add value no price increase

For years, on Saturday nights, radio listeners in the Boston area have heard a live ad: "It's live time, and the Jordan's Sale is on!" There is only one Jordan's The store, every Saturday night, is open until 11:00. Encouraged by the ad, customers can't help but come to the store to shop for furniture accompanied by the company's sales consultants. Unlike most furniture salespeople, Jordan's sales consultants are paid a fixed salary rather than a commission, they have no sales pressure, and the company encourages them to accompany customers to browse products and answer questions. Jordan's products are really good at affordable prices, and because of the convenience of shopping, many customers are very satisfied.

Jordan's combines the process of buying furniture with entertainment and calls it "shoppertainment." Based on this theme, the company's sales consultants and store owners starred in a series of TV commercials, witty parody of various TV and movie shows.

Add-ons are optional.

As business grew, Jordan's opened three more stores. Each is built on a different entertainment theme, offering customers very attractive new products. On the opening day of one of the stores, there were so many people that people had to wait in line to get in. Jordan's had to suspend the live broadcast of the radio, and urgently announced to everyone that "the store is overcrowded, please come to another day".

While increasing the number of new stores, Jordan's also pays attention to improving its professionalism. Customers can consult with their "sleep expert" to discuss your sleeping habits with them, and then, with their guidance, find the right bedding for them to sleep more comfortably. As purchases increase, Jordan's can arrange for the factory to create custom furniture to the exact specifications requested by the customer. Using this opportunity, Jordan's management learned how to design value-added furniture for customers.

Is the concept of shopping and entertainment cost-effective to implement? In 25 years, Jordan's has grown from 15 employees to more than 1,000 employees. As a private company, Jordan's has achieved rapid growth in sales and earnings, and the number of customers attracted by advertising is also expanding. While most furniture retailers have an inventory turnover rate of one or two, Jordan's has 12. This improves return on investment by reducing investment.

What about advertising? In fact, Jordan's spends only 2% of its sales on advertising, while the average retailer spends 7%. People come to Jordan's because of previous happy shopping experiences and the power of word-of-mouth reputation.

Was the strategy of adding value and not adding price successful? A success for Jordan's and its customers. All you need to do is look for business model innovations that effectively add value according to a rigorous process.

Why Add Value?

If your company's management already has a good idea to improve the business model, it's simple, you just need to push the idea forward. But when you ask most people in the organization to think about what kind of business model would be better than the current one, presumably their minds will go blank and come up with nothing. Their blank stares are proof enough that the company has no track record of innovation in business models. How to break through the limitations of existing knowledge and find new ways to improve existing business models?

Think about the last time you searched in vain for a stray item. How did you do it then? Chances are you've found some of the same places over and over again. If you didn't find it somewhere the first time, could it be there the second time? In the process of looking for it, you may have glanced at other areas without seriously searching there. When you expand your search to those areas, you find what you're looking for. In addition to being happy, you also breathed a sigh of relief. Based on this experience, you will find that if you start paying attention to aspects that you have never paid attention to before, your chances of success in business model innovation will also increase.

Few companies look for opportunities to improve their business models by offering customers something of greater value at the same or lower price. Why? Because almost every company's management associates improvements in customer value and end-user value with higher product prices or higher profit margins. If neither of these two outcomes is possible, not many people will carefully consider these improvements. For example, large discount furniture retailers that are open at night have been around for more than three decades, have large inventories and offer instant delivery. Every store wanted to have lower costs and more customers, but no one thought of adding a lot of value to customers in the form of entertainment -- Jordan's did just that.

If you're throwing it away because some improvement doesn't lead to a higher price, you're doing it wrong. Because there are still a lot of people who haven't started using your company's product and think your product's value isn't good enough. If you only focus on existing customers, you will miss out on a lot of potential customers. You should give people who haven't used your company's products a chance to try them, and then ask them to tell you what you can improve to attract business.

Think for everyone in the customer chain

If a company doesn't think deeply about how to add value to customers and prospects, it can't even add value to customers' customers. It is necessary to analyze how the customer's customers use the company's products or the customer's company's products, and look for opportunities to add value to the customer's customers. You should listen to their needs and challenges.

For example, in the case of cargo planes delivering flowers, by talking to flower growers, jet designers began to figure out how their designs might prolong or shorten the freshness of flowers. The cargo hold is generally dry and cold, and to keep flowers fresh, they must be placed in a high humidity and cool environment. Freshness isn't enough, you have to figure out how to keep them looking beautiful. But if stored in a dry and cold cargo hold, flowers can develop some unsightly imperfections.

On the basis of this analysis, the designers began to think further about the concerns of the customer's customers (ie flower shop owners). For example, how did the design of freighter planes affect the profits of American florists who bought Central American flowers? Designers generally rarely consider or explore the situation these florists face. For example, many consumers are concerned that growers of exporting flowers use some pesticides that are toxic and banned in some countries. To help florist owners attract more customers, designers may need to modify the cargo hold design so that people can use more environmentally friendly chemicals to easily disinfect the flowers in the cabin during the flight.

Continue to analyze the process down to the end customer level. How has the air transport industry influenced the pleasure flowers bring to people in ways that people haven't considered yet? For example, will the stems of roses be shortened due to the size of the cargo hold container, while flower lovers prefer roses with longer stems? In the process of doing this type of analysis, you may discover: How many opportunities to add value to customers! And your company captures only a tiny fraction of it.

Look for innovation opportunities

You can look for business model innovations that add value in specific areas. To find innovation opportunities, you need to complete a series of simple tasks, and the order in which you complete them is very important to you. By following the correct sequence, each task will yield the best results, as easily opening a safe with a password.

Building a knowledge advantage Ultimately, identifying the best opportunities to add value to customers depends on a company's knowledge, which should be unduplicated by others in any other way. As this knowledge is built and shared with customers, your competitors will be far behind you.

Consider Ecolab, a company that supplies cleaning chemicals to factories, public institutions, restaurants, and other service providers. Ecolab has found that maintaining a good relationship with a sanitation inspector is far more important for restaurant owners than simply purchasing effective cleaning supplies when it comes to saving money. To help these restaurants pass sanitation inspections, Ecolab began expanding its range of products to produce all the chemicals needed for restaurant cleaning. Drawing on the company's knowledge of chemicals, Ecolab is also telling restaurateurs how to make better use of these chemicals to improve performance in pantries, food processing, water treatment, cooking, dishwashing, cleaning, restrooms, and waste disposal equipment, among others. Hygiene of the link. Ecolab then extended this process of applying expertise to add value to customers to serve other customers, such as hospitals.

Encourage employees and customers to explore new paths Because few people have studied in depth how to add value without increasing costs and prices, you will find that when companies find opportunities to add value to customers, Some employees don't feel frustrated by the fact that the company can't really do anything. In their view, if the company can't use this to raise the price of the product, why bother trying it? Help employees let go of this mindset, and they'll keep coming up with great ideas. You also ask customers how you can improve your product to bring more value to them. They may tell you about their unmet needs because they feel you can provide them with them. Then ask your customers and employees: What should you do to meet these requirements of customers under the same price and cost?

Collect as many ideas as possible You must find every way to add value to customers without increasing costs. You have to assume that all of these approaches have value. Wait until it's time to select market test subjects to evaluate these new ideas. At this stage, all you have to do is collect as many ideas as possible. Don't judge them in the process, as this could destroy people's creativity and inspiration.

Broaden your horizons and seek more innovation Many companies offer additional value to their customers at the same price, while in doing so they grow their own business. Taking the American company Haemonetics as an example, in order to prevent patients from contracting complications during surgery, the company has developed a variety of products (such as autologous blood reinfusion devices), which provide patients with a way to reuse their own blood. , patients' families, doctors, blood donors, blood banks and hospitals are a boon. Disneyland has announced the opening hours of hot spots near the center of one of its attractions, the Magic Kingdom, so visitors can spend more time doing what they love.

Open your eyes and you'll see that there are many ways a company can add value and increase sales of its products. But even those organizations that are most successful at adding value at no cost ignore options that others see as useful. So, keep in mind: there are many areas of innovation that you don't know yet. You should follow this philosophy and work with an open mind to find new ways to add value to your customers.

Consider the impact and value of innovation in all aspects. Who will experience the benefits of the added value of the product? Suppose you are an ingredient supplier for a certain soft drink. First, you want to consider how the innovation will benefit one stakeholder, and leave aside for a moment how it will affect others—which is what most companies do when looking to add value to a product. You can make an improvement that benefits the beverage manufacturer, such as speeding up the billing process; you can extend the added value to the customer's customer, the beverage bottling plant level, such as in the preparation of ingredients Work hard to make beverages easier to fill; you can create benefits for the end consumer user, such as re-creating recipes to make them healthier.

Next, and more importantly, you must analyze the positive or negative impact of value-added innovations on the entire customer chain, from the initial customer to the end customer. Maybe you will find that the value of an innovative measure you give up is far more important than you originally thought.

Selecting Innovations

Selecting the right innovations to add value to customers is like deciphering an encrypted telegram. If you use the correct codebook, you can get useful information from the telegram, if you use the wrong codebook, you still have difficulty understanding the content of the telegram. The key is to pick the right innovations and implement them in the right order. In the process, your competitive position will be enhanced.

A good way to help you choose the right innovation is to find a market test method that is simple, economical, and easy to operate. If the business model of an innovative enterprise becomes the key task of the company, few people are willing to provoke this burden. It's not easy to find people who can shoulder the burden, because in many organizations, one of the scarcest resources is people who like to find new ways to expand market needs. Some talented people think this kind of work is very valuable, so many companies are breaking through the limitations of the organization in this area by attracting this kind of talent. Two companies, Linear Technology and Xilinx, have reported almost zero employee turnover in their R&D departments. This is mainly because the R&D personnel are working with the top minds in the industry to solve world-class problems, and this kind of huge intellectual challenge is very attractive to them.

You can nudge them forward with the curiosity and passion of challenge-seekers, and that's the best way you can take advantage of it. Tell them about opportunities for innovation and ask them for a test plan. At the same time, it is clearly stated that the company will recognize and reward those who design and implement the test.

You also want to make it clear that the company wants to go to market quickly with an improved business model. In order to do this, you must quickly free up the resources of failing test projects. How can I get these resources faster?

During testing, unexpected events often give you clues to breakthroughs. For example, if a customer buys a lot more than you expected, or some things that look very good are ignored by customers, you should pay special attention at this time.

If you have few successful tests, you can't move forward with improving your business model. You have to diagnose why the test success rate is so low. The most likely reason is that you haven't done enough testing, and most organizations don't have enough testing that they should. If you have a lot of ideas to dig into, you probably don't have enough people with both the skills and an interest in it to do these experiments. To do this, you must change staffing and assignments to free up more time for critical innovation tasks.

To ensure the success of the transformative business model, Paychex has recruited many senior executives with experience in various positions. The company's founder and CEO, Thomas Galisano, looked around for people with more experience and resilience than the leadership roles they held. In many cases, these top executives had successful experiences in other organizations before joining Paychex. As a result, each of them has the ability to bring together world-class tests and ultimately turn them into real, value-added innovations.

If you offer your customers something that is worth more than what your competitors offer them at the same price, your company's turnover will grow faster. Create more value on those factors that help you outperform your competitors, and you'll have a sustainable competitive advantage.

Originally adapted from The Ultimate Competitive Advantage by Donald Mitchell and Carol Coles with permission. CITIC Publishing House registered the copyright of the simplified Chinese version of this book in 2003. The English version is published by Berrett-Koehler Publishers, Inc. Translated by Liu Yanqun.

Donald Mitchell and Carol Coles co-founded Mitchell and Company, a strategic consulting firm, and served as CEO and Chairman, COO and President, respectively. They co-authored the books The 2,000 Percent Solution and The Irresistible Growth Enterprise.