Customers, Quality, and Price

This week, we shared a piece by Benedict Evans on the history of the advertising industry in the US and one particular chart stuck out to us as relevant to all businesses who advertise online. Here is Evans explaining the move from internet searchers moving from recommendations for cheapest product or service to recommendations for highest quality:

"One of the most interesting charts I’ve seen on this theme comes from Google Trends. Like all Google Trends data it needs to be taken with a large pinch of salt, but this one is pretty instructive.  I’d suggest this shows the internet moving up the ‘funnel’ - it moves from utility price comparison to recommendation and authority."

While Evans' research shows that customers have begun searching the internet for recommendations for highest quality rather than lowest price over the past 15+ years, every industry has its nuances. Your product or service will be differentiated along three dimensions: speed, cost, and quality. Your customers' needs will determine what is most effective. Based on Evans' research, here are several thoughts on how to best position your product or service:

1) Customers are searching for solutions that offer the best trade off between speed, quality, and cost. Know where your product or service falls and communicate this accordingly.

2) Understand where your competitors fall on each dimension and be able to articulate how your organization is different - i.e. what combinations of speed, quality, and price do you compete on?

3) In recessionary economic environments like the current one, do your industry's customers shift from quality to speed or cost or do their preferences remain largely unchanged?

4) Understand what is most important to your customers based on their needs: speed, cost, or quality. Generally, you can achieve two of the three.

As Evans' piece illustrates, the internet is changing the way consumers search, who they choose to do business with, and how businesses communicate their message.  Business owners will have to adapt to changing customer preferences and technology stacks to stay relevant, especially as COVID-19 accelerates the adoption of trends already in place prior to the pandemic. 

Rethinking last-mile logistics, post-COVID-19: Facing the ‘next normal’ (Automotive World)

+ "We believe pure brick-and-mortar retail will continue to struggle even after COVID-19. To illustrate, there has been a drop in store traffic across apparel and quick-service restaurants of 60% to 80% in the US since the beginning of the year. We expect a greater blending of online and offline retail. In extreme scenarios, closed or struggling stores in city centres could function as “dark stores” (i.e. fulfilment centres for local pickup and delivery)."

Delivery Technologies Are Reshaping the Grocery
Industry (Pitchbook)

+ "The coronavirus pandemic has reversed the long trend of declining grocery consumption relative to eating out. While grocery sales had generally been losing share to restaurants, restaurant closures and sheltering in place have driven consumers back to the grocery store. This trend is also being driven by modern delivery infrastructure that is allowing more grocery stores and other food vendors to sell via delivery apps, as consumers choose to stay home to avoid exposing themselves to the pandemic. Although life is returning to a degree of normalcy and restaurant business is improving, we believe the consumer shift to online grocery delivery will be a persistent, not temporary, trend."

Bankrupt Hertz is a pandemic zombie (Vanity Fair)

+"What happens 99.9% of the time is that existing shareholders get wiped out and the creditors, most of which won’t get their money back, divide up what’s left of the carcass. It’s often a Darwinian battle of epic proportions, with creditors fighting over every scrap of value. What happens time and time again is that unless and until every creditor gets back every penny it is owed plus accrued interest, there will be no recovery for the shareholders. As in zero."

News by the ton: 75 years of US advertising (Benedict Evans)

+ "So: if you talk to people at both Google and Facebook and in the agency world, you’ll hear that perhaps two thirds to three quarters of money spent on Google and Facebook is money that was never spent on traditional advertising - it’s coming from SMEs and local businesses that might have spent in classified at most but probably wouldn’t have done even that. $60bn of consumer spending went through Shopify last year - it’s safe to assume those vendors spent money on advertising, but how many of them would have bought an ad in a local newspaper? This has also come at much lower prices: Facebook in particular has been massively deflationary to online advertising: it offers vast quantities of relevant advertising inventory at much lower prices and much lower entry costs than you’d have needed in print, let alone TV."

GrubHub is buying up thousands of restaurant web addresses. That means Mom and Pop can’t own their slice of the internet. (The Counter)

+ "GrubHub’s commission fees had been inching upward over the years she’d been working with the platform. There was the flat transaction fee, which hovered around 3 or 4 percent. Then there were marketing fees and costs for additional promotions. Shivane says she feels like the platform is increasingly pay to play: Spend more to promote your restaurant, and see your search rankings rise. Cut down on marketing spend, and watch your restaurant fall to the bottom of the page and lose sales."

Chamath Palihapitiya on hiring based on a candidate's passion (Twitter thread)

+ "Think about something you deeply love. Take a few minutes to prepare and then teach it to me in a few minutes."

The manager's guide to inclusive leadership (First Round Review)

+ "From the immediate need to hold space for Black employees right now and lead vulnerable discussions with your team, to the long-term behaviors that build a welcoming culture, the team at LifeLabs distills inclusive leadership into its four most essential habits. For each of these high-impact behaviors, Dukuly, Luna, Sandhu and Tanicien share the small tactics and key questions that improve interactions and decisions. Their advice serves as an excellent starting point for leaders who have a renewed motivation to show up and work toward enduring change — the kind that starts within."

They were on a quest to visit every country. Then coronavirus happened. (National Geographic)

+ "Steve Fuller had one passport stamp to go. The 71-year-old judge from Kansas City, Missouri, had just spent three days on the Micronesian island of Nauru, the world’s smallest and least-visited republic. After a quick trip to Kiribati—the only country situated in all four hemispheres—he returned to Fiji’s Nadi International Airport for a connection to Tonga. It was February 15, 2020, and he was one flight away from joining a rarefied group of globetrotters who have traveled to every country in the United Nations."

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