Demand_Creating What People Love Before They Know They Want It Read online

  What’s going on?

  We set out to answer this question. To do so, we knew we needed to take a fresh look at the mystery of demand. To look at customers, producers, and the ways they come together in markets without the filters and encumbrances of traditional assumptions. We needed to think about demand as a child would, driven by curiosity and a willingness to ask naïve questions: How does demand actually happen? And how do those who create explosive and sustained demand even in tough economic times do it?

  Our curiosity about demand was amplified by a series of anomalies—odd happenings from the world around us that seemed to make no sense and left us wondering how and why they’d occurred. Surprising stories like those of the birth of Netflix and the Nokia 1100 sparked our interest. And once we began to notice such demand anomalies, they began popping up everywhere we looked.

  Before Amazon’s Kindle launched the e-book revolution, an almost identical device was introduced by Sony into the avid Japanese book market—and sank like a stone. Why has the Kindle outsold the Sony Reader several times over, despite Sony’s three-year head start?

  Nonprofit organizations that promote high culture must constantly struggle for funding—yet an opera company in a mid-size city has mastered the knack of generating a deep and ever-growing stream of demand for its programs. How have they done it?

  Everyone knows that Americans love their cars, despite their huge economic and environmental costs. How is a fast-growing car-sharing company convincing Americans to give up their beloved cars—and making them enjoy doing it?

  American health care is an economic disaster zone—yet a little-known health care company in California has figured out how to provide vastly improved services, keep its clients healthier and happier, and simultaneously cut costs—by as much as 20 percent. How is that possible?

  The decades-long decline of American education is a familiar story—but a young college graduate launched a rapidly growing nonprofit organization that is transforming American education by generating a revolution in demand on the part of students and parents, demand for education that really works. How did that happen?

  The unpredictable challenges of the demand creation process produce an endless stream of head-to-head matchups: Facebook versus MySpace, the Toyota Prius versus the Civic Hybrid, iPod versus Sansa, Eurostar versus Air France, and many others. In each case, consumers disproportionately demand one seemingly comparable product over another—not by a few percentage points but by margins of five or even ten to one. Why? What makes demand differ so dramatically when the underlying goods appear so similar?

  Closely examining these anomalies and many more like them, we discovered that demand is often created by a special breed of person with a number of unique insights and behaviors—yet the skills these people practice can be learned and practiced by any leader and by any team.

  These demand creators recognize the huge gaps between what people buy and what they really want—and they use those gaps as the springboard for a process of reimagination that you might call the demand way of thinking. They reimagine reality, and then they recraft it. As a result, they wind up creating products that customers can’t resist and competitors can’t copy.

  The process includes several steps that all great demand creators follow.

  1. Make It Magnetic

  Most of what comes into the marketplace is good, even very good, yet it fails to create an emotional connection with customers. Demand creators begin with a very tough realization: Very Good ≠ Magnetic. And they don’t stop developing their product until it’s absolutely irresistible, generating excitement and conversation everywhere. When it comes to creating demand, it’s not the first mover that wins; it’s the first to create and capture the emotional space in the market.

  2. Fix the Hassle Map

  Most of the products we buy are flawed, generating hassles that include time- or money-wasting features, unclear instructions, needless risks, and other annoying bugs and glitches. We rarely get to enjoy everything we want: greater simplicity and more choices, enhanced automation and more personal service, improved quality and lower prices. But herein lies enormous opportunity for the demand creator. Mapping the hassles that dominate so much of daily life, and then figuring out how to fix them, provides the path to explosive potential demand.

  3. Build a Complete Backstory

  What we don’t see can make or break the product. As many demand creators have discovered, it’s not enough to have 90 percent of the backstory in place—until the backstory is truly complete, demand simply doesn’t happen. Demand creators connect all the dots needed to fix the hassle map of the customer.

  4. Find the Triggers

  The biggest obstacles to creating demand are inertia, skepticism, habit, and indifference. Most people who hear about a product remain fence-sitters, unready to buy and stifling the growth of demand until something moves them to act—a trigger. Although it often takes even the best companies years to find the right triggers, great demand creators constantly search for them, always experimenting to find what turns fence-sitters into customers.

  5. Build a Steep Trajectory

  A product’s launch into the marketplace is merely the first step in a series of attacks upon the indifference of the market. On launch day, great demand creators jump into the next phase by asking themselves a very simple question: How fast can we get better? They know that every improvement they make—technical or emotional—will unlock new layers of demand, and leave less open space for imitative, piggybacking competitors.

  6. De-Average

  “One size fits all” is an appealing idea that great demand creators have discarded—because it doesn’t work. Instead, they “de-average” complex markets, recognizing that the “average customer” is a myth, and that different customers (and even the same customers at different times) have widely varying hassle maps. Then they find efficient, cost-effective ways to create product variations that more perfectly match the varying needs of very different types of customers, getting rid of overages (things we don’t want) and underages (gaps we want filled). They constantly improve their product’s fit for very different customer types from 60 percent to 90 percent, or better.

  GREAT DEMAND CREATORS have not only mastered these six skills; they also know how to transmit them to many other people. They build self-replicating teams that are obsessed with customers and their needs, obsessed with that magical difference between what customers buy and what they really want. In this way they are able to reduce hassles and provide life-improving products not just for a handful of people but for the thousands or millions of customers that only a great organization can reach.

  Demand creators have a hidden advantage. Many of their rivals are “anti-demand” organizations—organized in disconnected silos, focused on meeting yesterday’s demand, and often remarkably immune to the signals that customer behavior is trying to send us.

  Demand creators are remarkable people. In trying to decipher the mystery of demand, we’ve had the privilege of meeting many of them and observing them in action. We’ve found great demand creators in a surprising range of organizations—not only corporations but small businesses and nonprofit organizations. Some are company founders and CEOs, while others are middle managers, frontline employees, small business owners and entrepreneurs, idealistic reformers, and seemingly ordinary people in many walks of life. They tend to be deeply curious, extremely energetic, thoughtful and self-disciplined, intensely confident yet continually self-questioning, gifted with humility and with a highly evolved sense of humor. And they’re always looking for the next hassle map of the customer.

  Yet perhaps the most important trait this highly disparate collection of individuals has in common is a simple one. When confronted with the same question we’ve been pondering—Where will tomorrow’s demand come from?—they don’t point to the government, the Fortune 500, or to macroeconomic forces.

  Instead, they look in the mirror.

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  Magnetic

  (mag-NET-ik) adjective 1. extraordinarily and irrepressibly attractive 2. combining great functionality with intense emotional appeal 3. capable of producing a powerful stream of demand

  ZIPCAR INVENTS A NEW KIND OF FREEDOM

  It was Friday evening, February 14, 2003. Scott Griffith was heading home from an intense and eventful day. He’d been chosen by the board of directors of Zipcar to be the company’s new CEO, replacing founder Robin Chase.

  For the forty-four-year-old Griffith, it was a stressful, tumultuous moment. He was delighted to be back at the helm of an innovative young company, a role he’d relished in two previous assignments, one a failure, one a success. And he loved the Zipcar business for its uniqueness and its vaulting ambition—to revolutionize the way people use cars by providing a convenient alternative to ownership, saving money, eliminating hassles, and protecting the environment. Yet after four years of hard work by Chase and her dedicated team—years of research, experimentation, evolution, and struggle—the business was still on shaky footing. Demand wasn’t zero, but it was low—far too low to be sustainable or profitable.

  If Zipcar were a rocket, it was a rocket that had achieved liftoff but was still unable to reach escape velocity. Time and again it had stalled and fallen back to earth, grounded by the powerful gravitational force that causes more than 80 percent of new businesses and new product launches to sputter and fail.

  Board members and team members proposed many solutions: cut prices, advertise more, offer free trial memberships, change the lineup of cars, redesign the website … The problem was clear, but the solution was a mystery.

  Griffith had always been fascinated by the intersection between technological change and demand. Growing up in Pittsburgh in the 1970s, he’d watched the local economy collapse as its steel industry became outmoded. He was also a natural-born Mr. Fix-It, whose favorite childhood memory was of repairing the family toaster with a soldering gun at the age of nine (“I was lucky I didn’t electrocute myself”).

  Now Zipcar offered Griffith a similar challenge on a grown-up scale: Could he figure out why the rocket wasn’t reaching escape velocity? And could he fix it before the company’s funding ran out?

  AMERICANS LOVE their cars. We know it’s true, because practically every cultural commentator has told us so. And most ordinary people agree. In a 2001 survey, 84 percent of Americans confessed to loving their cars, 12 percent said they’d named them, and 17 percent reported buying them Valentine’s Day presents. Yes, Americans love their cars.

  Or do they?

  Do Americans love commuting? Do they love the daily traffic jams for which cities like Atlanta and Los Angeles have become infamous, the five-mile-per-hour crawl on New York’s Long Island Expressway (sometimes called “the world’s longest parking lot”), or the hair-raising adventure that is maneuvering among buses, delivery trucks, battered taxis, and double-parkers on the pothole-filled streets of Manhattan, Chicago, or Philadelphia? Do Americans love trolling for parking spaces, or searching for their cars among three thousand identical slots once they’ve managed to park them? Do they love paying for insurance, repairs, tickets, registration fees, taxes? Do they love playing gas-price roulette at the pump?

  Americans may love their cars. Yet there’s another side to the relationship—a side that, at times, looks an awful lot like hatred.

  Mary Morgan, a journalist in Ann Arbor, Michigan, has thought a lot about the love/hate relationship between Americans and their cars. In fact, she has lived it, talking with her family about getting rid of their car for a long time. Ann Arbor has excellent public transportation, and the Morgan family could manage most of its daily activities quite nicely without a car. But, Morgan says, “I’ll admit that I’m the one who’s been dragging my feet. For me, having a car is a habit—an addiction, really—and unable to go cold turkey, I’ve been edging toward carlessness in nicotine patch–like phases. Part of my reluctance to go car-free has hinged on my sense that owning a car gives me freedom, and that without a car I’ll be trapped.”

  Most telling, perhaps, is Morgan’s use of the word addiction to describe her feelings about her car. It’s a word we reserve for relationships we consider destructive and would desperately love to change … but somehow can’t. And that addiction is why millions of Americans buy cars: not because they love cars and the hassles that go with them, but because owning a car has been the only way to experience the sense of freedom they do love.

  Great demand creators are special, in part, because they understand that the things we buy and the things we actually want aren’t always the same. There’s often an enormous gap between the two—and that gap is where the opportunity to create demand originates.

  Unfortunately, transforming that opportunity into real demand often borders on the impossible.

  Throughout the seventies, eighties, and nineties, as oil spills, price shocks, overseas crises, supply shortages, and the looming threat of global warming exposed the dangers of our dependence on petroleum, progressive political leaders and city planners tried to eliminate or reduce public reliance on cars. They deployed an array of tools, including improvements to urban mass transit, establishment of car-free zones and pedestrian malls, restrictive auto regulations, tough tax and licensing requirements, congestion pricing of tolls, and onerous parking limitations.

  Yet most of those efforts foundered. Millions of people talk about wanting to break the driving habit; almost none follow through. (As a deadly accurate 2000 headline in the satiric Onion put it, “98 Percent of U.S. Commuters Favor Public Transportation for Others.”) The missing ingredient has been a powerfully attractive alternative—a form of transportation that eliminates the hassles of car ownership while providing the freedom, convenience, and fun that Americans love about their cars.

  In politics they say, “You can’t beat somebody with nobody”: Even an unpopular incumbent can win reelection when the opposition is lackluster. In the world of demand, it’s not enough to identify the failings of existing products—you need to create an alternative that will excite, allure, and motivate consumers to change their behavior. In other words, new demand begins—always—with a magnetic product.*

  What is a magnetic product? Here’s an easy way to define it for yourself.

  Consider the following contrasting pairs of products. Don’t think about them a lot—just react quickly. Which product from each pair strikes you as more attractive, interesting, desirable, lovable—in short, magnetic?

  Sansa iPod

  Sony Reader Kindle

  Civic Hybrid Prius

  Hertz Connect Zipcar

  Illy Nespresso

  Air France Eurostar

  MySpace Facebook

  Blockbuster Netflix

  British Air Virgin Atlantic

  Any toy set LEGOs

  Any movie studio Pixar

  Yahoo! Search Google

  Any online retailer Amazon

  You may not be familiar with every product named here. But if you’re like most of the thousands of people to whom we’ve presented this list, you probably feel a much stronger attraction to the products on the right than to those on the left—even though, in many cases, the apparent differences seem not to be significant. As we’ll discuss later, magnetism is as much about emotional appeal as about function. And magnetism is one of the crucial elements in creating significant new demand.

  In 1999, Robin Chase decided to tackle the challenge of creating a magnetic alternative to car ownership.

  A Wellesley graduate with a background in public health and an MBA from the MIT Sloan School of Management, Chase was a dedicated environmentalist who had long fretted about Americans’ car addiction, penning earnest articles with titles like “Fossil Fuel Is the New Slavery.” In the absence of an attractive alternative, her proselytizing had little impact.

  Then, in 1999, while searching for a way to apply her business talents to the mission of greening America, Chase learned abou
t a little-known approach to the auto dilemma—car-sharing. The idea was to get needless cars off the road by having multiple people, especially city dwellers, share a single vehicle.

  Chase saw that car-sharing could save resources in lots of ways. Fewer vehicles on the road would mean less steel, rubber, glass, and other materials expended in manufacturing. Less land would need to be devoted to highways and parking lots. And drivers relying on shared vehicles would be less inclined to hop in the car for a five-block drive to the supermarket, reducing the amount of gas expended in needless trips, idling at red lights, and round-the-block cruising in search of a parking spot.

  Not-for-profit car-sharing services had already been launched in cities throughout Western Europe and in a few places in the United States, such as Portland, Oregon. But these city-sponsored services, though well intentioned, were clunky and inconvenient. Car keys were stored in centrally located mechanical lockboxes; driving logs had to be filled out by hand. Except among hard-core environmentalists, demand for car-sharing was practically nonexistent.

  Chase understood that merely replacing the hassles of car ownership with a different set of hassles was unlikely to create much new demand. But she also recognized that the Internet offered an opportunity to reduce or eliminate the hassles of car-sharing. Chase became convinced that the ecological benefits of car-sharing could be realized through a for-profit company capable of attracting a serious stream of demand from mainstream customers.