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« July 2008 | Main | September 2008 »

The intangibles

Let's say your service costs more than the commodity-oriented competition (I hope it does!).

Where do you find repeat business or even new business? How do you make a sale (to another business or to a consumer) when you cost more?

The answer, of course, is the intangibles. The things that have no price. Things that customers value more than it costs you to provide them.

If you don't have that, all you can do is beg. And begging is not a scalable strategy.

If you find yourself saying, "the boss won't let me lower the price," or "we're more expensive, but that's because our cost structure is higher," then you're selling the intangibles too short. The stuff people can't buy at any price, from anyone else, but that they really value...

Here are some random ways you can embrace some intangibles:

  • Call the person before you get the RFP, before they know they need you. Brainstorm with them about how you can work together to create the thing they need. Participation is priceless. After all, if all you're doing is meeting my spec, why exactly should you be rewarded?
  • You'd be amazed at how much people value enthusiasm. Genuine, transparent enthusiasm about the project they're working on. Are you a framer? How do you respond to someone who brings something in to be framed? (Hint, if it involves a tape measure, you're missing the point).
  • Don't forget speed. If you are overwhelmingly faster than the alternatives, what's that worth? For some people, more than you can imagine.
  • Focus and personal service are obvious (but priceless) intangibles.
  • Generosity is remembered for a long time. People remember what you did for them when you didn't have to do a thing, when you weren't looking for new business, when it was expensive or costly for you to do it. Did you know that the movie studio bought Robert Downey Jr. a Bentley when Iron Man hit it big? He didn't ask, they didn't want anything (at least right now).
  • Error correction. How do you respond when you make an error? This is actually a huge opportunity to deliver an intangible, especially in a business to business setting. The last thing a client wants is to have to explain a snafu to her boss.
  • Peer pressure is another silent intangible. What will my friends and colleagues think if I choose you? What if I don't choose you? Is it fashionable to pay a lot? How hard are you working at establishing a connection across your market that choosing you is the right thing to do, regardless of the price?
  • The last one is probably the biggest. Hope. Do you offer hope for something really big in the future? Maybe just around the corner, but perhaps in the long run... What does it look and feel like? Are you drawing a vivid picture?

Simple example: Ideo. Check them on each one of these criteria and you'll see why they have a waiting list.

When providers are stressed or scared or pressured, they instinctively resort to price. It feels real and reliable. It's a trap, I'm afraid. It's the intangibles that drive all of the non-commodity decisions, and your job is to build remarkable ones and tell stories about them.

Old marketing with new tools

Remember hand-written thank you notes?

Then they became xeroxed form letters.

And then mail-merged form letters.

And then Amazon order confirmations by email.

We tend to use new tools to do less.
We try to save time and money at the same time, and end up depersonalizing and commodifying what we do.

A simple example: cost and speed pressure means that when you get your car serviced, it's unlikely you'll be greeted by the mechanic himself, wiping his hands on a greasy rag, telling you exactly what he did to your car. Instead, you'll get a difficult to decipher printout.

Why not use the technology to give more?

The mechanic can have a simple digital voice recorder. As he works, he can describe each thing he's testing and what he finds. You can then email the digital file to Iowa, India or Israel, have it typed up and beautifully formatted and waiting for the customer when he returns. How can that not be worth the $1.50 it would cost?

Or have your private school or summer camp record a 7 minute video on every student every month (that's a seven minute a day commitment per teacher) and post them privately. Seven minutes is the equivalent of a three-page personal letter, with far less resistance on the part of the teacher.

A friend of mine is wrestling with this right now. It's so so easy to hide behind technology, to use it as a shield, instead of as a clever tool to actually get you closer to the customers you depend on.

Another example: if you have high-value customers, you should never give them a mass Survey Monkey type survey. It's dehumanizing and it sends exactly the wrong message. Instead, ask them for feedback by email or web form. A few easy toss up questions and then just ask whether they'd recommend you and why.

If you get 200 responses, you ought to care enough to read and reply yourself. If you get 2,000, go hire someone to digest them all and make it easy for you to see the trends.

Inertia is one reason that techniques like these aren't done often, but the real reason is fear. We use technology to insulate us from our customers instead of bringing us closer.

Thoughts on popcorn

I don't like popcorn.

But today, walking by a bowl of it, I took some.

Most people do. The thing about popcorn is that it is a low investment, low risk snack. You can eat it if you're not hungry. You can successfully have a tiny portion. You are virtually certain that it will taste very much like your last popcorn snack.

There are products that are as easy to sample as popcorn. And making your product more popcorn-like is a great idea.

At the same time, it's interesting to note that very few people make a lot of money from popcorn. For a product this ubiquitous, it's surprisingly unsuccessful. Coke and Nike and Marlboro are a lot more powerful than Jiffy Pop.

So, the second lesson is that you want to make the sampling popcorn-like, but the commitment to be far bigger than it is for popcorn. Easy trial and consistent quality can lead to low commitment, not a great combination.

How do we make this more like popcorn? How do we make it less like popcorn?

The difficult choice

In a review of The Dip, a listener writes,

"Many winners and people or companies that get great results or wind up on top simply stumbled into winning or lucked out! He ignores the whole notion of how randomness plays into people or companies being winners or losers. But that's the whole point of these types of books - to make you feel like you have more control over your destiny. I would argue that luck and randomness play at least as big a role as all of this dip stuff. "

Without a doubt, luck is involved. I don't think anyone would tell you otherwise. The choice one needs to make, though is this:

Either you believe that luck is dominant, in which case, why bother with effort?
or
You believe that luck is random, in which case it can be eliminated from your thinking and you can focus on all the stuff you can control.

I don't think luck alone gets you into Harvard Law School or a clerkship at the Supreme Court. I don't think luck gets someone to buy your car (the best in its class and a great value) instead of the lame alternative.

I've been astonishingly lucky with many elements of my career. Mostly because solid singles turned into doubles or the occasional homer. I figure most of the failures are my fault and many of the successes were really good breaks. But I can't imagine how lonely and depressing it would be to view myself as nothing but a pinball, batted around by forces over which I have no influence.

The problem with not assigning it all to luck, of course, is that you're not only responsible for your wins, you're also responsible for your losses. This decision also means you've got a lot to do all day.

Waiting for the fickle finger of fate to point at you (and cursing the universe until it does) is a lousy strategy. What a shame that so many people rationalize their lives this way. It might be a useful rationalization, but how does it increase the likelihood you'll get what you want?

The secret of the web (hint: it's a virtue)

Patience.

Google was a very good search engine for two years before you started using it.

The iPod was a dud.

I wrote Unleashing the Ideavirus 8 years ago. A few authors tried similar ideas but it didn't work right away. So they gave up. Boingboing is one of the most popular blogs in the world because they never gave up.

The irony of the web is that the tactics work really quickly. You friend someone on Facebook and two minutes later, they friend you back. Bang.

But the strategy still takes forever. The strategy is the hard part, not the tactics.

I discovered a lucky secret the hard way about thirty years ago: you can outlast the other guys if you try. If you stick at stuff that bores them, it accrues. Drip, drip, drip you win.

It still takes ten years to become a success, web or no web. The frustrating part is that you see your tactics fail right away. The good news is that over time, you get the satisfaction of watching those tactics succeed right away.

The trap: Show up at a new social network, invest two hours, be really aggressive with people, make some noise and then leave in disgust.

The trap: Use all your money to build a fancy website and leave no money or patience for the hundred revisions you'll need to do.

The trap: read the tech blogs and fall in love with the bleeding-edge hip sites and lose focus on the long-term players that deliver real value.

The trap: sprint all day and run out of energy before the marathon even starts.

The media wants overnight successes (so they have someone to tear down). Ignore them. Ignore the early adopter critics that never have enough to play with. Ignore your investors that want proven tactics and predictable instant results. Listen instead to your real customers, to your vision and make something for the long haul. Because that's how long it's going to take, guys.

The bitter taste of nickels and dimes

Stopped by a Whole Foods early one morning this week for an iced tea.

I ordered a hot rooibos (you should try it) poured over a glass of ice.

Whole Foods is under two kinds of pressure: shareholders that want better results, and consumers who point out that it's really expensive. They're working hard to position themselves as not so expensive.

Anyway, the tea was $1.79 (a 90% gross margin) but the ice cost 50 cents extra.

Huh?

I mentioned to the cash register person that I wasn't going to pay fifty cents for ice. Understandingly, she said, "no problem."

And then, instead of doing what I expected (giving me the precious ice for free), she didn't give me the ice. I had hot tea. I got what I paid for.

The thing is, Whole Foods didn't get what they wanted. They focused on the add on revenue and generated ill will. No joy in Mudville that morning.

The problem with the infinite add on gross margin strategy is that it doesn't work on everyone. The problem with charging $95 to deliver a $10,000 purchase is that all the buyer remembers is the indignity of the add on.

Here's my advice: have all the add ons you want. But waive them early and often. Waive the charges for great customers or for customers that make a face or just because it's Tuesday. "Well, the to go charge is usually a dollar, but since you come here a lot, no charge for you."

It's not about charging less. It's about delight.

When in doubt, (don't) follow the money

People need to understand motivation in order to make sense of a story. When we see a person or a business take action, our first move is to try to figure out their motivation. The why. The what's in it for them.

We want to know why someone is acting the way they are. Your customers or your friends or your investors or your boss want to know what makes you tick.

And the reflex explanation is: money.

He works a ton of hours, but that's because he gets paid so much.

A going out of business sale? Oh, they're in pain, so I get to save money.

He recommended that book, but that's because he got a kickback from Amazon.

She wants me to buy that service because she works on commission.

Of course, in a few cases, this is exactly the correct explanation. Except it almost always isn't.

People don't volunteer long hours at the museum or at an online forum for the money. There isn't any.

People don't work nights and weekends at some jobs because they have to... they have colleagues that get paid just as much who work less.

I smiled a bit when I saw a few posts from people who suggested I started the Triiibe group as some sort of grand scheme to sell books. I've gotta tell you, there are far easier ways to sell a few thousand copies of a book than to build and run an online community.

No, people (most people) don't do things only for money. There's usually a minimum threshold that gets someone to pick a job and stick with it, but beyond that, the things we do are expressions of who we are and what we love and the impact we wish to make, not selfish acts designed to earn a few extra bucks. (No one paid you to read this post, I bet).

All other things being equal, people pick what pays the best. All other things being equal, people buy the cheapest one. Fortunately for marketers, all other things are rarely equal. People don't all sign up to work at Goldman Sachs. Most of the meaning and activity in our lives comes from the things we do for free, or the choices we make about work, not the financial exchanges we do to support ourselves.

Next time you catch yourself following the money, it's worth another look. Follow the non-money first.

Is architect a verb?

Michael_graves I confess. I like using it that way.

I think architecting something is different from designing it. I hope you can forgive me but I think it's a more precise way to express this idea.

Design carries a lot of baggage related to aesthetics. We say something is well-designed if it looks good. There are great designs that don't look good, certainly, but it's really easy to get caught up in a bauhaus, white space, font-driven, Ideo-envy way of thinking about design.

So I reserve "architect" to describe the intentional arrangement of design elements to get a certain result.

You can architect a computer server set up to make it more efficient. You can architect a train station to get more people per minute through the turnstiles.

More interesting, you can architect a business model or a pricing structure to make it far more effective at generating the behavior you're looking for. Most broken websites aren't broken because they violate common laws of good design. They're broken because their architecture is all wrong. There's no strategy in place.

Stew Leonard's, which used to be my favorite supermarket example, is architected to extract large amounts of money from customers. One example: there's only one route through the store. You start at the beginning and work your way to the end. No one goes there to buy a half-gallon of milk. And he's not going to win any design competitions either...

Or consider the architecture of the pricing at 37signals or the architecture of Hotmail's viral marketing campaign years ago.

Architecture, for me anyway, involves intention, game theory, systems thinking and relentless testing and improvement. Fine with me if you want to call it design, just don't forget to do it.

Two for two

Good news in the, "if you use them as examples, good things might happen" category.

Daily Candy, poster child for permission marketing, sold for $125 million today.

and CDBaby, my favorite ideavirus/music industry pioneer, just sold for a billion simoleons to the folks that also own the cutting edge duplicator, Oasis. Three companies that really pushed against the status quo to carve out important new businesses.

Selling out is no measure of real success, of course, but it helps make the case.

Next thing you know, we'll see tribal marketing musicians like Bon Iver continue to thrive.

Complicit

Are consumers responsible for the behavior of marketers?

Why does spam exist? Because (some) people respond to it. Why are ineffective pharmaceuticals so heavily marketed? Because (some) people demand that doctors prescribe them. Why are so many local stores struggling? Because so many customers cross the street to the big box stores.

I've maintained for years that marketing is so powerful that marketers have to take responsibility for the choices they make. And they do.

But what about us? What about the New York Times reporter who writes an entire column about the cheap grill he bought at Home Depot--he's upset that it didn't come with better service... At some level, isn't he getting what he paid for? And when consumers so often choose the cheapest possible tickets for air travel, aren't we arguing for a lousy product?

When I go back to a convenient B2B vendor even though they treated me poorly last time, aren't I complicit in rewarding that attitude?

(And please (!) if you think we need more ads like this or more stores like this or more service like this, go for it... you have the very same power in supporting them as you might in criticizing them. Consumers are also complicit when they fail to support the organizations that they agree with).

Ten years ago, this was a discussion that could be reserved for philosophy class. After all, ten years ago, what could one person do? Today, though, when everyone can be a blogger (as powerful as almost any broadcast journalist with the right story) and when everyone can spread ideas, what's our excuse?

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