Posts Tagged ‘demand’

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!

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.

Branding – Get the mix right!

by Laura Lowell on October 8, 2009

get the mix rightConstructing the optimal mix is part art and part science.  The art lies in understanding the nuances between the different marketing vehicles, how to craft copy tailored to the marketing vehicle, and how to combine copy with creative for the optimal impact. The science lies in the measurement and tracking of the effectiveness of various vehicles at delivering your message to the target audience in the context of the stated communications objectives.

There are two pieces of information that directly inform how we create the marketing mix.

  1. How does our target customer gather information? : Who do they go to for recommendations?  Do they search online or do they ask for suggestions from colleagues, friends or family?  Who influences the purchasing process?  Answers to these questions help us to target the influencers as well as the target customers.
  2. How does our target customer want to receive information? : Do they want a lot of detail but not very often?  Do they prefer to get more frequent information with less detail?  Do they like phone, email or old-fashioned paper and envelopes?  Again, this information will directly impact the types of marketing vehicles we invest in.

Marketing vehicles have a defined purpose and should be used according to the stated communication objectives.  The following is a summary of the primary marketing vehicles, definitions, purpose described in terms of awareness, demand generation or lead conversion, and examples of each.  This is not an exhaustive list, but is a great start.

Awareness:  Ensure that customers know you exist – eyes and ears

Demand Generation:  Attracting customers to your products/services – call, click or visit

Lead Conversion:  Converting prospects to revenue – customers

Marketing Vehicle Definition Purpose Examples
Advertising Mass communications that broaden perceptions. Awareness

Lead Generation

Broadcast (TV, radio), Print  (newspaper, magazine), Online (banner ads, site ads)
Collateral &  Sales Tools Material describing a product, service, or solution used to support sales and marketing efforts. Demand Generation Brochure, card/flyer, catalog, cover letter, envelope, datasheet, folder, binder, video, presentation, promotional item, poster, banner, magazine, newsletter, competitive brief, instant reference guide, order and configuration guide.
Customer Testimonials Customer endorsements illustrating the impact of the company product, service or solution. Demand Generation

Lead Conversion

Quotes, case studies, success stories, references, speaking engagements.
Direct Marketing A method of contacting individual customers directly and obtaining their responses. Lead Conversion Direct mail, telemarketing, addressable media.
Event An in-person or online occurrence designed to increase awareness, accelerate sales, and build relationships. Awareness Tradeshow, road show, seminar, conference, hospitality, executive briefing, webinar, online seminar.
Incentives Providing equipment, discount or rebates to entice customers to try and/or purchase products, services or solutions. Lead Conversion Demo equipment, evaluation and trade-in, free sample or trial, mail-in or instant rebate or gift with purchase.
Internal Communications Use of any marketing vehicle to keep employees informed. Awareness Broadcast/webcast, leadership meetings, internal websites, newsletters, webinars, etc.
Internet Marketing The use of the internet to promote, advertise and sell goods and services. Awareness

Demand Generation

Lead Conversion

Websites, pay-per-click advertising, banners, e-mail marketing, search engine marketing, search engine optimization, blogs, webcasts, podcasts.
Co-Marketing Funds and tools provided to partners to enable them to execute specific marketing strategies and tactics on behalf of the company. Awareness

Demand Generation

Affinity marketing, affiliate marketing, lead generation, co-op marketing, channel incentives, partner compensation (SPIF)
Market Research Research undertaken with the purpose on increasing understanding of markets, customers, competition, design and positioning of products, services, or solutions. Demand Generation Primary, secondary, syndicated, campaign testing, ad testing, competitive benchmarking.
Merchandising Materials created and displayed in retail locations for the purpose of affecting product selection and purchase. Lead Conversion Brochure, demo, samples, lugon, highlighter, posters, banners, rebate, selection guides, tear pads.
Packaging The physical material used to contain product including materials on-box or in-box designed to improve the customer experience. Lead Conversion Physical packages, inserts, literature, software, stickers, illustrations, installation guides, user manuals.
Public Relations Activities that focus on industry influencers to establish the public image of the company and its products, services or solutions. Awareness

Demand Generation

Press releases, endorsements, article placement, interviews, news conference, press tour, press kits, media briefings, product reviews, 3rd party releases, speaker’s bureau, white paper placement.
Viral Marketing Activities that use pre-existing social networks to produce increases in brand awareness, through self-replicating viral processes, analogous to the spread of pathological and computer viruses. Awareness

Demand Generation

Word-of-mouth with online enhancements, blogs, audio and/or video clips, flash, games, advergames, etc.