Madhavan Ramanujam: observation

Transcript context

…One final question on this topic and then we'll get to the next and the rest will be quicker. We're spending a lot of time on each, which I love. You talk a lot about the importance of packaging and bundling and how that alone can help you win a segment, versus even the price of the segment. Can you talk about how to think about the importance of that? The way to unlock your segmentation is to think about bundling and packaging, as in you're configuring your product, based on what customers need, what they value and what they're willing to pay for. Either you put a bunch of benefits that people like and call it packaging and put that out, or you're taking multiple products and calling it bundling and putting that out. So it's a question of, hey, that's the way you unlock segments. Your productizing. It's like the iPhone X versus the iPhone A test, different products, different features, different packages, et cetera. The quick framework to think about packaging, bundling, we call it the leaders, fillers and killers, exercise of framework. So if you think about the classic, let's say bundle, like a Big Mac or a Happy Meal, the Big Mac is the leader product, that's in the Happy Meal, and that's what people go for when they go to McDonald's. When you look at french fries and Coke, those are the fillers. You can put a burger along with french fries and coke, call it a happy meal, and most people wouldn't have bought a french fry or Coke, but if you just say for a dollar or two more, you know can actually get this, they would say, "Let's get the happy Meal." So you're actually bundling it in such a way that with marginal increase in price, you're also able to sell multiple products, which they wouldn't have if you didn't have it. The killer is the one where if you put it in the product, it just kills the bundle for everyone. So for instance, if you put coffee along with french fries and a coke and a burger, that's just going to kill the bundle. No one needs a double dose of caffeine when they're having a burger. But there are people like me, Lenny, who love to have coffee with their burgers. So these are great candidates for selling them as add-ons, because if I actually, I would pay for the add-on because I actually want the coffee. So I would take the burgers standalone, and I would take the coffee standalone and that's why it's actually listed separately in the menus. If you bundle it, what happens is it just depreciates the willingness to pay across the entire customer base to the point where no one actually wants it. So you need to find pockets of customers who want it and then maybe only sell it to them. So the rule of thumb that I usually say is, if 10 to 20% of your customers want something and they really want it badly, that's usually an add-on. That's not something that goes into a package unless you have a advanced package just for them, kind of thing. And if more than 50% of people want something, that's a leader product. So if you understand all these leaders, fillers and killers, then you can configure your product in such a way that your productizing to segments and you'll unlock maximum value. Your example reminds me, I just went In-N-Out yesterday, and how I don't think they've changed their model ever. Somehow, it just works. They nailed it.…

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