The 24-Hour Customer
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The 24-Hour Customer

Adrian C. Ott

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  2. English
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eBook - ePub

The 24-Hour Customer

Adrian C. Ott

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About This Book

In The 24-Hour Customer, Adrian C. Ott—the CEO and founder of a top Silicon Valley–based consulting firm—challenges businesses to re-conceive their approaches to time and technology in order to win an unprecedented share of their customers' attention and loyalty. Filled with powerful and provocative ideas, The 24-Hour Customer is an indispensible handbook for any company competing for business in today's around-the-clock economy.

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Information

Year
2010
ISBN
9780062002792
Subtopic
Marketing

1

THE MONEY VALUE OF TIME

“The decline in the cost of IT hardware has been so rapid that it’s tempting to assume it explains all the changes that take place in economy and society. But in our lifetime, we’ve witnessed a second price change that’s as jolting as the one in hardware; the cost of time has increased…human time is used in every productive process and every consumption activity, so changes in the cost of time have pervasive effects on the economy and society.”1
DR. PAUL ROMER, DEVELOPER OF NEW GROWTH THEORY, SENIOR FELLOW, STANFORD UNIVERSITY CENTER FOR ECONOMIC POLICY RESEARCH
While fishing for a new product idea a few years ago, some tech types at Nike noticed something about the runners they saw near the company’s Beaverton, Oregon, campus: they were all wearing ear buds and listening to music during their workouts.2 After further investigation, they learned that 50 percent of iPod users exercised while listening to the music players.3
Nike and Apple responded to this opportunity with the Nike+ Sport Kit, a tool that lets runners know how far and how fast they have run. The kit contains a wireless sensor that tucks into the sole of the Nike shoe and a corresponding receiver that plugs into an iPod. As the athlete runs, the sensor measures the runner’s pace and sends information to the iPod, where it gets synced up with the runner’s time to calculate distance, pace, calories burned, and other relevant details.
Other exercise-measurement products existed during that time, but they did not carry the guaranteed usability that is synonymous with the iPod. They also did not offer the increased benefit of a website for easy data comparison. At the end of a workout, runners plug their iPod into a PC, and their workout data will upload to the Nike+ website. There, they can track their time and distance compared with previous runs, evaluate their mile splits, and even sign up to “race” another Nike+ user anywhere in the world. They can also find workout and diet suggestions and buy more Nike products.
No doubt, this is an impressive product and the application of wireless technology in the shoe is innovative. But that’s not the important part of the Nike+ story. The real win comes from the fact that Nike changed the nature of their customer interactions from a periodic, transactional shoe purchase to a consistent integrated relationship with the runner. Nike figured out how to use time to differentiate its products and provide extra value to customers. Remarkably, it’s value that increases with every use, making it harder for competitors to catch the attention of Nike’s customers. As of this writing, more than 210 million miles have been logged by users on the Nike+ website. That’s equivalent to 8,486 laps around the world by loyal Nike customers.4
Nike is reaping the benefits of these efforts: its running-shoe market share has enjoyed a 13 percentage point gain since the launch of the Nike+, from 48 percent to 61 percent in 2008.5 Nike is playing by the new rules—and winning.
Time, Attention, and the 24-Hour Customer
The success of the Nike+ has come during an era of real challenges for businesses. Consumers are spending only about 28 minutes each day researching and buying goods and services—that’s less than 3 percent of waking hours.6 In other industrialized countries, the figures appear to be similar. And despite the 24/7 availability afforded by the Internet, U.S. customers spend less than six minutes a day on e-commerce sites—that’s less than 1 percent of waking hours—a small window of time relative to the thousands of e-commerce websites vying for attention.7
As I shared in the introduction, even business-to-business–sector executives making noncommodity purchases spend a fraction of their time doing this (between 10 and 15 percent of working hours).8 They are not lining up to meet with vendors or to read marketing materials on top of an already overflowing in-box.
It would seem logical that increasing the available opportunities for customers to buy would have increased the amount of time customers spend buying. However, the introduction of around-the-clock e-commerce and 24-hour store schedules has not significantly changed the amount of purchase time. Despite the opportunity to shop in your slippers at midnight, the time spent on shopping and services in the United States has remained relatively steady from 2003 to 2008 even when travel to and from a store is excluded from consideration. In fact, U.S. time-use studies have shown that the amount of time spent purchasing goods and services has remained relatively constant since the 1960s (see Figure 1–1).9 Viewed together, the increase in the number of available products coupled with the relatively static time spent buying present a considerable challenge for executives.
Ultimately, more and more goods and services are attempting to push through a small window of time. Meanwhile, the amount of information available on the Internet has exploded. It’s like an assembly line where there is capacity upstream to build widgets, but everything is piling up at the warehouse because there are not enough trucks to ship the final widgets to the consumer. A bottleneck of time prevents many offerings from ever reaching their intended audience.
Although we know that the amount of time consumers spend shopping has not changed over the past four decades,10 what has changed in that time is the amount of distraction that is encountered during those 28 minutes. A housewife grocery shopping in 1960 saw only products on the shelves, a daily newspaper, and a limited number of broadcast TV and radio channels. Today, the devices and inputs we choose to entertain ourselves beyond radios and televisions—including smartphones, MP3 players, electronic book readers, and PCs—provide constant, self-created distraction. Couple those with the inputs we don’t choose (commercial breaks, pop-ups and banner ads, taxi-top advertisements, dinner-hour telemarketers, cable TV piped into airport terminals), and it is a guarantee that we are incapable of paying undivided attention during most of our waking day. There is a time barrier and an attention barrier, and they work together to narrow the window of opportunity for products to take hold.
Time Spent Purchasing Goods and Services Has Remained Constant While Products Have Proliferated
image
Figure 1–1: Although product choices have grown significantly, the amount of time U.S. consumers devote to shopping has remained relatively constant since the 1960s.11
Constant Distraction Calls for New Rules
Many businesses are responding to these dynamics simply by getting louder. They develop the flashiest copy or Internet banner they can come up with and put it everywhere they can afford (and some places they can’t): Super Bowl commercials, Times Square billboards, Facebook, Twitter, Google, full-page newspaper ads.
With all due respect to the advertising industry, it is not working. The target audience is savvier than ever. They no longer tolerate the messages that marketers want to send. Instead, they use the ad-skipping functionality of TiVo or other DVR devices. They subscribe to the Kindle version of the Wall Street Journal so they get only the content. They delete voicemails and don’t return sales calls. They tune out the omnipresent Web banner ads and they don’t even see the links promoted in Google’s right-hand gutter—a 2009 report from comScore estimated that just 8 percent of Internet users are responsible for 85 percent of all ad clicks.12 Businesses are stuck trying to get through to customers that are actively avoiding them, or to consumers who are so oversaturated with marketing messages in media that they can’t see or hear even the content that would interest them.
There is another way. Rather than fighting against the barriers of time and attention, why not use them to build advantage? I have discovered in my research and through my work in Silicon Valley that there are certain rules or forces that compel customers to willingly spend more time on certain activities such as spending hours surfing the Web or on products such as Nike+. Conversely, there are other products that cause customers to actively shun them and say, “I have no time for this!” Understanding the differences and knowing how to work for, rather than against, these forces are essential new rules for winning in a time-starved, always-connected economy. We will explore these new rules throughout this book. They are summarized in Table 1–1.
By understanding the broader picture as to how runners multitask, Nike found a white-space opportunity between existing product categories (the running shoe and the iPod) that allowed runners to keep doing what they had been doing before—only better. Such a little thing resulted in the sale of one million Nike+ Sport Kits in their first year on the market. And users who synced their data with the Nike+ website willingly increased the amount of time they spent with Nike top of mind. Nike didn’t demand time and attention. It earned them by understanding the customer’s propensity for spending time and by developing a product that added value within those time constraints. By automatically uploading the running data to the Nike+ website, trend and training information cannot be easily transferred to a competitor, creating incentive for the runner to return to Nike+. As a result, Nike ultimately captured time, attention, and competitive advantage.
Then vs. Now
OLD RULES: Get louder-cut through customer distraction
NEW RULES: Capture opportunities that emerge from multitasking and distraction
OLD RULES: Differentiate on product features
NEW RULES: Differentiate on customer time priorities
OLD RULES: View customers as static: e.g., psychographic preferences (“urban chic”)
NEW RULES: View customers as situational: e.g., behavioral time preferences and triggers
OLD RULES: Grow through product adjacencies
NEW RULES: Grow by shifting time boundaries
OLD RULES: Focus on labor time as an input into production and price
NEW RULES: Focus on customer time to evaluate, set up and consume
OLD RULES: Create advantage by dominating mass media and retail distribution
NEW RULES: Create advantage through customer inertia and time-relevant value
Table 1–1: New Rules for Winning in a Time-Starved, Always-Connected Economy
To help companies find unique opportunities under the new rules, there are two important time-and-attention-based concepts and processes. To understand, they are:
  • the Time-Value Tradeoff
  • Customer Time-ographics Analysis
The Time-Value Tradeoff
Have you ever gone to the store intending to buy two items and walked out with a shopping cart full of purchases? Have you ever received an Internet offer for something that was available for free but hesitated when it came time to register your email address? This is the Time-Value Tradeoff in action.
The Time-Value Tradeoff is the time-and-attention calculation that every customer tallies in his or her head before buying a product or signing up for a service. We purchase additional goods at the store because the time saved by stocking up today exceeds the perceived cost of a subsequent trip. Or we hesitate to register for free Internet services because we know that we will “pay” with time spent erasing spam from our in-boxes.
The Time-Value Tradeoff causes the customer to answer the question “Is it worth it?” in a way that is not just about price and features. The tradeoff occurs with nonpurchasing decisions as well. If someone invites you to a club meeting or conference, you ask yourself, “Will the value of what I learn or people that I meet be worth my time?”
A simple way to think about the Time-Value Tradeoff is through the following equation:13
Value > Price + Customer Time Investment
The perceived value of the product simply must exceed the price of the good plus the customer time investment required to use it. Although economists have always included “other factors” in value, customers weigh the cost of time more heavily today. What was a small “t” for time investment in the past (not a big consideration) is now a capital “T” (a big consideration) in the purchase equation.
We can see this effect with the proliferation of free offers. The economic laws of supply and demand would argue that a free product will generate demand.14 Lower the price and customers will buy, right? Take the example I gave in the introduction of my first MP3 player. Even though the product was free to me (it was a gift), the time required to learn how to use it exceeded the value I anticipated receiving from it, and so it gathered dust on my shelf.
This equation factors into my evaluation of any new product regardless of whether it is free. Do you do the same? Understanding Time-Value Tradeoffs associated with your products is one of the new rules for winning in today’s economy.
Traditional economics tends to focus on the time to produce the good (i.e. labor). Under the new rules, innovators and marketers need to understand the perspective of the customers’ time to evaluate, set up, and consume the good—time is viewed through the lens of purchase and consumption instead of production. These consumption-related elements help to determine whether the balance of time and value fall into or out of a favorable position for product adoption. For innovators and marketers it is not about the TIME value of MONEY, it is about the MONEY value of TIME.
Segmenting Customer Time and Attention Priorities
The fact that people have preferences when it comes to their time and attention should make clear that not all time is equal. This is not just...

Table of contents