GROWTH SECRETS: Compelling customers to buy

New technologies often find themselves in a situation where they can be used to develop products to solve serious problems which have not been able to be addressed previously. This is one of the reasons why breakthrough inventions are often found in high growth firms. What you have is pent up demand, no alternatives, a compelling need and short decision times. Many biotechnology discoveries have spawned global products by solving medical problems which have defied medical science for generations. At the time of discovery, they are normally the only solution available. With such a background, high growth rates are almost guaranteed.

What if you have a product which has a low compelling need, how can you change the situation? Basically you need to strengthen the need. Clearly the need is not in the utility or funcionality of the product itself, therefore the value or need has to be built around its intrinsic value. This is the marketplace of designer brands and intangible value creation. With designer brands you create need through an association with an image of self or with high profile celebrities. Need can be associated with self image, ego, peer group pressure, a need to ‘belong’ or a need to be admired, respected or envied by being in possession of a specific brand. In industrial products or services, the need might be satisfied through an association with an admired and/or leading business customer or through being an ‘approved’ supplier of choice to a much admired corporation.

Intangible value is associated with elements of customer preferences beyond the functionality of the product or service. This is where companies use smart design, colours, styles, taste, smell, tactile feel and so on. While these are harder to assess, customer feedback can assit to identify those which have greater customer preference.

Multiple products can be pulled into a sale by being complementary to a product which solves a compelling need. The sale opportunity is created by having one component of the sale satisfy a compelling need, but the sale process itself takes the opportunity of presenting other complementary products. Thus an applications software vendor might open the door with a payroll, tax reporting or OH&S reporting system but sell an entire system on the back of it. Consulting firms have compliance audit services which gain them access to clients and then sell general consulting services in cross sell opportunities.

A compelling need reduces the costs of selling as there is little selling effort required. This in turn helps create higher velocity in the business. However, where there are close competitors, this advantage can be readily lost and deals will ultimately be won on lowest price. The ideal position to be in for any business is to have a product which satisfies a compelling need in a medium to large growing market, has no close competitors and is able to protect its competitive advantage for some length of time.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.