Stop Selling Products, Start Creating Value: The Business Leader's Path to Increased Profitability
"I'd like to explain how a winning marketing strategy will make you richer."
Having published over 50 books, sold more than half a million copies, and worked with directors in hundreds of companies, Professor Malcolm McDonald is passionate about sharing his knowledge, insight and experience with business leaders. In this blog on market planning and strategy, Malcolm addresses the fundamentals that can transform your business performance.
The Revealing Questions That Expose Business Vulnerability
I work primarily at director level, and there are two simple questions that quickly reveal whether a company is in — or heading toward — serious financial trouble:
1. What are your key target markets in order of priority?
2. In each market, what are your organisation's sources of differential advantage?
The first question is almost invariably met with directors describing their PRODUCTS -- a fundamental misunderstanding that has led many giants to their downfall.
Consider these cautionary tales:
- IBM nearly collapsed in the 1980s by defining their market as 'mainframes'
- Kodak defined their market as films and cameras, missing the digital revolution
- Nokia saw themselves as a phone company, not a mobile technology provider
- Even today, many publishers define their market as books, when business book publishers are actually in the "business knowledge promulgation" market
When leadership fails to properly define their markets, answering the second question about differential advantage becomes impossible.
Why Product Excellence Is No Longer Enough
The business graveyard of the past twenty years proves this isn't merely theoretical. Today, virtually all products and services work excellently, meaning product quality alone won't deliver riches.
The only path to wealth now lies in meaningful differentiation that appeals directly to your customers. A critical component of this appeal is demonstrating financial value. When customers understand how working with you makes them richer, they'll choose you every time.
It's that straightforward, but the execution requires clarity: you must show them precisely how they'll profit by working with you.
The Power of Financially-Quantified Value Propositions
After defining your market properly (by needs, not products), conducting detailed SWOT analyses on each segment, and prioritising the most promising profit-growth segments, Professor McDonald recommends developing "financially quantified value propositions" that create competitive advantage.
The statistics are compelling:
- Only 5% of companies have financially quantified value propositions (McKinsey)
- Companies implementing them typically close 2-10% more deals
- Discounting can be reduced by 20-30%
- Marketing campaigns become measurably more productive
- Customer relationships and referrals significantly improve
Today's Buyer Journey Has Changed
In the digital age, 90% of the buying cycle occurs before buyers even speak to suppliers. Customers can research entire marketplaces in minutes, making traditional sales approaches ineffective.
Modern buyers don't need product connections; they want:
- Honest advice about profitable growth
- Engaging conversations that surprise and inform
- Clear evidence they'll be more profitable by working with you
Creating True Advantage (Not Just Avoiding Disadvantage)
While most products fulfill basic functions customers need, the commodity trap awaits suppliers who can't demonstrate unique value. When everything works "perfectly well," price becomes the deciding factor, unless you can prove you create genuine advantage.
Even financially quantifying standard benefits can differentiate you when competitors don't, but sustainable success requires creating true advantage for customers.
This deeper work includes thoroughly understanding:
- Competitive pressures facing your customer
- Your customer's financial position (annual reports and accounts)
- Their entire operational process from inbound logistics through after-sales service
This investigation invariably reveals opportunities to help customers either increase revenue or reduce costs. Remember: Price is only an issue in the absence of quantified value, and it's the supplier's job to quantify that value.
6 Steps to Develop a Winning Strategy
1. Define your market by needs, not products. Understand the end-to-end dynamics.
2. Segment properly based on needs at key decision points.
3. Conduct detailed SWOT analysis on each segment.
4. Categorise segments by profit growth potential and your competitive position.
5. Focus on your strongest 1-2 segments. Develop financially quantified value propositions that create advantage.
6. Apply the 80/20 rule. Set only a few priorities, involve your team, and avoid trying to please everyone.
Learn More From Malcolm McDonald
In the new 9th edition of "Marketing Plans: Profitable Strategies in the Digital Age" by Professor Malcolm McDonald, QuoLux™ CEO Dr. Stewart Barnes contributed the chapter "Marketing Planning: Yes, it really works! Experiences from the real world." This updated edition is essential reading for leaders looking to boost sales and profit in 2025.
This article was written for Issue 2 of the award-winning QuoLux™ business publication, "Leading: a Meeting of Inquiring Minds," by Professor Malcolm McDonald, a world authority on market plans and segmentation.
Coming Next Week
Don't miss next week's blog featuring a leader's perspective on implementing Malcolm's strategy steps in their organisation.
We're also delighted to welcome back Malcolm as a guest Masterclass speaker on our LEAD™ programme next week, where he'll present "How to Boost Sales & Profits to Create Winning Strategies."
Interested in hearing Malcolm and joining our next LEAD programme starting November 2025?
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