Marketing basics – products and value
A core concept in marketing is the difference between your product and it’s value. What’s the difference between the item you are selling and its worth to your customer?
If you sell someone perfume, are they buying the scent in the bottle, the promise of romance, or the prestige of your label? An accountant’s product might be tax returns. What’s the value to the client – Compliance and safety from prosecution? Freedom and bookkeeping time minimised? The more you know about the value your customer wants, the better the business you can build.
First catch your hedgehog
In the classic business book “Good to Great”, a key success factor in breakthrough business performance identified is understanding the heart of your business – the meeting place for:
- What you are passionate about;
- What you can be excellent at; and
- The value you customer pays for.
So success isn’t all about the product you supply, it’s about the value of that to your customer. This is NOT a place for assumptions – it’s a research question.
Everything is a service
You buy a mobile phone because you want to communicate better. You buy carpet because you want warmth, good looks and noise reduction. Some people buy cars for the transport they provide – others buy cars for the image they create.
What are your customers really buying from you? If you know the real answer to that question, you can increase your sales substantially.
If you know the value of your products then you can start look at the services they provide. When you know the service your product provides, then you can start designing it to use less resources and be more sustainable. You might even find a way for it to be regenerative.
Evolving your cash flow
When you fully understand the value of your service, you can also look for ways to price
and sell it as a service instead of a product. Instead of spiky sales and production demand,
you can invoice your service monthly or quarterly.
Products becoming services
Interface Carpets lease their carpet to customers. Their cash flow is smoothed out,
their planning information is excellent, they can take back worn out carpet tiles and make
them into more carpet tiles.
FlexiCar car sharing provide transport services to inner city dwellers who want to go shopping or take a day trip. Similar to car hire, for as little as an hour and with far less fuss.
Members book online for the period of time that they need transport. They book the size
of vehicle that suits their needs. Transport as a service, instead of car as a product.
What’s your opportunity?
If you look beyond your “product”, what is it that your customers value? Not sure? Check out our RESOURCES page for some starting points.
(First published in Balance3 Update, May 2007)