Applying Six Sigma to Marketing


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Six Sigma Marketing is not a project-by-project approach for reducing the costs of marketing activities, but rather an approach that seeks to enhance marketing’s effectiveness and efficiency

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Applying Six Sigma to Marketing

  1. 1. Business901 Podcast Transcription Implementing Lean Marketing SystemsApplying Six Sigma Marketing to become Best in Market Guest was Dr. Eric Reidenbach, creator of the 5Cs of Driving Market Share Related Podcast: Applying Six Sigma Marketing to become Best In Market Applying Six Sigma Marketing to become Best In Market Copyright Business901
  2. 2. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsDr. Eric Reidenbach is the Director of the Six Sigma MarketingInstitute. The Institute is one of the leadingorganizations and authorities of Six Sigma Marketing,a fact-based, disciplined approach to growing marketshare in targeted product/markets by providingsuperior value. The Six Sigma Marketing Institute isdedicated to the advancement and deployment ofSix Sigma Marketing. At the heart of SSM is amodified DMAIC process that provides the architecture forgrowing top line revenues and market share. Dr. Reidenbach is the author of over 20 books on marketing and market research. His most recent books include: Listening to the Voice of the Market: How to Increase Market Share and Satisfy Current Customers Six Sigma Marketing: From Cutting Costs to Growing Market Share 5 Cs of Driving Market Share is acomprehensive program. It is not a project-by-project approachfor reducing the costs of marketing activities, but rather anapproach that seeks to enhance marketing’s effectiveness andefficiency. For organizations that have deployed Six Sigma orother quality initiatives, the 5 Cs approach provides a userfriendly bridge for moving the quality focus from themanufacturing floor to the marketplace. Those seeking to becomebest in market must shift their focus from a product orientation toa market orientation, from an internal efficiency focus to anexternal focus. Best in market companies will be those that canmake this transformation and make it soon. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  3. 3. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe Dager: Welcome everyone. This is Joe Dager, the host ofthe Business901 podcast. With me today is Dr. Eric Reidenbach,the director of the Six Sigma Marketing Institute, one of theleading organizations and authority on Six Sigma marketing. Dr.Reidenbach has recently published a new book called "Best inMarket." This book was written in response to what the authorhas experienced working with manufacturers, and is aimed atquality personnel, including Lean and Six Sigma practitioners, aswell as marketing professionals.Dr. Reidenbach, could you start with an overview of "Best inMarket"?Dr. Eric Reidenbach: Id be delighted, Joe. "Best in Market" ismy response to a couple of different factors. First of all, is theidea of world class. World class has really become nothing morethan an ad slogan. Just about every company that you seeindicates that it is world class, and its really kind of meaningless."Best in Market," however, really communicates something verymeasurable and something very palpable. That is best in marketcompanies are those companies that are the market shareleaders in those markets which they have targeted. Theres onlyone market share leader in any specific product market. The restare challengers and the rest are followers, but theres only onecompany that is best in market.The second part of the impetus for doing this book was that theold model regarding manufacturing is giving way to a newermodel. The newer model is predicated on the idea of ability of themanufacturer to identify, to create, and to deliver value. This ofcourse is very specific to those markets that the manufacturer istargeting.For the United States manufacturers to achieve their position ofdominance in the world, its going to require them to acquire thetechnology, the know-how to do those three things: to identify Applying Six Sigma Marketing to become Best In Market Copyright Business901
  4. 4. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsand to create and to deliver value. Those are the things that willdrive them to be best in market in their targeted productmarkets.Joe: Can companies, a normal company truly achieve that?Eric: Absolutely. It takes a certain discipline to do that.Becoming best in market begins with really the basics, and that isidentifying those key product markets that the firm is going totarget. Each product market becomes a competitive arena forthat particular company. The idea that manufacturers in specific,and any other company for that matter, can be everything toeverybody is long past. We are now at a point where focus isrequired. That focus is the thing that drives the effectiveness ofthe organization and the efficiency of the organization.So the first step in all of this is to identify those key productmarkets that represent opportunities for growth for themanufacturer. This is going to require rethinking about the waythey do business, in many respects, because many manufacturersare very product focused, very product oriented. They think interms of product features. They dont think in terms of markets.They dont think in terms of market opportunities per se. Theydont understand markets. Most importantly, they dont reallyunderstand value.Value in terms of how that market defines value. That isabsolutely critical in the new manufacturing paradigm. Theyregoing to have to become value engines in the future if theyregoing to achieve any kind of dominance in the global markets.This means that theyre going to have to develop the technologiesto identify specific product markets, to prioritize them. Which arethe ones that are most important to them? Which offer themanufacturer the best opportunity for growth and for futureperformance? Applying Six Sigma Marketing to become Best In Market Copyright Business901
  5. 5. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsOnce theyve identified these particular product markets, andtheyve been able to prioritize them and there may be three, four,five or even six. Ive got a client for example that has identifiedover 100 product markets, based upon their product line offeringsand the markets that they serve. But only really about 10 ofthose product markets represent superior growth options forthem.By focusing on those 10 product markets, this company is able togenerate about 80 to 90 percent of its revenue stream from thosespecific product markets. This has enabled them to grow fromabout a $200 million company to somewhere in the neighborhoodof about three billion over about a 10 year period.So its this kind of focus that is absolutely essential. Then oncethey are able to identify the product markets, theyre going tohave to go in and understand how those specific product marketsdefine value. Out of this value comes the idea of being able toidentify the critical-to-quality factors.I can give you an example of this, I think, that one company, oneof my clients, has done a superior job on. These guys understandthis concept better than any other company Ive ever seen.Joe: Are you going to pick these particular product markets thatyoure looking at, and then within the product market, you aregoing to take a look at whats important to the clients? The CTQs,or critical-to-quality issues what’s important to the clients, andweight them. Are you not?Eric: Exactly so. Let me back up just a little second on that toobecause youve raised an interesting point. In choosing thoseproduct markets, what youll probably want to do is to applycertain criteria, such as what is your current market share withinthat particular product market. What is the market growth rate ofthat particular product market? You dont want to invest inproduct markets that are in decline. We want to invest in product Applying Six Sigma Marketing to become Best In Market Copyright Business901
  6. 6. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsmarkets that have room for growth. You may want to look at thecompetitive intensity. You may want to take a look at what themust-haves, the qualifiers are within that product market. Canyou satisfy those must-haves or are you going to have to investadditional resources simply just to qualify?Once were able to identify and list the different product markets,then we want to go in and do the type of analysis thats going toallow us to identify how those particular product markets definevalue. As part of that value, what are the critical-to-qualityfactors? Not only in terms of what they are, but how importanteach one of them is relative to the other.This is going to have an impact on the way we select them andthe way we prioritize them in terms of whats going to give us ourbiggest bang for our dollar. This gets back to efficiency and aneffectiveness issue that we certainly want to pay attention to. Weknow that value is the best leading indicator of market share.Becoming a superior value provider is the vehicle that allows usto become best in market.The key is understanding how those markets, how those productmarkets define value from a quality standpoint, and being able toidentify the importance of those different quality factors. Thatsabsolutely essential.Joe: When people are looking at growing market share andincreasing business is it easier, in your experience, to go deeperinto a customer or to find new customers based on the theirrespective product markets?Eric: Well, I would phrase it a little differently, Joe. There are acouple strategies that they can embrace. One of which is amarket penetration strategy. Maybe its just a difference interminology. Market penetration talks about penetrating themarket even deeper than we currently are at this particular point.It means that if we have a market share in a particular product Applying Six Sigma Marketing to become Best In Market Copyright Business901
  7. 7. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsmarket of 10 percent, market penetration strategy would focuson bringing that market share rate up to about 15 percent. So, inessence, what we would be doing is actually selling more of ourcurrent product line to current markets that were serving. Thatstypically referred to as a market penetration strategy. We alsomay want to embark on, at the same time, on a marketdevelopment strategy. That is where were going to take ourcurrent product line and sell it, market it to a new market.Weve certainly got to understand how that new market definesvalue. What are the CTQs and what is the importance of thoserelative CTQs? In order to establish a foothold in that market,weve got to be able to provide a really outstanding palpablesense of value to that particular market.I often talk to my clients about what I call the "speed" of value.That is products that are marketed in particular to new markets.If they have a discernible sense of value, such that a customercan look at that and say, "Wow, this is really going to add to myown value proposition," then the speed of penetration, the speedof introduction, and the rapid growth of the product takes place.Those products that dont have that discernible value, it takes alot longer for the markets to find it, if its embedded in theproduct, or to try to convince them that the value is there, whenin fact it may not be as discernible or as palpable. There are acouple of strategies there, with respect to that: a marketpenetration strategy and a market development strategy. Both ofwhich are going to revolve around this capacity to identify, createand deliver value. And that is the major dictum facing U.S.manufacturers today.Joe: I think that rephrasing of my question was very good andbrought out some great issues. The part of customer intimacy ofgoing deeper into a customer. You may be able to give me anexample of that. I think customer intimacy is something that is Applying Six Sigma Marketing to become Best In Market Copyright Business901
  8. 8. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsimportant today, because lets face it, theres not a lot ofcustomers out there right now?Eric: Well, thats a really good point, Joe. Let me revert back tomy example, because this fits very nicely into this type ofexample. One of my clients is an Australian firm that sells heavyequipment to miners, and because of their franchisingagreement, theyre restricted in geography, as to where they cansell. Within this particular geography, for this client, there is afinite set of mine sites in iron-ore mine sites. There maybe six orseven of these things, so really theres six or seven customershere.So how do you grow a business thats got a finite set ofcustomers, like this company does, thats got six or seven basiccustomers? This is where the customer intimacy that you bringup, is so important.Heres a company that took a look at what the key CTQs were inthis highly competitive mining industry. One of the mostimportant CTQs, if not the most important CTQ, was a thingcalled product support. That is the capacity to keep the gear thatthey sell up and running 24/7.In the iron-ore business, which is a commodity business,downtime is an incredible drag on profitability for the miner. Theirequipment has to be up and running 24/7. One key element orproduct within product portfolio that the miner buys is these bigtrucks. These big trucks take a huge beating because they runconstantly, and at some in point in time they do requiremaintenance.This company took a look at how well they were performing onproduct support. They found that in a comparative analysis oftheir product support to other competitors, that they were gettingwhat they would call good scores. However, everybody wasgetting good scores. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  9. 9. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsThe interesting part about this is that the management took alook at that and came to a real interesting conclusion, and that isthat if everybodys getting good scores, what is average? Well,good is average. So, in essence, they were just average.Average doesnt have a differentiating capability, and so theywere looking for a way to create a differential value advantage.So immediately, they took apart their product support businessand said, "How can we provide superior--I emphasis superiorproduct support--to our customers?"One of the things that this led them to was the idea ofestablishing maintenance operations at each mine site, so thatthey could respond more quickly to any kind of maintenanceissues. This meant establishing parts warehouses and depots,putting trained maintenance people on the mine site.Well, this turned out to be a really good thing. They recognized it.They leveraged it. They invested more money into it. Not only didthey service their equipment, but they began to servicecompetitor’s equipment.The mine site operators were just tickled to death with thisbecause all of this was reducing the downtime for theirequipment. My client enjoyed the differential advantage here,because the product support dollars are huge. In fact, I think ontrucks, I was quoted there are about five times greater revenuesin product support, downstream product support then there are inthe sales of the product. So its a real huge revenue grower forthese guys.At the same time, they found that they were establishing atremendous source for competitive information, because theyknew more about their competitors by serving this particularequipment. They knew when the miners were ready to buy newequipment before the competitors knew. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  10. 10. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsThey were able, at this particular point, to get on the bid list ofmore of these different miners, by creating this kind ofcollaborative partnering relationship with the mine site operatorsthat became actually part of the production process for them.Joe: They really became part of their community?Eric: They did, exactly. This is I think what a lot of people aretalking about in terms of community collaboration. They havebecome a very key part of the value proposition of theseparticular mine sites.Joe: Cost had to be reduced for the client and it certainly had todrive a lot of other areas to include innovation?Eric: The local guy, the mine site operator, didnt have to incur afix cost, if you will, of having his own people there. So thisbecome somewhat of a variable cost to him. The relationship thatwas established between the miners and the supplier ofequipment, in this particular case, has led to all sorts of differentinnovations in terms of that. This is one of the things that reallydrives me crazy, about a lot of this. We talk about innovation anda lot innovation focuses on product innovation, but for the smartcompany, the company thats achieving best in market status,innovation can take a number of different avenues for them.The whole point of this gets back to that concept of creating thatdifferential advantage, a differential value advantage that issustainable, one that cannot be neutralized quickly. When youlook at how the market or customers define value, you openyourself up to all sorts of different ways to create thosedifferential advantages that lead to some sort of innovativeposition within the marketplace.Its not always in terms of the product itself, but often times, itmay be in areas of product support, product differential. Thesupply chain is a tremendous area that is ready for innovation Applying Six Sigma Marketing to become Best In Market Copyright Business901
  11. 11. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthat can add to the value proposition of a manufacturer andcreate that differential advantage that a competitor cannotneutralize easily.Joe: By putting your service into the customers yard, forexample you really minimized the supply chain right there?Eric: To a very large extent, you did. What youve done there isyouve created a real valuable tool for the mine site operator,because he does not have to deal with that now. He knows thatby this community, this collaboration thats taking place here, thispartnering, that this is a function that is going be taken care ofby, in this case, the supplier.Joe: I think the other thing you mentioned there: when we sitthere talk about innovation, most people look at productinnovation on the beginning of the curve and getting to the earlyadapters. But a lot of good innovation based on differentialadvantage is way up there on the curve, ready to be used, and is,I hate to use this word, but practically instant cash?Eric: It can be, yes. Because one of the ways... Ill give you areal simple example of what I thought was a real innovation, andthat is in the warranty area. This one client that Ive got wasselling these compact tractors to what they call the "sundowner"market. These are guys that would come home from work,professional guys who come home from work and sit on theirtractors, their 40-horsepower tractors and mow their estateswhile drinking a cold beer. They put on, over the course of ayear, a relatively low number of hours on the equipment.When they started looking at the number of hours that theseguys are putting on the equipment, instead of identifying thewarranty, like a three year warranty, they found that they couldextend that warranty something like five, six years, because ofthe low hours on it, and still not incur a whole lot of warrantycost. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  12. 12. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsWell, this took off. The whole idea was spreading through thiscompany about, "We can take this warranty program and extendit from three years to six years. What would that do for thecustomers?" Well, the customers liked that. Because thecustomer is not a technical guy, relies heavily on the dealer forany kind of product support.You can create that differential advantage through a warrantyprogram. The automobile industry has understood this now and isbeginning to offer extended warranties, ten year warranties. Thisessentially takes the risk out of owning a car. A lot of companiesare not attuned to creating the kind of differential advantage inways that are not associated with product.Joe: From a manufacturing perspective, really youre most likelyinnovations that can help you out in the short term are otherfactors outside of the product itself?Eric: Absolutely. And if you understand value, how the marketsdefine value, youre going to find that in many cases product isnot the major driving critical-to-quality factor. There will be awhole lot of other factors there. I often marvel at manufacturerswhen they buy an automobile. When they go out to buy anautomobile, they start evaluating the different products and thedifferent brands; they dont rely solely on the product itself. Theyrely on what the warranty is; they look at the dealer and thequality of the dealership. They look at any past repair problemsthat they might have had.They look at factors such as cleanliness of the dealership, etc.,etc. Ive often wondered why they dont bring that same type ofthinking back into their business and understand their businessfrom the market standpoint and not solely from just a productstandpoint. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  13. 13. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: That differential advantage compared to your competitorhas to be seen in the eye the customer. How do you go aboutdoing that?Eric: Well, you have to understand what your value propositionis and what your competitors’ value proposition is. Value is arelative concept. Lets say you have a ROA, a return on assets of5.0. Is that a good ROA? Well, it really depends on what theindustry is: the ROA for the industry and what the ROA for yourcompetitors is. Value is the same type of comparative type ofthing. So that if you can understand value and if youre listeningto the voice of the market, by that I mean, if you understand howthe markets defining your value proposition relative to the valueproposition of your competitors, you get that comparative view.With that comparative view, gives you an opportunity to identifywhere your value gap is, or where your quality gap is, bybreaking value down and understanding what the qualityelements of that are and your performance on those qualityelements relative to the competitor. Much like the example I gaveyou about product support, where everybody was getting goodperformance on that.If everybody is getting good, then good becomes average, and itfails to be a differentiator. Look at those gaps, you now have anopportunity to either leverage a gap for which you have anadvantage, invest in that gap, make it even wider, or improvingon a factor to close the gap between you and a competitor.It really is a very simple process of understanding how thisworks, if youve got the right tools. If you can understand howthe market defines value, and if you can look and see how yourvalue proposition compares to somebody elses, you can take alook at that gap and then do something about it. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  14. 14. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: Back to the parts supplier or the service suppliers in themining industry, can you give me an example of how theycreated their differential advantage and how they looked at it?Eric: Well, they had the information. They had the informationon how that particular mining market defined value when it cameto those big trucks. That was the product market. These areoff-highway trucks that are the product. Mining is the market.They went in there and they talked to these guys. They created avalue model out of it. They understood how that particularproduct market defined value. In the process, they were able toget information, not only on themselves, but how theircompetitors stacked up.This is where I made the point earlier, that everybody had a goodperformance on product support. They took a look at that, andsaid, "Well, theres no gap there, thats not a differentiator. But itis the most important critical-to-quality factor. Now, if weregoing to become best in market here, were going to have toexcel on product support. Were going to have to create a gapbetween us and our competitors."By taking that apart, by brainstorming it, by mapping out howthey went about doing this, how they provided product support,they were able to see that there was a huge opportunity there,that by establishing maintenance operations at each mine site,they could closer to that particular customer.They could create that kind of intimacy that would make thempart of their value proposition and create that differentialadvantage, which is going to differentiate them from a valuestandpoint among their competitors.Joe: So they really sat down and went through a processmapped the value stream and started with that process, correct? Applying Six Sigma Marketing to become Best In Market Copyright Business901
  15. 15. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsEric: Exactly so. They started with information. They knew whichproduct market they were targeting, and then they went in thereand got the kind of information that led to this type of actionableresults. Without that information, Joe, everything else becomessort of intuition or guessing. Strategic planning becomes strategicguessing. There is a lot of inefficiencies, a lot ineffectivenessthats associated with something like that.Joe: Reducing someone risk may be the most important thingfor anyone buying a product anymore?Eric: Well, I think youre right. I think that, of course, theresthrow away products. But when youre talking about a lot of thesemanufacturing situations, the investment in product is sosignificant that product support comes to the surface as thenumber one factor. Let me give you another example here. Itcomes from the same company that applied this thinking fromthe mining situation and they translated that to another productmarket of theirs, which again was off-highway trucks to theheavy construction market.In their value analysis in this particular product market, therewas two things, two CTQs that emerged from the pack. The firstone was speed of repair. Thats not uncommon, because anytimeyou are dealing with heavy investment in capital equipment likethis, downtime is a killer.So speed of repair was number one. Number two was keeping thecustomer informed. A lot of the complaints that companies had,supply companies had in this particular area had to do with thefact that when something was taken into be repaired thecustomer was not kept informed.Now that created all sorts of scheduling problems. And again, thiscompany was pretty much at parity with respect to itscompetitors. The issue then was well, what can we do to create a Applying Six Sigma Marketing to become Best In Market Copyright Business901
  16. 16. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdifferential advantage? How can we increase the speed of repairand how can we keep the customer more informed?So this began a process of mapping the repair value stream.What they were looking at were ways to remove wasted time.One area that came right to the surface was that every time adrive or transmission was brought in, theres always a strip andinspect process.What was holding up the repair process lots of times was gettingthe right parts to put the equipment back together again after thestrip and inspect had been done. So what they ended up doingwas saying well, we know what parts are going to be necessary,so what they did was created parts kits and delivered these to therepair bay at the same time that the repair was being conductedon the equipment.Now when I talk about a repair facility here, people have tounderstand that this is a 40-acre facility. Its not like a Goodyeartire changing place. As a result, it took time to put in partsorders, to pick the parts, to gather the parts, and to take theparts to the right facility. Lots of times those parts were deliveredto the wrong facility and they didnt have them when theyneeded. All of this added to the repair time. So by having theseparts kits and having them color-coded to specific repair bays,they were able to really cut down the speed of repair on that.In the mapping process, they looked at where the customercontacts came into that mapping process. Who initiated thosecontacts? In most of the cases it was a worried customer callingin saying whats happening with my repair? When am I going toget it? Am I going to get it when you said I was going to get it?So by looking at those types of contacts and the direction ofthose arrows from the customer down to the repair service, theywere able to reverse those arrow flows and give them periodicupdates. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  17. 17. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsWell, this made the customer very happy. Not only was hegetting his repair done more quickly, he was also knowing whenthat repair was going to be done and when his gear was going tobe available to put back in service.This was really a tremendous finding for them, a tremendousdifferential advantage because they were able to cut the repairtime by up to six hours which meant that these guys got theirgear back into service a lot quicker.This put them back in the top for bids. It created that kind ofdifferential advantage. Sales, I believe, increased by about 15percent predicated on the basis that if there was somethingwrong with the product, if a repair was needed, they knew thatthese guys were going to be able to repair it quickly and get itback into service.Joe: Like in the first example you used when they were alsorepairing the competitors equipment, you actually had to build arelationship with your competitor. Thats the ultimate form ofcollaboration is that youre really sharing knowledge and thecustomer is at the forefront.Eric: Yes, exactly so. But it also requires, in this case, themanufacturer. One of the points that I would make here is thatnone of this was done by the manufacturer. The manufacturer,the information on repairs went back to the manufacturer so thatit could be incorporated into future product development. All ofthese were done in the distribution system, things themanufacturer had very little control over. The manufacturer hadinvested in the distribution system to such an extent that theywere capable of doing these types of things.Joe: During the discussion, youve mentioned several times thatperformance was at parity with competitors. Ive sat in a lot ofmeetings where someone has sat there and said thats becausethe customer doesnt understand. To me that sounds like the Applying Six Sigma Marketing to become Best In Market Copyright Business901
  18. 18. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsproduct manager or the manufacturer is assigning the CTQsversus the customer assigning the CTQs. Have you been in thatsame situation?Eric: I think I must have been sitting next to you in several ofthose meetings, because youre absolutely right. This reflects aproduct orientation on the part of the company, the belief thatthe only value that is conveyed to the customer is conveyed interms of the product or product features itself. Its amisunderstanding about value at the point of consumption versusvalue at the point of production. These companies that are sofocused on the product do not have that clear line of sight to themarket to customers who actually define value, and you get amismatch of value definitions here.The mental model, if you will, of the organization does not matchup to the mental model of the market. And to that extent there isa discrepancy there, theres problems. Ive been in a lot ofmeetings that were dominated by product managers and Iveeven heard them say things like the customer doesnt know whathes talking about and if that doesnt send up a red flag, I dontknow what does.But this is a major problem, I believe, with a lot of U.S.manufacturing, and that is that product focus inhibits them fromunderstanding how the markets define value. Then how to takethat information and incorporate that information into yourstrategic and operational initiatives that are going to create thatdifferential value advantage for you and increase your marketshare.Joe: So, how do companies find a differential advantage?Eric: Well, lots of times they dont. Lots of times theyre just,they become me tos. They become followers. Keep in mind,theres only one Best in Market Company in any market andthats because these are the guys that typically understand how Applying Six Sigma Marketing to become Best In Market Copyright Business901
  19. 19. Business901 Podcast TranscriptionImplementing Lean Marketing Systemscustomers define value and are able to take that information andincorporate it into their business in a way that it actuallyenhances their value proposition and creates that value gapbetween themselves and their competitors. Thats what drives themarket share gains and makes these companies best in market.They rely heavily on an understanding of who their markets are.They take the time to carefully define product markets. They takethe time to get the kind of information thats going to allow themto act positively with respect to this and create that valueadvantage.They understand that the lack of market information is aninhibiting factor. Theyve stopped guessing. Theyve stoppeddriving their business by intuition and by agenda, instead arelistening to the voice of the market.That voice of the market actually brings the customer into thebusiness and puts them at the table with the different elementsof that business that are represented there and partners with thecustomer, partners with the market, creates that communitycollaboration, if you will, that allows them to get closer to themarket and create that value advantage.Joe: Its not about just taking the information from surveys andfocus groups and salespeople, its about extending customervalue and having customer value driven through the wholecompany and having the whole company have a meaningful, letssay, benchmark to the customer. Engineers, service people,salespeople all need to be together on this proposition, dontthey?Eric: Absolutely. Its the type of thing, the old water cooler talk.How do companies create value? Value starts being discussed in ameaningful way outside of the corporate missions and corporatecreeds. Value becomes not an abstract idea within anorganization but a very important driving factor within that Applying Six Sigma Marketing to become Best In Market Copyright Business901
  20. 20. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbusiness. You then get this kind of response that creates thosedifferential value advantages and drives market share. Its thetype of thing; its the DNA, if you will, of best of marketcompanies. They think, eat and sleep value.Joe: Value defined maybe going just a step deeper is differentialvalue.Eric: Thats exactly what youre trying to do is create thatdifferential value advantage. That may be based in terms of anynumber of the different quality elements that comprise value.Now, value also has a pricing element to it, also. Pricingadvantage, unless its based on some operational factor that issustainable, and not easily neutralized, is not a particularly goodway to create any kind of value advantage.You see companies that have sales. That sale generates a lot ofbusiness simply because if the company is offering a high value ofquality in their product, service offering, and now theyve reducedthe price of it, the value proposition of that company goes up. Itgoes up for a short period of time until prices go back. Then, oncethey go back, the value equation has changed once again.So companies that rely on pricing, and theres a lot of them thatrely on pricing to make sales at the end of month, all theircustomers know that if they wait till the end of the month, theprices are going to down because theyre going try to increasesales. Thats when the value is the best deal for them, for thecustomer.But instead of investing in ways to provide superior quality intheir product, service offering, at a fair and competitive price,these companies rely upon price itself. To be neutralized, anothercompany only has to reduce its prices.Then, you get into that internecine scenario, that self-destructivesituation, where these companies fall into this pricing competition Applying Six Sigma Marketing to become Best In Market Copyright Business901
  21. 21. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsand actually manage themselves almost into a commodityproposition, where their product is good as another product. Itdoesnt matter which product which you buy, because theyre allthe same. They lose that capacity to differentiate.Joe: What I take from that is that quality advantages, qualitydifferentiation, lasts a much longer time than any price advantageever will?Eric: Its typically so. Of course that is the challenge facing allthese different companies, is to continually innovative from avalue standpoint. Always look for ways to provide superior valueto the markets that theyre targeting, because other companieswill be coming along and challenging them on this regard. Thecompany that creates a value advantage and sits back and doesnothing with it to leverage that, for example, that value gap thattheyve created will be closed by the other company thatsfollowing them, thats challenging them.So its a continuous task on the part of management of thesedifferent companies to look for ways to provide superior value,innovative in the area of value, so that they can create thosevalue gaps and drive market share gains.Joe: If I am best in market in a certain area, I have to work justas hard to maintain that?Eric: Yes, absolutely. Its not a one time... Its not an event, itsa process. Companies have to look at this as a continualimprovement process. A continual value improvement process, ifyou will, that not only looks at how do we reduce our costs? Butperhaps more importantly is how we increase the value that wereproviding our customers? Its not a one-time situation. Its acontinuous process of invigorating the business and charging itwith the objective of creating superior value at every opportunity. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  22. 22. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsJoe: Eric, is there something that maybe I didnt ask you about"Best in Market" that Ive left out of this conversation?Eric: One of the things that has struck me, with respect to myexperience with a lot of manufacturing firms, has to do withculture of the firms. People talk about culture. Culture is aninsidious factor. It can be very beneficial if its a positive culture,but it can also be very detrimental if its an inhibiting culture. Ibelieve in a lot of these manufacturing firms, what I see, is thattheyre engineer dominated, and thats what gives them theproduct focus.About six months ago, or a little bit longer than that, when Iresearching information for "Best in Market," I downloaded a lotof curricula from really good engineering schools: Purdue,Berkeley, gosh, I cant remember them all. MIT. I downloadedthe actual curricula. What I found, Joe, was kind of striking. Thatis that in none of those curricula did I see mention words likecustomers, markets, customer information, value, things likethat. All I saw was a focus on tools, on calculus, differentialcalculus, and trigonometry, all of the things that make engineersgood engineers.But thats kind of old school. One of the things that I believethats representing a real challenge for our manufacturing sectorat this particular point is being able to re-educate engineers. Tounderstand, as I started off this whole conversation with you,how to identify, create and deliver value.Its not something you stumble over. But the identification,creation and delivery of value has to got to be able to be done ona systematic basis, not on a random basis. It has to be part ofthe way they do business, and its got to supplant the focus onjust the product itself. The belief that value or quality at the pointof production automatically equates to value or quality at thepoint of consumption--it does not. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  23. 23. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsBecause the value stream that flows from the organization to thecustomer, transcends the manufactures walls. Hes got to be ableto incorporate how that product moves from the manufacture tothe customer and the different utilities that are created in thatparticular process.Until they do that, any innovation that occurs in U.S.manufacturing is going to be dependent solely upon product andmanufacturing process. My point here is that there is an entireworld beyond that, that represents a very fertile, a very fecundarea for creating value innovation that is going to allow thesecompanies, these manufacturers to become best in market.Until they can raise their gaze from the manufacturing floor to themarkets to get that clear line of sight to the market, tounderstand how those markets define value, to take thatinformation drive it back into their business, incorporate it intothe way they do business, that their opportunities for differentialvalue advantage are going to greatly limited.This is whats going to inhibit them from becoming best inmarket. Theyre going to have to take that information, learn howto use that information. The irony of all of this is that is the U.S.leads in this whole area of value measurement and valuemanagement. Its not coming from China; its not coming fromJapan, and it’s here resident within the United States. And gettingmanufacturers to open up their business in such a way as to bringthat information and to bring that know-how in is critical. TheNational Association of Manufacturers at the national level, at thestate level, all these other manufacturing organizations,associations, are going to have to take a lead in bringing that inand offering that technology to U.S. manufacturers if theyregoing to dominate the world markets.Joe: How can someone get a hold of you, if they want to learnmore? Applying Six Sigma Marketing to become Best In Market Copyright Business901
  24. 24. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsEric: I can be reached a number of different ways. By phone:601-213-4849. I can be reached at Bythe contact option on a new website called Driving Market I would like to also mention that the ebook "Best in Market"can be purchased on that site, along with program associatedwith I would say one final thing. I will guarantee anybody whobuys that book; they will be challenged in their ways of thinkingabout their business. They will be challenged in the ways theythink about their competitors, and the way they think about theirmarkets. Joe: Well, thank you very much, Eric. I appreciate it,and well be looking forward to talking to you some more.Eric: Thank you, sir. Applying Six Sigma Marketing to become Best In Market Copyright Business901
  25. 25. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Lean Six Sigma Black Belt Ph: 260-438-0411 Fax: 260-818-2022 Email: Web/Blog: Twitter: @business901 What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joes ability to combine his expertise with "out of the box" thinking is unsurpassed. He has always delivered quickly, cost effectively and withingenuity. A brilliant mind that is always a pleasure to work with." James R.Joe Dager is President of Business901, a progressive company providingdirection in areas such as Lean Marketing, Product Marketing, ProductLaunches and Re-Launches. As a Lean Six Sigma Black Belt,Business901 provides and implements marketing, project and performanceplanning methodologies in small businesses. The simplicity of a singleflexible model will create clarity for your staff and as a result betterexecution. My goal is to allow you spend your time on the need versus theplan.An example of how we may work: Business901 could start with aconsulting style utilizing an individual from your organization or a virtualassistance that is well versed in our principles. We have capabilities toplug virtually any marketing function into your process immediately. Asproficiencies develop, Business901 moves into a coach’s role supporting theprocess as needed. The goal of implementing a system is that the processeswill become a habit and not an event. Business901 Podcast Opportunity Expert Status Applying Six Sigma Marketing to become Best In Market Copyright Business901