P37 Understand the Consumption Chain And Unlock Big Ideas
I have people ask me where they should look for new ideas, especially big ideas that can create a competitive advantage. This podcast is going to take an interesting approach to answering that question. To be clear, it’s not the only answer but it is a very good one.
This podcast is based on A Harvard Business Review article titled Discovering New Points of Differentiation. Since this is a podcast of innovation best practices, this is a pretty good source for finding best practice ideas.
The objective of this whole approach is to differentiate yourself from competition in a way that is important to customers and that your competitors do not have. Most companies in attempting to do this focus primarily on their products and services. How well do they deliver their key benefit? What is the value equation for the price they charge? What are the strengths and weaknesses of competitors? These are all good questions and deserving of close examination.
The approach the authors take in this article is to map the consumption chain. The consumption chain starts with your customers becoming aware of your product and goes all the way through to the point that they have totally used the product and/or discard what’s left over. By closely examining the details of this chain, you almost always will find ways that you can differentiate yourself versus your competitors and have that differentiation be strong enough to be a competitive advantage.
I’m now going to rather quickly walk through the many possible steps in a consumption chain. Not all of these steps apply to all products. The details of each step will certainly vary dramatically between consumer products and B2B products, for example. Even within a category, there can be significantly different answers to the questions you want to examine as you map your consumption chain.
Let’s get started. First, how do people become aware of their need for your product or service? Does a problem intermittently pop-up in their life that needs a solution? Do they use your product routinely every day and they notice they are running out of the product? In some cases the answer to this question can result in an innovative way of leveraging this moment.
Next, how do consumers find your product? In today’s world, consumers often have multiple options – local store, online, and mega chain, for example. You want to know how they find your product and what steps they go through in finding your product. For example, in today’s digital world they might enter a search term into Google. You want to know what those search terms are so that you can have a Google ad words advertising pop-up on their page.
How do consumers make their final selections? Okay, they found your product and they probably found competitive products also. Just imagine yourself needing toothpaste and standing in a store in front of more than 50 tooth paste options. The answer to this question in many cases is that various groups of consumers have different number one important considerations in making their selection. For some people price may be more important. For other people loyalty or confidence over a long period of time in a product performance may be most important. Another group of people might really prefer the scent of your particular product.
How do customers order and purchase your product or service? Again, the answer to this question will vary significantly by type of product. Cash and/or credit card? Purchase order? Coupons? The list goes on and on.
How is your product or service delivered? As short as a couple of decades ago, it was usually delivered by your personal car that went to a store to buy the product and deliver it to the home. To be clear, that’s still a very popular option. But with the advent of companies like Amazon and almost every manufacturer having an online store, the world and answers to this question have become far more complex.
What happens when your product or service is delivered? If it’s a consumer product, where does it go in the home? Is the person who uses product different than the one who purchases it? For example, parents often make a toy purchase decision but their children are the ones that use it. Parents might make food purchases, but different family members use different products.
How is your product installed? This does not necessarily apply to many consumer products, but it certainly applies to many products sold at Home Depot. In the case of products sold at Home Depot, what do people need to install the product – directions, tools, etc.
How is your product or service paid for? Again, the answer this question varies dramatically by the type of product. For products purchased in a grocery store it’s either cash or credit card or debit card. For B2B products, there is probably an invoice and payment terms. What if you could gain a competitive advantage in the ease of paying for your product or service?
How is your product moved around? For example, Pepsi gained a short-term advantage when they recognized the use of their product in some important consumption occasions was better facilitated by plastic bottles than glass bottles.
What is the customer really using your product for? This is one of those questions that can produce some very surprising answers. Yes, they use it for the intended and most popular use, but it may also be used in very different occasions by different people. There can be some valuable insights gained here.
What do customers need help with when they use your product? It’s not only what they need help with but how they get help. For example, do you want to deal with tech support from Apple or Dell? Based on my experience, Apple by a landslide! Engaging in both quantitative and qualitative research to answer this question can produce many promising ideas. For example, it can be as simple as the problem opening one of those clear clamshell packages – is there simpler packaging that gives you a win for convenience? What consumers need help with may also reveal opportunities to improve your product and to improve the on package directions about how to use the product. Nothing is more frustrating with a product that is not easy to use and getting answers about how to use it is even more difficult.
What about returns or exchanges? Remember, these are usually to some degree unhappy customers. How you handle returns and exchanges can make them more unhappy or make them a loyal customer. I am always impressed with the ease of returning a product with Amazon. I know that if I make the wrong purchase choice for any reason, returning it is not a hassle.
How is your product repaired or serviced? Clearly this doesn’t apply to a many consumer products like toothpaste. But anybody in the appliance, automobile, and tool businesses knows that this is an important question to answer. When it comes to computer tech support, I have no misgivings when I call Apple for help. On the other hand, in my personal experience, if I have a problem with my ADT security system, I dread making the call because of the difficulties I usually encounter.
What happens when your product is disposed of or no longer used? For many consumer products, it’s easy to answer this question – it goes into the trashcan. For more complex products ranging from computers to industrial equipment, this becomes much more important and challenging. Are there opportunities to create a competitive advantage at this end of the consumption chain?
That’s the end of their suggested questions. Now that you have these questions what do you do?
First, I suggest that this is a potentially productive line of questioning and that the answers you develop could have potential. To better understand the potential I suggest the following steps.
Select the questions that are most important and relevant to your business. The selection can be based on knowledge about how important an area is to consumers, your lack of competitive disadvantages, and consumer dissatisfaction.
Having made the selection, go deep to understand consumer behaviors and attitudes. When you go deep you will groups of consumer behaviors and attitudes. You want to understand how important each group is – for example, how much they purchase relative to an average purchaser. There are some relatively fast and inexpensive forms of research that can help you understand this.
Explore potential alternatives to the way you’re currently doing something. The first level of alternatives is different approaches your competitors are using. The second level of alternatives is other approaches used by people in your broader industry. For example, in the home improvement industry there may be certain practices for manufacturers of power drills and you can learn from other people in the home improvement industry like other kinds of tools, plumbing supplies, electrical devices, and other related types of products.
Lastly, you want to explore alternatives in the broader world. For example, if it is how people pay for a product look at all the alternatives in all categories and from a global perspective. Technology in this area is rapidly changing. Forms of payment like bitcon are also emerging.
At this point, you have a tremendous amount of stimulus. As a suggested next step, put together a quantum idea generating session. Organize the stimulus you have into a form that can be easily and provocatively shared. Search for the appropriate diversity you need in the session both internally and externally to the company. Understand the left and right brain makeup of your group and prepare to have fun by reducing fear.
I know that I’ve covered an awful lot in a short period of time. You can dive deeper into the subject by reading the article I mentioned at the beginning of the podcast. There are so many variations by type of product and industry and geography that by necessity the podcast has needed to be from an overview perspective. There is a lot in this podcast that can help you sell more and make more.