Dear CMO:

The artboards adorning your office are works of art, delicate balances of light and shadow, power and emotion. They make cultural icons of products and heroes of wise purchasing decision-makers. Product is king, long copy sells, white space above all, and less is more. The thunderous imminent consumer ground-swell will certainly float generations of shareholders to financial security. After all, selling more big boxes means more profit for the company. Doesn’t it? Or does it?

Sometimes, it’s not what it is but what it does and how you do it. And sometimes, it isn’t the big box that earns the profits for the company but the small box. The accessories, the peripherals, the disks and razor blades and ink cartridges and toner cylinders float the company. The big box, as a matter of fact, is often a money loser. Funny how often companies lose this focus.

When was the last time you bought a new ink cartridge for your printer? To refill my HP inkjet costs $58.99. To buy a new printer costs $99. Almost a toss-up. But to HP, which makes $10 billion a year on ink alone, this apparently works pretty well. Low initial acquisition cost, high recurring revenue stream. Good business model.

This strategy almost worked for Iomega back in the day. The company lost money on the drive and made it up on the media. If a consumer bought, let’s say, eight disks, the company broke even. But here’s the problem: let’s say you bought three disks when you bought the drive. You were an unprofitable consumer. Then you bought another three-pack. Still unprofitable. Then another three-pack. Profitable! Then another three pack. Great! Then, because you liked it so much, you bought another drive so you could move disks between your house and your office. Guess what? That great consumer who bought 12 disks is now unprofitable. The more utility you got out of their solution, the less likely you’d be a good and profitable consumer. They countered this by stripping even more profitability out of the drive in an effort to make it “the floppy replacement”. In other words, in an effort to be ‘ubiquitous’, they drove the break-even up to about 16 to one. And put it in the hands of people with even less interest in buying the media. Apparently, this model didn’t work any better.

I liked the HP example better. So, while we’re building our brave new business model, let’s do more HP and less Iomega. Now that we have that settled, how do we actually do this whole accessories marketing thing? Glad we agree that it always come down to execution. HP is a great example but it’s a captive market — you only use ink when you have their printer. What about the rest of us? Here are a few thoughts.

Idea #1: Don’t Tell People What To Do, Tell Them How To Do What They Do Better.

The biggest problem marketers face when launching a new product is trying to convince people to use it, especially when they were just fine without it. This is also the best possible space for a marketer to spend his or her time. Where else do you get to look back after a long stint and tangibly see how you’ve changed the world? Not a bad gig, if you can get it. And be successful at it. Not too many examples of this, unfortunately.

How do you approach this? Here are a few ideas. First, show it. Explain to your public visually what you want them to do. Consumers aren’t dumb and if you give them the right images in the right setting, the lesson sinks in. This is one of the great opportunities for product placement and also one of the worst. In my Plantronics days, this was a big issue, because showing the receptionist at the front desk or the serious looking guys in Mission Control wearing headsets was exactly the stereotype we didn’t want to promote. Getting a headset prominently placed in Die Another Day, or in How Stella Got Her Groove Back, or any number of other examples, was what we wanted. Once you’ve got this in hand, spent your time, money and effort on how to monetize the event.

At Iomega, we also spent a lot of time on this. I recall a rather colorful discussion many years ago on the subject of extending the line on Zip media. The discussion centered on launching a smaller version — less than 100MB — and selling it for less because, I was told, not everyone needs 100MB. Thankfully, this idea was killed before it prematurely killed off the company.

Victory for Iomega was organization: a disk for my word doc’s, a disk for my spreadsheets, a disk for my pictures. Disaster was capacity: the realization that I could drag and drop all of my backup stuff on one disk. The less consumers knew about how much storage they didn’t need, the better. By offering them different — and smaller! — versions, we would have blown open Pandora’s box and provided a user’s guide, too. The lesson here is leveraging the lifestyle and workstyle — one disk for every use. We’re not telling you that you need to organize your stuff, we’re telling you how to do it better. And by getting the media out from behind the glass — where consumers might actually pick it up and remember they need to organize their stuff — we had the beginnings of a fighting chance. By promoting organization with on-disk games, website ‘scooping’ utilities, and usable content, we extended the possibilities of what consumers could organize.

Idea #2: Don’t Call It An Accessory

Another example from Plantronics. Accessories are best positioned as not being accessories at all, but essential parts of rational people’s lives. Instituting ‘headset policies’ at major enterprises gave companies the tools to welcome new employees with a desk, a phone, a chair and a headset. All new employees were offered one. Just pick your style. We saw adoption rates of upwards of 80% in big, knowledge worker sites.

Another example was with mobile phone headsets. Verizon did an extraordinary job of maximizing how accessories were sold by not making them accessories at all. You buy a bundle that has a phone, a plan, a charger, a belt clip and a headset. Pick A, B, or C, just like a menu.

These two points would work well for a lot of products that are branded as terminally ‘aftermarket’. When you buy a desktop computer at Circuit City, how many consumers ask for a Logitech keyboard? How many Circuit City salespeople aggressively upsell Logitech keyboards to consumers, knowing that they make more money selling them than the plain vanilla ones? What is Logitech doing to get the Circuit people aggressively promoting this? Opportunity knocks, Fremont. Want to Supersize that PC?

Idea #3: Making the Non-Essential, Essential

Social proof, in the words of Robert Cialdini, is deciding what is good by finding out what other people think is good. The, “Hey, where’d you get that” phenomenon of everyday cubicle prairie dogging in corporate life is where most of us learn about new stuff. Seeing the guy sitting in the cube across the way get up and walk to the fax machine while talking on his wireless headset is a humbling experience. You’re not ‘in’ until you get yours, and then the guy next to you — who doesn’t have one — is ‘out’. Few things in life feel as good as this.

So use this nasty practice to your best advantage. Penetrate the hive, infect the colony, and win the hearts and minds of prairie dogs across the nation. There is no better way, particularly in the office market, to get adoption than sampling. Blackberries won the day this way, WebEx web conferencing has done pretty well with this, wireless headsets have had some success and are gaining traction, and white board capture devices tried and failed (I loved mine, but frankly I used it less and less as time went on, as opposed to more and more with my Blackberry and my headset).

You can accellerate this process with willing targets by turning up the heat on the exp
eriment. We turned a willing enterprise customer into a die-hard headset company by putting two people on site two days a week for three weeks, making sure the end users were happy (and using the headsets), swapping out styles, answering questions, and holding a lot of hands. We boiled six months of learning down to three weeks and the story spread to the other branches very quickly. This works if you have the manpower to do it. And we assume your product is good enough to win over your end users.

The big box puts your company on the map; the little box keeps your company in business. The big box grabs the end user; the little box keeps the end user. The big box is an opening for the little box. You can lose money on the big one as long as you make more money on the little one and your customers see the need to keep using it. You can do this right and wrong, depending on how you structure your business model, so choose wisely.

Your ad strategy is still brilliant. Just squint at it a little longer before you put it to bed, because making sure you’re aimed at enhancing the company’s profitability is more important than picking the location for the shoot.

In the big world of big strategy, don’t overlook the little picture.


Copyright (c) 2006 Stephen Denny

PS: The above-mentioned product placement work at Plantronics was done exceptionally well by the hardest working man in Hollywood, Jay May, President of FeatureThis!