ShopAlerts and Shopkick - Two Different Approaches to LBS

We've all heard the business plans for Starbucks rewards being broadcast to your mobile device just as you pass by. Apparently that's just something that sounds nice but doesn't translate to reality. If it did, then certainly Starbucks would have already done it by now.

It's refreshing to see new ideas emerging that represent the next step in monetizing Location-Based Services (LBS). Startups like Placecast and Shopkick exemplify two different approaches to the same opportunity.

Placecast got some press last spring with the announcement of their ShopAlerts program. In a nut shell, consumers who enroll in this program receive text messages from their favorite brand whenever they are physically near a retail outlet, or other location of interest.



The ShopAlerts technology uses "geo-fences" that are boundaries of a certain radius as defined by the marketer. Any consumer who has opt-ed in to this program receives a text message as soon as they cross this virtual boundary. The idea is to take advantage of people's likelihood to respond to a call to action requiring in-store participation through things like special offer alerts or other types of notifications.

The nice thing about ShopAlerts is that it will only send a maximum of 3 messages within a given week from a retailer. And, of course, to comply with SMS marketing regulations, consumers can opt-out at any time simply by texting "STOP" back to a short code.

Shopkick takes a different approach. Instead of using cell towers to triangulate the consumer with text-messaging as the vehicle of communication, Shopkick relies on in-store broadcast devices and a mobile device app.

When you walk in to a Shopkick-enabled store and your app is running, your mobile device will pick up a high frequency signal from the device and record your presence in the store. Once it's recorded, you get awarded points, or "kickbucks", which are redeemable for in-store discounts or even cross-brand promotions (e.g. Facebook Credits).



The approach that ShopKick is taking is that there is a distinct value to a person physically in-store versus a person physically "near" a store. This is especially helpful for physical locations where cell tower triangulation is not possible or certainly not as accurate at identifying a person's precise location within the store.

I applaud both Placecast and Shopkick for continuing to innovate in the field of LBS marketing. I don't see them as competing but rather as complementing simply because their approaches are founded upon different assumptions.

In the Placecast model, ShopAlerts is like the sideshow barker, whose job it was to grab your attention as you were walking by, and get you to do something that you originally weren't planning on doing.


In the Shopkick model, the consumer is specifically going to the retail outlet either in direct response to a prior call to action or just because there is a totally unrelated need to go there.

Personally, I'm less likely to respond to the ShopAlerts model and more likely to respond to the ShopKick model. As I mentioned in a previous blog post, when I'm out of the house, I'm usually going from Point A to Point B - fast. I'm not interested in detours to my flight plan. On the other hand, I like BestBuy (one of the brands piloting ShopKick). I shop there quite frequently 'cause I like shiny things with little blinky lights. As long as I'm already there, it's nice to be rewarded.

I'm thinking that Shopkick is good for brands whose own online marketing efforts still relies heavily on in-store conversions. For example, Hot Topic is a clothing retailer whose prime market is the 14-18 year old. Hot Topic has a strong online presence with not only its branded web site, but also its Facebook page with almost a million followers. The catch is that 14 year olds aren't old enough to have a credit card, so calls to action for online purchases are not very effective. As a result, almost all of their promotions - online and email - are designed to drive in-store traffic. So for this brand, awarding Kickbucks to their online followers that are redeemable in-store at Shopkick-enabled outlets could be a resonator with this audience.

So...are any of you subscribing to either ShopAlerts or ShopKick? I'm unfortunately not living in an area where either of these two services are being tested, so I can't comment on my personal experiences. But if any of you are, I'd love to read your comments.

Social Email - Real-life Feedback

Last week, I attended eTail East in Baltimore. This was the first time that I've ever been to Baltimore, and I was hoping to get an opportunity to be a tourist and have my picture taken outside the door of Charm City Cakes. But alas, time was too tight and I wasn't able to get there. As a consolation prize, I got a chance to sit on the outside deck at the Hilton with about 20 other guests and watch the Orioles win their game against the White Sox in extra innings.

But I digress...

At eTail, I had the opportunity to be a roundtable host on Email Marketing and Segmentation Day. This was the first time that I had ever been a roundtable host - much less participate in such an event. It's a pretty interesting format where attendees sit in a large ballroom at - you guessed it - round tables, each one seating up to twelve people. The job of the roundtable host is to facilitate conversation among those seated at the table on a particular topic. Together with my colleague from Hot Topic, my topic for discussion at my roundtables was "Social Email: What's New? What's Next". After twenty minutes of discussion, a bell rings and the roundtable hosts get up from the table, move to another table, sit down, and then have another twenty minute discussion on the same topic with those seated at that new table.

This time, there were six tables with about twelve people at each. So I was able to have great discussions with about eighty people - the majority of whom were responsible for their respective companies' email marketing programs. I met people from the U.S., the Netherlands, Belgium, and Germany, who represented both consumer brands (Zappos.com, Staples, and Amtrak) as well as one gentleman whose company sold cable ties and molded connector components.

My company chose social email for my discussion topic because we wanted to talk directly with online marketers and see whether the adoption of social media marketing was as widely adopted as industry analysts and members of the marketing media would have us believe.

For of all, I am a believer in social email. Brands are using social sites as a means of providing a venue for their customers to engage with each other as well as with the brand itself. Social sites are all about one-to-many conversations. Email marketing, on the other hand, when done correctly includes content that is personalized and relevant to the individual, making it a one-to-one conversation. There are times when it's appropriate to have a one-to-many discussion and there are times when it's appropriate to have a one-to-one discussion. (How many times has it been when you've been in a meeting - a one-to-many discussion - and someone says, "let's take that discussion off-line" - a one-to-one discussion).

So, after talking to about eighty different online marketers, here's what I learned about social email:

1. In spite of what's being reported in the media and analysts, marketers are still experimenting with social media marketing.


2. Easily 98% of marketers I met at the roundtables are "doing social media marketing" only because "everyone else is"; there is no clear strategy for using social media as a new marketing channel.


3. Using a social site just to promote products and services is falling flat. Using social sites to drive community engagement is what's working the best; the real question is whether social media is appropriate for all brands, i.e. is anyone in the B2B space that is getting good engagement from Facebook?


4. Marketers are struggling with proving real ROI with social media marketing. As one person put it: "I have one hour to spend either on email marketing or social media marketing. Email marketing is a known quantity with known ROI; social media isn't. It’s a no-brainer to choose email marketing over social media marketing in that light."


5. The majority of brands I spoke with have separate people doing social media marketing and email marketing. As a result, coordinated strategies between social media and email marketing are minimal.


6. Using social media as an opt-in source for email marketing is resonating very well. Hardly anyone is doing it, and when I mentioned the advantages of doing it, there was consistently a lot of head nodding and enthusiastic note taking.


7. "Share-to-social" is "been there done that" and is falling flat. Marketers are not seeing any benefit to this tactic.


8. User-generated content (e.g. user-entered product reviews) is a HUGE resonator. As one attendee put it, "If you’re not incorporating user-generated in your emails today, you’re already behind.


9. Strategies for combining social and email marketing in a coordinated strategy was an eye-opener to almost everyone I spoke with. There was certainly a lot of interest to learn more.

Social sites are excellent channels for building your opt-in email database with highly qualified leads. Assuming that your brand has already set up a social site, then people are already engaging with your brand through posts, "friend"-ing, and "like"-ing. If you provide email opt-in capability on your social site, then anyone going the extra step of opting in to your email marketing program is a person seeking a deeper, more personal engagement.

So, is your brand using social networking sites? Is so, what is it being used for? For pushing promotions? For building community? Anything else? Leave me a comment. I've love to hear from you.

Are Email and SMS Interchangeable?

A colleague of mine forwarded on to me the recent press release from Message Systems announcing their new product Mobile Momemtum™. In case you've not heard of it yet, it is "a single-platform solution that enables multichannel communication by making it possible to send and receive SMS messages, and then dynamically transform these messages to or from email."

Sez Message Systems in their press release:

"Mobile Momentum affords a critical point of difference over competitors in a multichannel era where customers expect to get messages how, where and when they want them. Now with Mobile Momentum, these companies can seamlessly initiate communication across the customers' channel of choice, immediately transform that message into another channel in the e3vent of non-delivery, and keep the dialog alive with follow-on messages in the channel the customer responds through. And they can do all this on a single-highly scalable and flexible platform that saves them money. The net benefits are: higher short-term revenue, greater lifetime value resulting from improved customer satisfaction, and a lower total cost of ownership (TCO)."

For those of you new to email marketing, Message Systems has become the de-facto standard for mail transfer agents (MTAs) that send emails through the Internet to your ISP - or to your company. It would seem that they are taking their expertise in SMTP - the protocol used for email delivery - and extending it to SMPP - the protocol used for SMS (or text message) delivery.

Let's first consider the pros of their new offering:

1. Makes good technical sense to take a simple message and translate it back and forth between the two protocols. As they mention in their value proposition, it totally makes sense to have a single platform for both email and SMS since cross-channel marketing is emerging as a highly effective marketing strategy.


2. A good application for simple alerts where the message is simple and transportable between plain text email and SMS (plain text message with 160-character limit). To this point, Mobile Momentum would be good for simple transportable alert messages like flight status updates, broadcast notifications (like "Come pick up your kids," or "Your dry cleaning is ready"), or appointment reminders.


3. It may be a good way to jumpstart SMS messaging if you are an Email Service Provider (ESP) already using Message Systems to deliver emails on behalf of your clients.
   

That having been said, I remain dubious regarding their product positioning for the following reasons:

1. It doesn't make good practical sense because text messages are limited to 160 characters while emails are not. As I mentioned above, the only types of messages that are interchangeable between email and SMS are those types of messages that should be text messages in the first place: short, simple alerts.


2. Effective promotional emails tend to be graphical whereas SMS is plain text. Once again, this means that the only messages that are good for this type of interchangeabilty are messages that should actually be SMS messages in the first place.


3. They are missing the point regarding the distinct advantages of email and SMS. The difference between email and SMS is not just the protocol of transmission, as Message Systems seems to imply. Email and SMS are different; each has their own strengths and weaknesses and they are highly complementary - not necessarily interchangeable. I discussed this unique complementary role in a recent blog post.


4. Rules for promotional SMS messages are very different than those for email. Wireless carriers mandate that certain verbiage be included in all promotional SMS messages. While CAN-SPAM and ISPs do have guidelines as to what can and cannot be said, there is no such thing as mandatory verbiage in a promotional email. Once again, Mobile Momentum's value proposition of interchangeability between email and SMS is relegated to simple text alerts that really should be text messages anyway.
   

So from my perspective as an online marketer, Mobile Momentum is a non-starter. Email and SMS are not interchangeable. They are, however, highly complementary. Email is a rich platform that marketers use to tell their story. SMS is the perfect platform to remind people of that story.

So how 'bout it? Are email and SMS interchangeable for situations other than the ones I've already mentioned? Leave me a comment. I'd love to hear from you.

Which Use of Mobile Is Right For You?

I've finally had a chance to digest the DMA's 2010 Response Rate Report and I'd like to share some of my take aways with you.

The DMA report is based on a survey of 473 members of - you guessed - DMA members. While the sample size is large enough to make inferences of the general population, the bulk of the membership of the DMA is probably different from...say...the Mobile Marketing Association. Hence no surprise that direct mail and email are the two most frequently used communication channels with 60% and 53% of survey respondents respectively using these channels. Only 6% of the survey respondents said that they were using the mobile channel (which includes both mobile advertising and text messaging). This tells me that mobile marketing is still an experimental medium - for members of the DMA that is. If I compare my personal exposure to marketers' messaging across the different media, I would say that this low adoption rate is fairly consistent across the board.

But low adoption rate aside, it's interesting to note that consumer engagement over SMS is much higher than over email.


According to the report, emails sent to a house list produced on average a 6.64% click through rate and a 1.73% conversion rate. In contrast, SMS messages sent to a house list produced over 100% higher engagement with a 14.06% average click through rate and a whopping 8.22% conversion rate. The conversion-to-click rate is another metric that I use for measuring engagement. It a good way to measure how compelling was my offer in the context of my message about the offer. On average, one out of every four people who clicked through in an email converted - meaning they accomplished some aspect of the marketer's goal (e.g. bought something, registered for a class, downloaded a prospectus, etc.). Engagement in the SMS channel was even greater with one out of every two people who clicked through an SMS message converting. Yes, SMS messaging is way more expensive than email. But with almost a 60% conversion to click through rate, the ROI of SMS messaging is highly compelling.

I interpret the higher consumer engagement in the SMS channel to a combination of the type of consumer that signs up for text messaging programs and the technology itself.

Another interesting observation from the response rate report is who's doing mobile marketing and who's not.


As one would expect, Publishing, Media & Entertainment, and Retail are the two industries having the highest adoption rate with 15% and 14% of survey respondents respectively stating that they are using the mobile channel for their marketing messaging. Interesting to note also is that none of the survey respondents that are in either the Financial Services or the Health Care & Pharmaceutical industries are using the mobile channel. Is this non-existent adoption just an artifact of the DMA membership represented in these two industries, or is this representative of the industries as a whole? I'm thinking that it might be the latter since these two industries represented almost 20% of the total survey respondents - so it's probably not just a statistical anomaly.

So why the low adoption rate of mobile marketing in Financial Services? The report may give some insights as to the reason. A closer look at how respondents in the Financial Services industry use each channel, it appears that they use the online channels primarily to drive traffic to their web sites for further information.

Making a financial decision is a thoughtful process that requires focused attention and one that takes time. None of these qualities fit the mobile channel. Mobile is all about immediacy and instant gratification, and the mobile web experience doesn't necessarily lend itself well to content-laden sites. Unless there is a sense of immediacy in a call to action and/or there is content that can be quickly consumed, then perhaps mobile is not the appropriate channel at this point in time for the Financial Services industry's marketing messages. So be careful about jumping on the mobile bandwagon. Just because it seems that everyone else is doing mobile marketing doesn't necessarily mean its right for your industry, your brand or your clients.

While the mobile channel may not be appropriate for Financial Service marketing messages, it is absolutely the right one for Financial Service transactions. In fact, this industry was a pioneer in transactional SMS messaging with text-to-access to account information including mini-statements, account balance verification, recent transactions, canceling lost or stolen cards, and ordering checks not to mention text alerts for recent account activity or passing of preset balance thresholds, and bill payment reminders.

The market for mobile apps on the iPhone, Android and Blackberry platforms is booming. At last count, there are over 300 "favorite" apps in the Financial category on iTunes so "thousands of smartphone apps for Financial Services" would be a ballpark guesstimate across all smartphone platforms worldwide.

With regards to cutting edge mobile payment technologies for point-of-sale and peer-to-peer services, once again the Financial Services industry is leading the way. Retailers and public transportation firms are introducing pilot programs whereby consumers can make purchases by merely touching their payment-enabled mobile device to a similarly-enabled point of sale device. (Of course, businesses in Europe and Asia have been doing this for years already.)

Mobile technology is transforming the way that people interact with their world and as a result, it is transforming the way that brands engage with their customers. Businesses have realized that though the mobile channel may not be appropriate for marketing messaging, it is clearly a strong channel that enables consumers to interact with their brands in other equally important areas. So it's not a question if mobile as a whole is right for you; rather it's a question of which use of mobile is right for you.

How many different ways is your brand using the mobile channel? Leave me a comment!

Consumer Privacy Versus Consumer Relevance

The draft privacy bill sponsored by representatives Boucher and Stearns is creating quite a stir in both the privacy advocacy and the online marketing worlds. It's a classic battle that pits technology as either a friend or foe depending upon your personal bias.

There are already a lot of blog posts and articles regarding the implications of this draft. I list a few of them here:

• Representative Boucher Introduces Privacy Legislation (Kelley Drye & Warren LLP)
• What does the draft privacy legislation say about location data? (Mobile Marketer)
• Privacy Groups Blast Draft Privacy Bill (Tech Daily Dose)
• Draft privacy bill could shake data collection (DM News)

It is ironic to note that both privacy advocates and online marketers believe that they have the consumer's best interests in mind. Privacy advocates believe that consumers have a right to control the collection and the usage of their personal data albeit how obtuse it may be. Online marketers believe that consumers deserve to have the best online experience with highly relevent information.

Two points of this proposed privacy bill causing consternation among marketers include the following:

1. IP address and browser cookies would be considered "covered information" and their usage for marketing purposes would become highly restricted.
2. "Precise" geolocation information would be considered "sensitive information" and its usage would become even more restrictive than "covered information".

Web sites (especially e-commerce sites), ad networks, and even web analytics providers rely on information gleaned from IP addresses and browser cookies from anonymous site visitors. Almost all e-commerce sites ranging from Amazon to Zappos all use site visitors' browsing history to display the appropriate products on their web pages. Under the draft privacy bill, using a site visitor's browsing history to dynamically display page content would be allowed to continue provided that

1. the site provides easy access to the company's privacy policy,
2. it informs the consumer that he or she has the right to decline consent, and
   
3. the consumer either specifically opts in or at least doesn't opt out.

Amazon.com's web site has a nice feature that enables me to prevent the site from tracking my browsing history.
However, once such a person opts out, then the marketer is not allowed to use the information previously collected on the person's browsing and purchase history during the time that he was opt-ed in.

The idea is that while I may still want to receive email marketing newsletter from my favorite brand, I may not want my personal browsing and shopping history to be included in them.

Web analytic providers and email marketers should take note of this provision. Vendors including Omniture, WebTrends, and Coremetrics enable marketers to build profiles of their customers' web site interactions and then target those profiles for specific remarketing campaigns via email or other channels. If the draft becomes law as it is currently written, then any marketer that does not inactivate an opt-ed out customer's web analytics data from his web analytics profile database and his email marketing database would be in violation of the law subject to severe penalties.

Another provision of the draft bill that is causing concerns among all marketers is the requirement that all "covered information" must be deleted or rendered anonymous if it has been 18 months since the date that the information was initially collected. Email marketers should take note of this provision because according to this draft, a subscriber's email address is considered "covered information." This means that even if you are a retention marketer and send your emails only to those who have opted in to receive then, the only ones that you can send to are those whose email records are less than 18 months old. If you have a single email address in your customer data that is older than 18 months old, then you are a law breaker.

While some brands would be thankful to have active email addresses 18 months old, there are many major brands having loyal customers whose email address records go back many years. Just think of the ramifications this bill would have on your email marketing program. How many dollars would you waste on thinking up and sending "re-enlistment" campaigns just to get your subscribers to re-create their email address records that you already have in your database? How many of you have built consumer tenure into your RFM (recency/frequency/monetary value) and RFC (recency/frequency/click through) models? How effective would they be if your subscriber database has artificially skewed tenure data?

Finally, the inclusion of "precise" geolocation information as "sensitive information" is an eyebrow raiser especially when it comes to mobile marketing. Aside from memories of Bill Clinton's famous "it depends on what you mean by 'is'", just how "precise" is "precise"? Precise to a city? Precise to a neighborhood? Precise to a house? Precise to within 3 feet? Precise to within 10 inches?

According to the draft bill, the collection and use of "sensitive information" requires prior consent. This means that the collection and usage of a consumer's geolocation collected either by your computer's IP address or your mobile device may not be done so for marketing purposes without that person first giving you permission to do so. If you are an e-commerce site operator, then think about how this will impact your site's user experience.

Amazon.com approximated my location by examining my IP address and determined that I live somewhere near Minneapolis/St. Paul, Minnesota. This is the default behavior of their site.


If this draft bill becomes law, then unless Amazon changes the default behavior of their site, then their web site is engaging in "an unfair and deceptive act or practice in violation of a regulation under section 18(a)(1)(B) of the Federal Trade Commission Act. In addition to being liable to federal penalties, Amazon would also be subject to civil action by any of all 50 states depending upon how motivated their Attorney Generals are.

Fortunately, the mobile marketing eco-system has arisen in a post-SPAM world although much work is still ahead. Marketers may only send SMS messages to those who have specifically opted in to receive them.

But not all mobile apps include the option for app owners to opt-in and opt-out of location based services. For example, I have the ShopSavvy app on my iPhone which finds and compares prices local to me. Short of removing the app from my iPhone, there is no way to inactive the location-based feature.

So what can you do about it?

Keep track of the discussion through the DMA, the ESPC, and others. As Lois Greisman, of the FTC cautioned during a recent webinar, the draft is still just a draft. Reps Boucher and Stearns, and the FTC are soliciting feedback which to some degree will be incorporated in coming revisions of the bill before it is put to the House floor for a vote. In the meantime, I do recommend that you keep track of this bill from time to time just to be informed. Depending upon where it goes, marketers and web site operators may be in for a lot of work to bring their tactics in line with the new law.

So, which side of the debate do you espouse? Both sides do have their own merits. Leave me your thoughts.

Will Mobile Help Save a Dying Industry?

Last year in November, I posted my blog entry on how mobile is breathing new life into a dying industry: print. Back then, the word "iPad" had not yet been unleashed on the marketplace. Interesting to note that here we are a half a year later and my prognostication is proving to be correct. Once again, Apple proves that it has the uncanny ability to take existing product concepts, perfect the experience, and knock it out of the ballpark.

But first: a presentation of evidence to what you probably already knew. The U.S. newspaper industry continues it's 10-year tailspin. A simple search on Google using the keywords "declining newspaper industry" turns up almost 140,000 results, with about 4800 results for articles written in the past ten years. According to an April 27th article carried by The Sydney Morning Herald, the Audit Bureau of Circulations reported that the average daily U.S. newspaper circulation declined 8.74 percent during the six months ending on March 31 compared wiht the same period a year ago. Circulation dropped even more the previous period with a 10.62 percent drop.

Magazines aren't doing any better. According to the Veronis Suhler Stevenson Communications Industry Forecast 2009, consumer magazines will suffer a compound annual growth rate of -2.8% in the 2008-2013 period.

The plain and simple reason for the decline is that people's consumption of media has changed from print to digital. Unfortunately, the heavily-unionized print industry has been slow to adapt.

So while I was partly right back in November with my prediction, I was also partly wrong. Back then, I saw netbooks as the consumer devices that would help breathe new life into the dying print industry. Wrong. But six months ago I didn't know about the iPad. Knowing what I do now, I believe that the iPad will both breathe new life into the print industry while at the same time greatly crimp the growth of netbooks.

All major U.S. newspapers and magazines have either already launched iPad versions of their content, or are quickly on the way to doing so. Publishing giant Conde Nast has already introduced iPad versions of GQ, Vanity Fair, and Wired. Softbank Corporation of Japan announced last month that they will be offering more than 30 magazines and newspapers to their iPad subscribers.

But not everyone is under the spell of Jobs' Reality Distortion Field. Disgraced former equity research analyst turned blogger Henry Blodget in his March 25th entry states a strong case as to why the iPad won't save the print publications' asses. (His words, not mine.)

Nevertheless, there are progressive minds at work in the crusty halls of Old School media. Marketers are starting to combine print media with instant interaction via mobile devices.

Mobile Marketer reports that Macy's has teamed up with magazine digitizer and distributor Zinio to present their traditional print ads for presentation within Zinio's iPad application. A two-page advertisement has a link-away to Macy's Spring/Summer Journey catalog.

Since catalogs are expensive to produce, Macy's has to be highly selective as to who they send it to. But with the iPad, Macy's can distribute digital versions of their catalog and also get real-time feedback.

Consumer electronics giant Best Buy is also starting to build mobile into its print campaigns. One of their circulars includes a QR code that enables readers to view a special trailer for a soon-to-be released video game. The print ad also includes call-to-action encouraging consumers to text the keyword BBYAPP to the short code 332211 to download the QR code reader application.


Slowly the print publication industry is recognizing that our collective preferences have shifted towards mobile devices. That is how we choose to consume our media and that's the way we been choosing it for the past ten years. We listen to music on mobile devices. We watch videos on mobile devices. We take pictures on mobile devices. We take movies on mobile devices. We get directions on mobile devices. We communicate with one another on mobile devices. We surf the web on mobile devices. We make purchases using mobile devices. We even read our email on mobile devices. Now, thanks to mobile devices like the Kindle, eReader, iPad, and others like them, we choose to consume our print media the same way. Let's hope the print publishers wake up in time to save themselves and realize that mobile is what will breathe new life into their dying industry.

So what are your thoughts? Do you think mobile will save the print industry? Will the iPad and similar products be the boost that they are looking for? Post your comments.

Accelerating Innovation with the Product Innovation Quadrant

One of the hardest things to do in today's uber-competitive environment is to innovate fast enough to stay ahead in the marketplace. Every business wants to succeed by having some type of advantage over the competition. But when it comes to competitive advantage, you need to be clear as to which one you want - there are actually two types. The first type is an advantage occurring with valuable resources in limited supply. The De Beers Family of companies is an excellent example of this type of competitive advantage. Though diamonds themselves are not necessarily a rare resource, the supply of them on the open market is tightly controlled by this corporate entity. The other type of competitive advantage is the one that most of us know about and it refers to an advantage that exists during the period of time between the introduction of an innovation and its subsequent imitation and commoditization. The key to successful business strategy is to have a culture and a process that accelerates product innovation.

There is never a shortage of innovative ideas. The separation between market leaders, followers, and stragglers is not always about who can come up with the best ideas. Rather, the separation is based upon who can execute the best both in terms of time to market and customer appeal. At one of the companies where I worked, I lead the creation of the Product Innovation Quadrant, a new product management framework for accelerating product innovation that was quite successful in helping us to get our arms around the literally hundreds of new product ideas and assign appropriate priorities to them. I'd like to share this framework with you.

When planning out your product roadmap, its good to look at each of your product enhancement candidates along three dimensions: (1) time to market, (2) revenue potential, and (3) customer appeal. This latter point is something that our company president liked to talk about in terms of "Steak vs. Sizzle". "Steak" refers to the roll-up-your-sleeves, in-the-weeds, non-glamorous capabilities that comprise the lifeblood of the product. Without the "steak", there is no product, or the product is so anemic that it doesn't help the buyer achieve any advantage using it. "Sizzle" is what gets our attention. It's the sound of the steak searing on the barbecue and the its aroma that gets us excited in the first place. Sometimes a product feature needs to be implemented purely for the purposes of sizzle - getting people's attention, capturing the imagination, and building excitement about it. Products lacking sizzle are perceived as boring in the marketplace - regardless of how capable the product is. A healthy product roadmap needs to include a balance between steak and sizzle.

So here's how the Product Innovation Quadrant works: as you plan out your product roadmap, create quadrants in two dimensions with time horizon and customer appeal as the two axis. Then, draw a circle for each of your innovative ideas, placing it in whichever quadrant best describes the interplay between the two measurements. Make the size of your circle based upon your estimated revenue potential. Just to keep things simple, I recommend three sizes: small, medium, and large. As you map out each of your enhancement candidates, you will begin to get a good idea how they all fall out. Then you can decide which enhancements to accept for your roadmap, which ones to defer, and which ones to reject.


If a product manager at a typical company were to plot its existing product roadmap on the Product Innovation Quadrant he might be surprised (or not surprised) to see that almost all of the roadmap is clustered in the upper right hand quadrant.


Companies - typically technology-driven companies - tend to focus their attention on swinging for the home run each and every time at bat. While this tends to be the most common approach, this practice is risky because it places all of the company's fortunes in long-term projects leaving themselves vulnerable to competitors who can innovate faster than they can - not to mention the risk of finding out too late after all the time and money that they've given birth to a total dud.

In the example below, feature candidates A and B should absolutely be accepted for the product roadmap. Feature candidate C should also be accepted for the product roadmap because without it, the company does not have any long-term development projects and may be at risk of mortgaging the future for the sake of the present. I would also recommend that feature candidate A be prioritized ahead of feature candidate C even though it represents a lesser revenue potential. Why? Because it represents an earlier recognition of revenue. Feature candidate D should not be accepted to the product roadmap because its small revenue potential does not justify the long-term commitment of resources to implement a feature that is just there for sizzle and doesn't make that much of a difference in terms of the overall product's capabilities.


Now if you're working at a software company that implements the Agile software development methodology, then you have a distinct advantage over those that don't. You have the unique ability to accelerate the introduction of long-term product features by slicing it up into smaller iterations that Agile facilitates.

In the diagram above, we have feature candidate C that is accepted for our product roadmap because it represents a good revenue potential and it's a good balance of long-term and "steak" for our product mix. We then break up the implementation of this feature into a series of three iterations as shown below.
The first iteration is purely a short-term, sizzle implementation of the feature. The purpose is to minimize our risk by getting the product into the marketplace as quick as possible. Real market feedback trumps focus groups, market research, and "gut feelings" every time. You then have a second iteration scheduled which works on more of the "steak" features and incorporates the market feedback you've gotten from that first iteration. The third iteration is intended to be The Full Monty. This is the one where the fullness of the product is realized. In real life, it could actually be more than three. I've introduced product features to the marketplace that took ten iterations.

Remember: we're dealing with product innovation here. So this means that you have a little bit of a head start over your competitors when you introduce your first iteration. They key is that you have already scheduled the subsequent iterations so that you maintain your lead over your competitors.

The Product Innovation Quadrant I've introduced here is a suggested framework for evaluating all candidates for product enhancements. It's value is that it doesn't take weeks of analysis. It's a quick tool to get a sense of how things stack up. I hope it helps you as it has helped me. Do you have other frameworks that you've successfully followed? I'd like to hear from you.