Upgrade or Die | Inc.com

The only survival path in the new digital age for many older firms with huge customer bases such as cable television, local newspapers, and the home alarm companies like ADT is for them to continually add new features and functionality to their basic bundle of services. They need to do this immediately, before millions of their customers — who are accustomed to paying fees that automatically renew monthly or annually– figure out that they’re paying too much for what little value and utility they’re actually getting from their provider given the existence of so many largely “free” alternatives.

These companies have a huge advantage in that they already communicate with their customers on a regular basis through reports, billings, newsletters, and email blasts so they have effectively zero incremental costs of customer acquisition in terms of promoting new offerings. But, of course, these kinds of tactical upgrades don’t happen by themselves. And simply adding “me-too” products that don’t make a demonstrable difference to customers doesn’t help anyone’s cause.

For many traditional product and service providers, the risks of rejection are rapidly rising, because the mobile and digital world has moved beyond the historical offerings of these companies and either improved upon or entirely obviated any need for their products. In many cases, the mistakes these companies made in failing to recognize, adapt, and move promptly to keep up with the changing times are unrecoverable. Too many have simply been greedy for too long – unwilling to impair today’s cash flows to prepare for tomorrow. Kodak “moments” are no longer captured on film, long distance charges are history, bank checks and credit card scanners are quickly being phased out, and it’s far easier to catch Covid these days than a cab at the corner. It’s brutal to realize that you’re a buggy whip.

Cutting the cord won’t simply be a cable TV phenomenon for much longer, even if cable is the all-time leading grudge buy and the current league leader in getting dumped. Streaming packages like Netflix aren’t too far behind. Nobody needs four different streaming services. These days every consumer is looking to save money, eliminate old and useless bundles, and free themselves from “ghost” subscriptions. There’s even an app called Truebill that helps people tap and toss these unused and un-useful artifacts.

Interestingly enough, the likelihood that buyers in any given market will wake up one day and drop a certain product or service is highly variable and depends on a number of key factors. The key determinants include: (a) how often purchases are made, (b) how frequently the consumer otherwise interacts with the service, (c) how significant (emotionally or dollar-wise) the amount of the purchase is, (d) how different or costly the service is compared with other available offerings, and (e) how easy it is to switch. This is why the cable providers were fat and happy for so many years since it was harder – especially given exclusionary territorial protections – to dump your cable service than to divorce your spouse. Life insurance is another one of these areas where the insurers’ basic philosophy is – no pun intended – to let sleeping dogs lie until they die.

For other players, there are still opportunities to react and respond to the oncoming changes in their particular marketplaces if they’re mentally prepared to take the necessary steps and make the required changes. But the moves they make can’t simply be more of the same. Sadly, our view of the future is too often limited in perspective and limited as well in considered alternatives by our existing reference points. Adding commoditized offerings readily available elsewhere to increase weight and volume is really nothing more than an effort to build bigger, boring bundles, which won’t excite anyone. Even a big box of the best candles is no match for a light bulb.

If the proffered responses are tipid and tentative, there’s very little chance of serious adoption by current customers and few realistic prospects for material success. It makes sense to constantly be looking for adjacencies and opportunities to land and expand and to add new revenue streams to your base, but these enhancement and extensions are likely to be only modest movers of the needle.

The example I most often use is the American Automobile Association (AAA), which has around 57 million members nationwide. When I was growing up, AAA provided two primary benefits. The first offering was TripTik, which was basically a loosely bound set of sequential road maps that would show you how to drive from Point A to Point B. It also served up information about all the interstate attractions you might enjoy along the way as you and your family shuttled from one set of Golden Arches to the next. The second service was Roadside Assistance, which offered towing, flat tire changes and battery boosts.

Both services made sense and provided real value at a reasonable annual cost to millions of AAA “members” until the arrival of free turn-by-turn navigation on every cellphone. Auto manufacturers then included in-car guidance and emergency notification features as standard equipment. Similarly, every upscale manufacturer has incorporated towing and other roadside services in their basic support packages for owners along with the assurance that they would be dealing with experienced support personnel from local dealerships rather than some random tow truck guy.

Unfortunately, AAA’s response has been mainly more of the same. Offering home and renters insurance has basically been a bust with less than 1% of their members signing up. Car loans, credit cards and mortgage services haven’t done much better and random travel services and purchase discounts didn’t make a dent. There were simply no compelling reasons sufficient to overcome the consumers’ eventual indifference. And, of course, there was nothing new to see or offer. To move the needle in cases like this, you’ve got to jump ahead and leapfrog the mass of commoditized competitors.

Porsche did it right by forming a partnership with Mile Auto to offer pay-by-the-mile Porsche-branded auto insurance to its high-end owners, whose annual mileage was always a tiny fraction of the national averages. This was a clear benefit, a carefully differentiated offering, and a real savings and service to its owners.

AAA needs to find similar prospective, rather than reactive, solutions. A perfect example of a next generation offering that would be ideal for them is a startup called SparkCharge which provides EV charging anytime, anywhere. This enables customers to charge their electric vehicles on demand and without the grief and hassles of finding the “right” charging station, hoping that it’s not occupied, and waiting for the charge to be completed. They can be in a meeting, at a restaurant, watching a movie or a ballgame and know that their vehicle is being serviced at the same time.

It’s a perfect fit for AAA’s customers now and even more so in the future and a great marketing channel for SparkCharge to reach millions of precisely targeted prospects at little or no cost. There’s nothing better or smarter for a new business to do than to ride someone else’s already-built rails.

The bottom line is that sticking more of the same old stuff into your offerings might make your marketing people feel like they’re keeping busy and earning their keep, but it’s not an effective strategy. It’s like talking back to the TV. It may make you feel better, but it doesn’t make a difference. If you’ve got nothing new, you’ve got nothing going for you.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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