Commercial Models, pt 2

This is part 2 of a small series of posts on business models. In the first part, I discussed how the Sales-led model can lead to a loss of focus and therefore, compromised competitive advantage and profitability. We looked at a fictitious auto-parts maker, XYZ Ltd, that decided to expand into a new industry, with less than stellar results.

It is pretty clear that I am no fan of a sales-led model. I completely understand the pressure to which organisations find themselves subjected, in that they must show consistent and rapid growth rates. However, I do not believe that the long-term interests of the firm are best served by chasing revenue opportunities irrespective of the ‘fit’ with the organisation’s strategy and capabilities.

So the marketing-led model requires the organisation to maintain a pretty constant alignment with the overall strategy of the business. By extension, then, there are a few pre-requisites for this to happen.

Firstly, the organisation needs to have decided on its VMOST. VMOST is one of those irritating MBA-type acronyms, but is actually a very useful tool. It stands for Vision; Mission; Objectives; Strategy and Tactics. In essence it answers the what; why; and how questions of your business’ existence. I won’t go into a lengthy explanation of each element here. 12manage has an excellent description, if you need it.

Secondly, you need to know your market. This means having solid research on who you are selling to; what they value; how much they are willing to pay for it; what level of service, quality and support they need. You will also need to have decided on your positioning – what emotion or characteristic will a prosepctive customer associate with your product or company? You can choose to be the premium player in a market; the budget player in a market; a niche player serving very specific needs or customers; or indeed any other position that fits with your own skills and capabilities. The important thing is to pick a position that you can defend from the competition. The seminal work on positioning is Ries and Trout’s book Positioning. Very well worth a read.

Thirdly, you need a well-crafted marketing message that addresses the customer’s problem; emphasises the solution your product or service provides; and establishes the position of your company (or brand).

So it’s easy to see, when you look at the list of activities and thought processes necessary for a marketing-led model, why some organisations see the sales-led model as the easiest path to take. The advantage of the marketing-led model is simple and incredibly powerful: long-term stability becomes significantly more attainable.

If your organisation has a well-thought out VMOST; a deep understanding of the marketplace; a clear position within the market and a resonant message to that marketplace (or compelling conversation in these days of the read/write web) your marketplace will understand what you stand for; what you offer and where they can benefit by purchasing from you. In a downturn customers will appreciate and respond to, this familiarity.