Adrian Slywotzky is an expert in profitability, evident in such books as The Profit Zone and Profit Patterns. His new book, Demand: Creating What People Love Before They Know They Want It, explores how the hassle map, magnetic offers, and trigger points all play a vital part in demand.
Curt: Small businesses can generate demand just as well as large businesses, correct?
Adrian: In Value Migration, we see that it’s often small businesses that are the first to detect changes in what's important to customers. Some of these small businesses grow up to be niche businesses and some grow up to be giants. But it all begins with figuring out how the customer and the circumstances are changing. In fact, small businesses are usually at the forefront of demand generation, the subject of my current research.
These days, market share no longer guarantees profitability. We must understand how companies large or small become profitable through creativity and being inventive. The burning question is: how does demand actually happen and how can companies use these ideas to their advantage? This is the core question for any size company that is trying to create value for the customer and increase their profitability.
Curt: Are there, say, top three rules of thumb that a business should ask themselves when they think about creating demand?
Adrian: Sure, but there are actually four steps to demand creation, not three. A company should ask itself:
As you can see, there are many things that characterize companies that are very good at demand creation.
Curt: The world has become very fragmented. Every single industry is being relentlessly commoditized right now. Everybody is desperately seeking a solution to this problem. What advice would you give companies as they look to increase their odds of success while trying to figure out a new profit model?
Adrian: As I mentioned before, market share doesn’t guarantee profitability the way it used to. So how does a company create profitability in their industry and which profit model will be the best fit for them? Profit models and demand here are interlinked.
I’ve outlined 22 profit models in my previous work and companies need to look at each one. Many profit models can be ruled out because they are not relevant to the company's customer base or segment. Typically, only three to four profit models that potentially seem like a good fit are left after this initial cut. With these remaining profit models, a company can begin to experiment with a few of their customers and see whether or not they'll accept the new model. Companies must determine if the profit model will perform the job that needs to be done. Then companies need to turn to demand creation. What I’ve learned is that companies must start with the hassle map because that shows how much value a company can create. Subsequently, the profit model is about how much value a company can get back.
For example, companies who give a free trial or a free sample are trying to create a trigger. Think about the profit model in parallel with how demand creation happens. The hassle map and the magnetic offer are so powerful that choosing (or creating) a profit model is much easier. Great companies that excel at demand creation can grow their business using less advertising and less of a sales push. Why? Because they give customers something to talk about. When companies create a radical hassle map and an offer that is so powerful that it's magnetic, the customer base starts buzzing about it and word gets out.
This concludes our Adrian Slywotzky interview series. I’d love to hear your thoughts on what you found most useful from Adrian.