April 27, 2009
My new guilty pleasure is watching the Discovery Channel show “Pitchmen.” On it are two pitchmen, Billy Mays and Anthony Sullivan, who create and star in direct response ads. These are TV commercials that sell you a product and entice you to call now.
Each week, inventors pitch their ideas to Billy and Anthony. Two inventions are selected and the dynamic duo then create advertisements for these products. Then they run the ads to see if they are successful.
It is interesting to watch which products the pitchmen select…and why. It appears that there are two criteria:
- The product must be visually interesting to demo. For example, using a hammer to smash Billy’s hand protected with a shock absorbent shoe insole.
- The product must solve a pain. I discuss the need to solve a pain extensively in my previous articles, including one on why a blizzard was the catalyst for the success of the ATM and why the best selling cars are gas guzzlers.
This last point is addressed more fully in a recent newsletter from The Straight Dope. In an article on direct marketing advertisements (the “As Seen on TV” brands), they discuss why now is the best time for these commercials.
In a January article in the Newark Star-Ledger, Telebrands president A.K. Khubani says tough economic times create an ideal environment for his company’s MO: not only are ad rates down, more people are staying home and watching TV. Superstar TV pitchman Billy Mays suggests that many direct-marketed products sell well in a bad economy because they help (or at least promise to help) buyers save money somewhere else. The problem of wasted food is solved with this miracle bag-sealer system! Don’t throw away those torn pants – save them with this mending kit! Even the clothes-storage products, which have been around a while, seem particularly appropriate in a time when some people are downsizing to less roomy, more affordable housing.
The rest of the straight dope article discusses the psychology of the special offers and pricing. In particular why the price point has to be low enough so that the viewer doesn’t think twice about impulse purchases.
This reinforces the point that I discuss often in my “innovation bell curve” articles…
In tough economic times, affordability and accessibility are king. Provide a product with a high perceived value for low cost. Perceived value is driven by the importance of the pain you solve. If you can solve a significant pain for little money, your customers will be eager to buy…even when they are cutting back on spending in other areas.
March 10, 2009
In a previous blog entry on the innovation bell curve, I presented a bimodal distribution curve rather than a bell curve. I did this because I wanted to clearly show the contrast between the existing model and the emerging model. I also did this because I am “graphically challenged” and I could not find a way of illustrating the movements in one chart. However, the changes are more subtle than a total shift to a bimodal curve. After working with a talented graphic designer for the past week, we finally have a more accurate depiction of the movement taking place.
You see the 3 main movements:
- Value brands are increasing their quality (including ease of use) and are moving into the Mid-Market area
- Consumers are increasingly buying value brands (e.g., store brands) as a way of saving money
- Premium brands are reducing prices while also offering different, lower-cost products.
The result is pressure on the Mid-Market brands that is squeezing many of these companies out of business.
Be sure to read all of the articles on the innovation bell curve to get a better understanding of the shifting dynamics.
March 2, 2009
In my previous blog entry, I discussed the struggles of Starbucks and how the innovation bell curve predicted this. Their early response to increased pressure from McDonald’s and Dunkin’ Donuts was to reduce prices by bundling. Not a good move.
The other day they announced their new instant coffee.
Their press release describes VIA™ as “a transformational instant coffee that replicates the body and flavor of Starbucks® coffee in an instant form…(It) is made by adding hot (or cold) water to a cup, which brews the coffee in an instant.”
It comes in individual packets that cost under $1 each.
I like this idea because if the product is truly a high quality coffee and the price makes it more attractive, they will effectively leverage their brand while appealing to the left-hand side of the bell curve. Instant coffee represents 40% of coffee sales, so it is a nice target market.
However, time will tell if this is a good extension of their brand, or if it dilutes their cachet.
P.S. In my previous article, I discussed McDonald’s forey into the higher-end coffee world with their McCafe offerings. Feedback from Starbucks junkies is that their products are as good – albeit appealing to a more mass-market palette.
P.P.S. My client gave me a Dolce Gusto machine. This capsule-based coffee machine makes cappuccinos, lattes, and espressos in no time with no effort or clean-up. Drinks range from $.50 to $1 each. The verdict? The cappuccinos are as delicious as those that cost many times more. Much better than any instant coffee could ever be. The only downside is that you have to invest in the machine.
February 27, 2009
In my previous article on the “innovation bell curve,” I introduced the new bi-modal innovation curve. Yesterday I gave a speech for Babson College MBA students. One of the attendees asked how this bell curve worked for the B2B environment (versus B2C).
Great question – and a harder one to answer. The reason it is harder is the psychology behind the buying decision.
I wrote about B2B versus B2C innovation a while back.
B2C purchases are made for both functional and emotional reasons. Functionally, a Lexus is similar to a Toyota. But there is an emotional component that makes the former more appealing. People often don’t just buy transportation, they also buy comfort, status, peer pressure and other less tangible attributes.
B2B purchases are made for primarily functional reasons. At the end of the day, the main purpose of a B2B purchase is to solve a particular business need. Yes, there are examples of B2B companies on the right-hand side of the bell curve. But quite often, these are luxury B2C brands that insist on high-quality, branded materials. In this case, the B2B provider is an extension of the B2C brand.
B2B companies, for the most part, play in the left-hand side of the bi-modal curve. Buyers of B2B products/services want:
- Someone who is easy to do business with
- High quality – they want it right, and they want it right now
- Cost is always a factor
Or, as Dr. Michael Hammer (the father of Business Reengineering) used to say, “People want it fast, right, cheap and easy.”
Yes, there are emotional reasons why B2B purchases are made. Back in the 1980’s, executives used to joke that you would never get fired for buying “Big Blue” (IBM) computers. It’s not that IBM was the best, but you knew they would not screw up. If you bought a computer from someone else and things didn’t work out, you might lose your job. But you were always safe buying the more expensive IBM boxes.
But even this emotional decision resides in the left-side of the curve. It is the emotional connection to the value you are getting that is at play. Value in the B2B world is defined a bit differently. That’s all.
February 20, 2009
The old model of innovation is dead…and a new model has emerged.
Therefore I have re-drawn my frequently used graphic and replaced it with the new innovation bell curve.
The Value Brands are rapidly improving their quality to the point where they are displacing mid-market brands. And, with the tough economic times, mid-market buyers are seeking greater value and shifting to the left, exacerbating this impact. Premium Brands remain differentiated (albeit sometimes niched) and always appeal to high-end, more sophisticated consumers. As the recession lingers on, these premium brands now offer lower cost versions of their products, further squishing the mid-market.
If you have not done so, please read all of my articles on the Innovation Bell Curve.
February 19, 2009
I spend most of my days thinking about the “innovation bell curve.” The concept is simple, yet profound.
Budget brands will continue to prosper as mid-market consumers move left to save money.
Although premium brands may suffer slightly, there will still be strong demand for high-end products and services.
It is the middle of the bell curve, the “mid-market brands” that are getting squished as consumers move toward greater value and premium brands reposition themselves (a bit more) toward the mid-market customer.
I’ve been thinking about this model as it relates to my career – giving speeches about innovation
On the right-hand side of this model are the “celebrity” speakers. These individuals include Harvard Business School Professors (e.g., Clayton Christensen), former CEOs of big companies (e.g., Jack Welch), and major best-selling authors (e.g., Seth Godin). These individuals charge MUCH more than I do. But they are also a draw. For large events, having one of the speakers on the platform will get butts in seats.
On the left-hand side of this model are the “vendor” speakers. These individuals work for large companies who view speaking as great marketing. These speakers are often not only free, sometimes they even pay sponsorship dollars to be on the platform. VPs of Innovation for large consulting firms or presidents of innovation software vendors fall into this category. They have something to sell the audience.
Where does this leave me? It certainly leaves me rethinking my business model. Then again, I am always rethinking my business model.
I am continuing to put more energy into books and products like Innovation Personality Poker®. These move me towards the left-hand side of the model. You can take me home for a fraction of the cost of one of my speeches.
I am also staying focused on the corporate market (rather than large conferences) because there is still great demand here. With group sizes of 50 – 300, celebrity speakers are prohibitively expensive. And given the small event size, the marketing opportunity is not as great for vendor speakers. My business continues to boom in this area.
Finally, I am shooting the pilot for my TV show in April. If all goes well, I may be able to re-position myself in the right-hand side of the chart – a celebrity speaker. But of course, time will tell.
Where are you positioned? Who is squishing you out of business? How can you reposition yourself?
P.S. In a previous blog entry, when discussing the innovation bell curve, I talked about the wisdom of Mr. Miyagi in the Karate Kid. He talks about those in the middle getting “squished like grape.” I thought you might like to see the YouTube video…
February 10, 2009
It was just announced that Starbucks is now selling a coffee and breakfast for under $4. It’s true. According to CNN You can get a 12-ounce coffee with a breakfast sandwich or roll or a 12-ounce latte with either oatmeal or a coffee cake.
According to CNN, “the move may be…targeted to drawing back business lost to more cost efficient retailers like McDonald’s and Dunkin’ Donuts.”
This is another examples of the “squeeze” of the players in the middle of the bell curve. If you are not familiar with it, read my articles on the bell curve of innovation. Dunkin’ Donuts (DD) is a great example of a coffee shop budget brand. As they expanded their offerings, they started to compete (at least in terms of coffee quality) with Starbucks. Although some think of Starbucks as a premium coffee, most real coffee snobs (and I know quite a few of them) turn their noses up at Starbucks. It has always been in the middle of the bell curve. In the past, the middle of the bell curve was a great place to be. No longer.
Last week I did a speech for the beverage division of a large food company. This division is largely comprised of “make at home” coffee products, including instant coffee. Business is booming. They now have easy to use coffee, espresso, and latte machines. These products represent an emerging “budget” entry. For a relatively low cost, these machines produce a high quality, single hot drink with little effort. There are no messy powders (uses simple capsules), no grinding, no cleanup. Accessibility at its best.
I realize that Starbucks is more than coffee, it is an experience. Unfortunately, today, people are less likely to pay for these experiences if other alternatives exist.
Are your products/services getting “squished?” Can you make them more affordable? More accessible? This may be the key to survival in this market.
February 2, 2009
In a previous blog entry, I discussed why the middle of the innovation bell curve is a dangerous place. I even quoted The Karate Kid’s Mr. Miyagi who said, “Walk on road. Walk right side, safe. Walk left side, safe. Walk middle, sooner or later [makes squish gesture] get the squish, just like grape.”
This prompted a question from Gareth Garvey, a great English innovator based in Copenhagen. He asked, “What happens as the products in the middle get squashed? Are we talking about a narrower road where we need to walk even closer to the edge to survive/succeed or is the middle ground recreated by new entrants?”
Great question. From my perspective, the middle ground is constantly shifting and getting recreated by new entrants.
Although using computers as an example is hackneyed, it does allow us to see the shifting dynamics in a short period of time. Regardless, these concepts apply to all innovations. Here are the dynamics…
The right-hand side of the bell curve is constantly shifting further to the right. That is, investments in innovation help premium product become better, faster, and higher quality. PCs now have the computing power of computers that once took up an entire room. There will always be a need for high end computers, whether it is for business, science, or gaming.
The left-hand side of the bell curve constantly moves too. I wrote before about netbooks that cost about $300. These computers will continue to increase in power squeezing out current mainstream computers.
Here’s the wrinkle…It was just announced that India has developed a computer that costs $20. Of course these have significantly reduced processing power, but will serve the needs of a larger audience. As these $20 computers increase in power over time, they will squeeze out the netbooks.
Mobile phones also need to be taken into consideration.
Right now, mobile phones have their own bell curve. Low cost simple function phones on the left (which have greater capabilities than the high-end phones just a few years ago). And the iPhones and Blackberrys of the world on the right.
What’s interesting is to see how these high-end phones can leap from the right-side of the mobile technology curve to the left-side of the computer curve.
iPhones and Blackberrys have basic computing functions now. But soon they too will become more powerful. I assume that in the near future they will also have the ability to display on larger screens – either through projection capabilities, expandable screens (like on the Jetsons), plug in monitors, or low cost wearable goggles. The data entry abilities will also improve. When this happens, and as costs drop, mobile phones will move formally into the left-hand side of the bell curve for computer innovations.
The curves are always shifting in many directions. What is a premium product today will become old quite quickly. What is considered budget will improve over time and become mainstream, eventually to be squeezed out by a new low-end entrant. What was on one curve (e.g., mobile phones) can shift to another curve (e.g., computers).
The key is to choose which side of the fence you are on. Premium or Budget. High-end or mass-market. Sophisticated or up-and-coming. Just try to avoid getting squished…
I will continue to address the “bell curve of innovation” in future entries.
December 26, 2008
Many of my recent posts discuss “Innovation and the Bell Curve.”
One quick comment on this idea. I often say that the left-hand side of the bell curve is about affordability and accessibility. But sometimes it is just about accessibility – for a premium price.
Two quick examples come to mind.
The Nintendo Wii is one of the best examples. Here, instead of creating higher quality graphics that would appeal to the advanced gamer (the right-hand side of the bell curve), they created graphics and interfaces that would appeal to people ages 8 and 80 alike. That’s accessibility (left-hand side of the bell curve). They must be doing something right. According to Engadget, 1.7 million Wii units were sold last week, when only 500 thousand XBox 360s and 240 thousand PlayStation 3s were sold. And of course there are all of the Wii add-ons.
Another example comes from the Financial Times. This is the best business and finance newspaper in the world. In addition to the paper, they offer many advanced services that would appeal to only those in financial institutions (right-side of curve). But they also offer their Lex subscription service for mobiles. This boils down all of the most important news into bite sized nuggets (and it is one of the most popular sections on the print edition). For people suffering from information overload (like me) this provides greater accessibility to the topics that matter most (left-side of curve). The cost to deliver this service is close to nothing (it’s all digital), yet the price to the consumer is more than the price of a print paper subscription.
Sometimes being more accessible (simpler) can lead to greater value and hence greater returns for you.
December 22, 2008
In the Karate Kid, Mr. Miyagi once told his student Daniel, “Walk on road. Walk right side, safe. Walk left side, safe. Walk middle, sooner or later [makes squish gesture] get the squish, just like grape.”
to listen to Miyagi, press play
This fits nicely with my perspectives on innovating in tough times. In my previous blog entries on how to make your products/services more affordable and accessible, I discuss why the middle of the bell curve is a dangerous place to be in these economic times.
I was just speaking with a client of mine and we had the same conversation.
His Fortune 50 company offers a commodity item, but is considered to be a premium brand. They are never first to cut the price of their items (and they rarely cut prices), but they typically lead the charge in price increases. Their brand is associated with high quality and high performance. They are often focused on the right-hand side of the bell curve. They have been doing exceptionally well.
Their competitors fall into two categories.
Some are white label, low price producers. Budget brands. They provide a lower quality product that appeals to those with the least to spend. These companies are in the left-hand side of the bell curve. They seem to be doing particularly well now that people are looking for bargains.
Other competitors are in the middle of the bell curve. They provide good product at a good price. How are they going? These companies are being “squished” by the low cost providers on one side and the premium brands on the other. They are struggling. My client wonders how many of these companies will survive.
The middle of the bell curve is a dangerous place to be these days. If you aren’t careful, you might just get squished like a grape.