Why lowering your price doesn’t do the job

My headline refers to business and leadership.

I often experience a great focus on results, in companies and among CEOs and leaders – and understandably so, as this is how we have been “brought up” in business. Businesses aim for their sales to exceed their expenditures, resulting in a profit, gain, or surplus – a result. However, a result is not just a result – it needs to be better than the previous year – as a business, we constantly need to perform better. Thus, naturally, there is a predominant focus on results.

I recently came across the result focus once more, in an article about a large Danish toy corporation. The article was based on an interview with the new CEO of the company and dealt with the tactics the cooperation would employ for this year’s holiday season. I won’t go deeper into these, but in the article the CEO is asked to elaborate on his aim for the future margin of the corporation. He states that while he cannot elaborate on this; he explains: “What is crucial for us, is that we continue to gain market shares and create a good investment for our shareholders.” I get his answer; the business needs to create results and perform better.

The challenge, from my point of view, is the order of things. I do not believe that a business creates the best results by focusing, as the CEO above, on gaining market shares and delivering return to shareholders. I believe businesses create the best results by focusing on WHY they are here and HOW they pursue that why in a – for the market – unique way. In other words, their beliefs and what they want to achieve – not just for themselves, but also for their customers and the world.

I believe businesses create the best results by focusing on WHY they are here and HOW they pursue that why in a – for the market – unique way.

What is crucial for the toy corporation – in my humble opinion – is that parents and children that visit their stores and their online platforms, have a great experience that is relevant for them, and in this way builds loyalty to their brands. I do not believe parents and children – or consumers in general – are attracted to companies whose focus is on market share and return. Loyalty is not built on market shares and return on investment, loyalty is built by companies and brands with a purpose, a belief, a passion; and from companies and people who want to do something for their consumers, who cares for them, and who cares for something bigger than their business and results. As Astro Teller, the captain of Moonshots at X (formerly Google X) puts it: “Purpose is the point. Profit is the result. It’s the natural order of things. Greater value creation leads to more profit than trying to maximise profit as an endgame.”

If I were the new CEO of this toy corporation, it would be crucial to me to be able to answer Why parents and children should visit my store instead of a supermarket.

If I were the new CEO of this toy corporation, it would be crucial to me to be able to answer Why parents and children should visit my store instead of a supermarket (which is exactly what this large toy corporation CEO needs now, as he is experiencing that his stores are losing market shares to the super- and hypermarkets, due to lower prices).

I would focus on the history – the Dna of my brands; what made them great to begin with?

I would talk to key employees and ask them why they have stayed with the company, why they get up in the morning, what makes the company unique in their opinion – and I will tell you this: For the majority of them, it has nothing to do with conquering market shares. Know and understand what drives the people in your organisation and what drives you. Externalise it into what you want parents and kids to experience, when interacting with your brands. As a result of this passion the results will follow. Remember; great companies aren’t great just because they make good results. They make good results precisely because they’re great. And that is the right order.