Imagine this conversation between two shoppers at a car dealership:
Consumer #1: I want the one I read about in the latest issue of Car and Driver magazine: It has a six-cylinder turbo engine, a double-clutch transmission, a 90 strokebore, and 10:1 compression ratio.
Consumer #2: I want a red one.
Involvement describes a person’s perceived relevance of the object based on their inherent needs, values, and interests. Most marketers and salespeople grapple with the challenge of finding ways to get their customers interested in what they sell. Indeed, a highly involved customer is The Holy Grail of Marketing.
Why is this so?
Our motivation to attain a goal increases our desire to acquire the products or services that we believe will satisfy it. However, as we see in the case of Consumer #2 at the car dealership, not everyone is motivated to the same extent. Involvement reflects our level of motivation to process information about a product or service we believe will help us to solve a problem or reach a goal. Think of a person’s degree of involvement as a continuum that ranges from absolute lack of interest in a marketing stimulus at one end to obsession at the other. Inertia describes consumption at the low end of involvement, where we make decisions out of habit because we lack the motivation to consider alternatives.
As our involvement increases we think more about the product (“I’ve spent the last three days researching mortgage interest rates”) or we experience a strong emotional response (“I get goose bumps when I imagine what my daughter will look like in that bridal gown”).
Not surprisingly, we tend to find higher levels of involvement in product categories that demand a big investment of money (like houses) or self-esteem (like clothing) and lower levels for mundane categories like household cleaners or hardware. Still, bear in mind that virtually anything can qualify as highly involving to some people—just ask a “tool guy” to talk about his passion for hammers or plumbing supplies.
Cult products such as Apple, Hydrox, Harley-Davidson, Jones Soda, Chick-Fil-A, Manolo Blahnik designer shoes (think Carrie on Sex and the City), and the Boston Red Sox—command fierce consumer loyalty, devotion, and maybe even worship by consumers. A large majority of consumers agree that they are willing to pay more for a brand when they feel a personal connection to the company.
In our 24/7 world where consumers are bombarded with marketing messages, selling involvement is harder than ever. But, it’s well worth the effort to explore strategies to boost customers’ motivation to acquire a product, service or specific brand. This requires investment of time, money, — and especially creativity. But the payoff is well worth it – this is what we can think of as Return on Involvement (“the other ROI”).
Join us for a one-hour webinar on May 11, 2017 and learn more about “the other ROI” with Michael Solomon.
Michael R. Solomon, Ph.D.
Photo Credit: Meghan Duthu
BENEFITS, NOT FEATURES: 30 QUOTES
- Reid Hoffman: Founder, LinkedIn
If you are not embarrassed by the first version of your product, you’ve launched too late.
A great product isn’t just a collection of features. It’s how it all works together.
- Marco Arment: Founder, Instapaper
Making a product better often requires removing features.
The secret to building great products is not creating awesome features, it’s to make users awesome.
Sell the benefits, not your company or the product. People buy results, not features.
- Dave McClure: Founder, 500 Startups
Features are like having sex. You make one mistake and you have to support it for life.
Pick three key attributes or features, get those things very, very right, and then forget about everything else … By focusing on only a few core features in the first version, you are forced to find the true essence and value of the product.
Our old system was just not able to accommodate our newest product features. Our goal was to get a stable, scalable, system that would help us speed new products to market.
The best feature is less featureless.
We see a lot of feature-driven product design in which the cost of features is not properly accounted. Features can have a negative value to customers because they make the products more difficult to understand and use. We are finding that people like products that just work. It turns out that designs that just work are much harder to produce that designs that assemble long list of features.
I would say, as an entrepreneur everything you do – every action you take in product development, marketing, every conversation you have, everything you do – is an experiment. If you can conceptualize your work not as building features, not as launching campaigns, but as running experiments, you can get radically more done with less effort.
We now know that something between 85 and 90 percent of most software product features are unwanted and unneeded by customers. That is an enormous amount of waste of time and money that ends up on the floor.
We are focused on features, not products. We eliminated future products that would have made the complexity problem worse. We don’t want to have 20 different products that work in 20 different ways. I was getting lost at our site keeping track of everything. I would rather have a smaller set of products that have a shared set of features.
Even the best designers produce successful products only if their designs solve the right problems. A wonderful interface to the wrong features will fail.
What features your customers as for is never as interesting as why they want them.
Reducing a product’s definition to a list of features and functions ignores the real opportunity – orchestrating technological capability to serve human needs and goals.
If you watched companies such as Sony and Samsung grow, they focused first on features and then on industrial design, which made their products look and feel better.
No amount of data will tell you if a feature should be in the product, because it doesn’t exist. You need to have a very clear leader with a clear point of view…otherwise, you get a mishmash of features and stuff that doesn’t make a lot of sense.
You want to do a few things really well because you want to come out with a product that is fully baked, even though it may be lacking in a few features or whatever, rather than the one that’s all-achieving but not doing anything too well.
It turns out that if you optimize the performance of a car and of an airplane, they are very far away in terms of mechanical features. So you can make a flying car. But they are not very good planes, and they are not very good planes.
Normal people…believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet.
Technology is supposed to make our lives easier, allowing us to do things more quickly and efficiently. But too often it seems to make things harder, leaving us with fifty-button remote controls, digital cameras with hundreds of mysterious features and book-length manuals, and cars with dashboard systems worthy of the space shuttle.
The cost of adding a feature isn’t just the time it takes to code it. The cost also includes the addition of an obstacle to future expansion. The trick is to pick the features that don’t fight each other.
I don’t want features, I want value. I don’t want benefits, I want value.
Every feature has some maintenance cost, and having fewer features lets us focus on the ones we care about and make sure they work very well.
Prices are coming down. And they have the features and benefits people want.
Hardwood floors are very popular features in new homes. Many individuals are also installing hardwood floors when they renovate their residences. Consumers realize that this feature adds value to their investment.
This is true for most new products. The majority of people you’re competing with are non-users. They are people who have never used your service before. And what they say is actually the most important. What they say is the thing that blocks you from expanding the size of your market with your features.
The fossil record implies trial and error, the inability to anticipate the future, features inconsistent with a Great Designer.
Learn not to add too many features right away, and get the core idea built and tested.
Image: Imani Clovis
Asset-light business model is the key to success for start-ups
Asset-light business model is the ket to success for most start-ups. Around eighty percent of new businesses fail not because of a bad idea but because of choosing the wrong business model. They start with high fixed costs and no revenue. At the core of this bad implementation lies the ill-conceived notion that a heavily invested business would generate high revenues. Some have flourished, but most have floundered. People give too much concentration on acquiring operational resources for the company. But not enough gets done on generating at least break-even revenue. This has resulted in a majority of start-up flops.
Well, it doesn’t have to be that way. There is still hope for entrepreneurs. Seasoned business people have extolled the virtue of starting small with zero assets and leveraging the enormous power of technology. Put it another way, it means adopting an asset-light business model at the very early stage of the company.
At the Berkshire Hathaway Annual Shareholders Meeting held in April 2016, Warren Buffett commented that asset-light businesses are the ideal investment opportunities. They generated significant cash flow by investing in some asset-light businesses in the early years of the company. At the heart of today’s most successful start-ups lies the emergence of asset-light business model empowered by deep-pocket private investors who are disappointed by the returns from other investments. The business model helps companies exploit new revenue opportunities faster than more mature and established firms. On closer inspection, it is not hard to find some common traits and features of several new generation businesses.
The disruptive trend towards asset-light business model has bolstered the bullishness of Uber’s investors. The model has enabled its strategy of growth over the pursuit of profits because of the lower cost of expansion. Uber does not own or maintain any vehicles because it uses the gig economy for its survival.
What started off as a simple online business in 2008 selling flip-flops from a Berlin flat has developed into large e-commerce selling goods to 15 countries. Zalando sales revenue is rising by around 15% a year. Guess their business. Selling other brands through the Internet. Surely, the asset-light approach is nimble and sustainable.
One of the ways to adopt an asset-light business model is through outsourcing as Wendy’s has done. It has reduced capital and the amount of real estate they own and managed through franchising their American outlets. Many fast food giants have followed suit and have taken advantage of such scalability.
Capital equipment OEMs
Most OEMs have transferred the task of designing and manufacturing the systems and subsystems to suppliers as new parts sold by vendors are replacing certain obsolete ones thereby passing on the operational complexities and costs associated with producing them using the capital-intensive equipment.
An innovative business model whereby partnering with existing hotels and getting a percentage of commission from them has made OYO Rooms a huge success. The brand owns hotels without having to build them from scratch thus resulting in huge savings, less risk, and exponential growth path.
From homegrown online start-up to an e-commerce giant Snapdeal has managed to garner a huge customer base just by leveraging technology. The Internet has made it possible to reach a wider range of market than ever before with lower asset requirements. In just over five years it has managed to achieve a valuation of USD 5 billion making it attractive to future investors.
Accor group of chain hotels and InterContinental hotel franchises some outlets to other hotel operators. They manage but not own some others. Only a minority of the outfits is owned or leased by the companies. Here the bricks-and-mortar is the property of someone else. Similarly, Marriott owns only a tiny fraction of the hotels that bear its brands.
Utilization and not the acquisition of aircraft is key to stellar returns in the aviation industry. Lan flights use their aircraft to service both passengers and cargo. Likewise, DHL and Cathay Pacific share aircraft for their cargo and passenger routes respectively enjoying the advantages of increased utilization of their capital intensive wide-bodied aircraft.
Types of asset-light business models
Boston Consulting Group points out the most common types of asset-light business models based on the sources of differentiation. They are outsourcing, asset-sharing, licensing in, and licensing out. Inherently these models help companies to keep costs low, diversify risks, and to branch out into new markets. Companies outsource the supporting systems so that they can free up their resources and concentrate on their core business. Similarly, asset-sharing helps in lowering operational and labor costs. Licensing in and licensing out has helped companies to foster valuable strategic alliances in a cost-effective manner.
Lessons for start-ups
It is only natural for a wide-eyed entrepreneur to get overwhelmed and intimidated by the sheer enormity of all these successful businesses. But they all started off with zero capital. All they had was the founder’s drive. Their success lay in adopting an asset-light business model that had virtually no cost and was easy to exit in case the business failed. An asset-light business model start-up company to be successful and to have the edge over others in the market should have the following essential qualities:
- Start with the potential for future growth by paying attention to the market demands
- Do strive for a wider and deeper reach of the target market to achieve quick scalability
- Follow the trends consistently and continuously for long-term business sustainability
- Invest in cutting-edge technology such as software, systems, and subsystems
- Take fewer risks i.e. less capital-intensive investment, equipment, and real assets
- Explore cost-effective measures such as sharing resources with other entrepreneurs
The growth path of traditional old businesses was linear which implies that it took a considerable amount of time to expand the business sometimes even took the founding entrepreneur’s lifetime to achieve the desired scalability and financial success. An asset-light business start-up, on the other hand, can grow exponentially bypassing many of the life cycles of a traditional business by adopting an asset-light model enabled by modern technology. Today advanced e-commerce software has made it possible for companies to find success with a mere fraction of the cost and time.
Photo Credit: Suhyeon Choi
What is the best way to communicate new campaigns to the salesforce? Traditionally there has been a constant tension between sales and marketing. The tension escalates when the marketing department designs a campaign to increase the sales of a particular product or a season without the input of the sales staff. Often the person in charge of marketing campaigns senses a disconnect between the marketing team and Sales team. Successful marketing cannot happen in a silo. It has to happen with the buy-in from the Sales team. Happy salespeople build lasting customer connections. Today, there is an urgent need to converge both the sales and marketing teams together to accomplish the desired results. The Marketing leader can adopt some proven methods to get the group to own the campaign.
Engage Sales early
If the Sales team is accountable for the success of a particular project or campaign, gain their buy-in early. Not after the campaign launch. The sales team are constantly in touch with the customers on a regular basis. Hence they can be a valuable source of strategic as well as tactical input. They can also drive creative thinking. Bring the sales force early on. It can be the most efficient strategy to find out how the target market will respond to the marketing campaign. Perfect the campaign at the initial stage itself with advice from the sales department. Then during the campaign, not much tweaking would be required.
Demystify the clutter
As a marketer, it is important to explain to the sales representatives the mechanics involved in the campaigns. Avoid using jargon as far as possible as it would only add to the confusion. Make it easy for them to implement the campaign. Telling a compelling story, pointing the team to an important thought leader in the field, and illustrating it with a diagram are all tactics that can help the team better understand the objectives that the campaign is meant to achieve. A better-informed sales rep does a better job in supporting the marketing team in their campaigns.
Address the pain points promptly
Before launching a new campaign, the sales team goes through a learning curve. The duration of the learning time differs from one person to another depending on their learning propensity. Marketers should work hand in hand with the sales team to identify the pain points involved and address them in real time. Sometimes the team has a good understanding of the process. However, they waste an enormous amount of time during each step of the process that would ideally take a far lesser amount of time. This wastage of time should also be addressed using automated workflows, educational slide decks, and if needed by installing an internal CRM software.
Show them what’s in it for them
Each team member in the sales department is different. So are the personal aims. Meet with each to find out what they are and relate the corporate goals to each person’s goals. Show them how the management can help them achieve these aims by accomplishing the company goals. After that, let them know that the communication lines are open to deal with any concerns, complaints, and ideas they may have as they go along. Give them the necessary training and tools required to roll out the campaign successfully. The sales team will then start feeling encouraged and motivated to be on the side of marketing.
Make sure the campaign tasks assigned to each member of the team play to their strengths. There is nothing more inefficient than putting people in mismatching tasks. People love to do those tasks that they are good at doing. It motivates them and keeps them productive. Then set measurable goals consensually and hold them accountable as agreed. Allow them to have a say in the improvisation process going forward. Paint the bigger picture and remind them why it matters to the company as a whole and how their personal goals and career advancement fit into the grand scheme of things.
Keep the team informed with regular updates
Keep the sales members regularly informed about the progress of the campaign through daily briefings, staff meetings, newsletters, etc. the staff will then start to see results as and when they happen and will feel valued by the management for their contribution. If there are any areas of the campaign that needs catching up, this will help the team come up with ways to bring the campaign back on the trail and forward. The methods thus suggested can also make their jobs much easier while enabling them to spend their valuable time on closing deals with qualified leads.
In larger corporations, it is a common practice to find task force teams set up around projects. Each of them would consist of 5 to7 members whose mandate it is to recommend ideas around an issue. The entire team agrees that they would strictly adhere to the recommendations thus made. In most cases, this arrangement has produced phenomenal results.
Companies launch marketing campaigns and promotions in response to varying market trends and consumer tastes. It is often the key responsibility area of a high-level Marketing Director or Business Development Manager who have a say in designing the campaign. Doing so without the input or feedback of the salespeople is doomed to failure. It is imperative to get the buy-in of the people who sell the products to the end-users. The success of the campaign, thus, to a large extent depends on including the salespeople in the decision-making process.
Photo Credit: Olu Eletu
Three Fs for Writing a Business Plan
Writing a real business plan comes innately only to a few. And that too after much skill. Those few may have chosen it as a career. Sometimes people in the academe write them for firms to earn a living. While the task is a chore to many for beginners it is a complete riddle. Start-ups find themselves compelled to write one for various reasons. The most common reason among them is to raise funds. People also write such plans for private investors. The aim then to get them to invest money in the firm. Another motive is to raise the stake in the firm. Also, entrepreneurs write them while seeking for new business. Even to sell the firm. Not knowing how to write one can be a nightmare. Here we give you a practical approach. We hope it can serve as a basic guideline.
Writing a real business plan comes innately only to a few. And that too after much skill. Those few may have chosen it as a career. Sometimes people in the academe write them for firms to earn a living. Even to sell the firm. Here we give you a practical approach.
Many people fail in their attempts to sit down and write a business plan. Because they face starting problems. An outline can help in overcoming the problem. Outlining involves jotting down what to write. Bear in mind the purpose of drafting the plan. Write as if you are talking to the target reader. In addition, think about who would be reading it. And draft an outline of what kind of info or data to include in it. Start writing the business plan section by section. This way provides a unified and logical flow to the rest of the content. It then becomes easier to arrange facts. Then start compiling them in a clear manner. Such a framework would appeal to the right audience.
Many people fail in their attempts to sit down and write a business plan. Because they face starting problems. An outline can help in overcoming the problem.
This stage is known as mapping scheme because it involves forming the exact order of sections. Delve deeper and write each area concisely for greater clarity. Planning stage is the muscles and flesh. It makes the content rich. Well, the target reader should find solid evidence of the business plan here. It would also enforce the standing of the plan. A few writing skills are needed here to make the concepts and ideas compelling.
This stage is known as mapping scheme because it involves forming the exact order of sections. Also called planning stage. Planning stage is the muscles and flesh. It makes the content rich. Well, the target reader should find solid evidence of the business plan here.
The draft is still rough at this stage as it needs some final touches. The next step is to edit it from top to bottom. Editing gives coherence and a smooth flow to the arguments expressed in the business plan. People write business plans to make a case. Hence it needs winning power. Repeat the main points throughout the document. For more emphasis furnish it with facts and figures. Make sure to use logic. Reasoning backed by information that was stated earlier in the plan can make arguments clearer. Edit the business plan further by paying attention to the smallest details. Fine-tuning the business plan in a detail oriented manner increases the readability of the document. If possible, let a third person review it for further refinement.
People write business plans to make a case. Hence it needs winning power.
A universally accepted and a regular business plan template is as follows:
- Executive Summary: Executive summary is the most important part of a business plan. Ideally it highlights the strengths of the company. This part briefs the reader the competitive advantage of the business. Briefly summarize why you have the best business idea. It is a snapshot statement of the program of activities as a whole. It touches on the company profile and typically runs from 3 to 4 pages in length.
- Company Overview: It should start by providing a brief history of the group ownership. It then goes on to describe the organization of the enterprise. A timeline as to when the business was founded is equally important. Information such as locations and facilities should also be included. Add the names of the key members of the management team. Profiling their backgrounds is an indicator of a well-thought-out business plan too.
- Industry Analysis: This section requires substantial research. It gives an understanding of the external factors of the playing field and how the company responds to them. Explain what the cyclical changes are, profit opportunities, and how the company fits into the industry.
- Market Analysis: The objective of market analysis is to provide a quantitative and qualitative assessment of the market. Such facts as demographics, segmentation, and market need are highly sought out by savvy investors. Market value, size, and regulation shows the investors that the business is lucrative enough.
- Competitive Analysis: Identify the competitors’ strengths and weaknesses. A distinct advantage of the firm over the competition is a prerequisite for a business plan. The unique competitive strategies will set the company apart from others. Discuss here, if any, any barriers to entry and exit into the market.
- Customer Analysis: This is a critical section that defines the characteristics of the target customer. Usually the characteristics are explained through their buying criteria and how the product typically satisfies their needs. Include also an in-depth analysis of the growth of the customer base, their average revenues, and service delivery model.
- Marketing Agenda: Emphasize the unique selling proposition of the business in this section. Along with that the pricing and positioning strategy and distribution plan should also be included. A marketing plan that outlines the steps taken to retain existing customers or gain new customers will add credibility.
- Strategy and Implementation: Insert in this segment a detailed plan of the marketing strategy and its implementation. It typically articulates how the company’s management intends to reach the products to the market. It includes the sales strategy, personnel hire, promotions and advertisement, distribution outlets, pricing, service delivery, guarantee policies and the like. Emphasis would be on past sales and a sales forecast.
- Organization and Management: Highlight who does what and their added value to the company. It is a simple but effective way to portray an organizational chart with a narrative. This section would reassure the investor that the people onboard are more than names on the organizational diagram.
- Financial Plan: Most investors are visuals. So, set up a spreadsheet with the past sales, sales forecast, and expense budget. It is also a good idea to incorporate a cash flow statement, assets, and liabilities. Some investors may require a breakeven analysis and the cost of doing business. A business planning software can be an invaluable help here.
- Appendix: In general, this section holds the entire supporting documents. All that information that was too large to be included in the main body should go in here. Any figures, statistics, charts, graphs and illustrations that augment the main points in the body must be in this section.
3F plan provides a systematic and practical approach to preparing a business plan. It has been proven to bring success to budding entrepreneurs. Bear in mind to also study the target readers. And finally tweak the plan. Stress those areas that would appeal to them. Good luck!
Title Photo Credit: Helloquence
The Best Sales Promotion, Before, During and After
The objective of the best sales promotion is to increase sales for a particular product through stimulating additional demand for the product. The end goal is to generate revenue over and above the standard. And the intent is almost always a short-term gain, unlike some marketing strategies that are designed to create customer loyalty, brand awareness and long-term return on investment. Successful promotions are the ones that have struck a chord with the intended audience and have met the desired results of increased business. Companies replace the non-performing promotional activities with performing ones to maximize the benefit.
What is it that makes some campaigns successful and others not? Here we dissect the variables involved pre-promotion, during and after the promotion. Usually, a particular successful promotional campaign may not have had all the factors described here, but a majority of them have. A careful analysis of such ingredients can help companies replicate the successful promotions and roll them out in another market or on a wider scale in the same market. On the other hand, the strategies that worked in the past may not necessarily work out in the future. So, it is recommended to exercise caution.
The primary variables involved in all promotional activities are the product, the market, the channel, the competition, and the budget. We examine the dynamics of each of these before the promotion, during and after the promotion.
- Product: A promotional activity narrowly targets a small subset of the larger target market. The campaign should take into consideration what benefit of the product would appeal to the audience. The promotion should highlight that feature that closely corresponds to that interest.
- Market: Understand the dynamics of the target audience and the stage in the product lifecycle. For example, how often does this market use the product? Conduct a preliminary research on the demographics and behavioral patterns of the market. Learn the cultural nuances of the area.
- Channel: Depending on the target market decide on the mode of delivery that would most appeal to the target market. Then consider a variety of channels that would help meet the promotional goals. For example, retail outlets, malls, media, community centers, event venues, etc.
- Competition: Find out if a direct or an indirect competitor has done a similar sales promotion. If so, what was the outcome? If the promotional activity has produced disappointing results, then there is no point in replicating it in the same market. It would end up in a waste of resources.
- Budget: Work out every element of the promotion that would incur a direct and variable cost. It would be ideal if some partners can bear some costs or if other stakeholders involved could share them in return for a benefit. Agree upon the cost-sharing model in advance with all concerned.
During the Promotion
- Product: Start a conversation with the customer through different media outlets before the promotional deal and communicate with them about the product’s features and benefits. Asking for personal references can work for high ticket items. Social media campaigns are very effective ways to hold a prominent position in people’s minds.
- Market: Rather than a mass approach, acknowledge and re-engage with old customers as well as encourage new customers to try the product by offering free samples and demonstrations. Direct marketing in certain markets and products is a highly efficient way to reach out to high net worth individuals.
- Channel: Help the customers make purchase decisions by making the product available as and when they require it using various channels. Motivate them to buy it by bringing the product to their doorstep. Try personal selling if appropriate when the customer appreciates a direct interaction on a one to one basis.
- Competition: Differentiate the product from the rest. Provide technical information to the prospects on why the product is different. Emphasize on those qualities and advantages that allow the customers to ask relevant questions rather than giving a sales pitch. If possible, distribute special coupons with expiration dates.
- Budget: For budget-constrained clients who show a serious interest in the product offer friendly payment terms in liaison with the local financial institutions. Create and foster brand loyalty by giving them various options on how they can conveniently get hold of the product. Offering them special deals is also a good way to seal deals faster.
- Product: Conduct a post-promotion analysis on what worked and did not work within the targeted audience. Consider what other benefits of the product were appealing. Fine-tune and replicate the ones that worked and discard the ones that did not.
- Market: Make a note of the receptiveness and rejection of the customers to the product features. Create a qualified database of the old customers as well as the new ones in the market. Tweak the product if necessary and possible to adapt to the cultural sensitivity.
- Channel: During the next promotion consider using only those modes of delivery and the channels that were beneficial and that brought the greatest return on investment. Do a survey directly with the first-time purchasers and regular purchases on the preferred usage of a channel.
- Competition: Do a competitive analysis on other companies who are selling similar or augmented products. Rather than competing headlong, work out strategic partnerships to leverage the sales. Some tactical alliances with local partners can even bring the production cost down for both parties.
- Budget: Calculate the cost incurred to carry out the promotion. Compare that to the incremental sales revenue obtained purely by carrying out the campaign. Work out the benefits and risks of the cost-sharing model. Post-promotion phase is a good time to evaluate the mode of payment most preferred by the target market.
The following matrix can help while doing a post-promotion analysis. The information filled out can be useful in designing an improvised promotion the next time.
Photo Credit: Roman Kraft