TACTICAL SOUP WON’T CURE MARKETING WOES

SoupMotivational speakers Jack Canfield and Mark Hansen created an entire industry with the 1993 introduction of their Chicken Soup for the Soul book series. They have since sold over 100 million copies, and inspired countless authors of every genre. A recent search of Amazon generated 35,024 hits of titles beginning with “Chicken Soup for the.”

One could easily get the impression soup has magical powers to cure just about anything.

However, there is one soup not good for anything except unnecessary costs and market failure. That is a steaming bowl of tactical soup. What is tactical soup? Princeton, NJ consultant Gordon G. Andrew describes the recipe this way:

“Tactical Soup occurs when firms get bogged down in a flurry of marketing activity without placing enough emphasis on how it will help generate revenue and profitability.”

Tactical Soup is served up regularly in businesses where activity is too often mistaken for results, where the urge to “early adopt” the latest craze eagerly overlooks cost-benefit analysis, and where the rush to hop on the newest social media bandwagon precludes any thought of whether your target market is similarly enamored.

To squander limited marketing resources in a valueless caldron of tactical soup is a recipe for disaster. It can be avoided by asking three simple questions:

  1. Where will I find my market?
  2. What is the total cost of the proposed marketing tactic?
  3. What incremental sales volume is necessary to justify the cost?

Marketing is about connecting with the right audiences in whatever communication channel they select, always a moving target. There was a time when most audiences were found through ads in the Yellow Pages, roadside bill boards  and the Sunday newspaper. Finding new customer prospects today is far more complex, and depends on demographics such as age, sex, income and education levels.

Question 2 is the easiest, provided indirect and allocated costs are added to the initial design costs, price concessions, monthly hosting and other recurring expenses.

The final question requires a basic understanding of your cost structure. While cost accounting is too complex to explain here, of primary concern in implementing marketing tactics are the average gross profit (sales price less cost of goods sold) and what volume of sales can be expected from new customers. A product or service with a $100 gross profit is cost justified at a much lower new sales volume than one with a $3 gross profit. Likewise, a service that typically enjoys 6.3 sales per customer supports a higher marketing budget than one where repeat sales are negligible.

Answers to these three simple questions will provide the focus, discipline and accountability to maximize return on marketing efforts and avoid the waste and disappointment of tactical soup.

© 2014 by CFO America, LLC

THE PITFALL OF WHOLESALE NETWORKING TO RETAIL PROSPECTS

Business DiscussionThe verb “network” means to meet or interact with people for the purpose of making contacts and exchanging ideas. Contrary to popular belief, its primary goal is not to generate sales! It is, quite simply, to get to know people, and to have them get to know you. Sales are just one of the benefits that might result from increased exposure.

I am a strong advocate of networking. I was introduced to several significant vendors and business associates at networking meetings. That includes my insurance agent, social media consultants and two business partners. However, while I have provided leads that resulted in other people closing sales, I can think of only one small client engagement I gained through networking.

Why is that?

It is because my ideal client prospect is unlikely to participate in what I refer to as “retail networking” groups. My best prospects have been established in business for years; are generating annual revenue of several million dollars, have fifty or more employees, are adequately funded and have highly specialized strategic needs beyond their ability to address internally.

Furthermore, they have progressed beyond the usual concerns of new ventures, the greatest of which is simply generating sales. They recognize and value the need for more sophisticated services, and are able to pay to meet those needs.

That profile is not a match to the typical retail networking group. A business targeting start-up operations, solopreneurs, small average sales and/or “main street” business and consumer needs is far more likely to generate sales through networking groups. However, a reality of mining for customers in this environment is high turnover and high marketing costs. Statistics show more than 35% of a typical group’s participants will not be in business in a year, and perhaps as high as 90% within five years.

So if wholesale (or large scale) networking to retail groups is not an alternative for marketing your B2B product or service, what is?

There are probably as many correct answers to that question as there are small businesses. I will share several things that have produced business for me in a future blog.

Eight Secrets from a Serial Blogger

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Have you been thinking about blogging, but are concerned whether your writing skills will translate into effective online communications?

Increase your chances of success in getting your message to the right audience by avoiding the mistakes of others. This article offers eight simple suggestions its authors learned in the preverbal “school of hard knocks”.

Here they are:

1. Stick to a schedule. The correct blogging frequency is whatever connects with your audience. For some blogs that might be daily. For others, once a month is sufficient. The optimal blogging frequency is not critical. What is critical is to decide on a schedule, communicate it to your readers and stick to it! Avoid the temptation to over-commit. While most bloggers enjoy writing, it can be grueling.

2. Expand and enhance. Supplement your usual content by periodically sharing relevant quotes, articles and tips from others. You can also try using guest writers, treating your readers to different areas of expertise and points of view. A generous introduction to your guest author may result in them reciprocating on their blog, further expanding your following.

3. Keep posts short. Readers are looking for tidbits of actionable information, not detailed research. Keep posts short, preferably under 600 words. The average American reads less than 300 words per minute. Studies suggest 65% of visitors spend less than 2 minutes on a website. Therefore, an entry longer than 600 words will not be read in its entirety, if at all.

  • A better alternative to lengthy articles is to split them into multiple parts, posting them in consecutive entries. Begin each post with a review of what was discussed in the previous entry, and end with what to expect in your next post and when it will be shared.

4. Promote your blog. Add your blog’s web address to business cards, print media ads, letterheads, email signatures and so on. Adding a Quick Response Code to business cards and other medium is gaining popularity. A QR code allows Smartphone users to find your blog easily.

5. Use social media. Post summaries of blog posts on Facebook, Twitter, LinkedIn, etc. Exercise care to comply with each platform’s unique character limitations.

  • Since you will always end with a hyperlink to your blog, use a free URL shortener like https://bitly.com/ if pressed for space.
  • Post blog entries on SlideShare or other article marketing sites by uploading a pdf file. The last paragraph should be a brief “About the author” with a hyperlink to your blog.
  • Blog posts can be featured in your monthly newsletter to customers and friends.

6. Support online sharing. Add plug-ins or widgets on your blog to promote article sharing through Facebook, Twitter and other social media vehicles you believe are likely to help capture your target market. Allow readers to bookmark your URL to their list of favorite sites with the click of a button.

7. Encourage feedback. Always thank readers who post comments. Be respectful of opinions and suggestions, even if you disagree with them. While it is perfectly appropriate to delete spam (an inevitable byproduct of successful blogging) or comments with inappropriate language, deleting reader comments simply because you disagree discourages feedback. Periodically end posts by asking readers for comments, suggestions and ideas for future articles.

8. Don’t give up too quickly. Some experts believe it takes about 100 posts before you begin to build a following. Most bloggers become discouraged and give up before reaching that milestone.

© 2013 by Dale R. Schmeltzle

Lessons from Cool Hand Luke: Failures in Business Communications (Part 2)

Last week, I discussed the potentially dire consequences of using the wrong channels when communicating with customers. Paul Newman’s famous line from Cool Hand Luke, “What we have here is a failure to communicate” served as my theme.

I outlined nine milestones in communications, from the printing press to the Internet. Today, I conclude with a follow-up on how each of those communications channels has fared over the years.

More recent developments in the nine communication mediums include the following:

1. The days of printed books and newspapers may be numbered. Consider the following:

  • Although Amazon keeps its sales figures close to its corporate vest, reports by Bloomberg and other sources suggest it likely sold over eight million Kindles in 2010. Amazon’s January 27, 2011 press release reported, “Amazon.com is now selling more Kindle books than paperback books. Since the beginning of the year, for every 100 paperback books Amazon has sold, the Company has sold 115 Kindle books. Additionally, during this same time period the Company has sold three times as many Kindle books as hardcover books.” Those sales were achieved in spite of stiff competition from the Apple iPad and other eReaders.
  • In an industry financed by advertisers, newspapers now cost more to reach a similar audience than radio, magazines, or websites. The Newspaper Association of America expected ad revenue to drop 9.7% in 2009 after falling 16.5% in 2008.

2. In a press release issued November 12, 2010, the U.S. Postal Service reported a loss of $8.5 billion in fiscal year 2010. They delivered 6.1 billion fewer pieces of mail than the previous year. Labeled advertising mail, 273 million pieces of daily junk mail make up 47% of Postal Service volume, but only 25% of its revenue.

3. Struggling from its failure to win a federal contract to deliver mail, the Pony Express announced its closure on October 26, 1861, two days after the transcontinental telegraph connected Omaha to Sacramento. During an 18-month existence, it succeeded in reducing the cost of a 1/2 ounce letter by 80%.

4. Home phones are being replaced by cell phones and other mobile devices. Smartphone users can now perform virtually any function available on a computer. They can also scan product bar codes for instant price comparisons and download directions to local competitors. In October 2010, CTIA-The Wireless Association reported in their 50 Wireless Quick Facts that over 89% of handsets operating on wireless networks are capable of browsing the web.

5. With its market steadily evaporating since the 1975 invention of digital cameras, Kodak ended a 74-year run when it discontinued production of Kodachrome film in 2009. SEC filings reported a $210 million loss that year. Kodak filed for Chapter 11 bankruptcy in January 2012. They will no longer manufacture cameras, and will sell its film division. The digital camera was invented by a Kodak engineer.

6. A July 2008 report by Borrell Associates titled Say Goodbye to Yellow Pages estimated the industry would lose 39% of its revenue over the next five years as small businesses focus more on online advertising. It was forecast that 2008 print revenue of $12.7 billion would decrease to $7.8 billion by 2013. In an age of instant information, an increasing number of businesses are obviously questioning the wisdom of spending scarce marketing resources on a medium that will not be distributed until months after incurring the expense. Some estimates suggest that up to 20% of small businesses do not survive to see their Yellow Pages ad in print. Meanwhile, concerns over the environmental impact of discarded books are causing cities to explore advanced recovery fee ordinances that will add millions of dollars to industry costs.

7. The marketing impact of satellite radio remains to be seen. Sirius FM Radio reports almost 22 million subscribers in some highly desirable demographics. Yet, the public company has not traded above $3 a share in over four years.

8. A four-decade oligopoly by ABC, CBS and NBC began to crack by the 1980s. Having once controlled 99% of all broadcasts, their market share dropped to 32% by 2005 according to the Journal of Broadcasting & Electronic Media. The Fox Network now produces the highest rated show on TV (American Idol) and the longest running primetime show (The Simpsons). The increased popularity of cable TV, Internet access to programming and digital recording devices threaten to redefine television’s role as the “high end” communications media. Fortunately, the ability to embrace technological changes has allowed television to hold the average American’s attention for 4.7 hours a day (according to a 2008 Nielsen report) over 60 years after its introduction. Finally, NBC’s owner Comcast announced in January 2011 they were dropping the iconic peacock from their corporate logo. This announcement ended a 56-year television tradition that first trumpeted the arrival of color programming to an entire generation of mesmerized children. Curse you, Comcast!

9. Lastly, the traditional model of text dominated static communications on a free World Wide Web navigated via a handful of search engines is being challenged. New paradigms including pay per click advertising, video and yes, social media are quickly redefining it.

As I reflect on this timeline, it occurs to me that few people can anticipate, let alone shape communications in this accelerating stream of consumer driven changes. Names like Gates, Bezos, Zuckerberg and a handful of other young billionaires come to mind.

The rest of us do well just to keep up with it.

The goal of today’s successful small businesses should be to meet customers in whatever communication channels they choose at that moment and to educate and influence (never dictate) consumer behavior as best they can.

There is no “one-size-fits-all” magic formula for success, no one thing that will permanently solve marketing challenges or slow the pace of change. What worked yesterday may not work tomorrow because as Tony Robbins and others have said, “The past does not equal the future!” That much is clear from the timeline. There is simply no substitute for hard work, vision and continuous planning and experimentation.

However, there is also much cause for hope.

Don Bradley and Chris Cowdery’s exhaustive study Small Business: Causes of Bankruptcy had this conclusion: “Evidence suggests that failure rates of small businesses in the United States are related to the nature of a capitalistic market in relying on competition where only the strongest survive. The causes for small business failure and ultimately bankruptcy are many. A successful entrepreneur is, no doubt, the consummate businessperson who must be a jack-of-all-trades. It is evident that nearly all entrepreneurs have the opportunity to control their own destiny. Success is obviously not a guarantee, but nor is failure. A well-rounded businessperson who has carefully planned and prepared with a clear vision of who and what the company is will have an excellent opportunity for success.”

I also point out that many of the marketing ideas discussed in this blog would not have been possible just a few short years ago. Many more have been made easier and more cost efficient by recent technological developments and increased Internet-based competition.

I therefore challenge and encourage you to seize the opportunity to control your own destiny, to embrace change, to experiment with new ideas, and to learn from your triumphs and your disappointments in these exciting times. Your business will grow in the process.

I wish you great success in your efforts and I hope you have fun in your journey.

© 2012 by Dale R. Schmeltzle

Lessons from Cool Hand Luke: Failures in Business Communications (Part 1)

The 1967 movie Cool Hand Luke earned Paul Newman an Academy Award nomination for his portrayal of a nonconformist member of a southern chain gang. It also taught me two lessons. The first is that some people can eat 50 eggs (you had to see the movie). Admittedly, that has never proven to be especially useful information. Nonetheless, it seems good to know.

The second and more important lesson is that a failure to communicate can have potentially dire consequences to individuals, and by inference businesses.

I am tempted to explain away the reason for the high rate of business failure with the fact that they ran out of money. While a true statement, it is overly simplistic. It is also more descriptive of a symptom than the reason for the problem.

I believe a root cause of many business failures is actually a failure to communicate.

Communication is what successful marketing is all about. It is about establishing and strengthening customer relationships by communicating your message and your value statement to the right people, at the right time and using all the right channels. It is about a continual education and training process.

A review of major milestones that have shaped business communications over the centuries will illustrate an essential point. It is that societies and consumers usually accept and embrace communications changes faster than the business community can adapt to them. Even the most carefully designed marketing communiqué, be it a press release, an ad campaign, a newsletter, etc., is likely to fail if it is not transmitted in the optimal channel. The pace of change is escalating, thereby increasing the chances that businesses will fail to communicate their message to customers and prospects.

As you review the timeline, think about how each change influenced the growth and success of businesses that were foresighted enough to embrace it. Consider also the wide variation in the useful lives of the various inventions, ranging from the printing press that has been around almost 600 years to the Pony Express that lasted less than two years. Lastly, imagine how businesses might have successfully adapted to further changes as each of the milestones were eventually displaced or relegated to a lesser importance by later means of communication.

Here are several examples of innovations that significantly influenced businesses:

  1. Gutenberg’s invention of the printing press in 1440 made the mass production of books possible. Mass production of newspapers followed in 1605. The first paid advertisements appeared in a French newspaper in 1836.
  2. The United States Postal Service began in Philadelphia in 1775. Free mail delivery in U.S. cities began in 1863, reaching rural America by 1896.
  3. On April 3, 1860, a rider left St. Joseph, Missouri and headed west. He carried a pouch containing 49 letters and five telegrams. A rider carrying another pouch left San Francisco the same day and headed east. The Pony Express was born. Both pouches reached their destination ten days later. It was the fastest means of east-west communication in the days immediately preceding the Civil War. A 1/2 ounce letter cost $5 at the start of the service, or approximately $135 based on changes in the consumer price index through 2010.
  4. Alexander Graham Bell was awarded a patent for the telephone in March 1876. The first “long distance” call between Cambridge and Boston, a distance of about three miles, occurred in October of that year. New York and Boston became the first cities linked by telephone in 1883.
  5. George Eastman developed film technology to replace photographic plates in 1884. He founded Eastman Kodak in 1892. With the slogan “You press the button, we do the rest” he introduced photography to the masses with cardboard box cameras that sold for $1, the equivalent of $25 in 2010.
  6. Chicago’s R. H. Donnelley created the first Yellow Pages directory in 1886. The name was coined three years earlier when a Wyoming directory printer ran out of white paper and used yellow instead.
  7. On November 2, 1920, Pittsburgh’s KDKA reported the results of the national election that saw Warren G. Harding elected president of the United States. This was the first broadcast of a commercial radio station. Paid advertising followed within two years. Large companies like Westinghouse, Philco, Wrigley and Maxwell House Coffee typically sponsored entire programs.
  8. Scottish inventor John Baird demonstrated the first television in London in 1925. The image had just enough resolution to discern a human face. Television was introduced to the public (including my father) at the 1939 New York World’s Fair. Commercial television developed following World War II. Milton Berle became its first “superstar” in 1948. As with radio, broadcasts were usually sponsored by a single national advertiser including Texaco and Procter & Gamble. The first national broadcast of a show in color was NBC’s Tournament of Roses Parade on New Year’s Day 1954. Westinghouse began offering a color television in the New York City area about two months later. It sold for $1,295, or approximately $10,500 in 2010 inflation-adjusted dollars.
  9. Two decades of research into communication networks, much of it related to government sponsored defense projects, culminated on August 6, 1991 when the European Organization for Nuclear Research introduced the World Wide Web. By 1994, there was a growing public interest. By June 2010, the estimated number of Internet users had reached two billion.

Next week I will review more recent developments in the same communication mediums, and discuss the lessons that can be gained from those changes.

© 2012 by Dale R. Schmeltzle

Too Foolish To Fail

The big buzz on Wall Street is today’s planned IPO of Facebook. I hope it will reverse the recent downward trend (11 of the 12 last trading days were losers). Several months ago, a partner and I were discussing Mark Zuckerberg in the context of starting a new business. That discussion lead to a two-part post, which in honor of his IPO, I repeat in its entirety today.

My partner and I concluded that Mark’s phenomenal success with Facebook is the direct result of three “rookie” mistakes, none of which we would have made.

Those mistakes were:

  1. He was not the first to arrive at the social networking party. Rather than come up with an original idea, he improved on other people’s ideas. That never works. Either get to the market first or stay home, right?
  2. He waited too long to “cash out.” He should have jumped at the first opportunity to raise some serious “beer money” like a normal college kid. If only he had, he would be a millionaire today!
  3. He failed to exercise basic common sense! Anyone smart enough to get into Harvard should know that a dream of launching a worldwide business to redefine a major facet of society is destined to break your heart. Homer Simpson said it best, “Trying is the first step toward failure!”

Let’s analyze each of his mistakes in more detail. It turns out there is historical precedence to support his seemingly illogical behavior in committing Mistake #1.

For example, historians credit German engineer Karl Benz with inventing the automobile. He patented the first gasoline engine powered vehicle in 1885. That was 11 years before a thirty-year-old “techie” at the Edison Illuminating Company began experimenting with his Ford Quadricycle.

Henry Ford’s primary contribution to the automotive industry was to apply “best practices” manufacturing processes including interchangeable parts and a moving assembly line. By combining cost saving efficiencies with a social philosophy that included paying factory workers $5 per day (double the going wage), he transformed the automobile from an expensive curio for the idle rich to an affordable source of transportation for the masses.

Ford put his vision into words. He said, “I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one – and enjoy with his family the blessing of hours of pleasure in God’s great open spaces.”

With the benefit of 115 years of hindsight, it is clear his value proposition actually created a market where none previously existed. He sold 15 million Model Ts over its nineteen-year production run.  At one point, half of the cars in the world were “Tin Lizzies.” True to his value statement, he was eventually able to reduce the selling price to $290, a 65% reduction from its introductory price.

O.K., Mark, I’ll concede your first mistake was not a mistake after all. Astute late comers can still profit by improving on an inventor’s ideas and capitalizing on missed opportunities.

What about waiting too long to cash out?

I am frequently surprised at the short-term vision baby boomers adopt in their business planning. I often encounter entrepreneurs who hope to build a successful business and “cash out” in five years or less.

This view is a distraction from your value proposition, the very reason you went into business in the first place. Think about it. Customers are at best indifferent to your retirement plans. Would you pick a new dentist if you knew she planned to sell her practice in two years?

It also introduces a bias that will slant business decisions in favor of maximizing short-term cash flows at the expense of building long-term value. For example, owners will forego investments in customer service and product design if payoffs extend beyond their timeline. This situation is analogous to watching a runner round the bases as you chase a fly ball. There are already plenty of opportunities to falter in business without unnecessary distractions. Do not take your eye off the ball!

It seems counterintuitive that a college student, given the opportunity to finance what would have been a carefree life style, would follow a business plan that extended beyond the next frat party. To his credit, now 27-year-old Mark Zuckerberg has resisted the temptation to monetize his 24% stake in Facebook for 7 years. Instead, he has continued to lead the company according to his vision.

It is hard to argue with his success. Earlier this year, Goldman Sachs valued the private company at $50 billion. Mark kept his eye on the ball, even when faced with what would have been an irresistible temptation for us mere mortals. Cashing out four or five years ago would have cost him billions.

You were right, Zuck. My partner and I were….we were….well any way, you were right. Gloating is so not cool, Mark!

That brings me to his third mistake. Mark should have listened to the voices in his head that are quick to point out all the reasons why his grand plans would surely fail.

Abraham Lincoln once described a general who was unwilling to make decisions under pressure as “acting like a duck that had been hit on the head.” Fear of failure is a powerful motivator. It causes some of us to avoid decision making altogether.

Decision making is a cognitive process involving logic, reasoning and problem solving skills. Unfortunately, each of us enters that process with certain preconceived biases. We are often quick to listen to any voice that supports them. It is normal to exhibit a reluctance to move off those biases, even if faced with new facts, circumstances or opportunities. Therefore, the safe decision (i.e., to spend our career as a corporate wage slave rather than launch a new venture) is often the default decision.

Samuel Clemmons once said, “It’s not what you don’t know that will get you in trouble. It’s what you know for sure that just ain’t so.”

To his credit, Mark Zuckerberg did not let what he did not know about launching a business get in the way of his success. His vision was inspiring; his execution was courageous.

In the final analysis, my partner and I could take a lesson from him. So can you!

You proved all of your distracters wrong! Good luck in your IPO Mark.

 © 2012 by Dale R. Schmeltzle

You Can Have Any Color You Want, As Long As You Want Black (Part 2)

Today I conclude the article on product driven versus market driven companies. I began by discussing the cultural differences between the two. Product driven companies concentrate on achieving and maintaining technical superiority. Market driven companies devote resources to brand development and customer communications.

Companies and industries sometimes attempt to adapt their marketing strategy in response to changing competition and other market forces. For example, conditions slowly but dramatically changed for the entire American automotive industry over the next 50 years. Detroit’s response to the 1973 oil embargo was a textbook case of a failed attempt to adapt. Faced with the first ever non-wartime limit on the availability of cheap gasoline, the American consumer suddenly became very conscious of gas mileage.

At the time, Japanese and European companies dominated the market for fuel-efficient sub-compacts. American manufacturers’ knee-jerk response was to jump headfirst into a market they had ignored until recently. They stepped up production of the notoriously undependable Ford Pinto (voted the worst car of all time), the Chevrolet Vega and the AMC Gremlin.

Detroit’s failure took a personal toll on an entire generation of consumers. My first car was a red, white and blue Pinto. It was a cornucopia of expensive mechanical problems, unrelenting frustration on a 94-inch wheelbase. I sold it just before a massive recall for an exploding gas tank problem that would eventually cost Ford millions of dollars in legal settlements.

My next car, a Toyota, sparked a love affair with foreign cars that continues today. It was 30 years before I bought another Ford, a pickup truck for my son. It took almost as long for American manufacturers to overcome the image of producing inferior cars. It remains to be seen whether they will ever regain the world market share they once enjoyed.

How have things changed since I bought that damn Pinto?

A national chain of men’s discount stores advertised, “An educated consumer is our best customer.” For a product driven company in 2011, an educated consumer might be more aptly described as their worst nightmare. Service industry executive and strategic planning expert Michael O’Loughlin recently summarized the reason. He said, “Thanks to the Internet, the consumer has come to believe that no concessions are ever necessary. They expect unlimited choices in meeting their needs.”

Potential customers are only a few clicks away from a myriad of rival goods and services. A consumer with a smartphone can compare competitors’ prices on the spot. Any business, even the smallest local operation, ignores those powerful market realities at their own peril. Broadening your product line or services can help fend off competition by better addressing market needs, and improve customer retention in the process.

The men’s store chain recently filed for Chapter 7 bankruptcy. One analyst said they had failed to keep up with the increasingly competitive off-priced clothing market.

My final point is that few successful companies employ an entirely one-sided strategy. They operate along a moving spectrum on which there are few absolutes, and no strategy guaranteed to bring success or failure.

Consider Ford one last time. Product limitations notwithstanding, they still managed to sell over 15 million units between 1908 and 1927. At one point, half of all the cars in the world were Model T’s. That production record stood until the Volkswagen Beetle finally surpassed it in 1972.

The correct strategy for your business is the one that is executable within the constraints of your cost structure and marketing budget, and that produces the highest net cash flow given all the relevant factors at work in your market and your competition.

I began this article with an old quote. I end with another. A marketing adage says, “You have to sell from your own wagon.” It refers to a bygone era when merchants plied their trade by pushing handcarts up and down urban streets. The adage may be true. However, today you get to decide how big your wagon is, and what products or services it carries.

Go forth and sell!

 © 2011 by Dale R. Schmeltzle

You Can Have Any Color You Want, As Long As You Want Black (Part 1)

This week, I get to incorporate two of my favorite topics, history and old cars, into a two-part article. My title is one of Henry Ford’s most quoted statements. He actually said, “Any customer can have a car painted any color that he wants so long as it is black”.

He said it in 1909, ironically at a time when black was not available. The Model T originally came in grey, green, blue and red. He did not implement his all black policy until 1914. However, He could have accurately said customers can have any model they want so long as it is a 2-door. But his quote sounds better, so I’m throwing journalistic accuracy to the wind and going with it!

I use it to introduce my real subject, product driven versus market driven companies. Henry obviously believed in a product driven strategy.

My first goal is simply to understand the difference between the two strategies and the corporate cultures that define them at the most basic level.

If you were involved in Ford’s marketing efforts back then, your job was to convince potential buyers they needed a black Model T, period! Your marketing approach was something like, “Here is what I have to sell, and this is why you need it.”

Contrast that to a market driven strategy that asks, “What do you need, and how can I best meet that need?”

The cultural differences between product and market driven companies run deep. Product driven companies will spend relatively more resources on product development. Their primary goal is to achieve and maintain technical superiority. In extreme examples, they believe their products are so good they simply sell themselves. Engineers will always outrank marketing in the corporate pecking order.

Market driven companies will devote more resources to brand their company and products, and on customer communications. Technical superiority is secondary to understanding customer needs and anticipating market changes. Product development is less mission critical than advertising, since the marketing department rules the roost.

My second point is that if you are going to sell a limited product or service line, you need to be very good at it. Ford was fanatical about producing cheap, dependable cars. He managed to reduce the original $850 sticker price to $290 by the 1920s. At that price, he owned the working family automotive market. He was so confident that the cars’ features and low cost could generate sufficient sales that he did no corporate advertising from 1917 to 1923.

Unfortunately, being first to market with a technically superior product offered at an affordable price is no guarantee of long-term success. As Ford Motor Company subsequently learned, competitors (increasingly on a global basis) have a long history of unseating early market leaders who grow complacent about ever-changing customer needs and wants.

Being a product driven company is certainly easier if you exercise some degree of control in your relevant market, and if consumer tastes are stable and predictable. Perhaps Ford was lulled into a false sense of security by assuming past market conditions, under which they flourished for decades, would continue indefinitely.

Car buyers in the 1920s were unsophisticated by today’s standards. They could not have imaged, let alone demanded the range of choices, options and features currently available. Ford was not the first company to replace dangerous hand cranks with electric starters. Cadillac beat them to market by seven years. However, when the world’s largest car manufacturer finally made the change in 1919, consumers and the rest of the industry fell in line. Ford defined the new standard, not Cadillac.

I will conclude this article on Friday, when I write about how companies sometimes attempt to adapt their strategies to changing market conditions.

Until then, best wishes for a joyous Thanksgiving holiday.

 

© 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

What Can Online PR Do for Your Small Business?

Today, I am pleased to have my very knowledgeable friend, Jim Bowman as a gust author. Regular readers to my blog will immediately recognize that his topic for today is near and dear to my heart.

Jim is a public relations expert. His 25-year career leading corporate communications departments included building one of the world’s top 10 global brands, and consultant to a national agency that launched the forerunner of the Blackberry. Jim was also a public affairs officer in the Secretary of the Air Force Office of Public Affairs, Eastern Region.

For the past decade, Jim has immersed himself in the ever-evolving world of online PR to serve clients ranging from startups to well-known publicly held corporations. Through that experience, he developed an approach that integrates the best of traditional and online public relations. Jim strongly believes that no PR professional can afford to ignore online PR or outsource it to specialists. It is an essential part of the skill set all PR professionals must have, as fundamental as writing, pitching and building relationships.

For more information on this subject, or to contact Jim Bowman, please visit http://www.theprdoc.com/.

Jim writes:

I subscribe to a number of online PR and marketing news alerts to track developments and trends. The quality is not uniformly good, and unfortunately, the feeds that consistently come up short are about small business marketing and public relations.

PR people spend considerable time debating how to charge and how to get others to appreciate them more, but few weigh in on how best to serve the needs of small businesses.

Considering the difficulty I have locating meaningful insights, I imagine small business owners find it at least equally difficult. It’s time to change that.

Make Your Image Big Online

Online PR offers small businesses a chance to look much bigger than they are, so they can compete more effectively with companies many times their own size.

If you own a small business and you’re not using any form of public relations in your marketing mix – especially online PR – you’re missing out on a great way promote your business.

I say that as a former small business owner who has done “traditional” public relations for global giants and pre-IPO start-ups. Now I help small businesses use public relations to do more business and make more money.

Public Relations Attributes

PR often is used interchangeably with publicity, but that’s a mistake. In some cases, good PR involves getting no publicity at all. Among other things, PR is:

  • Interacting with your constituencies – prospects, clients, vendors, employees, your community and the public at large – to build your brand, image and reputation;
  • Getting the benefit third-party credibility when others say good things about your products and services;
  • A long-term proposition – you must work at it consistently for months and years to get best results;

Online PR Is…

All of the above and more, using digital tools that include:

  • Keyword research;
  • Search engine optimized content – press releases, articles, videos, blog posts and informational web pages;
  • A variety of specialized websites;
  • Simultaneous outreach to prospects and customers, as well as journalists.

Public relations always has been a great way for small businesses to get known, usually at substantially less cost than advertising. The Internet magnifies and increases the effectiveness of online PR and makes it an essential tool for small businesses.

Today, small brick and mortar businesses that have flown under the radar of local newspapers are finding audiences online. PR pros who know how to serve them are doing well, as are business owners with the inclination and time to do their own public relations.

 

Thank you, Jim. I’m sure my readers have enjoyed this topic, and look forward to hearing from you again soon.

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