Category Archives: Marketing

Starbucks and non-free Wi-Fi

Posted on May 4, 2008 | 1 comment

I don’t get it. Entire city of Mountain View has free Wi-Fi. The New York City central park has free Wi-Fi. Almost every local coffee shop has it. So why at Starbucks one needs T-Mobile or AT&T subscription to connect to the Internet? Wi-Fi is something that is cheap and easy to set up, and I would expect the third place after home and office where Howard Schultz wants people to spend most time, to at least have free wireless connectivity.

Here’s some simple math to support my argument. AT&T charges $4.99 per month for basic Wi-Fi access. A cup of coffee at Starbucks is more than $4. Whatever deal Starbucks and AT&T have to let AT&T provide an exclusive service and the nominal Wi-Fi set-up cost which Starbucks will face to provide free Wi-Fi is pretty much mute if Starbucks is able to attract even a small number of additional customers who look for a local coffee shop where they can connect to Internet for free (instead of signing up with a service provider just to get Wi-Fi connectivity at Starbucks).

Yet another argument: Starbucks can ad power the Internet service and cut a deal with one of the search providers to make a particular search engine the default one while using Starbucks Wi-Fi, which can potentially make this “free” Wi-Fi service a money churning business. And now when Starbucks is facing competition from the likes of McDonald’s, providing free Internet access and making Starbucks attractive enough for customers to spend more time there is required more than ever before.

All this aside, I believe just going for free Wi-Fi will give Starbucks enough press blog coverage to provide that much required spark that might pull customers back to the coffee shop (something like the iPod touch announcement…) and make a statement that for Starbucks, customers still come first.

1 Comment

Posted in Marketing, Technology

Revenue: reason and source

Posted on April 30, 2008 | Comments Off on Revenue: reason and source

Reason a customer pays for a product or service offered by a company is in most cases the source of revenue for the company. But then there are cases when this is not true. The reason a customer pays is one thing, which in most cases is the primary offering, but a completely different secondary or additional offering generates more revenue for the company. These are the cases when the reason and source of revenue are different, though mostly interdependent.

One of the most talked about examples in this case is Hertz rental car service. The biggest source of revenue here is the rental insurance that Hertz provide with its cars which is an additional and optional service the company provides when you rent a car from them (just for kicks, the second biggest source of revenue: used car sale). Another example to consider is the wholesale retail chain that loves to play the membership fee ballgame. Customers go to Costco because they like to buy stuff in large packs at a wholesale price. But Costco makes 70% of its operating income through the upfront membership customers pay for to get in the store. Similarly, consider Google. Customers go to Google primarily to search something on the Internet. Their main source of revenue: advertisements, the contextual offerings next to the search results customers are looking for.

It’s interesting to see an auto rental company, a wholesale store, and a search engine, each excelling in the core area of their business but making the biggest chunk of revenue from a secondary offering. The important thing here is to notice their focal point of operations. Hertz cannot shift its focal point from rental car business and generate the same revenue through insurance. They are able to generate rental insurance revenue because customers like their rental car service and buy insurance for the cars they rent. Similarly, Costco cannot sell memberships if the customers don’t find what they want from the stores and Google cannot generate ad revenue if the search results are not relevant enough for customers to keep using it.

This brings us to the real thing…the success mantra to keep the cash register ringing is: focus on the reason and embrace the source. When the source and reason are the same, its a smoother ride, but when they are different, you got to make sure that you provide great reason to your customers to come to you along with maintaining attractive revenue generating additional offerings.

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Posted in Advertising, Marketing

It’s all about the perceived value

Posted on April 26, 2008 | 1 comment

One thing that counts a lot for any product is its perceived value. Customers do not buy the product, they pay for the value that the product provides them. The more the perceived value of the product, less relevant is the price tag on it and vice versa. The concept of perceived value reconfirms the importance of de-commoditization. Commodity by definition is something that has low perceived value. So the best way to remove the commodity tag from a product is by focusing on what value the product provides to its customer and adding a differentiating factor to it to make your offering stand above the competition.

If a product can create high perceived value, it can earn premium. This is something that makes an iPod nano worth $200, makes a customer pay thousands extra to buy a BMW rather than some other mid-size car, and makes a bottle of Fiji water cost 200% more than a Dasani’s.

It is interesting to look at the perceived value of Internet products. How valuable is your email service for you? How much do you value a good search engine? How much value does a good social networking site provides you? I believe a lot. But still you pay nothing for it. The entire concept of high perceived value seems to fall apart on the Internet…well not really. The concept does hold true in the Internet world as much as it does anywhere else.

In case of services like email, social networking and information look-up, the customer goes for the service that provides the most value. In fact the perceived value is the only thing that counts here, because price is totally out of the equation. What is important here is to understand the perceived value of the service for the payer, i.e. the advertiser. The value for an advertiser is directly proportional to the value for the end customer. More customers go to the service that provides more value. This in-turn attracts more advertisers to it…generating more advertising revenue for the service…making it all about the perceived value.

1 Comment

Posted in Marketing, Technology

Bundling: it’s solutions to problems

Posted on April 17, 2008 | Comments Off on Bundling: it’s solutions to problems

Flexibility is great for customers. It lets them choose and pick exactly what they need out of a set of offerings. But then there are some times when customers don’t know what all they need to solve a problem. And there are some other times when they have heard of some really cool products but are unable to figure out how they can be applicable to their business. These are the two cases, discoverability and applicability, where bundling comes into picture.

The idea is to target the niche by putting products together and adding bells-and-whistles to them, essentially creating a bundle for the target customers. Some really great examples of product bundling comes from the Microsoft Office. Microsoft Office has suites to meet the needs of any type of customer ever wanting to do anything with word processing or keeping inventory or preparing a presentation. These suites make it easier for customers to identify what all they need and how a product can be applicable to their needs. For example, with the help of bundling, a school can easily figure out which products out of the Microsoft Office family will be useful for it and how. Similarly, a small business owner can just pick up the bundle created specifically for small businesses and meet all her needs.

Some other great examples of bundling comes from Google. Google bundles their products in distinct areas to further simplify their offering to the niche customers. It could not be any simpler for a non-profit organization to discover and apply a dozen products including an online video community, a mapping software and a money collection service to their advantage without wandering around to get each one of them and figure their use. Similar offerings make lives of educators and businesses a lot easier as compared to otherwise.

Bundling is in some ways opposite to how we normally work. In normal scenarios, we look at a problem and work on it to figure out a solution. In case of bundling, we look at all the various solutions we have for different problems, identify who all are haunted by these problems and mix-and-match these individual solutions to develop a package for a type of customers. Just another time when we start from solutions and look for problems!

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Posted in Marketing

Customer is the King

Posted on April 9, 2008 | 2 comments

There is a common misconception when it comes to defining who or what rules an industry. Technology companies think technology is the king. Media companies think content is the king. Companies in real estate think location is the king. And we can go on and on. But the real fact is, be it any industry, it is the customer who is the real king. 

Take for example technology industry. A company can develop some out-of-the-world cutting-edge technological applications by making great investments in R&D. But if there is no customer problem that this product is going to solve, what is the use of it? Or in other words, how can it be successful? A technological application can be successful only if it solves some problem faced by the customer or fulfills a requirement of the customer. To find the requirements and problems of the customers  is not a trivial task. Sometimes you have to go to great lengths to discover these requirements, or make the customer realize that they have a problem. The right way to do this is to put efforts in discovering what is missing from the customer’s world, or how something can be made better, or what problem a customer is facing and then develop applications to solve those problems (and sometimes vice versa).

One interesting thing to ponder over is what makes customer the king? I believe two things play an important role here: limited resources and availability of options. Most of the time, customers have limited resources. This makes the customers prioritize their needs. Add to the mix the availability of options to fulfill those needs, and we can pretty much figure out the result.

In order to be successful in this customer-centric world, any business needs to focus on a few key things. The business needs to make sure that whatever it is providing, or whatever it is working on, is way up on the problem list of the customer. It must be able to evaluate the customer’s pain-points and then use resources to address them in the order of importance for the customer. When there is choice, there’s got to be a differentiating factor, and this is as important in a customer-centric world as anything else. So another thing to focus on is to make sure it stands out of the lot and can be distinguished from the competition. And one more thing, the business needs to make a commitment to make sure it has the best customer service in the industry.

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Posted in Business, Marketing

The global campaign against Global Warming

Posted on March 31, 2008 | Comments Off on The global campaign against Global Warming

One thing that has created lot of buzz around the globe is the campaign led by Al Gore against Global Warming. This campaign has made the common man at least aware of the fact that something needs to be done to address this environmental issue, and has won Gore the Nobel Peace Prize, an Academy Award and universal acclaim. This ongoing campaign led by the former United States Vice President, among other things, is a great marketing success (watch the 60 Minutes coverage of Al Gore’s campaign).

One of the marketing tactics used by Gore and company in this campaign is tp deliver the same message in a customized way to the people around the world. Following the global success of the documentary, An Inconvenient Truth, Gore acknowledged the fact that one size doesn’t fit all, and developed different versions of the same presentation with targeted content to back the message. The content is tailored to target an audience pool as narrow as evangelical christians as well as an audience as broad as a whole nation. On a recent visit to India, Gore delivered his presentation with focus on how India will be affected by climate crisis and how Indians can take steps to prevent it. The universal success of the campaign endorses the importance of targeted marketing in any field.

Another tactic used by Gore in spreading his word is viral marketing. Gore knows that he cannot reach all the people around the world with his message alone. So in order to address the urgency of the issue, Gore conducts seminars to train other individuals who take his message further by delivering it to the community and training others to do the same, hence leading to a chain effect.

Next Gore is launching a $300 million novel advertising campaign to spur a debate on the issue of climate crisis in the United States. Novel in the sense that it has roped in famous people from different walks of life to stand together to campaign for the issue. It has employed a theme that tries to make a point that people who disagree on all other issues, do agree on the need to address this issue. May be in six months or so, we will be able to pick up a few tips on effective advertising from this campaign.

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Posted in Marketing

Free vs. Close-to-free

Posted on February 22, 2008 | 3 comments

The world wide web influences cost of things. It has made lot of things people once paid for free, be it the basics like news, email and communication tools, or not so basic things like websites, storage space and office applications. The power of adware is changing the source of income for product and service providers and bringing the cost for the end customers down to as low as zero. In this world, an important pricing question arises: should the product be free or close-to-free?

Couple of things come into picture when this question is answered. What is the barrier to entry in the market for this product? If the barrier to entry is low, and the product is adware-able, the wiser strategy is to make the product free and set a customer base before competitors following the “used apple strategy” enter the market. This is much better than charging for the product initially and then driving the cost down to zero when competitive products come into picture.

Versioning plays a role. A good strategy is to provide the basic set of services that are easily adware-able for free and charge the customer for the high-end services, the ones with a smaller set of targeted customers or the ones which will look attractive to the customers after they start using the basic set of services and familiarize themselves with the product.

Whether the price is set to zero or close-to-zero, the seller should do one very important thing: communicate the reasoning behind that to the customers, or in other words, communicate the source of income to the customers. If you are providing something for free, it’s important to explain the customers how you plan to monetize it. This makes it easier for customer to adopt your service and believe that there are no hidden fees. The most rediculous strategy is to keep something free, but take the customers’ credit card for records. Even with good intentions, this challenges the customers’ trust on the company.

Similarly if you are charging for something, justify it. Explain the customer why your product or service is worth paying for, and make it attractive enough for customers to accept it with that price tag. If something is on the web and is not free, you got to explain why, because if it is on the web, the customer expects it to be free, at least partially if not entirely.

3 Comments

Posted in Advertising, Marketing, Technology

How many vs. Who

Posted on February 18, 2008 | Comments Off on How many vs. Who

Global advertising is a more than $600 billion industry that is growing year-over-year. This endorses the fact that in today’s competitive environment, the value of customer connection is more than ever before. Companies go to great lengths to make sure they connect with their customers, be it using old mediums like television and newspapers or new mediums like blogs and newsgroups. Television, radio, newspapers and other mediums sell their ad spaces based on how many people will watch that particular advertisement, and most of the time, more the eyeballs, more expensive is the advertisement space.

But does it really matter how many people watch your advertisement? Of course it does, if you are selling bottled water, because that’s one of the few cases where all the people watching the advertisement are your customers. But in nine out of ten cases, the marketers need to target the niche. In that case, it doesn’t matter how many people watch the advertisement, what matters is how many potential customers are watching it. The success of web search powered advertisements is a testament of the importance of relevance. If the advertisement reaches the right customer at the right time, it can have a real impact on the sales of the company.

To sum up, it doesn’t matter if your advertisement reach out to a million people if your potential customers in that million is a hundred. A much better strategy will be to first identify those hundred customers using customer intelligence and then tailor your campaign to reach those hundred customers with a clear and focused message. It’s the who that matter, not the how many.

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Posted in Advertising, Marketing

Niche: the way to go

Posted on January 28, 2008 | 6 comments

When you make a web search in your favorite search engine, nine out of ten times, you don’t go to the second page. So it’s the first ten results that matter and rest are ignored. Same way the human brain works. There’s a list of top choices for everything and we normally ignore the others. So here’s the question: do you want to be the top choice for something, or mediocre for everything? I believe in today’s world, to be a specialist in something is what matters, which endorses that niche is indeed the way to go.

Targeting a niche market is important also due to the fact that one size doesn’t fit all, be it individual or industry. Consider something like developing Enterprise Resource Planning software. There are several minute details in every industry and to make sure you are optimizing resources for a company in that industry, you need to know those details inside-out. So I believe the best way to sell ERP solutions is to target an industry, master the economics of that industry and mold your software to take those details in consideration and make your solution attractive, and the primary choice, for companies in that industry. Such an ERP solution will definitely appeal more to companies in that industry as compared to generic ERP solutions.

In certain consumer products, companies make a mistake by directly going for the mass market ignoring any niche to which the product might have a special appeal. This process is often more expensive and doesn’t work for most companies, with exception of a few with really deep pockets. I believe a better approach is the one taken by companies like Apple and Whole Foods. These companies market their products to a small niche, to people who consider themselves member of these company’s cult, and then expand their reach to the masses. In the process, they generate support from a group of mavens who add to the company’s capacity to target a bigger and broader market in the long run.

6 Comments

Posted in Business, Marketing

Marketing helps…even teachers

Posted on January 13, 2008 | Comments Off on Marketing helps…even teachers

I always believed that teaching is something that speaks for itself. If a person is good in the profession of teaching, it will be recognized, no matter what, and children will gradually start to enjoy learning from this teacher. But recently I came across a third grade teacher who challenged this theory. This person, though not the best in his field, is the most admired teacher by the children in the class and the students do the best in subjects taught by this teacher. Reason: he markets himself as a fun loving person and the subjects he teaches as interesting, thus attracting the students towards the subjects.

This makes so much sense. Children consider something as hard or as easy as the perspective is developed for them. A twelve year old can play a multi-player video game with excellence but cannot solve a math problem. Logically thinking, this is something that is really hard to believe. But it makes complete sense when you take into account the likeness parameter. The kid enjoys playing that video game but tries to solve the math problem just because it is required. So if the teacher teaching math to this child makes math as interesting as that video game, I believe the math problem will be solved with the same excellence, if not more.

I believe marketing helps. Just like proper marketing can put life in a dead product, it can put life in a seeming dead subject taught in a class. All you need is to create an environment that generates interests for the subject, hence attracting children towards it.

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Posted in Marketing