One of the most important parts of a businesses strategic development yet it seems to be one which most consultants and strategies I've encountered fail to understand. Perhaps this is because SWOT has become too standardized, its an older tool, one which people pay lip service to by making a base list of strengths, weaknesses, opportunities and threats without stating what should be done about any of these.
If you learn nothing else from me, learn this: The purpose of a SWOT is not simply to list concerns or advantages; it’s to determine what to do about these things. Its to help you take advantage of opportunities, to develop strengths to help deal with weaknesses and avoid threats. A good SWOT tells you everything you need to be successful.
Again far too many strategic plans and worse--overpaid strategic planning consultants--end their SWOT analysis with nothing more than a short list of a few good and bad points about a company. This is one of the biggest mistakes I’ve encountered in the strategic plans I’ve seen.
Strengths: Strengths are relative to your competition. It’s not a strength if everyone is as good or better at it than you are. One of the primary goals in business is to develop a solid list of strengths in order to gain advantages. So don’t be too discouraged if your current list is short. You use your strengths in order to develop new strengths and to take advantage of opportunities. They are also a way of balancing weaknesses and avoiding threats. Write down some examples of how you might do this beside each listed strength.
Weaknesses: Is anything you do worse than the competition or which might derail your entire industry if everyone does it poorly? Depending on how serious a weakness is to your core purpose, you may need to determine how to improve upon it or how to adjust it.
You don’t need to be great at everything of course, you just need a plan to deal with your weaknesses in such a way that they don’t impact your business in such a way that it fails to earn as much money as it could.
Opportunities and Threats
Opportunities and threats come from anything that exists outside of your company’s reasonable control; from social movements to the political environment, the economy, new technologies, your competition and more can provide opportunities and threats.
Remember that in all things part of what you’re doing is comparing yourself to your competitors not to what you think provides advantages or disadvantages. If your customer base is changing, then there’s a good chance that your competitors’ customer base is changing as well. This in turn can provide both an opportunity and a threat because such changes give you the chance to adapt faster than your competitors, thus allowing you to take market share from them. At the same time, your competitors gain the same opportunity to adapt faster than you do. What you need to do is determine how you might take advantage of or avoid damage from your opportunities and your threats.
Part 1: Assess Current Strengths, Weaknesses, Opportunities and Threats
The reason strategic plans must be adaptable is that they are a reaction to the environment in which they exist, even if the intention of the plan is to change that environment. This means both that as the environment changes, which it will, so to must your plans. It also means that all plans must begin and be continually revised with an assessment of both the world around those executing the plans. It is difficult, however, to know exactly what is happening in any environment with absolute certainty. Indeed, one of the biggest challenges you’ll run into when beginning to develop a strategy is imperfect information. Many things are not public knowledge or even known by anyone. Your competitors will try to share as little as possible with you. Further, thousands of important studies haven’t been done, and as a small business you don’t always have the money to do them.
That said, it’s easier now than ever for you to gather the data you need. Websites, libraries, and more are all organized by computer systems so that you can find almost all human knowledge. Need to know what the average household spends on your product? The census probably has that statistic or it can be derived in other ways. The ease of gathering information means that the gap between those who’ve done their research and those who haven’t is wider now than ever among small businesses. So information is an edge that either you or your competitors will have. When all is said and done, only a few businesses will be wildly successful, and most will go out of business so you need every advantage you can get.
Understanding Demographic’s
It’s important to understand that while we divide demographic data from psychographic data, most demographic data is actually a subset of cultural data. What people of different ages and genders are likely to be doing and thus are likely to buy has a lot to do with their culture. Further, things like age involve certain shared experiences which shape peoples’ thinking, and it is these shared experiences that are the reason why people of different ages think differently.
What makes demographics appealing is that they can be quickly learned. This means that it is often easiest to break target markets into demographic information. Most traditional ad media, such as magazines and televisions shows, release information about the demographics of their consumers. Certainly, in many cases such a broad categorization of people can be highly useful. Airwalk, for example, found that it could target people based primarily on age, and that their ads would work worldwide allowing them to expand quickly. On the other hand, any large demographic group can have subsets that are not always in agreement on everything. Further, any group you might not normally consider in your target demographic can have large subsets who are interested in your product. This means that great care needs to be taken when selecting demographic targets because more and more demographic lines are growing thinner. Oftentimes, what you’ll find is that demographic variables need to be paired with psychographic ones based on people’s emotions, values, beliefs, and interests.
http://highered.mcgraw-hill.com/sites/0070898332/student_view0/chapter18/video_cases.html
Age
Every age group has certain things that are likely to speak to them; songs that they love, TV shows that they watched, major events that shaped the way they think about the world. A picture of Kennedy means something different to someone who was old enough to vote for or against him than it does to someone who was born 30 years later. These shared moments make age an important target for many companies and in many ways can turn age into a psychographic variable.
It’s common for companies to seek after younger age groups, for example, as it’s often presumed that these consumers are more likely to select a new brand. However, it’s important to keep in mind that the vast majority of the money is owned by older consumers. So many other companies have found great success promoting themselves to older consumers, including American Girl, a maker of children’s dolls, that realized that middle-aged aunts and mothers were the ones buying dolls for their seven-year-olds. By choosing to work to gain the approval of older consumers for a product intended for children, American Girl was able to sell its dolls for four times more than other doll companies could. Further, American Girl grew from a few million to a few hundred million dollars in sales at a time when the doll industry shrank by about 50 per cent.
Dove Body Wash for men has also been targeting older males having found what they believe to be an important, underserved niche market. They have met with initial success, but it’s still early to tell if it’s going to be long-term success. Keep in mind, however, that age groups are often not stable. Many companies that focused on this demographic have found that their target grew up on them causing their tastes to change. Further, shared experiences can only take a company so far. Not everyone protested against the war in the Sixties; only a handful of people became Goths in the Nineties, and only a small percentage of the population watches any given TV show now.
http://www.businessweek.com/smallbiz/content/jun2009/sb20090612_217280.htm
Income
Although income might seem like an important target, some customers, after all, certainly can’t afford certain products. Luxury brands, however, have become a moving target according to Wharton:
“Today, it is much more difficult to conjure up a consistent picture of luxury living. People may live in expensive homes and drive luxury cars but purchase Evian water by the case at Costco and live with barely any furniture,” he said. "They might have two bean bag chairs, but they have the car.”
Yes, it is true that the point of targeting is to choose the people most likely to buy a product, and certainly people with higher incomes are seemingly more likely to buy expensive cars. In many cases other demographic or psychographic information will serve to refine a target better. Education, for example, often leads to greater support of the arts. An interest in fashion or image can lead people to purchase products that seem to be out of their price range. Still, because income is often quoted by the media in which you might place your ads, it can be useful for making traditional print and geographical decisions. After all, neighborhoods are often most easily divided by housing prices, and census data is based on income not interest.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1126
Geography
People in different areas are also more likely to know each other and are more likely to have shared opinions and experiences. Beyond this, where someone lives influences where they shop. So if you own a retail store, geographic targeting needs to be included in your marketing mix. How big this geographic region is depends on the type of store you have. Some restaurants can draw people for miles while a small corner store is likely only able to draw people from a few blocks.
If you don’t own a retail store but are planning to sell products to retail stores, geographic targeting is still important for you in selecting which stores to send salespeople and other promotional materials to. Sometimes such geographic selections are based on other demographic information within the target area but not always. For example, Seattle buys more books per person than nearly any other city does so publishers can take advantage of this by targeting Seattle stores over others. Kinko’s has used geography as one of its primary demographics--not based on who lived in the areas they located in, but what types of businesses were located in the area in order to target people who could afford and would need quick printing jobs.
Features of a Good Target
Easy to Reach
Your target needs to be easy for you to define and reach with your promotional efforts. You should be able to explain who your target market is, how many people are in your target market, and the best ways to market your products to them on a single page. If you can’t do that, then you need to better refine your target market.
Responsive
Some people hate to be advertised to; they dislike the types of promotions you can afford to do, etc. Unless you have found some other way to reach out to these people, you shouldn’t include them in your target market. You should look for people who are most likely to respond to your ads, which is why I created “Wiki Targeting” as a means of discovering who is most likely to respond to your promotional method.
Semi-Permanent
Many target demographics come and go. Flappers, for example, helped to define the early part of the 20th century, yet within a few years after 1930 they had all but disappeared. Today, hipsters are beginning to grow away from their temporary culture and, as a result, companies which catered to them, such as American Apparel, are losing money and in danger of losing relevance altogether. It’s important that you pick a target that will be around for a while or that you be prepared when that target changes.
Financial Evaluation
Some of the greatest ideas have seemed financially infeasible or have had no basis with which to evaluate their viability. At the same time, however, many seemingly great ideas have failed when a simple evaluation would have let their founders know that they needed to come up with additional concepts and change strategies to make the business work. This is what makes evaluation tricky because, on the one hand, over-evaluation can kill great ideas while, on the other hand, a lack of evaluation can allow you to think that a bad idea is great. My experience, however, has been that businesses tend to under-evaluate. Indeed, out of the dozens of businesses I have been involved with, none have over-evaluated. I have just heard of this danger. General evaluation doesn’t have to be a complex task. Basic wiki targeting and a review of general census data can give a business a pretty good idea of how things will work.
There are three things you need to determine in a financial evaluation:
1 ) The number of members in your market.
I cannot emphasize the importance of this enough especially for niche retailers. I remember the case of one business which failed to do this. The business was designed to serve upper, middle-class parents in an up-and-coming neighborhood. Everyone seemed to think that their opening was a good move and their business model was sound. They received loans, grants, and other forms of support. Yet they didn’t remain open for a full year because their neighborhood only had a few hundred upper, middle-class parents which made it impossible for them to survive.
Never assume there are enough people to support your business. You should always at lease see how many people there are of a given interest or population. You can check populations of an area using census data and interest by checking Facebook’s ad service to see how many fans there are of a service or Google’s Keyword Tool to see how many people are searching for a service. While neither of these gives perfect estimates, they are useful for evaluating general interest and the ease with which you can advertise to those with a general interest.
2) Spending habits of the market.
It’s important to know how much money people are likely to spend on your products in a given year. Census data usually provides some fairly good information on average household spending. In addition, you can look at various industry sizes and divide these by the population to learn what an average person spends on something. Finally, surveys are a good way of learning about a specific market. Of course, for many new innovations, such as new products or the development of new target markets, there is no way to know for certain what people will spend on them. In such cases you really do have to take a chance.
3) Who your competition is in a market.
Who you’re competing against and what their strategies are will alter your strategy. You need to evaluate how many of your customers your competitors are likely to be able to keep when you enter the market.
4) Cost to serve.
Whether because of their media preferences which require you to spend more on marketing costs or because of their expectations, some targets cost a lot more to serve than others. You need to determine what it will cost to serve any one group so that you can subtract that from your expected earnings.
Caution--Too much evaluation will cause you to miss important factors. I don’t think you should be excessive in determining the value of any niche. I have just seen too many businesses that opened children’s boutiques in neighborhoods which had young college students, so no one had kids, or made similar mistakes. It’s important that there at least appears to be enough people in your target for you to earn money.
What makes demographics appealing is that they can be quickly learned. This means that it is often easiest to break target markets into demographic information. Most traditional ad media, such as magazines and televisions shows, release information about the demographics of their consumers. Certainly, in many cases such a broad categorization of people can be highly useful. Airwalk, for example, found that it could target people based primarily on age, and that their ads would work worldwide allowing them to expand quickly. On the other hand, any large demographic group can have subsets that are not always in agreement on everything. Further, any group you might not normally consider in your target demographic can have large subsets who are interested in your product. This means that great care needs to be taken when selecting demographic targets because more and more demographic lines are growing thinner. Oftentimes, what you’ll find is that demographic variables need to be paired with psychographic ones based on people’s emotions, values, beliefs, and interests.
http://highered.mcgraw-hill.com/sites/0070898332/student_view0/chapter18/video_cases.html
Age
Every age group has certain things that are likely to speak to them; songs that they love, TV shows that they watched, major events that shaped the way they think about the world. A picture of Kennedy means something different to someone who was old enough to vote for or against him than it does to someone who was born 30 years later. These shared moments make age an important target for many companies and in many ways can turn age into a psychographic variable.
It’s common for companies to seek after younger age groups, for example, as it’s often presumed that these consumers are more likely to select a new brand. However, it’s important to keep in mind that the vast majority of the money is owned by older consumers. So many other companies have found great success promoting themselves to older consumers, including American Girl, a maker of children’s dolls, that realized that middle-aged aunts and mothers were the ones buying dolls for their seven-year-olds. By choosing to work to gain the approval of older consumers for a product intended for children, American Girl was able to sell its dolls for four times more than other doll companies could. Further, American Girl grew from a few million to a few hundred million dollars in sales at a time when the doll industry shrank by about 50 per cent.
Dove Body Wash for men has also been targeting older males having found what they believe to be an important, underserved niche market. They have met with initial success, but it’s still early to tell if it’s going to be long-term success. Keep in mind, however, that age groups are often not stable. Many companies that focused on this demographic have found that their target grew up on them causing their tastes to change. Further, shared experiences can only take a company so far. Not everyone protested against the war in the Sixties; only a handful of people became Goths in the Nineties, and only a small percentage of the population watches any given TV show now.
http://www.businessweek.com/smallbiz/content/jun2009/sb20090612_217280.htm
Income
Although income might seem like an important target, some customers, after all, certainly can’t afford certain products. Luxury brands, however, have become a moving target according to Wharton:
“Today, it is much more difficult to conjure up a consistent picture of luxury living. People may live in expensive homes and drive luxury cars but purchase Evian water by the case at Costco and live with barely any furniture,” he said. "They might have two bean bag chairs, but they have the car.”
Yes, it is true that the point of targeting is to choose the people most likely to buy a product, and certainly people with higher incomes are seemingly more likely to buy expensive cars. In many cases other demographic or psychographic information will serve to refine a target better. Education, for example, often leads to greater support of the arts. An interest in fashion or image can lead people to purchase products that seem to be out of their price range. Still, because income is often quoted by the media in which you might place your ads, it can be useful for making traditional print and geographical decisions. After all, neighborhoods are often most easily divided by housing prices, and census data is based on income not interest.
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1126
Geography
People in different areas are also more likely to know each other and are more likely to have shared opinions and experiences. Beyond this, where someone lives influences where they shop. So if you own a retail store, geographic targeting needs to be included in your marketing mix. How big this geographic region is depends on the type of store you have. Some restaurants can draw people for miles while a small corner store is likely only able to draw people from a few blocks.
If you don’t own a retail store but are planning to sell products to retail stores, geographic targeting is still important for you in selecting which stores to send salespeople and other promotional materials to. Sometimes such geographic selections are based on other demographic information within the target area but not always. For example, Seattle buys more books per person than nearly any other city does so publishers can take advantage of this by targeting Seattle stores over others. Kinko’s has used geography as one of its primary demographics--not based on who lived in the areas they located in, but what types of businesses were located in the area in order to target people who could afford and would need quick printing jobs.
Features of a Good Target
Easy to Reach
Your target needs to be easy for you to define and reach with your promotional efforts. You should be able to explain who your target market is, how many people are in your target market, and the best ways to market your products to them on a single page. If you can’t do that, then you need to better refine your target market.
Responsive
Some people hate to be advertised to; they dislike the types of promotions you can afford to do, etc. Unless you have found some other way to reach out to these people, you shouldn’t include them in your target market. You should look for people who are most likely to respond to your ads, which is why I created “Wiki Targeting” as a means of discovering who is most likely to respond to your promotional method.
Semi-Permanent
Many target demographics come and go. Flappers, for example, helped to define the early part of the 20th century, yet within a few years after 1930 they had all but disappeared. Today, hipsters are beginning to grow away from their temporary culture and, as a result, companies which catered to them, such as American Apparel, are losing money and in danger of losing relevance altogether. It’s important that you pick a target that will be around for a while or that you be prepared when that target changes.
Financial Evaluation
Some of the greatest ideas have seemed financially infeasible or have had no basis with which to evaluate their viability. At the same time, however, many seemingly great ideas have failed when a simple evaluation would have let their founders know that they needed to come up with additional concepts and change strategies to make the business work. This is what makes evaluation tricky because, on the one hand, over-evaluation can kill great ideas while, on the other hand, a lack of evaluation can allow you to think that a bad idea is great. My experience, however, has been that businesses tend to under-evaluate. Indeed, out of the dozens of businesses I have been involved with, none have over-evaluated. I have just heard of this danger. General evaluation doesn’t have to be a complex task. Basic wiki targeting and a review of general census data can give a business a pretty good idea of how things will work.
There are three things you need to determine in a financial evaluation:
1 ) The number of members in your market.
I cannot emphasize the importance of this enough especially for niche retailers. I remember the case of one business which failed to do this. The business was designed to serve upper, middle-class parents in an up-and-coming neighborhood. Everyone seemed to think that their opening was a good move and their business model was sound. They received loans, grants, and other forms of support. Yet they didn’t remain open for a full year because their neighborhood only had a few hundred upper, middle-class parents which made it impossible for them to survive.
Never assume there are enough people to support your business. You should always at lease see how many people there are of a given interest or population. You can check populations of an area using census data and interest by checking Facebook’s ad service to see how many fans there are of a service or Google’s Keyword Tool to see how many people are searching for a service. While neither of these gives perfect estimates, they are useful for evaluating general interest and the ease with which you can advertise to those with a general interest.
2) Spending habits of the market.
It’s important to know how much money people are likely to spend on your products in a given year. Census data usually provides some fairly good information on average household spending. In addition, you can look at various industry sizes and divide these by the population to learn what an average person spends on something. Finally, surveys are a good way of learning about a specific market. Of course, for many new innovations, such as new products or the development of new target markets, there is no way to know for certain what people will spend on them. In such cases you really do have to take a chance.
3) Who your competition is in a market.
Who you’re competing against and what their strategies are will alter your strategy. You need to evaluate how many of your customers your competitors are likely to be able to keep when you enter the market.
4) Cost to serve.
Whether because of their media preferences which require you to spend more on marketing costs or because of their expectations, some targets cost a lot more to serve than others. You need to determine what it will cost to serve any one group so that you can subtract that from your expected earnings.
Caution--Too much evaluation will cause you to miss important factors. I don’t think you should be excessive in determining the value of any niche. I have just seen too many businesses that opened children’s boutiques in neighborhoods which had young college students, so no one had kids, or made similar mistakes. It’s important that there at least appears to be enough people in your target for you to earn money.
Psychographic Information
Psychographics are true emotionally based targeting methods based on peoples’ actual thinking which are made up of; the lifestyle choices people make, what a person values, and how they feel about the world or different subjects. In the modern world, psychographics are rapidly becoming the most important targeting method both because they are based on the emotional choices people make and because they dominate Internet marketing. After all, search ads, SEO, website content, Facebook content, and more are all based on your targets interests as are blogs, and many websites you can advertise on. When buying ad space from a network like Google or Facebook, you gain an advantage by knowing what types of websites your customers will commonly visit as well as what types of ads they are likely to respond to.
When developing psychographic categories, it’s important to consider more than just the obvious as some of the best psychographic categories your customers fall into may not be obvious. For example, an organic produce company might be able to attract a lot of customers interested in biking, or who are interested in French Cooking, certain politicians, etc. By discovering these less obvious psychographics, you not only improve your reach but gain an advantage over competitors who might be all competing for the same marketing space.
Culture
Shared attitudes are what define a culture, not racial or geographic demographics as many might think. Although these things can indicate which culture a person is likely to have chosen in the modern world, I would argue that culture is about the choices people make. So while some people have these values instilled in them and are likely to share them with others of a similar demographic, it is important to keep in mind that the boy who grew up in the Midwest and chose to become a “hipster” is more likely to buy the same types of clothing as a “hipster” from New York than he is to buy the clothing that the “cowboy” he grew up next door to or who even happens to be his brother. This doesn’t mean, of course, that you should ignore the Irish culture or the Midwest culture. It just means that you should be aware that we live in an extremely diverse world. So it could be argued that even when values are instilled, they must ultimately be chosen. After all, when people leave home to go to school everyday, they are thrust into a plethora of other cultures and must choose which of these to fit in with. Later, these people will leave home altogether and will only have the direction of peers which will likely come from a number of cultural groups.
Value Systems
People’s value systems strongly define what they respond to in promotions as well as their purchasing habits. A few of the values marketers often target include; trend setter, family, friends, social acceptance, and social responsibility. There are, of course, many other values. Depending on what you’re selling, knowing your customers’ values can give you an important edge over your competition.
What makes values tricky are that people often stereotype values based on their own values. They presume that people who care about the same things as they do will care about the products they’re selling. Because of this, these business owners select their target based on their own values. Remember that you’re unique so you’re not necessarily your target audience. After all, only a small percentage of the population runs a business, which means that those who do are not like the average person. There are many companies who have used value-based targeting for a good effect by finding an underserved set of customers, or by actually researching the values of their target market.
Fox News, for example, realized that many with conservative values felt that they were being ostracized by other media sources. So by developing a product for them, they were able to attract a large audience base. Wal-Mart understands that its core customers hold strong family values so it refuses to sell certain products that don’t live up to these values. As with everything else, it’s important to research the interests of those who hold certain values rather than just assume what they are.
Hobbies and Goals
The Internet is quickly becoming divided based on peoples’ hobbies and interests. People search for sites based on keywords; they read articles based on their interests rather than based on the site where it’s located; they list their hobbies on Facebook; they tweet what they are doing, and they get apps that help them do very specific things. So while hobbies may not define people more than they did in the past, it is far easier to reach people with specific hobbies. In fact, at times this is the only real way to reach certain people. Add to this the fact that brands based on empowerment are entirely about empowering people to engage in certain interests or hobbies, and you have what can be the most powerful psychograph.
The challenge with hobbies is that these can be more fractured and harder to pinpoint than other targeting information. For companies like Nike, which were made to appeal to a specific group, this can be obvious. Mountain Dew has also managed to target people based on their hobbies; going after those interested in computer games and alternative sports. For many other companies, however, hobbies can remain elusive. Other than an interest in the arts, for example, what interests might a frequent ballet goer have? In a large part, hobbies are also useful as a frame of reference extension. To this end, Nature Valley, an energy/granola bar, had a series of ads to get hikers and bikers to use them as their quick bite to eat on the trip. Various arts organizations have worked to become a dating stop for couples going out on the town. By targeting hobbies, a company can become the product of choice for a given situation, allowing them to expand their sales into new areas. Further, selecting a hobby to market to makes it easier for a company to run public relations campaigns by donating to or hosting events related to that hobby. A company that discovers those interested in crafts are likely to buy from them, for example, could host crafting events, have a craft-based contest, and more as a way to attract customers.
Media Preferences
Media preferences can serve two important goals: first, targeting based on media preference can help a company to choose where to place their ads; second, media preferences can help a company choose how to frame the message of their promotions. This goes deeper than simply trying to place ads in a magazine or showing which targets consumers, people who are interested in something, are likely to watch YouTube clips paying homage to it. They are likely to mention it in a tweet on their Facebook page, etc., which means that you can target customers based on the name of the show they like. Further, bloggers can be targeted for press releases and contests based on their interest in something that cues you that they might be interested in your product.
Beyond simple targeting, having a target audience with specific media preferences allows a company to create better designed ads and copy. People who like a movie such as “Star Wars” have a shared experience and will respond to certain aspects of an ad better than others. Those who read a specific magazine clearly respond well to design elements within that magazine allowing a company to better adjust their own design guidelines. As with all psychographics, media preference has been growing and will likely continue to grow in importance both because it is easier now to target people based on preference but also because this psychographic is based on peoples’ personal choices.
When developing psychographic categories, it’s important to consider more than just the obvious as some of the best psychographic categories your customers fall into may not be obvious. For example, an organic produce company might be able to attract a lot of customers interested in biking, or who are interested in French Cooking, certain politicians, etc. By discovering these less obvious psychographics, you not only improve your reach but gain an advantage over competitors who might be all competing for the same marketing space.
Culture
Shared attitudes are what define a culture, not racial or geographic demographics as many might think. Although these things can indicate which culture a person is likely to have chosen in the modern world, I would argue that culture is about the choices people make. So while some people have these values instilled in them and are likely to share them with others of a similar demographic, it is important to keep in mind that the boy who grew up in the Midwest and chose to become a “hipster” is more likely to buy the same types of clothing as a “hipster” from New York than he is to buy the clothing that the “cowboy” he grew up next door to or who even happens to be his brother. This doesn’t mean, of course, that you should ignore the Irish culture or the Midwest culture. It just means that you should be aware that we live in an extremely diverse world. So it could be argued that even when values are instilled, they must ultimately be chosen. After all, when people leave home to go to school everyday, they are thrust into a plethora of other cultures and must choose which of these to fit in with. Later, these people will leave home altogether and will only have the direction of peers which will likely come from a number of cultural groups.
Value Systems
People’s value systems strongly define what they respond to in promotions as well as their purchasing habits. A few of the values marketers often target include; trend setter, family, friends, social acceptance, and social responsibility. There are, of course, many other values. Depending on what you’re selling, knowing your customers’ values can give you an important edge over your competition.
What makes values tricky are that people often stereotype values based on their own values. They presume that people who care about the same things as they do will care about the products they’re selling. Because of this, these business owners select their target based on their own values. Remember that you’re unique so you’re not necessarily your target audience. After all, only a small percentage of the population runs a business, which means that those who do are not like the average person. There are many companies who have used value-based targeting for a good effect by finding an underserved set of customers, or by actually researching the values of their target market.
Fox News, for example, realized that many with conservative values felt that they were being ostracized by other media sources. So by developing a product for them, they were able to attract a large audience base. Wal-Mart understands that its core customers hold strong family values so it refuses to sell certain products that don’t live up to these values. As with everything else, it’s important to research the interests of those who hold certain values rather than just assume what they are.
Hobbies and Goals
The Internet is quickly becoming divided based on peoples’ hobbies and interests. People search for sites based on keywords; they read articles based on their interests rather than based on the site where it’s located; they list their hobbies on Facebook; they tweet what they are doing, and they get apps that help them do very specific things. So while hobbies may not define people more than they did in the past, it is far easier to reach people with specific hobbies. In fact, at times this is the only real way to reach certain people. Add to this the fact that brands based on empowerment are entirely about empowering people to engage in certain interests or hobbies, and you have what can be the most powerful psychograph.
The challenge with hobbies is that these can be more fractured and harder to pinpoint than other targeting information. For companies like Nike, which were made to appeal to a specific group, this can be obvious. Mountain Dew has also managed to target people based on their hobbies; going after those interested in computer games and alternative sports. For many other companies, however, hobbies can remain elusive. Other than an interest in the arts, for example, what interests might a frequent ballet goer have? In a large part, hobbies are also useful as a frame of reference extension. To this end, Nature Valley, an energy/granola bar, had a series of ads to get hikers and bikers to use them as their quick bite to eat on the trip. Various arts organizations have worked to become a dating stop for couples going out on the town. By targeting hobbies, a company can become the product of choice for a given situation, allowing them to expand their sales into new areas. Further, selecting a hobby to market to makes it easier for a company to run public relations campaigns by donating to or hosting events related to that hobby. A company that discovers those interested in crafts are likely to buy from them, for example, could host crafting events, have a craft-based contest, and more as a way to attract customers.
Media Preferences
Media preferences can serve two important goals: first, targeting based on media preference can help a company to choose where to place their ads; second, media preferences can help a company choose how to frame the message of their promotions. This goes deeper than simply trying to place ads in a magazine or showing which targets consumers, people who are interested in something, are likely to watch YouTube clips paying homage to it. They are likely to mention it in a tweet on their Facebook page, etc., which means that you can target customers based on the name of the show they like. Further, bloggers can be targeted for press releases and contests based on their interest in something that cues you that they might be interested in your product.
Beyond simple targeting, having a target audience with specific media preferences allows a company to create better designed ads and copy. People who like a movie such as “Star Wars” have a shared experience and will respond to certain aspects of an ad better than others. Those who read a specific magazine clearly respond well to design elements within that magazine allowing a company to better adjust their own design guidelines. As with all psychographics, media preference has been growing and will likely continue to grow in importance both because it is easier now to target people based on preference but also because this psychographic is based on peoples’ personal choices.
Selecting a Target
For many, working to discover target markets seems to be the most boring part of marketing. I would argue, however, that some of the greatest innovations in business involve the discovery of new ways to reach a unique set of target markets. This is because targeting cannot be an emotionless exercise of statistics. The purpose of statistics is to help understand the emotions of the majorities and underserved niche markets. So anything done with this information has to be emotional. Targeting is about looking for people to build a relationship with. It’s about appealing to people, about creating a positive reaction among those who are most likely to purchase your products.
We target specific sets of people because emotions are a very personal thing. It is, therefore, almost impossible to spur strong emotions in every person in the world with the same message and product. This is where targeting comes it. Targeting is the process of reaching out to those your message and product are most likely to appeal to emotionally.
Far too many small businesses become overly concerned about leaving out a few customers and try to take a broad approach to their marketing. What they need to understand is that targeting isn’t about excluding potential customers. It’s about finding the best way to include those customers most likely to make your business money. There is a common saying in business that 80 per cent of your revenue comes from just 20 per cent of the population. While this exact figure isn’t set in stone, it is true that almost all of your money and, hence, the vast majority of your profits will come from just a few customers.
Indeed, there are many cases where a business has a number of customers who contribute so little revenue that the business actually loses money serving them. Some only do so in order to avoid looking bad. Further, it’s impossible for you to reach every potential customer through your marketing efforts. As an example, Target, the second-largest retailer in the U.S., spends billions on marketing in the form of product selection, promotions, pricing, location selection, etc. Yet they only sell a little more than $200 worth of products per person in this country. Given that TV’s, computers and groceries for a month cost more than that, we have to presume that this means that most people are not shopping at Target despite the billions of dollars they spend on attracting customers. It’s important then to focus ad dollars on the customers most likely to buy your products rather than trying to reach as many customers as possible.
Indeed, the vast majority of your promotional and strategic decisions should be made on the basis of your target market rather than on the opinions of anyone else. Mckee in an article for “Business Week” gives the following example:
Years ago, one of the home pregnancy test brands created an award-winning advertising campaign that was particularly successful at reaching its childbearing-age female prospects. Due to the nature of the ads, the company received a handful of complaints from older women who thought they were in bad taste. Its response? Press on. It wasn't that the company didn't care about the complaints; it simply recognized that older women were not the target audience for a pregnancy test, and it should therefore not be overly concerned about what they thought about the ads.
http://www.businessweek.com/smallbiz/content/jun2009/sb20090612_217280.htm
In other words, the company continued to embrace an ad model that made some people upset because, in truth, what should matter to a company are their core customers, and people have such variable tastes that anything a company does that one group finds funny or important another will grow angry at. Consider, for example, the case of Wal-Mart as they began to center their strategy around pleasing high-end consumers, they began to lose their existing customer base, and their same store sales started to slump. Their decisions had nothing to do with advertising, which remained generally the same. Rather, they had to do with like factors and pricing. Any businesses must center on selling to their customers; thus any strategy which detracts from this goal will fail.
Who you choose to target depends as much on your brand as your brand depends on your target. You shouldn’t develop one without developing the other. (The exception is artists and those using wiki targeting who create a certain product and brand around their art and so must discover their target.)
In order to select a target market, you must understand three things; first, who is using a product or service like yours and why are they using it? Which of these people is happy and unhappy with the service they are receiving from your competitors? Finally, which of these people are you best able to serve?
A good target market, then, are those not being served by your competition as well as you could serve them and are preferably dissatisfied with the service being given to them by the competition. Remember that this quality of service comes from the fulfillment of emotional needs rather than the fulfillment of physical needs. This is why there can be so many restaurants in an area because people often seek some variety in the food market and so will go to multiple restaurants within the course of a year.
We target specific sets of people because emotions are a very personal thing. It is, therefore, almost impossible to spur strong emotions in every person in the world with the same message and product. This is where targeting comes it. Targeting is the process of reaching out to those your message and product are most likely to appeal to emotionally.
Far too many small businesses become overly concerned about leaving out a few customers and try to take a broad approach to their marketing. What they need to understand is that targeting isn’t about excluding potential customers. It’s about finding the best way to include those customers most likely to make your business money. There is a common saying in business that 80 per cent of your revenue comes from just 20 per cent of the population. While this exact figure isn’t set in stone, it is true that almost all of your money and, hence, the vast majority of your profits will come from just a few customers.
Indeed, there are many cases where a business has a number of customers who contribute so little revenue that the business actually loses money serving them. Some only do so in order to avoid looking bad. Further, it’s impossible for you to reach every potential customer through your marketing efforts. As an example, Target, the second-largest retailer in the U.S., spends billions on marketing in the form of product selection, promotions, pricing, location selection, etc. Yet they only sell a little more than $200 worth of products per person in this country. Given that TV’s, computers and groceries for a month cost more than that, we have to presume that this means that most people are not shopping at Target despite the billions of dollars they spend on attracting customers. It’s important then to focus ad dollars on the customers most likely to buy your products rather than trying to reach as many customers as possible.
Indeed, the vast majority of your promotional and strategic decisions should be made on the basis of your target market rather than on the opinions of anyone else. Mckee in an article for “Business Week” gives the following example:
Years ago, one of the home pregnancy test brands created an award-winning advertising campaign that was particularly successful at reaching its childbearing-age female prospects. Due to the nature of the ads, the company received a handful of complaints from older women who thought they were in bad taste. Its response? Press on. It wasn't that the company didn't care about the complaints; it simply recognized that older women were not the target audience for a pregnancy test, and it should therefore not be overly concerned about what they thought about the ads.
http://www.businessweek.com/smallbiz/content/jun2009/sb20090612_217280.htm
In other words, the company continued to embrace an ad model that made some people upset because, in truth, what should matter to a company are their core customers, and people have such variable tastes that anything a company does that one group finds funny or important another will grow angry at. Consider, for example, the case of Wal-Mart as they began to center their strategy around pleasing high-end consumers, they began to lose their existing customer base, and their same store sales started to slump. Their decisions had nothing to do with advertising, which remained generally the same. Rather, they had to do with like factors and pricing. Any businesses must center on selling to their customers; thus any strategy which detracts from this goal will fail.
Who you choose to target depends as much on your brand as your brand depends on your target. You shouldn’t develop one without developing the other. (The exception is artists and those using wiki targeting who create a certain product and brand around their art and so must discover their target.)
In order to select a target market, you must understand three things; first, who is using a product or service like yours and why are they using it? Which of these people is happy and unhappy with the service they are receiving from your competitors? Finally, which of these people are you best able to serve?
A good target market, then, are those not being served by your competition as well as you could serve them and are preferably dissatisfied with the service being given to them by the competition. Remember that this quality of service comes from the fulfillment of emotional needs rather than the fulfillment of physical needs. This is why there can be so many restaurants in an area because people often seek some variety in the food market and so will go to multiple restaurants within the course of a year.
Provide Support for Your Brand
You support your brand by giving reasons why you can claim to provide the benefits to people that you do. Axe beauty products claim they help men attract women because they help to make them smell the way women want and by helping to make them look attractive. Wal-Mart is family oriented because they refuse to sell certain movies and music, and they also provide affordable, family products. As you can see, in many cases brand support isn’t necessarily something that makes you better or even different from your competition. Still, for many companies, certifications, the awards that they’ve won, that their products are natural, or press they’ve received are important parts of their brand.
It’s important to understand, however, that as important as these things might be, your brand is not the awards you’ve won or that your products are all natural or organic. A natural food store isn’t selling organic food. Its selling high-quality, healthy food, aka food that’s high-quality and healthy because it’s organic and natural. If you’ve won an award for your cupcakes, you’re not selling cupcakes. You’re selling super-tasty, high- quality treats that will make people happy which have won major awards for doing so. The goal of brand support isn’t to act as a benefit but to help prod people towards thinking about your benefits while also helping to support your claims.
As an example, while Kashi, an all-natural food company which makes energy bars and cookies from whole grains does state that they are “Seven whole grains on a mission,” they do so in support of activities that are fun or that show that they taste great. Kashi’s ads show people having adventures in exotic locations, little kids sneaking cookies out of cookie jars, etc. People eat Kashi because it helps make them healthier and gives them energy to do the things they want to do, and it tastes great. It does all these things because it’s made of whole grains.
Cheerios has a similar approach except, rather than young people on adventures, they show older people having fun with their grandkids, painting pictures, etc. The message being that Cheerios helps its customers do what they love to do for longer because it’s good for their heart. In both of these cases, the message is that the food helps to empower the person who eats it and helps them live better. It does this because it’s healthy.
Apple used brand support in a very unique way and was able to make itself young and hip while also working to make Microsoft appear stodgy in comparison. This is surprising in a way, after all, because Microsoft is the maker of computer games, Xbox, open technology systems that allow people to use flash games, indie cartoons, and more computer games then you can shake a stick at on their machine, while Apple seeks to make life difficult for these creative media. Apple was able to pull off its creative brand by mentioning reviews in just the right way, highlighting its creative software while highlighting poor reviews of Microsoft in a humorous way.
It’s important to understand, however, that as important as these things might be, your brand is not the awards you’ve won or that your products are all natural or organic. A natural food store isn’t selling organic food. Its selling high-quality, healthy food, aka food that’s high-quality and healthy because it’s organic and natural. If you’ve won an award for your cupcakes, you’re not selling cupcakes. You’re selling super-tasty, high- quality treats that will make people happy which have won major awards for doing so. The goal of brand support isn’t to act as a benefit but to help prod people towards thinking about your benefits while also helping to support your claims.
As an example, while Kashi, an all-natural food company which makes energy bars and cookies from whole grains does state that they are “Seven whole grains on a mission,” they do so in support of activities that are fun or that show that they taste great. Kashi’s ads show people having adventures in exotic locations, little kids sneaking cookies out of cookie jars, etc. People eat Kashi because it helps make them healthier and gives them energy to do the things they want to do, and it tastes great. It does all these things because it’s made of whole grains.
Cheerios has a similar approach except, rather than young people on adventures, they show older people having fun with their grandkids, painting pictures, etc. The message being that Cheerios helps its customers do what they love to do for longer because it’s good for their heart. In both of these cases, the message is that the food helps to empower the person who eats it and helps them live better. It does this because it’s healthy.
Apple used brand support in a very unique way and was able to make itself young and hip while also working to make Microsoft appear stodgy in comparison. This is surprising in a way, after all, because Microsoft is the maker of computer games, Xbox, open technology systems that allow people to use flash games, indie cartoons, and more computer games then you can shake a stick at on their machine, while Apple seeks to make life difficult for these creative media. Apple was able to pull off its creative brand by mentioning reviews in just the right way, highlighting its creative software while highlighting poor reviews of Microsoft in a humorous way.
Give Your Brand Some Personality
People respond to each other and become friends with each other in a large part based on personalities. Personality is so important to people’s emotional well-being and so built into our psyche that humans see personifications in everything from animals to objects. So at some point people will personify your business. The personality they give to your company will be far more positive if you work to develop something positive. Just as important, a set of personalities assigned to your business will make it far easier for you to write copy, develop ads, and make other decisions because you won’t be working with a blank slate. Further, the effectiveness of these promotions will be enhanced because they will all work together.
When developing a personality set for your business, there are two important things to keep in mind: first, your company isn’t necessarily you. It is tempting to assign your personality to your company, and it seems like it would be easier. However, it’s important to bear in mind that people are buying into the company. So you must consider how many people would buy into you. Even where a company’s personality chooses to defy expectations, it must match your customer’s needs. Second, the personalities of companies are never as complex as those of humans. Companies’ personalities are more like arch types or fairy tale heroes. They shouldn’t be overly involved or have layers that surprise people.
A brand needs to be something which people can easily befriend. I choose the word “befriend” because people feel something akin to friendship with the most powerful brands. Gucci, Harley-Davidson Motorcycles, Tiffany’s, and Disney are all examples of brands that people have built a relationship with.
Examples of Company Personalities:
Three of the largest technology companies (Apple, IBM, and Intel) have each developed powerful brands in very different ways:
Apple is-Stylish, imaginative, creative.
Steve Jobs’ genius has been to realize that a technology company sells what are, in essence, accessories and/or major pieces of decor within the home, and people will pay more for something stylish. So by choosing to focus its efforts on making its computers and other products more stylish, it has managed to boost not only its sales numbers but the price of many of its products. With its uniquely beautiful user interface design, many of Apple’s ads closely resemble those you would expect from a fashion company. Over time they have also shifted much of their focus away from technology to music and entertainment. Indeed, they made a big fanfare over taking the technology out of their name to reflect their more creative focus.
IBM is-Reliable, knowledgeable, optimistic, brilliant.
When many people think of a company that is truly brilliant and knowledgeable, they think of IBM, a company that has reinvented itself many times to remain one of the most cutting-edge companies for over a century. IBM’s brilliance comes in a large part from its ability to showcase its new problem-solving technologies. When it creates supercomputers like Watson, it doesn’t just set out to sell them to hospitals to help doctors answer questions. It puts them on TV, pitting their computers against humans, showing that they are on the cutting edge in a bold way. IBM’s goal of “Building a smarter planet” shows not only its focus on brilliance and knowledge but how completely optimistic it is. It is working, after all, to make the world a better place in everything from alternative energy to safety and medical care.
Intel is-Fun-loving, creative, innovative.
For the past few years, Intel has been successfully reshaping its image by creating ads that feature it not only as creative and innovative, as one would expect from a technology company, but also as fun-loving. With ads featuring “employees” acting like silly fans of inventors interacting with robots, or making the cartoon character Homer Simpson into a genius they have improved their success.
When developing a personality set for your business, there are two important things to keep in mind: first, your company isn’t necessarily you. It is tempting to assign your personality to your company, and it seems like it would be easier. However, it’s important to bear in mind that people are buying into the company. So you must consider how many people would buy into you. Even where a company’s personality chooses to defy expectations, it must match your customer’s needs. Second, the personalities of companies are never as complex as those of humans. Companies’ personalities are more like arch types or fairy tale heroes. They shouldn’t be overly involved or have layers that surprise people.
A brand needs to be something which people can easily befriend. I choose the word “befriend” because people feel something akin to friendship with the most powerful brands. Gucci, Harley-Davidson Motorcycles, Tiffany’s, and Disney are all examples of brands that people have built a relationship with.
Examples of Company Personalities:
Three of the largest technology companies (Apple, IBM, and Intel) have each developed powerful brands in very different ways:
Apple is-Stylish, imaginative, creative.
Steve Jobs’ genius has been to realize that a technology company sells what are, in essence, accessories and/or major pieces of decor within the home, and people will pay more for something stylish. So by choosing to focus its efforts on making its computers and other products more stylish, it has managed to boost not only its sales numbers but the price of many of its products. With its uniquely beautiful user interface design, many of Apple’s ads closely resemble those you would expect from a fashion company. Over time they have also shifted much of their focus away from technology to music and entertainment. Indeed, they made a big fanfare over taking the technology out of their name to reflect their more creative focus.
IBM is-Reliable, knowledgeable, optimistic, brilliant.
When many people think of a company that is truly brilliant and knowledgeable, they think of IBM, a company that has reinvented itself many times to remain one of the most cutting-edge companies for over a century. IBM’s brilliance comes in a large part from its ability to showcase its new problem-solving technologies. When it creates supercomputers like Watson, it doesn’t just set out to sell them to hospitals to help doctors answer questions. It puts them on TV, pitting their computers against humans, showing that they are on the cutting edge in a bold way. IBM’s goal of “Building a smarter planet” shows not only its focus on brilliance and knowledge but how completely optimistic it is. It is working, after all, to make the world a better place in everything from alternative energy to safety and medical care.
Intel is-Fun-loving, creative, innovative.
For the past few years, Intel has been successfully reshaping its image by creating ads that feature it not only as creative and innovative, as one would expect from a technology company, but also as fun-loving. With ads featuring “employees” acting like silly fans of inventors interacting with robots, or making the cartoon character Homer Simpson into a genius they have improved their success.
Brands Frame of Reference
One of the most powerful ways of getting people to think about your product is to build a frame of reference into your branding efforts. A frame of reference is the way people use your product, the times and circumstances therein when they do use it. Snickers uses this consistently in their advertising; showing eating Snickers as a way to stave of hunger quickly and pass time while positioning itself with funny ads showing people in need of a quick pick-me-up. Effective frame-of-reference marketing is what has allowed Snickers to position itself as the second, best-selling candy bar.
Godiva, another candy, has positioned itself very differently by creating promotional campaigns, price points, and packaging which makes it the candy for special occasions. This in turn allows it to charge a lot more than most candies do for its product while avoiding direct competition with giants like Snickers and M & M’s. The danger of using frame of reference is that your product will become limited in its functionality, reducing the number of times that people will buy it. After all, if people only purchase a product during specific times, then you have a shorter selling window to get them to make a purchase.
Sometimes you don’t have a choice however, after all, if your brand isn’t what you want it to be. It’s what your customers think of it. Oreo found itself trapped in a frame of reference that limited its sales to either special, indulgent moments or picnic-type settings. In order to combat this and increase its sales, it created snack packs in order to encourage people to buy it for their kids’ lunches or on the go in much the same way they might purchase any candy bar. When developing a frame of reference, you need to carefully consider your target audience to determine what it is that they are doing when they use your product or a product similar to it. After all, if Oreo was stuck on what people normally did with cookies, they might not have created snack packs. Instead, you must also consider what it is your target wants to achieve so that you can find possible ways of expanding the ways in which they will use your product.
Godiva, another candy, has positioned itself very differently by creating promotional campaigns, price points, and packaging which makes it the candy for special occasions. This in turn allows it to charge a lot more than most candies do for its product while avoiding direct competition with giants like Snickers and M & M’s. The danger of using frame of reference is that your product will become limited in its functionality, reducing the number of times that people will buy it. After all, if people only purchase a product during specific times, then you have a shorter selling window to get them to make a purchase.
Sometimes you don’t have a choice however, after all, if your brand isn’t what you want it to be. It’s what your customers think of it. Oreo found itself trapped in a frame of reference that limited its sales to either special, indulgent moments or picnic-type settings. In order to combat this and increase its sales, it created snack packs in order to encourage people to buy it for their kids’ lunches or on the go in much the same way they might purchase any candy bar. When developing a frame of reference, you need to carefully consider your target audience to determine what it is that they are doing when they use your product or a product similar to it. After all, if Oreo was stuck on what people normally did with cookies, they might not have created snack packs. Instead, you must also consider what it is your target wants to achieve so that you can find possible ways of expanding the ways in which they will use your product.
Branding Sub-Benefits
Sub-benefits are used in order to explain how your company is able to provide the emotional benefits it provides. Sub-benefits don’t fill the role of providing actual evidence for your company’s claims, however. Instead, these are emotionally charged statements. For Coke, its primary sub-benefit is that it’s the original cola “The Real Thing,” and is the most common soda. These things in turn help Coke position itself as the soda which provides happiness to the people who drink it.
The second purpose of sub-benefits is to help refine and differentiate two companies from each other. What becomes apparent when reviewing the list of possible good, emotional benefits is that there are a limited number of them, which means that many companies appear to have the same overarching benefits. Developing effective sub-benefits is how these companies differentiate from each other. The two largest department stores, for example, Wal-Mart and Target, both work to improve people’s lives, yet they are completely different companies. Wal-Mart works to improve people’s lives by helping them save money so that they can get more of the things they want. In addition, Wal-Mart works hard to adhere to a strict standard of family values, refusing to sell products such as computer games or movies which they feel violate this. Target, on the other hand, chooses to make people’s lives better by allowing them to save money on more stylish items. Because of this, Target costs a bit more then Wal-Mart but is presumably more likely to have the things that fashion-conscious customers want to buy in the first place. Target focuses its efforts on being socially conscious in a more fashionable way. It refuses to sell guns, for example, as a means of appealing to its customer base.
Certainly it’s true that Wal-Mart tried to imitate this form of social consciousness by making its suppliers use environmentally conscious packaging, selling organic products, etc. However, as it began to do this, it started to lose customers in same store sales. Wal-Mart’s primary customer base cared less about these things than they did about saving money. So as focusing on reducing the cost of social stewardship raised costs at Wal-Mart, their sales decreased. On the seemingly opposite end of the spectrum from Wal-Mart and Target, De Beers claims to make people’s lives better by making them feel nostalgic (creating memories), helping to build and symbolize love, and by lasting forever.
What we see, then, is that while these three companies (Target, Wal-Mart, and
De Beers) all have the same overarching brand, they prove that brand emotionally in very different ways allowing them to have different price points and different customers.
The second purpose of sub-benefits is to help refine and differentiate two companies from each other. What becomes apparent when reviewing the list of possible good, emotional benefits is that there are a limited number of them, which means that many companies appear to have the same overarching benefits. Developing effective sub-benefits is how these companies differentiate from each other. The two largest department stores, for example, Wal-Mart and Target, both work to improve people’s lives, yet they are completely different companies. Wal-Mart works to improve people’s lives by helping them save money so that they can get more of the things they want. In addition, Wal-Mart works hard to adhere to a strict standard of family values, refusing to sell products such as computer games or movies which they feel violate this. Target, on the other hand, chooses to make people’s lives better by allowing them to save money on more stylish items. Because of this, Target costs a bit more then Wal-Mart but is presumably more likely to have the things that fashion-conscious customers want to buy in the first place. Target focuses its efforts on being socially conscious in a more fashionable way. It refuses to sell guns, for example, as a means of appealing to its customer base.
Certainly it’s true that Wal-Mart tried to imitate this form of social consciousness by making its suppliers use environmentally conscious packaging, selling organic products, etc. However, as it began to do this, it started to lose customers in same store sales. Wal-Mart’s primary customer base cared less about these things than they did about saving money. So as focusing on reducing the cost of social stewardship raised costs at Wal-Mart, their sales decreased. On the seemingly opposite end of the spectrum from Wal-Mart and Target, De Beers claims to make people’s lives better by making them feel nostalgic (creating memories), helping to build and symbolize love, and by lasting forever.
What we see, then, is that while these three companies (Target, Wal-Mart, and
De Beers) all have the same overarching brand, they prove that brand emotionally in very different ways allowing them to have different price points and different customers.
Functionality as the Focus of a Brand
There are a few companies who focus their brand on functionality, although this happens much less than one might think. Even when a brand is functional, however, emotions still play a big part of a company’s branding efforts. After all, when functionality is about helping people to achieve a goal, in this sense using functionality as a branding focal point is a lot like using empowerment or living better as your overarching emotional benefit. Functions are better supported by emotions than evidence as people need to understand how any function will improve things for them, and people remember emotions better then rote statistics.
There are, of course, many products whose entire focus in consumers’ minds is functionality. Laundry detergent and tires are examples. In such cases, functionality is forced upon the brand. However, keep in mind that when this happens, all companies and products are in danger of having the same brand which, in turn, would destroy their ability to be successful. In such cases, emotions stand as the means of differentiating one brand from another. Michelin Tires made its brand stand out by seeking to become the traveler’s friend; creating a travel guide with a restaurant star system has become the paramount of high-end restaurant success. They also created ad campaigns which showed babies riding in tires in order to remind consumers that, as boring as they might seem, there’s a lot riding on their tires. Michelin has used its branding efforts then to highlight how important its seemingly ordinary product is to our emotional wellbeing.
Tide, a laundry detergent, uses a similar approach. Realizing that people buy detergent to get their clothes clean, Tide works to become a brand which empowers self-expression through clothing and style.
While some brands get pigeonholed into a specific functional benefit which requires them to differentiate from the competition, functional benefits are often at their most powerful when they are used to differentiate products and services from each other. Axe, a line of body washes, shampoos, and other similar products for men did this by altering the focus of what its products were meant to do. While most beauty products and cleansers focused on getting clean, looking beautiful, and feeling good about yourself, Axe realized that these benefits were generally boring to its target demographic. Axe focused instead on telling men that using their products would help them get women. After all, that's the purpose of beauty products for many people, and women do prefer clean men as a general rule.
There are, of course, many products whose entire focus in consumers’ minds is functionality. Laundry detergent and tires are examples. In such cases, functionality is forced upon the brand. However, keep in mind that when this happens, all companies and products are in danger of having the same brand which, in turn, would destroy their ability to be successful. In such cases, emotions stand as the means of differentiating one brand from another. Michelin Tires made its brand stand out by seeking to become the traveler’s friend; creating a travel guide with a restaurant star system has become the paramount of high-end restaurant success. They also created ad campaigns which showed babies riding in tires in order to remind consumers that, as boring as they might seem, there’s a lot riding on their tires. Michelin has used its branding efforts then to highlight how important its seemingly ordinary product is to our emotional wellbeing.
Tide, a laundry detergent, uses a similar approach. Realizing that people buy detergent to get their clothes clean, Tide works to become a brand which empowers self-expression through clothing and style.
While some brands get pigeonholed into a specific functional benefit which requires them to differentiate from the competition, functional benefits are often at their most powerful when they are used to differentiate products and services from each other. Axe, a line of body washes, shampoos, and other similar products for men did this by altering the focus of what its products were meant to do. While most beauty products and cleansers focused on getting clean, looking beautiful, and feeling good about yourself, Axe realized that these benefits were generally boring to its target demographic. Axe focused instead on telling men that using their products would help them get women. After all, that's the purpose of beauty products for many people, and women do prefer clean men as a general rule.
Common Mistakes Entrepreneurs Make
Not Experimenting
It’s nearly impossible to predict what’s going to be successful which is why most ideas and products don’t work out. From Pepsi Clear to McDonald’s Pizza, the world is filled with failed concepts and ideas. This is why it’s important to experiment with different ideas so that you can determine which ones are the best before spending too much money or time on any one idea to recover from if it doesn’t pan out.
Spending Too Quickly
It’s impossible for me to count the number of businesses which have spent large sums of money on things they didn’t need, before they needed them, or which they could have gotten cheaper. When you start a business, you should take it slow and rework your strategy and tactics a number of times to find out what you absolutely have to spend money on. Be creative in finding ways to cut your budget. Use Just-in-Time processes, lease products, buy used products, externally source tasks to avoid large purchases and improve efficiency, or do more internally to avoid large fees, and make deals with other businesses, etc.
Not Researching
While it’s true that research can’t tell you everything, there are a number of things you can only know from research. Some customer preferences are best arrived at through research, your potential market size, which promotional efforts are working, and more can only be learned through research. It’s true that you might discover there aren’t enough customers for what you’re planning to sell in a given area, or that your business is not viable in general, but it’s better to learn these things early so you can find ways of gaining additional customers or getting customers to spend more money before you’ve lost money promoting to a group that’s too small for you to earn you a profit on.
Setting Prices Too Low
Out of dozens of entrepreneurs I’ve met with, very few have priced their products too high, but almost all of them set their prices too low. Remember, you can always offer coupons, discount cards, specials, or simply drop your prices without chasing away customers. However, it can be tricky raising your prices. So it’s better to find out that you’re charging too much for what you’re doing than too little.
Not Having a Strong Brand
A brand is your most valuable asset or your biggest detriment. At one time some businesses squeaked by without a strong brand by being the only option of their kind in a community, but with the rise of the category killers and department stores, that is less likely to be possible. Without a strong brand of some sort, a business that does have a strong brand will outsell yours.
Not Planning Product Selection
You can’t fit everything into your store, your service schedule, or your invention cue. You must be picky about the products you carry, and you need to have a plan for how you’ll select one product over another. Remember, every product you carry represents hundreds if not thousands of other products you’re not carrying that someone might want to purchase. With that in mind, you need to choose what product mix will make you the most money not the product mix that avoids leaving someone out.
Not Promoting Properly
If you build it, most people won’t hear about it much less bother showing up. Most business owners can tell you innumerable stories in which a new customer has been completely shocked when they “discover” the entrepreneur’s business has been on their way to work, by their house, or selling just the product they’ve needed for years. The truth is that the majority of people don’t talk about businesses very often. What’s more, research has shown that most word-of-mouth originates because of promotions in which people are reminded to talk about the business or in which the people who do talk about the business first learned about it through a promotion of some type.
Not Tracking Cash Flow
You can’t know if you’re going to succeed if you don’t know how much you’re going to earn. By the same token, you won’t know what’s working unless you keep track of how much money different tactics and products earn you.
Not Collecting Data
Knowing who your best customers are and why they choose your store is the best way to determine who you’re not reaching and who is most likely to shop at your store. Far too many businesses just assume they know these things without any evidence to back up their claims. We all suffer from assumptions on who our customers are which aren’t true.
Not Planning Target Audience
You’re not going to tell everyone in the world about your store with an ad budget of just $10,000. Nor is there a product in the world that everyone buys. The closest things to general products in the world would be Microsoft Windows and Coke because of the number of customers they each have. Yet even they struggle to sell to even half the population, spending billions of dollars to execute their strategies.
Choosing a target, then, is not just about saying that a certain group won’t like your product. It’s about realizing that you can’t reach everyone so you need to reach those people who are the most likely to buy your products.
Having a Rigid Strategy
The world is not a rigid place, and it’s growing less rigid as time goes on. Customer tastes change, the economy changes, people move, technology advances, new companies form and change, etc. Even in an unchanged world, people find out that they were simply wrong. Coke gave up on New Coke, Google has failed to earn a profit on more products than you could count on two hands, and McDonald’s Pizza no longer exists. The truth is that 80 per cent of new products fail. So while you should try to avoid failure, you also need to accept it and adjust your strategy accordingly.
Failing to Maintain Quality
Quality is of increasing importance now that word of mouth can actually spread. While most people won’t tell other people if they had a good experience, they will say something when they’ve had a bad one. Because of this you only have to fail to maintain quality a few times to earn a bad reputation. Quality in business doesn’t come from the use of expensive materials; it comes from predictability. When people buy anything, whether high or low cost, they have certain expectations of it based on its price and your brand. Meeting or exceeding those expectations is what makes a quality product or experience.
Failing to Develop a Strong Brand
A brand is your most valuable asset because people buy brands, not products, which is why most industries have only a few companies which earn over half the money in that industry while thousands of others take less than half even though they all sell the same products.
A good brand can help you attract more customers or sell for higher prices. Tiffany’s can sell its diamond rings for more than most competitors even though it buys the diamonds from the same sources because of its brand. In the modern competitive environment, if you don’t develop a brand, people will purchase from someone who does.
Thinking That the Product, Event, or Sale is a Promotion
If no one knows you exist, the solution isn’t simply to roll out more products, host an event, or have a sale because people still have to find out about these things in order for you to be successful. A product, event, or sale, rather, is something that may be easier to promote.
Relying on Word of Mouth
It bears repeating that word of mouth is not a plan. Word of mouth is something you make plans to get. For this reason its best to think of word of mouth as another product that you need to develop. It’s a product which you are encouraging others to make rather than one you’re making yourself. So it’s the product over which you have the least amount of control. This means that obtaining word of mouth requires its own comprehensive plan. You can’t assume people will talk about you because they like what you sell or because you’re friendly.
Not Communicating the Reason People Should Buy From You
Wharton found in its research that the message is the most important part of a successful marketing campaign. Everyone knows about hundreds if not thousands of products and retailers they aren’t customers of. No one can buy or shop everywhere because even if they have the money, they don’t have the time. You need to communicate to people why they should buy from you rather then someone else.
It’s nearly impossible to predict what’s going to be successful which is why most ideas and products don’t work out. From Pepsi Clear to McDonald’s Pizza, the world is filled with failed concepts and ideas. This is why it’s important to experiment with different ideas so that you can determine which ones are the best before spending too much money or time on any one idea to recover from if it doesn’t pan out.
Spending Too Quickly
It’s impossible for me to count the number of businesses which have spent large sums of money on things they didn’t need, before they needed them, or which they could have gotten cheaper. When you start a business, you should take it slow and rework your strategy and tactics a number of times to find out what you absolutely have to spend money on. Be creative in finding ways to cut your budget. Use Just-in-Time processes, lease products, buy used products, externally source tasks to avoid large purchases and improve efficiency, or do more internally to avoid large fees, and make deals with other businesses, etc.
Not Researching
While it’s true that research can’t tell you everything, there are a number of things you can only know from research. Some customer preferences are best arrived at through research, your potential market size, which promotional efforts are working, and more can only be learned through research. It’s true that you might discover there aren’t enough customers for what you’re planning to sell in a given area, or that your business is not viable in general, but it’s better to learn these things early so you can find ways of gaining additional customers or getting customers to spend more money before you’ve lost money promoting to a group that’s too small for you to earn you a profit on.
Setting Prices Too Low
Out of dozens of entrepreneurs I’ve met with, very few have priced their products too high, but almost all of them set their prices too low. Remember, you can always offer coupons, discount cards, specials, or simply drop your prices without chasing away customers. However, it can be tricky raising your prices. So it’s better to find out that you’re charging too much for what you’re doing than too little.
Not Having a Strong Brand
A brand is your most valuable asset or your biggest detriment. At one time some businesses squeaked by without a strong brand by being the only option of their kind in a community, but with the rise of the category killers and department stores, that is less likely to be possible. Without a strong brand of some sort, a business that does have a strong brand will outsell yours.
Not Planning Product Selection
You can’t fit everything into your store, your service schedule, or your invention cue. You must be picky about the products you carry, and you need to have a plan for how you’ll select one product over another. Remember, every product you carry represents hundreds if not thousands of other products you’re not carrying that someone might want to purchase. With that in mind, you need to choose what product mix will make you the most money not the product mix that avoids leaving someone out.
Not Promoting Properly
If you build it, most people won’t hear about it much less bother showing up. Most business owners can tell you innumerable stories in which a new customer has been completely shocked when they “discover” the entrepreneur’s business has been on their way to work, by their house, or selling just the product they’ve needed for years. The truth is that the majority of people don’t talk about businesses very often. What’s more, research has shown that most word-of-mouth originates because of promotions in which people are reminded to talk about the business or in which the people who do talk about the business first learned about it through a promotion of some type.
Not Tracking Cash Flow
You can’t know if you’re going to succeed if you don’t know how much you’re going to earn. By the same token, you won’t know what’s working unless you keep track of how much money different tactics and products earn you.
Not Collecting Data
Knowing who your best customers are and why they choose your store is the best way to determine who you’re not reaching and who is most likely to shop at your store. Far too many businesses just assume they know these things without any evidence to back up their claims. We all suffer from assumptions on who our customers are which aren’t true.
Not Planning Target Audience
You’re not going to tell everyone in the world about your store with an ad budget of just $10,000. Nor is there a product in the world that everyone buys. The closest things to general products in the world would be Microsoft Windows and Coke because of the number of customers they each have. Yet even they struggle to sell to even half the population, spending billions of dollars to execute their strategies.
Choosing a target, then, is not just about saying that a certain group won’t like your product. It’s about realizing that you can’t reach everyone so you need to reach those people who are the most likely to buy your products.
Having a Rigid Strategy
The world is not a rigid place, and it’s growing less rigid as time goes on. Customer tastes change, the economy changes, people move, technology advances, new companies form and change, etc. Even in an unchanged world, people find out that they were simply wrong. Coke gave up on New Coke, Google has failed to earn a profit on more products than you could count on two hands, and McDonald’s Pizza no longer exists. The truth is that 80 per cent of new products fail. So while you should try to avoid failure, you also need to accept it and adjust your strategy accordingly.
Failing to Maintain Quality
Quality is of increasing importance now that word of mouth can actually spread. While most people won’t tell other people if they had a good experience, they will say something when they’ve had a bad one. Because of this you only have to fail to maintain quality a few times to earn a bad reputation. Quality in business doesn’t come from the use of expensive materials; it comes from predictability. When people buy anything, whether high or low cost, they have certain expectations of it based on its price and your brand. Meeting or exceeding those expectations is what makes a quality product or experience.
Failing to Develop a Strong Brand
A brand is your most valuable asset because people buy brands, not products, which is why most industries have only a few companies which earn over half the money in that industry while thousands of others take less than half even though they all sell the same products.
A good brand can help you attract more customers or sell for higher prices. Tiffany’s can sell its diamond rings for more than most competitors even though it buys the diamonds from the same sources because of its brand. In the modern competitive environment, if you don’t develop a brand, people will purchase from someone who does.
Thinking That the Product, Event, or Sale is a Promotion
If no one knows you exist, the solution isn’t simply to roll out more products, host an event, or have a sale because people still have to find out about these things in order for you to be successful. A product, event, or sale, rather, is something that may be easier to promote.
Relying on Word of Mouth
It bears repeating that word of mouth is not a plan. Word of mouth is something you make plans to get. For this reason its best to think of word of mouth as another product that you need to develop. It’s a product which you are encouraging others to make rather than one you’re making yourself. So it’s the product over which you have the least amount of control. This means that obtaining word of mouth requires its own comprehensive plan. You can’t assume people will talk about you because they like what you sell or because you’re friendly.
Not Communicating the Reason People Should Buy From You
Wharton found in its research that the message is the most important part of a successful marketing campaign. Everyone knows about hundreds if not thousands of products and retailers they aren’t customers of. No one can buy or shop everywhere because even if they have the money, they don’t have the time. You need to communicate to people why they should buy from you rather then someone else.
Intelligence gathering part 2
What’s Happening in Society and the World?
The world is changing at such a dizzying pace its difficult for many people to keep up with it. This is why your strategy needs to be extremely fluid. Big band music defined a generation changing the way people thought and acted as well as the structure of a number of businesses. Then, all at once, it vanished to be replaced by new ideas. Almost no one has control over what happens in society (a few companies like Apple do manage to control society, but if you run a restaurant, etc., odds are your impact will be limited). This means you must control how you react to society. There are three major types of changes; macro, micro, and migratory. Understanding what’s happening at each of these levels can help you make better judgments about your future.
Micro-changes occur when small groups of existing customers change their spending habits in a way that makes them easier for businesses to target or causes them to stop shopping at your store. Hipsters and hippies would be examples of these trends. They made up only a small percentage of society although they did make a lot of noise which caused a lot of businesses to try to target them. Macro-movements are large, social changes that impact a huge portion of the population. Macro-movements tend to be less extreme than micro-movements, but they often have more permanent impacts, and they involve more people. The movement towards being thrifty, online spending, or purchases of smart phones are macro-trends.
The last of these social changes involves migration patterns. Such patterns include both immigration to the United States and within it. One of the biggest social changes as far as businesses are concerned was the movement of Americans to the suburbs. Without this movement there would be no inner city poverty, and small, inner city businesses wouldn’t have gone out of business. At the same time, it would have been more difficult for large retailers like Wal-Mart to have grown as large as they did if most of their customers had lived in the middle of major cities. It’s interesting to note, however, that, at the moment, urban renewal is occurring in many places because people are moving back into the cities.
Society has been changing at a dizzying pace for hundreds of years, but now these changes are being exacerbated by a number of other changes that are coming ever more rapidly. Any successful strategy must not only take into account these changes as they occur; they must seek to take advantage of these changes. To a certain extent this means that you must invest and innovate around specific trends as much as you do around your core.
Study Other Industries
Many companies in industries other than your own have already dealt with issues very similar to the ones you’re dealing with. Whether they have similar customers, deal with similar social changes, or have to integrate with new technology, companies that may seem unrelated to yours may have found ways of doing things better than anyone in your industry has. Just as importantly, they may have tried a strategy or strategies which didn’t work allowing you to avoid making the same mistakes.
Where are you?
Although the purpose of a strategy is to help you get to where you want to be, you have to begin every strategy with where you are at the moment. Be honest in your evaluation of yourself. List what you’re good at doing and what you’re not good at doing compared to your competition. What are you efficient at; what makes your company special? When doing this, many businesses make the mistake of focusing on their customer relationship, their message, service, etc. While this is extremely important, it’s also important to consider your ability to manage projects, your costs to do business per product, the speed at which you can get things done, etc.
The world is changing at such a dizzying pace its difficult for many people to keep up with it. This is why your strategy needs to be extremely fluid. Big band music defined a generation changing the way people thought and acted as well as the structure of a number of businesses. Then, all at once, it vanished to be replaced by new ideas. Almost no one has control over what happens in society (a few companies like Apple do manage to control society, but if you run a restaurant, etc., odds are your impact will be limited). This means you must control how you react to society. There are three major types of changes; macro, micro, and migratory. Understanding what’s happening at each of these levels can help you make better judgments about your future.
Micro-changes occur when small groups of existing customers change their spending habits in a way that makes them easier for businesses to target or causes them to stop shopping at your store. Hipsters and hippies would be examples of these trends. They made up only a small percentage of society although they did make a lot of noise which caused a lot of businesses to try to target them. Macro-movements are large, social changes that impact a huge portion of the population. Macro-movements tend to be less extreme than micro-movements, but they often have more permanent impacts, and they involve more people. The movement towards being thrifty, online spending, or purchases of smart phones are macro-trends.
The last of these social changes involves migration patterns. Such patterns include both immigration to the United States and within it. One of the biggest social changes as far as businesses are concerned was the movement of Americans to the suburbs. Without this movement there would be no inner city poverty, and small, inner city businesses wouldn’t have gone out of business. At the same time, it would have been more difficult for large retailers like Wal-Mart to have grown as large as they did if most of their customers had lived in the middle of major cities. It’s interesting to note, however, that, at the moment, urban renewal is occurring in many places because people are moving back into the cities.
Society has been changing at a dizzying pace for hundreds of years, but now these changes are being exacerbated by a number of other changes that are coming ever more rapidly. Any successful strategy must not only take into account these changes as they occur; they must seek to take advantage of these changes. To a certain extent this means that you must invest and innovate around specific trends as much as you do around your core.
Study Other Industries
Many companies in industries other than your own have already dealt with issues very similar to the ones you’re dealing with. Whether they have similar customers, deal with similar social changes, or have to integrate with new technology, companies that may seem unrelated to yours may have found ways of doing things better than anyone in your industry has. Just as importantly, they may have tried a strategy or strategies which didn’t work allowing you to avoid making the same mistakes.
Where are you?
Although the purpose of a strategy is to help you get to where you want to be, you have to begin every strategy with where you are at the moment. Be honest in your evaluation of yourself. List what you’re good at doing and what you’re not good at doing compared to your competition. What are you efficient at; what makes your company special? When doing this, many businesses make the mistake of focusing on their customer relationship, their message, service, etc. While this is extremely important, it’s also important to consider your ability to manage projects, your costs to do business per product, the speed at which you can get things done, etc.
Intelligence gathering
Step 1: Determine who your competition is.
There are three types of competition. The first and most obvious is direct competition which is made up of those businesses which sell almost the exact same thing you do. The second type of competition is for the fulfillment of needs. People only need to eat so much; they only need so much light, etc. Once these needs are filled, anyone else trying to fill them is likely to fail. The third type of competition is for time. Even the richest person in the world can only be in one store at a time.
Competitors are anyone who replaces your product in the mind of the customers in one of these competitive areas. Porter’s model on threats to your strategy states that “…replacement products are one of the big seven dangers to any successful strategy.” For example, people read fewer newspapers because they spend more time online. They read less of the information in online portals because they go to Facebook more often. People stopped burning candles because of light bulbs, and people may start eating at fast-food restaurants less thanks to improved quality and decreasing costs of TV dinners. Because of this you could argue that a restaurant’s competition can include gourmet food stores and cooking classes not just other restaurants.
Things get a little more complex as you consider that people have a limited amount of money and time. People commuting to work take up time they could be spending in your store, as does Facebook, etc. I would argue that housing competes with almost every other job in the economy. Housing has taken up more time, more money, and works to supersede more needs than any other industry.
Step 2: Pick what you consider to be the biggest risks or the most crucial things you need to know based on your understanding of the business.
"Don't say, 'Find out everything you can about every competitor in the marketplace,' " says John Nolan, who spent 22 years as a military intelligence officer and is now a business consultant. It's far more productive to think of a specific question or problem that is crucial to your company's success. The goal of your intelligence operation will be to gather information to help address that one matter.
As with strategic planning in general, it’s important to get information quickly and in short, usable pieces. It’s impossible to know or track everything which means you must pick what to work on.
Step 3: Review your competitor’s mission statements if they are available.
Most of your competition will likely proudly display their mission or their vision somewhere. Think about what these missions and visions tell you about them and about the industry as a whole. Remember, good mission and vision statements tell you not only what a business is but the direction they are headed as well. The fact that Starbuck’s mission is to dominate anywhere that coffee is sold, for example, should let anyone who is going into this business know that Starbucks is thinking of new ways to compete with them wherever they’re selling their product.
Step 4: Think about your competitors’ brand image. How do they project themselves to customers?
Are they trying to position themselves as low-cost, as high-end, as a part of the local community? What is their personality like, and what are they really selling?
Step 5: Look at what your competitors are selling and what their price points are.
Step 6: Look at what competitors did in the past.
Your competitors’ past actions can give you important insight not only into how they think but into how consumers think as well. Did Pepsi Clear fail because not enough people were interested in buying it? Or perhaps if failed because Pepsi failed to differentiate it properly? If you’re creating a soda company, think about what this failure means. Notice that both Pepsi and Coke (New Coke) have had major and expensive failures changing their base formulas. They’ve also had real successes with changing formulas but only where it fulfilled a missing need such as with diet sodas or actual flavor changes such as cherry. Ask yourself what these failures mean about consumers. What do they mean about how your competitors will view the world in the future, and what strategies are they likely to try or avoid?
Step 7: Where are your competitors strong and where are they weak?
What are your competitors very good at and what are they bad at? Does being bad at something actually impact their business? McDonald’s, for example, has a very hard time projecting an image of health; however, they still enjoy healthy growth rates. Wal-Mart has had trouble projecting itself as a community business yet it’s also the largest retailer. Think about what this says about your customers.
Even when what a competitor is bad at doesn’t hinder their growth, it can help your own if you pick the right strategy. Subway, for example, chooses to focus on health and fresh food as a means of fueling its success against other fast food companies. Because it was different, both it and McDonald’s grew rapidly alongside each other. The fast food companies which suffered were the Me Too companies which followed McDonald’s strategy too closely (Burger King and Wendy’s).
Step 8: See who your competitors are hiring.
The types of jobs companies are hiring for, the expertise they are requesting, how much they are willing to pay, and how many people they are hiring says a lot about the direction they are headed. Some of these signals are clear. For example, when a series of companies recently started hiring touch screen interface designers, it was apparent that they were at least interested in touch screen technology. A restaurant that suddenly needs to hire a lot of servers has likely either had a lot of servers quit (which might signal that they have poor employment policies), or it could signal that they are getting ready to expand or have been expanding. Simply walking into their restaurant and ordering food would let you know if they have enough servers or not allowing you to make a fairly good guess as to the direction they are going.
Step 10: Review Competitor’s leadership.
Run a Google/Bing search of your competitors to determine what they’ve done in the past, and use other legal means to learn about them to see if they have any specific thoughts that would provide information on the direction they’re going.
Step 11: Go to their store, website, etc.
Shopping at a competitors’ store can give you a lot of information about them; how they handle customer service, what they are choosing to stock a lot of, if they have enough employees.
Step 12: Determine where your competitors might be headed given the above information.
There are three things that a company’s past can tell you about what they might do in the future. First, good companies learn from their mistakes and are going to be leery of repeating them. Second, companies and people often work within detectable patterns. There are things they like to do and don’t like to do. Third, good companies focus on the areas that they are strong. Review each of these to guess multiple directions that your competitors may go in.
Step 13: Think about how the competition is going to react to your strategy.
The moment you hit the radar, your competitors have the opportunity to react to what you’re doing. This is why it can be dangerous to sell low without some way of reducing costs because the competition only needs to cut prices to match your strategy. If you target a new market, your competitors might realize that they can target the same market as well. You need to guess how they might react and figure out how you’re going to deal with it. Some of the ways competitors’ reactions have been dealt with in the past include; simply being better than your competitors, getting them to wait to react until it’s too late for them to do so. Having your plan be such that reaction is essentially impossible, or being ready to adjust your strategy when they do react.
There are three types of competition. The first and most obvious is direct competition which is made up of those businesses which sell almost the exact same thing you do. The second type of competition is for the fulfillment of needs. People only need to eat so much; they only need so much light, etc. Once these needs are filled, anyone else trying to fill them is likely to fail. The third type of competition is for time. Even the richest person in the world can only be in one store at a time.
Competitors are anyone who replaces your product in the mind of the customers in one of these competitive areas. Porter’s model on threats to your strategy states that “…replacement products are one of the big seven dangers to any successful strategy.” For example, people read fewer newspapers because they spend more time online. They read less of the information in online portals because they go to Facebook more often. People stopped burning candles because of light bulbs, and people may start eating at fast-food restaurants less thanks to improved quality and decreasing costs of TV dinners. Because of this you could argue that a restaurant’s competition can include gourmet food stores and cooking classes not just other restaurants.
Things get a little more complex as you consider that people have a limited amount of money and time. People commuting to work take up time they could be spending in your store, as does Facebook, etc. I would argue that housing competes with almost every other job in the economy. Housing has taken up more time, more money, and works to supersede more needs than any other industry.
Step 2: Pick what you consider to be the biggest risks or the most crucial things you need to know based on your understanding of the business.
"Don't say, 'Find out everything you can about every competitor in the marketplace,' " says John Nolan, who spent 22 years as a military intelligence officer and is now a business consultant. It's far more productive to think of a specific question or problem that is crucial to your company's success. The goal of your intelligence operation will be to gather information to help address that one matter.
As with strategic planning in general, it’s important to get information quickly and in short, usable pieces. It’s impossible to know or track everything which means you must pick what to work on.
Step 3: Review your competitor’s mission statements if they are available.
Most of your competition will likely proudly display their mission or their vision somewhere. Think about what these missions and visions tell you about them and about the industry as a whole. Remember, good mission and vision statements tell you not only what a business is but the direction they are headed as well. The fact that Starbuck’s mission is to dominate anywhere that coffee is sold, for example, should let anyone who is going into this business know that Starbucks is thinking of new ways to compete with them wherever they’re selling their product.
Step 4: Think about your competitors’ brand image. How do they project themselves to customers?
Are they trying to position themselves as low-cost, as high-end, as a part of the local community? What is their personality like, and what are they really selling?
Step 5: Look at what your competitors are selling and what their price points are.
Step 6: Look at what competitors did in the past.
Your competitors’ past actions can give you important insight not only into how they think but into how consumers think as well. Did Pepsi Clear fail because not enough people were interested in buying it? Or perhaps if failed because Pepsi failed to differentiate it properly? If you’re creating a soda company, think about what this failure means. Notice that both Pepsi and Coke (New Coke) have had major and expensive failures changing their base formulas. They’ve also had real successes with changing formulas but only where it fulfilled a missing need such as with diet sodas or actual flavor changes such as cherry. Ask yourself what these failures mean about consumers. What do they mean about how your competitors will view the world in the future, and what strategies are they likely to try or avoid?
Step 7: Where are your competitors strong and where are they weak?
What are your competitors very good at and what are they bad at? Does being bad at something actually impact their business? McDonald’s, for example, has a very hard time projecting an image of health; however, they still enjoy healthy growth rates. Wal-Mart has had trouble projecting itself as a community business yet it’s also the largest retailer. Think about what this says about your customers.
Even when what a competitor is bad at doesn’t hinder their growth, it can help your own if you pick the right strategy. Subway, for example, chooses to focus on health and fresh food as a means of fueling its success against other fast food companies. Because it was different, both it and McDonald’s grew rapidly alongside each other. The fast food companies which suffered were the Me Too companies which followed McDonald’s strategy too closely (Burger King and Wendy’s).
Step 8: See who your competitors are hiring.
The types of jobs companies are hiring for, the expertise they are requesting, how much they are willing to pay, and how many people they are hiring says a lot about the direction they are headed. Some of these signals are clear. For example, when a series of companies recently started hiring touch screen interface designers, it was apparent that they were at least interested in touch screen technology. A restaurant that suddenly needs to hire a lot of servers has likely either had a lot of servers quit (which might signal that they have poor employment policies), or it could signal that they are getting ready to expand or have been expanding. Simply walking into their restaurant and ordering food would let you know if they have enough servers or not allowing you to make a fairly good guess as to the direction they are going.
Step 10: Review Competitor’s leadership.
Run a Google/Bing search of your competitors to determine what they’ve done in the past, and use other legal means to learn about them to see if they have any specific thoughts that would provide information on the direction they’re going.
Step 11: Go to their store, website, etc.
Shopping at a competitors’ store can give you a lot of information about them; how they handle customer service, what they are choosing to stock a lot of, if they have enough employees.
Step 12: Determine where your competitors might be headed given the above information.
There are three things that a company’s past can tell you about what they might do in the future. First, good companies learn from their mistakes and are going to be leery of repeating them. Second, companies and people often work within detectable patterns. There are things they like to do and don’t like to do. Third, good companies focus on the areas that they are strong. Review each of these to guess multiple directions that your competitors may go in.
Step 13: Think about how the competition is going to react to your strategy.
The moment you hit the radar, your competitors have the opportunity to react to what you’re doing. This is why it can be dangerous to sell low without some way of reducing costs because the competition only needs to cut prices to match your strategy. If you target a new market, your competitors might realize that they can target the same market as well. You need to guess how they might react and figure out how you’re going to deal with it. Some of the ways competitors’ reactions have been dealt with in the past include; simply being better than your competitors, getting them to wait to react until it’s too late for them to do so. Having your plan be such that reaction is essentially impossible, or being ready to adjust your strategy when they do react.
Intro to SWOT Analysis
An acronym for the four parts of the analysis, SWOTs are a review of your company’s Strengths, Weaknesses, Opportunities, and Threats. SWOT is a standard business planning tool that acts as a guide to the direction your company should take based on the advantages and disadvantages it has or may yet have. The purpose of a SWOT is not simply to list concerns or advantages; it’s to consider how to take advantage of these.
Far too many strategic plans and worse--overpaid strategic planning consultants--end their SWOT analysis with nothing more than a short list of a few good and bad points about a company. This is one of the biggest mistakes I’ve encountered in the strategic plans I’ve seen.
Strengths: Strengths are relative to your competition. It’s not a strength if everyone is as good or better at it than you are. One of the primary goals in business is to develop a solid list of strengths in order to gain advantages. So don’t be too discouraged if your current list is short. You use your strengths in order to develop new strengths and to take advantage of opportunities. They are also a way of balancing weaknesses and avoiding threats. Write down some examples of how you might do this beside each listed strength.
Weaknesses: Is anything you do worse than the competition or which might derail your entire industry if everyone does it poorly? Depending on how serious a weakness is to your core purpose, you may need to determine how to improve upon it or how to adjust it.
You don’t need to be great at everything of course, you just need a plan to deal with your weaknesses in such a way that they don’t impact your business in such a way that it fails to earn as much money as it could.
Opportunities and Threats
Opportunities and threats come from anything that exists outside of your company’s reasonable control; from social movements to the political environment, the economy, new technologies, your competition and more can provide opportunities and threats.
Remember that in all things part of what you’re doing is comparing yourself to your competitors not to what you think provides advantages or disadvantages. If your customer base is changing, then there’s a good chance that your competitors’ customer base is changing as well. This in turn can provide both an opportunity and a threat because such changes give you the chance to adapt faster than your competitors, thus allowing you to take market share from them. At the same time, your competitors gain the same opportunity to adapt faster than you do. What you need to do is determine how you might take advantage of or avoid damage from your opportunities and your threats.
Far too many strategic plans and worse--overpaid strategic planning consultants--end their SWOT analysis with nothing more than a short list of a few good and bad points about a company. This is one of the biggest mistakes I’ve encountered in the strategic plans I’ve seen.
Strengths: Strengths are relative to your competition. It’s not a strength if everyone is as good or better at it than you are. One of the primary goals in business is to develop a solid list of strengths in order to gain advantages. So don’t be too discouraged if your current list is short. You use your strengths in order to develop new strengths and to take advantage of opportunities. They are also a way of balancing weaknesses and avoiding threats. Write down some examples of how you might do this beside each listed strength.
Weaknesses: Is anything you do worse than the competition or which might derail your entire industry if everyone does it poorly? Depending on how serious a weakness is to your core purpose, you may need to determine how to improve upon it or how to adjust it.
You don’t need to be great at everything of course, you just need a plan to deal with your weaknesses in such a way that they don’t impact your business in such a way that it fails to earn as much money as it could.
Opportunities and Threats
Opportunities and threats come from anything that exists outside of your company’s reasonable control; from social movements to the political environment, the economy, new technologies, your competition and more can provide opportunities and threats.
Remember that in all things part of what you’re doing is comparing yourself to your competitors not to what you think provides advantages or disadvantages. If your customer base is changing, then there’s a good chance that your competitors’ customer base is changing as well. This in turn can provide both an opportunity and a threat because such changes give you the chance to adapt faster than your competitors, thus allowing you to take market share from them. At the same time, your competitors gain the same opportunity to adapt faster than you do. What you need to do is determine how you might take advantage of or avoid damage from your opportunities and your threats.
Examples of Brand Benefits - Empower
For some people there are things that they want more than happiness or goals that they are willing to sacrifice a lot to achieve. For these people, showing them how your product will empower them to reach their goal is the key. Again, as with any branding message, this does not mean pushing some basic utility benefit on people. It means showing people succeeding. As strange as it sounds, the empowerment brand doesn’t have to be realistic. It’s unlikely, for example, that Mountain Dew, which sponsors the
X Games, actually makes athletes more athletic. Its message of empowerment, however, still appeals to their fans.
The idea of empowerment is perhaps best exemplified by Nike and their slogan “Just Do It,” which isn’t a suggestion or a command so much as it’s a promise. It is the company’s way of promising that they’ll help consumers perform better in athletic activities. This promise appeals to a wide audience, from people who play a sport to the people who simply enjoy watching them because everyone likes to feel empowered even if they aren’t actively engaged in the task. Cheerios also claims to empower people by promising to help them live longer so that they can continue to do the things they love to do. Unlike Nike or Mountain Dew, their ads don’t typically include young athletes. Instead, Cheerios brands itself as empowering middle-aged people who are working to make birdhouses, selling art, etc. The key to the empowerment brand, perhaps more than any other brand statement, is to be able to pinpoint exactly what your customers want and what they’ll relate to.
X Games, actually makes athletes more athletic. Its message of empowerment, however, still appeals to their fans.
The idea of empowerment is perhaps best exemplified by Nike and their slogan “Just Do It,” which isn’t a suggestion or a command so much as it’s a promise. It is the company’s way of promising that they’ll help consumers perform better in athletic activities. This promise appeals to a wide audience, from people who play a sport to the people who simply enjoy watching them because everyone likes to feel empowered even if they aren’t actively engaged in the task. Cheerios also claims to empower people by promising to help them live longer so that they can continue to do the things they love to do. Unlike Nike or Mountain Dew, their ads don’t typically include young athletes. Instead, Cheerios brands itself as empowering middle-aged people who are working to make birdhouses, selling art, etc. The key to the empowerment brand, perhaps more than any other brand statement, is to be able to pinpoint exactly what your customers want and what they’ll relate to.
Examples of Brand Benefits - Making Life Better
Although living a better life is an ambiguous statement, it’s still emotionally powerful in part because people can insert whatever they want into the statement. So no matter what it is that a person wants, you are stating that your company can help to fulfill that for them. This means that helping people live better works well as a good, functional statement. There is a reason why companies as diverse as Tide, Microsoft, IBM, GE, and Wal-Mart all claim to provide this benefit in their own way. These, after all, are functional brands, brands people might otherwise think of as boring, yet they manage to stay on top by making it easy for people to correlate a relationship between them and the company’s products.
Wal-Mart’s slogan “Save Money, Live Better,” is a rallying cry not only to let their customers know their primary selling point but also to keep them on course. They work to establish themselves as the place where it’s possible for you to get more of the things you want, to save money so you can do the things you want. This in their statement can help you to live better, and because their goal ultimately revolves around helping people “live better,” they have been able to become not only the largest retailer (four times larger than their next biggest competitor), they have become the largest company in the world as of this writing.
Target, Wal-Mart’s largest competitor, has also taken up the “live better brand.” It, however, does this by making it easier and more affordable for people to be stylish. Google, on the other hand, brands itself as making people’s lives better by providing them with easier access to knowledge and by avoiding being “another evil tech company.” These are not portrayed as simple benefits, and oftentimes little evidence is given to back up the claims made by these companies. Rather, emotions are depicted in order to show people how they will feel when they use the product. Again, the primary purpose of claiming to improve people’s lives is to try to tie what might otherwise be a simple utility function into an emotional benefit.
Wal-Mart’s slogan “Save Money, Live Better,” is a rallying cry not only to let their customers know their primary selling point but also to keep them on course. They work to establish themselves as the place where it’s possible for you to get more of the things you want, to save money so you can do the things you want. This in their statement can help you to live better, and because their goal ultimately revolves around helping people “live better,” they have been able to become not only the largest retailer (four times larger than their next biggest competitor), they have become the largest company in the world as of this writing.
Target, Wal-Mart’s largest competitor, has also taken up the “live better brand.” It, however, does this by making it easier and more affordable for people to be stylish. Google, on the other hand, brands itself as making people’s lives better by providing them with easier access to knowledge and by avoiding being “another evil tech company.” These are not portrayed as simple benefits, and oftentimes little evidence is given to back up the claims made by these companies. Rather, emotions are depicted in order to show people how they will feel when they use the product. Again, the primary purpose of claiming to improve people’s lives is to try to tie what might otherwise be a simple utility function into an emotional benefit.
Examples of Brand Benefits - Happiness
Few things are more desirable than happiness, and despite the fact that one of our culture’s favorite sayings is that “you can’t buy happiness,” people are constantly trying to do just that. Because people seek to find and oftentimes buy happiness, claiming to be able to help make people happy can be one of the best-selling points you can have. Happiness is a strong brand not only because it is highly desirable but because it is easy to show. People instantly recognize happiness even when there are no humans in the ad. Depicting it with bright, cheerful graphics can portray the emotion. When done well, happiness provides an instant, gut reaction that draws people into your message and helps them to remember it. Finally, happiness helps to justify indulgences such as soda, ice cream, and candy.
Coca-Cola, whose brand is valued at some $55.4 billion, making it the third most valuable brand in the world, uses happiness as its primary selling point. Although Coke’s product is very basic and fairly easily replicated, it dominates its industry. It does this by being more than just a soda; it does it by working to craft an emotional image so that people have feelings for it beyond its role as a tasty beverage. Coke’s slogan “Open Happiness” says it all. To them and to many of their customers, their product is more than just a mix of corn syrup and water. Their product is a way to improve the day, an experience to share with friends. Coke brands itself this way by showing its product bringing people and the world together. It also shows Coke as a product which makes the world a more magical place. Coke is the most international beverage in the world because of their strong branding efforts.
While few products actually lead directly to happiness, happiness is an emotion that is very often based on social convention. In other words, happiness can be taught which means that the happiness created by Coke and Disney aren’t any less real then other forms of happiness. What good branding efforts do is create real emotions and desires in people. When many people see a blue box from Tiffany’s, for example, they get a sudden rush of adrenalin similar to the rush many get as a child when they are told they are going to McDonalds. Creating a product which helps to make people’s lives a little bit better through branding efforts is both emotionally fulfilling and financially rewarding.
Coca-Cola, whose brand is valued at some $55.4 billion, making it the third most valuable brand in the world, uses happiness as its primary selling point. Although Coke’s product is very basic and fairly easily replicated, it dominates its industry. It does this by being more than just a soda; it does it by working to craft an emotional image so that people have feelings for it beyond its role as a tasty beverage. Coke’s slogan “Open Happiness” says it all. To them and to many of their customers, their product is more than just a mix of corn syrup and water. Their product is a way to improve the day, an experience to share with friends. Coke brands itself this way by showing its product bringing people and the world together. It also shows Coke as a product which makes the world a more magical place. Coke is the most international beverage in the world because of their strong branding efforts.
While few products actually lead directly to happiness, happiness is an emotion that is very often based on social convention. In other words, happiness can be taught which means that the happiness created by Coke and Disney aren’t any less real then other forms of happiness. What good branding efforts do is create real emotions and desires in people. When many people see a blue box from Tiffany’s, for example, they get a sudden rush of adrenalin similar to the rush many get as a child when they are told they are going to McDonalds. Creating a product which helps to make people’s lives a little bit better through branding efforts is both emotionally fulfilling and financially rewarding.
Benefits are the Key to a Brand
Developing Your Brand
People do not buy products; they buy benefits or, more specifically, they buy emotions. So they’ll only buy from you if they believe that doing so is going to benefit them in some way. After all, there are oftentimes dozens, even hundreds of alternative products a customer could buy which do basically the same thing as your company does. In order to convince customers to buy your product, you must convince them that your product can fulfill their needs better than any other which requires you to connect with them on an emotional level.
It’s important to keep in mind when developing a brand that who you are or your company’s accomplishments are only of secondary importance and the only evidence that you can use to prove you actually provide customers the benefits you claim. If you provide real benefits, customers have and will forgive just about anything. Consider Wal-Mart’s case, for example. Even as millions of people claim to despise their business practices, they still became the largest retailer, indeed the largest business in the world, based on their brand of saving money and helping people “live better.” Again, your actions and the benefits your company provides people are based not on what the majority of people want; it’s based on what your customers want.
Overarching Benefits
The most successful companies provide customers with a powerful, easy-to-understand benefit which may not directly come out of their product but which the company is able to connect to it. Think about Coke, for example. Coke claims to provide its customers with happiness with its slogan “Open Happiness” and its promotional efforts. In this way, Coke has positioned itself as more than just another soda. It’s positioned itself as something that makes people happy. Its message is easy to communicate and resonates powerfully with nearly everyone in a memorable way.
Like Coke’s benefit, successful benefits work on a very basic, emotional idea which can be stated quickly and easily in just a few words. Further, these emotional benefits have a powerful impact on people so that, just as with any of their needs and desires, the product becomes a part of their lives. While there are many possible benefits your brand can provide, three emotional benefits which have proven hugely successful are: providing happiness, making life better for people, and empowering people. Because of the success of these emotional benefits in selling products for a number of companies, I would recommend starting the process of determining which emotional benefits your company offers to fulfill by trying a combination of the above three emotional benefits to determine how they would work with your company and product as well as how your customers would be likely to react to them.
As you work through the possible list of overarching benefits, it’s important to be creative. Remember, no matter what you’re selling, you can always come up with an emotional reason for people to buy it. Take tires, for example. At first glance, few products seem like they would be more basic, more generic, and boring. Michelin, however, has repeatedly shown how emotionally important tires are by having ads with images of babies riding through stormy weather on them; pointing out that everything you love is dependent on your tires not blowing out or slipping in the rain and snow.
Even if you have no real, natural benefit over your competitors, you can create one through proper branding. There is nothing inherent in the mixture of corn syrup and carbonated water that makes people happier when they drink Coke that their marketing and message didn’t create. Mountain Dew, a different, caffeinated beverage, positions itself as a leader in empowering people while Jones Soda positions itself as the fun soda. All these successful brands are not that different from each other in their ingredients, yet they develop loyal customers based in a large part on the brand and the relationship they build with their customers. Choosing the right overarching benefit is about choosing what you can achieve and what will set you apart from and above your competitors, not about the functional benefit your product may or may not actually provide.
People do not buy products; they buy benefits or, more specifically, they buy emotions. So they’ll only buy from you if they believe that doing so is going to benefit them in some way. After all, there are oftentimes dozens, even hundreds of alternative products a customer could buy which do basically the same thing as your company does. In order to convince customers to buy your product, you must convince them that your product can fulfill their needs better than any other which requires you to connect with them on an emotional level.
It’s important to keep in mind when developing a brand that who you are or your company’s accomplishments are only of secondary importance and the only evidence that you can use to prove you actually provide customers the benefits you claim. If you provide real benefits, customers have and will forgive just about anything. Consider Wal-Mart’s case, for example. Even as millions of people claim to despise their business practices, they still became the largest retailer, indeed the largest business in the world, based on their brand of saving money and helping people “live better.” Again, your actions and the benefits your company provides people are based not on what the majority of people want; it’s based on what your customers want.
Overarching Benefits
The most successful companies provide customers with a powerful, easy-to-understand benefit which may not directly come out of their product but which the company is able to connect to it. Think about Coke, for example. Coke claims to provide its customers with happiness with its slogan “Open Happiness” and its promotional efforts. In this way, Coke has positioned itself as more than just another soda. It’s positioned itself as something that makes people happy. Its message is easy to communicate and resonates powerfully with nearly everyone in a memorable way.
Like Coke’s benefit, successful benefits work on a very basic, emotional idea which can be stated quickly and easily in just a few words. Further, these emotional benefits have a powerful impact on people so that, just as with any of their needs and desires, the product becomes a part of their lives. While there are many possible benefits your brand can provide, three emotional benefits which have proven hugely successful are: providing happiness, making life better for people, and empowering people. Because of the success of these emotional benefits in selling products for a number of companies, I would recommend starting the process of determining which emotional benefits your company offers to fulfill by trying a combination of the above three emotional benefits to determine how they would work with your company and product as well as how your customers would be likely to react to them.
As you work through the possible list of overarching benefits, it’s important to be creative. Remember, no matter what you’re selling, you can always come up with an emotional reason for people to buy it. Take tires, for example. At first glance, few products seem like they would be more basic, more generic, and boring. Michelin, however, has repeatedly shown how emotionally important tires are by having ads with images of babies riding through stormy weather on them; pointing out that everything you love is dependent on your tires not blowing out or slipping in the rain and snow.
Even if you have no real, natural benefit over your competitors, you can create one through proper branding. There is nothing inherent in the mixture of corn syrup and carbonated water that makes people happier when they drink Coke that their marketing and message didn’t create. Mountain Dew, a different, caffeinated beverage, positions itself as a leader in empowering people while Jones Soda positions itself as the fun soda. All these successful brands are not that different from each other in their ingredients, yet they develop loyal customers based in a large part on the brand and the relationship they build with their customers. Choosing the right overarching benefit is about choosing what you can achieve and what will set you apart from and above your competitors, not about the functional benefit your product may or may not actually provide.
What are Brands and Branding
Branding
Brand and Target
Of all the things that help you determine strategy, a brand and a target audience are perhaps the most important. This medley is a statement about who your company relates with and how it does this.
What is a Brand?
A brand is what your customers think of your business; their belief of what a business provides for them, emotionally and functionally. In essence a good brand is the goal to strive for and drives much of your strategy. After all, a brand is what customers think of your company; the reason they buy from you. A good brand is your business’s greatest asset while a bad brand is its greatest detriment. Furthermore, there is no way your company can spurn branding. Customers automatically feel and think something about your company. Two or three decades ago some small businesses got away with ignoring what customers thought and felt. These companies made little or no effort to provide specific services and products which met customer needs. Due to exposure and demand that time has passed. Customers flock to businesses with the strongest brand, the primary reason why large companies dominate the market.
Furthermore, the Internet makes a world of products readily available to nearly every customer. More and more businesses compete with an ever-growing list of other business brands. Success mandates you guide customers towards your company, conduct their impression of your brand, and encourage them to keep your company in mind. Encouraging repeat customers is of the utmost importance.
Branding is not a burden. Knowing what you want your brand to be is the first step to more easily making decisions about your company. Business, as previously mentioned, is all about decisions: how to price your products, where to locate, what advertising methods to use, who to hire. At the center of all of these choices is your brand because your brand is your relationship with your customers, and every choice you make affects this.
What is Branding?
Branding is the conscious effort you make to guide people into thinking specific things about your company. This means, of course, that anything can become part of your branding efforts; from the prices you charge to the way you speak will all have an impact on what people think of your company. Branding can be split into two parts; what you do and what you say.
1) Actions speak louder than words or so the old saying goes. While this isn’t always true, it often turns out to be in the long term anyways. It’s important to incorporate your brand into your strategy in order to determine the tactics you’ll use and the people you’ll hire. Remember that your company’s brand, aka people’s good opinions of you, is based on their contact with your employees.
This also means, however, that the brand you work towards developing must be based on something which you can achieve. After all, if you are unable to fulfill the promises you make, people will figure it out, and it will ultimately hurt you if your branding efforts are centered around them. For example, retail businesses often claim to be focused on high quality while they are unable to afford to throw out bread that has gone a little stale. Having a quality brand means that people who truly care about quality will try this bread and then destroy your company’s reputation as they spread the word about their bad experience. On the other hand, if your brand is based on something other than quality, and it attracts people who are less likely to notice stale bread, this won’t be as damaging. Always consider what you can afford to do in your brand.
2) People judge each other and nearly everything else by the way it looks. We can all wish this wasn’t so, and we can speak philosophically about how it shouldn’t be, but in the end whether you get a customer or not depends on peoples’ first impression of your company. This makes what you say, how you dress up your company with store layouts, web designs, logo designs, ads, etc., an important part of making people think about your company in a positive way. For many businesses, in fact, this design becomes all that matters. Consider Morton Salt, for example. It sells well for a higher price than nearly any other basic table salt, yet its ingredients are pretty much the same. Further, it’s doubtful that very many if any of its customers know its history, how it treats employees, or anything else about them other than that they have an interesting package design with a little girl and an umbrella pouring salt in the rain.
Brand and Target
Of all the things that help you determine strategy, a brand and a target audience are perhaps the most important. This medley is a statement about who your company relates with and how it does this.
What is a Brand?
A brand is what your customers think of your business; their belief of what a business provides for them, emotionally and functionally. In essence a good brand is the goal to strive for and drives much of your strategy. After all, a brand is what customers think of your company; the reason they buy from you. A good brand is your business’s greatest asset while a bad brand is its greatest detriment. Furthermore, there is no way your company can spurn branding. Customers automatically feel and think something about your company. Two or three decades ago some small businesses got away with ignoring what customers thought and felt. These companies made little or no effort to provide specific services and products which met customer needs. Due to exposure and demand that time has passed. Customers flock to businesses with the strongest brand, the primary reason why large companies dominate the market.
Furthermore, the Internet makes a world of products readily available to nearly every customer. More and more businesses compete with an ever-growing list of other business brands. Success mandates you guide customers towards your company, conduct their impression of your brand, and encourage them to keep your company in mind. Encouraging repeat customers is of the utmost importance.
Branding is not a burden. Knowing what you want your brand to be is the first step to more easily making decisions about your company. Business, as previously mentioned, is all about decisions: how to price your products, where to locate, what advertising methods to use, who to hire. At the center of all of these choices is your brand because your brand is your relationship with your customers, and every choice you make affects this.
What is Branding?
Branding is the conscious effort you make to guide people into thinking specific things about your company. This means, of course, that anything can become part of your branding efforts; from the prices you charge to the way you speak will all have an impact on what people think of your company. Branding can be split into two parts; what you do and what you say.
1) Actions speak louder than words or so the old saying goes. While this isn’t always true, it often turns out to be in the long term anyways. It’s important to incorporate your brand into your strategy in order to determine the tactics you’ll use and the people you’ll hire. Remember that your company’s brand, aka people’s good opinions of you, is based on their contact with your employees.
This also means, however, that the brand you work towards developing must be based on something which you can achieve. After all, if you are unable to fulfill the promises you make, people will figure it out, and it will ultimately hurt you if your branding efforts are centered around them. For example, retail businesses often claim to be focused on high quality while they are unable to afford to throw out bread that has gone a little stale. Having a quality brand means that people who truly care about quality will try this bread and then destroy your company’s reputation as they spread the word about their bad experience. On the other hand, if your brand is based on something other than quality, and it attracts people who are less likely to notice stale bread, this won’t be as damaging. Always consider what you can afford to do in your brand.
2) People judge each other and nearly everything else by the way it looks. We can all wish this wasn’t so, and we can speak philosophically about how it shouldn’t be, but in the end whether you get a customer or not depends on peoples’ first impression of your company. This makes what you say, how you dress up your company with store layouts, web designs, logo designs, ads, etc., an important part of making people think about your company in a positive way. For many businesses, in fact, this design becomes all that matters. Consider Morton Salt, for example. It sells well for a higher price than nearly any other basic table salt, yet its ingredients are pretty much the same. Further, it’s doubtful that very many if any of its customers know its history, how it treats employees, or anything else about them other than that they have an interesting package design with a little girl and an umbrella pouring salt in the rain.
Dangers of Biases
Avoid Biases
In some ways you are the biggest danger to developing a successful strategy because you, like everyone else, are full of biases. There are things you want to engage in, emotions you have, ideas you hold to be true that all contribute to the choices you make. The problem is that many, if not most, of these gut reactions won’t lead to the best possible outcomes.
McKinsey points out that “good analysis and good judgment don’t naturally lead to good decisions as the process is also crucial.” In other words, no matter how smart and capable you are, you don’t necessarily make good strategic choices. So you must “Never trust your gut. You need to take your gut feeling as an important data point, but then you have to consciously and deliberately evaluate it.”
Ultimately, your gut is based on emotions, on split-second judgments that “the weighing of emotional tags associated with our memories rather than by conscious weighing of rational pros and cons: we start feeling something–often before we are conscious of having thought anything.” To deal with this you need to develop strategies to rule out strategies rather than simply to confirm them. Warren Buffett does this by hiring an advisor who is against a deal he’s thinking of making. More importantly, he pays that advisor a bonus if they can prevent the deal from happening through their arguments against it.
Use Biases
At the same time as you are avoiding biases, keep in mind that your competitors will tend to have the same set of natural biases. Good strategies work in such a way that your competitors--either because of physical or mental blocks--won’t be able to respond in time to prevent you from increasing your market share. Thus, you can take competitor biases into account when developing your strategy in order to try to create a plan which they will likely be slow to respond to.
List of Biases
Bias Blind Spot
You, I, and everyone else will tend to see ourselves as being less biased than other people, less biased then we actually are. I put this common bias first because as you take the possibility that you might be biased into account, you must realize that you are often less likely to presume that you are biased than you actually are. This is why it’s so important to listen to others and to not only encourage others to challenge you but, at times, to require it. Warren Buffett will sometimes even go so far as to hire people who get a bonus if they convince him not to go through with a deal he thought was a good idea.
Common mistakes exist and are repeated because, as humans, we all rely on a brain which is generally structured in a similar way one to another; a brain which sadly isn’t always perfect. Because of this, an important part of being successful is recognizing what aspects of our thinking are likely to cause these mistakes to come from so that we can avoid them as much as possible.
Anchoring
The tendency to spend too much time focusing or worrying about a single piece of information when making a decision, rather than being able to look at the situation as a whole, is complex. Anchoring occurs because, with dozens of pieces of information out there, it becomes difficult to take everything into account the way we should. So we focus on very few aspects of something to make our decisions. This is one of the big reasons economic gold rushes occur. Because a few aspects of an industry seem to be perfect, we become unable to take into account the more complex information that would tell us that there might be a problem.
While knowledge can be a valuable tool in combating this bias, this bias exists because of our inability to easily keep track of our knowledge. The key to combating this bias then is to be organized, to develop a list of the knowledge which would help us make decisions, and then being organized enough to review those many pieces of information to make the right decision.
Bandwagon Effect
Also known as groupthink, this occurs when people go along with the crowd or do what their boss wants. This is not to say that they will simply give in or don’t have enough of a spine to disagree with what the crowd wants, rather, this is to say that their own beliefs will change to fit those of the group. This is especially dangerous because doing things to encourage people to speak their minds may do nothing to prevent people from thinking what the group has already decided. This is why individual thinking time is important so that people can come to discussions and meetings with some idea of their existing beliefs. This way you are better able to get ideas from many sources rather than a single one.
Confirmation Bias
Rather than trying to discover the truth, humans will subconsciously search for information to confirm what they believe or disprove what they don’t believe. Along with this, any information we take in may automatically be interpreted in such a way that we think that it confirms what we already believe. The backfire effect is similar to this in that it occurs when evidence which proves we are wrong only increases our existing beliefs.
One could argue, then, that our existing beliefs alter how we perceive reality rather than reality altering our existing beliefs. This is why the scientific method involves trying to disprove a hypothesis rather than trying to prove it. I would argue that this idea of trying to prove your idea wrong is an important part of determining which course of action you should take.
Semmelweis Reflex
A reflex which shows that people tend to reject, or not take into account, anything which might contradict their established beliefs and ideas. In some ways this is much more dangerous than the confirmation bias because, while we might attempt to get around our confirmation bias by looking for information to disprove our ideas, we may not always pay attention to the information that we receive. This is one reason why diversity is cited as an important part of developing new and fresh ideas because different views have different natural biases. The danger when planning for diversity is to presume that alternative ideas come from demographic diversity. However, demographics are not an indicator of diversity in thinking; thus, it’s important then to think about psychographic rather than demographic diversity within your organization.
Irrational Escalation
As people invest in a project, they become more and more likely to continue to invest in that project no matter how much evidence comes to light that the project is likely to fail. This occurs in large part because people feel that they have to recover their investment and so hope that by continuing to put money into a poor investment it’ll eventually pay them back.
It’s important to remember that the amount of money you earn from any investment is curtailed by the amount you could have earned had you invested in something else. In other words, if you invest $10,000 in one tactic which will return $13,000 when you could have invested $10,000 in a tactic that would have returned $16,000 then you have lost 3,000 potential dollars. So no amount of previous investment justifies further investment if there is something better you could do with your money. If a project is struggling, you need to reanalyze the resources you need to put into it and compare this to the resources you could put into something else while completely ignoring the amount of previous investment because it is already lost.
Mere Exposure Effect
The more we experience something, the more we’ll like it. So the longer you work on an idea, the more likely you are to like the idea. This is dangerous because it prevents us from actually judging existing thoughts and ideas properly. This is why you need to test the marketing you’ve developed on other people in order to make certain that you don’t just like it because you’ve been looking at it for so long.
Negativity Bias
When people have a negative experience with something, they will tend to give more weight to that experience than they will to positive experiences or statistics. So if a tactic is normally sound, but you’ve had a bad experience with it, you are less likely to try it again regardless of the likelihood of statistical success or changes in the environment. This bias can be especially useful in predicting what your competitors will likely do or how they’ll react as it may be possible to see which of their tactics have failed and so predict that they’ll be slower to respond to similar tactics.
Neglect of Probability
The less certain we are about the outcome of our decisions, or the less information we have with regards to a certain tactic or strategy, the more likely we are to ignore the statistical information we do have. So when something seems to be uncertain, we tend to be more susceptible to our natural biases.
Normalcy Bias
People tend to focus only on what their experience has shown them is likely to happen and so won’t plan for disasters which haven’t happened. This, for example, is one reason why people have tended to underestimate the impact of some of the major disasters we’ve had recently. It’s also why many businesses underestimated the impact which the recession, changes in technology, gas prices, and globalization would have on their business.
Planning Fallacy
We tend to think that it will take less time to do something than it actually will; thus, we should always try to plan for things to take substantially longer than we think they will in order to mitigate this effect.
Status Quo Bias
Many people don’t like change. Once they’ve established a rhythm, they want it to continue on forever. This is why so many strategies remain rigid even as the world changes around them depleting their resources. Perhaps the biggest danger of the status quo bias occurs when what was the status quo was in fact the best situation for a business, yet the world has changed around the business so that the status quo they once knew no longer exists.
Take, for example, the book industry which reached a near perfect balance for large retailers, publishers, and distributors that allowed them to continually grow and earn profit while keeping smaller competitors from entering the market. Then everything changed in such a way that they stand to lose money. Rather than realizing that many of the loses are inevitable and trying to find a way to deal with them, however, most businesses have refused to accept the changes and have so failed.
You must understand that the world, the status quo, will change and many if not most of these changes will destroy much of the money you used to make. In order to survive, you can’t pretend that the status quo isn’t changing. You can’t pretend that globalization, recessions, bubbles, technology, etc. don’t exist because they do. I have repeated this throughout this book, but it bears repeating. You must adapt your strategy to the reality that exists or that you can actually change. Yes, sometimes the reality is that you are going to earn less money in a specific industry or with a specific niche than you used to which is why you must also be able to find new sources of revenue.
Think, for example, about Apple, a computer company which now earns billions of dollars on music, or Disney, a movie company who now earns more on theme parks than they do on their movies which has allowed it to survive while most entertainment companies have been bought out by someone else.
Ambiguity Effect
When people avoid doing something new or something because they feel they don’t have all the information for it, they have fallen victim to this bias. It’s important to remember that there is no such thing as perfect information, and you have to do something different from what’s being done in order to pull ahead of your competitors.
An example of this is the reason companies were slow to begin running Internet marketing campaigns. Indeed, most companies have only recently jumped in even though the cost of search ads, for example, has more than tripled. Any business which had tried this method of marketing sooner was more successful.
Ostrich Effect
I have noticed that almost all the businesses which started to slide into the red would tend to ignore what was happening and continue to pretend that they didn’t need to immediately implement some form of emergency strategy to deal with the problem until it was too late. This is why so many music retailers and book retailers seemed to ignore the impact that the Internet would have on their strategies until it was too late. It is also why so many businesses ignored the impact the recession was having on their strategy until it was too late. You cannot hide from a negative situation, nor can you assume that a negative situation will simply turn itself around. You need to be adaptable, to be able to change your structure in order to remain in business.
Disregard of Regression Toward the Mean
We tend to believe that whatever situation is occurring is likely to continue to occur no matter what is statistically likely. This is why we presume that we should continue to gamble during a winning streak, for example, even though we eventually have to lose and our chances of winning are the same regardless. This is also why people continued to think that the housing market would continue to increase in value forever even though most industries will eventually have to level off or decrease in value. Never assume that growth or other impressive events will simply continue on. You must plan to find ways to replace existing growth or deal with problems that arise because they will eventually happen.
In some ways you are the biggest danger to developing a successful strategy because you, like everyone else, are full of biases. There are things you want to engage in, emotions you have, ideas you hold to be true that all contribute to the choices you make. The problem is that many, if not most, of these gut reactions won’t lead to the best possible outcomes.
McKinsey points out that “good analysis and good judgment don’t naturally lead to good decisions as the process is also crucial.” In other words, no matter how smart and capable you are, you don’t necessarily make good strategic choices. So you must “Never trust your gut. You need to take your gut feeling as an important data point, but then you have to consciously and deliberately evaluate it.”
Ultimately, your gut is based on emotions, on split-second judgments that “the weighing of emotional tags associated with our memories rather than by conscious weighing of rational pros and cons: we start feeling something–often before we are conscious of having thought anything.” To deal with this you need to develop strategies to rule out strategies rather than simply to confirm them. Warren Buffett does this by hiring an advisor who is against a deal he’s thinking of making. More importantly, he pays that advisor a bonus if they can prevent the deal from happening through their arguments against it.
Use Biases
At the same time as you are avoiding biases, keep in mind that your competitors will tend to have the same set of natural biases. Good strategies work in such a way that your competitors--either because of physical or mental blocks--won’t be able to respond in time to prevent you from increasing your market share. Thus, you can take competitor biases into account when developing your strategy in order to try to create a plan which they will likely be slow to respond to.
List of Biases
Bias Blind Spot
You, I, and everyone else will tend to see ourselves as being less biased than other people, less biased then we actually are. I put this common bias first because as you take the possibility that you might be biased into account, you must realize that you are often less likely to presume that you are biased than you actually are. This is why it’s so important to listen to others and to not only encourage others to challenge you but, at times, to require it. Warren Buffett will sometimes even go so far as to hire people who get a bonus if they convince him not to go through with a deal he thought was a good idea.
Common mistakes exist and are repeated because, as humans, we all rely on a brain which is generally structured in a similar way one to another; a brain which sadly isn’t always perfect. Because of this, an important part of being successful is recognizing what aspects of our thinking are likely to cause these mistakes to come from so that we can avoid them as much as possible.
Anchoring
The tendency to spend too much time focusing or worrying about a single piece of information when making a decision, rather than being able to look at the situation as a whole, is complex. Anchoring occurs because, with dozens of pieces of information out there, it becomes difficult to take everything into account the way we should. So we focus on very few aspects of something to make our decisions. This is one of the big reasons economic gold rushes occur. Because a few aspects of an industry seem to be perfect, we become unable to take into account the more complex information that would tell us that there might be a problem.
While knowledge can be a valuable tool in combating this bias, this bias exists because of our inability to easily keep track of our knowledge. The key to combating this bias then is to be organized, to develop a list of the knowledge which would help us make decisions, and then being organized enough to review those many pieces of information to make the right decision.
Bandwagon Effect
Also known as groupthink, this occurs when people go along with the crowd or do what their boss wants. This is not to say that they will simply give in or don’t have enough of a spine to disagree with what the crowd wants, rather, this is to say that their own beliefs will change to fit those of the group. This is especially dangerous because doing things to encourage people to speak their minds may do nothing to prevent people from thinking what the group has already decided. This is why individual thinking time is important so that people can come to discussions and meetings with some idea of their existing beliefs. This way you are better able to get ideas from many sources rather than a single one.
Confirmation Bias
Rather than trying to discover the truth, humans will subconsciously search for information to confirm what they believe or disprove what they don’t believe. Along with this, any information we take in may automatically be interpreted in such a way that we think that it confirms what we already believe. The backfire effect is similar to this in that it occurs when evidence which proves we are wrong only increases our existing beliefs.
One could argue, then, that our existing beliefs alter how we perceive reality rather than reality altering our existing beliefs. This is why the scientific method involves trying to disprove a hypothesis rather than trying to prove it. I would argue that this idea of trying to prove your idea wrong is an important part of determining which course of action you should take.
Semmelweis Reflex
A reflex which shows that people tend to reject, or not take into account, anything which might contradict their established beliefs and ideas. In some ways this is much more dangerous than the confirmation bias because, while we might attempt to get around our confirmation bias by looking for information to disprove our ideas, we may not always pay attention to the information that we receive. This is one reason why diversity is cited as an important part of developing new and fresh ideas because different views have different natural biases. The danger when planning for diversity is to presume that alternative ideas come from demographic diversity. However, demographics are not an indicator of diversity in thinking; thus, it’s important then to think about psychographic rather than demographic diversity within your organization.
Irrational Escalation
As people invest in a project, they become more and more likely to continue to invest in that project no matter how much evidence comes to light that the project is likely to fail. This occurs in large part because people feel that they have to recover their investment and so hope that by continuing to put money into a poor investment it’ll eventually pay them back.
It’s important to remember that the amount of money you earn from any investment is curtailed by the amount you could have earned had you invested in something else. In other words, if you invest $10,000 in one tactic which will return $13,000 when you could have invested $10,000 in a tactic that would have returned $16,000 then you have lost 3,000 potential dollars. So no amount of previous investment justifies further investment if there is something better you could do with your money. If a project is struggling, you need to reanalyze the resources you need to put into it and compare this to the resources you could put into something else while completely ignoring the amount of previous investment because it is already lost.
Mere Exposure Effect
The more we experience something, the more we’ll like it. So the longer you work on an idea, the more likely you are to like the idea. This is dangerous because it prevents us from actually judging existing thoughts and ideas properly. This is why you need to test the marketing you’ve developed on other people in order to make certain that you don’t just like it because you’ve been looking at it for so long.
Negativity Bias
When people have a negative experience with something, they will tend to give more weight to that experience than they will to positive experiences or statistics. So if a tactic is normally sound, but you’ve had a bad experience with it, you are less likely to try it again regardless of the likelihood of statistical success or changes in the environment. This bias can be especially useful in predicting what your competitors will likely do or how they’ll react as it may be possible to see which of their tactics have failed and so predict that they’ll be slower to respond to similar tactics.
Neglect of Probability
The less certain we are about the outcome of our decisions, or the less information we have with regards to a certain tactic or strategy, the more likely we are to ignore the statistical information we do have. So when something seems to be uncertain, we tend to be more susceptible to our natural biases.
Normalcy Bias
People tend to focus only on what their experience has shown them is likely to happen and so won’t plan for disasters which haven’t happened. This, for example, is one reason why people have tended to underestimate the impact of some of the major disasters we’ve had recently. It’s also why many businesses underestimated the impact which the recession, changes in technology, gas prices, and globalization would have on their business.
Planning Fallacy
We tend to think that it will take less time to do something than it actually will; thus, we should always try to plan for things to take substantially longer than we think they will in order to mitigate this effect.
Status Quo Bias
Many people don’t like change. Once they’ve established a rhythm, they want it to continue on forever. This is why so many strategies remain rigid even as the world changes around them depleting their resources. Perhaps the biggest danger of the status quo bias occurs when what was the status quo was in fact the best situation for a business, yet the world has changed around the business so that the status quo they once knew no longer exists.
Take, for example, the book industry which reached a near perfect balance for large retailers, publishers, and distributors that allowed them to continually grow and earn profit while keeping smaller competitors from entering the market. Then everything changed in such a way that they stand to lose money. Rather than realizing that many of the loses are inevitable and trying to find a way to deal with them, however, most businesses have refused to accept the changes and have so failed.
You must understand that the world, the status quo, will change and many if not most of these changes will destroy much of the money you used to make. In order to survive, you can’t pretend that the status quo isn’t changing. You can’t pretend that globalization, recessions, bubbles, technology, etc. don’t exist because they do. I have repeated this throughout this book, but it bears repeating. You must adapt your strategy to the reality that exists or that you can actually change. Yes, sometimes the reality is that you are going to earn less money in a specific industry or with a specific niche than you used to which is why you must also be able to find new sources of revenue.
Think, for example, about Apple, a computer company which now earns billions of dollars on music, or Disney, a movie company who now earns more on theme parks than they do on their movies which has allowed it to survive while most entertainment companies have been bought out by someone else.
Ambiguity Effect
When people avoid doing something new or something because they feel they don’t have all the information for it, they have fallen victim to this bias. It’s important to remember that there is no such thing as perfect information, and you have to do something different from what’s being done in order to pull ahead of your competitors.
An example of this is the reason companies were slow to begin running Internet marketing campaigns. Indeed, most companies have only recently jumped in even though the cost of search ads, for example, has more than tripled. Any business which had tried this method of marketing sooner was more successful.
Ostrich Effect
I have noticed that almost all the businesses which started to slide into the red would tend to ignore what was happening and continue to pretend that they didn’t need to immediately implement some form of emergency strategy to deal with the problem until it was too late. This is why so many music retailers and book retailers seemed to ignore the impact that the Internet would have on their strategies until it was too late. It is also why so many businesses ignored the impact the recession was having on their strategy until it was too late. You cannot hide from a negative situation, nor can you assume that a negative situation will simply turn itself around. You need to be adaptable, to be able to change your structure in order to remain in business.
Disregard of Regression Toward the Mean
We tend to believe that whatever situation is occurring is likely to continue to occur no matter what is statistically likely. This is why we presume that we should continue to gamble during a winning streak, for example, even though we eventually have to lose and our chances of winning are the same regardless. This is also why people continued to think that the housing market would continue to increase in value forever even though most industries will eventually have to level off or decrease in value. Never assume that growth or other impressive events will simply continue on. You must plan to find ways to replace existing growth or deal with problems that arise because they will eventually happen.
Link AdSense to Analytics
As usual Google's help menu doesn't know how to do something. To learn how to link analytics and AdSense go http://smallittips.blogspot.com/2012/09/linking-adsense-to-analytics-updated.html
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