Chand Arora.com

If we want to know what a business is, we have to start with its purpose.

There is only 1 valid definition of business purpose: ‘to create a customer’.

You’re really not in a business to make a profit, but you’re in business to render a service that is so good people are willing to pay a profit in recognition of what you’re doing for them. A business exists to create wealth for its customers. Businesses routinely lose sight of the fact that the sole reason they exist is to serve customers outside of their four walls.

Selling should have an intense focus on the prosperity of the customers. You measure success by how well your customers are doing with your help. You’re not focused on selling a specific product or service; you’re focused on how your company can help the customer succeed in all the ways that are important to that customer. By tapping the many resources that you have at your disposal to help customers meet their business goals & priorities, you are adding value.

This approach is called Value Creation Selling. If you can’t impact the customer’s performance in a positive way, then you’re going to be a commodity product & you’re going to get commodity prices. The more you know about your customer, the better you & your company will be at identifying his concerns & devising products & services that will help address them. How to add value?

• You should devote large amounts of time & energy in learning about your customers’ business in great detail.
• You should use capabilities & tools that you’ve never used before to understand how your customers do business & how you can help them improve that business.
• You’re going to make it your business to know not only your customers but also your customers’ customers.
• You have to recognise that the execution of this new approach will require much longer cycle times to produce an order & generate revenue.
• Top management in your organisation will have to re engineer its recognition & reward system to make sure that the organisation as a whole is fostering the behaviours that will make the new sales approach effective.

Salespeople are no longer solo operators. Rather, they are team leaders, responsible for organising & directing groups of experts from such diverse areas as finance, legal, and manufacturing in their own organisation. Selling is a team sport & everyone is a player. This means that the entire staff, from the lowest levels to the top, has to change some aspect of their work. Value creation selling is team selling. The team should be cross-functional. You know your sales process is out of date when these things are true:

• Your sales force interacts mostly with customer’s purchasing department.
• The entire discussion about a possible sale revolves around price.
• Salespeople are not included in the design of the company’s offering.
• Your salespeople are internally focused. They have too much paperwork.
• Little thought is is given to your customer’s customers.
• Salespeople are pushed all the time.

You know that you are doing Value Creation Selling when:

• Customers share information about their future plans because they trust you.
• Customers see you as unique, creating a huge barrier for competitors to break.
• The customer calls your company first.
• Your organisation is seamlessly connected to the customer at all times.
• People outside of sales are thinking of ways to meet the customer’s needs.
• Customer information flows from the sales force back into product development, marketing & pricing functions.

In the final analysis, a business does not exist to be efficient, control costs, perform cost accounting, or give people fancy titles & power over the life of others. It exists to create results & wealth outside of itself. This profound lesson must not be forgotten.

It is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for goods, converts economic resources into wealth, things into goods.

What the customer thinks he is buying, what he considers ‘value’, is decisive – it determines what a business is, what it produces and whether it will prosper.

The customer is the foundation of a business and keeps it in existence. He alone gives employment.

Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. Concern and responsibility for marketing therefore should permeate all areas of the enterprise.

Thus marketing, through its studies & research, will establish for the engineer, the designer and the manufacturing man what the customer wants in a given product, what price he is willing to pay, and where and when it will be wanted. Marketing would have authority in product planning, production scheduling and inventory control, as well as in the sales distribution and servicing of the product.

Industry is a customer satisfying process not a goods producing process. The sale merely consummates the courtship, at which point the marriage begins. How good the marriage is depends on how well the seller manages the relationship. The quality of the marriage determines whether there will be continued or expanded business, or troubles & divorce.The era of the one-night stand is gone. Marriage is both necessary & more convenient. ( The analogy is not perfect, because the onus is really on the company to instil a sense of loyalty in the customer; it is not a 50-50 partnership. Companies need to invest a lot in retaining customers rather than acquiring new customers, which demonstrates the value the firm places on its existing relationships. No company has the right to attract new customers, if its existing customers are not delighted with its service.) Making a sale is not the objective, it’s a symptom of a successful communication. It’s a symptom that indicates you understand the customer & are measuring your success by your customer’s success. Then the marriage begins. The customer is truly in partnership with the effective companies and vice versa.

Marketing is about spreading corn to get the ducks to come. Sales is about taking the gun and shooting a sitting duck. And if the duck is not sitting, it means that marketing has not done its job.

Marketing is about making the market want your product.

Sales is about closing a deal with a specific customer.

Every product and service should have at least one unique feature that could be distilled into a 60-second sales spiel, the equivalent of a single written paragraph.

Uniqueness can be achieved in various ways:

1) By offering the lowest price.

2) By offering the highest quality.

3) By being exclusive.

4) By offering the best customer service.

5) By offering the widest choice.

6) By giving the best guarantee.

It has been said that most businesses do not have a USP (Unique selling proposition). They have only a “me too”, rudderless, nondescript, unappealing business that feeds solely upon sheer momentum of the market place. There is nothing unique; there is nothing distinct. They promise no great value, benefit or service – just “buy from us” for no justifiable rational reason.

A firm should scale up as much as it comfortably can, but at the end of the day, it should be able to identify a specialty. Customers will give the specialist credit for sure. So, the future belongs to either very large global players or small specialist entrepreneurs.

A firm differentiates itself from its competitors if it is unique at something that is valuable to buyers.

Firms are also often different but not differentiated, because they pursue forms of uniqueness that buyers do not value.

Differentiation allows a firm to command a premium price, or sell more of its product at a given price, or to gain equivalent benefits such as greater buyer loyalty.

A company which wants economic results, has to have leadership in something of real value to a customer. It may be in one narrow but important aspect of the product line, it may be in its service, it may be in its distribution, or it may be in its ability to convert ideas into salable products on the market speedily and at low cost. Unless it has such leadership position, a business, a product, a service, becomes marginal. It may seem to be a leader, may supply a large share of the market, and may have the full weight of momentum, history, and tradition behind it. But the marginal is incapable of survival in the long run, let alone of producing profits. It lives on borrowed time. It exists on sufferance and through the inertia of others. Sooner or later, whenever boom conditions diminish, it will be squeezed out.

No company can win if its offering resembles every other offering. Companies must pursue meaningful & relevant positioning & differentiation. Each offering must represent a distinctive big idea in the mind of the customer. A company must dream up new features, services & guarantees, new conveniences & enjoyments.

I am more or less convinced that corporate and marketing strategy are more or less the same things. The chief executive has to be the chief marketer. If you delegate that responsibility you are not doing your job.

Robert Goizueta, the late CEO of Coca-Cola said ” in real estate it’s location, location, location. In business it’s differentiation, differentiation, differentiation.” Real motivation starts with the weapon of a differentiating idea.The marketer must start with the belief that “you can differentiate anything”. Then you can challenge your troops to bring it to life (& make it flourish) in sales, product development, engineering etc. Employees want to work for a company with a compelling business idea, where they feel engaged & where they can make a difference. The differentiating becomes the rallying point for the employees.

Once the differentiation becomes the strategy, the employees ‘unlock their true potential’. For, they have answered the question ‘ What makes my company different?’ That answer gives them something to latch on to & run with. Without a powerful single compelling idea, all the motivation & people skills in the world aren’t going to help.

If you build a differentiated product, then you need to communicate this difference. Every aspect of your communications should reflect your difference. Your advertising, your brochure, your Web site, your sales presentations.

Top management has to make sure that a differentiating strategy is generated, communicated & maintained.

You can’t over-communicate your difference. Also, your differentiating idea must be as simple & as visible as possible.

Positioning is how you differentiate your product in the mind of your prospect. What makes the company strong is not the product or service. It’s the position it owns in the mind. The core idea behind the positioning should pass the “CEO test”. What would the CEO say when asked: “So what is this organisation really about?”

ABB’s Annual Report says:

Working closely with our customers, understanding their business needs & local market conditions, we are committed to ensuring their success through innovative products, systems, services & complete solutions, combining world-class cutting edge technologies & proven domain expertise with our strong local insight. We wish to make our customers more competitive.

David Packard, co-founder of Hewlett-Packard, wisely said: “Marketing is far too important to be left only to the marketing department”. Any department can treat customers well or badly, and this will affect their interest in the company. A customer may phone the company and find it difficult to get information or reach the right party. The product that is ordered may arrive in a defective condition because manufacturing standards were loose or the product was packed poorly. The product might arrive later than promised because of faulty inventory information. The invoice may puzzle the customer because the accounting department added unexplained charges. All those glitches can happen when other departments are not focused on satisfying the customer.

Some have suggested that the lack of customer-mindedness in other departments may partly result from the marketing department’s own operations. The other departments might think the marketing department’s job is to “manufacture and satisfy customers” while they take care of their own operations. Could departmental attitudes be better if the company had no marketing department? For example, Marks & Spencer, one of Britain’s best retailers, did no advertising and had no marketing department and yet attracted hordes of loyal shoppers, largely because everyone at Marks & Spencer thought of the customer first.

In highly competitive markets, all departments must focus on winning customer preference. Jack Welch, General Electric’s celebrated CEO, tells his employees: “Companies can’t give job security. Only customers can!” He makes his employees highly aware of their impact, irrespective of their department, on customer satisfaction and retention.

The implication: If you are not thinking customer, you are not thinking.

Assessing which company departments are Customer-Minded:

R&D

• They spend time meeting new customers and listening to their problems.
• They welcome the involvement of marketing, manufacturing, and other departments in each new project.
• They benchmark competitors’ products and seek “best of class” solutions.
• They solicit customer reactions and suggestions as the project progresses.
• They continuously improve and refine the product on the basis of market feedback.

Purchasing:

• They proactively search for the best suppliers rather than choose only from those who solicit their business.
• They build long-term relations with fewer but more reliable high- quality suppliers.
• They don’t compromise quality for price savings.

Manufacturing:

• They invite customers to visit and tour their plants.
• They visit customer’s plants to see how customers use the company’s products.
• They willingly work overtime when it is important to meet promised delivery schedules.
• They continuously search for ways to produce goods faster and/or at lower cost.
• They continuously improve product quality, aiming for zero defects.
• They meet customer requirements for “customization” where this can be done profitably.

Marketing:

• They study customer needs and wants in well-defined market segments.
• They allocate marketing effort in relation to the long-run profit potential of the targeted segments.
• They develop winning offers for each target segment.
• They measure company image and customer satisfaction on a continuous basis.
• They continuously gather and evaluate ideas for new products, product improvements, and services to meet customers’ needs.
• They influence all company departments and employees to be customer-centered in their thinking and practice.

Sales:

• They have specialized knowledge of the customer’s industry.
• They strive to give the customer “the best solution”.
• They make only promises that they can keep.
• They feed back customers’ needs and idea to those in charge of product development.
• They serve the same customers for a long period of time.

Logistics:

• They set a high standard for service delivery time and meet this standard consistently.
• They operate a knowledgeable and friendly customer service department that can answer questions, handle complaints, and resolve problems in a satisfactory and timely manner.

Accounting:

• They prepare periodic “profitability” reports by product, market segment, geographic areas (regions, sales territories), order sizes, channels, and individual customers.
• They prepare invoices tailored to customer needs and answer customer queries courteously and quickly.

Finance:

• They understand and support marketing expenditure (e.g. image advertising) that represent marketing investments that produce long-term customer preference and loyalty.
• They tailor the financial package to the customers’ financial requirements.
• They make quick decision on customer creditworthiness.

Marketing must be a company-wide undertaking. It must drive the company’s vision, mission & strategic planning. It is about deciding who the company wants as its customers; which needs to satisfy; what products & services to offer; what prices to set; what communications to send & receive; what channels of distribution to use; what partnerships to develop.

This can happen only if all departments can work together: engineering designs the right products; finance furnishes the required funds; purchasing buys quality materials; production makes quality products on time & accounting measures the profitability of different customers, products & areas

” There will always be a need for some selling. But, the aim of marketing is to make selling superfluous. The aim is to know & understand the customer so well that the product or service fits him & sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.”

As business becomes global, you have got to narrow your focus to a specific segment of the global market. You have got to try to own a single word in the mind.

A company like Volvo can be narrowly focussed on safety. But if somebody at the top isn’t screaming “safety, safety, safety”, every single day for the next decade, in the years you will have a wide diversified manufacturer of everything.

General Motors has Chevrolet, Pontiac, Oldsmobile, Buick & Cadillac.

But what does GM actually stand for today? It’s not enough to just stand for making cars. You’ve got to stand for making safe cars like Volvo or luxury cars like Mercedes or small ugly reliable inexpensive cars like Volks wagen did with the Beetle.

GM got fuzzy when it destroyed the identity of its brands, when it allowed each division to broaden its line.

Management’s mission, first & foremost, is value creation. Bringing value to some vaguely defined someone isn’t good enough. Only by meeting the needs of customers, as customers themselves define those needs, can an organisation perform. Value creation begins by seeing the world through customers’ eyes.

Taylor took the view that value is created by making the production process as efficient as possible. He believed that any task needed to be studied systematically to determine the ‘one best way’ to do it. The real limitation to Taylor’s approach was its single-minded focus on manufacturing efficiency. He assumed that value meant making whatever you were making more efficiently. Taylor wasn’t wrong, he was just narrow in how he thought management’s mission. It didn’t occur to him to question whether you were making the right things to begin with, or whether you could create more value by undertaking broader missions. After all, customers don’t buy products; they buy the satisfaction of particular needs. Defining value as efficiency, as Taylor did, led to an intense focus inward, on what the company makes & how it makes it. This has become known as the manufacturing mindset. It suggests that you start with what you make, you price it based on what it costs you & then you sell it to the customer. It is a make-and-sell model of how a business works. Lawyers & consultants, for example, have historically fallen into their own version of the manufacturing mindset, defining their product as ” hours of advice”,

Instead, if one looks through the customer’s eyes one creates a sense-and-response model that starts with what the customer wants, & how much he is willing to pay for it. This determines both what you make & how much you can spend making it. This is a marketing mindset. This led to the crucial distinction between selling & marketing.

One then needs to ask: “What is our business?” ” Who is the customer?”

” What does the customer value?” “Who depends on my work?” “How do they use it?” ” Why is it valuable to them?”

The customer never buys a product. He buys the satisfaction of a want. He buys value.

For the teenage girl, for instance, value in a shoe is high fashion. It has to be “in.” Price is a secondary consideration & durability is not value at all.

For the same girl as a young mother, a few years later, high fashion becomes a restraint. She will not buy something that is quite unfashionable. But what she looks for is durability, price, comfort & fit, & so on. The same shoe that represents the best buy for the teenage is a very poor value for her slightly older sister. What a company’s different customers consider value is so complicated that it can be answered only by the customers themselves. Management should not even try guess the answers — it should always go to the customers in a systematic quest for them.

How does one get ordinary employees to care for the business as though they are owners, & do extraordinary things? The trouble is that most employees do not see customers when they come to work in the morning. They only see other employees. They see directors, middle managers, junior executives, secretaries, office boys, but they do not see customers. So they get busy in office politics. We have to make our employees closer to the customers. They will then find hundreds of small activities that improve customer satisfaction. Only companies that are close to their customers will survive.

Selling should have an intense focus on the prosperity of the customers. You measure success by how well your customers are doing with your help. You’re not focused on selling a specific product or service; you’re focused on how your company can help the customer succeed in all the ways that are important to that customer. By tapping the many resources that you have at your disposal to help customers meet their business goals & priorities, you are adding value.

This approach is called Value Creation Selling. If you can’t impact the customer’s performance in a positive way, then you’re going to be a commodity product & you’re going to get commodity prices. The more you know about your customer, the better you & your company will be at identifying his concerns & devising products & services that will help address them. How to add value?

• You should devote large amounts of time & energy in learning about your customers’ business in great detail.
• You should use capabilities & tools that you’ve never used before to understand how your customers do business & how you can help them improve that business.
• You’re going to make it your business to know not only your customers but also your customers’ customers.
• You have to recognise that the execution of this new approach will require much longer cycle times to produce an order & generate revenue.
• Top management in your organisation will have to re engineer its recognition & reward system to make sure that the organisation as a whole is fostering the behaviours that will make the new sales approach effective.

Salespeople are no longer solo operators. Rather, they are team leaders, responsible for organising & directing groups of experts from such diverse areas as finance, legal, and manufacturing in their own organisation. Selling is a team sport & everyone is a player. This means that the entire staff, from the lowest levels to the top, has to change some aspect of their work. Value creation selling is team selling. The team should be cross-functional. You know your sales process is out of date when these things are true:

• Your sales force interacts mostly with customer’s purchasing department.
• The entire discussion about a possible sale revolves around price.
• Salespeople are not included in the design of the company’s offering.
• Your salespeople are internally focused. They have too much paperwork.
• Little thought is is given to your customer’s customers.
• Salespeople are pushed all the time.

You know that you are doing Value Creation Selling when:

• Customers share information about their future plans because they trust you.
• Customers see you as unique, creating a huge barrier for competitors to break.
• The customer calls your company first.
• Your organisation is seamlessly connected to the customer at all times.
• People outside of sales are thinking of ways to meet the customer’s needs.
• Customer information flows from the sales force back into product development, marketing & pricing functions.