Product Searching for a Customer Job To Be Done

keep-calm-and-sell-just-one-moreGrowth and market share seem the holy grail of most businesses. A McKinsey report titled, “Grow Fast or Die Slow”, says, only businesses that grow survive (tautology?).

Sometimes, in a mature market, product and brand managers tasked with meeting growth targets,   build products with the single minded goal of selling just one more to the customer. They build the product first then search for a customer job to be done.

Active product positioning starts with customer needs (jobs to be done) and informing the customer

  1. Which specific job you want them to hire the product for
  2. Which jobs you do not want them to hire the product for
  3. Why your product is the most suited candidate to do the job better than any other alternatives out there

Passive positioning is letting the customers decide which job they want to consider the product for. Active positioning is choosing the specific customer job to be done. In either case customer needs must be identified first. Growth driven positioning takes active to the extreme and becomes annoying.

In an attempt to get more wallet share from customers they resort to,

  1. Telling customers why a specific need is so acute that they better fill it or risk disaster
  2. Make yet another product variation  to apply for specific instances of a particular job – one for night time and another for day time
  3. Use emotional messaging to appeal to our System-1

That is what we see happening with Febreze Sleep Serenity. We have seen this before with Downy Simple Pleasures. When 99% of households already buy at least one P&G products the only option for growth seems to be get them to buy one more. So P&G wants us to buy different version of Febreeze just so we can sleep better.

You could try misting Febreze® Sleep Serenity™ Bedding Refresher on your sheets to help create a calming and relaxing environment as you wind down from the day.

Sure you could but it is highly likely it would have any effect on your sleep. (Their claim is not based on a double blind controlled test and they do not need to conduct one when they keep the messaging emotional.)

When you chase revenue you start at the wrong place. Instead of starting with customer job-to-be-done you start with your internal needs. If your growth strategy do not start with customer needs and products don’t evolve from which prioritized needs you want to address you will become irrelevant.

Customer Jobs To Be Done Growth Matrix

Does your growth strategy align with customer job to be done?

 

For marketing and de-marketing the first step is?

We have discussed enough about Greek yogurts, Coffee , Dry bar and Software. We even talked about Cronut. All those were cases of marketing. Now take a look at the following cases,

  1. A public school principal trying to keep a right “customer” mix in his school
  2. Public health officials trying to protect teen girls from skin cancer
  3. Conservationists trying to protect poor rhinos from being slaughtered for their horns

These cases are not that different from selling software or $40 blow dry. Instead of demand generation you are trying demand reduction.

The school principal does not want customers with expectations the curriculum cannot meet or those who won’t play a role in school’s growth.

The health officials are trying to teach the teen girls about detrimental side effects.

The conservationists are trying to eliminate the black market for rhino horns.

These three are doing de-marketing, trying demand reduction. And where does one start for de-marketing? The same place where one starts for marketing – customer segments and the job they are hiring the product for.

As The Economist writes about Rhino horn de-marketing,

The first step in “un-marketing” rhino horn is simple: find out who your buyers are and why they like the product. TRAFFIC, an organisation that monitors the illegal wildlife trade, has just conducted a survey to identify the most important buyers of rhino horn.

And the customer job  turns out to be,

It turns out that it is a luxury purchase by rich men in Vietnam: professional businessmen, celebrities and government officials.

In Vietnam horn is often bought for the sole purpose of being gifted to family, colleagues or people in authority. Buyers think that it affirms their social status—and that it is good for their health. They believe it possesses properties that detoxify the body and can therefore cure anything from a hangover to serious illness.

In business meetings, and other gatherings, rhino horn is sometimes ground to a powder, mixed with water and drunk. Rhino horn is made of keratin, like fingernails. Yummy!

How do they effectively do de-marketing?  In marketing one makes product pivots and positioning to make it the most suitable candidate for the customer job to be done. In de-marketing one does product pivots and positioning to make it the most unsuited product for the customer job to be done.

In case of rhino horns,

So how do you turn successful, well-educated men against a luxury good that conveys wealth and well-being?

Yet a better strategy may be to spread fear, uncertainty and doubt about the product. One idea being suggested is to inject rhino horn with poison that could make those that consume it seriously ill.

Anyone want to grind up and drink poisoned rhino horn?

Now if we can take this to saving sharks from connoisseurs or shark fin soup.

As Coroner I Must Aver …

A lot of people most likely do not understand what a coroner does.  I did not. For instance did you know that

  1. Coroners do not need medical degrees or understand pathology?
  2. Coroners do not need any training – medical or otherwise?
  3. Coroners do not perform autopsies?
  4. Coroners are appointed or elected by voters?
  5. To get the job they only need to be of legal age and have no felony convictions?

An year long investigative report by NPR goes into the details of the history and job of coroners and tells us what this job is about.

Once a person meets the basic age and criminal record …

“Basically, to be a coroner, you just have to be publicly popular. I guess it’s more of a popularity contest. Then you learn the job as you go.”

Actually there is no need to learn anything as well. They just need to pronounce people dead sign death certificates.

There are coroners everywhere you look in the management, marketing and social media world. They go by the name Gurus, Marketing ninjas and social media mavens  etc.  Just like a coroner these Gurus

  1. Don’t need any formal education
  2. Don’t need any training
  3. Don’t  have to run a business, met a payroll, struggled with product slips, market changes or internal IT systems
  4. Don’t need to look at a business anymore than what they see in newspapers  or their single visit to pronounce it dead (or alive)
  5. Don’t have to collect data, analyze or get second opinion
  6. Don’t need any basis in facts to pronounce you have reptilian brain, you are left brained, you need naps to kindle creativity, you get your best ideas in shower etc.
  7. They just need to be popular with enough people as followers who suspended their own curiosity and willingness to look for contradicting evidence

For all these factors the Gurus are just like coroners.

I see one difference though. I think coroners will get in trouble for pronouncing live people dead or dead people alive. On the other hand the coroners of management world, the Gurus, have no such worries. No one is going to call them out on their remarkable proclamations.

As coroner I must ever,

Blockbuster is not only merely dead but most sincerely dead!

How to fix your wrong 1.0 pricing?

fitbit-flexfitbit-forceFitbit, the San Francisco based maker of wearable fitness devices, recently announced a new device Fitbit Force. This new product launch comes less than six months since the release of their last device, Fitbit Flex. When you look at the two devices side by side they do look almost identical  with some feature additions.

The Force, as you can see, adds a display that gives more descriptive metrics than just four LEDs progress bar in Flex. Internally it also adds features like stairs counting.  It is still a product evolution. Yet, instead of choosing to call their new version as Flex 2.0 they chose to introduce a new brand, Force.   To give an analogy it is like Apple deciding to call iPhone 5s as  iPhone Force or some such name.

The answer to why they chose to introduce a new brand for a product evolution lies in how they chose to price Force. Fitbit Flex, when launched in May, was priced at $100. Force is priced at $130, a price realization of additional $30.  Surely you do not believe their marginal cost to add the tiny display or the altimeter is  $30 do you?

After  Fitbit launched Flex at $99, it is highly likely they realized that  a device someone sports on their wrist is lot more about image than about pure fitness. That is, in a basket of reasons why customers buy a product the hedonistic reasons outnumber and outweigh the utilitarian reasons. And hedonistic reasons carry higher willingness to pay over utilitarian ones (just look at the luxury market).

Another aspect is the profile of customer segment. Those who buy a fitness band to proudly display on their wrist are less cost conscious, have higher willingess to pay and have higher disposable income (wherewithal to pay).  So with $100 pricing, Fitbit was leaving too much money on the table by not capturing more consumer surplus.

They needed to fix this initial pricing mistake. And introducing 2.0 version was not going to do it because of previous reference price and its inability to properly serve the hedonistic aspect. Besides they would have to drop the price of Flex below $100 or discontinue it.

So they took a trusted play out of the pricing playbook – Shift the product category, which you can do by deliberate product positioning or by branding. With new brand, Force, they are telling their customers that this is a new category. More importantly their customers just want a reason to give more of their consumer surplus and this new brand gives them that reason.

Previously I wrote about this category shift in moving from free to fee. The same rules apply in fixing your past low price  mistake and getting price realization. It is a new device. It is a new brand. It is a new category. It breaks the comparison and helps them set a new higher price. It gives their customer a reason they are looking for to pay the new price.

Fitbit Force also took another additional step that results in better price realization. Flex ships with two bands for different wrist sizes. That was additional marginal cost with no profit driver. Force switched to one model one size, saving cost of extra band.  Don’t add a cost  component that does not serve a value driver.

Overall good moves by Fitbit. Not great, as I still believe there is more to be gained with even better price realization because wearable fitness devices are extreme form of hedonistic consumptions, they are conspicuous consumptions.

Can you think of another marketer who recently fixed their pricing using branding and category shift?  Amazon’s KIndle Fire HDX. Think about why they branded the new HDX thusly and its $229 price tag.

How do you fix your past pricing sins?

Your Mileage May Vary – Going Grubhub?

Does adding Grubhub to your restaurant channel mix help or hurt?

If the answer is anything other than, “I don’t know. Let us start with customers, business objectives and alternatives”,  it is wrong. There is one such categorical answer in recent Bloomberg Businessweek article.

The article quotes one case study, a restaurant that used to hire Seamless (now acquired by Grubhub) as sales channel found its margins go up despite smaller sales.

On its first night without Seamless (Aug. 16, a Saturday), Muñoz says Luz took $669 worth of delivery orders. That’s down about 16 percent from the $800 in orders the restaurant typically received on Saturday nights when using Seamless and GrubHub, another online delivery service that recently merged with Seamless. Instead of losing 14 percent of the total to commissions, though, Luz paid only $16 for credit card processing and other ordering-related fees, meaning the restaurant netted $653—just 4 percent off the $680 it would have made with the help of Seamless and GrubHub.

They use the word margin to refer to net amount they get to keep after transaction and channel charges.  Sites like Seamless and Grubhub create value by bringing in sales that restaurants would not have realized through other channels. They get their share of that value created by charging 10-14% commission.

As I wrote before, restaurants should be happy to pay this as long as they are making profit on each GrubHub transaction and it is new sale they would not have had otherwise.

Let us take this specific case of Luz restaurant. It appears from the numbers they have the wherewithal to generate $669 (average?) sales through their own gumption. What Seamless did for them is simply redirect $669 through its website and only added $131 worth of new sales.

If that is the case it does not make sense for the restaurant to pay 14% on $669 – sales they would have had without any help from Seamless.    Given these numbers it appears Seamless share is $112 from a mere $131 worth of sales.  The restaurant should have done this math before signing up for Seamless or explored its sales channel alternatives.

On the other hand if a restaurant has $200 in takeout revenue and Seamless increased it to $800. Then at 14% commission, Seamless share of value is $112 from $600 new sales they created. A far better number for some restaurants.

The answer for your restaurant is not a simple yes or not based on the extreme stories you see but starting with your customers, business objectives and channel economics. Do not rush to sign up or ignore Grubhub based on popular news stories.

Here is a much bigger question that even large enterprises grapple with – compensating sales team on repeat revenue.  It makes perfect sense to compensate the sales channel for acquiring new sales. But once you got that customer, aren’t they your customers? Should the sales channel be compensated for repeat revenue from the same customer? Especially at the same 14% level?

 

Free to Fee With Product Positioning Shift

ref-priceHave you been giving your product away for free and now want to charge for it? Afraid of backlash from your users? Wonder what would make your freeloaders fork over $4.99 a month without complaining about it in twitter?

I have been recommending businesses to focus on the reference price. That is the price customers have  been trained to pay and expect to pay for a product. Any increase from that reference price will be perceived as a pain by the customer and any decrease as a deal.

The reference price problem is severe when the price is frozen at $0, that is you have been giving away your product for free. Changing the price of a pint of ice-cream from $2.99 to $3.49 is difficult but not as difficult as charging $2.99 per week for access to your free online content. The latter is several orders of magnitude more difficult than the former.

Difficult does not mean impossible. You can indeed successfully move reference price in the minds of customers from $0. One such way is using choices, specifically premium priced choices as seen in this research,

Reference price solution alone does not address the free to fee problem says Uri Simonsohn, professor of marketing at Wharton School. According to him the second dimension is – It is the  category problem.

Imagine, for Thanksgiving, you go to your parents’ for dinner and after a nice dinner they say, ‘That’s going to be $10 per person’.

You would be upset.

We expect this category of products to be free like mom’s love is.

If we come to expect a product to be in “forever free” category then reference price is not going to cut it. Moving from free to fee for this category is like charging for mom’s love.

Is there a solution?

Yes – product positioning shift combined with reference price.

Customer Job To Be Done Growth Matrix
Customer Job To Be Done Growth Matrix

Think of your product as something your customers hire to fill a need. You have an active role to play in telling your customers what job you want them to hire your product for. That is product positioning.  When users have come to perceive your product in the forever free category you have a positioning problem. Somehow you have lost control of positioning and let them decide what job they want to hire your product for.

The way to shift that is to change the job – telling your customers what new job you want your product to be hired for. That is serving new jobs of customers (should we call them customers if they are not paying?) you already have.

This may require minor product changes – pivots- but the key is your deliberate action to take complete control of product positioning and telling customers which new jobs your products will serve.

Hopefully you will choose new jobs that they are used to paying for and not yet another mom’s love type jobs.