July 2010 Archives

Watch these two advertisements from two competitors in the same industry. Both advertisements appeared on YouTube this month, within the past week.

Xerox:

and,

Konica Minolta:


None of the above will achieve viral status, but they reveal how these two businesses approach their markets. One, Xerox, embraces customer intimacy.  In fact the entire video is about solving their customers’ issues.

The other, Konica Minolta, creates an implausible fiction around a product.  When was the last time you saw everyone gather around and welcome the new MFP?  Speaking of which, what is a MFP?  They don’t tell you in the ad. (FYI, it’s a Multi-Function Printer). On a historical note, Xerox’s very first advertisement is in may ways more compelling than the inauthentic product tall-tale we see here.

But let’s get serious for a minute. We see Xerox stressing its ability to impact major accounts.  Their story is around managing business processes in a sustainable way.  I believe Xerox created this market and although other companies play in it, Xerox is consistently telling the market that they are the player that can impact business.

This is a fundamental business model difference. Here’s how the two companies define themselves:

  • Xerox Corporation is a $22 billion leading global enterprise for business process and document management. 

  • Konica Minolta Business Solutions is a leader in advanced imaging and networking technologies for the desktop to the print shop.

While they both make claims that are true, only Xerox has positioned itself as meeting customer’s true business needs. We all know that Xerox’s has a rich history of product innovation. But Xerox is a business partner and solution provider not just a product seller. And the market is rewarding them for it.

A Gartner report shows that a segment of this industry - Managed Print Services (MPS) - is a cost-effective alternative to the traditional purchase and leasing arrangements under which organizations acquire their office printers and multifunctional devices. Here’s how Gartner phrases it:

Cost savings is the main driver behind the decision to go with MPS, and the poor economic climate has boosted MPS opportunities. MPS enables organizations to reduce the cost associated with printing and copying through product consolidation or redeployment. It gives them a consolidated contract for hardware, supplies and maintenance for greater visibility of spending. MPS also provides the flexibility to scale pages, print resources and cost to match business volume and staffing. It has the ability to shift costs to where customers have available budget via chargeback and by turning capital expenditure into operating expenditure or vice versa.

managedprinty.gif

Xerox is now really competing with HP on the basis of customer intimacy. It knows that solution selling is not enough. So what could Xerox do to further differentiate itself in this market?  For starters, Xerox could easily do what HP is doing and put out a line of ads stressing its varied and deep solutions and its ability to impact many more customer issues. Where is Xerox in its customer intimacy journey?  As stated Xerox has a vibrant and varied solutions business with a global reach.  Further, Xerox has a strong focus on major accounts and is building strong capabilities to impact them through a variety of solutions. 

If you look at the copier segment of Xerox’s other competitors they often stress features and functions; they’re addicted to product innovation. These companies are using traditional market awareness story-telling - so that customers will be familiar with their brand when sales representative many times an outside channel calls on the accounts.  Unfortunately, far too many of the stories told are not compelling, especially in this economic environment.

Eighty-eight percent of all CEOs say getting closer to the customer is the most important dimension to realize their strategy in the next five years.  According to an IBM study, "The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority."

This is not news for anyone who views customer intimacy as a business model and not just a sales technique. One of the key tenets of a superior customer intimacy practice is to constantly maintain a tight linkage between service delivery and value creation.  In fact, by definition, you can't have real customer intimacy if you're not solving your customer's most strategic issues.

customer-value-diagram.gif

The diagram above makes the following point: there must exist an optimal balance between your promise and your delivery, i.e., you gotta walk the talk.  Further, the value proposition you bring to your client must impact your customer's value drivers in a perceptible way.  Once you have convinced the customer that your idea will in fact deliver value (idea selling), then you must in fact deliver what you promised.  In our case, we say that you must offer True Solutions™ and be an intimate partner in solving problems and bringing new ideas to your clients. Of course, you also have to keep in mind that your ideas or propositions must be screened to ensure they meet your criteria for fostering customer intimacy.

If your solutions don't deliver on your value proposition, you're guilty of marketing hype.  This can be a fatal mistake.  Far too many companies believe their own marketing propaganda, and don't know how to deliver on their marketing promises.  90% of the time, this is why customer intimacy gets a bad rap.

Now, a few words about customer value drivers. We're all indebted to the academician Jag Sheth's theoretical model that explains the five values that drive customer choice:

  1. Functional value: the perceived utility that derives from a product's physical, utilitarian, or functional attributes.
  2. Social value: derived from an alternatives association with an identified demographic, socioeconomic, cultural, or ethnic group.
  3. Emotional value: derived from the ability of an alternative to arouse an emotional or affective state.
  4. Epistemic value: acquired by an alternative as the result of its ability to arouse curiosity, provide novelty, and/or satisfy a desire for knowledge.
  5. Conditional value: derived from the specific situation or context of the purchase decision. 
At McMann & Ransford, we help our clients build True Solutions™ that meet all five customer values.  Unfortunately, far too many companies are focused on functional value alone, a classic symptom of the product-driven company.  In our next post, we'll look at an industry which is addicted to innovation and examine the consequences of this behavior.

Today I want to examine the HP Let’s Do Amazing campaign:

First I want to congratulate HP on the campaign. They highlight the power of solutions - to differentiate themselves with a powerful, substantiated message, and keep the commercials interesting and novel.  From a practical point of view, this is an excellent example of explaining to the world the power of  True Solutions™ that pull through HP hardware and software. 

Although we have all seen companies produce ad-campaigns that place their company’s solutions ability ahead of their reality - in this case HP created, sold and implemented the solution.

Let’s first discuss the power of the ad campaign. What does it do?

  • Differentiation. The campaign places them above many other technology providers - Dell, Sony, Toshiba etc. as having more to offer.  So many conversations in the major-account technology sector that HP plays in are about price/discounts etc.  HP is stating that for its major B2B accounts it is something different.  They offer True Solutions™ and are an intimate partner in solving problems and bringing new ideas to the accounts.
  • Intimacy. Reveals a level of intimacy with clients - they solved a true issue or provided a new opportunity.  The ad shows that HP is working with the account to solve real problems not just selling existing products to the account.  You get the feel of a partnership facing the world of competition together.  
  • Vertical/customer-centric business model. Shows that HP has industry expertise in business and can provide concrete ideas to solve real problems.  Further, it shows an outside-in strategy.  Finally, the success was driven not by great sales but by great account intimacy (trust us we know and care), consulting (finding the answer) and delivery (making it work).
  • Repositioning. Places HP’s B2B business offerings as a worthy IBM, Accenture competitor.  Once you are successful in the Intimacy EngineTM and have a successful portfolio of solutions you want to reposition your company away from old competitors towards the people you want to be compared to.  Get prospects to think: “We should consider HP.”
  • Credibility. Provides a halo-effect for other vertical account discussions, an intro for further solution discussions across industries. It gives credibility to HP’s solution business.
What does it tell us about HPs journey to the Customer Intimacy Engine™ Business Model?


path2intimacy.gifAgain, we do not suggest any firm build an ad campaign ahead of its ability to deliver on the True

Solutions™ promise. But if we take the HP ad and determine their position we might find things that help you on your journey.
 
Are they in the Form stage?  The Form stage is all about early success.  Getting your company comfortable with the new model (getting out of its way if you will), producing success in getting market participation strategy, selecting an initial portfolio and offer, taking it to market and getting some success to build upon - a pilot if you will.  Clearly HP has chosen key or major accounts within verticals to focus upon. Further, they have successes to show case and the broader company must understand the Customer

Intimacy Engine™ business model or the idea of the ad campaign would never have got momentum within the company.  So we can easily determine that they are not in the Form Phase.

Are they in the Commercialize phase?  This phase is all about proving that the model makes commercial sense for the company - building a critical mass of solution creation, delivery, and account management resources to drive meaningful revenue (at least in sections of the business) and pull through their other products - the ones they push to market today.  Clearly HP can pull through hardware and software; the ads show this explicitly. Also, they have the critical mass for the vertical and the key accounts but they have more - they have accepted the business model as the way they do business for at least the major accounts of HP.  Therefore they are further along than the Commercialization phase.

Are they in the Scale phase?  The scale phase is about making this the way you do business (at least for the appropriate segments of your business).  The account management, R&D, business management, go to market, HR, Finance functions have all aligned in the business model and there is no more internal fighting about should we do this and will this work and why is this different etc.   Further, it is about fast growth of the model to be the driver of traditional product sales throughout the segments that are affected.  HP appears to be on top of these issues and has made the decision about business model and is confident enough to reposition its B2B business accordingly.  Therefore I think they are firmly in the Scale phase and are trying to move to the Dominate phase.

Again, I believe HP has put together a very impactful way to announce to the world in clear and interesting fashion where they are and where they are going.   Also, you should look at your company to see where you are and determine if you can move faster to the safe and profitable ground the HP appears to have found.

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