Archive for June, 2013|Monthly archive page

Boost marketing performance

The marketing landscape of 2013 is a menagerie of media vehicles, digital tools & platforms, Big Data initiatives, sales channels and influencer programs — all requiring coordination, integration and funding.  Making sense of this complex world is a challenge; it’s hard to know what’s working and what’s not.  Conventional evaluation tools like ROI have their place but they are not strategic and don’t go deep enough in analyzing plan effectiveness.  To really evaluate marketing’s worth, it pays to go back to basic principles. We have found that asking five questions can help determine whether the marketing function is “doing the right things, right.”

Do we really understand our customer and what influences them?

For many companies, the answer is an unfortunate no.  This knowledge gap goes beyond understanding basic needs; it touches on how consumers interact with companies, who or what influences their actions, and what sub-conscious triggers drive purchase behaviour. Even data-intensive companies often know little about how specific tactics — like social media or TV advertising — drive purchase, as well as how various programs interact with each other.

To maximize performance, managers need a new, 360-degree view of today’s consumer.   “Connecting with clients is much tougher now than it used to be,” says Lynne Coles, a senior B2B and B2C marketer.  “They are one click away from becoming as well or even better informed than the firms trying to sell to them. They’re also just one click away from sharing their opinions and experiences with an ever-expanding activist community. Marketers need a holistic approach to understanding the entire customer experience across all channels.”

Is our value proposition relevant and differentiated? 

Whenever I give a speech on branding, I ask the audience members what their value proposition is, and can it be supported.  Typically,  80% or more list the same benefits, like great service or lowest cost.  Furthermore, less than 20% of the audience will link a meaningful outcome and explanation to the benefit (e.g., thanks to newer technology, XYZ brand delivers an 80% savings versus the leading brand). These ad hoc surveys usually point to serious flaws in a company’s core positioning, that no amount of spending or technology can fix.

Most firms can differentiate.  Many already do, they just don’t realize it.  The marketing challenge is around finding meaningful strategic differentiation and then driving the message through all marketing tactics as well as the customer experience.

Do we have enough information and wisdom to make decisions?

Exploiting Big Data — using advanced methodologies and tools to mine data for insights — is all the rage these days.  Making it work is another story.  Companies may collect a lot of data but it is not always accessible and usable. Furthermore, much of the data may not be germane to marketing goals.  Finally, data mining skills does not necessarily translate into wisdom that would help in areas like fostering innovation or creative development.

Modern marketing remains as much an art as a science.  Companies require proven analytical and IT capabilities plus common sense to ask better questions and to make better strategic and tactical decisions.

Are we using the right metrics?

Einstein said, “not everything that counts can be counted, and not everything that can be counted counts.” Many firms use metrics that cannot be effectively measured, are unrelated to strategic goals and lack organizational buy-in. The choice of metrics is important.  They play a major role in driving management focus & behavior, allocating resources and in framing the evaluation of marketing plans and vehicles.

Leaders should regularly confirm that each tactic is properly measured, evaluated and then linked to the long-term, strategic goals of the company.  Managers should also be mindful that a slavish focus on metrics is not a replacement for solid business and creative judgment.

Is the organization enabling marketing?

Many leaders believe their firms are market(ing) driven, with a mission to fully satisfy in a differentiated way the needs of consumers in attractive markets.  The organizational reality, however, is often different.  Other internal groups frequently have different agendas, a disproportionate share of internal resources and dissimilar perspectives on what drives long-term performance.  These dynamics are natural but could result in strife, lack of focus and poor resourcing.

Marketing performance — and ultimately competitiveness — will suffer without adequate alignment, investment and capability-building. Making the marketing mission real will be part cultural change, part priority-setting and part talent management.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

 

Gamification for Retailers

Gamfication — the use of gaming principles and technologies to drive customer engagement — is the most unique business development to emerge in the past couple of years.  Gamification is a triple-threat strategy.  Properly executed it can drive higher customer loyalty, increase marketing efficiencies and boost brand differentiation.   Of the many industries it is being implemented, retailing has produced some of the most interesting case studies. Below are two of the most noteworthy examples, as overviewed in Retail TouchPoints magazine:

Duane Reade

Duane Reade is a leading pharmacy chain with over 250 stores in the New York City metropolitan area.  Duane Reade has used Gamification in conjunction with a variety of social media platforms over the past 18 months to build sales, brand awareness, and customer engagement.  Its Gamification initiative features a location-based game using smartphones and a variety of social media sites like Facebook and Foursquare.   Users first have to download an app that contains a storyline.  This story features two factions, each battling to control a recently discovered resource called Exotic Matter. Players choose a faction to join and compete against one another in teams to “control” territory.  A sprinkling of logos found in 250 Duane Reade stores marks this territory.  Customers would go to one of the stores, scan the logos and download promotional offers, collect virtual resources or collaboratively solve puzzles.

The marketing results have been impressive. Duane Reade has seen a sharp increase in web and in-store presence as well as higher brand awareness and deeper customer engagement. As of March 2013, Duane Reade has been mentioned and/or shared more than 1,500 times.  The Company recognizes that getting their customers to play fun games is an effective and efficient way to drive business results and collect user data. According to Duane Reade spokesperson Calvin Peters: “Strategically engaging gamification experiences that utilize location-based gaming platforms, are becoming increasingly relevant as mobile concentration within the retail space continues to expand. It is important for us to be where our consumers are, including the virtual world.”

Whole Foods

This upscale grocery chain uses Gamification in a different way.  Instead of a stand-alone marketing program like Duane Reade, Whole Foods leverages game mechanics to enhance the social media and mobile components of existing marketing campaigns. In a recent promotion, Whole Foods rolled out the “14-Day Blast Off” campaign, which challenged consumers with a set of tasks that focus on making healthy life choices such as getting daily exercise or eating better. Throughout the course of two weeks, badges were given after participants completed one mission of healthy living per day. The missions were designed to ease the players into healthy living with small but important gains. Whole Foods understands that its consumers want to eat well and live a healthy lifestyle.  Instead of pushing out information, this campaign used fun and engaging missions (i.e. games) that promoted the desired behavioral change.  Interestingly, Whole Foods also uses Gamification to promote positive behavioral change among employees.  If the employee can achieve company goals like losing weight, they can get a discount on products.

Three elements made these programs successful.  Each integrates Gamification as part of its existing online and offline marketing campaigns and business strategies; the retailers linked game mechanics to their deep understanding of a user’s habits and practices; and; their executions were fun and engaging, tapping into a consumer’s intrinsic desires like competition and achievement.  As well, there are now enough successful Gamification examples across multiple sectors to generate best practices around program design and implementation.

For more information on our services and work, please visit us at Quanta Consulting Inc.

Offshoring’s burn victims

RBC’s recent imbroglio over its Indian IT outsourcing practices illuminated the pitfalls of dealing with offshore providers.  Unfortunately, the Bank’s experience is not unique.  Contrary to conventional wisdom, IT offshoring has not been a boon for every North American firm pursuing that strategy.   Quality and service have struggled to meet stricter North American performance and service standards. Moreover, India’s labour cost advantage is declining for a variety of macro economic reasons. Finally, pervasive business and brand risks remain.  Leaders need to relook their existing offshore relationships to ensure they still make business sense and consider new compelling, ‘Made-in-Canada’ alternatives.

Offshoring IT operations have always been difficult and risky; the RBC/iGATE flap is merely the public tip of the iceberg.   Alex Rodov, CEO of a leading Canadian IT testing firm QA Consultants, has seen the damage of these arrangements first hand:  “Offshoring is no longer the bargain it once was.  It is not uncommon to see higher – not lower – costs, more hassles, delayed time to market and compromised quality.”

Our research uncovered the following example of an offshoring ‘burn victim:’

Financial Services project is “A Bridge Too Far”

A leading financial services company was looking to launch a major, new online offering.  The firm did not have the internal capabilities to build this platform themselves.  They chose to outsource the initiative to a large Indian IT services provider.  This is where the problems began. The Indian firm underpriced the project to get the deal.  They also took the client’s business and technical requirements ‘as is’ without vetting its feasibility.

Ultra low cost pricing is a common strategy for offshore providers to gain market share.  In this case, unfortunately, it did not leave them much margin room to validate the client requirements or assign enough experienced staff.  As a result, the provider missed gaps in the software architecture and did not fully understand the client’s needs and expectations.  Not surprisingly, each version of the delivered code did not meet quality expectations.  Furthermore, the cultural, time and language differences hampered alignment around expectations and trouble-shooting. The provider tried to redress the quality issues by throwing more staff at the problem – and then tried to get the client to pay for them.  Not only did this generate more friction in the relationship but it also failed to address the root cause of the problem namely misaligned goals, poor Indian staff quality and an unbridgeable cultural and linguistic divide.

This is not a case of a single deal gone bad but rather one example of the real difficulties commissioning knowledge-based work thousands of miles away.  This story did not end well.  The initiative had a target budget and delivery of $3.2 million and 7 months respectively.  It eventually was delivered in 22 months for a total cost exceeding $65 million.

Declining India…

Blaming one party or another is too simplistic.  Failure has many fathers.  Business conditions have fundamentally changed – and not in India’s favour.  For one thing, India is losing its luster as the lowest cost place to undertake IT activities. According to 2010 U.S. Bureau of Labour Statistics, India’s average per hour cost advantage has shrunk to only 6-7x U.S. rates (versus a 20x times advantage 10 years earlier).  Furthermore, the quality of the Indian workforce has never lived up to expectations.  The Wall Street Journal has reported that 75% of technical graduates are unemployable by their IT sector. Finally, bridging the relationship/cultural divide has proven to be more challenging and pervasive than anticipated.   In all its forms, distance really does matter.

…Emerging Canada

At the same time, Canadian IT service companies have become more competitive, taking advantage of moderating Canadian wage rates, a steadily increasing, educated (and stable) workforce and a growing sentiment that we need to cultivate strong local businesses. The emergence of globally competitive Canadian IT services firms is giving North American companies more choice, not to mention highlighting the value of good old fashion Canadian innovation and hard work.  To wit, QA Consultant’s roster of blue chip clients such as Loblaw, Bank of America, Praxair and Canadian Tire, demonstrates that leading North American firms recognize the business and reputational advantage of staying closer to home when outsourcing key processes.

Most likely, the optimal outsourcing strategy will include a mixture of local and offshore operations, with the ultimate decision based on an assessment of total delivered cost, the importance of local control and predictability and; a prudent evaluation of brand and intellectual property risk.  Managers should approach these decisions objectively and not be afraid to challenge conventional wisdom that lower cost and higher performance can only be found offshore.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Lean Innovation

It is commonly accepted that launching a new business or product is very challenging — so challenging, in fact, that roughly 75% of new product innovations fail to meet expectations.  Obviously, the chances of success will depend a lot on product and marketing decisions as well as customer interest.  Less attention, however, is paid to the process of commercialization or shepherding a new idea from concept to customer. Having a poor commercialization approach is guaranteed to increase failure rates, waste capital and stress the organization.  One way to improve your odds is to bring inside the “lean” start-up structure and lessons of Silicon Valley.

The typical approach to launching innovations or new businesses is to commercialize it using existing structures, processes and capabilities.  Though an internal focus can be appealing, this method has some major drawbacks.  For example, most firms and people display a bias towards the short-term and proven.  Higher risk innovation initiatives will always compete for resources, focus and capital with existing operations. When the going gets tough, innovation is often the first area to be cut. Moreover, though many companies pay lip service to breakthrough innovation, their culture, structure and management systems are often too rigid and siloed to deliver anything but modest improvements. But there is a better way.

Our experience and research with large organizations and high-flying start-ups show revamping the commercialization strategy can improve business performance and reduce risk.  Benefits include:  faster time to market; a tighter compliance between new products and customer needs; and, more efficient use of capital.  We call this improved model “lean innovation”. Below are four of its key features:

Intrapreneurialism

At the core of innovative companies is a diverse team of high performing individuals.  These people will be inherently entrepreneurial and customer-focused with strong learning competencies. Lean innovation seeks to find them in key functional areas, refocus their roles, foster collaboration and establish proper team and individual incentives.  Leaders, however, should be wary of creating renegades. Along with maintaining their intrapreneurial spirit, the team must continue supporting existing corporate values and goals.

Start up structures

There is an axiom that structure follows strategy. To foster lean innovation, firms should structure their teams like a venture capital-backed startup. In this model, teams have significant autonomy to target unmet customer needs and get-to-market fast (and if necessary pivot to a new offering or business).  To ensure proper governance and guidance, the team should be accountable to an internal board, which should include expert external advisors.  The board would provide a strong organizational mandate plus exemption from speed-killing (most, but not all) corporate practices and norms.

Despite being anchored in the mother organization, internal startups should relentlessly look outward.  This is not just about getting more market and customer exposure.  It is also about finding and leveraging external partners that can improve time to market, share risk and provide key learnings. Lean innovation is not about creating spinoffs or “skunk works” projects;  a prudent amount of internal collaboration is needed to take advantage of scale economies and other intellectual property.

Hypothesis-driven

Management typically looks at innovation strategy the same way they deal with traditional initiatives — inside-out, based on a formal business plan, metrics and implementation roadmap.  Conversely, lean innovation starts with a new product or business model hypothesis and goes directly to the customer, seeking to quickly validate the innovation’s appeal, demand and assumptions.  In many cases, the firm may want to co-create or co-market the new product with the customer.   In addition to traditional metrics like ROI or payback, Lean innovators focus on longer term measures such as lifetime customer value and viral appeal.

Agile practices

Optimizing the commercialization effort requires more than a startup structure and mentality. Like agile development principles, the team’s practices and policies need to support the goals of speed, pragmatism and learning.  As an example, product development should be undertaken in parallel with customer research (as opposed to serially).  Prototypes need to be developed quickly and deployed immediately into customer’s hands early to gain feedback and market experience.   Innovation teams should have the ability to tap external funding sources  (as opposed to waiting for budget cycles) in order to ‘fund on the fly’ and cement strategic alliances. Finally,external partnerships should be sought out to bring in new insights, add complementary functionality and increase market coverage.

Within large organizations, new business or innovation units can improve performance if they meld the best of start up learnings and organizational discipline.  Of course, this will not be easy from a cultural or management systems perspective.  However, those of our clients who have pulled this off have significantly boosted their innovation success rates while delivering better financial results and higher levels of customer satisfaction.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.