Excerpts from my new book, The Demand Perspective: Leading from the Outside-In
My small community bank added a new feature which is immensely convenient to me: the ability to transfer funds to and from other banks! I am sure that the bank would prefer that I keep all my accounts with them, yet they make it easier for me to keep and manage accounts at different banks so I will remain a customer. Amazon thought along the same lines when it decided to allow customer product reviews on its website, including many negative reviews. They found that the value of facilitating customers’ purchasing decisions far outweighed individual product sales in generating loyalty and increasing overall sales.
These organizations had shifted from the narrow construct of product sales to the more sustainable, profitable and flexible model of solutions development.
Solutions can include existing or new products as well as elements such as experiences, specialized expertise, access to relationships, custom services, and more. The difference is that the starting point, is not the program you designed and want people to register for, but the problems facing the customer for which you are prepared to craft solutions—mixing and matching or inventing services and solutions that are outside your usual product categories. This means that you have to begin reorganizing your business to enable it to deliver solutions
How to Increase Value through Solutions
To shift from a product to a solutions orientation, you don’t have to demolish your existing product lines or jump into large-scale ventures. You just need to think of your value from a different angle. Instead of, “how can we market and sell them?” think in terms of, “which of these add up to the kind of solution members need?” or “would our customers get better outcomes from this product if we added technical support or strategic advice?” Below are six strategies for increasing value and revenue by converting products into solutions:
1. Add Services to Existing Programs or Benefits
One of the simplest and most immediate ways to increase the value of an existing program or asset is to add components that enhance its use—services, experiences, or information. In short, instead of increasing marketing costs or products, you would aim at increasing their value and improving outcomes.
We see it all around us! You buy a software program or new car and you can instantaneously become a member of all kinds of user communities that extend the length and level of your engagement with the brand or company beyond your original purchase. Instead of simply buying computers at Best Buy, you can now buy computers and use their Geek Squad to install, repair and maintain them all year round.
In an article in Fast Company, Jeneanne Rae Rae argues that:
Generally speaking, service-enhanced products command premiums and deliver superior customer experiences compared to their product-only analogs.
Expanding beyond products through services, engages manufacturers and service providers with customers over a much longer period of time and generates more revenue. In this technology-driven era, services can take the form of interaction, access and enhancement of experience through digital platforms.
The bottom line for associations is that they need to think beyond new programs and services to compete today. An easy way to start is increasing the value of a single product or service with value-added features that enhance the way it is used in a real context. .
2. Enable Your Customer to Do Something New and/or Useful Right Away, Starting with your Website
Allowing members or customers to take actions and make choices that deliver immediate, practical value to them is a fast track to real engagement and new source of value. Aircraft Owners and Pilots Association (AOPA) became indispensable to its members’ ability to fly successfully and safely by allowing them to get instantaneous help with all issues relating to flying, for example (extracted from their website):
Instant answers from AOPA’s Pilot Information Center, where you can “talk to an aviation specialist for advice on buying and maintaining aircraft, flight training, medical issues, or any other aviation-related question; and “Unlimited 24-hour access to AOPA’s Internet Flight Planner.”
3. Reinvent and Repackage: From Rigid Credentials to Flexible “Micro‑credentials”
When AIHA’s CEO, Peter O’Neil, came on board about ten years ago, he embarked on a long process of cultural and business transformation. AIHA was a conventional association with the usual menu of fixed programs, services, and benefits. The problem was that the current program and business models lacked the speed and flexibility necessary to keep up with the pace of disruptive change in the profession or the emerging needs of members. While O’Neil couldn’t exactly dismantle the organization’s model and radically redefine its business in one fell swoop, he could refocus, reconfigure, and repackage individual credentialing and competency-building programs to better align them with the constant changes in the profession.
His first such venture was the development of the AIHA Registry Programs. When O’Neil and his team began by talking to their members and taking a fresh look at their need, it suddenly struck them that making these programs more valuable to members was not so much a content and design issue as it was a reorientation and solutions issue. Through a collaborative process of testing and development, AIHA reinvented and modernized the traditional registry program for the age of speed, creating “micro-credentials” that could be obtained at a fraction of the time it took to complete a conventional registry program; and greatly increasing its value to professionals while advancing the association’s strategic business goals.
4. Leverage the Intangibles
The value of intangible assets as your strongest competitive advantage has been discussed in previous chapters. By adding speed, customization, and interaction or enabling one-stop-shopping experiences, you could improve outcomes and transform a product, a service, or an entire organization from a liability to an asset.
5. Develop and Strategically Leverage Relationships with Member and Stakeholder Groups
Enabling and brokering access to key relationships and facilitating outcomes are critical components to solutions in today’s networked, interconnected world. Businesses are increasingly adding interactive platforms such as, online customer communities, to increase the value of static products or services, collaborate with customers and make use of them as sources of innovation and customer feedback. Associations are sitting on an enormous capital of relationships that, instead of leveraging, utilize narrowly for short-term membership revenue. Yet in a customer-centric, solutions-oriented perspective, the value that is uncovered is far greater than revenue.
The International Institute of Business Analysis (IIBA) is a fairly new association, first established in 2003 as a Canadian corporation. With an estimated 28,000 members and $3.5 million in revenue in 2011, it has become a leading association for business analysis around the globe. What’s more, membership and revenue growth have averaged 40 percent in the last three years with a 50 percent increase in the last year alone.
One of its reasons for its success is its ability to bring together and leverage a number of key relationships that play important roles in their members’ success, and extracting from them value that is far greater than dues-based revenue. In instituting corporate and university memberships, for example, the association is including two important contributors to their members’ career success: employers and knowledge service providers. Its relationship with the universities allows the association to establish demand and recognition for the profession, encourage research and new degrees around it. Moreover, by including and engaging students, the association has access to and influence on the future workforce—an asset greatly valued by its corporate members. IIBA is able to help companies improve their business analysis practices such as hiring and developing the right talent and optimizing the contribution of business analysts on their staff. The more the association learns from its efforts at aligning employees and employers, the more strategic the solutions it can offer to corporations. Conversely, through its relationships with corporate members, IIBA stays on top of employer needs and helps universities constantly align their programs and credentials with these needs as they occur; and greatly increase successful placement of its graduates.
For the most part, relationships with members and stakeholders, the most valuable asset for any business, remain passive and underutilized capital in associations and other businesses.
Who needs to talk among your members and stakeholders to get things done? Who needs exposure to whom to improve their business, get clients, or get investors? Who should be in a community with whom to exchange value and pool resources into a larger pool? These are questions every association must consider in moving toward an outside-in perspective.
6. Create Continuous Value at All Points of Customer Experience and for All Stakeholders in a Value Network
Perusing new initiatives on the website of CEMEX a few months ago, I was puzzled by a news announcement that stood out:
CEMEX in the UK has invested U.S. $5.5 million in a new cement bagging plant at its Rugby plant site in Warwickshire. The new plant has been built following extensive customer consultation, with many customers wanting the option of cement in plastic or paper bags.
Why would a global building material company bother with something like bag manufacturing that was clearly well outside their core business? Because, we are told, the CEMEX bags have a longer shelf life and additional benefits for everyone, “from us as producers, through logistics, to the merchant and on to the builder.” For example, the bags are environmentally beneficial. They are 100 percent waterproof, so that “they can be stored outside whatever the weather next to associated products such as bricks, sand, or landscaping materials.”
The “customer journey is a circle, not a straight line,” writes Rae.
“Companies that really understand customers know their journey never ends; they’re circling back continuously, potentially using your products and services many times. Why cut off the conversation after working so hard to make that first sale? Companies should continue to give customers reasons and ways to keep them involved…”