Toyota's supply chain relationships

A document published by the Treasury of the New Zealand government provides insights into the real life differences between firms who develop relationships with members of their supply chain, in contrast to those who pursue more arms length exchanges. Here is an extract, followed by a video produced by Toyota which provides more detail.

Toyota, as many other Japanese firms, maintains a small stable set of ’highly trusted’ dedicated suppliers, restricts competition for the various orders only to them, caring for their profitability and rewarding the best performing suppliers with a higher share of orders, while replacing those that fail to deliver the extremely high levels of contractible and non-contractible quality required.


Service quality, trust, specific asset investment...

One of my favourite journal articles is, 'Service Quality, Trust, Specific Asset Investment, and Expertise: Direct and Indirect Effects in a Satisfaction-Loyalty Framework' by Jyh-Shen Chiou and Droge and published in the Journal of the Academy of Marketing Science in 2006.

I like the article because it takes the concept of specific asset investments, something that is most often applied in the context of business-to-business marketing, and the authors apply in to the context of high-end cosmetics. The following quotations from the article help to explain why they are so relevant: 

Premium cosmetic products are high-involvement, credence products that require a lot of personal service. These luxury cosmetics are typically sold by highly trained beauty consultants at dedicated (rented) counters in high-end department stores. The consultants are usually the employees of the cosmetics company, not the department store. Their job has educational, experiential, and relational aspects and is similar in many respects to the job of B2B salespersons. Many strong interactive relationships develop between consumers and these beauty consultants.

Medicinal-type outcomes are often claimed or implied, such as impacts on the chemistry and structure of the skin. Often, specific products must be used in a specific sequence at specific times of the day (such as prescription drugs); educating consumers about this idiosyncratic product knowledge is the job of the beauty consultants. Outcomes are sometimes demonstrated to consumers using computerized photographs, but many products’ effects on the skin are long-term, and thus trust is important.
— Chiou, J-S and Droge, C. (2006) Service quality, trust, specific asset investment and expertise: direct and indirect effects in a satisfaction-loyalty framework. Journal of the Academy of Marketing Science. 34, 613-627.

behaIn the matter of a few short sentences the writers have helped to explain the key characteristics of these goods using relevant marketing concepts. They make clear how these offerings are intangible (despite being goods) and their credence attributes are also highlighted. Even though the marketers are trying to enhance the search attributes of these products (via the computerised photos), it becomes clear that in such a situation trust becomes important because the need to believe the salesperson's promises. 

The video below illustrates some of the ideas referred to in the quotation above.

Also worth noting from the perspective of a marketer behaving in an opportunistic manner when dealing with consumers who may have limited ability to assess the offering, is this comment from the FTC (Federal Trade Commission) in the United States:

Cosmetics company L’Oréal USA, Inc. has agreed to settle Federal Trade Commission charges of deceptive advertising about its Lancôme Génifique and L’Oréal Paris Youth Code skincare products. According to the FTC’s complaint, L’Oréal made false and unsubstantiated claims that its Génifique and Youth Code products provided anti-aging benefits by targeting users’ genes.


There will be blood

Discussions about risk and trust feature in many of the courses that I teach. I like this scene where Daniel Day Lewis highlights the risks the townsfolk will face if they get someone else to drill for oil on their land.

Out of all men that beg for a chance to drill your lots, maybe one in twenty will be oilmen; the rest will be speculators - that’s men trying to get between you and the oilmen - to get some of the money that ought by rights come to you. Even if you find one that has money and means to drill, he’ll maybe know nothing about drilling and he’ll have to hire the job out on contract, and then you’re depending on a contractor who’ll rush the job through so he can get another contract just as quick as he can. This is... the way that this works.

He then explains why he is so much more trustworthy:

I do my own drilling, and the men that work for me work for me. and they’re men I know. I make it my business to be there and to see their work. I don’t lose my tools in the hole and spend months fishing for them; I don’t botch the cementing off and let water in the hole and ruin the whole lease. I’m a family man. I run a family business. This is my son and my partner, H.W. Plainview.


▶ Jiro Dreams of Sushi

Watching Jiro in action you can see how a product (the sushi) can be supported by a service component. In this instance, where the sushi is made and handed over by Jiro, arguably the service component dominates. Without Jiro being there would the experience still be the same - even with a very similar physical product?

Leveraging your competitors' promotion mix

Nice little story about how the fledgling Keurig, the coffee pod manufacturer took advantage of having larger competitors at the start of their product lifecycle. It's also a good illustration of the complementary nature of the promotion mix and how they can influence the different stages of the hierarchy of effects.

Unlike Keurig, which had a shoestring marketing budget, these deep-pocketed competitors had more than $100 million to spend on advertising their new products. But Keurig was able to turn the competition to its advantage. “We piggybacked on all the marketing investments our competitors made developing [awareness of the idea] and doing TV ads,” says Nick Lazaris, who led Keurig between 1997 and 2008. Keurig let the competition spend freely on airtime, then sent reps into stores to do live demonstrations.

Icelandair - a matter of perspective

This is how we are used to seeing Iceland:

This is how Icelandair prefers to show Iceland in relation to Europe and north America:

Five Four Club

This is an interesting take on clothes shopping. The retailer works on a subscription basis and for US$60 they will send customers a selection of clothes. The target market is men, who don't like to waste time shopping. Benefit for the company is that they have 'loyal' customers guaranteed.

Is a Ronald McDonald House 100% McDonalds?

Just as the beef patties have come under scrutiny for whether or not they really have 100% beef, so the same criticism has been made about the fast food restaurant's eponymously named homes. These are located close to hospitals and are short-term residences for families wanting to live close to their children, who are ill.

Ronald McDonald Houses for Children are held up by the fast food restaurants as their contribution towards social responsibility. However their efforts have drawn criticism: 

Pop quiz: Who do you think funds the hundreds of Ronald McDonald Houses around the nation? McDonald’s right? Sort of, but not really. While McDonald’s gets 100 percent of the brand benefit from Ronald McDonald House Charities, the burger giant only provides about 20 percent of its funding globally. At the local level, it’s closer to ten percent, with some of that money coming from donation boxes at McDonald’s outlets, that is, from customers.

Product based characteristics of diffusion

Rogers (1995) identified the role of product characteristics in determining the successful diffusion of products into the market. The characteristics were: relative advantage; compatibility; complexity; trialability; observability. Meuter et al (2005, p.81) writing in the Journal of Marketing provided some of the measures that can be used to assess each of these. For example, respondents were asked about trialability using the following questionnaire items: 

  • I can use the [innovation] on a trial basis to see what it can do.
  • It is easy to try out the [innovation] without a big commitment.
  • I’ve had opportunities to try out the [innovation] 

In contrast observability was measured in the following way: 

  • I would have no difficulty telling others about the results of using the [innovation]. 
  • I believe I could communicate to others the outcomes of using the [innovation]. 
  • The results of using the [innovation] are apparent to me.

ith innovations such as the Copenhagen wheel (see video below) it can be interesting to assess how they rate using the criteria such as the ones above.

Co-creation Matrix

There's an increasing number of concepts around the notions of co-production and co-creation. The following matrix helps provide a useful map to navigate between them. The matrix distinguishes between the concepts according to whether they are consumer led or producer led and whether the value being generated is standardised across customers or personalised for the individual.

The complete report from which it is taken is here:

Burden of the first mover - teaching customers

This Apple advert shows customers how they can use their iPads.

I think this is an interesting illustration of what happens when a marketer has to anticipate and teach customers their needs, rather than just reacting to them.

The importance (to marketers) of dissatisfaction

Intuition and marketing texts make the importance of customer satisfaction to marketers pretty obvious. Customer dissatisfaction is similarly considered to be obviously bad news. However, there can be instances where dissatisfaction serves a purpose and could even be engineered.

A short while ago there was some analysis undertaken by Neil Cybart about the storage that Apple provides for its smart phones. The assessment was that the 16GB memory option may make the range seem affordable to customers (a lower headline price), but the 16GB option was also supposed to encourage the realisation amongst customers that it was not adequate for their needs. As a result in year two these people would migrate to the 64GB version, which may be more than adequate for their needs.

While some may say this discussion of purposely limiting storage capacities to help maintain profitability is anti-consumer and a money grab, observers need to look at this process as a bit more than just greed.

That this is not a new idea is reflected in the comment made by Oliver (1997, p9), he goes on to cite a General Motors executive who is supposed to have said that the company's corporate mission was the 'organised creation of dissatisfaction'. 

one purpose of new products is to create dissatisfaction with the prevailing style, a common strategy of automobile companies through the release of new models
— Oliver RL. 1997. Satisfaction: A Behavioral Perspective on the Consumer. McGraw Hill: New York.

Positioning supported by packaging

The Jax Coco example shows how a firm can position a product, that is otherwise similar to others, in such a way that it is seen as being different to competing offers. Also in this instance the packaging chosen supports the position that the firm is trying to achieve.

Jax Coco’s concept of elevating the natural drink to one of sophistication sets the brand apart from the numerous others. Jane states, “We positioned Jax Coco coconut water as a lifestyle product. Our competition has mainly focused on the sporting sector. We expanded into art, music, and lifestyle.” The company has sponsored Elton John concerts, a charity performance by Chinese classical pianist Li Yundi, and English rugby player Chris Ashton.

Jane highlights another branding difference that sets Jax Coco apart from the rest ‒ the glass bottle. This is unique in the coconut water market, and has been geared toward premium food and beverage clientele, as it’s a sophisticated step up from a Tetra Pak. Restaurants, clubs, bars, hotels, and first class lounges of Eurostar trains stock Jax Coco’s glass bottle; in addition, retailers, Whole Foods, Amazon, Vitacost and Starbucks (Hong Kong) carry both the bottle and Tetra Pak. Cathay Pacific, awardee of Skytrax’s 2014 Airline of the Year, and Asia’s largest international carrier, has reported that it too will offer Jax Coco’s coconut water in its lounges and on selected flights.

▶ Huawei - more watch symbolism

The video illustrates how, for watches at least, this marketer tries to develop an innovation that looks and feels as much as what people have become used to wearing.

Credibility in advertising

One of the most widely commented limitations of using advertising is that viewers tend to discount the claims being made, because the advertiser has an incentive to present only the positive aspects of the product.

The following advertisement challenges this.

Unlike most adverts you'll see people actually saying that they hate the product. This is effective in a number of different ways and not least because the viewers will tend to view the marketer as being honest.