The Marketing Solution (Unrefusable Offer)

The most common physical constraints exposed with the Theory of Constraints approach are capacity constraints, market constraints, and material constraints.

Capacity constraints are our bread-and-butter; they are what made the Theory of Constraints famous. Synchronous Manufacturing deals routinely with these.

It's almost boring.

Material constraints are less common, and while we do have some techniques to deal with these, Rod and I have never needed them.

But Market constraints – a lack of sales, or a margin-squeeze that erodes profits even if sales grow – are the constraints that companies often have the most difficulty in breaking.

Throwing money at the problem through advertising rarely improves the situation.

Simply increasing sales activity often makes no real difference ... and in fact many companies find it isn't as easy even to increase the activity level, let alone get some sales out of it. (We have a solution for both problems, incidentally - for increasing activities in a meaningful way AND getting a higher conversion rate from sales activities).

"Promotions" can be a profit-killer. Across-the-board price cuts can be disastrous. What other options are there?

The TOC solution to this problem is extremely powerful, but is also one that generates skepticism until it is fully understood.

The Theory of Constraints approach is to elevate a customer’s or a prospect’s perceived value of your product or service in order to win new business.

Or you can use the TOC solution to elevate customer’s or a prospect’s perceived value of your product or service to the point where they pay you more for your product than they previously paid you, and they pay you more for your product than they pay your competitors.

Yes, I know it sounds fine in principle, but ... what the heck does it mean in real life?

This approach has become known as the "Unrefusable Offer," or occasionally the "Mafia Offer." You offer a deal that is so good the customer cannot say no! Yet the deal is one that substantially improves your own bottom line … at the same time as it improves the customer’s bottom line.

We do understand that it sounds most unlikely. And to make sure we're clear on one thing ... the Unrefusable Offer NEVER comes down to reducing prices.

But in most companies –not all – it IS do-able.

I'll try to summarize it, but it's difficult to take-in the concept just from a few words on paper or on a screen; this is one of those things that demands some understanding in depth. We review this on Day 3 of our Synchronous Manufacturing workshop, for example.

The technique starts with the recognition that a whole bunch of every company's symptoms have a common, deep-rooted cause; what we call a core problem. This is ALWAYS true, incidentally, and the Theory of Constraints has a set of Thinking Processed that are designed explicitly to find this core problem.

Now, this gives us the possibility of tremendous leverage. Anything that "relieves" that core problem is inevitably going to have an impact on a lot of different symptoms.

The heart of the Mafia Offer technique is that the Theory of Constraints helps a manufacturer to identify a customer's or prospect's or even a market's deep-rooted core problem, and to construct an unorthodox market offer around their products and services that relieves the symptoms of that core problem.

When you do it right, the offer provides the customer with such tremendous value that they can't say "no."

Now, t here are two paths to get to this Unrefusable Offer.

But the other path is to perform an analysis of your customer's business to find the core problem and to construct a solution based around your products and services – and this can take a lot of management time.

The path to a custom solution is not trivial –but the potential rewards dwarf the investment of time and money in constructing the solution.

Be aware: t he Theory of Constraints process should not be confused with the superficial approach of asking customers what they want, then attempting to supply it.

All too often, the outcome of the logical-seeming trend towards surveys and responses is an investment of time and money on new products or product "improvements" that seem absolutely justifiable but ultimately make no significant difference to overall sales volumes, or to the contribution to total profits of a product or product line.

The Theory of Constraints approach of analyzing a customer's core problems, then constructing an offer that relieves the pain or creates bottom-line opportunities for the customer ... bears no resemblance to this "survey" approach.

While a survey might yield the information that the market wants a blue version of your product with wheels, or thinks your terms aren't as good as they should be, or ... whatever; the TOC approach tells you the EXACT leverage point that will create more sales or higher selling prices ... or both. And even the prospect doesn't know what this is! You end up understanding your prospect's business with you far better than he does.

A TOC Unrefusable Offer has to have one more characteristic; that competitors will not immediately move to duplicate it.

To put it in practical terms, when you make this highly attractive Market Offer to a prospect you have to expect that they'll pick up the phone, call their current supplier and ask if they'll match it. The ideal response, the way you know it's an Unrefusable of Mafia Offer is when that supplier responds with an emphatic "Hell No!"

To achieve this, the Market Offer has to rely on plant performance levels that can only be recorded following a major paradigm shift internally. It is far more difficult for a competitor to match deep-rooted policy and procedure changes than to match changes in product form, function, or price.

Even better is where the several different policies reflect entirely different paradigm shifts. It's extremely different for a competitor to match even a single paradigm shift; if you simultaneously introduce new shifts to (for example) production, distribution, and marketing, it's almost impossible for a competitor to match you. For years to come.

It takes competitors time to recognize, understand, and adapt to a very different way of thinking and working, by which time the Theory of Constraints organization has a second and third "Unrefusable" offer in their hip pocket, waiting to be brought out when the competition gets too close.

Now; constructing an Unrefusable Offer is one thing; but selling it to a customer is another, and you cannot sell an Unrefusable Offer in a conventional manner.

There is a specific technique that capitalizes on the Unrefusable Offer; check the TOC Sales solution.