To grow means to grow your market. In that sense this entire book is about ways to energize the component market for the growth of your company. In Chapter Six, we looked at the market in its widest sense as co-terminus with society. Every change in society creates new needs and new markets for companies that are quick to perceive their significance and to seize the opportunity. New technologies, new life styles, new laws and political configurations, and new types of organization are social developments with major impact on market opportunities. Companies like Liz Claiborne, Reebok, AMRE, Expeditors International, Gartner Group, P.A.M. and Mesa perceived such changes and converted them into opportunities for rapid growth.
In other chapters we have looked at companies which have grown their markets by implementing values like customer service, quality, and on-time delivery. SAS and Linear Technology are dramatic examples of the power of value implementation to attract customers. These two approaches to the market, one focussed on external changes and the other on internal developments, are important elements of a comprehensive approach to the market.
Our goal is to convert each of the five components of your business into an engine for rapid growth. Many people and companies consider market the most important of the five, yet the one that is least under our control. There is an almost superstitious reverence for the munificent market, which is the provider of all bounty, and an equally superstitious fear of the fickle or despotic market, which takes away as quickly as it gives. "After all," they argue, "businesses are created to meet the demands of the market and to thrive on it. When the market falls, there is not much you can do but hang on and pray for a speedy recovery." On the other hand, today there are many large successful companies that seem to dominate the market and actually command it to do their bidding. They boast, "We create the market. We decide what the customer will have. We provide it and the customer buys."
Both of these views of the market express a partial truth. The market creates businesses and business creates markets. The market is at once something vast and external to a company and at the same time something with which every company is in close and intimate contact. It can be cold and aloof. It can also be warm and embracing. But the relationship is not as one-sided as it may seem. The market is not just an enchanting temptress that leads us along and shares its charms and riches for awhile, before looking elsewhere for its pleasure. It can also be an enchanted lover, true to the core, which seeks after us passionately and clings with everlasting devotion. In this chapter we explore strategies to convert the market into an eternal partner and an engine for endless expansion.
WHAT IS YOUR MARKET?
The market exists at three different levels. Companies relate to the market in three different ways. At the first level, the market consists of a finite number of recognized needs, and companies compete to meet those needs. There is a strong demand for computers, so we make them. There is a widespread demand for fast and convenient food service, so we provide it. This is the basis of niche marketing. Study the existing market and find a segment or subsegment where your company can effectively compete. Niche marketing is effective, because it enables a company to focus on what it it does best. But the niche approach is also limited. It starts and ends with the existing market and tries to maximize gains within the present field. If your company approaches the market from this point of view, its growth is confined to the already established needs of the market.
At the second level, the market consists of needs which exist, but are unrecognized by society and companies, and therefore are unmet. Companies grow by recognizing those unfulfilled needs, creating a general awareness of them and then meeting them. This is what Fred Smith did when he founded Federal Express. He recognized the latent demand for overnight parcel delivery, generated public awareness of the importance of that need, and established a company to meet it.
Vipont Pharmaceuticals has done something similar. It recognized an unmet need in an increasingly health conscious population and created a product to meet that need. Toothpaste is a $1.2 billion a year commodity business, in which dozens of giant suppliers compete with one another for valuable shelf space in supermarkets and drug stores. What chance would a tiny startup toothpaste company have against Goliaths like Procter & Gamble and Colgate? Vipont realized it was fighting against heavy odds in 1981 when it introduced a new toothpaste containing sanguinaria, a natural medicinal compound from the bloodroot plant, which has been proven effective in preventing the formation of oral plaque, a major cause of gum disease that afflicts some 40 million Americans.
When Vipont started, there was very little awareness of the dangers of plaque and no manifest demand for an anti-plaque toothpaste and mouthwash, especially at twice the price of regular brands. Vipont did not enter an existing market at all. It created a new one. Instead of trying to compete on national television against the majors, Vipont chose another strategy. It went directly to dentists and oral hygienists-the ones who knew all about plaque and its dangers-to educate them about the virtues of a sanguinaria-based toothpaste and mouthwash. The strategy worked. The professionals recognized the value of the product and began recommending it to their patients. The awareness they created gave birth to a new market for anti-plaque toothpaste and mouthwash. Vipont has risen on the crest of that emerging market from sales of $12,000 in 1981 to $33.5 million in 1988 and is still growing at 30% a year.
You do not have to be an original thinker or visionary to identify unmet needs. You need an open, curious mind and careful observation. What are the unrecognized needs in your industry? What new dimension or incremental improvement can you add to an existing product or service that will meet a latent need of society or your customers and create a new market that does not now exist?
Not every company can create a new product or a new market. But the third level of market is open to all. There is in every industry a gap between what the market actually needs or wants and what companies perceive it wants. That gap represents fertile untapped ground for any company that can become more conscious of the market's real wants. Even as great a marketing company as Coca-Cola failed to rightly perceive the wants of its customer, when it introduced the new Coke in the mid-1980s. The American automobile industry has become notorious for its blatant inability or unwillingness to really understand what the market wants and to provide it. The gap created by that failure served as an open invitation for invasion by European carmakers in the 1960s and the Japanese in the 1980s.
How do you become conscious of something of which you are unconscious? One simple method is to ask! That is what Ford Motors did about five years ago when it finally realized that the old way of doing business in a comfortable shared monopoly industry was dead. When Ford launched it project to develop the Taurus, it identified and adapted some of the best features found on competitors' cars. Then it did the unthinkable. For the first time, Ford asked customers detailed questions about what they wanted. The company compiled a list of 1,401 customer wants, including apparently insignificant details such as lettering under the hood to help the non-mechanically minded distinguish the radiator from the battery and to know where to put in the oil! More than 700 of these ideas were incorporated in the Taurus and Sable models. Behold the response. Ford sold about half a million of the new models in the very first year. The Taurus went on to become one of the best selling cars in the U.S. for three years in succession. Car and Driver called it "the most agile and capable sedan Detroit has ever produced."24
Closing the gap between what the market wants and what we think it wants is an exercise in objectivity and humility. For many companies, this one strategy is enough to double sales. Small improvements can make a big difference. When is the last time you really and systematically asked your customers about their preferences? If it was not today or yesterday, perhaps you should ask again.
Asking for the customer's preferences opens up new avenues for growth, but by itself it is a partial approach. Many companies have come to understand a general truth of human nature. The individual is not fully conscious of what he or she wants or likes or why. The same is true of the market. The market is conscious only at the minimum level of its needs. If a company offers a new product or an improved service, the market knows whether it likes it or not. It can even make suggestions for minor improvements, but rarely more than that. This is what Federal Express has learned asking customers' about their needs. Carole Presley, senior vice president of Marketing, says, "People don't have a clue of what to ask for beyond what they currently are getting. They want what they are currently getting to work precisely 100% of the time. The customer can't help you identify new opportunities." That does not mean that preferences do not exist, it only means they are not conscious.
If the customers can not tell you their preferences, then how to you find out? That requires a new attitude and an effort to identity with the customer. C.E. Woolman, founder of Delta Airlines, described the attitude as "putting yourself on the other side of the counter and looking at things from the customer's point of view." The effort required is one of careful observation, perception, and thoughtfulness.
The level at which your company relates to the market determines the scope for its expansion. Relating to unfulfilled needs and unmet preferences opens up endless opportunities for growth in any industry.
WHO IS YOUR CUSTOMER?
As companies relate to the market at three different levels, they also view the customer from four different perspectives. The wider and deeper the view, the greater is the market that opens. First and most commonly, companies relate to the customer from the point of view of the product. I have a product to sell. Anyone who buys it is my customer. Companies with this view have a very limited idea of who their customers are, what their needs are or how to attract more of them. They rely on the product to do that.
The second view is more expansive. Look at the customer as a member of society. Identify the social characteristics of the customer and think of ways to meet the needs of specific social groups. Julius Rosenwald followed this approach when he introduced Sear's famed money-back guarantee at the turn of the century. Sears was selling to rural farmers, who were highly suspicious of urban merchants, especially mail-order merchants! Understanding the need of that social group, Rosenwald introduced the money-back offer to assure them of quality and complete satisfaction. Henry Ford did the same thing when he built a low-priced car for the working class man. He understood the urge of the working class to live the American dream of owning a car. So he designed and built the Model T at less than half the price of existing models and revolutionize the automotive industry. When Liz Claiborne introduced a line of garments specially designed for working women, the company was looking at the customer as a member of a social group with distinct characteristics. When Gideon Gartner packaged information on the computer industry specifically for decision-making computer users, he was looking at a social subset too.
Looking at the customer as a member of society with distinct characteristics and specific needs has enabled these companies to vastly expand the market for their products and services, in some cases to a size greater than the entire original industry it started in.
The third view of the customer opens even greater vistas. Look at the customer simply as an individual. Recognize the needs and preferences that any individual would have and cater to them. Apple Computers thought from the individual's point of view when they created the user-friendly Macintosh computer.
It did not take a genius to realize that companies which pay high prices to get valuable documents delivered overnight would like to have access to up-to-the-minute information regarding the location and status of their parcels-but it did take a company with an open mind, thinking about what other people think. Federal Express realized that getting the parcel there quickly was really only half of what the customer wanted. In many cases the customer also wanted to know that the parcel had arrived, and if not, when it would. In practice, the company discovered that immediate information about the parcel was even more important to many customers than on-time delivery itself.
The fourth and most powerful view is to relate to the customer, not merely as an individual who shares much in common with everyone else, but as a unique individual who has unique needs, preferences and identity. Hotel customers do appreciate the chocolate on the pillow or the newspaper under the door-everyone likes chocolate-even when they know that the same treatment is given to every other customer as well. But nothing evokes such a powerful response as when the customer realizes that the company relates to him or her as a unique individual. The effort a company makes to custom-tailor a product or service to meet a specific need, to solve problems to the customer's total satisfaction, or just to recognize the customer by name makes a lasting impression.
Who are your customers? How well do you know them? How deeply do you cater to the specific needs and characteristics which distinguish them from others? What more can you do to differentiate your products or services, so that they more closely meet your customers' social or individual characteristics?
MAKING THE MARKET RESPOND
When a company appeals very deeply and powerfully to the conscious or unconscious need of the market, the market rushes toward its and literally drives its growth. It is possible for any company to make the market respond with that intensity by what the company does within itself, without going out to seek the market at all.
The market is attracted to a company by the intensity and quality of the work it does. Virtually every strategy described in this book to release and utilize corporate energies more effectively, to raise the quality of work by implementing values, and to energize and balance the five components can directly or indirectly attract the market.
The following nine strategies can be used to energize the market for your company and bring it to your door.
Organized Work can energize the market
Organization even helps you know your customers better. Knowing exactly who your customers are enables your company to utilize the most effective means for reaching them. AMRE has a sophisticated customer tracking system that enables it to track every response to its TV advertisements and direct mail to determine precisely which state or zip code generates the highest rates of response and the highest closing ratios. All ad responses come in through postage paid return cards or over WATS lines to a centralized point where the customer is qualified by well-trained phone operators and appointments are made for sales people in offices around the country. This eliminates the necessity for sales people to identify their own leads and enables them to concentrate on making sales. AMRE's sales force averages a closing rate of nearly 20% on average sales over $6,000.
Raising performance on any value can energize the market. SAS did it with speed and customer service. Ford did it with quality. Merck has done it with credibility. Northwestern Mutual has done it through a commitment to teamwork and customer service. AMRE did it with systematic functioning and development of its people. Any value can evoke an intensely positive response from the customer. P.A.M. has discovered what McDonald's has known for decades. Even a simple value like cleanliness can have a tremendous impact. P.A.M. prides itself on maintaining its trucks in mint condition. Frequently existing and would-be customers comment on how impressed they are by the sparkling cleanliness of the equipment. Cleanliness attracts too. If you do not believe that, watch your own reaction the next time you go into a restaurant that is not clean.
People can energize the market
Capital can energize the market
Technology can energize the market
Extend the application of your product or service to one new area
Improve the quality and accuracy of information to the customer
Relate to the customer as a unique individual
ATTENTION TO THE CUSTOMER
Children respond to attention, but many children are deprived of it. The same is true of husbands, wives, friends, employees and shareholders. It is also true of customers. Nothing attracts customer like personal attention given to them in the form of pleasant, courteous, high quality service. The phone answered on the first ring with a warm, cheerful voice is a pure delight to the customer. The thank you note, the phone call "just to see how you are doing", the sympathetic listening to a problem, the order promptly and properly dispatched, the literature thoughtfully conceived to answer the customers' real questions-rather than raising new ones!-the letter telling the customer the products on back-order and when we expect to supply them-these are just a few of the small ways in which companies can give attention to their customers.
Two things are essential in order to give that attention. First, management and every employee must fully understand and believe that it is good to do so and feel enthusiastic about pleasing the customer. If it is done out of a genuine desire to help and make happy, it is most powerful. All negative attitudes-e.g. the customer is unreasonable, the customer is foolish, the customer is ripping us off-must be tempered by a genuine desire to please.
Second, the company and all its people must have sufficient energy to give that attention. As the child's inexhaustible demands for attention can exhaust the most energetic parent, the needs of the customer are endless. Therefore, the effort requires an enormous energy, which the company must be able to release from its people and harness effectively without waste. People must be enthused and continuously learning new skills, so that their energies are constantly overflowing. Systems must be fine-tuned and smooth-running, so that all available energy is properly utilized for service. Attention is given though prompt service, which requires an alert, highly efficient organization. It is conveyed through pleasant service, which is possible when people within the company are naturally happy in their work and not under stress. Attention is given through personalized service to the customer. Personalized service can be given to all customers only when impersonal systems are employed to manage routine work down to the last detail. The systems must be developed enough to smoothly handle even heavy bursts of activity and yet flexible enough to adapt to unusual, individual customer demands.
When we refer to the customer, we think of individuals. When we refer to the market, we usually think of an impersonal capacity to buy. But by market, we mean the sum of all actual and potential individual customers in the society. Giving attention to the market means to be genuinely interested in the needs, requirements, ways of life, tastes and levels of appreciation of people in the society. This effort has several dimensions.
There should be a full knowledge of the needs of present customers and the way your products or services are used by them. This knowledge comes from being in constant and close touch with buyers, dealers and actual users. There has to be an awareness of how the ultimate customers actually live or work and how they actually use the products or services as part of that living and working. The company must be constantly thinking about the customers' convenience and finding new ways to serve it. There should also be a full knowledge of the future needs of the customer, new ways in which the products can be used to meet new needs or to raise the level of comfort, convenience, productivity, etc. This requires an analytical study of the customer to discover what might bring greater satisfaction.
In other words, for a company to energize the market it must be continuously striving to know, understand, serve, please and anticipate the needs of its customers, while at the same time constantly fostering the growth and fulfillment of its own employees to release their enthusiastic energies and perfecting the systems needed for delivering attention to the customer.
YOU ARE BEING WATCHED
Make no mystery about it. Every company is being watched all the time. Just as we remember exactly how we were treated or mistreated when we went into that restaurant four years ago, just as we can recall exactly how we felt when our new car had to go back for servicing the day after we bought it, just as we can fondly recollect the patience and sympathy unexpectedly shown by a customer service representative after our warrantee had expired, in just the same way every customer remembers or does not remember your company.
Every company is being talked about too. Both the good experiences and the bad are eagerly shared with family, friends and co-workers. Word-of-mouth is as powerful an advertisement today, as it was in the centuries before TV and radio.
Customers perceive differences. Those differences do not have to be very great in order to make a great deal of difference in our market-just great enough to distinguish us one way or the other from our competitors. Every time we make a purchase or chose a company, we select on the basis of conscious or unconscious preferences that are often minutely small. Therefore, even a small effort, a small improvement in the product, the service or any other facet of our operations can have a disproportionately positive impact on our business. The same is also true of a small error or failing.
That is why focusing on corporate values is so powerful. Values raise the quality of our performance by significant increments, which become directly visible or indirectly perceptible to the market, even when they are implemented in the depths of the company away from the public eye.