Brand Loyalty Is Declining. Total Product Experience Chains Can Help.

Product strategists in many industries (from CPG to consumer electronics to financial services) share a challenge with their marketing colleagues: how to leverage the power of brand. Product strategists have a number of strategic tools in their toolboxes for differentiating their products from competitors’ offerings: features (a different taste, a new technical capability, or a higher interest rate, for instance); channel, price, or brand (or based on some combination of these factors). For the moment, let’s think about brand, because some product strategists design and build their products based largely on the promise implied by their brand name.

Forrester’s new research report – leveraging a multi-year analysis of Consumer Technographics® data – shows that while brand is important, brand loyalty (defined as the propensity to repurchase a brand) has been waning. The new report, entitled “Brand Loyalty Isn’t Enough For Products Anymore,” reveals that:

·         Brand loyalty is on the decline. Brand loyalty dropped in the U.S. from 2006 to 2010, our data shows. One reason? The Great Recession. Another? The strength of brands themselves: competing brands in the marketplace entice consumers to try new brands.

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Pulling Off A Razor-Razorblade Product Strategy, Like Amazon's Product Strategists

Amazon’s product strategists shocked some constituencies with their $199 price point for the Amazon Kindle Fire tablet announced today.  But there’s a fundamental product strategy lesson to this pricing, and it’s an old product strategy model:  The so-called Razor-Razorblade Pricing model.

We all know this model well, as consumers: your initial purchase of razor is relatively cheap, but the cost of replacement razorblades really adds up over time. If you don’t buy razors, perhaps you’re familiar with this scenario from your inkjet printer.  Remember how cheap that scanner/printer was -- but have you ever seen the price of refill inkjet cartridges?

The Razor-Razorblade model works when “dependent goods” – the refills, the stuff you need to keep buying to use the product – are closely related to the anchor product.  In the case of the Amazon Fire Tablet, the dependent goods are content and services – MP3s, streaming videos, and of course books, magazines, newspapers, etc. and cloud services that allow you to store and synchronize your content across devices. Amazon’s product strategists can afford to charge a low entry price to raise adoption of the device, and then (they hope) deliver an experience that’s attractive enough for Kindle Fire owners to pay for as a service.

Hence Amazon CEO Jeff Bezos’ portrayal of the Kindle Fire product strategy:  “What we are doing is offering premium products at non- premium prices,” Bezos says. Other tablet contenders “have not been competitive on price” and “have just sold a piece of hardware. We don’t think of the Kindle Fire as a tablet. We think of it as a service.”

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What Steve Jobs' Resignation Means For Product Strategists

First off, let me say this: I hope that Steve Jobs' health improves, and that he comes out of whatever challenges he's going through in the best of health. He's an amazing, visionary leader of a dynamic company -- and he's also a person with a family. Let's all wish him well.

While famously a CEO, Steve Jobs is also, it should be known, a product strategist par excellence. He's clearly been involved, in a deep way, in the development of Apple's product ideas, product designs, business models, go-to-market strategies, and responses to competition. These are the job responsibilities of product strategists. In his (and Apple's) case, product strategy has risen to the very top of the organization.

Product strategists of two different flavors are wondering how they might be affected by his resignation as CEO (and concomitant request to become chairman):

  • Product strategists who compete with Apple. Product strategists at companies like Microsoft, Google, Samsung, HP, Dell, HTC, and similar firms wonder if Steve Jobs' change in role might benefit them. They actually shouldn't wonder: His departure from the CEO spot won't benefit them -- not for a very long time, at least. Apple's product development road map stretches into multiple years ahead and has been shaped both by Jobs and by the organization he built. Jobs' departure won't affect Apple's product portfolio, quality, or competitiveness for a long time -- if ever.
     
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How Are You Reacting When New, Disruptive Products Come Out?

We talk to product strategists in a wide variety of industries. Regardless of the vertical industry of their companies, they tell us that the release of new, disruptive products -- like Apple's iPad -- changes their relationships with their customers. Oftentimes, nearly overnight.

Whether their product comes in the form of “bits” (content, like media, software, or games) or “atoms” (physical products, like shoes, consumer packaged goods, or hardware), consumer product strategists must navigate a world filled with a dizzying array of new devices (like mobile phones, tablet computers, connected TVs, game consoles, eBook readers, and of course PCs). We call this proliferation of devices the Splinternet, a world in which consumers access the digital world across a diverse and growing number of hardware and platforms. And product strategists have to react by developing new apps, by crafting digital product experiences, and by rethinking their product marketing.

Delivering digital products across the Splinternet isn’t easy: It requires understanding -- and acting upon -- an ever-changing landscape of consumer preferences and behaviors. It also requires reapportioning scarce resources -- for example, from web development to iPad or Android development. Yet product strategists who fail to contend with newly disruptive devices (like the iPad or Xbox Kinect) will find themselves in danger of being left behind -- no matter what industry they’re in.

We'd like to invite product strategists to take our super-quick, two-minute survey to help us better understand how you are reacting to disruptions caused by the Splinternet: 

UPDATED: THE SURVEY IS NOW CLOSED

Thank you!

Join Us July 27th In San Francisco For An iPad App Strategy Workshop!

More than 90,000 iPad-only apps are available today. Forrester clients in a wide range of industries — media, software, retail, travel, consumer packaged goods, financial services, pharmaceuticals, utilities, and more — are scrambling to determine how to develop their own iPad app strategies (or browser-based iPad strategies).

Clients are asking us to help them address both challenges and opportunities associated with the iPad: How do I develop an app product strategy for the iPad? Does the browser matter, too? What will make my app or browser experience stand out from the competition? How will an iPad app complement my smartphone and Web properties?

If you are navigating these sorts of decisions, I'd like to invite you to a very exciting event being hosted by an analyst on my team, Sarah Rotman Epps. Sarah's holding a Workshop on July 27 (in San Francisco) to help clients like you separate the hype from the reality and take concrete steps toward developing a winning iPad app and browser strategy. 

The Workshop: POST — Refining Your Strategy For iPads And Tablets
This Workshop focuses on refining your strategy for reaching and supporting your key constituencies through iPads and other tablets. We'll take you through the POST (people, objectives, strategy, and technology) process, helping you to:

  • Understand where the tablet market is going based on Forrester's latest data and insights.
  • Apply what other companies have done to your own tablet strategy.
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It's Time For Mass-Customized Clothing And Apparel Products

Calling all product strategists at big name clothing and apparel companies: If you work at the likes of Gap, Macy's, Nordstrom, or American Eagle Outfitters, we at Forrester think you are currently missing out on an opportunity to delight customers, generate new revenue, and differentiate your offerings. We’ve been writing about why now is the time to experiment with mass-customized product offerings – customer-facing digital technologies have reached the point where customization is easy to deliver, and customers increasingly expect products and services will be tailored to their desires and needs.

Now it’s time for product strategists at big name clothing and retail companies to give mass customization another shot. Levi’s once offered customized jeans (from 1993-2003), but the offering was too far ahead of the curve – it didn’t have the opportunity to leverage the type of digital configuration experiences available today, and it didn’t offer buyers choice in features they wanted (like color).

We know that product strategists who want to offer mass-customized clothing and apparel products face customers who are stuck in an off-the-shelf comfort zone. We know that this customer resistance is holding back some product strategists at big brand-name clothing companies. Yet the return on investment could be significant. Incorporating customization into your product strategy will enhance current customer relationships and attract new customers that, up to now, have not been able to find what they want or need from your products.

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Tablets And Mass Customization: A Match Made In Heaven

With a hat tip to the mass-customization.info blog, a screen shot showing that the latest Blackberry Playbook commercial depicts a mass customization experience – the Converse Design Your Own collection. (See the entire video here).

Sarah Rotman Epps is the senior analyst on my team who leads our research on tablets (and consumer computing) for product strategy professionals. She’s written extensively about the future of tablets but also about the characteristics of software and media experiences that succeed on tablets. (Forrester clients can read “Best Practices for Media Apps,” for instance). At the same time, I have written about how mass customization is finally the future of products in an age when customer-centricity reigns.

Tablets and configurators – the typical tool that consumers use to co-design customized products – are a match made in heaven. They share a number of characteristics that product strategists should consider when developing mass-customized product interfaces. For example, they both:

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Wrigley’s Customized “MyExtra” Gum: Exciting Product Strategy, Slow Fulfillment

Product strategists at Mars, Incorporated are experimenting with mass customized offerings quite a bit.  In addition to their build-to-order customized M&Ms offering, their subsidiary Wrigley has just rolled out MyExtra gum, which prints personalized wrappers on Extra gum packs.

Product strategists at Wrigley declined Forrester’s recent request for a research interview, but judging from the myextragum website and their press release, the offering is a really interesting example of a creatively mass customized product strategy.  Why?  Product strategists at Wrigley have:

  • Redefined the product using customization. Myextragum isn’t just gum with a customized wrapper. Instead, it’s a greeting card (Mother’s day, birthday, other holiday) or a business card (to be given to patrons) plus gum. Wrigley is moving into a non-adjacent, previously orthogonal product market in one fell swoop. That’s aggressive and creative.
     
  • Justified the higher price point. At $4.99 – though the price reduces with bulk orders – the product is pretty expensive for a pack of gum. But, again, it’s not a pack of gum – it’s a greeting card or business card that also has gum inside. This pricing makes sense when you think of the price of Hallmark cards or custom business cards.
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Mass Customization Is (Finally) The Future Of Products

Mass customization has been the “next big thing” in product strategy for a very long time. Theorists have been talking about it as the future of products since at least 1970, when Alvin Toffler presaged the concept. Important books from 1992 and 2000 further promoted the idea that mass customization was the future of products.

Yet for years, mass customization has disappointed. Some failures were due to execution: Levi Strauss, which sold customized jeans from 1993-2003, never offered consumers choice over a key product feature – color. In other cases, changing market conditions undermined the business model: Dell, once the most prominent practitioner of mass customization, failed spectacularly, reporting that the model had become “too complex and costly.”

Overall, the “next big thing” has remained an elusive strategy in the real world, keeping product strategists away in droves.

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Forrester's Marketing Forum 2011: Innovating Your Marketing For The Next Digital Decade

We're only a couple weeks away from Forrester's Marketing Forum 2011, April 5-6 in San Francisco, California. (You can view the event details and sign up to attend here). The theme is "Innovating Your Marketing For The Next Digital Decade," which will help attendees navigate the rapidly changing world of digital experiences. Rapid innovation is creating radical shifts in the methods and media that people use to engage with your company, brand, and products. From connected TVs to Microsoft's Xbox Kinect to tablet PCs to mobile-based location awareness, the panoply of emerging platforms and techniques gives powerful new means of creating rich product experiences and engaging with your customers.

For Consumer Product Strategy professionals, we've focused our sessions around a research theme called Total Product Experience. Developed by the amazing James McQuivey, the Total Product Experience thesis is that digital channels are no longer being used just to deliver marketing messages. Instead, they are swiftly being enlisted to simulate and stimulate product trial and use. Already, using Kinect for Xbox, marketers can enable you to kick the virtual tires of a car; tomorrow, with a tablet PC app, marketers will let you take pictures of yourself and dress your own body in virtual clothes. Welcome to the Era of Experience, a time in which product strategists and product marketers must collaborate to deepen the digital customer relationship and extend the total product experience to create value.

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