sf06_taddyhall_workshopmarketingmalpractice
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Marketing MalpracticeThe Cause and the Cure
Moscone CenterSan Francisco, CAApril 26-27, 2006
Road to “Marketing Malpractice”
Confusion… about how brands drive
growth+
Waste…with ineffective advertising
and failed brands
We Held a Belief -- Or Maybe a Tautology
“Every Process is Perfectly Designed to
Deliver the Results that it Delivers”
We Asked a Question
“Why do so many Good Marketers make Bad Marketing Decisions?”
And We Made a Bold Assumption
Marketers aren’t Stupid
We Explored
What’s the Key to Brand Success?• FAME?• LOVE?• CLEVER ADS?• AWARENESS?• LOYALTY?
Build Brand
We Found…
“The Game of Life”
“Jobs To-Be-Done”
It’s not Black Magic after all!
“Purpose Brands”
Great Brands Get Jobs Done:1. Will it save me time in selection?2. Will it reduce risk of poor selection?3. Will it make me feel good?4. Will it confer status?
Most Successful New Brands do #1 and #2
The First Brand
THOR’S BRICKS
c. 2500 BC
Early Days
Well-Built Brands
• Sony Walkman • Kodak EasyShare• Charles Schwab• Coke FridgePack• FedEx• Enterprise Rent-a-Car • BlackBerry• Google • iPod
• Southwest Airlines • Starbucks• Nucor and Chaparral Steel • Wal-Mart • Intel Celeron• University of Phoenix • Commerce and North Fork Banks• GladWare• eBay
Have Clear “Job Specs”
A Brand with no Purpose is an Empty Shell. . .
. . . No matter how clever its
“personality” or catchy its advertising
Brand Truth
Extending and Leveraging
Source: Clayton M. Christensen
The Power of a Great Purpose BrandOne job Many jobs
One product
Many products
•Arm & Hammer
Leverage purpose brand
•Listerine
Great Brands Start Here Grow purpose
brand into endorser brand
Vulcan’s Power: Arm & Hammer
Sodium Bicarbonate since 1846• Today, the “orange box” accounts for <10% of consumer
sales
• Purpose Brands address uses in:– Oral care
– Laundry detergent
– Carpet cleaning
– Deodorizing refrigerators and freezers
– Pool cleaning
– Air freshening
– Stain removal
So, how do I build a great brand?
Start With the Right Questions
MILKSHAKES!
Don’t Follow the Herd Off the Cliff!
Three Popular Market Research Mistakes:- Segment Market based on Product Attributes
- “milkshake flavors”- Segment based on Customer Attributes
- “families with kids”- Search for a Large Target Market
- “Males 18-40”
Where’s the “Job” to-be Done?
• Good Questions:– Are there unmet consumer needs I can satisfy? – Can I create Customers by satisfying those needs?– Is there a whole new Category can create?– Can I redefine an existing Category?
THE RIGHT QUESTIONS FOCUS ON CREATING A MARKET…..NOT ENTERING A MARKET
Start by Thinking about Growth
Two Growth Trajectories (or Innovation Types):– Sustaining Innovation is how companies grow
established businesses– Disruptive Innovation is how new businesses are
created
who wants to take a crack at describing their attributes?
Sustaining vs. Disruptive:
Sustaining Innovations
• Enhance performance based on established market criteria
• Target large, well-defined markets• Respond to most demanding customer
segments• Generate high margins• Technically sophisticated
Disruptive Innovations
• Target small or ill-defined markets• Often take root in the least profitable, low-
end segments of existing markets or….target “non-consumers”
• Technologically unsophisticated• Often establish a new basis for competition
from the established leaders• Generally unattractive for established
leaders
Don’t End Up On The Wrong Side of Disruption!
• New growth businesses with a disruptive strategy are 10X more likely to succeed than those pursuing sustaining strategies
• In sustaining innovations, established leaders beat new entrants in nearly 100%of all cases
Sustaining vs. Disruptive InnovationPr
oduc
t Per
form
ance
Time
Performance that customers
can utilize or absorb
New performance trajectory
Disruptive InnovationDisruptive Innovation
Pace of Technological
Progress
Sustaining Innovation
Breakthrough
Incremental
Source: Innovator’s Dilemma, Clayton M. Christensen
Important Lesson
“Creating new markets is significantly lessrisky and more rewarding than entering established markets against entrenched competitors.”
Innovator’s Dilemma, C. Christensen
Great Businesses Start as Disruptors
Intel
Sun Microsystems
Ford
Dell
FedEx
Nucor
Microsoft
Charles Schwab
Bloomberg
AT&T
Cisco
Southwest
Nokia
Toyota
Honda
Sony
Barnes & Noble
Amazon
Sears
Wal-Mart
How do You Find These Things?
Litmus Tests for Successful Disruptive Innovation
Learning to Look Learning to Look
Strategies for Disruptive Innovation
1. Does the innovation target non-consumers who will be delighted to have a simple product?
New Market Disruption: Litmus Test #1
New Market Disruption: Happy with “Less for Less”
• Sony Transistor Radios –– “I want to listen to rock ‘n’ roll without the folks around”
• Kodak EasyShare –– “I want to share pictures easily and instantly”
• Charles Schwab –– “I want to buy and sell equities without high-cost brokers”
Strategies for Disruptive Innovation
1. Does the innovation target non-consumers who will be delighted to have a simple product?
New Market Disruption: Litmus Test #2
2. Does it help customers get done what they are already trying to do -- or is success predicated upon their wanting to get done something that historically they haven’t prioritized?
New Market Disruption: Lafley’s“Nuisances”
• Coke FridgePack -– “I want a space-efficient way to keep soda cold and
available”
• FedEx -– “I need it there overnight. No excuses”
• Enterprise Rent-a-Car -– “why do I need to go to the airport to rent a car?”
• BlackBerry -– “I want to make small snippits of time more productive
and less tedious”
Strategies for Disruptive Innovation
1. Does the innovation target non-consumers who will be delighted to have a simple product?
2. Does it help customers get done what they are already trying to do, or is success predicated upon their wanting to get done something that historically they haven’t prioritized?
New Market Disruption: Litmus Test #3
3. Does it enable a larger population of less-skilled or less-wealthy people to do things that previously had not been possible?
New Market Disruption: How about the rest of us?
• Google –– “I want to generate customers on an inexpensive, pay-
for-performance basis”
• Balloon Angioplasty –– “I can’t perform bypass surgery, and I’m not sure many
patients need it.”
• Southwest Airlines –– “I want the speed of air travel and the price of the bus”
Strategies for Disruptive Innovation
1. Can we create a new business model to compete in a new way at the low end?
Low End Disruption: Litmus Test #1
Invasion of Steel Minimill Technology
Quality of minimill-p
roduced steel
12%
8%
18%22%
7% (Gross Margin)
4%
% of tons
Stee
l Qua
lity
19801975 1985 1990
Rebar
Angle iron; bars & rods
Structural Steel
Sheet steel25–30% 55%
Low End Disruption: New Models
• Nucor and Chaparral Steel –– with a 20% cost advantage, even rebar looks good
• Wal-Mart –– an inventory flywheel: 6X at 20% = 3X at 40%
• Intel Celeron –– A RARE self-disruption
Strategies for Disruptive Innovation
1. Can we create a new business model to compete in a new way at the low end?
2. Are prevailing products more than good enough?
Low End Disruption: Litmus Test #2
Exploiting Overshoot
• University of Phoenix and Corporate “Universities” –
– “Who needs Harvard?”
• Commerce Bank, North Fork Bank (Community Banks) –
– “I don’t trade currencies, but I do like to bank on weekends.”
• GladWare –– “Tupperware’s too expensive and a yogurt container’s too crummy for
kids’ lunch or potluck supper”
Litmus Test Recap
New Market Disruptions: 3 Litmus Tests
1. Does the innovation target non-consumers who will be delighted to have a simple product?
2. Does it help customers get done what they are already trying to do, or is success predicated upon their wanting to get done something that historically they haven’t prioritized?
3. Does it enable a larger population of less-skilled or less-wealthy people to do things that previously had not been possible?
Litmus Test Recap
Low End Disruptions: 2 Litmus Tests
1. Can we create a new business model to compete in a new way at the low end?
2. Are prevailing products more than good enough?
Getting Started
Ask Market Research to do the Right Job
1. To Identify “nuisances”, “job openings”, and “game changers”Not…To Define large, profitable markets
2. Generate InsightsNot…Observations
3. To Segment Markets based on “Jobs to be done”Not…To Segment based on Product or Customer Attributes
4. To Chart the FutureNot…To Measure the Past
• A Great Brand Idea is a Great Growth Idea
• A Great Growth Idea Creates New Customers
How do You Find These Things, 2.0?
The Innovation Spectrum: Broaden your Horizons
Core process
Process.
Enabling process
Business model
Finance
Networking Product performance
Offering
Product system
Service Channel
Delivery
Brand Customer experience
Source: Doblin Group Analysis
Investment is Disproportionately Concentrated
Hi
Lo
Volume of innovation effortsLast 10 years
Source: Doblin Group Analysis
Core process
Process.Enabling process
Business model
FinanceNetworking Product
performance
OfferingProduct system
Service Channel
DeliveryBrand Customer
experience
Returns are not!
Hi
Lo
Cumulative value creation1—Last 10 years
Source: Doblin analysis
Core process
Process.Enabling process
Business model
FinanceNetworking Product
performance
OfferingProduct system
Service Channel
DeliveryBrand Customer
experience
Less than 2% of projects produce More than 90% of value…
1Definition: ROI; TSR; EVA; Sales Growth??
10 Types of Innovation: it’s not just New Products!
Business model
FinanceNetworking
2. Networkingenterprise’s structure/value chain
1. Business modelhow the enterprise makes money
Channel
DeliveryBrand Customer
experience
10. Customer experiencehow you create an overall experience for customers
8. Channelhow you connect your offerings to your customers
9. Brandhow you express your offering’s benefit to customers
Core process
Process.Enabling process
3. Enabling processassembled capabilities
4. Core processproprietary processes that add value
6. Product systemextended system that surrounds an offering
Product performance
OfferingProduct system
Service
7. Servicehow you service your customers
5. Product performancebasic features, performance and functionality
New Ways of Looking and Innovating: A Few Examples
• Costco:– “What if only half our revenue came from product sales?”
• Ryanair:– “What if the price of tickets goes to zero?”
• GE Aviation Services– “What if airlines refused to buy engines?”
Final Takeaway: Learning to Look
• Are there Jobs with no Current Solution?– FedEx, BlackBerry, eBay
• Are there Jobs with only Imperfect Solutions?– GladWare, Coke FridgePack, Blackberry
• Are Jobs that Requires Considerable Effort or Expense on the part of the Customer?
– Zagat Guides, Crest WhiteStrips, match.com,
• Is there a group of Customers that would be Thrilled with a low-performance Product?
– Intel Celeron, Canon Desktop Copiers, Southwest Airlines
• Can we create a new business model and change the basis of competition?
– Nucor Steel, Wal-Mart
Dysfunction Diagnosis
It’s not Bad Brains, it’s Bad Thinking:
• Broken Business Models • Flawed Mental Models• Ossifying Incentives
Thinking about Thinking
• 11 Million : 40– Brains are designed to Filter, Ignore, and Forget
• Civilization– Most of our mental activity is unconscious
• Interrupted Dreams– Memory is just a version of reality
• Grapes or Chocolate?– We are not “rational”
• Footsteps in a dark Alley– We “Feel” first, “Think” second…if at all
• Earthquakes and floods– The Reality we perceive is a function of our prevailing mental model
When did “Brand” become a verb?
Discovery
“BRANDING WAS ORIGINALLY AN INSIGHTDISCIPLINE, NOW IT HAS BECOME AN EXPRESSION
DISCIPLINE”
– EX-LEGO CEO, CHRISTIAN MAJGAARD
Disruption of MBA Programs
Strategy consulting firms
Star
ting
Sala
ry
Time
Large corporations
Small businessesSelf-administered
distance education
Corporate Universities
with live instructors
Corporate Universities
with on-line instruction
Traditional MBA Programs