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Value Chain Marketing: The Outside-In Inside-Out Dynamic

 

 

Value Chain Marketing Strategy[Editor’s note: This installment is part of an ongoing series. You can start at the beginning in order to follow its logical sequence.]

by Kenneth Rudich

Every enterprise faces the outside-in inside-out dynamic. It springs from the inclination to at least break even, if not end up with revenue surpluses.

The treatment of this dynamic partially depends on the type of enterprise involved, whether it is for-profit, not-for-profit or public sector oriented, such as a government entity. This can be expressed with the following formula:

Revenue – Costs = Profits, or Revenue Surpluses, or Break Even (a balanced budget)

This formula depicts the sought after accomplishment that is behind the pursuit to be attractive, competitive and sustainable. It gets resolved by how an enterprise handles the outside-in inside-out dynamic.

For the sake of clarity, we’ll assume a for-profit perspective going forward.

Outside-in Thinking

Value Chain Marketing StrategyOutside-in thinking focuses on creating value from the market perspective. The objective is to identify consumer needs, wants and motives; and then use the value chain to engineer the fulfillment of them.

Satisfying needs, wants and motives involves the facility to provide consumers with a perceived benefit or gain; or to offer a solution for getting relief from a pain point. This frequently takes the form of a product, a service or a combination of the two.

A good idea — the right idea — is the thrust from which this endeavor is born. A solid execution — the right process — is the nourishment for giving it an enduring life.

Let’s begin with a product.

Product Characteristics

Value Chain Marketing StrategyConsumers are apt to use a product — take, hold or deploy it as a means of accomplishing a purpose or achieving a result. Its utility value typically revolves around the parameters of fit, form and function.

Fit refers to the product’s suitability for mating with the objective or desire at hand.

For example, consider how well Google Cardboard mated with the surgeons’ needs as explained in the introduction to multidimensional analysis. Or how well a hammer fits with pounding a nail, but not so much if you want to crush grapes for making wine.

Form centers on the physical dimensions and appearance.

Consumers pay close attention to physical appearance, because it conveys visual information like perceived usefulness, ease of use, safety, durability, desirability and presentability. This last is especially important when they believe it says something about them or adds flavor to the personality they want to project.

Function speaks to how it should perform or operate.

This is a core concern. Nobody wants a car that is euphemistically known as a “lemon,” or a hoverboard that erupts into flames right under their feet.

Service Characteristics

Value Chain Marketing StrategyAn idea for a service poses another sort of challenge.

It tends to be experienced — to encounter or undergo (an event or occurrence). It comes with the challenge of consistently forging trust — trust in the ability to perform the service as promised, reinforcing the trust during the actual performance, and replicating the trustworthy performance with each repetition.

For example, have you ever met someone who will trust only one person to do his/her hair? From a process standpoint, the provider is perceived as having perfected certain skills that differentiate his/her performance or technique.

Motives Characteristics

Value Chain Marketing Strategy

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Motives refer to gratifying the underlying emotional or psychological needs that frequently accompany human behavior.

To give a sense of what these needs are or might be, we can enlist Abraham Maslow’s Hierarchy of Needs for illustrative purposes.

Maslow, a well-regarded American psychologist from the recent past, contended that human motivation generally moves through a graduated pattern as displayed in the pyramid-shaped chart. The most fundamental needs are at the bottom levels, while higher order needs, such as esteem and self-actualization, are at the top.

Whether a consumer is consciously aware of it or not, underlying psychological motives such as these often drive the search for satisfying a need or desire, and they can influence the selection process while deliberating which product or service seems best suited for achieving their particular take on fulfillment.

Ipso facto, it’s no coincidence that a goodly number of products and services tend to embody underlying psychological needs in some fashion or form, sometimes directly, sometimes indirectly and other times symbolically.

Savvy marketers tap this influence to heighten the impact of the marketing function, knowing full well it will do so either at the conscious or subconscious level of the consumer.

It might be incorporated into the actual product or service itself; and/or woven into the messaging of the communications component.

For example, this practice can be seen in the insurance industry, where consumers underlying need for a sense of security gets leveraged (e.g., “You’re in good hands with Allstate.”).

It’s also used with luxury automobiles, where the need for a sense of achievement and esteem are symbolically suggested. The same can be said for other high-end products and services, such as upscale retail boutiques, restaurants and coffee shops.

In summary, outside-in thinking depends on the artful handling of the needs, wants and motives mix.

Putting It Together

Value Chain Marketing StrategyFew instances exemplify this better than does Apple’s introduction of the original iPod in 2001.

From a market characteristics standpoint, this was before the arrival of smartphones and streaming services. It was a period of time when people lugged around “boom boxes” on their shoulder or next to their hip, or they carried portable CD players which were limited to playing one disc at a time, prompting the need to bring along extras for extending its utility function and value.

Apple blended fit, form, function and motive for marketing the then unique iPod product, but in a way you might not really expect.

We’ll hold off on product fit for a moment, but the form was small as in pocket-sized. The function was storage for 1 gigabyte of MP3s. The motive lay in its ability to facilitate people’s emotional desire to connect with their music, which qualifies as an underlying psychological factor.

Ordinarily, one might expect the product function to be the pivotal selling point, only in this case it would have made for a very dry and abstract value proposition — to wit: what does storage for 1 gigabyte of MP3s really mean to a consumer (this was a relatively foreign concept at the time)? Why should or would they get excited about it?

Instead, product fit became the pivotal moment. But it had to be done in a manner that would spoon-feed consumers with a clear idea of how it could fit into their lives and provide a benefit in the process. In other words, it had to implant a need/want desire they didn’t know they had for this particular type of device.

Content Marketing StrategyThe inspiration was to promote it as: “1,000 songs in your pocket.”

Can you see how the attributes of fit, form, function and motive have been distilled down into this one pithy little phrase?

How it resonates in the mind unlike “storage for 1 gigabyte of MP3s” ever could?

How it breathes life into the concept of making the whole greater than the sum of the parts?

This example illustrates a clever linking of the value chain’s Market Characteristics Component, Product Attributes Component and Communications Component (no doubt the Distribution Channels Component and Transactions/Operations Component also were involved in the bigger scheme of things, but not in the same critical fashion from a promotional standpoint).

Let’s now compare outside-in thinking with inside-out thinking.

To be continued: Value Chain Marketing: Inside-out Thinking

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Email: ken@marketing-strategy-management.com