Tag Archives: business

Building a Brand In a Recession

The recent recession saw sales of condoms, guns and burglar alarms soar. This is because, when fear enters our mind in terms of losing our job or of not being able to pay bills, we focus on two of our most basic drives: fear and sex.

The key to selling and building a brand during financial crises, therefore, is simple: manage fear. Understand how it works and how it affects purchasing behaviour. This advice on brand-building during a recession comes from Martin Lindstrom, ex-advertising agency executive, author of Buyology, and one of TIME‘s 100 Most Influential People in the World, 2009.

First, there’s always good news in bad times. A standard approach in this situation is to address consumers’ problems. And people always have problems. The fact is we rarely know what we want, but we have no trouble pointing out our difficulties. For example, no one knew they wanted an airbag, but everyone agreed they wanted safer cars.

It’s therefore important to ask yourself what sort of problems are consumers facing during this economic recession? There are many. […] Convert problems into assets for your brand.

Second, add a practical dimension to an irrational decision. No matter how much money you may have in the bank, or how secure your employment may be, it’s now fashionable to save your money and buy everything at a discount. What can a brand owner do? Particularly in light of the fact that a discounted brand typically takes seven years to recover!

The answer is simple. Add a practical dimension to the equation. […]

Third, you have to systematically remove fear. Hyundai did it. And a stream of new banks are doing it. Both have succeeded in identifying why consumers are reluctant to spend. Once this is understood, then you can harness it and build a better product by addressing the fear and finding a way to eliminate it. Your sales may be down. But do you know why? People are certainly buying less, and explanations like, “Well, there’s a recession going on out there,” are not helpful. What’s important is to understand the fundamental role of fear, and then turn it around to strengthen your brand. Some of the world’s most enduring grocery brands were built on the back of the Great Depression. Each one turned the threat into an opportunity.

Random Promotions Beat the Peter Principle

The Peter Principle states that “in a hierarchy every employee tends to rise to his level of incompetence” (discussed previously). This principle is typically observed when promotions are rewarded based on an employee’s ability in their current position and provided there is sufficient difference between the two positions.

In such circumstances, is there a simple way to ‘beat’ the Peter Principle? According to the research that won the 2010 Ig Nobel Prize for Management, yes: promote at random to prevent the principle from coming true (pdf, also: arXiv, doi).

We obtained the counterintuitive result that the best strategies for improving, or at least for not diminishing,the efficiency of an organization […] are those of promoting an agent at random or of randomly alternating the promotion of the best and the worst members.

The authors of the study have created a simulation so that you can see the random promotion strategy in action, and it’s worth remembering that this counterintuitive and (hopefully) tongue-in-cheek approach is just one of the possible solutions to the problem described by the Peter Principle.

Reading up on this, I also came across the rather elegant Generalised Peter Principle, originating from observations regarding hardware at nuclear power plants:

Anything that works will be used in progressively more challenging applications until it fails. […] There is much temptation to use what has worked before, even when it may exceed its effective scope.

PlentyofFish and Unusability

In an early 2009 profile of Markus Frind–the founder and CEO of the online dating website PlentyofFishInc. briefly touched on the topic of the site’s famously bad user interface, with Frind explaining why he believes that, sometimes, user experience should take a back seat as a better experience isn’t always linked to greater profits.

Plenty of Fish is a designer’s nightmare; at once minimalist and inelegant, it looks like something your nephew could have made in an afternoon. There’s the color scheme that seems cribbed from a high school yearbook and the curious fondness for bold text and CAPITAL LETTERS. When searching for a prospective mate, one is inundated with pictures that are not cropped or properly resized. Instead, headshots are either comically squished or creepily elongated, a carnivalesque effect that makes it difficult to quickly size up potential mates.

Frind is aware of his site’s flaws but isn’t eager to fix them. “There’s no point in making trivial adjustments,” he says. Frind’s approach — and the reason he spends so little time actually working — is to do no harm. This has two virtues: First, you can’t waste money if you are not doing anything. And second, on a site this big and this complex, it is impossible to predict how even the smallest changes might affect the bottom line. Fixing the wonky images, for instance, might actually hurt Plenty of Fish. Right now, users are compelled to click on people’s profiles in order to get to the next screen and view proper headshots. That causes people to view more profiles and allows Frind, who gets paid by the page view, to serve more ads.

This wonky rationalisation reminds me of Andrew Chen’s insightful reponse to the Quora question, How did MySpace, with a smart team of people, do such a bad UI/UX job with the new design?

WordPerfect Business Advice

In 1980, as a $5-an-hour part-time office manager, W. E. Peterson joined the small company that would go on to become WordPerfect Corporation. Then, twelve years later, after helping grow the company to half a billion dollars in annual sales and becoming the Executive Vice President, Peterson was forced out of the company and set out to chronicle the rise and fall of WordPerfect in his book, Almost Perfect.

You can read Almost Perfect online like I did after hearing about it from Jeff Atwood two years ago. Why am I posting this now? Now that the book has a Kindle version I’m re-reading it and liked this paragraph of business advice from the afterword:

If you read [Almost Perfect] hoping to learn more about running a business, then I hope you noted the parts about teaching correct principles and allowing employees to govern themselves. In spite of the problems I had understanding and implementing this philosophy, I am convinced it is the best way to run a business. In today’s competitive environment, businesses can no longer afford the overhead of one supervisor for every five or six employees. As organizations flatten and supervision decreases, employees will make more decisions on their own and govern themselves much more than they have in the past. If a company is to function effectively, its employees must have a good understanding of what is expected of them. Very small organizations may be able to find success without defining and teaching correct principles, but any business with more than 25 or 30 people must get organized.

Preventable Startup Mistakes (That Caused the Downfall of Seven Startups)

Verifiable, Wesabe, Storytlr, TwitApps, Vox, Swivel and EventVue: All companies or products that no longer exist after preventable problems caused their downfall.

37signals collects their stories so that we don’t repeat the same mistakes, presenting a set of brief post-mortems on failed startups.

The recurring issues seem to be: solving problems that the world isn’t asking for, not having a feasible revenue model (specifically, the difficulty in moving from a free to a paid service), the complexity in scaling an idea from a prototype to a functional product, failing to articulate clearly the benefits the product will bring and failing to focus on the most important product/feature.

In addition, there’s the issue Wesabe encountered: competent competition in the form of Mint:

Mint focused on making the user do almost no work at all, by automatically editing and categorizing their data, reducing the number of fields in their signup form, and giving them immediate gratification as soon as they possibly could; we completely sucked at all of that… I was focused on trying to make the usability of editing data as easy and functional as it could be; Mint was focused on making it so you never had to do that at all. Their approach completely kicked our approach’s ass.

You’ll hear a lot about why company A won and company B lost in any market, and in my experience, a lot of the theories thrown about — even or especially by the participants — are utter crap. A domain name doesn’t win you a market; launching second or fifth or tenth doesn’t lose you a market. You can’t blame your competitors or your board or the lack of or excess of investment. Focus on what really matters: making users happy with your product as quickly as you can, and helping them as much as you can after that. If you do those better than anyone else out there you’ll win.

via @zambonini