Why did a minor math error that would occur only once every 27,000 years so enrage customers that it briefly threatened to derail Intel’s Pentium chip? And how could a feature as trivial as an inexpensive cup holder swing millions of customers to purchase a $17,000 automobile—particularly when only three years later, the same cup holder had become almost invisible to buyers? Is it possible to develop rational product strategies in the face of apparently irrational customer behavior?
The fact is that every product has more attributes than meet the eye. Profitable product strategies are built around giving customers the exact mix of attributes they want but no more. Companies that underinvest in attributes that customers value will lose customers; companies that overinvest in attributes that customers don’t value will lose money.
Managers must find the best fit between a product’s bundle of attributes and their customers’ needs—and doing so is an endlessly iterative process because competitors innovate and customers’ needs change. To help managers track and evaluate this dynamic fit between the needs of their customer segments and the attributes of their products, we have developed a simple analytic tool. We begin with a discovery-driven process for uncovering salient product attributes—those that, all other things being equal, will swing a purchase decision. Then, we map salient attributes onto what we call the ACE Matrix (Attribute Categorization and Evaluation), a grid that highlights the competitive imperatives for each attribute. The matrix shows what action a company must take in response to each attribute.
Step One: Uncover Salient AttributesIn any population of customers, there are concentrations of people whose behavior sets—patterns of why and how they use a product, how they purchase it, and how they perceive the risk of purchasing it—differ distinctly. These segments are not defined simply by demographic differences such as age and gender. Demographic differences are merely correlates of real behavioral differences, which are a source of opportunities for optimizing the fit between product attributes and the needs of customer segments.Observing customers as they buy and use a product is the first step in discovering its salient attributes. Sometimes the attribute is a part of the product itself or its packaging. At other times, it is less obviously associated with the product; for example, it may have something to do with the purchase experience. Watching closely helps uncover unexpected attributes. Consider the example of John Sculley’s marketing team at the Pepsi-Cola Company and how it rethought the cola market in the early 1970s.
[size=2.125]Watching customers as they buy and use a product is the first step in discovering its salient attributes.
For the first time in years, at the instigation of the Sculley team, Pepsi took a serious look at how consumers behaved when they bought and drank Pepsi-Cola. The company conducted an in-home consumer research study, giving 350 families the chance to order Pepsi and any competitive product weekly at discounted prices. Much to the surprise of the marketing team, no matter how many bottles of Pepsi were purchased, consumers emptied them. Furthermore, the total amount of soda purchased was limited not by consumers’ taste preferences but by their ability to bring the product home. Customers bought as much as they could comfortably carry and no more.
That insight led Pepsi to focus on packaging as a way to challenge market leader Coca-Cola. Plastic replaced glass, and multipacks replaced the six-pack. The distinctive Pepsi logo guided consumers to the product. More important, the packaging strategy converted a major Coke strength (its small, distinctive hourglass bottle) into a liability: At the time, plastic bottles in that size and shape were very expensive to produce.
Pepsi-Cola was able to identify a hidden product attribute—weight—that drove purchasing behavior for a subsegment of the market. The Sculley team arrived at the insight by watching customers closely and by thinking creatively about why customers behaved as they did. Discovering salient attributes is more a creative art than a science, but the search is most likely to bear fruit if it is conducted systematically. There are four good ways to look for salient attributes:
1. Identify parallel needs.It is seldom that only a single need is being satisfied when customers use a product. Usually, numerous needs are satisfied in parallel with the most obvious one. For a person who just wants a cup of coffee, the drink itself is the product, and its salient attributes are qualities such as taste, aroma, temperature—and, of course, price. But for the person who mainly wants to watch the world stroll by on the Champs-Élysées, the salient attribute is access to a critical piece of real estate—and the price paid for the coffee is rent for sitting time on the famous boulevard. So a customer who buys a cup of coffee on the Champs-Élysées may be filling a parallel need for atmosphere and entertainment and therefore can be persuaded to pay a considerable price premium for the coffee. The customer who is only after a drink, however, may be irritated at its cost. This raises the problem that parallel needs also have their downsides.
Madame is willing to pay extra for coffee on the Champs-Élysées to fill her parallel need for entertainment.
McDonald’s Corporation, for example, ran into a serious parallel-needs problem when it opened up a restaurant in Beijing. The prices it set were low compared to its prices in other countries, but a meal still cost a sizable portion of a Chinese family’s weekly income. As a result, the Chinese spent hours at McDonald’s, converting what was designed to be a fast-food experience into a long dinner affair. McDonald’s failed to recognize an important parallel need—to savor and prolong what was in China an expensive meal. Consequently, McDonald’s seriously underestimated the seating capacity required for profitable volumes.
2. Identify purchasing patterns.Understanding customer purchasing patterns can help uncover salient attributes. Texaco’s subsidiary in southern Africa, Caltex Petroleum, for example, identified the family holiday trip as a time when changes in routine buying habits might create an opportunity. Coping with the children rose in salience, whereas children normally had little effect on the decision to buy gasoline. So each year Caltex developed promotions at the peak vacation period. For instance, they offered popular cartoon stickers with each gas purchase. Maximum leverage came from releasing the stickers in sequence, thus prompting children to collect the whole set. Giving out only one sticker per purchase, Caltex mobilized a vocal, high-impact ally, who in turn persuaded families to make repeat visits to its stations.
Just as Pepsi discovered a salient attribute by watching customers struggle with heavy bottles, the Walt Disney Company learned a painful but valuable lesson about salient attributes by watching customers struggle with its new edutainment software products.
For the 1994 Christmas season, Disney developed an interactive CD-ROM version of its popular movie The Lion King. On Christmas morning, excited children ripped open their gifts. But the holiday spirit quickly vanished for many. Parents, often without much computer experience themselves, struggled with little success to install the software and get it to run. Frustrated and faced with disappointed children, they flooded Disney’s understaffed hot line with angry calls and created a serious public relations black eye for the entertainment giant.
By the time the next Christmas season rolled around, Disney had eliminated the major technical problems that made the product so hard to install. But the company went even further, redesigning the product with what actually happens on Christmas morning in mind. Their 1995 offering, an interactive version of Pocahontas, came with instructions to parents to open, install, and learn to use the software in advance. Special wrapping paper was provided so that parents could rewrap the boxed product. That way, they could relax and enjoy watching their children open their presents, confident that no surprises would ruin the holiday. Disney acted on the lesson that a deep understanding of the usage patterns of customers is as important to a new product’s success as its design and technical features.
4. Identify customers’ perceptions of risk.Sometimes explicitly addressing ways to reduce the risk customers perceive in purchasing a product or service becomes a salient attribute. Consider the soft-goods retailer, Nordstrom. The company’s no-questions-asked returns policy became legendary when a putative customer was refunded for a returned set of auto tires—a product category Nordstrom never carried.
[size=2.125]Addressing ways to reduce perceived buying risks can become a salient attribute.
In automobile services, Midas is building a successful brake repair business by eliminating customers’ fears of being gouged. For many car owners, brake repairs are an expensive and frightening proposition. Owners don’t have the technical knowledge to evaluate what work—if any—needs to be done. Yet at the same time, they don’t want to risk driving with faulty brakes. So customers are often, in effect, required to sign a blank check—that is, they must agree in advance to pay for whatever repairs are done without knowing what the final bill will be.
Midas reduces the customer’s fear of being exploited. Using a standard written checklist that covers each element of the brake system, a Midas agent walks each customer through a step-by-step review of what is wrong and what the cost of repairs will be. Receiving a detailed, written price quote in advance assures customers there will be no unpleasant surprises when it’s time to pay the bill. A thorough understanding of all the reservations the customer may have about purchasing, using, and disposing of a brake system allowed Midas to identify a competitive edge with respect to traditional repair shops.
In searching for salient attributes, companies should try to keep in mind two important but easily overlooked traits. First, as noted earlier, some attributes are intrinsic to the physical product itself, whereas others are defined by the way a segment of customers uses the product. Second, every product is imperfect—that is, it has at least some attributes that customers tolerate because, on balance, the product serves their needs better than any existing alternative. Thus customers might decide to use an inconveniently located Midas shop because the sense of security they experience outweighs the inconvenience.
Step Two: Map the AttributesThe ACE matrix is a simple way to track and evaluate attributes that are salient to any given customer segment. (See the exhibit “Product Attributes Signal How a Company Must Perform.”) It is based on the premise that not all attributes are created equal; each cell of the matrix has a distinctive impact on the competitiveness of the product. The columns capture the level of energy that the attribute generates—whether customers regard it as a basic, a discriminator, or an energizer. The rows reflect the sentiment that the attribute provokes in the target customer—positive, negative, or neutral. Because customer segments, by definition, behave differently and will therefore value attributes differently, a company should create a different matrix for each.
Product Attributes Signal How a Company Must Perform
Basic.A basic attribute is one that the target segment has come to expect from all competitors. Basics are taken for granted; they rarely engender much loyalty or provoke much antipathy. Basics are the attributes customers expect to find in any competitive offering.
If consumers feel positive about a basic attribute, we call it a nonnegotiable because such an attribute is required for a product to participate in the market at all. An automobile manufacturer today will not sell many cars that do not start 99.9% of the times the ignition key is turned. Witness the demise in the U.S. market of the Yugo, a car so unreliable it became the butt of numerous jokes.
If customers feel negative about a basic, it is a tolerable as long as the product performs no worse than its competitors—and as long as customers believe that the benefits of the offering transcend the inconveniences and that there would be the same inconveniences if they bought a competitive product.
But if a company’s competitors succeed in eliminating a negative characteristic, the company’s product attribute moves into the adjoining cell of the matrix, becoming a negative discriminator, a dissatisfier. It is here that customers begin to suspect that if they switch, they might not experience the negative attribute. An example of this shift from tolerable to dissatisfier occurred in the United States when Japanese automobile manufacturers introduced lower-priced, low-maintenance, reliable cars. The frequent visits for repairs and service that buyers of U.S. models had endured for years as tolerables quickly became dissatisfiers.
Discriminator.A discriminator is an attribute that distinguishes a product from its competitors. If customers feel positive about a discriminator, the attribute is a differentiator. In autos, for example, a typical differentiator might be a safety feature of the car—all other attributes being equal, the customer selects safety above low gas consumption. If customers feel negative about a discriminator, the attribute fits the dissatisfier cell of the matrix, and the imperative for the company is to ensure that the product performs no worse than competitors’ products. The problem with dissatisfiers is that they can seriously erode loyalty and push customers into the arms of the competition.
Energizer.An energizer attribute is so powerful that it not only distinguishes a product from others but often becomes the basis on which a purchase decision is made. If customers feel positive, the feature is an exciter and leads to purchases. In a competitive environment where several similar products go head-to-head, an exciter attribute need not be a large cost component of the product. The year that Honda Motor Company offered simple coffee-cup holders in its U.S. autos it gained significant market share against other Japanese competitors. People would look at the almost identical offerings and come back in search of the “car with the coffee-cup holder.”
If customers feel negative about an energizer, the feature is an enrager that causes customers to flee to competitors. Enrager attributes require immediate and urgent attention. They must be fixed, whatever the cost. The General Electric Company, for example, was perceptive enough to spend $750 million to retrofit freezer compressors that failed because a design flaw made the freezer defrost.
Companies can create differentiator and exciter product attributes through enhanced service and astute promotions. Opportunities to serve parallel needs are everywhere. Thus, when looking for differentiator and exciter attributes, managers should analyze all services associated with the offering. Especially for more commodity-like products, promotional offerings in parallel with the product can generate excitement. In addition to its cartoon stickers for children, Caltex has offered several other promotions tailored to the special behavior of vacationing families. By advertising that its gas stations provided the cleanest rest rooms, Caltex simultaneously created a differentiator for itself and turned the competition’s rest rooms into dissatisfiers. In that way, year after year, Caltex captured a major chunk of gasoline sales to families going on vacation.
[size=2.125]Caltex’s extra-clean rest rooms created an energizer for families buying gasoline on vacation trips.
On the other hand, companies have sometimes unwittingly let tolerable or dissatisfier attributes become enragers. A company’s handling of a trigger event may transform customers into angry, vocal, and deeply unforgiving opponents. They not only will refuse to buy again but also will actively discourage others from buying. Consider Intel’s fiasco with its Pentium microprocessor.
[size=2.125]A company’s mishandling of a trigger event may turn good customers into vocal and unforgiving opponents.
Even the finest computers—and the microprocessors that make them run—are not perfect. Microprocessor flaws most often fall into the tolerable cell of the ACE matrix. With 75% market share, Intel’s chips are highly desired and respected. The positive attributes of speed, efficiency, and reliability more than outweigh the minor negatives.
The new Pentium chip Intel launched in 1993 was two to three times faster than its predecessor. Shortly after the release, the public learned (primarily through the Internet community) that the much heralded new Pentium microprocessor had a flaw. The chip’s defect was a floating point error that occasionally produced an imperfect division that a user could notice. Because some numbers are infinitely long (numbers with nonterminating decimals, such as π), computers are forced to round off the number at some point, producing imperfect results.
Despite the flaw, the Pentium chip was still a highly reliable calculating instrument. Nevertheless, the flaw quickly became a deep dissatisfier for consumers. Interestingly, Intel knew of the floating point error. Yet because it seemed illogical for people to get angry about a flaw that only occurred on average once every 27,000 years, the company initially neglected to do anything about it—even when confronted with mounting public dissatisfaction. Because Intel persisted in doing nothing, a dissatisfier almost turned into an enrager.
Where did Intel go wrong? Intel knows better than anyone that all chips have bugs and that computer users tolerate them. Intel made a public relations error in that it failed to gauge what would happen when customers learned that the Pentium’s frequency of error was higher than that of its previous chips. The company was betting that the enhanced processing speed would far outweigh the minute processing error. Just as they expect a car to start 99.9% of the time on the first try, customers consider that a microprocessor’s ability to make correct calculations up to the standards set by earlier models is a basic attribute. Because the Pentium failed to meet that standard, its flaw was no longer a tolerable.
Step Three: Validate, Validate, ValidateOnce a company has mapped out its assumptions about how its customers react to the product, it must validate those assumptions. A variety of focused market research techniques can test the accuracy of the initial mapping: focus groups, discussions with lead customers and distributors, and test markets. The benefit of the ACE matrix is that it helps to structure this process, which all too often becomes bogged down in nonstrategic inquiries. Reality testing is especially critical in evaluating new product attributes because both managers and customers are particularly prone to illusions about new attributes. Customers may be wrong about what really motivates their purchasing behavior just as companies can misinterpret the messages they hear. Consider, for example, the many food manufacturers who have flopped with new products designed around their belief that a promise of low fat would be an energizer. What they failed to consider was that customers might say they wanted low fat but, in fact, wouldn’t want it at the expense of taste and texture.
Using ACE for Continuous ReconfigurationAfter using the ACE matrix to test assumptions, a company can use it to anticipate attribute migration. As customers and competitors become familiar with the product attributes, those attributes will migrate from one cell in the matrix to another. Positive attributes have a tendency to move from right to left on the ACE Matrix. Exciters will inevitably be matched or imitated by competitors, becoming differentiators and eventually nonnegotiables. Negative attributes are more likely to flow in the other direction. As competitors find ways to improve on tolerables, companies that don’t keep up will find themselves with dissatisfiers and even enragers. Car drivers once were resigned to crank-starting. Today many become furious if their cars won’t start immediately—even when they know the weather has been unusually cold. Because of competitive dynamics, managers need to enhance or add positive attributes constantly and reduce or eliminate negative ones.
Managing Positive Attributes.Answering three questions helps ensure profitable management of a product’s positive attributes:
- Will the net revenues that result from introducing the attribute exceed the operating and investment costs incurred in offering it? There is a crucial role for sound financial thinking here—the implicit assumption often made is that adding or enhancing an attribute will increase customer satisfaction, which in turn will increase repurchase loyalty. That is not necessarily the case. For some attributes, relatively large increases in satisfaction are accompanied by rather small increases in repurchase loyalty, and the company never really recovers its costs. It is crucial to identify and invest in only those positive attributes whose enhancement will yield positive net present values. Because this is often a function of the time it will take competitors to match the offer, their speed of response must be considered. Too often, companies get inadequate returns for their investments in product enhancements.
- As the current generation of attributes is matched, what market intelligence and product-design processes must be used to identify and incorporate the next generation of exciters and differentiators? Companies need intelligence systems that will reveal, early on, emerging changes in how their customers use or value their product. Opportunities to build in exciters and differentiators must be designed into the product-planning cycle. Honda, for one, has its design engineers sell automobiles in the showroom before redesigning models, creating many potential exposures to future exciters or differentiators.
- What is being done by the product and process engineers to bring down the cost of the current exciters and differentiators? These features will inevitably become basic attributes and thus part of the base cost of the product. Unless the cost of these attributes is brought down continually, they will slowly drive up the overall cost of the product.
Another important use for attribute analysis is that it identifies the strategic roles of the various functions of the company. Market research seeks early signals of exciters and differentiators and coordinates their introduction with product- and process-design engineers. Marketing estimates the size and potential penetration for each strategic segment and develops the vehicles to convey exciters and differentiators to the target segments. Process and product design focus on steadily reducing the cost of existing differentiators and exciters in anticipation of competitive matching. Finance and accounting departments work with marketing and production to assess whether the revenue stream that flows from a new attribute will offset the increased operating and investment costs.
Managing the Negatives and the Neutrals.The negative attributes raise several issues. First, it is nearly impossible to remove all negative attributes and still produce a product at a reasonable cost. It is essential, then, to monitor tolerables and identify those most likely to become dissatisfiers, removing potential sources of trouble before they damage customer loyalty.
Second, the negatives can actually be sources of opportunity. In some instances, there may be more bang for the buck in removing negative attributes than there is in enhancing positive attributes. Consider how Citibank revolutionized the student credit-card business. In the past, students seeking credit cards had to complete complex applications and, more important, they had to get approval from often reluctant parents. For the student segment, then, the application process itself was such a powerful negative attribute of the product that this segment remained sealed off from the card business.
Studying how customers actually behaved, Citibank observed that if college students at the more prestigious schools were unable to pay their credit card debt, their parents could usually be counted on to bail them out. Therefore, Citibank decided to make it as easy as possible for students to obtain cards. The lengthy application was replaced with the simple requirement that students submit a copy of their college identification card. No hassles, no parental signatures. By eliminating a negative attribute, Citibank almost overnight created a new market worth hundreds of millions of dollars. If each of the roughly one million students maintains an average credit balance of $200 earning 19.8% interest, the segment would generate $40 million dollars a year in virtually riskless revenue.
Other companies are addressing negative perceptions of the used car industry and turning their competitors’ tolerables into dissatisfiers. Circuit City Stores’ CarMax and Viacom’s AutoNation USA hire well-informed salespeople to take customers through the selection process, often using computerized kiosks. They close deals without haggling and offer quality guarantees. Removing negative attributes helps such companies thrive.
Third, mapping the attributes important to each segment may highlight opportunities to build distinctive features that alleviate segment-specific dissatisfiers ignored by competitors. Compaq Computer Corporation did that in introducing its Presario series of home-oriented computers, which emerge from the box ready to go: no fussing with cables, no irritating fiddling with disks, no anxiety-producing and incomprehensible DOS prompts. With the Presario’s set of attributes, Compaq pulled an entirely new user group of novices into the home-computer market.
The most often overlooked category of attributes are the neutrals. Perhaps because they generate little emotion from customers, they tend to become invisible to product managers. But, in fact, they are often enormously important to profitability. Customers are more or less indifferent to neutrals. These attributes are often legacies from the past, former basics or differentiators that are now obsolete. Or they may be positive attributes for another segment the product serves. Since such attributes add cost without enhancing revenues, managers should approach this cell of the matrix expecting to design out neutral features unless a strong case can be made for keeping them. The focus should be on justifying their retention rather than on justifying elimination. Consider the evolution of the spare tire. In the days when flat tires were commonplace, a full-size spare was a basic. Today, with better tires and much improved roads, a much smaller and cheaper temporary spare is adequate and, in most cases, has replaced the old full-size tire.
By focusing on the behavior of discrete customer segments, companies often can eliminate many of the attributes that must be included in the generic offering for the unsegmented market—and thereby reduce total costs considerably. For example, as video camcorder technology became increasingly powerful and features were continually added and upgraded, Matsushita Electric Industrial Company found itself with a product that was far too sophisticated and expensive for the average user. A number of expensive features—for example, the replay function and the zoom lens—held no particular value for the average buyer. And the price of the product was a dissatisfier.
[size=2.125]By eliminating a neutral attribute, Matsushita was able to drop its price and boost its camcorder sales.
By observing that a large segment of customers never actually used much of the sophisticated gadgetry, Matsushita was able to substitute less advanced features, which nevertheless were more than adequate to meet the needs of those customers. And eliminating neutral attributes for this segment meant Matsushita could drop its price by $135, thus removing a dissatisfier and boosting camcorder sales.
Using ACE for New-Product PlanningWe have demonstrated how managers can use the ACE matrix to monitor and reconfigure the attributes of an existing product to please the segment it currently serves. The tool can also be used prospectively to plan new products and to help a company screen for desirable customer segments.
We used the matrix to develop a product strategy for a producer of off-the-shelf telecommunications hardware and software packages. Our client targeted middle-market companies (smaller than Fortune 1,000 businesses) that use telecom services to enhance their sales effectiveness. Although middle-market companies must compete with much bigger businesses, they have neither the ability nor the resources to develop the sophisticated proprietary sales-support systems that their larger competitors use. Our client thought that middle-market customers might value an off-the-shelf package that could provide sales support. But we needed to find out what attributes the new product should have.
We began by analyzing how middle-market companies use telecommunications in their selling efforts, reconstructing in detail every step of the selling process. When and why did the companies use voice transmission, for example—was it to make a sales pitch or to receive an order—and who needed to communicate what to whom? As we probed the reasons for each step of the selling process, we began to see distinct patterns of behavior. (See the exhibit “Discovering Which Attributes Are Salient: Telecom Users.”) The middle-market companies we studied tended to fall into one of three groups—each with a different approach to using telecommunications for its selling effort. For our client, those three groups (order capturers, customer seekers, and sales leveragers) represented the customer segments it needed to understand.
Discovering Which Attributes Are Salient: Telecom Users
Order Capturers.Companies in this group—like the Home Shopping Network or L.L. Bean—do most of their selling through mass-marketing media such as print, catalogues, television, or radio. Such broadcast marketing first stimulates demand. Then an inside sales force takes orders over the phone. Thus for order capturers, the most salient attribute of a telecommunications package is message reception—the effectiveness with whichincoming messages are handled and then converted to deliveries.
Customer Seekers.These companies use teledata transmissions to reach customers with their sales message and to make the sale. Telemarketing businesses, for example, or companies that do most of their selling through a catalogue that connects to a customer’s terminal, fall into the customer-seeker category. The most salient attribute for this group is message transmission—the effectiveness with which outgoing messages are handled and then converted to deliveries.
Sales Leveragers.These companies use teledata transmission to support the efforts of their field sales force in order to enhance sales-processing efficiency and effectiveness by improving the information flow and coordination between the multiple links in the distribution chain. For example, Frito-Lay needs to have its field sales force in constant communication with inside order-takers so that it can improve the stocking of individual stores, keep adequate supplies of fast-moving items, and avoid the problem of aging, stale inventory. Frito-Lay’s delivery trucks are equipped with computers so that stock movements and daily inventory changes can be tracked and transmitted back into a centralized database. Thus for Frito-Lay and other sales leveragers the most salient attribute is connectivity: programs, systems, hardware, and software that allow mobile field representatives to communicate and coordinate with regional processing centers.
Clearly, each segment requires a unique telecommunication configuration. A telecom package designed to serve one segment will fail to meet the needs of the others, whereas a package designed to satisfy all three will incorporate many attributes that an individual segment might consider nice but not worth the resulting higher costs.
The ACE Matrix can help managers design a tailored product for each segment. Consider, for example, the order capturers. This segment contains thousands of companies that use media advertising to generate impulse purchases. The segment is critically dependent on message reception. Working with our client, we began by mapping the product attributes that had the greatest impact on message-reception effectiveness. (See the exhibit “Which Telecom Attributes Mean Most to Order Capturers?)
Which Telecom Attributes Mean Most to Order Capturers?
For an order capturer considering a telecom package, the nonnegotiable attribute is caller self-routing, a feature that allows callers to enter touch-tone numbers in response to a series of prompts and thereby work their way down a decision tree to the correct order-taker. Clearly, any company that wishes to offer a telecom software and hardware package to the order-capturer segment would not be in business today if it did not offer this feature.
What attributes differentiate a telecom company in the eyes of an order capturer? An example would be what we call programmed call prioritizers. This software recognizes, analyzes, and categorizes incoming calls and then gives them a place in the telephone queue that is based on parameters specified by the order capturer—for example, the caller’s area code. In this way, when the system is overloaded, customers who are the most likely to make a purchase are given priority. Prioritizing is an important feature because the customers of order capturers frequently buy on impulse. Caller ID and self-programming touch-tone inputs can be used to identify callers that have the most attractive profile.
Even more energizing would be a “smart” software package that analyzes calls on an ongoing basis and uses sales and profit data from the calls to reprogram incoming calls. Such a package would continuously update and reset parameters for prioritizing callers, rather than oblige the order capturers’ employees to spend time setting the parameters themselves. A system like that, capable of enhancing an order capturer’s most profitable sales, would most likely be an exciter.
After assessing the positive attributes of a telecommunications package, our client next turned to the row of negative attributes. Most of our client’s customers could accept as a tolerable the cost of additional phone lines to increase incoming-call capacity. But limited line capacity will remain a tolerable only as long as competitors cannot offer more lines for the same price. If competitors develop hardware that provides greater line capacity, then the tolerable will become a dissatisfier. The competitive imperative for a tolerable attribute is parity.
Through focus groups with companies that fell into the order-capturer segment, our client learned that longer caller-waiting time was a serious dissatisfier that needed immediate correction. Would-be customers kept on hold too long are likely to hang up and take their business elsewhere. The marketing intelligence gathered by our client suggested it might be able to convert its dissatisfier into a differentiator if it could develop systems to reduce caller waiting time below the level of competitors’. (And it wanted to turn its competitors’ tolerable into a dissatisfier.)
[size=2.125]Customers put up with a tolerable until a competitor does a better job and turns it into a dissatisfier.
Another salient attribute for this segment is reliability. Whenever the system fails, order capturers lose business. To prevent system failure from becoming an enrager, our client company began to design in systems redundancy, despite the cost implications.
Finally, we reviewed the neutral attributes. Features such as speed dialing and automatic redialing—important to customer seekers—were of little value to order capturers and only added to the cost and complexity of the product. Those attributes became targets for elimination and cost reduction.• • •
As this brief exercise demonstrates, the ACE matrix is a simple but potentially powerful tool. It imposes a discipline that helps managers match their product offerings to customers’ needs. It helps focus attention on opportunities to use the company’s distinctive skills to create new exciters and differentiators or to turn competitors’ tolerables into dissatisfiers. Thus the attribute matrix helps structure a more strategic assessment of a product and its future. It leads from product strategy to customer strategy: Have we targeted the right customer segments? Or are there other segments that value attributes we can supply more readily than our competitors? Most important, it provides a way to get everyone in the company thinking about why the customer will buy what we are selling. And that, after all, is what competitive advantage is all about.
[size=1.625]Ian MacMillan is the Dhirubhai Ambani Professor of Innovation and Entrepreneurship at the Wharton School.
