Creating Demand: The Secrets of Truly Magnetic Offers

Adrian Slywotzky

How do some companies generate runaway growth and extraordinary customer loyalty, even in a sluggish economy?

Adrian Slywotzky, an Oliver Wyman senior partner and bestselling author, examines the unpredictable dynamics of demand creation in his latest book, Demand: Creating What People Love Before They Know They Want It.

With engaging stories, Slywotzky pulls back the curtain on how demand creators wind up creating the killer offer: things customers can’t resist and competitors can’t copy. How do some companies seem to know what we want – even before we do? we all want video-on-demand now. But could we have even imagined it 10 years ago? Netflix founder Reed Hastings anticipated the future shift to on-demand streaming – even in 1998, when fewer than 7% of U.S. homes had broadband: “that’s why we named the company Netflix, and not DVDsBymail.com.” Demand “creators” always look to solve the next customer hassle – before we even recognize the hassle itself.

What makes us rave about some things, but rant about others, even when the underlying products are functionally the same? Magnetic products not only offer superior functionality, but also forge an emotional attachment that is hard to sever. they embed themselves so seamlessly into our lives that they become part of who we are. take the grocery chain Wegmans. More than just an incredibly functional supermarket – with an average of 60,000 items in stock – Wegmans has an emotional appeal that led 7,000 people (in 2010 alone!) to beg for a store in their area.

Here is an excerpt from an interview of Slywotzky. To learn more about his firm, Oliver Wyman, and its services and resources, please click here.

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How do some companies seem to know what we want – even before we do?

We all want video-on-demand now. But could we have even imagined it 10 years ago? Netflix founder Reed Hastings anticipated the future shift to on-demand streaming – even in 1998, when fewer than 7% of U.S. homes had broadband: “that’s why we named the company Netflix, and not DVDsBymail.com.” 1 Demand “creators” always look to solve the next customer hassle – before we even recognize the hassle itself.

What makes us rave about some tHings, but rant about others, even when the underlying products are functionally the same?

Magnetic products not only offer superior functionality, but also forge an emotional attachment that is hard to sever. they embed themselves so seamlessly into our lives that they become part of who we are. take the grocery chain wegmans. more than just an incredibly functional supermarket – with an average of 60,000 items in stock – Wegmans has an emotional appeal that led 7,000 people (in 2010 alone!) to beg for a store in their area.

Can you actually create demand – or are you just getting lucky?

Smart companies recognize that we often can’t articulate what we really want, and that “creating” demand is often just a matter of recognizing untapped demand. Demand creators identify hassles that bedevil all of us – and instead of simply accepting them, they ask, “Do they have to be this way?” Reed Hastings founded Netflix after a personal frustration with a $40 late fee. By making the leap from the way things are to the way they should be, he unleashed demand… to the tune of $2 billion.

Why do most attempts to create demand fail?

Identifying hassles that could be solved is a start – but it’s not enough. Demand creators recognize that even great products have a very low chance of success, and they do everything they can to increase it. Toyota knew the Prius’ odds of success were less than 5%. yet instead of dropping the project, Toyota actively asked, “how can we change those odds?” the company even went so far as to create a new division for the project – and then successfully launched the Prius two months ahead of an already “impossible” schedule.

Does what happens behind the scenes actually matter for demand creators?

It’s easy to think that only the product itself matters, but what happens behind the scenes can shape both the end product and your experience using it. Take the market for e-readers. the Amazon Kindle provided instant, wireless access to the world’s biggest bookstore. the Sony reader – released 10 months before the Kindle – offered wired access to only 20,000 titles. the backstory makes all the difference: there really is no point to an e-reader that doesn’t have the books you want to read, when you want to read them!

So many great products never get purchased, while others fly off the shelves. What triggers us to buy something?

Most of us need a trigger to get from want to buy. For Zipcar, it’s density – and just a short walk to the car. For Nespresso, it’s taste and trial in a fancy boutique. For Netflix, it’s waiting one day for a movie to arrive instead of six. Smart companies recognize that each product has its own trigger – and that discovering these triggers is the key to creating demand.

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To read the complete interview, please click here.

Adrian Slywotzky, a senior partner at Oliver Wyman, has consulted to Fortune 500 companies from a broad cross-section of industries, working extensively at the CEO and senior executive level for major corporations on issues related to new business development and creating new areas of value growth. He has written several books on strategy and growth, including Value Migration, The Profit Zone, and The Upside.

 

Why You Should Stop Trying to Delight Your Customers: The Idea in Practice

Here is an article written by Matthew Dixon, Lara Ponomareff, and Anastasia Milgramm for the Harvard Business Review blog. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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The notion of going above and beyond customer needs is so entrenched in organizations that managers rarely question it. But delighting your customers may be a waste of time and energy. In fact, most customers just want a simple, quick solution to their problem. Exceeding customer expectations has a negligible impact on customer loyalty. Instead of providing a series of bells and whistles in customer interactions, companies need to reduce the amount of effort customers make.

This is the conclusion we found in our five-year study, in which we analyzed customer data from 75,000+ respondents and conducted interviews with hundreds of companies around the world. We presented the findings in the 2010 HBR article “Stop Trying to Delight Your Customers.” In it, we explained that what matters most to customer is the amount of effort they put in to interactions: 96% of customers who report putting in high effort in their service interactions are more disloyal, while only 9% of customers who expend low effort are more disloyal.

Because these findings contrast the conventional belief that companies must provide over-the-top service for customers, we’ve found that companies are often relieved to have hard proof that exceeding expectations — an often expensive and unsuccessful mission — shouldn’t be their focus. Then they want to know what steps they should take to reduce the amount of effort their customers expend. In our work with companies to answer this question, we’ve seen where most organizations struggle: getting buy in from the rest of the organization and figuring out what to tackle first.

To provide practical advice for companies to address these challenges, we created an Idea in Practice that shares the experiences of two companies — American Express Consumer Travel Network and Texas-based energy company Reliant — as they implemented plans to reduce their customers’ effort in service interactions.

Here is a preview of two of the crucial lessons:

Reducing customer effort doesn’t require a 180-degree turn, but a shift in focus. Many of the companies we work with wonder if they have to start from scratch to achieve effort reduction. We’ve found most companies already have some of the right elements in place, just as Reliant did. Instead of starting fresh, they can reframe initiatives with the goal of effort reduction in mind, tweaking existing processes rather than overhauling them.

Focus on the front line. Frontline employees are crucial for good customer interactions. The most successful companies, such as American Express, focus on ensuring that frontline workers have the skills, permission, and the desire to reduce customer effort.

To learn more about how your company can get started, read the Idea in Practice and let us know what works at your company. And, if you’d like to assess where your customers are expending the greatest effort during service interactions, you can download the customer effort audit by clicking here.

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Matthew Dixon is Managing Director of the Corporate Executive Board’s Sales and Service Practice. Lara Ponomareff is Research Director of the CEB’s Customer Contact Council. Anastasia Milgramm is a Senior Research Analyst with the Customer Contact Council.

 

Losing the War of Talent, a Telling Leading Indicator – The Challenge for RIM (BlackBerry)

As in ancient times, talent has become the coin of the realm.  Companies that multiply their human talents will prosper.  Companies that don’t will struggle.
Talented People are scarce. 
Ed Michaels, Helen Handfield-Jones, Beth Axelrod:  The War for Talent

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So, here’s the problem.  People want to work with, and for, a winner.  People do not want to work for a loser.  And, people want to work for a winner more than they want to help revive a once-more-healthy company.

So, if you want to look at a most revealing leading indicator, look at this:  where do people want to work?  And the answer can be found in the simple observation of:  where do the best graduates of the most recent graduating class want to work?

With this question in mind, I think it is safe to say that RIM (BlackBerry) is in serious trouble.  It is no longer the place to work.  And when it is no longer the place to work, difficult days will only continue.  Because the best innovations, the best new products, the best process improvements, come from the best, most talented employees.  And the most talented employees frequently come from the best crop of “new talent.”

This is the conclusion affirmed in the article Tech talent turns away from RIM by Iain Marlow.  Here’s a key excerpt

…times have changed, and although this region is still rich with talent, many of the brightest no longer aspire to work at the company that helped put Waterloo on the global map (Research In Motion Ltd – maker of the BlackBerry). “It was definitely a really great place to have your first internship,” says Mr. Mir, now a 20-year-old intern at LinkedIn Corp. in Mountain View, Calif. “But you don’t see a lot of the strong students ending up wanting to go to RIM full time, which is sad.”
The talent, in other words, is following the customers, millions of whom have shunned the company’s once-dominant BlackBerry in favour of smartphones made by Apple Inc., Samsung Electronics Co. Ltd., and a host of other wireless-industry rivals.

The article is worth reading to see  an example of what a company can do to go “wrong.”  But the reality is that because of the successes of Apple (especially the iPhone’s success), LinkedIn, and other companies,coupled with the troubles at RIM, the best graduates now want to work for the Apples of the modern world, not RIM.  And where the talent goes, a better future is likely to be built.

Harvard Business Review on Aligning Technology with Strategy: A book review by Bob Morris

Harvard Business Review on Aligning Technology with Strategy
Various Contributors
Harvard Business Review Press (2011)

How and why technology should support your organization’s strategy…not the other way around

This is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Having read all of them when they were published individually, I can personally attest to the high quality of their authors’ (or co-authors’) insights as well as the eloquence with which they are expressed. This collection has two substantial value-added benefits that should also be noted: If all of the articles were purchased separately as reprints, the total cost would be at least $60-75; also, they are now conveniently bound in a single volume for a fraction of that cost.

Those who need to identify the best practices for unleashing technology’s strategic potential – but don’t have time to fine them — will find the material in this HBR book invaluable.  Authors of the eight articles focus on one or more components of a process by which to clarify corporate strategy with one’s IT department, fund only IT projects that support its strategy, transform IT investments into profits, build one technology platform for an entire organization, adopt new technologies only when their best practices are established, use analytics to make smart decisions at all levels of one’s company, and integrate social media into one’s business.

I now provide two brief excerpts that are representative of the high quality of all eight articles:

In “Six IT Decisions Your IT People Shouldn’t Make,” Jeanne W. Ross and Peter Weill identify and discuss a list of six decisions for which senior managers should make. “The first three have to do with strategy; the second three relate to execution. Each is a decision that IT people shouldn’t be making – because, in the end, that’s not their job.”

1. How much should we spend on IT?
2. Which business processes should receive our IT dollars?
3. Which IT capabilities should be firmwide?

4. How good do our IT services need to be?
5. What security and privacy risks will we accept?
6. Whom do we blame if an IT initiative fails?

In “Competing on Analytics,” Thomas H. Davenport identifies and discusses six imperatives for a company to become an analytics competitor.

• Champion Analytics from the Top
• Create a Single Analytics Initiative
• Focus Your Analytics Effort
• Establish an Analytics Culture
• Hire the Right People
• Use the Right Technology(ies)

Other articles in this anthology I especially enjoyed include Ron Adner and Daniel C. Crow’s “Bold Retreat: A New Strategy for Old Technologies” and “Investing in IT That Makes a Competitive Difference” co-authored by Andrew McAfee and Erik Brynjolfsson

SUGGESTED  READINGS

Enterprise Architecture As Strategy: Creating a Foundation for Business Execution
Jeanne-W.-Ross, Peter-Weill, and David Robertson

World Class IT: Why Businesses Succeed When IT Triumphs
Peter A. High

Open Business Models: How to Thrive in the New Innovation Landscape
Henry Chesbrough

Alignment: A book review by Bob Morris: Using the Balanced Scorecard to Create Corporate Synergies
Robert S. Kaplan and David P. Norton