The value prop of opt-out vs opt-in

The world has been transitioning from opt-in to opt-out for awhile. Have you noticed?

What does that mean?

In the old days, if you wanted to buy clothes you had to opt-in to the whole process. You opted-in to shopping, finding and then buying. You did a lot of the work.

Stitch Fix changed clothes buying to an opt-out value proposition. Many people attracted to Stitch Fix for low cost styling, but stay for the convenience of the opt-out process.

Of course, styling and fit are key value components. If Stitch Fix missed on those marks, few would stay.

But, as a customer, I’ve found more value than I expected because I can now avoid a good deal of the opt-in clothes shopping process while keeping my wardrobe up-to-date.

Of course, Stitch Fix did not invent this approach. After all, fruit-of-the-month clubs have been around for awhile.

But, they did tweak it with some technology so customers get more of what they want by  doing less. I imagine the business does less, too. It seems having one or two locations that you ship orders from should be more cost effective than stocking and running a network of retail stores.

And, by more of what I want, I mean that on several dimensions. I get styles I like, clothes that fit and keep my wardrobe up-to-date. I also get to try new brands and to try slightly experimental styles (a risk profile you can set) that I might not pick out myself.

By doing less, I mean I don’t have to drive to multiple retail stores, rifle through their racks, try on things, compare, winnow down, stand in line, buy and then drive home.

Managers who haven’t thought how they can deliver their products or services with an opt-out model in valuable ways for their customers should be.

Good Advice from Seth Godin

From his post, It’s not about you.

Right in the front row, not four feet from Christian McBride, was every performer’s bête noire. I don’t know why she came to the Blue Note, maybe it was to make her date happy. But she was yawning, checking her watch, looking around the room, fiddling with this and that, doing everything except being engaged in the music.

McBride seemed to be too professional and too experienced to get brought down by her disrespect and disengagement. Here’s what he knew: It wasn’t about him, it wasn’t about the music, it wasn’t a response to what he was creating.

Haters gonna hate.

Shun the non-believers.

Do your work, your best work, the work that matters to you. For some people, you can say, “hey, it’s not for you.” That’s okay. If you try to delight the undelightable, you’ve made yourself miserable for no reason.

It’s sort of silly to make yourself miserable, but at least you ought to reserve it for times when you have a good reason.

Accidents are the mother of invention

Here’s a nice piece on the invention of the Slurpee (via Marginal Revolution). An excerpt:

Knedlik’s [Dairy Queen] franchise didn’t have a soda fountain, so he began placing shipments of bottled soda in his freezer to keep them cool. On one occasion, he left the sodas in a little too long, and had to apologetically serve them to his customers half-frozen; they were immensely popular.

When people began to show up demanding the beverages, Knedlik realized he had to find a way to scale, and formulated plans to build a machine that could help him do so.

You never know what customers are going to like. Here’s a secret, kids,– they do not teach you how to figure that out in business school. There’s not a formula or process to follow to do it, other than trial-and-error.

I think executives who are trying to find ways to grow their company should consider using more low-cost, trial-and-error discovery .

Netflix for eBooks?

Over three years ago, I wondered when the Netflix business model would be applied to ebooks. 

I thought it was a huge step forward when I could checkout ebooks to my Kindle apps from my library. That is, until I read the five books that I wanted to read in the limited checkout library.

Then I thought Amazon Prime might be the answer, until I became a Prime member and realized I would need to buy a Kindle device to check out the books. I almost did, until I started trying to find books I could check out. I haven’t found one.

Maybe Oyster Books will do it. But, judging from my first glance at the library, it has even fewer books available for electronic checkout than my local library.

My understanding is that the limited available titles for electronic borrowing is caused by publishers weary of losing revenue. Could be. Too bad someone hasn’t figured a way around that yet.

“Great!”

I recently saw a new “Samsung Experience at Best Buy” TV ad. It features a young, recent grad who needs to update her computer equipment after for a free-lance job.

One part of the commercial I find particularly not compelling is when she asks the Samsung Experience person “How’s the battery life on this one?” The SE person answers, “Great!”

I realize the commercial has to squeeze a lot into a short amount of time, but I thought  they missed a good opportunity to demonstrate expertise by giving a short, but useful answer, possibly with information about battery life that most people don’t think about. While that’s typical of the answers I get when I go to just about any retailer and ask questions, I expect more.

A better answer could be something like, “this model offers a good balance of battery life and weight. It has 5 hours, which is best you’ll find in this category, and you can buy a 4-hour extender if you want more than that.”

Personal Preference Bias

I’ve read and heard a fair amount from critics of JC Penney’s disastrous everyday-low-price strategy. But, much of it is too simple.

Critics speak of JC Penney’s customers as if they are all the same. I’ve read things like maybe they liked sales prices or JCP has to attract a new customer base to replace the old one.

While JCP sales were down considerably, they were still doing 75% of the volume they did the previous year. That is a huge decline for a retailer, but the sales didn’t go to zero and that says something. Three-fourths of customers didn’t mind the change.

In my experience with consumers and retailing, it is not uncommon for about 25% of sales volumes to come from promotions and coupon offers such as the sales JCP use to run. A fair part of that percentage are folks in whatever product category that are bargain hunters. Another chunk are from folks who are not typical bargain hunters — they may shop on value — but they may just come across a deal too good to pass up. I was recently perusing Kohl’s and saw a griddle for half the price I’ve seen elsewhere. I’m not a typical bargain hunter, but I popped on it.

There’s no reason JCP can’t satisfy value shoppers and bargain hunters alike. Other retailers have figured out how, sometimes so cleverly that few notice.

Even everyday low-price leader Walmart has “Rolbacks” in the main aisles, which are goods offered below their everyday low price.

Target, not necessarily known as a low-price leader, has a dollar and value section near the front.

Old Navy has clearance racks hidden in the back. Banana Republic has its mall based-locations, carrying higher priced, in-season fashion. But, they too have limited clearance sale space in the back. They also have separate Factory Stores where you don’t get the latest, but you get good stuff at sales prices.

Management at these companies recognize that not everybody is the same and they try to find ways to satisfy varying consumer preferences in creative ways that don’t detract from the experience of others. That’s basic retailing.

In my opinion, that’s the key insight that escaped JCP CEO Ron Johnson — everyone is different.

Johnson was in charge of retailing at Apple. Certainly, many folks rave about the Apple store experience. But most of these ravers have very similar preferences when it comes to electronics — they love Apple!

So, Johnson didn’t have very tall task in delivering a retail experience that satisfied a relatively narrow consumer segment. He made a store for Apple devotees.

Ask yourself this. Does Apple need a store? Not really. Apple products would sell with or without their stores.

Johnson is remaking JCP to satisfy a segment of consumer that is smaller and more narrow — a group that he likely sees himself in — than the group that JCP was satisfying before he arrived, which is not usually a successful strategy.

I call this personal preference bias. Successful managers usually find ways to overcome their own personal preferences and give more weight to the varying preferences of their customers.

It’s an easy mistake to make. Ron Johnson probably thinks he learned from his former boss, Steve Jobs, that designing things to meet your personal preference is good. And, there might be something to that when you are trying to innovate from ground zero.

The King of Beers

 

 

This post about higher prices on tortillas packaged as ‘wraps’, reminded me of some thinking I’ve been doing lately about beer.

 

First, I noticed that the stalwart beers are Bud Light and Miller Lite. They have been for some time, so this isn’t anything new. But, I think it’s interesting that they use the word ‘light’ to distinguish it, rather than ‘diet’.

 

“Diet Bud”, “Diet Budweiser” and “Diet Miller” just doesn’t have a very appealing ring to it. Yet, “Diet Coke” seems better. What about “Coke Light”?

 

Second, I’ve recently switched away from diet beers. I drink more regular beer now. It seems that a lot of the folks who drink diet beer are overweight, so something isn’t working.

 

A family member who rarely drinks non-diet beers had a Budweiser at my house recently. He said, “Wow. This is good beer.” I pointed to the label, and noted, “Of course, it’s the King of Beers.”

 

A pretty penny saved is a pretty penny earned

On Marginal Revolution, Tyler Cowen linked to this page with pictures of some extravagant public libraries.

While these libraries are beautiful, I think they also demonstrate the careless spending that takes place when bureaucrats get a hold of other people’s money.

It reminds me of this post of mine where I eventually get around to suggesting that if libraries were not paid for by third parties through tax dollars and donations, we would likely still have libraries, but they’d look less like jobs programs for architects and artists and more like Blockbuster, Netflix and Redbox.

I’m sure all of these libraries have fans who can’t imagine the world without them, but it’s easy to treasure something that you didn’t pay for directly.  If these folks were asked to cover the cost of the library, few would.