In 2016, Mercedes-Benz accelerated past BMW in unit sales for the first time in 10 years. The win attributed by its CEO, Dieter Zetsche, to the company focusing on making cars customers wanted and not chasing market share. Many would ask, but aren’t these the same? And the answer would be no.
It is easy for leadership to forget that they are in the business of meeting the needs of customers and turn their eyes to sales and profit.
Everything around them is usually screaming, ‘more profit, more profit, more profit’. Their shareholders, their board, the stock market, the metrics they see every day, and the business community generally are all focused on profit and the sales which will hopefully deliver it. If everyone and everything looks to sales and profit then what else should be expected? But chasing market share is a volume game and often becomes one of driving price and therefore costs down. Focus becomes one of looking for efficiencies and savings. This will not necessarily yield an enduring profit.
A focus on customer value turns the mind to need and maximising the price/cost relationship with customer value. One way to express this relationship is to ask: what does the customer really want and what are they willing to pay for? Sales are won and profit is earned by providing the customer with a value proposition that is better than anyone else in the market. And, importantly, delivering that in a manner that is enduring and compounding.
Mercedes was also challenged by a paradigm that said, increasing sales volumes, even if led by increasing demand, would reduce brand appeal. The logic being that the value of a luxury brand lies in its exclusivity. However, today’s luxury brands are defined by the experiences they provide in what many describe as the ‘experience economy’ in which we currently live.
It is experiences that engage customers and through which memorable events may be created that connect them emotionally to the brand. Luxury brands orchestrate all elements of their customers’ engagement with their brand to ensure their unique offering is experienced consistent with their brand. Only a focus on customers can begin to deliver the promises of a luxury brand.
Another paradigm that Mercedes needed to dismantle was the belief that the best cars in the world were those with technical and engineering superiority. Cars that were powerful and with complex technology embedded. A customer experience focus however yields a very different set of measures, such as, would customers benefit from the inclusion of the feature or technology? I would liken this difference to a business that is inwardly focused on its product and produces the best possible product in the world, a product no one can match. And a business that is totally focused on the customer and delivers exactly what they want and more, by taking their experience and value to a higher level than they ever expected.
As you seek to grow your business the challenges experienced by Mercedes become a real example of the challenges every business and their leadership team face.
- A need to maintain an absolute focus on customer need and the value you offer through an approach that allows you to out-compete the rest of your market.
- Not allowing the desire to directly touch the bottom line to drive leadership’s agenda. It’s easy to find some costs to reduce or to justify a price cut on the basis of lower price driving demand and make this your growth strategy. But it’s likely to be only a short-term benefit.
- Unearthing the paradigms in your business that may be undermining your ability to deliver greater customer value, sales and efficiency.
- Leading your business and its growth strategy on the foundation of greater customer value, leading to greater enduring profit and capital value for your business.
You could strive to produce the best quality and technically superior product in the world, which maybe no one really wants. Or you could strive to produce a product that your customers are screaming for and give them greater value than they ever expected to lock them in as life long customers. Which do you think is the winning proposition for your business?
In today’s market businesses compete around customer value, which requires a growth model centred around need.
Have a look at my Real Growth model for an example.
Active Knowledge Questions:
- How do you drive the sales in your business? What is your focus?
- Are there any paradigms in your business or industry that instruct everyone as to the pattern or seasonality of sales? Why don’t you challenge these?
- How do you know you produce the best product? How do you measure its ‘quality’? Does that align with customer need?
- How do you know what your customers’ needs really are? Not what you think they are, but what they believe they are? And how do you exceed that expectation?
Need to lift the leadership performance in your business? Learn how in C88 – Leadership Performance Guide and Journal.
Or do you need to rework your business strategy? Take a look at Strategy Play – Crafting Undefeatable Business Strategies.
All the best in the success of your business,
Photograph by Yauhen_D / Shutterstock.com