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Five Keys to Using Innovation to Acquire and Retain Customers (Part 3 of 3)

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In part 1 and part 2 of this series ("Five Keys to Engaging the Customer to Produce Real Innovation"), we discussed using voice of the customer (VOC) in defining innovative core products and services.

The focus was on breakthroughs in the basic product, on hitting the home runs. Here, we take a different perspective—using innovation to acquire and retain customers once the core product or service is defined.

As you will see, innovation can occur in all aspects of the business, not just the basic (i.e., core) product. For example, innovation can apply to the sales/marketing approach and to the additional goods and services that are offered in combination with the core product/service in order to make a more robust solution.

You will also see in many of the examples below that a big innovation often results from a series of small innovations.


VOC continues to be critical, since innovation is valuable only if it ultimately benefits the customer. Marketing therefore has a crucial role to play: It typically orchestrates and conducts VOC activities, champions the results throughout the organization, and often acts directly on the customer input.

Now, five keys to using innovation to acquire and retain customers:

1. Expand the scope of your solution

Determine everything that is required in order for your customer to buy your product and be satisfied. Everything includes product extensions, upgrades, and complementary products, of course, but it goes well beyond that. For example, is it easy for the customer to buy and physically obtain your product? Do customers have easy access to information that helps them with their purchase decision? While this is normally considered a routine part of the marketing, it can lend itself to innovation.

Consider the experience of buying a book (or many other products) on Amazon.com. It is easy to find a product using Amazon.com's search capabilities. Once the item is located, there is a wealth of information to help with the purchase decision—reviews, music samples, etc. If the customer decides to purchase, she can activate "1 Click" and the product is on its way. A very easy process—less than one minute in many cases, without leaving your desk.

This ease of purchase, consisting of several smaller innovations and enabled by the Internet, represents a breakthrough in engaging the customer. Note that the basic product—the book, CD, whatever—is the same as before. Here, the definition of the "solution" has been extended to include the presales process, by understanding what is important to the customer up to and during the purchase.

There are certainly many other ways of innovatively expanding the solution definition to better reach and serve customers.

Enterprise Rent-a-Car applies a series of innovations to better serve one of its rental customer segments—people whose car is in the shop. Enterprise proactively reaches these customers by placing rental locations near repair shops, often within walking distance of a dealer who performs repairs. It advertises its services to other repair shops in the area, and provides pick-up and drop-off when the shop is beyond walking distance. It charges rates that are covered by insurance and bills the insurance companies directly, so customers are not "out-of-pocket." By using this series of small innovations, Enterprise has achieved a breakthrough for customer friendliness and satisfaction in this market segment.1

Think of additional services that you can bundle with your core product or service that will make it easier for the customer to buy and enhance the customer's overall satisfaction.

In most cases, these will not require changes to the basic product—they can be added on, often at low cost, and they often increase revenue and profit more than a change to the core product itself.

2. Enhance the total customer experience

A good experience starts with a high-quality product and good pre- and post-sales customer service, but there are many other steps a vendor can take to enhance the total experience. Consider all of the stimuli to which a customer might react—many of these will be unconventional.

The president of an association recently chose a hotel for a conference based in part on "the pleasant vanilla smell that was present throughout the public areas." On this same theme, certain shops on Main Street Disneyland blow pleasant odors to the path outside, where passers by can smell the candy and confections and are enticed to wander inside.

Starting years ago, Apple Computer had the concept of the OOBE: "out-of-box experience." When a customer took their new Apple product home, unpacked it, and set it up, how positive was the experience? Was the packaging attractive and easy to open? Were the accessories easy to find and assemble? Were the startup instructions clear? Was it easy to get the product to work the first time?

Apple recognized that the customer experience started long before customers actually used the products, and so it took care in the design of the packaging and instructions to ensure that initial impressions were favorable.

Starbucks's focus on enhancing the total experience in its coffee shops is legendary. One element of the experience is "Surprise and Delight"—the occasional surprise that delights the customer:

  • The Barista who opens the store early so that a customer is not turned away
  • Calm Tea on tax day, complements of the store manager.
  • The coffee cup glued to a magnet and attached to the top of a taxi, making it appear as if someone accidentally left it behind; when the rider points it out to the cab driver, he is given a Starbucks gift certificate.

Those are all small surprises, but they lead to happy, loyal customers who provide good word-of-mouth. While these acts are performed at the local level, the corporate culture at Starbucks is designed to encourage and empower front-line employees to provide this "Surprise and Delight."2

The examples are endless, and while they may seem small they truly represent innovation. Each is unconventional in some respect, so someone needed to be thinking "out of the box" for it to happen, and in each case the company is more successful as a result.

3. Leverage your vendor community

To paraphrase the old saying, "no company is an island." Each of you has an ecosystem, a community of vendors that provide complementary products, add-on products, sales and distribution, service, and other value-adds. Often, you can enhance your product/service offering by engaging new ecosystem partners that will help you to serve an existing market segment more effectively or provide the missing piece that enables you to address a new segment.

Innovation occurs when a third-party offering extends your product capabilities to provide "new to the industry" capabilities.

Throughout the years, Apple Computer has been very effective at enlisting third-party vendors to greatly expand the depth and breadth of solutions available to its customers. It started with the wealth of third-party hardware and software available for the Apple II, and continues today with the variety of iPod accessories. In certain cases, the third-party product combined with Apple's product to produce a real innovation. This was the case for Aldus PageMaker, the desktop publishing package that leveraged the Macintosh WYSIWYG ("what you see is what you get") display and printing capabilities and that ultimately became a "killer app" for the Macintosh.

Are there complementary or add-on products and services that, if added to your current offering, would strengthen your market position or enable you to serve new markets? If so, you might consider recruiting the appropriate outside vendor. Doing so often results in faster time-to-market, requires fewer of your internal resources, and leverages the core competencies of your partner.

4. Achieve a significant improvement in a valued attribute

Innovation can be applied to achieving a significant performance improvement in an attribute that the customer really cares about. "Significant" performance, in this case, means way beyond the expected. It requires a heavy focus on that attribute, often to the point of making the improvement the overall mission for the team.

On-time performance is extremely important to many travelers, especially business people traveling to an important meeting. Southwest Airlines has consistently been among the top—if not the top—airline in this category year after year, and it takes much more than simply trying harder.

It results from a combination of factors, including the short-hop point-to-point (versus hub and spoke) service strategy, the use of a single aircraft for simplicity, the first-come-first-served seating, and a company culture that fosters cooperation and close communication among the many functions that must work together during the time the airplane is on the ground.

Although each of these factors contributes to fast and predictable turnaround time—ultimately to the outstanding on-time performance—it is the combination of them that produces the breakthrough.3

5. Creatively segment the market

It is often possible to re-segment or sub-segment the market in order to focus on satisfying a particular set of customers that is under-served by competition, and thus gain competitive advantage.

This is what Southwest Airlines did by focusing on the short-distance traveler. In many locations it used older airports (e.g., Midway instead of O'Hare in Chicago) that were closer to the center of the city and therefore more convenient for travelers. As discussed above, this market segment also meant that Southwest could employ a point-to-point route system, rather than hub-and-spoke, to achieve better on-time performance.

The Enterprise Rent-a-Car example also illustrates the power of recognizing and serving a new market segment—the temporary replacement of an auto in the repair shop. Note that it is not a single item but a combination—convenient locations, shuttle service, selling through repair shops and insurance companies, insurance-friendly rates and billing—that ultimately contributes to Enterprise's prominence in this segment.

Think of ways you can engage additional customers by adding new services and sales/marketing approaches designed especially for them. Typically, you don't need to make major changes (or any changes, for that matter) to the basic product you offer; you can leverage what your company already produces. Often, these new services and sales/marketing approaches can be added by recruiting the right ecosystem partners, as discussed earlier.

There are, of course, many additional ways to be innovative in your business to engage your customers.

The important thing to remember is that it is not just about the company's core product or service, that ultimately the customer needs to benefit in some way, and marketing can and should play a major role.

Endnotes:

1 Example inspired by Jeneanne Rae, Peer Insight.
2 Joseph A. Michelli, The Starbucks Experience, McGraw-Hill, 2007.
3 Jody Hoffer Gittell, The Southwest Airlines Way, McGraw-Hill, 2003.

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Leland D. Shaeffer is Managing Director or PLM Associates (www.plmassociates.com). Reach him at lee.shaeffer@plmassociates.com.

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