Posted on Tue, Nov 22, 2011 @ 11:19 AM
Recently Yahoo fired its CEO, Carol Bartz. Although the company’s stock price jumped 6% immediately following the announcement, the problems plaguing Yahoo go beyond the choice of chief executive. The biggest challenge facing Yahoo goes to the core of what the company is and what it wants to be: Yahoo has become irrelevant to their users.
Yahoo was once one of the biggest success stories on the Web. It was the earliest and most successful “web portals,” offering visitors a broad assortment of news and information on everything from personal finance to movie listings to stock quotes to job listings to sports. Millions of people used Yahoo e-mail addresses. Yahoo was once mentioned in the same breath as Google, Amazon and AOL as one of the top online companies.
The problem for Yahoo is that the days of “web portals” are over. People don’t need a single site to click through multiple menus and sub-menus to find the information they’re looking for: now we have search engines like Google that deliver more precise results. Let's face it, Yahoo no longer gives web users a compelling reason to visit the site multiple times a day.
Although Yahoo is still a popular site in terms of the total number of people who visit it, Yahoo’s share of users is declining – and its revenues from display advertising are going downhill as well.
Today, Yahoo is a shadow of its former self. In 2008, Microsoft offered to buy Yahoo for $33 a share ($44 billion), but Yahoo’s then-CEO Jerry Yang rejected the offer. Yahoo’s stock price has gone mostly downhill ever since, currently trading at less than $15 per share.
The biggest problem for Yahoo, as Slate’s Farhad Manjoo explains in a recent article “What’s Yahoo to Do?”, is that Yahoo doesn’t know what it wants to be. It’s no longer a search engine like Google, it’s not a social network like Facebook – Yahoo has become a “rudderless collection of sites,” as Manjoo describes it.
Can Yahoo ever regain relevance, or is it doomed to go the way of Netscape and other forgotten relics of the Internet?
Takeaways from Yahoo's current predicament:
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Innovate or die. Yahoo needs to come up with something new. Of course, this is easier said than done, especially in the highly competitive, here-today, gone-tomorrow world of the web. Can Yahoo create the next Twitter? Could Yahoo serve as an incubator of promising young web startups? Unless Yahoo can create some new “next big thing” online, it’s likely to continue to lose ground to Google, Facebook and other sites.
- A scattershot approach rarely succeeds. Unable to compete with Google or Facebook (Yahoo once offered to buy Facebook for $1 billion, but Mark Zuckerberg declined the offer), Yahoo has tried to diversify. The company purchased various small startups like Flickr, but there never seemed to be any core guiding strategic principle behind the acquisitions.
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Know what you stand for (and know what your customers want). Yahoo doesn't seem to know what kind of company it wants to be. As the board decides on a new CEO, Yahoo needs to ask itself some hard questions: Who still needs Yahoo? Who are Yahoo's biggest fans? Perhaps this analogy doesn't work as well for a web company, whose revenue is based on amassing millions of anonymous eyeballs, but Yahoo needs to take a hard look at why it exists, who it serves, and who "couldn't live without" Yahoo.
Every business needs to know the answer to the question, “why do customers buy from you instead of your competitors?” Yahoo needs to find out, “why do people visit our sites and use our online products and services?” Then find a way to make Yahoo’s marketing more relevant to more of those people.
Image by MV.Tech.Blog
Posted on Wed, Nov 16, 2011 @ 08:29 AM
Amazon is growing its network of distribution centers to match the growing customer demand for faster shipping and a wider array of products. According to a recent article from All Things D (“Amazon Seeks Greater Fulfillment by Adding Distribution Centers”), Amazon is planning to add 9 distribution centers during 2011, with the possibility of building even more if demand increases. This follows on a high-growth year during 2010, when Amazon added 13 fulfillment centers to its logistics network.
Although all of these new distribution centers cost money to build, they aren’t cutting into Amazon’s earnings too heavily: on July 26, 2011, Amazon announced its biggest sales growth in four years.
Three reasons why Amazon Prime was an amazing sales strategy:
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Treat different customers differently: A common mistake that many businesses make is to treat all customers the same: you try to offer the same value proposition to everyone, even though different people respond to different aspects of what you sell. Your company is valuable to different people for different reasons, and not all customers are going to be ideal for what you offer. By the same token, some of your customers might be willing to pay more for special benefits. Are you offering them? For example, Amazon has an Amazon Prime service, offering free 2-day shipping for a $79 annual membership fee. The high demand for Amazon Prime is helping to drive Amazon’s investment in new distribution centers in order to make all those 2-day deliveries. What are the opportunities for your business to create value-added services or other options to generate more revenue and deepen relationships with your best customers? It’s not a matter of “fairness,” it’s about doing the right thing for your best customers. As Seth Godin says, “Treat different people differently. But don’t treat anyone worse.”
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Customer loyalty is (almost) always a good investment: When Amazon introduced its Amazon Prime membership service, many analysts predicted that this would be bad thing for Amazon, eroding its profit margins. After all, how can Amazon afford to ship so many packages, in two days, for a flat $79 fee? However, the results were more positive: Amazon Prime has helped to improve customer loyalty, boosting overall sales volume and making it more efficient for Amazon to cover the costs of serving those Prime customers. Amazon is so supportive of its Amazon Prime option, that it is also offering free unlimited video streaming for Prime members, as a way to entice more people to pay the $79 annual fee. It’s cheaper than Netflix…which, as we’ve written, didn’t do itself any favors with its recent price hike.
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Play the long game: Many Wall Street analysts have been disappointed with Amazon’s short-term profits as a result of these investments in new distribution centers. However, it’s clear that Amazon is playing a longer-term game by investing for the future. (And Amazon’s stock hasn’t suffered too badly; its share price is up 12.6% year-to-date.) What are some of the decisions your business has made that might have aroused criticism, especially in the short-term, but were the right thing to do for your long-term goals? You can’t listen to short-sighted criticism. Always focus on the long-term benefits (and possible risks) of any action your company is going to take.
Posted on Mon, Nov 14, 2011 @ 08:05 PM
According to a recent article in the Economist (“The winning streak: HBO and the future of pay TV”), HBO (Home Box Office) is facing a complex, ever-changing climate, with more innovative competitors than ever before. Even though HBO is critically acclaimed, wildly popular and highly profitable (104 Emmy nominations in 2011, 28 million subscribers, $4 billion in annual revenues, responsible for ¼ of the operating profit of its parent corporation Time Warner), it still needs to adjust to make sure it stays relevant to the rapidly changing market for TV entertainment.
HBO has become known for setting the standard for smart, intense, “adult” television that doesn’t have to meet the limitations of broadcast TV – many writers claim that HBO offers them far greater creative freedom.
As a result, because of this creative freedom, HBO is a creative playground of choice for some of Hollywood’s top talent. Screenwriter Alan Ball worked with HBO to produce the show “Six Feet Under” soon after winning an Oscar for the film “American Beauty.”
3 factors causing HBO pressure:
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Eroding consumer buying power: The economy has taken a toll on the disposable income of millions of middle-class American households, making people less willing to pay for TV. According to the Economist article, in 2010 the proportion of Americans that pays for television dropped for the first time ever. Many Americans are looking to cut spending in any way they can, and cable TV (and especially premium subscriptions like HBO) are often at the top of the list for spending cuts.
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The end of the “home box office?” Although HBO is best known in recent years for its award-winning original TV series, a large part of its programming schedule consists of broadcasting movies – hence the original “Home Box Office” name. But this movies-on-TV business model is coming under pressure in the age of Netflix instant video streaming and video-on-demand. People have more choices than ever for how to watch movies, sooner and sooner after they are released in theaters, and they don’t need to subscribe to HBO to do it. We’re reaching the point where everyone has the ability to create their own personal “home box office.”
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New competitors for premium TV: At the same time, HBO is facing intensifying competition in the original TV production business. Showtime and Starz have created critically acclaimed TV series of their own, like “Dexter” and “Weeds.” AMC has launched hit shows like “Mad Men,” “Breaking Bad” and “The Walking Dead.” Even Netflix is getting ready to introduce its own original series in 2012 called “House of Cards,” starring Kevin Spacey and produced by David Fincher (director of the film “The Social Network”) which won’t really be on “TV” at all – it will be available to Netflix’s instant streaming customers.
HBO still has a very strong brand. But “brand” alone is not enough to help companies overcome their challenges. Brands can lose relevance with customers for all sorts of reasons that are often beyond the control of the brand managers.
When working with companies, I often start the presentation by asking them, “Do you have a brand?” They say “Yes.” Then I ask, “Does your competition have a brand too?” They say “Yes.” Then I say, “Oops, now what?” Companies sometimes lean too heavily on brand. The worst mistake HBO could make would be to assume that “we’re HBO, and no one can do what we do better than us.” Because the fact is, the trends in technology and consumer behavior all point to a growing diversity of media channels, and greater ease for consumers to access the content that they want to watch, when they want to watch it – without having to wait for HBO’s programming schedule.
What HBO is doing to compete: "HBO Go"
HBO’s business strategy for the future appears to be centered on its new online streaming service, “HBO Go,” where subscribers can get on-demand access to HBO’s original TV shows, often before they air on TV. In the future, HBO could potentially sell its shows directly to customers, without even needing to rely on paid TV subscriptions.
As the pay-television system comes under strain, HBO is wise to consider creating its own platform to sell its content directly to the people who watch them.
The future of television could look very different in another 10 years. The same is true for your industry, whatever business you’re in. Are you making the adjustments today that will help you stay relevant tomorrow?
Chart via: Business Insider
Posted on Wed, Nov 09, 2011 @ 06:25 AM
I recently saw a TV ad for Quik Trip called “This is How We Roll” that really resonated with me. This is unusual, as I don’t usually eat at convenience stores, and I’m probably not the target market for the ad, but I think this TV spot illustrates some important points about relevant selling that other companies can learn from.
The ad shows a montage of moving tires, rims, and steaming hot dogs rotating on a griddle. The soundtrack is weirdly catchy and funky, with a techno/hip hop beat, and it positions the company as offering quick, convenient food for busy, on-the-go parents.
The voiceover says, “No time to mess with no four-course meal. Gotta blow, gotta go. Gotta get the kids to the…soccer field.”
This is interesting because it’s clearly positioning Quik Trip as a fast, no-frills dining option. They’re not trying to claim that Quik Trip is gourmet food; they’re saying something simple and believable and relevant to what customers are looking for: “Come to Quik Trip if you want to eat something fast.”
The voiceover goes on to say, “Dying over here…could eat my full leather steering wheel…need a meaty chill pill.” At the same time, the visual side shows a circling parade of taquitos and hot dogs.
Finally, the ad closes with a simple plea: “Think hot dogs. Think taquitos. Think Quik. Oh yeah.”
Here's Why the Commercial Works:
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It's a good example of relevant selling. Quik Trip is trying to appeal to a very specific consumer mindset at a very specific moment in the day: "I'm driving in the car, taking the kids to soccer, I'm hungry, maybe I missed lunch, maybe I’m running late for dinner, and I need a quick snack."
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It’s highly focused. The ad is only selling two products: hot dogs and taquitos. They're not trying to be all things to all people. They're not trying to make Quik Trip food sound like something it’s not; they just saying, “Hey, if you’re hungry, come get a hot dog or taquito at Quik Trip – they’re hot and ready to eat!”
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The creative doesn't get in the way of the message. The ad is clever with its visual flourishes, thumping soundtrack and “serious businessman” voice – but the cleverness supports the message, rather than distracting from it. Every image and sound supports the central marketing message: “You're on the go, you're hungry, come to Quik Trip for easy, fast food.”
It must be hard to differentiate convenience stores. It’s a commodity business with lots of competition, and very little "brand loyalty." Most people choose convenience stores based on, well, convenience – location, and often the price of gas on any given day.
Even if this ad doesn’t help Quik Trip against its other competitors in the convenience store market, it will help with the daily competition of making customers choose Quik Trip vs. not stopping at all. Quik Trip's "competitor" is not just "other convenience stores," it's "other ways to eat” – with this ad, Quik Trip is trying to become top of mind instead of "bring a snack" or "wait till you get home" or "stop at the grocery store."
Overall, I think this ad does a good job of relevant selling by positioning Quik Trip in the minds of customers. After someone sees this ad, perhaps the next time they’re feeling hungry while out running errands or picking up the kids, they’ll be more likely to stop at Quik Trip for some quick calories.
Posted on Thu, Nov 03, 2011 @ 09:52 AM
According to a recent article in the New York Times (“RIM Suffers as Profit Falls 58.7%,” Sept. 15, 2011), Research in Motion (RIM), maker of the BlackBerry smart phone, recently announced disappointing earnings results. The company’s shares lost 19% of their value, and many Wall Street analysts are saying that the future viability of the company is in doubt.
Just a few years ago, RIM was one of the most-admired companies in the mobile phone world. They basically invented the smart phone as we know it today – the BlackBerry was the first phone that also allowed people to check their e-mail, becoming known as the “CrackBerry” for its addictive properties. RIM’s reliable and secure systems made the BlackBerry popular with corporate IT departments, enabling companies to keep their people connected even when away from the office.
But after the iPhone was introduced in 2007, RIM failed to adapt to a fast-changing market. Even though BlackBerry was the first modern smart phone, and RIM basically invented the category of smart phones, most people today probably think of the iPhone as the prototypical smart phone.
Why BlackBerry and RIM are losing their way, and the lessons other companies can learn from RIM’s difficulties:
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Be proactive, not reactive: RIM got caught flat-footed by the emergence of the iPhone. The iPhone was something new – a smart phone that was more like a computer in your pocket, with a full Web browser and an ever-growing selection of software “apps” to navigate the everyday difficulties of life. BlackBerry was slow to offer a full Web browser capability, and they gradually lost relevance because their phones didn’t offer the same extensive features and apps as the iPhone and Android systems. Once the iPhone came along, suddenly people had the ability to surf the Web, shop online, get directions, buy movie tickets and access specialized content and tools on any conceivable topic, all from their phones: just being able to check e-mail wasn’t enough anymore. But instead of being proactive by innovating and offering something new, BlackBerry merely rolled out updates to its existing product.
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Focus on your best customers: BlackBerry achieved some of its biggest success in the corporate market. But after Apple introduced the iPad, RIM tried to get into the consumer market for tablet PCs by introducing its PlayBook tablet. The problem for RIM is that the PlayBook is nowhere close to being able to compete with the iPad. The iPad is better for presentations, has a bigger app selection, and is generally setting the standard for what a tablet should be. Instead of rolling out an inferior version of a highly successful tablet geared toward the consumer market (where Apple already had an insurmountable lead), perhaps RIM should have focused more on developing great new products for the corporate market. Too many tech firms try to sell to the common consumers instead of to corporate clients, even when they don't have the right products and the right message.
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To stay in first place, you have to innovate: Five years ago, BlackBerry was by far the #1 smart phone in terms of market share. They ran ads with trendy designers, artists and entrepreneurs talking about how much they loved their BlackBerry and how it helped them live a bigger life and be productive on the go. The decline of RIM shows yet another example of how being the first to market doesn't necessarily lead to lasting dominance. You have to continually innovate, and keep giving your customers something new to be excited about.
I am a BlackBerry user, and in fact I just bought a new BlackBerry Bold, and I like it a lot. So I am not rooting for RIM to fail, by any means. There are still signs of hope for the company – RIM still has over 65 million subscribers and preparing to release a new generation of phones based on its QNX operating system. Perhaps RIM can defy the expectations of analysts and find a way to survive. But ultimately, this story shows the rest of us, especially in the tech sector, how fast the world can change. No company can afford to rest on its laurels or coast along based on its past success. We all need to continually adapt and innovate to make sure our products are relevant to what customers want to buy.
Posted on Tue, Nov 01, 2011 @ 07:35 AM
According to a recent article in the New York Times (“Walmart to bring back layaway for the holidays,”), Walmart is bringing back their "layaway” payment program, where customers can set aside big purchases at the back of the store and pay for them in advance, over a period of several months. This is a pretty significant sign of just how cash-strapped consumers are feeling in the present economic climate.
Layaway is a rather old-fashioned concept in retail, dating back to an earlier era in American consumerism, when credit cards were scarce and people were expected to pay cash for even big-ticket purchases like appliances.
During the years of America’s credit boom, everyone was using credit cards and many retail analysts thought that layaway was obsolete. Walmart discontinued its layaway program back in December 2006, saying that most of its shoppers were using credit cards or gift cards when they couldn’t pay cash.
Walmart is not the first retailer to re-introduce layaway. Toys “R” Us brought back layaway on high-priced items in 2009, and Sears started offering layaway again in 2008. Instead of charging interest, layaway programs typically charge a service fee. For example, Walmart’s layaway program requires a $50 minimum purchase, a 10% down payment, and a $5 service fee.
3 Key Lessons that Businesses can Learn from Retailers Bringing Back Layaway:
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Listen to your customers. Walmart is bringing back layaway in response to demand for customers – people wanted another option to pay for their purchases. This might sound obvious, but many companies overlook it: give your customers what they want. Listen to their feedback. When customers care enough about your company that they offer suggestions for how you can help them, that is a positive sign. Offering layaway is not a cost-free proposition for Walmart. Surely there are some costs involved with storing the layaway items and keeping track of payments. But it seems like the costs are worth paying if you can keep your customers happy.
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Get creative with financing. Right now, there are a lot of people in America who are really struggling. Consumer behavior has changed dramatically in the past three years, especially for the segments of U.S. society that have been hardest-hit by the recession. If you sell to the middle-class/working-class consumer market, you might need to be creative about how to sell to them, or how to take payments. Depending on what you sell, could you offer your customers more flexible payment arrangements? How could you do "layaway" in your own business? This works for B2B sales as well as business-to-consumer; creative financing options are definitely in vogue in the B2B world. My consulting firm has even done flexible payment schedules for some of our clients.
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Help your customers feel "richer" than they are. Some customers who are going through hard times might be reluctant to buy items on layaway; it might feel like there is some stigma attached. There are a lot of families out there who had good jobs and disposable income 4 or 5 years ago, but who are now struggling to have any money left at the end of the month. There are millions of consumers who have gone from “trading up” for aspirational purchases to “trading down” for bargains. Perhaps Walmart and other retailers should consider rebranding layaway. Give it a new name, like “Pay in Advance,” “Advance Payment Express,” or “Smart Budget Buying.”
Choice of words matters. If retailers can make layaway sound more like something that people are choosing to do – in a proactive, energetic way – rather than something they’re being forced into because they don’t have enough money, then that might resonate with the mindset that these customers want to have about themselves. Even if they’re going through tough times, no one wants to feel “poor.” Retailers should try to make people feel good about using layaway, and make them feel smart about managing their budgets.
Photo from ABC News