In the search for innovative business models, we often refer to the US west coast. When I visited California lately that was just what I came for: inspiration. And what I found from Silicon Beach to Silicon Valley is one persistent thing: avocado topping. Yes, I also met visionary founders, dedicated entrepreneurs, and scientists working on things beyond my imagination. And yes, I am happy to share more with you in the future. But first, let me explain why I think that the avocado topping presents the most striking business insight.
I am not going to tell you what is so great about avocado. What I would like to point at is the way avocado is offered – on top. Whether in Los Angeles or in San Francisco, in a fancy hipster place or a simple taco stand the process was always the same: You order your food and get asked if you want avocado on top. Chances are, you want it since almost everybody likes avocado. Of course, this comes at an additional cost, on top. But you are happy to pay, as it’s what you opted-in for. Half an avocado in slices at the cost of 3 dollars plus taxes on top of your organic kale salad or Mexican taco plate is what makes you happy.
Why avocado topping is so smart
Restaurant analogies are frequently used to make a point for value proposition and customer experience, simply because everyone immediately understands. Everyone has been to a restaurant before and thus it’s easy to get the point. What is so great about avocado topping from a business perspective? By offering an avocado topping and asking for it every single time you get to talk to your customers about what they love. Customers opt-in, and are thus more likely ok with paying more.
You could ask: But wait, why don’t I just offer the perfect menu with avocado already in it? Everyone is going to love it, right? While this may be true from a purely rational perspective we are still humans. From a psychological perspective it works so well because you see a menu at a quite reasonable price and decide for it. But then, who doesn’t want a little extra?
The avocado topping has thus several advantages. The basic menu gets presented at a lower, more attractive price. When customers are confronted with the avocado topping question, they already decided to order and have gone through the ordering process. So, they are already invested and less likely to bounce. And, since avocado adds substantial value to the menu, people are likely to accept the offer. Congratulations, you just raised the price of your product.
Basic offers and delighters, what drives sales
So, by adding a delighter to the menu we can justify a higher price in the bottom line. Still, it is important to get the interplay between basic offers and delighters right. In this analogy the kale salad or traditional taco is the base, the avocado is the delighter. If you are familiar with the Kano model, you know where I am headed. Kano, a Japanese Professor, distinguishes customer preferences in three categories: There are basic needs, without this your offer would simply not be an offer. For example, there has to be some salad base in a salad. But somebody is unlikely to get too excited or pay more for that. There are the performance needs, things without which your offer wouldn’t work. For example, you need a bowl to put your salad into. We all know that a salad costs more when served in a nice environment, so here you can justify higher prices with higher quality. Finally, there are the delighters which are what we need to excite customers. Here, you can make a difference, that’s what brings the higher margin. For example, the price for the avocado topping is relatively higher compared to the basic menu ingredients. But then, that’s what customers are willing to pay for. This is why they say, you can do so many things right and still be wrong. You have to respond with elements of the value proposition or product features to all the needs.
A simplified view on great offers
In order to apply the principles to today’s fast-changing businesses, especially in the case of a digital business, I like to simplify the model to two perspectives and extend it around the temporal axis. For two reasons:
In my experience, we find it difficult to distinguish between basic and performance needs. Especially with technical solutions – and which ones aren’t today? – it is becoming increasingly difficult to differentiate between them. That’s why I simplify basic and performance needs and simply speak of commodity. I’m sure you’ve heard the term commodity before, when offers or individual features and functions simply don’t get customers off the ground anymore. If customers are used to it or even somewhat spoiled we speak of commodity. So it’s the usual standard to know the minimum requirements. On the other hand, the perspective on delighters stays in place, and the avocado topping should be the focus of the design of the offer.
In addition, there is the time perspective, since the world in which we live or do business changes rapidly thanks to digitalization. This requires the quick adaptation of offers and value propositions. Simply put, what inspires today is tomorrow’s commodity.
This perspective let’s you stay in the game
In my opinion, therefore, two things are important when designing offers: knowing the current relevance of individual offer components and also estimating the half-life. In order to win customers all over again, you have to stay in the game. Adding value to your offer is a continuous innovation process that requires continuous learning from your customers.
People get used to it or learn that there is something better. Just like we have become critical about avocados because the growing needs too much water and has dried up whole rivers in Chile. So, what to do next? Back to good old cheese? No, I want you to do better.