Tuesday, 24 June 2014

Billy's Twenty-Sixth Law: Never let prospecting campaign affect customer retention.

Sorry, but the ice cream is only for our new friends.
Ally Bank Advertisemen

There are two types of marketing and promotional strategies.  Strategies designed to attract new customers are called prospecting or acquisition strategies.  Strategies designed to keep your existing customers are called retention strategies.  Although both of these are in the marketing realm, they are different and sometimes conflict with one another.

I am amazed in the world of marketing how much time is spent on prospecting campaigns, promotions designed to attract customers.  Teaser pricing strategies hook the new client on price by using an 'introductory rate' and then raise the price once the prospect is used to the product or the service. These campaigns can succeed, however; they put the firm's relationship with your existing customer's in jeopardy.

The Ally Bank Ads illustrate this point brilliantly.  I have provided the link to the 'Ice Cream' advertisement.   This ad points out just how unfair it can be to treat potential customers better than existing customers. Yet many prospecting ads use specials, including price specials, to attract new customers.

The communications industry is notorious for these practices.  Cable companies and mobile phone providers both use these strategies in an attempt to get  customers to change from their existing carrier to theirs.  The battle for those customers willing to change, usually for pricing, is fierce, especially in mature markets that are traditionally 'sticky'.  Sticky markets are those in which the customers tend to make a decision and then stay put.  Retail groceries, financial services and communications tend to retain customers unless something goes wrong. 

It takes something really special to get people to change.  The problem is using these kinds of strategies can attract the wrong kinds of customers.  Most businesses need loyal customers.  These strategies attract a customer more likely to change once the special period is over.  They can also make existing customers feel as if they are being betrayed. 

Companies are simply not using the same creativity they use in acquisition campaigns.  Marketers tend to love the challenge of getting new customers, and leave the retention to customer service strategies.  There are some things that you can do for your existing customers.  Open houses, presentations, and customer only specials are just a few examples.  Many firms view trade shows as a means for acquiring new customers.  You should invite your existing clients to events before and during the trade show.  Use your existing clients for new product and service launches.
One other strategy for mining your existing customers is to ask yourself the questions, "Do all of my customers know every thing we do or sell?" It is amazing how often you may not have 100% of your clients' business.  Sometimes, this is intentional, as customers want diversity in their supply chain. Other times, there is an opportunity for you to get more business by your existing customers.  This can also help you develop and expand your product or service mix. 

Using as much creativity on customer retention strategies is one of the most effective marketing and promotional strategies in which you can engage.  Think about it, but keep in mind, the existing customer is less price sensitive than the prospect on the outside needing encouragement to come in.

Friday, 20 June 2014

Billy's Twenty-Fifth Law: The WOW Factor

If a new employee doesn't make me say WOW within the first two weeks, then he or she will never be a 'superstar'.
·         Ron Adolf

Learning new business skills is difficult.  Some are technically complex, such as financial analysis.  Others are difficult because there are no set rules.  These are factors involving that most difficult of all concepts, human nature.  This manifests itself throughout the field of Human Resources. 
Human Resources is the Rodney Dangerfield of business...it gets no respect.  HR departments are often dismissed as a burden on the real departments.  (The same is rarely said about finance probably because they control the purse strings.)  A lack of human resources skills often stunts business growth.  This is not to advocate a Human Resources department, but stress the importance of developing Human Resources Skills.  One of these skills is recruiting.
That is where Ron's observation comes in. He is a company founder, not a trained HR specialist.  We were going through a list of his top performers. These were employees across his firm whom he believed to be in the top 20 percentile of performers.  On developing the list, he noticed that those top performers really impressed him in their first week of working for the firm.  "It makes sense," he told me; “People are really keen in the first week.  They are happy they got the job and that shows in performance".
I am not saying that this is only criteria you should use.  Two weeks is not long enough to determine competence or fit within the organization; however, it can be an ‘early warning sign’ that you could have a high performer, or if you have made a recruiting error.

The Other Side of WOW

Your skills as a recruiter are essential to your long term success as a growing company. However, to be a good recruiter you must have an excellent working environment.  This means knowing the type of workplace you want and finding people who 'fit in'. Years ago, I was doing a recruiting seminar.  One of the participants was from the legal profession. She told me of a situation where a newly hired legal secretary was hired, and at the end of her first day handed a duster. Her supervisor told her that everybody was responsible to keep their own space clean. This was a part of the firm’s culture. The woman was so offended that she quit in the spot. 
The story illustrates the importance of fit.  Some companies are formal and others casual. Some have a work hard, play hard culture and other places have trouble getting support for a Christmas party.  Knowing your culture, and recruiting those who fit is the first step in retention.
A second factor is how you treat people.  We can debate employee motivation forever, however one common theme is treating people well, providing clear direction and supporting your employee's development.  If you want to WOW your employees, then here is a great start.
There are other important recruiting skills, and they may be covered in future laws, but never forget the power of the WOW factor, whether seeing it or providing it.  There are many other factors that affect staff retention, including management, salaries, and the career path; but never forget the importance of WOW... both being Wowed and Wowing your new recruits.

Tuesday, 10 June 2014

Billy's Twenty-Fourth Law: It really is all about the numbers!

Happiness is a warm spreadsheet!
Many entrepreneurs hold great faith in their 'gut feeling' or intuition. A well-honed gut feeling can prove to be an asset when starting your business but as your business grows you must become more systematic and analytical . Many entrepreneurs continue to use the 'seat of the pants' approach long after they ought to. Sometimes this is due to stubbornness, and other times due to a general distrust of figures.  Unfortunately, for you 'mathaphobes', analytics are important especially in a growing business in a changing environment.
When you start your business, you can keep track of what is going on in your head. You know exactly how much money is in the bank, how much you are owed by your customers and the birthdays of every employee. As the business grows, it amazes me how wrong many entrepreneurs are about their businesses. These false assumptions lead to poor decisions which, when executed, make the business worse and not better.
I had a client whose sales were declining. I asked her why she thought this was the case and she was certain that it was the lost sales were due to lost customers. She wanted to embark on a price oriented customer retention strategy. I wanted to be sure that customer retention the real problem. I performed a three-year analysis by top ranked customers.
It turns out that she was not losing many customers at all. In the three-year period, she did not lose a single of her top customers. (These customers are in the group representing the top 80% of revenue for the company.) The problem was not customer retention. The real problem was that her top customers were ordering less than they had in previous years. She then called these top customers and found out that they too had experienced a slowdown, reducing the need for my client's product. A price cut as a customer retention strategy would simply have reduced her revenue and her margins. She needed to add to her customer base and find more top clients.
Business owners must analyse the past, to determine how their business is doing, and analyse the future to make better business decisions.  I had a client add a new product to his company only to find out later that the new product increased revenue, but reduced profit.  I had another who added an entire division without doing a forecast or a break-even. 
Analytics are not solely the domain of finance.  Every business should track important metrics in Finance, Marketing, Operations and Human Resources.  Some are monthly metrics, others are quarterly and others make more sense over a year.  These metrics, also known as a ‘dashboard’ or even a ‘balanced score card’ form the basis for goal setting and progress measurement. 
One business adage, often attributed to both Peter Drucker and to Lord Kelvin is, “What gets measured gets done.”  I believe that the right metrics help.  You do not run a business with metrics, however; you can use the metrics to run a better business.
The question you may ask is, “Is there a place for intuition in decision making.”    I believe that there is.  Many people have insights they cannot explain, but are often correct.  Others say that intuition is the sub-conscious processing of information. 
Therefore, my rule is that my head must say yes…but my gut can say no.  Many ideas and decisions sound good in theory, only to go south in practice.  If it does not feel right, I do not do it. This is especially true with respect to people.  I would not hire anybody about whom I did not have a ‘good feeling’.  That said I would not hire on feeling without checking out if the candidate had the ability to perform the tasks required for the job.    
So find some key metrics that reflect those things important to you and to the success of your business. Ensure you are measuring the right things for your business and your situation.  Measure and share them, and create responsibilities around them.

Tuesday, 3 June 2014

Billy’s Twenty-Third Law: Up is hard and slow…Down is fast and easy!

There must be fifty ways to kill your business.
With apologies to Paul Simon

If you are like most entrepreneurs, at least most successful entrepreneurs, you have devoted time, effort and money to build your business.  I know a few people whose businesses were successful very quickly, but I have never met an entrepreneur who didn’t work hard while building the business.  Building a business is tough. It's like riding a bike up hill...slow, hard and painful!
Screwing-up is remarkably easy!  If you have read many of my ‘business laws’, you will quickly notice that there is a split between things you should do and things you should avoid.  If you have any brains at all, take the laws telling you what to do with a grain of salt.  I’m just not that smart.  However, take everything I have written on what not to do and take them to heart! 
When things begin to go downhill, they tend to accelerate.  One year things are looking good, and the next you have lost a key client, have a collections problem and key people quit.  In my experience it is usually that toxic concentration of several things happening simultaneously.  Friends of mine manufactured clothing.  They had a supply disruption caused by the weather in Eastern Canada together with a bad debt.  They couldn’t recover financially and their successful business was out of business within just a few months.
Big companies have the same problems.  Blockbuster went from a single outlet in 1985 to over 6,000 outlets at the beginning of 2010 to bankrupt in 2014.  What’s interesting is that they in 2000 they had the opportunity to purchase Netflix!  (IBM had an opportunity to buy a substantial portion of Microsoft but turned that down as well!)
Hindsight is easy, but it goes to show you just how quickly things can go wrong and go wrong badly. Dr. Theodore Levitt wrote a seminal article in the Harvard Business Review called Marketing Myopia.  In the article, Dr. Levitt asks the question “What Business are you Really In?”  His example came from the turn of the last century with railroads.  They thought they were in the rail business…not in the transportation business.  They ignored the threat posed by long-haul trucking at their peril.  The Blockbuster story was so similar…they thought they were in the rental business not in the entertainment business.  I know the internet has changed business, but the principles of business do not change.  Applications change, speed really changes but the concepts are true.
Over the next few weeks, I want to present some blogs on ‘minding the store’.  How do you play good defence, while at the same time generating offence or growth? I want to look at some of the big mistakes made by businesses and some of the ways you can mitigate those errors. We can call the next few weeks...Quit Messing Up Your Business!