The only two functions of business
Peter Drucker, one of the most highly respected business thinkers of the late 20th century wrote:
"Because its purpose is to create a customer, the business has two - and only two - functions: marketing and innovation. Marketing and innovation create value, all the rest are costs."
If Drucker is right – and only marketing and innovation create value - then surely your business should be based around these two functions.
However, how much of your time as a business owner is spent on these two wealth creating functions, and how much is spent on order taking and fulfillment?
Have you even thought about how you innovate in your business?
Before we answer that question, I think we should define what “innovation” is.
Many people, when they hear this word, think of high-tech. However, as I would define it, innovation is simply “offering superior value to the end user”.
If you are a pizza delivery company and you have the best pizza, then that’s innovation. If you can deliver pizza in 30 minutes and all your competitors take 60 minutes, that’s innovation. If you have the cheapest pizza in town, that’s innovation.
Innovation is any superior benefit that customers would value.
Why is this important?When I’m consulting with a client, one of the first questions I ask is: "why should someone do business with you ahead of any and all other options, including doing what they’re already doing or doing nothing at all?”
I get a blank look followed by something like “service” or “quality”.
But, when I ask “what does that mean specifically to the end result I, as a
customer, would experience?”, they’re stumped.
This is because most businesses don’t innovate. They don’t promise anything unique other than perhaps a convenient location. All they have is a “me too”, non-descript business that is dependent on a lack of competition.
These businesses are lucky they have any business at all.
What’s why it’s no surprise that so many businesses are merely getting by. Nor should it be a surprise that those businesses so often go from “getting by” to going broke.
Think of yourself as a customer. Do you want to do business with a business that offers you nothing special? Just the same prices, selection, service as everyone else? Have you ever picked up the Yellow Pages for a service and felt all the ads were just saying the same thing? Didn’t you wish that one of them actually offered something different?
If you ended up doing business with one of those non-descript businesses, that business was lucky to get your business. They certainly never earned it and it could have just as easily gone to one of their competitors.
Your clients are no different to you. You’ve got to offer them something special, so they’ve got a reason to come to you. Otherwise, they’re likely to go elsewhere.
believe that, deep down, we all know this. However, how many of us have gone
out and successfully created a unique offer for our market?
So I’ve made my point. Now, how do we take this and make it happen in our
One way to do it is to ask the question: “what is the biggest complaint people have about your competitors?”
Knowing the answer to that means knowing what your prospects want but aren’t getting. And that can be the key “hot button” that’s going to get them to dump your competitors and come knocking at your door.
Let’s look at an example of a business that became a huge household name by doing exactly this…. Domino’s pizza.
What was the problem with their competitors? That the pizza would often takes ages to arrive (and often arrived cold). So, Domino’s built their business around a promise that addressed this…. hot fresh pizza delivered to your door in 30 minutes or less or it’s free.
They offered the market what it was missing and put their money where their mouths were by backing up their innovation with a very powerful and specific guarantee.
Closer to home, in my own business, I saw that the biggest complaints about marketing consultants were:
(1) they expect to get paid, whether they make their clients money or not.
(2) they typically want the client to invest large sums in marketing or advertising campaigns, which may or may not work.
So, I took the opposite approach.
I dealt with the first point by guaranteeing my work. And I dealt with the second by offering to help businesses get a greater return from the money they’re already spending on their marketing.
This has helped me carve out a niche where I signed up a lot of clients that were unwilling or unable to gamble their money on a typical consultant.
How can you use the same approach to stand out in your market?
If you haven’t already developed a unique selling point, go out into your market place and do some research.
Why do people buy from you? Why do they buy from your competitors? Why don’t they buy at all? What pleases them about the business they buy from? What isn’t as good as they want and what would they like instead? What’s a hassle or inconvenience? What risks do they feel they have to take to do business with your industry and how could you remove that risk with guarantees?
Once you’ve gathered this information, it’s time to think about how you can turn this into a market advantage.
I’ve got a process I take businesses through to identify and create a unique selling point and, in a future newsletter, I’ll take one of my subscribers through this process to show you how it works.
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