Value drives your profits

“It’s fashionable today to talk of becoming ‘customer oriented.’ Or to focus on that moment of truth when customers experience the actual transaction that determines whether or not they are completely satisfied. Or to empower frontline workers so they can delight the customer with their initiative and spunk.” So starts the classic Harvard Business Review paper “Staple Yourself to an Order,” written in 1992 by professor Benson Shapiro, Kasturi Rangan and John Sviokla.

Market penetration is a challenge for most companies, and few ever really take a forensic look at the output of their company from the customer’s vantage point to determine the company’s overall effectiveness. Best defined as the value proposition, viewing the effectiveness of your company through this lens presents a very powerful vantage point.

The value proposition is made up of all the touch points between the company and the customer. While there are many touch points that make up a company’s value proposition, the most common elements are lead times, on-time delivery, fast response to quotes, quality, live operator and professional communications in social media, websites, letters, emails and the like.

We have been programmed to expect things immediately (Facebook, Google, Twitter, Skype, etc.). Objectively looking at most companies, they do not provide their current customers with any level of immediacy.

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If significant market penetration is the goal of a company, then the power of the value proposition is the tip of the market-penetration spear. It addresses the operative question that every target customer will have: Why should I buy your product or service? Your company must be in a position to give the target customer a real reason to believe. This means that some metrics must accompany any statement concerning the value proposition.

If you step back from the day-to-day crisis of the moment and look at the big picture, you can view the value proposition from a different perspective. Consider this: Every element of a value proposition is supported by a process, or family of processes, of some kind. In some cases these processes may not be formal, but have evolved to a habit where “we have always done it this way” is the order of the day.

In professor Shapiro’s order-riding journey through a company, he uncovered many inefficiencies that, when corrected, would improve the lead time in the value proposition for order fulfillment.

Since most companies have a very small market share, market penetration presents a viable strategic option for management. Also, employees know more about the processes they run every day than their managers ever will.”

As processes become more efficient, the employee-supported elements in the value proposition will measurably improve. This will provide the sales and marketing departments the firepower to differentiate the product offering. Quantifiable differentiation can only enhance the corporate brand.

As company sales grow, the key is to not add employees at the same rate. As EBITDA improves, this will provide the funds to reward employees for their “gift of efficiency,” and also improve the overall value of the company for management, leading to the ultimate win/win goal. •

Larry Girouard is president of The Business Avionix Co. in Newport.

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