Do great offerings automatically lead to great results? Not really. Learn more about it here! [Tuesdays: Return Driven Strategy]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
Welcome to today’s discussion on “Return Driven Strategy (RDS)!”
Every Tuesday, we write about business case studies, tips, strategies, and insights related to RDS to help business owners, builders, leaders, and other professionals in the field boost their organizational and individual performances.
In this article, we’ll focus on an important aspect that industry professionals have to keep in mind in fulfilling otherwise unmet customer needs (Tenet Two of RDS).
Curious to know more about this topic?
Keep reading to find out.
Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
Return Driven Strategy
In our past “Return Driven Strategy” articles, we talked about some business case studies that are relevant to Tenet Two—fulfill otherwise unmet customer needs.
According to Professor Joel Litman and Dr. Mark L. Frigo in their book, “Driven,” Tenet Two is an important recipe for achieving high earning power levels. We saw that in the case studies of:
Today, we’ll focus on an important aspect in achieving Tenet Two of RDS. This concept is a must-know for every business owner, leader, or marketer who’s aiming to generate high returns.
… and no. We’re not talking about the simple provide-great-offerings proposition.
In fact, our main message for today is…
Great offerings do not guarantee great results!
—
It’s not enough that you simply provide great products or services for your constituents. Why?
As Professor Litman and Dr. Frigo said, high-performance businesses deliver offerings that customers believe are not otherwise available. Meaning, there are no available substitutes in the market.
These enterprises focus on the real reasons for purchase and not simply on the functional attributes of goods or services. They redefine “quality” in light of customers’ perception of the purpose of an offering.
Let’s recall the key points in the business case studies we mentioned above…
- BMW is known for providing incredibly high-end luxury cars, yet its profitability levels have only been at corporate averages at best.
The reason for that?
The existence of substitutes!
While BMW provides high-quality products, there’s no denying that other luxury car brands like Mercedes-Benz, Audi, Lexus, Cadillac, and more are also doing the same. So, a slightly cheaper replacement with the same high-end utility has the potential to draw BMW customers away.
- Similarly, McDonald’s has thousands of franchises all over the world and millions of consumers “love” its offerings.
However, before 2008, the fast food brand’s earning power levels never reached UAFRS-based returns of above 10%, which is in line with US corporate averages. The culprit for this is the same in the case of BMW: Substitutes.
Sure, McDonald’s has a range of meals and snacks that people love, but so do Burger King, Wendy’s, Subway, Chipotle, etc. This shows that even when McDonald’s closes its stores worldwide, consumers wouldn’t go hungry because there are still lots of options to choose from.
- Meanwhile, IBM was known for manufacturing better laptops in the market. Its desktops had also been considered as innovative, high-quality products. However, the company still lost hundreds of millions in its personal computing division.
Why?
It’s because there was nothing truly new in the brand’s offerings and business model! Compare that in the case of Dell…
Aside from focusing on manufacturing innovative, high-quality laptops and desktops, Dell paid attention to how it conducts business with its customers. It saw the need for a unique computer production and delivery system and so it created mass customization in a direct-to-consumer business model.
This framework enabled Dell to fulfill customers’ needs for choice and flexibility in building the device they wanted. Because of that, the company produced earning power levels in excess of 20%.
These case studies clearly show that it’s not enough to just produce great offerings. To truly succeed and fulfill otherwise unmet customer needs, brands and businesses must identify the exact, real need and use unique strategies to address it.
There are also times when some firms with the highest revenues and cash flow returns are those that have created a series of offerings that target great pains felt by customers.
Examples:
- Pharmaceutical and medical device companies like Pfizer and Medtronic have provided treatments for immediate sicknesses. Because of these, the relief of pains from illnesses commands value-based prices and generates high cash flow returns.
- Job hunting firms like Robert Half have shown high earning power as it offered work to those who either don’t have a job, can’t wait to leave their current one, or desire higher compensation and better opportunities.
- Payroll servicing firms such as Paychex have allowed businesses to not be bogged down with lots of payroll and administrative functions, which can take a lot of valuable time in a day. By helping payroll officers gain an hour or two in a day, Paychex is able to create value-based prices for its services.
These examples show that sometimes, customers’ needs come in the form of pain… and by targeting these pain points, the companies mentioned above are able to generate high cash flow returns and stand out from their competitors!
Being Different is just a By-Product
One of the things we mentioned in our past articles about RDS’ Tenet Two is that being different is NOT—and SHOULDN’T be—core to a business’ strategy.
Brands can’t be different just for the sake of being different; it’s only a by-product of having done everything else right.
As Professor Litman and Dr. Frigo said, a firm that fulfills otherwise unmet customer needs is a naturally different firm. Having a goal of being different for its own sake could also lead to bankruptcy. In that case, it would be better to be like everyone else and still be in business than be different and be bankrupt.
Note: While it’s true that high-performing firms have distinctly different strategies, several companies that failed and went bankrupt also displayed a certain form of uniqueness.
… but because their goals weren’t properly defined and aligned with their strategies, they didn’t survive in an ever-changing business landscape.
The bottom line?
Great businesses do not dwell so much on wealth itself, but on their intention for wealth at the outset. They redefine competitive analysis along these lines and align their organizational processes alongside real customer needs.
As a result, consumers willingly pay for offerings in ways that create profitable businesses. This in turn makes up the high earning power levels of high-performing firms.
We hope you’ll keep these return-driven insights in mind!
Remember that real social good comes from wealth-creating businesses. A robust financial state is merely society’s reward to a firm for fulfilling unmet customer needs.
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Tuesdays: Return Driven Strategy”
In the book, “Driven,” authors Professor Joel Litman and Dr. Mark L. Frigo said that the goal of every long-term successful business strategy should incorporate the combined necessity of “making the world a better place” and “getting wealthy.”
That is why they created Return Driven Strategy and Career Driven Strategy―frameworks that were built to help leaders and professionals plan and evaluate businesses so they can also help others achieve their organizational goals and career goals.
The frameworks describe the plans and actions that drive returns for anyone in an organization such as independent contractors, marketers, brand managers, communicators, and other people in any field. These actions lead to the creation of wealth and value for customers, employees, shareholders, and the society.
Every Tuesday, we’ll highlight case studies, business strategies, tips, and insights related to Return Driven Strategy and Career Driven Strategy.
In planning, building, or managing brands and businesses, these strategies, case studies, and guidelines will help you choose what specific actions to take and when to take them.
Hope you found this week’s insights interesting and helpful.
Stay tuned for next Tuesday’s “Return Driven Strategy!”
Cheers,
Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
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