Innovation, Marketing and Avoiding Failure

Posted by SMstudy® on March 22, 2016 | Marketing Strategy (MS)

Keywords: SMstudy, segmentation, marketing, metrics

When famous, powerful people say, “I failed,” it gets people’s attention.

When famous, powerful people say, “I failed,” there’s usually a “but it wasn’t really my fault” lurking about.

When David Fradin, former division head at Apple, wrote a guest blog for Aha! titled “Why I Failed with the Apple III and Steve Jobs Succeeded with the Macintosh,”[i] it got the attention of SMstudy. And even though he never said it directly, there was an “it really wasn’t my fault” argument sidling through the piece. That argument really got their attention.

Fradin says that when he took over the Apple III product line he discovered ambiguity and confusion over the line’s targeted market segment. The product’s architect had a definite idea of who the Apple III was designed for and the marketing people did not agree, “To make matters worse, Marketing did not agree that there was any demand for the Apple III in the SOHO (Small Office, Home Office) or SMB (Small to Medium Business) market.”

How could the marketing department not see the logic of the architect? “That’s because Market Analysts had not identified such market segments yet. So, Apple’s own Marketing team could not identify those as market segments by themselves,” says Fradin. Claims like this—all too common with innovative and disruptive products—make the professionals at SMstudy sit up and take notice. They even smiled. That’s because they have addressed this situation in Marketing Strategy and Marketing Research, books one and three in their A Guide to the SMstudy® Sales and Marketing Body of Knowledge (SMBOK® Guide) series.[ii]

“Once the market has been defined, the company can then divide the market into various segments based on carefully chosen segmentation criteria. Customer segmentation should be used to help a company tailor specific offerings to segments that provide a distinct competitive advantage,” says the SMBOK® Guide, also known as the SMstudy® Guide. Though this seems fairly obvious on the surface, for innovative companies, this can be a problem. What segmentation criteria is the company going to carefully choose? The product may be so new that no one is sure how customers and user will actually use it. It is not surprising that the majority of the first Apple IIIs went to developers who were eager for more computing power, more drives, and did not care about the user friendliness that was so important to Apple’s other users. 

Even within the company, the Apple III had a distinct competitive advantage over the Apple II. The “product line was contributing over $100M per year in gross profits … because the Apple III focused on the Enterprise market and had a much higher Average Selling Price (ASP) than the Apple II.” But the company did not know it.

They did not know it because the company’s “metric — or key performance indicator (KPI) — was ‘units sold,’” according to Fradin, who says, “Instead, we should have focused on profitability.” The “units sold” metric came from the manufacturing division instead of marketing which added to a lack of focus. The process of determining metrics should “include the positioning statement, which describes the value a product or brand offers to its target customers; the Pricing Strategy; the Distribution Strategy; Industry Benchmarks and Key Performance Indicators (KPIs); and the goals that are defined at the corporate and/or business unit or geographic levels,” according to the SMstudy® Guide. Things might have gone better for Fradin and the Apple III if someone had remembered this.

The Marketing Strategy book has a chapter that “deals with the selection of the metrics to be used for sales and marketing efforts, such as customer reach, brand perception, product availability, and sales and profitability.”

But what about the market being so new that Apple’s marketing people did not know what segmentation criteria to use? Marketing Strategy suggests beginning with existing reports, “There are two types of marketing research reports that can serve as inputs for market segmentation—industry reports and company commissioned reports.” From Fradin’s comments, it is clear that industry reports were not available, so the emphasis moves to ones “that have been created or commissioned in the past by the company to understand specific information about the markets under consideration that the company is not able to understand adequately through other sources.”

By the time Fradin took over the Apple III division it had already been through three project managers, including the man who later developed PowerPoint. Previous Apple computers had been revolutionizing the market, the Apple II had been around a while, and they were selling 40,000 of them per month. Apple was in a position to have some proprietary research that could give hints about where to go with the Apple III.

SMstudy’s Marketing Research book makes the point that “marketing research is linked to all other Aspects of Marketing as it provides critical insights that inform key decisions in all other marketing planning and strategies.” Some type of research was needed to help Apple focus on the Apple III. In researching market segments there are two broad categories of the data one can collect: primary and secondary. Secondary data is the type you can get from reports that have already been written such as industry reports. Primary data comes from activities that a company or its research organization carries out directly with the customers and market members. “As a rule, a researcher should always try to collect and analyze secondary data before moving to the collection and analysis of comparatively costly and time-consuming primary data,” suggests Marketing Research. And this makes sense.

What also makes sense is that to avoid making decisions like those that led to the failure of the Apple III, one should use some insightful marketing strategies and do a good bit of quality research. SMstudy and the SMstudy® Guide can help!

 

[i] Fradin, David. (3/21/16) “Why I Failed with the Apple III and Steve Jobs Succeeded with the Macintosh.” Aha! [Guest blog] Retrieved on 3/22/16 from http://blog.aha.io/index.php/why-i-failed-with-the-apple-iii-and-steve-jobs-succeeded-with-the-macintosh/

[ii] The SMstudy® Guide can be found at http://smstudy.com/SMBOKGuide.

 

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