Reflection – Launching Tool

Challenge

I work in a four-employee family-run store, selling plastic bags of various types and sizes. We need to  make more profit.

That profit cannot come from cost reductions. We are confident that our operations are the most  cost-effective in the market. Also, having maintained good long-term relationship with our suppliers,  we have access to quality products at fair prices. Cost cannot go down any lower.

Nor that profit, or I shall say revenue, can come from increasing profit margin. Being a commodity, in  Indonesia at least, the plastic industry is a competitive market. Increasing prices carelessly is a sure- fire way to lose customers.

While we are currently reluctant to make the investment of opening another store, we are not  technically ready to sell on e-commerce platforms, at least not in the near future. So we need to  increase transaction volume without yet opening a new distribution channel.

This could mean two things: getting more people to buy our products or getting people to buy more  of our products. The question is: how to do them both simultaneously and cost-effectively?

Selection

The answer would not be direct and has to be peeled like an onion; Learning Launch Tool is selected.

As explained by Heinrich Sturm, it is a tool that starts with pain points – specific needs - then  hypotheses followed by experiments to test those hypotheses in ones’ effort to figure which  customers’ needs have been met & which ones that are not yet met, and how to best deliver these  unmet needs.

The higher the number of customers facing an issue the more likely the pain points worth  investigating. The first step is hence: determining what the potential pain points are, usually by asking  customers. At this stage, one would arrive at a broad number of issues which then have to be sorted  & filtered & confirmed with data, i.e. facts, on which pain points to be prioritized.

“The purpose of a learning launch is to get the truth that confirms or disconfirms the assumptions”,  Heinrich Sturm said. To get rich perspectives and to mitigate confirmation bias, as cognitive processes  will tend to prevent anyone on seeing things other than what he/she believes or knows, the process  of vetting the data is best conducted as a group consisting of diverse people from various functions  within the company.

Once a pain point is determined, along with earlier discussions with customers, one would usually  have a set of presumably great solutions. The next step would be to test them.

Application

To understand our customers’ needs, met or unmet, we talked with both our loyal customers &  dormant customers – not all of them, but just a few that we feel representative to their group - to  obtain a list of our possible strength and weaknesses. At this first step, we think, talking is the better  approach than conducting an online survey; talking allows us to get an exhaustive list. Yes, this list of  needs would be broad, not specific or urgent, and most definitely questionably valid.

Then, we gathered data – i.e. facts - by conducting a survey. We know we can only be confident of the  survey’s results when we have a big sample of data; we are sending this survey to everyone in our  phone book; considering our size, it is hard not to get comfortable with 750 target participants, even  after taking low participation rate into account. As we split our phone book into two groups – loyal  customers & dormant customers –, we gave each group a different set of multiple-choice questions.  Loyal customers was asked:  “why do you buy from our store?”, and dormant customers was asked:  “why do you no longer buy from our store?”. Choices to these questions were the ones we obtained  from the earlier talks to the group representatives, and presented in random order.

When survey results were out and the data had been cleaned and processed, we would have specific  & valid pain points. With survey results, assumptions would almost be automatically confirmed or  disconfirmed: the more participants an answer received, the more valid the need is. But we also had  a group discussion – group think – just to eliminate possible blind spots, to interpret results, and to  translate these results into the next peel of the onion: what kind of tests we should do that are fast  and cheap.

Insights

The reasons people buy from our store are: competitive prices, abundant parking spaces, availability  of the products they need, store accessibility, product quality, pre-sales services such as the option to  reserve products, WhatsApp Business customer service, the ability to pick up items through ride- hailing services, delivery service, the ability to custom make items, etc.   The reasons people do not buy from our store are: uncompetitive prices, poor customer service, not  carrying the items they need, no longer need the items they once bought at our store, having only  limited quantity of the items they need, etc.

Our survey tells the greatest reason people buy from our store is carrying the products they need. And  the opposite is true: the greatest reason people do not buy from our store is not having the products  they need.

We then compared these findings with our transactions data. It turned out: out of 640 Stok Keeping  Units SKUs we are carrying, most customers would only repetitively buy an average of five SKUs over  their business lifespan. And there are almost no SKUs that are so popular that they stand out. Different  customers are heavy-users of different SKUs. An SKU is only popular among an average of 10  customers.

We then hypothesized. Does the number of SKUs correlate with the number of customers we have?

To test the hypothesis safely, we ask ourselves: “Is there any SKUs that are needed by our loyal  customers that we have not yet carried and would also attract new customers?”

Approach

Given the Covid-19 pandemic, facemask is the SKU that are needed by our loyal customers that we  have not yet carried and would also attract new customers. It just so happens we have a facemask  distributor in our customers list: obtaining quality facemask would be fast & cheap, besides, if they  don’t sell well, we could always use them ourselves. We knew selling facemasks would be a walk away  out of our brand identity, but that is a question for another day. Then, we just needed to test the  hypothesis whether a new SKU could increase our number of customers while increasing basket size  of our loyal customers.   The result confirmed our hypothesis: facemask increased our basket size by an average of ten percent  in revenue, and we had obtained approximately great number of new customers due to face masks  alone and these facemask-induced customers usually also buy other items from our store.   It was time to go to next steps: “What other SKUs that are needed by our loyal customers that we  have not yet carried and would also attract new customers?”    Just as Geoff who was not easily content with data, we too made observations about customers’ wants  & needs and looked for emergent patterns: what we could be doing for customers that would truly  make their lives better. As Francoise Gohar suggested, we tried to be more empathetic to our  customers: focusing on their problems instead of our solutions. We tried to make educated guesses  about what they want, even before they can articulate these wants.     We talked again with our customers. This time to understand their businesses: the kind of businesses  they are in, the products they are selling, how they are selling them, and the items they use regularly  that we have not yet carried, etc. The answer was so fundamental we felt silly for not having figured  it out: adhesive tapes. Be it the laundry, bakery, or home-appliances business, customers are using  our plastic bags to package their goods; they would need adhesive tapes to package them. Today,  adhesive tape is the single most popular SKU we carry. And by displaying these tapes near the door  where they would be visible from the street, adhesive tapes bring a significant amount of new  customers


Reflection – Launching Tool Challenge I work in a four - employee family - run store , selling plastic bags of various types and sizes . We need to make more profit . That profit can not come from cost reductions . We are confident that our operations are the most cost - effective in the market . Also , having maintained good long - term relationship with our suppliers , we have access to quality products at fair prices . Cost can not go down any lower . Nor that profit , or I shall say revenue , can come from increasing profit margin . Being a commodity , in Indonesia at least , the plastic industry is a competitive market . Increasing prices carelessly is a sure- fire way to lose customers . While we are currently reluctant to make the investment of opening another store , we are not technically ready to sell on e - commerce platforms , at least not in the near future . So we need to increase transaction volume without yet opening a new distribution channel . This could mean two things : getting more people to buy our products or getting people to buy more of our products . The question is : how to do them both simultaneously and cost - effectively ? Selection The answer would not be direct and has to be peeled like an onion ; Learning Launch Tool is selected . As explained by Heinrich Sturm , it is a tool that starts with pain points – specific needs - then hypotheses followed by experiments to test those hypotheses in ones ’ effort to figure which customers ’ needs have been met & which ones that are not yet met , and how to best deliver these unmet needs . The higher the number of customers facing an issue the more likely the pain points worth investigating . The first step is hence : determining what the potential pain points are , usually by asking customers . At this stage , one would arrive at a broad number of issues which then have to be sorted & filtered & confirmed with data , i.e. facts , on which pain points to be prioritized . “ The purpose of a learning launch is to get the truth that confirms or disconfirms the assumptions ” , Heinrich Sturm said . To get rich perspectives and to mitigate confirmation bias , as cognitive processes will tend to prevent anyone on seeing things other than what he / she believes or knows , the process of vetting the data is best conducted as a group consisting of diverse people from various functions within the company . Once a pain point is determined , along with earlier discussions with customers , one would usually have a set of presumably great solutions . The next step would be to test them . Application To understand our customers ’ needs , met or unmet , we talked with both our loyal customers & dormant customers – not all of them , but just a few that we feel representative to their group - to obtain a list of our possible strength and weaknesses . At this first step , we think , talking is the better approach than conducting an online survey ; talking allows us to get an exhaustive list . Yes , this list of needs would be broad , not specific or urgent , and most definitely questionably valid . Then , we gathered data – i.e. facts - by conducting a survey . We know we can only be confident of the survey ’s results when we have a big sample of data ; we are sending this survey to everyone in our phone book ; considering our size , it is hard not to get comfortable with 750 target participants , even after taking low participation rate into account . As we split our phone book into two groups – loyal customers & dormant customers – , we gave each group a different set of multiple - choice questions . Loyal customers was asked : “ why do you buy from our store ? ” , and dormant customers was asked : “ why do you no longer buy from our store ? ” . Choices to these questions were the ones we obtained from the earlier talks to the group representatives , and presented in random order . When survey results were out and the data had been cleaned and processed , we would have specific & valid pain points . With survey results , assumptions would almost be automatically confirmed or disconfirmed : the more participants an answer received , the more valid the need is . But we also had a group discussion – group think – just to eliminate possible blind spots , to interpret results , and to translate these results into the next peel of the onion : what kind of tests we should do that are fast and cheap . Insights The reasons people buy from our store are : competitive prices , abundant parking spaces , availability of the products they need , store accessibility , product quality , pre - sales services such as the option to reserve products , WhatsApp Business customer service , the ability to pick up items through ride- hailing services , delivery service , the ability to custom make items , etc . The reasons people do not buy from our store are : uncompetitive prices , poor customer service , not carrying the items they need , no longer need the items they once bought at our store , having only limited quantity of the items they need , etc . Our survey tells the greatest reason people buy from our store is carrying the products they need . And the opposite is true : the greatest reason people do not buy from our store is not having the products they need . We then compared these findings with our transactions data . It turned out : out of 640 Stok Keeping Units SKUs we are carrying , most customers would only repetitively buy an average of five SKUs over their business lifespan . And there are almost no SKUs that are so popular that they stand out . Different customers are heavy - users of different SKUs . An SKU is only popular among an average of 10 customers . We then hypothesized . Does the number of SKUs correlate with the number of customers we have ? To test the hypothesis safely , we ask ourselves : “ Is there any SKUs that are needed by our loyal customers that we have not yet carried and would also attract new customers ? ” Approach Given the Covid-19 pandemic , facemask is the SKU that are needed by our loyal customers that we have not yet carried and would also attract new customers . It just so happens we have a facemask distributor in our customers list : obtaining quality facemask would be fast & cheap , besides , if they do n’t sell well , we could always use them ourselves . We knew selling facemasks would be a walk away out of our brand identity , but that is a question for another day . Then , we just needed to test the hypothesis whether a new SKU could increase our number of customers while increasing basket size of our loyal customers . The result confirmed our hypothesis : facemask increased our basket size by an average of ten percent in revenue , and we had obtained approximately great number of new customers due to face masks alone and these facemask - induced customers usually also buy other items from our store . It was time to go to next steps : “ What other SKUs that are needed by our loyal customers that we have not yet carried and would also attract new customers ? ” Just as Geoff who was not easily content with data , we too made observations about customers ’ wants & needs and looked for emergent patterns : what we could be doing for customers that would truly make their lives better . As Francoise Gohar suggested , we tried to be more empathetic to our customers : focusing on their problems instead of our solutions . We tried to make educated guesses about what they want , even before they can articulate these wants . We talked again with our customers . This time to understand their businesses : the kind of businesses they are in , the products they are selling , how they are selling them , and the items they use regularly that we have not yet carried , etc . The answer was so fundamental we felt silly for not having figured it out : adhesive tapes . Be it the laundry , bakery , or home - appliances business , customers are using our plastic bags to package their goods ; they would need adhesive tapes to package them . Today , adhesive tape is the single most popular SKU we carry . And by displaying these tapes near the door where they would be visible from the street , adhesive tapes bring a significant amount of new customers