What Motivates You?

Why does a figure skater spend two hours, after her coach has left a six-hour practice, attempting to perfect her routine?

 

Why does a fifteen year-old stay wake until 3:00 a.m. to advance to the next level of a video game?

 

Why do some people arrive at the office by 6:00 am, and rarely leave before 6:00 pm?

 

Why do billionaires show up every day to work at all?

 

Motivation is the driving force by which we achieve our goals.  It is a very personal thing.  Motivators are the source of our motivation.  Understanding the motivators that are both relevant and important to individuals opens a door to understanding why people respond in different ways to the same situation.

 

Understanding the principles and mechanisms of motivation help us to:

1. Identify why and how buyers make purchases, so that we can better sell to them.
2. Build and develop high-performing workplace teams.
3. Understand our own passions, and tap into the energy that fuels our success.

Theories of Motivation

There are easily a good dozen theories of motivation - models that help explain why people act in the way they do.  Some are well-known and straightforward; others are developed for specific applications, such as education and learning.  

 

Here are the common ones, with links to more information if you want to deep dive into any of them.

 

Theory 1: Maslow’s Hierarchy of Needs

This is probably the best-known theory of motivation.  Who isn’t familiar with this?  The basic model suggests two things:

1. our unsatisfied needs dictate our behavior
2. the lowest levels of need hierarchy must be satisfied first; in other words, our focus is on satisfying deficits in any lower level before shifting our focus to the next higher level.

 

You can find our more about Maslow’s theory here and, if you are into scholarly pursuits, here as well.  Alderfer’s ERG theory - dealing with the core needs of existence, relatedness, and growth - is an offshoot of Maslow’s theory.

 

Theory 2: Incentives

This is likely the second best-known theory of motivation, explaining the influence of positive and negative reinforcement in shaping our behavior.  Learn more about it here.

 

Theory 3: Drive Reduction

This is actually a composite of several theories, all to do with drive.  Partly embedded in Maslow’s theory, drive theory helps to explain the underpinnings of our basic physiological and psychological needs.  It is explained here.

 

Theory 4: Herzberg’s Two Factor Theory

A standard offering of most management courses, this theory suggests that two factors - extrinsic and intrinsic - determine job satisfaction in the workplace.  They include motivators which give positive satisfaction (e.g. challenge, recognition), and hygiene factors which when absent or insufficient, become demotivators (salary, job security).

 

Theory 5: Self-Determination

This focuses on intrinsic motivational factors such as curiosity, care, hobbies and interests.  The  theory explains why people devote themselves to the mastery of endeavors like playing an instrument, developing expertise in a field, or being altruistic like Mother Theresa.

 

Intrinsic and Extrinsic Motivational Factors

Extrinsic (external) factors come from our environment, outside of us - monetary gain, trophies, threat of punishment, fear for our lives, etc.  Intrinsic (internal) factors come from within us.  When someone refers to another as “motivated” they usually mean that their behavior is driven by something internal to that person.

 

What Are Your Intrinsic Motivators?

It helps to understand what makes us tick.  By and large, most of us are going to respond to extrinsic motivators (fear, reward) in fairly predictable and observable ways.  However, our internal drivers are entirely personal.  What is relevant and important to one person (for example, the need to compete and win) can be entirely irrelevant and unimportant to another person.

 

Here’s a list of commonly recognized categories of internal motivation drivers.  Determine which ones characterize your behavior.  There are no right or wrong answers.

•  
  • Acceptance - approval from others
  • Achievement - the desire to excel, and avoidance of failure
  • Affiliation - harmonious relations with others
  • Curiosity - yearning to learn
  • Eating - enjoyment of food
  • Family - raising children
  • Honor - loyalty to family, ethnic, or organizational values
  • Idealism - social justice altruism
  • Independence - individuality, and freedom from control by others
  • Order - organization, stability, predictability, repeatability
  • Physical activity - exercise, physiological development
  • Power - telling others what to do, or organizing others to achieve a common goal
  • Romance - sex, being sexually attractive to others
  • Saving - keeping, collecting, protecting assets
  • Social contact - having friends and acquaintances
  • Status - social standing, importance and recognition in society or a social group
  • Tranquility - safety, peace, harmony, freedom from violence
  • Vengeance (competitiveness) - striking back, conquering, winning

 

Hard Goals Are the Best Motivator

You might be surprised to learn that motivation, as a serious topic for psychological study, was pooh-poohed 50 years ago.  So begins a 2002 paper published by business professors Edwin Locke and Gary Latham titled Building a Practically Useful Theory of Goal Setting and Task Motivation: A 35-Year Odyssey.  It’s worth a read.

 

Basically, Locke and Latham surveyed the literature on goal-setting and motivation, and drew several conclusions.  Here they are in a nutshell.

 

Goal-setting works, and hard goals work best

1. Difficult goals yield the highest level of effort and performance.
2. Encouragement (“Do your best”) is not as effective as goal setting.

Motivation increases because hard goals:

1. Focus our attention on goal-relevant activities, and away from irrelevant activities.
2. Energize us, resulting in more effort.
3. Prolong our effort either to make deadlines, or stay in it for the long haul.
4. Compel us to test out know-how and strategies until we find a solution. 

Our level of motivation is influenced by:

1. Commitment - the most important factor when goals are difficult
2. Importance - our belief in the need to achieve a goal
3. Confidence - our belief that we can succeed
4. Feedback - knowing our progress in relation to the goal
5. Task Complexity - our ability to master the skills needed to achieve difficult tasks

Is all this new?  Probably not.  But it serves as a good reminder that:

• we work most effectively when we rise to the occasion
• understanding the underlying principles of motivation are helpful in pulling together a goal framework that works effectively for us
• what works to motivate us, works to motivate others, too

Seeing the Forest for the Trees

Though we’d like to believe that things will become simpler over time, they don’t.  Complexity and detail grow.  There is zero risk of either of them subsiding any time soon.

 

The amount of information we must deal with to make decisions grows annually; it doesn’t shrink.  As the body of knowledge in every field grows, mastery becomes difficult.  As a result, the jobs we perform become more specialized.  We use technology not to rid ourselves of complexity, but to make complexity more manageable. 

 

It is harder to see the big picture, how the pieces all come together, and where where our particular piece fits.  All is not lost, though.

 

Managers can deal with increasing complexity and detail by envisioning what they do in a larger context, and using simple frameworks to make decisions.

 

Context = ecosystem.  It’s our surroundings - particularly those which directly affect outcomes, and over which they have little influence.  Economic,  technological, social, regulatory and geophysical factors shape the market’s operating environment.

 

Framework = systematic approach.  Frameworks build on well-known and accepted principles, rules and relationships that generally characterize how things work together.  They are the basis by which decisions can be tested against well-understood models of how things behave.

 

Looked at another way:

 

Context =  a radar screen for things that matter in the environment

Framework = viewing actions as variables that determine how things work

 

Jack Welch, GE’s past CEO, was fond of saying that superstars could “see around corners.”  In other words, they developed effective radar screens for picking up on the things that mattered most to their undertakings.  He also emphasized that Execution, the ability to wrap it altogether to get measurable results, was the key skill of effective business leaders.  It was his way of saying that leaders possessed uncanny skill at seeing the system of how things work together, and then focusing on those variables that made all the difference.

 

Learning to think, decide and act in terms context and frameworks makes for great managers and leaders.

When to Take Action

Things aren’t working out the way you hoped with the online advertising campaign (or new hire, new product introduction, etc.)  Should you be stoically patient and stay the course, or immediately take action to set things right?

 

Good leaders seem to instinctively know what to do.  But it’s less a matter of instinct, and more a result of practice.  Such leaders are neither impulsive, nor are they fence-sitters.

 

They develop the skill of mentally testing and visualizing how a plan can unfold, and what could cause it to unravel.  They rapidly run through what if options in their heads, learning to recognize critical milestones and markers, and etching these into their mental plans.  The acquire such skill consciously and deliberately at first, and then unconsciously with practice as their confidence builds.

 

If key milestones and progress markers are being met the leader is patient, no matter how anxious others may be.  Yet, when a critical marker is missed, even if it’s not obvious to others, the leader acts decisively, knowing exactly what to focus on.

 

What appears instinctive is more often the result of methodical practice.

Delegation

On a radio interview I heard, a management writer defined delegation as getting other people to do what you don’t want to do.  Though tongue-in-cheek, he made his point.  

 

Some managers regard delegation as a means of disposal, retaining the things they covet while distributing the leftovers to their subordinates.  When workloads mount, they must assign some of the things they enjoy doing, often fiercely micromanaging those who have been given responsibility for them.

 

It’s a dismal proposition for the staff: either be assigned something that doesn’t matter to the boss and be left alone, or be given responsibility for something of value knowing that the boss will hover over you.  No wonder morale under such managers runs low.

 

Leaders, however, see every task as an intrinsic component of a larger value proposition, no matter how trivial it may seem.  They match the skills of subordinates to the organization’s activities to maximize the overall value that can be harvested by it.  They are conductors of an orchestra, directors of a play.  Their gift lies in the realization that the whole is greater than the sum of the parts, and their attention must then focus on developing high-performing teams.

 

Their staffs are energized, eager, and focused on contributing.  They are keenly aware that mastering abilities will create opportunities to expand their skills and take responsibility for ever-higher components of the organization’s value delivery.

 

All managers delegate.  Leaders delegate masterfully.

Reset or Rewire?

In a 2009 speech about relations with Russia, U.S. Vice President Joe Biden said, “It’s time to press the reset button.”  The phrase, adapted from the common instruction for personal electronics devices, aptly describes what we to do in situations when things simply don’t work properly.

When a pitcher’s throwing mechanics are off, the soufflé doesn’t rise, a process runs afoul, or a tried-and-true sales promotion is getting lackluster results, then pressing the reset button is often the fix.  Especially when a mistake or miscue has been made.  Some minor or unwitting change in how something is performed or executed can lie at the root of the mishap. 

 

Yet, if a pitcher’s mechanics are corrected, the oven temperature for the soufflé is raised, and the miscues in the process and sales promotion are detected and remedied, and the desired result still does not come about, then something else is going on.

 

Doing the Right Things, in the Right Way

Management is concerned with choosing the right things to do, and then ensuring that they are done the right way.  “Don’t fix what’s not broken” is a well-known cliché.  Managers learn to resist go back to the drawing board at the first sign that something isn’t working the way it should. 

 

Rule of Thumb #1: when results fall short, the default course of action should be to first examine implementation.  More times than not, the issue can be found there.  “Pressing the reset button” restores everything to its initial working order.

 

Sometimes, though, the problem lies not in how something is done, but what is being done.

 

What Worked Yesterday May not Work Today

If a policy, strategy, program or activity stops performing well, and no fault can be found in its implementation, then it is no longer serving its intended purpose.  Repeatedly pressing the reset button won’t make it work better.

 

The problem lies not in a reset or restore, but in the wiring.  Things need to be changed.

 

Rule of Thumb #2: when a reset doesn’t fix the problem, then rewire.

Good management is about knowing the difference, and knowing the order in which to proceed with a fix.

Knowing When Something is Strategic

On September 26, I blogged about the distinction between a strategy and a tactic.  In short, a strategy is a plan that describes how resources are organized and focused over the long haul to achieve important aims.  Tactics are the actions that bring a strategy to life.

 

A strategy without action is not useful.  Likewise, tactics performed in the absence of a coordinated plan are like closing one’s eyes and throwing a dart at the board in hopes of hitting a bullseye.

 

I also emphasized that, though we may not realize it, the vast majority of us spend our waking hours executing tactics - not creating strategies.  That’s ok.  After all, tactical execution is what makes strategies work.

 

Of all the tactical actions that a firm takes, some of those actions are so important to the success of the firm in the market that they are said to be strategic, i.e. critical components of the firm’s plan.  All strategies are comprised of tactics; but not all tactics are strategic to the firm.

 

The Canary in the Cage

There’s a simple test to tell if a tactic is vital to the success of a strategy: simply stop doing it and see what happens.

 

If a tactic is critical, stopping it (or altering it in a significant way) will soon affect the firm’s performance.  If the tactic is not integral to the firm’s strategy, then the strategy will continue to perform (though perhaps with some inconvenience or inefficiency). 

 

To illustrate this, look no further than what happened to Coca-Cola when it altered its taste formulation in 1985, weeks later, they were forced to introduce Coca-Cola Classic in response to consumer backlash.  Or, more recently, consider what happened when Netflix changed its pricing model, and then decided to separate its streaming and mail order businesses.

 

Looking at What We Do

Working at something that is recognized as being essential to a firm’s strategy translates into job security.  Being great at it is the best job security one can have.

Where Our Tax Dollars Go

Graphic artist Jess Bachman discovered that the U.S. Federal Government is quite transparent when it comes to telling us where it plans to spend our money.  The only problem is that the data is buried in spreadsheets containing hundreds of thousand of tables when, printed out, weigh 50 pounds.

So, Bachman labored for weeks to find the data, and then convert it to a simple visual, understandable set of information.  Edward Tufte would be proud!

You can purchase it from Amazon as a 24” x 36” glossy poster for $20.  Or, you can simply view it here.  If the web page loads properly, you can click on any part of the poster to magnify it.

Enjoy!

 

Mirrors and Windows

The basic principle underlying all marketing strategy is the creation of value: developing offerings that create value for buyers, while creating value for the firm and its partners.  When both sets of values live in equilibrium, the long term health of the firm improves.

 

As firms get larger, managements become more removed from daily interaction with their markets - with the demands of Wall Street ringing daily in their ears, it is easy to lose sight of the balance.  When achievement of the firm’s strategic objectives becomes a proxy for providing customer value (e.g. “What’s good for General Motors is good for the U.S.A.”) the firm’s health is at risk.

 

When asked once what keeps him awake at night, the CEO of a Fortune 500 company responded, “The thing I fear most is that the office windows become mirrors, reflecting back to us the image of the world as we want to see it.”

 

Does your organization look through windows?  Or does it stare at its own image in mirrors?

 

When was the last time you stepped outside to make sure?

The Choices We Make

A common lament of doctors is that patients don’t follow prescribed treatments.  Sometimes, a patient chooses to follow only the parts of the treatment plan that are agreeable.  At other times, a patient will end up back in the doctor’s office insisting that the treatment plan has been faithfully followed, either embarrassed or fearful to admit that they took some shortcuts.  In doing so, they undermine their own welfare.

 

Managers take similar shortcuts too, and find themselves wondering why a problem persists.  For example ...

 

You present a four-step plan to a boss who agrees with three of the steps, but not the fourth (which may be the lynchpin to the entire plan).  As you’re the expert in the area, and know the three-step version won’t work.  You have an obligation - to your boss and yourself - to stand your ground and explain why.  If your boss remains unconvinced, your only option is to come back with an alternative.  Agreeing to a plan (for which you are accountable) that you know won’t work is not an option.

 

Or, after much back-and-forth debate, your company devises a new marketing plan.  Some parts you like, others you don’t.  You have a choice: agree (though reluctantly) and commit to supporting it; pretend to agree, then privately modify the company’s plan to fit to what you think will work better.  Agreeing to a plan (for which your boss is accountable) to keep your boss happy, and then following your instincts, is likewise not a sound option.

 

All things being equal, make the choice that does not land you back in the doctor’s office worse off than when you began.

The $10B Social Media Ad Gamble

With worldwide spending on advertising expected to reach $500 billion in the next year, it is both a big industry and a major component of marketing spend.  In the 15 years since the internet hit the mainstream, the industry has undergone significant change.  Now, with the rapid rise of social media, the difficulty in effectively allocating advertising dollars has ratcheted up a notch.

 

Advertising Fun Facts

To understand why, let’s begin by examining baseline spend on all forms of advertising.  The table below shows expected 2011 advertising spending (worldwide and for the U.S.) for all media, the subset of online media, and its subset of social media.

 

 

	Global Spend $B	Yr/Yr Growth	U.S. Spend $B	Yr/Yr Growth	5-Year Annual U.S. Growth
All Media	480	3.7%	175	3.8%	3.8%
Online	80	16%	33	18%	14%
Social Media	5.5	146%	3.0	148%	35%

 

Sources: eMarketer, GIA, IAB, Kantar Media, ZenithOptimedia

(Caveat: individual forecasts disagree markedly among themselves and, as with all forecasts, one needs to judge which method seems the most reasonable.  Example: For 2011, the range of global ad spending is a low of $460 million and a high of $492 million.  The discrepancy widens over the term of the forecast horizon.  For the purpose at hand, medians are used.) 

 

In round numbers, online media will soon account for almost 20% of all advertising spend, and is expected to grow in the U.S. by 14% annually through 2016.  The expected growth through 2016 for social media spending (forecasters are cautiously sticking their necks out on this one) is expected to come in between 30% to 40% annually (the midpoint of 35% appears in the table).  Why the broad range?  There are simply too many unknowns with social media advertising: it’s short of history, and long on experimentation.

 

Within two years (2013) forecasters are comfortable calling out a global spend in the neighborhood of $10 billion - with half of that spent in the U.S.  Here is one outlook.

 

 

$10B is a Big Number

Compared to an expected worldwide spend on advertising of over $500B by 2013, $10B seems a mere drop in the bucket.  Here are some benchmarks, though, that put this $10 B figure in perspective.  

$10 billion is about the same as:

• All U.S. online ad spend in 2004
• All U.S. online display advertising in 2011
• All banner ads purchased worldwide in 2011
• The expected total of all U.S. Classified newspaper advertising from 2010 to 2016
• Expected 2011 U.S. online ad expenditures by the computer, financial services, and automobile industries combined.

The $10B Allocation Gamble

From initial online advertising in 1994/95, it took 10 years for the U.S. to reach an aggregate spend of $10B - a period of considerable trial and error (much of the latter).  With new media it often takes years to understand the frameworks and best practices that determine effective promotional spend, and to acquire and refine the skills to pay it off.

 

Social media ad spend is no different - and, arguably, even more challenging to get right.  Shifting ad funds from one medium to another is easy.  Getting the same - or better - performance from those re-allocations is not.  Those who experiment and run by gut instinct are indeed taking a gamble.  Those who approach the opportunity with vigor, and a systematic method of allocating, monitoring and tuning ad spend have the odds in their favor.

 

Managing advertising spend is similar to managing an investment portfolio: one must arrange the portfolio to support strategic goals, then manage it to keep it on pace to achieve those goals.

Effective management is a matter of: 

• having concrete, reliable and valid performance measures
• testing market behavior and planning assumptions before diving in (measure twice; cut once)
• establishing performance milestones at short intervals to determine if programs are paying off as planned

There may as yet be proven certainties in social media advertising, but systematic management can keep it from being an expensive object lesson.

Netflix Takes a Deep Breath

Neflix CEO Reed Hastings announced today that Netflix has retreated from its strategic move to spin off its DVD mail business under the Qwikster moniker.  Netflix shares immediately rose 6% in premarket trading following blog post.

 

In his blog post, Hastings admitted that customer complaints were the driving force.  “This means no change: one website, one account, one password... in other words, no Qwikster,” Hastings wrote.

 

Presumably, this also means that the reconstituted Netflix is less attractive as an item in Amazon’s shopping cart - if Amazon was even seriously looking at the Netflix streaming business.

 

Is Netflix out of the woods?  Not by a long shot.

 

Following the July price increase (60% if you wanted both the streaming and DVD options combined) and last month’s surprise announcement of Qwikster, customers were furious.  They felt betrayed and confused, given voice to their anger through subscription cancelations that topped 1 million - or 4% of Netflix’ subscriber base.  This move is not likely to quiet them down.

 

It takes considerable time and effort to build a loyal customer base.  Customers must acknowledge the promise of value, experience that value, and come to trust the integrity of that promise.  Isolated situations can cause a customer to experience a letdown with a company (a poor service experience, or a billing dispute); but companies can, if on top of their game, restore the customer’s confidence.  When a customer feels betrayed by the company (a change in policy or offering that sharply “breaks the promise of value”) though, it is more than a matter of a poor customer experience; it is severing an implicit bond of trust.

 

Companies don’t consciously seek to unravel customer confidence, but when they fail to understand the nature of their value proposition, they risk taking actions that later prove reckless.

 

Netflix needs to do something significant this quarter to restore that confidence and re-establish the value promise that many customers believe to have been broken.  Dumping the Qwikster option won’t cut it.

Why Steve Jobs is Missed

I expected the Steve Jobs’ passing would garner considerable headline media coverage and tributes from around the world, but I underestimated the extent of the outpouring.

 

I cannot recall a business person’s passing that was as profoundly felt as that of Steve Jobs.  Not ever.  The reaction from people upon hearing of his death has been compared to that for Princess Diana and Michael Jackson.  After all, Steve Jobs was, in his own right, a global celebrity who had achieved “star” status.

 

I’ve both read and listened to comments from journalists, computer analysts, industry observers, as well as colleagues and contemporaries of Steve Jobs.  During the past week some have drawn a comparison to Thomas Edison, the icon of American inventors who gave us light bulbs, the phonograph and the motion picture camera.

 

Like Edison, Steve Jobs was one of those individuals who comes along once every 75 years to do things that affect lives and hearts, and do it in a way that stirs emotions.  Of the reasons that Steve Jobs is missed, for me there are three:

• Jobs was a visionary and a creator, first and foremost.  His dreams were brought to life through the company he co-founded.  Importantly, his dreams connected to the dreams of tens of millions of people who, through his products, experienced the joy and wonder in using them that Jobs had envisioned in creating them.
• He was imperfect, just like the rest of us.  Adopted, raised in a humble environment, and a first semester dropout at college, Steve Jobs was not born with a silver spoon in his mouth.  He was brash, impatient, demanding, intolerant and difficult to work for and work with.  Achieving early success that made others envious, he suffered the ultimate indignity when he was fired from the company he co-founded by the very same person he had hired to help it.  Even his most ardent adversaries felt for the man at this sad turn.
• Yet, he was his own Phoenix, rising from the ashes.  Jobs defied the odds, making a comeback to Apple as its CEO, and then set out to achieve accomplishments that even the best of fairy tales cannot match.  Steve Jobs became to personal technology what Walt Disney became to childhood imagination, and what J.K. Rowlings became to children’s fantasy books.  Apple redefined the personal technology landscape not through brute competitive force, but by creating offerings that were irresistible to tens of millions of us.  In his own language, Jobs wanted to “seduce” us by cloaking functionality under the most elegant of designs, and creating an experience with the customer that was unique, compelling and without substitute.  

 

Steve Jobs achieved enormous success by giving us things we could only imagine, and appealing to the universal desire for novelty, simplicity, wonder and delight, with functionality sandwiched in between.  Just like Thomas Edison did.

 

The Best Marketing Research

One of the best sources for marketing research is frequently overlooked: our own sales people.

 

By the nature of their jobs, sales people - whether in personal sales, telesales, or online sales - come into daily contact with buyers.  In doing so they quickly learn what the buying hot buttons are (i.e., attributes of an offering that resonate strongly and positively) as well as the red herrings (i.e., attributes of an offering to which buyers are indifferent or, worse, are outmuscled by the attributes of a competitive offering).

 

A Gold Mine in the Top 20%

The best sales people (i.e., those whose performance consistently ranks in the top, say, 20% of the sales organization) typically identify the hot buttons and red herrings quickly, adapting their sales engagements to take accentuate the former and stay clear of the latter.  The top 20%  can let you know what is working, with whom, under what conditions, how often, and why.  They can likewise apprise you of what doesn’t work, and why.

 

The top-performing 20% of a sales organization serves well as a proxy for understanding how customers respond to an offering.

 

These are the ones to talk with - ideally, all of them.  It’s easier to do in a small organization than it is in one with hundreds or thousands of sales personnel.  But, as large organizations tend to cover diverse markets, it’s important to determine if what applies in one market applies to others: New York and Tokyo; small businesses and enterprises; among discrete manufacturers and process manufacturers; among younger and older buyers.

 

The Discipline to Succeed

Consistently successful product marketing organizations - especially in B2B - regularly survey their sales organizations for feedback.  For example, some firms, following introduction of a new offering, will interview their the top 20% of sales performers at 60 days, 120 days, and 180 days post-introduction.  They gather observations, look for trends and similarities, and then compare the feedback from customer interactions to the value-benefit model that marketing developed for the offering for its day of introduction.

 

Doing this enables three important conclusions about the value-benefit model to be drawn:

• what is working as expected (this is what needs to be tuned and amplified)
• what is not working as expected (serves as the basis for adjusting tactics)
• what is working that was not anticipated (potential incremental revenue)

 

Getting the Sales Organization is On Board

Firms that tap into the collective wisdom of their sales organizations, do so in a way that is mindful of their time, and act on what they learn, find willing participants.  And why not?  Improvement that the firm makes in its offering and marketing tactics serve to assist the sales organization in being successful.

 

The key lies in acting on what is learned.  

The Problem with Soundbites

Part 2 in a series about the nature and principles of value propositions, positioning, and competitive advantage.

 

Recap - Value Proposition

Firms exist to create value for customers and, in doing so, compete in the market to earn a profit and achieve the goals of the firm.  A value proposition describes the ability of the firm’s offering to provide greater value to its target customers than the offerings of its competitors can.

 

Those last two words are highlighted for a reason.  The same offering can represent different values to different customer segments, depending on the specific needs of each target group.  In fact, what is valuable to one target market may have no relevance whatsoever to another target market.

 

Like beauty, value lies in the eye of the beholder.  Sales people - especially those who sell complex products to B2B customers - readily recognize this.  A good sales person is skilled at eliciting a buyer’s needs and motives, and then adapting the sales presentation to focus on the attributes of the offering that best fit the buyer’s needs.  Other attributes, no matter how appealing they may be to other buyers, are kept in the background.

 

The Problem with Soundbites

There’s a reason mission statements are crisp: so that they clear and memorable. 

 

It’s hard, though, to find a simple statement that aptly and fully describes a firm’s strategy.  For example, one can say that a firm’s strategy is “to be the low price leader in its industry.”  It’s a convenient shorthand device, but it says nothing about the tactics that shape the strategy.  How are costs kept low?  Is quality traded off to achieve low price?  Are assortment and variety constrained as occurred with the Model T - any color you want as long as it’s black?  Or perhaps the offering is only distributed in urban areas, and not outside.

 

The shorthand form can only be correctly interpreted when it is accompanied by a detailed description of the tactics used to achieve the strategy of low price leadership.  It is much the same with articulating value propositions.

 

Marketers are expected to come up with a memorable and effective soundbite that captures the essence of the offering’s core value.  Just like Apple did with the iPod: twenty thousand songs in your pocket.  But, too often, it is left like that - a catchy soundbite with very little back-up substance.

 

A value proposition soundbite left standing on its own, no matter how catchy, is just like a strategic soundbite: leaves a lot open to interpretation.  And it won’t earn any marks with the sales force.

 

From Soundbites to Value Maps

You can be sure that Apple did not print up cards printed with 20,000 songs in your pocket, hand them out to all their retail sales people, and then tell them to sell a boatload of iPods.  And if they have such a card as part of the iPod product intro, you can be certain that it did not stand on its own: there would have been plenty of back-up material.

 

Value maps are like strategic maps.  Value maps show the linkage of every relevant attribute of an offering to the needs of each target market.  If there are 5 target markets, then 5 value maps are needed.

 

A value map relates relevant and strong attributes of an offering (compared to competitive offerings) to the needs of each segment.  In the case of B2B customers, and increasingly consumer targets, detailed profiles are given that describe key purchase drivers along with effective ways to link the offering’s attributes to each of the drivers.

 

Constructing effective value maps takes good research and effort.  But the results are worth the effort.  Your sales personnel will be the first to thank you for them.

 

Not so Fast on Social Media

If the life of a CMO was not difficult enough, add to the mix what most have suspected for the past year or so -- social media are not the promotional panacea they are believed to be.

On September 29, Demandbase and Focus jointly released a national study conducted in May with executives spanning all sizes of B2B companies.  Its observations:

• Good, old-fashioned personal networks and referrals are still the best source of leads.
• While corporate websites run a distant second for lead generation, they are still seven times more effective than social media.

Companies have had 15 years to experiment with, understand, and refine their use of the web as a calling card.  Progress has been made, sure, but truly effective corporate websites are still in the minority.

Social media are no different, and are still in the early stages for most companies.  They hold both promotional and CRM promise -- particularly as components of a comprehensive online set of tactics -- but the payoff lies down the road once the refinements are made.

As the devil is in the details, the study should be examined fully so that you can draw your own conclusions.

Competitive Myopia

Many companies claim they don’t have competition, yet that’s a matter of public bravado and promotional license.  Their CEOs know better.  

 

But, managements that genuinely believe they have no competitors are short-sighted.  They are living in a world that, sooner or later, will deliver a nasty surprise.

 

There is always competition: known and unknown, dangerous and benign, indirect and breathing down your throat; current and yet to emerge.

 

A firm might have the upper hand on a competitor now, e.g., 17 years if it has a patented drug that is the only effective treatment for a disease.  But patents don’t last forever.  Neither does competitive advantage.

 

Every company has competitors:

• Those known to it who compete directly with a similar, or perhaps identical, offering.
• Those over whom it has a competitive advantage that enables it to satisfy a need of target customers much better than its competitors.  They, however, may have markets for whom their offering represents competitive advantage.
• Those whom they’ve yet to come across, who are working quietly and investing seriously to come up with an offering that may upstage the incumbents.
• Those who are working on a game-changer that will redefine the market, leaving current participants scrambling to react.
• All the other firms in all the other industries who compete for a share of every buyers dollars.

 

Competitive myopia - either arising through denial, or from not keeping a careful eye on external developments - can be the undoing of a company.  No company has an impenetrable moat, an infinite product life cycle, or either regulatory or divine protection from interlopers that goes on forever.

 

There are no guarantees.

 

There are, though, three things that can be done to remain competitive.

 

1. Be vigilant.  Keep your eyes and ears on the market - especially if you hold leading share and enjoy competitive advantage.  The more attractive a position you hold, the more attractive your market becomes to new entrants and upstarts.  As Intel’s Andy Grove believed in choosing the title for his 1999 book, Only the Paranoid Survive, it pays to look over your shoulder
2. Strive to keep your customers for life.  Recognize that attempts to displace you by others is inevitable.  Do no hunker down and simply protect your customer base.  Innovate to find improvements - even disruptive ones.  It is better to defend your customer base by being the master of the new, rather than the protector of the old.
3. Embrace change.  Operate a culture that thrive on change, rewards risk-taking, and prizes agility and execution.  When a new competitor emerges, as it will, if all else has failed, you will be in a better position to press the reset button.