Profits follow customer dissatisfaction. Discounts follow manager laziness
In a previous familyandtrends, Clayton Christensen's theory on the retention of attractive profits was used to explain how the profit split in the food industry between branded products and distribution has gone from 70/30% to almost 50/50%. The theory says that in the Evolution of the Value Chain, companies should control every activity, or combination of activities, that determines performance on the dimensions that increase the consumer's willingness to pay the most; when functionality and reliability are important to consumers, companies need proprietary and integrated solutions to try to achieve a good enough level; when product functionality and reliability exceed consumer needs, then convenience and customisation become the aspects that are no longer good enough.
Many comments at familyandtrends focused on the complaint that now in every industry consumers have everything and the only way to compete is convenience, i.e. discounts, and customisation, i.e. new product/version launches. Discounting is the easiest and also the most damaging decision, so much so that familyandtrends has proposed to fire on the spot every marketing manager who proposes it: understanding where the complex and unmet needs of consumers are is more laborious but still possible: here are two recent examples in two sectors where competition is not lacking: distribution and banking.
The first: CRAIGO, the new format of the CRAI group launched in Turin, a city often at the forefront of innovation, with the aim of solving new needs of those who do their shopping: completing dinner on the way home or breakfast on the way to the office, solving the lunch break, buying something good for a walk. CRAIGO focuses on functionality: a wide choice of prepared foods, hot (free use of the microwave), freshly made (coffee, sandwiches, freshly squeezed juice), fresh (sandwiches, brioche) and classic consumer products (yoghurt, bars, biscuits, coffee, crisps, etc.) and reliability: you find what you need when you need it, you buy it quickly and in the meantime you also have some tasty treats (where do you find freshly squeezed orange juice that you take away with you as soon as it is bottled). To the consumer this sounds simple, but from an operational point of view the CRAIGO concept requires the complex integration, as Christensen's theory goes, of different modules, from managing the shelves, e.g. for those who want to buy coffee capsules, to preparing and serving the product, e.g. for those who want to take coffee. Everything must be fast, so there must be no barriers to payment, and the offer must be complete but in a smaller space with limited possibilities of references on the shelves. All done over a wide range of hours in the day, e.g. from breakfast to going home: to be quick and easy the consumer needs to know you are open, not have to check your hours. CRAIGO aims to increase the consumer's willingness to pay for needs that today are not satisfied in a "good enough" way by integrating a café, a self-service, a bakery, a supermarket, a delicatessen, putting on the shelf or handing out to the customer depending on the product for about twelve hours a day.
One of the shortcomings of CRAIGO is that, apart from the sweets, the prices are not high: only if the consumer is willing to pay more have you shown that you have solved a need that is difficult for him to solve with the current offer.
The second: Tot.money, the new account integrating banking services, cards, invoice and F24 payment management, document scanning, expense note organisation, etc. Tot.money focuses on integrating activities that small businesses and professionals need to do separately and then integrate on their own: keep track of receipts for expense reports by taking a photo, upload it to an app perhaps with a phone, download it to a desktop, account for it and perhaps re-bill it, request a courtesy invoice by email, receive it digitally, account for it, enter the data on a bank app to make the payment, etc. Integrating everything in an application allows you to have a single reliable source of information, not having to switch from one system to another, and being able to easily forecast cash flows. Again, this sounds simple, but from an operational point of view Tot.money integrates a set of processes and systems, from the tax drawer to the paper receipt of the expense report, from the current account to the allocation to cost centres, providing access to the system for multiple parties.
