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The magnetism of demand

Jan 27 2013 10:40 *Ian Mann
Demand book


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Demand, by Adrian Slywotzky

THERE are some products, suppliers and services that we just love. We tell others about them and we wouldn’t think of switching.

Consider four well-known pairs as examples: Sansa and iPod; Sony Reader and Kindle; MySpace and Facebook; Yahoo! Search and Google.

iPod, Kindle, Facebook and Google are the first and no-contest choice of a huge number of people around the world.

What makes a product or service one’s consistent first choice, explains Adrian Slywotzky in his book Demand, is a combination of six factors.

  • The product is magnetic, it attracts and retains us – think iPod.
  • It is hassle free, or as close as one can get to this – think selecting, paying for, and delivery of a book on Kindle.
  • There is a solid, unseen backbone propping up the service – think Google.
  • There is a trigger that gets us to commit – well, many triggers in the case of Facebook.
  • They are on a growth trajectory – think Bloomberg and their expansion from financial terminals into business TV and business magazines.
  • There is constant variation of the product – think Wegmans, the grocery stores described below.
If there is no demand for what you offer, you will close. If there is demand and it is not sustained, you will close sooner or later. On a broader scale, if demand slows, the economy slows.

Demand is the essential ingredient in any business venture, and yet we know very little about how to create demand that lasts beyond the specials and the campaigns.

Demand creators, such as the companies mentioned above, start with the understanding that being very good does not make a product “magnetic", so they keep refining the product until it is irresistible and generates a wide, loud, buzz.

They create this demand by creating exceptional functionality and capturing an emotion that resonates with buyers.

Danny Wegman, the third-generation family member to head upmarket grocery chain Wegmans, came to a horrifying realisation while at university: Walmart would be coming to get them sooner or later.

The result of his response to this challenge is best illustrated by the more than 7 000 letters received last year from customers in regions where there is no Wegmans store, begging them to come to town.

Since opening in 1930, Wegmans has been noted for its retail experiments, many of which have now become industry standards. Their retail philosophy is to constantly do things that no one else is doing, and to offer customer choices no one has ever thought of.

With 70 magnificent stores, each generation of Wegmans has continued making the shopping experience magnetic.

Slywotzky has identified a set of behaviours that give a sense of how this demand creator achieves such a distinction.

These behaviours are appropriate to a grocer and are not a formula; there is no generic formula for creating demand, but it does illustrate themes that run through the book.

Wegmans has eliminated or reduced the hassles that make shopping inconvenient, costly, unpleasant or frustrating.

For example, surveys show that long, slow, checkout lines are more irritating than high prices.

Even on Sunday afternoons, most of the checkouts at Wegmans are open and a board nearby notes the number of items scanned per minute with daily motivating comments such as “12.44 - We can do better!” or “14.26 - Good job everyone! Let’s get 14.5 next time!”

Demand creators enhance the superb functionality of their offering with emotional excitement.

Wegmans helps people become proficient and enthusiastic home chefs, through posters throughout the store suggesting menu combinations, offering mini lessons on planning meals and inviting celebrity chefs to the stores for demonstrations.

Being a demand creator is not the responsibility of the CEO; every employee should be one.

Instead of talking about how their people are their most important asset, Danny Wegmans raised everyone’s salary on becoming president - unheard of in the low margin grocery business.

Pay is still higher that the industry standard. They also have a unique set of policies for recruiting, training, compensating and retaining employees. The senior vice-president, Mark Ferrera, says he spends 95% of his time helping employees.

Having the courage to listen to customers is another characteristic of the demand creators.

They want to hear the problems their customer experience, they want to know why others don’t use a service, and then they respond by correcting what is flawed. They are constantly experimenting.

Perhaps the most critical aspect is protecting the uniqueness.

Just think of stores which were your favourite, but then seemed to have lost the magic and now disappoint. The reason Wegmans expands so slowly - about two stores a year - is to be ensure they do it right, every time.

The book is not about Wegmans; there are full descriptions of 12 companies and many more are referred to. I chose the Wegmans example because it succinctly captures the magnetic quality that creates demand.

The practicalities of how demand is achieved requires that you address the “Hassle Map” by first knowing what is on it, and then systematically eliminating hassles.

It requires that "the Backstory,” the unseen elements that make the product magnetic - including the infrastructure, the ecosystem, and the business design - are solid.

There needs to be a “Trigger” to get people to buy, and buy again, and this requires that there is reason to return because the offering is never boring, it is always on an upward “Trajectory” and there is always exciting “Variation”.

Using examples of “demand creators” ranging from a supermarket to an e-reader and from aseptic packaging to teaching, Slywotzky provides a compelling argument and provides insight into a perennial business problem.

This book is both thought-provoking and practical. It should not be overlooked by anyone in business.

Readability:  Light ---+- Serious
Insights:      High -+---- Low
Practical:      High -+--- Low

 - Fin24
 
* Ian Mann of Gateways consults internationally on leadership and strategy. Views expressed are his own.
 

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