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Published: May 29, 2012
 / Summer 2012 / Issue 67

 
 

Rethinking the Product Launch

Your customer value proposition is the key to organic growth — for a fast-food chain like Wendy’s, or for any other consumer business.

If you could consistently drive organic growth, how much would that be worth? Quite a lot, especially in mature industries where the customer base isn’t growing much and people are habitually loyal to their favorite brands. For many companies interested in growing their markets by launching new products or services, having a framework for organic growth based on a better customer value proposition could make all the difference.

By customer value proposition, we mean everything a customer receives, tangible and intangible, for the money he or she pays. The definition can be expressed as an equation: customer value = (product performance + service delivered + image) / price paid.

For example, consider the quick-service restaurant (QSR) industry (also known as the fast-food industry). According to recent Booz & Company research, QSR customers can be segmented into five basic groups, based on the overall reason they pick a particular fast-food restaurant. Some customers look for a pleasing ritual; some are price sensitive; some want to maximize convenience; and some seek an experience of pure indulgence. A smaller cohort of customers want it all; they are looking for all these things, and some health benefits in addition.

Quick-service restaurant chains constantly develop new product and service offerings that align with different attributes. This same research found that McDonald’s, Taco Bell, and Burger King excel at developing products for customers who are price sensitive; KFC and Pizza Hut have come the closest to offering an experience of pure indulgence. Any QSR company that wants to grow organically must create either an improved value proposition for the segment it already leads (thus increasing its market share) or a new value proposition for a segment it does not currently lead.

Let’s use Wendy’s International Inc., one of the world’s largest hamburger restaurant chains, as an example. We’ll start with a disclaimer: This article claims no firsthand knowledge of Wendy’s and is a purely hypothetical exercise, based largely on an analysis we conducted as outsiders. We are also ignoring some of the competitive realities of the QSR industry, including the overwhelming importance of store location. When customers are about to spend their dollars at their favorite quick-service restaurant, a rival chain has only a fraction of a second to get them to even consider going elsewhere. Even with those factors left out, the journey by which we get to a recommendation for Wendy’s should be instructive, since the way of thinking about customer value propositions would be the same for any company, regardless of industry.

Wendy’s, founded in 1969 in Columbus, Ohio, has been known for its large, square hamburger portions; its first major ad campaign, in the 1980s, introduced the expression “Where’s the beef?” which quickly entered popular culture. It was also the first QSR to introduce salads as a regular menu item. The chain, which maintains some coherence by not serving breakfast, nonetheless scores high among consumers who “want it all.” Unfortunately, this is the smallest of the five segments, and the expectations of these segment members are, by definition, diffuse, which makes it difficult for Wendy’s to develop a clearly differentiated market position.

To grow its share, the company must introduce a new value proposition that appeals to larger, more commercially viable groups of customers. That will require launching some new products and services that are coherent with the rest of its offerings, making use of Wendy’s existing strengths to attract a new segment of people who have not identified with this chain in the past. That’s not an easy task, and any obvious ideas for new propositions — at Wendy’s or other companies — should be regarded warily.

 
 
 
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Resources

  1. Ken Favaro, David Meer, and Samrat Sharma, “Creating an Organic Growth Machine,” Harvard Business Review, May 2012: Toward an expansion strategy, building on these techniques and more.
  2. David Meer, “A New Way to Gain Customer Insights,” s+b, Spring 2012: More detail on conjoint analysis and its use for organic growth.
  3. Maureen Morrison, “How Wendy’s Found Itself, Slipped Past BK Into No. 2 Spot,” Advertising Age, Jan. 9, 2012: Recent in-depth story about the chain’s revitalization.
  4. Corey Yulinsky, “Making Customer Segmentation Deliver,” s+b, Winter 2011: A four-step process for making segmentation drive improved performance using sophisticated data.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/marketing_media_sales.