Review your Offerings to stay Profitable

A travel industry client of a colleague recently reduced its offerings down to a narrow niche of cruises and then focused its marketing effort and management time on ensuring these were profitable and generated cash quickly. While there was a temporary fall in sales, the company returned to positive cash flow and profit within a matter of weeks.

The moral of the tale? Don't be scared to reduce and focus your offering portfolio for greater profit. Now is a great time to apply rigorous focus and do this. The first step in the process of reviewing and developing your offerings is to categorise what you’ve already got.

We tend to think that it is easy for manufacturing and product companies to categorize their products, but more difficult for service companies to do so. There is a tendency for those of us in the services sector – particularly in consulting – to think that, because our Offerings are less tangible, perhaps more complicated, that somehow they are superior to the manufacturing and product equivalents. There’s a certain intellectual snobbery about it. But it’s nonsense.

If you are a service provider, or provide a product-service amalgam, for a moment think of your Offerings as products. That way, you’ll likely find it a lot easier to define the components – the Bill of Materials, so to speak – that go to make up the whole. So think of building offerings like building products.

Only when this mapping has been completed – and it may be quite a lengthy exercise – will you be able to position your Components, Offers, Solutions, and Co-created Value onto a Value Pyramid, as explained next.

It is our experience that the whole of this exercise is best carried out using workshops: create hypotheses and workshop through with your offering managers or solutions leads.

Map to The Value Pyramid™
Having identified your Offering portfolio you need to map the offerings to The Value Pyramid™. The basic components are Component, Offer, Solution and Co-created Value, and that the nature of the sales processes around each of these categories changes profoundly, as indicated here:

By way of example, we set out below an Offering Portfolio Map for a hypothetical market intelligence consultancy. We have envisaged an organisation that offers a range of research and analysis services to its clients. The map might work out as follows:

Once this mapping is complete, it is far easier to see the way forward because you are able to identify:

• What offers can be grouped together to form new Solutions or higher value offerings?
• What offerings in one part of the business can be combined with other offerings from other areas (sectors or technical lines) to create new offerings?
• What pricing needs to be used with which offerings and what level of required profitability?
• How should each type or group of offerings be sold? That is, which lend themselves to low-cost of sale, automated or transactional selling, and which to high-touch, problem solving, high value-add consultative selling?
• To whom should each offering be sold? Offerings suited to transactional selling will be targeted to expert buyers (e.g. procurement experts) whereas Solutions and high-value offerings will normally involve consultative selling with more senior management (e.g. CEO and other senior executives) who, although they may know generally what they want to achieve, will need value-creation support to help them shape the solution.
• How long will it take to sell the respective offerings? Offerings lower down The Value Pyramid™ generally have a shorter sales cycle than those nearer the top.

Profitability
We also recommended a radical review of the profitability of your products and services, which we will explore in another article.

Having identified your best Offerings, you should then examine whether (and how) your sales and marketing approach needs to be refined.

Strategy and the Fat Smoker

I had a conversation with a journalist the other day who asked me if the best way of weathering the recession was to put strategic plans on hold in favour of more tactical actions that produce more immediate results. I resisted the temptation to snarl and politely told him that if I see yet another email coming out from Business Link and the like telling me how to “cut costs and save money during the recession” I’ll scream!

These articles and related ideas focus purely on tactics in the absence of a strategy. Yes, I agree that it’s sensible practice to, for example, reduce traditional marketing communication costs and do more e-marketing because it’s generally cheaper. But are we throwing the baby out with the bath water? Have we stopped to think about how our existing customers and prospects want to be communicated with? Have we linked this back to our strategic objectives of communicating with our existing clients 6 times a year and reaching 100 new prospects? I doubt it.

Having been through three downturns in the economy (let’s not call them recessions), I’ve seen how senior management in tough times often forget how to think. We all need to take the time to think things through. The trouble is that often the action is an immediate response to an immediate stimulus; the knee-jerk reaction of a rabbit caught in the headlights (forgive my tirade of mixed metaphors). Why do we do this? As David Maister says,” As human beings, we are not good at delayed gratification. We start self-improvement programs with good intentions, but if they don’t pay off immediately, or if a temptation to depart from the program arises, we abandon our efforts completely—until the next time we pretend to be on the program.”

We don’t focus on the long term good health of our business (or ourselves) because the rewards (and pleasure) are in the future. The disruption, discomfort and discipline needed to get there are immediate. So it’s easier and less painful to go for the quick fix, the immediate hit of “I’ve taken action now”. Think about it and that’s exactly what alcoholics and drug addicts do, or fat smokers for that matter. [The title ‘Strategy and the Fat Smoker’ is taken from David Maister’s excellent new book, available here.]

Let’s explore how individuals, managers and organisations can overcome the temptations of the short-term and actually do what they already know is good for them.

I am clinically trained in Transactional Analysis (TA) and so my professional suggestion would be to stop and hold back the impulse to act. Revisit the desire to act in 24 hours, by which time hopefully you will have decided if it’s a sensible course of action linked to your strategy or maybe it was just the need for an instant quick fix.

A lay person who arrives at the scene of a traffic accident may rush in to help by pulling a person out of a car, or tying up a bleeding arm; those actions could make a condition even more serious. The ambulance crew, by contrast, who suspend immediate action by performing a triage; assessing each individual, using first the eyes and then touch, to determine the full extent and seriousness of the injuries. Only then will they perform first aid to one, rush another to hospital, and so on. This is professionalism and leadership. If the desire for action is suspended then all sorts of warning signals begin to show that the adrenalin of the immediate action would have masked.

So slow down a bit to allow proper thinking rather than just doing. Strategy means saying no, taking a leadership position and ensuring that you as the leader are right there with your people. Not directing them via email or an ivory tower. You are with them, communicating directly on a regular basis.

Written by Cindy Barnes

What do the following have in common…?

Customer experience, voice of the customer, market selection, client selection, client benefits, ROI measurement, no price erosion, not discounting, reducing risk of purchase, case studies, substitutes, alternatives, Total Cost of Ownership, benefits realisation, product or service management, solution development…

Answer: They all link and work together to create your value proposition.

The chances are that you have probably looked at each one of these things in isolation, but again, let’s apply some strategy here (see posting titled: Strategy and the Fat Smoker). Let’s plan a bit further forward, outside the immediate horizon of, “s**t, I’ve got to do something”. If you pull all of these areas together and use a framework and process such as Futurecurve’s Value Proposition Builder™, you can create a value proposition that stops price erosion and aligns your value with what your client needs and will pay for.

To stay in business and not only survive but thrive during this recession, you only have one sensible option: focus and hone your value. If clients complain that you are too expensive, then you are simply not demonstrating your superior value to them. You can, of course, keep offering the same product or service and cut your prices, if you want to go down the discounting route. But doing this means you are losing value during the sale - value that you won’t be able to regain in the future. So don’t do it! Building and developing your value proposition means proving to clients your superior value in bottom line terms, not making unsupported marketing claims about your value.

Our new book “Creating and Delivering your Value Proposition: Managing Customer Experience for Profit” (published by Kogan Page and available from September 2009), answers many of the ‘so what’ questions. “OK, I’ve done my customer satisfaction surveys, I’ve got my benefits worked out, I’ve even got my ROI or TCO calculated, but how do I pull all of that together to demonstrate superior value and make money?” Our new book shows you how.

Immediate Actions

1. To get a flavour: download our new Value Propositions white paper.

2. Attend our 1 day workshop: learn how to stop price erosion now and sell on value Link to workshop details

Written by Cindy Barnes

The New Normal

Most leading business writers, economists and social scientists are saying we are experiencing not another downturn but a fundamental restructuring of our economic and social order. Tomorrow’s possibilities will be different and better for those who are prepared.

For a lot of us, near-term survival will be the only agenda item, but once we are past the panic stage, it’s time to think strategy again (see post titled: Strategy and the Fat Smoker). The economist Dr David Fleming wisely said at a recent conference, “Large-scale problems do not require large-scale solutions – they require small-scale solutions within a large scale framework.” This time we are in shouts for strategy rather than knee jerk responses, if ever I heard it.

There will be less financial leverage and more government involvement. The price for risk will be much higher but innovation will abound. We are a creative species and investors looking for opportunities will start to shift away from financial services[1] and towards areas such as renewable energy, software, genetics and agriculture opportunities.

There is also a shift in consciousness happening. A desire to move away from pure profit-induced materialism towards an appreciation that the whole world matters and a new type of altruism. We’ll see less power-over behaviour and much more power-with. Long may this continue, I say.

We have selected some of the best articles and books for you to read…

Articles to link to:

The New Normal

A Less Selfish Capitalism (May require registration to read full article)

The Green New Deal

The Great Turning: from Empire to Earth Community

“To those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.”

From the inaugural address of US President Barack Hussein Obama, on 20th January 2009

[1] Although the ethical banks are booming, Triodos just posted huge growth.