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CIRAS - TOC - Applications

Marketing

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Eli Goldratt's uses an analogy that marketing is like spreading corn on the ground to attract ducks. Sales, then, should be the equivalent of shooting a sitting duck.

What then is the core problem of marketing? What needs to be changed? There is a conflict between the need to satisfy the company’s requirement for sufficient sales volume (which requires that you market and sell according to the customers’ perception of value), and the need to get a reasonable profit margin (which requires that you market and sell based on the company’s perception of value). This conflict is deadly when the customer’s perception of value – expressed most clearly as the price they are willing to pay – is less than the producer’s perception of value – generally expressed as cost plus some reasonable margin. TOC claims that this conflict defines the basic job of marketing: to raise the customer’s perception of value for its products and services.

The TOC approach is to do a complete analysis of the perception of value for the customers in your chosen market segment, and use it to create what is called an “unrefusable” offer that is customized to that segment.

While each unrefusable offer is unique, TOC provides a well-defined process for developing a customized offer. The idea is to thoroughly understand how the customers in the chosen market segment use your product or service to create “value” in their business or personal life. Figure out how your product or service can help them achieve their goal, then create an offer they can’t refuse. Most of the time the breakthrough that enhances the customers’ perception of value does not involve a significant change in the features of the product; rather it tends to show up in the combination of such things as delivery/availability, packaging, warranty, etc.

An unrefusable offer will not sell itself. Most sales staff are used to selling product features and benefits. Most will need to be trained how to sell the 'business solution' that is the unrefusable offer. This training on how to sell the the business solution is an important part of TOC marketing solution.

For more information contact Michael Willett, or consult the following resources:

  • "It’s Not Luck" by Goldratt (This book is the sequel to "The Goal" and is fundamentally about using TOC when the effect of the system constraint shows up as a shortage of sales.)
  • "Necessary But Not Sufficient" by Goldratt (This book tells the story of a software company that needs to develop an unrefusable offer in order to survive.)

 

Marketing Diagram.