Category Archives: Business Model Innovation

Extraordinary Guarantees and Your Business Model

I am a big fan of by Dr. Christopher Hart’s book, “Extraordinary Guarantees: A New Way to Build Quality Throughout Your Company & Ensure Satisfaction for Your Customers.” In the book Dr. Hart lays out a blueprint for improving margins and sales via exceptional guarantees. He offers several examples including a powerful one of a New York company that captured a 60% share of their market with a product priced at double the normal rate.

I could not agree more with Dr. Hart’s commentary on guarantees as a powerful business model tactic. However, the business landscape is currently cluttered with guarantees that are anything but extraordinary. Here’s my personal hate list of lousy guarantees:


  • Price matching. Please-- you try to get away with overcharging me then offer me the same price I could have gotten elsewhere if I only would have been smart enough to go there first?


  • 110% price matching. This is a slightly less horrible option. I overpay at your store and now I can stand in line at customer service and duke it out for $3.44. Here’s the math. I buy an item for $53.12 but find it for $49.99 elsewhere. I get the $3.13 difference plus a whopping 10% bonus of $0.31. This is well worth my headache standing in line at customer service……right. I am guessing you, like me, have never taken anyone up on one of these unless it was over $50 or $100….if at all. So what’s the point of having the guarantee, to attract the hyper-price sensitive customers that are willing to stand in line for $3? It reminds me of the movie Christmas Vacation when the out-of-touch Grandmother offers the grandson a quarter to rub her bunions. She felt like a quarter was a nice reward. The grandson felt differently. This type guarantee offers too little reward for too much work.


  • Warranting an item for a period of time less than it should function problem free. I just bought a washer and dryer from a major manufacturer. Most of the machine is warrantied for a year. Whoopee! I fully expect a major branded appliance to last a year without breaking. That’s not a guarantee, that’s honoring your defects.


  • Scam-type guarantees. These guarantees seem too good to be true….and they are. Free toothpaste for life if you don’t love our new flavor. This sounds great until you realize you have to travel to Uruguay to visit the prescribed dentist to check you out prior to receiving your “free” toothpaste. A guarantee should make the customer more comfortable with the offering and quality of the product, not less.


Here’s an example of a guarantee done right. I recently stayed in a Crowne Plaza hotel and found the sign below by my alarm clock. We will wake you at your set time or your stay is free. No excuses or yabuts; no exceptions or *’s; and enough skin in the game to make it interesting and worth my while.


More companies need to leverage the power of extraordinary guarantees like Crowne Plaza. Dr. Hart suggests in his book that these guarantees increase customer satisfaction, allow for increased pricing, and force operational improvements (Crowne Plaza cannot afford to give away too many free nights so I am guessing they tightened up their wake up system).

What cool ideas have you seen companies use for extraordinary guarantees?



Unbranding and your business model

Proctor and Gamble (P&G) plans to introduce a lower-priced version of #1 selling brand Tide. Tide Simply Clean and Fresh will be price in the mid-tier category vs. the premium category for regular Tide. Here’s what has P&G salivating –According to Nielsen, in the most recent year, 41% of American households bought value-priced laundry brands, while 30% bought mid-tier brands and only 29% were buying premium brands.

Tide Basic

This is an interesting decision that has a potentially profound impact on P&G’s business model. Clearly, P&G feels the sting of recession-burned and still stingy consumers and feels it needs to add a solid product in the mid-tier category. However, this decision may raise more issues than it solves:

- P&G enjoys industry-best margins at 49.6% vs. competitors Unilever (45% approximately) and Clorox (42.9%). Do the benefits of increased market share outweigh the reduced margin? It’s safe to say the new brand will not cost much less, if any less, to produce. It will simply be sold for less.

- P&G built a world-leading company by creating powerful distinctive brands. Does diluting the world’s top detergent brand with a cheap sub-brand help or hurt?

- Is P&G making an incorrect assumption that Tide can increase market share at all.  Tide currently holds about 40% of the detergent market. Isn’t there a possibility that the Tide brand is hitting the point of diminishing returns and a lower priced product will simply switch premium buyers to mid-price buyers, leaving market share approximately the same? Will P&G steal market share from competitors or just themselves?

- Is the dual brand confusing? What is the difference in the minds of consumers between “good Tide” and “cheap Tide”? This seems like no win situation. If the consumer perceives a difference between the two, they ask “Why is Tide making a poor substitute of itself?” Three years ago, P&G tried a Tide Basic brand but consumers felt it did not clean as well so the brand was dropped. This is dangerous to the billion-dollar brand.  If consumers don’t perceive a difference, the consumer simply says, “Thanks for making Tide cheaper,” and buys the lower margin product.

- Would P&G be better off launching a new brand or a “with the power of Tide” brand? Launching a new brand is expensive but it seems safer to leverage Tide with a “with the power of” statement than actually branding the product as Tide. If the product did not clean well, the consumer could assume the product did not have enough of the power of Tide.

P&G has used a similar approach with Bounty paper towels and Charmin adding “Basic” to the name. Introduced in 2005, the basic versions sell for about 25% less than regular Bounty and Charmin. P&G views these basic versions as a success that add new mid-priced customers. The Tide concept appears to be version two of the same plan. In P&G’s defense, Bounty paper towels have approximately a 40% market share like Tide, so if the Bounty Basic plan is working, perhaps the Tide plan will work also.

Whether the Tide Simply Clean brand adds market share or not, it unearths a disturbing consumer trend – shrinkage of premium brand demand and a shift to “less is more” brands. Similar to dollar store growth during the recession, will P&G be fighting more and more frugal consumers looking for “good enough” brands vs. premium brands? How will this affect P&G’s typically high margins?

This move tends to fly in the face of general business model principles- excellent margins, powerful brands, etc.  P&G is endangering the #1 detergent brand and chasing lower margins. This move bastardizes Tide rather than innovates. P&G is one of the most innovative companies in the world, but this product is disappointing. They should innovate at the top of the market instead. For instance, new Tide pods and pre-measured packets carry the highest margins in the industry. Risking a top brand to marginally grow sales is NOT innovation. If P&G wants to attack the low end of the market, they should employ the proven disruptive innovation principles set forth by Clayton Christensen in The Innovators Dilemma.

Do you think a mid-priced Tide brand is a good move?


Does a cool idea = a great business model?

When I met the owners of NoChar Inc. and the showed me how their product can protect a town from burning down in a forest fire or how it can protect a man’s hand from a torch, I assumed they had to beat off customers with a stick.

It turns out there is more to creating a powerful business model than a cool product or idea. NoChar’s product is unmistakably cool and valuable. However, NoChar still has some work to do on their business model.

Products do not sell themselves, even great ones. That’s where the sales performance model comes into play. NoChar’s business model is very strong in the marketing areas but needs work getting this great product into the hands of customers.

If you were NoChar and had a great product but only average sales, what would you do?



The Business Model Wheel as a Brainstorming Tool

We have had many requests from readers for more information on how to use the Business Model Wheel as an innovation tool. The video below shows how to brainstorm using the wheel as a starting point. If you are not familiar with the wheel concept. You can get an overview in the Powerpoint found at


Business Models for Dummies Highlights

The recently released book, Business Models for Dummies, offers both beginners and expert’s insight into the fascinating world of business models. The book is comprised of three main sections: creating a business model, assessing the model, and ongoing innovation.

9781118547618 cover.indd






Creating a business model

There are countless methods to create a business model – from the back of a napkin to a highly formalized methodology. This book offers a structured approach to a business model using The Business Model Wheel™. The wheel breaks down a business model into offering, monetization, and sustainability. Each of these areas is further broken down into more finite components:

  • Market Attractiveness
  • Unique Value Proposition
  • Profit Model
  • Sales Performance Model
  • Ongoing Competitive Advantage
  • Innovation Factor
  • Pitfall Avoidance
  • Graceful Exit


Business Model Wheel Color

By using a structured approach to the business model, a more complete and robust model can be created.

Assessing a business model

The Business Model Wheel™ can also be used to score a business model. By using the version below, the business owner or model creator can assess the quality of each area of the model. The book goes into great deal on what factors are important as well as what to look out for.

One of the often overlooked areas of a business model is the Sales Performance Model. Many people create a model of something they think customers will want and it will be sold at a significant profit. However, if there is no proven and repeatable sales system in place, it’s nothing more than a coulda-woulda-shoulda model. Only models that produce actual sales, not theoretical ones matter.


Ongoing Innovation

Perhaps you remember the companies below. All of them had good business models and were leaders in their field. However, competition, economics, technology, and other factors are working to erode your business model. In order to combat these negative influences, you must innovate.

The book offers many potential sources and methods of innovation but my favorite is the section on Advanced Innovation. One entire chapter each is devoted to three techniques: “Getting in the insurance business, Advance Crowdsourcing, and Sales Virtualization.” If you own a business, jump ahead to these chapters. There’s gold in there.

The author uses several case studies and examples to drive home these important points. I must admit, a business model is far more complex than I originally thought. I enjoyed the systematic breakdown of the model into understandable pieces as well as the many examples that made the lessons “sticky.”

You can purchase the book at