It’s the customer, stupid….

On 29th March 2004, I had given a talk in our college to lecturers from various colleges in Kerala.
Since the presentation is still fresh in my mind I thought I’ll put up the notes here. It was all about marketing… which in short is all about the customer.

First, I’ll write about the books and sites I referred to. Please note most of the ideas of this presentation is not mine and neither do I make any such claims.
The core of the presentation was from a book “customers.com” by Patricia Seybold. It is an excellent book and one must read it. Most of my presentation is around this book (or rather shamelessly copied from this book)  basically because it is one of the best marketing books I have ever read.
The other book from which I took a lot of material is “The Innovator’s Dilemma” by Clayton Christensen. This is a wonderful book which describes the concept of disruptive innovation. 
Both the above books are a must read and I would encourage everybody to buy and read these. My wife got me “The Innovator’s Dilemma” for Valentines this year. She also got me “The Innovator’s Solution”.  
The last part of the presentation was taken from MIT’s opencourseware . This is one site where many of us can spend a lot of time learning.
I took some material from Sloan School of Management course on Marketing Strategy
Instead of uploading the presentation separating and writing the notes here I think I’ll just put in the presentation here and write the notes along with it. So here we go…

Secret of a successful e-business
It’s the customer, stupid.

It can’t be said in a more simple manner than this. Any business is all about the customer. There is no business for you to be in business without the customer. So take good care of the customers, else the competitor would.

Overview

  • Disruptive Innovation
  • 5 steps to success in electronic commerce
  • 8 Critical success factors
  • Marketing Strategy

These were the topics I spoke about. First I introduced the concept of being disruptive which is the essence of success for any organization.
Then I spoke about how to run a successful e-business and finally I wrapped it up with what a marketing strategy is.

Disruptive Innovation

  • Disruptive innovation in an industry always creates new markets and new net growth.
  • Disruption creates net growth in the form of new markets and customers long before it directly encroaches on an established business.

Examples from many industries, both recent and decades old, show how new entrants did not start out as competition to the established players; they were serving customers who could find nothing acceptable in the established market. Only as the newcomers moved upmarket did they create problems for the incumbent companies.

Three phases
Disruption actually develops in three distinct phases.

  • The innovation creates a new, noncompetitive market independent of the established business.
  • The new market expands and slows the growth of the established business.
  • The disruptive innovation, having improved greatly over time, significantly reduces the size of the old market.
Sustenance Innovation
Tries to retain market position

For those who have not understood the concept as yet. Let me explain in more detail. Consider my company Poornam. We are a small company with about 100 odd people. Our servers run on FreeBSD and we require a good backup system. At present we mirror the data  on harddisks and take a copy with on a CD. A more refined approach would be a product like what HP , IBM etc. offer. However all the products are very expensive and does not make sense for us to buy it. Also, these products all talk about data backup of about 100+GB per day. Not something which is of interest to us. If there was a product which was priced a lot lower than these products and has a data backup of about 10GB per day it would be great for us. The moment a manufacturer makes it, it would be disruptive. He would not cater to the present large corporates however, he’ll be creating a market for smaller corporates. Slowly his product improves and with time eats away the market of the present leaders. This is how all industries work and this basic concept is referred to as disruptive innovation by Clayton Christensen.

Disruptive innovators do not see past stats. They focus on purely the customer needs. Intel , Sony are some companies which believe and spend a lot of money on disruptive innovation. Who knew the market size of walkman before it was invented. The centrino is another good example of disruptive innovation. It runs at a slower speed but it is light , does not heat up and needs lesser power.

In India one good example of disruption would be the “Reliance India Mobile”. Reliance had everything going for them when they first launched their services. However, it never took off the way they wanted it. Then came the offer of leasing phones at just Rs 300 a month (about $8) and an initial payment of Rs 501 (about $12). This really changed the game completely. Auto drivers, fishermen , vegetable hawkers etc. all took mobiles and the mobile penetration is India became very deep. India today is one of the cheapest places for mobiles in the world.

Sustenance Innovation is what most of us practice. We go with the past figures and try to improve on it. It has lesser risks involved but does not make any significant improvement on the products or services that a group offers.

I personally have a slightly different view about these concepts. I like to see these more as a part of a product life cycle than being disruptive. I maybe wrong but I guess this is how most software engineers would see.

Every technology goes through three stages: first a crudely simple and quite unsatisfactory gadget; second, an enormously complicated group of gadgets designed to overcome the shortcomings of the original and achieving thereby somewhat satisfactory performance through extremely complex compromise; third, a final proper design therefrom.

Every product at some stage reaches it’s maximum potential. that is when a newer technology takes over. Consider this, some time back the best way to connect to the net was dial up. The phone lines have it’s limitations but I always thought that we’ll keep on making faster modems which we did for some time. But then the limitation was apparent to all and finally we had to look at other media  and technologies. Enter broadband and the problems were solved.

Anyway, I’ll now go back to the slides or else I may end up writing a book on this. :)

Benefits of e-business

  • Increase customer loyalty
  • Increase Profitability
  • Decrease time-to-market for new products
  • Reach your customers in the most cost effective way with targeted offers
  • Reduce your costs per transaction substantially
  • Reduce your customer services costs dramatically
  • Reduce customer service time
How to create a profitable Electronic Business Strategy
5 Steps to Success in e-commerce

  • Make it easy for customers to do business with you
  • Focus on the end customer for your products and Services
  • Redesign your customer-facing business process from the end customer’s point of view
  • Design a comprehensive electronic business architecture
  • Foster Customer loyalty
 Make it easy for customers to do business with you
  • Don’t waste our time!
  • Remember who we are !
  • Make it easy for us to order and procure service !
  • Make sure your service delights us!
  • Customize your products and service for me!
Redesign your customer-facing business process from the end customer’s point of view
Redesign Processes from the Outside-in.
Old Thinking –

  • Streamline business process
  • Re engineer business to make it cost effective

Most import piece of the equation was missing
The end customer

New Thinking

  • Customer is the king
  • Optimize processes to make it easier for the customer
Foster Customer loyalty
Why ?

  • Base Revenue – Revenue you receive from a given transaction , regardless of customer relationship or loyalty or product discounts. Longer the period , more the revenue
  • Growth – Customer may like the product and buy more
  • Referral – Satisfied customers refer friends
  • Price premium – Loyal customers are ready to pay more

8 Critical Success Factors

  • Target the right customers
  • Own the customers total experience
  • Streamline business process that impact the customer
  • Provide a 360-Degree view of the customer relationship
  • Let customers help themselves
  • Help customers do their job
  • Deliver Personalized Service
  • Foster community

These points are taken straight from the book and I have made no modifications either. Basically because Patricia writes very well and I felt people should see these points and buy the book and read it. It makes sense for everybody not just business owners.

Having said all this I went on to talk about Colleges. After all the group I was talking to were teachers from various engineering colleges in Kerala. I wanted them to think in a disruptive manner. I wanted them to understand that their customers are students and they need to compete in the global market.
All the universities in the US today have gone global. They all have online classes which makes their target group much larger. These are all examples of disruption. MIT’s opencourseware is an example of disruption.
On the other hand the Indian Universities are still far behind. Our politicians are more keen on fee cuts than on thinking global.
Take a look at  The Business Education Commission Surveys best B-schools in Asia.  The best is the Melbourne Business School. Indian IIM’s are also there. The table had some interesting figures on the Fees, Starting salary, Work experience,  Age , Foreign students and Male/Female ratio.
Here’s how the Indian B-schools are –

  • Lowest Fees
  • Lowest Salary
  • Minimum Work Experience
  • Lowest Average Age
  • Minimum Foreign Students
  • Worst Men/Women Ratio.

I do look like a guy who is complaining about the system and who is thinking negative. But please note that I do not blame the school as such for things like poor male/female ratio or average age. However, it would be good if they start thinking global.
Most of our parents studied in Govt. schools. But because the government schools never kept up with times, they slowly died. I would not like to see my college face the same fate.

Finally, I concluded the presentation with Marketing Strategy.

What Is Marketing Strategy?
What is Marketing Strategy?

  • Finding Profit Opportunities
  • Creating Competitive Advantage
  • Challenging Competitive Advantage
  • Creating Corporate Advantage

Go back in circles

Marketing Strategy – 1960’s Style

  •  Identifying customer needs
  • Designing products to satisfy needs
    • Only functionality is checked
  • Choose 4 P’s for monopoly advantage
    • product
    • price
    • place
    • promotion.

Marketing Strategy – 2000+

  • Identifying needs and resources
  • Designing products to create value
  • Choose efficient selling formats

How can a firm earn sustained, superior returns?

  • Create value
  • Capture value
  • Continue to do this

A Marketing Strategy is an integrated set of choices about
how we will create and capture value, over long periods of
time.
   

Conclusion
If you ask young men what they want to accomplish by the time they are 40, the answers you get fall into two distinct categories.  There are those – the great majority – who will respond in terms of what they want to have.  This is especially true of  graduate students of business administration.  There are some men, however, who will answer in terms of the kind of men they hope to be.  These are the only ones who have a clear idea of where they are going.

The same is true of companies.  For far too many companies, what little thinking goes on about the future is done primarily in money terms.  There is nothing wrong with financial planning.  Most companies should do more of it.  But there is a basic fallacy in confusing a financial plan with thinking about the kind of company you want yours to become. 

It is like saying, “When I’m 40, I’m going to be rich.”  It leaves too many basic questions unanswered.  Rich in what way?  Rich doing what?

 

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