Consumer Strategy

Overview

Although most executives can recite the truism that a business has to develop a distinct competitive edge to expand and remain sustainable over the long term, many have just the worst understanding of what that means. They are confused by the esoteric vocabulary of strategy or bogged down in analytical tool technical specifics.

Three circles

We also meet these executives in our consultancy and classrooms. We're asking them to draw three circles. These circles, put in the right relationship with each other, offer an outstanding visual representation of what strategy — internal and external — means. Using this primary method, hundreds of leaders and future leaders rapidly absorbed strategic principles. They brought it back to their organizations, where it also becomes part of decision-making.

Let's say that the executive team ducts this exercise. First, the team should think deeply about what consumers value and why. For example, they may appreciate speedy service because they want their time management or other business or family obligations. (Exploring deeper values will open managerial eyes and uncover new value-creating opportunities.) Thus, the first circle reflects the team's consensus view of everything the most critical consumers or consumer segments want. (Analyzing other segments later.)

The second circle demonstrates the team's perception of how consumers interpret the company's offers. The degree to which the two circles overlap shows how well the company offers satisfy consumer needs. Even in mature industries, consumers don't express all their desires or concerns in business conversations. They weren't knocking on the door of Procter & Gamble demanding Swiffer's innovation, whose segment now contributes significantly to the company's double-digit rise in-home care goods. Instead, it originated from P&G's careful study of household cleaning issues. Customers' unexpressed issues can also become a source of opportunities for relationship building and development.

The third circle reflects the perspective of the team on how consumers interpret deals from competitors.

The second circle demonstrates the team's perception of how consumers interpret the company's offers. The degree to which the two circles overlap shows how well the company offers satisfy consumer needs. Even in mature industries, consumers don't express all their desires or concerns in business conversations. They weren't knocking on the door of Procter & Gamble demanding Swiffer's innovation, whose segment now contributes significantly to the company's double-digit rise in-home care goods. Instead, it originated from P&G's careful study of household cleaning issues. Customers' unexpressed issues can also become a source of opportunities for relationship building and development.

The third circle reflects the perspective of the team on how consumers interpret deals from competitors.

Each area within the circles is strategically significant, but crucial to creating a competitive edge are A, B, and C. The team should ask each question. A: How influential are our advantages? Based on distinctive capabilities? For B: Are we delivering parity effectively? For C: How can our rivals' advantages be countered?

The team should hypothesize and test the strategic advantages of the company by asking customers. The process can yield surprising insights, such as how much white space (E) exist. Another perspective may be its value, or its rivals generate that consumers don't need (D, F, or G). Zeneca Ag Products noticed that one of the most crucial distributors would only be able to do more business with the firm if Zeneca removed the time-consuming advertising programs that its managers felt were an integral part of their value proposition.

But the biggest surprise is that area A, conceived by the company as huge, turns out to be tiny in the customer's eyes.