Getting inside the customer’s mind
Increasingly, sustainable competitive advantage is to be found not in the technical superiority of products but in interactions with customers, according to Niraj Dawar in his book Tilt: Shifting Your Strategy From Products to Customers. Businesses therefore need to be tilting their centre of gravity from upstream activities (activities relating to production and products) to downstream activities (activities relating to customers).
What other strategic changes are involved in the “Tilt” from upstream to downstream? According to the author, the changes include:
- The customer, rather than the factory, becomes the core of the business.
- The central strategic question changes from “How much more can we sell?” to “Why do customers buy from us?” and “What else does the customer need?”
- Businesses now need to focus on how to reduce customers’ costs and risks.
- Competitive advantage can be gained by managing the flow of information in marketplace networks.
- Competitive advantage can be gained by using marketing to convince customers that particular criteria (which happen to favour your products) should be used to determine purchasing decisions.
Among the many useful insights contained in this book, I was particularly struck by the importance of reducing customers’ costs and risks, and by the author’s assertion that any business has information about its customers which customers don’t know and can’t find out on their own. Nearly all businesses work on the assumption that the price which they put on their products or services is the price at which customers value their products and services, but the reality is that customers factor in costs and risks when evaluating different options, and the seller can command a higher margin by delivering a solution with lower costs and risks.
This is definitely one of the most interesting and insightful books on marketing that I have read. It demonstrates that old-style marketing (pre-social-networking) is not dead, but it also shows that a clear understanding of the customer purchase decision is more important than ever.