Life is like jelly beans in that what you see isn’t always what you get, but in the end the experience is well worth the risk. — Source Unknown
Jelly Beans teach us a lot about commoditization, perceived value, and the necessity of strategy in the marketplace.
Take price for instance. The leading brand of jelly bean earns nearly six times as much per ounce as a top store brand, $0.40 versus 0.07 per ounce. What’s more, that same leading brand enjoys a $0.25 per ounce advantage over a gourmet brand of comparable quality purchased in a specialty retail shop.
And despite the higher price, the market leader sells significantly greater volumes as well. Higher volume at a higher price selling essentially the same product with the same ingredients is a winning proposition no matter how you slice it.
In a blind test panel the leading brand outscored both the gourmet brand and store brand unanimously when it came to taste. But surprisingly, the gourmet brand won in terms of packaging and product appearance and the store brand provided the best overall mouth feel according to the tasters.
So what’s the big deal? How many times has your sales and/or marketing team played the commoditization card as an excuse for losing deals or declining market share? How often do they complain that prices are too high as justification for another lost opportunity? Are you even targeting the right audience and sales channels to begin with?
At issue is value and how it is communicated. The market leader has established a strategic position predicated on brand identity, taste, product merchandising, packaging, distribution, and yes, higher pricing. After all, if they are fetching a higher price the retailer is enjoying a proportionately higher payback as well.
According to Michael Porter, “ultimately all differences between companies in cost or price derive from hundreds of activities required to create, produce, sell, and deliver their products or services, such as calling on customers, assembling final products, and training employees…differentiation arises from both the choice of activities and how they are performed.” [see Harvard Business Review, November 1996]
As in the case of jelly beans, competing against and outperforming competitors requires strategic positioning. Relying on operational efficiency and tactics will not suffice.
Here are three actions you can take to immediately improve your organization’s overall performance:
- Define your business strategy in simple, uncomplicated terms.
- Make sure the strategy is aligned with your company’s core values and competencies.
- Make sure everyone in the organization understands and can coherently articulate the strategy.
Is your business lacking a focused strategy? MindMeld offers proprietary methodologies and processes for discovering, developing, and communicating value. To learn more contact Doug Knuth at doug.knuth@mindmeldmarketing.com.