marketing

MARKETING

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HOW 20 TOP AUSTRALIAN ENTREPRENEURS

STANDFORD MANAGEMENT INSTITUTE EXECUTIVE BOOK SUMMARIES

CRACK MARKETS WITH THEIR MINDS

—By John C Lyons and Edward de Bono

D

o you want to create entirely new markets? Or do you want to dominate an existing market but don’t have the marketing budget to compete with the big players?

Do you want to inspire customers so that they build your brand for you? You can do all of the above and more. It simply requires you to treat thinking creatively more seriously in your business. There is no one formula to achieve marketing success, but there are strategies that work better than others. Marketing Without Money teaches you the stealth marketing techniques used by Australia’s top twenty entrepreneurs. Learn how they create outstanding value for their customers, engage people in their cause and do it all creatively and provocatively. Things that unsuccessful entrepreneurs fail to do. Even if you have little or no start-up funding, even if you are facing strongly entrenched competitors, you nevertheless have the opportunity to steal the market using innovation and creativity. This summary will show you how

IN THIS SUMMARY

to generate and implement business, product and service concepts to create new markets in which your company

Create Outstanding Value

2

Market the Cause, Not the Product

3

brainpower for money. By using your mind to crack the

How to be Seriously Creative

6

market, you will be able to create your own future, instead

Start valufacturing today

8

is the leader. You will learn how to substitute creative

of being led to it by others. Now, that’s one proposition no business can afford to ignore.

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ABOUT

THE

AUTHORS

John Lyons is a renowned expert and author in Marketing. Lyons was founder, CEO and then Executive Chairman of the leading national strategic research and marketing company, Marketshare, which he sold to a public company in 2000. Edward de Bono is the world’s most respected authority on creative and cognitive thinking in business. Widely regarded as the leading writer and speaker on the topic of ‘thinking’, De Bono is the author of sixty-five books, translated into thirty-five languages. He has recently been named one of the most influential people in the history of humanity.

CREATE OUTSTANDING VALUE The single most important focus in your business should be the creation of outstanding value for your customers. You will always have the opportunity to create further value for a customer; people are never satisfied with the value they currently have and are always looking for something better. The good news is that there are countless ways to create new and exceeding levels of value for your customers. But to be a successful creator of value, you must focus your company’s effort.

FOCUSED VALUE You will never be able to please every segment of the market. Businesses that try to be all things to all people are inevitably undermined by more focused competitors. You can create outstanding value for your customers by using these four steps to focus your product or service offering: 1. DECIDE

ON YOUR SPECIFIC CAUSE

One of the biggest mistakes made by entrepreneurs is entering a market where there are already many similar competitors and then imitating their competitor’s strategies, policies and procedures. Avoid this by first choosing a group of potential customers to whom you think you could provide outstanding value. Ask yourself if you would be able to supply a product or service package offering better value than any of the existing competitors. If you don’t feel passionate, almost fanatic, about improving that product or service,

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then you are not connected to the cause and should not enter that market. 2. ENSURE

PROFITABLE DELIVERY

There are an unlimited number of ways you can provide outstanding value. You could lower prices, provide better quality, shorter delivery time etc. New companies do it all the time, but many are still unsuccessful. They haven’t worked out how to profitably deliver that extra value. Before you take your offering to the market, you must work out how you can extract a premium from the extra value you have created for your customer. 3. CONSOLIDATE

A SUSTAINABLE POSITION

Once you have decided where you will create outstanding value, your business must be able to protect or monopolise the value you deliver. To do this, develop an efficient system or formula for value creation and delivery. Build your company’s reputation so that it becomes ‘famous’ for its value delivery in your focused area of expertise. Your value bundle should be improved over time through the addition of other values. The aim for your business is to create a value monopoly. 4. DECIDE

BETWEEN CUSTOMISED VS. STANDARDISED

Will you be rigidly standardised (like McDonalds) so that your products or services are delivered at exactly the same level of quality and design for every customer? Or will you have a highly customised business design (like a top restaurant) where each product or service is delivered according to each customer’s needs and expectations? You may be somewhere in between. But whatever level of customisation you calculate to be most profitable for your business, make sure it is consistent across that product category. That will be the level of customisation your business will be famous for – as long as you stick to it.

HOW

TO ANTICIPATE NEW OPPORTUNITIES

The more you can anticipate a customer’s need, or the value of a product to a customer, the more profitable your business will be. The problem is that most people can’t tell us what they want or need until it’s available on the market. However, there are four types of values where you can uncover brilliant opportunities. 1. Convenience value: products that make our lives easier. 2. Quality of life value: products that provide us with a better family, social and work life.

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3. Distraction value: products that entertain or help us escape from our everyday lives. 4. Self-importance value: products that make us feel better about ourselves and generate admiration from others. Ask yourself how you can create outstanding value in any of the above. This will help you anticipate what people are going to want before they know themselves.

MARKET THE CAUSE, NOT THE PRODUCT Charles Revson, founder of Revlon cosmetics once said, ‘In the factory we make cosmetics, but in the drugstore we sell hope.’ Revson was a marketing pioneer. He recognised the difference between selling his product and selling his cause. This insight meant that he focused all his resources on creating that hope – from his product packaging and movie star endorsements to his retail environment emphasising beauty and glamour. His innovations form the basis for every marketing strategy conducted by fashion houses around the world today. You can all apply this principle to your own business by understanding the causes that are most important to your customers. Understand your customer’s priorities and values and you will instantly command their attention. This sounds easy but it’s rarely done. There are two reasons for this: 1. Businesses are often too centred on their product or service. They do not make the effort to truly understand their customers. They lock themselves into trying to persuade customers to buy their products, because they think it’s what they need. Instead, they should be trying to understand the causes important to their customers then creating products or services to address those causes. 2. Businesses rarely take full advantage of the media to promote their cause. While the media are constantly searching for news and information, organisations are often too busy within their operational day-to-day tasks to fight for their cause in the public domain. To appeal to your customers, you need to start approaching the media with potential stories about how your cause is interesting to their audience. Ultimately, customers are interested in themselves; both the media, and your product or service, are means to improve themselves and further their causes.

GERRY HARVEY - VALUE FOCUSED ENTREPRENEUR One of Australia’s most admired and successful entrepreneurs, Gerry Harvey started with a small business called Norman Ross (now Harvey Norman) four decades ago. He still thinks he could end up a failure – ‘I’m looking around saying “I’ve got all this knowledge, how can I exploit it?” Now if I don’t exploit it over the next ten years I’m basically a failure.’ This underlies Harvey’s basic business philosophy: he never stops looking for opportunities. As he has done over the past forty years, Harvey continually experiments and learns new ways to improve his value offering to customers. He creates an environment to help people achieve the best results for themselves. The Harvey Norman culture constantly communicates to employees that the company is trying to help them reach their goals. Managers are given people to mentor. The most talented people are given latitude to create bold strategies. Everyone learns. Gerry Harvey continues to test the best management systems on his different businesses. When Harvey Norman changed from being a company-operated to a franchisee-operated system, the result was explosive. Business growth reached new levels because store managers owned a piece of the business, but they were still provided with the experience, wisdom and strength from the head office. Harvey Norman’s recent acquisition of Rebel Sport was a different story. The problems facing Rebel Sport are more easily fixed under a company-operated system. Harvey aims to test a number of changes on the company to eventually produce a hybrid management system. Some parts of the business might be operated by store managers and other parts managed by head office. He doesn’t know the best formula yet, but in testing small changes, Harvey is bound to reach the right combination. He can then replicate this across other stores within the Rebel Sport business. As Gerry Harvey says: ‘I don’t think you go out with a grand plan. If people are good when they start a business, when the opportunities come up they take them…but very few want to take those opportunities…they get comfortable…they don’t want to grow to a huge business.’ Clearly, you need to know yourself well before you start your business.

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DICK SMITH – THE ULTIMATE CAUSE CHAMPION Dick Smith has a winning formula for designing, building and then selling start-up businesses. In thirty short years, Smith has created an entirely new category of business not once, not twice, but three times. Each new business is created on the basis that it will be the market leader, not a follower. While many start-ups offer products that are only slightly different to competitors in terms of price, quality or convenience, Smith prefers to reinvent the race entirely. He creates a new race where he is the sole competitor. In this new market, it’s almost impossible for late entrants to outpace him. In all three of his start-ups, Smith achieved this via a two-fold strategy: he narrowed the focus of his product offering while enhancing the overall value. In Dick Smith Electronics, he did this by focusing on selling electronic componentry while offering knowledgeable advice within his retail stores. Ten years after he started Dick Smith Electronics, Smith sold the company to Woolworths for $25 million. Smith’s next cause was related to his passion for Australia and the wide range of natural experiences available to people within this country. Australian Geographic magazine was born. Smith took the best ideas from the Alaskan and Canadian geographic magazines and combined them with the top class subscription system from Readers Digest magazine. His was the first business to combine the Australian Geographic magazine with Australian Geographic retail outlets that sold related products. The result was a totally new experience for readers and shoppers. A few years later, Smith sold Australian Geographic to Fairfax for a massive $42 million. In 1999 Smith created the cause for which he is most famous – ‘Fighting Back For Australia’, symbolised by his new company, Dick Smith Foods. Smith connected his product with a powerful cause - the future of Australia and our children’s jobs. While other food companies promote the superior benefits of their products, Smith has tied the purchase of his product to patriotism. To buy any other product is un-Australian. Smith is perceived as a national hero, because customers feel a powerful connection to his cause. Within four short years, using a marketing budget that would be a fraction of that spent by competitors, Dick Smith Foods has been able to challenge Australia’s strongest brands.

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BECOME

A

CAUSE CHAMPION

Positioning yourself as a cause champion is one of the most cost-effective marketing techniques you can use. On the surface, it may seem like successful entrepreneurs such as Dick Smith or Richard Branson have a natural ability to passionately champion their cause. However, this ability arises more as a result of their passion about their cause rather than any innate skill in public speaking. We’ve all been touched by people who speak with passion. They tell such a powerful story about their cause that their target audience becomes interested and involved. A powerful story told with passion is a hard combination to resist. But watch out for the mistake made by many entrepreneurs and big companies, who pick a cause or passion that revolves around the products they are already offering. It’s a huge mistake. You will diminish the credibility of your cause champion. You will not tap into what your target market are really interested in. Instead, your first step should be to recognise that your target audience are preoccupied with their own unique set of interests, concerns and needs. The only way you will capture their attention is if your issues closely coincide with theirs.

GENERATING POSITIVE WORD

OF

MOUTH

Positive word of mouth is the most powerful way you can make your cause and product famous. Generate word of mouth and build your reputation as a cause champion using these three simple stealth marketing techniques. 1. CREATE

TALK-WORTHY CONTENT

At all times, you should be focused on talking about your cause, not your product. Your customers want to talk to others about things they can get passionate about. People rarely get passionate about a product. When you start talking with empathy and knowledge about the cause, not the product, you are establishing yourself and your company as an ‘authority’ on the subject. Once your audience is ‘sold’ on your cause, you can be certain your solution will be too. If you are the first company to provide a solution to a cause, it’s highly likely that you’ll lead the market for a very long time. The first mover advantage does pay off. 2. PROVOKE

PEOPLE

If you were to walk around the city wearing a tailcoat on a hot summer day, you will naturally

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gain the attention of those around you. You will have provoked their interest. They will be trying to work out why you are dressed differently, and actively trying to understand your logic. People might then start to notice that you have a sign on your back that says ‘Cool Tails’, with your address and telephone number. This great provocation conveys two high impact messages – firstly, that the tailcoats are designed to be cool in summer; secondly, they are available in the area. Just by being dramatically different to your competitors, you will find yourself the centre of attention. Invest your time in identifying ways you could be different. The difference must be noticeable and worthwhile for people to tell their friends. The more noticeable the difference, the greater the returns. 3. SET

UP A CHALLENGE

Give your audience a challenge to bring out their competitive spirit. Paul Cave, founder of BridgeClimb, gives people the ultimate challenge. He challenges people to prove to themselves that they too, can climb the Sydney Harbour Bridge. Climbers then refer other friends to BridgeClimb simply by challenging them to make the climb. The target audience is engaged in the cause - this is what sustains word of mouth referrals. Once the person referred takes up the cause, they will purchase the product as a natural progression. Then they will refer others to the cause and the process will snowball as the number of people advocating your cause grows faster and faster.

BUILD

A

REPLICABLE FACTORY

When you find a winning formula for creating outstanding value, your biggest challenge is then building a system to replicate it to the larger market. Accountants, lawyers and consultants have all struggled to achieve this because of their reliance on the knowledge of their professions. You can overcome this challenge by building a replicable factory using the following three-step strategy: 1. Narrow the focus. You will already have narrowed the focus of the value you offer to a select target market. Similarly, when developing your formula to deliver that value, you should narrow the focus of what you provide. 2. Simplify the delivery process. Brainstorm ways in which your business can streamline its value delivery formula. Some common ways business delivery processes can be simplified is via their

sales strategy. Telephone or internet sales are often just as good as face-to-face selling. Technology can now be used to handle almost all of your delivery process. The remainder, which cannot be delivered using technology, can be outsourced or simply not offered by your company.

FLIGHT CENTRE – A

REPLICABLE DISCOUNTED FLIGHTS FACTORY

Flight Centre is based on one of the simplest retail models around. Its principles can be applied to your business, regardless of industry or size. The Flight Centre model revolves around selling uniformly discounted flights. Since most travel agencies generalise in selling everything, they become famous for nothing. Flight Centre differentiated itself by being the first to put prices in its windows. Each store has an unrelenting focus on providing value to customers while still making a strong profit. Efficiencies discovered in one store are communicated to others. This narrow focus allowed Flight Centre to quickly replicate the way it delivered value to customers in the very early stages of the business. Flight Centre has become famous for recruiting down to earth people and rewarding them better than competitors. It’s no coincidence that it was one of the Top 10 employers to work for in 2002. Employee performance is clearly measured and top performers are openly praised across the company. Objectives are set and each person who contributes to achieving that outcome is championed. Flight Centre builds its company structure to take advantage of human nature, rather than working against it. The 4,500 staff members work in teams of three to seven (the ‘Family’) in one retail store. This store co-ordinates its efforts with four to ten other stores in a ‘Village’. Each Village is combined with their support businesses to form a ‘Tribe’ of 120 people. The company then begins to feel more like the normal social structure in which people feel most comfortable. The result is that work becomes a more integrated and enjoyable part of a person’s life. In just sixteen years, Flight Centre has opened 975 shops generating an after-tax yearly profit of $62 million. Founder Graham Turner aims to increase Flight Centre’s market share from 25% to 40% and become a global leader in the discounted flights category. Quite a feat considering Turner started the company as a veterinary science graduate with no previous retailing experience.

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3. Recruit like-minded people to manage the system. If you are aiming to build a replicable system, you need people who are prepared to follow that system and add value to improve it over time. Even though you are looking for people who will follow the rules, you also need those who will challenge it when they see change in the marketplace.

HOW TO BE SERIOUSLY CREATIVE Many companies are serious about continually creating outstanding value and creatively championing their cause. But they don’t know how to start being creative. They don’t know the process of creative thinking. Their concepts become poor copies of competitors. That’s why creative thinking is the ultimate skill for any successful entrepreneur or manager. Here are eight steps you can take to nurture creative thought within your business:

1. SEARCH FOR ALTERNATIVES, DOESN’T SEEM NECESSARY

EVEN IF IT

Lead your mind in different directions by asking yourself: is there another way of doing things? What are all the alternatives? What can we be doing better in this situation? When you are generating alternatives, remember not to judge them at the same time. Otherwise, your limited range of alternatives will compromise the quality of your end decision.

2. FOCUS

YOUR

THINKING

There are two types of focus you can use in your business: • Area Focus. Focus on looking for ideas in a particular area. This allows you to think about anything at all in that particular area. • Purpose Focus. Focus on the reason or purpose for the new ideas being generated. This could by done via a ‘Creative Hit-List’ where you list your problems, situations that could be improved and general focus areas. The benefit of the Creative Hit-List is that everyone in your organisation instantly becomes aware of the situations where there is an urgent need to think creatively.

3. DEFINE AND THEN CHALLENGE CURRENT IDEAS Every new innovation or technological breakthrough has come about because someone

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dared to challenge the status quo. You can do the same by defining your current mindset with this checklist: • What are your dominating ideas? You need to know which ideas are currently dominating your thinking, so that even if you can’t fully escape them, at least you can recognise them and consider new alternatives. • What are your assumptions? Articulate what your assumptions are about your market, your customers and your competitors, so that you can challenge them. • What are your constraining factors? For example, constraining factors within the airline industry revolve around passenger safety. Once you have defined your current way of thinking, you can start to challenge yourself simply by asking: what is the benefit to the company of doing this? If there is no significant benefit, then that action is not necessary and you should get rid of it, or find alternatives which do provide you with benefits.

4. CREATE

IDEAS VIA

RANDOM ENTRY

Random entry is one of the easiest ways to start generating powerful new ideas. All you need to do is pick a word at random and then use this word to fuel your new ideas. The beauty of entering random words into your brain is that it stimulates your thinking in new directions you may not have reached otherwise. For example, your assigned purpose may be to make cigarettes less harmful. You are then given a random word: traffic light. From this word, you could come up with the idea of printing a red band near the end of the cigarette. When people reach this band, they know they are at the section of the cigarette where their cigarette smoke is at its most harmful.

5. BE PROVOCATIVE Come up with ideas that are deliberately controversial, absurd or provocative. By using provocation to jump outside your current boundaries, you are providing movement to concepts, without fear that they will be attacked. For example, Dick Smith used provocative thinking techniques to create Dickhead Matches as a promotional tool for his bigger cause (persuading people to buy Australian-made products).

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6. HARVEST

YOUR

THINKING

Once you are reaching the end of your brainstorming or creative thinking session, you can harvest your thoughts by categorising them as follows: • Specific ideas. You can see the value of these ideas right away and they can be applied immediately. • Beginnings of ideas. There is something new and interesting about the idea that should be thought about further. • Concepts. Extract the concept behind your ideas, to find alternative ways to implement that concept in the future. • Changes. Identify the changes that are occurring in your thinking, approaches or concepts, so that you can track it over time. Once you have categorised your ideas, you can select the ones that best suit what you are looking for at that point in time and then store the others for the future. For example, you may want a big idea with a big risk if you are a small company trying to enter an overseas market. All your ideas that don’t suit this profile can be kept for use when you are ready to implement your next idea.

7. TREAT

YOUR IDEAS

It is rare for a new idea to be ready for implementation in its current format. Often it will need to undergo some kind of treatment, modification or improvement. The best kind of treatment will make your idea simpler and less expensive to put into practice. Specific ways to treat your ideas include: • Shaping it to fit real-world constraints of technology, budget and legality • Tailoring it to fit within the resources available in your organisation • Strengthening it to expand the range of benefits it will deliver • Correcting its faults to address any areas of potential failure • Differentiating more clearly between this new idea and previous ideas or the current status quo

8. CREATE

A

CONCEPT R&D

GROUP

Every business started with a concept. Entrepreneurs that have penetrated markets without

money have done so because of their skill in developing and implementing better concepts. One way all of us can develop better concepts is through the creation of a Concept R&D group. The role of the Concept R&D group within your company is to treat the development of concepts as a serious priority. This group would be concerned not only with major strategic concepts, but also with ideas affecting every area of the organisation – from production to advertising to accounting. There are four main functions that should be undertaken by your Concept R&D group: 1. CATALOGUING

CONCEPTS

It is essential for any business to extract, isolate and define current and past concepts. By identifying the traditional notions used by you and your competitors, you will find it easier to move your business away from the concepts that are dying out in your industry, towards those that are emerging. 2. GENERATING

CONCEPTS

Next, your group can generate new concepts by: • Pinpointing specific areas where new concepts are needed inside your company. Anywhere there is a bottleneck, high-costs area or source of competitive disadvantage is a suitable area to target for change. • Perceiving changes and developments in the outside world. Such changes will often require your business to implement defensive concepts to protect your market share. • Reviewing existing concepts. Even your most successful concepts should not escape review. Positive change should never be limited to areas that are underperforming. 3. DEVELOPING

CONCEPTS

The success of a new concept within your company will rely on the way it is developed once it has been thought up. One way to ensure the best utilisation of the concept is to put your Concept R&D group in charge of securing the contracts, information, technology and people to facilitate its development in the real world. 4. TESTING

CONCEPTS

A concept that is not tested and implemented is a wasted concept. Ensure your business doesn’t

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SELECTED AS ESSENTIAL READING FOR BUSINESS PEOPLE waste any of your potentially valuable concepts simply by conducting a test with a small group of people. If the concept doesn’t produce the level of benefits you expected, then the Concept R&D group is responsible for creating a report to record the lesson. If the concept does work, this should also be recorded. But in the end, the decision to use it should rest with the people responsible for overall strategy within your business. After all, they are the ones that are best suited to weigh up the risks associated with the concept in relation to the rest of your business. When you are forming your Concept R&D group, strive to include one senior executive from your business. The group should not be comprised of purely creative people. Instead, there should be a core group of people coming together from different departments, with other semi-permanent members who can choose to rotate in and out of the group. If you want new concepts to be treated seriously within your business, the group needs to be given a formal name and structure. By creating an emphasis on new concepts, you will open up the barriers currently placed around your organisation. In time, members of the Concept R&D group will set up smaller concept groups within their own areas. Once creative thinking has become a source of competitive advantage in your business, you will be operating within the same league as Australia’s most successful entrepreneurs. If a computer that generated new ideas were sold on the market for $5 million, organisations would rush to buy them. Consider then, the unlimited value you have in your own mind to create new ideas that could translate into great businesses. The good news is that creative thinking is a skill you can develop. Once developed, it is likely to be one of the most powerful forces of competitive advantage within your organisation. As with all skills, it simply requires patience and practice. But once you have mastered the skill, you will be able to call on it at any time.

current business environment, we are surrounded by downsizing, acquisitions and consolidation. Companies are concentrating on cutting costs. Of course, this housekeeping and quality management is important. But it should be the basis from which you start work, not your sole focus. The benefit for entrepreneurial businesses is that this focus is likely to be diverting your competitors’ attention away from finding new ways to create outstanding value. That is where your opportunity lies. It’s a chance for your business to capture the customer’s imagination. It’s an opportunity for creative thinkers to stand out in a landscape of corporate bleakness. Get your cause right. Make creativity the soul of your business and develop winning concepts – then energetically follow-through. You will create new markets and stamp your authority on them using the media and your customers instead of your money. You will have built a replicable business that endures, because you won’t have bought your market. You will have won it.

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STANDFORD MANAGEMENT INSTITUTE EXECUTIVE BOOK SUMMARIES Bringing Essential Knowledge to Busy People A 12 month subscription of 36 summaries costs AUD$259 To subscribe, contact Standford Management Institute at:

1300 88 14 16 or Fax: (02) 9460 6281 [email protected] PO BOX 184, Crows Nest, NSW 1585, Australia www.standford.com.au ACN 097185825

START VALUFACTURING TODAY At the end of the day, the success of your business relies on your ability to create or manufacture value. To valufacture. The most effective way to do this is through your concepts. In our

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