The root of the problem Niraj Dawar argues is that for a couple of decades now, marketing hasn’t been seen to be delivering competitive advantage.
Since the heyday of mass media and mass brands, marketing’s strategic contribution has progressively diminished. The function has become increasingly tactical. The CEO wonders how marketers spend their time. The chief financial officer (CFO) wonders how they spend the company’s money. The sales folks think marketers are too conceptual, too abstract, and not sufficiently focused on the immediate business and what the production and supply chain folks think is not fit to print.
Why do your customers buy from you rather than from your competitors?
Answer this question and you can reveal new opportunities to create both value for customers and new sources of competitive advantage When Dawar poses the question. Why do they think their customers buy from them rather than from their competitors? The responses consist of reasons such as:
- “They trust us,”
- “Our reliability of supply and delivery”
- “Our service”
- “We are knowledgeable about their business”
- “Our experience with other such customers”
- “We make it seamless”
- “They see us as unique”
- “We’re prominent in their consideration set”
- “Our reputation”
- “Our brand”
Rarely is a better product mentioned, and seldom is a lower price seen as the reason customers buy from a company. In other words, the answers to “Why do customers buy from us?” reside almost entirely in the interactions that take place in the marketplace. Trust, the reliability of supply, service, knowledge, experience and reputation cannot be made in a factory or packaged and sold off the shelf.
Downstream sources of value
They have their origins in specific activities processes and systems that the firm employs to reduce the customer’s risk and their costs of doing business. The wide gap between why customers buy from a company (downstream reasons) and where business are spending most of their effort and resources upstream is the reason Dawar wrote this book. Businesses have traditionally sought advantage in the upstream in value creation activities related to production and products:
- building bigger factories
- taking advantage of scale
- finding cheaper newer materials
- cheaper raw materials or labour
- better ways to make move and store inventory
Erosion of upstream competitiveness
Dawar argues that it is driven increasingly by rapid commoditisation of products and production. Today, manufacturers just about anywhere can replicate the looks, and even the feel, of an innovative product and can bring it to market for a fraction of the price, in a fraction of the time it used to take. Even in industries whose new products are protected by patents.
Building competitive advantage in the downstream
To build competitive advantage in the downstream you have to uncover the hidden points of pain in the interactions between you and your customers. “Tilt” sets you three questions to help enumerate these points of pain:
- What are the hidden costs that your customers incur in buying and using your product or service?
- What are the hidden risks that your customers incur in doing business with you?
- Why do potential customers not buy from you (in other words, what are the costs and risks that prevent potential customers from doing business with you)?
Does marketing serve preexisting customer needs, or does it help create them? Some of the contempt for marketing practices are those that add little value in their attempts to sell snake oil or pet rocks
First to market or first to mind?
A large global study conducted by one of the two car companies aimed to find out what “excitement” meant to customers. One question asked respondents to “describe the most exciting day of your life.” When the results were tallied, it turned out that BMW owners described exciting things they had done—white-water rafting in Colorado, bungee jumping in New Zealand, attending a Rolling Stones concert or a Wimbledon tournament match. In contrast, the most exciting day, by far, in the life of Volvo owners was the birth of their first child. This understanding of why do your customers buy from you should be the keystone of any organisation that wishes to build and sustain competitive advantage in the marketplace.
Implications for strategy
By now your business knows what it takes to make and move stuff. The problem so does everyone else. For too long businesses have concentrated on upstream activities emphasising volume throughout and greater efficiencies. They think of product innovation as a key to a brighter future to the detriment of customer focus, understanding customer needs, downstream innovation, cost and risk reduction and ownership of the criteria of purchase. The Tilt strategy urges the CEO “to seek competitive advantage in the firm’s interactions with the marketplace, in the networks with and between customer’s and on the playing field inside the customer’s mind. By asking fundamental questions such as ” Why do our customers buy from us? the firm brings the voice of the customer into strategy formulation.