Marketing Myopia: Expand Your Vision and Strategy

Even if your company has a successful product with very little competition, it’s important to stay on the defense. Getting too comfortable can leave you vulnerable to competitors – or, even worse, leave you unprotected if your product becomes obsolete. This process starts by shifting from a sales based approach to a marketing based approach, allowing you to focus more heavily on the customers’ current and future needs.

Defining your Business
When defining your business, it’s important to have an open mind. For example, a car manufacturer may choose to expand their business from automobiles to transportation – looking at new ways to address customers’ needs. Having a vague or outdated definition of your business can negatively impact the future of your company and severely limit growth opportunities.

Reshaping your Focus
Companies need to think about customers in a new way. Often times, companies are focused on sales efforts which directly impact revenue. However, understanding the customers’ unique needs, and addressing them through marketing efforts, will do a better job of driving results.

Piggybacking on New Innovation
New technology that makes a company’s core products irrelevant or obsolete often feels devastating. However, this should be a welcomed opportunity for businesses, allowing them to tap into new customer needs, or even serve an untapped market segment. This can also reduce the amount of time a company spends at the drawing board coming up with new products designed to sustain and grow a company.

Watching for Signals of a Changing Industry
According to the Harvard Business Review’s article “Marketing Myopia,” there are four factors that can indicate that turbulent conditions may be ahead. Here’s a quick breakdown:

1. There isn’t any competition for your product. Once your product gains popularity, competitors will quickly swoop in to cash in on the new “needs” created by the product.
2. Your product serves an affluent client base. This gives businesses a false illusion that their product is safe from the highs and lows of market conditions.
3. Having too much confidence in pricing the product lower, and selling more volume. This creates a disproportionate focus on sales instead of marketing efforts. These two components need to be carefully balanced.
4. Your product is reliant on scientific experimentation and improvement to continue to grow.

Focusing on Improving Efficiency
Many companies focus on improving efficiency in hopes that larger profits and growth will follow. However, this can be a mistake for companies if it results in neglecting other important areas, such as focusing on marketing efforts or improving their generic product for future growth. Striking a balance between these factors will produce the best results.

Breaking a False Sense of Security
Often times, when a company creates a product that appeals to an affluent consumer base, they feel overly confident in the success of their business. This lack of focus can open up opportunities for other competitors to create products that appeal to the customers’ needs.

Also, some companies have the misconception that their product is “indispensable.” Although you might not see an immediate substitute for your product, it’s important to not get too comfortable. New developments in the market can quickly make your core product irrelevant, which will result in a downward spiral of profits.

Evaluating Mass Production
As a product gains popularity, often times a company will ramp up production to drive down per unit cost. However, companies should be careful about managing this process. This also creates a high amount of pressure to “move” the product. This attitude can shift the focus of staff to sales, rather then marketing the product to drive sales. This process is important because selling focuses on meeting the needs of your company, while marketing addresses the needs of the consumer. And, ultimately what drives growth is the connection consumers feel with your product.

Creating an Emotional Connection with Consumers
When a consumer is purchasing a product, they need to be able to connect with the item. For example, products that consumers “have” to buy instead of “want” to buy lack emotional appeal. For this reason, it’s important to approach these products differently. For example, buying gas for your car isn’t always pleasurable, but getting more gas mileage or another added benefit can create an emotional connection. This will drive growth in sales, and create enhanced profitability.

Creating Better Marketing Campaigns
Focusing on creating more creative advertising strategies and sales promotional strategies can protect your product from competition, and help establish a unique position for new products. Often times, when exploring these strategies, companies will discover they haven’t asked basic marketing and sales questions.

Changing the way your company thinks about marketing can give your business a competitive edge in the marketplace. Also, understanding that even though your company has a strong position in the marketplace right now – it’s possible for that to change anytime. Investing resources in marketing will help protect and grow your company in the future.

Resource:

Theordore Levitt. “Marketing Myopia.” Harvard Business Review.

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.

Winning Over the Marketplace: Competing with Analytics

Maintaining and expanding your position in the current marketplace is essential for survival and growth. But many businesses are left asking the question, “What strategies can drive better success?” This is especially true if your company has a disadvantage, like higher pricing due to competition from companies that use offshore production.

But, even without the best pricing, there are ways to differentiate your products, become a market leader, and ultimately maximize your revenue. Analytics is the new “secret weapon” of choice for many companies. Having a heavy focus on analytics allows companies to make better decisions based on a high quality of data and analysis.

These tools can be used for a variety of functions, from determining pricing strategies to enhancing your company’s brand loyalty. But, before tackling your analytics strategy, it helps to have a few pointers.

Choosing your Focus
When creating a plan for analytics, it’s important to focus your efforts on areas with potential for the largest impact. Developing data and strategies around these areas pave the way for market leadership, and better results. Here are a few items to consider:

• Research and Development: Many companies allocate large resources on research and development, which can be smart when done effectively. When managing this area, use analytics to improve the effectiveness of this process.
  
• Brand Loyalty: Once you’ve identified the most profitable market segment, it’s important to focus efforts on measurable retention strategies. Analytics can help you gather the information needed to accomplish your goal. This will enhance brand loyalty, and create lasting momentum for your company.
  
• Quality of Services or Products: Catching problems before they become widespread will help you quickly contain problems, and create solutions. Analytics can help you track this information, and create strategies for improvement.
  
• Supply Chain Management: Holding inventory too long is expensive and can negatively affect your bottom line. The quicker your product moves, the less holding costs, and the more revenue. Using analytics to manage this process will allow you to operate more efficiently, and have better cash flow.
  

Fine Tuning Pricing Strategies
An important part of analytics is determining your consumer’s threshold for pricing, and setting a pricing point accordingly. You can also expand your offerings, as discussed in The Harvard Business Review article, “Competing on Analytics.” After mastering pricing strategy, Marriott International expanded their expertise to areas like conferences, catering, and internet sales. This gave the company many opportunities to fine tune pricing, and appeal to profitable market segments.

Focusing on Retention Strategies
Most businesses know it’s more expensive to generate new customers than retaining your existing customer base. This means that developing optimized programs and targeting your loyal customers is worth the expense. Allocating resources on analytics focused on this area will yield positive results.

Shaping Revenue Strategies
In addition to implementing a retention program, companies should consider measurement tools which allow tracking for optimal revenue potential. For example, in the same article “Competing on Analytics” by the Harvard Business Review, Marriott created a revenue-management system that was designed to measure and grow revenue. Using this measurement tool allowed Marriott to grow their revenue from 83% to 91%.

High Impact Analytics Teams
When incorporating analytics into your company’s strategy, consider choosing skilled employers across all business units to join the team. For example, employees working in business units such as: marketing, operations, sales, and consumer research can maximize the impact of your team. That’s because a variety of backgrounds allows greater insight into the process and strategy behind analytics.

Role of Leadership in Analytics
Although not every CEO or senior manager has a background in statistics, having a trusted group of advisors can help them wade through information easier resulting in better decisions. These leaders should have internal consultants with expertise in this area to assist with questions. Also, when hiring employees in all departments, make sure there is a nice cross-section of employees who are skilled in analytics.

Managing and Sharing Analytics Data
The data collected during the analytics process is valuable across all sectors of your organization. For example, analytics can be used for developing pricing and promotional strategies - and for sharing with vendors and business partners to work towards future strategies and promotions.

In addition, this information can be used to tell a story about your company. Results generated from this information are valuable in your annual report, investor communications, and even marketing materials.

Balancing Analytics
Overcoming disadvantages in the marketplace isn’t easy. But having analytics on your side will enhance performance, and drive revenue. And remember that analytics should guide your decisions, but ultimately you’ll also need to trust your instincts. Using facts to direct your company’s resources, combined with your business instincts, will yield the best results.

Resource:
Author Info. “Competing on Analytics.” Harvard Business Review, January 2006

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy,” “Selling Your Business the Easy Way,” “Enhancing Your Business Value…The Climb to the Top,” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.

The Balanced Score Card: Driving Better Performance

Whether your company is a market leader or brand new to the marketplace, all companies are constantly looking for fresh new ways to stay ahead of the competition. Although there are a wide variety of strategy and measurement tools, the balanced score card is a tool that ties these two components together.

This measurement tool was first introduced in the Harvard Business Journal in 1992. The balanced scorecard was designed to provide executives with a new formula for developing a company’s strategic objectives, while creating measurement tools. This tool quickly proved to be successful at motivating executives to come up with breakthroughs in critical areas, such as customer service and bringing new products to market.

While many companies have measurement tools, they are often disjointed and disconnected from financial initiatives. Some companies use the yearly budgeting tool to facilitate planning. However, this can leave gaps in planning and fail to address important points.

Implementing the Balanced Score Card
Introducing the balanced score card is a process that takes hard work from senior management and employees to drive success. Here’s a quick breakdown of the three steps needed to launch this planning tool:

1. Determine which Business Units Needs the Card

The first step in implementing a balanced scorecard is making a list of business units that will use the tool. According to the Harvard Business Review, a scorecard is appropriate for business units that have their own customers, production facilities, channels for distribution and financial performance measures. Once you’ve defined which business units will need their own scorecard, you’ll need to bring senior managers up to speed on the process.

2. Partner with Management Teams

Each senior manager should receive general information about how the balanced scorecard works and the benefits. Once the management team has reviewed the information, they will meet with the facilitator to discuss ideas and input for the process. In these meetings, senior managers will also accomplish the definition of success factors, the company’s mission and performance measures.

After the initial meeting, senior managers will meet for a second workshop to further define the scorecard goals. The attendees of this meeting will be more diverse including senior managers and high level and middle managers. At this meeting, an implementation plan will be developed.

Then, a final meeting will be held with the executive team only. In this meeting, the team will come up with a final plan for the company’s objectives and how they will be measured. During this process, senior management will also need to develop a strategy for rolling the process out to employees.

3. Implementing and Reviewing the Balanced Scorecard

Once all of the details of the balanced scorecard have been finalized, management will need to implement the scorecard. This process includes communication with employees and putting support in place for the new measurement systems. Once the information has been implemented, the scorecard will need to be reviewed quarterly to measure effectiveness and performance. In addition, the senior management team should evaluate the scorecard annually. In this meeting, they will need to determine if the measures still fit in terms of strategic planning and resource allocation.

Trying a Pilot Program
Some companies decide to start out slower when implementing the balanced scorecard. In these cases, a company can launch a pilot program in specific divisions to test the program’s effectiveness. During this process, many companies choose to focus on output measures to drive better success.

After the program has been launched, the company can evaluate the effectiveness of the program and determine if it should be integrated across the entire company.

External Reporting Issues
Many companies wonder if the balanced scorecard should be included in external reporting. The Stanford Business Review explains that the scorecard isn’t easily translated to the investment community. This tool is primarily useful for internal purposes that plan and shape the future of an organization. Also, the information used in the scorecard is sensitive and should be protected.

Getting Rid of Benchmarking
Although benchmarking is a common performance tool, companies often find this requires an investment without much return. If your company is using benchmarking, you’ll need to discontinue it when launching the balanced scorecard. Since the balanced scorecard focuses on output instead of process, it generally can’t be used in conjunction with benchmarking.

When adapting a balanced scorecard, remember to keep it simple. Companies that get carried away, adding hundreds or even thousands of performance goals, don’t get the full benefits. Instead, keep your goals to a dozen or less. The results of using this tool will be well worth the investment and will provide a solid foundation to grow and preserve your business.

Resource:Robert S. Kaplan and David P. Norton. “Putting the Balanced Scorecard to Work.” Harvard Business Review.

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.

The Core Competence of the Corporation: Develop for Growth

Often times, companies discover that losing sight of core competencies isn’t difficult. With expanding technology, many businesses find themselves offering new products and services that simply don’t mesh with their core competencies. But the problem is, losing sight of these attributes can severely limit a company’s success and hamper future opportunities for growth. Investing time in developing a set of strong core competencies can give a company the ability to expand product offerings, and drive profit - without sacrificing the foundation of the company.

Developing Core Competencies
When perfecting core competencies, it’s important to ask a few questions about your current product offerings. Determine if your current core competencies allow you to tap into a variety of markets. If not, you could be limiting your company’s ability to grow in the future. Also, determine if your competencies are producing strong benefits to consumers. And finally, make sure your competencies aren’t generic and competitors can’t “copy” your unique abilities.

Reshaping Management Strategies
Although market leaders make developing core competencies look easy, it’s often the complete opposite. This leaves many businesses wondering “what’s the secret?” These skilled companies are able to design competencies that are flexible; they can easily change with the marketplace. When rethinking these attributes, keep in mind that products need to be capable of adapting to a consumer’s desire for functionality and likeability.

This may sound straightforward, but in practice, accomplishing this task is often difficult. Companies need strong management to make these changes. And often times, management changes will be needed. Maximizing internal resources can also help companies recognize their core competencies and then develop additional opportunities.

Making Core Competencies Stronger
Once a company has identified core competencies, it’s important to strengthen those attributes to drive success. Putting together groups and committees that include individuals from all business units of the organization can help a company develop stronger core competencies. During this process, the company will also need to look at how funds are allocated. For example, if a large chunk of the budget is allocated for breaking into emerging markets, some of that money should be shifted back to strengthening core competencies.

Organizing Delivery Value
Before a company can successfully strengthen their core competencies, they must determine the delivery value. Marketers, salespeople and production staff must all understand the customer’s needs and how to deliver a message and product that fits perfectly with those needs. This will allow companies to differentiate their products from key competitors and earn a reputation as the market leader.

Partnering with Employees
Senior managers should invest time in employees so they understand the company’s core competencies. Employees who work in a “silo” environment are so focused on their individual tasks they often can’t see the big picture. Integrating employees into a process that helps connect their job function to core competencies can help employees have a broader focus. They will also be able to share their experience with other individuals in the organization, which is crucial to success.

Protecting Core Competencies
If a company loses sight of core competencies, they can often lose their best assets in the marketplace. These attributes provide strength and lay the foundation to develop new products and technologies. Keeping core competencies in mind when entering new markets can also help guide success. The Harvard Business Review article “The Core Competence of the Corporation” discusses 3M’s competency with sticky tape. The company recognized that their core competency lay with sticky tapes and developed the famous post-it-notes, magnetic tape and pressure sensitive tapes. Although the company’s product offerings are broad, each product can still be tied to the company’s core competencies.

Perfecting Technology
Technology is an important driver to success. For example, auto manufactures often have distinct engines that give them a competitive advantage in the market place. This is also true for video cameras, digital cameras and computers. Focusing on technology provides a core competency that customers start to recognize and feel a loyalty towards.

Also, over time the marketplace changes and consumers demand technology advances. For example, many consumers are drawn to “miniaturization,” wanting smaller, sleeker and more advanced products. Companies that anticipate these advances and incorporate them into current core competencies can gain market share and drive up profits.

Protecting Core Competencies
The Harvard Business Review article explains that companies who judge their competitiveness by pricing and performance of end products are risking the erosion of core competencies. Outsourcing important components can often be a mistake. Instead of outsourcing, companies should try to keep unique technology and designs in-house instead of trusting them with an outsourced company. This allows a company to keep control over their core products and services and have greater power to determine future success.

Investing in the development and preservation of core competencies can help a company enter markets more effectively and develop a market leader position. All business units must work together and share talented employees for the greater good of the company. Managers must be willing to circulate talent and skills to protect and build the most effective core competencies.

Resource:C.K. Prahalad and Gary Hamel. “The Core Competence of the Corporation.” Harvard Business Review.

Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Driving Business Value in an Uncertain Economy”, “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or click here to email Mark.

Middle Market Investment Bank, VERCOR, Expands to Pacific Northwest with Seattle Office

FOR IMMEDIATE RELEASE
PRLog (Press Release) – Jun 22, 2009 – VERCOR, a middle market investment bank with offices in North America, South America and Europe expanded into the Pacific Northwest with the addition of Seattle-based dealmaker, Joe Hoff. Joe brings VERCOR and middle market companies over 20 years of comprehensive business experience.

Joe’s expertise comes from the buy and sell-side of complex business transactions. As a senior leader with Fortune 1000 companies such as General Signal and SPX and as a management investor in private middle market companies with annual revenues exceeding $70 million, Joe has a broad leadership background in mergers and acquisitions, business development, product development, manufacturing and supply chain management throughout North America, Europe and Asia.

Joe’s experience as an entrepreneur enables him to empathize with business owners in the middle market. “Most dealmakers at VERCOR have been involved in starting, buying and selling their own businesses. We can advise clients from an owner’s perspective. That’s why Joe is a perfect fit for our team,” states VERCOR’s Managing Principal, Mark Jordan.

VERCOR advisors are dedicated to identifying strategic and financial buyers, negotiating deal structure and closing transactions no matter the economic climate. Joe states, “The recession has been indiscriminate by region and industry, but some businesses and industries continue to perform moderately well. Now is the time for middle market companies to act on an exit strategy or to implement changes that can improve their performance and prepare them for a future exit.”

About VERCOR
VERCOR is a provider of middle market investment banking services with offices in North America, South America and Europe. Specializing in transactions for companies with revenues of $10 to $100 million, VERCOR offers extensive expertise in all stages of the business sale from concept to completion. The experts at VERCOR have executed transactions totaling over $1 billion in value. For more information about VERCOR, visit www.vercoradvisor.com.