The question brings to mind an old, made-for-TV serial, Noble House, in which Pierce Brosnan takes control of a family empire on the verge of collapse. Fast forward to a scene at a horse race where Brosnan is enjoying the day’s activities. One of Brosnan’s guests is amazed at his ability to enjoy the races given all the challenges he’s facing. When asked how he managed that seemingly impossible feat, Brosnan replied?
Every problem has a compartment. I pull it out when I’m ready to work on it. \
What a simple, yet incredibly profound, way to deal with the array of challenges we inevitably face. While wonderfully insightful Brosnan’s response doesn’t answer the question of how to choose which problem to address or what amount of time and energy to devote to it.
Problem
The reality is that, as business owners, on any given day you’re facing challenges on a variety of fronts:
The list goes on and on. Obviously you can’t focus on all of these fronts at once, so how do we choose?
Urgency
Unfortunately many of us choose on the basis of urgency. Urgency being defined as the greatest perceived threat at this point in time. Are we losing top talent? Are sales languishing? Has our primary market become a commodity market? Are we losing our most profitable customers?
The problem with this approach is that we’re always reacting to situations; we’re scrambling to maintain the status quo while our competitors are gaining a competitive advantage. Not a great long-term strategy.
Enjoyable
Absent any emergency, we’re likely to choose to work on the things that interest us the most. As business owners we should have the privilege of doing the work we enjoy while delegating less pleasant tasks to others. That privilege, however, does not exempt us from monitoring the work being delegated or applying strategic thinking in those realms.
Rotating
The thing that’s worked best for me is carving out time on my calendar each week to focus my attention on each of the various aspects of my business. I’ll devote some time each week to:
You get the idea. While I put these items on my calendar each week, I’m not so rigid in my scheduling that I don’t allow for movement within the week. I won’t allow one of these sessions to slide into the next week. Doing so readily translates into a habit of deferring work I don’t enjoy.
Flexibility
I allow for flexibility during the week for a variety of reasons. My energy level may be low that day and my ability to focus diminished. If so I’ll opt for some mindless tasks that need to be completed and postpone the truly important work for the following day. When I do that I make sure I hit the sack early that evening so I have the energy to tackle those tasks the next day.
Another reason for flexibility in the schedule is that my mind isn’t always ready to deal with the issue I’ve scheduled. There are days when I’ve scheduled writing time and stare at the screen for five fruitless minutes. Often it’s because my mind is drifting to other questions. Things like a question posed by a client that may open the door to a new opportunity or an observation made by someone I just met that causes me to look at my offerings in a new light. Whatever the reason for my inability to write at that moment, it makes sense to shift my focus to the issue my mind wants to address. In other words, I don’t fight nature. I’ve found fighting nature to be one of the most futile and frustrating exercises in which I’ve engaged.
Interestingly, when I allow my mind to work on what it wants to address, I not only complete that task more quickly I find it much easier to focus on the scheduled item when I return to it.
This simple approach will not only help you make sure that you’re touching all the bases in your business each week, you’ll find that you’re preempting many of the issues those employing the ‘urgency’ strategy face. Now FOCUS!
]]>Facilitating employee growth. Ms. Gulati went on to say “Employees are our greatest asset and if they are happy, then business will be good.”
Interestingly, this article appeared in my Google alerts within a half hour of my response to a St. Louis Small Business Monthly reader’s question. The reader asked:
One of my employees just left and has started a professional service firm just like mine. He has recruited some of my employees away and he is contacting my customers. I need to reach out to my clients and keep their business even though he is charging less with the new firm. What should my first steps be with my current customers?
Part of my response suggested some soul searching to ascertain the reasons behind the employee exodus. Why? Because, as Ken Blanchard and Sheldon Bowles indicated in their book, Raving Fans, the treatment your employees receive gets reflected in their treatment of your customers. That, I believe, is the point that Rekha Gulati was making when she established her goal.
I don’t know whether or not Ms. Gulati would put it this way, but to me the essence of a brand is the customer experience. Your brand reflects how your customers feel when they purchase and use your offerings. For it’s the emotional bond that gets created that produces the kind of brand image we envy in companies that have achieved that level of brand recognition.
The moral of this blog post? If you want a stronger brand, focus on facilitating your employees’ growth and success.
P.S. For those of you who are interested, responses to the St. Louis Small Business Monthly reader’s question will appear in their June 2013 issue.
]]>The Problem
There’s no doubt that obesity is a problem that has been getting worse over the past few decades. The reality is that people who suffer obesity (until a year ago, I was one of them), haven’t found the motivation they need to address the problem.
Does the airline industry really think that pricing by weight will produce that motivation? Do they realize that over half the population will not disclose their weight unless it’s to get a driver’s license and even then they’ll fudge on their weight?
Unintended Consequences
Here are some of the ramifications of their weight-based pricing policy:
The Solution
Airlines should stop thinking about solving their profitability problems and focus on creating a more enjoyable customer experience. If they did that, fliers would be willing to pay higher prices for their services which would go a long way to solving their profitability problems.
Ralph Waldo Emerson put it this way “It is one of the most beautiful compensations in life…that no man can sincerely try to help another without helping himself.”
Lesson
The next time your company is facing a problem that limits your profitability don’t look for solutions that solve your problem, look for ways to WOW your customers. They’ll reward you with higher prices, increased sales and a healthy bottom line.
]]>It’s only fair that I credit them for their current ‘faster, better’ commercials which celebrate children, their energy, creativity and unique wisdom.
What can we take away from AT&T’s experience? Three things:
Thoughts you may want to keep in mind as you craft your next marketing campaign. It’ll dramatically improve your brand.
For more ideas on how to improve your brand, check out my latest ebook, Brand Promise: What Do YOUR Customers Expect?
]]>Lost revenues
The most obvious cost is foregone revenues. When we, as sellers, put something on sale we encourage buyers to buy and hoard. We also encourage them to wait for the next sale to buy again.
As our ‘sales’ become more predictable, buyers time their purchases to coincide with our sales. We train them to buy when our offerings are on sale. That means that we’re offering permanent discounts instead of an occasional deal.
While consumers’ buying habits change with our pricing, their consumption habits don’t. You don’t have to trust me on this, simply review your own consumption habits. Do you eat chicken more frequently because it’s on sale? Or do you merely store it in the freezer until you have a craving for your favorite chicken dish?
Production scheduling
Discounting doesn’t increase demand, it merely shifts it from one period to another. I’m sure some business owners/leaders would say that ‘sales’ help them exert more control over their production schedules and allow them to eliminate some of the seasonality from their business.
Nice logic, but is that what really happens? Are you really considering your production planning or are you reacting to a decline in sales, a competitor’s pricing or any of a myriad other reasons? My experience is that the latter are more viable explanations for the discounting that occurs.
So if we’re not gaining production efficiencies with our discounting what are we getting? When we artificially alter demand driving demand and production out of sync, we typically end up with excess inventory in our distribution channels (which often leads to further discounting) or we lose revenues to unmet demand. Both results add to our carbon footprint and drive up our costs.
Brand dilution
Another cost, often difficult to measure but just as real, is revenue loss related to brand dilution. The more frequently we offer sales, the more quickly we discount our offerings, the more resounding our message is to consumers – our offerings aren’t worth the normal asking price.
If asked directly none of us would make that admission, yet that’s one of the messages we send when we offer discounts. The message we send to those who bought at full price – Gotcha! The message to price buyers – We’ll do whatever it takes to get your business.
Shouldn’t those message be reversed? To full price buyers we should be saying – you’re our ideal customer, we view value the same way you do and we’ll continue to provide that value to you. Our price is set to assure that you receive that value.
We should be telling price buyers – I understand that our offering doesn’t fit your budget, but it’s worth every penny we’re asking.
As we’ve seen the costs to sellers and consumers alike are huge. Our pricing practices are costing us in terms of revenues, inefficient use of productive capacity as well as the costs of storing, insuring and handling excessive inventories.
At the same time our pricing practices are costing our customers ‘inventory‘ carrying costs and higher levels of waste.
A simple change in pricing strategy can have a huge impact on the carbon footprint you leave behind as well as your bottom line performance. Now that’s a winning combination.
]]>From the consumers’ perspective, here are some of the costs I’ve identified. ‘Sales’ trigger excessive purchases – purchases well beyond what the consumer will use in normal cycle. For meats that means a month’s supply or more of what we typically eat.
Where does that excess go? Into the freezer. The more we store the harder our freezer units have to work to keep everything frozen driving up our utility costs and stressing an already strapped grid. And who among us hasn’t lost track of what we have in the freezer only to find it months later, exhibiting signs of freezer burn. These discarded excesses not only add to our landfill costs they drive up the cost of the meat we did consume.
The same can be said canned goods. Excessive canned goods purchases go into pantries until we get a craving for that particular item. Our pantries have gotten larger and larger over the years adding to the square footage of our homes driving up our heating/cooling costs.
When we do get around to using those canned goods it’s not unusual to find that the expiration date has passed or see a telltale bulging of the lid letting us know that the contents are no longer safe for consumption. More landfill, higher cost of what we actually consumed.
Women have reported having as many as half the items in their closets still having price tags attached, never having been worn. These items were ‘too cute to pass up at that price.’ Men aren’t exempt from this behavior.
There is only one brand of shoes that fit comfortably and afford the look I’m seeking. They’re typically $185, but about twice a year on they’re on sale for $85-$90. What do I do? I buy a pair of each color whether I need them or not and store them in my closet.
We exhibit the same behavior whenever socks, underwear, laundry detergent or any of a myriad other items go on sale. It’s one of the factors that increases the size of our homes and the costs of heating and cooling them.
By the way, have any of you ever gained or lost significant amounts of weight and no longer been able to wear that excess supply of underwear or those ‘too cute’ outfits? We have all been there. Yet I doubt that we know the true cost of what we actually consumed.
Next week we’ll discuss the costs from the seller’s perspective as well as how more appropriate pricing can benefit all of us as well as the planet.
Want to sell more, more quickly with less effort? Check out my latest ebook, Psychographic Profiling.
]]>The answer to this question depends upon which market you’re targeting. There are basically two markets for these improvements, the early adopters and the mass market.
Early adopters
These are folks who simply must have the latest, greatest technology no matter what the price. Or they’re people who could care less about the technology, but want the image of being on the cutting edge. Both groups pay handsomely.
Mass market
By far the largest percentage of the population falls into this group. These consumers buy as long as they perceive a difference in quality. The owner of a printing company described it this way:
Most people can’t tell the difference between a good print job and a great print job and a great print job costs a whole lot more. That’s why most people entering my store are looking for a good print job.
There have been rumors that 4K’s resolution enhancement is only noticeable if you’re very close to the screen. If that’s true, it’s unlikely that the 4K technology is going to enjoy much success in the mass market.
Lesson
As you embark upon product improvement strategies ask yourself “Will the mass market be able to tell the difference between our existing offerings and the improved version?” If they can, you’re likely to enjoy financial success in both the early adopter and mass markets.
If not, you’re going to have a very small market and all of your money will be made from the early adopter group. Unless you’ve tracked the sources of early adopter sales in the past, marketing to these folks could be a very expensive proposition. Whether you decide to pursue the early adopters or not, do NOT create a ‘more affordable’ option for the mass market. It’ll be a waste of money.
]]>When I heard news story after news story of Carnival’s problems I couldn’t help but think “Their price is too low.” Hey, I’m a pricing guy what do you expect? But seriously, I thought “They’re not charging enough to allow time for regular maintenance, that’s why they’re experiencing so many mechanical problems.”
Then I heard a commentator suggest that Carnival’s business model might be the source of their problems. The model was described as a ‘high turnover’ business meaning that Carnival was relying on getting a large number of passengers out and back quickly and repeating the process frequently to generate a profit.
That business model requires two things:
How do you generate volume? Lower prices. What’s the simplest way to limit downtime? Forego maintenance. What’s the result? What Carnival is experiencing.
What’s the antidote? Charge higher prices so that Carnival can afford downtime for regular maintenance.
People who favor high volume, high turnover business models suggest that my approach leaves a lot of money on the table. My retort is “How much revenue is Carnival going to lose because potential customers don’t want to risk the nightmarish experiences of recent passengers?”
If you’re relying on high volume, high turnover for your business model, you’re opening the door to some very unpleasant customer experiences. Once lost, those customers will be very difficult to get back.
Don’t let that happen to your business. Whether you’re selling B2B or B2C, price your offerings to assure a pleasant customer experience.
]]>
A couple of definitions will help us avoid the pitfalls inherent in most communications:
Do innovative offerings carry the same price premium as enhancements? Let’s take a look.
Innovation
You can look at the historical pricing of virtually any innovation and you’ll see that the early adopters, those who simply must have the latest and greatest, pay 3 to 4 times what the mass market does for that privilege.
We’re not going to discuss the reason why here. You’ll find that answer in ‘related posts’ listed at the end of this post. For now, we’re merely interested in the premiums themselves.
Enhancements
Product improvements rarely carry that premium. Why? Because buyers use a different formula for calculating the value of enhancements. Here’s a quick example:
You’re using Product A which costs $10. You become aware of Product B which produces the same result 50% faster. How much are you willing to pay for that additional speed? Here’s the math you’ll likely use:
Product B is 50% faster. I’m paying $10 for Product A. If the price of Product B is $15, I’m breaking even; I’m not gaining any additional value for my dollar. If the price is more than $15, I’m losing money. At a price less than $15, I’m ahead of the game.
This logic indicates that enhancements carry a much lower premium than innovations.
You may be able to overcome this math by showing the buyer an alternative way of calculating value. How? By showing them how much a 50% time savings is worth to them?
If the person makes $10 an hour, a 50% time savings is worth $5 – precisely the same value that their math produced. If, however, that person makes $200 an hour, it’s worth $100. That’s a huge difference. The keys to getting this kind of premium is to:
Having said that, the probability of getting an innovation premium for an enhancement is low. It’s difficult to overcome your customers’ math. Logically they may agree that the time savings is worth $100, but they’ll have a hard time getting past paying more than $15 for Product B.
Whether you’re selling B2B or B2C, you’ll find buyers making the calculations outlined above to determine the value of an enhancement. That’s why a portion of every R&D budget should be devoted to innovation. That’s where the real premiums are.
]]>As promised I’ll share my thoughts with you in the form of responses to the questions I posed. Here they are:
What can I expect as a customer?
From the home page I see that I can get banking services, loans, investment advice and other services. I’m also getting a sense for what rates EverBank is paying on savings accounts and interest rates on loans.
How is that different than other companies in that industry?
It isn’t. Those are exactly the services I’d expect from a bank. Ergo, there is no obvious differentiator. No reason to choose EverBank over any other bank.
As a potential customer, how do I know whether or not this company is right for me?
I don’t. There is nothing to indicate whether EverBank’s focus is on:
Absent a profile of their ideal customer I have no way of knowing whether or not EverBank and I share the same values. Values are the basis of a bond, an emotional connection, that will allow both of us to enjoy great success and a long-term relationship.
Because I don’t feel a bond, it’s not likely that, as a potential customer, I’d stop my search for a bank after seeing EverBank’s new look.
It’s not my intent to single out EverBank. I challenge you to find a bank that has a website that effectively answers the questions I posed.
Nor is it my intent to pick on the banking industry. Choose any industry you like, research the websites of companies in that industry, pose the questions above and you’re likely get the same result.
It’s time to move onto important work – evaluating your brand. Ask yourself the questions posed above and see how well your brand stands up to the challenge.
If your responses are disappointing, if they lack the clarity and appeal necessary for buyers to form an emotional bond with your company, it’s time to ask yourself the following questions:
The answers to these questions will help you do a significantly better job of branding your company than the vast majority of companies in your market. That’s my wish for you.
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