Jeff Bezos, the owner of mighty Amazon constantly features in one of the most successful entrepreneurs of modern time. The way he has steered Amazon through all these years, shows his dedication and skill to make things work against all odds. However, even he failed. A lot of articles have come up post this and many different perspectives have tried to solve this problem from a different angle. Jeff Gothelf and Josh Seiden’s book, Sense and Respond tries to look at such cases from a newer perspective:
‘Amazon’s 2014 Fire Phone disaster is a classic example and, oddly, one that comes from the very same company that developed and frequently uses many of the sense and respond techniques we’re discussing—a company we laud in chapter 1 for that reason.
Motivated by consumers’ increasing use of mobile devices, Amazon began the Fire Phone effort in 2010, just as the iPhone 4 was hitting the market. Mobile users were becoming a more important source of traffic to Amazon, and the company wanted more control of the mobile store than Apple would allow. Apple’s rules about what companies can and can’t do in iOS apps include strict rules about commerce, including one that stipulates that Apple gets a 30 percent share of each in- app sale. 2 (The reason you can’t buy a book on the iOS Kindle app is that Amazon doesn’t want to pay Apple 30 percent of each sale.) So Amazon created the Fire Phone initiative to solve a business problem: it wanted complete control over the store that its customers visited on their mobile devices.
But what would be the value to customers? They struggled to find it, in part because of a strict culture of secrecy around this product. Jeff Bezos, CEO of Amazon, had lots of ideas for cool features. But cool and valuable are not the same thing. Over time, Bezos exerted an increasingly heavier hand in the design and development of the Fire Phone and, according to published reports, ignored feedback from his team that questioned his approach. 3 There was no conversation with the market here, only Bezos talking. He insisted that the phone have a series of fl ashy features like Dynamic Perspective, a 3-D display that didn’t require special glasses and could be seen from all angles; but it delivered little consumer value. Bezos assumed that fl ashy hardware features would make the phone more desirable to consumers than an iPhone. Without a continuous two way conversation with his target audience to guide the development of these features, though, Bezos was making a huge guess.
He guessed wrong. Four years later, in July 2014, the Fire Phone went on sale in the United States. Within days it was clear that consumers were unimpressed— with the design, with the ecosystem, and with the gimmicky features Bezos had pushed for so hard. Priced at $199, the Fire Phone was intended to compete directly with Apple’s iPhone, but consumers didn’t see the value. Instead, they saw it for what it was—a way to easily get to Amazon’s store in a way that was better for Amazon but not significantly better for customers.
After a $170 million write- down of unsold inventory, the Fire Phone was available for 99 cents before finally being sunset in late 2015. The behind- the- scenes stories reveal the arrogance in the top down decision- making process that Bezos led. Although people on the team pushed back, they ended up deferring to the boss. After all, he’d been right many times before. Why wouldn’t he be right again this time?
It might have helped if Bezos had listened to the market. Had he approached some of these decisions as assumptions to be tested and questions to be answered, rather than hunches to be followed blindly, things might have been different.’
You can get your hands at the book here.
This is an excerpt from Jeff Gothelf and Josh Seiden’s Sense and Respond.
Credit: Abhishek Singh
Tag: Harvard University
Winning with Superconsumers
Daniel Zein (disguised), the CFO of Great Snacks, thought that Nacho Cheese could be one of the company’s most valuable brands, so he encouraged the team to dig further into the product. The team did some robust analysis, and to their surprise, they discovered that Nacho Cheese’s consumers spanned the entire income spectrum.
From the data, it was obvious that Nacho Cheese could be a much bigger brand. Of all the full meals that consumers eat at home, about 37 percent are consumed hot and include cheese. But Nacho Cheese was used in only a fraction of those meals. To grow its product, the Great Snacks team decided to focus on the twenty-four million or so other consumers who share the same three loves that Laura had—people, cooking, and cheese—but who may not understand the magic of Nacho Cheese and the dozens of life solutions that it could deliver.
Simply put, the team gathered data from their superconsumers, ensured that the resultant insights and inspiration also appealed to the other twenty-four million consumers, and then geared its marketing, innovation, and retail execution to their tastes and behaviors. The immediate challenge was to convince the company leadership that Nacho Cheese could grow through better marketing and innovation—from packaging to product.
Line extensions into other forms of cheese were also a logical action step. Great Snacks drove growth by megabranding Nacho Cheese into other categories. The core business grew steadily faster than inflation, but the extensions in cheese (e.g., slices, shredded cheese) grew by double digits. All told, the brand extensions drove more than $50 million in growth, and the megabrand grew $100 million in three years.
For years, innovation for Nacho Cheese was a challenge. Since the brand was not well understood, innovation concepts yielded mixed results, which made the team hesitant to pursue breakthrough innovation. But with new data, the team revamped its innovation testing process to include both superconsumers (like Laura) and potential superconsumers (folks who could become like Laura).
The group was pleasantly surprised to find that among all the new product concepts it tested, some were off-the-charts positive for superconsumers. The team made a few tweaks, the new concepts tested positive for potential superconsumers as well, and the team finally had the results it needed to proceed.
The team saw that retail activation was inconsistent across retailers. In some stores, Nacho Cheese was placed in the center of the store. In others, it was refrigerated in the cheese and dairy section. So the team did some analysis and found that Nacho Cheese sold faster in the refrigerated section, which consequently produced better results for Great Snacks and the retailer. The team learned that superconsumers strongly preferred the product when it was sold in the refrigerated section. What’s more, potential superconsumers had a much easier time finding it in the refrigerated section.
Finally, the Great Snacks team used big data to uncover meaningful ways of improving marketing ROI. It used big data from Nielsen Catalina Solutions—a joint venture that creates a single-source panel of consumers from the sixty million loyalty-card holders from grocery stores and the Nielsen TV panel of two to three million households. The single-source data gave the team interesting insights on the actual TV shows that Nacho Cheese aficionados were watching. In one test using this data, the team found that superconsumers were fifteen times more responsive to Nacho Cheese advertising than other consumers! The vice president of marketing noted that the brand’s marketing objective was to have a conversation with superconsumers about their love for Nacho Cheese, but to do so in a way that potential superconsumers could listen in.
The beauty of all this was that the data the team used to improve innovation, retail activation, and marketing was already there. Superconsumers gave the marketers a way to synthesize the data into a coherent and coordinated set of actions and metrics. Looking at superconsumers like Laura, the team gained confidence that the strategy had even more upside. And the team saw the potential and ran with it.
Want to know a simple, speedy, and sustainable path to superior growth? Order Eddie Yoon’s Superconsumers here!
This is an excerpt from Eddie Yoon’s Superconsumers.
Credit: Abhishek Singh