This is post number nine. Looks like I’m going to make my ten post goal for April. As always, you can subscribe to the blog by email. Thanks for reading.
I’ve had this thought rattling around in my head for awhile and after listening to the latest episode of Slate Money about brands I wanted to take a shot at writing it down.
One of my very favorite mental models in marketing is “satisficing.” The idea comes from Nobel Prize-winning economist Herbert Simon and is a portmanteau of “satisfy” and “suffice.” The basic idea is that a much more reasonable model of human behavior than utility maximization is that when we make decisions we ensure that we clear some arbitrary satisfaction threshold (satisfy) and then we give up excess utility for ease (suffice).
Here’s Simon from his 1956 paper “Rational choice and the structure of the environment”:
The central problem of this paper has been to construct a simple mechanism of choice that would suffice for the behavior of an organism confronted with multiple goals. Since the organism, like those of the real world, has neither the senses nor the wits to discover an “optimal” path — even assuming the concept of optimal to be clearly defined — we are concerned only with finding a choice mechanism that will lead it to pursue, a “satisficing” path, a path that will permit satisfaction at some specified level of all of its needs.
What does this mean for brands? Well, first and foremost it means that people are spending way less time thinking about your brand than you hope they are. In most situations brands are a means to an end: A way to ease the burden of choice we all face in our everyday lives. This doesn’t mean that marketing doesn’t matter in the decision-making process, just that we should generally assume people are spending way less time thinking about our brands than we like to think they are.
But I think there’s something much more interesting for marketing strategy at play here. (Please bear with me as I work through some thoughts out loud.) Satisficing says two important things about how people make purchase decisions: First, they ensure that whatever they’re buying clears the threshold and second that they sacrifice excess utility for ease of purchase. (As an aside, I always wondered why it was “suffice” instead of “sacrifice”.)
If that’s true (which I think it is), than you could argue there are only two true strategies for marketing a product: You either have to move the bar or you have to make your brand the easiest to buy. Let’s take those one at a time.
How do you move the bar?
Well, there’s not one bar, so let’s start there. But to be a mass product the bar represents the minimum set of requirements for a category of products. For toothpaste that’s pretty much price (around ~$3), taste (minty for most), and distribution (do they have it at Walgreens/CVS/Walmart/Costco or wherever it is you buy your toothpaste). For cars, where there are multiple categories, the first thing you have to do is narrow down your choices based on use case (compact, SUV, truck) and then price (cheap, regular, luxury). After you choose a category (say luxury SUV), there are a specific set of requirements that make up the threshold. (Four wheel drive? Leather seats? Sorry … not in the market for a luxury SUV, but hopefully you get my drift.)
If your product can’t hit that threshold for whatever reason you’re in trouble. Either you’ve got to change your product to break the bar, switch categories, or you’ve got to attempt to move the threshold.
Take airlines: You could argue Southwest (and Ryanair before it) moved the threshold down by pulling hard on the price lever. They said you don’t have to pay a lot for air travel, but to move the price down we’ve got to remove a bunch of the requirements that the category typically has like reserved seats, free baggage, and even flying into major airports (for Ryanair at least). On the other side, when JetBlue launched 20 years ago, they moved the bar up by saying every plane should have cable TV and tasty snacks.
While it seems like both of these moved the bar different directions (and, to be fair, that’s how I presented them), they actually both had the same effect: They raised the bar and made their competition unbuyable for some portion of the population. While Southwest did away with some of the luxuries of air travel, they raised the bar by saying a flight must be less than this amount. JetBlue, on the other hand, decided to play an experience game instead of a price game, but the outcome was the same in that they made their competition unbuyable to a specific target. The competition is left with the same set of choices: Rejigger their product or move the threshold, thereby making themselves buyable again.
One of my favorite current illustrations of this problem is Airbnb. They did such a great job differentiating themselves and their product that they made themselves unbuyable for business travelers. The threshold for most folks traveling for business is basically the opposite of what Airbnb markets: I want the same room in every city, with coffee in the same place, and most of all I don’t want to have to talk to anyone about my life when I arrive bleary-eyed at 1:30 in the morning with a meeting the next day at 7am. If you look at what Airbnb is trying to do with their Work product it’s basically to change their product by highlighting listings that meet these basic threshold requirements (automatic entry, fast wifi, working space if I remember correctly). The next step, of course, is to convince the world that those things actually constitute the bar.
So that’s the first marketing strategy: Find a way to move the threshold and make your competition less/un-buyable. In essence this is category definition/re-definition work.
Onto the second strategy …
How do you make yourself easiest to buy?
What about for situations where you can’t /don’t want to move the bar? This is where you have to make yourself the easiest to buy. The most obvious way to do this is to ensure you’ve got distribution in places people are and/or spend a ton of money on advertising and put yourself in the front of a shopper’s mind when they’re walking down the toothpaste aisle. This is basically the definition of physical and mental availability from Byron Sharp’s How Brands Grow.
But are there other ways to make yourself the most buyable that aren’t about mass reach and also don’t constitute moving the bar? (Again, competing on price, I would argue, is about moving the bar, not making yourself easier to buy.) I think the answer is pretty much no. Obviously there’s stuff like naming and packaging, but changing those can also have the opposite effect (see: Tropicana, 2009). There’s an interesting argument that some of these new ecommerce plays across every industry is about making things more buyable, but I’d actually argue getting a mattress delivered in a box or new razors at your door every month are the definition of moving the bar in an attempt to make your category competition unbuyable.
So what’s the conclusion?
Well, as usual, I’m thinking out loud and not totally sure. One of the interesting questions this raises is whether I’m thinking of things too zero-sum, but while we know consumers try lots of brands in a category, it’s safe to assume any single purchase is almost always zero-sum.
The other question is whether you can/should be doing both of these things at once? Should you be using your reach to try and move the bar. I think the answer to this is almost definitely yes. You should either be using your reach to move the bar or make yourself the easiest to buy and you should be very clear about which outcome you’re trying to drive. Of course, that raises the obvious question of whether you could use marketing to try and raise the bar while at the same time making yourself easier to buy and I think the answer is probably yes, but I’m not sure yet.
One thing it does clearly suggest is that it’s critical that everyone has a sober eye on the threshold requirements and an understanding of whether your product currently meets them or not. Another is that you shouldn’t try to persuade someone rationally if it isn’t towards the end of raising the bar of the category.
Anyway, fun to write some of this out and would appreciate any feedback. Comments are open and I’m @heyitsnoah on Twitter or you can find me via my contact form.
At the beginning of December I gave a talk at Google’s Firestarters event that built on some of the ideas I wrote up in my post about strategy as algorithm. Rather than posting the whole deck, which at some point I will do, I thought I would try to share the slides in groups of a few at a time and tell the story over a number of posts. This is a bit of an experiment and mostly because I’m trying to get all the posts I can out of the deck, so thanks for bearing with me.
What is strategy? Anyone who works in and around brand has run into something called strategy, but seldom do we step back and actually ask ourselves what it is and what it means. A few weeks ago I posted this definition from Lawrence Freedman’s book Strategy: A History (via Martin Weigel):
Strategy is much more than a plan. A plan supposes a sequence of events that allows one to move with confidence from one state of affairs to another. Strategy is required when others might frustrate one’s plans because they have different and possibly opposing interests and concerns… The inherent unpredictability of human affairs, due to the chance events as well as the efforts of opponents and the missteps of friends, provides strategy with its challenge and drama. Strategy is often expected to start with a description of a desired end state, but in practice there is rarely an orderly movement to goals set in advance. Instead, the process evolves through a series of states, each one not quite what was anticipated or hoped for, requiring a reappraisal and modification of the original strategy, including ultimate objectives. The picture of strategy… is one that is fluid and flexible, governed by the starting point and not the end point.”
Despite that, most of what we talk about when we’re discussing strategy is actually a small set of tools that were all developed before 1970:
- Market Segmentation (1920): “General Motors CEO Alfred P. Sloan managed GM’s car models through loosely monitored “divisions,” which operated as separate companies with Sloan’s oversight, laying the groundwork for today’s corporation.”
- Customer Funnel (1959): “The progression through the four primary steps in a sale, i.e., attention, interest, desire and action, may be compared to that of a substance moving through a funnel.”
- Scenario Planning (1967): “The practice involves envisioning multiple future events and developing plans for responding to them. Shell first experimented with scenario planning in 1967, helping it navigate the oil shock of the 1970s.”
Ultimately a strategy is an approach for solving a problem. In the case of marketing, a strategy is generally the formula a brand develops to identify the best mix of activities and messages to communicate the positioning of the product or company with the goal of driving growth (either in sales, price, or purchase occasion). Strategy, then, is not the activities, but rather the framework a brand uses for choosing (and not choosing) those activities. (We will come back to this point later.)
For strategy to live in the world it must be paired with execution. The problem with strategy is that it doesn’t work in a vacuum. Strategy without execution is just words on a slide. For our purposes, then, when we talk about strategy we are talking about two things: The approach to solving the business problems and the coordination of resources to execute on that approach.
In the next installment I’ll dive into execution, how it’s changing, and why that matters a lot for strategy. Stay tuned.
In response to my post on Strategy as Algorithm, Michael Migurski shared this image with me from P&G CEO A.G. Lafley’s book Playing to Win: How Strategy Really Works.
These are the five questions Lafley’s used for making major strategy decisions at P&G. In explaining why he uses this approach and why strategy is hard, Lafley explained:
In Roger Martin’s and my view, the essence of strategy is making 5 integrated — sometimes difficult — choices; so 5 choices to win. And a lot of us, a lot of human beings, don’t like to make choices, right? Choices are difficult, we want to keep our options open, choices involve taking risks, and not only risk to the business but personal risk. So I think there’s this sort of human resistance to making choices, and choices are the core of strategy.
Business Insider has a nice breakdown of what each step in the above image means and how they were used. Here, for instance, is how they explain the capabilities question:
What are my core competencies that are going to enable me to win? In order to make the above decisions work, they have to be based on and supported by the things that a company’s best at. For P&G, it was innovating quickly and understanding consumers.
Now that Lafley is back at the helm as CEO it’s interesting to take some of his more recent decisions, like the big one to divest a large number of brands, through the lens of this system.
When I was at Naked we used to have a joke for an advertisement that was little more than a strategy line: We’d say “your strategy is showing.” If you work in the marketing world you know what I’m talking about, it’s those ads where someone wrote a line about what the brand was trying to accomplish with its marketing and rather than coming up with a creative way to represent that they just made the line the ad. (I can’t think of a really good one off the top of my head, so if you’ve got one chime in.)
Anyway, I was looking at Twitter when they first launched their redesign and all I could think was “your strategy’s showing.” Obviously it’s not an ad, but when you see the labels on the tabs at the top its so obvious that they let their strategy slip into their nomenclature decisions.
For those who haven’t noticed the new tabs are “home,” “connect” and “discover.” Home is good, it works, I get it. But connect and discover are very funny choices for a company that is otherwise almost always very impressive in its UI decisions (it’s sort of amazing how far they’ve come since they were an organization that outsourced design completely).
Anyway, back to “connect” and “discover,” what do they mean? “Connect” is interesting and I really like the new activity feed view, but I certainly wouldn’t think of what lies beneath as being represented best by the word “connect.” “Discover” takes things even further. That’s one of those words that gets thrown around (we used it at Percolate for awhile) even though I’m fairly convinced no normal person on the planet has ever though of what they do when they find cool stuff on the internet as “discovery.”
The beauty, of course, is that if you’ve got a platform with however many hundreds of millions of people used Twitter than you can actually define these things. Often, that’s the best solution since no other word perfectly encapsulates what it is your trying to represent. We ultimately went with “brew” to describe the main Percolate dashboard for brands because it’s something unique and because of the relationship with clients, something we can be sure to define as part of the on boarding process.
But still, it’s funny when you catch someone with their strategy showing.
We’re hiring for a bunch of different positions at Percolate and one of the big ones is sales. My co-founder, James, wrote a good post outlining how we approach sales and hiring salespeople. This part in particular hit close to home:
I’ve thought a lot about my profession as my career in digital advertising sales has evolved. It is an interesting profession that I’ve enjoyed but there are things about being a salesperson that I’ve always been intrigued by. For starters, a lot of salespeople, even very good sales people, don’t like to think of themselves as being in a sales profession. They will call themselves ‘business development’ or ‘account manager’ or ‘chief strategy officer’, while often their goals all ladder back to a direct sales relationship with the company that employs them. They might pass it off as, ‘well everyone sells’, and while that is hopefully the case, why shy away from what your profession is? Own it and be proud to say you’re in sales.
Towards the end of my time in agencies I began to fully grasp this. Most/all of your job as a senior strategy person is actually sales: You’re helping to get client buy-off on creative ideas. As we’ve been starting to hire salespeople I’ve been talking to some of the folks I know from the agency world and trying to get them to come over under this capacity. Surprisingly, most are much more open than I would have expected. To James’ point, the holdup is almost entirely in the title, they are worried about the implications of being a “salesperson” not in the actual selling (which most of the folks in advertising I know live for).
Anyway, no specific point here other than to say you should read the post and, if you like it, come work for Percolate.