offers success to whoever seizes it

by Kenneth Rudich

Several posts to this blog have already explored the concept of creating customer value, each from a different angle.  The reason for that is simple: it’s the cornerstone to a successful marketing strategy.

Observing the many ways to create customer value is always informative and worthwhile.  It provides a fresh perspective for thinking about your own business, another lens for looking at it anew.  It can stir the imagination, and it can help you to make connections that might otherwise remain stubbornly elusive.

Sometimes it can even lead to creating a kind of new value known as transformative value.

transformative value

Transformative value happens when an already existing product or service undergoes a significant change, to the extent it becomes cloaked with a new look or structure or appeal.  It passes through a transformation or metamorphosis as the name suggests.

transformative value often carries big marketing implications

Transformative value can compromise the life cycle of currently existing products, forcing them into a state of decline or even to drop out altogether.
   
History is littered with relevant examples.  The personal computer displaced the mainframe computer.  Automation technologies have greatly reduced the need for unskilled labor.  Phonograph players are a relic of the distant past.

The internet and its associated technologies has become a kind of ground zero for transformative value creation.  It has opened all sorts of doors to opportunity, but it has wreaked havoc too.

beware the hazards of marketing myopia

Transformative value offers success to whoever has the vision to seize it.  It doesn’t care whether that reward is bestowed upon the young upstart or the well-established.
 
Vision is the key.  The opposite of vision is known as marketing myopia, and it can cause a longstanding business or industry to fall into a backslide and literally collapse.
 
Marketing myopia is the inability to comprehend how a transformative change in the marketplace can or will affect your existing product or service.  It makes you vulnerable to being displaced by someone or something else, typically because you have failed or will fail to make timely adjustments or adaptations.

The newspaper industry is a classic example of marketing myopia.  It couldn’t quite grasp how the advent of the internet was going to radically change its core business – the collecting, printing and distribution of news and information.  Rather than think outside the proverbial box, it spent the early days trying to determine how to transfer the same old business model to the new platform.
 
Others, meanwhile, went about the business of innovating new models for collecting and distributing news and information.  Piece by piece, the newspaper industry was slowly being dismantled by the likes of search engines, the Wikipedia, online news outlets, and social media.  Somebody named Craig even put the classifieds section on the internet.
 
All in all, the ability to generate revenue with a conventional newspaper has become so badly eroded that only a relatively few remain in operation today, and who knows how long they will last.

On the other side of the coin, IBM took heed when the core of its business, the mainframe computer, was at risk of being displaced by the pc.  It re-invented itself as needed to survive.  In fact, it has successfully done so on numerous occasions since, and it has managed to retain a strong competitive stance in the face of a constantly shifting wind.

a lesson for marketing

The lesson of transformative value is this: one marketer’s dream can be another’s nightmare.        

click on image to enlarge

by Kenneth Rudich

Effective marketing?  Don’t do it!

A competitor once offered me that gold nugget of a marketing tip.  I have been keeping my eyes peeled for evidence of him following his own advice ever since.

Truth be told, it’s a good idea to keep an eye on the competition regardless of whether you have been goaded into it or not.  It’s important to know where you stand relative to them.  Do you have a competitive advantage, a competitive vulnerability, the potential for improving your competitive position?

Gathering this information will help your strategic planning.
 
There’s even a method to guide the process.  It’s called a SWOT Analysis, where the acronym stands for Strengths, Weaknesses, Opportunities, and Threats.
 
Only, in this post, I’m going to suggest a slight modification in how to use it.  For our purposes, you’ll be enlisting it to see how well you measure up, whether favorably or unfavorably, with each key competitor.

And then you’ll incorporate the results into your strategic planning.

the conventional use

If you’re unfamiliar with the conventional use of a SWOT Analysis, let me briefly walk you through the basics:

• Strengths: your business’s internal characteristics that are favorable to achieving its objectives.
• Weaknesses: your business’s internal characteristics that could or do impair the achievement of the objectives.
• Opportunities: external conditions that favor your business, like new avenues for growth or expansion.
• Threats: external conditions that could or do impair your business, such as a bad economy. 

If you look at the generic value chain for marketing, this analysis would investigate every aspect of it.  Again, the idea is to inform the strategic decision-making process in some manner.  For instance, you might focus on turning a weakness into a strength; or, if you can’t do that just now, try minimizing or avoiding the harm it could unleash.
 
If one or more external conditions are favorable to your business, you’ll want to assess how you might exploit them to advantage.

Okay, that’s the more conventional deployment for a SWOT Analysis.

a competitive swot analysis

A competitive SWOT Analysis operates under a slightly different mindset.  It aims to assist in determining how well your business is positioned against each key competitor.  So, it might ask questions like:

1. How do your strengths compare with the strengths of each competitor?
2. How do your weaknesses compare to the weaknesses of each competitor?
3. Are there comparable functional areas where you’re strong and they’re weak?
4. Are their comparable functional areas where you’re weak and they’re strong?
5. Can you learn to turn a functional weakness into a strength based on their functional strengths?
6. Is there an opportunity to advance your business objectives by exploiting their weaknesses?
7. Is there a threat of them using their strengths to exploit your weaknesses?
8. Are there any external threats that will affect all of you?  How will it affect each of you?
9. Are there any external opportunities that are common to all of you?  Who is likely to pursue it, and what are the odds for success among those that pursue it?
10. Given the totality of this information, are you positioned in the market – or can you position yourself – in a way that differentiates you from them, and/or puts you in a more favorable light than any or all of them?

This is not an exhaustive list, but you get the idea.   It uses the SWOT Analysis to compare and contrast for the purpose of eliciting strategically valuable insights. 

as for the matter of effective marketing

If you are not one of my competitors, then by all means do it.

If you are a competitor, DON’T DO IT!

At least, that’s my advice.

Related Articles:

Using a SWOT Analysis for Personal Strategic Planning

click on image to enlarge

by Kenneth Rudich

The last post, “Creating Value with Modular Thinking,” discusses how the principles of modular design apply to the concept of creating value for customers, and how the generic value chain for marketing encourages modular thinking to effectively manage value creation across time.  

This post outlines some of the key value creating scenarios likely to be explored when using the value chain for marketing.    

the value creating scenarios

Throughout this blog, I interchangeably use terms like “components” and “modules” to describe the different parts of the generic value chain for marketing.  Regardless of the term used, let me reiterate that value can be created from within an individual component or it can be enhanced by strengthening the relationships between components.  In each case, the added value comes from making a change either in the perceived benefits, the cost, or possibly both.  This will hold true regardless of whether it happens within a component or in the relationship between components.

With that in mind, the four most probable value creating scenarios, as shown in the diagram above, are:

1. The perceived benefits are increased, the costs remain the same, and the value goes up.
2. The perceived benefits remain the same, the costs are reduced, and the value goes up.
3. The perceived benefits go up, the costs go up, and the value may or may not go up (see discussion below).
4. The perceived benefits go up, the costs go down, and the value goes up.  

external forces

The external forces will have a significant role in determining what actually happens with the implementation of any given scenario.  This is shown in the lower right hand corner of the above diagram.  As you may recall, the generic value chain diagram shows the external forces as exerting an influence on it. 

For example, let’s say a competitor successfully executes the fourth scenario against your organization’s execution of the first one – so that the perceived benefits between the two products remain comparable but now they sell it at a lower price.  Under this circumstance, your organization may have increased the value of its product, but it wasn’t as much as the competitor was able to do.  This creates a possibility for the competition to now have a market advantage.

the curious “?” in the third scenario          

Notice the question mark in the value outcome cell for the third scenario?  There are several sub-scenarios that can explain this.

For example, it may be a prestige item where some people are willing to pay extra for the brand image because it matches the perceived psychological benefits they get from having it.  It therefore derives its value based on the value of the psychological benefits.

Or maybe it’s a case where the rise in cost is only marginal and seemingly fair in light of the perceived increase in benefits.

Or maybe there is a basic version of the product line and a deluxe version, and each individual is left to decide which one represents a better value. 

Finally, there is the risk that a higher price will overshadow the perceived benefits and the sales of that item will suffer as a result.

Consequently, the third scenario is more likely to unfold in a manner that is distinctly different from the other three, with all else being equal.

the two perspectives of value creation

Lastly, there are two perspectives from which to view these value creating scenarios, and they will come into play when tracking the outcomes against the objectives.  I will introduce and explain these two perspectives in the next post.

value defined

by Kenneth Rudich

My dog Reddi constantly burdens me with costs in terms of time and money.  I have to walk him, feed him, train him, bathe him, and play when he gets restless.  There are vet bills and licensing fees, plus squeaky toys and special treats.  And then, too, there’s that perennial chore of having to tidy up in the wake of his path, if you get what I mean.  

Every single day he’ll exact a price, but never once have I resented it.  The truth is, when he looks up at me with those adoring eyes and wags that slender tail, or greets me with a splendid show of canine jubilation, or curls up beside me just to be nearby, I am rewarded with a sense of satisfaction that far exceeds the costs of keeping him.  At moments like these, he is, in every way, the very definition of a marketing concept called value.  

the concept of value

Economists define value as the perceived benefits relative to the price or cost, as shown in the formula: Value = Perceived Benefits/Price or Cost.  

The perceived benefits are usually traceable to some underlying set of human motives, which may be social, functional, physiological, or psychological in origin.  

Sometimes these motives are of equal priority; but more often they will vary in importance, such as divided into primary and secondary ones. Thus a person may agree, albeit reluctantly, to forgo one or more secondary motives if the primary motives are met.  For example, a financially strapped individual may settle for an economy car even though a luxury car is preferred.  In this case, the primary motive of securing transportation (functional) outweighs the secondary motive of prestige (psychological).  

The price or cost represents what someone is willing, able, or authorized to give up in exchange for the perceived benefits.  

It too may have motives attached to it, such as the amount of money, time, or energy a person is willing or able to invest.  For instance, some people will gladly pay a premium for convenience or prestige.  Others would rather exert extra time and energy to hunt for a bargain. Economists refer to this as price elasticity, and it can help with establishing the optimal price people will pay in exchange for a product or service.  

Ultimately, the satisfaction of motives, not just needs, is at the heart of delivering value.  If the price or cost exceeds the perceived benefits [a key motive (or motives) is under-served or not served], then value is decreased or non-existent.  If the perceived benefits equal or outweigh the costs, then value exists and is perhaps even maximized, which produces a level of satisfaction known as value fulfillment.  

Ipso facto, my dog Reddi delivers value fulfillment for me because the perceived benefits of having him around clearly overshadow the costs (bear in mind that he’s fortunate I’m not counting on functionality as a primary benefit, given his gross negligence with matters like housecleaning, doing laundry, or picking up after himself).  

create value, build brand

In the last post, “As the Marketing World Turns,” I touched on the idea of building a memorable brand from the customer perspective.  If you follow where I’m now going with this post, then you’ll recognize that value is the foundation upon which such a brand rests.  

The better you know and understand the people you serve, the better the foundation you’ll be able to build for your brand.  Here is a short list of questions you might want to deliberate when assessing the value of your product or service:  

• what value creating attributes or activities can enhance the connection with your brand?
• what underlying motives seem to be at work, and how do they get prioritized?
• what role does cost or price play in the perceived value of your product or service?
• how can value creation help to position your product or service in other people’s minds?
• how does your value proposition stack up against that of your competition or of other substitute products and services?

This article titled “Marketing Strategies by World Hotels for Customer Retention” is an illustration of value creation from the perspective of the lodging industry.  Notice the attention to detail for identifying, and then catering to, specific motives.  

Brand management and marketing must rigorously entertain questions about delivering value on a regular basis, and then tweak the value proposition accordingly.  To do anything less will result in the equivalent of trying to climb up a waterfall. No matter how hard you work, you’re not likely to get very far with making your brand stand out.  

In future posts, and with a hopefully generous amount of input from others interested in the same topic, I would like to explore in-depth some of the better tools, techniques, and ideas for managing and marketing value across time — whether for realizing individual goals or helping an organization to meet its objectives.  My vision is that the eventual pooling of insights will lead to a rich form of creative cross fertilization, in which we not only inspire one another, but also achieve greater success because of it.  

Insofar as the usability of this blog is also important to me, I would like to invite suggestions along those lines as well.  

Welcome everyone.  And may we all deliver value with dexterity and skill!