Dann: Your latest book is entitled "MarketBusters: The 40 Strategic Moves that Drive Exceptional Business Growth." Which of the "40 Moves" in your book are best applied in this kind of economic environment?
McGrath: The easiest one has to do with changing the customer's experience. The advantage of customer experience innovations -- as opposed to product or service innovations -- is the fact that you already have customers. You can actually see the customers and talk to them and do a little experimentation to find out what works and what doesn't without spending a great deal on what I call "expeditionary marketing." These efforts can deliver the most short-term results for the least investment.
I was working with a flavors and fragrances company. We were examining how their products -- which go into making other peoples' products -- get into the actual factory of the customer. We looked at the phase where the ingredients are being added to the customer's mix and asked, "Gee, what's the typical batch size you use?" They responded, "Oh, about thirty pounds." Well, the stuff had been shipped since time immemorial in 50-pound drums. Nobody had ever questioned this-- no one thought it could be shipped any differently. And, it turns out, this created enormous problems for their customers. The guy making the mixture has to measure out 30 pounds, then remember there are 20 pounds left, seal the drum, find some place to store it--you get the idea.
The innovation that solved this problem turned out to be packaging the material in 10-pound resealable "Ziploc" packages. It reduced the risk of error and spoilage and just generally improved cost throughout the whole process. It made a huge difference to the customer experience.
Dann: So, what kind of benefits will customers especially value in this kind of economic climate?
McGrath: Yes, it's incredibly important to hone in on the trade-offs that customers will make. In this day and age, your customers are giving a good hard look at this themselves. What could you add to your offer that certain segments would find very valuable and what would you want to take away that the segment doesn't value or would be prepared to do without?
A great example here is the business oriented hotel. If you think about a full-service hotel, you have a bar, a restaurant, daily maid service--all kinds of stuff. The business-oriented hotels have effectively taken out of the mix of their offering a lot of things you would take for granted in a full-service hotel. There's no on-site restaurant-- there's no on-site bar. Instead of daily maid service they can come in every two or three days. It's a pretty stripped down sort of experience, but in exchange, what do they give you? Unlimited high-speed Internet service. They often give you a microwave and a fridge-- a big desk. They provide that certain market segment just what they want without anything extra for a reasonable price. What they've capitalized on is that this market segment will make different trade-offs when they are traveling on business that they wouldn't make when traveling on a personal vacation.
The question people often don't ask--and I think it's worth taking a big step back to do it -- is "Why am I offering this?" Stuff gets into offers because at one time it was valued, but no one ever goes back and asks, "Is this still valuable?" My favorite example of this is in Microsoft Word. Even in Word 2007, there's a feature called "Word for WordPerfect Users." Back in the day when these two programs were duking it out for ownership of the "desktop" this kind of feature would have been incredibly important; if the WordPerfect competitors wouldn't convert, this would be a competitive problem for Microsoft. But today, the last remaining two living people who still use WordPerfect can use this feature, but by and large, it's irrelevant. Its time has come and gone. They can probably take out cost and complexity by removing it.
Next week, we'll discuss the internal processes companies can deploy for effective strategic planning during economic downturns and how the study of strategy in the business school setting has evolved in the last decade.