How to Grow Revenue – Steadily & Profitably

Sales Growth Arrow*****5 star rating

 

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***** A Must-Read!  Kevin Moyer. “Growth Juice is an amazingly educational and easy-to-read approach to selling complex solutions in particular. Rather than boring instructions, this book provides examples, cartoons, easy to understand diagrams, and entertaining side stories that make it a fun read, as well as a great introduction to a proven selling process. This truly is a must read for anyone wanting to learn about how to grow sales, how to grow revenue and become a sales super-star.”

***** Fun and Informative!  Morgan Smith. “This is NOT your typical sales book. It’s light, fun, and a breeze to read. Dr. Weber gives a fantastic guide to selling your product or service. When you finish this book, you will not only retain an intimate knowledge of the selling process, but a hunger to get out there and use it! If you want to learn how to grow your sales and how to grow revenue, this is a must-read!”

*****See dozens of additional 5 star reviews Here

This book was written by Dr. John A. Weber of the University of Notre Dame, who has helped scores of major firms, including more than thirty Fortune 500 companies, learn how to grow sales and revenue steadily and profitably.  The book is fast moving and easy to read, featuring short, single-concept chapters, high-lighted by dozens of cartoons and exhibits which help to clarify principles as they are presented.  To build and maintain interest, every important concept is illustrated through actual selling scenarios – which include many fun characters and a lively, entertaining story-line.

Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

 

Does Your Salesforce Know your Market Solutions Inside & Out?

What could be more important for sales professionals than knowing their overall market solutions inside and out?  Nothing, right?  How can anyone communicate the value of something they know very little about?

Yet ask yourself, how many times has your company failed to capture a new target customer because your sales folks were not adequately familiar with your overall market solution, much less, what benefits are most highly-valued by the target customer?  How foolish can a company be in this day and age when the relative value of different features and benefits can change so rapidly reflecting ever-more dynamic and rising competition and customer expectations?

This underlines the importance of thorough initial training and periodic re-training to help the sales folks, new and old, learn and keep up to date with:

  • All of the ins and outs of the market solution being offered;
  • Each market solution’s specific values for target customers today; and
  • Primary competitors’ new initiatives in the marketplace.

This also highlights the importance of having a well-designed, consistent mentoring program for any new person joining the sales team.

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Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

Do You Study Your Customers and Competitors?

This Growth Juice blog continues the review of the series of requirements for achieving steady, profitable growth.

Know Your Customers and Competitors

It should come as no surprise that companies with more successful growth records are also more committed to regularly monitoring customers and competitors.  After all, customers’ expectations and competitors’ initiatives are the primary forces driving commodity drift (refer to earlier Growth Juice blogs).

Pic 17 MPGHow the Internet and Social Media Have Changed the Game

In the not-too-distant past, before the proliferation of Internet access and social media platforms, many firms were content with casual monitoring of customers and competitors.  In fact, as unbelievable as it may seem in today’s ‘instant information world,’ according to a study in the late 1990s, approximately 40 percent of companies at that time paid little attention to either customers or competitors and fewer than 20% closely monitored both.  This may have been a primary cause behind the disappointing growth records of many companies.

Well, that was then, and this is now.  The proliferation of Internet access and customers’ burgeoning monitoring of social media platforms have created new, informed customers.  Today, these customers’ expectations for nearly all market solutions are becoming more dynamic and demanding each year.  And companies had better listen.

Furthermore, more global competitors are entering the game each year.  These are smart players that are leveraging social media to do a superior job of both monitoring and responding to dynamic, heightened customer expectations.

Weak players that do not keep up with the times and that have not developed substantive social marketing strategies to more closely monitor dynamic customers’ expectations and competitors’ offerings are destined to flail their way down the slippery slope of Commodity Drift.

Pic 18 MPGAuthor:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What’s a Reaction Threshold?

Assume that the primary competitor, Company B, offers a price of $100.  Assume also that, the industry leader (perhaps your company), Company A, target customers Company A to have a $20 perceived value advantage over Company B.  What price should Company A charge and still have a perceived value advantage over Company B?

The logical answer is anything less than $120.  But that assumes the customer will shift suppliers whenever there is a perceived value advantage.  In the ‘real world,’ Company A might be able to retain its customers while charging even more than $120.  Why?  This is because personal and corporate life is difficult enough without re-evaluating brand choices each time one re-buys a product or service.  Thus, corporate customers, like regular consumers, establish brand loyalties to make life simpler, reducing the number of decisions that need to be made each day.  So Company A might be able to charge $125, $130 or more and still maintain its loyal customer base.  This could certainly help Company A’s bottom line!

Enter the ‘Reaction Threshold.’  The reaction threshold is the price at which a company’s ‘loyal customers’ will decide to re-evaluate their brand purchasing habits.  Say this threshold for a certain customer segment is $130 in the example above.  If Company A charged $135, many in that customer segment might change to Company B’s brand and with that change, form a new brand loyalty.  Company A, when realizing it is losing that segment of customers, might return with a new offer – say $120, $115, or even less – only to be turned down by its formerly brand loyal customer.  You already know why – the same reason as before – the trouble of re-evaluating brands yet again is not worth the potential financial gain.

A company can bring in new revenues that will flow directly to the bottom line by carefully raising prices for brand loyal customers.  That is due to the hesitancy of loyal customer to continually re-evaluate its satisfactory brand choices of the past.  For example, if my bank raises its monthly service charge from $10 to $25, I’ll stick with the bank because I have my e-bill payment system set up with the bank.

Lesson A company hoping not to lose an important segment of its brand loyal customers better be aware those customers’ ‘reaction threshold’ before deciding how much to raise its prices – or for that matter, compromise any other dimension of its overall market solution.  For once you lose a formerly brand loyal customer, that customer may be gone for good.  Warning to my bank J — if you raise that service charge one more time and I’ll start looking around!

Reaction ThresholdAuthor:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What’s a Price Umbrella?

Dropping the price is the easiest way to enter a market.  Unless aggressive pricing (i.e. lower prices) is based upon unique, sustainable cost advantages, it is generally not an attractive growth strategy.  If most firms in the relevant industry have similar cost structures, once one competitor begins to make sales and market share inroads through aggressive pricing, others will follow – accelerating the price and profit collapse for the whole industry.  Any competitor that significantly lowers price without real, sustainable cost advantages is ‘guilty of’ killing industry-wide profits.  That is not good marketing!

Well-respected firms that have an image as industry leaders can provide a ‘price umbrella’ for the industry.  Providing a price umbrella means resisting lowering prices to help all firms in the industry maintain relatively high profit margins for as long as possible.  A leading company can do this without compromising its own sales and market share because its image as the industry innovator and leader is itself a highly valued, sustainable differentiator for many target customers.

The price umbrella (relatively high price) provided by the leading company or companies reduces the temptation for other competitors to lower their prices and kill industry profit margins.  Thus, a price umbrella provides more time for all competitors to receive higher prices and profit margins.  When ‘price umbrella leadership’ is not present for any particular market solution, the prices and profits are destined to quickly slide down the commodity drift drain.

Price Umbrella PicAuthor:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What New Features and Services Should a Company Add to Stimulate Growth – without Compromising Profits?

What new features and services can a company add to stimulate growth – without compromising profits?

First of all, let’s recognize that different market segments typically value more or less the same core solution, but with different sets of features and services. Value is the first guideline.  The challenge is to identify which specific features and services are highly valued by each segment.  The supplier then pursues ideas for new features and services where its own costs would be substantially less than the true value for the target customer – i.e., less than the price relevant target customers are willing to pay.  The supplier discards ideas where its own costs would be greater than the price that its target customers would be willing to pay.

But that’s not enough, as clearly exemplified in the previous blog, arbitrarily adding even highly valued new features and services can have disastrous profit consequences not only for individual segments, but for whole industries.  Sustainability is the second guideline to use in evaluating which highly valued new features and services one can safely add without compromising segment and industry profits.  The key is to add only those unique differentiators that cannot be quickly or easily duplicated by primary competitors.

Sources of Sustainability

Sustainability can come from a variety of sources such as those listed below.

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The Bottom Line on Sustainability

The bottom line for the growth planner is this:  when attempting to grow sales, market share, and profits through adding new advantages or differentiators, add only those new advantages that are uniquely sustainable – regardless of the source of that sustainability. Without sustainability, competitors will quickly duplicate any temporarily successful advantages, after which both prices and market shares will regress to their previous levels. The new costs associated with the added advantages will squeeze profits for all competitors.  Who wants that?  No one — neither you nor your competitors!

 

Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

How Do We Determine What Customers Value?

In previous Growth Juice blogs, we identified strategies for delaying or reversing the price and profit pressures that come with commodity drift.  A quick referral back to those blogs reveals the ‘value focus’ of each potential strategy used to counter commodity drift.  Given the value focus of these strategies, it makes sense to consider exactly what value is and how to identify which dimensions of our market solution our target customers do indeed ‘value.’ 

Pic 13 MPGWhat is Value and How Do We Identify What Target Customers Value?

Consider this scenario.

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The lesson of this scenario is clear. If the sales force spent more time asking about what specs and services the customer truly valued and was willing to pay for, then the company could have likely avoided losing this sizable account — perhaps even simultaneously increasing its profit margins for this account

      For example, that careful query into what this target customer truly valued and was willing to pay for could have guided the design of each of the commodity drift strategies reviewed earlier. More specifically, that exploration could have:

  • Revealed which currently offered services were unvalued or undervalued by this target customer.  The supplier could subsequently cut such services for this customer, thus reducing costs and increasing profit margins;
  • Identified services that the target customer valued significantly more than the price currently charged.  The supplier could subsequently increase those prices & margins accordingly while still leaving a transparent price incentive for the customer;
  • Uncovered new highly-valued, differentiated services desired by the target customer.  The supplier could subsequently add those new services where the customer perceived- value was greater than the supplier’s cost, thus providing more profitable margins on these specific new services; and last but not least,
  • Stimulated enhanced communications of all highly valued services currently offered as integral parts of the relevant market solution.  This enhanced communication could subsequently stimulate demand for and support the price of the relevant market offer among target customers.

Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What Are Some Re-Active Ways to Counter Commodity Drift That Has Already occurred?

In previous blogs we considered the Commodity Drift phenomenon.  Commodity Drift is the gradual, but continuous power shift from suppliers to buyers for virtually any market solution.  Initially, the market solution is an innovative, yet relatively simple core solution that can support a high price because of its uniqueness and lack of competition.  In this introductory, innovative stage, the solution requires few costly add-ons (refer to earlier Growth Juice blogs that considered the concept of a ‘total market solution’) to attract initial customers, often referred to as the ‘innovator customer segment.’  Thus, with high price and low costs, the profit margin is high during this introductory stage.

Pic 3 MPG            What happens next is not desirable, but is inevitable.  The high profit margin reaped by the original solution innovator immediately attracts competitors.  These competitors gain access to the new market by offering the same fundamental core innovation at a lower price and often adding new features and services.  These twin forces of lower price and the higher cost from new features and services quickly drive down profit margin for all competitors, including the original innovator.  This process continues over time until the once-attractive market reaches commodity status.  Commodity status is characterized by low prices, high supplier costs, and miniscule profit margins.  This phenomenon is known as Commodity Drift.  Although this profit-sapping drift may be slowed (through strategies considered in the following chapters), it is inevitable for virtually every market segment and every solution.

Here we consider re-active marketing strategies to counter commodity drift that has already occurred.

Re-Active Strategies to Counter Commodity Drift that Has Already Occurred

Re-active strategies address commodity drift that has already occurred.  Such strategies seek to rebuild commodity offerings into more valued and customized market solutions for selected target customers.  If these re-active strategies are successful, modest price increases, cost reductions, and enhanced profit margins result.  The success of these strategies may be short-lived, as market deterioration that has already occurred.  They represent efforts to make the best of an already bad market situation.

To continue the health example, think of re-active commodity drift strategies like working-out and eating right in an effort to improve significantly-deteriorated health.  You have aged and are now at a different stage of life than when you were using pro-active strategies.  You search for ways to temporarily reverse or at least slow the continuing downward drift in health by working out, eating right, etc.

Growth Juice Book - Final - Color - 6-12-13a_page424_image25      What to do?  The re-active strategies nearly duplicate the pro-active strategies, but from a different, much less attractive position on the commodity drift grid.  The goal of the re-active strategies is to try to slow the downward pressures on profit margins.  Re-active commodity drift strategies might include any of the following:

  1. Cutting Selective Feature & Service Costs.  Selectively cutting features and services now offered that are unvalued or undervalued by the specific target customers, thus reducing costs and increasing profit margins;
    1. Raising Prices for Selected Features & Services.  Increasing prices and margins for features and services that are still highly valued by the specific target customers, while still leaving a transparent price incentive for the customer and increasing profit margins for the supplier;
    2. Innovating with New Features & Services.  Carefully researching customers to identify new potential differentiated features and services that would be highly valued by specific target customers, adding these differentiators, and then charging more profitable prices for these specific new features and services;
    3. Enhancing Communications of Highly Valued Features & Services.  Enhancing the marketing and communications of currently offered features and services that are highly valued by target customers.  This helps to maintain higher, more profitable pricing and slows commodity drift.
    4. Bailing Out.  Finally, bailing out from participation in marketing to certain segments is also an option.

Consider the first three of these re-active strategies in the context of the commodity drift diagram.

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Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What Are Some Pro-Active Ways to Try to Delay Commodity Drift?

In previous blogs we considered the Commodity Drift phenomenon.  Commodity Drift is the gradual, but continuous power shift from suppliers to buyers for virtually any market solution.  Initially, the market solution is an innovative, yet relatively simple core solution that can support a high price because of its uniqueness and lack of competition.  In this introductory, innovative stage, the solution requires few costly add-ons (refer to earlier Growth Juice blogs that considered the concept of a ‘total market solution’) to attract initial customers, often referred to as the ‘innovator customer segment.’  Thus, with high price and low costs, the profit margin is high during this introductory stage.

Pic 3 MPG

What happens next is not desirable, but is inevitable.  The high profit margin reaped by the original solution innovator immediately attracts competitors.  These competitors gain access to the new market by offering the same fundamental core innovation at a lower price and often adding new features and services.  These twin forces of lower price and the higher cost from new features and services quickly drive down profit margin for all competitors, including the original innovator.  This process continues over time until the once-attractive market reaches commodity status.  Commodity status is characterized by low prices, high supplier costs, and miniscule profit margins.  This phenomenon is known as Commodity Drift.  Although this profit-sapping drift may be slowed (through strategies considered in the following chapters), it is inevitable for virtually every market segment and every solution.

Here we consider pro-active marketing strategies to delay commodity drift.

What Are Some Pro-Active Marketing Strategies to Delay Commodity Drift?

What can be done to delay commodity drift for a company’s current market solutions and target customers?  First we look at solutions and target customers that are still in the attractive position – the upper-left portion of the commodity drift diagram.  In this situation, prices and profit margins are still appealing.  Forward-looking firms design and implement pro-active strategies to delay the inevitable downward drift toward commoditization.  Think of pro-active strategies like exercising and eating right to stay ‘young.’  Eventually you will age and your physical condition will deteriorate, but you can delay that drift by working out, eating right, and making healthy decisions.

Growth Juice Book - Final - Color - 6-12-13a_page424_image23What to do?  Several pro-active strategies are possible for slowing commodity drift.  These might include the following:

  1. Cutting Selective Feature & Service Costs.  Identifying which current features and services are unvalued or undervalued by the specific target customer – then cutting such services for this customer to reduce costs and increase profit margins;
  2. Raising Prices for Selected Features & Services.  Identifying features and services that the specific target customer values significantly more than the price currently charged – then increasing the prices and margins for those services, while still leaving a transparent price incentive for the customer;
  3. Innovating with New Features & Services.  Uncovering brand new, highly-valued, differentiated features and services desired by the specific target customer, adding those where the customer’s perceived value is greater than your costs for providing those features and services – then charging more profitable prices for these new features and services;
  4. Enhancing Communications of Highly Valued Features & Services.  Enhancing the marketing and communications of currently offered features and services that are highly valued by target customers.  This helps maintain higher, more profitable pricing and thus slows commodity drift.

Consider the first three of these pro-active strategies in the context of the commodity drift diagram.

 

Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

Why Is It So Important to Continuously Add New Market Solutions and Target New Segments?

Bet on this!  The attractiveness of virtually every overall market solution for every relevant segment will decline over time, reflecting the inevitable drift toward commodity status — with squeezed profit margins.

Growth Juice Book - Final - Color - 6-12-13a_page424_image21

This drift can be slowed but not stopped.  Therefore, in order to consistently expand sales and profits, a company must constantly seek out new market segments for current market solutions and continuously add entirely new market solutions.

Social Media Accelerates Commodity Drift, but Also Provides Vehicles to Help Cope with the Inevitable Drift

The proliferation of social media platforms and the ever-expanding use of social media are twin forces accelerating Commodity Drift in both consumer and business-to-business markets.  Actual and potential customers now have the capability to learn almost instantaneously of new competitive offerings, and thus to put more intense pressure on all suppliers to match or surpass their competitors’ market offers or else to be left in the dust.  In turn, this ever-quickening pace of competitive responses is working to accelerate the growth of customer expectations of ‘more for less.’

Growth Juice Book - Final - Color - 6-12-13a_page424_image28

Fortunately, sellers can also use social media to help cope with Commodity Drift.  More specifically, social media have enhanced the ways that sellers can listen to, engage, and build relationships with existing and potential customers.  For example, sellers can monitor and learn what product-specific focused interest groups, blogs and white papers are saying about them and their primary brand competitors, as well as what specific new features and services actual and potential customers are demanding.  This regular monitoring of social media by sellers does not slow Commodity Drift, but it can help guide strategy development towards reducing the negative impacts of the inevitable drift on the bottom line.

Future blogs in this series consider additional potential marketing strategies to try to counter commodity drift – including the need to regularly go after new segments and to think innovatively.

Growth Juice Book - Final - Color - 6-12-13a_page424_image22Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.

What is Commodity Drift and What Causes It?

Commodity Drift is the gradual, but continuous power shift from suppliers to buyers for virtually any market solution.  Initially, the market solution is an innovative, yet relatively simple core solution that can support a high price because of its uniqueness and lack of competition.  In this introductory, innovative stage, the solution requires few costly add-ons (refer to earlier Growth Juice blogs that considered the concept of a ‘total market solution’) to attract initial customers, often referred to as the ‘innovator customer segment.’  Thus, with high price and low costs, the profit margin is high during this introductory stage.

What happens next is not desirable, but is inevitable.  The high profit margin reaped by the original solution innovator immediately attracts competitors.  These competitors gain access to the new market by offering the same fundamental core innovation at a lower price and often adding new features and services.  These twin forces of lower price and the higher cost from new features and services quickly drive down profit margin for all competitors, including the original innovator.  This process continues over time until the once-attractive market reaches commodity status.  Commodity status is characterized by low prices, high supplier costs, and miniscule profit margins.  This phenomenon is known as Commodity Drift.  Although this profit-sapping drift may be slowed (through strategies considered in the following chapters), it is inevitable for virtually every market segment and every solution.

Growth Juice Book - Final - Color - 6-12-13a_page424_image18 What Causes Commodity Drift?

Competitors.  The high profits from innovative new solutions quickly attract global competitors.  These new players enter the market using alternative approaches to try to establish themselves and capture a share of the growing market segment.  Some new competitors simply lower price, while others add frills and maintain the current dominant price.  Still other companies both lower price and add frills in the effort to grab market share.  Inevitably, this flood of competitors drives down prices, increases costs and causes once-high profit margins to evaporate.

Growth Juice Book - Final - Color - 6-12-13a_page424_image19Ever-rising Customer Expectations.  Rising customer expectations further accelerate Commodity Drift.  Customers demand both continuously declining prices and more add-ons.  Naturally, this leads to even more rapidly-declining profit margins.  More competitors and more intense competition give target customers more choices and more leverage to continually demand ‘more for less.’  This happens continuously for the broad cross-section of market solutions and segments.

Growth Juice Book - Final - Color - 6-12-13a_page424_image20Thus, Commodity Drift consists of the market shift away from very attractive, unique, highly differentiated core solutions with high profit-margins towards lower priced, heavily frilled, higher cost solutions with lower-profit margins.

 

Author:  Dr. John A. Weber, University of Notre Dame.  For more information on this and related topics, see www.growyoursaleswithgrowthjuice.com.