Pitchmen, Pain and Positioning

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:

1. 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.
2. 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.

The Updated Innovation Bell Curve

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:

1. Value brands are increasing their quality (including ease of use) and are moving into the Mid-Market area
2. Consumers are increasingly buying value brands (e.g., store brands) as a way of saving money
3. 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.

Starbucks Fights Back

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.

B2B Innovation Curve

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.

The New Innovation Bell Curve

The old model of innovation is dead…and a new model has emerged.

For months now, I have been writing about the Innovation Bell Curve.  If you read between the lines, you quickly realize that it is no longer a bell curve but rather more of a bimodal distribution.

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.

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