Marketing Innovation

Tesla Rocks!

I am an electric vehicle convert.

If I had driven a Volt, or Leaf, or Prius, I might not be.  But I drove a Tesla Roadster, and it changed my worldview on this technology. 

Driving this car was a profound experience.  I have never experienced acceleration like this.  Hit the “gas”, and you are launched.  The performance of this vehicle is simply unmatched.  Yeah, it costs $110,000, but… 

There is a Lithium-Ion battery pack, connected to a motor/generator that is, in turn, connected (via a gear) to the drive axle.  That’s it.  One motor, one gear.  No shifting.  There's a button with a "D" on it, for "Drive". That's the transmission. [In a neat trick, the speedometer and the tachometer are the same gauge in the (very spartan) instrument cluster.  One gauge, two scales, since there is only one gear. Not that you need to worry about the revs, though.]

The Tesla engineers have optimized the gear ratio to cover the range of speeds from “standing still” to “so fast you can’t think”.  60 mph?  3.7 seconds away from “standing still”. 

I said “motor/generator” back there.  When your foot is pushing the pedal, you are consuming battery power and making the car go (the “motor” part).  When your foot lets up, the same component now generates power, recharging the battery a bit. (Oh, and the car slows down due to the work being done.)  Magic to most; standard operating procedure for electrical engineers. 

And another benefit -- the car is nearly silent.  (Shaun Phillips, the Tesla rep who enabled this life-changing experience and the dude on the left in the picture, told me that the sound of the the Tesla motor was used in the Batman film “The Dark Knight”.  Cool!) 

The car is extremely drivable - the road manners are exquisite.  Handling is tight -- the steering is rack and pinion, for a good, solid mechanical connection to the road.  I didn’t get a chance to wring it out on the track, or even on an interstate, but I was very impressed with the driving around the city of Raleigh. 

The range is about 245 miles.  One driver got 350+ by driving at a steady 35 mph or something like that, but you have to have a pathological level of restraint to do that (IMHO).  Shaun says that the 245 number is very reliable.

Before I got into the car, Shaun asked if I would like him to show me how it drives.  I have driven a few cars in my time, so I was reluctant to share any seat time with him.  His concern appeared to be that I wouldn’t be willing to push the accelerator as hard as he thought I should.  I assured him that I would be willing to stomp on it. 

We left the parking lot, and wound through some city streets.  I asked him if he had ever had a test driver get a ticket in a bright orange Tesla.  He said that they had been pulled over a few times, but the constabulary was generally more interested in the vehicle than administering justice. 

As we turned onto Wade Avenue (two lanes in each direction), Shaun said, “Punch it!”  So I did.  Hit 65 mph in a heartbeat.  The gauge in the car showed an acceleration of 0.65 G.  It sure felt like it!  It was exhilarating. 

The officer coming the other way flipped on his lights, but never turned around to follow, for which I am grateful. 

Save the planet?  Maybe not, because charging the thing up still is most cheaply done by burning coal and shipping the energy over transmission lines. 

But in terms of sheer performance, and what this technology enables, the future of electric vehicles is very bright.  Tesla has interest from Toyota and several other companies, and is working to introduce a “BMW/Mercedes-killer” in the $60,000 range, and then a “Camry-killer” in the $30,000 range.  (They think of the Roadster as a Lamborghini-killer.) 

This technology isn’t just about alternative fuels, it is about what new energy sources enable.  And what they enable is awesome.

 

Opportunity for Innovation -- the North Carolina DMV

My son and I just had the experience that is uniquely the DMV -- a one hour, fifty minute long wait to renew our licenses, which took precisely 3 minutes.   

Let’s start with the facility: There were three active stations (out of eleven total). Based on counting ceiling tiles, the room was 30’ wide by 88’ long. There are 40 gray chairs and eight green chairs. The chairs were filled, and there was a line that averaged 20 people long pretty much the entire time we were there.  When we arrived, we were given ticket numbers A202 and A203, and a pictographic list of all the road signs in use in North Carolina. (The only requirements for license renewal is that you pass an eye exam, and can correctly identify 12 road signs, four of them by shape only.) An overhead sign said that the examiners were currently on ticket A170. I was worried that if I memorized all the signs too early, I’d forget them by the time my ticket was called.

We were told that we were to stand in line until a spot opened up in the gray chairs, and then we were required to take that seat. We could not sit in the green chairs. As we moved toward the front of the line, we noticed that there were also B-series and C-series tickets. So the simple assumption that we had only 32 people ahead of us was optimistic. My son got a seat in the front, and I got a seat in the back.

There were two video screens hanging from the ceiling at the front of the group of gray chairs, hanging directly over the green chairs, in fact. (The green chairs are where you went to sit after passing the test but before getting your picture made.) The video screens displayed an 11-minute long clip that had weather, local traffic maps, a message that drunk driving was bad, an ad for a law firm that specialized in license suspension and revocation cases, another ad for a firm that made duplicate keys, and an odd assortment of factoids, including that African elephants only have four teeth with which to chew their food, that the Sahara Desert is roughly the size of the continental US, or Europe, and that Eva Longoria and her husband went out to dinner on Monday night. The thing about elephant teeth was particularly intriguing, since there would presumably be two on each side, one top and one bottom, meaning that each tooth would have to be about the size of a cinder block.

We waited for forty minutes, wondering about elephant teeth, and also wondering why anyone would care whether or not Eva Longoria and her husband went out to dinner, texting back and forth as the numbers changed up on the overhead screen. 

“Only 27 more to go”, I texted when A175 went up.  

“Only?”, he texted back.

Suddenly, the lady who was tending the line and handing out tickets made an announcement. “The average wait time is 62 minutes. This is a first come, first serve department. The A tickets are the express tickets, and the B and C tickets will have to wait longer.”  

Thank goodness the A-tickets were express. However, just when we thought things couldn’t get any worse, a baby started to scream. At least the air conditioning worked, and it struck me then: There is a huge opportunity for innovation here!

We waited one hour and fifty minutes to go through a three minute process. That isn’t efficient. How could this be improved? How about a kiosk that asked multiple choice questions, had a camera, and a credit card swipe? I could even conceive that this could be done at home, over the internet, if there weren’t concerns that people would get help with the test. (Not that giving you a sheet with all the answers on it while you waited indicated that they were really plumbing the depths of your knowledge with this test.)

I texted this to my son, who responded that if we sped this up, we would be depriving people of the soul-crushing “experience” we were having.  Good point.

Anyway, I started a conversation with the fellow on my left, Kenneth, an older man who was passing the time reading the DMV handbook. I asked him if he thought that automation with a kiosk would be a good solution. He said yes, and there were probably a lot of ways to improve the overall situation as well. The lady on my other side said that she thought it would be a great idea to have an ATM nearby, especially since the DMV only takes cash and check. Vending machines would be a nice idea, and we thought video poker games would help pass the time, and both of these ideas would inevitably lead to more revenue for the state.

Not surprisingly, I am not the first person to think this way. Working on my Droid, I found a 2004 article by Lisa Kerner of kioskmarketplace.com identified many places that kiosk can be used for “line busting”, including the Nevada DMV:

The Nevada Department of Transportation uses kiosks for self-service license renewals, shortening wait time from one hour down to 15 minutes, reported Karla Guarino, marketing director for KIOSK InformationSystems. As in this example, a line-busting kiosk often serves as form, pen and clerk.

According to Guarino, lines at the Nevada DOT are reduced by as much as 30 percent, and have led to improved customer service. This can be attributed to the fact that while kiosks shorten lines, they also offer a consistent customer experience. A kiosk is never in a bad mood and, in retail environments, it doesn’t forget to suggest additional merchandise. Guarino added that kiosks often lead to significant increases in new product and promotional item sales.

While I’m not sure what sort of “new product and promotional items” are for sale at the Nevada DMV offices (perhaps “I ♥ the DMV” hats and T-shirts), the fact that the kiosks were successful is instructive. California and Connecticut are reportedly considering kiosks as well.

It costs $32 to renew a license, so I would think that the state would want to get as many $32 fees processed per hour (let’s call them “inventory turns”.) My count showed that there were 60 people waiting at any given point in my nearly two hours there, so there was about $2000 out there waiting to be collected. With 10 kiosks, the 60 people could have been done in 30 minutes total. If we assume that the 60 people arrived evenly over the two hours, then that is one person every two minutes. We'd only need about four kiosks to assure there should be no waiting under those circumstances.

Maybe we should just turn the whole thing into a drive through operation!

P.S.  I shook hands with Kenneth after finishing up, and said, “I’ve enjoyed the time we spent together!” He laughed, and said something very interesting: “It is strange the kind of bond people form in situations like this!”   I wonder if he thought that a session at the DMV was some sort of hostage situation!

The New Sharpie Liquid Pencil: A Temporary Marker!

I saw a press release the other day about a new invention from Sharpie, the Newell Rubbermaid brand of markers.  They announced the imminent arrival of a “Liquid Pencil” -- a writing instrument that uses a capsule of liquid graphite to provide the feel of a gel pen with the erasability of a pencil.  I described it to my 19-year old daughter, and she said, “Cool!  A pen for people who make mistakes!”

As an innovator and student of innovation, I am constantly amazed at what people come up with.  I’ve worked with a wide range of innovative products and services in my career, and some of the most intriguing are those in mature industries (trailer hitches, for instance).   The Liquid Pencil seems to be another.

I would have loved to be around when the inventor said, “Y’know, I think we need a better pencil.  One that writes like a gel pen but can still be erased.”  What sort of reaction did he or she get?  Especially from management?    

Even better, once the idea gained traction, it would have been great to be part of the team coming up with the marketing -- the value proposition.  Here’s a quote from Sally Grimes, VP of Marketing for the Markers, Highlighters, Art and Organization global business unit (there’s a mouthful!) in the press release:   “It solves the No. 1 consumer dissatisfaction with mechanical pencils -- breaking leads -- while also giving users the added confidence of stronger, darker lines that stand the test of time, plus the ability to erase and edit as they go.”  A pen for people who make mistakes, indeed!

An interesting aspect to this product (from a marketing perspective) is the break with what has long been one of Sharpie’s key product attributes: permanence.  The press release notes this:  “The Sharpie Liquid Pencil joins the Sharpie Pen as the brand further expands from permanent markers into near-neighbor categories.” 

I think that this is smart.  Growth in the marker category itself has already shown Sharpie to be an innovator.  They’ve got a huge color palette, retractable markers, a wide range of tip sizes, mini-Sharpies, industrial products, highlighters, and recently, pens.  (Really, they are just really, really fine point Sharpies, but you can use them as a pen for writing notes, etc.,  and put them in your pocket -- neither of which you would really do with a regular Sharpie.) 

This move into an adjacent, “near-neighbor” category is a great way to grow.  You build off of established relevance and credibility, and add new function to existing customers while attracting all-new customers.  In an earlier post, I talk about a way to innovate by “questioning your constraints, but knowing your boundaries”.   In this case, the team at Sharpie questioned the constraint of “permanent pens”, but knew that (at this point in time), they are in the writing instrument business (their boundary).

I’m a bit of a nut about writing instruments -- I’ve got lots of pens, pencils, and fountain pens -- and can’t wait to try out this Sharpie Liquid Pencil.  It’ll be available in September, 2010 and will carry a price tag of $1.99.  Let me what you think when you get your hands on one.

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:

Take the cork out of corkscrew

Imagine a premium product synonymous with the good life.  A product with a romantic image, where using the product has its own little ceremony, complete with a satisfying sound. The product has been around for millenia, and figures prominently in religious ceremonies.  It is produced and used around the world.  Its price ranges from $2 to $2000 a unit. 

The product is wine, and it is in the throes of a major image crisis.  Wine bottles have been sealed with cork for ages, giving rise to the "ceremony" and "satisfying sound" mentioned above.  But there's a problem -- there isn't enough good cork left.  There has been no end of innovation applied to the problem, most of which is akin to rearranging the chairs on the deck of the Titanic.  The one true solution, however, requires more innovation in marketing than most of the industry can handle. 

Cork is taken from the bark of the Cork Oak tree.  This can only be done once every decade or so per tree.  It is a very good material for sealing wine bottles.  It is light in weight; its highly elastic and stays that way, thus ensuring a good seal for a long time; it isn't very dense, which means it is fairly easy to extract; and it is slightly permeable to gases, which helps the best wines age slowly.  All in all, quite a good stopper material, which is why it has been a stopper material since the Phoenicians sailed the seas.

The problem is that the supply of good cork is dwindling quickly.  This is leading to a rise in the number of so-called "corked" bottles, where a harmless but incredibly stinky compound contaminates the cork and thus the wine.  Estimates of 10% to 15% of cork sealed wine bottles are affected in this way.

Wine is not inexpensive or quick to produce.  It requires a substantial investment of time and money, and, in spite of the fact that the inventory is sloshing around in tanks and/or barrels, it isn't a liquid investment until it is put into bottles and sold.  Understandably, producers don't like to take a 10% to 15% yield hit well after the product has been sent through the distribution channel and purchased by the end user.  So they have been seeking alternatives to corks made from a single piece of bark.

The industry responded with some incremental innovations.  The picture shows some of the results.  The top right cork is the traditional cork - a single plug.  The top left is a natural cork made up of lots of little pieces of cork smushed together -- sort of like particle board.  I guess you could call it particle cork.  This was a natural evolution of the product, and actually quite efficient.  There are lots of leftover particles of cork, so forming them into a bottle stopper was a no-brainer. 

The problem with it is that the pieces don't hold together all that well, so when you push the corkscrew in, you get lots of little cork pieces floating around in your chardonnay.  This is one problem.   The other problem is that particle cork doesn't have the same structural integrity that single-plug cork has, and this leads to the dreaded "corkscrew tearout" phenomenon.  This happens when the corkscrew is screwed in, and instead of pulling the entire cork out of the bottle, it tears a hole right out of the center.  This is a bigger problem than having little pieces of particle cork bobbing around in your glass because the wine is still securely in the bottle.

The next incremental solution is seen in the center cork, shown lengthwise.  The middle is made up of particle cork, but the top and bottom are made from good cork -- sort of solid cork caps on a particle cork plug.  This holds the particles out of the wine and prevents (ok, minimizes) cork tear-out.  It is, however, expensive.

Naturally, someone thought to apply technology to the problem.   The lower right stopper is a purely synthetic plug made from a plastic material.  The lower left cork is also synthetic, but with a thin outer wall that slides a bit better, aiding extraction.  (The pure synthetic ones occasionally take a lot of force to remove.)  One of the leading producers is nomacorc, located near here in Zebulon, North Carolina.

In a refreshingly forthright description of their product, the nomacorc home page tells us that "A nomacorc^® is a foamed co-extruded still wine closure based on a highly elastic chemically inert polymer formulation."  No marketing BS there! 

And marketing is really what is required for this industry, because the solution is not a better stopper, it is the screw cap.  Yes, the screw cap.  Talk about a disruptive innovation!  Boone's Farm to the rescue! 

The screw cap is finding its way onto bottles of quality wine from around the world.  (OK, it will be a cold day on Mercury when we see a screw top on Chateau Latour, but as the picture shows, they are getting to be more and more prominent.)  It makes sense. 

The closure is inexpensive.  It seals the wine in and allows it to be stored in any orientation, including upright where the label is in full view.  (Wine is traditionally stored on its side to keep the cork wet and expanded tightly against the bottle.)  Having the label in view is key to sales, since with over 1800 producers in the US alone, consumers are pretty darn mystified by words and descriptions and tend to buy based on the graphics.

Most importantly, it always works.  There is no loss due to bad screw tops.  There is no problem with screwtop tearout from the corkscrew.  There is no corkscrew!

The problem is one of image.  Wine has a mystique, much of it built around the age-old problem of getting the cork out of the bottle.  It has always been a tricky business, and one to which much innovative thinking has been applied on its own.  A little digression into cork removal technology may be instructive. 

Cork extraction is a wonderful illustration of how simple machines work.  Simply trying to pull the cork out on its own requires a fair amount of strength, and often body poses that are not, shall we say, genteel.   The bottle must be held firmly in place, and if one is to accomplish the feat by one's self, one puts the bottle between one's feet or knees, or under one's arm, and pulls determinedly until the cork gives up and pops out.  Sometimes wine comes along with the cork, and sometimes one grunts during extraction, or (worse) says naughty things, all of which take the romance out of the occasion.

The waiter's corkscrew, probably the best known and widely used type, applies leverage to the situation, and allows the edge of the bottle to serve as a fulcrum for what the scientists call a "second class lever".  This is a huge help, and allows the cork (assuming it is sound) to be extracted smoothly, even elegantly, with a gentle "pop". 

In a restaurant, the cork is offered to the person who ordered the wine, who is supposed to sniff it to see if the wine is "corked".  If it smells like a wet cork, it is fine.  If it smells like a wet dog, it is not, and you should send it back.  This is the problem we described at the start of this post -- 10% to 15% of wine smells like Fido.   

With a screwtop, "cracking open a bottle" takes on a whole new meaning, since opening one sounds like shelling a pecan.  This is not a good image.  There is no cork to smell.  Just twist and pour. 

It is difficult to associate the finer things in life with something that is used to seal up 2 liter bottles of diet Mountain Dew.   So far, the wine industry has addressed the incursion of the screw top by ignoring it from a promotional point of view.  Personally, I think this is a bad move.  When nature hands you a lemon, make lemonade.  Celebrate the virtues of the screw top!

If you've ever been on a picnic that involved a traditionally sealed bottle of wine, but forgot to bring the extraction device of your choice, you can immediately identify with the inherent superiority of the screw cap.  While a cork can be forced into the bottle, or chiseled out with a knife or a key, it is decidedly hard work, and not a positive contribution to the picnic.  (What's the most innovative way that you've removed a cork?)

I can see an ad with this very theme -- a couple is outdoors, on a picnic with a nice wine, at sunset, and they are not in bathtubs like in those Cialis commercials.  No corkscrew?  No problem!  The evening ends well because of the screw top.

A tagline is more problematic.  "Screw Tops:  Not Just for Boone's Farm Anymore" lacks a certain something, as does "From Jugs to Bottles".

It is interesting to watch the collision between the practical and the elegant.  The wine industry derives much of its profit margin from image -- is a $50 bottle of wine really worth five times more than a $10 bottle of wine?  Probably not by any objective standard.  But how to maintain that image (and margin) with a screw top in the picture.  If you want to extend this argument further, bottles are really not the best way to ship, store, and serve wine.  ("Best" being viewed in the practical sense here.)  The bag-in-a-box method is quite superior to bottles, but if you think that marketing screwtops on Bordeaux is a challenge, try pushing a 1982 Chateau Haut Brion in a three liter box!

For my part, I'll be watching the evolution of wine marketing with interest, and will keep up to date with my research.  I'll keep you posted.

Cheers!

[For  more information about the whole serving process, go here.  Amazon has a whole pile of "cork extractors" for sale.  My personal favorite, even though I've never tried it, injects pressurized gas into the bottle, forcing the cork out.  It is not called the "Wine Bomb", although that would be cool.  And if you really have a lot of spare time, one website I came across in researching this post, corkscrewnet, has a frightening amount of information about corkscrews.]

Customer Based Innovation

An interview with Kraft, Inc. CEO Irene Rosenfeld (WSJ, February 20, 2007, page B1) contained some interesting nuggets about innovation and marketing that I thought I'd post.  (There's no link because a subscription is required.)  As loyal Kraft customers (my son could probably live on Kraft Macaroni and Cheese alone!), I was especially interested in her thoughts.

The first set of questions and answers points out the need to focus on the ultimate consumer of your product.  (At Netanium, we call that "The Customer BuyCycle", and it is the centerpiece of our market strategy formulation process.)  Here, Ms. Rosenfeld says that Kraft had been looking at their products from the manufacturer's perspective, not the consumer's perspective.  Her words:

WSJ: How will you make the new-products pipeline stronger?

Ms. Rosenfeld: Part of the strategy is really about looking at our products through the consumers' eyes rather than through our manufacturer's lens. Cheese is a perfect example. Our cheese segments are based on our manufacturing processes. We have processed slices, natural chunks, jar cheese -- not exactly the most appetizing kinds of descriptions. Consumers are using processed slices to make sandwiches. They're using natural chunks to snack. They're using jar cheese to dip and spread. So if you start to focus on it from the consumers' perspective, it opens up a whole world of possibilities to what new products one might offer.

It's interesting that a company the size of Kraft, in one of the most competitive industries there is (packaged food), can let this happen.  Of course, they aren't alone.  Lou Gerstner's turnaround of IBM was based on fixing the very same problem.

The next exchange shows an interesting global twist on product usage that you couldn't predict in the lab.  It also illustrates that customers will do whatever they want to with your product, whether you developed it for that purpose or not.

WSJ: When you first came back to Kraft, one of the things you did was to go to consumers' homes and watch them. What were you looking for?

Ms. Rosenfeld: We have all kinds of studies that we've done. But there is no substitute for seeing with your own eyes how people actually use the products.

When I went to Beijing, the consumer whose home I was in offered me some Tang. She poured it out and I started to gulp it down and almost burned my tongue because they drink Tang hot. And I didn't know that. We haven't really spent a lot of time thinking about the solubility of our Tang product in hot water.

Another thing that every company has to worry about is how customer perceptions change over time.  Many of these changes happen so gradually that we can really tell that something fundamental is going on.  One day, however, we look around and the landscape is completely different.  This exchange about the nature of cooking illustrates this very nicely:

WSJ: Do people still want to cook?

Ms. Rosenfeld: A lot of people consider microwaving their nacho chips with Cheez Whiz on it as cooking. I think consumers very much like to cook. I think the definition of cooking has changed dramatically. Whereas our mothers were more inclined to using their oven and their stove when they cooked, today's consumers think about using their microwave. They think about assembly as opposed to necessarily cooking.

I'm excited about this new product we just launched in January called Deli Creations. These are hot sandwiches that are made with our high-quality ingredients like Oscar Mayer meats, Kraft cheese and A1 and Grey Poupon sauces. But what's so cool about them is you stick them in your microwave, it takes 60 seconds and it tastes freshly baked.

WSJ: Do people feel like that's cooking?

Ms. Rosenfeld: In all honesty, no. But they certainly feel they've eaten a substantial, quality meal. As part of this notion of changing our lens, we are beginning to have more complete solutions in our offering of products. Today, a lot of what we make are what you'd call components. We make the meat, we make the cheese, we make the mustard, we make the steak sauce. Increasingly there are many consumers who don't have the time or the interest to put it all together themselves.

And lastly, we need to look at how our products are distributed, and what the buying experience of our "end users" is like:

WSJ: How will the supermarket look in 50 years?

Ms. Rosenfeld: We ought to see together the kinds of things that go together. Today if you want to make a salad, you have to go to the produce to get your lettuce, you have to go to the meat and cheese sections -- which are in two different places -- to get your meat and cheese, and then you have to go to a third section to get your salad dressing. So increasingly I think a big part of what we'll see in the future is better thinking about how to organize the store.

Time will tell whether Kraft will succeed with these initiatives, but they'll have the independence to pursue Ms. Rosenfeld's program.  Kraft will be spun out of Altia (NYSE: MO), which will be left with Philip Morris.  The stock symbol for Kraft is KFT on the NYSE, and it will serve as a scorecard for the company. 

I think she's on the right track, and wonder what innovations will come to that friendly blue mac-and-cheese box!

P.S.  Another company often accused of doing what it wants instead of what is best for the use is Microsoft.  Here's a link to a story on PC World's website called "The Most Annoying Things about Windows Vista".  From my reading, that's a pretty ambitious title! 

P.P.S.  I haven't thought about Tang in years.  I wasn't even aware it was still available!  And while many people think it was developed by NASA, it wasn't.  It was developed by General Mills in 1957, and used by NASA starting with the Gemini program.  I guess the Mercury flights were so short that nutritious beverages weren't a problem.

Incremental Innovation: A Little More is Better (But Not Always)

I break innovation down into two broad categories -- incremental and disruptive.  Disruptive innovations are brand new things that haven't been done before (cloning) or brand new ways of doing things that have been done before (digital cameras).  This type of innovation needs special marketing techniques because people have no frame reference for adoption.  Actually, they have no real reason to adopt a disruptive innovation because they didn't know they needed it!

Incremental innovations are improvements on existing methods.  The vast majority of innovation is incremental.  People are already using the product or service, and the innovation almost always falls into one or two of the famous "better, faster, cheaper" categories.  A lot of the time, the incremental innovation is good.  Sometimes, it isn't so clear.

Case #1:  The Good (perhaps even brilliant).  You may have heard of the nationwide shortage of Wiis, Nintendo's latest game console.  Perhaps (like me) you are personally involved in the nationwide shortage of Wiis.  (And before you get thinking about how wonderful/awful/both the name "Wii" is, that's not the subject of this post.  Wal*Mart is the subject.)  My son has employed many strategies to figure out where the supply bottleneck is liable to first ease up, and logically decided that since better than $1 out of every $10 spent in America is spent at Wal*Mart, that would be the place to start.  So he called all the local Wal*Marts and there were no Wiis in stock at any of them.  So we went to Wal-Mart.com, where they had an "OUT OF STOCK" notice.  (This was back in early December.) 

Fast forward a few weeks, and we checked back.  (Here's the innovation.)  They still didn't have any Wiis, but instead of "OUT OF STOCK", the site sent us to the Nintendo Wii Gift Card .  It is nothing more than a regular old Wal*Mart gift card, but with Nintendo Wii artwork and in the amount of $249.24, the "every day" low price of the Wii!  Very smart!  They customized a routine commodity offering (the gift card) to be a substitute for a wildly sought after product.  (It might be a poor substitute, but I'll bet that it was a popular and necessary substitute.)

Case #2:  Incrementalism gone awry -- the Gillette Fusion razor. (That link is to a non-Flash site.  To link to a semi-bizarre Flash site, hosted by someone named "Cassandra" who guides you through the "laboratory" to learn more about this amazing innovation, go here.)  The Fusion is a razor that has five blades packed together in the head.  I just got one in the mail.

Men have been scraping their beards and mustaches off since the invention of dating, and had been using a variety of single edged razors, including the so-called "safety razor", which had been introduced by Gillette in 1901. 

A mere 70 years would pass before the Gillette people could improve on things with the introduction of the Trac II razor, the first two-bladed cartridge.  The theory was (if I remember the commercials right), that the first blade would -- in the process of severing the offending hair -- actually pull the hair slightly out of the face so the trailing blade could cut off even more.  It would then snap back below the surface of the skin, producing irresistibly smooth face parts. 

You could probably argue about whether this was an incremental innovation or a disruptive one.  It certainly hadn't occurred to anyone in the previous several millenia to add a second blade.  That said, going from one of something to two of something is truly incremental.  In either event, it did improve both the process (less cutting and nicking) and the result (the previously mentioned irresistibility).

Life went on with much of the innovation in hair removal being confined to the electric side of the business.  The manual business was made up by competing on price (everyone had introduced two-bladed cartidges) and making disposable razors that were just barely adequate to shave with but cheap enough to be profitable and drive growth.  (A departure from the traditional razor-and-blade business model, we note.)

Only 27 years passed before another wizard at Gillette caught the industry by surprise and got the idea to add a third blade to the mix.  This became known as the Mach3.  (I'm actually short-changing some of the smaller, less earthshaking innovations along the way.  They can be found at Wikipedia.)

This was an incremental innovation, and it did actually seem to yield an incrementally better (and again, less dangerous) shave.  You might think that this would be the logical end of the line for adding a "plurality of blades" to the cartridges, as the patents might read.   You would be wrong.   After a century of getting out-innovated by Gillette, the Schick people responded with the Quattro, which had the startlingly non-obvious innovation of a fourth blade!  Gillette responded with the fifth blade, which brings us up to the present.

I've been using my new Fusion instead of my Mach3 for the last week or so, and the question remains:  does all this rampant innovation lead to a better shave?  I put myself through the Post Cheek Smoothness Meter (my wife) who pronounced it no different with the Fusion. 

Where will this all end?  Will we wind up with a Microplane grater that we drag around our face?  Or maybe there will be a shaving cream like Nair that gets rid of hair once and for all.  (There's actually a pretty funny analysis at Wikipedia about the progression of blades.  They predict that we will reach an infinite number of blades in 2015 with the introduction of the "Schick Infini-T".)

I'm going to stick with three blades for now.  Call me a Luddite.

    

Blend right in? No way! An Innovation in Marketing

I have a personalized Google home page, and I subscribe to two sources of news about all things Apple (Computer, that is).  The other day I saw a headline on The Unofficial Apple Weblog that read "A blender + an iPod = great entertainment".  Now who wouldn't be pulled in by that?

Turns out to be part of a series of videos made by Blendtec to promote their series of (you guessed it) blenders.  I hadn't really given much thought to the blender market recently, and if I had, would have assumed that blenders were kind of a commodity product, and that one was just as good as the other, and they'd all be relatively inexpensive.

I would have been wrong.  Very wrong, on the last point especially.

Blendtec sees a market for exceptionally powerful and exceptionally expensive blenders.  Presumably, one is willing to pay north of $400 for a blender that can blend -- in addition to iPods -- golf balls; marbles; hockey pucks (three at once); stick pens (40 at once); oysters (6 "on the whole shell" at once); a full can of Coke; a rake handle; and, in the nearly obligatory tribute to the Bass-O-Matic on Saturday Night Live in 1976 (!), a Tilapia.  Forget about margeritas.  This is serious blending.  The company calls it "extreme blending".

The host is a genial fellow named Tom Dickson, who appears in every video on the Will It Blend? website dressed in a lab coat and safety glasses.  (You can get a "Tom Dickson is my homeboy" T-shirt at the WillItBlend.com online store.)  Tom is a master blender and has great calm overseeing the destruction going on inside the 64 ounce jar.  (He holds it down in most cases.  It gets pretty violent in there.) 

If you want to buy one of these blenders, there's good news.  They're on sale!  That's right -- the Tabletop model is on sale for $399.95 (regularly $599.00) and comes in either white or black.  It has a 1500 watt motor.  I just checked my Krups blender, and it has a 330 watt motor.  And up until now I thought it had been doing just fine with my (rare) blending needs.

There's also the Connoisseur model, which is also on sale (for $825.00, regularly $1,250.00).  For doubling the price,  you get the versatility of being able to install the motor (the very same 1500 watt model) in your countertop.  AND you get a separate base that you can move from room to room.

I would think that the consumer market for $400 blenders might be pretty small, and -- even given the margins that have to be built into that price -- wouldn't support a national advertising campaign on, say, "MythBusters" or "Good Eats".  So what to do?  Why, a web-based viral marketing campaign, of course!  Featuring the videotaped destruction of common household items in one of the world's most powerful small kitchen appliances!

The videos are pretty compelling.  I gathered the family around last night and we watched quite a few from the "Don't Try This At Home" collection.  Hilarity ensued!  We thoroughly enjoyed them.  Perhaps unfortunately for Blendtec, I was not so moved as to purchase one, but I don't think I'll ever forget the website or the company.

It turns out that's the whole point -- to build top-of-mind awareness and brand recognition for Blendtec.  This afternoon I spoke with George Wright, the marketing manager (genius might be a better word!) responsible for this campaign, and he was very forthcoming. 

He explained that this wasn't a "hard sell" campaign, where the goal is to drive sales, but instead to start to build the brand recognition.  Blendtec has a substantial commercial blending business, and a small but diverse set of home users -- he mentioned "health and fitness conscious" consumers and "raw food" consumers as two segments -- that they want to grow.  The "Will It Blend" campaign is the first step on that journey.  (He did allow that sales have, indeed, gone up.  A very happy side effect!)

The videos have drawn terrific traffic, both to the website and to postings on YouTube.  George mentioned that there was an occasion when Blendtec was trying to upload three videos to YouTube, but for whatever reason, one of them hadn't loaded after six hours.  Some fans took things into their own hands by downloading the video from www.willitblend.com and uploading to YouTube by themselves.  Talk about a successful viral campaign -- you have your viewers doing your work for you! 

I asked if there was any fear that "extreme blending" might detract from the luxury image that a $600 blender might enjoy.  His answer was that their customer segments have different needs, and that power and quality are important characteristics -- luxury isn't foremost at this time.  Building awareness is.

This campaign is truly an "innovation in marketing".  Many companies strive to stand out, but find themselves "blending in" with everything else.  That's certainly not the case with Blendtec, and it will be entertaining to watch what else George Wright is going to whip up.

[NOTE:  if you want to bid on the remains -- dust, essentially -- of Tom's iPod, you can do so on eBay.  Proceeds go to charity.  As of this writing, the current bid is $660.75, with 2 days and 2 hours remaining.]

Update:  I found the following item about Tom Dickson on the Utah Business Magazine website:

Tom Dickson, K-TEC

"Tom Dickson grew up putting big engines in little things. From drag racing motorcycles to clocking go-cart speeds on the salt flats, Dickson is always looking for more power. It’s not at all strange, then, that this K-TEC CEO leads the way in building high-end commercial blenders.

"The blenders, which have found their way into food and coffee joints all over the nation––places like Starbucks, Baskin-Robbins, Subway, and Red Lobster––have cut blending time in half. Dickson brags that four chocolate shakes which used to take six minutes to make, can now be made in six seconds. “Nobody can make better drinks with less money and less time with less stress on the operator,” he says. When Jamba Juice told Dickson the $14,000 blender package was too expensive, he cut them a deal, asking simply for a nickel of every sale. Now, with 50 million smoothies sold each year, Dickson says it was one of the best deals he ever made."

Market Segmentation: Give 'em What They Want

As I help my clients develop their marketing strategies, I ask them to consider what I call "The Three Questions":

1. Who is your offering for?
2. Why will they buy it?
3. Why will they buy it from you?

The questions are deceptively simple.  Getting the answers right can be hard.  The answers are:

1. Your target market
2. Your "value proposition"
3. Your source of competitive advantage

Let's look at the first Q (&A):  Establishing a target market is a fundamental element of strategy.  No one can be all things to all people.  Not even Wal-Mart, though they are trying.  Nor Hormel or Sony, as we will see in a bit.

Segmentation and targetting is especially important for companies marketing innovative offerings.  Your customers will be people with a unique need -- by definition, not a mass market.  You must define this "target segment" well -- specify the common attributes, behaviors, and motivations that make up your ideal customer.

One client learned this lesson the hard way. 

It was a software company founded by two engineers whose product allowed the exchange of data between different platforms and databases.  (What would now be called "Enterprise Application Integration".)  They proudly showed me their product and announced, "It's a thirty five billion dollar market!"

I said, "That's great!  Which part of it are you going to go after?"

They looked at me and said, "All of it!"

I explained about segmentation, and the idea (from "Inside the Tornado", by Geoffrey Moore) of thinking of the market like a bowling alley, and just knocking down the head pin -- essentially, find a niche, dominate it, and grow.  The more expressive of the two engineers-turned-entrepreneurs said, "That's just a bunch of marketing crap" and left.

Six months later, the other guy called me back and said, ""You were right.  We found that the pharmaceutical industry had a huge need for our product because of all the merger and acquisition activity, and companies needed to merge their data from all these different applications.  They had unique requirements that some of our other customers didn't have, so we've decided to focus all our efforts on this segment.  Sorry it took us so long to see that!"

All companies wrestle with segmentation.  Trying to expand your market beyond the appropriate segment dilutes your brand (reputation) and will ultimately lead you to lose your focus.  Your product will take on features that the core segment finds unnecessary, and they will start to leave for competitors who focus on them.  You don't want that to happen.  Alternatively, focusing on the needs of a highly demanding segment can limit your overall appeal.

Today's (11/29/06) Wall Street Journal had a pair of articles that drive home these points.  One was about Spam ("Hormel Struggles to Add Upscale Foods Without Alienating Lovers of Its Spam", page B1) and the other concerned new game consoles from Sony and Nintendo ("Battle of the Boxes:  PlayStation 3 vs. Wii", The Mossberg Solution, page D1).  [The link is to a site that is republishing that article, not to the WSJ.]

Hormel would like to expand into natural and ethnic foods, but they realize that the Hormel brand is rather entwined with the blissfully understated food category known as "potted meat".  Spam, in other words.  (They also are well known for canned chili, which I once heard referred to as "the duct tape of food". Great phrase.)  Here's a key passage from the article:

[CEO Jeffrey] Ettinger recognizes that skewing the company's image too far afield might alienate the core customers who turned Hormel into a surprise star of the packaged-food industry:  middle-age, blue-collar men who place a premium on hearty foods that are affordable and easy to make.

"Hormel stands for canned ham, bacon, and more traditional products," Mr. Ettinger says. "We don't want to harm these items with the target customers."

The article says that Hormel has appointed Dan Hernandez as the company's first director of innovation.  Some of the offerings we'll see coming down the grocery aisle will be new varieties of Spam, including "Stinky French Garlic".  (I can't wait.  I am a Spam Fan, particularly of the variety called Turkey Spam.  In our house, we simply call it "Spurkey".)  Also on the plate are single serving packages and other incremental, derivative products that stay true to the brand.  (You can innovate just about anywhere!)

The "Battle of the Boxes" was a comparison test in which the much more sophisticated, feature-rich, and expensive Sony PlayStation 3 lost -- rather badly -- to the Nintendo Wii.  The graphics on the Sony are "rich" and "realistic" while those on the Wii "ranged from dated to cheesy".  The Sony can play DVDs (even Blu-Ray discs), produces HDTV signals, has a hard disk and an ethernet port.  The Wii doesn't.  It just plays games, albeit with a very innovative controller. 

Many people would think that the Wii wouldn't stand a chance against the PS3.  Those people aren't thinking about Question #1:  Who is it for?

From the article:

The two products are clearly aimed at different audiences.  While the PS3 has a lot of multimedia features, it is really for hard-core gamers with deep pockets (or parents with deep pockets) - the folks who spend days mastering all the levels and secrets of a complex game.

The Wii is for casual game players, including younger kids and older adults who find the complexity and finger skills required for the PlayStation and Xbox to be intimidating.  Even adventure games and racing games on the Wii seem easier to get into than similar titles on the PS3.

Both systems are doing pretty well in the marketplace since their introduction a couple weeks ago.  Each target segment is snapping up all available product.  But the media reports that the Wii is doing better.  Is that because it's target segment values the simplicity, lower cost, the innovative motion-sensing remote control more than the "hard core gamers" value the sophistication, capability, and superior technology in the PS3? 

Nope.  The target market for the Wii is simply bigger.

Help Your Customers Plan to Find You

As a semi-frequent traveller on the Interstate highways, I've used the blue informational signs to find fast-food restaurants quite a bit.  Because of a need to find gluten-free foods, we search out Wendy's, which has the potatoes and salads that fit the bill.

One can only eat so many baked potatoes before the desire for variety becomes undeniable.  So we got to work on finding alternatives.  Most of the chains have fairly complete nutritional information on their websites, including gluten.  Those that don't usually respond to email inquiries.

During this search, we came across an absolutely brilliant idea on the Chick-Fil-A website:  a trip planner.  You put in where you are, and where you're going, and it will show you the route AND all the Chick-Fil-A's along the way. 

For demonstration purposes, let's assume you were going from Raleigh, NC to Epcot Center at Walt Disney World.  Entering in the respective zip codes give you the driving route plus the locations of all 24 Chick-Fil-A's along the way.

What a great way to help your customers plan to find you (and integrate you into their lives)!

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In the interest of completeness, I researched some other fast food chains' websites. The following have trip planners (the number in parentheses is the number of restaurants on our demo route):

Sheetz (2) Probably the best-of-breed planner in this round-up; gives options like "avoid major highways"
McDonalds (40)  This planner isn't as easy to use as Chick-Fil-A's
Cracker Barrel (20)
Bob Evans  (10)

The following chains had store locators but not trip planners: 

Burger King, Wendy's, Hardee's, Bojangles, Denny's, Sweet Tomatoes, Taco Bell, KFC, Arby's, Subway, Quizno's, Schlotzsky's, Applebees, TGIFriday, Ruby Tuesday, Chili's, Backyard Burgers, Friendly's, and Shoney's (although there are some "advanced" location features, like locating by Interstate Highway), Church's Chicken, Olive Garden, Checker's, Golden Corral, and Sonic Drive-In.

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For more information on the road signs:  the regulations are described in the federal Manual of Uniform Traffic Control Devices.  The section on "Specific Service Signs" (the blue ones) can be found here.