Monthly Archives: April 2016

What is The Element of Value

When customers evaluate a product or service, they weigh its perceived value against the asking price. Marketers have generally focused much of their time and energy on managing the price side of that equation, since raising prices can immediately boost profits. But that’s the easy part: Pricing usually consists of managing a relatively small set of numbers, and pricing analytics and tactics are highly evolved.

What consumers truly value, however, can be difficult to pin down and psychologically complicated. How can leadership teams actively manage value or devise ways to deliver more of it, whether functional (saving time, reducing cost) or emotional (reducing anxiety, providing entertainment)? Discrete choice analysis—which simulates demand for different combinations of product features, pricing, and other components—and similar research techniques are powerful and useful tools, but they are designed to test consumer reactions to preconceived concepts of value—the concepts that managers are accustomed to judging. Coming up with new concepts requires anticipating what else people might consider valuable.

The amount and nature of value in a particular product or service always lie in the eye of the beholder, of course. Yet universal building blocks of value do exist, creating opportunities for companies to improve their performance in current markets or break into new ones. A rigorous model of consumer value allows a company to come up with new combinations of value that its products and services could deliver. The right combinations, our analysis shows, pay off in stronger customer loyalty, greater consumer willingness to try a particular brand, and sustained revenue growth.

Most companies have a formal method of segmenting their customers into demographic or behavioral groups, which presents an opportunity to analyze what each of these groups values and then develop products and services that deliver those elements.

Whenever an occasion to improve value presents itself, managers should start with a survey of current customers and likely prospects to learn where the company stands on the elements it is (or is not) delivering. The survey should cover both product and brand, because examinations of the two may yield different insights. For example, the product itself may deliver lots of value, whereas customers have difficulty getting service or technical support.

The elements of value have an organizational dimension as well: Someone in the company should be tapped to explicitly think about, manage, and monitor value. One pay-TV executive, lamenting the success of Netflix, told us, “I have a lot of people working on product features and service improvements, but I don’t have anyone really thinking about consumer value elements in a holistic manner.”

The concept of value remains rooted in psychology, but the elements of value can make it much less amorphous and mysterious. Abraham Maslow emphasized the bold, confident, positive potential of psychology. The elements can help managers creatively add value to their brands, products, and services and thereby gain an edge with consumers—the true arbiters of value.

You’ll Have to Sell It

Most of the time, the best decisions respect or reinforce the norms and values of your organization. That gets you buy-in and commitment. But how do you raise the odds of doing this? One approach is to run through a simple mental exercise – before you actually make a decision that will affect many parts of your organization. It’s basically testing your options for resonance.

Imagine you are making a presentation. Your audience consists of people who will be affected by your decision. Go through each of your options and imagine how you would justify choosing that option – in terms of the values and norms they really care about.

What specifically would you say about each option? What could you say with genuine conviction, which is often critical to persuasion? What might ring hollow, raise eyebrows, or elicit resistance? Which options seem likely to get your audience smiling or nodding yes? In short, which option seems to be the right next paragraph in the ongoing story of your organization and what it stands for?

What does this mean in practice? Here is an example you may recall, if you read some of the many negative headlines it generated about Yahoo. The problem originated in the early 2000s. Like many other Western companies, Yahoo began building major operations in China. As a condition of doing business there, these companies agreed to follow China’s laws and regulations restricting freedom of speech. Then, in 2005, a dissident journalist named Shi Tao used his Yahoo email account to send a document to Western reporters that described Chinese government restrictions on media coverage of the anniversary of the Tiananmen Square protests. This document had been widely circulated among Chinese media organizations and was hardly a high-level state secret.

Yahoo faced a very difficult issue in China, once the state security officers appeared at the Yahoo offices, but the company might have handled it better, if its executives had followed some version of this exercise in the months or years before Shi Tao’ arrest and imprisonment. They could have asked themselves how they would handle a situation like the one that actually occurred. After all, a request from Chinese state security authorities for personal information about a political dissident was hardly an unlikely scenario. And, if they decided to handle it in the way they actually did, Yahoo’s executives might have understood how difficult it would be to explain this decision – in terms of basic values and commitments – to everyone it would affect.

Would this exercise have a difference? There is no way to know. But it might have become clear that doing what the company actually did was an untenable response to the situation, and the company might have taken some useful precautions. For example, the office manager who identified the journalist had no guidelines or training for handling situations with state officials. There was no senior Yahoo official available for him to consult. And the information the police wanted was readily available, not stored a remote server or protected by passwords or approvals. In contrast, Google kept its personal identification data on servers in Hong Kong.

None of these steps would have solved the problem, but some combination of them might have given the company time to work on tactics and perhaps negotiate with the Chinese officials. Steps like these would have enabled Yang and Yahoo to explain, to critics and to Shi Tao’s parents, that they had done all they could – aside from leaving China altogether – to protect the privacy of Yahoo customers and stand up for Western values of free speech. Yahoo and its employees would also have known that the company had done all it could do to adhere to the values that defined Yahoo.

Testing for resonance can help you make a good decision and also raise the chances it will be implemented effectively. If your plan for resolving a gray area problem clashes with the defining commitments of your organization, it may work no better than a badly matched organ transplant. Some people will follow your decision because you’re the boss, others because they want to keep their jobs or get their bonus, and others because they have no choice other than to live with the decision. But none of these tepid motives can substitute for the deep commitment that creates great organizations and thriving communities. That level of commitment requires a strong sense of common identity and shared purpose.

How to Businesses from Pokemon Go

Since the launch of the augmented-reality game Pokémon Go, there’s been a lot of buzz about how small businesses can use the game to their advantage. Now, after more than a month since Pokémon Go first launched in the U.S., market research shows that the hype is real: Pokémon Go really is bringing in more customers and boosting sales for many small businesses.

The first survey that demonstrates the bump given to businesses by Pokémon trainers comes from Revel Systems, which builds mobile point-of-sale systems for iPads. The data Revel collected comes from the company’s clients that have PokéStops nearby, and it demonstrates an increase in foot traffic, gross sales and total customers. Here’s what Revel found: Eighty-two percent of businesses with nearby PokéStops reported an average 9 percent increase in weekly foot traffic. Sixty-three percent of businesses with nearby PokéStops increased their weekly sales by an average of 12 percent. The average increase in weekly gross sales totaled more than $2,000 per business. Those businesses also reported an average increase of 265 weekly customers. The mantra “gotta catch ’em all” has helped small business owners capture more customers and boost revenue, according to Revel’s research.

“If I were a store owner with a PokéStop nearby and I was attempting to increase traffic at a specific point in the day, I’d activate a Pokémon lure on the PokéStop,” Chris Ciabarra, co-founder and CTO of Revel Systems, said. “Lures attract Pokemon for 30 minutes, and can significantly increase traffic, which is especially good to use during slow times. It’s an easy and cost-effective way to use technology to your advantage. Instead of trying to reinvent the wheel to increase sales, you are using what you have access to in order to generate results.”

In addition to Revel System’s research, the Slant marketing agency conducted a survey of 500 Pokémon Go players to find out more about how they interact with businesses while out hunting for Pokémon. Their findings reinforce the reporting by small businesses and suggest that Pokémon Go is leading players to patronize small, local businesses they otherwise might not visit.

Slant Marketing found that most Pokémon trainers play from 1 to 3 hours each day, most prominently during weekday evenings and weekend afternoons. The survey found that while these players were out and about, they were far more likely to visit a local business, particularly restaurants.

Eighty-two percent of players have visited a business while playing. Fifty-one percent have visited a particular business for the first time. Seventy-one percent of players who visited a business did so because of a nearby PokéStop or Pokémon gym. Sixty-eight percent of players who visited a business did so because a Pokémon lure had been placed nearby. Forty-eight percent of players who visited a business with a Pokémon lure reported staying for an average of 30 minutes or more. On average, players who made purchases spent $11.30 at the businesses they visited while playing. Thirty-three percent of players said they visited businesses “a couple times per week,” while 18 percent said they visited businesses daily.

“Whenever we see new technologies — or existing technologies used in new ways — in our culture, we look for how we can engage consumers to interact with brands,” said Chris McGuire, VP and general manager of Slant. “That search starts by finding out how consumers are currently interacting with brands/businesses using the new technology, which is why we were excited to conduct the survey of Pokémon Go users.