There are signals that China—whose artificially deflated currency and price supports have driven its economy for years—may soon allow the Yuan to appreciate. If it does, China will have to focus selectively on markets and market segments where it can meet its competition on value rather than price. And that will send an important signal throughout the world that Value Management is a strategic imperative that goes beyond the marketing department.
According to Dr. Tom Nagle, author of the just-released fifth edition of the Strategy and Tactics of Pricing, many of the most profitable companies, even those in some slow-growth, low-profit industries, are those that target growth opportunities carefully to leverage and reinforce pre-existing competitive advantages and the value they provide to their customers. Nagle maintains that particularly now, given predictions of relatively slower growth in the west over the next decade, the ability to find and create the optimal circumstances for competitive advantage based on value are critical. “The fight for market share will remain intense,” says Nagle. “Those that win will be those that can better leverage advantages to grow, or at least hold, market share without sacrificing profits.”
How to do this? Conventional wisdom is that marketing and sales drives top-line growth, while cost cutting drives margin growth. Marketing identifies sales opportunities; operations pursues efficiency. Not surprisingly, the past year has been a difficult one for marketers as companies struggle to maintain cash flow by cutting costs—including those for organic growth initiatives.
“The tragedy in this,” Nagle says, “is that marketing can drive sustainable margin growth as well as sales growth, even in markets that are highly competitive.” The answer lies in what Nagle describes as “Advantage-Based” Marketing for Profit, Not Just Sales, the title of his keynote address at the Annual Spring Conference of the Professional Pricing Society (PPS) in Chicago next month. Advantage-based marketing is about finding, or making, the circumstances to win profitably. For marketers, the tactical implications are quite different from those required for a “customer-driven” approach of adapting to the markets as you find them.
The focus, increasingly, is on selective advantage; the ability to find and if necessary construct the ideal markets in which your company has a natural competitive advantage. In the words of George Bernard Shaw, “People are always blaming their circumstances for what they are. I don’t believe in circumstances. The people who get on in this world are the people who get up and look for the circumstances they want, and if they can’t find them, make them.”
We hope that you enjoy Tom’s prescient comments at PPS and that you will visit the LeveragePoint booth on the expo floor, where we can show you how our suite of Value Management tools can help you to create the advantage he describes, communicate it clearly to your clients and capture the margin that your competitors leave on the table.
Former President and CSO