Category Archives: Applying "The Alpha Factor"

• This is the best time in decades to grow without big investment

  Monday, November 17th, 2008 by Wes Ball

  This is the best time in years to create dramatic, sustainable growth without having to invest in technology or product innovation.  In fact, we may see the most dramatic changes in decades in who the leading companies are.

  I have had several conversations with business CEOs recently, and, not surprisingly, there is a common theme:  Fear.  There’s also a lot of wondering what the answer to creating growth is going to be.  But the secret to growth is both easier and harder than you may have thought.  It’s easier, because the answer is so simple and attainable by almost anyone.  It’s harder, because few business managers will believe that it can be that simple and easy.

  Why is there such a great opportunity for growth right now? 

  One reason is that most of your competitors are pulling back in fear.  It’s easier than ever to steal share from your competitors when they are hiding out.  And, as long as you don’t fall into price competition as your primary tool to create growth, you can see great gains in market share and profitability, no matter what the economy is doing.

  Cahners Publishing has done decades worth of research to prove that recessions are the best time to jump past competitors.  They have continually found that those companies who use the resources to create more non-discounted demand, while everyone else is holding back, grow much greater than their competitors during and after the downturn.

  My own research and testing over more than 25 years has proven conclusively that you can dramatically grow market dominance and customer loyalty without discounting even more easily during a downturn than when things are good.

  The real choice will be, “Do you want to be the one left behind to follow someone else’s lead, or do you want to emerge 6, 12, or 18 months from now as a dominant leader?”  Act wisely now, and you can leap-frog past competitors. 

  Another reason is that there also is no lack of customer need.  Despite the typical perception that “customer satisfaction” surveys measure how satisfied customers are, reality is that most customers are not at all satisfied.  They just won’t tell you that.  Most of what is measured by customer satisfaction surveys is what the marketer thinks is important, not what the customer really values.  In fact, most customers won’t even reveal what is most important to them in a customer satisfaction survey.

  I do a lot of innovation research, and invariably I uncover entire areas of deep need (functional and emotional) that customers have never revealed to anyone, because they never believed that they could fulfill those needs through a product in that category.  And the marketers in that category are completely blind to it.  It would be like never recognizing the opportunity for a Victoria’s Secret, because there are already so many other retailers that sell lingerie and pajamas.  But such are the opportunities that dominate categories in a short time, no matter what the economy is doing. 

  The best part is that emotional, ego-satisfaction needs are the ones that create the greatest growth in a downturn, and they cost the least to address.  Ego-satisfaction has two elements, according to a 15-year research study my company conducted into what creates sustainable growth:  1) how they feel about themselves (I call this “self-satisfaction) and 2) how they believe others feel about them (I call this “personal significance”).  Every time I have helped a company understand and address these unmet needs, that company has grown dramatically without discounting… no matter what the economy is doing.

  The real barriers to growth now:

  The economy is not the real barrier to growth right now.  Yes, people and businesses may slow their spending for the next several months, but they will not stop spending.  And what they spend their money on will be defined by how they feel about themselves and what they think the product will do to change that self-perception.

  The real barriers to growth are…

  1.     Believing that low price is critical – it’s actually the last criteria, not the first.  It only comes into play when the customer realizes that there is no meaningful difference between products.  Our research showed that approximately 90% of consumers will spend more for something they want, even though they may tell researchers that they won’t.

  2.     Believing that function is most important – improving quality or performance works best when it supports ego-satisfaction.  In really tough economies, ego-satisfaction beats functional performance or quality.  Almost every Alpha company we studied (companies who dominate their category and have greater price leverage) had lower quality or product performance than many of its competitors.  Functional performance is only a rationale for justifying the emotional, ego-satisfaction basis for the buying decision.

  3.     Believing that customer expectations get lower in a downturn – they actually go higher.  Customers actually demand much more, especially in ego-satisfaction, during a downturn.  To really win, you must satisfy those emotional needs and then drive expectations even higher.  The company that successfully accomplishes that will become the new leader.

  4.     Believing that measuring outcomes is how to manage success – “causes” are more important than final outcomes, because they let you modify and improve your process as you go BEFORE final outcomes.  Measuring sales and profit is backward-looking.  It’s like driving a car by looking out the back window.  Look ahead at the emotional elements of the buying decision process, and you can manage improvement far more easily and cost-effectively.

  5.     Believing that when competitors follow your lead, you need to stop them – followers are your best marketing support.  Our research into what creates sustainable success proved this.  Every competitor who follows your lead or competes against you is proving your value, not theirs.  Just don’t let them pass you in driving customer expectations.  Incorporate the best things they are doing and overcome the weak things they do.

  You can do better than just survive in an economic downturn.  Be smart about shifting current resources into ego-satisfaction fulfillment, and you will grow, while everyone else wonders what happened to them.  Recognize that this may be the best opportunity your company has ever had to grow dramatically and sustainably, and a year from now you could be the dominant success in your category.

   

  Posted in Applying "The Alpha Factor", Articles, Business, Innovation, Uncategorized | Comments (0)

• How to thrive in a downturn – Part 2

  Thursday, October 30th, 2008 by Wes Ball

  How can you make your business customers more loyal, especially when times are tough?

   

  It’s not hard to imagine all kinds of bad things happening due to the economic situation, but that’s all it is:  imagination.  During tough times, great things can happen.  And mostly, because, while everyone else is pulling in, a few others will be having a huge strategic impact upon current, new, and future customers.

  In the b-to-b arena, this fear and the opposite opportunity for growth are even greater than for consumer products marketers.

  Imagine this: 

  You sell to businesses, and (as everyone else experiences) they regularly put you through the meat-grinder on both price and other “support” – what they mean by that is promotion and advertising allowances, special promotional discounts, and other profit-robbing special “give-backs.  You are used to walking in, hat in hand, expecting to be given a list of expectations (read “demands”) of what you must do to keep the business for another period.

  Then, suddenly, everything changes.  You walk in and the buyer expectantly invites you to sit down.  He can’t wait to hear what your company is up to, so they can “ride your coattails” to greater success.  He can’t wait to hear every word you have to say, so he can figure out how to take advantage of what you are doing.  Demands?  No, he just wants to know how he can get the benefit of everything you are doing, so he can become even more successful.

  Sound ridiculous?  Impossible?  It may be beyond anything you’ve ever experienced, but it’s not only possible, but it is also probable… if you understand what can drive such behavioral change.

  I’ve personally seen that happen so many times, I can’t even count the occurrences.  What was previously an adversarial relationship suddenly becomes one of mutual benefit.  It happens because the customer is in pain and can’t solve it on his own (like right now with a tough economy and a lot of fear among your customers’ customers).  He needs help.  Can you provide it?  If so, all the self-assurance and arrogance you’ve typically seen from those buyers starts to become a lot more pliable.

  Yes, they will still start out hoping to make a profit “the easy way” by taking money from you, but when confronted with a confident, Alpha-focused supplier, they are very open to help that can benefit both of you.

  Alpha Innovation focuses upon identifying unmet or under-met functional needs and creating solutions that incorporate ego-satisfaction, so that the buyer comes out feeling like a big winner.  It sounds so simple (and in many ways it is), but the discipline to not create functional solutions without ego-satisfaction is so difficult for most corporate teams fall short most, if not all, of the time. 

  The process to achieving this blend of functional needs satisfaction and ego-satisfaction is fairly straightforward; it’s just outside the realm of experience in most companies.  Or, if it has been experienced, it has happened more by accident than by intention.

  Understand firstly what “ego-satisfaction” is.  Ego-satisfaction is accomplished when a person feels good about himself and when he feels that others feel good about him when he buys or uses your product or service.  These two aspects are called “Self-Satisfaction” and “Personal Significance” in The Alpha Factor.  A person feels self-satisfied, when he believes he is smarter, wiser, more powerful, more fulfilled, more knowledgeable, more appreciated by the company marketing the product or service, more capable of doing the job for which he is paid, etc.  A person experiences personal significance, when he thinks others view him as any of those attributes mentioned above and when he believes others may either envy him or aspire to be like him.

  Now, consumers are reluctant to admit such things.  Business owners or buyers often are not reluctant to admit those desires, especially the self-satisfaction list.  The trick is getting beyond the demands the buyer feels he must present to the real hidden needs that he (or his boss) have but that he doesn’t believe can be solved by a supplier.

  For instance, … 

   

  • Most businesses would love to have ongoing information that will make them capable of being more competitive in the marketplace. 
  • Most businesses would also love to have a supplier, who helps them grow personally and corporately.  That means being a source of solutions that help them grow beyond the direct impact of buying or selling your product or service.   Help them get more business beyond what you directly offer, and your value skyrockets (yes, even among those tough organizations who seem to resent any supplier whose influence appears too great).

  These are only two of the most common ways I have seen Alpha thinking drive solutions that provide functional and ego-satisfaction fulfillment. 

  There are obviously many other functional things that could be addressed, such as better payment terms or delivery schedules, etc.  But it is important to understand the difference between these purely functional solutions and the more effective ones listed above.   Function-only solutions may make the buyer seem happy for a short time, but…

   

  • Any other supplier may also be able to provide that solution (or eventually create the capability to provide it) and
  • The buyer maintains “control” of the solution, so you get minimal sustainable benefit from either offering or providing the solution.  The buyer thinks he solved the problem, not you.

  By using an Alpha-focused solution, you also generate greater competitive control.  I have yet to see a competitor easily overcome Alpha-focused solutions, simply because of two factors:

   

  1. The personal and business-to-business relationships established are very strong, because of the great ego-satisfaction created, the idea of dependence upon you generated, and the fact that the buyer would not want to reveal his level of need to anyone else (he fears that he might lose the appearance of control by revealing it), and
  2. Competitors can’t see the ego-satisfaction part of the solution, so, when they try to copy your effort, they will invariably focus only upon the functional aspects without the same success.  Your ego-satisfaction elements are “invisible” to competitors, because your customer will not reveal that he either had such needs or had them addressed.

  The most important factor

  Ego-satisfaction is the critical factor.  The functional solution is only the “vehicle” or “conduit” for providing ego-satisfaction, but without the ego-satisfaction element there is no Alpha dominance.  We saw it over and over again as we studied Alpha companies, but we saw it play out even more clearly as we tested the theory with real companies to create growth. 

  It is absolutely critical, however, to understand that in b-to-b situations you need to initiate the solution.  You cannot wait to respond to your customers’ demands for help.  It is only through recognizing the need without the customers’ suggestion and providing a solution that goes to the heart of ego-satisfaction, while also solving a critical functional need, that it works. 

  If the customer suggests it, then there will be no ego-satisfaction credited to you, no matter how much reward the buyer gets for the results.  You must be the proactive agent of ego-satisfying growth.  Otherwise, he “owns” the solution, and you are just the supplier who was required to provide it.

  So, if you are like most b-to-b marketers who focus upon responding to customer needs, you have already undermined your ability to become an Alpha.  You must become the driver of expectations, not the responder to them.

  Growth during tough times

  Don’t believe that tough economies are a bad time to invest in growth.  They are, in fact, the very best times.  Just as Warren Buffet once said, “When everyone else is fearful, be greedy.  When everyone else is greedy, be fearful.” 

  Your b-to-b buyers are hungry, and they are getting hungrier.  Use Alpha Innovation as the model for driving new growth now, and you will benefit more now and later.  Hide and try to wait it out, and you will stay right where you are or be left behind by an Alpha innovator out there who is “invisibly” taking dominance away from everyone else.

  Here’s a real practical way to approach this:

  Since most of your sales maintenance will come from existing customers during an economic downturn, start by segmenting your existing customers.   Divide them simply by those who want and accept such innovative ideas and those who don’t.  Don’t assume that, just because you presented some functional ideas in the past that were rejected, those same companies will reject ego-satisfaction focused ideas now.

  How to create the “right” innovation –

   

  • Go beyond the obvious solutions to discover ways you can help them address broad business development needs – they need new business as much as you do.   Especially look for problems that your customers believe are “unsolvable.”  (Anything you do that will help your customers generate more business overall is attractive and unexpected.  Obviously, you need to make sure your product or service is at the core of that, but the benefit obviously provides broader rewards to them.) 
  • Look for ways to make the real decision-makers responsible for profitability (and who also have sway over the buyers) feel smarter, more powerful, more likely to get promoted, and more influential by allowing you to help them.

  What will come out of this process of discovery and ideation are ideas that may cover a range of business needs that you can help them address, such as ways to build store traffic for retailer customers or ways to create competitive advantage for manufacturing customers.  These ideas are only the starting point for developing ways you can use your product, your advertising, or your market influence to help them grow their business.

  What NOT to do –

   

  • Don’t allow internal nay-saying to stop the process until you have gone far enough to discover ideas that will work (It always looks hopeless early in the process – don’t fall into that trap.  The biggest barrier to your success is your own unwillingness to go beyond what you have experienced in the past.)
  • Don’t allow an internal go/no-go decision to be made without actually field testing these ideas with real customer decision-makers (not just the paid buyers).   (Pick a few that you think would be open to a test and make sure they understand the intent to help them grow beyond what is directly attributable to your product or service.  If you have not hit on the right ideas, start fishing more deeply for what their real needs are.  Once you hit upon the right needs with a workable solution, they WILL respond positively.  Who would not wish to gain benefit from someone else’s investment?  And who would begrudge the supplier of such solutions to not also profitably benefit from them.)
  • Don’t allow every salesperson or division to try this at once.  (Only a few will have the self-confidence and influence that will lead to success on the first try.  Encourage those few, and their success will spur others to try where they unconsciously undermined their own efforts before.)
  • Don’t fall into the trap of believing you have to sell or respond to every customer you have had in the past no matter what they demand of you.  Although it frightens most salespersons to hear this, saying “No” is often the best path to future success, especially if the customer making the demands is hurting.

  For those companies who respond negatively to such ideas, you have three choices:

   

  1. Tap relationships you have at higher levels among real decision-makers with a practical appreciation for the company’s broader business needs.  Present these ideas with as strategic a perspective as possible that transcends the limitations of just what your product offers.  (I have seen negative-responding buyers come running back one day after a higher-level executive received information about a strong strategic idea from an equally high-level executive in my client’s company.  And the buyer could not hold a grudge, because the directive came down to him and the information had been provided high-level executive to high-level executive.)
  2. Create a lesser plan for these negative responders that still attempts to generate some broader objectives that will be noticed by higher-level management.
  3. Ignore them, and focus upon those companies who want to get help that benefits both you and them.  (Some of the most productive strategic “promotions” we ever used with companies was to make sure these uninterested companies saw the benefits gained by those companies who accepted help.  Typically, the next year, these negative responders were begging for the help they turned down earlier.)

  For those companies who respond positively, make sure that what they get is visible to competitors and makes those competitors want the same thing from you.  Then you have the leverage to both set expectations and drive new ones.

  For those on the fence (who won’t take the plunge and try a test), really make sure they see what the best supporters of your proposals are getting and how they benefit from it.

  Throughout the 15-year Alpha Factor research project, I helped companies grow through three recessions.  One of the reasons the process works so successfully is because most companies refuse to believe it can work.  They never try.  They pull back and follow the pack.  And they leave an open door to the few companies who use Alpha Innovation to create a stronger, more prosperous future for themselves and their customers.

   

  If you want to better understand how the Alpha model works in all types of businesses, you need to read The Alpha Factor.  Or give us a call, and we can help you uncover the opportunities for Alpha growth in your category.

  Posted in Applying "The Alpha Factor", Articles, Business, Innovation, Uncategorized | Comments (0)

• Can Apple’s iPhone survive the T-Mobile G1?

  Friday, October 24th, 2008 by Wes Ball

  As an Alpha company, does Apple have to worry about T-Mobile’s new G1 competitor? 

  Nope.  Here’s why…

         There has been a lot of speculation about the new T-Mobile G1 “handheld computer”  (or otherwise known as a “smart phone”) and whether it represents a real threat to Apple’s 3G iPhone. Despite some “test drives” that say it is a good technical runner-up, the answer clearly is, “No.”  And that is based upon understanding the Alpha Factor and how it reflects the real buying and decision behavior of real people.

  I have not had the honor of being able to test it personally yet, but there are a couple of reasons that make it easy to predict that it can’t be more than an irritation to Apple:

  Firstly, there are the obvious functional issues.  According to the Alpha Factor model, in order to be competitive, a product must meet at least the minimum functional expectations for the category.  The G1 fails on that measurement.

  Apple has already set a fairly high expectation for functionality with easy synchronization with PCs or Macs through iTunes.  It also set the standard for both web and video viewing with the screen that changes from portrait to landscape by simply turning the device.  Those are just two of the functional advantages the iPhone has over the G3.  Although the G1, designed by Google, has added some apparently interesting new features and software, it does not address the core performance expectations set by Apple.  It also has a much smaller network through T-Mobile, which by itself will limit the phone’s success.  

  But don’t stop there.  The most important reasons the G1 is a waste of innovation investment are below.

  Secondly, it is a “follower,” which is the worst thing to be, as proven over and over again in the research used to develop the Alpha Factor model.  Followers are what you want to make everyone else in the category.  Followers make the Alpha stronger, because it is obvious that followers see something of greater value in the Alpha’s offerings than the follower had in theirs.  Hence, the follower changed to copy the better offering of the Alpha.  That’s a big “duh,” yet it is the very trap that most marketers fall into.

  Thirdly, it reinforces that it is not as good by making itself cheaper.  If you haven’t figured it out yet by reading about the Alpha model, cheaper equals “not as good.”  Consumers are not stupid.  Any research you do will reinforce the consistent findings that people believe that cheaper is not as good, even though they wish to believe that somehow someone might make a mistake and price a better product cheaper.  Confidence is lower in a cheaper product.  Cheaper only works if there is no evidence that something else will work better for them and/or make them experience more ego-satisfaction.  Then price becomes the critical decision factor.

  Nothing that copies the iPhone has a chance of becoming the Alpha in the category.  And being an Alpha, which Apple has made itself, generates all kinds of hugely profitable benefits.  For instance, the Alpha can charge more, no matter what its cost structure is.  The Alpha gains more competitive influence, meaning it has more influence over decisions made by customers, competitors, retailers, distributors, and referral agents.  The Alpha is less vulnerable to competitive pressure.  It is also more able to weather tough problems, like product recalls, bad economies, or other ugly things that happen.

  So, what could the G1 have done to make itself an Alpha rather than just an “also ran?”  It could have started by going in a completely different direction than the iPhone did.  It could have started with really understanding what iPhone, Blackberry, Trio, and other “smart phone” users wish they were getting, but aren’t (which goes far beyond just putting a keyboard on the G1 and offering a few different, not necessarily great, programs).  It could have taken the core functional needs not being met by any of those products and made that the new standard for everyone else to meet.  Then they should have looked for ways to address unmet ego-satisfaction needs among the segment they discovered was most vulnerable.  Instead, they made themselves a very slightly cheaper alternative.  Sad move, guys.

  For instance, just as the iPhone moved from basic functionality to focus upon better personal entertainment performance and then added design and tactile features to enhance the ego-satisfaction, the new G1 could have explored making itself the ultimate business application, overcoming the functional shortcomings of the iPhone and then found ways to address the many unmet ego-satisfaction needs of business persons.  Functionally, it could have made itself the ultimate “office in your pocket” application.  Emotionally, it could have found ways to make people feel smarter, more “powerful,” and better in touch with the world, which would have put them on the track to become the business segment Alpha. 

  That may not have given it the ability to outsell the iPhone in numbers of phones or given it more overall appeal than the iPhone, but that would have given it a niche to own rather than just being a copycat (and a weak one at that).

  What about the network?  Isn’t that really the big weakness?  No.  It certainly makes this product a minimal threat in terms of sales volume, but even if it had been picked up by AT&T as another option to the iPhone, it still would not be a viable competitor.  The $20 savings on recommended product price and the meager savings on service would only have made it an option for persons who really did not know what the iPhone offered.  More than 3 million iPhones were sold to persons who were willing to pay significantly more than a Blackberry would have cost them.

  As the Alpha Factor Project proved over and over again, price is not the issue.  It never is, except when there is no real better choice (or the more expensive option is unjustifiably higher priced based upon the functional needs defined by the customer).  I am really saddened seeing companies believe that they can make sustainable inroads against an Alpha company (or in many cases, even the non-Alpha company that has a better product) by sliding 10% to 20% below them in price.  In every research study I have ever done, I have seen that people are more than willing to pay 20% to 40% more on most products when they can see better functional performance targeted to their needs.  They are also typically willing to spend 40% to 200% more if it also addresses ego-satisfaction better than competitors do.

  What a waste of hard to come by R&D money.  had the G1’s innovation investment been targeted rightly, it would have a chance of generating a serious ROI.  As it is, I would not recommend selling your Apple stock just yet.  Apple’s rising star is based upon its having established itself as an Alpha.  And with competitors like the G1 that has no understanding of the basics of how customers make buying decisions, Apple has little to worry about.

  (NOTE:  If you would like to really understand how The Alpha model works and can be applied to almost any business to create greater profitability, price leverage, market dominance, and competitive control, get your own copy of The Alpha Factor.  You can order yours on Amazon or BN.com.)

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