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Don't Listen to Customers Become Them
October 29, 2005 By: Tom Andel Official Board Markets
Independent corrugated converters can compete without a price advantage. That was the promise delivered by Michael Lanning, managing director of The DPV Group, LLC, during his keynote address on the opening day of Association of Independent Corrugated Converters (AICC) annual meeting held in Boston last week.
Approximately 400 box makers and suppliers registered for the event. Reading Lanning’s book, “Delivering Profitable Value,” was everyone’s homework assignment before the meeting. Lanning’s assignment that morning was to help the business people in his audience discover and deliver their value propositions.
The session started with a discussion of two strategies: lowering the customer’s non-price costs or increasing the customer’s revenues.
Sure. Easier said than done. Realizing this was going through the minds of many business people listening to his message, Lanning took a poll of each table, asking them to rate the level of difficulty of these techniques from one to 10, with 10 being most difficult.
Total Cost—The discussion that followed went into the need to understand the customer’s total cost of ownership, including acquiring, maintaining inventory, changing design and disposal. These costs can be anywhere from 30 to 100 percent greater than the purchase price of packaging. That is the independent converter’s opportunity to make a difference in his customer’s life.
“Many of you are chasing smaller orders, and orders that are harder to make profitable,” Lanning says. “Meanwhile the supply chain movement has the corporate purchasing function putting additional pressure on you. You have solutions you think make sense but getting it accepted all the way through the customer’s organization is the challenge.”
Lanning outlined the case of an independent corrugator with customers in Mexico. This box maker studied his customers’ biggest challenges. One of them was getting to market in a timely manner. He came to the conclusion that timely box design could make a big difference.
This box maker made a substantial investment in an advanced 3D based CAD system that allows its customers’ design departments to see a 3D prototype by computer instead of having to wait for a physical prototype, which is always slow. But getting them across the Mexican border can cause even more delays. CAD allows these customers to look at variations in size and style. They can also understand how the pallet layout works.
“This saves customers the amount of time they need to get to the marketplace, and that goes directly to the bottom line,” Lanning explains. “That’s a creative way box makers can help customers achieve more revenue.”
Presenting such opportunities to customers is part of the value proposition: “experiences they derive if they do as we propose,” he says. A converter’s business must be understood as a value delivery system.
“If the total cost of delivering a superior value proposition is less than its revenues, the business will generate wealth,” he adds.
What’s the Value?—Yes, but what’s the value that will be valued by the customer? Don’t ask them. Customers are used to talking in terms of products, not resulting experiences. It’s up to the converter to “become” the customer so the non-price-based value propositions can be discovered. This is done by interviewing, observing and analyzing every department of the customer’s company — beyond purchasing. This will tell you what customers actually do and why. It also will show the role packaging plays in delivering their value proposition to their customers.
Corrugated boxes and support services are means not ends, Lanning states. He used an analogy to drive his point home.
“The customer doesn’t want drill bits, he wants holes,” he says. “Or maybe what they want is a bookshelf, and that’s the way you need to sell. Think about the end result the customer is trying to achieve or should value.”OBM
