In marketing terms, products can be considered at three different levels, core product, extended product and augmented product.  A simple example would be air travel.

In this case the core product is simply long distance travel; this is the core customer need that the product satisfies and at this level a commodity.

The next level is the extended product, those things that are necessary to support the core product such as booking systems, inflight catering etc.  This is also satisfying customer needs but at a different level.

The final level is the augmented product, attributes that go beyond basic product requirements and satisfy higher customer needs.  These would include  frequent flyer schemes, airport lounges,  packaged holidays.

The key point is, that successful products are carefully designed at all levels to match customer needs.

Bringing this altogether we have a completely designed product.

So how does this apply to a project delivery company?   Well it’s about fully understanding your customers’ needs at all levels, and deliberately designing products to fulfil those needs.  Let’s take for example a conveyor manufacturer.

At the next level we are dealing with extended customer needs, those things that are necessary to support the installation and operation of the core product.  At this level there is greater opportunity to differentiate yourself from the rest of the pack  through project management systems, after sales service etc. that add extra value to your clients

The highest level provides the  greatest opportunity to differentiate, opportunities to completely stand out from the crowd and delight your customers.  Why is this so important?  Well this provides the foundation for enduring customer relationships, customer retention  and repeat work, more than often at reasonable margin.  Competing at this level is the basis for success.

Bringing it all together we have carefully designed products that deliberately seek to address customer needs at all levels.

Transparency, empathy, responsiveness etc. are designed into the product through systems and processes.  For example, transparency, ownership and accountability can be achieved through effective project communications and regular (weekly ) reporting of issues, risks, progress and lookaheads.   This in turn gives your customer confidence that project risk is being managed.

Responsiveness can be built into estimating systems that can quickly handle changes to proposed scope or pricing of alternative options.  This in turn provides your customer with flexibility and nimbleness.

These are all qualities that competitors may not be able to provide (or don’t even think of providing!) and that establish a point of difference.  They position you to compete not at the commodity level, but at a level that addresses customer pain points.

Finally, they  add value for your customer.  For example, your $200,000 project may represent $20,000,000 of risk to your client in terms of lost production or contractual exposure.

At the core level the fundamental customer need is material handling.  Product design is governed by physical attributes such as throughput rates, speed etc.  At this level we are basically dealing with a commodity, all competitors are dealing with common parameters and there is very little opportunity to differentiate yourself.

Braid was a key speaker at today’s China Business Summit in Auckland, and shared with business leaders the story of Mainfreight’s ten-year journey getting established in China.

It had been a slow road and the global logistics and freight company had chosen to grow organically in China rather than through acquisitions, he said.

“It was a deliberate choice to grow our business organically, but it slowed us down. However, we are a stronger business because of it.

“The joint venture we started with – where we did our apprenticeship – was certainly far better than thinking we could go in there and buy Chinese freight forwarding.”

Mainfreight were no longer just “truckers from New Zealand” and aimed to be the biggest listed company here, he said.

But it was still a small player on the global stage and in China, Braid said.

“We’ve got competitors that are 10 and 20 times bigger than we are.

“We’re proud to be New Zealanders and I think that we can do this and continue to grow the business without needing to raise capital offshore and without needing to be listed offshore.”

The key question was whether to acquire a Chinese business in the freight forwarding sector, he said.

“There will likely come a time when we’ll acquire a business which will surely double our size if not more.”

He said an all-China solution for logistics would take significant investment.

“The rise of e-commerce in terms of freight is rising very quickly, there’s no doubt about that.

“But the last mile is very difficult and for us to establish our networks to service the last mile will take an awfully long time when you’re talking about cities of 22 million people.”

The company was now finding itself being pushed inland as labour and manufacturing moved west rather than east, he said.

Braid, the Herald Business Leader of the Year for 2011, said about 75 per cent of Mainfreight’s overall revenue, at $1.8 billion, was from offshore operations. But the China business was at this stage only $100 million.

One of the key reasons Mainfreight had found success in China so far was down to its decision to employ local people.

“We had one foreigner based up there. Effectively the rest of the business are locals and those locals have given us a strength and improved our knowledge of the Chinese business practises.

“More importantly, we’ve established a Mainfreight Asia culture.”

An important lesson for those entering China to learn was that business there was driven commercially from a local and provincial base, not from a centralised base, he said.

“Therefore, having locals in each of the areas is extremely important to be successful in that particular area.”

Mainfreight last year purchased one of the largest privately-owned transport and logistics providers in the Netherlands and Belgium, the Wim Bosman Group.

Braid said buying the European business was not to do with increasing freight between New Zealand and Australia. “It was all to do with what we have in China.”