Posts from ‘Learn From the Worst’
This is a guest post by Charlie Fitzgerald, a second-year MBA candidate at the Crummer School of Business at Rollins College. He’s passionate about Technology, Entrepreneurship and Finance, and you can follow him on Twitter here.
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To stimulate sales and build customer loyalty, it’s important that a company clearly communicates to consumers why their product is useful, and why the company is motivated to produce it.
There are two primary areas in the human brain involved in decision making; the neocortex which is responsible for rational, analytical thought, and the limbic brain which is responsible for judging feelings. When a consumer’s looking to buy, these two portions of the brain process information and collaborate to set a subjective demand for the product. Both processors are significant in decision making, but it’s the limbic brain that ultimately pulls the trigger.
In 1999, Mike Ramsay, and Jim Barton, ineptly raced their new product, TiVo, to the market. TiVo was innovative, and the technology has significantly improved television viewing ever since. Although, in the company’s feckless hustle to deliver its product to the market TiVo executive’s overlooked one very important move. They didn’t effectively communicate to consumers why they needed a TiVo.
One year after going public, TiVo missed projected unit sales set by one market researcher by a staggering 93%. The few consumers who did purchase a TiVo unit in 1999 were swayed to buy initially because of rational appeal; while this is only part of the purchasing thought process. Early commercials explained what TiVo could accomplish, and how it worked, but failed to induce a visceral response in consumers. Instead of making it clear why they needed a TiVo, marketers of the company left it up to the consumer.
This communication failure by TiVo’s leadership adversely affected initial product sales and thwarted future customer loyalty. TiVo’s developers made out with a coined phrase, but the company’s marketing strategy left shareholders with nothing to show for.
In retrospect, TiVo’s leadership should have concentrated on three fundamental questions prior to launch. Who are we, and why? Who are our target consumers? How do we engage our target consumers to feel our purpose? Consideration of these questions would have allowed TiVo’s leadership to understand, and consequentially better communicate purpose to consumers.
To inspire consumer loyalty, business leaders must focus on appealing to consumer’s limbic brain by clearly illustrating why the product is beneficial, and clarifying why the company exists to produce it. A convinced limbic brain is the tipping point of a purchase, and the primary driver of consumer trust and loyalty.
Groupon is the butt of a lot of jokes within the tech startup crowd, especially after their recent IPO in November. Most of these jokes are deserved — they lose tons of money each quarter, their founders have already cashed out, and the future is bleak for Groupon.
Groupon’s initial value proposition was incredibly innovative. They capitalized on one of the most foundational principles of economics: things costs less to businesses in bulk. They built a platform that empowered businesses to pass these savings onto their customers in exchange for viral and rapid marketing.
Of course, they had no business model. But who cares? Neither does Instagram. Neither did Twitter.
No one cares if you have a business model right off the bat – anyone can monetize a couple million users (or so it goes). As you grow, and continue to drive value through innovation, you find new and exciting revenue models to slowly become financially sustainable.
The potential for Groupon was massive. They gained tons of users very quickly, and they were being cloned hundreds of times every week all over the world. With a great business model, international expansion through acquisition would have been easy. The group-buying economics are location-agnostic. There was a massive upside, but it had to be capitalized on.
But here’s the kicker: they stopped.
The lack of innovation as Groupon grew was astounding. No new business model. No new value. No new marketing strategy. Just skyrocketing costs of customer acquisition and a management team who couldn’t care less.
Potential doesn’t matter if it’s never realized. One innovation is never enough. It takes continual innovation on every front to drive sustainability and growth within organizations. The best companies never settle.
Google+ won’t win.
It may ‘win’ for a year or two, but it won’t win in the long run — it isn’t the ‘Facebook Killer’ that everyone is heralding it to be.
When people say ‘Facebook Killer,’ they really mean ‘Next Big Thing.’ Most people don’t care about the ‘Killing Facebook’ part of it — they care about the next big innovation that will become the primary platform by which they connect with people across the globe for the next 5 to 7 years. It isn’t Google+.
You can’t kill Facebook by creating a slightly-improved version of Facebook. Why? Because no one wants a better Facebook. They may say they do, but they don’t. Steve Jobs (a master of innovation) famously says, “You can’t just ask your customers what they want, because they don’t know what they want.” In reality, they want something new entirely — something they haven’t even thought of yet.
Whoever can create an online platform that connects people in a completely-unexpected, simple-to-use, fully-integrated, and universally-accessible way will dominate the web for the next 5 to7 years. Barring serious improvements, it won’t be Facebook, Twitter, or Google+. When it does come around, you won’t even realize you need it — until you do.
Every industry has a Facebook. Unless it’s a necessity, don’t spend time creating better Facebooks. It’s not sustainable. You’ll never change the world by creating slightly better products than your competition. Develop a product that no one knows they need, then convince the world that they need it. Create an entire market that didn’t exist before, and force your future competitors to follow your lead.
