Years ago, the franchise manager of a company was trying to convince me to invest in a barber shop franchise. I figured that a barber shop has a high repeat visit frequency so I was interested to know more.
When I asked what was unique about the barbershop, I was told that it would be thematic, with the barbers dressed like construction workers (with helmets and overalls). I wasn’t so sure what pain points they were trying to satisfy with this idea so I asked for more information. The franchise manager added that the prices were low, and with good service to boot. Pressed further, he was almost proud to say that the price will be 5% cheaper than the average barber shops, and that they would provide a free orange drink in tetra pack to all customers. As a business consultant and not necessarily a prophet of doom, I predicted that the concept would not succeed and true enough, the barber shop has been closed for a while now. I have seem many businesses trying to offer too much, thinking that this is the way to differentiate, and competing at too low prices, believing that this is what would attract customers.
I would like to share four simple tests to spot a losing concept. A single yes to any of these questions puts in doubt the concept and/or the innovation being introduced since it is more likely supply-side thinking than real demand-side, customer-centric thinking.
Here are the four tests to spot losing concepts:
1) Are you unique without being relevant?
2) Are you investing in cost that does not add value?
3) Are you guilty of having a lower price – higher cost business model?
4) Will consumer prefer status quo than change preference in your favor?
On test number one, staying relevant is by knowing and acting on the consumers and/or customers BIDA, an acronym we use in Mansmith and Fielders, Inc., to refer to barriers, irritants, disappointments and annoyances. Perhaps one irritant in a barber shop is time predictability since many people seem to be in a rush. How can a barber shop successfully manage waiting time? QB barber shop in Japan has a “traffic light” system outside their shops to inform people of waiting time even before they go inside the shop. Instead of shampoo and blowdry, they use a “vacuum”-like apparatus to remove cut hair faster – all addressing the need for some customers for a quick cut.
On test number two, investment should focus on key drivers to generate revenue. QB barber shop for example also uses and gives away a new but inexpensive comb for those turned off with unhygienic practices of barbers using their comb from one customer to another. Free orange juice may be nice but is not an important satisfaction attribute that will make customers come back – it is clearly an additional cost that will not bring in revenues.
On test number three, there is a need to ensure not just a good value creation concept but an equally good value capture idea. If the most ideal of higher price – lower cost business model cannot be attained, at least earn the right for lower price by having a lower cost.
On test number four, consumer trial leading to adoption is the ultimate goal of a launch. If the attribute design cannot even lead to trial, or having a high trial but a low repeat buy, then the product or service concept is doomed from the beginning.
It is best that product or service concepts be based on insights on consumer needs or unmet needs, and not just formulated in ivory towers or laboratories. Marketers need to be able to develop skills in observation, or ask critical questions that will lead to deeper insights.
(Thanks to BusinessWorld for publishing this article)
Bestselling author Josiah Go is the Chairman and Chief Marketing Strategist of Mansmith and Fielders, Inc. (the leading marketing and sales training company in the Philippines), President and CEO of Waters Philippines (the market leader in the direct selling of premium health durable products in the Philippines) and President and CEO of PT Noah Health Indonesia. He is Chairman / Vice Chairman / Director of over a dozen companies.