Tony Freeman, President, A.S. Freeman Advisors LLC06.06.23
Last month’s column spoke to a common 3 a.m. worry among medtech contract manufacturing managers—how to win the next big customer. Consolidation of OEMs and CMs makes winning new customers more difficult, especially for smaller CMs. Head-on competition against multi-billion international firms is beyond most otherwise qualified entities. Special skills and outcomes offer a chance to compete against the largest companies. The first step towards winning by differentiation is developing a Unique Selling Proposition.
How should managers of established companies approach the market need question? It takes humility, a bit of time, and a tolerance for contradictory, incorrect, and missing information. Managers have to approach their customers with the question “Why do you buy from us?” They have to listen carefully, writing down what their customers tell them without judgement, which is often the hardest part. They will hear unexpected things—some customers will not share the complete truth, while others will offer platitudes for fear of retribution. Others may involve group buying decisions, so it may be murky as to what led to an order. Some will manipulate the situation to influence a future concession. It is essential not to judge responses during the discussion or argue their accuracy. It is like asking a spouse for honest feedback. You may not like it, but it gets you out of the room of mirrors.
After speaking with as many customers as possible, these firsthand accounts should be analyzed for common themes by the manager and their staff. Multiple points of view on the data are essential. What will emerge is a few needs most customers share. In the bone saw example, the company may learn that customers value identical blade performance above price or exceptional (blade) sharpness. Surprising insights may be revealed, like the saw blade company’s ability to package product in a manner competitors cannot. The analysis should culminate with a list of needs the supplying firm serves that entice customers to place orders. Sometimes, managers will also find unaddressed market needs by asking their customers for feedback. Whether a supplier can meet those needs varies but the information is an opportunity for someone.
In conducting this exercise, management has changed its definition of the market(s) it can serve. New opportunities may come into view.
Is the lack of genuine uniqueness an issue? Not really. A company can still make money with an undifferentiated offering but customers will eventually be won only on price or ordering convenience. Surprisingly, most companies are unaware of what makes their offering unique. In selling to customers and prospects they forgo one of their best tools to land new programs.
Looking at this issue another way, most manufacturers do not have a unique offering. They and a few competitors offer similar services and nothing they provide gives them a strategic advantage. Customers and projects are won solely on tactical grounds of promotion and selling. A strategic advantage, however, would set the company apart from its competition.
There is a tendency in writing USPs to shove too much information into a couple of sentences or use complex jargon to more accurately describe the need and unique solution. This should be avoided, as there is ample opportunity to use these terms later in the sales process to more fully inform the prospect. A USP should require no explanation or assistance from a dictionary. Once a USP is established, it should be tested on a business person in a different industry. If that person cannot provide a simple explanation of the USP, it is too complex or arcane.
Once a USP is selected it should become the core of a company’s promotion and selling. It will allow sales teams to rapidly distinguish themselves from competition and direct them to call on prospects of common need. If crafted correctly, it is like a magic phrase that will open doors to new business.
Tony Freeman is the president of A.S. Freeman Advisors. A.S. Freeman specializes in merger and acquisition advisory and corporate valuation strategies for precision manufacturing companies in the medtech, aerospace, and general industrial supply chains. He can be reached at tfreeman@asfreeman.com. He enjoys designing cowboy boots and discussing the causes of de-industrialization.
What Is a Unique Selling Proposition?
A Unique Selling Proposition (USP) is a one or two sentence statement that highlights a customer need and explains why a particular company is the best choice to address it. Arguably the best USP was Fedex’s 1970s “When it absolutely, positively has to be there overnight.” These nine words described when a customer should call Fedex and what could be expected once they did. Creating a clear statement of exceptionalism seems easy but it is usually a challenging experience.The Room of Mirrors: Essential Failure Before Success
When asked to draft a USP most managers describe what their company does and brags about it. They describe their company as they see it. Fedex’s first attempt at a USP may have been, “We have lots of planes, great pilots, and excel at flying at night.” While true, the statement does not address customer needs or how Fedex meets them. A successful USP starts by looking first at the customers’ issues.Humility Exercise No. 1—Market(s) Served
Asked to describe the markets they serve, most managers will rationalize their collection of customers into some shared attribute. For example, a company that makes bone saw blades may say it “serves the orthopedic market.” While its customers may indeed be orthopedic OEMs, the statement gives little insight into the market needs being addressed. Many companies serve the orthopedic market with a range of products. Surprisingly, most managers cannot explain why customers buy their bone saws other than customers keep ordering bone saws. For some executives, this lack of certainty is not an issue. Many manufacturers of steam sterilizers, popular before the advent of disposable instruments, had a similar lack of curiosity about what they were actually selling. The orders kept coming until they didn’t. Had they asked which market needs they served (infection avoidance), rather than which arbitrary classification of customers they thought mattered (those needing steam generators), they might be in business today.How should managers of established companies approach the market need question? It takes humility, a bit of time, and a tolerance for contradictory, incorrect, and missing information. Managers have to approach their customers with the question “Why do you buy from us?” They have to listen carefully, writing down what their customers tell them without judgement, which is often the hardest part. They will hear unexpected things—some customers will not share the complete truth, while others will offer platitudes for fear of retribution. Others may involve group buying decisions, so it may be murky as to what led to an order. Some will manipulate the situation to influence a future concession. It is essential not to judge responses during the discussion or argue their accuracy. It is like asking a spouse for honest feedback. You may not like it, but it gets you out of the room of mirrors.
After speaking with as many customers as possible, these firsthand accounts should be analyzed for common themes by the manager and their staff. Multiple points of view on the data are essential. What will emerge is a few needs most customers share. In the bone saw example, the company may learn that customers value identical blade performance above price or exceptional (blade) sharpness. Surprising insights may be revealed, like the saw blade company’s ability to package product in a manner competitors cannot. The analysis should culminate with a list of needs the supplying firm serves that entice customers to place orders. Sometimes, managers will also find unaddressed market needs by asking their customers for feedback. Whether a supplier can meet those needs varies but the information is an opportunity for someone.
Humility Exercise No. 2—Other Potential Matching Prospects
With a first pass of common customer needs in hand, managers should ask if other prospects outside their traditional markets have the same requirements. The bone saw blade company may find that OEMs of trauma products, cranial surgery, and maxillofacial products have similar needs for blades with precisely similar performance.In conducting this exercise, management has changed its definition of the market(s) it can serve. New opportunities may come into view.
Humility Exercise No. 3—Discovering the Differentiator
Like the previous exercises, answering the question of product offering uniqueness can be humiliating. Signs that a firm’s manufacturing capabilities are the same as competitors are clear when, after careful thought, managers make such statements as, “Our people go the extra mile” or “We bend over backwards to help our customers.” While those statements may be true, the attributes themselves are not unique. Most companies take pride in their employees and a can-do attitude. Generic statements of pride presented as a distinguishing factor is a sign the company’s offering is definitely not unique.Is the lack of genuine uniqueness an issue? Not really. A company can still make money with an undifferentiated offering but customers will eventually be won only on price or ordering convenience. Surprisingly, most companies are unaware of what makes their offering unique. In selling to customers and prospects they forgo one of their best tools to land new programs.
Looking at this issue another way, most manufacturers do not have a unique offering. They and a few competitors offer similar services and nothing they provide gives them a strategic advantage. Customers and projects are won solely on tactical grounds of promotion and selling. A strategic advantage, however, would set the company apart from its competition.
Four Moments of Clarity
After completing the three exercises managers should have initial answers to four questions:- Who buys from us and why?
- Who has similar needs and may become our customers?
- What makes us unique, giving us an advantage in the marketplace?
- If we concentrate on the needs of different customers with new offerings (within reason), can we establish a more unique offering?
Creating the USP
When crafting a USP the manager must shift his frame of mind to a potential customer. What simple statement will lead the customer to consider buying? The USP speaks to need and to why the firm is the one a customer should call first. In the saw blade example, upon learning their medical customers prize consistent performance above all else, an appropriate USP might be, “If your product has to cut the same way each time, our approach is market-proven.” It is simple and allows the firm to stand out in the pantheon of suppliers. The advantage claimed is also demonstrable.There is a tendency in writing USPs to shove too much information into a couple of sentences or use complex jargon to more accurately describe the need and unique solution. This should be avoided, as there is ample opportunity to use these terms later in the sales process to more fully inform the prospect. A USP should require no explanation or assistance from a dictionary. Once a USP is established, it should be tested on a business person in a different industry. If that person cannot provide a simple explanation of the USP, it is too complex or arcane.
Once a USP is selected it should become the core of a company’s promotion and selling. It will allow sales teams to rapidly distinguish themselves from competition and direct them to call on prospects of common need. If crafted correctly, it is like a magic phrase that will open doors to new business.
Tony Freeman is the president of A.S. Freeman Advisors. A.S. Freeman specializes in merger and acquisition advisory and corporate valuation strategies for precision manufacturing companies in the medtech, aerospace, and general industrial supply chains. He can be reached at tfreeman@asfreeman.com. He enjoys designing cowboy boots and discussing the causes of de-industrialization.