This book is from the author of the famous “Art of Profitability” and offers more advice on marketing and making money on your business.

Move your company into the profit zone. The process involves addressing a sequence of twelve questions:
1. Who are my customers?
2. How are their priorities changing?
3. Who should be my customer?
4. How can I add value to the customer?
5. How can I become the customer’s first choice?
6. What is my profit model?
7. What is my current business design?
8. Who are my real competitors?
9. What is my toughest competitors’ business design?
10. What is my next business design?
11. What is my strategic control point?
12. What is my company worth?

1. Who are my customers?
Identifying customers really means being able to categorize them into distinct groups whose behavior can be analyzed accurately.
try to segment your customers into different groups - for instance, by behavior or by priority.
Coke’s Major Customer Groups 1. Consumers 2. Fountain and Vending Customers 3. Anchor Bottlers 4. National Chains
Understand their priorities.
Deciphering the priorities that are guiding your customers’ behavior.
Name three products or services in your industry that have become popular over the past 2 years.

Why did customers like them?
What were the underlying reasons for the products’ value?
Did they save money?
Reduce hassle?
Offer security?

Repeat the above exercise but substitute an unrelated market or industry where your customers are actively engaged.
What preferences do they express in that market?

To discover what your customers’ silent or unspoken priorities are is to consider the entire economic system in which your customers operate.
Imagine yourself as the CEO of each of your five most important customers (or as a head of household in your five most important demographic groups).

What would your overall objectives be?
What major concerns would you have?
How could a supplier help you toward your goals?
How is the supplier currently hindering you?

2. How are their priorities changing?
Changing customer priorities in the coffee industry (a priority shift away from price to quality, leading to a shift from grocery retail brands to specialty coffee stores) allowed Starbuck’s to prosper.

Look at the other industries where your customers operate.

Do you see any trends that may soon appear in your market?
If customers are trying to save time in one of those areas, aren’t they likely to value saved time in yours?
What advantages can you introduce now, or in the near future, to anticipate your customers’ preferences or needs?

3. Who should be my customer?
Are there new groups who would value what you do?
Can you jump a step along the value chain and serve your customers’ customers?
Can you step in the other direction and become a supplier to other companies like your own?

Innovative customer selection was critical to value creation for each of the reinventors.

Roberto Goizueta realized that Coca-Cola had always thought of consumers as its target customers, when, in fact, bottlers were the buyers of Coca-Cola’s syrup and controlled the commercial availability of Coke beverages. He reoriented the company to see bottlers as the key customers in the system and began organizational reform that led to Coca-Cola’s low-cost distribution system.

4. How can I add value to the customer?
A business earns no profit when customers are willing to pay only the total cost of a product.
Each company must ask itself: “What special benef it of our product will compel customers to pay us a premium?”
The answer will always say, in some form: “Customers will pay us a premium if we meet their priorities, which are X, Y, and Z.”

Which priorities are your competitors satisfying?
Which priorities might you be able to serve better than your competitors can?
Which priorities might you satisfy at a lower cost than your competitorsare charging?
How large a premium will your customers pay to have each of their priorities met?
Which set of priorities can you serve simultaneously in order to provide the most value for your customers?

5. How can I become the customer's first choice?
Who is your most important customer?
What are that customer’s top three priorities?
How do you score?
How does your best competitor score?

6. What is my profit model?
A business design that adds value to the customer but is not designed to create high profitability is an incomplete - and in many cases, a fatally defective - business design.

Do any of these models apply to your business?
Does more than one apply?
Which ones?
How does high profit happen in my business?
Who is the most profitable company in my business, and why?
Is there a picture that captures how profitability works in your business?
Can you sketch it?
What is on the X-axis? Time? Scale?
How do the different pieces of your business relate to one another?
Does everybody in my organization understand our profit model?
Does the organization align its actions to create the conditions that will achieve high profitability?
Do we make decisions and allocate resources based on this understanding?

7. What is my current business design?
A company’s business design is composed of four strategic elements:
(1) customer selection
(2) value capture
(3) strategic control
(4) scope

The table below profiles these four strategic dimensions of business design.
In the following chart, what options are relevant for your company?

Examples of business design options:
Customer Selection All segments Segment 1 Segment 2 Downstream customers

Value capture Revenue per unit Licensing fees Service revenue Solutions revenue

Strategic Control Brand Low Cost 2-year lead Customer relationship

Scope Broad line Narrow line Fully integrated Virtual

8. Who are my real competitors?
your true competitors are any companies that share your customers and/or your scope. Your competitors may be in industries that are different from yours. They may provide a completely different set of products and services.

What companies are not competitors yet, but could be in the next year or two?

9. What are my toughest business competitor's business designs?
10. WHAT IS MY Next BUSINESS DESIGN?
A business design that is well aligned with customers’ priorities will be in a state of value inflow

11. What is my strategic control point?
Strategic control points:
brand
patent
copyright
2-year product development lead
20 percent cost advantage
control of distribution
control of supply
owning customer information flow
a unique organizational culture
value chain control
and others.
Each one is designed to keep a company in the profit zone and to prevent others from stealing away the profitability.

Review the strategic control point index shown in Exhibit 3.4, repeated here.
Where would your company be situated on a strategic control point index?
Where would your competitors be placed?
What can you do to increase your company’s strategic control index?
How would your profitability increase if you increased your degree of strategic control?

12. What is my company worth?
What is my profit model?
What is my strategic control point or points?
These are two of the most important questions in business today.

They determine how profitable we will be, and how long that profitability might last.

[From the Great Books  Series. Also see The Success Manual  - Encyclopedia of Advice, which contains summaries of 100+ Most useful books.]