Are You Ready For A Dog Eat Dog World?

Let's talk about competitionWith that in mind, let’s talk about competition. To paraphrase Sara Lee, “Nobody doesn’t have competition.” We do, you do, everybody does. Do I hear you asking what’s the point?

Simple. Since having competition is a given, it’s what you do with it that counts.

What do you do with it? Ignore it? Hope it will go away? Bad mouth it?  Or do you learn from it? Do you make improvements to keep ahead of it?

For many of us, a big part of our current competitive situation boils down to one word. Price.

There are always small companies cherry-picking chunks of the market with lower prices on selected product knock-offs.  Do they offer anything else? Uh-uh. They can’t afford to. Have they embraced the very important concept of customer support that is key to a successful marketing effort?

The low price competitor is historically short on value

The low price competitor is historically short on value

As we’ve watched price-based competition come and go over the years, we’ve learned that your customers demand more than low price. They want comprehensive programs that include new product development, technological innovations and easily understood differences.

They also want merchandising support that really helps them sell. And, of course, they want service…before, during and after the sale. Moreover, they want it from pros who know their products, their markets and their needs.

It’s impossible to separate price and value

Your customers also know that it’s impossible to offer a comprehensive package loaded with value and always offer the lowest price in the market. But, they’re not searching for a shortcut to a quick buck. Like you, they’re in this for the long haul.

Dog Eat Dog World of CompetitionIf this support list describes what you provide to your customers, you should be able to weather just about any competitive storm. Your customers should recognize that in this industry, it’s impossible to separate price and value. A successful distributor-based business needs both.

The low price competitor is historically short on value. And, in this dog eat dog world, value is the thing on which we and you keep our incisors sharp.

For more on value, see the Channel Instincts posts Are You Delivering Real Value to Your Customers? and Are You Your Customer’s Biggest Fan?

Are You Struggling to Stand Out To Your Customer?

Do ever struggle to differentiate yourself from competitorsDo ever struggle to differentiate yourself from competitors?

My guess is that this is a constant struggle but one that is not addressed often by your marketing team. That’s because it’s not on their radar.

Perhaps it’s because they are too focused on the new product development processes you have in place and not listening to the critical input from customers.

When you listen to customers, you sometimes get an earful

When you listen to customers, you sometimes get an earfulThe commercial interiors business at Owens Corning struggled to differentiate itself from competitors. Sales were architecturally specified and product driven. The product was designed to absorb echoes in school gyms and classrooms.

In making calls with the sales team, customers emphasized that schools demanded a high level of performance. And also that many architects were becoming increasingly sensitive to being as green as possible in their designs.

Turning a black art into a differentiator

be differentAcoustics, however, was considered a bit of a black art.

Specialists were needed to figure out how much absorption a space needed. Surprisingly, we discovered that no one guaranteed the acoustical performance of their products, let alone have an independent third party determine their performance level.

This led us to successfully seek UL certification for all of our commercial interior products, a first for both the industry and UL.

Because Owens Corning was also the manufacturer of the base fiberglass boards the products were made from, we knew that those boards had a minimum of a 35% recycled content. This was enough to earn the product line a third-party certification (SCS), which would allow Owens Corning products to qualify for green projects.

Not all innovation is new product innovation

product_innovationWe combined these elements together with the standard 3-year warranty Owens Corning offered to create a program called Performance Marketing.

For the first time, our sales team had the ability to clearly position and differentiate our product line from the competition.

This  not only increased sales but also allowed us to create a significant trade PR program around our efforts to demystify acoustical performance.

Innovation can come from anywhere in the company. It can be product innovation, process innovation or, in this case, program innovation.

All of which will help you be more successful in launching impactful products and programs to grow sales and profits.

Good Selling!

8 Steps to Building a Customer-Focused Commercialization Strategy

8 Steps to a Commercialization StrategyBefore a commercialization plan can be developed and implemented, it must be driven by an overall commercialization strategy. By taking a strategic approach to your commercialization strategy, you will be better positioned to be successful with your new product launch.

The commercialization strategy should not contain a lot of financial detail or “how to,” but it must be consumer focused and customer centered and not technology focused. A key issue in a commercialization strategy is to set the direction to explore and understand the market. The commercialization strategy must focus on what satisfies the needs of the customer.

8 questions you need to answer in your commercialization strategy

1. What’s the Offering? (What are we trying to provide or create?)

Commercialization Strategy TipsAt a high level, clearly state what products and services are being offered to the market.

Identify what other products/services may need to be provided to be a credible supplier to the customer and the channel. Identify, at a high level the anticipated pricing strategy at the end-user level and for the expected distribution channels.

2. What is the Adjacency Assessment of the product or service? (How does the product or service align with the core business areas?)

Chris Zook in, Beyond the Core, addresses the concept of Adjacency or the relationship of an opportunity to your core business and competencies. Zook defines several things when looking at an opportunity:

1)    Core – Known business strengths and competencies

2)    Adjacency – Relationship to the Core ranked from 0 (identical to the core) to Diversification (a completely new area).

 3)    Shared Economics – There are five dimensions that when evaluated and measure the distance from the core and can be used to determine the degree of relationship to the core:

  • Customers – Are they the same as, or different from, customers currently served?
  • Competitors – Are they the same as, or different from, competitors currently encountered?
  • Cost Structure – Is the cost structure (infrastructure) the same or different?
  • Channels of distribution –Are these the same or different?
  • Singular capability/technology – If there is a singular capability (brand, asset, technology) that gives the core business its uniqueness, then is this relevant in the new opportunity?

3. Who is (are) the Targeted Customer(s)? (Who do we really think will want the product/service and Why?)

Identify who is (are) the targeted customer(s) – end-user, big box retailer, distributor, internal business unit, etc. Who are we trying to sell this product or service? Keep in mind that the targeted customer(s) may change as more marketing and Voice of the Customer data is collected.

Why is this customer believed to be the real customer? It is toward this customer that the Business Proposition will be initially oriented. It is toward this customer that the Business Plan will be structured.

4. State the “Business Proposition”

Strategy and Marketing traffic sign in the handThe business proposition describes what the product or service offers that no other product can.

It is important that the Business Proposition be benefit focused. For example, Coke quenches thirst. Coke is also a good rust remover but it will NEVER advertised as such.

The Business Proposition should take caution not to over advertise advantages – in other words, DON’T clutter the message. The more focused the message, the more likely to clearly communicate it.

Have a single Value Proposition – Keep It Simple – the KISS principle.

When developing a business proposition think of what people are buying.

Customers are not buying a product – they are buying what that product does for them. Customers don’t typically buy a product because they fall in love with the technology. Customers buy the SATISFACTION OF NEEDS. The Business Proposition MUST clearly state how that need will be satisfied.

Doug Hall, in his book, Jump Start Your Business Brain, addresses three key elements to Stating Value:

1) Overt Benefit to the Customer – What is the real benefit to be realized? Engineers love to talk specifications – “This car will go from zero to 60 in 3.2 seconds.” Buyers want to feel the wind in their hair and the thrill of feeling the force of their heads being pushed against the back of the seat.

2) Dynamic Difference – What makes our product/service any different that what is now available? Unless this product is for a total new and untapped market, customers have choices.

3) Real Reason to Believe – What gives the customer confidence that we can deliver the product or service we are offering? For example, “We have had Z years of 100% customer satisfaction as measured by JD Powers.”

5. State the “VALUE CHAIN”

Sales leadership stepsThe Value Chain relates to the business processes of the company selling the product.

Questions to be answered are:

  • Who will sell the product? Whoever has sales responsibility must be aligned with the Value Proposition – they must care that the product/service really does meet the customer’s real need.
  • Where will the product be sold? This may need to be clarified in later, but initially, choose the logical area(s) that fits in with your Value Proposition.
  • How do you distribute your product? What is (are) the expected distribution channel(s)?

The Value Chain and Business Processes must be aligned as close as possible to the Value Proposition. The closer the alignment, the greater the probability of success.

6. How will the product/service be Marketed?

Brand idea chartAt a high level, what is the basic marketing approach? Consider the following:

  • Who will provide the marketing activities?
  • Who internally will oversee that the marketing activities are done correctly?
  • Identify logical points to test assumptions, validate alignment with the Value Chain and/or Business Proposition, and logical changes/adjustments to the marketing approach, the Value Chain, or the Business Proposition.
  • What is the overall Communication Strategy for getting the message out to potential customers?

7. Provide a rough-order-of-magnitude Business Plan

Given the information available, give a high-level assessment of the business potential for the three years after commercial launch. Try to be realistic, meaning not overly optimistic nor overly conservative.

Items to consider are:

  • Sales
  • Gross Margin and Gross Margin as a percent of Sales
  • Operating Income and Operating Income as a percent of Sales
  • CAPEX
  • RONA

8. Major Commercialization Risks/Issues/Obstacles/Support Requirements?

What significant commercialization items can keep this effort from being successful? What support is needed from management, gatekeepers, resource managers, etc.

Write out what the risks are and rate them High, Medium or Low. Put a few ideas down on how you can mitigate these risk.

Don’t use a Ready, Fire, Aim commercialization strategy

readyfireaimTo maximize your chances for success, you need to be thoughtful in developing the strategies behind your new products.

Innovation can happen in the commercialization of a product as easily as in the product itself.

Think about all the ways you can build upon and leverage your commercialization strategy and you might find your sales teams more engaged in the product launch, your customers understanding what’s in it for them, and ultimately your new product goals being achieved.

Good Selling!

A special thanks to Lowell Dye for his help in better understanding the product development process and in writing this post.

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