For every “Apple” type company in America, there are dozens (hundreds?) of companies that operate in a low-interest, commodity realm. Many of these organizations will work hard to develop new products, but lack the ability or courage to do so in a bold way. As a result, they are often frustrated at the lack of tangible results from their innovation efforts. In their minds, the improvements they have brought to market are exciting and clearly meet the unmet needs of their consumers. So why the low level of market success?
For many of these categories, the three hours the company spends brainstorming new ideas is more time than their consumers spend thinking about the same category over their entire lifetime. As a result, the bold new improvement the company provides goes completely unnoticed by the marketplace. Think about this for a moment. On a given Saturday you find yourself in the midst of an unexpected home plumbing project (that does happen to people other than me, doesn’t it?). You realize you need a Monkey Wrench. You drive to the store, go to the plumbing department and are looking to buy right now. You see a tag hanging from a given wrench that claims “50% better than our previous design”. You’ve never owned a Monkey Wrench (I don’t think the things actually wear out, do they?), so you have no preconceived notions of the problems that existed before. You can’t visually distinguish between this new “better model” and the competitor next to it on the shelf… You can’t compare the new with the old, so that doesn’t help. My guess is you probably make your decision based on price. The Monkey Wrench company looks at their sales over the next two quarters and sees that they have experienced no significant increase in volume, and they decide that their innovation efforts were a wasted investment.
So the question is… Is it wrong to invest in ongoing product improvement? No. In most commodity situations that level of investment is required to maintain the shelf space that you currently have at retail. But recognize it for what it is; maintenance. If you want to drive growth, you have to innovate in a big enough way to first bring attention to your (oft-neglected) category. You have to provide a benefit that spans well beyond what the traditional product has offered. As an example… What if the Monkey Wrench company focused on expanding the usage of this now highly specialized tool? What if with some reconfiguration and new design, this same product could benefit a consumer across various projects within their home? If this became the next “must-have” tool, people would talk about it, it would appear in magazines and on cable shows and pretty soon people would come to the retail aisle in search of it. What would the return on that innovation investment be?
The bottom line is this. Companies that find themselves in a commodity status cannot afford the luxury of incremental innovation. If they’re not making a big enough difference to attract attention to their category first and to their product second, their efforts will be wasted. A design change that seems huge to the product managers in charge, may go completely unnoticed by the paying consumer. It’s got to impact their lives in a significant way to get their attention. Innovate big or go home!
My eight year old son was in Sunday School last weekend. The teacher was teaching a lesson on patience. At one point during the lesson, the teacher talked about a situation where the Israelites were frustrated and began to whine. The teacher looked at the class and asked the kids “Do any of you ever whine?” My son immediately shot up his hand and announced to the class “I never whine, but my parents do… And sometimes they run out and have to run to the store to get more!”
Funny story as it is, but it did get me thinking… How often do we think we are clearly communicating something that is actually received very differently than it was intended? This can be true in a marriage, in an office setting or in any other social situation. It’s easy to assume that written communication would be exempt from these types of misunderstandings, but there are internet sites filled with funny examples of typos that portray a very different message than what was meant. But typos aside, how many times do we clutter our communication with “insider knowledge” that our target audience doesn’t understand? We create websites and wonder why people don’t call us. We pass out marketing brochures that get no response. Granted, there is a key design element at play here, but beyond that what are we really communicating? Are we speaking in terms that are readily understood or are we including jargon that puts potential customers off because they’re not sure what we’re offering?
The Sunday School teacher knew exactly what he was asking. And my son knew exactly what he was answering. However, they were clearly on two different pages. It’s critical for our success that we make sure we’re communicating in a way that won’t readily be misunderstood. Unless we’re looking for humorous stories as opposed to new business.
There’s been a lot of thinking and writing done on market segmentation. Companies have spent small fortunes with consulting companies to help them identify the key segments that they want to target, so they can uniquely deal with each of them. I have seen this done to the point that each segment has a descriptive personality associated with it. The following are actual excerpts from one such study that I’ve come across:
People falling into the X segment would share the following traits:
- Is likely to bowl in a Saturday morning league
- Is likely to eat at the same three restaurants repeatedly
- Cares about the way they look and dress, but never want to stand out from the crowd
- Does not speak a second language
- Drives an American car, that was bought used
- Will cry at movies, but will not speak openly about it
- and many more…
Keep in mind, these characteristics reflect only one segment of the five that were identified for the company. Each of the other four had their own descriptors. While this paints a vivid picture of different consumer groups, I have to ask the question, “So What?“. When I see such reports, I always wonder why I don’t personally seem to fit into any single group, but rather share traits across many of them. Does that mean I’m not a consumer? Granted, not all segmentation studies are as graphic as the one I’ve cited above, but I do feel that most share many of the same absurdity as this one does.
The above study was done for a multi-billion dollar company that sells products under several different brand names. So to some degree it makes sense to understand the “personality” of each brand that you are offering. The problem is that many smaller companies want to emulate this process and do similar segmentation for their own customers. That is where this methodology ceases to make sense. The way I see it, it can and should be much simpler. For my own company, I take the following approach. As I consider the universe of potential customers that we could serve, I first recognize that there are those companies that have heard of us, and those that have not. For those unfamiliar with our services, my goal is to create an awareness that we exist. But as I consider this macro segment, I know that this group can be divided into two sub-segments, those that currently need the services we offer, and those that don’t. My goal is to approach these two sub-segments differently. For those that currently need our services, we utilize a “pull-marketing” approach. In essence, our goal is to provide this group first with an awareness that we exist, then entice them to contact us through a variety of ways. Making it simple to get ahold of us, and learn more information is critical to being successful here. For the group that is not currently in the market for our services, my goal is again to create awareness of our existence, but to also show how our services can benefit them when they find themselves in need. In this case I use a “push-marketing” approach, where we send information (via post, email, or social media) that hopefully catches their attention and helps them to remember us when the time comes.
For those prospects that have an awareness of us, we essentially follow a similar approach. Push/Pull. Educate those that don’t have a need yet, and entice those with a need to give us a call. For our purposes, that is effective segmentation. It’s not perfect, but it seems to be effective. Now, if I could only figure out which prospects are most likely to cry at a movie…