If you’re fortunate enough to work with a good SEO agency, there’ll be no shortage of prospects and, eventually, real customers. The question is, while a digital marketing agency can bring those people to you, are you going to derive as much value as you can from them once they do business with you?
American business consultants Alan Lewis and Dan McKone have long believed that the average company does not do enough business with one of their core assets: their existing customers. So, they coined the term “edge strategy” to describe the concept of an organization finding extra revenue in existing core programs and products through optimization or re-thinking how the product is sold.
It’s a fairly simple concept to grasp. Edge strategy involves looking to the edges of your current business and finding ways to monetise your two core assets, your customers and your competencies.
Lewis and McKone gave two examples of how this might work when they first introduced the idea of edge strategy to the world:
- Example One: A supermarket chain selling heads of lettuce starts cutting them up to make pre-prepared salads. It’s the transformation of a relatively inexpensive commodity product into a high-margin product of convenience through the addition of a marginal amount of labour and baggaging.
- Example Two: A television manufacturer doesn’t just sell the TV – it also sells an extended warranty with it, making the sale of that appliance even more profitable.
That second example is commonplace. You will know it only too well through making significant purchases of your own, such as home appliances, computers, and even cars. More likely than not, you’ll be asked to buy an extended warranty on top of the manufacturer’s warranty that is standard with any such product. It’s an edge strategy in action.
You would have noticed other examples too. They include:
- Sewing machine retailers selling lessons on how to best use their products.
- Supermarkets opening on-site cafes and restaurants.
- Airlines selling you insurance.
- Cinemas selling ice creams and popcorn
- Inner-city bus services selling premium seating with extra leg-room and Wi-Fi
- Cirque du Soleil selling backstage tours.
- Amazon renting out its scalable technology infrastructure to third parties.
After analysing the innovation strategies of 585 international brands, Lewis and McKone claim that those who have adopted an edge innovation strategy have grown 39% more than their peers and delivered a 15% higher shareholder return. So how do you develop your edge strategy? It begins with two exercises.
- Create an Asset Inventory. List all the core assets and competencies of your business or brand and ask yourself, who else would pay for these assets or competences? In our example above, we saw that Amazon rents out their scalable technology infrastructure to third parties.But it could be something as simple as hiring unused warehouse space.
- Understanding the Job-to-Be-Done. Understand what people are trying to accomplish when they buy your core offer and ask yourself what else would they pay for to help them achieve this? Lessons are an obvious example. Or, charging extra to assemble the flatpacks you sell is another example.
You can think of edge strategy as an upsell for the new age. It’s about selling a product or service to your existing customers – but using innovation at the edge of that product or service to give them added value, and yourself added profit. It’s the lettuce being turned into salad: convenience for the customer, and a higher profit margin for the retailer. Flatpack assembly: the customer pays for less hassle, while more money goes to the supplier of said flatpack. Extended warranties: the consumer pays for peace of mind through a longer warranty, while the retailer increases their profit. There are many ways you can put an edge strategy into place at your business, and while it might involve some intensive brainstorming within your organisation, it will be well worth it.