I suspect only a small percentage of my followers will drill into this because they feel “it’s more than I need to know” or “I don’t want to think that hard”. Fair enough. I get it.
So this is for those “endless curiosity, can’t get enough” folks.
You’re not going to see the above graphic in any business textbooks. Because I created it myself years ago for one of my consulting clients. I prepared it for one of our strategy discussions to visually illustrate – in one graphic – all of the factors that contribute to the fate of a business. I did it because the client thought his survival challenge was merely a tactical marketing problem.
Not so. His real problem was that not enough people cared that his company/products existed! Because his “value proposition” wasn’t. Nobody cared.
So, let’s walk through the elements in the above graphic one at a time and I’ll explain how each one relates to the fate of a business. You’re going to recognize your own business or employer history in this.
Starting from the bottom of the graphic and working up:
The red band: a company is created based (hopefully) on a vision, mission and set of values. However, let’s say that those elements don’t resonate with the target market. (Example: the company embraces a hard-sell style of selling. Its target audience hates it. Oopsy!)
The baby-blue band: The Business Model is how the company is organized, managed, financed and it’s “revenue model”: how it intends to make money. If each of those elements don’t serve the target market well, it will catch up with the company. (Example: The company doesn’t offer payment terms for their expensive products/services, while the key competitors do. Oopsy!)
The gold band: every business operates in a certain external environment comprised of legal, regulatory, environmental, competitive factors, among others. It’s in trouble if those aren’t conducive to the business. (Example: long-standing competition has established virtually un-impenetrable barriers-to-entry into the market. Oopsy!)
Every business has an internal environment comprised of management style, the kinds of people who work there, policies, procedures, and core competencies. When it’s positive, people tend to like coming to work. When it’s negative, not so much. (Example: management hires a Millenial workforce, but tries to force its people to think and behave like Baby Boomers. Oopsy!)
The blue band: Whether a business has 10,000 employees or just one, they are either physically organized around the kinds of categories listed (it varies with the kind of business it is) , or those functions are at least carried out by someone (owner, employee or independent contractor). If it isn’t organized such that it serves customers well, there is no overcoming it. (Example: Research & development rarely talks to marketing & sales, so R & D, lacking market feedback, is out of touch with what the market wants. And marketing & sales doesn’t understand what innovations the company could potentially introduce. Oopsy!)
The purple band: The value proposition is what the company asks its prospects to do (usually buy) in return for what the business is offering to provide them. But if it’s out of whack, prospects will flee. (Example: the seller wants a prospect to switch all of its computers from Windows to Mac, but the “switching” costs are way too high to be practical (training costs, business disruption, employee disgruntlement, etc. Oopsy!)
Differentiation is how the business distinguishes itself from other options available in the marketplace. But all it offers is non-distinctive me-too products/services. (Example: the company has Chinese competitors who make almost identical products and sells them for one-third as much money. Oopsy!)
The bright-green band: There is much confusion about this. A “brand” is merely an identity that helps distinguish a business from its competitors. But that’s not nearly as important as that elusive rascal “brand equity”, which is the sum total of all things that contribute to what the business means to people. (Example: Uber has tremendous name recognition, but, among many people, the company represents dirty and unfair competitive practices, which turns them off. Oopsy!)
The light-green band: As explained in my post “The Sales Hourglass”, though obscured by the boggling array of marketing talk out there, there are only three basic ways to grow a business:
1. Get more customers.
2. Increase the average sale amount (of either or both of your first-time sales and repeat sales).
3. Increase the number of times that customers return and buy again from you. (Notice that repeat sales can be two types: if you sell consumables, repeat sales can be replenishing what customers “use up”. If not, it means selling them other usually related – but not necessarily – products and services. )
That’s it! Now, here’s another little secret that will put you head and shoulders above “the pack”: Very close to 100% of all small businesses focus 100% of their marketing efforts on first-time sales only!!! Why? Because 95% of all marketing babble is about “acquiring customers.” And only 5% of the babble addresses keeping and growing customers. (Those are my best estimates at the numbers – I have no idea what they really are, but it wouldn’t change my point – it’s all out of kilter.)
(You know why it is that way? Because the vast majority of marketing babble is propagated by people trying to sell you customer-acquisition services, NOT customer retention and growing services. There’s another reason: most business executives aren’t trained or atuned to retaining and growing customers. So they don’t hold their marketing staff accountable for either one. Oopsy!)
The yellow band: That is “where the plastic meets the ocean” (a variation on “where the rubber meets the road”). Think of it as the interface between prospects/customers and all the other factors in the table above. This is where your business and the prospect’s/customer/s motivations come together some way, some where, some how. If all the factors discussed above in the graphic contribute to suiting the prospect’s needs, an exchange may occur. If not, oopsy!
So, bottom line, it’s all about alignment isn’t it?
And there’s your MBA degree. Keep it somewhere safe. 😉
“Why You Usually See Three-Tiered Service Pricing”