After Selling Blue Elephants was republished in India, I got an unexpected invitation from the second largest (and the fastest growing) business newspaper in India, Daily News and Analysis (www.DNAIndia.com), to write a few columns for their Marketing and Management section.
Here are the copies.
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Daily News and Analysis, October 4, 2007
Consumers know what they want. Or do they?
Alex Gofman
My daughter knows exactly what she wants. In a restaurant, she could order without even looking at the menu. And she always like her order. I, on the other hand, regret my choice the moment I see someone else’s dish delivered. THIS is what I want! Why didn’t I order it?!
It is a truism that to succeed in business you need to know what your customers want. In other words, a route to success appears to be simple: just ask your customers about their needs and desires and try to fulfill them. Sounds like a prudent way, but is it?
If you are, for example, in the banking business and want to create a new credit card offer that will send your bottom line off the charts, you could just ask what kind of card people want. Chances are, you will ‘find’ that they want 0% APR for the rest of their life, free airline miles for them and everybody they know and a lot of cash back for just having the card.
Not very insightful results. True, people may want all of that but how actionable is this knowledge? And the ‘insights’ are produced by the same consumers that relatively easily and realistically choose between real life offers and trade-offs. Asking them to explain why they like one or another may not help either. It is like asking a high school boy why he fell in love with the girl from his class. He knows he is deeply and madly in love with her but can he explain what specifically he likes about her? And would other people agree with him?
Asking customers in direct terms what they need and want will not work in most cases. Companies spend fortunes on focus groups and 80% to 90% of new product launches, based on the input from those groups, fail.
As Malcolm Gladwell once said, we cannot always explain what we want deep down (actually, he formulated this idea after interviewing my co-author of Selling Blue Elephants, world-renowned experimental psychologist Dr. Howard Moskowitz, but this is another story).
Does it mean that we eliminate the customers from the process of product creation and contest the famous John Wannamaker’s adage that the customer is always right? No and another categorical no. Customers might not be able to explain what they want and need but they will easily choose the winning offer if they see the options. An astute businessman should experiment with his offering, create multiple prototypes (physical or conceptual) and solicit customer feedback (liking, purchase intent, etc.) to find a potential winner. This is a much easier exercise for the consumers – they get to choose among different products on the shelves, various websites, offers, etc.
Businesses (some of them intuitively) understood this long ago. Companies like Seiko go through thousands of designs, tested in real stores (like in the Akihabara district of Tokyo), before shipping them around the world.
What is missing in many cases, is a disciplined approach to the experimentation afforded by the new paradigm Rule Developing Experimentation (RDE) co-developed with the Wharton Business School of the University of Pennsylvania (the best business school in the US and arguably in the world) and introduced in the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them.
RDE is a systematized, solution-oriented business process of experimentation that designs, tests, and modifies alternative ideas, packages, products, or services in a disciplined way so that the developer and marketer discover what appeals to the customer, even if the customer can’t articulate the need, much less the solution!
Scientific details of RDE, which is based on a unique application of experimental designs (conjoint analysis), might be daunting for a leisurely reader and well beyond the scope of this column. Until some time ago, it was an exclusive domain of statisticians and university professors. Fortunately, recent advances in software development and proliferation of the Internet allowed the algorithms to be incorporated in simple-to-use WEB based tools that can be deployed by anybody, anywhere around the world, without virtually any knowledge of statistics. The task is quite simple. First, you need to split your potential proposition into parts (buckets of ideas). In the case of the credit card offer, it could be different APRs, Security Guarantees, Rewards Options, Prestige Messages, etc. Second, you enter several options for each of the ‘buckets’ such as 2.5% cash back for gas purchases; One airline mile for every 100 Rupees spent, etc.
An offer may have 3, 4, 5 or more such ‘buckets’ with several options in each. An RDE tool will automatically mix and match the ideas according to an experimental design, present them to customers via WEB interviews asking them to rate how likely they would be to apply for this card - screen by screen (usually, between 20 and 50). This task is very simple for the majority of consumers. The tool accumulates the responses and at the end of the interview automatically calculates how much each idea individually adds or detracts from the purchase intent (regression model).
RDE helps businessmen to create better products, marketers - to optimize advertising, web designers - to find the most impactful landing pages, political candidates - to fine-tune their platform and messages, package designers - to synthesize packages that ‘fly’ off the shelves, investors – to know the reaction of the stock market on potential news, etc.
Many Fortune 500 companies like HP, Citibank, Unilever, Microsoft, Pepsi-Cola, etc. have benefited from using RDE. Their RDE experience could be summarized as the following: if you want to succeed by knowing what your customers want and need, do not ask them directly – show them experimentally designed prototypes according to the RDE rules and let them rate the prototypes (whether it’s a new product, an advertisement, a promotion idea, a mixture of ingredients in a soft drink, etc.). The result - the algebra of the consumer mind with precise knowledge about what works, what does not and for whom.
The very first use of RDE for credit cards (similar to our example exercise in the beginning of this column) by the HSBC bank in Hong Kong helped the issuer to achieve annual goals of new customer acquisition in the first two months. Six banks tried to issue affinity cards linked to the world football cup at the same time. HSBC’s use of RDE helped it to win while all other launches failed. Currently, MasterCard and Discover license this technology worldwide.
In another example, a wide cross-divisional use of RDE by Hewlett Packard helped the computer giant to create what they called “an always-on intelligence system”. The technology company has brought the consumer to the table in every design initiative or marketing decision in a way and scale that was unprecedented for HP. RDE fit in perfectly with HP’s new goals becoming one of the “evidence-promoting” components of their business and, in HP’s own words, with some spectacular results.
It is easy for the businesses to work with the customers like my daughter – just asking what they want will do. For the rest huge majority of us, one has to use more sophisticated approaches like RDE. For that and for many other applications of RDE – read the book. It’s all there.
__________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Howard Moskowitz and recently republished in India (it is currently translated in twelve countries). He may be contacted at alexgofman@sellingblueelephants.com
Here are the copies.
++++++++++++++++++++++++++++++
Daily News and Analysis, October 4, 2007
Consumers know what they want. Or do they?
Alex Gofman
My daughter knows exactly what she wants. In a restaurant, she could order without even looking at the menu. And she always like her order. I, on the other hand, regret my choice the moment I see someone else’s dish delivered. THIS is what I want! Why didn’t I order it?!
It is a truism that to succeed in business you need to know what your customers want. In other words, a route to success appears to be simple: just ask your customers about their needs and desires and try to fulfill them. Sounds like a prudent way, but is it?
If you are, for example, in the banking business and want to create a new credit card offer that will send your bottom line off the charts, you could just ask what kind of card people want. Chances are, you will ‘find’ that they want 0% APR for the rest of their life, free airline miles for them and everybody they know and a lot of cash back for just having the card.
Not very insightful results. True, people may want all of that but how actionable is this knowledge? And the ‘insights’ are produced by the same consumers that relatively easily and realistically choose between real life offers and trade-offs. Asking them to explain why they like one or another may not help either. It is like asking a high school boy why he fell in love with the girl from his class. He knows he is deeply and madly in love with her but can he explain what specifically he likes about her? And would other people agree with him?
Asking customers in direct terms what they need and want will not work in most cases. Companies spend fortunes on focus groups and 80% to 90% of new product launches, based on the input from those groups, fail.
As Malcolm Gladwell once said, we cannot always explain what we want deep down (actually, he formulated this idea after interviewing my co-author of Selling Blue Elephants, world-renowned experimental psychologist Dr. Howard Moskowitz, but this is another story).
Does it mean that we eliminate the customers from the process of product creation and contest the famous John Wannamaker’s adage that the customer is always right? No and another categorical no. Customers might not be able to explain what they want and need but they will easily choose the winning offer if they see the options. An astute businessman should experiment with his offering, create multiple prototypes (physical or conceptual) and solicit customer feedback (liking, purchase intent, etc.) to find a potential winner. This is a much easier exercise for the consumers – they get to choose among different products on the shelves, various websites, offers, etc.
Businesses (some of them intuitively) understood this long ago. Companies like Seiko go through thousands of designs, tested in real stores (like in the Akihabara district of Tokyo), before shipping them around the world.
What is missing in many cases, is a disciplined approach to the experimentation afforded by the new paradigm Rule Developing Experimentation (RDE) co-developed with the Wharton Business School of the University of Pennsylvania (the best business school in the US and arguably in the world) and introduced in the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them.
RDE is a systematized, solution-oriented business process of experimentation that designs, tests, and modifies alternative ideas, packages, products, or services in a disciplined way so that the developer and marketer discover what appeals to the customer, even if the customer can’t articulate the need, much less the solution!
Scientific details of RDE, which is based on a unique application of experimental designs (conjoint analysis), might be daunting for a leisurely reader and well beyond the scope of this column. Until some time ago, it was an exclusive domain of statisticians and university professors. Fortunately, recent advances in software development and proliferation of the Internet allowed the algorithms to be incorporated in simple-to-use WEB based tools that can be deployed by anybody, anywhere around the world, without virtually any knowledge of statistics. The task is quite simple. First, you need to split your potential proposition into parts (buckets of ideas). In the case of the credit card offer, it could be different APRs, Security Guarantees, Rewards Options, Prestige Messages, etc. Second, you enter several options for each of the ‘buckets’ such as 2.5% cash back for gas purchases; One airline mile for every 100 Rupees spent, etc.
An offer may have 3, 4, 5 or more such ‘buckets’ with several options in each. An RDE tool will automatically mix and match the ideas according to an experimental design, present them to customers via WEB interviews asking them to rate how likely they would be to apply for this card - screen by screen (usually, between 20 and 50). This task is very simple for the majority of consumers. The tool accumulates the responses and at the end of the interview automatically calculates how much each idea individually adds or detracts from the purchase intent (regression model).
RDE helps businessmen to create better products, marketers - to optimize advertising, web designers - to find the most impactful landing pages, political candidates - to fine-tune their platform and messages, package designers - to synthesize packages that ‘fly’ off the shelves, investors – to know the reaction of the stock market on potential news, etc.
Many Fortune 500 companies like HP, Citibank, Unilever, Microsoft, Pepsi-Cola, etc. have benefited from using RDE. Their RDE experience could be summarized as the following: if you want to succeed by knowing what your customers want and need, do not ask them directly – show them experimentally designed prototypes according to the RDE rules and let them rate the prototypes (whether it’s a new product, an advertisement, a promotion idea, a mixture of ingredients in a soft drink, etc.). The result - the algebra of the consumer mind with precise knowledge about what works, what does not and for whom.
The very first use of RDE for credit cards (similar to our example exercise in the beginning of this column) by the HSBC bank in Hong Kong helped the issuer to achieve annual goals of new customer acquisition in the first two months. Six banks tried to issue affinity cards linked to the world football cup at the same time. HSBC’s use of RDE helped it to win while all other launches failed. Currently, MasterCard and Discover license this technology worldwide.
In another example, a wide cross-divisional use of RDE by Hewlett Packard helped the computer giant to create what they called “an always-on intelligence system”. The technology company has brought the consumer to the table in every design initiative or marketing decision in a way and scale that was unprecedented for HP. RDE fit in perfectly with HP’s new goals becoming one of the “evidence-promoting” components of their business and, in HP’s own words, with some spectacular results.
It is easy for the businesses to work with the customers like my daughter – just asking what they want will do. For the rest huge majority of us, one has to use more sophisticated approaches like RDE. For that and for many other applications of RDE – read the book. It’s all there.
__________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Howard Moskowitz and recently republished in India (it is currently translated in twelve countries). He may be contacted at alexgofman@sellingblueelephants.com
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