Which generates the most profitable revenue?
- A product
- A service
- An Offer
Entrepreneurs are often really good at something – they are good programmers, plumbers, designers, cooks or something needed by at least one group of customers.
Some entrepreneurs have a vision of a product or service that has never been designed let alone delivered before.
In both cases, the entrepreneur needs to find someone willing to pay enough money to make the effort a success.
Most people who open a business are good at “what” they do, so the question is not about the quality of what they bring to the market. Since the entrepreneur is hungry for any customer (and their money), as a result, the price is almost always VERY reasonable.
How does this impact why then do entrepreneurs (and big companies) have so much trouble getting new products and / or services into the market in a profitable way?
The problem is businesses almost never sell what the buyers need to buy – the business tries to sell a product or service.
Buyers have some kind of problem they need solved, and seldom is the fact a company has a product or service a clear indication of a solution to the buyer’s problem.
Certainly commodities that are known to the buyer may solve the buyer’s known problem. When that is true, why do buyers have a preference for one commodity over another even when their preference may be more expensive?
For example, Kroger’s sells a store brand cola, a mom and pop gas station sells off-brand gas, and smoke shops have brandless cigarettes, but in each case, these attract only a small portion of the buyers with the rest opting for more expensive brands.
The same is true with service offerings. There is a guy with an old pickup painted up with advertising about his services as a plumber for $20 per hour, but few of us call. Not only don’t we call, but we knowingly pay 5 times as much per hour and wait a day for the person to come.
Since the buying behavior is predictable, what is the entrepreneur missing that they should be doing to get and keep more customers who will pay a premium?
What few companies get is that you can’t buy or sell a product or service until it is turned into an offer. Most of the time offers are created by accident with little or no thought to any feature other than the “product” or “service” is good or cool or the best, when what the customer wants is the problem of speed, or quality or image, or long-term support, or risk, or training or ROI, or anything else. All of these or any combination of these go way beyond the ability of product alone to solve the problem.
As the father of three daughters, I can tell you that the label and the shopping bag are often more important than the product inside and that the salon is more important than the look of the haircut, and how much you paid (normally a lot) is more important than shopping in an inferior store for a lower price.
Each of those things is part of the offer that surrounds the product or service. Those offer elements that surround the product or service impact the B2B world as well as the B2C world.
The B2B world cares about ROI, risk, liability, training, speed and a hundred other things beyond the product or service, and in both B2B & B2C where there is more than one person in the buying picture, different elements of the offer may appeal to different buyers. My wife cares about how things wash or what they tell the world about our kids. Purchasing cares about contracts, and engineers care about design, maintenance and down time.
The model above is made for developing an offer. Answer these questions:
- What problem does the offer solve for the buyer?
- Is the product consistent with our brand promise?
- Is this product compelling in the niche we dominate or plan to dominate with this offer?
- Will the ideal buyer be compelled to use this product to solve their problem?
Once these are answered, determine the 5 to 10 elements that must surround the product or service to eliminate all buyers’ (often there is more than one buyer in the picture) objections, solve the buyer problem, make
buying easy and show great value.
Based on these surrounding elements, you can train your sales staff what to talk about, build go-to-market structure and focus your marketing efforts to those who have the problem, are in the niche, with the ideal buyer profile who values both the product and the 10 surrounding elements.
Stop trying to sell products or services – it is not possible until they are turned into offers, and it is your choice who determines your offers. You can determine the offer or let the market determine the offer, and then you can enjoy the chaos of trying to deliver what the market decided to buy.
Go build intentional offers to dominate your market, delight your ideal buyer and get paid for all the value you deliver.
Luckily some of our suppliers DO let us define our own offer – in fact, they encourage it. They believe that our offer – deep stock, helpful no-pressure staff, and play-before-you-buy complements their own offer as a manufacturer. Taylor Guitars, for example – once they found out that our inventory was nicely presented and always up-to-date on our web site they started referring customers – even out-of-territory customers – who are looking for a specific model we have in stock.
I own a retail music store. My problem is that my suppliers don’t let me operate in the “offer” model. We sell high-end acoustic guitars from makers like C. F. Martin. These are $2-3K instruments, so the buyers are pretty serious (if amateur) musicians.
Our “offer” is several-fold: (1) We stock a good variety of instruments, and at this level you want to try several different ones to see what works for you. Mail order doesn’t cut it, and not many stores carry the deep inventory we do. Play before you buy! (2) We have knowledgeable staff who are NOT on commission. Our job is to match you with an instrument you will be happy with (literally) for the rest of your life. If you’re not ready to buy today, fine. We still treat you with respect. You leave better equipped to choose wisely, and we know you’ll be back. So our “offer” is that we’re the best around at helping you get a perfect match between your musicianship and an instrument – and it won’t cost you extra $$$!!
Problem is, our suppliers are in the “product” model, not the “offer” model. And they force us to go the that way too.
Example: Our store web site shows detailed photos and descriptions (both our own, not boilerplate) of all the high-end guitars we have in stock. We do not show prices; although we are competitive on price, that’s not a key element of our “offer”. We show the guitars and descriptions so a prospective customer can start the “matching” process that will be continued in-store.
One of our suppliers – C. F. Martin – just blew us out of the water. They are trying to tighten their advertising policies, so they are now FORCING us to display prices along side our photos. I took this issue all the way to their top US sales executive, and they basically told me to sit down and shut up. So now the first thing a customer sees on my web site for C. F. Martin guitars is a price. If I didn’t do that, they would yank my dealership.
But that’s better than Fender, who completely prohibit me from showing photos or even an in-stock model list of their products on my web site. They want all Fender dealers to seem the same to customers – in other words, they have chosen a “product” model big-time and they explicitly prohibit me from adopting an “offer” model.
So I get it! But how do I shift my suppliers so they get it too?
Carl,
Great to hear from you and thanks for the thoughtful message.
Sad but there are things out of our control (at least in the short-term).
However EVERYONE has an offer for everything they sell. The difference is if the offer is intentional or accidental.
While we can’t control everything an intentional offer controls everything it can so the buyer gets no surprises.
The intentional offer needs to be aligned with our Revenue Strategy and must always keep us in integrity.
Sometimes in the short-term it is tough until we can transition to a better place.
Thanks for the thoughts and good luck.
Rick