January 30th, 2010

This week Apple announced their much-anticipated iPad, a tablet-like device which has been described as a supersized iPhone, a shrunk down (or new form factor) notebook, or a competitive product with Amazon’s Kindle and other e-readers. At a base price of $499, the iPad has hit a price point to give people who want to purchase an e-reader time to ponder their purchase decision. From a market perspective, I believe their timing was excellent. There was a good article in the Washington Post , Top 10 Reasons The Apple iPad Will Put Amazon’s Kindle Out of Business that has more fact than fiction in it. Truth be told, Apple is going to revolutionize yet another category and give many a competitor angst and a run for consumers’ purchasing dollars.

As a pundit of the high technology marketing, I would be remiss if I did not try to look at this and break down some of the key things that make Apple’s entry into new market so formidable. So I am going to comment on a few marketing strategies I have observed that make this such an interesting case study.

1. Great Pricing Strategy. Everybody knows that Apple has a premium pricing strategy. At $499, Apple surprised the market and priced the iPad $10 higher than the Kindle DX. For $10 more of course you would want to buy the Apple over the Kindle. Why not? Well to begin with the iPad display is color while the Kindle is monochrome.  Think it will cost you $499 over its lifetime? Think again. If you want 3G wireless, it will cost you an additional $130. More memory – an extra $100. Want a data service to run the 3G network capability and connect to the internet beyond basic Wi-Fi connectivity? That could easy cost you $500 a year. So the total cost of ownership (TCO) of the iPad is going to be pretty high – probably over a $1000 for the first year. And don’t forget the e-books at $9.95 each. The point is that Apple has created a pricing strategy that will lure buyers in. With desirable extra features and services, many buyers will leave a few hundreds of dollars poorer than they expected. Will customers be unhappy? No, because they will have created as product that has delivered an excellent customer experience vs. what the competition can offer.
2. Excellent Customer Experience. Much of Apple success can be attributed to developing products that are game changing – not first to market. Did Apple develop the first e-reader, smart phone, or MP3 player? No they did not. What Apple is brilliant at doing is creating a unique product experience that is so engaging and fun, that they can significantly differentiate themselves from any other competitor. Michael Porter, in his book, Competitive Advantage, would call this a differentiated advantage. Differentiation advantage is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customer service. With Apple, this differentiated experience comes in the form of its industrial design, cool factor, brand name, Apple retail stores, software user interface, application widgets, iTunes/App store and synching software. In addition, Apple has figured out how to wrap a business model around it and make money as well! There are many models on how customer experiences can be defined and delivered. HP used a model called ACOILUSD and it will be the subject of a future post. By delivering an excellent product experience, Apple hopes to increase customer loyalty and preference for its products – now and in the future.
3. If First You Don’t Succeed, Copy. If I was an executive at Apple, I would enjoy watching how the competition responds to my new products. In fact, most companies that compete with Apple just try to copy the features and capabilities of the Apple product, in hopes that it will make them a closer compare to the Apple device (and most likely sold at a lower price) at the time of purchase. Now this can be a respectable strategy when applied properly. After all, Microsoft has Zune, Samsung introduced its Galaxy i7500 Android phone, and RIM announced widget support for its Blackberry. To be honest, I would find new marketing executives in these companies, if that is the best they can do. Instead of trying to up the ante and create better, alternative, and differentiated experiences that delight customers, these vendors decide that following Apple is better than trying to beat them the old fashioned way – by developing and delivering innovative new customer experiences and products.  Have they conceded to Apple? Don’t have any better ideas? Do they believe following/copy cat strategy is better than the status quo? I have no idea, but there must be a better way. The question is which company can do it? Take Apple to the mat, to use a wrestling metaphor.
4. Scarcity of Value. Probably the most important idea here is that Apple depends on a “scarcity of their products” in markets of high demand. What does this mean? What I am trying to say is that when Apple goes into a new market, the markets are relatively big, can be big, or converging into a big market. The scarcity of supply simple means is that there are no other competitors out there delivering a comparable product value or customer experience. Using MP3 players as an example, this means you will pay more to enjoy the Apple experience vs. the competition – even in a market where there is tons of competition. Because there is not a direct replacement product – hence scarcity! The best examples of this concept are people who bought another brand of product, perhaps due to budgetary constraints, and wished they had bought the Apple product instead!

Taking a high road product and pricing strategy is not the only strategy a company can deploy. If you are not in a commodity market, most markets are stratified into different price points and volumes. A company can build a value proposition in the low end, the middle or top end of a market. I think what the Apple example illustrates is how delivering great marketing through excellent product value and customer experiences, a company can become a dominant market force and game changer in the market, even though they might not always be the volume leader.

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Posted By Vince Ferraro

January 25th, 2010

Love them or hate them, loyalty programs/clubs have become an important marketing tool in many industries. According to Wikipedia, in marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program. Of course, some of the biggest examples of loyalty programs come from the travel industry (frequent flyer, hotel points), retail (grocery, gas, and sundries), and credit cards (AMEX). A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Of course, managing your points so that you can use them (before they expire) has become one of the biggest drawbacks of these programs.

In addition, loyalty programs have expanded globally and in the types of industries one might find them. For example, Hewlett-Packard induces small and medium business to spend more money on branded supplies through their Purchase Edge Program.  And they are pervasive too. According to Jupiter Research, more than 75 percent of U.S. consumers now have at least one loyalty card. Most people belong to multiple loyalty programs.

Marketers intend to maintain loyalty program spend in 2010, with 34 percent increasing investments. In fact, a key area of spend will be investments into online communities and social networks that will allow members to share and connect.  Unfortunately, according to consumers, online communities, social networks and connecting with other members are among the least valued inducements to participate and remain active in loyalty programs.  

The CMO Council’s latest report, The Leaders in Loyalty: Feeling the Love From the Loyalty Clubs, reveals that marketers are failing to fully connect with consumers and are missing a big opportunity to leverage member insights to deliver on rewards, value and engagements customers say they really want. The full report contains detailed findings from both the marketing and the consumer research, along with over two dozen qualitative interviews from brand leaders from American Express, Etihad Airways, Giant Eagle, Jet Airways, Marriott, Office Depot, RIM, Shell, Travelzoo, Virgin Atlantic, and more.  It also contains key findings,  loyalty rankings and contributed insights from industry leaders. Get a complimentary summary of the study at the CMO Council’s web site.

Love them or hate them, loyalty programs and clubs are an important part of the marketing mix and spend for many industries. Yes … they can help in building and maintaining brand loyalty. In addition, they also act as a gigantic CRM database that identifies and tracks high usage customers. Finally, they link consumer buying and shopping habits with demographics at the individual or family level. This data is then used to formulate offers and programs to drive more purchases and demand for a company’s product. Powerful marketing tools for sure (in the right hands).

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Posted By Vince Ferraro

January 20th, 2010

Old Saybrook, CT (PRWEB) January 12, 2010 — Though there were a number of “Best of Blogs” lists offered by a variety of blogging connoisseurs to close out 2009, the Marketing Executives Networking Group (MENG) chose to survey their nearly 2,000 executive marketing members to determine which marketing blogs, written by non-MENG members for objectivity, were actually being read by marketing executives. Click to read more details.

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Posted By Vince Ferraro

January 9th, 2010

I am always inspired about who gets the coveted awards CES gives out to the most innovative products of 2010. This year is no exception. What these awards demonstrate is the variety of ways mature product categories can create innovative new products and customer appreciated value. Some of the examples I liked are the Nikon camera with projector, The Parrot G Drone, Novatel MiFi Portable Hotspot, AudioVox Flo TV for vehicles, and Hybra Advanced Technology O.R.B., a ring that user wears on their finger alerting them of calls, text messages, etc. Now that is clever! While the products are cool and and have some geek value, their creation really follow a few simple product development rules. While not an exhaustive list, innovative products like these generally work on a few key vectors. First, is having a great industrial design. Second, take an existing product category and make it thinner, smaller, lighter than what is unexpected for that class of product. Third, add a new (wow) feature to an existing product category. The projector function you see in cell phones and cameras (like the Nikon camera on this list) is a good example. Another example is Samsung’s introduction of the industry’s first Blue-ray 3D DVD player. The next product innovation strategy is to bring an existing product category to a new use model. On this list is Ford’s on-board car computer and connectivity. Another example is the streaming of live TV to your vehicle. So bringing existing technologies and services to mobile platforms creates innovation. Probably the hardest innovation to deliver is creating a whole new product category. This is extremely diffiult to do. If the new product is too innovative, you risk low sales as new product categories take years to take off.  The company that is the leader in this type of innovation is Apple, with the iPhone, iTunes, etc. Even with these examples, smartphones and mp3 players existed before Apple went into the market. Apple’s value added was creating a superior customer experience and improving upon existing designs and functionality. Over 20 years ago, HP developed the industry’s first affordable desktop printers, eliminating the need to go pick up your printed pages at the data center. Remember those days? I do.

You can find the list of award winning entries for 2010 here:

http://www.cesweb.org/awards/innovations/2010honorees.asp

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Posted By Vince Ferraro