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Value and Honor Individual Preferences to Build a More Profitable Business Model

By Donald Mitchell

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Published: 02May2008
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Think about something you buy all of the time. Imagine how you would change that offering if you had complete control over what was delivered. The result would look a lot different, wouldn't it? Your customers feel the same way, as do their customers, and so on.

Let's expand on the idea of individualizing what you offer. This is an important subject, and one where you have many pleasant and unpleasant surprises ahead of you. To begin with, you probably don't know what choices each potential customer wants.

Market research results will often tell you which percentage of the market favors various options. Better market research may even segment the market, and tell you preferences by segment.

Be wary though of the answers because both approaches can be very misleading for identifying the right new benefit choices to add.

Let's look at the information a different way. Segment your customers to find those where you should earn a higher profit margin than any of your competitors in serving the total account. Then, consider one-by-one how you could add valuable benefits to each of these customers.

The best way to do this is to spend time observing how they and their customers (and so forth on to the final user) engage and respond to your products and services. Then follow up on your observations by discussing what you learned with those you observed and asking them about what else is important to that customer which you have not yet observed. Your expressed sensitivity to their problems will help them dredge up deeply buried resentments and problems that they have repressed because they assume you will do nothing to help them.

Why start with those where you can earn a higher profit margin than competitors?

First, because you will be more eager and interested in finding new benefits for them.

Second, you are more likely to be willing to create customer-specific solutions for them (which all of your potential customers may also need).

Third, the potential rewards for your company from adding these benefits are large. As such, your successful experiments will add more resources that you may need to change to a better business model.

After you have done all you can do with this set of customers, then look at the customers (one-by-one again) where your total account profit margin will be similar to the most effective competitor in supplying or helping that account. Follow the same process, except to discuss and offer to add improvements that you have identified from your first experiences.

Having examined these two groups, you then need to begin thinking about how each of these benefits can be customized to reflect what individual customers need. Rather than giving each new benefit to all customers (whether they need or value the benefit, or not), how can you change your business model to provide just the right mix of new benefits that the customer wants and needs? Notice that in many cases this may include doing less than you do now in some areas for certain customers.

Consider Dell Computer. Each corporate account can have a separate on-line profile that tells Dell what configurations of hardware and software the company wants. The profile for each customer is different, and is based on interactions with the customer.

When a person at a customer account orders a piece of equipment (whether a server or a personal computer), that equipment will come preloaded with just the capabilities and software that are needed to work best for that company without any further activity by the Information Technology staff. This compatibility across all the equipment allows all the tasks to run faster and more reliably for their intended purposes in a given application.

How can your business model go from providing consistent potential benefits to all customers to tailoring those benefits specifically to individual customers and sell at today's prices? The odds are pretty good that you can, because many people don't want expensive-to-provide aspects of your current offerings.

At the same time, others would be willing to pay a premium for the same aspects. The cost of getting and responding to the right information for what to provide should be a lot less than the cost of providing the wrong combinations of aspects for almost every customer. Many contract manufacturers and outsourced service suppliers have the skill and experience to help you put processes in place to fulfill these individual needs, if you find the challenge insuperable.

Copyright 2008 Donald W. Mitchell, All Rights Reserved

Donald Mitchell is chairman of Mitchell and Company, a strategy and financial consulting firm in Weston, MA. He is coauthor of seven books including Adventures of an Optimist, The 2,000 Percent Solution, and The Ultimate Competitive Advantage. You can find free tips for accomplishing 20 times more by registering at: www.2000percentsolution.com

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