Do You Have a Business Model Strategy – or a Marketing Tap Dance?
Recently I wrote about the necessity of working out branding strategy before starting a marketing program. But there’s another step that must come ahead of branding – defining a business model strategy.
Client Kay Plantes is an authority on the topic. I just started reading her book (co-authored by Robert Frinfrock) Beyond Price, a fascinating exploration of business model innovation. Early on, she makes these incredible observations about the relationship between business model strategy and marketing.
“Advertising and other communication positioning, however, is not strategic differentiation. Ad agencies (a.k.a. branding consulting professionals and communications firms) will help you tell your story well, but they are unlikely to teach you what you have to do to create that story in the first place. Communication positioning is to strategic differentiation what painting a house is to its design and construction. No matter how great the paint job, it cannot hide the flaws of a home that is poorly designed and constructed or faces a crumbling foundation because the earth changed underneath it.
“Worse, the ad agency working with your marketing department may identify differentiated features and associated benefits and lead you to think you have escaped the quicksand of commodity competition. …”
Business Model Strategy is Vital for Customer Retention
Business Model Innovation Drives Growth
In the long run, a marketing campaign, no matter how clever, is basically a smoke and mirrors act without business model differentiation. Customers may come, but they will quickly depart for a less expensive competitor making similar promises. In the same way, a well optimized web site might bring lots of traffic, but unless the site is well designed and communicates value, visitors will leave as quickly as they came. (That’s why our Writing for the Web courses focus on human and search engine writing technique.)
Bottom line – Marketing attracts customers, branding secures customers, but it is business model innovation that retains customers.
Why am I, a marketer, telling you this? Because I want your marketing to work. Absent underlying value, advertising and marketing efforts, no matter how well executed, are destined to fail. This is true now more than ever. Thanks to the social web, customers can share their product and service experiences with thousands of people at lightning speed. False claims and empty claims can be exposed in an instant.
Over to You
What’s behind your marketing materials? Do you merely claim to be different, or are you different?
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Absolutely. Violently Agree with Kay and you.
I’ve worked on both the product development and marketing communication sides of the coin and the most difficult meetings I ever had on the communications side is when I had to keep asking, over and over, ‘what’s different here about the product.’ Truth is, it is usually harder to make your product or service different than it is to say it is different.
Fred, Kay might say (if I follow her drift) that it’s not enough to be different – you have to be different in a way that is meaningful to customers. The latter is the really tricky part, don’t you think?
Thanks Brad for the book plug and you have picked out in your blog entry and reactions to Fred one the the key conclusions about learning to complete beyond price. Furthermore, because is’s gotten so easy to copy products and services, you have to think in your business model strategy about what’s different about your entire offering e.g., all of Apple’s products save me time and reduce frustration. Winning companies no longer have the best products, they have the best foundation on which all their products rest. I think this is why Google is getting into Microsoft’s market space — a worry that search might have to be wrapped in other stuff for it to be successful longer term. That seems SO far off today, but maybe not given the speed of technological change. E.G., in the notebooks or on our cell phones, search and operating systems may be much more successful if they are part and parcel of the same solutions.
Brad – Much better way of saying it and more along the lines that I meant. Thanks.
Thanks for this post. It certainly seems that in this day of never-ending marketing opportunities, less attention has been paid to Business Model Innovation. However a lot digging needs to occur in order for a company to understand how precisely to innovate itself. We are currently interested in understanding the unique DNA of a company, doing that deep-digging, so that it’s easier for a company to take the next steps towards innovation.
The Business Genome comment is really insightful. It takes deep digging to understand what is or could be the unique, hard to copy advantages underlying a company’s business model. At the same time, it takes a market understanding process as strong as the financial understanding process (i.e.,–the acquisition,interpretation and use of information in decisions)to know how to best deploy that advantage in a way that is meaningful for the target markets. When leaders fail to understand advantage or what Bill Welter’s calls their external “ecosystem,” more and more of the offering becomes commodity-like. Kay
Thanks, experts, for sharing your insights. Now that I have your attention, let me ask this – is it easier to innovate in a sector characterized by innovation(e.g., technology), or in a sector that moves more slowly (e.g., packaging)?
Great question. Depends a lot of the stage of the new technology. Early on it’s about proof that the technology works in its initial applications. A race to be first. Then, it’s all about ease of use with different companies vying to be the standard. The easy stage is when lots of new markets are opening up and leaders can pick different spaces to excel in, each requiring different applications. This is also, however, the stage when technology companies can come head-up against larger, better funded “channel leaders,” who often end up buying the technology company. With maturing, margins decline as commoditization-pressures pick up, making it harder to generate funds for differentiation. But oftentimes the competition is a lot sleepier, giving an edge to a company willing to redefine itself.
These are all gross-characterizations with each market/technology being different. But if you are in a mature category, don’t assume it’s hopeless. Just be willing to rethink what business you are really in. Apple is a great example–each new technology/product added value to its existing products as they work well in a “suite,” saving users time and frustration.
Thanks, Kay. That makes a lot of sense. Obviously organizations need to understand innovation within their industry before they can develop a winning strategy. I wonder how many have that type of understanding.
Brad,
This is absolute plain and simple common sense and Kaye puts it brilliantly in the quote to which you refer in your discussion.
Success in any realm of life is about getting first getting the basics right. In almost any form of business, the basic fundamentals involve:
(1) finding the right range of products or services (those which add a substantial amount of value to the lives of your prospective clientele, and which your firm is able to produce or deliver on a consistent, reliable and cost effective basis); and
(2) putting in place the processes and systems (i.e. supply chain, distribution, infrastructure and facilities, information systems etc.) to enable your firm to deliver consistent performance and output to your customers in a way which is either better or more cost effective than what your competitors are able to deliver.
Regardless of how slick their marketing effort is (and I am not for one second suggesting that the importance of effective marketing strategies can be overstated), firms which are not getting things right at this simple basic level and are not able to deliver performance which meets customer expectations on a consistent basis are going to have a mighty hard time generating a great deal of success from their marketing activities.
But in the case of firms who get their basics right, the flow of testimonials and referrals from which they will no doubt benefit can be expected to make life a whole lot easier for their marketing personnel out there in the marketplace.
Andrew, We are in violent agreement. From a marketer’s perspective, putting together a slick campaign when the underlying product/service does not fit your (1) point is what gives our profession a bad reputation and undermines long term results for the client. It’s a syndrome that really must be avoided at all cost.