Category Archives: Product Management

Is This Any Way to Treat a High Value Customer? Ask My Mother.

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Do You Know Your Most Valuable Customers?  Do they know that you love them?

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It’s 10 times harder to get a new customer than to keep an existing one.  Loyal customers are more profitable and have the highest Lifetime Customer Value. They love your company already.  They have already been acquired, qualified and taken through the funnel – – you have them where you want them!

So why, with today’s sophisticated customer management systems, are loyal repeat customers too often just an afterthought?  Or missed entirely?

In today’s post we will try to demonstrate that marketers must make extra effort to identify and appreciate these great customers.

Customer Relationship Management (CRM) data-based systems have given marketers the illusion that they not only know everything about their customers, but that their email outreach perfectly motivates everyone.  This is not always the case.  They don’t always get it right.  Customer targeting algorithms written too narrowly can miss the bigger picture.

Case in point: my very own Mom.

  • Mom’s primary indulgence is periodically taking her 5 kids and their families (20-25 people total) to an all-inclusive resort. Club Med has been the most frequent (but not exclusive) beneficiary. (Yes, I chose my mother extremely well). Her aggregate investment is well into 6 figures over the past 20+ years she’s been doing this.

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In the case of Club Med, the algorithm failed.  They were focused on the last 3 years only.  And they completely missed the fact that she’s a long-time customer who brings a group. Mom turns out to be a mere Turquoise!  A rookie in their eyes!

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  • Mom selects the location, makes the reservations and all expenses go through her. She has 99% of the decision-making power on where we go. She should be a Big Kahuna to Club Med. They should make sure she’s happy, show their appreciation, and make every effort to acknowledge her loyalty.

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  • Yet Club Med scores loyalty on a per-person visit basis over the last 3 years. So despite influencing a lot of spending, Mom is classified as entry-level Turquoise, with the same status as a 10-year old who goes along with her parents. There is no acknowledgement at the corporate level, and none at the local Club level – – no one has told them who this is. No bottle of wine or fruit in the room. No upgrade. No ‘thank you for your continued loyalty’. Nothing.

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  • Small victory!  But it took a lot of effort.  Shouldn’t have to.
  • What defines your best customers? Longevity? Frequency? Cumulative $ spent?  Early adopters of new products?  This is really important to figure out.

Club Med of course doesn’t want to ignore their best customers. It’s just that their system isn’t set up to recognize them all the time.  To their credit, they handled my email rant with grace – – and came through in the end.

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So figure out who your best customers are and take care of them!

Right after you take care of your mother.

 

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Peace of Mind as a HUGE Competitive Advantage

Some of you may know that I recently moved from the Chicago area to Raleigh after some 35 years.

While I have moved away from many close family members and old friends, the person I will probably miss the most is Mr. Lee (who, like my elementary school teachers, has no known first name).

Mr. Lee runs a humble shop called North Town Auto, and took care of our out-of-warranty cars, both domestic and foreign, for many years. It helped that he was only 2 blocks from us in Northbrook (convenient to the Metra Station!). And while there are probably mechanics who could do a certain thing for a slightly lower price. I would use Mr. Lee even if it required a drive to get there.

The reason? Peace of mind. Peace of mind that the car would be fixed correctly, that I would not overpay, that I would not pay for unnecessary repairs, that things would be done on time, that if he said I needed to do something, then I actually needed to do it.  That there was service with respect and a smile.  No worries, as they say.

I had complete loyalty to Mr. Lee.  And when it comes to loyalty, peace of mind turns out to be a huge competitive advantage.

Americans spend a lot on lots of stuff. They generally don’t seem to mind spending a lot.

However, Americans HATE the thought that they might be over-spending. And they don’t want to worry about it.

Think about institutions that offer what Mr. Lee does:

  • fair price (not necessarily the lowest)
  • high quality
  • consistency in delivery – no surprises
  • customer focus – great service, you don’t need to be on guard

Here are a few that come to mind that deliver great peace of mind:

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  • COSTCO – – once I pass through those portals with my oversized shopping cart, I’m pretty sure that anything I put in my cart is a great deal and great quality (even if in the back of my rational mind I realize that some things are better value than others)
  • Trader Joe’s – – great value, interesting selection, fun experience – 2-Buck Chuck!
  • Amazon Prime – – I know my selections will be delivered on time and at no cost
  • Tire Rack – – awesome customer service, great pricing, instant shipping – – it’s the only way to go
  • Online window treatments – seriously – – it’s so automated and competitive that you’re not going to make a big mistake
  • Spirit Airlines (just kidding!)

Here are a few organizations that seem to fall down on the peace of mind continuum – – you might be overpaying, you’re not sure of the quality delivered, etc. And that bugs you.

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  • 1-800-Flowers – – sometimes works, sometimes doesn’t
  • Chipotle – – unfortunately moved from the other list – – love their food, but still have a vestige of doubt
  • Car Dealers – – sorry, guys – no change
  • Movers, painters, realtors, various local contractors – – until you build a track record like Mr. Lee, you’re not on my speed dial.

Why is peace of mind so important? Because we’re so stressed with just the basics of surviving from day to day that we need to simplify and eliminate unnecessary decisions.

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While Mr. Lee is a small businessman, the Peace of Mind list includes enterprises of all sizes.  We all have our examples of who provides peace of mind and who doesn’t (would love to hear about yours).

In the end, it’s about delivering consistent, dependable value. And that’s good advice for everyone.

Not all Innovation is High-Tech. Not all High-Tech is Innovation.

To borrow an old punchline, sometimes companies innovate around technology ‘because they can’.*

A recent visit to the Hertz facility at the Denver airport illustrates the point – – innovation can only work when it is designed around the user experience.  Innovation that requires the user to adapt to technology, at the expense of experience, is not usually a blueprint for success.

My key car rental criteria are price, convenience and how fast I can get my car. At the counter, I preemptively say I don’t need an upgrade, don’t need insurance, and will fill it up myself. I also tell them they’re on the clock and my personal record is out the door in 3 minutes (although I had a wonderful 1:30 experience just this past week). It works, and it’s not nearly as jerky as it sounds. (really)

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So I was eager to experience the Denver Airport Hertz facility, which is huge (2500 s.f.) and bristling with open format desks, high-tech kiosks, and bumblebee-colored employees. The car rental facility of the future, right?  I’d be out of there in no time.

It was a disaster.  First, 25 minutes in a standard Disney-style winding line; then left the line and went to the separate line for a kiosk on the recommendation of a Hertz employee.  10 minutes to get to one of the kiosks, which needed assistance to operate.  The disembodied head on the kiosk video screen informed me that while I had a reservation, my car would not be available for at least another 30 minutes.  Except, of course, if I wanted to upgrade (at extra cost).  (we’ve seen this before)

I got mad and tracked down a manager, who finally gave me an upgraded vehicle without the upcharge (duh).  That was 45 minutes of hell in a facility that was presumably built on research and smart engineering.

The expensive technology and fancy building did nothing to help this experience.  The difficulties I had (kiosk operation, being held hostage for an upgrade) were resolved with the human touch.  The same human touch that gets me in-and-out of low-tech counters in under 5 minutes (often with a high-five to the counter person).Hertz charging

(Perhaps I should have thought more when I passed the cute ‘recharge’ station – under what conditions would you be using one of these at a car rental place?!).

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On the other hand, a recent Delta flight showed how smart innovation made the experience much better.  This was on a newly refurbished plane.

The overhead compartments had signs asking passengers to load their rolling bags vertically rather than horizontally, which gets more bags on the plane, and therefore keeps me from gate-checking.  Smart!  I win!

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Facing me on the bottom of the seat in front was an electrical outlet. I’ve seen these before but they’ve been awkwardly placed in a hard to reach place around my ankles, presenting the constant danger of feeling up my seat mate’s leg.

In both situations there was an outlet on each seat.  Delta figured out it’s better when you can see it.  Smart! I win again!

Technology has transformed our world and has fueled amazing innovation.  But this innovation has only worked when it has improved the user’s experience.  

Technology with no benefit is usually not lasting.

*it’s a guy joke.  If you don’t know it already, you probably wouldn’t appreciate it.

HarperCollins Teaches Us About Brand Management

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Watchman A strange thing happened during the recent launch of ‘Go Set A Watchman’, the new(ly discovered) first novel by Harper Lee, author of the classic ‘To Kill A Mockingbird’:

  • Publisher HarperCollins advance printed more than 2 million hardcover books
  • Presses were globally coordinated to simultaneously deliver versions in multiple languages
  • Extremely tight security was used, including shrink-wrap, security cameras, and secured shipments by truck to retail locations
  • Barnes & Noble was in the news

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A new book shrouded in mystique, focused on retail distribution sounds more like a 1980s release than 2015. Especially for a book that was written before TKAM, which no one had yet read! Why the throwback approach?

HarperCollins very shrewdly realized that it had an opportunity of huge proportions, which could be optimized by understanding the audience and delivering what they would want.

  • A brand, named Harper Lee, with enormous equity from over 50 years of visibility
  • A built-in audience of several generations who first enjoyed ‘To Kill A Mockingbird’ in book form
  • A heavily covered back-story concerning the surprise discovery of the secret manuscript and inquiry into the mental state of the author
Watchman at Costco

Display Shipper at Costco

As of now, the book has already been reprinted several times and is the fastest-selling book in HarperCollins history – remarkable in this digital-centric era.   The fact that ‘Go Set A Watchman’ has gotten generally mediocre reviews is almost beside the point.

HarperCollins scored a big success by understanding the audience, the environment, and having the courage to act accordingly and decisively.

Diet Pepsi drops aspartame: Gilding the Lily?

PepsiCo just announced that it will be taking the artificial sweetener aspartame out of Diet Pepsi and replacing with another artificial sweetener, sucralose (known more commonly as Splenda®), combined with another sweetener named acesulfame-K (‘Ace-K’), which is a lower cost ’sweetener helper’.

apm-free D Pepsi

The stated reason is to respond to consumer objection to aspartame, as stated by a Pepsi Sr. VP: “Aspartame is the number one reason consumers are dropping diet soda.”

The more likely reason is that Diet Pepsi volume is down over 5% in the last year, part of a long-term slide, and nothing so far has worked to reverse the trend.

But this change is unlikely to make a material difference, for a few key reasons.

First, let me risk public embarrassment to try to establish my bona fides.  I marketed aspartame (Equal® Sweetener) for 6 years, and sucralose (Splenda) for another 5.  Did a lot of consumer research during those years.

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Left: failing the dorky marketer test. Right: at a trade show, excitedly pitching sweeteners

Here’s why I don’t think this will make a difference:

1) Consumers generally don’t know what’s in their diet soda to begin with.  When asked open-endedly about ingredients in diet sodas, they have a vague notion that they contain artificial sweeteners, but the sweetener is not often mentioned by name.  When prompted, they will recognize aspartame.  But while consumers may theatrically claim that they avoid aspartame when they’re in a focus group, in reality very few actually check labels.

2) Consumers are generally full of it when it comes to stated preferences.  They will tell you all day long that they want less fat, less sugar, less salt, etc – – but in reality they will rarely change ingrained habits if there’s even the slightest risk of compromise (such as taste or cost).

3) Non-users or lapsed users have a handy reason for why they don’t use the product.  Aspartame has enough negative PR that it is an easy, politically correct and inarguable reason as to why surveyed consumers aren’t using the product.  But the true answer is a more complicated mix of dynamics including macro consumption trends, emergence of new alternatives, and changing demographics (‘modern’ diet sodas were first introduced, and gained loyal followings, in the early 1980s).

4) Changing out one artificial sweetener for another just reminds consumers that diet sodas generally contain artificial sweeteners.  Not a great plan to bring in new users. 

5) Changing ingredients to meet claimed consumer preferences is no guarantee of success.  3 years ago ConAgra changed its Hunt’s ketchup back to High Fructose Corn Sugar after a 2-year switch to sugar, ostensibly to answer consumer objections to HFCS.  Sales volumes showed that consumers didn’t really care.

Hunts No HFCS

6) Most importantly, consumers like their products the way they are.  ANY CHANGE in a loyal user’s product formulation will arouse suspicion.  A product as iconic as Diet Pepsi owes its unique taste to the specific combination of sweeteners in its formula.  It is impossible to improve the taste of Diet Pepsi, because its ideal is defined by its current taste.  So any change will alienate current users, who are currently drinking it even knowing in the back of their minds that it contains an artificial sweetener.

Ironically, this is the same category where New Coke infamously demonstrated what happens when you change the formulation of a well-loved product.  It will be interesting to see whether this ‘New Diet Pepsi’ fares any better.

Below is an introductory spot for New Coke in 1985.  In retrospect, a product and spokesperson that ultimately followed similar paths, albeit on different timing.

SAP spells ‘Trust Me’: S-I-M-P-L-E

Say ‘SAP implementation’ to someone who has been through one and you are likely to get a look conveying some combination of pain, pity, terror and dread (and perhaps schadenfreude).

Enterprise Resource Planning (ERP) giant SAP recently announced an approach and suite of applications called ‘Simple’.

For a company with a reputation of being anything BUT simple, this casting-against-type positioning could be tricky business; successful transformation will not be immediate.

And one look at their recent 2-page WSJ ad indicates they may not yet be fully embracing this ‘Simple’ concept.

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5 years ago Domino’s acknowledged that it didn’t taste as good as it should, and used this acknowledgment to justify a reformulation that was the focal point for a new campaign.  By many accounts, this bold ‘we sucked, now we’re better’ approach has yielded good results.

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But ERP software is not pizza – – with pizza, a $10 or $15 mistake and you’re on to someone else.

Do a search for ‘SAP Implementation’ and it’s obvious that the stakes are quite a bit higher – – not only $100 million or more, but years of organizational churn and resources, as well as lost opportunity if/when things go awry.  You can’t say ‘we know we’ve messed these up in the past, but going forward we’ll be awesome – trust us’.

A few examples here, some others below:
Avon Products halts an SAP implementation, leading to write-down of $100-125 million
– Waste Management and SAP in $100 million lawsuit
– HP claims $160 million damage from flawed SAP implementation
Select Comfort abandons SAP ERP implementation
SAP issues at Hershey prevents $100 million in shipments for key holiday
While client’s management often has a hand in screwing things up, at the end of the day, it’s SAP’s name in the headline.

SAP has chosen to own ‘Simple’ as its defining principle going forward.  In the ERP space, this is a compelling proposition. And some industry experts are cautiously optimistic.

But based on SAP’s history, it’s a tall order – – and prospective clients will certainly have a ’show me’ mindset.

Requiring 2 full pages to explain Simple is not a great start.

We Tested it On You, So It’s Probably OK for Your Pet

I had the pleasure of attending a brand new trade show – Petfood 2.0 – in Chicago recently.

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Not surprisingly, this show is still getting its furry legs under it – – a very manageable group of 35 disparate exhibitors made for a quick and interesting, if not yet cohesive, experience.

Overall, though, a larger theme presented itself:
Following thousands of years of dogs serving man, the tables have turned.
Man now serves dog.

Exhibit 1:  Hemp for Pets.

Now available from our friends at HempMeds, is a line of products made from hemp to benefit your pets.  aNew™ Pet Nutrition‘s products provide essential fatty acids (EFA – – Omega-3 and -6) and are made from a blend of hemp seed oil and raw hemp stalk oil (which is rich in cannabidiol – CBD).  EFAs, as we know, are highly beneficial – – just don’t ask the industry to agree on what the top benefits are.

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This innovation in pet health could not have been possible without the committed testing of hemp products by millions of Americans in the 1960s and 1970s.  So while the outcome of all that testing is up for discussion, your cat or dog is possibly benefiting now from what you did in college then.

OK, that’s not accurate.

While hemp is illegal to grow in the US, it is perfectly legal to import any part of the hemp plant in all 50 states.
And while the prospect of Fifi or Rover lying on his or her back contemplating the ceiling tiles for hours on end and giggling is intriguing, these products contain virtually no THC – the active ingredient that makes marijuana psychoactive.

Although it would be interesting to see if Nigel would behave any differently with the munchies.  Doubtful.

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Exhibit 2:   Functional ingredients for pets – – it worked on Man, so it’s probably safe for Rover.

We long ago realized that we could do better than feeding our pets Ol’ Roy (WalMart).  Thus emerged added value feed (e.g. Iams, Eukanuba, Science Diet, etc), offering different formulas for large breeds, older pets, etc. as well as some medical needs.

Meanwhile, human foods and beverages have increasingly been stuffed with a dizzying array of functional ingredients, many of which have no empirical basis in efficacy.  But we humans have shown that we’re willing to buy them anyway.  What did Charles Revson say about hope?

Based on this massively-scaled test market on mankind, it apparently has been deemed that animal-kind is now ready to safely ingest all sorts of functional ingredients that may or may not actually ever benefit them.

Petfood2.0

Incorporating things like ancient grains, fiber, medium-chain triglycerides, probiotics and ionic trace minerals, your pet can now get benefits heretofore only considered for the human species (notwithstanding hairballs and a healthy coat).

One company, PetNaturals of Vermont, offers products to address the following areas:
– Agility, Antioxidant, Bladder Support, Breath, Calming, Daily Multivitamin, Digestion, Hip & Joint, Immunity, Slim-down, Urine pH balance (really – to avoid yellow spots on the lawn), Periodontal health, Fecal function, and Skin/Coat health.

You dog and cat owners will probably recognize some of the benefit areas in the products below.

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We live in a world where the things we eat promise magical powers to fix whatever marketers insist needs fixing.  And regardless of the effectiveness, manufacturers have made a tidy business catering to hope.

Now, due to the significant sacrifice, expense and effort expended in testing on humans, our pets will soon be able to have their diets enhanced, and your wallet may end up just a little lighter.  So when your pet looks up as if to say ‘Thanks, Man’, now you know what’s going through that little brain.

I have no doubt that many of these ingredients can provide real benefits to some of the 150 million dogs and cats out there.

Except I’m not believing anything that promises intelligence to an Irish Setter.

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