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Betterment…Is A Strategy July 12, 2013

Posted by David Dirks in business strategy, marketing, Marketing Buzz, Sales Strategy/Tactics, Sales Tactics.
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DirksProPhoto Why do people buy your products or services?  Are they forced to buy them out of necessity? Do you have a monopoly? Probably not. But understanding why people buy – and it’s often not on price – is one key to business longevity.

If you sell products or services that can easily be obtained elsewhere, why should they buy from you?  Think about yourself as a consumer for moment.  When you make a purchase – are you making it to contribute to a life of mediocrity?  No.  We buy things because of one basic reason: betterment.  I buy milk as a staple but the place I buy my milk is the place that offers me the best tasting milk at a fair price.  I don’t buy my milk anywhere else because I feel the milk I buy there is better for me and my family.

Betterment.  It’s a word…a noun to be exact.  Websters defines it as “becoming better” and “an improvement that adds value to property…”  Consider yourself “property” as a consumer.

As a business owner, your job is to convince the rest of the world (or at least your wedge of it) that your product or service offers someone a way to better themselves…their lives…their families.  In a world where everything seems like a commodity, your edge is communicating how your company delivers on improving something in the life of your customer and, most importantly, your prospective customers.  The success of your business model depends on it.

That said, if betterment was easy to define, everyone would be doing it but few are – just look around you.  Most business owners are stuck on price or try to differentiate based on product or service features or benefits.

Apple has long been a master at parlaying great technology and wrapping it around betterment.  Apple marketing and sales messaging is almost centrally focused on how Apple products enhance or better a life.  And they are able to deliver on that promise to (if you are a pc head, you don’t get this but we’re ok with that).

If you follow a blog, perhaps this one – you have the expectation that spending time here will better your life or business in some way, shape or form.  Otherwise, you wouldn’t spend you time on any blog that didn’t offer and deliver on that.  The most popular blogs are followed because people get something out of them (entertainment value, economic value, etc.) that they can’t find easily elsewhere.

The first step on the path of a message of betterment is to translate what your product or service does to get a customer there.  The destination is betterment.  For example, a landscaper cuts the grass and makes the property look great each week.  Where’s the betterment? How about the time it frees you from having to do it and spend more time on things you want to do instead – like spending more time with family.  By making your property look like an estate, you feel that your property and the quality of your life are enhanced (as opposed to looking at tall grass and weeds).

In other words, a betterment message is thinking of your product beyond the standard features and benefits it offers.  How does it translate – tangibly or intangibly – into a path to making some aspects of a customers life better?

The second step is making sure all of your marketing and sales messaging is zeroed in on the elements of betterment…clearly…concisely…and consistently.  You have to be able to draw a picture in the mind of the customer so they don’t need an algorithm to figure out why your product is the one they should buy.  They should “get” betterment.

Never easy to do but clearly worth the investment of time and effort to get there.  Betterment – it’s a strategy.


The Rise of Lower-Priced Premium Quality May 21, 2013

Posted by David Dirks in business strategy, Sales Strategy/Tactics, Strategy.
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DirksProPhotoThere is a very distinct trend in product and service development today that I feel has major implications for businesses of all sizes and industries. It’s the idea that cheaper or lower-priced products are being design and built with far better quality than just a few years or even a decade ago.

Take the Ford Fiesta for instance. This is an economy car (lower priced, low expectations) that’s been around for a while but like the Chevy Cavalier or the Ford Escort, suffered from the traditional “low-priced, low-quality” syndrome. The 2012 Ford Fiesta is now a highly rated car (edmunds.com) with a still-low sticker price. To get the Fiesta to this point, Ford had to make a commitment with itself to find ways of incorporating select design & engineering elements from their higher-priced, higher quality brands and drilling them into the designs of their economy car line. And they still had to provide this economy car at an economy price (starting at $13,000).

For another example, both Hyundai and Kia had to learn the same hard lesson across all of their product lines when they came to the U.S. market just a few decades ago. Back then, both were the laughing stock of the car industry when they tried to produce less expensive cars in all categories but fell short with major quality problems. What they learned is that while some American consumers want to spend as little as possible…they still want to be able to show value for whatever money they spend. Now both offer less-priced cars at higher than average quality. A market strategy win for both.

Remember the Yugo? The idea was great – a super cheap car for the masses. Sure, you could buy perhaps three or four Yugos for under $12k all in but there was one problem. The Yugo broke down almost immediately upon trying to leave the dealership. That was the end of Yugo.

Let’s take wines as another example. There was a time when there was very cheap wine (Boones Farm Strawberry wine ring a bell?) or very premium wines (at $20 or more a bottle). There was little in the way of a great Merlot or a Sirah at $8 a bottle. However, for more than a few years now, consumers have been treated to a very competitive industry that has figured out how to provide high quality wines in the $8 to $14 dollar range.

So what’s this mean for you and your business? Here some thoughts:

– Do you offer lower-priced, higher quality products or services to you customers? The key is figuring out 1) which features & associated benefits from your high quality offerings can be 2) engineered into your lower-priced offerings.
– Check your competitors. Who is offering a slightly upgraded product or service at a competitively lower price? If I’m your competitor and I know I have to have a line of basic, lesser priced products or services for those customers who want them, my best strategy for outflanking you is to offer a slightly improved version. One that has the kind of feature(s) and benefit(s) often only found in the premium lines.

Consumers today are far less tolerant of cheaply priced, lower quality products than ever. Rest assured that there is still quite some amount of junk being sold as a product or service – but therein lies your competitive opportunity. Seize it.

Shifting Your Business Strategy – 6 September 28, 2009

Posted by David Dirks in business strategy.
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David DirksThere are plenty of times when changes within your industry justify a shift in your core business strategy.  Industry changes like new product or service innovation, pricing, manufacturing processes, delivery mechanisms and such can create an opportunity for the business that is able to detect and executive on such changes.

Hewlett-Packard is just such a company that has recognized some major changes within the personal computer industry and is striking hard to take advantage of them.  In the September 9, 2009 issue of the Wall Street Journal,  writer Justin Scheck wrote that, “Hewlett-Packard Co. is using the dismal technology market to  bolster its position as the world’s largest personal-computer maker.  How it’s doing so is evident from a $298 laptop it sold at Wal-Mart Store Inc. in July.”

H-P has long been a big player in mid-and upper priced personal computers.  You could call it a ‘premium player’ in the non-Apple world if you compare it to the low-priced gang of Dell and Acer in particular.  Like Apple, H-P has positioned it’s brand as a higher quality, premium priced PC maker.  The folks that I  know who own H-P sound very similar in their praise and brand loyalty to people like me who are just nuts about iMacs and Macbooks.

So let’s review the changes in the PC market that led H-P to make a shift in its core strategy of positioning itself as a premium PC brand (still much less in price than Apple but higher than Dell or Acer) and shifting some emphasis on low-cost PC’s.

1.  H-P demanded cheaper rates from both suppliers and contract manufacturers using the leverage from its huge sales volume to drive prices down.

2.  According to the Wall Street Journal, it has “taken advantage of an improved supply chain to quickly design and deliver new, less expensive PC’s.”  H-P is working closer with retailers like Wal-Mart to improve sales forecasting for PC demand.  They are focused on maintaining a competitive edge based on large efficiencies in their entire design-to-ship process.

3.  H-P is also taking advantage of a weaker competitor in Dell.  With Dell not willing to match H-P with discounting of its own, H-P has been able to increase market share by almost 20% in the second quarter of 2009 (global shipments of PC’s).

While H-P has lowered it’s margins on PC’s, it is faring better than it’s other competitors and the additional marketing share (meaning more volume!) helps to keep the profit margins moving in the right direction.

What does the H-P experience mean for you?  Here are just a few top-line points to consider for your own business:

1.  H-P has demonstrated that it can take in the changes going on around it and move quickly with a strategy to take advantage of it and trounce competitors.  Lot’s of businesses note changes in their industry, the economy, global shifts, competition, and consumer preferences but how many are willing to act on those changes?  Are you prepared to take in the changes in your business & industry and create ways to take advantage of them for your business?

2.  H-P is willing to make a shift from its core strategy in order to increase market share and keep profits moving in the right direction…up.  Many businesses, comfortable with strategies that have worked very well in the past (or recent past), are reluctant to change or shift strategy and risk ‘killing the golden goose’.

3.  Outside of external changes, H-P continues to find ways to make their PC’s cheaper by constantly improving its own internal operations.  H-P demonstrates that sometimes it takes a two-pronged approach to get the results you need instead of relying on one factor alone to help you grow your business.  In their case, the combination of leveraging a changing PC industry landscape and creating greater operations efficiencies from within is the perfect duo for increasing market share and keep profits stable.

Shifting Your Business Strategy – 5 September 11, 2009

Posted by David Dirks in business strategy.
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David DirksShifting a business strategy doesn’t always mean that it will be successful.  However, business is about risk and making investments in strategy options that seemed to show the most promise.  Often times the need to shift business strategy is driven by events outside the span of control that a company normally exercises.  Then again, prior business strategy decisions that didn’t pan out with the necessary results will require you to re-adjust.

IBM has long been known for its huge investment and consistent commitment to research & development, the incubator for innovative products and services the feed revenues and profitability.  In the September 7 issue of BusinessWeek, there was a story on how IBM is making some significant changes in how it manages its R & D process.  One change that is particularly eye-opening is how IBM is shifting how it shares and partners with others in R & D efforts.

Traditionally, IBM research was in locked-down mode; a closely guarded and very secretive organization.  Now, IBM is cutting deals with corporations and research universities across the globe to collaborate on research.  Intellectual property issues aside (and that is no small issue by the way), this shift in business strategy gives IBM several key advantages:

1.  By sharing the cost of R & D with key partners, IBM gets more bang for its research budget than ever before.

2.  The collaborative process allows IBM to get viewpoints and insights to research that it normally wouldn’t get access to and thereby exposes its researchers to potentially more ideas.

3.  Globalization of IBM research by collaborating with foreign governments and major research universities gives IBM a leg-up on competitors when it comes time to start selling products and services.  If you have a critical relationship with someone like IBM that is working, why wouldn’t you consider buying their products and services?  This strategy allows IBM to develop key customer relationships in places that it had not considered before in the context of sharing research.

Will this R & D strategy shift work?  The jury is still out on that and it will take some time to see the full measure and benefit of the new open collaboration on research.  IBM is willing to make a real investment in this strategy primarily because it has so many positive outcomes for the company if it executes it effectively.

Shifting Your Business Strategy – 4 September 4, 2009

Posted by David Dirks in business strategy.
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David DirksThere is a point when the definition of shifting business strategies gets a bit muddled.  In general, there are two types of business strategy shifts.  The first is when you make adjustments or shifts within your core business.  For example, a local dry cleaner may want to expand revenues by adding a pick-up & delivery service.  That adjustment is relevant to their core business of providing dry cleaning services to the public.  It’s a shift from relying on just the brick & mortar building where people bring their garments to them.

The second shift is when you make an adjustment to your business strategy that is outside the core business.  Using our dry cleaning example, if the dry cleaner decided to utilize some extra space and open a cafe within his/her shop, that would be considered an out-of-core strategy.

In our current economic times, not a day goes by without another large corporation declaring that it is shedding ‘non-core’ operations and ‘re-focusing  efforts on our core business of (you  fill in the blank)’.  This is all neatly packaged as a ‘retrenchment’.  It’s more aptly called a ‘retreat’.

Why is that?  The answer is rather simple.  In a roaring economy, it’s far easier to justify shifting business strategy outside of your core business in the name of more revenues and profitability.  That old cliche, ‘a rising tide floats all boats’ comes to mind.

When the economic tide finally goes out something bad happens.  Those non-core business strategy shifts can sometimes become sink holes for cash or they require greater and greater internal investment to keep them moving forward…all at a time when capital is scarce.  Or capital is all of a sudden guarded like Fort Knox (unlike the free wheeling days of the booming economy).

When this happens, everyone heads for the hills.  The golden geese of last year suddenly have no supporters that want to keep them.  One of the main issues is that when a non-core business hits the skids, it’s much tougher to nurse it back to health.  Why?  Mostly because the intellectual capital of the company is not well invested in the non-core strategies.  There’s another saying is appropriate here:  Times of high profitability and growth can hide a lot of mistakes.  When the music stops, all of a sudden things are much more complicated and there isn’t enough talent available to fix it.  Again, it’s outside their core knowledge base.

A lot of times these non-core strategies get sold off to the companies that should have had them in the first place.  Now they can pick these assets up for song because the seller can’t get rid of them fast enough.

I know what you’re thinking.  Isn’t Berkshire Hathaway, Warren Buffets conglomerate, an example of shifting business strategy out of your core business?  In a word, no.  While Buffet buys and owns many different kinds of businesses, each runs independently and sticks to its core business strategy.  Geico, for example, was primarily known for car insurance but has expanded it’s core strategy to include other insurance lines like homeowners insurance.  Geico doesn’t own anything outside of that core business strategy of providing insurance.

So for now, we’ll continue to hear about businesses of all sizes and shapes starting to declare that they’re going back to their core business once again.  In many cases, refocusing on the core strategies makes sense.  However, when the next economic boom hits, they’ll be a migration once again to chasing profits by adding non-core business strategies to the mix.

The relentless drive for increasing shareholder value and profits will once again find executives scrambling to acquire or develop cash cows outside of their core business strategy.

Shifting Your Business Strategy – 3 August 24, 2009

Posted by David Dirks in business strategy, Solving Business Problems.
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David DirksWaiting for things to ‘get better’ is not a strategy.  Or least, it’s not a winning strategy.  Waiting for things to ‘get back to normal’ is just an opportunity for someone else to eat your lunch.  I hear too often from business owners who echo those sentiments.  Whatever the outcome of any economic cycle, the high performing Big Dogz who grow through them are the ones who win longevity.

It’s quite natural for a business owner to want to hunker down, close the hatches, and wait the economic storm out.  Some businesses will survive and others will not.  Let me ask you: who wants to be just a ‘survivor’ when you can do better?

How many do you know that own a business that are using the ‘wait and see’ approach as an excuse to hide in the bunker until the shelling stops?  Probably more than you and I know of.

The good news is that you can take advantage of this or any other times of great uncertainty by looking for opportunities that you can leverage to grow your business.  I’m just scratching the surface here but some things to consider:

  • Work harder to find ways to free up cash that can be deployed to expand your business.  The common response in tougher times is to free up cash and then hoard it until the good times come again.  Obviously not entirely out of order to keep some cash in reserve but many businesses just hoard it.  By the time anyone realizes the good times are back again, it’s too late for you to find opportunities to invest some of that hoard.

What to invest in during tough business climates?

  • Upgrade to more efficient and powerful equipment.   The right investments could reduce your costs on a product or service line is one possibility if it makes your business provide services faster, better, and cheaper.
  • You could take advantage of a weak competitor in a nearby geography that you currently don’t serve and hire additional sales firepower to build business there.
  • Buying a competitor when it makes sense and the price is right.
  • Develop & expand your product and services lines.  We’re often quick to prune the losers (or at least we should be) and much too slow to replace with products/services that could keep revenues moving forward.
  • Upgrading customer services.  Too often this is left in place or cut back.  High performing companies make sure that any customer touchpoints are responsive and best-in-class.
  • Establish a strategic partnership(s) with other businesses that are complimentary and have high potential to drive revenue growth.  Hunkering down can blind us to opportunities that are staring us right in the face if you only took the time to look.

None of this is easy to do.  That said, what it does take to do this well is 1) constant and deep scanning of our business environment to find and connect with opportunities and 2) the internal ability to move on those opportunities that won’t be there if you wait for the ‘good times’ to come back again.