Managers in the pursuit of increased productivity in recent years have focused heavily on cutting costs and streamlining processes inside their business operations. While it’s important to operate “lean and mean," many business leaders have tipped the scales too far in this direction at the expense of revenue growth - administrative and SG&A budgets have been cut to the bone. It seems this focus on cutting costs is considered the only way to improve productivity but flip-flopping the view to the outside makes one realize that increasing revenues with the same level of investment is another way to improve productivity and profits.

Therefore, the top line is becoming “top of mind” as many CEOs identify revenue enhancement as the number one challenge facing their company today. To solve this problem, many assume the answer is in assessing the classic marketing “4 Ps” (product, price, placement and promotion). However, it has been my experience that a focus on the 4 Ps creates an inside-out view. Instead, the most profitable top-line growth occurs when marketers break away from the “4 Ps” and focus their initiatives on strategic, cross-functional and bottom-line activities. This “outside-in” strategic focus requires a change in direction that is implemented with the following five steps:

1. Identify strategic segments
2. Develop value propositions
3. Create messages
4. Maximize sales channel effectiveness
5. Measure results and loop back to segment identification

Identify Strategic Segments

Strategic segmentation identifies and defines the differences among many potential customer segments based on need, geography, and demographics. A company must decide how many segments they can realistically serve without spreading the organization too thin and compromising the capabilities across the multi-disciplinary functions. 

Working recently with a telecommunications company that had originally defined their market segment as an entire state, it was difficult to develop a message that had meaning for all potential customers due to age disparities, geographical variances, and lifestyle differences. Plus, pitching themselves against formidable competitors such as AT&T, Verizon, Charter, and Time Warner was a daunting task to create any kind of awareness in their new marketplace. 

When I worked with this client to identify its potential market segments by geography, customer demographics, and psychographics, market penetration became more manageable and less daunting, while also offering something that Verizon and AT&T could not - flexibility and nimbleness. 

Another important segment are current customers who should be treated as a separate segment and treated very differently than potential segments.  With entrenched customers, customer loyalty is started and the ability to cross-sell is greatly enhanced with an existing customer base.

Develop Value Propositions

Next, interview customers to determine their needs and wants and identify the true differentiators in each segment in order to develop your value propositions. In addition, consider the strategies and offerings of your competitors so you’re your value proposition is truly different from others.

Your value proposition should not simply describe your product offering’s features, but also describe its solution in a tangible way. Why? Because when a company develops a product and brings it to the market, it typically takes very little time for someone else to copy the product and quickly bring a similar product to market. With two similar products on the market, prices decline, margins are not protected, and the original value proposition is destroyed. 

However, if a solution is brought to market, rather than just a product, the company’s “value proposition” is more protected and not easily copied. Also it becomes much more difficult for customers to switch to the low-cost provider if they are loyal to a partner who brings a true value-add to their vendor choices.

For example, using the same telecommunications provider example as before, the smaller provider cannot compete solely on price – their resources are fewer (financial, people, technological investments, etc.)  Therefore, the smaller provider could initially attract new customers with a low introductory price, then retain customers by providing outstanding customer service and a customized (one-on-one) marketing program that addresses concerns and needs of their customers. 

Create Messages

Creating a different message for each segment is important in order to offer a value proposition that resonates with varying segments. The message must be different enough to attract each respective segment but cohesive enough not to destroy opportunities for economy of scale within the organization.

Additionally, messages become more persuasive when they back up their claims to provide solutions. For example, simply saying that you can save your customer money isn’t as persuasive as actually demonstrating and documenting that claim. This is particularly important for business-to-business selling, where customers are accountable to their companies for watching budgets. Bring “one-on-one” marketing to life by creating a spreadsheet, for example, that shows a “before” and “after” financial statement documenting the real dollars your customer could save by using your product. This is one way to create very customized messages.

Maximize Sales Channel Effectiveness

Under pressure to generate top line growth, marketing executives cannot ignore new channel opportunities such as the Internet and other technology advances that are significantly changing the way products and services are sold. Tough questions await the marketer: channel changes rarely occur without top management support. Re-upping entrenched channel processes causes turmoil in all functions of the organization, especially operations and finance. 

Two essential questions need to be addressed when determining the most effective channel structure: “How will this effect the value proposition we bring to our customer?” and “Will the new channel replace or complement the existing channel?” Answers to these questions will help shape the new channel structure. 

Many companies find complementary strength when they open their products and services to the Internet - particularly if they want to attract a younger demographic.  Many times companies will customize their strategy channel to reach various market segments.  For example, a recent client completed a comprehensive market study and determined that the awareness and buying patterns of its customers thirty years and younger were more Internet-based than retail oriented. The client was putting all of its marketing dollars into newspaper, radio, billboards and direct mail. Although these media channels were effective in retaining existing older base customers, they were not effective channels to reach the younger customer. 

A more dramatic shift occurred with another company who switched from a more cold-call sales force mentality to a broader Internet-based strategy. When switching channels, the company had to think through all the details that a channel-shift entails – not the least of which involves substantial attention to the back-end changes that need to occur to make certain the sales process is seamless.

Measure Results and Loop Back to Segment Identification

Tracking revenue growth by segment is vital in order to continue top line growth. If a segment is not growing, the company needs to re-define the value proposition, craft a clearer message, or re-configure the channel structure. The process of value creation and top line growth is continual. One of the biggest flaws that occur in companies today is lack of tracking the sales source and not reacting quickly enough when a strategy is not effective. Marketing dollars should be an investment, not an expense and this only occurs when strategies are tracked and adjusted when one is not effective.

In summary, business leaders who go beyond the classic “4 Ps” of marketing and take these five steps to create an “outside-in” focus will be on the road to improving productivity. They will create a more market-focused and customer-focused organization, rather than a product-focused environment. The end result will be profitable top-line revenue growth, more loyal and satisfied customers, and a stronger future for your company.

About the Author

Ms. Hendershott helps her clients create and implement strategic marketing programs to grow revenues and increase market share. With more than 25 years experience, she has successfully completed assignments in a wide range of industries and has worked with clients that are growing, evolving, and distressed. Her areas of expertise include revenue growth strategies, sales and marketing effectiveness analysis, market position analysis, market trend studies, and marketing plans.

Ms. Hendershott previously was founder and president of Rainmaker Marketing Corporation, which provided strategic and marketing guidance. Prior to that, she was marketing director and assistant vice president for Property Resources Corporation and was a member of First Bank System’s team of real estate professionals that successfully turned around troubled loans.

She has a BA from Yankton College and an MBA from the University of Minnesota. In addition, she is a member of the Turnaround Management Association and an advisor for The Owner's Institute.