2+1 ¢ : A Full Cent More on Customer Insights

My brother started playing guitar since he was 12 and he was pretty good at some points. My family all felt pretty surprised that he became an engineer not a musician. According to him, one of the reasons he didn’t even try to make music his career was the guitar he likes is too expensive and mixers are costly too. In fact, he wanted a Martin Guitar, one of the finest guitars that money can buy. Celebrities, from Paul Simon, Willie Nelson, and Johnny Cash to Eric Clapton and Dave Matthews Band all own one the this babe and performed with it. Special edition’s MSRP is up to 25 thousands Dollars a piece, and even the more affordable models cost $2000. Despite all that, Martin Guitar is still considered a highly valuable investment and most of all, it does not depreciate.

So how did Martin Guitar do it? In my opinion, first, the celebrity endorsement marketing approach works quite well in the music industry. Second, the company creates a remarkable product that the right people seek out. Then, the company can charge high premium to the customers who crave for the products. Their manufacturing capacity is always full with more demands increasing every year. Our class has been doing exactly the same practice: identifying the target segment, gaining insights and finally developing products. This weekend, I spent most of the time making a product prototype of 'recessed shower caddy' and I was wondering: Seriously! If I was the VC, will I invest on this piece of "art" out of my own pocket?

Obviously, it will require more work and time to complete such task in the real life. For example, we will have to choose an appropriate pricing model to stay competitive and also profitable. Even though the idea of product is not new and customization products are usually more expensive, we designed the product knowing it serve the customer’s needs to make bathroom clean and more organized. If we understand the customers better than they understand themselves, we are able to provide a higher value proposition than the modular piece-together fixes and up-sell the customers with a more complete solution for bathroom organization. Gaining customer insights is like getting a pass code to their bank account; marketers will do little wrong with whatever they are going to sell.

2.9¢ : Great Peer Blogging

It finally comes to write another assigned topic after many hours of struggling with being creative with writing. I think it is so much easier to find a blog and have a comment about it than crafting the blog from scratch, even though there are so many things to blog about, I don’t want my blog to be just a blah. I think Mark Olson did a great job in his blog "#6 Why do people still wait in line at the movies?"

"Is it a fear of new technology" when it comes to the customer’s reluctance to use automated ticket machine? In Mark’s blog, he posted the above question. In lieu of enjoying the benefit of saving time, many movie-goers, as Mark observed, rather waited in line to purchase tickets from the counter. It’s really a lose-lose situation especially during the peak hours. Customers are waiting behind 20+ people in line and theater managers have to hire more staff to handle the rush traffic. I also agree with Mark’s analysis of reasons behind why the customers fear for technology – we are just used to the conditioned process and do not want to change. People don’t want to look stupid in front of the machine doing simple tasks like buying a ticket or checking in the flight. Maybe the situation is the same for ATMs and vending machines, but the volumes of these machines are much larger than movie or airline ticket kiosks. There are only ~10 theaters in Austin and 1 airport, of course. I believe someone (especially older generation) would scratch their heads and feel complete lost while attempting to use an ATM right now and look around to see if any live help is available.

Since every decision of customer is an economic decision, some people value their time highly that they are willing to try things that appear to be better, faster and more convenient. Certainly, customers waited in line for movie ticket probably want to save time too, but they may also want to save themselves from public embarrassments since they have never used the machine before. I constantly see travelers showing signs of struggle in front of the ticket kiosk, perhaps because they are the first timer or unfamiliar with the operation system, but they have no choice since their plane is leaving soon. I think the company (or theater manager in Mark’s case) should assign a staff standing next to the automated machine, guiding the customers how things get done quicker, offering helps to the customers with any trouble, and even bringing the customers fro the line to the machine and show them the step-by-step. It may take a long diffusion curve for the majority to cross the gap of technology, but companies need to start somewhere and it is better early and late.

2.8¢ : Design with Customers in Mind

I recently talked to a RISD (top ranked design school in US) student on their project with the company OXO. 'Good Grips' was the breakthrough that helped the company to earn its current market place years ago since the designing team spent tremendous of time to understand the needs of customer segments before the first sketch of design was drawn. The proposal for design school students will not be approved based on only creativity, but also usefulness. The real life experience for him this summer is that not all the beautiful idea can sell, so he has to make some compromises between the art world and the business world.

Customization seems like a solution. Target has launched a service in 2004 called ‘Target to a T’ where customers can design their own clothing online. Although Target currently only offers very limited choice, customers can pick their preferred color, fit, rise, and packet/leg styles and of course the clothing is made to fit the size. It costs $36.99 for a pair of jeans, which is not bad at all. The information gathered from the customers might also be analyzed to help Target to design their store brand clothes. Because Target did not offer too many different product lines, they should be able to mass produce the clothing at a very competitive price and make the purchase more easy and convenient for its shoppers. The idea is great, but I don’t see my self buying custom clothes online particularly, since I am skeptical that the jeans will look and feel exactly the way I want it to be. Another reason may be because trying out different things is part of the fun of shopping --- for girls, at least. In addition, I feel the web site is a bit lacks of human touch and I seriously doubt the general public enjoy shopping on Target to a T. Nevertheless, I personally think customization of Timbuk2 is a brilliant idea and I think if Louis Vuitton could do the similar thing on its signature canvas bag, it can reach another level of luxury.

The 64 million dollars question for any product launch is "how to enhance customers experience even though the product is already customized by request". I don’t have an answer, but product development certainly should come hand in hand with customer feedback to reach the ultimate satisfaction. Stores like 'Timbuk2' or 'Target to the T' must constantly review customer satisfaction survey and evaluate what’s the disconnect between customer expectation and reality of the product they ordered. The truth is customers can always put together a customized BMW online, but they rarely pay for it without a test drive.

2.7¢ : Costly Free Shopping Website

Everyone likes free stuff. But if you are offered to get free stuff you like worth of thousand dollars, you might think "it’s too good to be true". It is very likely is the truth. I started with studying Consumer Research Corporation (CRC) and found there are so many complaints filed by its members who registered to their websites like retailreportcard.com and producttestpanel.com. These websites promised their potential members free gift with registration, but eventually the members not only complained about not receiving the freebies but also complained about the unstoppable spamming horror.

So exactly what information CRC collects from its members? I barely found it hidden among all the fine prints:
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We use all of this information in the following ways:
1. to provide you with personalized marketing information via electronic delivery and/or direct mail;
2. to send you targeted advertising via electronic delivery and/or direct mail;
3. to contact you for feedback and surveys via electronic delivery and/or direct mail;
4. to send you general and administrative information about your CRC membership via electronic delivery and/or direct mail; and
5. to provide your contact information to CRC marketing partners to allow them to send you special offers via electronic delivery and direct mail. This most often occurs when you request that we do so such as when completing an online survey;
6. to deliver products to you for the purpose of review and testing.
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What we could easily understand from CRC's private policies is they have the right to spam the consumer to death. According to the previous court ruling of DoubleClick case, plaintiffs in this type of case need to establish the accused company's primary motivation intercepting communication is criminal and the transactions are not authorized by users. I am sure by now majority of the people are aware of the freebie online is most likely very costly --- cost of your privacy.

I think consumers have a love-hate situation about marketing research and how insights should be collected. For example, many of us will obtain product rating from Consumer Report before buying the product, but most of us don't want to give user experience to some strange dude on the phone in the name of marketing research. We just need a trust-worthy organization to help us gather customer feedback and distribute them at an aggregated level. Truth to be told, I used to always turn away any marking research activities because I fear that my information will be wrongfully used. However, I found myself on the phone this weekend with a telemarketer guy from Spurs. I gave him information about how my experience was of the game, whether I prefer going with a big group or just 2 people, and whether I will be interested in buying next season Spurs tickets. I feel pretty good about helping Spurs to get to know their fans a bit better. Of course, I might regret my kindness to help out this marketing research a month later because all the non-stop marketer callings. "National Do-Not-Call registry" will come in handy then.

2.6¢ : Sticky Sony

When you hear someone said they are in the market of buying a new camera, you most likely think they are looking for a digital camera. Indeed, 35mm seems like such a distant memory. Digital cameras are probably one of the few high tech gadgets that have crossed the chasm into mass production. Among the big players, Sony is known for always creating its own standards, from early day's Beta VCR to Mini-disc. While the capability of digital camera expands, the capacity of data storage needs to increase as well. Currently, Sony creates the memory card so differently than any other existing technology. There are a lot of customer complaints posting on the web. Andy Pennell’s blog is one example. "Rant: Sony Memory Sticks: what are they thinking?"

The blog is hosted by MSDN, Microsoft's Developer Network blog which offers help for developers in writing applications using Microsoft products and technologies. IBM, Sun and HP also have similar employee blog to better communicate with the technical community. However, this particular blog didn’t mention anything about Microsoft’s product; just expressed the author’s frustration of Sony application design strategy. I found myself following his trend of thought very easily, unlike some other blogging reading experience. The author talked about several incidents that people are confused by Sony memory card naming convention. Not only the author’s friends, but also the author himself (should be a very technical guy) have trouble finding the compatible memory card for his Sony electronic device among all the offerings:
Memory Stick
Memory Stick (with memory select)
Memory Stick MagicGate
Memory Stick Duo
Memory Stick Duo MagicGate
Memory Stick PRO
Memory Stick PRO Duo

Since MSDN attracts technical community, I assume people who make comments to this blog probably have similar technical background or at least look for technical information. Hence, blogging becomes a mean to reach the audience that usually not reachable by conventional marketing.

Most of the consumer probably only looks for the basics of digital camera, such as resolution, optical lenses, or the appearance, but for more advanced users; they may start to look into compatibility or software interface and friendliness. Sony’s products have a lot of great features and superb quality, but its different-than-mainstream design standard always baffles new customers. Since product cycle seems to be pretty short (different naming/standard is created every 6 months), Sony should have posted the latest update on the web and make sure the link is printed on every instruction of Sony electronics package. Although Sony product "differentiation" strategy may not change in a short run, customer experience can be improved by simply the due diligence.

2.5¢ : Prada at Soho

This 4th of July holiday, I took a trip to NYC in hope of escaping from Texas heat, and of course do some decent clothes shopping. Prada is one of the targets that I can not pass on. The famous Prada flagship store occupies the entire block on Broadway and Prince Street, although 80% of the showroom store is used for presentation and only 20% for product display. It does seem to be a little bit over the top. The giant "wave" designed by the Dutch architecture took almost half of the room, sloping from the street level to the basement level. There are at least 20 LCD monitors lined up next to the walk path, featuring Prada’s latest runway show. I was excited to check out this store and want to know how RFID would change my Prada experience.

I talked to the most adorable sales guy in the store and asked him to show me the trendy suitcase that in fact I can’t really afford. Then our conversation switched to their RFID project. When the store opened in 2001, RFID was deployed to help the company gain customer insights as well as to serve as a high tech marketing tool. However, according to the sales person, Prada had to drop the project due to technical difficulties. First, the technology itself is not at its optimal stage. It constantly needs IT specialist onsite 24/7 to maintain the stability. Second, there are unknown RF signals (probably from cell phone or other electronic devices) interfering the transmission. It’s rather annoying when scan is not doing the right trick to show off RFID's feature. Third, majority of Prada’s customers prefer more personal service, sometimes two sales people at a time, rather than enjoying the benefit of "fast service". Beside, I think Prada faced the same privacy concerns that challenged Wal-Mart and Beneton, especially when Prada’s customers have higher social economical status, they may not want their information be shared or used by any brand marketing research.

Although RFID project was terminated, Prada doesn’t seem to stop expanding to other high tech territories. There is a new movie out in the theatre over the weekend, called "The Devil Wears Prada". Of course, the movie is not only about the mean boss who wears Prada but also about how an average girl thrives to succeed in the big city. Nevertheless, the marketing effort combines movie, music, and retails in selling everything Prada. They also work with Amazon.com on exclusive sales of clothing and leather goods we see in the movie. Majority of the merchandise were sold out before the movie release.

Although I didn’t take away the $1200 sheepskin suitcase I really want from Prada's Soho store, the experience is like touring a modern art museum, expect everything has a price tag. Priceless!!

2.4¢ : The Green Mermaid Invasion

There is no way that we can talk about customer experience without mentioning Starbucks. The black magic of coffee began before 1000 A.D. when an Ethiopian man ate the same "cherrie" that made his goals unusually hyperactive. More than a thousand years later, we are still frisky about this magical liquid all over the world.

It's not the coffee itself but the customer experience of coffee has helped Starbucks become Fortune 500. Starbucks has done something remarkable: promote something that costs about 50 cents, sold it for $3.50, and still made customers crave it. They have figured it all out what exactly their clients want and deliver the same way every time. There is rarely any selling effort necessary after the brand equity and customer loyalty been established. In fact, when was the last time we see any Starbucks commercial on TV!!

When I grew up back in Taiwan, we didn't have coffee around. Because tea has been dominating in Chinese beverage culture for centuries, the grand opening of Starbucks coffeeshop in Taipei, Taiwan was just as revolutionary as the first coffee shop in the world opened in Turkey in 1475. In Westerne's mind, Chinese tea probably is as tastely as water. However, if you ever visit Taiwan, you would feel amazed by all the tea shops at every corners of the city. Tea beverage is sold hot and cold, mixing with juice, flavored syrup, herb and all different kind of condiments like jelly, tapioca and pudding. Most of all, tea beverage is cheap – averagely 50 cents per cup, so it is very popular all over Southeast Asia countries. However, Starbucks and its franchises came to this marketplace, where per capita GDP is only half of US (China is less than 1/10), still sold a cup of coffee for $3.50 US dollars and slam-dunked the beverage business in Taiwan and China.

Starbucks becomes so successful that they opened a hundred stores in just 4 years on the tiny Taiwan island of population at 22 million, and it plans to double the store number very soon. Starbucks prospers in Taiwan by single-handedly bringing in a great coffee experience. In additional to making customized beverage (same as the existing tea shops), Starbucks tailors its food menu to satisfy local favorite. There are much more selections than just pound cake and muffin. Furthermore, Starbucks created a welcoming environment in store internationally for people to socialize, which indeed is a unique attribute in Asian culture. Unlike Starbucks in US mostly serving professionals, where everything is drive-through or pick-up efficient, stores in Taiwan draw major crowds by dedicating an entire floor for students to study or people who want to have some quiet reading; other floors are regular hang out areas where people usually play poker/chest or have group meetings. Starbucks in Taiwan becomes more like pub for guys/girls to pick up or get picked up: the difference is people are paying a lot for coffee instead of paying a lot for beer.

Now when I drink Starbucks, I not only enjoy a cup of awesome coffee but also indulge in an extravagant experience or memory associated with it and some fun time I had in the stores. Hence, Starbucks has successfully transformed a commodity to a luxury. On the business side, there is lower GDP and cheaper everything from labor to material, Starbucks business soars in Asia without any marketing, promotion or advertising. That's a true tale about customer experience.