What Jeff Bezos Knows

Let’s not ‘turtle’ our way through the recession

Millennia of shared experience and painful years of direct experience have taught us to keep our heads down in times of crisis, lest we draw attention to ourselves. All this conditioning has trained us to think that if we don’t rock the boat, we might get through the storm OK.

From our herd instinct we have learned “there’s safety in numbers”. But marketers know that in order to get heard, this is a death wish. Only by standing out will we remain standing.

Now this does not mean, as some marketing agencies have been disingenuously promoting, that we simply “stay the course” and just keep advertising our way out of the recession. This makes sense only if we believe our prospects have money they could be spending with us, but are not, because they do not sufficiently know or appreciate what we are offering.

But this is not the problem. The problem is that they have less money to spend. So we cannot expect that simply repeating the same message about the same products to the same prospects is going to yield the same response it did before the recession. If we are going to be truly relevant to prospects who are facing new problems we are going to have to do it by innovating to find better ways of meeting those new needs.

everything that Jeff Bezos knows

This summer, Jeff Bezos, the CEO of Amazon, talked about Amazon’s acquisition of popular online shoe store Zappos, in an 8-minute video, a talk that he claimed was about ‘everything he knew.’ In short, what he said was:

1.Obsess over customers.

2. Invent. Invent on behalf of customers.

3. Think long term. Not all inventions will pay off immediately.

4. It’s always Day One. There’s always more to invent.

Excited about acquiring Zappos, he said, “I have seen a lot of companies and I have never seen a company with a culture like theirs. That culture and Zappos brand are huge assets I value very much.”

Clearly, Zappos has something ‘different’ about it that has delighted customers, analysts and now the big daddy of the online shopping space.

the Fanatics @ Zappos

Why should such differentiation matter to businesses? In the case of Zappos, they have an almost fanatical devotion to customer service and will go to lengths that other businesses may consider absurd. For instance, their returns policy allows customers to return footwear up to a year after purchase, with free return shipping. Unlike most online retailers, they delight in taking customer calls. They will even refer you to other stores if they don’t have the product you need.

Suicidal, most retailers would say. And yet, about 75% of purchases at Zappos on any day are from repeat customers, a figure that most brands would give an arm and a leg for. Year on year, their revenues are up 30% — even in a down economy. And that investment of extraordinary customer care paid off in an acquisition price of nearly $1B!

That is the power of differentiation. Zappos is certainly not the only online shoe store. In this economy, it is true that customers are shopping around for the best value. The thing to note is, ‘best value’ does not mean ‘lowest price’ for every consumer. Even with few dollars to spare, customers will still look for other ‘value’ benefits such as durability (can use a product longer), ease of buying (spend more time on that job search instead!) or better service (reduce the risk of being stuck with something faulty). Brands such as Zappos have built themselves by offering that differentiated value.

If such behaviors apply to something as discretionary as another pair of shoes, think of what this means for a considered purchase in a B2B environment!

slow death for copycats

What of the converse? If your company is currently selling undifferentiated commodities, you know how difficult it is to market them without slashing the price. In tough times, customers expect the imitator to offer an even bigger discount to compensate for the implicitly greater sacrifice that continued purchase of your product represents to them. Consider this – purchasing your $100K product out of their present $1M budget requires twice the commitment it did back when they had a $2M budget.

With undifferentiated products, your profit margins get more and more squeezed and you watch your bottomline rapidly turning red. Soon you discover that deep discounting is not sustainable unless you have the scale of a Wal-Mart.

finding what makes you different

Companies don’t become differentiated in one day. As the Zappos example demonstrates, differentiation often stems from a company culture, philosophy or vision. Without total commitment from business owners, differentiation simply becomes another fancy word that never actually gets translated into anything. So, first, there must be a desire to innovate at the highest level.

In addition, business teams must do the hard work of identifying relevant areas where they can make a difference. Sometimes, this may mean that a particular business will take time to pay off. This is where owners’ commitment to fund the business and open up other avenues to keep the cash flow going is critical. Some companies such as 3M and Google empower employees to innovate by allowing them to spend some time on free-thinking, creative work not directly related to their job. For smaller companies, helping employees innovate and find the difference can be a big challenge in itself.

avoid zebra innovations

To a zebra, no two zebras are exactly alike. To the human eye, however, the difference in stripe patterns is so negligible as to be non-existent. Don’t let your innovation fall into that category.

Translating innovation into market relevant products and services is a big challenge but this is also when all the hard work finally begins paying off! This involves understanding the market well so that your hard work isn’t irrelevant to what consumers need or will pay for.

When Apple developed the iPod, customers didn’t pay simply for a smaller device that would let them listen to music on the move. The idea was not to offer a better portable music player. Instead, Apple’s innovation lay in giving consumers an easier way to access the music they liked, in units they wanted, rather than having to buy an entire album in the form of a CD.

Ultimately, the only innovations that work are those which offer customers credible differentiation in some form. Does it help them do more? Can they do more with less money? Does it help them spend their time better? Does it make their lives more enjoyable or less stressful? Innovations that create a difference on these lines are the ones that customers are willing to pay for. Getting from conceptual innovation to concrete differentiation is a process that must address these questions.

Finding your own unique uniqueness

InSighting Ideas helps companies develop customer-centric innovation and then ensure that nothing is lost in the translation from innovation to differentiation. We ground our innovation sessions in a sharp understanding of customer behavior and the “drivers” that motivate that behavior. These come from a contextual understanding of the customer’s purchase and use of your product, including a powerful mix of ethnographic research and creative ideation. As a result, our recommendations are all based on insights about what prospects seek and are not getting from other providers currently. We help tap those pain points which exist, and which too often, companies miss.

If you believe that your team could create stellar differentiation to help your company succeed, our five-step program based on our expertise can help you in uncovering unseen customer insights, creating customer-centric innovation and relevant differentiation. If your company would like to straddle the path from innovation to differentiation, contact InSighting Ideas to ask for a free consulting hour on how we can help you create your own opportunities.

Who knows? Maybe we can create $1B of differentiation for Amazon’s next acquisition!