Operations

Brand Quality
Brand Quality Jonathan Poland

Brand quality is the perception of the level of excellence that a brand achieves in the eyes of its customers. It is the degree to which a brand’s products or services meet or exceed the expectations of its customers. Quality is an important aspect of branding, as it can significantly impact customer satisfaction and loyalty.

There are several factors that contribute to brand quality:

  1. Product or service quality: The quality of a brand’s products or services is the most important factor in determining brand quality. This includes the functionality, durability, and overall performance of the products or services.
  2. Customer service: The level of customer service that a brand provides can also impact brand quality. Customers expect responsive, helpful, and personalized service, and brands that are able to deliver on these expectations can be perceived as high quality.
  3. Brand reputation: A brand’s reputation can also impact its perceived quality. Brands that have a strong reputation for excellence are more likely to be perceived as high quality.
  4. Price: The price of a brand’s products or services can also impact its perceived quality. For example, a brand that offers high-quality products or services at a lower price may be perceived as high quality, while a brand that charges a premium price for mediocre products or services may be perceived as low quality.

Overall, brand quality is the perception of the level of excellence that a brand achieves in the eyes of its customers. It is influenced by factors such as the quality of the brand’s products or services, customer service, reputation, and price, and it can significantly impact customer satisfaction and loyalty.

Customer Need Examples
Customer Need Examples Jonathan Poland

Customer needs refer to the specific desires or requirements that a customer has for a product or service. These needs may be functional, such as the need for a particular feature or performance level, or they may be emotional, such as the need for a product to convey a certain image or status. Understanding customer needs is an important aspect of marketing, as it allows businesses to develop products and services that meet the specific needs and expectations of their target audience. By focusing on meeting customer needs, businesses can increase the likelihood of making successful sales and build strong, long-term relationships with their customers. The following are common types of customer needs.

Functionality & Features
Customers need products and services to accomplish objectives. For example, a customer needs a refrigerator that makes small ice cubes.

Price
A customer needs a product or service that meets their budget objectives or constraints. For example, a student needs a reliable bicycle for under $100.

Time & Convenience
Requirements for products and services that save time and are easy to use. For example, a hotel that is close to major attractions.

Terms
A customer requires certain terms of service. For example, a mobile network customer requires privacy such that their location and data isn’t sold to third parties.

Experience
Expectations regarding end-to-end customer experience. For example, a customer may require a hotel that feels elegant and tranquil.

Look
A customer requires a product in a particular style and color.

Design
Design related requirements such as usability. For example, a customer requires a baby stroller that is easy to fold.

Status & Identity
Customers may view certain types of products and service as an extension of their identity and element of their social status. For example, a customer may require clothing that doesn’t have a visible brand logo.

Reliability & Durability
Customers often have requirements that products and services be reliable, available and durable. For example, an airline requires aircraft that can be operated safely for many hours each month.

Performance
Performance requirements such as speed or accuracy. For example, a customer requires a software service that can process a million transactions an hour.

Efficiency
Customer requirements for efficient resource utilization. For example, a customer requires solar panels with a high conversion efficiency.

Safety
A customer may have safety related requirements. For example, a customer may strongly prefer vehicles that do well in crash tests.

Quality of Life
Requirements related to quality of life such as a customer that expects healthy menu items from a restaurant.

Risk
Needs related to risk such as a customer that requires delivery insurance.

Formulations
A customer needs a product with specific ingredients such as a moisturizer made with shea butter.

Sustainability
Requirements related to community impact, ethics and the environment.

Packaging
A customer needs a product that is easy to open and reseal.

Integration & Compatibility
Requirements for products and services to work with other products and services. For example, a mobile device that accepts memory cards.

Standards & Compliance
A customer may require that a product or service adhere to a particular set of standards or rules. For example, a restaurant may require organic certifications for its ingredients.

Customer Preferences
Customer Preferences Jonathan Poland

Customer preferences are the specific desires, likes, dislikes, and motivations that influence a customer’s purchasing decisions. These preferences complement customer needs, which refer to the basic requirements that a customer has for a product or service. For example, a customer may need shoes, but they may also have specific preferences for a particular style, brand, or color. Understanding customer preferences is an important aspect of marketing, as it can help businesses to develop effective branding, product development, distribution, and customer experience strategies. By appealing to customers’ preferences, businesses can better meet the needs and expectations of their target audience and increase the likelihood of making successful sales. The following are common types of customer preference.

Convenience
Preferring things that are easy such as a settling for a nearby restaurant. Convenience is considered a strong type of customer motivation.

Effort
The satisfaction that results from effort. For example, a customer who gains a sense of accomplishment from a diy project.

User Interfaces
Some customers will prefer the simplest user interface possible. Others will prefer lots of buttons to play with. This can be as much about preference as need.

Communication & Information
Preferences related to communication style and information density. For example, some customers want to read detailed specifications and others want to hear a story.

Stability vs Variety
Customers who would prefer the same exact shoes they purchased a year ago in the same season versus customers who prefer an incredible variety of shoes and avoid repeat purchases.

Risk
The risk tolerance of the customer. Applies to seemingly innocuous things such as purchasing a new brand for the first time.

Values
Preferences related to values such as customers who purchase environmentally friendly products.

Sensory
Preferences related to color, look, taste, smell, touch and sound.

Time
Time preferences such as a customer who prefers an attentive waiter who drops buy every 5 minutes versus a customer who doesn’t want to feel rushed.

Customer Service
It is well known in the customer service industry that some customers prefer friendly service and others prefer diligence and professional distance. For example, a hotel porter who engages in friendly conversation versus dry information about the room and hotel.

Customer Experience
Preferences related to the end-to-end customer experience. For example, the interior design, lighting, art, music and social atmosphere at a cafe.

Innovation Risk
Innovation Risk Jonathan Poland

Innovation is a proactive approach to business and design that aims to make significant improvements, rather than simply making incremental changes. This often requires taking bold, ambitious risks in order to achieve significant improvements or breakthroughs. Innovation is a key component of many successful businesses, as it allows them to stay ahead of the competition and continuously improve their products and services.

Why Manage Innovation Risk?

It is a common misconception that risk taking and risk management are incompatible. In reality, risk takers often rely on risk management strategies to minimize unnecessary risks and maximize the chances of success. For example, extreme sports enthusiasts may use knowledge, preparation, equipment, and training to reduce the risks associated with their activities.

Innovation often requires taking calculated risks, as it involves experimenting with new ideas and venturing into unknown territory. However, effective risk management can help innovation succeed by minimizing unnecessary risks and enabling businesses to focus on intelligent risks that have the potential to drive significant improvements. In this way, risk management can enable innovation to push the boundaries and achieve breakthroughs while minimizing the chances of failure.

Early Phase Innovation

Early phase innovation risk is typically handled by designing experiments to fail quickly, cheaply and safely. At this stage, risk management is a lightweight review of experiments to identify reputational, operational, financial, health & safety and environmental risks.

Late Phase Innovation

Late phase innovation risks typically require the due diligence of a full risk management process of identifying, assessing and treating risks. Common treatments include avoiding, transferring, sharing, mitigating or accepting risk. Innovation risk management often requires careful consideration of the precautionary principle.

Risk Tolerance
Risk Tolerance Jonathan Poland

A risk is the possibility of an adverse event occurring, while a trigger is the root cause of that event. For example, if a company identifies a risk that bad weather could cause the business to close, the approach of a hurricane could be the trigger that causes that risk to materialize. Sometimes, risk triggers can be identified in advance as part of risk management efforts, but in other cases, the specific triggers for a risk may be unknown beforehand. For instance, an organization may be aware of the risk of damage to its reputation, but may not be able to predict exactly what could cause that risk to occur, such as a customer posting a viral video showing poor customer service.

Risk tolerance refers to the level of uncertainty or potential loss that an individual or organization is willing to accept. Risk management aims to maximize the potential reward for a given level of risk tolerance, rather than always trying to minimize risk. This is because taking calculated risks is often necessary in order to achieve business or personal goals.

High Risk Investor

A high risk investor who is willing to tolerate potential losses of up to 50% of their portfolio in order to maximize their potential gains.

Low Risk Investor

A low risk investor who will not tolerate any potential loss of capital is restricted to relatively safe investments such as insured savings accounts that have limited potential returns.

High Risk Startup

A startup company is run by individuals with a high tolerance for risk. Although the business may fail, it also has potential to provide unusually high returns to investors.

Mega Projects

A mega project such as a large bridge may have very low tolerance for risk due to its large budget and responsibility for public safety. Such a project requires intensive risk management processes to ensure that its low risk tolerance is met.

Professional Snowboarder

Most professional snowboarders have a high risk tolerance because it’s difficult to acquire superior snowboarding skills without taking any risks.

What is a Superior Good?
What is a Superior Good? Jonathan Poland

A superior good is a type of good that tends to see an increase in demand as income levels rise. This is in contrast to an inferior good, which sees a decrease in demand as income levels rise.

For example, luxury goods such as designer clothing or expensive cars are often considered superior goods because people tend to purchase more of them as their income increases. On the other hand, basic necessities like rice and bread are often considered inferior goods because people tend to purchase less of them as their income increases.

Superior goods can be either normal or luxury goods. Normal goods are those that see an increase in demand as income levels rise, but they are not considered luxurious. Luxury goods are those that are considered luxurious and see an increase in demand as income levels rise.

Here are 12 examples of superior goods:

  1. Luxury cars, such as Mercedes-Benz or BMW
  2. Designer clothing and accessories, such as Gucci or Prada
  3. Fine jewelry, such as diamonds or gold
  4. High-end watches, such as Rolex or Omega
  5. Luxury hotels and resorts, such as the Ritz-Carlton or the Four Seasons
  6. Fine dining restaurants and Michelin-starred restaurants
  7. Luxury cruises, such as those offered by Carnival or Royal Caribbean
  8. Private jets or helicopters
  9. Luxury vacation homes or vacation rentals
  10. Artwork and antiques, such as paintings or sculptures by famous artists
  11. Premium spirits, such as whiskey or champagne
  12. High-end electronics, such as Apple’s iPhone or Samsung’s Galaxy.

Pricing Techniques
Pricing Techniques Jonathan Poland

Pricing involves carefully considering various factors in order to determine a price that will maximize a company’s profits over the long term. This includes factors such as supply and demand, customer behavior, competition, and industry standards and regulations. The price of a product or service can have a significant impact on a company’s profitability and overall brand value. The following are some common terms in pricing including economics, strategy and behavioral considerations.

Customer Behavior
Cognitive and emotional factors in pricing.

  • Bargaining Power
  • Price Sensitivity
  • Sticky Prices
  • Willingness To Pay

Pricing Models
Structures and methods of pricing.

  • Customary Pricing
  • Flat Pricing
  • Market Price
  • Premium Pricing
  • Price Optimization
  • Price Points
  • Price Promotion
  • À La Carte

Pricing Strategies
Common pricing strategies.

  • Algorithmic Pricing
  • Decoy Effect
  • Dynamic Pricing
  • Everyday Low Price
  • High-Low Pricing
  • Loss Leader
  • Price Discrimination
  • Price Leadership
  • Price Skimming
  • Revenue Management
  • Sales Promotion

Pricing Economics
The basic forces of pricing driven by supply, demand, consumer perceptions and competitive behavior.

  • Commoditization
  • Equilibrium
  • Inferior Good
  • Marginal Utility
  • Market Value
  • Pricing Power
  • Snob Effect
  • Superior Good
  • Value
  • Veblen Goods

Competition & Pricing
The effect of competition on prices.

  • Benchmark Price
  • Commodity
  • Competitive Advantage
  • Competitive Parity
  • Monopoly
  • Perfect Competition
  • Predatory Pricing
  • Price Competition
  • Price Umbrella
  • Price War

Compliance & Ethics
Pricing related regulations and ethics.

  • Price Fixing
  • Price Gouging
  • Sale Above Advertised Price

What is the Snob Effect?
What is the Snob Effect? Jonathan Poland

The snob effect refers to the phenomenon of a brand losing its prestige and exclusivity as it becomes more widely available or popular. This can happen when a brand engages in aggressive discounting or when it begins to appeal to mainstream culture, leading some individuals or subcultures to view it as less special or desirable. Luxury brands often try to avoid triggering the snob effect by carefully managing their brand image and avoiding mass production or discounts. However, the snob effect can also be driven by customers feeling that a brand is no longer a good value at full price when it becomes more widely available or heavily discounted.

Some examples of Snob Effect:

  1. A high-end fashion brand that starts offering frequent sales or discounts may see its prestige diminish among its core customer base, leading to the snob effect.
  2. A luxury car brand that introduces a more affordable model may risk losing its status as an exclusive and prestigious brand.
  3. A luxury home goods brand that starts selling its products at mass market retailers may see its exclusivity and desirability decline among its original customer base.
  4. A high-end beauty brand that starts offering its products at discount stores may see its prestige decrease among its core customers.
  5. A luxury watch brand that starts producing lower-priced models may risk losing its status as a top-tier brand.
  6. A high-end restaurant chain that starts offering cheaper menu options or discounts may see its prestige decline among its original customer base.
  7. A luxury hotel brand that starts offering discounted rates or packages may risk losing its status as an exclusive and high-end destination.

What is Price Stability?
What is Price Stability? Jonathan Poland

Price stability refers to the maintenance of relatively stable prices over time. This is typically measured by the rate of inflation, which is the percentage change in the general price level of goods and services over a period of time. A low and stable rate of inflation is generally seen as a sign of a healthy and stable economy.

There are several factors that can affect price stability, including the supply and demand for goods and services, the level of economic growth, and the availability of credit. Government policies, such as monetary policy (which is implemented by a central bank to influence the supply of money and credit in the economy) and fiscal policy (which involves government spending and taxation) can also impact price stability.

Price stability is important for a number of reasons. First, stable prices can help businesses and consumers to make more informed and confident purchasing decisions, as they are able to anticipate the future costs of goods and services. Second, stable prices can help to reduce uncertainty and increase predictability in the economy, which can encourage investment and economic growth. Finally, stable prices can help to promote social and economic fairness, as they can reduce the impact of unanticipated price changes on different groups within the population.

In summary, price stability refers to the maintenance of relatively stable prices over time and is typically measured by the rate of inflation. Price stability is important for businesses, consumers, and the overall economy, as it can help to promote informed and confident purchasing decisions, reduce uncertainty and increase predictability, and promote social and economic fairness.

Inflation vs Deflation

Inflation is a sustained increase in general price levels. Deflation is the opposite, a sustained decrease in general price levels. Low levels of inflation or deflation below 2% may be viewed as price stability.

Inflation & Growth

Inflation is often viewed as better for an economy than deflation because a low level of inflation may stimulate economic growth. When prices are always rising a little, people have incentive to invest their money as opposed to saving conservatively. Inflation also encourages consumption because you are less likely to delay purchases when prices are likely to rise.

Deflation & Savings

Deflation benefits people with savings because they do not have to take risks to preserve the value of their money. Deflation encourages people to save because the value of money is always going up as things get cheaper. In this sense, deflation benefits the old as they are more likely to have savings. Inflation may benefit the young as it may stimulate employment.

Monetary Policy

Price stability is a common goal of monetary policy. However, in practice monetary policy is often aimed at producing mild inflation as opposed to zero inflation. Generally speaking, lower interest rates and more liquidity in a system cause inflation and prevent deflation. Conversely, increased interest rates and less liquidity help to prevent inflation.

Fiscal Policy

An expansionary fiscal policy that involves a government spending more than its tax revenues can contribute to inflation. The opposite effect is a contractionary fiscal policy that involves a government spending less than its tax revenues to pay down debt.

Deflation & Innovation

It is quite common for innovation to reduce prices. For example, an improvement in farming methods may greatly increase the supply of food, driving down prices.

Deflation & Globalization

Globalization can cause deflation as it allows things to be produced at greater scale. For example, it is cheaper for one country to produce 1 billion solar panels than for every country to produce a few million solar panels.

Price Instability & Economic Efficiency

Price instability is a rate of inflation or deflation higher than about 2%. It is possible for both high inflation and deflation to damage the economy of a nation. High inflation encourages hoarding of goods and can lead to a break down in economic efficiency. Likewise, deflation encourages the hoarding of money. This also harms economic efficiency by discouraging spending and investment.

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