April 14, 2010

47) Facebook

危 wēi  danger

Many technology startups, particularly social networks, are heavily dependent on network effects (the phenomenon whereby a service becomes more valuable as more people use it, thereby encouraging ever-increasing numbers of adopters).  This makes it very challenging to attract the first users to the system because they see relatively few benefits until others join. When Facebook was launched in February 2004 by Harvard undergrad students as an alternative to the traditional student directory it faced exactly this challenge, how would it get to critical mass?

机 jī opportunity

Facebook overcame this challenge because it tapped into an existing offline community – Harvard University students.  And that group had a real need – it was difficult for them to meet fellow students outside their social groups.  The most pressing need to meet students came from those searching for dates – the group that became the system’s earliest adopters.  Facebook initially only allowed students with a Harvard email address to use the site, and then opened it up to other Ivy League schools.  This enabled the startup to control its growth and in the process made it more aspirational to the wider population.  Since launch it has grown to more than 400 million active users, with over 50% logging in on any given day.  Profits are believed to exceed $1bn per year.

I noticed that for the week ending March 13th 2010, Hitwise said that for the first time more Americans typed Facebook into their browser than Google.  It made me wonder if Google’s algorithms for search are being disrupted by different types of recommendation engines – if Facebook can harness its community to offer ‘discovery’ it might become the search engine of choice.

How About…

  • Piggy-backing off an existing offline (or online) community?
  • Initially targeting those that are likely to be influencers for other groups in due course?

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March 8, 2010

43) Dr John’s Spinbrush

spinbrush logo

危 wēi  danger

John Osher is a serial entrepreneur.  After successfully selling his Spin Pop invention, a lollipop with a battery-operated handle that twirled in the eater’s mouth, he wondered where else he might apply the technology.  He hit on the idea of developing an affordable electric toothbrush. To succeed, the product had to cost only a few dollars more than a conventional toothbrush and had to have a long-lasting battery, to meet this target Osher set about designing up from 80 cents (while everybody else was trying to design down from $79). The finished design, the Spinbrush, was highly popular in early trials.  However, with no marketing budget and a product that was so different to anything else on the market would consumers actually give the product a go?

机 jī opportunity

In the book Diffusion of Innovations (1962), Everett Rogers defines several intrinsic characteristics of innovations that influence an individual’s decision to adopt or reject.

1)    relative advantage – how improved an innovation is over the alternatives (including any previous generations)

2)    compatibility – how easily the innovation is assimilated into an individual’s life

3)    complexity – how easy it is to use

4)    trialability – how easily an innovation may be experimented with as it is being adopted

5)    observability – how visible the innovation is to others

Osher’s experience had taught him that a great product alone wouldn’t guarantee adoption, he understood that trialability and observability were important too.  Accordingly, he launched the SpinBrush at $4.99 – $5.99 in 1999 with a patented “Try Me” feature that allowed consumers to turn the brush on in-store, stimulating fast in-store trial.  This low cost approach maximised ‘observability’, ‘trialability’ and demonstrated the low ‘complexity’ in the product thereby reducing the need for consumer advertising.  The strategy worked and within its first year SpinBrush accounted for 10% of toothbrush sales in the US.  Osher’s company was sold to P&G two years later for $475m and by 2002 the SpinBrush was the best-selling electric toothbrush in the US.  With P&G’s marketing and distribution muscle the product’s annual sales grew to more than $200 million in less than twenty-four months.

how about…

  • Designing for all of Rogers’ characteristics when launching new products and services – relative advantage, compatibility, complexity, trialability and observability ?

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February 11, 2010

37) PepsiCo

危 wēi  danger

The Superbowl is nearly as famous for its commercial breaks as for the game itself.  In fact, the commercials are more memorable than the game for many viewers – a study by ad agency Venables, Bell & Partners showed that 66% of viewers remember their favorite advertiser from the 2009 Superbowl and only 39% recall which team won.  However, this exposure comes at a hefty price, rates for Superbowl commercials run far above any other TV event because the game draws around 95 million viewers in the US alone.  30-second spots run close to $3m and the game typically includes 50 to 60 spots.  PepsiCo has advertised its cola during every Superbowl for over 20 years but it has become more and more difficult (and expensive) to stand out from the field.

机 jī opportunity

Instead of running the risk of being an also-ran, PepsiCo announced in December that it wouldn’t be advertising its cola during the Superbowl this year, instead it unveiled a $20m fund in which it is looking for people, businesses, and non-profits with ideas that will have a positive impact on US communities.  Anyone can submit and rate ideas and each month those rated highest receive grants of between $5k and $250k.  Moving away from the norm seems to have worked, in a recent survey by Nielsen, Pepsi’s ‘Refresh Everything’ campaign accounted for more than 21% of the media coverage and online buzz around Superbowl advertising.  Given that PepsiCo usually spends in the region of $30m on Superbowl advertising breaking away from the norm seems to have paid off.

How About…

  • Deliberately moving away from marketing channels used by your competitors?
  • Allocating marketing budget toward campaigns for positive social impact?

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