The seasonal dimension

Posted on January 8, 2008 | 1 comment

While waiting for my veggie burger to be cooked, I had a chat with the chef of the cafeteria I visit for lunch regularly. He asked me for cheese in my burger and I said no (as usual ;-)). He smiled and said – that’s the new year effect. The cheese consumption in the month of January drops pretty drastically because lot of people have it as part of there new year resolution to eat less fatty food, and it starts picking up again in February returning to normal in a couple of months.

This suggests that incorporating the seasonal dimension in enterprise resource planning can optimize the resources usage and prevent a lot of wastage. Another place where seasonal dimension can play a major role is advertising. Just as important as it is to target the right customer, it is also important to target them at the right time. For example, sticking to the “stay healthy” theme of new year resolution, I believe early January will be the perfect time for exercise machine sellers and fitness club owners to advertise their products and services respectively to the right set of customers. Similarly, it might not be as fruitful for airlines or travel web sites to spend on advertising in January because most of the people they are targeting just had their vacation a few days back.

These scenario show that something like seasonal dimension can play an important role in cost savings. In fact, I believe it is one of those nitty-gritty details, which if considered correctly can make your planning system stand out above the lot.

1 Comment

Posted in Advertising, Technology

Let’s think green

Posted on January 4, 2008 | 1 comment

Green is for everything, and you don’t have to make your product bland to make it eco-friendly, all you need is creativity in product development to attain it. I came across gDiaper video a few days back and I believe these diapers certainly endorse this fact. gDiapers consists of a washable outer pants and plastic free flushable refill. The outer pants make the diaper look nice, the flushable refills make them a lot easier to use and dispose, and at the same time the plastic free refill makes the product eco-friendly. So next time when you think that your product doesn’t have scope to go eco-friendly, think about the diapers to get some inspiration!

This is just one example where making the product eco-friendly makes it easier and smarter to use. Another one that is gaining lot of attention is Honda Pilot. Honda built this car which looks like an SUV and gives twice the gas mileage as compared to a normal SUV. By making a green product, Honda is on its way to cash on all the bad publicity SUVs are gaining for bad mileage, which makes them both non eco-friendly and costly to use.

So what does “think green” mean? “Think green” simply means add features to your product that gives it added advantages along with making it better for the planet. Using creativity and making conscious efforts in designing the product can lead to an eco-friendly output with features that can attract the customers. Plus you need one more thing – marketing. You need to let the customer know that your product is eco-friendly. Eco-friendly pitch can give your product the much needed differentiating factor, and in some cases can even help you de-commoditize the product.

1 Comment

Posted in Business, Marketing

Starbucks: Goal – Soul. Bonus – Belly.

Posted on December 22, 2007 | 2 comments

Living in Seattle, it’s hard to escape two things – rain and Starbucks. Experiencing both in abundance and spending quite a good sum–money and time–at my neighborhood Starbucks on frappuccino, it came as a surprise when Starbucks lowered its forecast for 2008. One of the reasons for lowering of forecast is increased competition from McDonald’s and Dunkin’ Donuts. This raises the question – what is the best way for Starbucks to take on these two giants moving forward? I believe the best way is by sticking strong to their roots and concentrate on filling the soul. In the process if the belly is filled, that’s an added bonus.

I recently completed reading Howard Schultz’s Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time. Schultz’s very well defined the foundation of Starbucks i.e. making the local Starbucks as the third place for the people in the community after their work and home. Starbucks should make sure they do not loose their coffee bar atmosphere while tackling any competitor. That atmosphere is as integral to their brand as is the high quality coffee. Another important thing to note is that people do not come to Starbucks just for a cup of coffee, they come to get satisfaction of buying coffee in a store, where there is the perfect atmosphere to buy that perfect cup of coffee prepared by the cheerful (mostly) barista, or as Schultz put it, people come to Starbucks to fill their souls.

Now let’s talk about the specific competition from McDonald’s and Dunkin’ Donuts. Starbucks cannot take on either of these two on price equation. McDonald’s is known for its economical offerings and has an edge over all its competitors in this field, Starbucks being no exception. In fact, we all know that Starbucks charges a premium, and that has become an integral part of the brand. As far as the rising cost is concerned, it is experienced equally by all the competitors, so I won’t bring that in this equation.

McDonald’s and Dunkin’ Donut are primarily known for their “not so healthy” food. Fat rich offerings at both these places are not the first choice for the health conscious customers. That creates a perfect opportunity for Starbucks to play the health card! Starbucks has always created that perfect third place atmosphere for its customers. By offering healthy food for breakfast with the cup of coffee will provide Starbucks the opportunity to make it the one stop shop for customers in the morning, rather than hopping to different places for coffee and breakfast. Selling point – they are having the best coffee with a healthy meal.

The basic point to understand here is that people do not come to Starbucks to buy the panini sandwich, they come there for the cup of  coffee, but while getting that cup of coffee, if they can get something healthy to eat, they would appreciate that as compared to eating that thousand calories breakfast with a not as good cup of coffee.

2 Comments

Posted in Business, Marketing

Howard Schultz and Ray Kroc

Posted on December 16, 2007 | 2 comments

Howard Schultz and Ray Kroc are two great entrepreneurs behind two of the most identified American brands, Starbucks and McDonald’s respectively. I love long plane journeys, one reason being that I get to catch-up on my reading. During my most recent trip to India, I picked up Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time authored by Howard Schultz. This is one great book. (One thing to learn from Howard Schultz apart from his entrepreneurial skills is the art of story telling…) Coincidentally, during my last long plane journey (to Milano, Italy), I was reading Grinding it Out: The Making of McDonald’s by Ray Kroc, another book that falls in the same autobiographical league. The two autobiographies have some amazing similarities worth talking about.

First, both were believers. After his first visit to the single McDonald’s store in California, Ray Kroc knew that this is going to be something bigger than what anyone can think of. He believed in the concept of McDonald’s and had the drive to spread it beyond boundaries more than anyone else, even more that the McDonald brothers running it. Similarly, Howard Schultz was impressed by the coffee bars he saw in Milano, Italy. He believed that Americans should start enjoying their coffee experience and became a preacher of serving hot coffee in the once retail-only Starbucks stores. Their belief powered by persistence through all the ups and downs led to the formation of these two global brands.

Second, neither one of the two started the first store of what they are known for. Not only this, both of them were suppliers to the stores they later converted into big phenomena. Ray Kroc supplied juice mixers to the original McDonald’s store in California and Schultz supplied appliances to the Starbucks stores in Seattle. A slight difference in approach over here, Ray Kroc signed a deal with McDonald’s owners to use their name and concept to open similar stores elsewhere, while Howard Schultz joined Starbucks as a marketing manager, left the company to open coffee joints under the name of Il Giornale, bought Starbucks and became its CEO.

Third, both were obsessed with the names. Kroc went through series of issues with the McDonald’s founders but stuck with the name and the famous M curves. Ditto for Schultz. He opened his coffee bars Il Giornale, but liked the name Starbucks so much that he renamed all his already running Il Giornale stores after acquiring Starbucks.

Fourth, both left stable jobs to chase their dreams. Kroc was selling mixers when he came in contact with McDonald’s. Within weeks, he was on plane with deal papers to start his journey. Schultz decided to quit his well paying job of $75,000 a year in 1980 and took a big pay-cut to join Starbucks.

Fifth, both were staunch believers of quality. Starbucks is known for its quality, and Schultz developed the entire enterprise one store at a time keeping the quality intact. Till today, Starbucks does not compromise on the quality as far as possible. They do not add flavor to the beans, or sell low quality beans in their stores. Starbucks, since its inception has a 40 hours training program for its baristas to serve the perfect cup of coffee. If McDonald’s is known for one thing, its the fries. McDonald’s got a perfect process for preparing its fries and they have not compromised on standards there even a little bit. There’s a complete university like program for the employees at McDonald’s for decades and every person working in McDonald’s goes through this program to maintain the McDonald’s quality and service standards.

Sixth, like any other successful entrepreneur, both Kroc and Schultz pioneered the unique quality of building and leading great teams. Read their autobiographies and you will find chapter after chapter in praise of the people they worked with and the great folks who embarked on the journey with them to lay the foundation of their respective enterprises.

These two individuals, role models for many budding entrepreneurs, and the similarities in their approaches endorses the importance of persistence and people management among other things. A look at one big difference between the two can be interesting as well. Howard Schultz started his first coffee store operation when he was 28 years old. On the other hand, Ray Kroc started his first McDonald’s when he was 52. If nothing else, this definitely proves that age is no barrier to kick-start something you believe in…all you need is a dream and the vigor to chase it!

2 Comments

Posted in Business, Management

Is Kindle adware-able?

Posted on November 26, 2007 | 6 comments

Amazon came out with their much talked about e-book reader – Kindle. The device is no doubt impressive, but it is $399. To place it one way, well if you can buy a music player for this much (remember iPod early days?), why not an e-book reader? This is fair, and yes, Kindle will get its share of early adopters. But what Amazon must be wanting is to get this reader in as many hands as possible so that it can build and sell its exclusive library of e-books. I think it will be really hard for the company to get deep penetration with the reader if it is sold with this price tag. So what are the alternatives?

Well one alternative is to subsidize the reader and sell it at a loss with the hope to make it up with e-book sales. This is a time tested strategy used by everyone from printer manufactures, betting on cartridges, to gaming console manufactures, developing market for the video games. Thought this might not work that well for Amazon, because Amazon is selling e-books for $9.99, and this includes royalty costs for the publisher/writer and transfer cost for the wireless service provider. So it is very much possible that the lion share of Amazon profits are coming from selling the Kindle hardware, and not the e-books.

But there is another, much compelling and hopefully much more successful alternative. That is to make Kindle adware-able. Adware is the growing source of subsidizing cost of many things online, be it news, search or communication applications. So why not an e-book reader? Kindle has wireless access powered by Whispernet (runs on Sprint network in USA, and by other cellphone providers globally as and when Amazon takes it to global markets.) Amazon uses this wireless access to download e-books, newspapers, and even wikipedia articles on customers’ Kindle device. At the same time, it is very much possible for it to download advertisements on the device. Amazon has an added benefit here. It can very well serve contextual or location based advertisements to make them more effective for the customers and compelling for the advertisers. I believe customers won’t mind seeing advertisements on bottom corner of their reading screen every ones in a while if they get the Kindle for substantially low price, or may be for free. Amazon can of course use its creativity to make ads as less obtrusive as possible.

Amazon can make this adware enabled Kindle optional. They can sell a premium version of the device for the existing price tag, which will have no ads, and sell an adware version of device for the ones willing to go for it. Even if Amazon is making its money just by selling the device, I believe it will be an incredible business opportunity for Amazon to try an adware based Kindle, as it will be a win-win for both the customers and the company.

6 Comments

Posted in Advertising, Business, Technology

Marketing Experience

Posted on November 15, 2007 | Comments Off on Marketing Experience

When people enter a BMW (replace with your favorite car) showroom, what are they looking for? Are they looking for a car with a great performance and cool interior? Or a car with 5 years/40,000 miles warranty? Or something else? Well I think both, a great car and a top notch service, but that’s not all. Most of the time they are also looking to buy the experience, the experience of owning and driving this car. Many times, great product and service just do not make it lucrative enough for the customer, and that’s where experience kicks in. In a market where there are many choices available, you need to differentiate your offering from the competitors’, and one way to do that is by hooking an experience with your offering.

So what is this marketing experience? You can think of this as just another form of de-commoditization. It’s like you are still selling a product coupled with service, but you are packaging it as something more. Something virtual that adds value to your offering. There are several ways of marketing experience. One way is to attach a story to the product, something that the prospective customer can connect with. By doing this, the product creates a special place for itself in the hearts and minds of the customers, and when they finally go to buy it, they are buying that experience.

Yet another way is by adding a vibe to it, like in case of Trader Joe’s: a classic example of marketing experience. People shop at Trader Joe’s because they trust the quality of products they get at this place and they experience shopping at Trader Joe’s as shopping at a local store, a store that does not have that big chain kind of feeling. So here we are talking about a company with about 300 stores nationwide, a chain enterprise with the highest sales per square foot numbers (about $1300 to $1400, compared to industry average of $400 to $500) in its class and yet creating an experience of the local grocery store, which forms the base for its success. And to make it more firm, here’s the tagline of Trader Joe’s: Your Neighborhood Grocery Store. That’s what is marketing experience at its best.

Marketing Experience goes even further. Companies sell experience of working at their company to prospective employees. Business schools attract top talent by selling experience of studying and networking at their schools. The army and the marines sell the experience to get the best of the best to join the forces. Politicians sell a dream of an experience, an experience of a better tomorrow, to buy the votes. The list goes on and on.

The basic strategy is to put the product aside and concentrate on marketing the experience. The experience that can be only filled when your product comes in picture. If you are successful enough to make customers look for that experience, your product will automatically sell.

Comments Off on Marketing Experience

Posted in Advertising, Marketing

Change is constant

Posted on November 4, 2007 | 3 comments

Change is inevitable. There is nothing that stays constant for ever. Things change, businesses change, markets evolve, customers move and to succeed in this continuously evolving world, you need to stick to only one constant, and that is change. Any entity, be it an individual, a group or a business needs to change with time to succeed. Businesses change and evolve in many ways, sometimes to lead a change in the industry and sometimes to adjust to the changing environment, sometimes using an experimentation approach and sometimes using a gradual approach, and at times even out of desperation to succeed.

One of the best examples of change, as described by Jim Collins in his book Good to Great, is the change in the retail industry led by Kroger in the early 1970s. Kroger understood and managed radical change in the way Americans wanted to shop, and changed the way Kroger stores sold goods to the people by shutting down its small stores and opening superstores. Kroger understood what customers wanted and gradually went on to replace all its small grocery stores into big superstores. This exemplifies the importance of change very well because during the same time, other grocery chains like A&P did not feel the importance and need to change and suffered major losses loosing most of their market share.

Another way change occurs is when companies explore different ways to sell their products to the customers. An example that comes to mind for this type of change is the change and development in the software industry. With the advent of Internet and increasing penetration of broadband connections, more and more software companies are operating like service companies providing services to customers by hosting their software and letting customers access it through the web. The change is making the world of software better in many ways like reducing the cost of the products for the end customers, better manageability of the software at central locations and faster evolution of the software over time. With more people spending more time on the Internet, and increased budget of ad money spent online, another change that has been seen in the software industry is the way companies make money. The software companies can now subsidize their services which they provide to the end customers with the help of targeted advertisements alongside their services.

Yet another way change occurs is in the way products are developed and owned by the companies. More and more companies are moving to a more open model of development as compared to the closed model with strict ownership. One of the most clear evidence of this change is the change in the way Apple operates and develops on its platform. A traditionally closed company Apple, even after striking gold with its end to end controlled platform of iPod, now plans to open up to let third party developers and individuals develop software on their iPhone framework.

There are lots and lots of examples of how companies drove change or adapted to change to succeed in the industry. At the same time, there are equal number of examples of times when companies refused to change and suffered in the long run. The success of any business largely depends on how well it manages change and sooner they move in the right direction to implement change, stronger it builds the foundation for success.

3 Comments

Posted in Business, Technology

iPhone and the Chasm

Posted on October 30, 2007 | Comments Off on iPhone and the Chasm

There is one important thing to notice in all the activity and development in the iPhone world over the last few months. It takes us back to the discussion about the Chasm and the Tipping Point. The attempt of Apple to increase the adoption of iPhone can be seen in two ways:

First, Apple is trying to take the product across the Chasm. This brings up a case when companies take steps to push its product across the chasm. When this happens at a normal pace in the technology world, the mavens act like an important force to enable this push. But when companies try and force this by measures like price cuts, they are always taking the risk of loosing the support from the early adopters. For Apple, the risk was relatively low because of its track record of creating design geniuses over the years and the die-hard loyalty of the customers. 

Second, Apple is trying to increase the number of early adopters. If you see the potential size of the cellphone market around the World, having a million users for your product is not even scratching the surface. So one way to look at this is the early adoption base that Apple is trying to create in order to have a more profound force to take it across the chasm, may be in a few years.

I am more willing to go with the latter argument. It is true that Apple iPods have been a massive success and people pay a considerable premium to buy one of these. But when it comes to cellphones, the ballgame changes a little. We are looking at a two year contract with a minimum of $1200 for cellphone plan over this time. More important, we all know that in these two years, the iPhone and the likes would have taken at least a few major jumps both in terms of design and features, and the early adopters will not be able to move to the newer device till the contract ends (just look at an iPod from two years back and compare it to what is offered today). So I think it is a good strategy for Apple to get as many happy early adopters with it as possible so that when it comes out with the next version of iPhone in more models and variations to target a bigger market, it gets enough push from these mavens to cross the chasm. 

Comments Off on iPhone and the Chasm

Posted in Marketing, Technology

It’s not $200, it’s the differentiating factor

Posted on October 30, 2007 | 1 comment

Now that the dust has settled a bit on the $200 price reduction on the much popular Apple iPhone, I think we should give it another look, from a slightly different perspective. Apple’s move caused a massive uproar from the early adopters. But price reduction is not something that happened for the first time. Cellphones get cheaper every other day, sometime even reaching negatives. So what was so special about iPhone? I think it was the differentiating factor, and Apple took that away from its early adopters by making the iPhone considerably affordable.

Apple early adopters are the group of people who are willing to shell additional dollars to get their hands on the latest Apple product, before the masses start adopting it. It is that virtual cult membership that gives them a sense of satisfaction and pride, to say the least. Now when the price conscious buyers got a hand on the iPhone after the price reduction, helping Apple to reach the target of selling 1 million iPhones by September, this cult pretty much dissolved in less than 12 weeks.

Apple tried to calm down the early adopters, its maven community, by giving a $100 store credit. Though it did make some early adopters happy, but for some reason, I think Apple did not hit the bull’s eye this time around. The basic thing that Apple did not fix with this move is the disappearance of the differentiating factor for the cult. How Apple could have fixed it even better? By creating that differentiator, or should I be more clear by saying clearly identifiable differentiator. It could have been an exclusive screen saver or wallpaper on iPhone, an exclusive set of ring-tones only to be available for the early adopters, a couple week early availability of the new apps coming out on iPhone or something else. Though this won’t have discounted for the $100 store credit, but the additional set of bells and whistles would have kept the loyalty of the “very” early adopters more intact.

But then, there is another perspective to take here – by making the iPhone more affordable, Apple increased the number of early adopters to a million, creating a stronger base for future releases…

1 Comment

Posted in Marketing

De-commoditization

Posted on October 22, 2007 | 6 comments

Selling commodities is hard, or should I say, selling anything as a commodity is hard. But what is a commodity when it comes to marketing? Is water a commodity? I think we have discussed this extensively in the past, so let’s move on to something else that looks like a commodity. How about coffee? Coffee is something many people need as the first thing in the morning. But then you put down $4 for a cup of it at Starbucks when you can clearly get it much cheaper at other places, let alone making your own coffee at home. This clearly throws it out of the commodity category.

Why are basic things like water and coffee not treated like commodities anymore? I think it is because companies like Fiji Water, Evian and Starbucks have very successfully applied the skill of “de-commoditization”. Anything that is treated like a commodity can be moved out of this commodity bracket with the help of marketing principles used by these companies.  All you need to do is make your product as attractive as possible and differentiate it from the lot. Whether it is by calling your bottled water as Artesian water and importing it from a far off place, or by finding tongue twisters to the name of your coffee and creating an atmosphere in there as cosy and comfortable as possible.

Let’s take something that is marketed as a commodity and play with it to de-commoditize it.  How about rice? Let’s try and de-commoditize rice, theoretically (I am not saying it is an easy thing to do. We all know that it took lot of hard work for the likes of Evian and Starbucks to master de-commoditization. We will just think out-loud and put some ideas on the table for the sake of this discussion). Rice is a food product, so like any other food product, we need to bring in two factors into consideration – purity and health – while marketing our brand of rice. Talking of purity, some things that come to mind are things like how it is handled, packaged, added coating and so on. As far as health is concerned, things like fat content, impact on cholesterol, organic production and healthy for heart are some factors that appeal most to the customers while making a buying decision. By advertising and marketing this product around these factors, we can create an impact on customers, hence persuading them to go for this brand of rice. 

In order to add the final push, we need to take packaging into account. This is something that is super important as well. Aren’t you wowed seeing the iPod packaging? Aren’t you excited to open something that is packed with lots of artistic integrity? So to add value to our product, let’s create an attractive packet for it with option to preserve the packet after using it or keep using it on an ongoing basis instead of emptying its content in a box.

By differentiating your product by using aspects like purity and health, and making it attractive using a unique packaging, we are now selling something that is much more than just a packet of rice…so what is it? It’s faith, health and purity being sold in that packet which contains a byproduct known as rice!

The point here is that it is not important what product you are trying to sell, what is important here is how you are selling it. Doesn’t matter how common or how lack-lustrous (you think) your product is, you can make it cool and attractive. Just think about it…if water, coffee and eggs can be de-commoditized, then your product or service can as well!

6 Comments

Posted in Marketing