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Richard's and Laura's Blog

3 Posts tagged with the apple tag
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The Disgruntled Traveller

Posted by RichardOwen May 26, 2011

A math quiz for my 11 year old son:

 

It is 419 miles from San Francisco airport to Las Vegas airport. And 2 miles from Las Vegas airport, terminal 2, to your hotel room. If the average speed of a Boeing 737 is 560 mph in cruise, and your average walking speed is 3 mph, how long will the total journey take?

 

Of course, it’s a trick question. The answer is, ALL NIGHT.

 

If you could walk from the terminal at Las Vegas to your hotel room, without being roadkill, it would only take you 40 minutes. Of course, you can’t do that. The airport planners, car rental companies and hotels work to ensure that, when Southwest airlines proudly announces that “the safest part of your journey is over” as they land, they could also add “the shortest part of your journey is over”.

 

Las Vegas, like many airports, has constructed a “consolidated rental car facility” which they proudly announced was “for your convenience”. This is great news, as I had been thinking that having the car rental facility within a short walk of the gate had been very inconvenient in the past. Now it’s located in a neighboring state, Kentucky, and is accessible by a bus ride (see prior postings on airport buses). By the time we arrived, Hertz was doing a cracking trade (at 11:30pm), and required 30 minutes of waiting time before service, during which they processed five other customers at their 3 desks. It’s hard to figure out what people are doing in these situations, but from the safety of the queue a well trained eye can hazard a guess:

The nice elderly couple wearing the “Visit Wisconsin” sweatshirt was negotiating a hostile takeover of Hertz Corporation;

The very young man whose brand of car should have been “Fisher Price” was clearly a mathematics genius building a simulation of his journey to optimize the returned fuel level under multiple traffic scenarios;

The couple at the front of the line was renting a fleet of midsize cars, one at a time. Upholstery choices seemed important to them.

 

Or something along those lines...

 

The hotel was not much better. In Vegas, it’s standard practice to provide a DNA scan as part of the check-in procedure, presumably so they can track you down if you dispute the Pringles weight activated sensor in your mini-bar. And yes, I’m still sensitive about the jury’s decision against me on that one last time.

 

But why is it so hard? What’s slowing us down?

 

Choice is one factor, information and trust is another.

 

Southwest Airlines really does understand this. They don’t have complicated offerings. I never have to figure out if I’m flying on a “J” class of ticket so I can understand my upgrade options – although having said that, I don’t even know why I’m asking, I already know the answer. They have a simple solution to a simple problem, moving people safely, cheaply and quickly from one location to another.

 

I can check in online. Boarding is simple and fast. They will even sell me a place at the front of the line – Business Select, although one such passenger arrived onboard to be shocked by the lack of “first class seats.”

 

“All seats are First Class” said the flight attendant. Beautiful.

 

For a de-humanizing process, i.e. flying, Southwest makes it feel, well, almost human and doesn’t make you feel dumb.

 

Car rental, by comparison, has too much choice, too little information, and too little trust. The eager renter faces difficult options: what class of car do you want? Surely not the same class you selected when you booked online! Is this your current address? Or is, by chance, your address the same address that you entered in your booking under the field “address”? We need to know!

 

Now for the tricky part. Her face a mask of concern, the agent informs me that I have insurance options. She cryptically adds “in case something goes wrong”. The insurance choices carry names that everyone would instantly recognize if they had a 30-year career in the insurance industry: Loss Damage Waiver for example. And there is a handy, laminated sheet to sub-reference the necessary legal clauses. To reinforce the serious nature of the contract you are entering into, the wall behind the agent has a section devoted to liabilities, and, of course, fuel choices. As usual, I declined the recommendation to take out short term “put” options on an exchange-traded-fund-tracking-light-brent-crude-oil. But keep those Black-Scholes* calculators handy kids!

 

The plethora of complicated options stems from the complexity of the legal transaction, coupled with the desire of the company to up sell the buyer. But it’s a mess. BMW only offers 2-3 choices of model for a $60k automobile, why do we need to make so many choices for a $100 rental? Choice has value in customer experience, but needs to be handled in a more effective fashion. Simple communication? Online choices to streamline “real time” processes?

 

Simplicity often wins the customer experience battle. Simple is fast. Simple is clear. Keeping it simple isn’t stupid, it’s hard work, but worth it. Over the last 30 years simple solutions like Southwest, Apple’s iPad, Google or Zappos have been winning the customer experience battle. As consumers, we are trained to believe that complexity is a cover story for bad profits – and often it is.

 

As I unlocked my rental car, the fellow next to me was taking photos of his rental choice, presumably to document the condition of the car when he took the wheel. He got the message.

 

 

*The Black–Scholes model is a mathematical model of a financial market containing certain derivative investment instruments.

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Not Just a Flash in the Pan

Posted by RichardOwen Apr 30, 2010

Let’s say you have the absolutely best product on the market. You out-innovate your competitors and have dominant market share. Things are pretty good: your customers love you, you have the best Net Promoter Score in the industry and you are making amazing profits.

 

Competition ensues. Extraordinary profits are a signal to the capitalist economy; picture the scene in “Finding Nemo” where the seagulls all start shouting “Mine!” The profit pool is deep, come dive in the water is lovely. Sooner or later, the profit pool gets eroded; either someone out-innovates you or the availability of close substitutes reduces prices and profits. It’s hard to keep the party going.

 

Unless.

 

Switching costs are the enterprise’s solution to the long term seeming inevitability of eroded profitability. If you can create significant costs for your customers to defect, you delay the inevitable. It’s the fountain of youth for corporate profits. Wireless contracts, pharma patents, up-front capital expenses – all great switching cost strategies that defend profits beyond their sell-by date. All legal, and all smart business practice.

 

From a customer perspective, the benefits are less clear. Companies that enjoy significant switching costs typically also demonstrate lower Net Promoter Scores. Of course! You now have reduced incentives to innovate and take care of your customers. Comparative NPS rules the outcome and all of a sudden you have a leg up when it comes to customers making a real comparison. I may not like my current provider as much as new entrants, but with the hassle and costs of switching they may keep my business.

 

Although it’s not part of a plan, companies with higher switching costs almost inevitably end up with lower NPS, and firms who are subject to brutal competition are more likely to fight to raise their scores (or just concede market share). And all companies are trying to create switching costs.

 

The Apple/Adobe spat in the news is, at one level, a simple business conflict. Adobe benefits from standardized tools that run their popular flash technology on all kinds of devices. Apple benefits from creating differentiation around those devices. These two perspectives inevitably lead to competition. The question is, how does this game play out for their customers?

 

A lot hangs on Apple’s ability to execute their strategy of being best when they go it alone. Nobody else in the industry has been quite as  good,  quite as innovative, at creating products that allow their customers to remain loyal despite switching costs. Once you have your itunes library, your iphone, your Mac, your switching costs are significant but your vendor has not, yet, exploited them – to the contrary, they have rewarded your loyalty with innovation. But the conflict with Adobe seems to take this strategy to the next level. Developers are being told to choose sides – which they hate to do – and Apple customers may face less choices and higher switching costs as a result.

 

Apple will be successful in creating switching costs, they have done so for some time. They are comfortable going it alone. But the pressure will only get more significant if competitors can create promoters using popular technologies such as flash. The table stakes just shot up.

 

Read also Josh Bernoff’s take on this at Advertising Age. Or, for an alternative, a view I don’t subscribe to from Simon Dumenco in the same publication.

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The Onion satirizes Apple.

 

OK, it's funny (and not true, of course).  But, at the risk of not just letting good humor stands without interpretation, there is a lesson for marketers.

 

If you are a loyalty leader, you get license from the market. Your mistakes are forgiven. A bad service experience is considered by customers to be a fluke – just bad luck. Even a poorly conceived product is assumed to be a work of genius. We know that high NPS companies don’t just enjoy more people who are willing to recommend. We know that they also have a greater proportion who are likely to recommend – a virtuous circle of word of mouth. The assumption is that you are good at what you do.

 

The flip side is tough work. Low NPS brands have to work harder, build better products and deliver superior services in order to compete. They need to overcome a deficit in positive word of mouth. Customers tend to believe that a positive experience was a fluke – they don’t always reward good service that you might actually deliver. It’s a vicious circle – the assumption is that you aren’t good at what you do.

 

Trends are hard to change in either direction. The solution? Never let yourself get out of “NPS Position” in your industry hierarchy. Fall outside the leadership circle for any period of time and it’s a lot harder to climb back in.