For the clients you have, large or small, existing or prospective, ask of them this: Why are you in business? Suffice it to say, the answers will be broadly articulated, however, once the dust from the superfluous mission statements, visions and core values has settled, they will all invariably come to the conclusion that they’re in business to make money.
Agreed, in order to stay in business you need to make a profit. But, to run a business solely for profit serves no purpose and has no value to the end user: the vulnerable market. Peter Drucker, arguably the most profound management thinker in history, has indefatigably pointed out that, “there is only one valid definition of business purpose: to create a customer.”
We call that marketing. The purpose of any organization–from a government agency or nonprofit foundation, to a corporation or a church–is to create results outside of itself… in other words, to create wealth (not necessarily monetary) for its customers. Your clients are indifferent to the internal workings of your agency in terms of costs, desired profit, and efforts. Value is only created when you have produced something the client voluntarily and willingly pays for.
What makes effective marketing so brilliant is that the focus is always on the outside of an organization… your clients’ customers. Unfortunately, clients do not readily assimilate this lesson, nor is it often persuasively taught by agencies.
Conventional client wisdom, based on a 500-year-old formula, advocates buying low and selling high… an utterly inadequate accounting model for relating internal costs to external wealth… unless you’re buying and selling pork bellies.
Remember Shawn Fleming, the 19-year-old college dropout who in 1999 created Napster? By March of 2001, 2.5 billion files a month were being downloaded, validating the economics of lower price/higher demand… especially when the price is zero. Nevertheless, when you have millions of potential customers breaking the law, you don’t have a crime wave you have a marketing problem. The point then, is not to argue the highly contentious issues of copyright and intellectual property, but rather recognize the lack of understanding by industry execs who kept their focus on the inside of their empires and completely ignored the external value of easily obtaining tunes.
iTunes. That is all.
Had the industry execs studied and innovated what the market found valuable, they could have invested in productive R&D instead of tossing millions down the judicial drain.
What and how do your clients buy? The “what’s in it for me?” generation is not going anywhere just yet. Don’t sell me a suit sell me style. Don’t sell me insurance sell me peace of mind. Don’t sell me books sell me knowledge. Don’t sell me things, sell me ideals, confidence, happiness, excitement…
Leo Burnett used to say, “Don’t tell me how good you make it, tell me how good it makes me when I use it.”
Consider this: doctors don’t complain that their patients didn’t attend medical school, and similarly, it does no good for an agency to complain that their clients “just don’t understand the value of what we do.” It’s our job to make them understand the value of what we do and we can only do that by understanding–at a very deep and meaningful level–the motivations of why clients select us and stay with us.
Focusing on the total client experience–solving problems and creating good feelings–demonstrates not only competency, but distinction. More succinctly, what our clients are really buying are expectations. And in most instances, they’re not as price sensitive as they are value conscious.
Also consider this: if you charge for stuff, then you’re in the commodity business. If you charge for tangibles, then you’re in the goods business. If you charge for the activities you execute, then you’re in the service business. If you charge for the time clients spend with you, then you’re in the experience business. If you charge for the demonstrated outcome the client achieves, then and only then are you in the transformation business.
The old paradigm of running a business is losing relevance and ground to success in today’s intellectual capital economy. Old strategies don’t produce new results. Agencies need to accept the challenge of establishing new traditions for our industry that create value for others. Value-based pricing will enable us to be paid what we’re worth and put an end to sacrificial profits upon the altar of accounting.
Focus your design practice on value–a new way of thinking and operating whose time is now.