If you need a differentiated, superior value promise to win customers’ votes, how do you know when your value promise is no longer working and business model innovation is called for? Make sure you measure repeat purchases, your consideration rates and your win rates. Discover where you’re losing business and why you’re losing business, as losses signal a weakening value promise and threats to profit potential. Lost order autopsies can reveal – Nascent industries reducing customer interest in your categories Your differentiators becoming standards to be considered Non-traditional competitors entering your space Subgroups of customers exiting for simpler offerings Reduced profit margins also indicate a weakened or less differentiated value promise. But leaders too often forget that a compelling value promise creates the best context for reliable profit potential. They fix profits by cutting costs, forgetting value promise implications. A vital strategic leadership…
Value Promise and Profit Potential, Part One
Image via Wikipedia All customers buy on perceived value. Unfortunately, Walmart’s advertising has led us to define value as lowest price. We’ve forgotten that there are value promises beyond lowest price in today’s recession. Value is a mental scale with benefits on one side and costs on the other. Both sides contain tangible and intangible, emotional, functional and/or social factors. More benefits, more value, a formula Target exploited and Sears forgot. We stay in business if the customer exchange (benefits for price customers pay) is consistently profitable for us or, if we’re a venture-financed start up, promises profitability. Value promise and profit potential are interrelated. Understanding this interrelationship explains how to win. Way #1. Build the lowest cost structure for delivering required benefits. Your higher margins can be channeled back into the business to create further advantage. McDonalds dominates Wendy’s. Way #2. Offer…
Strategic Leadership in Fearful Times
I took up rock climbing to confront my fear of heights. I’d follow my planned route, stopping to decide on my next steps. Stopping for too long, usually out of fear, was always a mistake. Fear aroused the oldest part of my brain that screamed, “Any move other than right back down the way you came is dangerous.” I’d hold onto the rock for too long, and only look narrowly in front of me, missing potential steps. I’d exert more energy than was needed, sapping my power to move upwards, and eventually forcing me to retrace my steps. We’re in the scariest economic time in our working lives (unless we worked in the Great Depression). Fearful, we hold tight to what worked in the past. The only next step we see is the age-old wisdom: “Cut costs and lower break-even points to conserve…