The problem is that a Leadership body too closely allied to a particular iteration of a product or service may need outside assistance with viewing their favored product’s potential in the real market space. An inventor’s emotional bond to his or her product may not mirror the potential clients’ perception of its usefulness, innovation, and/or price. The cost calculations can become bloated by a myopic worldview as well. Obviously, costs and processes accepted as a reality of production during the initial creation (such as NRE) must be reduced and recalculated constantly. Efficiencies in production must be enforced and intellectually questioned (Does it really still take 800 hours? Hasn’t So-and-So gotten any better at this, shouldn’t we be saving time/materials?).
Stagnation (via comfort) with old the costing and pricing methodologies for a product, cultivates to maturity the disadvantage in cost and price between the favored product verses the market space’s other like-products.
The only way to find out if your client has their marker on the right number is to take an earnest (sometimes uncomfortable) look at where they think they are and where others think they are. And then have a discussion with the marketing senior staff to design a campaign move the perception closer to what the firm wants it to be. Marketing is more than making tri-fold brochures and binding BD presentations into spiral notebooks. Intelligent marketing is the singular force for changing perception in any business. Unfortunately, what the bean-counters oft overlook is that just as in a relationship, perception is reality. You will also have to have a Coming to Jesus meeting with the executive and engineering teams and let them know about the delta in their valuation and the market’s valuation to work out what needs to change.
Simpler? You cannot charge $20 for a product that the marketplace thinks is worth $10. It is irrelevant that the true cost may be $18; that’s your fault not the market’s; it’s worth $10 until Marketing convinces the market otherwise.
There are as many ways to solve this problem as there are people experiencing it.
One catch-all solution is trained and experienced leadership coupled with broader communication in all directions. Communication is to modern industry what water is to a plant. You might not notice its presence, but you’ll certainly notice its absence. Leadership is the watering can.
How then? For a true long-term marketing strategy, we have to identify ourselves to ourselves. We have to define the friends and foes. Foes today might need to be friends in 2018, so strategic intelligence and research is critical to make good decisions as early as possible. There are no foes; only tools for success we haven’t leveraged yet (or ones we have over-leveraged in the past).
An exaggerated example of this failure to communicate strategy and identify enemies can be found in Washington D.C..
Naturally, your client’s consequences are far less drastic, but metaphorically no different, since without identifying and communicating objectives they may perish. When your boss perishes, your pay goes with it.
The first thought from the CEO, owner, founder, or Board will be to become a central brand. People don’t ask for a strip of plastic adhesive with clean gauze in the center, they say Band-Aid; a brand name of a strip of plastic adhesives with clean gauze in the center. You don’t get a boo-boo and ask your Mom for a Curad, Elastoplast, or Nexcare; it’s a Band-Aid because Band-Aid is a central brand and the one a general consumer thinks of when they think of that kind of product.
Think soda: a central brand is Coke.
Think cars: a central brand would be Ford or Toyota.
Think airlines: it is American Airlines. Notice here, to insiders centrality may bring Singapore Airlines to mind as a basis for product/service comparison. But true centrality in the marketplace is not determined by insiders. If you asked about an airline in Europe, that marketplace might say Lufthansa or Emerits; so be mindful of the BUS 101 lesson in the difference between market space and marketplace. Your client’s product may have multiple international marketplaces, so the intelligence and marketing will necessarily need to be place specific. Ford learned this when they tried to market the Pinto to men in Portugal (Google it).
Still, whatever the central brand is, it was not coronated by CEOs; the market did it. Interpretation of the message takes place off campus, as it were.
Government Contracts aren’t the same either. Central brands are the basis for comparison to others in that marketPLACE. The U.S. Government marketplace is not the U.S. Civilian marketplace. This is important to understand, particularly in Defense contracts where the reader/buyer will not be an insider like normal civilian industry. He or she will be the person assigned to be the reader/buyer at the time the buy decision needs to be made (and likely was not there at the outset - as billets are 2-4 years long). Not only are these RFP readers and buyers not industry insiders, but they don’t have resume pedigree of parity with their counterparts in industry. That is, the people you are trying to sell your client’s Widget with a Silencer to in the DoD were not raised to their leadership position because they were a really good junior estimators of market force dynamics, knowing the value of widgets, the use of silencers, or of the manufacturing processes needed for their marriage. They were pilots or boat drivers or firemen or cargo handlers, etc… Neither will he or she be promoted out of that job for becoming an expert at saving money, making friends, or lessening process on either end of the deal. They’ll go back to flying or sailing or stacking boxes or being in charge of people who do (or retire). There is a set calendar date for his or her transfer, and they’ll be lauded as an expert in their exit fitness report, no matter what they do, or don’t, buy and not matter the benefit to DoD.
See, statistically, at any given moment, half of the staff is new and the other half is over the hump and on their way out. Half One knows what they are doing, and Half Two are learning from One. Marketing’s job is to get Half One to do the marketing for you (your client) by their telling Half Two that your product is mainstream, part of the trusted group, and affordable. This is why marketing is so critical for injecting a new concepts or companies into the government marketplace. If Half One doesn’t know you, it doesn’t matter how great your Widget plus Silencer concept is, they’ll tell Half Two the trouble it will take to implement “something new,” and you’re sunk. You’ll start over next time when Two is One and you’re trying to convince them of your client’s prowess.
Do not market to personalities; market to markets. Markets stay, people don’t. In the civilian sector, market to personalities and markets.
Sorry for the grim realism. The unfortunate reality of education in marketing is your needing to learn the negative parts in order to better leverage the positive ones. You have to know who you are dealing with so to understand why it’s so expensive and inefficient the land of mixed uniforms and half-day Fridays. But in the government market (unlike B2B) your Marketing campaigns really can quickly change that $10 problem into a $50 profit. You are, not them, the actual subject matter expert at the table (unless you’re dealing with SpecOps, SOCOM, the 160th, and the like. If that’s the case, read my paper on that market first, then find someone who was in that community and take them with you (or don’t go).
To be central in an established market, you must first be somewhat distinctive from the centrally throned competitor to unseat him. The requirement does not mean stark new innovation, a small distinctive quality will do. Better performance, better lines, better feel, better taste, look, reputation, connections, and of course better marketing. Think of the best ad campaign you’ve seen recently – probably wasn’t the product that was distinctive, it was probably the campaign. Distinctive brands, such as Monster Drinks or Tesla may stand out from the crowd but they do not offer direct competition to the central brands.
Toyota was the only U.S. auto retailer to sell over one million cars in 2014; they aren’t talking about Telsa all day. And although Hansen Natural Corp introduced Monster in 2002, and now sells that swill in a dozen varieties in 50+ countries, they aren’t central enough to alert Pepsi Co to worry about them (of course Coca-cola, like Textron Inc. (owners of Bell, Cessna, Beechcraft, Tug, Dixie Chopper etc), makes long-term make-buy decisions over the Smalls, thus Coke bought from Anheuser-Busch, in 2012, the distributor rights for Monster from Colton Life). The future will tell for sure, but since that acquisition Monster’s distribution has increased over 1200%. Centrality is a power position for tertiary market endeavors as well as goal for the first product (Coke – central, helps Monster – off-shoot).
Exempli gratia, CAE Inc. has a 76% world market share of defense flight simulation. They probably don’t spend a great deal of time spying on small businesses that are too distinctive or niche to threaten that global market share. If one of the Smalls gets out of line and tried to move toward centrality in simulation however, CAE would send 30 salvos into their booth at a trade show to gather intelligence and then, quite correctly, shift their market approach in that sector to mitigate the risk to their position as a central (read: go-to) brand. That is how you hold your ground.
Playing King of the Mountain, as it were, takes more than deep funding and charisma; one must have a defined (and well communicated to the troops) strategy and a strong intelligence and marketing staff to press the point.
That said, you will need to make your client identify the key players. ID those players in the current market space that are central brands and evaluate, on an emotionless plane, how they got there and if your client has the stomach to do what it takes to get there too.
The call to ID centrality is the need for an open-forum exercise of the brain-trust you already have on staff about whom and where they are (really are, not think they are) and whom/where they want to be. Input for non-traditional growth has to come from non-traditional sources; polling junior staff and previous customers on your client’s reputation and technology will yield more salient data than a small meeting of its insiders who are already “sure” of it. I found this in a company’s Pink Team Review earlier this year for a massive sale of a tertiary product to a foreign client. The thematic trend of the writing was that the potential buyer would already agree that the source brand was highly desirable and singularly central to the global market. The assumption was made that it was categorically enough to bestow quality on the hopeful product line offered by naming the central brand multiple times. The brand is great, in disclosure, I used to own one. But branding in industry (particularly in the culturally diverse global marketplace) means not only knowing what you mean (and think of yourself), but also what others think of you. There is always more than one truth.
The truth was that the tertiary (offered) brand was too distinctive from the company’s central brand to draw that connection successfully. Therefore the repeated mentioning of it actually diluted the aspirational (innovative) quality of the off-shoot. The leadership was so vested in the factual global perspective of their product that correct intelligence in marketing and discovery were left undone (because they perceived the answer as known). So ID what is truly central and be prepared to deliver the news that your client may not be it.
If getting to centrality is what they want, prepare to explain what they have change to get there. The balance between centrality and distinctiveness is critical. One cannot have conversations about how the brand will be perceived (acceptably priced) without simultaneous regression analysis of the current central brands and what they are able to charge for their products and services.
The price point for the distinctive market is higher than centrality, but for significantly less than total market share (in total sales percentage). E.g. there is an inverse correlation between distinctiveness and sales volume. Porsche: highly distinctive, high price, low volume. Toyota: meh, low price, one million cars.
As Dr. Dawar points out in his research, companies breaking into a new market tend to analyze brand positioning, business line aspirations, and performance separately.
I assert that professional Marketing and Professional Strategic Categorization are not separated parallel roads, but rather the same road with parallel chariot tracks ground into it.
Looking at what is called a Centrality/Distinctiveness Chart (C-D chart) for market space analysis can help bring this together for us with short effort (see below).
Mainstream brands are the ones that come to mind when asked about a broad product line and are also called central brands. They are very central but not very distinctive… it’s a safe place to be until someone comes along with an aspirational (aka. innovative) product or service that moves your placement left toward peripheral (thus the previous “30 salvos”).
Unconventional brands (Tesla cars or Stella beer) are from a niche market strategy and occupy 2-4% of the total market space. This would be Redline to CAE. They have decent product for what and whom it is made for, but not for everyone, and not for CAE customers.
Peripheral brands are the ones that you know are out here but they do not come to mind when you are thinking of a product line. This is a comfort in stagnation market strategy. RC Cola is an example. It has been on that market since 1934 (first as Royal Crown Cola) but hasn’t made much market shift since - even though in 1954 they were the first to sell soda in a can (id est. an aspirational blip).
So it is not enough to be aspirational once and sit still; one must innovate constantly and stay in centrality anyway (3M for example). Still, Coke isn’t talking about RC Cola or sending 30 people to their booth at conventions. Coke’s marketing is king of that domain and RC Cola isn’t invited to the ball.
Knowing that, how would understanding your client’s true centrality or distinctiveness affect their sales volume and price? How does this affect their yearly budget allocation for resourcing intelligence and marketing? Is it in there at all? Did McArthur lead his forces without a big picture plan, a strategy to get there, and a map for the troops? Your role is to provide those three critical (yet overlooked) tools.
Volume. The higher on centrality, the higher on sales volume. Toyota and its 1M cars in 2014 or Budweiser and 30% of a saturated market are examples of high centrality done correctly. You can come to your own conclusions about the sacrifices they made in quality to get there, but they got there. Dr. Dawar’s regression analysis of centrality, given a 10-point scale, shows that a single point increase in centrality resulted in a 200,000 car increase in volume for Toyota last year. 1 point = 200k…
So the pay-off is remarkable for proper investment in marketing and correct brand recognition (think better CSR, seeking feedback, and more Social and Print Media). If you look at the marketing strategy seen in publically available EZ-Go Golf Cars advertisements over the last two years, they appear to be taking advantage of the very appealing opportunity to increase centrality while remaining as a highly distinctive (aka pricey) brand of choice in that sharply competitive market.
Price. Highly distinctive = higher prices (but lower sales). Centrality is negatively correlated with pricing (but awards more sales). You have to be central to control the price; otherwise you are matching a price. My previous research found that the U.S. market for aviation simulation is shrinking in new builds and increasing in sustainment and training. The UAV market is increasing in the U.S. and Canadian market in both devices and sustainment. The global market is increasing for UAV and Aircraft Sims in all areas studied. The UAV demand signal is immediate; the pilot training demand is to the right, but not too far right that we aren’t approaching too late.
A shift in marketing and branding for those wanting in that market may be necessary to position oneself for the 2019 pilot-bubble bursting globally. If is it 2018 and people are still asking who the main players are (and your client is not on the list), they will have not become central enough to eclipse the companies you should now ID as central in that market.
A shift of this nature takes 18-24 months of fulltime effort by a very specific skill-set of people. Find them.
Back to the chart, because I would like everyone to at least momentarily stare at it and try to place yourselves and three competing products on the chart.
The yellow circle is our (hypothetically estimated) impression of Wiss as aspirational (unique, innovative) and nearing centrality (well known and accepted). A residual and untested impression like this might hypothetically be that Wiss is high in distinctiveness and this would result in placement of this product as unique and highly aspiraitonal – thus higher value to the market (as a bigger circle representing a bigger price: $20).
The blue circle would be the notional finding from retrospection and analysis of the marketplace (and space) with current trend in technology and client perspectives. That is, “what do they think?” Here we may find that the consumer finds the Wiss as more peripheral and less central than your client thought. Notice too, the notional research drew a smaller perceived circle as the acceptable value for that device (to the clients: $10 not $20).
If this was the truth, what would we do with that information to increase market share for Wiss? How about manufacturing procedures in design and support? What would ask Marketing to address to shift Wiss to the ideal location on the C-D? And what would you advice they do with pricing? Any service or product could benefit from this ilk of regression analysis – in each market.
Strategic planning and smart marketing are parallel efforts which support each other as do the equal wheels supporting a roman chariot. Research into both, and unguarded introspection among staff, works. Communication and identifying goals works. The allowance for external input (post-RFP hot-wash, post-loss debriefs by client, more time allocation to research, exit interviews, client visits to plant(s), etc) have been found to be a proven solutions for the correct pace, the correct direction, and as corrective guides to planning at all levels of strategic discourse (as well as strategic pricing).
I hope to this week’s research is useful to the success of the team.