Value is Key to Solution Marketing

You might think that the most important aspect of marketing a solution would be what goes into it.  What goes into a solution are just a bunch of pieces, products, or components.  But value is about the benefit and cost of those components to the user or buyer.

More specifically, value is equal to the difference between (1) the benefit as perceived by the user and (2) the total cost of the solution.  By perception I mean that the user or buyer must appreciate and want the resulting benefit.  In fact, if they don’t perceive it as a benefit to them, it’s not a benefit but is instead just a useless feature.

Value is interesting in many ways, some of which are counterintuitive and not so obvious.  Following are a few important examples – both obvious and not so obvious.

Value is a core component of SEVA(or SIVA) solution marketing strategy which also includes (1) Solution, (2) Education & Engagement and (3) Access.

Value is in the eye of the beholder (not the seller)

• Obvious: A cheap solution or product that delivers a lot of benefit is a great value.  If you like double cheeseburgers, then a $1 McDouble double cheeseburger is a great value.  Remember, this is about what the buyer perceives.
• Not obvious: A cheap solution targeted to the wrong audience delivers NO value.  If you’re a vegetarian, a $1 meat McDouble is a bad value.  In fact, it would have no value to you.

Unique and needed solutions provide more value

• Obvious: A $100 aspirin tablet delivers low value if other tablets do the exact same thing and deliver the same benefit at a lower total cost than the $100 tablet.
• Not obvious: A $100 tablet of a lifesaving drug is a great value if it’s the only want to save that life.  (And in many cases it is).   In fact, that same $100 tablet would have great value if the only comparable treatment was a $50,000 operation.

Total cost counts

• Not obvious: Assuming both are equally effective, a once-and-done (only one dose required) $100 lifesaving drug, at a total cost of $100, is more valuable than a competitive product requiring 10 doses at $50 each, for a total cost of $500.

Value is core to social media

• Maybe obvious: Value applies to your marketing, such as social media, as well.  At its core, social media is about sharing content – tweets, photos, blog posts, comments, pluses – with other people who see its value.  If you share low value content – perhaps boring self-centered content (“I just woke up; going to be another crappy day”) or salesy, promotional pitches (buy my stuff now!), you’ll turn away your friends, your network, and/or your prospects.  Once again, different people will perceive different value based on their interests.
• Not so obvious: Social media’s low out-of-pocket costs (i.e., no fee to read content) does not mean that it delivers high value.  Low benefit minus low cost still equals low value.

Value shifts as new options emerge

• Not obvious: Value is partly comparative, so as alternative solutions or products proliferate, the relative value of your unchanged solution may decline.  Once upon a time, newspapers, network TV and radio news shows had a lock on, well, the news since few other options existed.  But once the Internet came on the scene, you could obtain news in new (and free) ways through search sites, personal portals, free online Web pages.  Suddenly, the same benefit could be achieved for almost no cost to the reader; the value of print news started declined as evidenced by a parallel decline in newspaper readership.

Value – it’s everywhere the user or buyer perceives it to be.  And it should be a core element of your solution and solution marketing strategies.

Additional Reading

• The Solution Marketing Blog: Fixing the Mix
• The Solution Marketing Blog: Value Posts
• Successfully Establishing a Winning Twitter Strategy
  (check out the second paragraph)

Anticipation builds customer loyalty.

A few weeks back, I had a few “wow” experiences that demonstrated the power of anticipation.  No matter that they were almost mundane: each experience improved my perception of the brand/company, service or location.  And they offer great lessons for solution marketers.

Anticipated receipt

After filling up with gas at the nearby Hess Gas Station, I saw that the  gas pump’s receipt printer was out of paper – which is a nuisance.  But when I walked into the store to pick up a receipt, the cashier already had my receipt ready – before I could utter a single word.  Wow!  I’d say that I was actually more impressed with her anticipating my receipt needs than I would have been had the printer actually had paper.  I’ve been filling up at this station because they had competitive gas prices.  Now I’ll do it because they have great service as well.  

Anticipated question

The next day, I inadvertently locked myself out of my ConstantContact account, so I called the company to see what they could do to reset my password.  No sooner had I mentioned my account name than the customer service rep said, “I bet you’re calling because you’re locked out… Here’s what you need to do…”  She took care of it and I was on my way.  Once again, Wow!  And once again, an experience that would make me recommend the company to my peers.

Both experiences had a common element: anticipation.  The staff at both Hess and Constant Contact had anticipated my challenges, they knew how to address them – and they fixed them in a fast and pleasant manner.

Anticipated customer needs

Now, let me give you a different example.  I head marketing at FirstBest, which designs and sells software for insurance companies.  Early on, the company’s founders researched our market to understand insurers’ biggest underwriting challenges so that the company could anticipate their needs.  Turns out those insurers had a lot of challenges that had never been solved before and our company was able to develop great software applications that have consistently exceeded their expectations.

But we really knew we were successful when prospects began muttering things under their breath.  Thinking that my colleagues were out of earshot, prospects would say things like “Wow, they know my job!” and “holy s&#t” and “this would be great!”  Things that prospects and customers say only when you, the vendor, actually anticipate their needs by understanding their challenges at the very deepest level.

Anticipation wins customers

When applied to the customer/prospect relationship, anticipation is a powerful tool that transforms an otherwise nice-to-have solution into a game-changer.  A “Maybe I should I buy that” to an “I gotta have it”.  It can even create an almost emotional connection.  But most importantly, it’s about understanding the customer’s challenge and solving it in a unique and superior manner.  Which is how anticipation builds lasting bonds between customers and their vendor partners.

So, how well does your company anticipate your customers’ needs?

Six Solution Marketing Lessons from Netflix

As I mentioned at the end of the last post, Netflix: It’s the Customer, Stupid, Netflix’s recent misadventure is a cautionary tale for solution marketers.  Following are a six key lessons:

#1: As a vendor or service provider, technology upgrades are good.

So, if you rent DVDs and know the market will eventually transition to video on demand, you need to offer video on demand as well – just as Netflx does today.  Streaming is proven and consumers will demand it.  It’s not a matter of if, but when.  However…

#2: Consumers and customers do not share your company’s timetable

Having managed both mature and cutting edge products, I can say that it usually takes a while for customers to switch over to new technologies like streaming.  While you may want to entice customers to make the switch, you can’t force them without risking the loss of their business – which is of course what happened at Netflix.  If you’re losing money with the old business model (DVDs), you may actually want to jettison those customers.  But that’s not the case for Netflix, which projects healthy Q4 profit margins of 40% to 52% for DVDs (and 7 to 9% for streaming).

#3: Customer problems are not always communication problems.

When it comes to “communication”, Reed Hastings has issued more mea culpas than a sinner at confession. Just one problem: Netflix hit headwinds because of their customer-hostile strategy, not because of poor communication.  Netflix’s initial communication in July seems pretty clear and direct to me.

#4: If you’re trying to get customers to use new technology, bundle old (DVD) and new (streaming) together at a (gasp!) discount.

Incredibly, it actually looks like Netflix is more interested in punishing dual DVD and streaming subscribers than rewarding them.  These folks pay more and they almost had to manage their DVD and streaming accounts separately on two different, disconnected websites (Netflix has since scrapped that plan).  Instead, most marketers would discount bundles to reflect the lower customer acquisition and handling costs per dollar of revenue for dual DVD and streaming customers.

#5: Today’s old technology customer should be tomorrow’s new technology customer.

Every marketer knows that it’s expensive and time-consuming to build a customer base.  In fact, it should be a lot easier to keep existing customers happy than to find and convert new ones.  It only makes sense to keep those customers (and their revenue) and gently work over time to get them onto new technology if it benefits you and them alike.

#6: Remember that you exist to provide value to your customers.

Meet the need and provide a good value, and you’ll keep customers.  If you lower the value (customer’s perceived benefit minus the cost of using your service) by raising the price and lowering the benefit (as Netflix did), you’ll lose customers.  The perceived benefit is determined by the customer, not by you.  Sure you may think you’re providing a benefit by making streaming more attractive.  But if they’re not ready for streaming, then streaming – or any other new technology – is not a benefit.  And they won’t buy it.

Learn More

• The Solution Marketing Blog: Netflix: It’s the Customer, Stupid, Part I
• The Solution Marketing Blog:  Posts on Value
• Wall Street Journal: Netflix Adds a New Woe: Red Ink

Netflix loses sight of their most important asset: the subscriber

If you’ve read The Solution Marketing Blog for a while, you know that business (or consumer) problems tend to remain fairly constant while the technologies and solutions to those problems tend to advance at a more rapid pace.  That’s one reason why most problems have multiple solutions.  And it’s why dominating a market today does not guarantee dominance forever.  Just ask General Cinema (General Who?) or Blockbuster or, well, you get the point.

So, if you’re a savvy solution marketer, you realize that today’s hot technology or medium will eventually be replaced by another.It seems “the new guys” usually lead the disruptive technologies and solutions.  But it doesn’t have to be that way: the smartest incumbents will continue to innovate (often incrementally) in order to stay ahead – and even reset the bar for their competitors.  Think of Apple’s continuous cycle of innovation.  Heck, think of Apple, inventor of the home PC, talking about how the iPad ushered in the post-PC world.

Continuous Innovation in Movie Rentals

The movie rental biz is a great case in point.  Movie rental has migrated from storefront VCR and later DVD rental from Blockbuster to rotating DVD rentals from Netflix and grocery store kiosks from Redbox and now, increasingly on-demand video from cable companies and streaming video from Netflix, Apple and others.

Movie Rental Problem Statement:

For consumers:
“watching the movies I want, at my home, with minimal effort.”

So the industry is in flux and if you’re an incumbent, you have to stay well ahead of the competition, which is where Netflix finds itself today.  As you may know, Netflix’s rotating mail-order DVD rental put a major dent in Blockbuster (old news).  Consumers can borrow one, two, three etc videos at once based on their monthly plan.  If you rent a few videos each month, the plans can work great – and with videos delivered in the mail to your house, you don’t have to waste time picking up and then returning videos to a store (or worry about late fees – remember those?).

Netflix was poised for wild growth

Netflix has delivered consistent subscriber growth over the years.  By the end of March 2011, Netflix had 22.8 millions subscribers – more than any of the cable companies and just north of Comcast’s 22.76 million, according to SAI Business Insider.

Losing Sleep – and customers

But they had a nagging problem: they knew that eventually, someday, consumers would switch from DVDs to streaming media.  Having eclipsed Blockbuster and others with their mail-order DVD rental service, Netflix was determined not to let themselves get eclipsed:

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business.

-         Reed Hastings, Co-Founder and CEO, Netflix,
Netflix blog

Netflix was ready to move to streaming, even if their streaming library was far smaller than their DVD library.  Apparently, their customers were not.

Over the summer of 2011, Netflix increased the price of DVD rental by 60% and then announced plans to separate the DVD from the streaming business.  And it was a very real separation: now customers would have to order from two separate sites, increasing inconvenience and price at the same time.

Predictably, customers revolted.  If they weren’t upset enough by the price increase, they were incensed at the company’s lack of empathy.

Netflix Inc., which once could do little wrong in the eyes of customers and investors, has lost the goodwill of both.

- Wall Street Journal, October 25, 2011

And those customers rewarded the company handsomely by defecting in droves.  By the end of September, Netflix suffered a 3% net decline in customers for the first time since 2009 at least (if ever).  Compare that to quarterly growth rates as high as 17% for Q1 2011.  From an all-time high of $299 in July to $84 at today’s close, the share price has dropped by a staggering 72%.  With competitors seizing the opportunity, it may take the company a long time to regain both subscribers and investors.

As you might imagine, Nextflix’s folly is a cautionary tale to any solution marketer.  In my next post on Nov 7, I’ll explain why.

Learn More:

• Netflix: It’s the Customer, Stupid, Part II (live on Nov 7)

It’s what lurks below that drives solution launch success

Icebergs:  pretty, grand, glistening in the afternoon sun.  The stuff of movies.  And even disasters like the sinking of the Titanic.

And yes, these icy wonders share more than a few traits with solution launches.

The process of launching a new solution is much like an iceberg.  The most important trait?  Just like an iceberg, you see only 10% of the effort above water.  Up top and above the water, everything looks shiny and crisp.  Pretty even.  But just like an iceberg, a launch’s success is based on the 90% of effort, the foundation below the surface — the planning and preparation that sit well below the surface, invisible to the public and to many of your colleagues.  Oh, and yes, just like an iceberg, a bad launch can, well, sink a ship.  Yikes.

Let me explain.   

When you do a launch, “above the water” sit your press release, press and analyst coverage, website, social media activities, your ads, events, datasheets, public presentations, etc.  These are the flashy, shiny things that get all the attention and glisten in the sunlight, much like the tip of an iceberg.  And the most important piece is results, the gold that shines for you, your executive team, and shareholders alike.  Results like awareness metrics, the count and quality of new leads, and deals influenced by the launch and associated marketing efforts.

Most folks outside marketing think that marketing is all about what they see “above the water.”  But that is, after all, just the tip of the iceberg.  After all, in marketing – and especially in solution marketing – what lies beneath is actually more important because it determines the success of what lies above.

In fact , that shiny stuff above the water should be an end-result of a much longer process.  Sure, you’ll probably spend more than 10% of your effort, budget or time on the final assets, tools and campaigns.  But certainly, you also need to make a significant investment in the invisible foundation that lurks below the surface.

So what lurks below?

Below the surface sits solution marketing strategy; the full development of a solution encompassing corporate and partner products, information, business processes, and services; organizational alignment and commitment; an understanding of business problems;  development of compelling messaging and value propositions; sales enablement; selection of relevant communication channels; budgeting and more.  Much more.

Over the years I’ve seen many a launch that lacked a solid foundation beneath the surface.  The results were usually the same:

• Muddled messages
• Inability of sales to effectively sell the solution
• Dissatisfied customers, the result of sales people who overpromised and under-delivered solutions that didn’t meet their needs or expectations
• Internal confusion, infighting and finger-pointing
• And as a result, poor marketing and sales results

So, the next time you go to launch a solution, start by building a solid foundation of strategy, planning, messaging, sales enablement and alignment, and you’ll be on the way to great results.

Learn More

• The Solution Marketing Blog: Fixing the Mix
• Slideshare: Build a Winning Solution Marketing Strategy