by Stan Phelps
5. Consumers talk with each other before talking with brands: Social networking and exchange of information outside of the brand space will increase. This – at least in theory – will mean more opportunities for brands to get involved in these spaces and meet customers where they are.
USING PARETO TO FLIP THE RATIO ON TRADITIONAL MARKETING
Vilfredo Federico Damaso Pareto was an Italian economist who made a famous observation in 1906. He stated:
“20% of the population in Italy owns 80% of the property.” {Endnote 25}
The rule was popularized in the early 1940’s by Joseph Juran and is now commonly referred to as the 80/20 principle, i.e. 20% of your customers will account for 80% of your sales. Basically, 20% of your efforts will net 80% of your results.
Enter the Phelps 80/20 Corollary
If we subscribe to the principle that, “80% of your results is generated by 20% of your efforts,” then I respectfully put forth the Phelps Corollary:
“80% of your efforts will net you 20% of the results.”
Traditional marketing (tell and sell broadcast advertising) is ineffective. According to the late legendary retailer Joseph Wanamaker,
“ Half the money I spend on advertising is wasted... the problem is that I don’t know which half.” {Endnote 26}
I believe 50% is an understatement and therefore I propose that for the vast majority of your marketing dollars spent on the traditional funnel (the 80%)... you receive one dollar worth of return for every four that you spend given the Phelps 80/20 Corollary.
The Revolving Door Effect
There is a huge flaw when focusing the majority of your marketing efforts on the traditional purchase funnel. That flaw is “The Revolving Door Effect.” If the majority of your marketing is mainly focused on prospective customers, you may be able to add between 10% to 25% of new customers per year.
Wait a second... most companies would say, “Sign me up right now for an increase of 10% - 25% of customers per year.” The problem is that most businesses have huge problems with retention. It may not be uncommon to lose 10 to 25% of the customer base in a given year. The net effect is that you might negate all of your gains and in essence create a revolving door by not taking care of your new and current customers.
The overwhelming traditional view of marketing is the process of acquiring prospective customers. Eighty to 90% of marketing budgets are aimed towards getting consumers into the purchase funnel. We’ve become so preoccupied with generating awareness and interest that we tend to forget about our most important asset, our current customers. We need to flip that ratio on traditional marketing. We need to heed Pareto’s Law and determine the 20% of traditional marketing we are doing that is generating the strongest ROI. Once you’ve earmarked that vital 20%, it’s time to put the remaining 80% to work by putting the focus squarely on current customers.
By putting the focus on your current customers, you can generate the following three benefits:
Reduce attrition
Increase satisfaction and loyalty
Promote positive word of mouth
THE SEA OF SAMENESS
How do you stand out in a sea of sameness? What is your one signature differentiator in customer experience?
Instead of being a “me too,” what is the one special thing your company does that is superior and distinctive in the eyes of our customers? What is that little something extra that is tangible, valuable and talkable?
What do you hang our hat on? How do you stand out from your competition?
What is your warm Chocolate Chip Cookie like DoubleTree?
What is your “Bags Fly Free” value like Southwest Airlines?
What is your free peanuts and bonus fries like Five Guys?
What is your free shipping upgrade to overnight like Zappos?
Where is your “penny arcade” in the lobby like TD Bank?
What’s Your Purple Goldfish?
Chapter 3
Why Purple and why a Goldfish?
“The thing that makes something remarkable isn’t usually directly related
to the original purpose of the product or service.
It’s the extra stuff, the stylish bonus, the design or the remarkable service
or pricing that makes people talk about it and spread the word.”
- Seth Godin
GOLDFISH ON THE BRAIN
OK – I’ll be the first to admit it. I am oddly preoccupied with goldfish. Mainly because the average common goldfish is four inches, yet the largest in the world is almost five times that size! {Endnote 27}
Five Times Larger!!! Imagine walking down the street and bumping into someone 25 feet tall. How can there be such a disparity between your garden variety goldfish and their monster cousins? It turns out that the growth of the goldfish is determined by five factors. Part of my obsession is my firm belief that the growth of a product or service is similar to that of a goldfish.
Let’s break down a purple goldfish into two parts:
First the goldfish
Why a goldfish? Because the growth of a goldfish (your product or service) is affected by five factors:
#1. Size of the Environment = The Market
GROWTH FACTOR: The size of the bowl or pond.
RULE OF THUMB: Direct correlation. The larger the bowl or pond, the larger the goldfish can grow. The smaller the market, the lesser the growth.
#2. Number of Goldfish = Competition
GROWTH FACTOR: The number of goldfish in the same bowl or pond.
RULE OF THUMB: Inverse correlation. The more goldfish, the less growth. The less competition, the more growth opportunity.
#3. The Quality of the Water = The Economy
GROWTH FACTOR: The clarity and amount of nutrients in the water.
RULE OF THUMB: Direct correlation. The better the quality, the larger the growth. The weaker the economy or capital markets, the more difficult it is too grow.
FACT: A MALNOURISHED GOLDFISH IN A CROWDED, CLOUDY ENVIRONMENT MAY ONLY GROW TO TWO INCHES / FIVE CENTIMETERS.
#4. How they’re treated in the first 120 days of life = Start-up Phase / Launch
GROWTH FACTOR: The nourishment and treatment they receive as a fry (baby goldfish).
RULE OF THUMB: Direct correlation. The lower the quality of the food, water and treatment, the more the goldfish will be stunted for future growth. The stronger the leadership and capital as a start-up, the better the growth.
#5. Genetic Make-up = Differentiation
GROWTH FACTOR: The genetic make-up of the goldfish.
RULE OF THUMB: Direct correlation. The poorer the genes or the less differentiated, the less the goldfish can grow. The more differentiated the product or service from the competition, the better the chance for growth.
FACT: THE CURRENT GUINNESS BOOK OF WORLD RECORDS HOLDER FOR THE LARGEST GOLDFISH HAILS FROM THE NETHERLANDS AT A LENGTHY 19 INCHES / 50 CM. {Endnote 28} TO PUT IT IN PERSPECTIVE THAT’S ABOUT THE SIZE OF THE AVERAGE DOMESTIC CAT.
Which of the five factors can you control?
Let’s assume you have an existing product or service and have been in business for more than six months. Do you have any control over the market, your competition or the economy? NO, NO and NO. The only thing you have control over is your business’ genetic make-up or how you differentiate your product or service. In goldfish terms, how do you stand out in a sea of sameness. How can you make yourself PURPLE?
MARDI GRAS, SETH GODIN & GUPPY LOVE
Why Purple? The reasons for Purple are threefold:
#1. Lagniappe is Creole for “a little something extra.” Purple is an ode to the birthplace of the word [New Orleans] and the colors of its most famous event [Mardi Gras].
The accepted story behind the original selection of the Mardi Gras colors {Endnote 29} originates from 1872 when the Grand Duke Alexis Romanoff of Russia visited New Orleans. It is said that the Grand Duke came to the city in pursuit of an actress named Lydia Thompson. During his stay,
he was given the honor of selecting the official Mardi Gras colors by the Krewe of Rex. His selection of purple, green and gold would also later become the colors of the House of Romanoff.
The 1892 Rex Parade theme first gave meaning to the official Mardi Gras colors. Inspired by New Orleans and the traditional colors, purple was symbolic of justice , green was symbolic of faith and gold was symbolic of power. {Endnote 30}
Ode to Seth
#2. Purple in marketing represents differentiation. Seth Godin established purple as the color of differentiation in his seminal book, Purple Cow {Endnote 31} back in 2003. Seth outlines the why, what and how of becoming remarkable.
Seth sets up the premise of the book with a story : {Endnote 32}
“When my family and I were driving through France a few years ago, we were enchanted by the hundreds of storybook cows grazing on picturesque pastures right next to the highway. For dozens of kilometers, we all gazed out the window, marveling about how beautiful everything was. Then, within twenty minutes, we started ignoring the cows. The new cows were just like the old cows, and what was once amazing was now common. Worse than common. It was boring.”
He further defined where marketing is heading : {Endnote 33}
The old rule: Create safe, ordinary products and combine them with great marketing.
The new rule: Create remarkable products that the right people seek out.
The Difference Between a Purple Bovine and a Purple Goldfish
Think of a Purple Cow as your product. Your product needs to stand out and be remarkable. A Purple Goldfish on the other hand is the distinctive way that you deliver that Cow and the extra value you provide. It’s difficult to make your product itself “remark”able.
I had the opportunity to comment on MarketingPilgrim.com to emphasize this exact point. Joe Hall wrote a post about cell phones and the importance of being memorable. {Endnote 34}
Joe made the following assertion:
“Why can’t I get one shaped like a banana with pink and purple stripes? I want one that can also open a bottle of beer, or something else equally ridiculous. Seth Godin will tell you that your brand has to be remarkable. However, before your brand can be remarkable it has to be memorable. It has to stand out from the crowd. It has to make me want to know more.”
Here were the thoughts I shared:
Great points Joe. You absolutely need to be memorable. Stand out or perish. The difficulty in Seth Godin’s PURPLE Cow principle is that you need to bake that remarkability into the product. That is extremely difficult. A phone is a phone. It would have to be really remarkable for you to overcome the friction (p.i.t.a. factor) associated with making a switch.
However – let me offer another take on how to color that phone PURPLE. That is by creating a few PURPLE Goldfish. A purple goldfish is something a whole lot smaller than a cow and much easier to create. It’s based on the concept of marketing lagniappe. Lan-what? Pronounced “Lan-yap,” it’s a Creole word that represents the little unexpected something extra thrown in by the merchant at the time of purchase. In Louisiana lagniappe is part of the vernacular and represents anytime someone goes “above and beyond.”
Do small “PURPLE” things make a big difference? Absolutely. Imagine if you asked that same friend for a recommendation and she started gushing about “Product X” because they did these little things that were unexpected and extra. It could be the customer service they received (think Zappos ), a feature that they decided not to charge for (think Southwest and Bags Fly Free ), or a “thank you” with free minutes if you spend “X” per month (think Stew Leonard’s ).
Guppy Love
#3. Kimpton Hotels is the final reason for purple and a goldfish. This example of lagniappe was a huge inspiration. Kimpton has a signature (Purple) Goldfish that’s well... a fish and a keeper [Purple Goldfish #109]. Introduced at each Hotel Monaco in 2001, Guppy Love has become a signature element that has gained the chain national attention. The hotel offers guests the ability to adopt a temporary travel companion.
The “Guppy Love” program is a fun extension of our pet-friendly nature as well as our emphasis on indulging the senses to heighten the travel experience, says Steve Pinetti, Senior Vice President of Sales & Marketing for Kimpton Hotels and Restaurants. “Everything about Hotel Monaco appeals directly to the senses, and ‘Guppy Love’ offers one more unique way to relax, indulge and promote health of mind, body and spirit in our home-away-from-home atmosphere.”
Is it possible for a PURPLE GOLDFISH to become PURPLE GOLDFISH STRATEGY?
Let’s compare it to the critically acclaimed model in the book Blue Ocean Strategy. According to authors Kim and Mauborgne : {Endnote 35}
Blue Ocean Strategy is based on the simultaneous pursuit of differentiation and low cost. It’s goal is not to out-perform competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. The opposite of blue ocean is red ocean. Characterized by competition and a crowded space, red ocean is bloody water.
Is there a middle ground or better yet a middle ocean?
Purple Goldfish Strategy is differentiation by added value. Finding signature elements that help you stand out, improve customer experience, reduce attrition and drive positive word of mouth.
Illustration: Purple Goldfish Strategy floating between Red and Blue Ocean
CUSTOMER EXPERIENCE IS MORE IMPORTANT THAN EVER
Here are three leading indicators:
The cost of customer acquisition continues to rise, making increasing retention the lowest hanging fruit in marketing.
Consumers now have a stronger voice given the emergence of social technologies like Blogs, Wiki’s, Facebook, YouTube, Twitter, Foursquare, TripAdvisor and Yelp.
Competing solely on price can “commoditize” your product or service.
In a recent Temkin Group survey The State Of Customer Experience Management , {Endnote 36} 7% of respondents think that their company is a customer experience leader today. A bold 61% want to be their industry leader within three years. This reminds me of one of my favorite quotes:
“Everyone wants to go to heaven… but no one wants to pay the price.”
Chapter 4
A Little Something Extra
“We picked up one excellent word - a word worth
traveling to New Orleans to get;
a nice limber, expressive, handy word - lagniappe”
- Mark Twain
WHAT IF...
What if there was a simple marketing concept that moves the needle towards achieving differentiation, driving retention and stimulating word of mouth? What if your execution was 100% targeted, with zero waste and given with a personalized touch?
I believe the answer lies in focusing a greater percentage of your marketing budget on the customer, not the prospect. Deal with the one that is “in hand” rather than the two “in the bush” through a concept called lagniappe.
What is Lagniappe?
Lagniappe is a Creole word meaning “the gift” or “to give more.” The practice originated in Louisiana in the 1840′s whereby a merchant would give a customer a little something extra at the time of purchase. It is a signature personal touch by the business that creates goodwill and promotes word of mouth. According to Webster’s : {Endnote 37}
LAGNIAPPE (lanyYp, ln-yp) Chiefly Southern Louisiana & Mississippi
1. A small gift presented by a store owner to a customer with the customer’s purchase.
2. An extra or unexpected gift or benefit. Also called boot.
Etymology: Creole < Fr la, the + Sp ñapa, lagniappe < Quechuan yapa. Interesting fact- Napa comes from yapa, which means “additional gift” in the South American Indian language, Quechua, from the verb yapay “to give more.”
Enter Samuel Langhorne Clemens
According to Mark Twain in Life on the Mississippi : {Endnote 38}
We picked up one excellent word–a word worth traveling to New Orleans to get; a nice
limber, expressive, handy word–”lagniappe.”
They pronounce it lanny-yap. It is Spanish–so they said. We discovered it at the head of a column of odds and ends in the [Times] Picayune [newspaper] the first day; heard twenty people use it the second; inquired what it meant the third; adopted it and got facility in swinging it the fourth. It has a restricted meaning, but I think the people spread it out a little when they choose. It is the equivalent of the thirteenth roll in a baker’s dozen. It is something thrown in, gratis, for good measure.
The custom originated in the Spanish quarter of the city. When a child or a servant buys something in a shop–or even the mayor or the governor, for aught I know–he finishes the operation by saying– ‘Give me something for lagniappe.’ The shopman always responds; gives the child a bit of licorice-root, gives the servant a cheap cigar or a spool of thread, gives the governor–I don’t know what he gives the governor; support, likely.
A marketing lagniappe, i.e. purple goldfish, is any time a business purposely goes above and beyond to provide a little something extra. It’s a marketing investment back into your customer base. It’s that unexpected surprise that’s thrown in for good measure to achieve product differentiation, drive retention and promote word of mouth.
So – is it just a Baker’s Dozen?
In order to understand a baker’s dozen, we need to travel back to its origin in England. The concept dates back to the 13th century during the reign of Henry III. During this time there was a perceived need for regulations controlling quality, pricing and checking weights to avoid fraudulent activity. The Assize ( Statute ) of Bread and Ale {Endnote 39} was instituted to regulate the price, weight and quality of the bread and beer manufactured and sold in towns, villages and hamlets.