There are many aspects to creating commercial momentum, but often what used to work effortlessly in the past can begin to fail. It’s like walking through a treacle pond and no one knows how you got there or how to get out. Finding continuous and exceptional growth, year after year is unusual? How do you find that growth that sets you apart from your competitors?
Step one is to ask if the business a Pusher, Plodder or Pioneer. A Pusher drives their business hard in the traditional way by growing through aggressive increases in marketing spend. The Plodders spend the same marketing percentage, year on year. This plays within well-defined safety margins. The Pioneers on the other hand decided to cut their marketing spend to zero and find alternative ways to gain market share to focus on profitability. Research confirms that over a 20-year period, the pioneers grew whilst the plodders and pushers declined.
But momentum cannot be taken for granted. In 1962 Sam Walton discovered that momentum can be re-ignited by competing against ‘islands of losses in an ocean of profits’. Walmarts competitors had made a great living taking this opaque approach As the Walmart footprint grew, Sam knew that economies of scale fueled EDLP (Every Day Low Prices) . Walmart’s purpose became the grocer for middle America. Today they are the largest global grocer
Today Toyota is one of the largest car manufacturers in the world. After the 2nd World War industrial Japan was on its knees. From that point onwards Toyota developed a subtle and nuanced understanding of its customers globally. Toyota’s ability to create new, original and compelling value drives its growth today.
Both Toyota and Walmart knew that customer focus was one axis to success. Research confirms that Pioneers achieve revenue growth of 93% greater than pushers. Pioneers achieved this by creating conditions that are needed for momentum to take place.
Knowing your customer is one thing. Anticipating your customer needs, that’s momentum. So how do we create value that keeps organisations focused on the customer?
Value creation starts with identifying customers who spend their money to have their needs satisfied. Customers are the source of all the value that firms can distribute to their shareholders. This is where value chain marketing becomes a core principle for any organisation. The introduction of value chain marketing depends on an organisation’s ability to extract, capture, and originate value.
Value extraction requires the organisation to be as efficient as possible. Value capture is the process through which value is gained by the company, either from competitors or partners. Value origination is all about the NPD that customers what to pay for. Almost every new product or service adds to the value origination story.
But what of capabilities? A company’s capabilities will determine performance in these areas. Each segment is crucial to sustained momentum. Long term sustainable growth must be at the heart of all that you do.
To balance these resources creates a long term momentum strategy.