TILT: Shifting your Strategy from Products to Customers
from Business Leadership Management 05 Dec 13 enhanced by Peter/CXO Wiz4biz
TILT-ing Marketing from Up to Down-stream. Doused with a great deal of prominent examples, Author Niraj Dawar has done an excellent task in getting marketers to “TILT” downstream in order to secure a competitive advantage for themselves in a world of options. Introducing readers to a broad sweep of marketing literature, the Author states his case on why he thinks there is a need for a downstream Tilt.
< Upstream: activities pertaining to product development, production, supply chain management;
> Downstream: activities pertaining to customer after-sales service, customer satisfaction, and distribution.
The Author observes that traditionally, businesses have focused on building competitive advantage in Upstream activities, & Op-in’s, that the new game of building competitive advantage must now “Tilt” downstream and this shift will have “profound implications for strategy and the way businesses are measured, monitored, and managed”.
An Explosive Example: ask “What business are we in?” is the one on the explosives company ICI. As all of its competitors defined their business as “explosives” manufacturers, they failed to differentiate themselves well and continued to compete fiercely on price, tightening margins & creating a downward spiral for the entire industry. When ICI took a step back to examine its product offering, it realized that its business was not in explosives per se but a service that it could provide to its customers. As ICI had the data on blowing up rocks to exact specs and since its customers were seeking to obtain rocks at exact specs by blowing them up, ICI decided that it would bill them based on the outcome (blown up rocks in the exact specs) rather than selling them explosives per se. This dramatically altered the game in their favor.
Building an un-Breakable Brand. Perhaps the paragraph that sums up everything that the Author says: “The rules of the competitive playing field determine how brands compete for the consumers’ consideration, choice, & loyalty. To break into the consideration set, your brand must meet the cutoff on the key criteria that customers use. If the criteria is unique to your brand or the cutoff is so high that only your brand makes it into the consideration set, you minimize competition by limiting the brands that enter the set. If you can persuade large numbers of customers to use the unique or high bar, you have a winning combination of a large segment and few competitors. If you enter the consideration set along with other brands, your competitive objective is to maximize your chances of being selected for purchase from within the set. You do this by maximizing the relative exchange rate between your brand’s key positioning criteria and those of your competitors—by increasing the importance of your criteria relative to the competitors’ criteria for as many customers as possible.”
The Good Stuff to adopt. The Author articulates his thoughts clearly into bite-sized paragraphs that make it easy for readers to connect with his points. I personally like the manner in which he clearly phrases questions for reflection both within the chapters and also at the end. For example, he asks three sets of questions to help C-suite executives locate their business’s center of gravity:
1. Where is the greatest burden of your fixed costs? Is it in your factory, in your R&D, or in activities related to customer acquisition, retention, & satisfaction?
2. Which of your activities do your customers most value? Which activities are they most likely to pay a premium for? Which ones are the reasons for their loyalty? Where do these activities reside on the upstream-downstream spectrum?
3. Where along the spectrum does your competitive advantage lie? What about your enduring differentiation?
The Bad Stuff to avoid. Some of the points that he makes, need to be reinforced with examples immediately to help readers solidify some of by their own thoughts on the issues. “Competitors are quicker to replicate, neutralize, & commoditize Upstream competitive advantage than they are to do the same thing with Downstream advantage”
Comments: What are your thoughts on Upside vs Downside activities?