Monthly Archives: August 2008

You must be designers

I recently attended a meeting for product development of a technological product. There were representatives from different desciplines including program management, software development, business management and product design. Twenty people, all with their laptop open, were sitting in a conference room. Most of the participants were meeting people from other deciplines for the first time. The meeting organizer comes in the room and before the introductions could start, pointed at three folks in the room and said: “You must be designers.” “Bingo!” came the reply.

How did that person, or for that matter all others in the room, know that they were designers? They were the only ones carrying Apple macbooks in a room full of Microsoft Windows running laptops!

This is a typical case of targeting the niche, and Apple does it with ultimate perfection. Like any other niche marketing effort, Apple as well gets the pros of targeting the niche. You will hardly find any designer, artist or the likes carrying anything but a mac. Mac has a die-hard following and a strong cult continuously growing around it. At the same time there are cons to the approach. There are millions of people who do not want to be associated with this cult and go for the alternatives.

But there is something bigger going on here with respect to this cult. What do the young masses in their late teens and early twenties think about carrying a macbook? For most of them, a macbook provides everthing they need from a computer and carrying it gives them a way to join this “cool” cult. If you believe that’s the future, Apple has found a pretty good route to target the mainstream…

Why not standardize?

I recently bought a new laptop, a Lenovo T61, at work. At home, I use HP Pavilion zv5000. Thanks to software supremacy, starting to work on a new laptop is normally a pretty smooth and easy process with a negligible learning curve. But it just happened that Lenovo and HP for some reason decided to switch the places of control key and function key on their laptops, i.e. where HP decided to out the control key, Lenovo decided to put the function key and vice versa. Along with that, the two keyboards have different placement of almost all keys other than the letters and numbers on the QWERTY keyboard. These different placement of keys on the keyboard has made working on these two laptops considerably frustrating.

There must be some really good reason for these companies to design their laptop keyboards and key placements as they did. Each one of them must have spent in millions to research and develop the best possible key placement. The important thing to notice is, normally we never buy a laptop because we like the key placement on the keyboard of the laptop. There are half a dozen other differentiating factors we consider before buying a laptop like price, battery life, size, weight and so on. So why not standardize this relatively unnoticed thing and make the end user’s life easier?

Interestingly, the same thing happened with me when I switched my cell phone from HTC Dash to MOTO Q. Though the frustration here was considerably less because I don’t use the keyboard that often and I made a switch rather than trying to use both everyday, but the same argument makes sense here as well (till we are not on all touch phones), why not standardize?

It’s the kind of eyeballs that matters

Consider the following hypothetical scenario:
100 people watch a sports broadcast on television. During a timeout, an advertisement appears on the screen. Out of 100, 20 people are really target audience for this advertisement. So what matters to the advertiser? The fact that the viewership of the broadcast is 100 or that the number of target audience it is reaching is 20?

It’s the kind of eyeballs that counts 9 out of 10 times (I say 9 out of 10 times, because there are one-off cases like a Superbowl ad or times square banner ad where you are just trying to build the brand recognition). That’s the secret behind the success of search advertising because here you are reaching the right kind of audience. Advertising that targets one customer at a time based on any criteria, be it mobile phone advertising targeted based on location and time of day to an individual, or advertisement next to a web email based on what conversation a person is in, or search advertising where the audience is really trying to look for something, is more effective than the mass advertising because of the same reason. The advertiser knows that every pair of eyeballs they are reaching to are the ones that matter.

How to find out which audience matter? Couple of ways: first, profile characteristics of the audience and second, activity of the audience. Linking this information to the advertisement can provide right targeting. Let’s look at a couple of examples to make more sense here. On the Internet, if you can find that I am a person living in Seattle (City from IP address: a profile characteristic) and a Jerry Seinfeld fan (I searched for Seinfeld videos: activity), an advertisement selling DVD of Seinfeld sitcom might make more sense to me. Or, on a mobile phone, if you know that I am currently in New York City (mobile signal: a profile characteristic) and texting friends to ask for dinner (text message: activity), an advertisement selling specials at a restaurants in the vicinity will be the most attractive to me.

Few to Many

Some businesses fall in the middle ground of Few vs. Many, or we can say evolve to a state which is encompassing more than one of the two rigid blocks (few and many). They start with one and develop into other. More common is the scenario where you start with a niche area targeting a few big customers and slowly the market expands and evolves into a mass market.

For example Customer Relationship Management services. It started with big corporates looking for highly customized solutions to manage their customers. The big players in this business are companies like Oracle and SAP. Slowly small and mid-size businesses started looking for CRM solutions and providers like Salesforce and Microsoft Dynamics emerged in the market.

Another example that comes to mind is stock trade. Years back stock trade was done by a few financial houses and businesses working at the stock exchange. Now there are dozens on online brokers like Etrade, Ameritrade, Scottrade etc. and any individual can participate in the market.

Internet has been a big enabler of getting the service to the many due to a couple of reasons. First, scalability. Internet has drastically reduced the scaling cost of various services. Second, customer service and support. You can use community site to support your product or service.  This is a fantastic way to provide support because then you can use the community power to improve the product as well.

The interesting thing to understand here is when the business shifts from few to many, most of the times the major players changes as well. This states that it is completely a different ballgame when it comes to serving the many as compared to few and the companies that are focused towards serving the few cannot shift gears that easily to serve the many. Few big difference: a different pricing model, a completely different way to connect to customers (physical to virtual) and adapting to different technologies.

Few vs. Many

Ten times one million equals ten million and one million times ten equals ten million (I know it’s not rocket science, but stay with me for a second). What I am getting at is comparing two scenarios: first, having a few big customers and second, having a lot of small customers. Which is the better option: having ten customers and earning $1 million from each or having one million customers and earning $10 from each?

The first scenario is where you are targeting for specific customers. This is the more common when your customers are businesses and you are selling expensive products like computing grids, plane engines etc. or services like supply chain management. The size of the customer’s order and one-on-one relationship with a customer is what matters the most in this case.

Now let’s look at a few things that play important role in this type of business. First is goodwill. You got to (literally) have really good customer relationship management in place and maintain great relationship with every customer. A successful operation in this business turns more into a consultant-client relationship than a supplier-buyer relationship. Second, word of mouth marketing. When you are serving a niche and large amounts are at stake, referrals make all the difference. Third, brand equity. This is as important as anything else. For you to be successful in this business, your customers and prospective customers should be able to recognize your brand, depend on it and vouch for it.

The second scenario is where you are targeting for volume. This is the most common type of business in the consumer marketing and the Internet world. In case of consumer marketing, you will be selling products like soaps, cellphones, cars and so on. The success of your business depends on the size of your customer base. Similarly in case of Internet, what matters is the number of customers using your search engine, reading news on your website, participating in your social network and so on. More the eyeballs, better are your prospects.

Advertising plays a crucial role in this type of business. The goal is to reach the masses and increase the number of customers using your product. Advertising your product to the right audience at the right place and the right time can make all the difference. Another important thing is the network effect. Having a network around your product can draw more customers to it. Some services like social networking sites on the Internet naturally attract customers to the same place in order to serve their basic purpose (networking). In case of other products like cellphone, the mobile operators provide incentives like free calls to others on the same network to initiate the network effect.

There are loads of success stories (and unsuccessful attempts we don’t even know of) in both scenarios. It doesn’t matter which approach you take, what matters is how well you execute on that approach. Another thing I want to point out here is goodwill, brand equity, word of mouth marketing, advertising and networking is required for any business you choose, by pointing them in specific scenarios here, I am trying to put forward what matters more where. You cannot ignore any one of these, irrespective of whether you choose to go for few or many.