Archives for category: Strategy

TL;DR: The mobile screen is a safe-space, a cocoon of familiarity. To be accepted in you have to design for uninformation: negentropy.

The other week I attended the API World conference in San Jose. API stands for application programming interface, which provides “a set of functions and procedures allowing the creation of applications that access the features or data of an operating system, application, or other service.” Basically, it’s a great way to get computer systems and services to talk to one another. MuleSoft has a great explainer video on this. Let’s call it computer-to-computer communication, or C2C for short.

In recent years, API has turned from an acronym into the proper noun API First, which is a business model. API First is basically platform-as-a-service (PaaS), but the infrastructure is software—pure IP—rather than hardware. API First companies enjoy the highest valuation multiple, surpassing any other aaS.

As the article states:

For fast-moving developers building on a global-scale, APIs are no longer a stop-gap to the future—they’re a critical part of their strategy. Why would you dedicate precious resources to recreating something in-house that’s done better elsewhere when you can instead focus your efforts on creating a differentiated product?

Thanks to this mindset shift, APIs are on track to create another SaaS-sized impact across all industries and at a much faster pace. By exposing often complex services as simplified code, API-first products are far more extensible, easier for customers to integrate into, and have the ability to foster a greater community around potential use cases.

At the conference I immediately noticed something: it’s the quietest conference I’ve ever been to. And that’s with 6,000 people in attendance. Quiet, of course, is relative; there was conference noise, but people didn’t really talk to one another. Instead, they were glued to their screens. That in and of itself isn’t unique in today’s society, but it was remarkable for a learning and networking event.

Of course, it’s easy to dismiss this observation when considering the attendee persona: 6,000 people who make computers talk to one another. This is all they do, all day long.

However, the next day I took a shared Lyft to Facebook, to meet up for lunch with a former mentee. In the car were two other passengers, exclusively glued to their mobile screens Even just greeting my co-riders made the entire situation awkward. One of the riders needed to be dropped off at the Google campus, where I witnessed the same scene: almost everyone outside, who was either sitting or walking somewhere, was glued to their screen. Even when walking with others (bicycle riders, thankfully, were still paying attention to traffic). Then, at Facebook, yet another mirror image of this behavior across campus.

Again, there are some persona similarities here: Google and Facebook are platform companies, and their APIs are heavily leveraged across the internet.

But, there was another key cohort in the mix: millennials.

The second half of the Millennial generation are the first digital natives. They grew up with an always-on internet, Yahoo, AOL Instant Messenger, etc. Along with Gen Z, they now live inside Instagram, WhatsApp, WeChat, and other social platforms. It’s the only world they know and human-to-human (H2H) interactions with strangers are often unwelcome, awkward (see above), and frequently even unnerving.

Theories of Human Communication

In 1948, Claude Shannon published his paper “A Mathematical Theory of Communication,” turned into the book “The Mathematical Theory of Communication” a year later. The book itself created information theory, which mathematically defines how information can be measured. If you want to understand the internet, the book is an excellent read—or, it could just really bore you to death.

But beyond measuring entropy and redundancy, information theory has to be understood in the larger communication context:

Information is a measure of uncertainty, or entropy, in a situation. The greater the uncertainty, the more the information. When a situation is completely predictable, no information is present. This is a condition known as negentropy. Most people associate information with certainty of knowledge; consequently, this definition from information theory can be confusing. As used by the information theorist, the concept does not refer to a message, facts, or meaning. It’s a concept bound only to the quantification of stimuli or signals in the situation. (“Theories of Human Communication,” Third Edition)

A New Reality

While information theory is a mathematical concept that does not refer to a message, facts, or meaning, I believe it does inform us on today’s society, which I call “Screeners” (people glued to their screens). Screeners cut across generations, but are increasingly found in recent generations, in the following ascending order: GenX (1965-79), Millennials (1980-94), Gen Z (1995-2015). But Gen Z has yet to meaningfully enter the workforce.

As noted above, these generations have trouble with human communication. By human, I mean verbal, real-time, human-to-human exchanges that can include strangers. This can include telephone conversations, so these exchanges do not have to be face-to-face, but they’re definitely not asynchronous like screen exchanges. Verbal communication necessitates an immediate response. Whereas, while messaging does appear to be real-time, nothing in the social protocol dictates that responses need to be immediate, although often they are.

But why can’t recent generations handle reality anymore; or why are they creating a new reality? There is probably a progression of factors, but at least one seems to be parenting. Helicopter parenting, an extreme form of living vicariously through your children to give them the best opportunity at a life better than yours, was probably an early harbinger. Strangely, it apparently works. This was followed by Lawnmower parenting, also known as Bulldozer or Snowplow parenting, where parents go to extremes to assure that their child will never experience disappointment or have to make a choice.

One [child] didn’t like to eat food with sauce. Her whole life, her parents had helped her avoid sauce, calling friends before going to their houses for dinner. At college, she didn’t know how to cope with the cafeteria options — covered in sauce. (NYT)

But the biggest influence is probably behavior design, “…where psychology and technology meet – a systematic way to influence a desired behavior, one step at a time. (Peep Laja)” What the Smashing Magazine and Peep’s articles are saying, is that designers and developers have figured out what makes us tick. Effective behavior design can be as addictive as crack cocaine. On the other hand, it doesn’t have to be this way; behavior design can be used for either good (“Ethical Design”) or evil (“Evil by Design: Interaction Design to Lead Us Into Temptation”).

Why is this important? Because the world’s largest companies by market capitalization are platform companies, many of which operate social networks. One of them dropped its mantra of “Don’t Be Evil” from its code of conduct (you may also want to google, teehee, Tristan Harris or Meredith Whittaker). And two others, Facebook and Tencent (WeChat), who have minimal user overlap, have virtually digitally enslaved over half the planet with behavior design, preying on our frail human psyche.

So, that genie is out of the bottle; there is no going back. If you want to be successful in digital design you must incorporate behavior design (duh!). But that doesn’t mean you must use behavior design for exploitation. It does, however, mean that you have to design for uninformation: negentropy.

It doesn’t matter if you are in B2B or B2C, or their variants, there is no more human-to-human (H2H). People are freaked out being addressed as humans, which requires thought and analysis for response. You are not designing or developing your APIs and applications for humans. You are designing and developing for their devices, for their screens, for one computer to talk to another computer. For the recipient, situations must be completely predictable, be devoid of change (“information”).

You are optimizing for C2C. H2H has simply become marketing B.S.

I haven’t written in a long time. Mostly because beyond technology there isn’t anything interesting going on in marketing. And in an arms race, if everyone has access to the same merchants and weaponry, there really can’t be any winners. So how do you win?

I’ve been spending most of my time on the strategy side. Remember, one of the the first axioms I’ve published is “If you are not marketing strategically, you are not marketing.”

Most people don’t grasp strategy; they confuse it with mission, goals, or tactics. Yes, you need all of these to have or execute a strategy, but also as I’ve written before, sameness is not a strategy. So, trying to out-do your competitors by being marginally better is not a strategy—it’s actually hopium.

But this piece isn’t about explaining what strategy is, but simply to give you one.

In combination, three recent articles foretell where services and digital products companies are heading (or need to be!):

  1. “Why, Workday And ServiceNow Are Obsessing Over This New Cloud Metric”
  2. “Outcome-based Business Models for Enterprise Software”
  3. “New Decades, New Rules: Focus on the New Scarcity!”

Individually, there’s isn’t anything earth-shatteringly new here:

  1. It’s customer success, not satisfaction or loyalty.
  2. Having skin in the game and acting as a partner, rather than vendor, is good business.
  3. Data analytics, machine learning, and AI will power insights and value.

But when the three approaches—obsessing over customer success; implementing and outcomes-based business model; and leveraging AI and deep analytics—are combined and executed as corporate culture and go-to-market paradigms, then competitors will be completely unhinged.

1) Bob Evans’ point is that creating lifetime customer loyalty creates incredible value that drops to the bottom line. This is validated by the three “case studies”—, Workday, and ServiceNow—which despite their already enormous size, continue to grow between 20-40% year over year.

2) Bill McBeath advocates for revising pricing, so that remuneration is based on measurable outcomes. Basically, you establish the current willingness to pay (the present cost of the problem), define the metrics you want as outcomes, and then mutually agree to the value of the solution to be implemented.

3) And the evergreen Geoffrey Moore predicts that CRM will overtake ERP “as the most prominent information system.” Why? Because, again and as above, customer intimacy creates loyalty, which creates revenues.

We all know that churn kills. Or, as Jason Lemkin says, “Customers don’t churn, they quit you.”

So, in an age of low switching costs, annual contract renewals, dwindling loyalty, and increasing automation, what’s your strategy for competing and winning?

If you want to achieve zero customer churn, you need to walk and map your value chain backward, and examine each and every piece to see how it connects to creating lifetime customer loyalty (or fix it).

Not to rehash previous posts in their entirety, but I once more take the approach that marketing is the process of getting your product to and into the market—a larger discipline that includes R&D, sales, and customer care, not just promotion and advertising. Marketing also includes pricing and margin optimization, which can often mean needing to reinvent or reposition existing products with a new spin.

To be successful, marketing needs to take the customer’s side—to paraphrase a saying that has popped up at the top of my LinkedIn feed for the past week, marketing needs to listen to learn, not just listen to answer. What is the psychological driver that causes product adoption? Yes, a need is surely a driver, but among myriad choices, what differences matter to whom?

Therefore, both customer satisfaction and customer loyalty are critical measures of marketing’s success. However, satisfaction ≠ loyalty. You can have extremely satisfied customers, but if they buy based on price, and you raise your prices, they may not stay loyal. Thus, loyalty measured in price elasticity is an important metric to track.

Which brings me to Delta Airlines’ brilliant decision to revamp its frequent flyer loyalty program, and start rewarding travelers based on how much they spend, not on how far they travel. This shift has received tremendously negative attention in the press, I’m guessing because muckraking is fun, and business acumen is not required to write a compelling story.

Let’s first cite a different example. Grocery retailers reward their worst customers the best—those who spend the least get the quickest lines. But those who spend the most need to queue up in long lines while the ice cream is melting in their shopping carts. Grocery retailers are well advised to treat “high rollers” just as well, if not better than the “quickies.” The tactics supporting this strategy would be quite simple to implement.

Delta has grasped this. To date, like all airline loyalty programs, bargain shopping has been the most efficient way to maximize the value of a frequent traveler loyalty program—in fact, infrequent travelers are rewarded the best, needing just a few cheap cross-country flights to earn the right to a free flight. Those who need to travel last-minute, and thus pay the most, get no additional benefits. Their ice cream is melting.

Instead, Delta will be re-programming travelers’ mindsets from spend-less-get-more to spend-more-get-more. Bargain hunting will die a quick death with those who want to maximize the value of their loyalty program membership. And Delta’s profits will soar. They may lose some travelers, so revenues may stay flat, but margins will be better. Less work = more money; employees and stockholders love this!

And I even question the loss of travelers. Most airports have one anchor airline, maybe two. But in the end you need to get to where you are traveling in the most efficient and expeditious manner, regardless of who you want to be loyal to. My own attempt to switch from US Airways to United Airlines—because I desperately want to stay with the Star Alliance loyalty program after US Airways merges with American Airlines’ One World loyalty program—has been an utter failure, because US Airways dominates PHX, and can get me to most destinations more quickly.

I bet that’s what Delta is counting on: increased happiness from its best customers (those who spend the most, most frequently), and the inability of the least good customers to make serious changes to their travel needs, while still giving them the ability to earn the same level of rewards they are used to (by simply spending more).

That’s pretty damn good marketing—the process of getting your product into the market at a higher profit margin, while offering the disenfranchised the opportunity to stay engaged.

Apparently Barnes & Noble has different online and in-store prices. I didn’t know this, since I haven’t shopped there in ages (nor on their website), but this recent thread on The Consumerist website makes the pricing discrepancy abundantly clear.

Bringing a business mindset to this issue, it is easy to understand why the prices are different: because the cost structures are different. But the resulting price discrepancy is somewhat unusual for consumers to deal with…apparently. That is something that B&N’s media and customer relations departments didn’t seem to grasp, as evidenced by their well-reasoned business-like response when confronted with customer dissatisfaction over this issue:

“Barnes & is a subsidiary of Barnes & Noble, Inc., with its own management, operations and price structure.”

“The online and retail businesses each offer their own unique selection and competitive price structure.”

“Neither business advertises the other’s price structure.”

“Neither business matches the other’s advertised prices.”

And, as stated on
Barnes & usually is able to fill your order with less expense than our retail stores, and we pass those savings on to our online customers. This is why our prices online sometimes are lower than prices in your local Barnes & Noble store. Similarly, at times, your local store may offer exclusive promotions that are not offered at Barnes &


The correct response would have been, “The two business units have different cost structures…[blah blah blah]. This is also because of differing labor costs across these two types of businesses. You see, we love our employees as much as we love our customers. And to attract and retain high-quality employees to give you the best possible service and in-store experience, we need to pay people well and also provide benefits. That’s why our in-store cost are higher—to create a win-win. Both of us need happy employees to make sure you are a satisfied customer.”

I’m not quite talking cause-marketing here, but according to a Nielsen study, consumers apparently are “…willing to pay more for goods and services from companies that have implemented programs to give back to society…”

B&N could have humanized the problem and made sure that customers understand that their hard-earned money goes to a good cause: making sure that other people can also earn a living wage in a service-oriented economy. That’s turning lemons into lemonade (and brought to you by the “duh” department).

A brand―a trusted solution that meets the expected psychological and utility needs of the purchaser―is an important competitive differentiator. Having a brand means one’s product or service is chosen more frequently over similar solutions, and one can command a price premium, which results in greater profitability.

A brand, however, is not owned by the company that manages it—it’s the intellectual property, including service marks and trademarks behind the brand that are. Instead, the consumer who experiences the product or service elevates it to brand status, thus exercising “ownership.” [See previous post, “You Don’t Have a Brand.”]

What makes a brand, then, is the implied agreement by the consumer that the product or service delivers the desired experience repeatedly, so that switching to another solution is not a consideration (unless under duress). A brand is a primary choice, and often a secondary choice may not even exist.

To be considered a brand, a wide adoption must be in place in the target market; a brand is a social experience validated by other consumers. The market for the product or service does not need to be large—luxury markets are narrow segments of the population—but the penetration should be significant and profitable.

If the customer loses faith in the brand’s ability to deliver the expected or promised experience, and he/she instead begins to choose another solution repeatedly, then the original solution has lost brand status. If this happens on a large scale with an incumbent customer base, then the product as a whole loses brand status, suffers market share losses, and cannot maintain its pricing, for it has not maintained its promises and differentiation.

This risk is what makes a brand not just an intangible but an ephemeral asset, and therefore necessitates constant vigilance in brand protection measures.

The Brand Steward: A Definition

If the owner of the brand is the consumer, what is the company that owns the intellectual property? It is the “brand steward.” Although the company originated the product, its success was created by the purchaser. Certainly, a company must take great care to foster an environment that will give the product the greatest chance of success at brand status, but there is no guarantee of success, only preparedness.

The brand steward is thus entrusted with caring for an asset that is highly valued by a sizable consumer community, which wishes for the product to continue to deliver the same, or better, benefits. However, this steward is not a person—even though there are “brand managers”—it is the entire organization behind the product or service.

This organization is made up of various departments—executive leadership, R&D, manufacturing, sales, marketing, customer care—that must work together to continuously meet the promises offered by the product, and the expectations these promises have created within the customer.

Because brands are ephemeral, the entire organization is tasked with keeping the product alive and relevant within the expectations set by customers, so that the product will continue to be a primary choice for the longest time possible. Sales, marketing, and customer care interface directly with the customer on a regular basis, making these departments particularly responsible for carrying out careful brand stewardship activities. But R&D and executive leadership are equally important, as their work affects the direction of a product or service to which customers have attached brand status.

The customer may not always be right, but the customer can always damage the brand. As a consequence, the company stewarding the brand should make every reasonable effort to prevent a lasting poor impression in case of a brand experience failure by a customer. Further, the company should leverage failure into an opportunity that causes the affected customer to praise the company and its product to others. This is how brands are maintained.

Ultimately, not one person but the entire culture of a company stewards a brand.

Stewardship Roadmap

To innovate and keep a brand alive, a company must regularly engage in market research to learn how its product performs against customer expectations, and also to learn what additional value the customer would like to receive. These findings must then be tested against the brand’s ideals (its mission/mantra), compared against competitors’ existing capabilities, and validated for market acceptance within the incumbent customer base.

Sometimes the customer does not want change (“New Coke”), but customers often value continuous improvement, as long as these improvements are in keeping with the brand’s ideals and differentiating factors (iPhone 5)—the reason for why the product or service was chosen in the first place.

Sameness does not a brand make. Think evolutionary, not revolutionary.

Thus, in addition to collecting meaningful customer insights, a company must (1) have a framework against which to evaluate potential product changes, (2) the know-how to make those changes in accordance with customers’ wishes, and (3) the ability to communicate and support these changes. This entire process is called brand stewardship.

(1) The Positioning Journey

When the marketing department (often the customer/consumer insights division) has observed or learned of a new benefit the customer would like to receive from an existing product or service, the typical next step would be to test the possibility of adding this value (a feature) and costing out this process, including its effect on final price.

However, the first step should be an analysis of how this additional utility affects the perception of the brand. Just because someone has requested something, or a competitor has added a feature to its product, does not necessarily provide good enough reason to incorporate the same change into one’s own product. Parameters must exist against which the viability of an idea can be tested against brand perception

To do this, a company must understand itself, its product, and the competitive landscape. In case these analyses have not been performed in the past, basic strategy tools exist to help produce the answers to each of these questions. With these answers, the company can very clearly define the positioning of its product, enabling it to compete effectively, and better evaluate future product innovation and feature requests.


In combination, SWOT, VRIO, and Five Forces analyses help a brand steward figure out (1) what the company itself is capable of, (2) how the product or service is presently positioned, and (3) what competitive forces the company is facing. These basic insights are critical to helping the company create the correct positioning and customer expectations that can help elevate a product to brand status, or maintain an already earned brand status.

Positioning is more than just deciding to produce a luxury or a mass-market product or service. The company must envision its customers and figure out why they would be attracted to the product. This is the most difficult step, because it involves making long-term strategic decisions that affect customer adoption and competitive positioning.

While the consumer will ultimately decide the positioning, value, and utility of the product that can lead to brand status, the company needs to get its initial positioning right―it must define the core essence of its offering to which a self-selecting audience will be attracted.

Positioning is not necessarily permanent, but it must be impactful the first time to permit future adjustments. Apple Computer did not start out as the world’s largest digital music retailer, but its original positioning as a computer design and manufacturing company which understood the wider implications of “personal” computing, enabled it to successfully transition the Apple brand into new markets, with even greater brand equity as a result.

Analyzing the Company: SWOT

A SWOT analysis is probably the most commonly used strategy tool, and examines the overall ability of a business. It asks the following questions of the company:

  • Strengths: What do we do well?
  • Weaknesses: What do we do poorly?
  • Opportunities: What can we exploit?
  • Threat: What external threats do we face?

The analysis process should include members from the aforementioned departments in order to get a wide variety and inputs to help create a complete picture. If necessary, an external facilitator should manage this process to keep potentially strong political forces at bay and to assist in collecting all valuable input.

First, the company needs to look inward and review its own strengths and weaknesses. What is the company good at, what are its core competencies? The answer can include any number of things, such as design, customer service, and patents. Where does the company underperform and how might those areas jeopardize the idea’s success? Again, any number of things can be identified, such as project management, distribution, and key employee retention.

Next, examining opportunities and threats takes into account external factors over which the company has little or no control. What opportunities can the company’s strengths create for the idea? Is its marketing better than that of its competitors? Does it have a more resilient supply chain with less country risk or pricing volatility? And what threats do its weaknesses expose it to? Does it have poor distribution that would keep it from rapid market penetration? Or does it lack the ability to scale customer service? Are some competitors simply better at some things, which could put the company at a market disadvantage?

The more precise and quantifiable the SWOT analysis, the more valuable its information and results will be for long-term strategy planning. Knowing one’s own strengths and weaknesses, as well as the external opportunities and threats that these strengths and weaknesses can exploit or create, is critical to successful product planning and potential brand success.

Analyzing the Product: VRIO

A VRIO analysis is not performed on the company (that’s what SWOT does) but on its inputs or outputs. VRIO is used to analyze the proposed service or product, or the requested change.

  • Is the product Valuable? Does it help meet a threat or exploit an opportunity?
  • Is the product Rare? Is it not already a widely available solution?
  • Is the product (in)Imitable? Is it difficult to copy or easy to defend?
  • Is the company Organized? Can it readily exploit the product and repeatedly deliver on all of its promises?

The obvious answer is that the more valuable, rare, and difficult to copy the product or service idea is, the more advantaged the competitive positioning will be. This is critical in evaluating any proposed change. How would such a change affect the value, rarity, or imitability of the product or service? Does it lead to homogeneity, or does it create further differentiation, driving VRI?

Any successful/profitable product will ultimately cause others to enter that market. The most difficult thing to copy, however, is not a product or a service, but the execution of that, which itself is driven by the corporate culture behind it. How well a company is able to defend its output over time is therefore a matter of how operationally well it executes—how well organized the company is, and how well it communicates internally.

The better organized a company is, the more difficult it is to imitate its success, and the better protected the brand is.

A baseline VRIO analysis needs to be crated first, so that any new product or service idea can be evaluated in context. If the new/revised idea maintains or increases competitive differentiation and can be brought to market cost effectively, a defensible competitive advantage with favorable economic implications will have been maintained or increased. The opposite needs to be avoided!

Analyzing the Competitive Landscape: Five Forces

A Five Forces analysis examines an industry’s overall structure and the competitive external pressures a company will face. It provides further context against which to evaluate the outcomes of the SWOT and VRIO analyses.

Five Forces includes the following points of analysis:

1. Research any direct competitors. The more unique an idea—tested or re-adjusted via VRIO—the greater the likelihood of the idea’s short-term survival, as few or no direct competitors will presently exist.

2. Quantify the risk of new competitors entering the space. Can current pricing be maintained in the face of cheaper competition? Is the product attractive or defensible enough (think patents or market share) to ward off new entrants wishing to encroach on its market share? What inputs can the firm dominate to keep competitors at bay?

3. Identify the possible threat of substitutes. Substitutes are dissimilar solutions with similar benefits (e.g., portable digital cameras being displaced by smartphones). What can solve the same problem differently? Will the product remain relevant in the face of competition by substitutes?

4. Determine the bargaining power of the company’s customers. How much power can customers wield to affect pricing? If a company is dependent on a few customers for most of its business―e.g., 80% of revenues generated by 20% of customers―its top customers can dictate what they will pay; unless the company has a monopoly, which is a situation customers will try to avoid by seeking out substitutes.

5. Determine the bargaining power of the company’s suppliers. Suppliers provide raw materials, ingredients, or components, but even the labor market itself can be a supplier if the product is intellectual property such as software. If a company depends on only a few suppliers for the majority of its inputs, these suppliers can charge whatever they want, because their pricing is inelastic.

As a first rule of thumb, the brand steward wants to occupy a market space with the lowest potential for both new competitors and substitutes. The more unique an offering or positioning, the fewer direct and indirect competitors will need to be dealt with.

As a second rule of thumb, the company needs to avoid buyer and supplier monopolies because of the risk such exclusive dependence poses to a company’s ability to generate significant profits that can be reinvested into brand stewardship. Management should seek many suppliers and customers so that none can create a bottleneck in production or dictate pricing that would jeopardize the product’s viability or a brand’s status.

In summary, brand stewards need to know:

  • What the company is capable of and what its limitations are (SWOT).
  • How the product/service is different, or needs to be differentiated (VRIO).
  • What the competitive landscape is and who holds power (Five Forces).

Once the brand steward has figured out the product’s uniqueness and competitive white space, product innovation or changes can then be better evaluated.

During this phase of brand stewardship a company is tasked with maintaining and further enhancing the positioning and identity of the product that the consumer has deemed critical—not that the company itself has decided is most important.

(2) The Customer Experience Phase

Marketing is the process of getting one’s product or service into the marketplace, noticed, and bought. Therefore this includes traditional marketing activities (such as promotion and advertising, which communicate positioning and create expectations), sales people (who further communicate positioning and create expectations), and customer care activities (which manage incongruities of positioning and expectation).

A sale is not truly complete or successful unless the customer’s expectations have been met. The customer care department’s role, therefore, is to help the customer avoid buyer’s remorse, making customer service and care a marketing activity in and of itself.

Marketing communication activities (including promotion and advertising), sales promises, and customer care activities must all fully understand the product’s positioning in order to carry out brand their brand stewardship responsibilities. Does the execution of sales and marketing tactics communicate the product’s intended brand ideals? Have the promises implied in the company’s positioning been carried all the way to the customer?

When any of these MarCom activities, including customer care, touches the customer, it is critical that they act and communicate in one voice with one message. Otherwise, if incongruities in messaging and positioning do occur, it is possible that customers will become confused and differentiation will be lost. As a result, brand perception will slip in status.

To manage and optimize cooperation and interoperation among sales, marketing, and customer care activities, one first needs to determine what gaps may exist in these processes.

The Services Gap Model

Brands can only come into being when the correct expectations are set and delivered. Executive management makes product feature and positioning decisions, which must then be communicated by the marketing department, implemented by the sales or services departments, and supported by post-purchase customer care activities. Here a variety of disconnects can happen. Is the promised experience envisioned by management, promised by marketing, delivered by sales, and supported by customer care congruent with the customer’s perceived experience?

The Services Gap Model provides a framework for understanding and improving service delivery, and thereby customer experience, which directly affects brand perception. Even when the item sold is a product, not a service, the framework remains applicable because intangibles that are perceived as services are always involved in delivering a good.

Services Gap Model

Figure 1: The Services Gap Model Triangle

Executive leadership makes “executive decisions” about a product or service; marketing encapsulates these as value propositions; sales communicates these value propositions to customers; and customer care deals with customers when the promises thought up by executive leadership, encapsulated by marketing, and communicated by sales are not perceived by the customer.

Clearly, communication breakdowns can happen at every level and juncture.

(1) How has executive leadership learned what the customer wants? Through direct interaction with the customer, or though surveys or other traditional quantitative research methods? If those who set the tone—who are responsible for defining positioning—have little to no engagement with real customers, then critical decisions related to product positioning (features and benefits) are made in an information vacuum, and often may not be customer-centric. If insights were gained through direct customer interaction, it is rather more likely that leadership will have a well-informed understanding of what the market really wants, as well as what the market does not need. This does not negate the need for aggregate market research, however.

Therefore, the highest echelons of the company must be involved with the customer, even if only from time to time, so that the true customer desires are learned, their solutions implemented, and the correct promises communicated back. This avoids or minimizes the occurrence of the customer having a different experience than was promised, which is important for maintaining brand identity and loyalty.

(2) Executive leadership and marketing (who encapsulate leadership’s value propositions) must also have a rapport with frontline staff, and must regularly inform customer-facing departments of what was learned during high-level interactions with customers, and how that might have affected messaging and positioning.

Further, by empowering customer-facing departments to remediate customer experience issues immediately, without frequent escalation, customers whose expectations were not met can still be converted into happy customers (or into happy non-customers who at least will not damage the brand’s reputation). This avoids or minimizes the occurrence of the customer perceiving a different experience than was delivered, which is equally important for maintaining brand identity and loyalty.

But communication is not a one-way street. If properly trained, frontline staff can listen to customer ideas and complaints, and report upward the best ideas and greatest failures as reported by customers. Therefore, frontline people are exceptionally well positioned to learn, summarize, and communicate important ideas and experiences from highly valued and profitable customers, as well as new ideas that may lead to additional product differentiation not previously considered. Those ideas will then need to be evaluated against the strategy frameworks discussed above, but the fact that these suggestions have come from existing satisfied customers gives them additional credence for consideration.

The two, communication and empowerment, may seem like separate issues, but both are focused on customer satisfaction, either by encapsulating and messaging the correct promises, or by fixing perception issues when promises were not met correctly the first time. This also helps avoid the very unfortunate occurrence of a customer’s experience being different from his or her expectation of that experience, and tests and validates the organizational capabilities of the company.

(3) Obviously, companies know that over-promising and under-delivering is the most assured recipe for failure. Few know that the opposite—under-promising and over-delivering—can be damaging, too.

Instead of trying to give customers the best experience ever, which should be a goal but not necessarily a stated promise, leadership needs set expectations in the positioning, marketing, and sales phases that can be met repeatedly.

When a firm temporarily over-delivers on product reliability, features, customer service, and so on, it has likely raised the expectations bar permanently. Disappointment will later ensue should the original—but now superseded—performance levels take hold again. For example, If 24/7 world-class service has been promised, then that expectation must be met. But if 18/7 world-class service has been promised and the firm delivers at a higher level, then customers will be disappointed if the company later falls back to 18/7 world-class service.

Therefore, brand stewards must make promises very carefully, and ensure that these promises are met continuously without fail.

So the Services Gap Model recipe is simple:

  • Customer experiences that are incongruent with customer expectations must be avoided.
  • All departments, including executive leadership, must listen to customers.
  • Internal communication about customer expectations and experiences must flow both ways, up and down.
  • To turn negative customer experiences into positive ones, employees must be empowered to resolve issues without frequent escalation.

The Customer’s Journey

So far we have discussed strategy schemes for competitive and strategic positioning wrapped in a customer-centric R&D and services approach. Next let’s discuss actual customer needs.

The customer’s thought process on purchases always boils down to the following:

  1. “I have a need or a problem.”
  2. “Is there a solution out there I already know and trust?”
  3.  “If not, let me do some research.”
  4. “This product/service is purported to be great/terrible/okay.”

Obviously, the potential customer will not reach step 3 if a default solution is readily available. However, should the potential customer reach step 3, it is critical that the brand steward has positioned and made available its solution in such a way that it seems the obvious next choice. This is no longer achieved simply by having dominant shelf space or an appealing advert in the Yellow Pages.

Since the advent of the commercialized Internet, traditional advertising has become less and less effective. The Web has given nearly every person the ability to perform research on products and customer satisfaction. And social networks have enabled instantaneous and asynchronous communication with trusted advisors (friends and family, colleagues, hired professionals) to receive product recommendations anywhere in the world.

Additionally, potential customers do not rely exclusively on personal relationships for product recommendations; they also rely on other trusted networks to aid in discovery and decision-making. For example, new mothers who are otherwise complete strangers may congregate at to share experiences and recommendations. In-person Meetups ( take place on an infinite variety of topics across the globe, allowing complete strangers to share their interests and passions. Customer reviews on and serve the same purpose of sharing product and service experiences. In any of these situations, the opinions of strangers are treated as expert recommendations that can at the very least lead to a one-time trial of a suggested solution.

This new landscape is why customer satisfaction—which can lead to customers becoming net promoters (rabid fans who promote and defend a company and its offerings)—is very important, and why incongruities between the expected and perceived customer experience need to be minimized or eliminated. This is also the reason why traditional advertising is becoming less effective, and authentic endorsements from trusted resources is the most effective form of marketing.

While advertising is still relevant, a brand steward’s responsibility is to be an active member of the communities that have embraced and are talking about its products. Red Bull Energy Drink is a prime B2C example of how a brand steward has become part of the community that champions its product. In B2B, marketing materials such as believable client video testimonials must be available collateral in places where potential customers perform their research before reaching to the company for further information—the least and last of which is the brand steward’s own website.

As the saying goes, you can lead a horse to water, but you cannot make it drink. Likewise, by being visible and authentic in the arenas and communities where customers participate and start their research, brand stewards can effectively enlarge the pond so that the proverbial horse no longer has to be led to it.

The other critical component is the long-term, post-purchase experience. Customers will forgive product mishaps if they receive the proper care and support. To win at this stage, management must have empowered frontline employees to resolve issues without the need for frequent escalation. Spending a little on customer satisfaction returns a lot in customer lifetime value. Or, to co-opt yet another cliché, a customer saved is a customer earned (perhaps even a net promoter).

Have You Been Listening?

Brand is the perception of how an offering is positioned and whether a buyer’s experience was congruent with his or her expectations. It is rare that a company is permitted by the customer to attempt a brand do-over, because customers don’t wish to relearn how they think about a product or service.

In the journey from evaluator to customer, people typically wish to make choices that represent little risk, especially as the monetary cost of these choices increase. It is therefore the brand steward’s responsibility to understand the customer and then incorporate that understanding into product design, delivery, and support. The innovation/improvement cycle can only succeed if the brand steward keeps this ultimate outcome in mind: that experience matches expectation.

If the brand steward (including executive leadership) listens only to customer complaints in the hopes of fixing them, then it is too late to listen to the customer. Listening is a broad and active process. Brand stewards need to listen to everyone who interacts with the customer, not just the customer itself.

Further, brand stewards should not listen only to downstream and in-house suggestions and outcomes, brand stewards also need to listen upstream: suppliers also need to become part of the conversation about customer satisfaction and continuous improvement. And the upstream also needs to be connected to the downstream: suppliers need to be enabled to listen to their customers’ customers. With this process, brand stewards can build a complete chain of information trust, and may discover additional efficiencies and opportunities for product or service enhancement that will deliver value to the customer.

Cheat Sheet

To steward a brand successfully, follow these basic steps:

  1. Create a multi-functional brand stewardship committee to collect and evaluate new ideas.
  2. Test and refine ideas against strategy frameworks to assure continued positioning and differentiation.
  3. Keep your promises: only make promises and implement as ideas when these can be delivered on repeatedly.
  4. Measure to see if the promised experience matches the perceived customer experience.
  5. Pinpoint areas in your processes and organization that have led to customer experience mismatches and develop processes to fix them.
  6. Listen and learn: participate in and add value to communities where large numbers of brand consumers and advocates aggregate.

When I was living on the East Coast, traveling to the West Coast posed no problems for productivity and alertness. Flying across country one would lose very little time, and due to the three-hour time difference, getting up early in the morning was also a cinch.

Now I live on West Coast time. AZ doesn’t play that Daylight Saving Time game, meaning, that for most of the year (March 10th to November 3rd; or as I call it, Conference Season) our time is actually equivalent to PDT, because we are always on MST, while the rest of you waffle back and forth.

Traveling to the East Coast is a chore. Often meetings and conferences start at 7:00 AM—especially when you are an exhibitor—meaning you have to get up at 6:00 AM, which is 3:00 AM your body clock.

That means, in order to get a good night’s sleep one also needs to go to bed [relatively] early. Going to bed between 9:00 to 10:00 PM East Coast time means my body thinks I’m trying to go to sleep between 6:00 to 7:00 PM per my body clock. That takes some coaxing.

I’ve never take prescription sleep aids, but do purchase “non-habit forming” OTC pills to help me get to sleep on those trips. So when my wife handed me a $3-off coupon for ZzzQuil (from the makers of NyQuil!) I thought I could save some money. I stopped taking NyQuil when they took out the sleepy stuff, and was excited to see I could get the sleepy stuff again from a brand that has previously served me well.

Here I was at the store holding a 24-count box of ZzzQuil (suggested retail price of $11.99) when I decided to look at the active ingredient: Diphenhydramine HCL. That sounded familiar… So I acted on a hunch, turned around and grabbed a box of Benadryl to look at it’s active ingredient: Diphenhydramine HCL. And at the exact same dosage: 25mg. Except that a 48-count box of Benadryl has a suggested retail price of $8.99.

It’s not difficult to figure out which the better deal is.

The question, however, is which is the stronger brand? Benadryl is definitely a strong brand name. It comes to mind immediately (unaided recall) when considering an allergy remedy, and the ingredient Diphenhydramine HCL is often simply referred to as Benadryl.

But why would Vicks be able to command a better than 150% price premium, when brand differentiation typically tops out at a 25-30% price premium for like products? Does it really have that much better brand recognition than Benadryl?

The answer to the question probably isn’t brand, but positioning. Without any empirical research I simply have to assume that Vicks plays in a market that solves short-term problems (e.g. flu symptoms) to which immediate solutions are needed, vs Benadryl, which handles long[er]-term problems (e.g., seasonal allergies) that also require a longer-term investment. I’ll pay just about anything to get over this cold quickly, but since there is no way to control the weather, seasons, and pollen, I’ll pay as little as necessary to remedy problems that will recur not matter what.

Additionally, I can tell you that OTC sleep aids are not cheap, so Vicks should be able to easily maintain pricing power with this brand extension. It’ll be worth watching how Vicks fares in that arena over time, and if enough people might catch on to the cheaper alternative. Benadryl (McNEIL-PPC, Inc., actually) might not be able to do anything—can’t openly compete against ZzzQuil—because they can’t jeopardize the positioning they’ve created for themselves.

Vicks’ only problem might be that if consumers learn of this and feel taken advantage they might vote with their wallets and pocketbooks against Vicks’ other brands as well.

At play is a possibly risky pricing strategy that has a chance to blow up and do larger damage than just cutting into ZzzQuil’s profit margin. On the other hand, Vicks might just be raking it in until then, and they might never get found out. And if Vicks does need to drop ZzzQuil’s price, that just might set off a price war in OTC sleep aids. Hallelujah.

Let’s get ready to rumble.

Lesson to marketers: know the risks you are taking and plan for the various scenarios.

In “The perils of best practice: Should you emulate Apple?” the McKinsey Quarterly examines the practice of copying successful companies, and uses Apple as a case in point. The theme is, can you identify best practices, and is it a good idea to copy them?

If only it were that easy.

You should also ask the “can” question: Can you emulate Apple and its best practices? More abstractly, can you copy the best practices of your more successful competitors and steal some of their market share, or begin to outperform the market yourself?

I don’t have the answers, but here are some considerations.

The VRIO framework talks about:

  • Value
  • Rarity
  • Imitability
  • Organization

(1) Does your product/service/solution provide value to the customer; (2) are you the sole or one of very few providers with that capability; and (3) are there notable barriers to copying your offering? In comparison to yours, how do competitive offerings stack up?

Most importantly, is your company organized in such a way that you can (could) consistently exploit your market differentiation? Being the best isn’t good enough, it’s being able to defend being the best that matters, and that’s what “organization” in VRIO speaks to.

O” is about all the things that are hugely difficult to emulate:

  • Operational effectiveness and excellence
  • Corporate culture that learns from success and failure
  • Ability to innovate — interpret signals from slow and fast culture
  • Comp plans that foster innovation
  • Customer-centric service design

Only when what you deliver is valuable, rare, and difficult to imitate, and you are fantastically well organized will you be able to emulate a company like Apple, or your very best competitors.

And then it’s not about emulation, but about domination. Taking a cue from the Five Forces: for example, what inputs could you dominate to keep competitors at bay? Apple has signed huge contracts for glass for its portable devices, purchasing as much as 70% (if I recall correctly) of the available supply. That (a) creates shortages for competitors, and (b) drives up the price for the remaining manufacturing capacity. In your business, do you have enough cash to manhandle your competitors’ supply chains?

Back to the larger questions of should and can you emulate Apple, which has a Superstack—a nearly wholly owned and fully integrated value chain (infographic PDF).

Accenture Superstack

Accenture Superstack (appropriated w/o permission from Superstack PDF. Sorry.)

[FWIW, as much as people say that Google purchased Motorola Mobility for its patents, I can just smell the Superstack synergies, which likely weren’t lost on Google. Watch for a similar Microsoft move. . .]

In an era of outsourcing and specialization, how vertically integrated are you? Should you engage in M&A or, against the recommendation of the Five Forces model for many alternate suppliers, should you have just a few highly symbiotic, tightly coupled single-vendor relationships. How would those be affected during economically tough times?

What does your more successful competitor really deliver? Is it a product or an experience? Apple delivers a fully integrated and portable experience. You can watch the photos you took on your iPhone either on your iPad or even on your TV via Apple TV. You can listen to the music you purchased on your iMac via your iPhone or iPod. Apple makes available what matters to you in your personal life anywhere you want to experience that. They’ve made a conscious choice to leave the office behind. Microsoft, Google, and Oracle will fight that battle (not just with data availability, but secure portable application availability).

The “should you” question really is about strategy. What do you want to be when you grow up? And will emulating someone else actually get you there?

The “can you” question really is about capabilities. Can you successfully implement similar strategic and tactical choices that will ostensibly result in the same outcomes for you as they do for your competitors?

Which question you ask first is of academic importance—they’re two sides of the same coin, and in both cases the answer needs to be “yes.”

Ask yourself these questions:

  • What is our company good at?
  • What is our company bad at?
  • What is our competition good at?
  • What is our competition bad at?
  • Is our product valuable, rare, and inimitable?
  • Are we organized in a way that provides value (triple bottom line?), and is that organization difficult to copy (causal ambiguity).
  • Who are our direct competitors; who is entering our space with a similar solution; what dissimilar (substitute) solutions exist that accomplish the same outcome?
  • How are our competitors organized?
  • Do we have a clearly defined strategy, and is everyone in the company aware of this strategy and working toward its success?
  • Is sameness a viable differentiation strategy? Yes? No? For what reasons? What gaps need to be plugged?
  • Do we have a brand in good standing?

Then you can ask yourself: Should I copy my competitors’ best practices? By now you ought to know if they would add value to your organization, and if you could implement them successfully.

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