Category Archives: Applying "The Alpha Factor"

• Alpha learning applied: Good enough is good enough… Until an Alpha makes it better

  Friday, August 1st, 2008 by Wes Ball

  Why is everyone obsessed with the idea that better quality sells? There has been more than enough evidence that this isn’t true.  Better quality or performance for the same price as what something else costs sells, but not better quality…UNLESS it helps prove that emotional fulfillment needs are being satisfied better through your product or service.

  I sat for half an hour listening to the tirade of a marketing guy from a major manufacturer who had gone down the quality path only to find over and over again that lower quality, lower cost product from Asia was being chosen in lieu of his product.  What he had missed (and I tried to tell him, but he was far too focused upon the unfairness of it all to hear it) was that unless there is a clear emotional fulfillment provided by your product or service, quality means little.

  What the Alpha Factor Project discovered was that functional performance (quality, product performance, features, etc.) only have to meet the minimum acceptable functional requirements to be considered and purchased. Once that hurdle is crossed, the battle becomes one of which brand offers the most emotional fulfillment? That means “self-satisfaction” (how I feel about myself when I buy or use your product or service) and “personal significance” (how I believe others feel about me using or buying your product or service).  If none of the other products provide any emotional fulfillment, then the choice becomes one of price.  Among those that do provide some level of emotional fulfillment, the comparison is one of which provides enough to warrant the greater price?

  I may buy Kraft cheese to make cheeseburgers, but I will probably buy a much more expensive and more unique cheese to serve to friends with wine.  If the Kraft cheese is acceptable to me (meets minimum functional performance) and I don’t think anyone will see what’s going on the meat, then why would I spend the extra money?  Where the cheese will be seen and it will be a major focus of the entertainment, then I may spend ten times as much to make sure it’s really something that will please and gain points with my guests.

  This kind of behavior can be quite predictable with a range of brands or products getting my attention based upon the situation and likelihood of anyone noticing. When an Alpha company enters the game, however, things start to change very rapidly.

  The Alpha, by definition, is in the process of continually defining what it means to be in that category or product or service. It defines the expectations and the aspirations of customers in that category.   There may be a minimum acceptable functional requirement, but that starts to move upward as the Alpha defines new, higher expectations.  Almost every competitor begins to focus its attention upon competing with the Alpha.

  Even though Starbucks is having troubles right now, it has been the Alpha in the coffee shop category for a long time.  It neither invented the coffee shop concept nor did it better than everyone else.  It did, however, bring a new minimum acceptable functional requirement to the category that pushed many local shops to do a much better job than they had in the past.  Every other shop out there (whether they were better or worse than Starbucks) competes with Starbucks and compares itself to them.  Sadly, it is because Starbucks has fallen below the minimum acceptable functional requirement that they set that they are now experiencing the problems they are.  It isn’t just the fact that they over-expanded; it’s that they over-expanded for the lower functional performance they were providing.

  Harley-Davidson, another slipping Alpha, has fallen into the same trap. When Harleys started becoming better motorcycles after the company was purchased by some employees in the early 1980s, a new and higher acceptable functional minimum was established.  Despite their poor quality, up until that point in time they had been the minimum acceptable functionality.  Most Japanese bikes were already far above that, so it did not affect them, but it did establish a new higher minimum that had to be met.

  Unfortunately, H-D (like Starbucks) fell below that minimum they set.  They also allowed other manufacturers to begin to define the leading edge of the “cruiser” and “chopper” categories that they had owned.  Now a new, even higher functional minimum has been set, and Harleys don’t measure up either in functional performance or in emotional fulfillment.

  Apple, on the other hand, is setting a much higher functional minimum in both its iPod and iPhone products.  What was acceptable just two years ago is no longer acceptable.  If someone chooses one of the competitive products, they do it knowing that they are sacrificing something they aspire to own and experience. Even among those of us that thought that there couldn’t be that much difference between lesser brand versions and the “real thing,” the truth becomes quite apparent after enjoying the “i” experience for even a few minutes.  This new higher experience has become the benchmark for everyone else to reach.

  The secret to Apple’s success, however, is not the technology that looks far beyond competitive products, but actually is probably less cutting edge than it seems.  It is the emotional fulfillment that comes from owning, feeling (they really have a terrific tactile character to them), and sharing them with others.  Competitive products tremble in comparison.

  Apple’s Mac computers have long had a much higher experiential factor that should have made them the Alpha of the personal computer category.  Because they focused so heavily upon the “artistic” market with software and marketing, they missed being able to drive minimum functionality higher in the overall category.  Unfortunately, Microsoft (through a lot of shenanigans) made themselves the minimum functionality required for most businesses and computer technicians, which drove the choices most individuals had, as well.

  Now that Apples has been able to make their product more available to all the poor souls who had to put up with Microsoft products for all those years, they are emerging as the clear Alpha of the category.  Who would not aspire to own a MacBook Air?  It feels great, looks great, performs better than any PC laptop I’ve owned, lets me do beautiful presentations, displays none of the software “crankiness” that my old XP-Pro machine did, AND runs Microsoft Office programs.  I also have people walk across the room to ask me about it.

  Quality is not and has not ever been the real “Holy Grail” that is has been purported to be.  Emotional fulfillment is the core of Alpha learning, leadership, and innovation.  Good enough is truly good enough until emotional fulfillment comes into the picture.

  Posted in Applying "The Alpha Factor", Articles, Business, Uncategorized | Comments (1)

• Starbucks’ customers prove it’s an Alpha

  Monday, July 21st, 2008 by Wes Ball

  If there was any doubt that Starbucks had attained Alpha status, it’s certain now.  With all the talk of downsizing and closing of stores due to “over-expansion,” many pundits have thought that perhaps Starbucks is just another one of those sad stories of poor management caught in an economic downturn.  The truth, however, is being displayed clearly through their customers.

  An article in The Wall Street Journal today by Janet Adamy and Anna Prior discussed the customer response to store closings.  Reminiscent of the customer outrage that saved Coca-Cola, when it made the terrible mistake with “New Coke,” we are seeing one of the strengths of an Alpha at work again through Starbucks.

  One of the key benefits of becoming an Alpha company is that you can weather difficult times and even bad management decisions better than “normal” companies can.  That extends to the point that an Alpha’s customers will often save it from really bad mistakes.  We are witnessing this at work right now.   By having made themselves the customer expectation leader so that every other coffee shop wants to either emulate or overcome it, Starbucks has made itself a part of American life that people don’t want to have to do without.

  According to the WSJ article, all across America — from major metropolises like Manhattan to small towns in Mississippi and Nebraska — Starbucks customers ranging from local neighbors to business owners and managers to city mayors are contacting Starbucks headquarters to lobby for their local stores.  Starbucks has made itself a draw for attracting people and businesses into a community and for attracting employees to businesses near a Starbucks store.

  None of this would be happening, if Starbucks had simply managed its business to be a top moneymaking machine, as business schools teach us to do.  It has only been due to Starbucks’ focus upon fulfilling high-level customer emotional needs (self-satisfaction and personal significance) that it is enjoying this level of customer support.  Customer expectations from a coffee shop have changed significantly all across America due to Starbucks.  No cost-side management could ever have created this phenomenon.  Only by understanding and fulfilling these revenue-side customer needs has Starbucks made itself anything more than one more pretty good coffee shop.

  Hopefully, Starbucks’ management will recognize that the reason behind their slowdown is not just “over expansion,” but also (and probably more importantly) a loss of focus upon continuing to raise customer expectations by driving them into higher and higher emotional fulfillment (again refer back to The Alpha Factor for a discussion on the core concepts of self-satisfaction and personal significance in driving purchase decisions).  There has been a noticeable decline in customer experience in Starbucks stores wherever I travel.  When I talk with store people, this focus seems to have been replaced with more focus upon new equipment.

  Bad move.  Luckily, being an Alpha, they have time to get back to the focus that got them where they are.

  Posted in Applying "The Alpha Factor", Business | Comments (0)

• How to weather an economic downturn – Part 2

  Tuesday, July 8th, 2008 by Wes Ball

   

  How retailers react, and what you can do about it  

   

  In an economic downturn, retailers react (just as consumers do) on the news of a potential downturn.  As soon as they see consumers pulling back in fear, they do not take a leadership role, but rather they start looking for ways to minimize risk.  Guess what the outcome is?  A downturn.  But that doesn’t have to hurt you, if you sell through them.  It can actually be the best time to strengthen your position and sales.

   

  Let’s start by understanding what retailers do when they start to fear a coming economic slowdown.  The first and most obvious thing they do is put together a plan for pulling back rather than looking at how they might take control and make themselves the leaders now and after the downturn.  Much of what they do is self-destructive and also harms the marketers selling through them.

   

  From the top down comes the order to cut costs, extend payment schedules (whether or not they actually negotiate longer terms), reduce in-stock inventories and increase special orders as a percentage of total sales (if they even offer such services), pressure their marketers to offer promotional discounting (that may or may not be passed along to end-users), become tougher on asking for other promotional allowances, and (occasionally) create new ways to get money from marketers without ever having to sell product.  That’s ugly.  But it’s the environment almost anyone selling through retail has to face. 

   

  In making these cuts and “innovations,” they typically reduce the knowledge levels of their sales staff (the higher-paid people usually get cut first) and reduce the selection of product, despite the fact that broad selection is one of the most important things customers expect from a retailer.

   

  Then they usually put even more emphasis on “store brands” that make them the exclusive place to go to get them.  This usually doesn’t have much real effect upon store traffic, but it does steal sales from their branded products (and makes for bad relations with the marketers who sell through them).

   

  All of this is “functional” innovation that they do in an attempt to make themselves “leaner” and more attractive to customers.  Most of it backfires.  That’s why retailers are in such a mess today.  Unfortunately, most brand marketers have allowed themselves to be sucked into the trap of relying upon retailers to “sell” their product.  So when tough times come along, it’s time to stop being lazy and start thinking strategically.

   

  So what can you do when faced with this?  Firstly, get excited.  This is an opportunity to make great gains for yourself both in overall sales and in gaining long-term support from your retailers.  It may even force you to innovate in ways you never would have without this impetus.

   

  Assuming that you have not given up on retailers and have decided to take distribution into your own hands (a decision that many smaller marketers are choosing), there are many things you can do that will help you now and also after the economy improves.

   

  Here are just a few ideas –

   

  Innovate to address the core needs of the retailer:

   

  1. Retailers want more customers in their doors. They don’t want to save money – that’s their desperation move.  They need traffic.  And they want it to stay in the store for a longer time period.  (For every minute a customer is in a store, their average purchases increase geometrically.)

  ·         Create ways to drive more customers into the doors of those retailers who have given you (or commit to give you) extraordinary perks in their stores.  We have had great success in getting otherwise ruthless retailers to dramatically reduce the demands placed on a marketer who drives traffic into their stores.  This can be done through marketer-sponsored ads that

  ·         Don’t forget “dealer listing” ads.  They have been poorly used by most marketers in the past, but they are a great value to retailers.  List one retailer per ad, not 20, and make it appropriate.  (We used this to great advantage by placing billboards listing one retailer across the street from a competing retailer who would not support our efforts.  The next year, the recalcitrant retailer got “on board.”)

  (This is a “Satisfaction” innovation.)

   

  1. Retail buyers want to be “heroes.” 

  ·         Using the ideas above, make your buyer the hero to be able to offer what top management really wants.  (In some cases, we have had to go around the buyer to the VP or even the CEO level, where those benefits are recognized and supported.  We’ve never had a buyer stay angry about that after his boss told him how excited he was with what was being offered.)

  ·         Offer an exclusive on a new product to your buyer at a key retailer from whom you want to get a greater commitment.  It can even be a re-packaged older product, but it will often represent a value to them.

  (This is a “Significance” innovation.)

   

   

   

  Innovate to go beyond your retailers:

   

  Don’t allow yourself to be limited by the short-sightedness of your retailers.  Sometimes, they don’t want to be helped by their brand marketers.  You don’t have to stop selling through them to make yourself stronger and to increase your sales.  For instance…

   

  1. Build your brand’s influence.  

  ·         Don’t count on retailers to sell your product.  If you are going to work through them, only allow them to be the place customers go to get it, not the place to learn about it.  The result will be immediate and future influence, which equals greater retailers support.  (Remember, retailers want to have products that attract customers.  Make yours their lead attractor.)

  ·         Make sure what you are “selling” is what customers really want.  (Beyond the obvious things they tell everyone, discover what they really wish they were getting.)

  ·         Start to drive higher customer expectations.  Once you understand what customers wish they were getting, you have the key to driving higher expectations.  If you innovate for “Significance” and “Satisfaction,” you will become the most influential brand.)

  1. Find ways to make your product available in more places.  There are more places to sell product today than every before.  The internet has become just one new way to expand the availability and influence of your product.  
  2. Go in the backdoor to increase sales through your retailers.  Many retailers offer online sales, so you could easily use your product’s website (and other information venues) to lead customers to retailers who have given you extraordinary commitment.

   

  These are only a few ideas that have worked to overcome the resistance retailers put up.  The fact is that once end-users get past the initial time of holding back as fear of a downturn is created, they want to buy the products that will address their satisfaction and significance needs.  Retailers may stand in the way of you getting your product to those customers, so do what is needed to attract customers to what you offer.

   

  If you combine that with innovating ways that make your retailers see you as they path to greater satisfaction and significance, you will be far stronger on the back side of a downturn than your competitors are.

  Posted in Applying "The Alpha Factor", Business, Uncategorized | Comments (0)