At its core, every new product has three possible value propositions: it can be better than the competition, it can be cheaper than the alternative, or it can be easier to acquire and use. Knowing which proposition drives your business is critical for developing the right ongoing marketing, sales, and product strategy.
"Better" is the nominal reason most inventors create new things. There is a problem. Current solutions to this problem either do not exist or aren't very good. Let's make something better. That's why every Shark Tank company is about better; it's the easiest business concept to understand. Scrub Daddy is a better sponge. Bombas are better, more comfortable, and stylish socks.
While millions of Scrub Daddies and Bombas were sold, it doesn't mean every "better" company is a home run. Products exist to solve problems, but many prospective buyers may not think a problem exists nor care enough about the problem to warrant buying a solution. From a marketing perspective, products in this category are either doomed for failure, or they must convince the world that the problem is bigger than they think. Proctor & Gamble's 80's campaign for Head and Shoulders is a classic example of this: convince the world that dandruff is a big deal and you'd be remiss if you didn't buy shampoo to solve it.
Another challenge Better brands may face is switching costs. The benefits of the new solution must be great enough to warrant switching or people will just stay with the current product. There's an old adage, at least in the internet space, that a service must be 10x better than the existing solution to motivate people to switch. Facebook's ongoing success exemplifies this. While millions complain about Facebook, millions more continue to use it. While sexier alternatives may be out there, Facebook works fine as a communications or entertainment utility; so inertia sets in and people don't try something new. As a result, social media success goes to companies, that reach audiences that never embraced Facebook in the first place, or to services, like Tik Tok, that is truly 10x better for at least a segment of the audience.
Let's not forget that Better doesn't have to be rationally better. It can be emotionally better. The J.C. Penney bag does just as good a job holding things as a Prada bag, but people feel better and think they look better when walking around with Prada. Irrational and emotional 'better' drives success for many companies.
So if you are going to be Better:
- Make sure people understand the gravity of the problem you are solving and the inferiority of the current solution.
- Build customer lock-in so the bar gets higher and higher for customers to consider switching to a new products that claims 'better'.
- Continue to innovate so you remain the best, or are at least perceived to be the best; because your brand starts to decline the minute people start to think you are no longer better.
"Cheaper" may not sound glamorous but it's arguably the most commonly-used path to business success. Take a solution, innovate to drive costs (or profits) out of it, and bring it to market. Many of the world's great historical innovations were about cost. For example, the printing press made the cost of a printed book much less than a hand-transcribed book. And while we celebrate the convenience of many of the great internet success stories, arguably the true driver to many of these companies success was cost: Uber was cheaper than taxis, Warby Parker glasses were cheaper than comparable glasses from the Luxottica monopoly, and Craig's List was free, compared to paying money for a newspaper classified advertisement.
Cheap is only a viable strategy if a solution can be reasonably commoditized so price can be the metric with which a decision is made.
Cheap may be effective in driving quick market penetration. The challenge is sustaining the business when cheap is what the company is known for, because someone cheaper can always come along. As a result, successful companies in the business of Cheap often:
- Build a brand in the early days around Cheap, so the world knows you are the cheapest. For example, home insurance company Lemonade built their brand around $5 insurance.
- Bridge "Cheap" into a Better or Easier, where the evaluation of a product is more subjective and therefore more easily defensible. Now that Lemonde is a successful insurance company, all its marketing revolves around being better home insurance. And, although roughly 40% of the time, Amazon is no longer the cheapest place to buy a given product, but it is so easy, many do not bother to look elsewhere.
- Continue to relentlessly drive down costs through innovation. WalMart and Costco have both proven you can remain a low cost winner if the focus is relentless cost extraction.
Finally, we have a universe of companies that exist because they're easier than the competition. It's hard to buy a server from IBM, install SAP on it, and properly set it up to run your business; it's much easier to put in your credit card and sign up for Salesforce.com. Software-as-services businesses are just one example of a broad array of companies that became a success because it is easier to do business with them than the alternatives.
I live in New York City and there's a bodega (New York-speak for a small owner-operated convenience store) around the corner from my apartment. It's small, dirty, a bit of an eye sore, and the prices are sky high. But it is soooo convenient I buy things from there anyway, even though it's probably twice the price of walking a few blocks away to a grocery store, and probably triple the price of buying the same thing online. I resent going there every time. But my laziness and poor planning is their business success.
For companies that win with Easy, the name of the game is user experience and removing friction from both the transaction and being able to quickly use the product. It must be effortless to buy and even more effortless for the new owner to start solving the problem with their purchase. That's easier said than done, and often trivialized, but studies have shown that companies that focus on design have significantly higher stock market returns than the broad S&P.
As with Better and Cheaper companies, companies that win with Easy must continue to innovate to make sure they remain the easiest. Until products can be procured with Star Trek's replicator, there's always an opportunity to make the process simpler.
So which are you...better, cheaper, or easier?