Marketing Innovation

Innovation: Make the NASCAR Sprint Cup Chase a real playoff

The format of the Chase to the Sprint Cup (NASCAR) and the FedEx Cup (PGA Tour) both bother me because they are billed as a "playoff," when they are, in fact, nothing of the sort.  

In order to have a playoff, you need to have at least two leagues/divisions/conferences/etc.  Neither sport has that. Just singling out the top performers during the regular season and making them the only ones who can win does not a playoff make.

Those two programs are not, in my mind, marketing innovations.

The upcoming IndyCar Racing League (IRL) race at Texas June 11 gave me an idea, though.  Instead of one long 550 km race, they are running two back-to-back 275 km races.  These are both full-field affairs, with the running order in the first race determined by traditional qualifying procedures (fastest lap starts first), and the second race starting positions determined by the finishing order in the first race (could be highest finish first, or invert the field).

Pretty cool.  More action for the fans.

My idea For NASCAR takes it quite a bit further.

Let's organize the Sprint Cup drivers into two leagues -- let's call them the American and National leagues, just for convenience.

Before the season starts, the drivers are assigned to each league based on the prior season's point finish. Drivers who finished in an odd numbered position (1,3,5, etc.) would go into the American League, and the even-numbered finishers go into the National League.  There would be 25 (or more) drivers in each league, with pretty good parity between the leagues.

The first 26 races of the season would be run as two league races -- half field events.  Instead of the Goody's Fast Relief 500, as at Martinsville last weekend, there'd be the Goody's Fast Relief American 250, and the Goody's Fast Relief National 250. Points would be awarded according to the current system.

It would be great for fans, because they get more meaningful action each weekend.  NASCAR would have a great opportunity to stage some sort of event between the races -- a “halftime show,” if you will.  The networks would love it.

After 26 races, only the top 12 to 15 drivers from each league go into the Chase -- that's the 24 to 30 top drivers, which would make for great racing. The Chase races would all be full length affairs, designed to test the durability and talent of the teams competing.  And the Chase would be a true playoff between drivers from two leagues.  There would be a champion driver and a champion league.  Drivers might cooperate on track more to prevent a rival league’s driver from advancing -- it would add a new dimension to race strategy.

The drivers who didn’t make the cut end their season there.  No “start-and-park” teams in the Chase, no wasting money driving laps that don’t mean anything. 

Races would be both shorter and more exciting. There would be lower costs associated with fielding a team for 26 short races, which might bring more sponsors into the sport.  Sponsor deals could be worked for the “regular season” and then again for the playoffs.  Much more flexibility.

NASCAR fans tune in more during the summer than the fall -- the NFL is pretty stiff competition.  For a team owner running outside the top 10 or 12, the Chase is currently a huge money drain.  With my proposed playoff system, there is more excitement for the fans and a better ROI for the owners and sponsors.

With a total of 50 cars each weekend, there's more opportunity for owners and drivers to compete at the Cup level -- and more opportunity for sponsors.

That strikes me as a marketing innovation!

 

Dell: Return to its Roots to Find a New Future?

Dell is (again) restructuring its top management, and altering its strategy in an effort to rekindle growth.  Sometimes, there is value at looking at history through a different lens to gain insights into what made a company great.

In Dell’s case, the company started by selling a product directly to consumers.  What were the characteristics of that product (and the business model) that made the company even possible, much less successful?

Six factors:

• It used commodity components, meaning that there were multiple suppliers and (perhaps more importantly) no research and development was required.
• There was value added in the assembly (however minor) by the company.
• Supplier terms were favorable to Dell, especially later.  Multiple suppliers of each component meant competition kept prices low.  The exception was the CPU, where paradoxically the Intel monopoly kept prices low because there was always the threat of going to AMD.
• Mass customization of the end product was possible through mixing and matching a virtually infinite number of different component configurations.
• Massive inventory turns enabled by the direct-to-customer model meant that Dell could collect the price of the machine before they had to pay for the parts.
• A brand name that stood for quality.

This is ideal for a desktop computer.  It could be built in a dorm room (or a garage, or pretty much anywhere, which ultimately gave birth to the “white box” built in the so-called “screwdriver shops”, so named because anyone with a screwdriver could build a PC.)  It is also ideal for a PC-based server.

Notebook computers, on the other hand, remove four or five of these sources of competitive advantage.

• Assembly is not done by Dell, but by contract manufacturers, removing that value add.
• Supplier terms aren’t as favorable, because there are fewer contract manufacturers, and they aren’t able to be played off against one and other like, say, power supply suppliers could be.
• Mass customization was much more difficult, because there were a relatively low number of fixed configurations in notebooks.
• All the above three factors combined to produce much lower inventory turns.

As Dell grew, they diversified their product line to include more and more peripherals (printers, for instance) and other electronics (flat screen TV’s, for instance).  These items moved even further away from the six core principles that made Dell successful -- where was the ability to differentiate?  Why was a printer or TV purchased from Dell any better than one from Best Buy?

So what does this mean for the future?  For one possible answer, let’s ask the question a different way:  What products of the next 5 - 20 years share the six characteristics of the original PC?

Perhaps those products are in the PC business, like blade servers, or even parallel supercomputers.  On the other hand, the answer might be in completely different industries.  NOTHING about the “Six Success Factors of Dell” say anything about personal computing or even electronics.  The next industry to be transformed might be something like transportation, where the six competencies described above can provide some competitive advantage in an emerging and/or high growth market.

As for transportation:  We can compare the not-as-Big Three of today to the IBM and Digital Equipment of the 80’s.  Who would have thought that the lowly PC (a “toy”, in some early reviews) would transform one of those business so completely, and eliminate the other one?

"Beware of the Doghouse": As Brilliant as Diamonds!

A friend of mine forwarded me a link to an awesome site.  What a great viral marketing campaign!  I would rate this one very high on the Marketing Innovation Index!

Chevy Volt: Running on Empty (Even After a Full Charge)?

With all the news about GM these days, I'm intrigued by the near-constant use of the forthcoming Chevy Volt (pictured to the left) electric vehicle as a proof-point of the continued viability of the firm.  Of particular interest me, from a marketing innovation standpoint, is the promotion of the 40 mile battery range before needing the gas engine (a 1.3 liter, three cylinder model that keeps the electric motor running, but does not recharge the batteries).  It seems like GM trots out that range with pride every time the need to bolster their innovation cred arises.  (Which appears to be frequently.)  To boil it down to unflattering simplicity, it is like putting a gas-powered generator on the back of a golf cart, and using that to power the vehicle once the batteries are dead.

I am intrigued by the premise of an electric car.  However, it seems that the chemistry of energy storage is giving gasoline a bit of a leg up on the Lithium-Ion cell.  For under five bucks, you can buy enough stored energy (yes, gas) to push around just about any current vehicle for forty miles.  Heck, you can do that for under two bucks for some vehicles!

But I digress.  In addition to the Chevy Volt, there is another electric car out there, and it is a true electric car (no gas motor).  It is the Tesla Roadster (pictured below).  Here is a little comparison of the two vehicles:

                            Tesla                Volt
Price                    $109,000     $40,000-ish
Power (HP)               248              150
Recharge time        3.5 hrs         3.5 hrs
Battery weight        992 lbs.        375 lbs.
0 - 60 mph             <4 secs          8-9 secs
Battery rating         53 kWh         16 kWh
Range (miles)            244               40

What this table doesn't include is company image, or the brand.  (It also doesn't include sales projections, because I can't find any for the Volt.  The Tesla is a low production vehicle, in the 1,000 - 2,000 range, but is sold out with a waiting list for 2009.) 

Strategically, GM could have chosen to roll out this car as a high-performance, technology-laden marvel with a stunning design, perhaps under the Cadillac brand.  Instead, they chose to roll it out as an everyday kind of car, under the Chevy label.  And it looks like a Camry.  Or Accord.  Or Malibu.  Not distinctive, in other words.

Also strategically, they chose to highlight the 40 mile battery range.  I don't know about this.  When my car gets to the point when there is only 40 miles of range left, which is well after the little yellow light comes on, I panic.  My trip computer -- which tells me how many miles I have remaining in the tank -- stops making predictions when 50 miles remain.  It just blinks instead. 

If for some reason I drive home with that little range, I don't sleep well if I have anywhere to go the next day.  I hope that there is enough gas to get the nearest station.  Buying a car where that kind of range is when the electricity tank is full doesn't seem inspiring.  I wonder what kind of ad campaign will support this "feature".  ("Don't worry, you've still got gas"?)

Contrast this with the Roadster:  244 miles.  It looks like Tesla put in two-and-a-half times more batteries (measured by the pound), got three times the energy and six times the range, and threw away the gas engine.  I realize there might be more to it than that, but that's what jumps out at me.  Why didn't GM make that decision? 

Look at that table again.  Yeah, the Tesla is expensive, but it will come down.  It'll probably be like the iPhone -- really expensive at first, but then coming down to pretty expensive, and then perhaps to expensive.  Like a Corvette.  Funny I should mention that car -- it has performance specs very similar to the Tesla, but it does so motivated by a 7 liter, 436 horsepower V8 engine getting (a surprising) 20-ish mpg (Z51 model, around $60,000).  And there is another model (the ZR-1) that uses various enhancement technology to achieve slightly better specs at a price of about $110,000.  So GM (even Chevy) knows how to play at these price and performance levels.  Presumably, Tesla is profitable at this price, what with it being the only product the company sells.

It seems like a great management team, presented with a technology like this and a company with the resources of GM, would do this:  Start with a high performance technology, and let it find it's way into more pedestrian vehicles.  Start with something to really crow about -- an all-electric vehicle with eye-popping performance, drop-dead looks, and let the halo spread over the rest of the company.  Or they could get on private jets and go ask the federal government for a bailout.

Update 12/10/08:  The editorial cartoonist Pat Oliphant apparently agrees with me that the professed 40-mile range is somewhat underwhelming:

A New Brand Model for Innovation

The concept of a "brand"  has become pretty confused.  Once a simple mark on the rump of a cow, it has become so diluted as to be nearly meaningless.  People are equating "name recognition" with "having a brand".   We don't see it that way.  We developed a 3-layer model for product (or service) differentiation that defines "brand" -- and helps guide your efforts to innovate.

The 3-layer model starts with a foundation -- the COMMODITY level.  All products and services have a commodity element.  This is the basic level of performance expected by potential customers.  For instance, all vacuum cleaners suck.  If all you are interested in is basic dirt removal, you will likely buy the cheapest vacuum cleaner you can find.  Price is the basis for competition at this level, and opportunities for innovation are geared toward reducing costs.

Next up is the FEATURE layer.  In our example, if you are interested in something more than mere suction, then you've entered that level.  This is where vacuum cleaners start to differentiate along a variety of performance vectors:  power; attachments; filters; bags; wet/dry; ease-of-use; self-propelled; quality; handheld; battery operated; headlights; robotics; and so on.  Customers will research and compare various offerings before buying -- and will pay more for the features that are important to them and improve upon the commodity element.  Product and service innovation happens most often in this level.

The ultimate layer is the REPUTATION layer.  This is where a company has established trust and formed an emotional bond with existing and potential customers that engenders loyalty, drives repeat business (without consideration of competitors!), and commands premium pricing.  When these characteristics are met, a "brand" exists.  "Hoover" is a brand.  "Oreck" may be a brand.  Dyson, by all accounts, makes a terrific vacuum cleaner but isn't a brand (yet).

There are two very important aspects to a brand.  First, it must be earned over time -- you can't invent a brand or wish it into being.  No amount of promotion will make a brand:  Only customers can make a brand.  The second aspect is that a brand is very fragile -- they can be broken quickly (and may be impossible to repair).  A brand must be managed and cared for or it will become tarnished or meaningless.  (Think "Oldsmobile".)

This model is simple, but has profound implications for innovation.  Innovation can:

•    Give cost advantages at the commodity level;
•    Lift products and services out of the commodity level;
•    Create new features and benefits for customers (and create new customers, too!); and
•    Drive the development of a reputation that can become a source of competitive advantage -- a brand.

P.S.  For those so inclined, there's a very complete story on the evolution of the vacuum cleaner at the American Heritage website (thanks, Peter!)