by Jonathan on March 26, 2012
Many B2B marketers suffer from a misplaced concept of differentiation.
Differentiation is different in B2B than B2C. In B2C, the emphasis is on product-specific differences – typically, tangible and visible differences in function, performance or design. The concept of differentiation tends to revolve around the question of “in what ways is our product different from others?” In B2B, the products and services are typically more complex and an attempt to define differentiation in terms of product characteristics leads to extremely granular arguments about “feeds and speeds” that leave most target audiences (other than product engineers) bored and confused. My experience is that the most meaningful definition of differentiation in a B2B context is “why is this product right for us?” The answer is not that the product is necessarily the fastest, brightest, most flexible, cheapest on the market but that it is the one that best conforms to the specific needs of the individual client.
The key question is not “different from whom?” but rather “different for whom?” The key issue in B2B differentiation is understanding the need to be served.
by Jonathan on March 25, 2012
In my view, there are two inter-related contributions that marketers can make to the success of the businesses they work for:
- Identifying the target audiences
- Definition a compelling value proposition to each
Simple, right? Yet I am constantly surprised by how poorly either discipline is practised by business. The imperative for growth tends to result in a reluctance to narrow the range of target audiences; the lack of definition of customer need tends to result in communications that are more about what the product or service does, as opposed to what it does for you in particular.
It is a critical moment in a company’s evolution when it accepts the need to move from being creator of products, to being a provider of solutions. This evolution requires having a clear sense of three things:
- Who the target customer is
- What specific needs they are looking to have met
- Why the customer should prefer to do business with you in particular
It is literally transformative for companies when they achieve clarity on these three issues.
by Jonathan on March 20, 2012
Apologies for the long absence. But if there is a decent excuse, then turning 50 is probably it.
The great thing about birthdays, especially significant ones, is that they prompt reflection on a personal, professional and philosophical level.
One product of this reflection was my surprise at realizing that, even as recently as 10 years ago, I had not yet fully grasped the importance of bringing together the marketing and financial perspectives on business. It was February 2003 before my first major article on the topic (“Learning to like each other”) would be published and when I would start the process that would ultimately result in the creation of Type 2 Consulting. 10 years ago, I had not worked out how to analyze intangible value correctly, nor how to isolate the proportion that might reasonably be attributed to brands. 10 years ago, I had only just met Rich Ettenson but we had not yet begun our collaboration into corporate brand strategy. 10 years ago, I would not have been able to articulate the difference between a USP, positioning statement and a value proposition.
I guess what I am saying is that I am excited about the insights gained over the past 10 years and full of anticipation about what the next 10 will bring.
by Jonathan on February 29, 2012
Yesterday I blogged about the superiority of the goal of being regarded as a “strategic resource” rather than a “strategic partner” because a resource implies a source of value.
All providers should aspire to being viewed as “value relevant” – meaning that the nature of their services is so important that it has a material impact on the performance and valuation of their client.
Value relevance requires demonstrating that what you do has a direct, measurable impact on one of the three drivers of corporate value – profit, growth or risk. Influence any one of these for the better (higher profit or growth, or lower risk), and you have the attention of the client’s finance and management team.
Ironically, this is where the issue of measurement becomes somewhat perverse. It is far easier to demonstrate tactical, short term results than long term, strategic ones. So, in their enthusiasm to demonstrate the materiality of their services and lay claim to the title of “strategic resource/partner”, providers often focus on the tactical impact of what they do.
We need to remember that the financial statements of a company consist of more than an income statement and a cash flow. The reason why they include a balance sheet is precisely because of the importance of the asset base of a company. Assets are defined as the resources controlled by the company from which future economic benefits are expected to be realized. The most compelling demonstration of value relevance is the creation of an economic asset – because this is something that will generate returns over multiple time periods.
by Jonathan on February 28, 2012
It makes me nervous when companies claim to be “strategic partners” to their clients. It is something we should all aspire to, but we should never forget that it is the client’s choice – not the provider’s – whether the relationship is viewed as one of partnership.
The goal of being viewed as a “strategic resource” is what most companies should be aiming for. Our primary goal should be to be useful to our clients, and let the consumer of our services decide whether our level of usefulness merits the sobriquet of “strategic partner” or not. Stable business relationships are built on the principle of value exchange. It is only when relationships becomes asymmetric (either because there is a mismatch between the benefits received and the price paid, or because one party feels they are taken for granted and/or held captive) that the profits made by one party are regarded as unfair. They are regarded as the product of exploitation, not partnership.
So let’s worry less about the social dimension of partnership (“do you respect me?”) and let’s focus on the functional dimension of partnership (“am I useful to you?”). This will make it apparent why being viewed as a “strategic resource” is the basis for an stable, mutually beneficial relationship, whether that relationship is called a “partnership” or not.
by Jonathan on February 23, 2012
A surprising number of marketers are unable to articulate the difference between a positioning statement and a value proposition. This is worrying, since the core of marketing is the understanding of customer value.
A positioning statement is what it says – a statement that positions the company. A value proposition is the articulation of a specific promise of value to a specific audience. If you do not have a clear sense of who you are trying to communicate with, then the chances are that you have written a positioning statement, not a value proposition.
The distinction is important because customers are not interested in companies per se – they are interested in what companies can do for them. Unless customers get a clear sense of “what’s in it for me?” they tune out the messaging.
It is hard for companies to be disciplined about creating value propositions rather than positioning statements. First, because there is a natural tendency to focus on what the company wants to communicate rather than what the customer wants to hear. Second, because it is hard to make the mental effort to look at things from the customer’s point of view. Third, because a value proposition forces you to confront that the world is not your target market – there are different segments that you need to focus on, and develop specific messaging for.
At the heart of marketing are two disciplines:
- Segmentation – identifying those segments of the market for whom the company can deliver a distinctive level of value
- Value proposition – defining a compelling statement of “what’s in it for you” for each of those segments
by Jonathan on February 16, 2012
Marketers in B2B companies are often criticized for not understanding enough about the technical aspects of their businesses. The implicit assumption is that, absent a deep technical understanding of how the business does what it does, marketing will be unable to help the business.
My goal is to help marketers expose this assumption as a fallacy. My experience is that most B2B companies are full of people with deep technical understanding, and woefully short of people who can talk about the business in terms of the benefits that clients will receive.
This is the core mission of marketing – to understand the basis for, and to articulate, a compelling value proposition to clients. The mission of marketing is NOT to become the technical writing department of the company, finding eloquent ways to talk about the company’s technology or services.
To do this, marketers obviously need to understand a lot about the technical side of how the company does what it does. But marketers must never lose sight of the fact that their role is not “how to explain the company to the world” but rather “how to explain what kinds of customer needs are best resolved by our products/services/technology.”
What I am advocating is a more muscular stance by marketers. They need to articulate where their value added lies, and be politely firm in resisting the suggestion that they need to become technical subject matter experts. The true benefit to the company is not in swelling the ranks of the employees who can describe their technology but rather in creating a cadre of people who can articulate the benefits delivered by the technology.
by Jonathan on January 30, 2012
I am passionate about the business importance of marketing. But I often find that marketers are their own worst enemies when it comes to establishing credibility in the board room.
The bottom line is that marketers need to demonstrate that they are serious about enhancing the value of the business. Period.
None of the other metrics of marketing are relevant to a business audience until that audience recognizes that marketing cares about business success more than it cares about awareness, loyalty, engagement, community or any other of the host of metrics against which marketing measures its impact.
Few marketers realize the extent of the skepticism about their interest and ability to impact business value. It is generally believed that marketers care about dramatic impact more than business impact.
by Jonathan on January 28, 2012
The business press has been full of commentary over the demise of Kodak. Probably the most trenchant observation was the one voiced by The Economist (January 18 edition - economist.com/node/21542796) about the fallacy of “competing through one’s marketing rather than taking the harder route of developing new products and businesses.”
The moral for marketing is that a brand can only be as strong as the underlying business that it supports. The mandate for marketing is therefore to be responsible for ensuring that the offerings and service of the company are focused on the hard task of ensuring the delivery of differentiated levels of customer value, not just differentiated communications.
That is why it is so depressing to hear Jeff Hayzlett, the CMO of Kodak until last year, describe himself as “a global business celebrity” and ” a leading business expert” – if he really was such, then the company of which he was until recently a member of the executive would not be in Chapter 11.
I have no problem with marketers like Hayzlett claiming to be communications experts. What I have a problem with is them claiming to be “business experts” when their contribution is limited to communications. It is this fallacy that “marketing communications alone are enough to drive business success” that lies behind the folly of brand as a separate asset on the balance sheet – the misguided notion that the brand exists in isolation from the capabilities, culture and products/services that gives the brand meaning to customers.
A true business CMO like Beth Comstock at GE recognizes that the CMO’s role encompasses ALL of the dimensions of the business that impact the customer experience. She demonstrates as keen an interest in the innovation and service delivery of GE as she does in its communications. She recognizes that the GE brand is better thought of as multiplier on the performance of the business.
The sooner that marketers accept that their (thankless) role is to champion all aspects of customer value, not just communications, the better chance we will have of avoiding the depressing spectacle of once-great companies declining into customer obsolescence.
by Jonathan on January 15, 2012
One of the tricky things about brand valuation is the evidence that brands act as multipliers on the performance of a business, rather than having a single, absolute value.
The research we did at BrandEconomics using the BrandAsset Valuator data from Young & Rubicam and the EVA data from Stern Stewart demonstrated that brands are more valuable in the hands of better run businesses. Our analysis showed that increasing the brand strength of a poorly performing business lifted its valuation multiple by around 20%, but improving the brand strength of a well-performing business raised its valuation multiple by 50%.
This reinforces the point that I have made many times – that brands are an integral part of a business system, and that it does not make sense to attempt to value them independent of the other elements of that system. The customer is paying for the entirety of the experience, not the individual elements in isolation.
