Independent professionals are individuals with a specific calling. One part of this call? It’s to fulfill unmet customer needs!

Tuesday: Return Driven Strategy FROM THE DESK OF MILES EVERSON: Being an independent professional is not completely different from traditional employees. Keep reading to know how the second tenet of the Return Driven Strategy will help you accomplish this role in your independent career. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Independent professionals are individuals with a specific calling. One part of this call? It’s to fulfill unmet customer needs! Last week, we talked about how you can maximize your wealth as an independent professional and what it means to do that ethically. … but come to think of it. In an independent career, how do you generate wealth in the first place? The primary source of your income comes from your customers and clients. You achieve this by fulfilling their unmet needs. This is the second tenet in the Return Driven Strategy framework. According to the book, “Driven,” by Professor Joel Litman, a colleague and friend of mine, and Dr. Mark L. Frigo, tenet two is the “recipe for achieving high returns on investment.” This happens when businesses deliver an offering customers believe is not available. Do you want to make your customers and clients happy by surpassing their expectations and offering a product or service that is MORE than what they initially imagined? We bet you do! Take note of these tips (as stated in Professor Litman and Dr. Frigo’s book) that will help you, as an independent professional, deliver on tenet two: Exactly and continually identify the needs that cause customers to buy the things they buy. Identify what customers would buy instead if a particular solution to their needs were available but unaffordable. Here, an unmet need is identified. Focus on the REAL reasons for purchase. This doesn’t necessarily equate to the functional attributes of goods or services. Avoid pricing goods and services based on internal costs. As much as possible, the pricing should be based on the value customers receive when a substitute or alternative product is unavailable. Keep in mind that pricing wars do not necessarily come from an external organization’s attack. Sometimes, it happens due to an internal inability to produce offerings that fulfill customer needs uniquely. Build and sustain unique capabilities through customer relationships and intelligence. Be vigilant to forces of change that affect customers’ needs and always be ready to adjust to these changes. In performance measures, focus on the pricing power that’s relative to both the cost of offerings AND the cost of assets required to produce those offerings. Let’s use this business as an example to further understand what tenet two means… BMW is a German multinational corporation that manufactures luxury vehicles and motorcycles. As a business, it is known for providing “high-end” offerings; however, its profitability levels have been at corporate averages at best. Think about this: BMW constantly shows up at the top of the ranks for the most satisfying cars to own. Additionally, it often wins accolades such as “Top Customer Satisfaction” from consumer intelligence company, J.D. Powers. … but why do you think BMW shows earning power levels that are “just average?” As stated in Driven, it’s because the business is not nearly as great as the product it provides. As satisfied as customers may be with BMW’s products, there is still a possibility that a slightly cheaper alternative will draw customers away. Sure, BMW offers “high-end” products, but so do other automotive brands like Mercedes-Benz, Audi, Lexus, and Cadillac. Because of these alternative brands, BMW gains little pricing power regardless of the value its customers receive from its offerings. In this case, tenet two of the Return Driven Strategy cannot be achieved. Remember: A company that doesn’t have a pricing power won’t have sustainable, high cash flows. As long as suitable substitutes exist for fulfilling a particular customer need, prices will be down to the costs to produce these products. On the contrary, in a situation where no substitutes are available and customers pay based on the value they receive, the impact on a business’ performance can be enormous. Do you want to know the difference between a great business and a great business with great offerings? Just take note of this principle: “Great products and services make customers happy and can generate high revenues. Great businesses sell offerings that customers need and without that offering, customers’ needs would have gone unmet. They thereby generate not only high revenues, but also higher cash flow returns.” Since tenet two is under tenet one, this means tenet two should NEVER violate tenet one. In determining the needs you want to pursue as an independent professional, your definition of wealth should remain the end-goal. Real social good comes from a wealth-generating firm. Such a company aligns its organization alongside customer needs and not just along product lines and a seemingly arbitrary definition of “industry.” Take note of tenet two as you work to establish your own brand as an independent! One of the signs that you’ve succeeded? It’s the distinctly measurable fact that people are willing to pay for your offerings in ways that result in a profitable business! Clearly, whatever your financial state is at present, it’s your customers’ and clients’ reward to you for striving to fulfill their unmet needs. Hope you found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Tuesday’s Return Driven Strategy! Learn more about the third tenet of Return Driven Strategy on next week’s Return Driven Strategy!