Daniel Priestly asks you to take a look at the problem you solve for people. He says that high-value products and services are linked to four underlying drivers:
- Save or make money.
- Save time or eliminate wastage.
- Bring increased emotional benefits.
- Ease pain, suffering or negative emotions.
If you’re linking your business to the industry, to the market and to the trends that everyone else is following, then you’ll continue competing on price with everyone else.
Why delivering an outcome is key
The more your business takes on the responsibility of delivering an outcome, with little or no external input, the more value it creates. We see solution products in a variety of industries, from telecommunications, software, accommodation, financial services and countless others. These solutions are ready to go; you can buy them and no further input is required from you in order for them to be implemented.
Done for you
This is a “solution” whereby your business has created a full and complete answer to a problem that your client needs solved. This is the most valuable solution for a customer because it involves very little of their time or creative energy to get a result. Example: liposuction.
Done with you
This is of moderate value to your clients. It’s where you and your clients work together to create an outcome. Example: personal fitness trainer
Supervision
This is the lowest form of implementation work you can offer. It’s where your company provides close and ongoing supervision while your client works at achieving an outcome. Example: a gym.
Components
Components could be raw materials, basic services or regular commodities. You’ll need to sell a lot of these if you want to make any money. Example: a set of workout weights
Less energy more value
And almost every industry offers various products at all levels. The less energy required from the client, the more valuable the product. Sticking with the example from above, if you want to lose weight, you can buy a book for $20, pay $500 for a gym membership, $3,000 for personal training or $15,000 for liposuction.
The world is changing
Right now the world of business is having breakthroughs in speech recognition, automation, robotics, logistics, processing power, data management and collaborative sharing of resources. A tipping point has hit when it comes to outsourcing, social media marketing and systemization. What this all means is that the value of “functional people” is sliding off a cliff. People with respectable jobs in IT, consulting, design, senior management, health care and other professional services are about to see the value of their time diminish substantially.
How to create a market imbalance
- Innovation – You create something new and shiny, that no one else sells. (Apple)
- Relationships – You build such a powerful relationship with buyers that they ignore other sellers. (Top class restaurants hotels)
- Convenience – You are answering the needs of the market with the most frictionless expression of what they want. (Online offerings Amazon)
- Price – You’ve invested into an asset (Aldi Lidl) that creates an efficiency others don’t have. If you look carefully at large and established markets you’ll see that there are often four big players who each occupy one of these market positions. You can see it in hotels, airlines, banks, telecommunications, cars and computers. Essentially, the big brands focus on dominating one of these four market imbalances and choose one of the others as a secondary.
Clients versus customers
A customer buys something. A client keeps coming back. A customer results from a transaction whereas a client results from a relationship. Your job is to create both.
There are three ways you can reduce costs and still keep your margins:
- Invest, cleverly invest in assets that create a natural barrier to entry will allow you to reduce your costs and keep your margins. Owning your premises or buying equipment that is expensive to hire can be ways to keep prices lower.
- Refine, looking for inefficiencies where there are costs that do not increase the value to a paying customer will keep margins wide while prices fall.
- Systemise, using systems and technology rather than people is a powerful way to keep
Disrupt your industry
If everyone in your industry charges by the hour, create a fixed price solution. If everyone in your industry sells components, be the company that only sells bundles. If everyone is showing off about their heritage, be the company that is a new and disruptive thought leader. If the industry norm is to sign clients on to a 12-month contract, be the first to offer month-by-month billing with no break clause.
Why social media works
Brains don’t know its social media and digital technology allow you to leverage this process even more. If people read your blogs, follow your tweets, watch your online videos, listen to your podcast, click-through your slides or flick through your photos, it’s as good as sitting face to face. Strangely, the human brain can’t distinguish between digital media and real life (which is why we still feel sad when a celebrity dies, even though we didn’t ever meet them). When you ask people to buy straight away they only have two choices: they buy or they don’t. It’s a binary decision. But people aren’t binary. What if someone is 90% ready to buy?
Value of information
You must remain conscious that the value has shifted away from information and into implementation. The value of information has fallen through the floor and the value of getting things done has risen through the roof. Give away ideas, but charge for implementation
Niche
Too many business owners focus on the entire market place. They are deeply concerned by what the majority will pay rather than finding the small group of people who really value what they offer. But if you focus on the wider market price, you’ll always be average. The book reminded me a little of Hidden Champions of the 21st Century which talks about a number of successful German companies who have become supernichists. They have extreme market segmentation (they don’t sell washing machines – they sell washing machines for quality linen, for the restaurants in 5-star hotels only), all have an international focus and all are doing one thing brilliantly.
