Curiosity was Framed, Ignorance Killed the Cat

My first job after public accounting was as Director of Internal Audit for a large regional insurance company. Given free range to determine my own assignments, I immediately launched a review of the claims processing operation. As Willie Sutton would say, “That’s where the money is.”

Back then, mainframe computers housed in cold rooms that took up an entire floor were the order of the day. Reports printed on large “green-bar” paper with perforated edges, bound together between heavy cardboard covers using bendable wires.

On my second day on the job, I was flipping through a report of claim payments. It listed basic information like policy and claim number, payee, amount, dates and so forth. The report probably had 50 to 60 claims per page, and was several hundred pages long.

I spotted something strange. About every 15 or 20 pages, a claim would show a negative payment. Based on my understanding of the system, there was no logical explanation for negative numbers. I started asking questions, lots of questions!

To make a long story short, I had stumbled across an internal control weakness that allowed certain claims to be paid twice. As best I can recall, I found about $125,000 of duplicates. That was not a lot of money to a billion dollar company, even in 1978 dollars. Still, with an annual salary of $22,000, I cost-justified my first five years’ compensation the second day on the job.

My point in recalling this story is not to take you with me on a boring stroll down memory lane. OK, that is part of it, but a very small part.

My point is that other people who had worked with the claim report every day had undoubtedly noticed negative amounts before, yet had failed to follow through with a few simple questions. If they had, they might have closed the control weakness years earlier. Why?

I offer two words: human nature.

People seem to have a natural tendency to accept most things as they are. Asking questions and challenging the status quo is actually considered rude in many cultures. Sadly, it is career limiting in many corporate environments. Relax and remember what happen to the mythical cat! I heard it was a mid-level manager in a Fortune 500 company somewhere on the east coast.

That is not to suggest people are by nature lazy, apathetic or any other negative adjective. It’s just how things are.

Contrast that to Thomas Edison, who said he rarely picked up an object without wondering how he could make it better. I call that the curiosity factor. Either you have the curiosity factor, or you don’t. It cannot be taught or learned, and is seldom spoken of. Yet in many professions (including internal auditing), it is probably the single best predictor of ultimate success.

Every business desperately needs someone who will leap headfirst into operations or finances with a dedication approaching a Pit bull on a pork chop. If that is not you, go hire someone with the curiosity factor.

You will be amazed at what valuable business opportunities are waiting to be discovered just below the surface.

 

© 2011 by Dale R. Schmeltzle

Customer Service #101: Buddy, Can You Spare a Sandwich?

I had an experience last week I feel compelled to share. It was Friday night, the end of a long week. After fighting construction traffic for 45 minutes, I stopped at a national fast-food chain. I ordered three sandwiches. Mind you, I didn’t order drinks, chips or dessert, just three sandwiches. The bill came to $27.14. Since I didn’t have much cash on me, I handed the salesclerk a credit card. I was informed their “system” only allowed credit card charges up to $20.

Since I have previously  bought takeout from this chain many times without encountering this problem, I’m not certain whether it is a new corporate policy, a misguided rule imposed only by this franchise, or if the employee was simply mistaken.

Regardless of the reason, it points out a common business failure. The problem is creating unnecessary obstacles for people who might otherwise become loyal customers.

I have written many times that competition is based on price, product or service. Those are your only three choices.

Perhaps spurred by the current slow economy, price competition is clearly the most promoted basis of competition. It is especially prevalent in the food service industry. Witness Applebee’s “Two eat for $20” or Pizza Hut’s “$10 any pizza, any size, any toppings” campaigns, just to cite two.

Low prices are completely objective, easily communicated and quickly adjusted as necessary. Unfortunately, while coupons, discounts and sales may bring more customers through your door, they always cut into your gross profit. You simply cannot consistently sell a product or provide a service for less than your cost and survive!

Price competition also presents a more immediate challenge. In a high-tech world where any customer with a Smartphone can quickly determine if your competition is offering a better price, the strategy is certainly no guarantee of marketing success. The risk is escalated if low-price guarantees are common in your business. Furthermore, if someone purchases only because you are the cheapest available option, he or she is unlikely to develop any customer loyalty unless you are always the low-price provider. Few businesses are large enough or profitable enough to be in that enviable market position.

Competing mainly on product also carries risks. Even if you think your product or service is unique, the reality is there are probably countless options that are close enough to serve as a substitute for customer needs. A classic example is the difference between a Lexus and a comparably equipped Toyota that sells for thousands of dollars less. Product competition is also complicated by the widespread availability of on-line shopping and free shipping.

That leaves service as the only basis of competition on which your business can truly distinguish itself. It is also the only one that doesn’t have to increase your operating costs, or cut gross profits. A friendly smile and prompt, courteous service cost nothing! More importantly, superior service cannot be instantly matched by the competitor up the street.

Superior service encompasses the entire customer experience, starting with the moment they enter your facility or contact you. It continues until the product or service produces the level of satisfaction the consumer expected. It includes point-of-sales services such as allowing credit cards, answering questions, gift-wrapping and perhaps even walking packages to their car. It also includes after-sale services like satisfaction guarantees, generous refund policies and warranty service.

What’s the lesson here? Ask yourself two questions. First, are your policies and procedures primarily designed to make your life easier, or to increase customer satisfaction? Secondly, are your employees adequately trained in those policies and procedures, and are they consistently delivering a customer experience that will keep shoppers returning year after year?

I’ll end with a quote from Mark Cuban, billionaire owner of the Dallas Mavericks. He summarizing the essence of Customer Service # 101 with this, “Make your product easier to buy than your competition, or you will find your customer buying from them, not you.”

© 2011 by Dale R. Schmeltzle

Can You Offer Free Lunches?

There is an old adage that there is no such thing as a free lunch. The same is true of free shipping. It is a variable cost of doing business. It ultimately must be passed on to customers, directly or through increased prices.

So why did Wal-Mart, America’s largest retailer, announce in early November 2010 that it was offering free shipping through December 20? Furthermore, why did competitors like Target and JCPenney quickly announce similar plans?

The answer is they all read the same market research. Consumers love “free” shipping. It is as close to a guaranteed way of increasing customer satisfaction as you will find. Conversely, an online shopper survey by Compete.com reported that high shipping costs were the number-one reason online shoppers were not satisfied with their orders. It is also why 65% of respondents indicated they prefer the “in store pick up” option, when available.

This tendency to avoid explicit shipping costs can present marketing opportunities to a creative businessperson. For example, a few years ago, one of the national pizza chains decided to offer a home delivered pizza that was larger than the in-store version. Customers willingly paid extra for the super-sized pizza, especially since it came with free delivery. Customers did not know (or did not care) that there was no incremental cost for the larger product. The extra price was in reality a hidden delivery charge.

The moral of this example is simply that customer perceptions and opinions define value in every transaction. If they are reluctant or unwilling to pay for one service, perhaps they will perceive value in some other feature that can fund the cost of the first service.

Finally, if you decide to offer free shipping, test the bottom line impact by initially setting a minimum threshold (for example, only available on orders over $50) on sales.

Accountability is a key to every successful marketing campaign, and this is no exception.

 

© 2011 by Dale R. Schmeltzle

 

What to do When Life Hands You Lemmings

Apple introduced the Macintosh personal computer in a third quarter television commercial during Super Bowl XLIII in January 1984. Playing off a George Orwell 1984 theme, it featured rows of uniformed, colorless drones. They sat mesmerized, watching as Big Brother dribbled propaganda on a large movie screen. Suddenly, a female runner chased by storm troopers entered the room. She hurled a sledgehammer against the screen, which explodes. The commercial ended with the statement, “You’ll see why 1984 won’t be like 1984.”

That commercial has been voted the best Super Bowl commercial of all time. Always stick with what works, right?

The following year, Apple decided to use Super Bowl XIX to introduce Macintosh Office. This commercial featured a long line of blindfolded business people marching across a dusty, forbidding terrain. Their only source of guidance is their hand on the shoulder of the person in front of them. One-by-one, they walk off a cliff. It has been dubbed the “Lemmings commercial” and is widely considered the worse commercial in Super Bowl history. Apple did not advertise during the Super Bowl for the next 14 years.

Have you ever had a Lemmings-like marketing experience, one whose cost was exceeded only by its complete failure to accomplish its intended purpose? Sadly, I have! I spent $10,000 developing a traditional website in the hope it would soon have my phone “ringing off the hook” with eager prospects. The vendor guaranteed a “top 3” ranking for the phrase “fractional CFO.” While it accomplished that goal, I am still waiting for the phone to ring! Very few people search that phrase, largely because they do not know what it means.

I gained three things from my personal Lemmings experience. Allow me to now swallow my pride and share the lessons learned.

1. Cut your losses!

Ego has no place in rational business decisions. Admit your mistakes, save what is left of your limited marketing budget and move on! I compounded my mistake by continuing to pay the vendor $60 a month to host the site. They provided no marketing support, no analytical data or anything to justify an additional fee. I eventually moved the site to JustHost.com, a vendor that for a low annual fee provides unlimited email and website hosting. Since I already had an account, I saved $720 per year.

2. Reevaluate your marketing goals and the tactics to achieve them.

My initial hope (it was far too naive to qualify as a goal) was that if I simply created a website, my target market would flock to it and contact me. I now realize it is unlikely businesses will retain executive management consultants solely from online relationships. That is not to say that the website cannot serve a valuable role in my marketing strategy. However, it cannot serve as the primary strategy for new business production. One of my goals is now to move promising online relationships offline. In other words, to make personal connections over a cup of coffee or phone calls. I also learned the need to help educate the business community on the existence, purpose and value of fractional CFOs. My tactics include extensive networking and event-based marketing.

3. Salvage some value from your missteps.

I grew up playing in my family’s auto recycling business (o.k., junkyard if my brother is reading this). I learned the importance of salvaging maximum value from every opportunity. In the case of my misspent marketing funds, I have uploaded the site’s video (half of its cost) to YouTube, where it may increase my Internet footprint and contribute toward my goal of consumer education. As previously mentioned, I also transferred the website to another hosting service. While this may or may not help increase brand awareness and establish my expertise, it is now essentially free!

Let me close with some simple but very practical advice. To err is human. To learn from your mistakes is good business!

© 2011 by Dale R. Schmeltzle

It Takes a Village to Grow a Company

Balancing the needs of your business with the needs of the communities it serves is always difficult. John Mackey is the CEO and cofounder of Whole Foods Market, and Ernst & Young’s 2003 Entrepreneur of the Year. He addressed this delicate balance: “I think one of the most misunderstood things about business in America is that people are either doing things for altruistic reasons or they are greedy and selfish, just after profit. That type of dichotomy portrays a false image of business. The whole idea is to do both.”

 

In other words, being a good corporate citizen means serving your community as you grow your business, two completely compatible and praise-worthy goals. Here are some thoughts and ideas to help you succeed in this balancing act.

 

  • You can gain access to a broad new market by simply setting up a table at charity and community events. My wife manages a retail store. She sponsors fashion shows and similar affairs for local women’s clubs and senior activity centers. The organizations’ members usually serve as models. Not surprisingly, they often buy the outfits they model. A small donation or commission on sales may convince an organization to become your defacto marketing partner if they have not done so in the past.
  • Consider allocating a portion of your marketing budget to support local charities. Make a promotional flyer (you already have all the tools you need on your PC) and hire a youth group to distribute it in neighborhoods, shopping center parking lots, sporting events and community events. Take out ads in community group bulletins and newsletters. You can also offer special discounts to their members. I once attended a church that received a small contribution from a local grocery store for all cash register receipts collected from church members. The promotion was prominently mentioned in the church bulletin every Sunday.
  • Homeowners associations are not charitable entities. However, I include them in this post because they are non-profit organizations. HOAs have the added advantage of easily observable and homogeneous demographics. Do not overlook them when offering targeted special discounts and similar promotions. They may also welcome your sponsorship of their newsletters and neighborhood events.
  • Because of the close physical proximity of prospects, homeowners associations with whom you have established a marketing relationship are an ideal setting in which to experiment with a door hanger campaign. You can print flyers on your computer, order door hangers from any print shop or online, or order the paper stock and print them yourself. Think about hiring your favorite charity youth group to distribute them for you.

 

I look forward meeting with you again on Wednesday morning. Best wishes until then.

© 2011 by Dale R. Schmeltzle

12 Things I Learned About SlideShare, Part 2

On Friday, I began a discussion of things I learned about SlideShare.net, a free online slide hosting service. Since that time, my seven files have had more than 3,400 combined views, 2,800 for one file alone.

I shared the first three items on my list. They discussed how to start your profile, upgrade options and social media connections. Part 2 will discuss suggestions for making SlideShare an integral part of your marketing efforts. Here is today’s list:

4. I preach a simple 12-word marketing strategy to clients and friends. It is this: Communicate one message, promoting one brand, to multiple audiences, at no cost. While Friday’s item #3 fully supports this strategy, do not stop there! I issued three free press releases (one of which can be viewed at http://bit.ly/ipIFnF), published this information using several free article marketing websites and periodically retweet links to the presentations.

5. The first slide of a PowerPoint presentation or the first page of a pdf document will appear as a small icon link on your profile page. It should be readable, attractive and descriptive to invite viewers. I display my logo and blog URL on every download. You will also be asked to provide a description, category and tags for each file. Making this information keyword rich makes it easier for interested views to locate you slide shows and videos. Making something keyword rich simply means using certain words and phrases that potential customers are likely to use in search engines when looking for your company, products or  services.

6. SlideShare gives users the option of allowing viewers to download files. Since you are posting files in a very public venue, I see no reason not to allow downloads. Additionally, presentations can be made available only to authorized viewers with any of the upgraded versions. It is then a viable option to share private files that are simply too large to email. An example might be a large contract or proposal in pdf format.

If you do not know how to create a pdf file, download CutePDF Writer at http://cutepdf.com/Products/CutePDF/writer.asp. It is a free version of commercial PDF creation software. CutePDF Writer installs itself as a printer subsystem. This enables virtually any Windows applications to create professional quality pdf documents.

7. SlideShare can be used to promote and support your event marketing efforts. For example, you can make advanced copies of upcoming seminars available online to help invitees decide whether to attend, or provide copies to interested parties who are unable to attend.

8. Users and their followers can post additional information on their wall, very similar to Facebook. I posted a notice of a free seminar based on one of my uploaded files, along with a link to EventBrite for event details. Viewers can also post comments on individual slide shows.

Please return Wednesday when we not only complete the list of 12 things I learned, but will reveal the final two Chinese proverbs.

Nine Things I learned about YouTube-Part 2

Wednesday’s blog post discussed the first four things I learned about creating YouTube videos. It covered hardware and software requirements, and their cost. I hope you were as surprised as I was to learn you don’t have to spend a lot of money, and may already have everything you need.

Today, I will complete the list. Here are items 5 through 9:

5. Windows Live Movie maker or WLMM allows you to import entire PowerPoint presentations or individual slides. This is useful if your video subject matter is technical and requires visual aids. It is far more professional than writing on a flipchart with your back to the camera. The trick is to save documents as png or tif files, rather than in PowerPoint. The software also imports pictures. You can then narrate off-screen, or just use them to spice up your video.

6. Whether you import videos, slides or pictures, MLMM presents a plethora of editing options. I found the ability to end videos before that awkward moment when I walk off-screen to stop the camera is especially helpful. For that reason, stand motionless and silent for one or two seconds before you end a video or slide. It will make for a cleaner break as you transition into the next slide. The standard length of a slide will be 7 seconds, but that is easily changed to accommodate your need. There are also countless video and animation special effects, which I have yet to explore. One feature that I do plan to incorporate into my next video is captions. I might, as an example, include my web address or contact information in the presentation.

7. You can record narrations with Sound Recorder, and match them with the appropriate slide. If you are a type-A person as I am, concentrate on speaking at a moderate pace. Again, you can edit the duration, adjust the volume and fade in and out of the audio. You can also import music.

8. One feature of WLMM did surprise and disappoint me. Perhaps I missed something, but my computer saved the videos into something called a wlmp file format. YouTube supports a wide variety of formats, but wlmp is not among them. After a little research and experimentation, I discovered some good news. You can upload directly from WLMM to YouTube by simply clicking the appropriate “Share Button” in the upper right Toolbar. I found a technical explanation of why this works, but who cares? Problem solved!

9. Finally, once you have successfully uploaded your finished video, keep in mind that YouTube allows you to do some basic Search Engine Optimization or SEO. It allows a description and tags. As always, make them keyword rich. Fred Campos, the founder of FunCitySocialMedia, suggests you include your company’s name in video titles. Since the end game is to have people locate and watch you videos, do not over-look this important step.

Well, that’s my list. I hope you will find something of use here, and more importantly that it will encourage you to pursue more of the low-cost marketing experimentation I talked so much about in my book. If you would like to see CFO America ShiningStar Studio’s (a wholly owned subsidiary of just plain old CFO America) premiere video, please visit http://bit.ly/lx8ard.

Have a great weekend, and thanks to all the faithful readers who have so kindly posted comments and words of encouragement on this blog. Please continue to spread the word!

Nine Things I learned about YouTube-Part 1

A few weeks ago, having recently published Highly Visible Marketing, I had a guilt-stricken moment. You know the experience, the one where you suddenly realize you’re not following
the very advice you so freely give to others. In my case, it was driven by having advocated YouTube as a free marketing tool in your social media arsenal, something I had yet to do myself. Having resolved to “practice what I preach” I published my first YouTube video yesterday. The experience was so cathartic that I decided to blog about it.

Frankly,  my video has yet to snag an Academy Award nomination for best cinematography or sound editing. I am especially disappointed at being ignored for Best Costume, given that I wore a freshly laundered shirt. However, I did learn a few things in the process that might save you time and money, and might encourage readers to “take the plunge” into producing their own YouTube videos.

Today, I’ll share the first four things I learned, those dealing with required hardware and software, and how much you can expect to spend. Here is today’s list:

  1. I began my YouTube adventure expecting to spend several hundred dollars to get the hardware and software I’d need. That did not prove to be necessary. I initially explored several software packages that would provide basic editing capabilities. Each had a price tag of around $100. It turns out my Windows operating system already had two pieces of software that provide all the functionality I need. Unless you fancy yourself as the Steven Spielberg of social media, so does yours! They are Windows Live Movie Maker (“WLMM”) and Sound Recorder.
  2. Although most computers have a built in microphone, the audio from mine sounded muffled and distant. I invested $15 in a basic headset (available at any big-box store that sells computers or audio equipment), which although far from perfect, greatly enhanced the sound quality.
  3. You will need a video camera to complete the full range of input options you’ll want. Almost any digital camera or cell phone will work, but video quality and ease of uploading to your computer can be issues. I initially planned to buy a Cisco Flip video camera, the preferred camera of most people I know who are active on YouTube. I quickly learned this brand has been discontinued. Instead, I bought a comparable Sony Bloggie camera for $149. One word of advice is to make sure your camera has a tripod mount.
  4. Finally, I also bought a mid-range web camera, which was on sale for $15. This tool could replace the need for a microphone and a video camera. However, I found the sound and video quality both somewhat lacking. More significantly, I would be forever tied to filming in front of my computer. With a son in the military and the free availability of Skype (an awesome product I plan to discuss at length in my next book), the money was still well spent.

On Friday, I will discuss the final five items. I’ll see you then! In the meantime, locate WLMM and Sound Recorder on your computer and start drafting that first script!

More on Dues-fee Networking

Last Friday’s post discussed ways to network without incurring dues. Here is one more idea on that topic. Use your burgeoning networking skills to form your own merchants’association.

I was in a frozen custard store a few months back. (Note that if I were making this story up, I would have said a health food store.) As I was leaving, the cashier handed me a 25% coupon. There was nothing unusual
about that. However, this coupon was for another retailer selling totally unrelated products. The reality is the second retailer (assume it was a shoe store) would happily hand the identical coupon to any new customer who walked through their door. This idea is effective because except for the coupon, I would have never given the shoe store a thought.

Many malls and similar retail venues have a merchants’ association to promote its members. For example, you can plan facility-wide marketing events (festivals, special sale days, etc.), or one-on-one partnership
promotions like the custard store illustration. Another common practice is to offer gift certificates that can be redeemed in any member’s store. The concept works well for participants in close physical proximity and if marketing partners know and trust you, and are familiar with your product or service. Assuming you can obtain the help and support of other members, create an association newsletter or similar forum to keep members informed about matters of common interest like law changes, community events and so forth.

Let me now end the discussion on networking with a quote from Mr. Tom Lewis, an online marketing consultant from “across the pond” who I thought put the whole concept of networking in a rather interesting and
concise perspective. He said, “All these new media buzzwords like social networking and technology like LinkedIn are just new ways of complementing (some would say avoiding) personal contact. Get out there and get your face known! Pick up the phone and call some potential clients. Speak at some networking events. Knock on some doors.”

Thank you Mr. Lewis, I agree.

Let Me Think About It and Get Back To You…

Have you ever had a customer or prospect utter that dreaded phrase? If so, then you understand they were probably just trying to be polite. They wanted to avoid saying the single most hated word in all of business directly to your face. NO! And yet I see countless vendors and businesses practically inviting customers to say exactly that every month. Let me give you an example.

I have a monitored home security system. It costs $19.95 per month. The security company mails a bill every month. Several aspects of this practice amaze me. First, the vendor incurs the unnecessary expense of postage and paper. I waste a stamp, check and envelope every month. Do not get me started on the whole “go green” thing! Furthermore, I suspect being dependent on when customers remember to mail checks makes for less predictable cash flows.

However, there is a far more important and obvious marketing implication involved here. This billing procedure provides every customer with a monthly opportunity to reconsider whether he or she really wants to spend the money, to “get back to you” as it were! I am going to assume you have implemented the payment options discussed in previous blog posts. If so, and if your value proposition includes providing recurring services, this situation cries out for an auto-payment system.

Offer clients a discount to authorize an automatic credit card charge or bank draft on the first business day of every month. Your customer retention rate will likely improve as billing costs decrease and cash flow becomes far more predictable. Perhaps most important of all, you will make it easier for your clients to do business with you! It is a shining example of what Robert Allen might consider a “never-ending improvement” customer educational opportunity. Also keep the following in mind.

  • If customers need a monthly invoice, email it to save costs and a trip to the post office.
  • Maintaining sensitive financial information like credit card and bank account numbers imposes certain legal obligations and requires an increased level of internal controls to ensure customer security and privacy. Having to announce that your data systems have been compromised or that a laptop containing customer financial records has been stolen are public relations nightmares. I have had my credit card numbers stolen by someone at two different companies, neither of which I will ever use again.

Finally, as regular readers of this blog have figured out, I am both a history fan and a proud Northern transplant to Texas. Be sure and read CFO America’s Facebook page today for a historical anniversary that had a strong connection right here in my own back yard. You’ll find it at http://www.facebook.com/CFOAmerica.

I’ll talk with you again on Wednesday.

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