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Your History With Watermelon

For the most part, the world would be a better place if we continued to apply the rules and standards we were taught as children in our adult lives.

This does not apply to eating watermelon.  We were all taught that "you must finish eating the slice you have before you can have another..."  That meant working through the part with the seeds, all the way to the rind.

Good at picnics, questionable in business....

Heart, Seeds, And Rind

We all know that the heart of the watermelon is the best part - sweet, no seeds - life should be so good!

The part with the seeds is pretty tasty too, but you do have those pesky seeds to contend with - a fact that really slows down the hungry watermelon consumer!

Then there is the rind - perhaps good for pickles, not much else.  Its job was to protect the tasty part inside, and once that is gone...

Watermelon In Business

In business, their are two "hearts of the watermelon", the customer heart, and the product heart.

The heart of the watermelon, from a customer perspective, are those customers who happen to favor the product that you provide, are logistically easy to service, pay their bills, and are reasonably easy to deal with.  They cost the least to sell and service.

From a product perspective, the heart of the watermelon is the group of products that is the core of your business.  Not the eleven colors, black.  Not seven variations, the "reasonably equipped" model.  This product offers the best value to your customers because it costs the least (relative to perceived value) to produce and distribute.

Heart Of The Customer Watermelon

Let's just imagine that your company only sold to the customers that are the heart of your watermelon - what would be different?

For one, you would have little bad debt, and no long term receivables.

Your customer service department would discover that they have fewer customer complaints, and those they do get are much easier to solve - the customer is working with them to find a fair outcome.

You would also notice that your customers actually like doing business with you, and help you innovate by suggesting improvements that will help you stay ahead of your competition.

Heart Of The Product Watermelon

When "upstart" companies first get rolling, they begin with a limited product line - they can't afford to offer everything, so they offer the few things that most people want - the heart of the product watermelon!

But companies have egos, and for some reason everyone wants to offer a "full line", one of everything, with variations on top of options.

Somewhere along the way accounting establishes average costs and the next thing you know, the company has grown up - and the heart of the watermelon products are (without knowing it) subsidizing everything else...

Product Subsidies

Let's figure you manufacture, sell, distribute, and support two models of widgets, and each model is offered in one color, black.  Figure your production costs with those longer / simpler production runs.  Now think of how much easier it is to promote the smaller product line - we have this - period!  Distribution is a piece of cake, and with just two models to keep in stock, it is more practical to maintain a comfortable inventory.  Support is equally straightforward - limited parts inventories mean it is easier to have what is needed when something breaks - you are a master of customer service!

So, what would your costs be like?

Now try it again, but this time work up your costs with ten models, each in six colors.  You don't need much experience or imagination to see that the variety forces costs up - how far up depends upon your product line, but it always forces costs up.

Heart And Seed Pricing

Assume other producers are pricing to make a profit based on their average costs of producing their normal product mix.  A company offering just the heart of the watermelon product to just the heart of the watermelon customers has an advantage - a greater advantage than you might think!

As we already discussed, costs are lower and customer service is higher when you offer a limited product line.  When you are only offering it to "heart of the watermelon" customers, your costs drop even more.  You are suddenly in an enviably competitive situation!

They'll Buy It In Black!

Market research can be a tricky thing - ask customers what colors they want, and the list becomes almost endless.  So, you need to offer all of those colors, right?  Wrong!

Ask the market if they will buy it in black if it costs 10% less than the color...or 20%....suddenly black is almost everyone's favorite color!

And what about product customization?  You will find that the auto companies figured it out a long time ago with "value packages" - they win, and so does the consumer, with packages of features over buying exactly what you might want.  The cost of the package (with more than you want) costs less than the smaller custom list of your preferences.

The Competitive Edge

Now let's put this product mix to the test.  The market likes colors, but 80% of the market will take black if it is 10% less expensive.  80% also indicates that they will go for one of our "standard package" units if it costs 10% less than another unit with exactly the features they wanted.

From where I am sitting, this suggests that at least 64% of your market will go for the heart of the watermelon product with only a 10% price reduction.  Your competition can hardly afford to fight back, because they are busy subsidizing their diverse product lines.  Of course, if you were to reduce prices even further.....

Pressing The Advantage...

Pursuing only "heart of the watermelon customers" and offering only "heart of the watermelon products", you are suddenly the most competitive supplier in the market...but wait, it gets better!

As you succeed in selling the heart of the watermelon product, your competitors notice that their sales volumes remain fairly stable - fewer of the heart products, but strong sales in the specialty items - boy, they sure are glad they didn't follow you!

Of course, they are filling up on seeds while you sell the heart.  Think about it - those heart products that they count on to subsidize their product mix are being sold by you.  Those heart customers that they have always counted on are being sold by you.  Your competitors' costs are rising while yours are falling!

Comparison Shopping

The customers that are still buying from your competition are starting to ask them why they charge them so much more than your prices...  If the competition did all of the math they would discover that you can sell at retail for their cost - they can no longer compete!

You can make a reasonable profit at prices no one else could touch....by offering the customer a better value.  There are other products with more features, but you offer the most product for the least price - the best value.

The key to the "Heart Of The Watermelon" strategy is to produce and distribute efficiently so that the most customers can receive the most benefit.  Let your competitors have the full lines and big egos - satisfy the market with the heart of the watermelon.

Best Picks...

....If you are in a hurry and can only read a few articles, the following five are the ones we hear the most about...

They are a bit longer than most of the others, but they will give you something to think about....

Could You Run A Winning Football Team Like You Run Your Company?

Teamwork - Coaches and players speak to business professionals, encouraging them to build teams that can win.  Let's compare your company to a professional football team....

Eating The Heart Of The Watermelon

The heart of the watermelon is the sweetest and lowest hassle part - so why bother with the rest?  You may not want to follow this thinking at your next picnic, but it sure works when making customer and product decisions!

Quit Your Company - An Exercise

This exercise will force you to see your company and the competitive landscape differently than ever before.  It will help you decide what needs to be done in order to stop the competition you don't even have yet...

Dealers And Distributors (Short Version)

You may need dealers and distributors- or not.  The real issue is whether your end users feel that they need your dealers and distributors!  Companies win when they offer end users what they want....

Dealers And Distributors - And "Going Direct"

If you have a dealer and distributor network, should you consider "going direct"?  Let me ask you this - if a major competitor did, what would happen to you?  That's your answer - this will help you see how to do it....

Management Theories

Not all management theories work - and this section discusses some theories that have problems

Reality Instead Of Theory

You can't believe everything you have been taught about business.  Most of it is true, good information - the trick lies in knowing which parts to believe, and which parts to reject.

Positive Reinforcement Myths

Positive reinforcement can result in training and motivational miracles - but there is one little catch...everyone in the "real world" seems too well fed for it to work!

Truth About Advertising - What Advertising Awards Mean To You

Advertising awards are something ad agencies love to display - perhaps it gives them a feeling of credibility.  It's a shame those awards don't reduce their client's advertising costs or increase their client's sales...

"One Size Fits All" Management Fads

Management fads do a lot of damage - they send companies off in wrong directions, and they erode the confidence of managers.  How?  Managers try the latest fad, and when it doesn't work, they assume it is because they were not good enough - it's a shame, because their instincts are almost always more effective than the fads...

TQM - The Quality Myth

TQM has been a major force for a number of years.  Although it has lost some of its luster in many circles, its proponents (consultants getting wealthy, perhaps) continue to re-invent it under a constant flow of new names....

Your Departments

The last group of articles in this section apply to sales and marketing.  The reason this area is receiving so much attention here is that there seems to be more confusion in that area.  Let's just take a quick look at some of your key departments...

Accounting Excitement

If business was a sport, the accounting department would be keeping score.  Unfortunately, the accounting department seldom provides the kind of information managers need in order to make good decisions....

Purchasing

Purchasing is more than "buying what you said you wanted", it is a proactive role that investigates better products and anticipates demand.

Engineering And R & D

Engineering creates your "new and improved" products - you need to make sure they know what your company and your customers want from them.

Manufacturing

Manufacturing - Manufacturing efficiencies largely determine your costs - and costs largely determine your competitive position!  Efficiency requires great management, management willing to do what it takes to attract and retain the very best people.

Entering New Markets - Then Closing The Door Behind You

Entering new markets - you couldn't do it if the companies already in those markets were staying in touch with their customers!  Remember that after you enter a market - or you may become someone else's "new market"!

Innovate, Renovate, But Satisfy Your Customers

Things have changed faster than most companies have changed - the web, overnight delivery, long distance charges, longer lasting products, direct (to consumer) sales - there are many ways to combine these things to satisfy your customers - and gain market share.

A Winning Marketing Campaign - Lousy Sales

Heartbeat Of America.  The ad campaign won awards, but market share slipped.  Winning companies match great marketing with great products - then the competition loses while consumers win.

Strong Companies Win In Efficient Markets

Marketing is not the art of lying without getting caught.  When your product is the best choice, there is no need to lie.

Applied Market Research - Satisfied Customers

Market research can come from a consultant, but it should also come from your own employees.  Having market research means nothing, however, if you don't use it to make customer driven decisions.

Selling To People - Not Markets

Sometimes we can forget that markets don't buy anything, people do.  Market research is valuable, but make sure it tells you about real people.  Nobody wants your product - they want a way to solve a problem or meet a need - perhaps your product can help them accomplish that.

Advertising For Sales, Not Awards

Advertising - why are you doing it?  If it is for sales, you may need to make sure your agency understands your priorities - instead of pursuing "awareness" and "impressions" - if you want sales, hold them accountable for sales!

The Rest Of It...

Not everything fits into a file, box, or compartment - this is the rest of it....

StrategiesThatWork.com Homepage

Marketing should not be a lie - build a company with productive labor, efficient purchasing, great design, accurate accounting, rational distribution - and the result is a truth you are proud to tell.  Marketing becomes a simple matter of telling the truth to people who are interested!

Eating The Heart Of The Watermelon

The heart of the watermelon is the sweetest and lowest hassle part - so why bother with the rest?  You may not want to follow this thinking at your next picnic, but it sure works when making customer and product decisions!

Dealers And Distributors - And "Going Direct"

If you have a dealer and distributor network, should you consider "going direct"?  Let me ask you this - if a major competitor did, what would happen to you?  That's your answer - this will help you see how to do it....

Dealers And Distributors (Short Version)

You may need dealers and distributors- or not.  The real issue is whether your end users feel that they need your dealers and distributors!  Companies win when they offer end users what they want....

Quit Your Company - An Exercise

This exercise will force you to see your company and the competitive landscape differently than ever before.  It will help you decide what needs to be done in order to stop the competition you don't even have yet...

Three Kinds Of Employees

The right employees are one of the most important resources a company has. Most employers are quite aware of how valuable a great employee can be, but have a difficult time figuring out who the great ones are.  It helps to divide the work force into three groups.... 

Your Mission Statement - What It Means

A mission statement is not something you can carve in a plaque next to your door, because it needs to change.  Mission statements establish priorities, and if customer satisfaction is not at the top of those priorities, you may have a problem.

Could You Run A Winning Football Team Like You Run Your Company?

Teamwork - Coaches and players speak to business professionals, encouraging them to build teams that can win.  Let's compare your company to a professional football team....

Performance Reviews

Performance reviews.  Yawn.  While performance reviews are not exciting, few things can do more to shape your company.  Done right, they can make a big difference...

"Honey, We Need To Talk"

"Honey, we need to talk" are terrifying words when they come from your spouse.  You may feel that you have an "open door policy", but walking in that door feels a lot like "Honey, we..." to most employees.  You need an easy way to stay in touch - like lunch!

Partnering And Sole Sourcing

Partnering - we hear a lot about it, but if you aren't willing to be a partner in your purchasing, you are not ready to ask your customers to trust you in that role....walk in their shoes for a moment.

Customer Focus

"Customer Focus" is something we hear a lot, but seldom results in much action.  Funny, isn't it, that customers are the only people who leave money in your company - everyone else is there to take some out....

Science Of Yourco

You don't have to look further than the nearest business magazine to find a few easy steps to management success - so why bother to develop a "Science Of Yourco"?