This article originally appeared in Ezine Articles
In this extract from my new book ” Marketing They Don’t Teach You at Business School!”, due out later this year, I look at the importance of understanding why we refer others to help us inspire others to refer us.
CREATE A CUSTOMER – OR TWO!
THE PURPOSE OF A BUSINESS
There is only one valid definition of the purpose of a business and that is to create a customer. This is wonderful thought. To create a customer actually instils something that suggests that the customer is so important that he or she is ours to look after and keep for ages!
This is a colossal mistake!
If you have tried marketing this way, then you know how exhausting, time consuming and frustrating it can be. The reverse of this approach is to find the market first, find out what the people want, and then… let them buy what they have told you they want!
Let me give you an example. Glen makes bespoke design-and-build wrought iron products. When I asked him who is customers were, he told me ‘anyone who’s interested!’ When I hear that sort of thing I start to wince — like sitting in my dentist’s chair and being told ‘Now relax this won’t hurt!’
I asked him what was the one thing his customers wanted the most. The best metals? A secret process? Friendly approach? An endorsement? It turned out that what his customers were really hungry for was real craftsmanship, with requirements ranging from weather vanes to car parts, and from garden gates to household ornaments, people were prepared to pay the going price – and more!
Customers buy from us because they see something they want. We think it might be the product or service we offer. But invariable the value and experience that is wanted is something deeper. We have to find this, bottle it and use it as medication.
What do customers buy?
Here is a favourite example of mine. Reckitt Benckiser’s medicinal lemon drink Lemsip provides a great example of how to attract customers based on their emotional needs – quite unlike the efforts of Beecham’s, a close competitor, whose marketing is based on functional needs Beecham’s customers.
In fact, Lemsip has enlarged its customer base by creating customers through its appeals to different customer groups. In the late 1990s, Lemsip was positioned to meet the needs of busy women seeking the comfort of a warm, soothing medicinal drink. You may remember the campaign’s compelling offer was built around the statement ‘a hug in a mug’.
A few years later (2003), Lemsip moved into another segment, young career-minded male executives, wishing to protect their advance up the corporate ladder, from other career-crazed rivals. You might recall the positioning statement at the time: ‘Life goes on’.
The concept of a ‘hungry crowd’!
At the end of the day a ‘HUNGRY CROWD’ is a steady flow of a group of customers that value what we have to offer and whose values match ours.
The point of all this is to start to concentrate on spotting customers – hungry crowds. Listen to what people ask for, dream or complain about. It’s not enough for us to sell to people who CAN benefit from what you sell; we need to sell to people who WANT to benefit from the SOLUTION we offer. In fact you’ve got to find people who will CLAMOUR for your product, so that sales and marketing becomes a lot easier…
Where is your ‘hungry crowd?’
There are lots of niche markets – our job is to find one – one around which we can build our product or service. Look at it this way – every product or service has the potential to appeal much more strongly to a definable group of people – or ’hungry crowd’ – more than it would appeal to everyone else. When you spot a ’hungry crowd’ and tailor your products and services to it, winning sales becomes much, much easier.
There are several techniques we can use to find a hungry crowd; research is one, market sensing is another. There is no shortage of techniques. In the process though our assessments should unearth answers to three relatively distinct questions; ‘who’ will buy, ‘what’ will be bought and ‘why’.
The first question; ‘Who is buying?’ attempts to describe the characteristics of the customers within our current market or market to be examined. The second asks what needs and wants customers have. Here we unbundle all the features of a purchase so that we arrive at a list of what is bought. And third ‘Why are they buying?’ examines the behaviour of our customers. Taken in unison, we place ourselves in a better position to create a proposition of value with which to match our customers’ needs.
Make sure your ‘hungry crowd’ meets the right criteriaIt is one thing to find a hungry crowd but quite another to choose the right one. Some criteria are needed. Here are a few:
- Does this hungry crowd have something in common with our values?
- Does it read certain publications, or visit specific websites? Are people in it members of certain clubs or associations? Can we easily reach this group in large numbers?
- Is this group ALREADY spending money to meet the need we think they have or achieve the goal that we can help them with? How do you know?
- Can our proposed market afford our solution?
- Does our proposed market WANT our solution?
- Can we give a compelling reason why this group should do business with us instead of someone else?
- Will we enjoy working with this particular ‘hungry crowd’?
- Which unique collection of capabilities would enable us to do more for our customers than our competitors? and
- What capabilities do we need to be able to do more for our customers than competitors?
If you can’t say ‘Yes’ to all of the above questions, then I strongly suggest that you go back to the drawing board and save yourself a whole heap of heartache!
A NEVER ENDING PROCESS!!!
The question a business leader should ask is: ‘Am I rediscovering new viable hungry crowds?’ No customer group will remain the same forever. Aggressive competitors not only imitate attractive offers, they create new ones. This means that established companies must continually strive to discover new customers for their business.
We must continually watch out for what our customers want and need. Some of us have a tendency to think that this means developing new products or services. But this isn’t necessarily the case. Customers may enjoy our products and services but have different and changing priorities. We need to identify and keep abreast of these.
Often we can find new customers or changing needs and priorities and create fresh space to operate in. Then of course there are customer groups that are not being served by our products and services and we need to find them too.
Remember this takes time so do not rush but think through what we have said here and think about what you need to do to UNDERSTAND your customers needs and priorities over the long term!
For more buy your copy of : Marketing They Don’t Teach You at Business School for the special price of …………..Click here
There are two types of mindset. People tend to fall into one category or another. There are those that put marketing to one side. They believe that they have a great product or service and assume customers will buy them. Invariably they don’t. Then there is the other mindset, here people go out and get good at marketing. These people believe that business success is down to good marketing. These people will actively take an interest in their customers, and will want to find their needs and encourage them to buy their products with couched in matching benefits.
Whatever category we are in, we must begin to appreciate the main processes ‘of going to market.’ In other words identify and implement the marketing tools, tactics and plans that are so necessary to market your business in practice and categorically how to make it happen.
BRINGING IT ALL TOGETHER
So there you have it; the fundamentals of marketing, packed into a ‘crash course.’ What comes next is a short summary of the main principles to develop a marketing strategy. There are five essential principles to consider all which that contribute to overall profits and to the overall success of your marketing;
- Your objectives. Set out an overall turnover and profit target and establish objectives for new customers, increased average spend and frequency of purchase
- Your customer group (or niche). Identify your niche and a compelling promotable message that creates an “I‘ve got to have that!” response.
- Your offer, by this I mean the package that demonstrates the overall value of the offer is worth the cost of paying for it.
- Your database. When it comes to marketing the most important thing is the database – without it sustainability is doomed.
- Your multiple marketing approach, these need to speak to the niche, build relationships with its incumbents and tackle their needs and wants convincingly.
The key is to unite an offering of superior value with a targeted customer group, together with an efficient and distinctive game plan, or means, to create a fit between what the customer needs and what the company does really well in the face its competition.
Let me put it another way! Let your targeted and distinctive offer be the brass and your game plan be the gold! Blend the two metals in the refiners fire and what will you gain? You will bring into being rich Corinthian metal, fit to compare with the creative castings of other marketers that have created their own shining reputations in business.
The role of metrics
In recent years measurable performance and accountability have become essential keys to marketing success. But few managers and business owners appreciate the range of measures or metrics by which they can evaluate and improve their company’s marketing strategies.
Consequently we must select, calculate and explain crucial marketing (and business) metrics. We must understand how each is constructed and how to use them in decision making. And so as the old adage states; ‘If you can’t measure it, you can’t manage it’ we must identify the measures that will help us evaluate our plans and actions, explain variances, judge performance, and leverage points for improvement in numerical terms.
The role of processes
All this requires a strong command of the processes that enable us to set measures of performance. Every business is made up of a series of processes that convert inputs into outputs. It is in these very themes of input, conversion and output that we have the means to understand how each process works and what it delivers and then to do everything we can to improve them to achieve more output from every input. Therefore, One of the keys to making our business more successful is to identify our businesses’ most important processes.
TWO IMPORTANT METRICS
There are metrics for almost anything. Key ones that concern us are measures such as; customer service, customer satisfaction and willingness to recommend, product profitability, customer profitability, sales effectiveness, cost per transaction and so forth
But for now we would like to mention two fundamental metrics that are so robust that just knowing these two numbers will give a pretty clear idea of how well our business is performing. Let me define these two terms for you:
| Cost Per Acquisition | The marketing and advertising expenses needed to generate a new customer. Online, this includes money spent to entice the visitor to the web site, the payroll costs of a live rep if there is live chat on the website, etc… |
| Lifetime Customer Value | The total value (in terms of money spent) of your average customers spanning the entire period that these customers are likely to do business with you. |
There are a number of ways to calculate these metrics. For example we could calculate the lifetime value of a customer by the total amount of money spent in the lifetime customer value equation, and or the total amount of profit received. Alternatively we could use cost per acquisition to determine what is spent to convert a prospect into a customer.
Let’s say that the life time value of a supermarket customer is in excess of £50,000. Or to put it another way, the average customer will spend more than £50,000 in his/her lifetime at the supermarket. It means of course that when we go into complain about the broken bottle of jam and they respond by telling you that you must have done it, they have just waived goodbye to at least £50,000!
Imagine if a business loses just one customer per day and the average customer spend is £50 per week, then the net loss to the business is a staggering £949,000!
Couple this with a couple of other statistics like discount rate and the net present value of future cash flows and you begin to see why customer retention is so critical.
What are you accomplishing?
But, before we go any further, can you rattle off what your business is currently paying to acquire a customer? Even better, can you break your cost per acquisition down from different sources of feedback (word of mouth recommendation, advertising etc)?
And can you state what the lifetime or long-term value of your customers is? And once again, what about the value of the customer broken up by the different sources they were generated from?
Here’s a question! What do you think would improve the bottom line?
1. A 10% increase in price
2. A 10% reduction in costs or
3. A 10% increase in volume sales
Be wary of reducing prices
You will find that most people would opt for options 2 and 3 (volume sales or cost reduction). But when you get down to it, a price increase will often lead to profit improvement – if you can get away with it. The sceptics among you might argue, “a price increase will only work if you do not lose sales”.
Be wary of stimulating sales by cutting prices. It may boost top line turnover, but it can devastate your profits. And think hard before cutting costs. You could decrease value, lose custom and damage your hard earned reputation.
Raising prices meanwhile, may jeopardise turnover, but can in fact create a fitter business, a focus on loyal customers, reduced working capital all of which engenders a higher rate of return.
One further issue is that we should never compete on price alone. We should start by making sure that what we are offering exactly what meets needs of our customers, and sell on best value rather than lowest price. Sell what someone wants and they’ll pay for it. Sell what no-one wants, and we will not even be able to give it away.
Here’s how to do it – and go “up market”
What follows is a shortlist of pricing tactics for high value products some of which are pretty familiar.
- Guarantees – Often customers will part with their money more readily and pay a higher price, if they know that they can get their money back if something goes wrong
- Outstanding service – Study after study has shown that customers are willing to pay more if you give them great service. Research also shows that companies that provide great service grow twice as fast as those with bad service
- Price as an investment – Describing your price as an ‘investment’ rather than a cost can often go along way towards persuading customers to buy
- Explain why – Be prepared to explain why prices have risen, perhaps as a result of cost increases, and point out that, had it not been for improvements in your own productivity and efficiency, the increase would’ve been even higher. Better still; explain that the price has increased as the result of improvements to the quality of the product. Emphasize the enhanced customer support, faster and more convenient delivery and other factors which make the product better and therefore worth paying more for
- Justify your prices – It is vital to have a strong justification and defence for your high prices prepared in advance. This is likely to include knowing the prices of your most expensive competition, demonstrating the savings and benefits from your product and demonstrating that your product is hugely superior and therefore slightly more expensive because…
- Use “Non-price increases” – For example, consider charging extra for installation, delivery, insurance, handling, storage, urgent orders or rapid delivery. You should also try increasing your minimum order size and introducing a surcharge for any orders below that threshold, revising your discount structure, slimming down the specification of your product and stripping out any expensive features that are only limited value to the customer, and charging interest on overdue accounts
- Change the package – If a customer tries to knock you down on price, don’t change the price, and change the package. In other words, never simply crumple on price. Always trade a price reduction for some concession from the customer e.g. a larger order or cash up front.
Any attempt to grow our business can meet with sluggish results even though we have got the other result areas mentioned here in place – it’s almost certainly our MARKETING TACTICS that are holding us back and restricting us to lacklustre results.
Marketing tactics
How many of these marketing approaches are we using? Most businesses use only one or a small number. If we really want to optimise the potential of our business success it is vital to develop a number of approaches into a multiple marketing profit making machine.
| Risk Reversal | Telephone Marketing |
Advocacy |
| Newsletters | Direct Sales | Joint Ventures |
| Price promotions | Advertising | PR |
| Special Events | Conference Calls | E.comms |
| Sequenced Mailing | Internet Advertising | Referrals |
Such tactics, and there are many more, may be used to attract leads from the core of your market and others then used to nurture and convert warm leads into customers through a range of outstanding offers in a process of patient communications and relationship building in pursuit of advocacy all taking place in designated niches.
“FRONT-END” AND “BACK-END” TACTICS
There is one important thing to bear in mind and that is that we can separate marketing tactics into two camps; “Front-End,” and “Back-End.”
We should think of “Front-End“, as the first sale; the pipeline that brings new customers into the business. The “Back-End” is the product (or hopefully the series of products and services) that you sell to your customers after they have purchased your initial offering.
The question to ask now is what tactics you should use in each area. They are:
- Front-End : The marketing tactics employed to attract and acquire new customers.
- Back-End : The marketing tactics employed to optimize the profitability of each and every customer relationship.
Clearly front-end marketing is vital for your long term business success. This is why it’s so important to inject the power of marketing into your business so that you can increase the number of customers that come to your business as a continuous flow…
The facts behind front end and back end marketing
Let me ask you some questions, answering them should help you grasp the importance of front end and back end marketing
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Let’s review these questions before we go any further, however, should you want to see the answers to the, you will find them at the foot of this section.
Short and long term issues
In the short-term we can almost always make more money from a back-end promotion than a front-end promotion. Back-ends have a much higher conversion rate, they usually sell for more money, and we make a larger percentage of profits on them too. Why is this, you ask? Well it is because it is easier to sell to a customer than a prospect.
But what about the long-term? Well, long-term we must have new customers entering into relationships with our business, or eventually we will be put out of business. This means of course that we must spend time developing effective front end promotions otherwise our competitors front end offers will eventually turn ours into a lame, and undesirable ones.
You see many managers and business owners get engrossed in back end sales it is so much easier and more profitable, who wouldn’t want to spend all their time devising new schemes to launch one offer after another to customers?
Five principles to guide multiple marketing approaches
The thing is of course to find a balance for these five very important reasons:
If we do not have clearly established paths for our new customers to take after their initial purchase, it will be very difficult to test and establish the best sequence of offers on the back-end.
The source of future back-ends comes from our successful front end promotions. If we fail to keep in touch with the market place we will be forced to get back into it to work out what customers want, what their priorities are and what trends and shifts in our market impact our competitiveness.
While back-ends contribute a greater percentage of today’s profits, today’s front-ends will contribute even more profits in the future.
The customers that have the greatest potential value are the ones that are acquired most recently.
Every business has an attrition rate and if we are not bringing in more customers than the rate of attrition, we risk losing important cash flows – every day.
By now the logic behind this different approach should be somewhat obvious. The upshot therefore is that we need to plan multiple approaches to attract new customers at the front end and optimise sales at the back end.
Oh! Yes I almost forgot here are the answers the questions we posed a little earlier.
The answers
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The Front-End |
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The Front-End |
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The Front-End |
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The Back-End |
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The Back-End |
Some last words
In coming ending in this section, remember the definition of marketing. Marketing is bringing the market to desire your product or service. Given this definition the question is this; are we doing any type of marketing whatsoever, and if we are where is the focus of our efforts?
It is conceivable that far too many people mistakenly believe that the only effective marketing and advertising is the type that goes for the sale and for the most part the immediate sale. This type of thinking really is flawed that can cost business people a tremendous amount of lost profits.
You see, the thing that is so important in business, is to live at the heart of your customers market and continue to sell the knowledge, the product, the service, the story and the system that we have created that we have designed to make a difference in people’s lives. In a sense the only way to convince people that we can deliver on our offer is to show our product or service in action. Just like Nike shows its products in action by fitting out the sports people we admire the most.
Now then we move to something that is often taken for granted yet seldom applied. It is a subject that relates to our customers – our existing customers to be precise!
I would like to start with two questions. They are these:
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| Question 1 | In percentage terms, how many businesses do you think try to raise sales by increasing the number of customers they work with rather than trying to increase sales from existing customers? | |
| Question 2 | If you are, or are not, one of these businesses to what extent do you think your business is losing opportunities to gain more sales from existing customers? | |
EXISTING CUSTOMERS
It has been said that more than 95% of businesses concentrate their entire attention on trying to get more customers, apparently unaware that it costs 5-15 times more to gain a new customer as it does to correctly serve an existing one. Also we should note that a correctly served existing customer is 5-15 times more likely to buy from us than a new one, and a customer who has bought 3 times is far more likely to buy from you again than a customer who has bought once.
So if gaining a new customer is up to 15 times more expensive and they are up to 10 times less likely to buy from us than an existing one – what tactics should we operate to optimize the potential with our existing customers to gain maximum loyalty and profit?
Tactics for existing customers
As you can imagine there are a number of these. And I have listed and outlined a number of tactics below:
Referral systems
First a referral system often generates an extremely positive impact on our sales. One of the great features of a good referral system is to impart a sense of invitation; that visitors would be especially welcomed as we invite guests to our home. Referral systems vary from business to business but there are things that we can do to increase the number of referrals. We can ask for them, alert customers to the fact that referrals are a vital part of our business and we can reward them – and we can develop and introduce a referral system.
Communicating with customers
Second communicate with existing customers. When did you last mail them, or call them or consult with them? There may be opportunities to communicate with our best customers by letter or email items that would be of interest to our customers and appreciated them. Such things as birthdays, holidays and events come to mind and may distinguish us from competitors
Another tactic along these lines is to set out a clear and ongoing sales process to provide customers – and even customers that have stopped buying from us – with compelling new offers and a ‘back-end’ of further products or services
Yet another is to check with our best customers to find out how enhance our relationships with them and see how they are doing.
Then there is your value proposition. This should be visible to all customers and should clearly articulate the top three benefits that our product and service offers
The possibilities are endless.
Sales processes
This is really important. There are of course a number of processes that have inveigled their way into sales literature but one that I would advocate here is nothing more than adopting a conversational approach. It ensures customer focus and above all relationship development. In fact good marketers and service suppliers do not have to sell they coach their customers.
By helping prospects and customers to make the best decisions for themselves, we add trust and genuine value. You can ask these questions in any situation to help guide and lead your ‘selling’ activity. Remember the suggestion is a generic one. Each question should be modified so that is business specific.
| 1 | How can I help you? Contrast this with a style that tells! |
| 2 | What works well already? Do not rush to find the want or need, take time with this step, build real rapport and trust and get to the real wants later. |
| 3 | What would you like to change what would, it be? Avoid quick assessments and long lists of need and want, coach customers gently to get to their root likes and wants. |
| 4 | If we solved this, what difference would that make? Feel free to repeat the question in several ways. Ask for the benefit of the benefit. Keep going until they cannot think of anything more. These are the reasons they will buy. |
| 5 | If I could help you with that, would you be interested? Either they are or they aren’t. There is little point in spending time on a solution where there is not genuine interest. Therefore seek an alternative. |
Up sell and cross sell with add-ons and volume
There are two ways to deliver benefits to customers, offer higher margins than the core product and make a difference to turnover.
Add on product and services
The first method is give customers the means to add related items to their basic purchases which when combined provide greater satisfaction. This means that service and sales people should be aware of the relevant combinations so that customers can choose from over their initial interest. There are three opportunities, and they are to:
1. “up-sell” to with a different more expensive package from one of say 3 options for the same product (different pack sizes or something that enhances overall value),
2. “cross sell” with other products (cheese with wine,
3. “give away” complementary products
Incidentally if ideas for up sells and cross sells are hard to come by, ask your customers for some help.
Remember though to consider what customers want or value from the products and services they buy. Then against each one prioritise how these wants or values might be increased to benefit the customer.
Time and volume options
The second way is to help customers decide the quantities and qualities in which they want to purchase our products.
For example consider what larger unit of purchase might benefit customers in some way. A discount for regular purchases or a ‘best buy’ with a discount or a free bonus incentive for choosing this preferred option are alternatives.
It is possible that most of us have heard about companies that use customer databases. But many companies know very little about their customers. Most think they know their customers and everything about them. Most think that ‘all you need to know is located in your brain or a file cabinet in your office.’
FIVE REASONS A CUSTOMER DATABASE IS IMPORTANT
Is it conceivable that if we stopped to think about it we might just realize how much we benefit from setting up a simple customer database system? ‘How can this be done?’ you ask. Well, let me give you five reasons why a customer database will help a company grow and prosper.
Access to information
First of all it is likely that a considerable amount of information, if not paperwork is strewn throughout your office without any sort of organization. You may know where it all is, but do your people? They may need that information to help your customers. A customer database puts all of that information in a central location where all employees can access it.
Knowing our customers
Second of all, and I believe we are getting to the heart of the matter now, just how much useful information do you have about your customers? For example; do you know who spoke with your customer last? What do we know of their preferences, service issues, birthdays, interests and so forth. Do your people? Probably not! Without a customer database system, you run the risk of looking unprofessional and unprepared because your employees may not know about your customer’s work history or needs. A customer database puts that at your employee’s fingertips.
Knowing when we disappoint them
Third is the issue of customer satisfaction. This is something that’s possible to track on a customer database system. How will anyone know what our customers are thinking about the work we do? If they are dissatisfied with what we do and how we go about doing things we can make adjustments according to their complaints.
Creating loyalty
Next is the frequency of their visits to us? We need to know if our customers are returning to us. If not, the hard truth is that it may be because of problems connected to our offer and service. Customers feel secure knowing that their service suppliers know most things about their needs and remember them from job to job. If we do not have a customer database we run the risk of losing customers to our competitors who can offer the package we have. And that can hurt.
Keeping costs down
Fifth and finally I want to present the reason for a database. If you have a list of customers that have bought from you it is well worth remembering that a person who has purchased something from us, is more likely to buy from us again. This means that the cost of marketing to them in the future will be far less when compared to trying to get someone new to buy your product or service.
You may have a customer database system in your company. But if you have not then you may wish to set one up. It will help improve your business in all areas and will only help you become a stronger business owner in the process. This, in turn, will mean a better business and more customers coming to you again and again. Who knew all of that could happen by becoming organized and implementing a customer database?
Now try your hand at writing your own marketing plan! Click here
THE PRIMACY OF VALUE
Here is a practical matter; one which is probably the biggest issue for us to tackle! The challenge is how to please an increasingly sophisticated customer. Yet to fully appreciate what customer value is accommodates revelations and variations in what customers actually value.
Success is directly related to our ability to provide perceived value to customers because customers perceive value only in the benefits that our products and services provide. These perceptions are almost always connected to our ability to produce superior products, tailor such offerings to targeted customer groups and back all this up with advanced services.
What do customers buy?
There are enumerable forms of value – types of demand being placed on us by new customers. Take a look at some of them listed below:
- Quality does not always reflect what we think of as value; customers define it.
- Products and services that were once new and expensive are sometimes expected to be FREE. For example, we once paid for broadband.
- Just as suppliers demand loyalty, so do customers.
- Both high quality and best prices are expected.
- Customers seek simplicity, proliferation and duplication are frustrating.
- Intriguing new and innovative products and services will be interesting for customers that want t
- Products and services that offer customers the chance of feeling or being treated differently; the i-phone, designer fruit juice and a financial services package are cases in hand.
- Products and services that create an experience and enjoyment for the customer at the point of purchase will afford enjoyable memories.
- People want to feel good about the things they buy; therefore, sellers that are socially responsible or ethically will be valued.
A proposition of value
It follows that if we understand what customers’ value we should make known that we can provide the value sought by our customers in a compelling way in comparison with your competitors. Thus customers and prospects may see and understand why they should buy from us
Has your company got a value proposition? You might answer the question with an emphatic “YES!”, and if this is so, try jotting it down. If we are unable to state what makes our offer more attractive to our selected customer groups more effectively than competing offers, then, it is likely that we will not have a unique strategic position.
Let me illustrate the point with some well-known examples. For example, the written value propositions of the following three businesses describe the positions they aim to take in their customers’ minds.
SOME EXAMPLES
- ‘The internet in my pocket – Apple’s iPhone
- ‘Ladies and gentlemen serving ladies and gentlemen’ – the Ritz Carlton Hotel chain
- ’25 Years: Still red hot!’ – Virgin Atlantic.
Finding a Value Proposition
There is no fixed format for defining a value proposition but we can find one if we dig deep enough to find the real reason why customers buy from us? Remember they’re only interested in what our product or service will do for him/her. If all we are doing is telling our customers about the knobs and whistles on our products we will never find out what’s important to your customers.
There is no fixed format for defining a value proposition, but a series of questions – such as those listed below – will help Find the Value
A seven-step process to create a value proposition
- Create a list of 7 key features of your service offer
- Ask which 3 features that offer the value being sought are the most relevant
- Ask which of the three is the most important
- Ask why that feature is more important
- Recap and ask again, why that point is so significant
- Ask who else might value that sort of benefit
Try to convert your findings into a few words
The point about being different
The question of SUSTAINABLE differentiation is also important. If our value proposition is any good our competitors will want a slice of the action. The answer is to develop a special and distinctive activity system; in other words a ‘value system’ that offers additional inimitable advantages of importance to customers and which also distinguishes our business from its competitors.
Consider for a moment the difference between Zara and Marks and Spencer, easy Jet and British Airways, as well as the Ritz and Premier Inns
When you consider each case we can see how a company’s activity system can give its offer sustainable competitive strengths – even advantage. Thus if business marketing strategy is about being different then the essence of superior value is to select and to perform activities differently, or to perform different activities to those of competitors such they that cannot imitate or equal with their operations.
One last point; approaching sustainable differentiation in this way is dependent on creating a unique combination of activities (and competencies) that support and reinforce one another.
Now try your hand at writing your own marketing plan! Click here
THE PURPOSE OF A BUSINESS
There is only one valid definition of the purpose of a business and that is to create a customer. This is wonderful thought. To create a customer actually instils something that suggests that the customer is so important that he or she is ours to look after and keep for ages!
The majority of business owners and managers do this: they come up with a product or service, and then they expect to go out and find people to buy their products.
This is a colossal mistake!
If you have tried marketing this way, then you know how exhausting, time consuming and frustrating it can be. The reverse of this approach is to find the market first, find out what the people want, and then… let them buy what they have told you they want!
Let me give you an example. Glen, makes bespoke design and build wrought iron products. When I asked him who is customers were, he told me ‘anyone who’s interested!’ When I hear that sort of thing I start to wince — like sitting in my dentist’s chair and being told ‘Now relax this won’t hurt!’
When I asked him what was the one thing his customers wanted most such as; the best metals? A secret process? Friendly approach? An endorsement? It turned out that what his customers were really hungry for was real craftsmanship, with requirements ranging from weather vanes to car parts, and from garden gates to household ornaments, people prepared to pay the going price – and more!
Customers buy from us because they see something they want. We think it might be the product or service we offer. But invariable the value and experience that is wanted is something deeper. We have to find this, bottle it and use it as medication.
What do customers buy?
Here is a favourite example of mine. Reckitt Benckiser’s medicinal lemon drink Lemsip provides a great example of how to attract customers based on their emotional needs – quite unlike the efforts of Beecham’s, a close competitor, whose marketing is based on functional needs Beecham’s customers.
In fact, Lemsip has enlarged its customer base by creating customers through its appeals to different customer groups. In the late 1990s, Lemsip was positioned to meet the needs of busy women seeking the comfort of a warm, soothing medicinal drink. You may remember the campaign’s compelling offer was built around the statement ‘a hug in a mug’.
A few years later (2003), Lemsip moved into another segment, young career-minded male executives, wishing to protect their advance up the corporate ladder, from other career-crazed rivals. You might recall the positioning statement at the time: ‘Life goes on’.
The concept of a ‘hungry crowd’!
At the end of the day a ‘HUNGRY CROWD’ is a steady flow of a group of customers that value what we have to offer and whose values match ours
The point of all this is to start to concentrate on spotting customers – hungry crowds. Listen to what people ask for, dream or complain about. It’s not enough for us to sell to people who CAN benefit from what you sell; we need to sell to people who WANT to benefit from the SOLUTION we offer. In fact you’ve got to find people who will CLAMOUR for your product, so that sales and marketing becomes a lot easier…
Where is your ‘hungry crowd?’
There are lots of niche markets – our job is to find one – one around which we can build our product or service. Look at it this way – every product or service has the potential to appeal much more strongly to a definable group of people – or ’hungry crowd’ – more than it would appeal to everyone else. When you spot a ’hungry crowd’ and tailor your products and services to it, winning sales becomes much, much easier.
There are several techniques we can use to find a hungry crowd; research is one, market sensing is another. There is no shortage of techniques. In the process though our assessments should unearth answers to three relatively distinct questions; ‘who’ will buy, ‘what’ will be bought and ‘why’.
The first question; ‘Who is buying?’ attempts to describe the characteristics of the customers within our current market or market to be examined. The second asks what needs and wants customers have. Here we unbundle all the features of a purchase so that we arrive at a list of what is bought. And third ‘Why are they buying?’ examines the behaviour of our customers. Taken in unison, we place ourselves in a better position to create a proposition of value with which to match our customers’ needs.
Make sure your ‘hungry crowd’ meets the right criteria
It is one thing to find a hungry crowd but quite another to choose the right one. Some criteria are needed. Here are some
1. Does this hungry crowd have something in common with our values?
2. Does it read certain publications, or visit specific websites? Are people in it members of certain clubs or associations? Can we easily reach this group in large numbers?
3. Is this group ALREADY spending money to meet the need we think they have or achieve the goal that we can help them with? How do you know?
4. Can our proposed market afford our solution?
5. Does our proposed market WANT our solution?
6. Can we give a compelling reason why this group should do business with us instead of someone else?
7. Will we enjoy working with this particular ‘hungry crowd’?
8. Which unique collection of capabilities would enable us to do more for our customers than our competitors? and
9. What capabilities do we need to be able to do more for our customers than competitors?
If you can’t say ‘Yes’ to all of the above questions, then I strongly suggest that you go back to the drawing board and save yourself a whole heap of heartache.
A NEVER ENDING PROCESS!!!
The question a business leader should ask is: ‘Am I rediscovering new viable hungry crowds?’ No customer group will remain the same forever. Aggressive competitors not only imitate attractive offers, they create new ones. This means that established companies must continually strive to discover new customers for their business.
We must continually watch out for what our customers want and need. Some of us have a tendency to think that this means developing new products or services. But this isn’t necessarily the case. Customers may enjoy our products and services but have different and changing priorities. We need to identify and keep abreast of these.
Often we can find new customers or changing needs and priorities and create fresh space to operate in. Then of course there are customer groups that are not being served by our products and services and we need to find them too.
Remember this takes time so do not rush but think through what we have said here and think about what you need to do to UNDERSTAND your customers needs and priorities over the long term!
Now try your hand at writing your own marketing plan! Click here
The starting point is to define your company’s overall financial goals. Are you able to do this?
The next step is set out some marketing objectives that would enable us to achieve our financial goals. Actually increasing sales and profit may be more achievable than one might at first think!
Many business owners and managers are daunted by the idea of being unable to increase their profits. They think it always involves increasing the number of customers. But when we think about the options, we get some interesting results, as the tables below show:
| OPTION 1 | Target Increase | Current Result | Net Increase | Total Increase |
| Increase the number of Customers by: | 10% | 20 | 2 | 22 |
| Increase the average spend by: | 10% | £100 | £10 | £110 |
| Increate the number of times people purchase by: | 10% | 10x | 1x | 11x |
| Your turnover will increase by: | 33.1% | £20,000 | £26,620 |
| OPTION 2 | Target Increase | Current Result | Net Increase | Total Increase |
| Increase the number of Customers by: | 30% | 20 | 6 | 26 |
| Increase the average spend by: | 20% | £100 | £20 | £120 |
| Increate the number of times people purchase by: | 30% | 10x | 3x | 13x |
| Your turnover will increase by: | 100%+ | £20,000 | £40,560 |
What the tables show is that an increase in sales turnover can be obtained by setting targets for sales increases in three separate result areas. These are first to increase customers numbers, second to increase the average spend and third to increase the frequency of purchase.
If we know what the numbers are for our business, multiplying the three figures together should give us our existing turnover. This enables us to do ‘what if’ exercises to see what we can achieve. If we do this continually and focus on increasing each category by just 10% we achieve more than a 10% increase in our business, we accomplish a 33.1% increase! And if we increase each or any of these factors by more than 10%, we will achieve even greater results.
By concentrating on these factors, and the leverage they can give us, we can develop a mindset to identify and implement the activities required to give our business the growth we target.
Now try your hand at writing your own marketing plan! Click here
