Monday, January 11, 2010

The Lesson from Seth Godin's Post

I read Seth Godin's blog quite often and over a period of time have come to expect that with each post I would learn something new, or gain fresh insights into stuff I was already aware of. I am usually not disappointed -- at worst, I might find a post or two to be about a business or a market or an industry that is far removed from mine or that I don't understand, and so less engaging. However, his last post (reproduced below in its entirety) was quite disappointing -- not in the sense that it was dull or uninteresting or lacking in gravitas, but in the sense that it was misleading, if not wrong.

The lesson from two lemonade stands

The first stand is run by two kids. They use Countrytime lemonade, paper cups and a bridge table. It's a decent lemonade stand, one in the long tradition of standard lemonade stands. It costs a dollar to buy a cup, which is a pretty good price, considering you get both the lemonade and the satisfaction of knowing you supported two kids.

The other stand is different. The lemonade is free, but there's a big tip jar. When you pull up, the owner of the stand beams as only a proud eleven year old girl can beam. She takes her time and reaches into a pail filled with ice and lemons. She pulls out a lemon. Slices it. Then she squeezes it with a clever little hand juicer.

The whole time that's she's squeezing, she's also talking to you, sharing her insights (and yes, her joy) about the power of lemonade to change your day. It's a beautiful day and she's in no real hurry. Lemonade doesn't hurry, she says. It gets made the right way or not at all. Then she urges you to take a bit less sugar, because it tastes better that way.

While you're talking, a dozen people who might have become customers drive on by because it appears to take too long. You don't mind, though, because you're engaged, almost entranced. A few people pull over and wait in line behind you.

Finally, once she's done, you put $5 in the jar, because your free lemonade was worth at least twice that. Well, maybe the lemonade itself was worth $3, but you'd happily pay again for the transaction. It touched you. In fact, it changed you.

Which entrepreneur do you think has a brighter future?

Like many other famous and popular bloggers, Seth Godin does not provide his readers with a window to comment on his posts, presumably because moderating and responding to a large number of comments can be too tedious and time consuming. Be that as it may, I found I had a couple of things to say with respect to this last post, and since there was no space for comments, I decided to come back to my own space where I am monarch of all that I type, as is my usual wont in such situations.

Let me tell you which entrepreneur I think has a brighter future: I think the kids behind the first stand have a brighter future. Now let me tell you why I think so. For one, they provide a reasonably good product at a reasonably good price, and deliver it fairly quickly through efficient processes -- all good and highly desirable business values in themselves. Secondly, because their entire delivery cycle moves fast, they are able to cater to more customers within a shorter time-frame. This gives them more throughput, higher volumes and a better top-line. The second stand delivers an experience that is described by Seth Godin over 4 paragraphs (as compared to the modest description of the experience at the first stand, within a single paragraph). Is such an elaborate and if I may use the word - enchanting - experience really something that a lemonade consumer is looking for? Well, perhaps 1 in 10 customers is (my guess). Now do the math, and while you're at it remember that a dozen people drove past the second stand because it was taking too long.

Lemonade is not a high-touch / high value-add product. It does not need an elaborate conversation with the consumer to understand their needs or their pain points. The scope for innovation is anywhere between zero to very little, even for a highly ingenious entrepreneur. Expectations are fairly well understood on both sides of the lemonade dispensing table. If the point being made is about user experience and the perception of value and stuff like that, then lemonade is not the best choice to write a customer delight story around. On the contrary, this could almost become the story of how not to hype-up a mass-market commodity product by building fluff around it.

I'm not saying the second stand is doomed to fail. I'm saying that the second stand caters to a niche market, and should locate itself in a neighbourhood where there are abundant target customers -- those 1 in 10 who: (a) have a lot of time on their hands (b) don't mind waiting in a queue to get what they want, rather than settle for something else which could be procured faster (c) prefer hand-made lemonade, which is made at the appropriate pace at which good lemonade should be made (d) attach a lot of importance to the beaming countenance, graceful bearing and joyful spirit of the individual behind the stand making the lemonade, and finally (e) like to pay, of their own volition, an amount of their own choice which is commensurate with their own assessment of the value they got from a transaction. I'm sure such customers exist, and in fact, other than Seth Godin who walked away 'touched' and changed by the experience, I could be one of them myself. But then where are the volumes? Even to generate the volumes needed to make this a viable business proposition, the second stand would have to have enough smarts to locate the right neighbourhoods where such niche markets exist and are as yet untapped. If I were a VC, I'd invest in the first model and not the second, though I may give my business to the second more often than the first, circumstances permitting. Not that I am betting on the failure of the second, but that I am betting on the success of the first. There are more people who are not like me (and Seth Godin), and the people who are like me (and Seth Godin) are in a hurry more often than I am (not sure about Seth Godin). C'mon - this is lemonade we're talking about, not high-end consulting or private banking or haute couture, where exactly the opposite argument would no doubt hold. Different horses for different courses!

There's a phenomenon that I'd like to call the comedian's momentum trap. When you are watching comedy your mind is already set to 'laugh' mode. You feel your mood lifting within the first few seconds, and a feeling of levity seems to come from nowhere and pervade through you. A few really good jokes are all it takes to build the momentum of laughter. Soon you're holding your sides, tears rolling down your cheeks ... all that. The momentum of this is so strong that even a weak joke will get more laughter out of you than it deserves. If someone else cracked the same joke in a stand-alone mode or in some other context, you'd have found it barely risible and it would have just fallen flat. I think Seth Godin's readers arrive at his blog with a similar 'momentum' -- a momentum of expectation, of the momentous. So just about anything that is posted there is seen as great insight and gets retweeted and delicioused and digged, just like all other posts.

I wonder whether Mr Godin would realize at some point that the real lesson from his blog post is a little different from the lesson he hopes readers will take away. Well, it was, for me. Ergo this post.

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