Competition tends to converge not only on the scope of their products and services but also on their appeal. Some industries compete primarily on price and function based on calculations of utility. Other industries compete essentially on feelings or emotion.
In the past, companies have unconsciously educated consumers on what to expect. A company’s behavior affects buyers’ expectations in a reinforcing cycle.
These traits change over time and become more entrenched. It is no wonder market research rarely reveals new insights into what attracts customers. Industries have trained consumers on what to expect and what they hope is more of the same for less.
Companies willing to challenge their industry’s functional and emotional orientation can often find new market space.
Industries that are emotionally oriented offer many extras that add price without enhancing functionality. Stripping away these extras may create a fundamentally simpler, lower-priced, lower-cost business model customers would welcome.
Conversely, functionality-oriented industries-infuse commodity products with a new life by adding a dose of emotion and, in doing so, can stimulate new demand.
Some Examples
For example, Swatch watch transformed the functionally driven budget watch industry into an emotionally driven fashion statement. Or Body Shop, which did the reverse, transformed an emotionally driven cosmetics industry into a functional, no-nonsense cosmetics house.
Comex, a large cement producer, created a Blue Ocean by shifting the orientations of its industry from functional to emotional. Instead of selling cement, they got people together who each put money into a pot.
Then each week, there was a winner. At the end of 10 weeks, there would be enough winnings to buy cement to build a particular room in their house. It was very successful because they were selling a dream with a business model involving innovative financing and construction know-how.
Pfizer shifted its focus from medical treatment to a love lifestyle enhancement. Starbucks turned the coffee industry and its head by shifting its focus from commodity coffee sales to the emotional atmosphere where customers could enjoy their coffee.
Relationship businesses –such as insurance, banking, and investing — have relied heavily on the emotional bond between broker and client. They are ripe for change.
Direct Line Group, a UK insurance company, has eliminated its traditional brokers. They felt they could do that because customers would not need the hand-holding and emotional comfort if they could pay claims quickly and eliminate any complicated paperwork.
So instead of using brokers and regional branch offices, Direct Lines uses information technology to improve claims handling and passes on some of the cost savings to customers in the form of lower insurance premiums.
The vanguard group (an index fund) from Charles Schwab (brokerage services) did the same thing in the investment industry, creating a Blue ocean by transforming emotionally oriented businesses based on personal relationships into high-performance, low-cost, functional businesses.
Questions
Does your industry compete on functionality or emotional appeal?
If you complete with an emotional appeal, what elements can you strip out to make it functional?
If you compete on functionality, what features can be added to make it emotional?
