Cost reduction isn’t a strategy, but rather a way for companies to take better advantage of their strategies. When a business confuses reducing cost with undercutting its value proposition, it’s making a critical mistake. Ikea, however, gets difference right. In “Ikea’s Path to Selling 150 Million Meatballs” published on the Wall Street Journal, Jens Hensegard illustrates how the company’s low-profile food department has grown to rival full fledge restaurant chains. The key is in making innovation and cost reduction work together.

Despite being a quirky idea at first, Ikea’s rational is very straight-forward: hungry costumers will stay longer in its stores if they have food. In essence, the strategy involves introducing a brand new value proposition to its furniture business. A nuisance PoD like this that enhances customer relationships and purchasing experience is very powerful since the actual furniture sold by different stores varies relatively little .

But a great idea alone isn’t enough. Ikea follows up implementation with cost reduction techniques: selecting a small standard menu to increase inventory velocity, outsourcing production, and developing dishes that offer the most “fullness” for the price. Although Ikea’s food outlet has the potential to become an independent revenue stream, it’s probably more profitable if it remains a cheap complimentary service to help capturing lucrative furniture sales.

Japan looks bullish as Prime Minister Shinzo Abe rolls out reforms to stimulate the country after a decade-long economic stagnation. In an article on The Wall Street Journal “Looking Beyond Yen in Japan” Yumi Otagaki suggest that now is the prime time for foreign investors to look beyond the familiar selection of exporting giants (Toyota, Sony, etc.), and focus instead on small/midsize domestic companies. Though this assessment has some merit, the article risks being too optimistic. First and foremost, it’s yet unknown how effective the reform will really be in the long term. In particular, there are questions about the true drive behind Japan’s recent market recovery. Is it due organic industry growth, or is it the effect of a national hype following Abe’s bold promises?

A stock indicator board in Tokyo (image taken from The Wall Street Journal)

Never the less, my analysis shows that the short term boom will continue, during which small businesses will experience growth as the domestic market revitalizes. But at the same time investors must be extra careful about these small companies’ realistic worth so as not to be caught in a bubble as share prices spike above their true value. Moreover, only newly emerging industries will continue to benefit from sustainable growth after the immediate effect of the new reform wears off. Some hedge funds have smartly chosen to invest in Japan’s medical services given the country’s aging population. I think the organic foods industry might also also a good bet. In a wealthy and increasingly health conscious nation, what will the consumers eat?

Commercials are products too. They provide consumers with brand awareness and the price is one’s time and attention. Consequently, good advertisements must also possess the same ingredients – points of difference, points of parity, and frame of reference that govern the success of the products they promote. Sauderite Katrina’s post “I Don’t Care What It Is, But Please Take My Money,” illustrates one such advertisement:

As Katrina pointed out in her post, Fantastic DeLite succeeded because the campaign voiced the FoR, PoP, and PoD that the brand possesses. Yet if we look even closer, we can see that the campaign itself possesses the these elements too.

Firstly, the commercial can be quickly identified as a snack commercial (frame of reference). In contrast, some exotic ads confuse the viewers because they aren’t perceived as real advertisements. Secondly, it does what other commercials of its kind do – attest that the snack is delicious (point of parity). Thirdly, the advertisement possesses a compelling point of difference – it shows how consumers think about the product through their spontaneous actions instead of testimonials or a celebrity endorsement. A successful marketing campaign not only must consider the FoR, PoP, and PoD of the brand it is promoting but also create ones for itself.

With the latest iPhone 5s & 5c, even some of the most harden fan boys are forced to concede that their beloved brand is really letting innovation slip. However, are they still passionate about Apple? Absolutely yes! And herein lies the beauty. While reading fellow Saudrite Jerome’s post: “Solid New Iphones Fail to Excite,” I started thinking about flip side of the coin.

What if the new iPhones were never intended to “excite”, i.e. to snatch customers away from competitors, or to reach out to new customer segments? My analysis show that Tim Cook’s vision subtly differs from Steve Jobs’. Cook is all about maximizing returns using available resources (his background being operations after all) – in this case, iPhone’s existing enthusiasts. He wasn’t concerned about creating radical new features that would persuade a Galaxy user that iPhone is superior. On the contrary, his aim was to achieve the greatest product satisfaction possible (e.g. by launching a more affordable line) for Apple’s established target market.

The new iPhones’ record breaking 9 million first week sales in September clearly affirms Cook’s perspective. Apple’s success comes from its strong grasp of consumer behavior. The key is not to forcefully compete for new customers, but rather to see the Purchase Funnel through to a full loop.

Increasingly, people are beginning to rationally analyze Facebook’s effectiveness as a marketing tool. However until very recently, businesses would simply scrambled to get behind this booming social networking website, believing that it was truly “the new thing”.

Is Facebook truly new? Let’s compare Facebook and television channels. As much as they are radically different means of advertising, they offer their clients essentially the same value proposition! And both suffer from the same disadvantages. Neither Facebook nor TV users engage in their respective activities with the intention to search for products or services. Thus both Facebook and TV ads must actively compete with more interesting contents. In addition, while Facebook boasts of its ability to target ads at the desired customer segment, the same effect can be achieved on TV by selecting the appropriate channel and air time.

Doubtlessly, Facebook offers top of the line social networking experience. In this frame of reference, Facebook reigns supreme. But if the frame were to be extended to include other competitors, then it lacks a convincing edge. Perhaps it time for Facebook to rework its advertisement delivery. Imagine if instead consumers were invited to look up what brands their friends are all buzzing about!