Our executive sponsor at a long-time client used to start off every Grassroots Strategy session by telling the teams to put a jar in the middle of their table and every time someone mentioned the word ‘product’ they had to put $5 in it. She told them that she was sure that every team would be able to throw a pretty good party by the end of the week with the money they collected. Her point was that they needed to focus on the customer and the problems that they could solve for customers rather than on their product. Professor Theodore Levitt said it best decades ago when he said, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”
In 1759, Arthur Guinness leased a disused brewery in Dublin and began producing beer for the local market. Like most brewers of his time, he produced a variety of beers to meet a variety of tastes. But by the late 1770’s, Guinness was becoming known for his porter. The dark beer that used roasted barley to produce a deep brown color and rich complex aroma had become quite popular, especially among the dockhands in Dublin. In 1799, faced with a shortage of capacity, Guinness made the bold decision to discontinue production of his various other ales and focus exclusively on the porter – the beer we know today as Guinness Stout.
This historical tale underscores one of the most powerful and difficult challenges of strategy – focus.
Bottom line, effective value pricing relies on first having a good segmentation that is based on customer needs. Or, as we often say in our workshops, “value and segmentation always go hand in hand.”
If you are like many of our clients, you may have thought about strategy and long-term goals sometime in the late summer/early fall and probably presented something to your leadership and/or your board at that time.