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 skill is keeping the value promise front and center throughout your organization. Cut waste and inefficiencies, but not at the cost of differentiated benefits. Strong marketing managers know that internal communications are as vital as external communications.
No customer will pay you for inefficiency. So all costs must be linked to generating benefits. Otherwise you’re cutting into customer value and your price premium.
How does your organization approach cost reductions?
__________
For insight on business model strategy and business model differentiation, read my recently released book, Beyond Price.
Hi Kay, More sage advice! I remember from my days in industrial distribution how we used to tout “next day delivery.” At first, this was a real differentiator – the average delivery in our markets was 2-3 days. But over time logistics became more efficient and there was nothing special about next day delivery. We continued to tout it, but customers didn’t care. Worse, competitors began touting “same day delivery”, and our benefit had become a liability. We should have been looking more closely at why we were losing orders, as you suggest. We might have discovered the delivery problem earlier.