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Rev­enue Growth from Mar­ket­ing Effec­tive­ness — Part I: How to Find the Right Busi­ness Model


Part I: How to Find the Right Busi­ness Model

Mar­ket­ing is some­times referred to as a blend of sci­ence and art. Man­age­ment guru Peter Druck­er once said, “The aim of mar­ket­ing is to make sell­ing super­flu­ous.” Yet many senior man­agers see mar­ket­ing as a ‘black box’ into which mon­ey is poured, with lit­tle evi­dence of results.

Mar­ket­ing Ver­sus Sales

One of the major cri­tiques of mar­ket­ing for many com­pa­nies is that it is com­bined func­tion­al­ly with sales, and often the team is referred to as ‘Sales and Mar­ket­ing.’ But it doesn’t work this way in the real world.

Mar­ket­ing and sales should be func­tion­al­ly sep­a­rate, with mar­ket­ing ask­ing the ques­tions “What? When? Where? How? Who? Why?”) — and com­ing up with the appro­pri­ate plans — and sales respon­si­ble for exe­cut­ing those plans. Mar­ket­ing should deter­mine tar­gets, and sales should be deliv­er­ing on them, and there should be argu­ments between both par­ties to fos­ter a cre­ative process.

if these two func­tions are com­bined, then it is much eas­i­er for the staff to set weak tar­gets and make excus­es for poor per­for­mance – and for those excus­es to go unchallenged.

New Real­i­ties

When faced with fore­cast­ing future sales, the gener­ic approach is to begin with his­tor­i­cal sales data, take a view on the mar­ket con­di­tions using feed­back from cus­tomers (which is often anec­do­tal), add in some macro-economic data, and then final­ly come out with an esti­ma­tion of around 3% — 4% growth.

The prob­lem is that this process starts with the assump­tion that the sta­tus quo is broad­ly cor­rect. There’s no inten­tion to change the dynam­ics and rad­i­cal­ly shake up how we sell, rather it’s about repeat­ing the sta­tus quo with a lit­tle bit more effort (or a bit of help from infla­tion) and end­ing up in the ball­park of the estimate.

When it comes to what a com­pa­ny is sell­ing, this is the main­stay of the “4Ps” – Prod­uct, Place, Price, Pro­mo­tion and Ser­vice. This is also where there has been an upheaval in mar­ket­ing over the last decade.

One of these upheavals? Redefin­ing what a company’s busi­ness mod­el actu­al­ly means.

Redefin­ing The Busi­ness Model

No one agrees on the def­i­n­i­tion of a busi­ness mod­el, but the eas­i­est descrip­tion would be the way a com­pa­ny is con­fig­ured to make money.

The shift from brick-and-mortar retail out­lets to online shop­ping is an exam­ple of a change in the busi­ness mod­el. The mar­kets, prod­ucts, and con­sumers did not change. But the way com­pa­nies inter­act­ed with con­sumers did.

The oth­er major upheaval is the advent of inbound media such as social media, blogs, review sites, YouTube con­tent cre­ators and so on). Cus­tomers are aban­don­ing con­ven­tion­al out­bound media (radio/TV ads, news­pa­pers, bill­boards, etc) in favour of these new medias.

Gone are the days where con­sumers would be influ­enced by brand recall and in-store offers (espe­cial­ly for high involve­ment prod­ucts such as white goods). They would rather seek out third-party reviews, check out the com­ments sec­tion of online shop­ping sites, or find out what their favourite social media influ­encers have to say.

Near­ly all com­pa­nies that we con­sult with are still work­ing out how to recon­fig­ure to this new reality.

Dis­cov­er­ing The Right Busi­ness Models

It’s not con­ven­tion­al strate­gic manoeu­vres, such as launch­ing a new prod­uct, or expand­ing into new mar­kets, that have dri­ven the change. Rather, new busi­ness mod­els make it eas­i­er for con­sumers to get what they want the way they want it.

Many indus­tries are expe­ri­enc­ing sim­i­lar dis­rup­tions. Per­haps the biggest ongo­ing dis­rup­tion is in the bank­ing indus­try, which is being tak­en on by fin­tech. For exam­ple, the largest bank in the world is the Indus­tri­al and Com­mer­cial Bank of Chi­na, with 443 mil­lion cus­tomers and more than 430 thou­sand employ­ees. Com­pare this to WeChat Pay, with 1 bil­lion cus­tomers man­aged by around 85 thou­sand employ­ees. That is 1,000% more effi­cient in terms of employ­ee to cus­tomer ratio!

In terms of the log­i­cal flow, we need to con­sid­er what seg­ments will be entering:

  1. How do we estab­lish rela­tion­ships with the customers?
  2. What chan­nels should we used to access the customers?
  3. How will we gen­er­ate income?
  4. What resources will we need to deliv­er the prod­uct or service?
  5. What are the key activ­i­ties the resources will need to do?
  6. Out­side of our own resource, which key part­ners are cru­cial to success?
  7. How much will the deliv­ery cost?
  8. Between the rev­enue we see as pos­si­ble and costs that we expect to incur, is there a profit?

If you are not clear on your company’s busi­ness mod­el you may well be obliv­i­ous to a large ice­berg on the hori­zon. Find­ing out the right busi­ness mod­el for your com­pa­ny — and quick­ly uti­liz­ing them — could well be a game-changing strat­e­gy for your operations.

Prob­a­bly the most wide­ly used tool to doc­u­ment and exist­ing or pro­posed busi­ness mod­el is the Busi­ness Mod­el Canvas.

Click image to zoom
The Busi­ness Mod­el Can­vas is a visu­al chart show­ing how a com­pa­ny cre­ates val­ue (high­light­ed in green), cap­tures val­ue (high­light­ed in yel­low), and deliv­ers val­ue (high­light­ed in blue)

Cus­tomers don’t real­ly care about your offer­ing, the care about how it address­es their needs. Hence, the focus of the Busi­ness Mod­el Can­vas is about solv­ing a prob­lem or a need for a cus­tomer. It’s about find­ing answers to ques­tions like “What pain are you solv­ing? What gains are you cre­at­ing? Who are your customers?”

You need to assume that every part of your busi­ness mod­el is a hypoth­e­sis that needs to be val­i­dat­ed. The only way to val­i­date your busi­ness mod­el is by test­ing your assump­tions. We may be able to val­i­date cer­tain assump­tions by research, but a com­mon approach is to pilot one or more busi­ness mod­els. Once the proof of con­cept is estab­lished, the decision-making process will become more straightforward.

This con­cludes Part 1 of our two-parter on rev­enue growth from mar­ket­ing effec­tive­ness. In Part 2, we’ll look at inbound and out­bound media, and explore the impor­tance of choos­ing the right media chan­nel for your message.

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