3 parameters of successful differentiation

3 parameters of successful differentiation

 

Having a point of differentiation that is sustainable, and sufficiently valuable to customers that they are prepared to pay for it, is marketing’s holy grail.

Everybody seeks differentiation, the challenge is to do it effectively.

It seems to me there are three dimensions:

The first is the product itself, pretty obvious. The benefits that the various product features that add the differentiated value to customers are not easily replicated by competitors.

The second is the means by which you deliver those benefits, which is your business model.

A valuable differentiation is one that competitors cannot or will not replicate without great expense and effort. Some of these evolve out of a significant change in the prevailing business model, such as happened when Amazon started to sell books, but most happen incrementally.

It is relatively easy for a competitor to copy one or two things you do, and usually they will get it pretty right, even 99% right. However, when you do a whole lot of things together, it is harder to copy them all, and even if they do, getting 5 elements of your strategy copied at 99% accuracy, delivers only 95%. Few customers will opt for 95% without a significant discount.

The third is the choices you make that exclude some customers but have an impact on your ability to better service those who remain. This is a strategic choice you make based on the needs of your ideal customer.

Years ago, part of my sales responsibility for my employer at the time was for the regional distributors we used.  Across NSW we had numerous small distributors, most of whom took small amounts of product on each delivery. The logistic costs were often more than the gross margin on the sales, but the sales revenue in total was significant. I took the decision to deliver only in 1/2 pallet lots of any product, and put in a staged discount for increased pallet numbers. After the initial yelling finished, most distributors moved to one of our competitors, along with the margin losses. We were able to increase the levels of support we gave to the remaining larger distributors, and they were able to significantly increase their sales, and our costs dropped accordingly. That segment of distributor customers suddenly became profitable after years of losses.

If you cannot figure out how to differentiate in ways that are meaningful to a cohort of customers, you are destined to be defined by price.

No future in that!

 

 

 

A picture is not worth a thousand words.

A picture is not worth a thousand words.

The old cliché that a picture is worth 1,000 words is disproved again and again, by all the pretty websites and dumb marketing collateral material out there, that is useless.

While pictures have a valuable role in grabbing attention, the real commercial value is delivered by the words that express the value proposition and call to action to the potential customers who turn up.

We are in a competition to gain and keep attention, then to move the reader to a decision. That decision may be that your product deserves a place on the ‘maybe’ list, or to the next point in the sales process. A successful sales process is always moving the potential customer towards the transaction.

Human beings scan their environment, instinctively leveraging their mental frameworks to filter out the stuff that does not matter. Our subconscious organises and filters information, leaving cognitive capacity to deal with the threats and opportunities that emerge. We do not see anything that does not have to do with survival, love, relationships, doing better, some sort of challenge, danger, unless for some reason, it is specifically relevant to us at that moment.

When someone sees our website or collateral material, their brain on autopilot filters out the stuff that is not directly relevant. Somehow, we need to cut through those automatic barriers that exist.

Story is the best way of doing so.

They are the evolved format that can deliver the information that reflects ambition, challenges, a plan to conquer the challenges, unexpected hurdles, and last-minute success. This is the standard format of every story, if you do not use it, or some derivation, the reader will skim over your site and not take in anything at all, effectively not ‘seeing’ it.

Formulas are the assembly of best practise; we use them because they work.

That is why stories work, it is the formula that feeds into the cognitive patterns used by our brains.

The key to a story is clarity. Who is the hero, what he/she must do to win, what happens if he/she does not win, what happens when they do?

What problem do they have, what does the outcome look like when the problem is solved?

Noise kills, the noise from inside and outside our business.

From inside, the clutter we spray around, the ambiguity of what we are saying confuses what others hear.

We need to clarify the message.

How many potential customers go elsewhere because they do not understand how you can help them?

When you need someone to help cut through your clutter, give me a call. It will be a worthwhile investment in clarity.

What multiple of LCM do you need to grow?

What multiple of LCM do you need to grow?

 

LCM: Lifetime Customer Margin.

There is lots of talk, mostly hype, about Lifetime Customer Value. When you look closely, it almost always means lifetime customer revenue.

Revenue is of little commercial value in the absence of margin, so the discussion is somewhat misleading.

Understanding the margin generated by customer segments, or in some cases, individual customers, is an immensely valuable metric. It enables you to focus activities where there is the most benefit to the enterprise.  You can make both strategic and tactical decisions with a great level of confidence based on the margin delivered.

Customer margin is also an enormously useful metric elsewhere.

Salespeople are often rewarded on revenue, which can be gamed. Margin over time is much harder to game, and a far better measure of the effectiveness of a salesperson in delivering value to the enterprise. In any comprehensive key account management process, margin is one of the best measures of the impact of sales and marketing investments made.

Similarly, calculating the cost of acquisition of a customer gains traction when measured against margin rather than revenue.

One of my clients’ businesses relies on referrals as a major source of sales. Increasingly they are moving towards margin on converted referrals as the single metric that best measures the impact of their efforts.

It is proving to be a rewarding strategy.

 

Header credit: Dilbert and his mate Scott Adams.

 

 

 

The role of medicine in marketing

The role of medicine in marketing

 

 

Customers buy to relieve some sort of pain, or fill a need. Sometimes that pain is real, the need genuine, and sometimes it just takes the form of a psychological itch that needs scratching.

Whatever the form, source or type of the pain, nobody buys without it, so your product is medicine for that pain.

Why don’t you tell them that more often?

Be clear: ‘This product is for people who……..

Many years ago, I was the marketing manager of the Dairy Foods division of the then Australian owned Dairy farmers Ltd. We marketed Ski yogurt which had been swamped by the launch of Yoplait.  Good advertising, packaging innovation, and a good product had massively increased yoghurt consumption, with Yoplait taking all the benefit.

The manufacturing process installed to produce Yoplait ensured that there were no discrete fruit pieces in the final product. It may have been strawberry yogurt, but the product was completely homogeneous. The process Dairy Farmers installed was different, and we could produce a product with discrete and obvious fruit pieces. (Note: I would like to claim this as strategic foresight, but in fact it was good luck which we aggressively leveraged)

The core of the platform of our marketing and innovation processes became ‘Ski: for people who like to see pieces of fruit in their yoghurt’.

We never used this line, but it was implicit in everything we did.

5 years later, Ski was market leader in a market many times bigger than when Yoplait had launched. While it may not have been painful to buy a fruited yoghurt with no discrete pieces of fruit, when the offer was made, the preference for many became immediately clear.

Sadly, both brands have since lost their way. The businesses that were running them were taken over by multinationals who understood absolutely ‘didley-squat’ about brands, and the need to continue brand building investment. In the face of the aggression of the most concentrated consumer retail market in the world, they surrendered their position by stopping brand advertising and innovation, redirecting the funds to price discounting. They forgot who the products were for, and the role they played.

 

 

 

7 reasons many digital marketing programs do not work

7 reasons many digital marketing programs do not work

 

So called ‘Digital Marketing’ has become an end in itself. Instead, it should be a potentially potent tool in the marketer’s toolbox when used well in the process of delivering value. I see it often spoken of and treated as if it were a separate functional discipline, then it fails. All sorts of rubbish is then wheeled out to explain the failure and move responsibility elsewhere.

It seems to me that the failure of understanding the real nature of digital marketing falls into 7 distinct buckets.

  • ‘Digital marketing’ is seen as an event, a set piece, and not part of an ongoing commitment to delivering information and value to customers and potential customers.
  • There is no sense of the end point, a vision, the picture on the jigsaw cover. The absence of a clear objective makes consistent production of compelling communication virtually impossible.
  • There is a lack of commitment from the top. Many inhabitants of the corner office are older guys trained in accounting, engineering, and the law. Many still consider marketing to be a cost, to be managed short term, rather than an investment in the long term. Often so-called marketers do too little to address this misunderstanding. Instead, they continue to sketch out a few bits of ‘content’ to throw against the digital wall, hoping something works.
  • No-one holds accountability for the work, and its results. Digital marketing tends to be a subsection of the overall marketing and sales programs, and it tends to be the least understood. As a result, it is pushed off to the juniors, after all, they know all about this technology stuff.
  • All things to all people rather than highly relevant to a few. Digital is mixed up with a mistaken understanding of genuine inbound marketing activity. Inbound sounds nice, but how are we going to set ourselves up as an expert in the face of the competition. Nobody can be all things to all people. If you are a small business, be the expert in your specific niche, your geography, with those on your list of current and lapsed customers. You do not have to be the biggest in the world, just the best to a select few.
  • Results are not measured properly, vanity measures are all that are collected, and they tell you nothing about cause and effect.
  • The work is done quickly, without thought, passion, creativity, so does not grab a potential customer by the purse. It is just another deadline hit, then move onto the next one, tomorrow. The search for the ‘big idea’ that resonates and differentiates seems to have been replaced by many mediocre bland and ‘safe’ ideas. The big idea remains elusive, and of great value, but we seem to be no longer looking for it as we are distracted by the acceptance of the many mediocre ideas. Not a great exchange. Occasionally you find the big idea, hiding in plain sight, which is where it usually hides, but is so hard to identify.
  • A final one. There is no permission, as in Seth Godin’s definition of permission marketing, as requoted in Tom Fishburnes cartoon narrative, with which I absolutely agree. This is all about the consumer, and treating them with respect, something that increasingly many so-called marketers do not do.

 

Header cartoon credit: Tom Fishburne at www.Marketoonist.com

 

 

 

The danger of the ‘Exposure Effect’ in advertising

The danger of the ‘Exposure Effect’ in advertising

 

 

Several of the advertisers who bought large packages of advertising in association with the recent Australian Open did themselves a massive disservice.

The ‘Exposure Effect’ is a double-edged sword.

We are more likely to be positively impacted by things with which we are familiar and comfortable. That is how advertising works. However, the flip side is that we also become bored and potentially contemptuous of those things with which we are extremely familiar and dismiss them.

Colloquially, we refer to this as ‘Familiarity breeds contempt’.

The marketing wallies at ANZ ignored, or perhaps more likely did not understand, this flip side of the ‘exposure effect’. They were persuaded to spend up big on ad spots by channel 9 sales executives in the mistaken understanding that ‘more is better’.

Those who watched the Open were probably at least sports fans if not specifically tennis fans, and they probably watched a lot of the tennis.

The negative impact of the exposure effect can come into play as early as after 5-7 exposures to an advertisement. Most of the viewers would have got that in the first hour or so of watching, after which, the familiarity desired by the advertiser, risked becoming something else entirely.

Diminishing returns from the advertising investment.

The ANZ advertising was grossly overexposed. The use of Dylan Alcott being introduced by the hosts ‘mucking around’ with his phone, seemed to be in almost every ad break.

Clearly the ANZ made a significant investment. It would have been much better used if some of that investment had been directed towards a variety of creative executions of their brand, rather than being all the same quickly boring, becoming really annoying, execution.

Personally, I became so annoyed, had I an account with the ANZ, I might have run down to the branch and closed it, as doing business with a bank that wasted so much money does not seem to be a good idea.

Not the impact I assume their naive marketing people were hoping for.