Andrew Mackie, business catalyst

The thin veneer of luxury

The probable journey of luxury handbags:

• Cows in a field,
• Cows in a truck,
• Cows killed and skinned in an abattoir,
• Cow hides in a truck,
• Cow hides at the tannery,
• Leather in a truck,
• Leather on a container ship,
• Leather in another truck,
• Leather in a factory (or sweatshop),
• Leather cut to size,
• Leather sewn into handbags,
• Handbags labeled, packaged and placed in nondescript cardboard boxes,
• Handbags transported in a truck/container/ship/truck,
• Handbags in nondescript boxes delivered to a retail complex by delivery staff,
• Handbags stored in nondescript boxes in a retail storeroom,
• Handbags removed from nondescript boxes by staff on minimum wages,
• Handbags placed carefully by staff on aesthetically beautiful display units in luxurious retail premises, priced at $3000 as befitting the true luxury & status of the brand.

Why are consumers satisfied by so thin a veneer of luxury? Do they not know or just not care what goes on behind the scenes?

There is momentum building for systems that make the ecological footprint of products visible to consumers - a history that travels with each product. This will no doubt reveal all aspects of production, including the source & conditions of labour for each product. Manufacturers will find transparency forced upon them - those who move fast to voluntarily and openly provide transparency will be the winners. Will this transparency also limit the mystique that marketers can generate around a finished product?

Homaro Cantu, remarkably mad restauranteur

If you thought you'd seen everything there was to see in food, you haven't come across Homaru Canto of moto cuisine. He offers a degustation menu that's so different it's truly remarkable, using liquid nitrogen, class 4 lasers & a patented polymer oven to create visual and textural plays on food beyond anything I've ever seen.

This may not be your thing - Howard doesn't care. I'm sure the place is booked months in advance by people who absolutely love it. Here's what he and business partner Ben Roach had to say at PopTech in 2006:

Information asymmetry

In his excellent book The Undercover Economist, author Tim Harford discusses (among many other topics) the problem of information asymmetry, first identified by Nobel prize winner George Akerlof in 1970.

Information asymmetry
Information asymmetry is a market condition where the sellers of a certain good know more about the product than the buyers. Akerlof’s example was the second hand car market where sellers know the foibles of their cars but buyers cannot tell the good cars from the bad. Buyers therefore compensate for this uncertainty by offering a price lower than the sellers of good cars are prepared to accept, preventing the sellers of good cars from entering their car in the market at all. Ultimately the effect of information asymmetry is that the second hand car market becomes a market for lemons.

Solution #1 - Experts
Given the value to both sellers and buyers in reducing uncertainty, a variety of businesses have been created to solve the state of asymmetric information in a number of markets. Two examples might be pre-purchase vehicle inspections in the second hand car market and building & pest inspections in real estate. Of course, experts sometimes have different incentives to that of their clients - real estate agents, for instance, have little incentive to get the best price for their clients, instead looking for turn houses over as fast as possible. Freakonomics discusses one study which found that real estate agents kept their own houses on sale ten days longer (waiting for a better offer) than the average, getting 3% more than the price they obtain for you and I.

Solution # 2 - The internet
Of course, the most powerful antidote for information asymmetry has been the internet. Information is no longer controlled by the powers that be - it's now democratised and readily searchable through Google. It's also changed the speed at which information is available so that everyone gets it at the same time. Finally, a large number of comparison services have been created to deal specifically with this issue, be it a restaurant guide or customer reviews on Amazon & EBay.

Solution #3 - Other signals of quality
Where information asymmetry persists in spite of experts and the internet, Tim Harford explains that consumers look to other signals for quality that have nothing to do with the product itself. A car dealer with a marble-floored showroom would therefore be viewed more favourably than someone who operates from their garage. This is because their larger investment suggests they are more interested in protecting that investment than doing a dodgy deal and leaving town. I see two problems with this, however, where significant financial investment is involved:

a) Apparent risk only
Investing in non-product quality signals speaks to apparent risk rather than real risk – the marble flooring makes no actual difference to the quality of the BMW parked on it. Being an inefficient solution it may worsen the problem - sellers may seek to recover their investment by massively inflating prices, selling lower cost goods or hitting you with hidden costs.

b) The past, not the future
The second problem with this high-investment solution is that a showroom is an indication of a previous commitment, rather than a future commitment. That prior commitment might also involve high levels of debt, requiring solid-looking businesses to close without warning.

What does all this mean? It's hard to get people to trust vendors in faulty markets. For you and I who want to sell things, this is a serious problem. In a future post I'll discuss an inexpensive solution that any business can employ.

What's in it for me?

In the battle for Australian ice cream cone supremacy, Nestle and Streets are currently going head to head with expensive TVC campaigns, promoting their Drumstick and Cornetto respectively. Here are their commercials:

Watching the ads, it seems that Streets have a better handle on the 'what's in it for me?' factor - their tagline of 'no boring bits' is a compelling difference between their cone and the competition. The axe-weilding maniac clearly demonstrates the difference - we don't need to believe Streets, we can see the difference.

Nestle, by comparison, appear to be taking a social proof / nostalgia line, that Drumsticks have been part of the Australian summer experience since 1963. This might encourage us to get to the corner store to buy an ice cream, but standing at the fridge which ice cream will we choose? Maybe the one with 'no boring bits' rather than the one that was first made in '63.

Ensure your products have a compelling advantage over the competition (one that consumers will find compelling, not you) and in every instance of your customer-facing material, ensure that it passes the 'what's in it for me?' test - clearly communicate that compelling advantage. If you don't, you're wasting your precious cash, your time and another opportunity to turn consumers into customers.

The Brand Gap

The Brand Gap by Marty Neumeier is one of my favourite business books for three reasons:

• it explains clearly what a brand is (trust),
• it provides a high level view of how to build a brand, and
• you can read it and understand all of the concepts in 90 minutes.

This slide presentation tells you all you need to know about the book - the book uses the same illustrations but with additional text that's worth the investment.

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Storytelling

Storytelling is a method of creating an emotional connection between you and consumers, one that bypasses the filters that protect them from the noise and clutter of modern life. It works because it replicates how friends communicate - through stories rather than the transfer of facts and figures.

Consider Honda, who wanted to convey their commitment to and success in achieving their impossible dreams. They could have tried listing their achievements or spouting figures but they created this masterpiece instead:

You’ve just willingly participated in a Honda history lesson, spanning 50 years and highlighting 12 of their most significant vehicles and motor sport achievements. Honda paid you to educate yourself about their passion & products by offering Andy Williams’ compelling narrative (the song), the filmic visuals of stunning Kiwi scenery and allowing you to vicariously enjoy the character's Honda-derived pleasure. 

Here's the current Australian campaign for Nestle Diet yogurt:

Nestle have reinforced their ‘No unexpected calories’ tagline for Diet yogurt by using the familiar metaphors of a courier & female friends conversing, playfully but directly attacking other ‘light’ snacks, reminding women of their thighs and showing Kate’s confidence & blissful ignorance in eating Diet yogurt. You were paid to educate yourself on Diet yogurt with humour that’s still funny after multiple viewings.

Renault have a different take on vehicle safety:

You’ve just been shown multiple full frontal, offset frontal and side impact collisions for eight models in their range and seen each of the passenger safety cells remain intact. Normal crash testing images are of manikins hitting concrete barriers in strangely painted cars and are as interesting as watching paint dry. By using the metaphor of a ballet, simple but beautiful visuals, playful music and a large dose of the unexpected (how many car ads have you seen where the cars are crashed?) you were pleased to educate yourself that Renault have the safest car range ever, with 8 models achieving a 5 star NCAP rating.

Then there’s Jim Beam (small town nostalgia), Apple (versus PC), Mainland cheese (farmers who take life at a gentle pace), Bud Light (male rituals) … the list goes on and on.

Of course, you don’t need to invest in an expensive television commercial to tell stories. Where possible you should tell your story - one that is truthful to you & your products and is meaningful to your target audience – consistently in every customer-facing interaction. 

Belief

A few years ago, Dove started their campaign for real beauty. For Dove it was a point of differentiation but it was more than that - a core belief that a) the cosmetics industry negatively impacts women's (and particularly young women's) self-esteem and b) real beauty exists in all women. It's been enormously successful for Dove, so successful that Nivea has recently started a poor imitation of the campaign.

Here are three examples of Dove's campaign and the latest ad from Nivea. Firstly, Dove's 70 second 'Evolution' film released virally a couple of years ago, showing how fake images of models really are: (email readers click through to view)

Secondly, Dove's 'True Colours' ad - a clear statement of belief without selling any product at all:

Thirdly, an advertisement from Dove on their pro-age range of products, a brilliant counterpoint to the proliferation of anti-aging products on the market:

Finally, here's Nivea's lacklustre me-too campaign which is currently running on Australian commercial TV:

In his book BE Brands, author Simon Hammond explains how brands with core BElief foster a desire for BElonging from consumers. If the brand exhibits BEhaviour consistent with their BElief then they can expect amazing BEhaviour in response from their consumers. Dove has achieved this to a remarkable degree by sharing a clear and original BElief. Nivea will, however, need to come up with the own BELief and share it with much greater clarity than the advertisement above.

As for your business, your BElief can be simple and does not require the investment that Dove has devoted to theirs - it just has to be yours and not faked. Simon Hammond's advice is to be who you are, to "start with your passion ... follow your real spirit, align that with the real lives of consumers and see where you end up".

Experiences: Build-A-Bear Workshop, Pete the Pom

I pity the teddy bear stores that sell just bears - Build-A-Bear Workshop delivers an experience 'where best friends are made'. Here's a video that a customer has made about their visit (because Aunt Debra sent a gift card). Don't skip what the kids have to say.

Children follow this process, posted on the wall of the store:

Choose Me (select an empty bear from around 20 styles)

Hear Me (a prerecorded/personally recorded sound or heartbeat)

Stuff Me (insert a heart, make a wish and child presses button to fill)

Stitch Me

Fluff Me (brush the bear on a stand which looks like a child's bath)

Name Me (name the bear, print a birth certificate)

Dress Me (choosing from a wide range of clothing & accessories)

Take Me Home (in a home-shaped box)

Because Build-A-Bear Workshop provides every opportunity for kids to personally create and bond with their bear in-store, the bear is highly anticipated, lovingly made, unique to each child and cherished longer than the average bear. This in turn makes the bear worth more to the parents who happily pay higher prices, giving more profit to the store owner.

Most products can be turned into experiences of one form or another, and it doesn't necessarily mean a large investment. My local shoe repairer is called 'Pete the Pom' and the entire district knows him. He ends every sentence with either 'me handsome' or 'my lovely' as in 'What's wrong wiv your 'eels, my lovely?' or 'That'd be fifteen bucks if that's alrigh', me handsome'. We all know he's hamming it up but we love it, love him and love his work. He doesn't repair shoes, he makes us feel good. Sure, his style doesn't suit everyone but he doesn't care - visit on a Saturday morning and there's a queue well out the door of his tiny store.

Take every opportunity to turn your product into a customer experience.

Gordon Ramsay, restaurant catalyst

I love watching the UK version of Gordon Ramsay’s Kitchen Nightmares, a TV show featuring one of the world’s most successful chefs delivering weeklong, intense and foul-mouthed crash courses on how to run a restaurant for those who desperately need it.

Here’s the first ten minutes of one episode:

Gordon follows more or less the same consulting method each episode:

1. Visit as a customer
Gordon visits, tries the food & samples the service. He provides critical feedback, pulling no punches, to the assembled owner and staff.

2. Obtain commitment to change
Gordon shows how bad things really are and obtains commitment from everyone to change.

3. Observe staff
Gordon steps into the kitchen and watches the chefs and service staff at work. Typically owners haven’t put systems in place either in service or the kitchen, don’t have properly trained staff and don’t have enough experience to improve the situation.

4. Demonstrate viability
Most owners cannot go much further financially and have reached desperation point. Gordon demonstrates how the business can be turned around, sometimes running trials to show how much money can be made.

5. Inject business sense
Gordon puts systems in place across the restaurant, leverages relationships to get better deals on business inputs and finds contra deal opportunities such as cross-promotion.

6. Rebuild passion
Usually the staff have wallowed in mediocrity for so long that they’ve lost all interest in their job. Gordon works with them to restore “passion, care, attention & love for food”.

7. Provide focus
Typically the restaurant has an inconsistent theme and a menu without focus. Gordon says "a good restaurant does one thing brilliantly, a bad one does fifty badly" and typically cuts the menu down to 5 excellent (& simple to prepare) dishes per course.

8. Restore confidence
Gordon often provides the staff with a surprise challenge that irons out problems in the kitchen and restores confidence of the staff and owner.

9. Consolidate the learning
Gordon observes staff on a busy night, irons out remaining bugs in the system.

10. Find replacement staff
Some staff cannot change or do not have the owner’s interests at heart. Gordon provides the owners with the courage to get rid of them and finds qualified replacements.

11. Leave
Gordon Ramsay know how to make a number of small changes to achieve significant outcomes. Then he hands control back to the thankful owner and leaves.

So that’s Gordon Ramsay’s method. It’s good advice for any type of business and entertaining to boot.

Being remarkable

In this classic 20 minute TED.com video, Seth Godin explains how to make your idea spread:

The core ideas:

• The TV-Industrial complex (where more advertising -> more sales) is dead.
• People don't care about you, they care about themselves.
• Be remarkable (both being different and worth talking about) to cut through the noise.
• Find a passionate audience - sell to people who are listening & maybe they'll tell their friends.
• Making average (merely very good) products is now risky - no one will notice.
• Be remarkable.

For further reading, check out one or more of Seth's books.