- Business Wisdom from the Mouth of Dr. Seuss
- What Is RDE?
- Why RDE?
- Companies are Using RDE, Whether They Know It or Not
- Buying In and Getting Started
This chapter is from the book
This chapter is from the book
This chapter is from the book
Companies are Using RDE, Whether They Know It or Not
You don't always find what you're looking for—but you rarely find what you're not looking for.
Skeptics might say, "Heck, RDE is just a scientific name for trial and error, right?" Actually, yes and no. No, because a trial-and-error approach is usually completely random, and RDE is all the way on the other end of the spectrum. Yes, because you set the scene for profitable learning by astutely designing and executing the trials, by keenly observing the reactions of the customers, by shrewdly detecting what part works and what does not ("errors"), and, finally, by making educated modifications to the trials and iterating the process, if needed. You've set up the scenario to learn from your successes and your mistakes. More than likely, you will succeed simply because you have thought through the problem, that inner game so necessary for winning, and you have followed the process, making measurements that quickly yield the rules.
It is difficult to ignore the power of being able to know the algebra of consumer minds before they can even articulate the need. Many companies already use RDE to their advantage, in one form or another. There is every reason for you to be up to speed, or even faster than them.
Testing New Electronic Gadgets with "Otaku" in Japan
Japan is the home of some well-known examples of product development experiments. Japanese society is less polarized in income compared to the West. People tend to buy products based not on their income, but on their taste. This variation in taste leads to a huge variety of products on the market, brutal competition, and, as you might expect, continual experimentation.
Tokyo is a vast market for testing new commercial ideas. Tokyo's great size, density, and diversity, and excellent transportation system make it an ideal setting for social experimentation. There are whole districts in Tokyo called antenna districts, where companies and consumers test out the newest product ideas, as well as deliberately start fashion trends.8 These districts naturally attract otaku ("geeky fans") and professionals in fashions, electronic products, and so on.
Arguably, Japan's most dynamic sector is high-tech. In the Akihabara district of Tokyo, sometimes called the "Electric City," a visitor can buy virtually any product or gizmo that uses electricity. Just a few blocks of densely packed stores sell about 10% of the total electronics in Japan. Here otaku can find products that anticipate the market and that will not be available anywhere else in the world for months or perhaps even years to come.
Many products sold there will never find their way to the shelves of other stores because Akihabara, dubbed as Mecca for early adapters, is also the place for the marketers to test what "flies" with the consumers and what does not. One example is Seiko Corporation. Annually, Seiko develops more than 2,500 watch designs and introduces them in test markets. The winning designs are further improved, tested again, and only then launched in target markets.9 Japan's icon, Sony, also develops, tests, and measures about 1,500 products annually. About 20% of them are completely new designs, and only a portion of those find their way to the global market.10 Some believe that the global success of Japan's electronics manufacturers begins in Akihabara. In their race to be the first to market with the season's latest products, electronics manufacturers send prototypes of their new products to Akihabara to see if they will fly. The rivalry is fierce, with some product lifecycles reduced to a few months, turning Akihabara into a churning, self-renewing experimentation paradise. The sales and feedback are closely monitored by the companies for further modification and the ultimate launch decision. In a sense, it has been done at the expense of traditional market research. On the flip side of this Japanese innovation phenomenon is the fact that some of the most successful products in history, such as Sony PlayStation, have been developed against the corporate view.
Keeping Customers During "Down Times" in Brazil
Could RDE be applied the same way in developing countries as in the U.S., Europe, and Japan? This story11 in Brazil is a wonderful example of retaining customers by RDE-inspired communications, in a way that shows the importance of a systematic approach in a challenging business environment, where Unilever Brazil was riding the storm of economic uncertainty and massive competition. The Brazilian political and economic climate, seldom calm, had turned volatile in 2002. Consumers reacted by avoiding many premium brands, Unilever's brands among them. Times were tough in Brazil.
Unilever owned Brazil's market leaders in 14 product categories, distributed among foods, household cleaning, and personal care. These premium names in Brazil included Hellmann's, Knorr, Omo, Comfort, Lux, and the newly launched Dove. Despite the fame and admiration earned by its premium products, Unilever itself was not a well-known brand name in Brazil.
Unilever used RDE to drive messaging by having RDE reveal the "algebra of the consumer's mind." By doing so, Unilever discovered the hot buttons to keep the customers. RDE drove Unilever to create three alternative (versioned) executions of its newly developed customer magazine DIVA, and to distribute these to groups of high-value customers, the Unilever target. By monitoring the reactions of the customers, discerning what worked, and then modifying its communications, Unilever created new messages and tapped into the heart and soul of the Brazilian customer. This systematic approach, promoted by RDE, effectively saved the Unilever business in Brazil. The happy consequence was that, during a recession marked by heavy down-trading in virtually all consumer product categories (especially upscale ones), RDE-driven knowledge of the customer maintained and even increased market share of Unilever's premium products.
This book presents to you many other RDE case histories that have resulted in huge competitive benefits for their users. But the book does more than that. It also teaches you RDE. RDE successes are within reach of most companies and can be dramatic. Some examples that you will see later in this book range from the more than 200% increase in credit card acquisitions to the 42% increase in jewelry catalog response rate with a much higher average purchase at the same time, as well the creation of such iconic products as Vlasic pickles and Prego extra-chunky pasta sauce along with the aspects of the massive application of RDE in China and India. The examples abound.