Entrepreneurial Mettle

Sales Channels: P&G Says "Giddy Up" to Internet Whereas Google Says "No Mas"? What Gives?

A mere six days after new economy powerhouse Google announced it was stopping online sales of its Nexus One smartphone, old-line stalwart Procter & Gamble announced the launch of eStore - its first foray into selling its brands direct to the consumer via the Internet.  What's going on?  Why is e-commerce a seemingly good idea for P&G and a demonstrated bad idea for Google's Nexus One? 

The answer lies squarely with the fact that P&G understands consumers and their purchasing preferences.  P&G was not a first-mover in selling consumer packaged goods directly to the consumer via the Internet.  Rather, they patiently waited, watched and learned.  What they observed was that consumers were willing to buy such products online, particularly for replenishment.  They also realized that the "brick and mortar" retail channels were low-touch/low-support environments that did not do much more than rent shelf space.  Although the retail channel serves an important purpose in providing convenience -- immediate availability, multi-category selection -- P&G realized that the retail channel didn't need to take a bite out of every apple sold and that the consumer would support them in the move online.

Unfortunately, Tide, Pantene and the like are still physical products.  P&G still needs to manufacture, package, store and ship these products.  P&G deals with the delivery issue by offering $5 flat-rate shipping.  Competitor Alice.com offers 100% free shipping.  However, the fact that P&G still needs to get the goods into the hands of the consumer means that the "brick and mortar" retail channel will not be completely disintermediated.  Somebody will always need some Pampers and a pack of Lucky Strikes (legal disclaimer: not a P&G branded product).   

Reader feedback is encouraged.  Please feel free to post your comments in the feedback section below.  Thank you for reading!

 

Sales Channels: Google Says "No Mas" to Internet

It was tough not to see some irony in Google's quiet admission last week that it was stopping online sales of its Nexus One smart phone and moving to "brick and mortar" retail sales.  It was just this past January when Google announced that it was going to "end run" the traditional carrier-centric distribution model with an online, direct-to-the -consumer sales strategy for Nexus One.  Apparently not all things can go digital.

The change in strategy was announced in a blog post by Andy Rubin, the VP of Engineering leading the Android effort.  In the post, Rubin writes: 

While the global adoption of the Android platform has exceeded our expectations, the web store has not.  It's remained a niche channel for early adopters, but it's clear that many customers like a hands-on experience before buying a phone, and they also want a wide range of service plans to chose from.

There are many important learnings from this change in strategy and it would make for a great case study in channel marketing.  However, three important and fundamental concepts stand out:

(1)  When designing channel strategies, it is imperative to start with the ultimate buyer and understand exactly how they wish to purchase your product or service.  It has long been understood in the wireless world that consumers want a hands-on experience -- that is why there are mobile phone retailers or kiosks on practically every city block.  It is unwise to dictate how you are going to sell and then expect buyers to fall into line.  

(2) Channel marketers must understand the full continuum of the buyer's purchase process and decision-making from initial information gathering to post-sales service and support.  Thinking through this process in the wireless space immediately identifies the immense challenge inherent in trying to sell a handset disconnected from a service plan.  People are buying the ability to communicate wirelessly -- anything short of that is an incomplete solution.

(3) It is important to be sensitive to your market ecosystem to avoid channel conflict.  Google's Android operating system for smart phones currently enjoys 28% market share, behind RIM's 36% and outpacing Apple's 21%.  Clearly it is a successful product and it owes its share position to partnerships with Sprint (which is running the O/S on its HTC Evo 46 handset) and Verizon (which is running the O/S on the Droid Incredible).  Given this, why would Google elect to compete with its partners by selling the Nexus One online, especially when the only carrier willing to offer it service is Sprint/Verizon competitor T-Mobile?  It makes no sense.

One could argue that Google's strategy was hubristic.  They may have felt that they were smart enough to decide that the online channel was best, disregarding customer purchasing preferences.  They may have believed that their handset was so cool that it would sell disconnected from a service plan.  And, they may have believed that the omnipotence of being Google allowed them to "dis" their partners by going direct-to-consumer.  But as Icarus found when he flew too close to the sun, hubris results in downfall. 

Reader feedback is encouraged.  Please feel free to post your comments in the feedback section below.  Thank you for reading!

 

Candidate Interviews: How To Probe For Leadership Competency With A Tough One-Two Combo

My wife is an executive recruiter who often works on CEO-level placements.  Not only does she interview potential candidates herself but she also observes how company Boards conduct interviews of leading candidates.  Through this process she has witnessed the full spectrum of questions from the mundane to the bizarre and is rarely struck by any.  The other week, however, she observed a simple sequence of interview questions that positively impressed her.  The interviewer was a prominent business leader (someone who's name you would recognize) evaluating a series of candidates for a COO role.

The first question posed to the individual candidates was straightforward: "have you ever fired anybody for performance reasons?"  Given that the candidates were experienced leaders the answer was "yes" and each candidate briefly described the circumstances.

The second question, however, was brilliant in its elegance:  "were they surprised?" 

With that simple probe the interviewer positioned himself to mine deep veins of insights on each candidate's leadership and management acumen.  Let's consider this.

If the candidate answers "no, they weren't surprised" then the interviewer can explore why that was.  For instance, if the candidate is a strong manager of people, then the candidate might explain that the terminated employee understood what was expected of him, with clearly communicated goals and objectives.  Furthermore, the candidate might continue that the terminated employee was made aware that his performance was not meeting expectations, perhaps through a formal review process that the candidate himself had instituted.  The candidate might even outline how the terminated employee was coached to correct deficiencies and given opportunities for professional development and yet it still didn't work out.  Although the individual answers will vary, chances are that the candidate will highlight some strong management skills and practices.

However, if the candidate answers "yes, they were surprised" then the interviewer is immediately put on notice to dig deep.  Did the terminated employee have no idea that they weren't meeting expectations?  Was this because their goals and objectives had not been clearly communicated?  Was it because the candidate failed to have "tough" conversations to put the terminated employee on notice, perhaps because there was not formal review process?  Or, most damning, does the candidate have a mercurial and volatile personality?  You get the picture. 

In the context of the actual interviews for the COO position, the prospective candidates offered a range of responses to the aforementioned questions.  As the selection process was intense, there were also many other questions and screening procedures, including detailed reference checks.  Nevertheless, when all was said and done, the candidate who ultimately prevailed had answered "no, they were not surprised." 

Reader feedback is encouraged.  Please feel free to post your opinions in the comments section below.  Thank you for reading! 

New Product Development: Beware Of The Feature That Breaks The Product's Back

Because new product development often starts with a blank slate, the temptation is to overload features and functionality.  Coca-Cola Co.'s experiences with the innovative Freestyle soda fountain illustrates the risks of unchecked engineering enthusiasm.

Monday's The Wall Street Journal featured Coke's experiences in an article titled "Coke Goes High-Tech to Mix Its Sodas."  The article described the fantastic technology embedded in the high-tech soda fountain which enables users to mix up to 104 different drinks using digitally-controlled amounts of concentrate flavor.  Allowing for the ultimate in personalization, users can create drinks such as Caffeine-Free Diet Rasberry Coke.  Coca-Cola is hoping that the cool innovation embedded in the Freestyle and the fun experience associated with using it reivigorates sinking sales volumes for fountain sodas.  So far, the strategy sounds pretty solid.  

The article goes on to describe how Coca-Cola's test marketing is faring and states that the machine has encountered some technical difficulties.  One problem is that users are dumping half finished drinks into the drip tray as they experiment with flavors and the drip trays are overflowing.  One could argue that Coca-Cola should have anticipated this problem but give them some slack on this one.  If anything, this problem illustrates that users are captivated enough with the technology to be playing around with it -- a good thing.

The problem that leaves my head shaking, however, is the software glitch associated with the wireless device that beams information back to HQ notifying when a particular restaurant will need concentrate shipment based on usage patterns.  Huh?  

Coca-Cola has designed a technological marvel (with aesthetics developed by Ferrari car designers) that utilizes touch screen operation, digitally controlled spray technology borrowed from medical devices, and dozens of ingredient catridges used to create over 100 different flavors.  Isn't getting that right enough of a product development challenge?  Apparently not as the siren call of an additional bell and one more whistle seems to have won the day to Coca-Cola's detriment.  Beware of that one additional feature that ultimately breaks the new product's back.