Why your customers by from you and not your competitors is a key strategic marketing question that is harder to answer than ever before.The competitive landscape has changed and commoditisation of products and services has given rise to the focus on customer retention and differentiation based on the “how you provide a service or product”.The shift away from an industrial, upstream model toward a customer-centric one has been under way for some time now. Niraj Dawar argues in his new book Tilt that most companies still look for competitive advantage where it used to be: through activities related to products and new product creation. But today’s advantage comes from interactions of a different sort—those you have with your customers. Companies that recognize and move on this shift win.
Key strategic questions that I earmarked in reading Tilt by Niraj Dawar are as follows:
1. Why do your customers choose you? Make sure it is not table stakes.
2. What business are you in? What business do your customers think you are in? How have they defined you? The answer you give to this question is predictive of how you see your business strategy
3. How is profitability measured? By customer or by volume?
4. Where do you spend most of your effort and energy? – on the service or product you sell or on understanding your customers and consistently delivering value to them by asking one fundamental question: What else do our customers need?
“Today manufactures can replicate the looks and feel of an innovative product and print it to market for a fraction of the price, in a fraction of the time it use to take. Even Nike and HP manufacture their products in Asia.” Tilt pg 178
5. How can we take what we know about our customers and provide value in different ways:
- How we distribute a product: Nespresso
- How we store a product: iTunes
- How a product or service is delivered: Audible, Spotify
- How a product is consumed: Coles new ready made meals
- How we dispose of a product or service: eBay
Niraj states the value equasion is VALUE= WHAT+HOW
6. How close are we to our customers and understanding them? If you sell through a channel that is made harder. Nespresso had the Nespresso club to sell direct first which gave them invaluable data on who their customers around who buys their coffee and at what price. They changed the coffee making market by understanding the pain of getting out of bed and getting dressed on a Saturday morning to stand in line and pay $4 for a espresso and risking that they are closed or run out of stock. Kodak didn’t understand their customers and so focused on a need that was surpassed.
7. Do you focus on scale or scope? Niraj makes the comment that it is not how many widgets you sell but how you deliver on the needs your customers have and scope your deliverables around that. What are the costs and risks they face in doing business with you? How can you eliminate these? How do you make it easy for your customers to choose you?
“Businesses rarely pay enough attention to customer costs and risks because these aspects of a transaction tend to be invisible to a sell too.”Tilt g806
This is where strategic service design can uncover those opportunities and create a competitive advantage that is hard to replicate.
Listen to my podcast with Niraj here:
Video on Tilt strategy