Flipping the Funnel and where it does and does not work

This post was driven by this very funny video with Brian Posehn doing stand up at SXSW poking fun of Joseph Jaffe and New Media.

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Flip the Funnel is Mr. Jaffe's Book which is linked here:

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The premise is that it costs less to keep customers than get new ones. This idea goes back to the stone ages when the first spear tip maker had his first competitor for business. I have 16 years of Customer Service and Account Management experience. I have seen from both sides companies not investing in quality or customer service and thus losing clients while replacing them.

Where this specifically works is in Service Industries and High Ticket Item OEM's whether consumer or industrial. Service is easy. Your not taken care of you flee to another company or person. Big ticket items have the highest potential for buyers remorse. Try a new soda flavor and you don't like it, you toss it but do not cause pain to the Brand. Will you really stop drinking Coke just because Coke Vanilla tasted like Waste Water? No. But if you are upset you bought that car and your stuck with it for awhile, your never going to buy that Brand again.

But does this work for consumer brands? Yes and No. Whenever there is an equal out there it is very hard to Flip the Funnel. Can Coke win all my business Flipping the Funnel? No. Never. Not anyone's. People will substitute Pepsi when the deal at the market means saving money. (See previous blogposts on how Point of Sale trumps Ad Spend every time). But Coke can do this at their Wholesale Clients like Restaurants that usually only offer one brand. That is someplace that Coke can Flip the Funnel because service will often trump a pure price play and their retail patrons can't choose the 'or equal'.

What about other Brands? I personally think we patronize certain Brands or Products and do not know why. We try something, like the price point and found no problems using it so we go back and don't actually think about trying another Brand or Product for a long time. I really don't think the Brand did anything besides get lucky. But often this is price driven. And when you sell on price often you are vulnerable to someone else's better price.

Now with Store Brands coming in with almost equal taste and quality it is really hard to win and keep customers without a constant effort of coupons and rewards. Super Markets and anyone with a Loyalty Card Program do this the best. It doesn't mean they are truly Flipping the Funnel with superior attention or service, but the bribe of something back for the patronage is very strong. Think Frequent Flier Miles or a buy 10 sandwiches get one free at your local Sub Shop. But again we do patronize places that are cleaner, happier employees, better quality stuff and know we have to pay more gladly. But I don't think the products themselves can Flip the Funnel because service is not involved. Service is required.

See my post on Skullcandy

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High end brands definitely have an edge. They can combine quality with cache/image to keep you. Often this brings great service to the mix. Higher end products are sold at more upscale retailers that spend more to ensure the value proposition is there. And while a Brand might lose me if they product turns out shoddy, I won't blame Nordstrom's who gave me great service. Unless I specifically ask a sales person an opinion that turns out wrong.

For Service Industries or Big Ticket Items Brands MUST Flip the Funnel. For other consumer product Brands maybe spending a bit more on quality vs focusing on price will help them win more business.

The Coming Mobile Commerce Destruction of Retail Profits

I have been kicking around this scenario for a while. It should strike fear in all retailers (and somewhat for Brands too). It will erode customer service especially in times of economic recession when 'price' trumps all else because profits have to be made so service might be cut. And with the increasing power, abilities, and breadth of mobile smart phones and eventually tablet computers small enough to take around with you this will be the bane of brick and mortar stores.

When we shop online we have the ability to compare prices. Thank you Search Engines! Soon we will be doing this in stores that sell 'Commodities'. Commodities in this case is anything I can buy (same or equal) at multiple locations within a short drive. These could be anything small like a bag of Doritos and a case of Pepsi, to big ticket items like HDTV's or even automobiles!

This blog has discussed in the past the Point of Sale fact of life for consumer products. Anything that has a substitute is in danger of a lower price competitor getting the sale no matter how much is spent on Advertising based on the current price in the store. Often this is out of a Brand's control. I have used the Coke vs Pepsi battle as example number 1. The Supermarket not the Brand puts one on sale with the club card as a loss leader (or break even leader) so you buy what is on sale vs maybe your preference. Kiss all those Ad Dollars Goodbye!

Your Supermarket could care less as long as you buy your Cola from them. But to Coke and Pepsi its a revenue issue. I myself prefer Diet Pepsi but buy what is on sale at point of purchase.

In the future (not too far off) a consumer will be able to show up ready to buy and at the point of sale not only decide based on pricing at that store, but also compare with every other retailer within a few mile radius. I can show up at Best Buy and run the Sony 56" HDTV throw my Smart Phone and show that the store down the street has it for $250 less and I demand they match the price or I walk.
I am in Best Buy, this proves my preference to buy from them, will they let me walk?

Or I can compare a Sony and a Panasonic 56" HDTV and I can contact Sony and say I am buying the Panasonic if you don't match their price via Best Buy somehow.

This isn't a browsing dilemma. This isn't a 'let's sow the seeds so we get the sale in 3 months'. This is a 'the person is ready to buy immediately' and if you miss the sale you must wait for the next purchasing opportunity to make the sale. For Coke and Pepsi they might have to wait a few days to a week or two. For a big ticket item it could be years before the next chance. Just think Sony and Best Buy has a chance to sell a 56" HDTV right now with the next chance in 4 years! What do they do? Especially if the consumer notifies them that they prefer to buy Sony! You give a competitor a chance to not only get this sale, but all the free marketing when friends ask how you like your new TV and you say "I preferred the Sony but the price was better on the Panasonic and you know what, its a great TV. I would recommend it to others."

This could be a huge problem for Retailers and Brands. They are not allowed to collude on prices. If a retailer has to contact a brand every time this issue arises to work something out that adds costs to the picture. And worse all the Ad Spend up in smoke. Sony or Pepsi can spend millions getting a consumer to the point of purchase only to lose the sale because the Retailer or the Brand themselves refuse to match the price.

Why Brick and Mortar will never disappear

Media Post Article

I read this article by Laurie Sullivan and really was blown away that anyone in the Ad Industry or Retail for that mater would think we would go all E-Commerce. She blew her thesis up front by saying there will be warehouses to go see/feel product, which if that is true we would need them all over the place (ie stores) and if we already are there wouldn't we want to buy what we like for immediate gratification? I am surely not going home then placing and order and paying for shipping.

But there are a few significant reasons why in person retail will trump online for the foreseeable future.

1] Many, many stores are small businesses and it would be impossible to replace these online.

2] We love exploring unique and interesting stores. And shopping is often enjoyable. And there is much less buyer's remorse in person.

3] Online reduces impulse buys considerably. When you walk into say a Target think of how massive your view is. Imagine changing that view to a 15" diagonal window. You will miss so many sale items and choices.

4] If something is close by and we can get it now we will. Especially if i is something we didn't plan ahead for. Like oops ran out of milk.

5] I can view the whole Cracker/Cookie aisle in 3 minutes in a Supermarket. This would take about 15+ minutes on line. I don't have time for that. And the actual physical packaging makes or breaks a sale. To get the same visual online I have to click on each item to blow it up.

One day it is possible that we might buy commodities or things we don't need to shop in person for online as routine. But until we can shop via hologram or HD-3D with the exact same visuals from our home, E-Commerce will accent not replace our shopping experience. While a store might make more margin on an item I buy directly from a website like my favorite shampoo I always buy, they would lose the volume of impulse buying that is proven from a 100 years of retail and marketing research and studies.

For items like clothes which we are getting used to buying online more and more, it really sucks when something doesn't fit and you have to wait to return it and get a replacement. And shopping for books is so much more pleasurable in a book store than online. You can browser titles and subjects so much faster. And it is very hard to replace that feeling of discovering something via the online experience. It is being worked on but nothing yet is close.

Behavorial Targeting, the Good, the Bad, and the Ugly

This post is aimed at Google, Facebook, Twitter, and all Ad Serving Networks.

My previous post discussed my search for a new laptop. One that will cost me between $650 and $900. So not a small sale. It is worth the various brands and retail outlets to observe me researching specifications and pricing. The specs I seek are for across the brands in terms of the hardware, so they are an equalizing factor. Since I seek to buy in the next 6 weeks the real impetus will be the best deal. I have a few models picked out that I am willing to buy and seek the best price, warranty, and any deals like free virus protection etc. I do have concerns about pre-loaded software. I want minimal. My Compaq that I bought in May 2008 came with too much stuff. Like MS Works..deleted. MS Office trial...deleted. MS Internet Explorer...deleted.

I want to take the BT from various view points. The retailers, Staples, Best Buy, Walmart, and Apple all observe me crawling around their websites. The Ad serving networks that have access to my surfing also could possibly see that I went to these sites (unsure if they see on the sites themselves). And if I post any information about my search on Twitter or Facebook, they have access to knowing I am searching. And of course Google owns this Blogging site!

What I want. I want the retailer to send me a pop up saying if I buy within the next 60 mins I get something. Free accessory. $50 off. Free shipping. Etc. And really that is it.

The retailers. Should want what I want. Try to make the sale right there immediately while I have items in my cart to look at pricing.

Those two are great benefits to BT.

Now the Ad Serving networks, Google, Facebook, and Twitter. It is in their best interest to offer Ads to be served by the Brands themselves to me in hopes of swaying me one way or another. But to do this they would have to serve me Ads at some point, somewhere. Obviously a retail site will bar this. Obviously if I have Firefox with Ad Blocker I won't see them anyway. But I am a very high value prospect. Meaning they could auction or sell Ads served to me to the brands at a high price. Now while I might be fine with 1 or 2 ads popping up, I would flip out if I was slammed because of BT. And that is the danger of BT.

Brands obviously want every single time someone is looking for such a big ticket item to be able to contact you. But if they all do, again I am slammed and upset.

Now get to the value of BT. Who gets the value? That depends. Will BT of Ad Serving help me find the best product at the best price? Or will the Ads bought by the highest bidder cloud out a best solution for me? If I can't see all my options then BT fails me.

And of course the only way to see best option is to work at it. To search via Bing or Google. Read all the Ads and Circulars. Visit stores. Ask friends. And make phone calls. In this case my work (and information found online) will pay off 80% of the effort to find best product/price. And Advertising will actually help since that is how the 'deals' reach me.