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• 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)

• The secret to sustainable innovation (managing change with Alpha Innovation)

  Thursday, September 18th, 2008 by Wes Ball

  Harnessing change as the key to innovation dominance.

  No one likes change.  Even the 15% of the population with the personality type that can thrive on change doesn’t “like” it.  Change causes pain – personally and organizationally.  And pain causes uncertainty, which makes everyone uncomfortable.  So we all try to avoid it, if at all possible.

  But creating and managing change is the key to market dominance.

  Change is going on all the time – and at an alarmingly increasing rate.  It is also what every C-Suite executive is tasked with driving in order to survive in the job.   It may be called “profit growth,” or “sales growth,” or “innovation,” but what it really comes down to is  the need to create “change.”  And it causes pain.

  The good news is that change can be managed and controlled to your benefit, if you understand the Alpha Innovation model.  Most innovation creates little dynamic, profit-enhancing change; it just creates minor “noise” in the marketplace that briefly changes the focus of customers until some new “noise” occurs.  In most cases, it is either a reaction to another marketer’s efforts, or it is a simple extension of what you have been doing before that has not created dominance for you and won’t any time soon. 

  These kinds of innovation are the most costly and the most painful, because they not competitively sustainable or defensible over the long term.  Competitors can create their own noise that redirects customer attention away from you, defeating your efforts and investment.  It takes a continual effort to be more creative than the last time to come up with something to create more noise to re-attract customers.

  The most profitable innovation is the one that drives a new “thread” of future changes or innovations that increasingly focuses customers upon your offerings to the exclusion of your competitors’.  That is Alpha Innovation.  Alpha Innovation typically is less painful, because competitors actually make it easier for you.  They follow your lead, giving you control over the innovation thread for the entire category.

  The secret is in understanding how customers view innovations.  There are three elements to their view of anything new:

  1.     How it works (function)

  2.     How it makes them feel about themselves buying or using your product or service (self-satisfaction)

  3.     How they believe others view them using or buying your product or service (personal significance)

  All innovators start with identifying an unmet functional need.  They spot something that could be improved functionally to make customer experiences better or more efficient or more fulfilling.  The trouble is that most innovation stops right there.

  If I make a soap that cleans better than the leading brand, I have created a functional innovation.  I may have created a brief window of advantage.  My competitors find out what I did and create a way to make a soap that cleans at least as good as mine PLUS makes things smell nice, as well.  Suddenly, that competitor has a brief window of advantage.  And so it goes, on and on with one competitor gaining a brief advantage until another creates a brief advantage. 

  Each one focused upon creating a functional innovation that one-upped the previous leader.  This innovation was costly, requiring retooling and investment in new marketing and perhaps even in new distribution.  The result was no sustainable advantage; just an on-going battle of one-upmanship that required careful management of backend costs to avoid losing whatever gains might have been generated during the window of advantage.

  Now, add in the other elements of the Alpha Innovation model and a very different result is created. 

  The rule is this:  “Satisfy function to the minimum; satisfy ego-satisfaction to the maximum.”

  I create a soap that works at least as well as the minimum basic functional expectation of soaps in the category (among at least 80% of the current buyers in that category).  Instead of innovating further on the basic functional side of cleaning (unless I have discovered that no soap is fulfilling the basic functional need to the level desired by customers) and instead of just trying to reduce costs to make myself the low cost provider (that then puts me in a “who will charge less” game that no one wins), I start looking for satisfaction and significance opportunities.  (NOTE:  What I describe from here on is wildly hypothetical, so don’t go running out to create a new soap like this without competent Alpha model research to discover the real ego-satisfaction opportunities.)

  For instance, I could start looking for any clues that might lead to benefits customers would spend almost anything to get.  What would make a customer say, “It’s the most expensive soap out there, but it’s worth every penny of what I pay?”  You may never reach that goal, but the insights you get will lead you to an area for focus of innovation that competitors will have a tough time beating.  Like l’Oreal’s, “I’m worth it,” you will discover things that, if you functionally innovated to provide them, would prove enough ego-satisfaction to make your product not just the one everyone aspires to own, but the one that customers will pay more for.

  The really amazing thing is that that the basic core functional performance of most products that address innovation in this way may not be much better than competitors’, but the effective value customers place on that product is dramatically higher than that of competitive products.

  Apple’s iPhone is a great example of this.    I compared the original to RIMM’s Blackberry.  In many ways the Blackberry’s performance was better, especially for anyone used to typing with two fingers using their tiny keyboard.  The iPhone’s user interface was much prettier, and certainly the internet looked significantly better on an iPhone than on a Blackberry.  The cost of the iPhone was much higher than the Blackberry (even at its “new lower” price flowing its original introduction at almost $600).

  So why did more than 3 million iPhones get purchased?  It was more than the “new” factor.  It was more than the “sexy” graphics and interface.  It was even more than the media hype that made it sound like the greatest thing to hit planet Earth.  What made it so different were all the non-functional things that Apple so adeptly built-in that did not really affect the functional performance.  For instance, the tactile feel of it – it just feels great to hold in your hand.  Or the black glass screen that covers the entire front.  It looks like something from another planet, or at least from three generations of Earth time from now.  For me, it was the “feel.”  Holding it made me smile.

  I bought one.  I love it.  Even now that generation two is out, I still have people stop me and ask to “see” it, which means, “Let me touch it, feel it, etc.”

  Apple could have just innovated like Blackberry and one-upped them functionally.  The result would have been a more and more costly war of functional improvements.  Instead, they focused upon the ego-satisfaction side, ignoring the fact that their functionality was only comparable to Blackberry’s, and the result was that they are out there alone, leading the pack.  Competitors are trying to mimic the iPhone, but they all fall short because they are focusing upon functional innovation and missing the ego-satisfaction hold that Apple has gained.

  The innovation thread now is open for them and will take a completely new set of ego-satisfaction elements to be addressed by a competitor to overcome it.  Apple’s newer generation iPods (the original was certainly a “disruptive” innovation, but it could have been overtaken functionally by competitors, even with iTunes being the core element of the disruptiveness) have followed the same innovation thread.  They have taken the design and feel of the iPhone to another level with Nano – small, wonderful to feel in your hand; it even feels good in your pocket.  Then came the MacBook Air that reminds me of a big Nano in feel and design.

  While their competitors are beating their brains out on functional improvements, Apple is using the ego-satisfaction elements that they now “own” to increase profitability, sales, and stock value.   While “tech-heads” are busy extolling the benefits of their super-dooper PC laptops tat only they can understand and use efficiently, people are paying more for the MacBook Air and are being swamped by people in airports, coffee shops, and the office to touch and see it.

  This recognition of the “value” customers place upon ego-satisfaction over function is critical to becoming and remaining an Alpha.  It’s how Apple is making itself (finally) into an Alpha.  It’s how Harley-Davidson became one.  It’s how Victoria’s Secret became one.  It’s how John Deere became one.  It’s how Intel became one.  It’s how Mercedes and BMW became one. 

  It’s even how Wal-Mart became one.  They certainly don’t fit the profile of the others, but their hold on the retail industry has been based totally upon customers wanting to believe that they are making the smartest shopping decision.  No other general merchandise retailer has done what Sears did in the past – making itself the trusted place to go for household items, no matter what anyone else’s price was – so Wal-Mart has made retailers become followers in their “price is everything” model.  The funniest part of this is that Wal-Mart is not and never has been the lowest-price provider.  They just make sure that they provide enough functional proof of that idea to be able to make their claim of lower prices believable and trustworthy.

  So the trick to managing change is to use the Alpha Innovation model to create change that focuses everyone (customers and competitors) upon your offering.  The way to do that is through functionality that at least meets the minimum basic functionality required AND that proves that the customer will gain more ego-satisfaction by buying your product or service.

  Deliver ego-satisfaction.  Prove it with function.  Become the Alpha.

   

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