Posts Tagged ‘attachment’

Two factors comprise the market potential for any product or service – demand and attachment.  Demand is about quantity – how many people want what you sell.  Attachment is about quality, how much do people want what you sell.

There are some products and services for which there is obvious demand.  For example, almost everyone needs a grocery store, a cell phone and the occasional cup of coffee. Universal demand creates extraordinary opportunity.  But universal demand also spawns burgeoning supply and intense competition.  The harsh reality is, in virtually every sector, supply exceeds demand in a way that isn’t cyclical.  We’ve crashed full speed, head first into a world where we have more stuff to sell than people want to buy.  And yet, a number of companies in highly contested categories are growing dramatically, even exponentially.  How do they do that? What’s their secret?

Attachment

Their secret is attachment.  Attachment is about how much your prospects and customers value the product or service you provide.  It’s about the extent to which you improve their lives.  And at the highest level, it’s about how your product or service defines or supports your customer’s aspiration and self-image.

There are five fundamental value platforms – what you might think of as the five basic reasons that any customer is motivated to make any purchase.  They are:

• Price/Value
• Location/Convenience
• Quality/Functionality
• Style/Status
• Experience/Lifestyle

The platforms of Price/Value and Location/Convenience are rational platforms and very seldom create much attachment.  If a Walmart customer discovers that Target has a lower price on laundry detergent this week, that Walmart customer will probably hot-foot it over to Target and load up.  She’s not attached to Walmart, she’s attached to the low price, which is relatively easy to replicate.

At the other end of the spectrum, a Nordstrom’s shopper who is motivated by Style/Status or Experience/Lifestyle is unlikely to darken the door of JC Penney, even if JC Penney has the same item at a lower price.  Style/Status and Experience/Lifestyle are emotional platforms.  They have the potential to invoke powerful feelings and create strong attachment which are almost impossible to replicate.

Effect of Attachment

Let’s think about the effect of attachment in one of the categories with universal demand, grocery stores.  Have you ever met a customer of Trader Joe’s?  They are borderline rabid.  Given half a chance, they’ll regale you (endlessly) of their Trader Joe’s favorites:  Two Buck Chuck, Green Papaya Salad, Mango Butter or Chili Feta.  To say these folks are attached to Trader Joe’s might be the understatement of the century.  And that attachment translates directly into revenue.  Think about this:  According to Fortune Magazine, Trader Joe’s averages $1,750.00 per square foot in sales.  That’s more than double the sales per square foot of competitor, Whole Foods Market.

Now let’s turn our attention ro cell phones.  Ever try to pry an iPhone out of the hands of an Apple fanatic?  That’s attachment in every sense of the word, attachment that has led to astonishing growth for Apple.  Since being released in 2007, well over 100 million iPhones have been sold and Apple has become the most valuable tech company on the planet.

Attachment means your product has become an essential, even indispensable, part of your customer’s life.  When that happens, you have a shot at exponential growth that few can match with, let alone surpass!

—

Tagged as: active garage, attachment, convenience, demand, experience, Good business great life, Jack Hayhow, lifestyle, location, price, status, style, supply, target, trader joes, value, walmart, whole foods

Many people assume that most any business can become a big business.  But if that’s true, why is it that 95% of all businesses in the United States never reach a million bucks in annual sales?

Surprising as it may be, most businesses simply don’t have what it takes to grow significantly.  In fact, only two or three businesses out of a hundred will ever grow past the Mom & Pop stage – past the owner’s immediate span of control.

If you’re a small business owner with visions of growth, these facts can be a little unnerving, and more than a little disheartening.  What these facts tell us is that if you want your business to grow into a substantial enterprise, you need to do something that roughly 25,000,000 other business owners have been unable to do!

So where do you start?  You start by confronting the brutal facts.  You start with perhaps the most important question a business owner can ask:

Is the market sufficient?

Two factors comprise the market, demand and attachment.

• Demand is about quantity – how many people want what you’re trying to sell.
• Attachment is about quality – how much do people want what you’re trying to sell.

For a business to grow significantly, there must be high demand or strong attachment, preferably both.  Although it’s a little unwieldy, here’s a question that gets to the core of market evaluation:

Do enough people care enough?

Sometimes, the answer is no.  Last year about this time our company released an online service called ReallyEasyHR.  The service provided a complete small company HR program for $30 a month.  It was a great service and a remarkable value.  But guess what?  Nobody cared.  It turns out that small business owners have virtually no interest in spending even a few dollars a month on HR.

I believed ReallyEasyHR was going to be successful.  And I suppose I could berate myself about how wrong I was.  But here’s the thing:  You don’t know how the market will respond until you start trying to make sales.  The hard truth is, until you ask a prospect to fork over some cash, it’s all just guesswork and speculation.

That’s true in small companies like ours and it’s also true in huge, wildly successful organizations.  Not so long ago the brain trust at McDonald’s looked at emerging demographic trends and saw what they thought was an opportunity.  People were living longer and the older adult population was burgeoning.  In response, McDonald’s spent $300 million to develop and launch the Arch Deluxe, a sandwich positioned as “a more sophisticated burger for the adult palate”.  The Arch Deluxe was a complete flop. As it turned out, people didn’t want a sophisticated burger from McDonald’s.  Which just goes to show you that some of the smartest people on the planet can be flat-out wrong when projecting demand.

Demand is one thing your company can’t grow without.  Unless enough people care about the product or service you’re trying to sell – and care enough to go out of their way to buy it – survival is unlikely and growth is impossible.  So here are two important reminders for owners who want to grow their businesses:

1. You won’t know if there’s enough market for your product until you offer that product for sale.
2. There’s a chance you’ve overestimated demand, so don’t go all in.  Make sure you live to fight another day.

In my next article, I’ll offer some thoughts on the other factor of market potential, attachment.

—

Tagged as: A Good business, A great life, active garage, adaptation, attachment, business, Business Strategy, demand, failure, Jack Hayhow, OpusKC, product, success