Who owns the consumer, he will outperform competitors - Niraj Davar, professor at the Richard Ivey School of Business, convinces in his book “Ideal Marketing” (“Tilt: Shifting Your Strategy from Products to Customers”). He has worked with global companies, participated in BMW, HSBC, Microsoft, Cadbury, L'Oreal and McCain Foods projects on three continents and came to the conclusion that too many companies are still building their business around a product, when their development requires focus on the consumer. In Russian, Ideal Marketing will be on sale at the end of May. The Secret publishes excerpts from the book to help executives decide on their marketing strategy.

Product orientation as a strategy is obsolete

For the past 20 years, I have been asking the question "What do you do?" thousands of managers around the world. And then another one: “Why do your customers buy from you and not from your competitors?” And what? The answers to the first question from year to year describe the products or production capacities of the companies. It always amazes me how rarely respondents mention consumers or product value!

Traditionally, companies seek competitive advantage at the product level, that is, in the part of the value chain that relates to production and product. But the world is changing fast. History knows examples when unique competitive advantages became obsolete literally overnight. The dominance of De Beers was ended by cheaper Russian diamonds that flooded the market overnight after the end of the Cold War. The easy life of Infosys ended when other IT companies like Accenture and IBM started recruiting in India en masse. (By 2009, IBM had more engineers in India than in the United States, and by 2013 it had almost wiped out the competitive advantage of its Indian rivals.)

The approach that has dominated over the past 250 years is rapidly changing to a post-industrial consumer-level model. In this model, customer value is created through interaction with customers, competitive advantages arise in the open market, and the main costs are associated with attracting, satisfying needs and retaining customers.

Where is your "center of gravity"?

All CEOs should ask themselves the following three questions. The answers to them will help to find out where the “center of gravity” of their business is located:

What accounts for the bulk of your fixed costs? For production, R&D (research and development. - Note. ed.) or activities aimed at attracting, retaining and satisfying customers?

Which of the steps you take do consumers value the most? What are they most likely willing to pay a premium for? What are the reasons for their loyalty? What part of the product-consumer spectrum does this activity cover?

In what part of this spectrum is your competitive advantage located? And what about the long-term differentiation of your company?

The location of the “center of gravity” of your business (relative to other industry players) determines the degree of your competitiveness. Increasingly, it appears that the companies that dominate the 21st century are masters at working with consumers.

Determine consumer costs and risks

The best thing you can do to build competitive advantage at the consumer level is to find out the pain points that are not lying on the surface in the areas of your interaction with him. The following three questions will help you formulate them.

What are the hidden costs that consumers incur when buying and using your product?

What are the hidden risks they take in dealing with your company and your product?

Why potential consumers do not buy from you (in other words, what costs and risks prevent them from doing so)?

Companies rarely pay attention to the costs and risks of buyers, since these aspects are usually not visible to sellers: they arise either before or after the conclusion of the transaction. But lowering costs and risks at the customer level creates significant and significant value—so significant that it often far exceeds the monetary value of the product itself.

To take a simple example, there are many ways to buy a can of Coca-Cola. A customer can go to a supermarket or wholesaler and purchase a 24-pack of Coca-Cola. It will cost him $5.99, which is about $0.25 per can. But once in the park on a hot summer day, the same person, thirsty, will gladly give $ 2 for a can of Coca-Cola from a vending machine. Since a can of Coca-Cola can be purchased at both the wholesaler for $0.25 and the park for $2, the 700% premium in the second price reflects the value that the company creates at the consumer level in the process of interacting with the market. In this case, the premium of 700% is so high that no efforts at the product level aimed at reducing the consumption of raw materials and materials, the costs associated with the production and storage of each can of drink, are able to provide such a jackpot.

Let go of traditional priorities

To get the right result, you need to think about what costs and risks of consumers (searching, acquiring, using and utilizing the value you produce) you can reduce, and not how to get even greater economies of scale.

The high-profile battle of recording studios with the Internet, its users and pirates was in full swing when suddenly a new actor not directly related to the music industry, - Steve Jobs. The head of Apple quickly realized that the pillars of the music industry had lost control at the consumer level - and therefore would eventually lose control at the product level as well. While the studios were wondering how to "rearrange their sunbeds" to "keep up with the sun," Jobs began to vigorously transform the failed "music" business model. Apple decided to create an organized marketplace that has value for music consumers and incentivizes music producers. The value, which consists not only of the music itself, but also of the way it is bought, stored and listened to. Apple's revolutionary contribution was to develop an end-to-end solution that created enough value for a listener willing to pay $0.99 per song. Searchability, recommendations, playlists, customization, ease of use and storage, legality, and the “My music is always with me” principle are all elements of consumer-level value.

Why didn't the music industry players themselves implement this idea? Because they were firmly convinced that customer value exists only at the level of the product, that is, at the “what” level, and did not notice the possibility of creating it at the consumer level, that is, at the “how” level.

The consumer club is the main advantage of the company

The beginning of the 21st century was marked on the market by a new consumer trend - gourmet coffee. Nestle felt: the moment has come! A cup of delicious strong coffee at the touch of a button - what could be better for a family morning? To creation own model The company came into direct distribution of coffee capsules by accident - as a result of an unsuccessful attempt to sell Nespresso through traditional retail chains. The coffee machines themselves could be bought in large shopping centers and specialized stores. household appliances, capsules were ordered only via the Internet or by phone directly to the Nespresso Club. The result was a slower start, but greater control over product presentation, promotion, and competitors. Today NCS feels its consumer much better than if it sold its product only through traditional retail channels.

As a result, the Nespresso system became a worldwide hit, and retailers began to apply to the company with a request to allow them to sell this product. Nestle refused. Further events could be predicted: competitors entered the fray, patent wars broke out. Companies helped to survive 1,700 patents obtained ahead of time. But many of them will soon expire, and then Nestle will have one protection - the Nespresso Club with its 12 million members worldwide, three hundred boutiques - direct distributors in major cities - and other consumer-level benefits. It is the club of consumers, as one might assume, that will become the main competitive advantage of the company, an insurmountable barrier for new players to enter this monopoly market.

Share information with consumers about them

Imagine that you have 500 customers, each with one of the 500 puzzle pieces. Although each of these elements is unique in itself, but when put together, they give something more. But how often are attempts made to collect them? Usually these elements gather dust in cabinets or vegetate in databases. In order for consumers to see them in a general context, you need to be able to look at the problem from the outside. By finding a way to combine the five hundred, or thousands, or millions of pieces of information distributed among consumers, you may discover patterns that no one has noticed. Based on them, your customers will be able to make other, better decisions, which will add value to your relationships.

Take Netflix, which revolutionized the video rental business and spawned a wave of imitators. The company is still ahead of its competitors thanks to the system it created for collecting and analyzing market information. Its "real" rival, Blockbuster, is left far behind, not only because Netflix operates over the Internet and does not incur infrastructure maintenance costs - commercial premises lined with shelving. Netflix's main selling point is the information the company collects through its customer network: viewers assign ratings to the films they watch, and the company uses them to recommend other moviegoers. Having built a system of market relations and the collection, analysis and application of information, Netflix remains unattainable for competitors. Information from market participants is a consumer-level asset: Netflix has managed to make it available to customers and thereby reduce their risk of choosing the “inappropriate” movie for themselves. Because of this, consumers keep coming back to Netflix over and over again, despite the company's decision in 2012 to raise prices by 60% at once.

Transfer knowledge from one client to another

You take information in one place and apply it in another. Learn from one client and apply what you learn to help another. Act as an intermediary between two parties who can benefit from the acquaintance.

In this market, the Amazon system clearly stands out. Amazon owes its meteoric rise not to what it sold. best goods, but the fact that it organized its sales better than others. Buyers highly appreciated the mechanism offered by the company for recommendations and advice from consumers like them. Due to the depth of processing of the received data, Amazon often knows what they want before its visitors. By learning to connect sellers with buyers, the company has grown into the world's largest virtual shopping center. It is quite difficult for competitors to copy the transfer and link functions. If Amazon followers wanted to supply their consumers similar information with the same accuracy and reliability, they would have to start by reproducing the vast audience coverage that Amazon has, the experience of this company with millions of users, as well as millions of users with each other.

Let customers compare themselves to each other

Benchmarking provides consumers with an invaluable opportunity to determine their position in the coordinate system that is important to them, to compare it with the position of other buyers. As a result, both decisions and behavior of people can change. For example, families reduce their consumption levels more and are more conscious of recycling if they are able to compare themselves with neighbors or friends than when they are exposed to abstract data on consumption volumes. Rendering utilities Opower allows users to log in and compare their electricity bills with those of their Facebook friends. The result is a significant reduction in electricity consumption.

The list of competitors is determined by consumers ...

When compiling a list of competitors, you need to be guided not by your own considerations, but by finding a way to find out the thoughts of consumers. It's not easy, but it's worth it. There is a chance that your list and consumer's list will not match. Undoubtedly, the list of the latter will more accurately reflect the real situation in terms of competition than the one that you make in the silence of your office. There may be surprises in the lists of consumers. Is it possible that a serious competitor swiss watches Omega performed for $3,000 Nikon camera? Did the leaders of Omega and Nikon imagine that their companies would compete with each other? Have they developed their corporate strategies in view of the presence of competitors who operate in other product categories? And it would be necessary: ​​as it turned out, these brands are direct competitors. Many online stores now show visitors who have bought or become interested in some product a list of products that other people have already bought or viewed. According to Amazon, buyers of Omega Seamaster watches also liked to gawk at the Nikon D800 (the price of the camera is about the same $3,000).

The products and brands that a consumer considers before buying your item are your competitors. The products and brands that a consumer purchases after reviewing your product are also your competitors.

…But this list can be influenced

After entering the set of options considered by the consumer, you face the second strategic challenge - to make membership in this club as exclusive as possible. The smaller the set, the fewer competitors and, hopefully, the weaker the competition. You must influence who else gets on the coveted list with you.

Imagine that you are a manufacturer of soft drinks and have developed a drink to combat dehydration. You can position your new product in different ways: as a cure for digestive disorders, as a way to replenish fluid loss after a workout, and, finally, as a remedy for a hangover. In each case, we are talking about the same product - only the purchase criteria used by consumers differ. Accordingly, competitors differ. When choosing how to position a product, managers usually focus on the size and growth of the market, but overlook such points as the intensity of competition and the composition of competitors. You don't want to come face to face with giants like Coca-Cola and Pepsi? Then choose a market with less intense competition.

The composition of your competitors also depends on how you position yourself in the eyes of buyers according to your chosen purchase criteria. Do you want to be compared with one of your competitors? Then do your best to compare your brand with their brands in your promotional messages, place your product next to theirs on store shelves, develop comparable package sizes and formats.

And lastly, pricing that puts your brand in one or another set of options under consideration. When Infinity brought its G35 to market at the start of this century, it was considered almost a "BMW killer". A bit reminiscent of the legendary Nissan Skyline, the car had a cabin size and engine characteristics similar to the BMW 5 Series, but could not compete with it for several reasons. Firstly, the BMW 5 Series is not a car for beginners, it is intended for those who already drive cars of this brand or have previously owned a luxury car. Buyers of such machines lay out a lot of money not for the consumer value itself, but for a well-known brand. Based on the foregoing, it made sense for Infinity to initially position the G35 relative to the BMW 3 Series, especially since the stated price also corresponded to this. It should not be overlooked that when forming a set of considered options, buyers use price as one of the cut-off criteria. The same is true for journalists who write about automotive topics. Since the price of the G35 was close to the price of the BMW 3 Series, it was compared with it, and not with the 5 Series.

Consumer-level marketing allows you to create a brand that is stronger than the product

A textbook question in the world of branding is: Could The Coca-Cola Company raise funds and restart its operations if all of its physical assets around the world were to mysteriously disappear in an instant? Experienced businessmen answered as follows: the elimination of this annoying trouble would cost the company a serious investment of time, effort and money, but Coca-Cola would not have problems with the revival. The brand would help the company survive even in such crisis situation and attract investors looking for future returns.

In the second part of this thought experiment, another question needs to be answered: what if the company's assets remained intact, but consumers around the world were struck by amnesia one morning and they all completely forgot about the Cocal-Cola brand and everything that related to him? And the same seasoned businessmen responded that in such a scenario, despite having physical assets, it would be difficult for the soft drink giant to reopen.

Do not miss!

Comments:

Perfect Marketing: What 98% of Marketers Forgot About

Questions, questions and more questions - what should a marketer ask himself in order to understand the desires and needs of buyers?

Again and again, marketers in all industries are faced with questions: where to look for the competitive advantages of a product? How to maintain positions in the market? Cheap clones are springing up like mushrooms after the rain, and consumers are increasingly cheating famous brands with less loud, but more profitable counterparts. Investment in new product development and technical innovation is less and less profitable. According to Professor Neeraj Dawar, customer-oriented business will be the future success. In the book "", he, using the example of various companies, the author shows that the most powerful competitive advantages, which are almost impossible to repeat, lie at the level of consumers, not the product. In his book, he discusses in detail the tools for collecting data on consumer interests and methods for analyzing them.

Interpreter S. Filin

Editor L. Mammadova

Project Manager M. Shalunova

Corrector S. Mozaleva

Computer layout K. Svishchev

Cover design Y. Buga

Copyright © 2013 Niraj Dawar

Published in arrangement with Harvard Business Review Press via Alexander Korzhenevski Agency (Russia).

© Edition in Russian, translation, design. Alpina Publisher LLC, 2015

All rights reserved. The work is intended solely for private use. No part of the electronic copy of this book may be reproduced in any form or by any means, including posting on the Internet and corporate networks, for public or collective use without the written permission of the copyright owner. For copyright infringement, the legislation provides for the payment of compensation to the copyright holder in the amount of up to 5 million rubles (Article 49 of the zoap), as well as criminal liability in the form of imprisonment for up to 6 years (Article 146 of the Criminal Code of the Russian Federation).

Why doesn't anyone like marketers? Company executives are interested in what, in fact, these smart people spend their working time; financial directors- money; in sales departments they consider marketers to be boring, they supposedly think too abstractly and understand little about real business. The characteristics awarded to marketers by manufacturing and purchasing departments are not at all suitable for print. The trouble is that for two decades now no one has considered marketing as a source of competitive advantage. The days of media dominance and mass brands are long gone, and with them the era of marketing triumph. From a strategic tool, it has turned into a tactical one, spending on it is falling every quarter. Think about why your company consistently delivers (or doesn't perform) higher (or lower) margins than its competitors. What role do you think marketers play in this?

In fairness, it should be noted that in some industries, marketing is still in favor. All new giants - Google, Amazon, Facebook and Apple - rely on it. The customer value and competitive advantage of these companies are based on customer insights, and success is underpinned by a strong brand. Let's face it: Silicon Valley, this innovative leader of the world economy, having gone through the phases of active development of hardware, software and the Internet, eventually "steered" into the so-called marketing stage. Moreover, the “marketing renaissance” is not limited to the sphere of high technologies. Its influence is noticeable in many industries in all corners of the planet. Companies, trying to prevent the depersonalization of their products, are paying more and more attention to relationships with their consumers.

This book is intended for executives involved in strategic decision making—CEOs who seek to strengthen their strategies through marketing; for CFOs who want to get a better return on their marketing investment; for CMOs and Brand Managers who want to earn more respect from their peers by creating a tangible competitive advantage for their company.

Over the past 20 years, I have had the pleasure of working with the CEOs of numerous companies across continents and in a wide variety of business areas, from start-ups to multinational corporations. Due to globalization and the rapid spread of new technologies, many of them have lost their traditional competitive advantages. In my book, I help managers go back to basics, ask the fundamental question: why do consumers buy from us and not from competitors? The answer to it will open up space for creating new consumer value, creating new sources of competitive advantages.

Most of the books, including mine, would never have come into being without the help of friends. I thank my wife Chantal, my muse, critic and friend, for her selfless support. I thank my sons who patiently waited for me to finish the job and we could ride bikes and canoes again.

I am grateful to colleagues from the Richard Ivey Business School for professional discussion and review of my manuscript, for constructive cooperation. Special thanks to Mark Vandenbosch for both great ideas and snarky remarks! Dean Carol Stephenson, Associate Deans Roderick White, and Associate Deans Eric Morse, MBA Program Director Fraser Johnson, I am very grateful to you for kindly agreeing to provide me with flexible working hours while this book is being written. And, of course, many thanks for the support to colleagues from the marketing team!

The clear, business-like comments of Harvard Business Review Press editor Jeff Keoi improved my manuscript many times over, and the rest of the HBR Press team honed the final product to near-perfection. I really enjoyed working with my agent Esmond Harmsworth of Zachary Schuster and Harmsworth. I bow before his knowledge of the laws and wilds of the publishing world, the ability to "cut off" all unnecessary - and before his sense of humor!

During my sabbaticals, I often visited with colleagues from the INSEAD business school (in Fontainebleau in France and Singapore) and I am very grateful to them for their hospitality. Dear employees of the Faculty of Marketing, our unforgettable conversations are infinitely dear to me! And the idea for this book was born during my trip to Vlerik Business School (Belgium) and discussions with Philippe Haspeslag, Steve Mile, Marion Debryn, and Frank Gedertier. Thanks to Flanders DC for their financial support and personally to Livia Pidzhakova for providing the research that formed the basis of Chapter 4!

I am very indebted to John Bradley for talking about the history of marketing and for joint work over the manuscript of The Future History of Marketing, prepared by us a long time ago. Thanks also to Neil Duggal, who shared his ideas with me, which helped me a lot in the work on the book!

I thank PhD students Charan Bagg, Theodore Knowsworthy, and Jody Whelan for discussing and helpful comments on early drafts of the manuscript. And also my close friends who became the first readers of these pages!

Thank you Courtney Hambids and Kirra Clemens! You relentlessly formatted and numbered numerous versions of the book. Thanks to you, I didn't get confused!

And finally, thanks to the heads of the companies in which I gave master classes, interviewed and participated in meetings - for their openness, sensible suggestions and, in general, for their help. This book is for you!

The question "What are you doing?" is a classic conversation starter at a party. We answer it without hesitation. And here's what I noticed: the vast majority of answers describe either the product or its properties: “I am engaged in plastic windows"," I work for a company that produces software for risk management” or “We have our own bank”. These precise and succinct phrases say a lot about how the manager sees his business and its strategy.

Fifty years ago, in his truly revolutionary Harvard Business Review article "Marketing Myopia," Ted Levitt demonstrated the dangers of taking this seemingly innocuous question too narrowly. Levitt argued that at one time the railroad lost in competition to road and air carriers only because they did not realize in time a simple fact: railway companies are engaged in the transportation of specific goods, and not some abstract “rail transportation”. Today's business is as myopic as it was in Levitt's day. The long and painful extinction of Eastman Kodak logically ended in bankruptcy - and all because, although digital photography and was invented in its laboratories, the company itself did not take control of the market transition to this new technology. Levitt would say that the company mistakenly considered its business to be the production of photographic and film films, rather than the development of image preservation technologies. Similarly, Xerox was mired in the mundane business of document processing, even though its popularity with consumers and extensive market research allowed it to dominate information processing, one of the fastest growing industries in the last forty years. The BlackBerry example falls into the same category of "lessons not learned". The company has become so attached to one of its products, the physical keyboard, and has so overestimated its power in the corporate user market that it has overlooked the advent of touchscreen smartphones. The result is the loss of its once undisputed leadership, and much faster than one might have imagined.

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Quote

What is Perfect Marketing: What 98% of Marketers Forgot About?

Why Perfect Marketing: What 98% of Marketers Forgot About is worth a read

• After reading the book, you will remember what you always knew, but for some reason forgot: the key to success is understanding the client.
• You will learn how to monitor consumer demands and modernize your product and its advertising, taking into account these requests.
• Nice bonus: you will learn a lot interesting stories from the practice of large global companies.

Who is the author

Neeraj Davar - professor at Ivy Business School(Canada and Hong Kong). A well-known specialist in marketing and strategy, he has lectured at leading business schools in Europe and Asia. He works with senior executives in global companies and has been involved in projects for BMW, HSBC, Microsoft, Cadbury, L'Oreal and McCain Foods on three continents. Collaborated with start-ups in the field of informatics and biotechnology. His articles appear in Harvard Business Review, MIT Sloan Management Review, Financial Times, International Herald Tribune and other major publications.

Key Concepts

"Perfect Marketing" is another book about perfect marketing (tautology at the very beginning - there's something in it, don't you think?), which I already mentioned in a previous review of "Recommended" by John Janch. If you love Amazon, Nike and Google, live in the world of tech startups, Kickstarter and Zuckerberg Call, then you will love it. I also liked it, but rather not because of the thought, but because of ... Read more

This is the book that all top managers of the country must read. The main value of the book is that it helps to shift the focus of marketing from the function of promotion to the function of understanding and working with customers. Recently, this is relevant for 90% of the country's enterprises. One way or another, the budgets have been cut for many marketing departments and the most working investment is the creation of a loyalty program ...

Interpreter S. Filin

Editor L. Mammadova

Project Manager M. Shalunova

Corrector S. Mozaleva

Computer layout K. Svishchev

Cover design Y. Buga

Copyright © 2013 Niraj Dawar

Published in arrangement with Harvard Business Review Press via Alexander Korzhenevski Agency (Russia).

© Edition in Russian, translation, design. Alpina Publisher LLC, 2015

All rights reserved. The work is intended solely for private use. No part of the electronic copy of this book may be reproduced in any form or by any means, including posting on the Internet and corporate networks, for public or collective use without the written permission of the copyright owner. For copyright infringement, the legislation provides for the payment of compensation to the copyright holder in the amount of up to 5 million rubles (Article 49 of the zoap), as well as criminal liability in the form of imprisonment for up to 6 years (Article 146 of the Criminal Code of the Russian Federation).

* * *

Foreword

Why doesn't anyone like marketers? Company executives are interested in what, in fact, these smart people spend their working time; financial directors - money; in sales departments they consider marketers to be boring, they supposedly think too abstractly and understand little about real business. The characteristics awarded to marketers by manufacturing and purchasing departments are not at all suitable for print. The trouble is that for two decades now no one has considered marketing a source of competitive advantage. The days of media dominance and mass brands are long gone, and with them the era of marketing triumph. From a strategic tool, it has turned into a tactical one, spending on it is falling every quarter. Think about why your company consistently delivers (or doesn't perform) higher (or lower) margins than its competitors. What role do you think marketers play in this?

In fairness, it should be noted that in some industries, marketing is still in favor. All new giants - Google, Amazon, Facebook and Apple - rely on it. The customer value and competitive advantage of these companies are based on customer insights, and success is underpinned by a strong brand. Let's face it: Silicon Valley, this innovative leader of the world economy, having gone through the phases of active development of hardware, software and the Internet, eventually "steered" into the so-called marketing stage. Moreover, the “marketing renaissance” is not limited to the sphere of high technologies. Its influence is noticeable in many industries in all corners of the planet. Companies, trying to prevent the depersonalization of their products, are paying more and more attention to relationships with their consumers.

This book is intended for executives involved in strategic decision making—CEOs who seek to strengthen their strategies through marketing; for CFOs who want to get a better return on their marketing investment; for CMOs and Brand Managers who want to earn more respect from their peers by creating a tangible competitive advantage for their company.

Over the past 20 years, I have had the pleasure of working with the CEOs of numerous companies across continents and in a wide variety of business areas, from start-ups to multinational corporations. Due to globalization and the rapid spread of new technologies, many of them have lost their traditional competitive advantages. In my book, I help managers go back to basics, ask the fundamental question: why do consumers buy from us and not from competitors? The answer to it will open up space for creating new consumer value, creating new sources of competitive advantages.

Most of the books, including mine, would never have come into being without the help of friends. I thank my wife Chantal, my muse, critic and friend, for her selfless support. I thank my sons who patiently waited for me to finish the job and we could ride bikes and canoes again.

I am grateful to colleagues from the Richard Ivey Business School for professional discussion and review of my manuscript, for constructive cooperation. Special thanks to Mark Vandenbosch for both great ideas and snarky remarks! Dean Carol Stephenson, Associate Deans Roderick White, and Associate Deans Eric Morse, MBA Program Director Fraser Johnson, I am very grateful to you for kindly agreeing to provide me with flexible working hours while this book is being written. And, of course, many thanks for the support to colleagues from the marketing team!

The clear, business-like comments of Harvard Business Review Press editor Jeff Keoi improved my manuscript many times over, and the rest of the HBR Press team honed the final product to near-perfection. I really enjoyed working with my agent Esmond Harmsworth of Zachary Schuster and Harmsworth. I bow before his knowledge of the laws and wilds of the publishing world, the ability to "cut off" all unnecessary - and before his sense of humor!

During my sabbaticals, I often visited with colleagues from the INSEAD business school (in Fontainebleau in France and Singapore) and I am very grateful to them for their hospitality. Dear employees of the Faculty of Marketing, our unforgettable conversations are infinitely dear to me! And the idea for this book was born during my trip to Vlerik Business School (Belgium) and discussions with Philippe Haspeslag, Steve Mile, Marion Debryn, and Frank Gedertier. Thanks to Flanders DC for their financial support and personally to Livia Pidzhakova for providing the research that formed the basis of Chapter 4!

I am very grateful to John Bradley for talking about the history of marketing and for collaborating on the manuscript for The Future History of Marketing, which we prepared a long time ago. Thanks also to Neil Duggal, who shared his ideas with me, which helped me a lot in the work on the book!

I thank PhD students Charan Bagg, Theodore Knowsworthy, and Jody Whelan for discussing and helpful comments on early drafts of the manuscript. And also my close friends who became the first readers of these pages!

Thank you Courtney Hambids and Kirra Clemens! You relentlessly formatted and numbered numerous versions of the book. Thanks to you, I didn't get confused!

And finally, thanks to the heads of the companies in which I gave master classes, interviewed and participated in meetings - for their openness, sensible suggestions and, in general, for their help. This book is for you!

Introduction
Orientation - to the consumer

The question "What are you doing?" is a classic conversation starter at a party. We answer it without hesitation. And here's what I noticed: the vast majority of responses describe either the product or its properties: "I deal with plastic windows", "I work for a company that produces risk management software" or "We have our own bank." These precise and succinct phrases say a lot about how the manager sees his business and its strategy.

Fifty years ago, in his truly revolutionary Harvard Business Review article "Marketing Myopia," Ted Levitt demonstrated the dangers of taking this seemingly innocuous question too narrowly. Levitt argued that at one time the railroads lost out in the competition to road and air carriers only because they did not realize in time a simple fact: railroad companies are engaged in the transportation of specific goods, and not some abstract “railway transportation”. Today's business is as myopic as it was in Levitt's day. The long and painful demise of Eastman Kodak logically ended in bankruptcy - and all because, although digital photography was invented in its laboratories, the company itself did not take control of the market transition to this new technology in time. Levitt would say that the company mistakenly considered its business to be the production of photographic and film films, rather than the development of image preservation technologies. Similarly, Xerox was mired in the mundane business of document processing, even though its popularity with consumers and extensive market research allowed it to dominate information processing, one of the fastest growing industries in the last forty years. The BlackBerry example falls into the same category of "lessons not learned". The company has become so attached to one of its products, the physical keyboard, and has so overestimated its power in the corporate user market that it has overlooked the advent of touchscreen smartphones. The result is the loss of its once undisputed leadership, and much faster than one might have imagined.

I always try to understand what is the "center of gravity" of a particular business. Answers to the question "What do you do?" prompt what managers consider to be the “primary drivers” of customer value and what they primarily focus on.

New question

For the past 20 years, I have been asking the question "What do you do?" thousands of managers around the world. And then another one: “Why do your customers buy from you and not from your competitors?” And what? The answers to the first question from year to year describe the products or production capacities of the companies. It always amazes me how rarely respondents mention consumers or product value! Just as in the days of Levitt, managers fully personify their activities with the products manufactured by their company. And no wonder! Companies spend an inappropriate amount of time, effort and resources on “cherishing” the latter. The entire business structure is usually product-oriented. Companies have product divisions and product managers. Profitability is also calculated in terms of products (not customers). Planning and budgeting are built around the product; promotions and bonuses are tied to the volume of its output. All hopes and aspirations of managers are aimed at innovation in product line and non-stop release of more and more new products. Listen to some - so bright, free from competition, the future depends entirely on the ability to create better products! And how could it be otherwise? After all, money appears only when the product leaves the territory of the enterprise! The volumes of its output are easily measurable; revenue, costs and profit are tied to a unit of production; the calculation of all summary indicators is based on the number of products produced and sold ... etc., etc.

In asking the second question, I am trying to understand what company leaders consider their main competitive advantage. Why do consumers buy from you and not from your competitors, I ask. And, as a rule, I hear in response: “They trust us”, “We have a reliable supply chain”, “Thanks to our service system”, “We know our customers well”, “We ensure the continuity of their activities”, “They consider us unique”, “We are a major player in the market”, “We have good reputation", "Because of our brand." Rarely does anyone cite a better product or more as a reason low price. In other words, answers to the question: “Why do consumers buy from you?” almost entirely within the scope interactions with consumers. Trust, reliability of supply, quality of service, knowledge, experience and reputation cannot be released in a factory, packaged and sold in a store. All of these are sources of customer value. Companies develop and use certain procedures, processes and systems to reduce the risks of their consumers and the cost of doing business. In fact, the reason for writing this book was the huge logical gap between why consumers buy from a particular company (customer level) and what it spends most of its energy and resources on (product level).

Let's define terms

Before embarking on a journey, it makes sense to define the terminology. Term interaction with consumers I use in relation to situations where the buyer comes into contact with the seller, the seller's product, or information about the seller that is available on the market. Sellers usually have goals, say, increase sales by 10% per year, make a profit of $ 10 million, win the sympathy of consumers or take the largest possible market share. Goals make more sense when defined in relation to competitors. To achieve their goals, companies develop strategy, which describes exactly how to create customer value and outperform competitors. It is important that value is not limited to product features alone – it should include customer service as well as feelings and emotions, such as peace and comfort. In the process of creating consumer value, market players strive for uniqueness, isolation from competitors. They know if there is unique offer them the target audience will be ready to buy more or pay more - and more than once. Companies are trying to develop a system that can help them create customer value year after year, setting themselves apart from competitors that do not have a similar system. In other words, companies seek to provide themselves competitive advantage - a way to create customer value that is not available to their competitors and, preferably, sustainable. But since it, unfortunately, cannot be created once and for all, companies are forced to constantly invest in innovation, that is, to look for more and more new ways to create customer value.

Offset "center of gravity"

The basic idea of ​​this book is the concept of the "center of gravity" of business. Traditionally, companies seek competitive advantage at the product level, that is, in the part of the value chain that relates to production and product. Success here is usually achieved by building more large factories and economies of scale; search for new, cheaper raw materials or labor; more effective organization manufacturing, handling and storage processes finished products; finally, by inventing ever more sophisticated product variants, features that competitors cannot replicate. Historically, product level has seemed infinitely important. In any case, in the past, companies secured a dominant position in the market and made huge profits in precisely the ways listed above:

At the beginning of the automobile era, Henry Ford created such a large-scale and flawless organized production that the cost of the Ford T car was significantly lower than that of competitors. This achievement provided Ford with a serious head start in the division of the market. Soap, chemical, food and textile manufacturers were the first to recognize the benefits of economies of scale and assembly line. In the 20th century, business scale became one of the main sources of competitive advantage and changed the rules of the game in almost all industries.

Capturing a large share of the world market and standing head and shoulders above its competitors, De Beers, a diamond mining and cutting company, enjoyed its unique position for several decades. Few other industries can find a similar player that controls almost all sources of raw materials. And very few people are able to take advantage of the current situation to convert their competitive advantage at the product level into profit!

India-based software company Infosys' undisputed global leadership is the result of its ability to inexpensively hire a skilled workforce of programmers, systems analysts and engineers. Clients appreciated the company for its mobility - it is able to quickly form teams of experienced specialists to work on short projects in accordance with the needs of clients. This competitive advantage for Infosys seemed out of reach for a long time.

Retail giant Walmart has built an unrivaled logistics network to move goods from suppliers to its stores. The branching and high efficiency of logistics means lower transport costs per unit of production and losses during transportation, as well as a decrease in the number of buyers who are dissatisfied with the lack of goods on the shelf. All this allowed Walmart to keep prices lower than its competitors.

The world's largest automaker, Toyota is known for its uncompromising attitude to the quality of its products. It is central to every stage of car production, from prototyping and organizing the assembly line to incentivizing quality control teams. With this advantage, Toyota makes cars that are more reliable than its competitors—and more willing to buy.

Companies that relentlessly develop new products measure their degree of innovation by the amount of revenue generated from products introduced to the market in the last three to five years.

But the world is changing fast. History knows examples when unique competitive advantages became obsolete literally overnight. De Beers' dominance was ended by cheaper Russian diamonds that flooded the market overnight after the end of the Cold War. Easy life Infosys ended when other tech companies like Accenture and IBM began to recruit in India en masse. (By 2009, IBM had more engineers in India than in the United States, and by 2013 it had almost wiped out the competitive advantage of its Indian rivals.) transport companies. With the emergence of China as a global supplier of many products, independent logistics firms like Hong Kong's Li & Fung have made Walmart's once-unique technology a public service. Now any competitor of the network can afford it. And the ability to order products from third-party manufacturers, such as Asia's Foxconn, means that all of their customers benefit from economies of scale. From now on, to reduce costs, it is not at all necessary to build your own giant factories.

Companies that once basked in the glory thanks to the quality of their products also felt the fragility of this seemingly indisputable competitive advantage. Faced with an avalanche of negative publicity about brake failures in its vehicles, Toyota found that it was easier to lose its reputation as a manufacturer of quality cars than it was to earn it.

Equally precarious is the position of those who rely on innovation. The game has changed, and now companies like Ideo and Jump are offering innovative product development and cutting-edge design services to the open market. Today, any market participant can take advantage of an inaccessible privilege in the recent past. Product-based competitive advantage wanes or disappears as competitors secure once-unique assets, technologies and production facilities or get the opportunity to use them on the side.

The approach that has dominated over the past 250 years is rapidly changing to a post-industrial consumer-level model. In this model, customer value is created through interaction with customers, competitive advantages arise in the open market, and the main costs are related to attracting, satisfying needs and retaining customers.

What caused the shift to the level of the consumer

There are three critical aspects of any business that are relevant to the shift to the consumer level: the essence of competitive advantage; type of activity that creates consumer value (for which, in fact, the consumer pays); nomenclature of fixed costs of the company. The shift to the level of the consumer leads to major changes in the strategy and methods of measurement, monitoring key indicators business and management. Leaders will have to scramble to find new forms of customer value creation and new sources of competitive advantage. In other words, the company must go to another level, that is, reformulate your strategy for the consumer.

The erosion of product-based competitive advantage is not limited to any particular geographic region or industry. It occurs worldwide, occurs in all industries, and affects companies of all sizes. He is summoned by powerful new forces. The main one is the rapid depersonalization of products and industries. Manufacturers today are able to copy appearance any innovative product (so cleverly that the consumer will not feel the difference when using it), and then bring it to the market for much less money and time than what was required by its creator. Even in industries where new products are protected by patents, say, in pharmacology, analogues begin to be sold even before the expiration of the patent - competitors simply need to slightly modify the original formula.

Another strength is outsourcing the production of goods. Even former record-breaking manufacturers like Nike and HP no longer manufacture their products themselves, but place orders with third-party manufacturers, mainly in Asia. Outsourcing requires standardization of tasks, processes and quality. This standardization makes products more accessible to competitors. Development, production, and even design are becoming so versatile that it is becoming harder and harder to build any long-term competitive advantage on their basis. The world is more and more like the model described by J. Schumpeter, the pace of creative destruction is growing. A significant contribution to this process is made by the rapid and free flow of information and human resources, open markets for new products and investment opportunities, reverse engineering methods and global outsourcing.

See how easily new products are copied in the already mentioned China. Counterfeit Chinese iPhones cost less than $100, Nike sneakers from Putian are almost indistinguishable from the original ones and are successfully passed off as them in many countries around the world. The market is full of legal "clones". As a rule, many technical innovations - say, wireless technologies, NFC, HTML5 - are based on uniform industry standards, to which, by definition, competitors also have access. At the request of the same competitors, independent designers, manufacturers and logistics specialists turn a certain set of basic technologies into the final product. In the end, the “building blocks” that make up this product are unified, and the competitive advantages based on product uniqueness are eroded.

However, all of the above does not necessarily lead to the appearance of double players in everything similar to each other, fiercely fighting for a place in the sun. In the following chapters, we will see how the “center of gravity” shifts towards the consumer and becomes a source of new long-term competitive advantages. Companies that recognize the importance of being customer-centric are building businesses that are destined to dominate their competitors in the future.

Researchers in this rather young area of ​​market relations are faced with a paradox. The fact is that the sources of such competitive advantages and the examples illustrating them are relatively new, and in order to speak with confidence about their success and sustainability, long-term observations are required. That is why I deliberately chose companies that I have been following for many years and even decades as examples for my book.

Theodore Levitt is an American economist, professor at Harvard Business School, considered one of the founders of modern global studies. - Approx. ed.

Joseph Alois Schumpeter is an Austrian and American economist, political scientist, sociologist and historian of economic thought. According to the theory of J. Schumpeter, the economy lives and develops due to the destruction of old companies, methods and ideas, which are replaced by new, more productive and profitable ones. - Approx. ed.