Maximizing Profitability the Theory of Constraints Way #6
This is the sixth in the series of conversations. To read number 5, go here: https://www.velocityschedulingsystem.com/maxprofit5/
Brad: “So far, we have established that a business can make much more money than it has or has thought possible; perhaps as much as 20% Return on Sales.”
Dr. Lisa: “Yes, by improving productivity and then selling that capacity.”
Brad: “You have explained productivity and how to improve it in our previous conversations. Today, let’s discuss how to sell that capacity. After all, that’s what you are known for in the Theory of Constraints community – you are the leading TOC expert on Marketing and Sales.”
Dr. Lisa: “I’ll start by saying something counterintuitive that I shared at the most recent TOC conference in my presentation ‘5 Major Marketing Mistakes’. It has to do with focus, which is Dr. Goldratt’s one-word description for TOC. That is, in marketing, a company must narrow its focus.”
Brad: “Meaning not trying to be all things to all people?”
Dr. Lisa: “Exactly. My analogy was comparing this first step in marketing to the first step to productivity improvement in operations which is to reduce work-in-process – reducing WIP in marketing means really focusing on a narrower market segment.”
Brad: “That is scary for the business owner and managers. Focusing on one market segment means that you are losing out on all those other potential opportunities.”
Dr. Lisa: “That is the perception and the fear. But being distracted by all those other opportunities is the opposite of focus. And it is a mirage.”
Brad: “But a market segment is by definition smaller than the whole market. Won’t the opportunities be too limited?”
Dr Lisa: “No, not unless you pick too small a niche – a niche that only has a 1,000 prospects for example might be too small. The example I used in my TOCICO presentation is the following:
Dr Lisa: “So even though we’ve gone down five levels, there are still tons of prospects. In fact, I can make the case that you will have even more qualified prospects than before because:
- The more specific and targeted your market, the more you can talk directly to them and in their language — increasing your conversions. If you are a man that wants to lose belly fat are you more likely to listen to someone generically talking about weight loss or specifically about the challenges men have losing belly fat and what they can do to get results?
- When you enter the conversation going on in their mind and because you understand the situation so well, it is assumed that you have expertise – increasing your conversions.
- If all your efforts are focused on this one niche — you become THE expert in the space – increasing the people who come to you – increasing your conversions.”
Brad: “So that’s why you have choosing a ‘large enough’ target market as the first step of the Mafia Offer Boot Camp. It makes sense – you can’t create a really good Mafia Offer without first understanding who the offer will be made to.”
Dr. Lisa: “Exactly. And, it turns out that developing a Mafia Offer is not so simple to do. We are not used to seeing the world from our customer’s point-of-view, nor are we likely to develop a Mafia Offer that really solves their problems because of the perceived risk to us from doing so. However, this mentality of perceived risk will block competitors from implementing their own Mafia Offer for years.”
Brad: “But if a business did those things, it now has a powerful marketing and sales tool to get the additional sales it needs to sell the capacity revealed by productivity improvements.”
Dr. Lisa: “And the business understands why those productivity improvements are needed to deliver the Mafia Offer. The synergy needed between operations and sales becomes obvious.”
Brad: “What is the next step?”
Dr. Lisa: “If anyone wants to discuss whether a Mafia Offer Boot Camp might work for them, send us an email and we’ll set up a time to talk.”
To be continued.
Best Wishes,
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P.S. Please ask questions or leave a comment below.
P.P.S. To find out more about our Mafia Offer Boot Camp visit: https://www.scienceofbusiness.com/events/mafia-offer-boot-camp/
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