The question in marketing is: in what way can you create the purchase of your product. And it has a very simple answer: changing the cost / benefit ratio. Because value is the central concept in marketing. If you work in the marketing area, you are in the business of creating and delivering value. And the value is the difference between benefit and cost.
You can apply the value lesson as follows: you may be able to extend the benefit by telling customers: “If you buy the car I am selling to you, we will give you a television, or we will give you a warranty for five years ” This is called adding value. Or you can reduce the cost or cut the price. And by the way, the price is not the only cost to the customer. There is also the effort of going to see the product, parking, dealing with an unpleasant situation … There are other types of costs that you can reduce if you propose it.
So I would say there are four or five ways to make this operation happen:
- Increase the benefit without increasing the cost.
- Increase both. But increase the benefit in a greater proportion than the cost.
- Keep the benefit equal, but reduce the cost.
- Reduce the benefit, because one does not want or does not need all the things that the car has, if we follow the example, lower the benefit and lower the cost in a greater proportion than the benefit is being reduced.
Increase the benefit and reduce the cost. This is the most powerful form and is called “more for less”. The seller says: “Mr. customer: we will give you a television, besides the car, and we are reducing the price, or reducing the type of cost you face.” (Jack Welch, a leading executive who is in charge of General Electric, says that in the future, if one is not able to offer more for less, he will be out of the game.)
Now, let’s take this equation: value = benefit-cost. Suppose the customer can go to another dealership, see another vehicle, where he also obtains an excellent cost / benefit ratio. Because if there is not an excellent cost / benefit ratio – or benefit over cost – there is no value. Who will you buy? It will buy from the one who gives the greatest surplus or the greatest surplus value over the cost.
So it is not enough to say: we are creating value for you. What is at stake is the relative value that two different providers are offering. All this is abstract, and we can start talking about what kind of benefits or what kind of costs it is. We can talk about the benefit of an aggregate service, knowledge, consulting, physical things that can be offered, but, ultimately, we must be creators of value.
You have to select markets where you have a special competence that you can contribute to them. You will be wasting time if you are in three markets being the number six in each of them. I would prefer to buy shares in a company that is in one or two markets and is number 1 or 2 of these markets. Instead of spreading or diluting energy in places where your competitors are strongest.
REINVENTING OR DYING
The environment always changes more quickly than companies. So one will be more and more behind, and their alignment will be deficient. So he must constantly reinvent himself. You must constantly ask yourself: in what business do I find myself? What business should it be in and what business should it go? You should find out what you want to be, what customers want, what gaps exist in the market. Somebody said: find the market gap and then find a market for that gap. Or I know that you do not have to find only where the gap is, but you also have to invent a market within that gap. If we do not change our address, we will most likely end up where we are headed, and maybe we do not like it.
Drucker reminds us: “before getting there, in the age of acceleration, one must self-cannibalize.”
And Drucker reminded us also that the only profit centers are the customers. Your factory is dead if you do not have a buyer. Sometimes, I can say, well, I sell other companies the names, addresses of the clients. And, in fact, perhaps their only asset is the database of those customers. The rich information that you have about each client and what you want, what you have previously purchased.
The biggest problem in business is to keep the model that was previously successful, one more year. This was said by the chief executive of Hewlett Packard. That is to say, to stay with a successful strategy, but a year of more. And his former boss, who started the Packard company at Hewlett Packard, said that people who are in marketing should not be restricted to marketing. That should involve all the people of the company to help them in marketing.
The whole company has to be based on the client. And there is an interesting reflection: it is not enough to be a product manager. Because the product manager tries to anticipate what the client is going to do and tries to introduce a product in the market. The product manager also has to be managing or influencing processes that create processes and products that they can sell. And this is not enough. The process and product manager has to be a network manager. What is a network manager? If your company works with suppliers and distributors, there is a network that competes against other networks.
Forget the word company. Companies have to be extended companies: a set of partners that want to win together. It is a new thought. Because in the past, the company did all the best to pay suppliers, dealers and dealers as little as possible, as if it were a zero-sum game. The majority of agreement would be maintained with them. That model no longer works in the 21st century. Companies must have partners. If not, they are left out.
So, do you work in a company or in an extended company? It has to be this last.