REVIEW: FLIP THE FUNNEL: Joseph Jaffe (John Wiley & Sons)

I’ve read Joseph Jaffe’s book across multiple air journeys, nationally and internationally. I agreed with the principles described and saw parallels with excellent services businesses over the past few years. However, the implications didn’t quite strike me in the gut until I realised – while writing this on board an aircraft – that the journeys I had taken with this book had also been with just one airline.

My loyalty to this airline is not because of the mileage card I hold, although their mileage programme is certainly among the best in the world. It is not because they were the cheapest or the most on-time, though they compete favourably with other comparable airlines.

My loyalty to them is because of what they did during the Mumbai floods in July 2005. Those who remember the chaos, through personal experience or through media, wouldn’t blame airline staff for abandoning their counters, and leaving the airport to try and reach home as early as they could. Certainly most of them must have felt helpless in the face of increasingly desperate passengers who couldn’t expect to depart any time soon. Jet Airways stood out as being the only one in Mumbai’s Terminal 1-B whose team felt responsible enough to stay back at the airport to be available to the passengers. Not only did they ensure that the passengers stuck in the terminal were safe, but that all waiting passengers got three meals a day! Whether or not they were flying with Jet Airways.

Now, in telling you about incident, I have closed the loop and given you a living example of the “flipped funnel” that Jaffe describes in the book.

The normal marketing funnel is described by the process Awareness, Interest, Desire and Action (or “AIDA”) which underlies the spray-and-pray approach of traditional marketing. The result of AIDA is that a lot of customers become aware of a business, brand or product. Some are interested enough to seek out the product. However the number who move on to the next stage of actually expressing desire to buy is lower, and those who actually buy are fewer still, as amply demonstrated by carts being abandoned before actually checking out.

Jaffe points out that the AIDA principle was created in times of abundant growth in the US, but is a suicidal funnel to fall into when resources are scarce. It is lopsided, with more money being spent on customers who will not buy. It is linear and does not capture the complexity of buying behaviour. It is open and incomplete because it only handles potential customers up to the point where they become actual customers, but does nothing with them thereafter. AIDA also inherently assumes customer churn, hence the opening focus on creating awareness among potentially new customers.

The alternative principles Jaffe describes are simple: getting more customers to buy from us and more often (repeat purchases), to spend increasing amounts with us (loyalty), and finally, to recommend us to their friends and associates (referrals). However, to do this requires dramatically different thinking from AIDA spray-and-pray. Jaffe’s alternative model – ADIA (Acknowledgment, Dialogue, Incentivisation and Activation) – focuses on customers more than prospects.

Acknowledging customers itself is such a major stumbling block for so many companies, such as the retailer whose front-line staff would prefer to fold and put away garments than meeting the eyes of the customer who has walked into the store. In some cases it may be about using technology effectively rather than as a barrier. When the taxi company can recognise the number you are calling from and close your order in less than 120 seconds, why does the telephone company that issued that number make you jump through burning hoops for 5-10 minutes before they will allow you to request a duplicate bill?

That acknowledgement should lead to an on-going dialogue, before, through and well after the purchase is done. This would be supported by constant incentives for the customer to buy more from you. It is not about having a loyalty programme, as Jaffe quotes studies that demonstrate that loyalty programmes alone don’t produce loyalty; in fact there are enough businesses that do not run loyalty schemes but have what can only be called fan followings.

The final link in that funnel is building that community of evangelist enthusiasts who will carry your brand message farther and far more effectively than any traditional form of marketing could. Religious organisations have known this for thousands of years – it is high time that businesses and other organisations recognised the power of the community as well.

Jaffe acknowledges that Seth Godin actually came up with the term “flipping the funnel” over 3 years ago, when he released the e-book of that name (available on sethgodin.typepad.com) primarily about using social media effectively. Jaffe, to his credit, has applied the principles more fully across the marketing and customer service process.

Jaffe recently sold his business, crayon, but has kept his title “Chief Interruptor” at the acquiring company. If you want to make your marketing really pay, you’ll find it worthwhile letting “Flip the Funnel” interrupt your normal marketing thought-process.

(This review was written for Businessworld.)

REVIEW: BEATING THE COMMODITY TRAP: Richard D’Aveni (Harvard Business Press)

In his latest book, Professor Richard A. D’Aveni focusses on a topic that most businesses should be acutely concerned with: the problem of commoditization. In interviews he has accurately described commoditization as “the black plague on modern corporations” and “a deadly disease that’s spreading like crazy”.

Certainly, if one had to pick the ultimate nightmares to keep CEOs awake at night, commoditization would definitely be among the top of the list. Specifically, given the economic uncertainties around the world in the last couple of years, business leaders who are not concerned about their products or services being turned into commodities are either supremely equipped to maintain their differentiation, or immensely deluded as to their capabilities to fight market forces. Prof. D’Aveni suggests that maintaining differentiation alone is not enough to sustain business.

A product or service becomes a commodity when it is not distinguishable from competing offerings and therefore not valued above the competition. Prof. D’Aveni views commoditization along two key attributes: the benefits or features that are being offered and the price (margin) that is available to the business. Based on his model, he has identified three types of competitive stress that a business could face:

• Deterioration: In a deteriorating market, competitors present low-cost and low-benefit offerings that appeal to the mass market. This is possibly commoditization in its “purest” sense, where the customer ends up valuing the lowest price over and above any other benefit or feature. In this scenario a business can either get stuck in the commodity trap, fighting an ever downward spiral of price and cost minimisation, or could marginalize itself to a niche where it can protect its margins.
• Proliferation:  According to Professor D’Aveni, a proliferating market constantly sees the emergence of new combinations of benefits and price that serve specific segments. This is not about the business offering turning into a true commodity, but extreme differentiation and proliferation of choice do make it difficult for businesses to create a clear value statement that can be priced above competition. Professor D’Aveni describes this as “being squeezed in the middle of a pack of piranhas” which are snapping away pieces of the market.
• Escalation: This form of commoditization is possibly the most prevalent in industries that are prone to disruptive changes (such as technology, consumer electronics and communications). Simply put, extreme competition here results in more for less, as each competitor goes one-up in terms of offering more benefits for the same price, the same benefits for a lower price, or at its most extreme, higher benefits for a lower price. Prof. D’Aveni suggests that companies try and control this downward momentum.

The book suggests competitive strategies that a business could take to avoid getting caught in the commodity trap.  These strategies can be boiled down to the biological choice: fight or flight (escape). Professor D’Aveni echoes the basic warfare strategy laid out by many military and business strategists through the ages. He suggests that businesses need to gauge the opponents, choose their battles, and pick opponents against whom they can win. He also calls for pre-emptive action: where companies can, they should either change the business environment to avoid commodity battles entirely, or initiate the battle of commoditization and control its direction and momentum.

In fact, anticipation and pre-emption is the key to avoiding the commodity trap. To help with this, Prof. D’Aveni offers a relatively simple framework to analyse a current market situation in terms of a price-benefit matrix, and to identify the advance corrective actions to be taken.

The book is short and straight-forward enough to pick through a domestic flight, or to read in the back-seat during a long commute between office and home. The easy to understand framework gets the messages across quickly. In analysing the variations of commoditization, both in consumer and business oriented industries, the Professor also offers up something for everyone.

However, the book’s strengths also turn out to be among its biggest weaknesses. The book would have benefited from more depth to each of the concepts. Skipping quickly from one area to the other, in some places the book risks losing coherence of thought.

Some short books are like downhill hairpin bends on a mountain road; Prof. D’Aveni’s book is one of those. Much as you might be tempted to go fast, it’s advisable to go slow. If you speed through it, you might miss a nugget that actually makes sense to your business.

One of the other grouses I had was with the examples quoted. The predominantly US market examples reduce the book’s relevance for a global audience – the Professor presumes the reader will know the company and its context well enough to understand the lessons being discussed. In some cases the examples are incomplete and possibly even incorrect: one such is the example of Zara. The broad-brush attributes Zara’s business success to turning fashion into commodity, and ignores the fact that fashionability and desirability are a cornerstone of Zara’s offer, not the cheapest price. Others would possibly be far more accurate examples of commoditization in the context of price.

However, if you are sufficiently concerned about the possibility of being commoditized out of profitability, or being marginalised out of market share, I would suggest that you could easily overlook these flaws. The fundamental premise of the book is far too important to ignore. [Beating the Commodity Trap on Amazon]

(This review was written for Businessworld.)

REVIEW: DISCORDANT DEMOCRATS: ARUN MAIRA (Penguin Books India)

As I read through Arun Maira’s book, the month unfolded with a number of high-pitched disagreements around the world. In India, quotas and reservations were a hot topic, as was an apparent divergence between the Prime Minister and corporate chiefs on executive income and distribution of wealth. Self-appointed moral police disapproved the expressions of a student of art, while, elsewhere in the world, suicide bombers expressed disapproval of foreigners on their soil.

We are surely not the first to wonder why, after millennia of physiological evolution, societies around the world are still stuck in the same, predictable response: where disagreement (on an issue) translates into disapproval (of a person), more often than not leading to conflict that is frequently violent.

The need to accept differences and the use of democratic dialogue as a process to close the gap is the basis of Arun Maira’s Discordant Democrats. While the book is largely about democracy in India, Maira draws from events, personalities and initiatives around the world to make the case for democracy as the only reasonable mechanism to manage diversity in society, and dialogue as the only reasonable mechanism to sustain it.

This is embodied in a quotation that is commonly attributed to French philosopher Voltaire: “I disapprove of what you say, but I will defend to the death your right to say it.” In fact, Maira goes beyond free speech to the need for mass dialogue. While free speech typically stops at the “right to express different opinions”, dialogue is about the free “exchange” that can move people closer. Dialogue, unlike debate or argument, is not about sticking to one’s own point of view but about parties reaching a consensus through a process of mutual expression and understanding.

When comparisons are made between Communist China and democratic India, democracy is presented as the millstone around the neck of India’s development. India has a demographic diversity that is among the highest in the world, and a body politic that is among the most fragmented. It is the disagreements among the various segments, interest and pressure groups that some people often hold up as the biggest hurdle to India’s economic and social progress. On the other hand, the advocates of “democracy in action”; may hold up noisy debate as the true expression of desires of individuals and small, otherwise powerless, groups. And there is little common ground between these two groups.

But, as Maira writes in the preface: “This book is about democracy and about consensus: two ideas that cannot but be associated with India. Indeed, one must wonder whether India could be one country without democracy or without consensus.”

Maira takes a middle path, in differentiating between the “hardware” and the “software” of democracy. He describes the hardware as the mechanisms that we are all familiar with — the Constitution, devolved institutions and the framework of free and fair elections, whereas the software is dialogue and deliberations. The democratic hardware enables the freedom of divergent expression. But it is the democratic software that enables a convergence to consensus and the emergence of a functional rather than dysfunctional society.

This is an important distinction when we examine the relative success or failure of countries that are all apparently democratic in structure. Most elections may be free and fair, but are the results later really representative of the electorate’s wishes? From what we can see around us, the hardware of democracy is robust, but there needs to be greater emphasis on the software.

Maira devotes the latter part of the book to tools that he calls Weapons of Mass Dialogue. Using topical and real-life instances of the dialogue mechanism being applied, he takes the reader through the steps of creating a common aspiration, exploring and identifying the thought anchors of the parties in the dialogue, framing the situation and then arriving at a solution.

As a comparison, the example of a Native American tribe comes to mind. To resolve conflict between members, the tribe follows a structure that requires a member to silently listen to the other’s views and then express that person’s views back to him until he or she concurs that the listener has completely understood what has been said. Only then does the first listener get the opportunity to express his own views, while the first speaker only listens and then reiterates what he or she has heard.

This mechanism may appear lengthy in most modern debates, but when we are dealing with issues as complex as the evolution of our cities or the uplift of disadvantaged castes and socio-economic classes, do we really have any other option?

Our genetic response to crisis is hard-wired from our days in the wild: fight or flight. While the latter is clearly “escape”, the former is also an “exit” because it shows an inability to deal with a discord to a mutually satisfying result. We need to expand this to a trinity of responses that includes “unite” – an integrative process that can help cope with the complex and interrelated world we live in.

The tools may look contrived and slow to those championing the cause of “action” there are few alternatives to dialogue. But in a world where discordant democrats do not often listen to each other, Maira’s Weapons of Mass Dialogue are definitely worth a try. Here it is on Amazon.co.in.

EXCERPT:
We want action. And we want democracy. Sometimes, in despair, when that speedy action is difficult in democracy, he seemed willing to forsake democracy. But that is a cop-out. We have to find a way to have both – speedier action and more democracy. Once again, a very important “either-or” choice is raising its head. We must convert it into a ‘both-and’ solution. As Einstein said, we cannot solve the difficult problems that we face with the same thinking that led us into those problems. Rather, we must look into the theories-in-use that are causing the problem, and develop a new one. In this case, the problem with our theory-in-use of how people can work together to resolve problems that they are all part of. The call for an authority above them, “insulated from the intense pressure of democracy” – a dictator or expert that they would be willing to unquestioningly delegate upwards to – is giving up on the further evolution of humanity’s democratic enterprise.

[Here’s the book on Amazon.co.in.]