Sloanreview.mit.edu – Gabriel Catalano®

The Power of Customers’ Mindset

re your customers in a concrete or abstract mindset as they think about purchasing your product? The answer can affect how much they buy.

Every day consumers make purchase decisions by choosing among large sets of related products available for sale in the aisles of stores. What factors might systematically affect how consumers make decisions among an array of products? Our research explores one aspect of that question.

As most marketers realize, not all shoppers are created equal. Within the same store, one may be searching for a specific product to meet an immediate need, while others may simply be browsing. Just as they can have different goals when they enter a store, individual consumers may approach purchase decisions with different mindsets that can affect how they shop. In social psychology, a mindset is defined as a set of cognitive processes and judgmental criteria that, once activated, can carry over to unrelated tasks and decisions. In other words, if you get a consumer thinking a certain way, that way of thinking — that mindset — can influence his or her subsequent shopping behavior.

In particular, social psychologists have identified two distinct mindsets that are relevant to how consumers make decisions when choosing among large sets of related products: abstract and concrete. An abstract mindset encourages people to think in a more broad and general way. Consumers in an abstract mindset who face an array of related products will focus more on the shared product attributes associated with an overarching purpose — for example, the general category of hair care or car maintenance. Conversely, a concrete mindset draws attention to lower-level details and attributes associated with execution or usage; consumers in a concrete mindset will thus focus on factors that differentiate between products.

(…)

By Kelly Goldsmith, Jing Xu and Ravi Dhar
Full article [PDF]
http://sloanreview.mit.edu/the-magazine/articles/2010/fall/52112/the-power-of-customers-mindset/

Are your customers in a concrete or abstract mindset as they think about purchasing your product? The answer can affect how much they buy.

As most marketers realize, not all shoppers are created equal. Within the same store, one may be searching for a specific product to meet an immediate need, while others may simply be browsing. Just as they can have different goals when they enter a store, individual consumers may approach purchase decisions with different mindsets that can affect how they shop. In social psychology, a mindset is defined as a set of cognitive processes and judgmental criteria that, once activated, can carry over to unrelated tasks and decisions. In other words, if you get a consumer thinking a certain way, that way of thinking — that mindset — can influence his or her subsequent shopping behavior.

Who Has Innovative Ideas? Employees.

The trick is knowing how to tap into them. One answer: innovation communities.

Let’s take the mystery out of innovation and its inspirations.

Most great ideas for enhancing corporate growth and profits aren’t discovered in the lab late at night, or in the isolation of the executive suite. They come from the people who daily fight the company’s battles, who serve the customers, explore new markets and fend off the competition.

In other words, the employees.

Companies that have successfully made innovation part of their regular continuing strategy did so by harnessing the creative energies and the insights of their employees across functions and ranks. That’s easy to say. But how, exactly, did they do it? One powerful answer, we found, is in what we like to call innovation communities.
Questions to Ask Yourself

1. Does your company leave innovation to an R&D team without input from groups that work directly with customers?
2. Are your best managers and staff increasingly restless and cynical because they aren’t being given the opportunity to shape your company’s future?
3. If you asked 10 employees what they thought management considered to be fruitful areas for innovation, would you get 10 different answers?
4. When you talk of employee-generated innovation with your management team, do they act dismissively?
5. Does your management team think it’s too costly and disruptive to hold regular cross-function innovation discussions?

If you answered yes to any of these questions, your company probably needs to rethink how it inspires innovative ideas. Regularly hosting what we call innovation communities can save companies money while enhancing future leadership, growth and profits.

Every company does it a little differently, but innovation communities typically grow from a seed planted by senior management—a desire for a new product, market or business process. A forum of employees then work together to make desire a reality.

Innovation communities tackle projects too big, too risky and too expensive to be pursued by individual operating units. They can be created with little additional cost, because no consultants are needed. After all, those in the midst of the fray already know most of the details relevant to the project.

A lot of senior managers think the opposite: that the people around them don’t understand what’s needed or are incapable of seeing the big picture. This is why some call in consultants. But we say this often shows a signal lack of strategic courage and resolve. We say trust your own people.

Innovation communities are a way of giving new shape and purpose to knowledge that your employees already possess. The detailed discussions that take place, led by senior managers, often represent a company’s most productive and economical engine for increased profits.

Here, then, are seven key characteristics that we have identified as being part of successful innovation communities.

CREATE THE SPACE TO INNOVATE. Line managers and employees occupied with operational issues normally don’t have the time to sit around and discuss ideas that lead to cross-organizational innovation. Innovation communities create a space in which employees from across the organization can exchange ideas.

At first, participants typically meet face to face at a central location, often company headquarters, then shift to virtual meetings for follow-up sessions. The most important thing is blocking out time free of daily responsibilities to devote to discussion and creative thinking.
Executive Adviser

Innovations in management theory & business strategy – a collaboration with The Wall Street Journal

Senior management sets the agenda. A clear statement of purpose and themes for discussion are set forth. Participants are free to discuss ideas without concerns about hierarchy and quarterly financial results.

Each year at food retailer Supervalu Inc., 35 to 40 mid- and director-level managers break up into four teams to discuss strategic issues suggested by executives in the different business units. The managers discuss issues outside their own areas of expertise and work on their leadership development at the same time. Over periods of five to six months, they hold electronic meetings at least weekly and meet in person at least five to six times, all while continuing to perform their regular duties.

Japanese pharmaceutical maker Eisai Co. has convened more than 400 innovation communities since 2005 to focus on health-care-related issues such as examining possible new structures and sizes of medicines—for instance, a medication now on the market in Japan in a jelly-like substance that Alzheimer’s patients can swallow easily—and devising social programs for the families of Alzheimer’s victims. Every Eisai employee world-wide participates in at least one such project, and spends time with patients as well. The company thinks connecting in person with patients is crucial because it helps employees see and understand issues that the patients think are important, and so enhances the employees’ ability to see beyond pure data.

GET A BROAD VARIETY OF VIEWPOINTS. It’s essential to involve people from different functions, locations and ranks, not only for their unique perspectives, but also to ensure buy-in throughout the company afterward. Innovation communities focus on creating enthusiasm as well as new products. At Honda Motor Co., innovation groups in the U.S. draw members from sales, engineering and development, and from different business units across North America. Some companies, like General Electric Co., involve consumers and business clients in new-product discussions as well.

Sometimes groups seek out certain kinds of participants. Best Buy Co., for example, assembled mostly women employees, from store cashiers to corporate executives, to discuss how to make its stores more attractive to female consumers. The inspiration: Best Buy considered women a seriously underserved market segment with high growth potential. Store data also revealed that women customers tended to return less merchandise than men did, and so generated more profits.

CREATE A CONVERSATION BETWEEN SENIOR MANAGEMENT AND PARTICIPANTS. By definition, innovation communities can’t work in isolation: To create sustainable cross-organizational innovation, it’s important that ideas flow to senior managers. If they don’t, innovations will tend to have limited, local effects that don’t benefit the organization as a whole.
See Also

Further reading from MIT Sloan Management Review

* Six Myths About Informal Networks—and How To Overcome Them
Rob Cross, Nitin Nohria and Andrew Parker
Informal groups of employees do much vital work.
* Four Keys to Managing Emergence
Ann Majchrzak, Dave Logan, Ron McCurdy and Mathias Kirchmer
Encouraging spurts of participatory innovation.
* An Inside View of IBM’s ‘Innovation Jam’
Osvald M. Bjelland and Robert Chapman Wood
What happened when IBM brought 150,000 employees and stakeholders together.

Discussions about innovation should be open but guided conversations between senior managers and lower-ranking participants. Everyone has to be on the same page, especially when it comes to understanding the competitive environment and how to respond.

http://sloanreview.mit.edu/executive-adviser/articles/2010/3/5234/who-has-innovative-ideas-employees/
By JC Spender and Bruce Strong

The trick is knowing how to tap into them. One answer: innovation communities.

Let’s take the mystery out of innovation and its inspirations.

In other words, the employees.

Questions to Ask Yourself

Does your company leave innovation to an R&D team without input from groups that work directly with customers?
Are your best managers and staff increasingly restless and cynical because they aren’t being given the opportunity to shape your company’s future?
If you asked 10 employees what they thought management considered to be fruitful areas for innovation, would you get 10 different answers?
When you talk of employee-generated innovation with your management team, do they act dismissively?
Does your management team think it’s too costly and disruptive to hold regular cross-function innovation discussions?

Here, then, are seven key characteristics that we have identified as being part of successful innovation communities.

CREATE THE SPACE TO INNOVATE. Line managers and employees occupied with operational issues normally don’t have the time to sit around and discuss ideas that lead to cross-organizational innovation. Innovation communities create a space in which employees from across the organization can exchange ideas.

Executive Adviser

Innovations in management theory & business strategy – a collaboration with The Wall Street Journal

GET A BROAD VARIETY OF VIEWPOINTS. It’s essential to involve people from different functions, locations and ranks, not only for their unique perspectives, but also to ensure buy-in throughout the company afterward. Innovation communities focus on creating enthusiasm as well as new products. At Honda Motor Co., innovation groups in the U.S. draw members from sales, engineering and development, and from different business units across North America. Some companies, like General Electric Co., involve consumers and business clients in new-product discussions as well.

CREATE A CONVERSATION BETWEEN SENIOR MANAGEMENT AND PARTICIPANTS. By definition, innovation communities can’t work in isolation: To create sustainable cross-organizational innovation, it’s important that ideas flow to senior managers. If they don’t, innovations will tend to have limited, local effects that don’t benefit the organization as a whole.

10 Data Points: Information and Analytics at Work

The New Intelligent Enterprise inquiry is all about the intensifying wave of data that organizations are facing, and its implications for managers. Companies are becoming data driven in ways that are new, raw and — in many cases — untested. And now so are we: We’re trying something new by letting the data come first, without a lot of editing or parsing. Here is a slice of the raw goods, a kind of behind-the-scenes look at the data we gathered from our survey of nearly 3,000 managers and executives from every major industry and all regions of the globe. (Also see “10 Insights: A First Look at The New Intelligent Enterprise Survey.”)

We chose these 10 charts to share because they captured our attention. Some are provocative, some are telling, and some raise questions we haven’t even tried to answer yet. They’re by no means comprehensive, and our final report will cover many more points accompanied by rigorous analysis. But we do think you’ll find these graphics worth a look if for no other reason than that they allow you to do some immediate benchmarking. How does your organization compare with others? What are your peers doing, and how might that influence decisions you’re considering right now?

The survey respondents answered two questions that allowed us to group them and their answers in some interesting ways. One question asked them to assess where their organization is along the journey to an ideal state: an organization that has been “transformed by better ways to collect, analyze and be prescriptively guided by information.” Those that were farthest along that path we deemed Sophisticates; those who were midway became Intermediates; while those that were just beginning to look at data and analytics we called Starters.

We also asked them to describe their organization’s competitive position. Those that rated themselves as substantially outperforming their industry peers we named Top Performers. Those that were underperforming we labeled Lower Performers. You’ll note both groups called out in the accompanying charts.

By Nina Kruschwitz and Rebecca Shockley | http://sloanreview.mit.edu

Early returns are in from the first annual New Intelligent Enterprise Survey. Here are major highlights of what executives and managers said about how they are — or are not — capitalizing on information.

PDF Buy article & permissions

10 Insights: A First Look at The New Intelligent Enterprise Survey

How do you win with data? SMR surveyed global executives about turning the data deluge and analytics into competitive advantage. Here’s an early snapshot of how managers are answering the most important question organizations face.

Last May, at the MIT Sloan CIO Symposium main-stage discussion on “Emerging Stronger from the Downturn,” one panelist listened with a growing private smile as his fellow speakers described example after example of how technology-driven information and analytics applications were transforming their companies. The stories were of data and analysis being used to understand customers, parse trends, distribute decision making, manage risk; they foretold of organizations being reinvented and management practice being rethought. They told of change, basically. A lot of it. Driven by ever-emerging technology and the new things it could do.

That was the point at which the panelist, a multinational industrial COO, turned to the audience and unofficially summarized, “So, the lesson: If you don’t like change, you’re going to like irrelevance even less.”

He’s right. Change is here. Failure to adapt means irrelevance. Time and progress march on, but at a Moore’s law pace instead of a clock’s. [Más…]

However, the focus on exactly what’s changing can be misplaced. For all the swiftness with which technology is shifting — getting smarter, more powerful, more cognitively “human” — it’s sometimes true that the attention we pay to the next new technology is a distraction. It distracts us from the changes that organizations could make with no more new technology at all — the changes organizations could achieve just by capitalizing on how current technology can enable them to capture, analyze and act on information. (Though the “just” in that sentence may be ill-advised.)

MIT Sloan School’s Erik Brynjolfsson, director of the MIT Center for Digital Business, talked about that kind of change in an interview with SMR:

“Although most of what I’ve been talking about has focused on changes in the technology, I think the biggest changes are going to be in the way the companies use the technology. If some catastrophe happened and technology just froze for the next couple of decades, I believe the pace of organizational change would continue just as rapidly, because we have so much catching up to do. Specifically, I think this cultural mentality of using data more effectively, running experiments and responding to the environment and replicating it is something that is going to happen regardless of what additional advances we see in the underlying technology. A decade from now, I expect companies to be far more responsive, far more innovative, far more analytics-minded.”

Brynjolfsson gave experimentation special emphasis, but his observation fits other information-enabled practices found under the big tent of analytics. The technology is here. The data are available. How will companies use them to win?

To answer that question, SMR has teamed with the IBM Institute for Business Value to build a new innovation hub and research program called “The New Intelligent Enterprise.”

Through the SMR and IBM IBV collaboration, The New Intelligent Enterprise aims to help managers understand how they can capitalize on the ways that information and analytics are changing the competitive landscape. What threats and opportunities will companies face? What new business models, organizational approaches, competitive strategies, work processes and leadership methods will emerge? How will the best organizations reinvent themselves to use technology and analytics to achieve novel competitive advantage? How will they learn not only to be smarter, but to act smarter?

In the months ahead, this inquiry into the makeup of The New Intelligent Enterprise will consist of survey research, in-depth interviews with thought leaders and top corporate executives worldwide and the most relevant academic research and case study work in the field. This article presents (very) early returns on that research — especially on the first annual New Intelligent Enterprise Survey, a global survey of nearly 3,000 executives who told us about their top management goals, their uses (and misuses) of information and analytics as they attacked those goals and the management practices in play in their organizations. In both this article and “10 Data Points,” we call out some of what we’re learning. The articles have been coauthored by core members of The New Intelligent Enterprise team: Steve LaValle, IBM Global Strategy Leader for Business Analytics and Optimization; Nina Kruschwitz, SMR Special Projects Editor; Rebecca Shockley, IBM IBV Global Lead for Business Analytics and Optimization; and Fred Balboni, IBM Global Leader for Business Analytics and Optimization.

Please note: What’s here is only preliminary — a true “first look” at the themes, benchmarks and questions that are surfacing. Next on the schedule: conclusive analysis of the survey and stage-one interview findings will be published in a New Intelligent Enterprise Special Report on October 25. Selected interviews will be published online through early winter. And in late December, the Winter issue of SMR will include further exploration of the key ideas in October’s Special Report.

For now, though, consider the following notes — and the survey statistics in “10 Data Points” — as a collective reminder to reexamine your own practices and plans. As the gentleman said, If you don’t like change, you’re going to like irrelevance even less.

Here are 10 observations and questions about analytics-driven management that have popped out of research and interviews so far, and which we’ll be exploring more deeply in the major reports ahead.

By Michael S. Hopkins, Steve LaValle and Fred Balboni
http://sloanreview.mit.edu

He’s right. Change is here. Failure to adapt means irrelevance. Time and progress march on, but at a Moore’s law pace instead of a clock’s. Continuar leyendo «10 Insights: A First Look at The New Intelligent Enterprise Survey»

From The Magazine «MIT Sloan Management Review»

When Staff Shape Facts to Fit Decisions

Many managers think they’ve committed their organizations to evidence-based decision making, when in reality, they practice decision-based evidence making. In the MIT SMR summer issue, Peter Tingling and Michael Brydon explore the downside of having subordinates shape evidence to meet perceived expectations of company leaders — and what can be done to lessen the negative impact.

ALSO IN THE NEW SUMMER ISSUE:

The challenge of finding just the right trust level with partners, in “Why Too Much Trust Is Death to Innovation.”

COVER STORY: Strategy

What to Do Against Disruptive Business Models

Constantinos C. Markides and Daniel OyonFighting a disruptive business model by rolling out a second business model is one option for companies under fire. The risk, though, is getting stuck in the middle.

Feature: Sustainability

Sustainability Leadership’s 3 Phases

Christoph Lueneburger and Daniel GolemanSustainability initiatives can’t be driven through an organization like other changes. They have three distinct stages, each requiring different organizational capabilities and leadership competencies.

Promises Aren’t Enough

//sloanreview.mit.edu

By Rodrigo Canales, B. Cade Massey and Amy Wrzesniewski
Business schools need to do a better job teaching students values

It is a sign of the times that hundreds of Harvard Business School’s 2009 and 2010 graduates took “The MBA Oath.” These students promised to “serve the greater good,” act ethically, and refrain from pursuing greed at others’ expense.

We are inspired that students who will soon be in positions of leadership vow to reject the temptations their predecessors could not. But they and the more than 100,000 new M.B.A. students who enrolled this year will need more than an oath if they wish to become ethical business leaders. Simply put, such oaths sound much like chastity vows taken by thousands of teens every year. The problem in both cases is not a lack of sincerity, but a failure to adequately prepare for the moment of truth.

Just Words

Like a chastity vow, the M.B.A. oath has an unstated assumption that those who have gone before are somehow different: They had weaker wills, less resolve, looser morals. The oath is meant to signal a stronger commitment to values. The danger is the false sense of moral inoculation such oaths engender. Just as teenagers who take a chastity vow in lieu of better sexual education are more vulnerable to the consequences of unprotected sex—vow takers are actually more likely to engage in risky sexual behavior—M.B.A.s who take an ethics oath without enough supporting leadership education are likely more vulnerable to ethical breaches.

Executive Adviser

Innovations in management theory & business strategy – a collaboration with The Wall Street Journal

The power of the situation, and our too frequent disregard for it, is an overarching lesson from sociology and social psychology. Situational forces drive behavior to a surprising extent, much more than expected by those who believe character determines all.

This lesson has been implicated in one scandal after another, from Enron to Abu Ghraib. Pledges made without the benefit of experience with compromising situations, and without some kind of supporting structure, actually exacerbate the problem.

When Should You Nickel-and-Dime Your Customers?

Keep It Simple: The Case for Combining Price Components

So the advantages of price partitioning imply that, as a manager, it’s better to offer a low base price and then hit consumers with a litany of small fees at checkout, right? Not so fast, say researchers who study a phenomenon called “shipping-charge skepticism.”5 Experimental research shows that some consumers strongly dislike paying for shipping. For those consumers, offers that include shipping in the total price are more attractive than offers that partition the price of the product and shipping into separate components. Data from customers using shopping bots (computer programs that search Internet commerce sites for the best prices — Google Inc.’s Froogle, would be an example) — to purchase books online has demonstrated the same effect. Customers were found to be almost twice as sensitive to changes in shipping charges as they were to changes in the price of the books they were purchasing.6 This analysis suggests that combining shipping charges and the price of the books makes consumers willing to pay more for the bundle, making combined pricing more advantageous than partitioned pricing.

Under what conditions do combined prices make consumers more satisfied or willing to pay more than partitioned prices? In contrast to the examples of partitioned pricing (telephone and hotel bills), the prices for two different components of a product or service are often combined: Books or shoes ordered online may be shipped for free, new kitchen countertops are sometimes sold with free installation, and new cars may come with a five-year/50,000-mile warranty. The fact that combined prices are common in the marketplace suggests that, under some conditions, it must be advantageous for sellers to take this approach.

One reason for combining prices is to avoid highlighting components such as shipping charges that consumers would rather not think about, or a warranty that might make reliability more of an issue. For example, research conducted by one of the authors shows that when a consumer is considering the purchase of a refrigerator, partitioning the price of a warranty raises more concerns about the appliance’s reliability — hurting purchase likelihood — than partitioning a different component, such as an icemaker.7

Another reason for combining prices is to be upfront with consumers and avoid surprising them later with fees that may upset them, ruining customer goodwill. A resort stay that costs a lot more upon checkout than the customer expected may not be remembered favorably the next time the customer goes online to make reservations. Resorts like Club Med offer all-inclusive prices to help consumers relax while they’re on vacation. In a sense, this combined pricing strategy decouples the pleasure of consumption and the pain of paying, allowing consumption to be savored more fully.8 The price of a stay at Club Med may be high, but repeat business is good because consumers know the price upfront, and they aren’t reminded of the costs every time they enjoy a resort amenity or surprised at checkout by a long list of charges for the amenities they already enjoyed. This kind of goodwill may be why Southwest Airlines Co. recently advertised its “Freedom from Fees” policy, differentiating itself from airlines that add on fuel surcharges and charge fees for checked baggage. (It also eliminates all that yelling at the ticket counters.)
A Contingent Approach: The Strategy of Benefits-Based Price Partitioning

Although most managers are familiar with the concept of selling benefits — not features — in their marketing communications, this concept hasn’t been adopted as widely in the area of pricing, and particularly price partitioning. In this section, we describe why the approach of benefits-based price partitioning — pricing components based on customers’ sensitivity to the price of each component — can be a win for both managers and customers.

One of the reasons cost-plus pricing has continued to be popular among managers is that it has the advantage of being perceived as fair by consumers. Research indicates that customers believe companies are entitled to a reasonable profit margin and that cost-based price increases to preserve a company’s profit margin are fair, but they feel morally outraged when companies opportunistically increase prices to increase their profits. A classic article by Nobel Prize winner Daniel Kahneman and his colleagues illustrates this principle by showing that customers believe a cost-based increase in the price of snow shovels is fair, but a demand-based increase in the price of snow shovels during a snowstorm is unfair.9 Similar to cost-plus pricing, when managers use cost-plus price partitioning with a uniform profit margin across components, it is straightforward to justify why a specific price is being charged for a particular component.

However, keeping your profit margin constant across price components may not maximize either profit or customer satisfaction. Recent research we conducted shows that customers are more price sensitive for components that they feel provide them with less benefit (“low-benefit” components, such as installation or shipping) relative to components they feel provide them with more benefit (“high-benefit” components, such as auto parts or books).10 In other words, customers are happier to pay for some components (auto parts or books) than for others (installation or shipping). Thus, for customers buying books online, a price partition in which the profit margin on shipping is low — or even negative — and the profit margin on books is high will be systematically more attractive to customers than a partition of the same total price in which the profit margin on shipping and books is the same. Taken to the logical extreme, this strategy suggests that customers prefer combined pricing in which a component they don’t like paying for is included in a single total price, rather than partitioned pricing in which they pay some proportion of the total price for each component.

In contrast to a strategy in which the same profit margin is expected for each price component, benefits-based price partitioning suggests that profit margins should be higher for components for which customers are less price sensitive and lower for components for which customers are more price sensitive. By holding the total price constant, research shows that customers will be more likely to buy when components they don’t like are de-emphasized (either by decreasing their profit margin or by combining them into a total price) and components they do like are highlighted (either by increasing their profit margin or by partitioning them from other components). It’s hard to argue against a strategy that improves outcomes for both the seller (by increasing customer purchase intentions) and the customer (via greater customer satisfaction and perceived value) while keeping the total price constant.

http://sloanreview.mit.edu/
By Rebecca W. Hamilton, Joydeep Srivastava and Ajay Thomas Abraham

Every manager who’s ever set a price has had to wrestle with whether to “partition” the elements — charge separately for such things as shipping, installation or warranties — or to bundle everything into one price. Here’s how to decide.

If you’ve spent time at an airport recently, you’re likely to have overheard a conversation between a surprised non-frequent flyer and a ticket agent about fees for checked luggage. That exchange may have been a loud one if the airline was charging $25 (or more) per bag. Although charging separately for luggage allows airlines to advertise lower ticket prices, potentially increasing sales, incorporating baggage fees into the ticket price might increase the satisfaction of customers en route as well as raise the retention rate of check-in counter agents. And therein lies the rub.

When should a company “nickel-and-dime” customers by charging separately for various extras, and when is it better to keep things simple by combining all of the charges into one total price?

Before answering, consider another example: The price of wall-to-wall carpeting may or may not include the cost of installation or delivery to the customer’s home. Given that most customers neither own a vehicle large enough to transport a living-room–sized piece of carpeting nor have any desire to rent one, delivery is, for all intents and purposes, a required component of the purchase. If nearly all customers will be buying both carpeting and delivery, should the price of the carpeting include delivery or should the company charge for it separately?

The Leading Question

When should companies bundle charges, and when should they list them separately?

Findings

One size does not fit all. How you answer the question depends on many factors, including industry norms.
If you don’t follow industry norms, you will be at a disadvantage when people quickly comparison shop.
But moving away from the pack — for instance not charging passengers to check bags — could give you a competitive advantage.

On the one hand, assigning a separate dollar value to the delivery component would decrease the price per square foot that the company charges for their carpeting, making its prices appear more competitive when customers comparison shop. Charging separately for delivery also might increase the perceived value of the delivery service to customers and discourage absenteeism when the delivery truck is scheduled to arrive. On the other hand, if delivery is something customers really dislike paying for (like other shipping and handling charges), they might be much happier with the overall transaction if delivery charges were included in the price. Including free delivery could even increase the likelihood that they become repeat customers. Continuar leyendo «When Should You Nickel-and-Dime Your Customers?»

Do Techies Make Good Leaders?

By Robert M. Fulmer and Byron Hanson

They can, but developing their skills definitely poses challenges

It’s hard to develop leaders in any industry. But people in the technology sector seem to believe it’s especially hard in their business.

So is it?

We put that theory to the test and concluded that tech people have a point: The speed of the industry’s growth, along with the type of workers it attracts—young and with backgrounds in engineering and science—does, indeed, lead to some unique challenges.

What follows are the key insights and lessons that emerged from our research, which involved surveys of technology companies and interviews with industry leaders. Although the focus of this study was the tech sector, our previous work suggests that these lessons could be useful to any company seeking to improve its leadership-development process.

By Robert M. Fulmer and Byron Hanson

They can, but developing their skills definitely poses challenges

It’s hard to develop leaders in any industry. But people in the technology sector seem to believe it’s especially hard in their business.

So is it?

We put that theory to the test and concluded that tech people have a point: The speed of the industry’s growth, along with the type of workers it attracts—young and with backgrounds in engineering and science—does, indeed, lead to some unique challenges.

What follows are the key insights and lessons that emerged from our research, which involved surveys of technology companies and interviews with industry leaders. Although the focus of this study was the tech sector, our previous work suggests that these lessons could be useful to any company seeking to improve its leadership-development process. Continuar leyendo «Do Techies Make Good Leaders?»

Quick Takes: Why Is Customer Service So Bad?

Andrew McAfee’s plea about customer service
“How can it still be the case, in 2010, that really well-understood technologies (telephony, voice prompts, etc.) are still detracting from customer service, rather than improving it, at some of the largest companies in the world?”

That’s MIT Sloan research scientist Andrew McAfee, wondering in his blog why the American Express Travel Services phone service offers such poor service. None of the possibilities make sense. Leaders aren’t aware? All they have to do is dial their number. They’re aware, but not bothered? “How could they not be?” McAfee asks. “They run a customer service business — it’s all they do — and they just released a study showing that, as their headline put it, ‘Americans Will Spend 9% More With Companies That Provide Excellent Service.’”

McAfee’s third possibility is the most intriguing: Leaders know about the problems, are concerned about the problems, but aren’t planning on doing anything about the problems.

“Maybe they don’t feel like they have the budget, the expertise, or the managerial bandwidth to take on a tech-heavy project now,” McAfee says. “Maybe the issues I experienced only crop up in the particular segment of Amex Travel I was dealing with, or when call volumes are particularly heavy, and so the company is willing to live with them for the time being. But I’m a heavy traveler, the kind of customer they probably want to attract and retain, and I’m sufficiently struck by this lousy tech leading to lousy customer service that I’m sitting around blogging about it.”

Andrew McAfee’s plea about customer service
“How can it still be the case, in 2010, that really well-understood technologies (telephony, voice prompts, etc.) are still detracting from customer service, rather than improving it, at some of the largest companies in the world?”

That’s MIT Sloan research scientist Andrew McAfee, wondering in his blog why the American Express Travel Services phone service offers such poor service. None of the possibilities make sense. Leaders aren’t aware? All they have to do is dial their number. They’re aware, but not bothered? “How could they not be?” McAfee asks. “They run a customer service business — it’s all they do — and they just released a study showing that, as their headline put it, ‘Americans Will Spend 9% More With Companies That Provide Excellent Service.’”

McAfee’s third possibility is the most intriguing: Leaders know about the problems, are concerned about the problems, but aren’t planning on doing anything about the problems.

When People Come and Go

Project teams often have different workers at different times. And that can create problems.

It’s tough for a team to deliver top performance when members keep coming and going. Constant turnover makes it hard to maintain team spirit—and the continuity of skills and knowledge necessary to get the job done.

But sometimes companies don’t have any choice but to keep shuffling the deck. Teams might need different workers at different stages of a project—designers at the start, for instance, and prototyping experts later on. Likewise, the team members may not all be available at the same time, or employees might constantly come and go because of layoffs or mergers.

Questions to Ask Yourself

1. Are you constantly shuffling people on and off teams in your company, either out of necessity or by design?
2. Do new team members take a long time to get up to speed?
3. Do longstanding team members resent the extra work it takes to get newcomers trained?
4. Do team members who are constantly shuffling from manager to manager complain about a lack of career oversight?
5. Overall, do you find that these unstable groups aren’t performing as well as they should?

If you answered yes to any of these questions, you need to rethink how you set up and manage your teams. You should craft team roles that take little on-the-job training, and make it as easy as possible to slot people in and out. As part of that, you should come up with formalized procedures for employees to follow, making it easier to get newcomers up to speed. Finally, find ways to motivate workers who are always moving among teams, and help them identify with the organization and its goals—such as assigning them to a manager who oversees everyone at the company with similar skills, instead of bouncing them from boss to boss.

Some managers, meanwhile, want to keep team membership unstable on purpose. They may want to rotate employees in and out of groups to give them exposure to different parts of the business, or to cut down on theft or other bad behaviors that can develop when employees work together closely for a long time and turn a blind eye to each other’s misdeeds.

So, how can companies get the most out of teams under unstable conditions? Here’s a look at the most common problems that teams with fluid membership encounter—and the best ways to solve them.

By Gervase R. Bushe

Project teams often have different workers at different times. And that can create problems.

Questions to Ask Yourself

Are you constantly shuffling people on and off teams in your company, either out of necessity or by design?
Do new team members take a long time to get up to speed?
Do longstanding team members resent the extra work it takes to get newcomers trained?
Do team members who are constantly shuffling from manager to manager complain about a lack of career oversight?
Overall, do you find that these unstable groups aren’t performing as well as they should?

So, how can companies get the most out of teams under unstable conditions? Here’s a look at the most common problems that teams with fluid membership encounter—and the best ways to solve them. Continuar leyendo «When People Come and Go»

A Plan to Invent the Marketing We Need Today

The discipline of marketing hasn’t kept up with the rapid changes facing 21st-century businesses. New scholarship doesn’t have enough management relevance, and practicing marketers are too often forsaking rigor. Here are seven strategies that can make marketing both relevant and rigorous in today’s world.

The world in which marketing operates has fundamentally changed. Thomas Friedman has sketched the outline of the new realities of our “flat world” and Kenichi Ohmae has discussed the requirements of operating on “the new global stage.”1 The rise of China, India and other emerging economies has demanded new market strategies to reach developing countries. Technologies from the Internet to biotechnology are fundamentally changing science and society. At the same time, social concerns from environmental impact to corporate social responsibility are changing the relationships of companies to the societies in which they operate. [Más…]

New channels and technologies are transforming the media through which marketing works. Virtual worlds such as Second Life are giving new meaning to the concept of “place” in marketing. Collaborative projects such as open source software and Wikipedia are transforming the consumer into a cocreator. Movies and entertainment have broken out of the television box and into the iPod, cell phones and computers. The broadcast has been transformed into the podcast. TiVo and other technological innovations have made the mass media more customized, eliminating the predictability of traditional advertising.
The Changing Context

It is no wonder that some of the marketing concepts and models that were developed in the last century are no longer relevant today. There have been dramatic changes in the environment that require us to rethink our approaches to marketing. Among these changes are:

* Post-9/11 global terrorism
* A turbulent global economy
* The pervasive impact of the Internet and constant advances in information and communication technologies
* Continued advances in science and technology-based inventions
* The empowered hybrid consumer who expects customized products and services, messages and distribution channels
* The reluctant consumer — with declining response rates, TiVo and increasingly negative attitudes toward marketing and advertising
* Decreased consumer and employee loyalty
* The vanishing mass market and increased fragmentation of all markets
* A blurring of the line between B2B and B2C
* The rising importance of the developing world
* Opportunities for outsourcing and digital outsourcing/offshoring of marketing services (beyond call centers)
* Increased focus on public/private cooperation (nongovernmental organizations and others)

This world has led to a new breed of consumers. They expect customization (make it mine), communities (let me be a part of it), multiple channels (let me call, click or visit), competitive value (give me more for my money) and choice (give me search and decision tools).2 The era of the passive consumer is history. Empowered consumers are increasingly in control, which dramatically changes the role of marketing. This shift in relationship between consumers and companies is the most fundamental change in the history of marketing, even more dramatic than the historic shift from a product orientation to a market orientation.

Of course, there are limits to these shifts. Consumers may expect more, but there is more pressure on their time — so while they may be given the opportunity to cocreate customized solutions, some segments may in the end just want that standardized product off the shelf.

Has marketing research and practice kept pace with the emerging new realities? Most marketing is too focused on the developed world rather than the developing world, where many future opportunities lie. With increasing pressure for organic growth, marketing has been called upon to play a broader role in the company, but is it ready to take a seat at the corporate table? There is a need for greater collaboration with finance, operations and other areas of the company, but is marketing too isolated as a discipline?

Through its maturation as a discipline over the past half century, marketing has emerged as a rigorous field. Tools such as conjoint analysis, economic and econometric modeling, behavioral economics, data mining, and techniques derived from mathematical psychology have raised the level of rigor and strengthened the insights that marketing can contribute to the enterprise. But many of the most rigorous tools were developed years ago. Today’s challenge is how to move from using old tools that are focused on solving problems of the past to developing new and rigorous tools that are relevant to the challenges of today and the future. We need both rigor — using scientifically valid methods to address marketing problems — and relevance — a true focus on the evolving needs of managers and their organizations.

At this point in the development of marketing, we have a difficult choice. We can choose rigorous tools that are less and less relevant to the challenges at hand. Or we can choose more relevant approaches that lack rigor. We have lost the focus on the dual objectives of rigor and relevance. Academics focus on rigor with limited attention to relevance, while practitioners focus on relevance with limited attention to rigor. This is not an acceptable situation. We need both rigor and relevance. But to achieve this we may need to rethink and transform the field of marketing.
Increasing Rigor and Relevance: Seven Strategies

I propose seven strategies that can increase both the rigor and relevance of marketing research and practice. These strategies will raise marketing’s usefulness and impact on the organization while sustaining its rigor and achieving the desired outcome for all its stakeholders. While some of these strategies have been discussed before, they all make important contributions to increasing rigor and relevance and have to be considered together.

By Yoram (Jerry) Wind

The discipline of marketing hasn’t kept up with the rapid changes facing 21st-century businesses. New scholarship doesn’t have enough management relevance, and practicing marketers are too often forsaking rigor. Here are seven strategies that can make marketing both relevant and rigorous in today’s world.

Designing the Soft Side of Customer Service

In service environments, customers have complex needs. Even in the most mundane encounters, emotions are lurking under the surface. Your job is to make those feelings positive.

When people think about innovation in customer service, they usually think in terms of technological or process enhancements that make service delivery faster or more efficient. In recent years, restaurants have introduced hand-held devices that buzz patrons when their table is ready, and supermarkets offer customers self-service checkout lines. While such innovations may simplify matters for customers, service organizations rarely stop to consider the overall psychology that shapes service encounters. Indeed, despite the plethora of articles and books about managing the customer experience, many key psychological variables that influence customer perceptions — the subtle enhancements that help define a positive experience — have yet to be defined or articulated fully.

Organizations often measure the outcomes of service encounters in concrete terms such as on-time flight arrivals or the time to resolve a customer’s call. However, the subjective outcomes — the emotions and the feelings — are more difficult to describe: Did the passenger enjoy the flight? Did the customer who called the service center with a problem hang up feeling better about the provider? Much as having a deeper understanding of systems dynamics and process analysis has pushed companies to re-engineer their operations to achieve explicit outcomes, findings from behavioral decision- making research, cognitive psychology and social psychology can point service providers to ideas for redesigning the psychological or implicit aspects of service encounters.

Service and Quality

By Sriram Dasu and Richard B. Chase

In service environments, customers have complex needs. Even in the most mundane encounters, emotions are lurking under the surface. Your job is to make those feelings positive.

The Price Isn’t Right

By Detlef Schoder and Alex Talalayevsky

Thanks to the Internet, companies have lost control of their pricing power. Here’s how they can get it back.

Everyone knows that companies have rock-bottom prices they’re willing to offer in emergencies. Think goods and services whose value is about to expire: hotel dates, plane tickets, last season’s fashions, packaged food.

But until recently, not many people knew what those prices were. Keeping them under wraps is a key part of how companies maintain pricing power.

Well, the secret is out. Now, thanks to the Internet, consumers are able to figure out those prices. And that is creating huge headaches for the companies.

Online shoppers today aren’t just buyers; they’re also product reviewers, technical consultants and scouts for legions of fellow shoppers hunting for bargains. Many use Web sites where links are posted for online coupons and cash-back offers—deals that some companies didn’t intend to circulate so widely. Others go to sites where people discuss how to find the lowest bids acceptable on travel-service auction sites. Even shoppers for big-ticket items like cars get an edge from sites that reveal prices paid for new and used cars.

Questions to Ask Yourself

1. Does your company deal in products or services whose value is highly perishable or time-sensitive?
2. Do you offer online coupons or have multiple discount strategies that can be used by unlimited numbers of consumers?
3. Are your resellers sometimes discounting your goods without your authorization or knowledge?
4. Is your company unaware of what’s being said on bargain-hunting and other shopping-related Web sites about its prices and products?
5. Do you make last-minute offers at cut-rate prices without full appreciation as to how that might undermine your established pricing schemes or your brand image?

If you answered yes to any of these questions, your company may need to reassert control over its pricing power by pushing back against the increasing ability of online shoppers to obtain your lowest acceptable prices. Selling unlabeled, marked-down merchandise through an intermediary is one strategy, as is bundling the goods with additional offerings so that the base value you’ve assigned to the products is less clear.

Further assisted by search engines and so-called shopping bots that find the lowest prices for any number of products, shoppers today have unprecedented power to buy products at the sellers’ rock bottom. But if they come to expect such prices all the time, companies could see their long-term pricing power erode and profits slashed.
Here are eight tactics companies can use to limit the ability of bargain hunters to find their deepest discounts and lowest acceptable prices.

Marketing

By Detlef Schoder and Alex Talalayevsky
http://sloanreview.mit.edu

Thanks to the Internet, companies have lost control of their pricing power. Here’s how they can get it back.

But until recently, not many people knew what those prices were. Keeping them under wraps is a key part of how companies maintain pricing power.

Well, the secret is out. Now, thanks to the Internet, consumers are able to figure out those prices. And that is creating huge headaches for the companies.

Questions to Ask Yourself

Does your company deal in products or services whose value is highly perishable or time-sensitive?
Do you offer online coupons or have multiple discount strategies that can be used by unlimited numbers of consumers?
Are your resellers sometimes discounting your goods without your authorization or knowledge?
Is your company unaware of what’s being said on bargain-hunting and other shopping-related Web sites about its prices and products?
Do you make last-minute offers at cut-rate prices without full appreciation as to how that might undermine your established pricing schemes or your brand image?