Market Discipline: The Key to a Dynamic Marketing Plan
Jay Chalmers
MARKETING
In most companies, the marketing plan involves little more than deciding how much revenue the company wants to have for the year and how it intends to get it. Long before you make those decisions, however, you must do some very basic things. Good marketing is all about defining the value focus you want to bring to the business.
Another essential component of effective marketing is commitment. A poor marketing plan with great commitment will almost always beat a great marketing plan with little commitment. Before deciding what strategies to put into place, make sure you are truly committed to your marketing plan. Nothing is more destructive to an organization than creating unnecessary change. So when you set a new direction, it’s very important to stay committed. One good way to introduce change is by calling it a test. Even risk-averse people will often accept working in a test environment.
Marketing is all about communication, internally as well as externally. If you can’t communicate your focus and your commitment, you won’t get the results you want. Internal communication of your marketing focus and direction is more important than the external. If you do the job properly internally, the message will get delivered externally. On the other hand, marketing is not an inside-out process. The message has to be created from the customer’s perspective, not yours. Although it is critical to the marketing process, the internal communication doesn’t determine what you do. Customer needs determine what you do.
A marketing plan is worthless without good execution. The good news is that marketing is much easier to measure than other aspects of the business. Many companies measure but don’t hold accountability.
Before starting any marketing plan, you must make two key value decisions: your value discipline and your compelling values.
VALUE DISCIPLINE
According to the authors of “The Discipline of Market Leaders,” companies that dominate their markets do so by following one of three value disciplines. A value discipline is a highly focused strategy for delivering a specific kind of customer value. The most successful companies focus on one of the three value disciplines without sacrificing the other two. In other words, although they choose one primary strategy, they don’t neglect the other two.
The three key value disciplines are:
- Operational excellence. Operationally excellent companies focus on providing a quality product or service at the lowest cost. They are so internally efficient and effective that they can satisfy customer needs cheaper and better than the competition. Southwest Airlines is a good example. They have the ability to operate airplanes at much lower cost than their competitors. As a result, they can offer more flights and charge much lower fares than much bigger airlines.
- Product leadership. Product leadership companies lead the way in terms of product quality, performance and innovation. They lead the way in terms of developing and implementing new technologies and are the first out with new products. The main drawback for product leadership companies is the difficulty in managing change. Most people and companies have a natural resistance to change because they find it difficult and scary. The technology industry is a prime example. They work for years on a product and the day it gets released, they have to be working on the next generation of product. Also, creative people tend to pay less attention to the financial side. So product leadership companies have to work hard to maintain a balance between innovation and operational efficiencies. Product leadership is a high-risk, high-reward value discipline. Companies can go from nothing to billions to nothing again in a very short time.
- Customer intimacy. Customer intimate companies focus on developing very strong relationships with their customers. They specialize in the ability to customize their products and services to specific customers needs. Many companies talk about having this value discipline, but most fail to deliver on it. There’s nothing worse than trumpeting your exceptional customer service to the marketplace and not delivering on it. It’s better not to say anything than to raise expectations and not meet them. To excel in the customer intimacy value discipline, periodically walk in your customer’s shoes, Go through the actual process of doing business with your company and experience the whole process. Visit your key customers at least once a year to find out what you should be doing that you’re not doing. The customers doing the most business with you today often have the most potential for doing more business. Segregate your customers based on their importance to you and stay in close contact with the top ones. Visit a customer you have lost within the past two to six months (don’t wait longer than six months). You will be surprised at how willing they are to talk with you. More important, they will open your eyes about what it is like to be your customer and why they left. It may be that you didn’t drive them away. There could be other factors in the marketplace that changed the context of the relationship and caused them to become somebody else’s customer. Either way, you need to know why they left.
Customer intimacy is an attractive value discipline because it is human. Operational efficiency is not as attractive, but it is a very effective value process. But no matter what business you’re in, you had better be operationally efficient or you won’t be able to compete.
Identifying the #1 value discipline for your company is one of the most important decisions you can make. You can’t ignore the other two, but you must identify #1 and build your strategies around it.
The key is to find the right balance between your 111 focus and the other two. An example is Wal Mart, the unquestioned low-cost leader in the retail industry. Yet, when you walk into a Wal Mart store, the first thing you see is a Wal Mart employee asking if they can help you. Wal Mart has learned that they can’t totally ignore customer intimacy in the name of price. Keep in mind that your #1 focus can change over time if the industry changes.
Future success lies not in getting more and more new business. It’s in building the relationships you already have with customers and growing the amount of revenue you can generate with those relationships. To do that, many businesses are driving new products and services through their existing channels, in many cases becoming competitors with companies they previously were customers of
Many industries tend to have an overall focus on one value. But if every company in a particular industry tends toward one of the three disciplines, it provides an opportunity to differentiate yourself by choosing another discipline. Nordstrom is a perfect example. It separated itself from the rest of the retail business by focusing on customer intimacy. By doing so, they changed the industry and raised the customer intimacy level of every retailer in the U.S.
Bad news is opportunity. When something goes wrong, there isn’t a better time to improve the relationship with the customer. When things go smoothly and there is no need for interaction, you become vulnerable to losing the business. So even operationally excellent companies need to have a certain level of customer intimacy.
Everyone in the organization needs to know your #1 value discipline. However, don’t just tell them. The best way to communicate your values focus is to bring your staff together, have them read the book “The Discipline of Market Leaders,” and then have them work out your #1 focus among themselves. Ask, “What value discipline do you think we need to be?” You will be surprised at how well they identify your focus, If the staff disagrees with your #1 focus, it provides an opportunity for meaningful discussion around what the company needs to be doing.
COMPELLING VALUES
Most companies don’t clearly identify why the customer buys from them. They don’t identify the benefits that make the real difference in the buying decision. All products and services have multiple benefits. But not every benefit has the same value to prospective customers. The only customers you should have are ones where you can come up with a compelling value scenario.
Most companies do a very poor job of discerning between their features, benefits and compelling values. A feature is merely an aspect of the product or service. For example, in TEC, the group meetings, the speakers and the one-to-ones are features. They are merely events that take place. In and of themselves, they have no value. On a copier, a feature would be a document feeder or a sorter. There is no inherent value in having either of them on the copier. The benefit comes from using those features.
A benefit is the value derived from the proper use of a feature. A compelling value is a very powerful benefit that solves a critical problem for the customer. For example, the benefit of the group meetings in ‘FEC are the useful information, feedback and insights from the other CEOs. The compelling value is that this information solves critical strategic issues that may threaten the very survival of the business.
In the beginning of a sales relationship, customers assume the cost is overwhelming and the value is unknown, The goal of the sales process is to get the customer to the point where value exceeds the cost. The worst place in the relationship is to get stuck in “maybe.” This is the worst place because the salesperson won’t get the sale but the customer won’t directly say “no.” The last thing you want is to walk away with this kind of” maybe.” if you call the customer next week, he will have to think of a reason why he doesn’t want to do business with you. In fact, customers are already thinking about it when they say “maybe.”
When someone tells you, “I have to think about it, call me next week,” immediately say “no.” Recognize that you have failed to create a compelling value scenario in the mind of the customer and step back from the relationship. Instead, disengage from the customer and use a stay-in-touch program to keep the relationship going. From time to time, send the prospect things that will be of value and will maintain the relationship, If you honestly think they should be a customer, you don’t want to lose the relationship. But you have to let them make the decision about when to become a customer. You can’t do that by continually calling them and asking for the sale.
Pull marketing involves gradually pulling customers toward you by educating them about the benefit of your product or service. When they are ready to buy, then push hard, if they’re not ready to buy, use a stay-in-touch or some other kind of relationship marketing to keep the relationship going. In the beginning of a sales relationship, people usually just want to gather information. They don’t want to be pressured into buying. But when they get ready to buy, they want someone to help them make that decision. If a prospect isn’t ready to buy, back off if you don’t, you will push them away forever. When they decide they’re ready to buy, then you can aggressively move forward.
When you create compelling value, the customer perceives the cost of doing business with you as inconsequential compared to the value received. Compelling value comes in blocks. There are five- and ten-pound blocks of value versus 50- and 100-pound blocks of value. You will have a lot more success by putting 50- and 100-pound blocks of value on the customer’s value scale.
All human decisions are made on two levels: emotional and intellectual. Most marketers and sales people overdo the intellectual and under-stress the emotional. This is not a male/female issue because most female salespeople do not do a good job of handling the emotional side. The only way to know the value you’re offering is by the emotional reaction of your prospect. The emotional reaction determines how much a benefit weighs, whether it is important or not. To get to that emotional reaction during the sales process you must identify an important goal of the prospect and ask what are the chances of meeting that goal without your product or service, if the answer is, “It won’t make much difference,” you don’t have a compelling value. It may be of great benefit to others, but not to this particular prospect.
Once a prospect uses feeling words or non-verbal cues that indicate a strong feeling, stick with feelings. The next question you ask should be about feelings. For example, “You sounded frustrated there. Can you tell me about that?” Yet, most salespeople completely miss the emotional clue and go on to the next intellectual question. Once you miss the feeling, the prospect may not be willing to go back there.
To effectively market and sell your product or service, you have to figure out the compelling values based upon the customer’s perceptions. For example, TEC has five compelling values:
- Making decisions
- Accountability
- Growth (personal and professional)
- Isolation (lonely at the top)
- Change (introducing and managing change)
If a CEO doesn’t relate to at least one of these five compelling values, they aren’t invited to join TEC because they won’t derive any real benefit from the process. The whole point of the membership interview is to determine if a prospective member relates to any of these five compelling values,
The goal of the sales process is to create or uncover pain in the prospect, but only if you have the solution to that pain. The smaller the sale, the less clear the compelling value. The larger the sale, the more importance the compelling value has. By uncovering the prospect’s pain and demonstrating how you can remove the pain or solve the problem, you can create significant compelling value.
When developing your compelling value scenario, every question must lead only to compelling values. Do not ask questions that lead away from your compelling values. Talk to your customers on a frequent basis. Why are they really buying from you? What is it about you, the salesperson, the product or service or the organization that is different from the competition? The people who have bought or are going to buy your product or service have the answers; never assume you know the answers. The more assumptions you make, the more you lower the quality of your decision making. Assumptions are deadly to any relationship. In a good relationship, all assumptions are checked out.
Compelling values determine the direction of all your marketing strategies. They determine the behavior of the entire organization. They play a major role in your selling process and your retention strategies. Customers come to you because they see a compelling value. But that value can change over time as you satisfy it. Customers develop new needs that you have not identified. Your relationship with them may not keep pace with their evolving needs. To keep up, you have to develop retention strategies that keep you in touch with your customers and help you determine whether your product or service is still meeting a compelling value.
Leave-behind materials, if properly designed and implemented, can play an important role in the sales process. They give you the ability to talk to others and support your sales process. They should make all the points you want the salesperson to make during the sales process. Often, the person you talk to isn’t the decision maker. They have to talk to someone else who can make the decision. A leave-behind document should be designed to help those people sell internally.
TEC – Market Discipline The Key to a Dynamic Marketing Plan – Jay Chalmers