Archive for November, 2004
Making “value” meaningful again
Here’s a home experiment for you to try. Read the following outloud:
Customer value.
Market value.
Value add.
Value marketing.
Business value.
Value based management.
Driving value.
Unlocking value.
Hidden value.
Value, value, value!
Has the word "value" started to lose it’s meaning? Say it enough and it starts to sound like a non-sense word. Well, take any business setting, talk to a typical consultant, read a popular business magazine/book (or even a soon to be popular blog) and you’ll notice this same loss of meaning. "Value," at least within a business setting, has ceased being valuable – it has lost it’s meaning. Everywhere you look, you’ll find people talking about value…but do they really know what it means? Too often the definitions used are vague, watery and have a huge financial bias. More importantly, these definitions usually don’t assist with any kind of meaningful dialogue with customers.
How can we fix this? I argue that we can easily regain the power and usefulness of this word in business by constructing a useful and easy to agree upon definition. Let’s try this one on for size:
V= QSP/C*
What do the letters stand for?
Q = Quality, which implies a desire for effective products and processes, without necessarily being flashy or extravagant.
S = Sustainability, which implies a desire to solve problems once, well, and leverage that solution over time.
P = Personal Value, which implies a recognition that good business solutions improve the quality of life for those directly and indirectly involved .
C = Cost, which implies a sensitivity to using financial resources well, rather than simply a short term "low price" mentality.
V = customer specific Value.
The equation can be used as a guide to explore a customer’s value system…and therefore, which aspects need to be emphasized during product development, marketing and sales. The beauty of this equation is that it is customer centric and does not rely solely on the topic of cost. In that sense it is balanced and timely…especially if you directly engage with your clients on defining the right side of the equation.
Hmmm…a tool that allows you to directly talk to your clients about more than the gross feature of your product/service…now that’s valuable.
*Although I’d like to stake claim to this equation, it is not of my own construction. However, the source has been lost to me. If you know where it is from, send me a note.
AMA offers a new definition of marketing
After almost 20 years, the American Marketing Association (AMA) has updated its definition of marketing. The first one was developed in 1935 by the National Association of Marketing Teachers, the predecessor to the AMA. The AMA adopted it in 1948 and didn’t revised it until 1985…50 years later! This original version stated that, “Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals.”
So, what’s the new definition you ask? “Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”
Check out the Peppers and Rogers Group site for more details, along with some interesting commentary on What’s Your Brand Mantra?
Value versus pitch
Here’s a new strategy for you: offer to satisfy your customers basic needs better than your competitors. Sound simple? Read on.
In a recent article from strategy+business, authors Patrick Barwise and Sean Meehan argue that if more companies paid attention to the basics (delivering measurable value instead of a new sales pitch), we would all be better off – better products, better delivery, better profits. Barwise and Meehan offer evidence by way of Shell Oil Company and European wireless provider Orange PLC but there are more out there.
Take Herman Miller, Inc. – one of the big three office furniture manufacturers, creator of the Aeron chair and home to many Ray and Charles Eames designed products. During the 90’s, Herman Miller developed a subsidiary company called SQA – an acronym for the value they focused on bringing their clients: furniture Simply, Quickly and Affordably. The basic insight was that the existing industry players (Herman Miller, Steelcase, etc) had increased product performance to the point that the furniture exceeded the expectations of 80% of furniture buyers. Once product performance was more than good enough to meet their needs, the customer’s priority shifted to a new job that was not being done well enough – fast, reliable and convenient purchase and delivery. Double digit growth ensued for most of the 90’s.
Why aren’t all companies taking this approach? Frankly, because it’s hard work and finding a new way to pitch your product is easy by comparison. The evidence is everywhere. We’ve all seen the marketing campaigns: brighter colors, less calories, bigger screen, now it takes pictures! Listening to your customers, instead of adding to the cacophony, can be hard. They’ll tell you things you don’t want to hear (but probably already know). But the message is there, focus on customer value instead of products and you will succeed.
Need help determining where your company is focusing on product instead of value? Take a look at Mohan Sawhney’s (Professor of Technology, Kellogg School of Management) Perspectives on Marketing Excellence for some common mindsets.
Hmmm…there really is a viral marketing association.
The Viral+Buzz Marketing Association is alive and they have themselves a manifesto. I find this whole approach to marketing fascinating – let your customers (or would-be customers) carry your message…and then infect all of those within an email radius.
The word of mouth marketing epidemic has spread itself across a variety of business topics at a fevered pitch – like customer satisfaction. It’s no wonder why Jackie Huba of creatingcustomerevangelists.com is a member of the VBMA. Her and partner Ben McConnell’s philosophy is simple, "When customers are truly thrilled about their experience with your product or service, they can become outspoken "evangelists" for your company. This group of satisfied believers can be converted into a potent marketing force to grow your universe of customers." Read their Customer Evangelist Manifesto at changethis.com for more.
And don’t think this is a fringe effort, the Harvard Business Review is asking very similar questions of its subscribers. In December of 2003 it published The One Number You Need to Grow. What is that one number? More answers in the affirmative to the following question, "Would you recommend my business to a collegue or peer?"
Are you an evangelist? What businesses would you recommend?
Too many blogs…can’t keep up…drowning…[blub blub blub]
Ok…I’m still new to the practice of reading blogs, but now I’m hooked and drowning with the amount of information that is out there. You have this problem too? I had a friend recommend bloglines – a free service which allows you to search, subscribe, publish, share blog content.
What is the purpose of business?
So here’s a question for you, "What is the purpose of business?" Simple to answer right? Unfortunately, the answer most people provide offers much more insight into themselves than the reality of business. So what answer would you give?
- to provide stockholder value
- to bring about the mission and/or values of the company
- to serve its employees
- to make the best products for its customers
The list of possible answers keep on going. I should know. During a random survey, I asked this question to over 50 people from various industries, organizations and levels – none of them got it right….and yes, there is a RIGHT answer.
"What is the purpose of business?"…drum-roll please…To create a customer. Simple as that. All of the other potential answers are merely byproducts of this fact, including profit, happy employees and good products. Read Peter Drucker’s article entitled "The Purpose and Objectives of a Business" for more details, but this statement is an immutable fact of all business.
So, what does this mean for you? Anything your business does must ultimately result in a clear and tangible increase in customer value. To quote Mr. Drucker, "What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him." Providing real innovation and competitve advantage in your industry therefore, is about redefining and better understanding what that utility is. Figuring this out creates customers…and takes them away from your competitors.
