Start Dating Your Customers

Volume 14 Letter 11

“Innovation” often means new products or services but really an innovation is anything that ultimately delivers more value to the customer. An innovation can simply save the customer money, or it can bring market differentiation, meaning customers can be charged a premium for a product or they buy more of it. Take the case of Sherwin Williams Paints and how they used some market insights to strengthen their relationship with painting contractors and gain a competitive advantage.

As a result of doing customer research, Sherwin Williams discovered that contractors purchased paint based on its proximity to their job site rather than on the quality or the brand name. To contractors time is money and the more travel time taken to purchase paint means more cost. Based on this insight Sherwin-Williams decided to test the idea of reducing travel time by saturating the paint market with new outlets in four markets across the USA. The strategy worked brilliantly and they rolled it out across the North America. However, as often is the case, competitors got wind of Sherwin-Williams expanded distribution strategy and quickly followed suit. The competitive advantage of distribution was soon diluted; that is, until the recession hit in 2008. With the collapse of the housing market most paint suppliers scaled back on stores to cut costs and ride out the recession. Shareholders encouraged Sherwin-Williams to do the same but instead Sherwin-Williams stayed the course opening 60 to 100 new stores per year to be closer to their customers when the recession ended.

The strategy paid off big time! As the market rebounded Sherwin-Williams’ revenue growth was much steeper than competitors and the stock has since quadrupled. When the CEO of Sherwin-Williams was asked about his strategy he said “We’ve always looked at business more like dating than war. It’s a theme that runs through our 140-year company history. In war, you’re focused on beating the competition. In dating you’re focused on strengthening a relationship. That difference of perspective has a million knock-on effects for how decisions get made.”

What can we learn from Sherwin-Williams:

  • Stay focused on solving customers’ problems not beating competitors
  • Build your strategy on customer insights, not on gut feel
  • Short term reactions can destroy long term strategies

An innovation can provide benefits to you and your customer. Rather than innovating simply to show how smart you are or to beat your competitors, keep your focus on delivering more value and solving customer problems and your innovations will stay on track. Start dating your customers!

Taking Smart Risks: How Sharp Leaders Win When Stakes are High: Doug Sundheim (McGraw-Hill, January 2013)

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