Back Seat Marketers

In a product marketing class we took in undergrad, we played a simulation game each week that was supposed to replicate a market with consumers that had shifting preferences over time. All of our teams were given comparative advantages and then had to determine where we fit today in the market, and had to read the tea leaves of only a handful of data points to understand where consumers’ interest would be for the future weeks and make changes accordingly. The game proved to be educational in its interactivity as well as the point it relayed: things change and companies have to think ahead to be where consumers shifting preferences will be. Sort of throwing the ball to where the receiver will be, not where he is.

A great example was Porsche’s choice of getting into the SUV market with its Cayenne. Generally regarded as a huge bet on the company’s future, the Cayenne has been a very profitable move by a savvy company in touch with what its clientele wanted. While its 911 sports car was a icon, it had spent too many years trying to create a ‘mini-911′ which never seemed to carry the same weight. In the past 15 years, the company saw SUV’s grow wildly and put its own spin on one. While not revolutionary in design, it offered those interested in a Porsche a chance to get one in the right flavor.

What happens to the other SUV manufacturers as Porsche enters is where the real problem develops. Customers’ choices increase, volume at each legacy player decreases and old less desirable lines die. Chrysler started the minivan category and Ford owns the truck category with its F-series yet both companies are not profitable. In time, competitors new and old can shift to meet consumers’ preferences and hone offerings.  In fact, automobiles are no different than any category in Wal*Mart. Why are so many auto companies in trouble? Over time other players targeted all the right features of the best products while very little new technology (read: alt energy vehicles) emerged.

Avoiding strategy decay requires looking through the crystal ball and charting a course. Here are some general areas to consider when placing time into the marketing strategy mix:

1. Innovation over time is unpredictable, but measuring innovative successes has greatly improved making ‘fast following’ or copying features/products a profitable venture with a far lower cost structure. Additionally, as fast following becomes a norm in society, rules protecting unique properties have been weakened to allow consumers access to more manufacturer options.

2. Optimized business models for fast following strip away needless innovation and hone product offerings by all companies to the most successful options. Value chain leaders integrate or contractually lock up fast followers stripping costs out of identifying consumer preferences and integrating them into the product mix.

3. Traditional innovators unable to sustain multi-year investments must move downstream into being fast followers (being locked up or bought) or upstream into core technology developers that are harder to replicate. [Note that Apple continues to buy small technology companies to ensure its edge on core technologies over its suppliers.]

4. Supply chains are adapting into mass market, large scale ‘best product mix at lowest cost’ v. ‘newest technology / design at premium or value-for-features price’. In automobiles, think BMW and Porsche v. GM and Kia. In grocery, think Whole Foods and Harris Teeter v. Wal*Mart and Kroger. [Along this case, I'd note that Hulu v. YouTube is sorting this out where Hulu is the lowest cost distribution point for content producers like NBC while YouTube will need to differentiate by being a value-for-features option (begs the question: what are those features?)]

The next two years will mark a very difficult time across the board. Consumers will push for value and a purpose forcing companies to think about where they fit. Only a few like Apple are lucky enough to have its consumers next gen versions of its products for them.