To attract customers – be available in all channels

Robert CrowderLast night I was having a discussion with Robert Crowder who is the chairman of SkiClub GB and owner of Crowders Nurseries and www.crowders.co.uk.  We were talking about retail and the role of e-commerce for garden centres in particular.  Robert reminded me of such a simple truth that to maximise growth opportunity it is essential for the product and service to be available in as many channels as possible. Especially channels that are growing like e-commerce.

Being in the right channels

This morning Robert sent me these quotes as follow up to our discussions.  This is from today’s trading update from the Chairman of the John Lewis Partnership:

Charlie Mayfield John Lewis“Although we expect to report profits up on last year, trading profit is under pressure. This reflects the greater changes taking place across the retail sector. We expect those to quicken, especially in the next 12 months as the effects of weaker Sterling feed through. We will now accelerate aspects of our strategy. This will involve a period of significant change, investment and innovation to ensure the Partnership’s success.”

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Attract don’t Extract

attracting customers employees shareholders

I have spent all my working life believing that when organisations serve customers better and seek to help people, then they do better than organisations who just want to extract money from people. When I started work in 1979 it took me some years to realise that my view was not always shared by those whom I worked with.

I worked in marketing in food and drink (initially biscuits, then chocolate and then soft drinks). I saw my role as being to help the organisation to

  1. find out what matters to customers
  2. make products better by creating things that solved problems for people
  3. ensure products were profitable
  4. ensure products were available in the right places
  5. run marketing campaigns to let everyone know about them.

As a result, we would get more sales and customers would keep coming back.

Now 38 years later, I still think business is that simple. It is simple to understand. The challenge is to work with the people, the finances and the products to do it. This is the primary role of a business owner, a marketer or a CEO. This is what will attract more customers, grow profitable sales and maximise value for shareholders.

We were frequently told our job is to maximise shareholder value. For the management team that meant hit the quarterly numbers and ensure the company could pay dividends.

Maximising shareholder value

For me, maximising shareholder value means being more attractive, more visible and more available to more customers. But this costs money, so I kept running into people who were worried about adding cost to products without a guarantee of extra sales and were sceptical about the benefits of marketing spend when profits were under pressure. So for others maximising shareholder value was about cost control and financial management. The customer could easily get lost in these financial discussions.

Sound financial management and cost control are essential for success. But quite quickly financial discussions can start to view the customers as a target that we should extract more money from for the benefit of the shareholders. The discussions are about capturing loyal customers, seeing how far we can push up prices, how low can take the product quality. This mindset is an extractive mindset and not an attractive mindset.

Industry disruptors

What I have observed over the intervening years is that the best businesses are those that have the best reputations. This is linked to the most enduring growth and profit performance. They all start with great products that solve a problem for people. The are dedicated to better products. This is particularly true of industry disruptors

  • Easyjet disrupted European air travel with better flights (and cheaper ones) they made it easier to book and easier to travel. (Maybe they are becoming more extractive now they are more corporate)
  • First Direct created bank accounts where every customer is left feeling totally taken care of
  • Hiscox created insurance that pays out when you need it, with great claims handling and protects what you need
  • Uber created taxis you cn get hold of when you need them with no effort
  • Miracle Gro created gardening products that make it easier to
  • Dorset Cereals reversed years of cereal manufacturers engineering cheaper products with cheaper ingredients
  • Hotel Chocolat now fill our high streets with chocolate shops where Thorntons used to dominate
  • Redington did it for pensions investment management and have helped trustees to reduce and eliminate pension fund deficits

The attractive mindset knows that the business can only grow by attracting more customers.

Align shareholders, employees and customers

There is a commonly held belief that the interests of customers shareholders and employees are at odds with each other. This suggests there is a conflict between them

  • Shareholders want to give the customers less and charge them more
  • Employees want to work less and get paid more
  • Customers want to pay less and get more

This conflict does exist when you have an extractive mindset. My experience is the best businesses do not suffer from this conflict and the reason is that have an attractive mindset

Better products sell more and customers are very happy to pay higher prices for them. Prosperous growing businesses are fun places to work and attract better people. When the business seeks to attract more customers and seeks to attract better staff, this results in a virtuous circle of growth. When a business is working out how to extract more money from customers and get more for less from their staff, the business enters survival mode.

This blog and all my future posts are about observations on how this works, when it works, examples of it working and lessons we can learn from them. These lessons of the attractive mindset can be applied to business organisations, charity fundraising, political campaigns, club memberships or any organisation that exists as a group of people trying to get things done.

This is a hybrid of a campaign for better business and a series of practical insights you can use to make your organisation or business perform better.

I hope you will join me for the ride.

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Attracting more customers vs extracting more money from the ones you already have

Value adders vs value extractorsDo you believe that this is true?

“No-one ever achieved significant growth in their business without attracting additional customers”

The need to attract new customers underpins everything I believe is important for businesses and organisations who want to grow. Attracting more customers is something that all business leaders should consider every day. Attractive Thinking is the key to unlock your maximum growth potential.

Attracting new customers matters

This is because you cannot get significant growth by just selling more of what you have to your existing customers.

Really? So how can we be sure it is true that you cannot get significant growth just from increased spending from existing customers? Well, there is a large body of evidence based scientific research that demonstrates this is true. This research was kicked off by Professor Andrew Ehrenberg in the 1960’s and has been continually updated and expanded by the Ehrenberg-Bass institute under the leadership of Professor Byron Sharp (@byronsharp). You can read a summary of the research, its implications and the resultant scientific “laws of marketing” in Byron Sharp’s book “How Brands Grow”. The work of Ehrenberg Bass is now sponsored by over 100 global brands who study their work to glean insights about how to grow their business.

My own Attractive Thinking article is about the five questions you need to answer if you want to attract more customers. Download here The article goes beyond the Byron Sharp insights and provides a practical framework on how you can attract more customers. This is a better way to get growth than extracting more money from them.

What if chief executives focused on helping their customers solve a problem? And then used their insight to create products and services that customers are attracted to and really help customers. This would make for a much better world than businesses who just focus on how much money they can extract from customers. When businesses do this

  • They get more growth
  • They are a happier more creative place to work
  • Have happy more loyal customers
  • They get more referrals

More Human … its amazing how many people disagree with the idea this is desirable.

Steve Hilton, More HumanI have just finished reading More Human. This book written by Steve Hilton and published last week. Steve Hilton was an adviser to David Cameron from 2006 to 2012 (and was caricatured as special advisor Stewart Pearson in “The Thick of It”). It is not often I feel compelled to write a blog about a book I just read, so this book has clearly had a big impact. The last time I wrote a blog about a book was when I read Nassim Nicholas Taleb on The Black Swan.

So do get a copy and read it now.

 

Steve Hilton analyses and explains things that have frustrated me for many years about the way business, politics, government, schools, healthcare and many institutions operate against people rather than for people. He shows how institutions and bureaucracy frequently frustrate and damage the people that they set out to help. He discusses how leaders have the very best motives to help people (there is no conspiracy to harm people) but often feel trapped by the way things work and believe they are doing the right thing in the circumstances. He describes how staff in airlines, civil service, social services, schools and many places can end up behaving in ways that are not human, even though they are almost certainly caring and loving with their friends and family.

The central idea is that we have lost touch with what it means to be human. The institutions and bureaucracy we have created do not treat people as human. This has affected everything: the food we eat, the schools our children go to, the growing inequality, the lower engagement with politicians, the hospitals and healthcare services and we use, our inability to eliminate poverty and they ways we bring up our children.

Yet, the world is full of examples of how when people get together to make things happen at a human level, then great things do happen. How is it that we cannot harness this more effectively?

I cannot do his ideas justice in two paragraphs, you have to read it.  At first you may find some of it seems fanciful and impractical. But if you find yourself thinking that then I would urge you to read on. Steve Hilton diagnoses many things that are wrong and the fixes he suggests are radical. The ideas are not classically left-wing or right-wing. Many of the ideas require a change in what we find socially and culturally acceptable, not just a few short-term policy fixes.  It is amazing to me how many people disagree with the idea that being more human is the way forward.  (See tweet from Alan Duncan)

Steve Hilton concludes that to make something happen needs a large number of people who are committed to be being More Human actually in positions of power and leadership . He invites us to join in and have a go and run for office.

Is there anything we can do in business today?

Whilst much of this is in the political arena, this need to be “More Human” also affects business and there are things business can do within the current economy and politics.

I believe that when we set out to help customers solve a problem or satisfy a need rather than just focus on how to extract more money from customers, then we create a better business. And this will be a more human business. By that I mean we enjoy more growth, make more money, are a happier place to work, create more jobs and build sustainable long-term value.

This is the difference between being a value adder and a value extractor. Value adders want to help customers. Value extractors work out how to get the most money from them. The interesting thing is that all big innovations that really transformed industries and markets involved helping customers solve a problem, not just making more money from customers.

So EasyJet challenged the European Airlines like BA who were all value extractors. First Direct and MetroBank challenged the value extractor banks. AirBnB are challenging the hotel chains. All these game changing businesses focused on the people’s real needs and problems and enabling us to do things we wanted to do as people.

There is now a change happening in the food industry. The supermarkets were value adders who provided what people wanted, created wider availability and delivered better value. They have become value extractors driving prices up through pricing, confusing promotions and local dominance. But now they are looking vulnerable to many smaller businesses that help customers in more relevant ways from discounters to local food producers and retailers.

If you are working in a business with a value extractor mindset and you think there is a better way to get growth by helping customers, it is not easy to get people to see it. But there is a way. I explain the thinking and the approach in this paper.

Steve Hilton definitely fits my definition of being an attractive thinker (and doer). I filled out the form in the back of his website under the button “Run for Office”. Looking forward to see what I get back.

Understand what really motivates us

box-header-home

This weeks blog from Guy Watson of Riverford Organic farms is one of the best pieces of attractive thinking that I have seen for some time.  It is prompted by his reflections on the election aftermath.

He accurately describes the human condition.  This condition is why I believe that business organisations which set out to help customers solve problems (value adders) do better than those who set out to extract the most money from customers (value extractors).  Three statements that stand out for me are

  1. What I find so depressing … is the apparent ubiquitous cynical belief that appealing to personal greed is the only way to get anything done.
  2. Ultimately we all want to feel good about ourselves and at work this falls broadly into three areas: feeling we are learning and getting better at stuff, feeling some control over our lives and feeling a sense of purpose.
  3. My plea .. is to have a little faith in people; we’re not as shallow, selfish or as dumb as you seem to think. Show some trust, give us some hope and we might even surprise you.

If you take this thinking and apply it to attracting more customers it takes you to a very attractive place.  (N.B.  We also like their veg)

Re-blog of post from Guy Watson www.riverford.co.uk

I believe that given half a chance, most people, most of the time, are smarter, fairer, more generous and capable of more empathy than our institutions give us credit for. I found both the election campaigns and the result hugely depressing without really understanding why; with the exception of the Greens I feel no more aligned with the policies of the losers than the winners. On reflection I realise the reason for my gloom is a conviction that the institution with the most cynical view of our behavioural motivations is the modern Conservative party.

I’m guessing that, as someone already personally rich, I will be richer under an unfettered Conservative government; but I don’t expect to be happier. What I find so depressing about modern post-Thatcherite Conservatism (and only marginally less so about post-Blairite Labour) is the apparent ubiquitous cynical belief that appealing to personal greed is the only way to get anything done. Considering the almost complete lack of evidence to back up this assumption, it has gained extraordinary traction in Westminster and the City over the last 30 years. In the real world, where businesses have to compete by getting the best out of people, it has largely been abandoned as a piece of failed, ideologically driven dogma.

For the most part, we are emotional beings responding to much deeper, less tangible but more powerful emotional motivators; ask anyone in advertising. Ultimately we all want to feel good about ourselves and at work this falls broadly into three areas: feeling we are learning and getting better at stuff, feeling some control over our lives and feeling a sense of purpose. To believe that ‘carrot and stick’ management is why a nurse will care for a patient, a parole officer will struggle to support a young offender or why a programmer would write exceptional code is crass to the point of incredulity. I suspect it is even more threatening to public services and well being than cuts and austerity.

Both hope and cynicism, given enough voice, can be self-fulfilling prophecies. My plea to Cameron and his team is to have a little faith in the people they lead; we’re not as shallow, selfish or as dumb as you seem to think. Show some trust, give us some hope and we might even surprise you.

Guy Watson

Why the ski industry needs better products to attract more skiers?

On Tuesday 5th May, I gave a short talk at Listex on how ski companies, tour operators and resorts can attract more customers.  Listex is a forum where the ski trade meets to discuss business development and why customers and suppliers do business

The talk discusses how the ski  industry has focused on keeping its loyal customers, but now needs to recruit new enthusiasts into the sport.  The sport is at risk of its current baby boomer customers retiring from the activity and not replacing them with younger blood.

Here are the slides with the transcript of the speech attached to each slide in the notes.

Attracting more customers

Attracting more customers

 

Here is the transcript of the talk

The idea for this talk was promoted by two articles that I saw in Planetski last week. The first was a quote from the 2015 International Report on Snow & Mountain Tourism which stated that visitor numbers in ski resorts have been declining year on year for 5 years in all the major ski markets. Even France and the US which had been doing better are now in a 5 year decline. The second story was from Phil Smith of Snowworks in Tignes. Phil reported he had enjoyed a great season and things are looking up. In fact skiing is so addictive, that people will always want to come skiing and there is nothing to be concerned about. How can both of these things be true?

The subject of this talk is how can we attract more people to skiing, whether as an industry as a whole, as a resort in particular or for your own business. If numbers are down, this is a matter we need to address.

For those of you I have not met yet, I founded Differentiate as strategy consultants to help CEO’s and business owners to bridge the gap between the insights they have about their customers and the creative decisions you make about developing products and creating marketing plans to attract customers. I used to be a marketing director at Pepsi and since I have consulted with global brands like Mars as well as high end B2B service providers in Finance, Law and Technology. I am also a director at Henry’s Avalanche Talk teaching skiers how to stay safe and have more fun off-piste. This involves avalanche awareness and off-piste equipment training.

My aim today is to prompt a debate about within the ski industry about the need for game changing new products and services that will attract more people to skiing and get some lapsed skiers to come back to the sport.

I will talk about the subject in three different sections.
First I will discuss why the numbers of skiers are down
Second I will talk about a principle of good marketing. I will discuss the debate about penetration vs loyalty and show why it is essential for good marketers to focus ion increasing market penetration. Or in simpler language, attract more skiers to take part.
Third, I will discuss why having better products is essential before discussing better marketing. I will show some tips on how to start the process of developing better products.

So are the numbers really going down? This report from Crystal shows estimates of the numbers of British skiers going on holiday over the past 5 years. Whilst there was an expected drop with the recession and a bad snow year, this is starting to look like a trend. Numbers are difficult to get here, but this is a trusted source.

The 2015 International Report on Snow & Mountain Tourism looked at all visitors to ski resorts in every country across the world. So this includes locals visiting the resort as well as people on longer holidays. What is interesting to us, is that the alps has shown a consistent decline over the past 5 years. There is growth in Asia, but everywhere else is down. So why might this be happening.

Skiing is often thought of as a younger persons game, just for fit people. Well in my experience, you need to be fit, but you don’t need to be young. When I am in ski resorts, I increasingly see large numbers who look more like this group here. A lot of us were recruited into skiing as young adults in the 1980’s and 90’s. This generation of Baby Boomers and GenX have fuelled the growth of snow sports, by joining in the then choosing to go skiing more often each year. But some of this group mare getting less able as they get older. And I am not convinced the sport is recruiting younger adults to replace them.

And younger people have a far greater choice of things to do than we could do in the late 20th Century. Exotic adventurous travel options have exploded, from Asia and America’s back packing to surfing to kit surfing, mountain biking, charity and physical challenges, yacht racing. All these things are competing for the adventurous travellers pound. Many of these activities are more accessible and less expensive than they were due to cheaper flights and the internet helping people discover ideas about what to do.

Another element in the mix is that sometimes people have bad experiences when they go skiing and it puts them off, especially if they are on the first or second trip. This research by the ski club measured net promoter scores for tour operators and resorts. This was done among 15000 skiers and they found that for some the experience was not good and they would not recommend it. This variability will be putting some people off.

So that covers my first point and offers some reasons why the numbers are down. I am sure there are other reasons you could come up with, but this is a start.

My second point is to discuss the marketing debate around Penetration vs Loyalty. There is quite a fashion for loyalty programmes and CRM. Now these are all useful to a point, but we must not lose sight of the fact that business only grow when they attract more customers. This was established as proven fact by an early marketing academic, Andrew Ehrenberg in the 1960’s. His work has been followed up by Byron Sharp who published a book on it in 2010. Study after study has shown that the difference between bigger businesses and small businesses is not how loyal the customers are, but how many customers they have. It is not possible to get growth without increasing your market penetration or in other words attracting more customers.

A second study conducted by the Institute of Practitioners in advertising has confirmed this. This study looked at 1000 entries for their marketing effectiveness awards. The winners were selected for the business results and cost effectiveness, not for their creativity. And 95% of the award winners had set as their objective to increase market penetration.. Only 5% of the awards went to campaigns that had set loyalty as their campaign objectives. Loyalty programmes did not win effectiveness awards.

So this is my second point, No-one ever achieved significant growth in their business without attracting additional customers. We have to attract more skiers if we are to grow the industry.

Now my third point is about why the best and easiest way to get more customers is to create better products, we cannot just rely on better marketing. It is better products that attract customers first. And as shown by Michelle in an earlier presentation, most great marketing campaigns either draw attention to product improvements or use product improvements as a tool to communicate the brand value and the brand attraction.

I will start by asking you how you view your customers? Do you see them as a target to be lassoed into your business and then you must find ways to attract as much money as possible from them? Are you like this cowboy looking to entrap and ensnare customers? I call this approach value extractors.

Or do you see your job is to find out what customers need and want, to find out what would really help them and then develop something that delights and surprises them. People buy things when they have a problem to solve or a need to address. If they see you offering the perfect solution to that need, if you offer the missing piece in the jigsaw, then all you have to do is let them know about it and then they will just buy it. I call this approach value adders.

In my experience prime value extractors are banks, insurance companies, utility companies, mobile phone operators. These businesses exploit our reluctance to switch providers. So they focus on how much money they can charge and how little they can do to help to ear that money. Whereas big successful branded companies like Apple, Google, Unilever P&G, Mercedes, Mars, they all know we have the freedom to switch, they cannot trap us so they invest in attracting us with better products.

Now all the big game changers in every industry are value adders. They are people who put … better products before better marketing.

So what are the characteristics of better products? What makes a product better? Here are a selection of brands and products that have all shaken up their industry when they launched. They each looked at their markets and said, “there has to be a better way”, “we can make the customer experience better”, “we can make it quicker, easier, better value”.

Easyjet challenged legacy airline carriers by making it easier to buy the tickets and removing all the complex terms and conditions that were designed to trap fliers into spending more money. Fridays speeded up property conveyancing to help people get their homes more quickly, Netflix ensured we could watch what we wanted at any time and made it easy to use, Paypal made it possible to transfer money and easier to pay for things online.

So these are characteristics of game changing products and services, I am sure you can think of some more.

And last week I saw this guy present the game changer in power supply. This will disrupt the energy supply industry. Elon Musk used the money he made from selling Paypal to invest the Tesla car, but he is now going further and has just launched the Tesla PowerWall. He looked at energy supply and climate change and said we have to do better. He noticed the sun provides more energy than we need. Solar panels are getting better, the problem is it does not work at night and we had not found a way to store energy from the sun.

This product is the first battery than you can install at home to plug the gaps when the sun does not shine. Read more here http://www.chrisradford.net/using-better-products-not-better-marketing/

The phrase he used repeatedly is “It just works”. This is I believe the ultimate attribute of better products. Iron out the glitches, find the disruptions, improve the customer experience, re-engineer the product, then you will find the game changer.

So how do we develop better products? Where do we start? The first principle is to start with the problem or need the customer has. No-one ever spends money without a problem to solve or an occasion to sort out or a need to fulfil. When you go to the supermarket, you do not have a list of products, you have a series of occasions and needs to fulfil. There are kids coming home from school, meal times to feed, people coming round, clothes to be washed etc etc. The start point for product development is understanding these problems and needs.

What might these problems be for skiers and ski holidays?

The first one is that we all like to spend time with our family in a nice way and are looking for ways to do that.  Skiing is a great way to do this.  People also love to spend time with friends and an activity like skiing is a great way to do it.  But you will notice that skiing is not the only answer to these problems.    But ensuring ski holidays  address this need in the best way is one way to develop better ski holiday products and services.

The second problem is that it is often a bit grey and gloomy at home in the winter. Many of us are looking for ways to escape the gloom, get some sunshine, get out doors and cheer ourselves up in the winter. Again, skiing is great for this, but it is not the only way to do it. This is a powerful driver for ski weekends as well I think.

The third problem that skiing addresses, is that increasingly we are looking to push ourselves a bit harder, we are looking for a physical challenge. Again skiing is a great answer, but not the only one. Other adventurous sports or charity challenges can do this equally well.

So that covers three problems and needs that people have that ski trips can address. But what are the things that stop people going skiing, what puts people off. This will provide some insight into developing ideas for better products and services.

It was hard to find research on this, but I tracked down two studies. The first is a report from the Ski Industries Association in the US, this looked at reasons regular skiers did not go in any one year. The top reason reflects the fact that skiing is a social activity and they said they had no-one to go with. They also cited that other activities sometimes seem like a better option. A significant number thought they were just getting too old for it. This is that Baby Boomer generation who are opting out of skiing. The last point was a fear of getting injured because of the consequences in the aftermath and the following months.

The second report I found was published by the University of Edinburgh and looked at PE students and teaches and what put them off going skiing. They raised quite a few points but this slide starts with the cost of the holiday and importantly the cost of acquiring the clothes and associated equipment. The sport is difficult to learn and this a big psychological hurdle. Some complained that the slopes are getting too crowded these days.

So these are examples of insights that can support and help product development and can help in the creation of better products.

So please remember “no-one ever achieved significant growth in their business without attracting additional customers”.

Customers are looking for something that solves a problem …

Our job is to solve it for skiers and prospective skiers and we need to provide something that is better than the alternatives.

So in this talk, my aim was to provoke a debate about the need for a game changer in products and services for skiers. This is the key weapon to attract more customers into the sport, into the industry and into your business. I have talked about why the numbers of skiers are declining, I discussed the need to increase market penetration and not just get more customer loyalty. The best way to this is to develop better products not just rely on better marketing. The start point for better products is to understand what problems and needs customers have that skiing holidays can address. Our job is then to develop better ways to solve these customer problems.

You can find a copy of this presentation and talk on my blog on ATTRACTIVE THINKING at www.chrisradford.net.

If you are interested in doing some research into customer needs or turning your insights about customers into better products and better marketing, then please do get in touch
You can Sign up at : chrisradford.net, you can follow me on Twitter : @chrisradford10 and I always welcome connections on LinkedIN

Contact: Chris Radford chris@differentiate.co 020 8432 9772

Finding purpose – what’s the point?

Iconic Shift Mike HarrisLast week I was fortunate to be at one of Mike Harris’ ICONIC SHIFT mentoring events. It was motivating to be with an inspiring bunch of entrepreneurs covering industries from healthcare, pensions, financial services, fashion, food and business services; especially when each entrepreneur is aiming to challenge the way things are done in their industry and turn their business into a game changer that that delights customers and disrupts an industry.

Mike shared with us his model of high performance leadership drawing on his experience of creating game changing businesses in current account banking with First Direct, fixed line phones at Mercury Telecoms, credit cards at Egg and internet security at Garlik.
Like all the best ideas, you get a lot from them the first time but then you get more on the second, third and fourth time of hearing them.

But the real reason for this blog is that during the event it finally dawned what really bugs me, and I want to do something about.

Setting goals and purpose

Business owners and business leaders want to maximise shareholder value. It is an explicit goal of all public and of many private businesses.  But the irony is if the leader makes this the primary goal they will be less successful at achieving it than if they start with a bigger purpose that helps customers in some way.  Why is this true?

Value Adders vs Value Extractors

Starting with a focus on creating shareholder value will lead you to what I call value extractor strategies. These strategies are effective at maximising the short term revenue extracted from customers.  They are tempting, it appears a much faster way to hit this yera’s profit targets.  But in the process you engage in a stressful relationship with customers.

Value Extractor Cowboy, Differentiate

The value extractor tends to view their customers in the same way this cowboy regards his cattle.  They are there to deliver a source of income and to be reined in with the lasoo.

So for example, customer acquisition is done with value incentives and offers which lead to contracts that trap customers into buying more than they need. Mobile phone companies and utilities are expert at this. Energy firms leave us stranded on inefficient tariffs, mobile phone operators use tariff complexity to confuse customers into buying services they don’t need.

In consumer product and food companies it is a lot easier to shave a bit of quality and bank a £m on the bottom line than to perusade the finance director that the product quality improvements will deliver more revenue by attracting customers.  So business leaders are tempted to shave product quality to save money in the short term.

There is another way that delivers better results than this.

Value adders continually improve the product and service and find ways to go beyond what customers want because they know this will attract more customers in the long term.  By going beyond what customers want and they stay ahead of their customers and competitors.

JigsawI always think value adders are more like this cartoon character fitting the last piece of the jigsaw to make things just right.  they are supplying something that solves a problem for their customers and design it to fit.

Leaders who deploy these strategies know that if they offer something attractive to customers that really helps them, then they will come back for more and even more importantly tell their friends about it.

Value adders also create businesses that are more fun to work in as well as delivering better value to customers. Value adders believe businesses must engage all the participants not just the shareholders. They must engage the customers, the employees, the management and the local community as well.  And we have seen many examples of this.

  • Hotel du Chocolat transformed chocolate retailing with superior product quality and design whilst Thornton’s value engineered themselves into an empty market space between their high street stores and value products in supermarkets.
  • Galaxy reshaped chocolate products in the Middle East by bringing superior quality and design to everyday supermarket products
  • The most over-used example is Apple who reinvented mobile communications whilst Nokia made lower cost mobile phones using the technology they already had.
  • Miracle Gro has entered new market categories through it’s determination to make products that make gardening easier for everyone.
  • P&G have taken the excess margins out of skin care whilst delivering superior products with Olay.

What distinguishes these firms was a purpose beyond shareholder value

These firms created a purpose beyond money and this created better shareholder value than the ones that start with maximising shareholder value as the goal.  This is still business not a community or some higher purpose or campaign.  It is simply about helping improve people’s lives in a small but practical way.

These businesses also end up as the most rewarding to work in, deliver great shareholder returns and always experience the most growth. They deploy VALUE ADDER strategies that help customers, improve the products, enhance the customer experience and as a result grow by attracting more customers.

I know this idea has been discussed in many places such as by Jim Collins in Good to Great.  Collins talks about this from the perspective of the CEO and the mission.  But my take on this is that the principle can be adopted for every brand development, every growth strategy and every business.  What frustrates me is how many people still don’t seem to “get it”.

So every time I experience a value extractor business whether as a consultant, manager, advisor or as a customer, a voice inside me pipes up and questions why do they do this?  Don’t they realise there is a better way?   I don’t like it when people are not doing the best thing for their business. It is bad for customers, bad for staff and bad for shareholders, bad for growth.

SO WHAT NEXT – I will be less frustrated and take action!

I realised this week, I need to stop moaning about this and stop getting frustrated. I should do something about it.

My whole consulting service is devoted to helping value adders. So I need to work with more of them to create more examples of how this strategy works.  I have seen that value adders want to turn their products and services into things people love to buy.  That is what we do at Differentiate, so we can help.

So I set my own 10 year goal to help 10-20 business leaders transform 20 products and services into something that helps to make customers lives a little better.  It is much more satisfying to make customers smile than to extract money from them.  And I need these examples to get the message out there that value extraction is not best strategy for anyone, certainly not for customers, but not for staff and shareholders as well.

Clarifying purpose

It is an immense relief to have clarified my purpose and know the reason to build Differentiate in the next 10 years. I plan to share the bumpy road of experiences through this blog, my Google+ and my email list.

If you like this journey and want to explore it with me, please subscribe for blog updates (top right) or stay on my email list or sign up for email updates on the Differentiate website.  You can also follow me on Google+ and Twitter.

If you are even more interested in this, I am creating a group who will meet every two months to shape and develop this path and ensure we succeed.  Call it a non exec role, an advisory board.   If you are interested, please do get in touch?  More on that later.