Why should you test your ideas? What matters when it comes to scaling?

December 2019

Key learnings from the digital cost convention (part 1)

Nine Keynotes – hundreds of insights. The Digital Cost Convention last Wednesday has taught me a lot about the ongoing trends, future prospects and must do’s and don’ts.

In the following, I will give you a short recap of what I have learned per session and what you can take away from it for your business – starting with the first four keynotes. Please keep in mind that the article is based on my own understanding and interpretation of information and is not a word-by-word transcript of what the speakers said.

Returning sales in the online dating industry – Insights from Spark Network

Even though my work has no touchpoints with this industry (yet), the insights from Spark Network helped me to get a new perspective on customer behavior and analytics. An interesting fact about the dating industry is that no matter how good or how bad the customers’ experience is with your company, customers are usually gone after a year. Emotionally driven impulse pruchases defines customer behaviors and triggers them to subscribe to dating platforms. At the end customers either find love or are disappointed that they haven’t and switch products. This is a big challenge! Even though this is only a short extract I am giving to you, it gives an idea on how complicated it is to manage customers in the dating business and, at the same time, to be profitable. For a long time it seemed that subscription is the only way to ensure profitability and no one believed that you could give away dating features for free. However, Tinder proved otherwise. Tinder puts the customer needs in the center of all and provides the basic feature free of charge. Tinder is now profitable and has several pricing models on the market, from subscription to one-time purchases called boosts – and people buy it for several hundred euros! Today, subscriptions are still a powerful and commonly used pricing strategy in the dating industry, but the example of Tinder shows that there are also other customer-oriented ways. Dating businesses therefore use data analytics to acquire customer insights more and more in order to define potential price strategies. With analytics customers’ willingness to buy and purchase are evaluated, e.g. in terms of age, gender, location, browsing behavior and more, to then develop price models suitable for specific customer segments and improve conversion rates. In my opinion it’s a foresighted approach to develop customer-centric price strategies. What do you think?

Key learnings for you:

  • Evaluate your customer’s behavior constantly: Be 100% clear on why, how and when your customers buy your products, how this changes constantly and what effect emotions can have

  • Question the status quo: You might think there is no other way, but don’t wait until others prove you wrong – think outside the box and teach them!

  • There is no one-price-fits-all solution: Use data analytics and do price segmentation to identify price drivers of customers and base your pricing strategy on it

Testing your ideas – Insights from Etventure

I always come up with plenty of different ideas on how to solve problems. Other people and companies have great ideas as well. However, people tend to focus on what they can sell without really knowing if the customer needs it, thinking product first, not customer first. This is often the what differentiates successful execution of ideas from failure. Based on Etventure’s innovation process, the first crucial step in innovating and developing ideas is understanding customers and their needs. When this is done – test, test, test. Prototype your idea – quick and easy via a landing page, e-shop, fair stands or else, and try it on the market. True to the motto “fake it ‘till you make it”, identify usage or purchase rate of potential customers. This is the only way to find out if the product is truly needed. Based on my experience, people sometimes hesitate to test their idea due to the fear that someone else might take the concept and develop it or due to a lack of time and resources. However, again I have learned how important it is for being successful – better risk it now than being sorry later. And of course, you have to reach out to those potential customers to explain the situation and maybe even give them a gift to compensate for the circumstances.

Key learnings:

  • Always think customer first: focus on what your customers really need and do not rely on your good idea only

  • Let loose of your personal opinion: test your ideas with customers to see whether what you think customers want is actually what they need

  • Process your experience and re-evaluate: even though you might have had an unsuccessful experience, learn from it and do better - customers have the need for a reason

  • Test your ideas with a quick and easy solution: do not spend a lot of money on testing, find a simple solution to validate your case

Scaling digital products – Experience from Zalando

In my opinion, the scaling of digital products is complex to manage. There are a variety of factors that have to be included while planning and executing scaling, but there are two factors Zalando has identified as common factors on which successful scaling can depend upon: organizational fit and profitability of scaled products. When it comes to innovating and developing digital products, incubators have become a common tool. Incubators are great ways to develop products faster and more cost-efficient. Nonetheless, some companies fail to scale as connecting or transferring their operations to the operative business of the company does not work. This may be due to differences in processes and speed or simply due to differences in culture and mindset. However, it is not only the organizational fit, which can limit scaling of products. The complexity of addressing customer needs alongside a lack of the product’s profitability can be a cause as well. In terms of Zalando gift cards, emotions of customers play an important role. Gifting is about the positive feelings of giving and receiving gifts, but it is also more than this. Sometimes gifts have to be tangible; but sometimes they do not have to. Sometimes gifts are handed over in person, sometimes digitally. For Zalando, these variations in needs makes product scaling complicated, requiring both digital and tangible gifts that can harm profitability of the gift cards business. This is because tangible gift cards are a loss-making product. The customer may pay 25€, but Zalando pays 25€ + production cost + delivery. Digital gift cards can also have additional costs, e.g. as fees to providers. Therefore, it is important to always think about the implementation of operations in the future and identify ways on how to transfer operations to the operative business, as well as to assess profitability of scaling the products to address customer needs.

Key learnings for you:

  • Incubators are great for innovating digital products, but always think ahead: scaling is key for long-term success

  • Try to identify all possible impacts of scaling and manage these in the best possible way – your product’s success depends on it

  • Lack of rationality: Emotions can take a large role when it comes to customer needs and behaviors

  • Make sure to align customer needs with profitability of scaling your product

The future of mobility – Examples from Scania

To me it seems that mobility is under a lot of pressure. Changes in customer behavior, such as sharing economy and increasing requirements for sustainability are the only two aspects that define the future of the market - mobility as a service and autonomous driving. Scania is a pioneer of mobility as a service and launched a digital mobility service for employees. With a travel app, electric bicycles, and connected transport systems including Scania taxis and busses, the company has streamlined the employee’s journeys to and from work as well as within the company site. This does not only save employees a lot of time, it is also more efficient for the company and more environmental friendly. A great way for me to validate the use case and provide a customer-centric solution of transportation for society. However, an issue accompanies the future mobility solutions: who will drive the services? The industry has to come up with a solution to ensure mobility for the society as the number of drivers is steadily decreasing in specific areas. This is why autonomous driving is not only an innovative development; it is a way to safeguard our global mobility in the future! Did you know?

Food for thought: The mobility topic inspired me to think about the future mobility from the customer perspective. What if collaboration across the industry and governments will be so advanced that mobility as a service is not centered around companies, but the customer? What if there is only one app arranging efficient transportations? What if I only have to request a ride from A to B and I am picked up from whatever company and whatever type of transport I prefer (car, shuttle, bus …)? And what if a system behind it, e.g. with quantum computing or else, calculates the most efficient mobility options for all citizens to reduce traffic and environmental impact?

Key learnings for you:

  • Partner up: Be open to collaborate across and beyond the industry to come up with solutions that solve customer problems and needs!

  • Try your ideas within your own company – this is one of the best ways to validate your idea

  • Don’t focus on customers only. Asses changes in the supply of employees as well.

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Sources: Keynote speeches @ Digital cost convention 2019

The power of returning sales – Insights from the online dating industry by Michael Schrezenmaier

The realm of people transport: what will the business case model look like and what role will Scania play – Rodrigo Caetano

Scaling digital products – learnings at Zalando by Martin Lawerence

Digitize or die – how companies can use startup methods for digital transformation – Philipp Depiereux

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Further blog articles