Having trouble Creating a “Unique Value” For You Commodity Product or Service?

Ever wonder why Florida-brand Oranges are better than oranges from California or Louisiana? The commercial indicate that there is a difference, so what do you believe?  The sun is the same; the mild southern climate is the same; the water is the same; the fertilizer and soil conditioners are the same.  So, the next time you are tempted to buy “Florida Oranges,” consider how you can improve your marketing campaign.

Brands Add Value

If you sell products in a highly competitive environment, you may feel that you have limited options to separate your products from others in the market.  Keep in mind that your statements must be true and verifiable and your brand must offer something of value to your customers to be effective in selling more products/services. So, here’s some food for thought for companies that sell commodity items (shrimp, fruit, gasoline, socks, etc.)

You can “Brand” your product to stand out from the crowd.  Alternatively, you can ask your industry trade association to create a brand for products sold by the trade group’s members.  Brand benefits for commodities typically are based on the consistency in how you produce, deliver, sell, and/or support your products.

When you purchase Shrimp, do you know if they were caught in the Gulf of Mexico, the Pacific Ocean, or a Brazilian shrimp farm?  Given the option, most people would you buy locally harvested shrimp over foreign shrimp…if the products were branded correctly.  (Currently, there is an effort to brand shrimp with their origin so that customers have a choice.)

How is your industry helping you to differentiate your products?  What messages do you promote about the unique value of your products?  Do you deliver only “fresh” produce?  Do you sell only items that meet a minimum size?  Do you package your items in a way that keeps them from damage during shipment?  Do you offer products “in season” only to ensure that they are not created under artificial conditions.  Do you meet the needs of large buyers who demand high quality products?  Do you rate your items as:  a) High Quality, b) Standard, and c) Discount so that buyers know the quality of their purchases?  Use the concepts of Integrity-based Leadership to help you identify the unique value proposition for your products and services, whether you sell socks or airplanes.  That way, you can guarantee that your brand is valuable.

Are You ready to implement Integrity-based Leadership in your Company?  Call us Today at (504) 780-9091.  Let’s discuss your needs and where you want to be over the next year.

 

Profitability Equals Sustainability (Part 2)

Last time, we presented the concept of profitability as a measure of sustainability.  So, how do you calculate the amount of profit needed to achieve sustainability?  Keep in mind that in order for a company to be sustainable, annual profit must be enough to cover the three measuring points:  Owner’s Compensation, Return on Investment, and Reward for Business Risk.

 

Compensation:  What would you pay someone to perform the daily operational tasks that you perform?  Operational tasks are:

  • Functions that you should be delegating because they are recurring,
  • Activities that are necessary to sell and/or deliver product, collect cash, pay workers, etc.
  • Assignments that much larger organizations assign to Managers or Supervisors, or
  • Actions that keep your business on track (as opposed to actions that create change)

Return on Investment

This is calculated by taking your total equity, subtracting the current net profit for the period, and multiplying that resulting amount by a percentage rate.  The percentage rate is your estimate of what a potential investor would use to justify purchasing your company.

Reward for Business Risk

This is calculated by taking your total sales for the period and multiplying that amount by a percentage rate.

This is actually the most difficult calculation, because the better you design your company to be safe or to mitigate risks, the smaller the percentage rate that you will use.  So, a chemical refinery may use a higher percentage rate than an accounting firm.  The percentage rate is your estimate of what a potential investor would use to justify purchasing your company in your industry.

The difficulty is calculating the sustainability rate is that your growth does not impact the percentage rate over time.  So, 15% of $500,000 is $75,000 and 15% of $5 million is $750,000, but both amounts represent a 15% reward for business risk.  If you do not improve your safety as you grow, you cannot justify a smaller reward rate just because the number is larger at higher sales levels.  As a result, sustainability becomes more difficult at higher sales levels unless you manage your resources more effectively.

How do you determine profitability in your company?