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The 7 steps in the path to market

In Business, if needs are what people are prepared to pay for, wants are what people are prepared to pay extra for.

To explain why this path to market works, I will explain how two of the most common theories used in business relate to each other, then give an example of the 7 steps in a start-up’s path to market.

Maslow’s Hierarchy of needs sets the order to develop the bottom 4 Ps of marketing, what project managers would call the “precedents” that must be done first that will then allow you to do other things.

So what are the top three Ps of the marking mix pyramid above? That is the sales process, known as these days as conversion, as in converting customer contact into income. This is where most of the top business consultants make their money, and they know all business owners want to learn this, so they know a business owner is willing to pay extra to develop the top 3 Ps.

If a business can “afford” the consultant will depend on if the business has no weakness in the bottom 4 Ps. You will be paying extra money at top dollar to fix things the business already needs to be doing before growth can occur. Most of the top consultant have some form of an information session for free to see if you are the consultant’s idea customer (one they can get fast results).

Both Maslow’s and the Marketing Mix theories start out focusing on satisfying needs first to put people in a position to get what they want.

The outcome of Maslow’s original theory was just left at Self Actualisation, which is the desire to become the most that a person can be, measured by the happiness of a person. But this was a bit like telling someone how to get fit enough to climb Mt Everest without telling them the route to climb when they got to the mountain. So Maslow developed his own model to not only include how to climb the mountain but also to reset your goals decide what to do next.

The outcome of the original 4Ps was Sales, measured in dollars.

When you put the two models side by side and take into account personality types, what is seen as an increasingly blurred line between sales and marketing becomes a lot clearer. Even Gary Vee will tell you one does not exist without the other, and people that only focus on sales without building the relationship first is what has given salespeople a bad reputation (particularly in MLM companies).

Marketing does lead to sales, but as it mainly focuses on why the customer needs it is, cost comparisons is a greater factor in the purchase decision. Customers know they need it, but can customers get it cheaper somewhere else?

Whereas sales in my experience are more about wanting something that you may not need (now), and as money is not as the biggest factor in the decision-making process, the “Sales Process” converts marketing into sales growth for both existing and new customers.

While the pinnacle of the original hierarchy of needs was self-actualisation, reaching this level was not sustainable if a person had a deficiency in any of the 4 levels below Self Actualisation. In the same way, a weakness is any of the bottom 4 Ps mean a business will not survive.

Here is where Emotional Intelligence comes into it.

Certain personality types are naturally better at one half of the pyramid than others. For example, an extrovert may focus on an inverted pyramid on Maslow’s 8 level hierarchy of needs model, trying to transcend to “god-like” status in their industry, believing that if they can it will funnel down and all of their lower level needs will be met as a consequence.

If you are looking for an example of this; when Elon Musk sold his sold Pay Pal for around $US170 million, he reinvested it into new companies, then had to borrow money to pay rent on his house (although I don’t know how big the house was).

That is not to say one person cannot work both above and below the line, but it involves different thinking and hard to maintain focus on both halves at the same time. It also involves using different varieties of empathy, and research shows that the ability to use both Cognitive and affective empathy equally as well is only present in the top 10% of performers, so it may be unrealistic to expect anyone can sustain the effort required.

The good news is, people are more open to collaboration these days rather than competition, and you can buddy up to someone who loves the urgent tasks with someone who loves working on the important tasks. Both will prefer to work on different areas of the marketing mix, and just in to help each other to overcome problems without getting in each other’s way or trying to take over

If you are wondering what replaces the “?” at the top of the Marketing Mix pyramid, this is where the “unicorn” business such as Uber, Amazon, or Facebook would sit. Unicorns have all of the 7Ps as a strength, and research into the history of these businesses will show the strengths were developed as examples. It didn’t happen overnight.

the 7 steps in a start-up’s path to market:

  1. A product or a service may be the product, but any start-up needs a Minimum Viable Product (MVP), and an investor cannot help you improve a product if it doesn’t exist.
  2. Price – the best way I’ve seen to set a price is getting people to trial your product and exchange an ongoing discounted price for “foundation customers,” as long as they provide you with information on what other customers would be prepared to pay extra for (as well what other customers would be willing to pay now).
  3. Place – how can the customers get your product. Distribution costs need to be factored into the breakeven point so you can set realistic sales targets.
  4. Promotion – at this point, the focus is on creating a need for people in your target to change to your product so you don’t have to spend money on adapting it, to promote the benefits of using it now, and how you could adapt the product to add value to it for repeat customers.
  5. Process – Make it as easy as possible to get the money from them and get the product to the customer. The less they have to think about it, the better your process is. Keep it simple and familiar to your target market. This is where an Entrepreneur/investor can be the most benefit to you if you can use their system. Why re-invent the wheel?
  6. Physical evidence – Now you have sales, you can start adapting your product for actual customers from user feedback. This produces tangible benefits to satisfy wants, and wants are what people will pay extra for.
  7. People – Here you are looking for “social proof”. Testimonial, referrals, repeat customers and strengthening your brand reputation.

What comes next?

You develop a new product (or model) or service and the path to market begins again. That’s how you stay ahead of your competition, or at least stay in business. If you don’t, your product becomes a weakness and the whole house of cards comes crashing down.

The 5 competitive market forces

Michael E. Porter of Harvard University developed the Five Forces Framework in the 70’s as a tool for analysing competition of a business, however in modern business it can get confusing when trying to apply this theory in a real-world situation if you don’t know how it relates other theories that are commonly used by successful business.

The five forces model take a lot of the opinions and guesswork out of developing the marketing mix (4Ps), and when you also relate it to Maslow’s Hierarchy of needs, it tells you what to look for at different stages of business start-up, particularly when it comes to pre-start-up planning.

It draws from five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability. Under this model, business is not just a tug of war between the biggest players, the best options are the most profitable, so can be applied to businesses of any size.

In start-up mode, the focus in on 4 out of the 5 market forces, and the bottom 4Ps of the marketing mix. However when the focus of the business shifts to sales, competitive rivalry within an industry drives a wedge into your business and weakness are likely to develop in the 4Ps that directly relate to what is considered the strongest market force.

These market forces do not only apply in a start-up but have a large effect on what customers are willing to pay for new products. It is useful to know to work out if you can at least charge enough to cover the costs of production and plan promotions.

An example of a competitive rivalry between larger companies is the failed attempt by the Master’s home improvement stores. Bunnings is what is known as a “category killer”, a store so big that overwhelms all the competition. But the way business is done in the modern era is not just about size and another retail giant Toys “R” us (one of the first category killers) has also recently closed its doors because they couldn’t adapt.

The home improvement market is so big in Australia that the Bunnings only had around 17% of the market, and category killers would often be around 40% of the market, so it seemed likely there would be room for another major player, and the challenge came from a competitor who was already at least an equal another industry (supermarkets).

How did Bunnings fight off the attack from another giant?

  • Products – Bunnings already had an established supply chain and was of sufficient size and demand to restrict access to popular brands from key suppliers, so any new entrant would have to look at different brands of products unfamiliar to the customer (even if it came out of the same factory).
  • Place – Bunnings already had a store located in the best locations, so a competitor was unlikely to find a sufficient sized block of land to build a warehouse that was in a residential area close to renovator customers.
  • Price – While the idea of a category killer was to be the cheapest on price due to economies of scale, Bunnings just had a slogan in all their ads: “If you can find a cheaper price on a stocked item, we’ll beat it by 10%”. This took out shopping around, and people would just go to the most convenient. Bunning would also put their competitor’s brochures on the entry wall to show transparency, so you didn’t even have to go to Masters to see if it was in stock.
  • Promotion – Bunnings was large enough to buy up all the stock of certain suppliers with different features and charge a premium, effectively voiding the price guarantee for different brands and models exclusive to Bunnings.

Lessons learned by going negative… are you just delaying the inevitable?

A similar price-matching tactic was a promotion used by Pizza outlets, who would honour discount vouchers from other chains. Kind of the reverse of matching stocked items and saying to the customer even if it is different, the price is all you care about, so just come to us.

Effectively chains like “Eagle Boys Pizza” (which has also now closed down) would save printing cost and letterbox drops, which would only return about 2% of the number offers homes received in the post, but was considered the standard what to promote Pizza delivery. To counter this, the larger chains went back to the start and focussed on product R&D, then start introducing things like square pizza and other side products not available at the smaller chains.

However, this price matching also opened the market to charge more for delivery deals as vouchers had to be brought into the store to get the cheaper price (so pick-up only). Now it has also opened up a market for Uber eats. It is no longer just Pizza and restaurant food delivery, burger chains, and others can now become rivals in what was the traditional Pizza market, and the long-term result of focusing on only one of the 4Ps.

All this affect the profitability of your business, which is usually measured as a percentage. So, the sales process becomes important when you grow your sales, and you want to maintain your percentages, but increased sales may increase profits if you have fix costs.

You can’t bank a percentage point, you need dollars, so you have to prioritise what in your marketing mix will give you the highest return on your marketing investment.

If you just start a price war to eliminate weakness in your 5 forces, it will decrease your profits.

It goes to show how going negative does not end well in business. It may also be illegal for a bigger business to undercharge to drive a competitor out of business, or engage in “cartel” behaviour, such as price fixing with competitors, and legal costs affect your profits too.

Diagnose your weakness, but have a plan for what to do if you overcome them. Keep it positive, and play the “what if” game.

5 tools most business coaches use

It is a simple fact that most small business owners don’t care why something works for them, just that it does work. This is not the same “why” Simon Sinek is talking about.

The why for business owners relates to the need to change what they do. The business owner then goes to a coach/mentor/trainer/consultant (let’s just say “coach” for now, and not get into the difference) and asks why I should choose you, which is more about trust.

The response from the coach is usually one of two things;

  1. Social proof in the form of (sometimes questionable) testimonials, or;
  2. Some form of validation, often using parts of well-known theory that is not understood by the general population, as evidence as to why what the coach does works as to justify why the business owner should choose the coach.

Both responses come down to trust. Does the business owner trust the testimonials? Or, does the business owner trust that the coach can explain how to do things in a way that the business owner can understand?

What is essentially happening (in point 2 above) is the answer the coach gives to the business owners why is in different why context. It’s like asking a question in Mandarin and getting answers in Cantonese, and others observing can’t help explain what is going on unless they at least speak some form of Chinese.

If the coach doesn’t understand the theory well enough, they will struggle to answer the “what if” questions the business owner has, and people tend to pick up on this and this part of the brain has no capacity for language. So this is when you hear “it just doesn’t feel right”.

There is such a thing as “unconscious competence”. Just because someone can’t explain why something works doesn’t mean that thing doesn’t work. Knowing why it works only becomes important if you want to do it better. But you can’t improve something if it doesn’t exist, which is why taking action and actually doing something speeds up the learning process.

I hear people say they don’t have time to do things, yet have time to do things all over again. Does that sound familiar? This comes down to prioritisation, and the first tool on the list.

Eisenhower Matrix

Used to priorities and delegate tasks. Business owners should be doing the important and urgent tasks first. However, in the age of social media and a need for instant gratification, urgent tasks are given higher importance because people are told this is what you “must” do if you want to be successful. This is essentially a band-aid solution that gets quick results, but not sustainable for long and leads to burnout.

Dwight D. Eisenhower was the 34th President of the United States from 1953 until 1961. Before becoming President, he served as a general in the United States Army and as the Allied Forces Supreme Commander during World War II. He also later became NATO’s first supreme commander.

Dwight had to make tough decisions continuously about which of the many tasks he should focus on each day. This finally led him to invent the world-famous Eisenhower principle, which today helps us prioritize by urgency and importance.

Maslow’s hierarchy of needs theory

You can google lots of info on this and it has been around since mid last century, but anything a coach is talking about the needs of people (customers, clients, collaborators), it eventually ends up here.

There are endless ways it can be applied in business, but here is an example of how it can be applied to the 7’p of marketing how sales and marketing fulfill different customer needs:

Attachment theory

Another one that has been around since the 70’s, but recent research into neuroscience and emotional intelligence has validated claims that while formed in childhood, it is not irreversible. No longer just about attachment to people, the theory has now developed to account for attachment to objects and ideas.

When you think about it, Small business owners treat their business like their kids and often treat start-up business owners like parents with a new-born baby. No shortage of advice, but when do you ever hear someone say to a start-up business owner “that’s good enough”?

It is a very complex area of psychology, but if you don’t look for why it works and just look for what does, there are organisations out there that tell you what to do. They have been teaching people from low socioeconomic backgrounds with low literacy skills, just not in business. However, over the last two years, they have started to look at transferring it.

For the simplest way to learn about Attachment Theory, start HERE.

I think therefore I am

Cogito, ergo sum is a Latin philosophical proposition by René Descartes usually translated into English as “I think, therefore I am”.

This may come out in speeches that you can have anything you want as long as you believe in yourself, but the flaw in this thinking comes from the original quote came from a search to see if the author did in fact exist. Reality is what it is, but unfortunately, no-one can be told what the matrix is.

Regardless of whether or not Descartes is being deceived by a “demon”, or his beliefs are wrong, he was able to see that even if he has the ability to doubt something he must be existing to even doubt it in the first place.

Think and grow rich, the secret, or other motivational books that focus on using this as a tool to get you to the “be the best” discounts the fact that original quote came from a guy that was just wanting to “be”.

So when a coach throws examples of others that have been successful, they are not telling you to be your best, they are saying you need to be the best of someone better. No-one can make you feel inferior without your permission, so it is still up to you if you think you are not good enough to do it. If you want to be like the others, do what they do, but don’t say it doesn’t work if you don’t put in the work the examples did.

Process vs Product praise

Google this one by all means, but look for the different phrasing used in both and you would have heard it.

the Simplest way to codify this (see what I did there? 🙂 ) is to say product praise is given as a reward for completing something, such as achieving a goal, whereas process praise is given as a reward for at least putting in any effort, such as the prize for coming last.

The confusion has been created due to pressure to give praise when it was not due (in both cases), so if there is a lack of trust the praise can be seen as condescending and embarrassing for the recipient. Even when the giver is trying to be helpful, but the problem is (in society in general) this may be enabling the abuse for the recipient.

Words do matter, although not always evident at the time, and while people may take feedback well, they also disregard it if they don’t see it as relevant to them. If a person has a “positivity bias”, a coach may say “they don’t listen to me”. If someone is just trying to improve, do better, and a coach starts to tell them examples of what they need to do to be the best they can be, this is a miscue too.

If there is too much product praise, the danger is a person becomes addicted to it and have to be the best to have self-esteem. They also don’t play well as part of a team and become isolated as to give away too much it becomes a competition. This makes it hard for people who want product praise to network well.

So if you are a coach looking to get people to be their best, that’s fine, nothing wrong with that, but the question is “what happens next”? You could say “that’s not what you do”, again fair enough, but other peoples lives is not about you.

Using empathy for Urgent/Important tasks

I came across this lecture on using empathy as part of the collaborative decision-making process while researching content for the Free Diploma course. We all know we should be dealing with the important stuff first, so why don’t we?

It sounds simple enough, but the problem is that we’re far more likely to deal with urgent activities, regardless of importance; because we can see them right in front of our faces. Think an email coming in, a phone ringing, or a coworker barging into your cubicle.

Urgent matters are usually visible, they press on us, they insist on action, and in business usually relate to the sales process that has in fact “called” the customer to their action. Urgent matters are often popular with others, and more important to others than you. They’re usually put right in front of us to get our attention. And often they are pleasant, easy, fun to do.

If given a time frame, say 1 hour’s work, humans will generally try to solve the problem of having too much work by putting the tasks to the top of the list that is quick and easy to do so they can start checking off at least some of the number of things that have been set in the insurmountable challenge.

This actually goes against what the Eisenhower Matrix, and puts an urgent bias for a business owner, even if the tasks are both urgent and important. The more urgent task still get bumped up to the top of the list.

The business owner is the person that should be deciding what is the most important, so even if you employ people to focus on important tasks, employees will follow the business owner lead, particularly when trying to impress the business owner by doing a great job.

Affective empathy is used to prioritise tasks in order of how urgent you feel a task is, whereas cognitive empathy, also called “problem-solving”, uses tools like the Pareto principle (also known as the 80/20 rule) what is most important.

Building a team

If you love dealing with the fast-paced problem-solving nature of customer service and getting “wins”, you will naturally focus on urgent tasks. This means that you need an assistant to focus on the important stuff that is not as time critical for you, such as scheduling, accounting, follow-up. This will mean less important things will become Urgent, and lower your workload. This is good for people that want to grow their business focusing on sales. Build your team in this order:

If you want to do the marketing and strategy for your business, 90-day plans etc… get an assistant to look after the urgent matters for you. You just have to give them clear instructions on when to escalate things up to you. For example, when they can give refunds and up to how much they can give. When they do escalate a problem to you, it must come with enough information so you can provide the solution and be a hero to your customer. Customers are NOT always right, but they always win. You can make it a win-win situation for you by getting them to come back. Build your team in this order:

This makes your business scalable as you can duplicate your teams until you have 8 people directly reporting to you, and have around 60 to 100 staff. If you have more than 100 staff, you are classed as a “Big Business”, so it is likely you will need to restructure your business by then.

What’s “the problem”?

There are an infinite amount of problems, so it depends on each situation.

If a lack of sales is the problem, a salesperson may just give attention to their best 2 customers, but the business owner is then likely to start getting complaints from the other 8 customers, but the decision needs to be made as to how important these customers are to your business objectives. Maybe you can’t meet these customer’s needs, so is it worth keeping their business. These situations are commonly known as “sacking your customers”.

In the situation above, you could get rid of 8 customers, find just 1 more like the 2 customers you want to keep, and that would likely increase your sales by 20% with a lot less effort.

However, if you feel you sales growth depends on building relationships and getting more customers, you need to find out how to get more business from your customers, and complaints become more important as problems you can solve. People that come back and complain do so because they like coming to you, and want you to fix their problem so they can come back again and not have the same problem. If they were not planning to come back, they would just walk away and say nothing, but then you don’t get the opportunity to overcome problems that other customers may have as well.

Happy customers don’t find cheaper options unless they are looking for them. It’s like when an employee tells you they are leaving you because they have a job with better money. How did the employee know they could get better money if they didn’t apply for the job, so the real question is why they felt they needed to apply for another job?

Empathy used in Buyer Behaviour

Dr Daniel Segal breaks empathy down into 5 areas, which may provide a point of reference to where you may sit on the scale.

At a 2017 Research Symposium, Dr. Dan Siegel spoke about five types of empathy. Dr. Siegel is a Clinical Professor of Psychiatry at the UCLA School of Medicine. He is also the Founding Co-Director of the Mindful Awareness Research Center at UCLA.

  1. Cognitive empathy – Thinking of reason why others may be acting the way they do, what could be upsetting/scary etc.
  2. Perspective taking – Seeing the world through someone else’s eyes, how you would feel if you went through what they have.
  3. Empathic concern/sympathy – I can feel your pain, and I want to do something about it. Also called showing “Compassion”.
  4. Emotional resonance – You feel happy because you see someone else is happy; or sad because someone else seems sad.
  5. Empathic joy – “I get so excited about your success!”. Essentially proud parent moments, that are also experienced by leaders when their team is doing well.

Looking at buyer behaviour, this order indicates the dominant type of empathy used in the decision-making process.

You may get the sale, however, empathic salespeople may pick up that the customer is not very happy with the purchase, so they themselves to be happy with the sale. This may be because the salesperson may have to work harder in the “post-purchase” phase of the buyer behaviour to get a repeat sale. It is less work to just find another customer than to keep an unhappy one.

If you are the type of person that needs to know “why” someone acts the way they do, then you would be starting at the first type of empathy and work your way through Dr Siegel’s list. Joy is still achieved if the person does what you suggest, but you may not go through the full range, even skipping the middle 3 altogether, but more likely to end up on emotional resonance. Someone else (an account manager for example) will look after the customer from there if they have a problem. Still a win, but without the joy it may feel like a hollow one.

However, as an example, if you skip the emotional resonance and the other doesn’t share your joy with the outcome, maybe you have asked the person you are trying to help to do something that goes against their values and beliefs.

Are you justifying doing it because that is just what you “have” to do, taking away other options the person you are trying to help are more comfortable with. This may be an indicator that success is more about your needs than the person you are trying to help. These actions may be seen by others as narcissistic abuse, and bring your own “why” into question.

If a person has a natural tendency towards Affective empathy, it is likely that another person’s “why” doesn’t matter as much. The helper may start with showing compassion (empathic concern), take action based on the reaction of the other person. The helper, in this case, does use cognitive empathy and perspective taking, however, this is generally done after the problem is resolved, and subconsciously returns when the helper see someone else in a similar situation.

The just do it mentality is another example of affective empathy at play. Some people get so much advice that they just can’t make a decision. Let’s call it “analysis paralysis”. You suddenly someone doing something, they look happy, and all you think is “I want to be happy like them”. Doing anything is better than nothing for people going through this; they just need the right call to action.

Empathy has more than just psychological effect on human, it is biological. It causes chemicals to be produced that can make you feel sad, anxious, in love, even addicted, and create new “neural pathways” that literally change the way you think.