A travel industry client of a colleague recently reduced its offerings down to a narrow niche of cruises and then focused its marketing effort and management time on ensuring these were profitable and generated cash quickly. While there was a temporary fall in sales, the company returned to positive cash flow and profit within a matter of weeks.
The moral of the tale? Don’t be scared to reduce and focus your offering portfolio for greater profit. Now is a great time to apply rigorous focus and do this. The first step in the process of reviewing and developing your offerings is to categorise what you’ve already got.
We tend to think that it is easy for manufacturing and product companies to categorize their products, but more difficult for service companies to do so. There is a tendency for those of us in the services sector – particularly in consulting – to think that, because our Offerings are less tangible, perhaps more complicated, that somehow they are superior to the manufacturing and product equivalents. There’s a certain intellectual snobbery about it. But it’s nonsense.
If you are a service provider, or provide a product-service amalgam, for a moment think of your Offerings as products. That way, you’ll likely find it a lot easier to define the components – the Bill of Materials, so to speak – that go to make up the whole. So think of building offerings like building products.
Only when this mapping has been completed – and it may be quite a lengthy exercise – will you be able to position your Components, Offers, Solutions, and Co-created Value onto a Value Pyramid, as explained next.
It is our experience that the whole of this exercise is best carried out using workshops: create hypotheses and workshop through with your offering managers or solutions leads.
Map to The Value Pyramid™
Having identified your Offering portfolio you need to map the offerings to The Value Pyramid™. The basic components are Component, Offer, Solution and Co-created Value, and that the nature of the sales processes around each of these categories changes profoundly, as indicated here:
Value Pyramid 2
By way of example, we set out below an Offering Portfolio Map for a hypothetical market intelligence consultancy. We have envisaged an organisation that offers a range of research and analysis services to its clients. The map might work out as follows:
Value Pyramid 3
Once this mapping is complete, it is far easier to see the way forward because you are able to identify:
- What offers can be grouped together to form new Solutions or higher value offerings?
- What offerings in one part of the business can be combined with other offerings from other areas (sectors or technical lines) to create new offerings?
- What pricing needs to be used with which offerings and what level of required profitability?
- How should each type or group of offerings be sold? That is, which lend themselves to low-cost of sale, automated or transactional selling, and which to high-touch, problem solving, high value-add consultative selling?
- To whom should each offering be sold? Offerings suited to transactional selling will be targeted to expert buyers (e.g. procurement experts) whereas Solutions and high-value offerings will normally involve consultative selling with more senior management (e.g. CEO and other senior executives) who, although they may know generally what they want to achieve, will need value-creation support to help them shape the solution.
- How long will it take to sell the respective offerings? Offerings lower down The Value Pyramid™ generally have a shorter sales cycle than those nearer the top.
We also recommended a radical review of the profitability of your products and services, which we will explore in another article.
Having identified your best Offerings, you should then examine whether (and how) your sales and marketing approach needs to be refined.