That Filter Problem

I start this post with a tip of the hat to my favorite political columnist and pundit, David Brooks. He writes for the New York Times, has authored several books, and has a regular commentary spot on the PBS Newshour. His wry humor and out-of-the-box thinking have entertained and educated me for many years.

In a recent interview, he used a line that had real resonance with me. Referring to the effect of political advertising, he stated that people use “an extremely thick filter” when evaluating these ads, and that it takes a lot to make an impact on the audience.

While this is undoubtedly true for people listening to political ads, it is also just as true for people listening to your business advertising. And for the same reasons.

To put it bluntly, people recognize that politicians have a lot at stake during a campaign, and therefore assume that much of the advertising they hear is full of purposeful miss-interpretations, half-truths, or just plain lies. History has proven this to be a pretty safe assumption.

To perhaps a lesser but none-the-less real extent, they feel the same way about business commercials. They have become jaded, sceptical, and extremely cautious about accepting what you say as factual.

You can't just say it, you have to prove it.

In this environment of consumers with “extremely thick filters”, just how much proof do you have to provide? There isn't a simple answer to this question but, in general, the more the better. However, this comes in conflict with another precept of advertising, “Keep it Simple”. There is only so much you can put into a short ad (print, radio, or TV) and the audience will only accept a limited amount of information.

• Sometimes, simply making a statement of fact will appear to the audience as proof:    “Our pizza has 20% more toppings than the competition.”
  
• Additionally, you can make a performance statement and invite your audience to see for themselves:  .“Come in, get a quote, and compare our prices to the competition.”
  
• Even better, if a little more cumbersome, is mentioning a positive statement from a 3rd party:   “The Daily Journal rates our service as the best in the region.”

Technically, none of these statements constitute “proof”, but if your target audience believes they are probably true, that will be enough to get past the “thick filter” and get them to respond.

Remember: Don't just say it, find a way to prove it.

 For more about David Brooks, click Here.

The B. J. Mendelson Theory

I saw a great interview on CNN this week, and it really struck a chord with me.

The interview was with B. J. Mendelson, and his new book is entitled

“Social Media is Bull Shit”.

The title, obviously, is designed to get noticed, and he has been getting a lot of press. I found a more extensive interview on Tech Crunch (link included at bottom of post), and then I spent some time on his website. What he has to say is of direct relevance to small business owners, and I want to share it with you here.

Mendelson is primarily known as a comedian, and he has made good use to social media over the years to promote himself and his favorite causes. One unique fact about Mendelson is that, although he has these negative things to say about social media, he has 770,000 Twitter followers. (The Tech Crunch interview explains how that happened.)

So, Why does he think that Social Media is B. S.?

Actually, he doesn't disparage the various social media components as communications tools. He is attacking the myth that social media platforms can be used to make people successful, well-known, and rich.

This myth is perpetuated by the media (it kind of feeds on itself) and, most importantly, the large number of marketers promoting themselves as Social Media Specialists. These are the people that convince small business owners, artists, writers, musicians, etc., that they can make a huge splash just by adroitly manipulating social media. Using some more salty language, Mendelson refers to this process as the “Asshole Based Economy.”

His personal experience, and that of many others that he interviewed for the book, is that social media is unable to build a reputation and won't create a fan base. For most of the people listed above, it is just a waste of time. And if you add in a consultant, it becomes an expensive waste of time.

Why does a guy with 770,000 twitter followers think it is a waste of time?

His main points are these:

• If you are already known in RL, then social media is a great way to stay in touch with your “fan base”.
  
• Much of the activity on Twitter, for example, is from celebrities, comedians, and journalists. These people developed their following in real life, before moving to Twitter.
  
• You can get Twitter followers and Facebook connections, but most of those people won't actually engage with you, buy your books or records, or go to your events. If you aren't already famous and worth knowing, social media won't make you so.

Practical Tip of the Day:

• If you aren't a major “name”, don't accept a marketing plan that claims it will turn you into a big social media presence overnight.
  
• It's your real life, analog activities that will build your reputation and your audience. You have to first develop this audience before digital communication platforms can be of much use.
  
• If you do have a customer list / subscriber base that is interested in hearing from you, give them valuable content. Not just what's on sale this month. 
•  

You can see the TechCrunch interview with Mendelson HERE.

5 Signs it's Time for a New Strategy

I have written often about making strategic marketing changes. This post addresses the question “How will I know when it's time for a change?”


1.) It's Always about Price

If your customers are always making buying decisions based primarily on price, then its time to thoroughly re-examine your marketing strategy. An effective strategy offers your customers things they need and want, and that they can't get from the competition. Your customers have a vivid imagination, and their “nice-to-have” list is continually expanding. If you do a good job of delivering those results, the “nice-to-haves” migrate to “must-haves”, and you have outmaneuvered the competition. Additionally, your price and margin situation will also improve.

If you don't offer your customers these distinctions, you'll never get out of the downward price spiral.


2.) You're Losing Good People

If your best staff are looking to move on, this is another sign that it's time for reconsideration. Really good employees are looking for a challenge, and for a place where they can grow. If they have decided that working for you is no longer interesting or challenging, they will look elsewhere. Further, your best people are on the look-out for innovative ways to address the market. If you can't provide that, others will. Address this situation now, before the best are gone and only the mediocre remain. That will make it even harder to turn things around.


3.) The Annual Plan is a Photocopy

Perhaps a more up-to-date sign would be if this year's plan is really just a cut-and-paste version of the last one. Try this test: Pull out the plan from 5 years ago, and highlight 3 major differences in this year's plan. Hard to do? Then it is time for major change. No business can succeed today with the same plan it ran 5 years ago. Too many market factors have changed. Some, radically.


4.) People Confuse You with the Competition

Is this scene familiar: you introduce yourself and your company at some business event, and people think you work for your competition? If people don't automatically know who you are, and how you differ from the competition, that's a sign that some change is needed. When people don't know what sets you apart from the competition, it's because you haven't told them. Some new ideas are in order.


5.) It Just isn't Fun Anymore.

Here is the final and most important sign. Time for a truly honest gut-check. Are things still fun? Is there a sense of adventure everyday when you get to work? Are you always interested in telling people what wonderful things your company is doing? Perhaps more interested than they are in listening to you go on and on?

This is an instinctual assessment, rather than the quantifiable ones listed above. But it is no less valid. If it isn't fun, exciting, and challenging anymore, then you (and your staff) run the risk of just going through the motions.

If these points hit home, then it is time for a change. Some real change, not just tinkering with the details. You need something radically new, and you need to shake things up.

Like the Nike ad says: Just Do It!

The Power Of A Conversation

I saw this line in a recent Wells Fargo Bank commercial. In the ad, they portrayed their banking counselors as courteous, helpful, and full of useful insights. But most of all, they wanted to convince people to come into the bank and just “engage in a conversation”.

It's a great concept, and I am recommending it to you. Except, I want you to turn the idea around. I want you to focus on having a conversation with your customers. Many of them. Non-customers and former customers as well.

In most small businesses, the owner was the original salesperson. He spoke with all of the customers, fielded all of the calls from prospects, and had first-hand knowledge of what was going on in the marketplace.

Then, things got busier. The business expanded, and many of the routine sales duties were handed out to others. Unfortunately, the owner (now Chief Operations Officer) began to loose contact with his best source of information about his customer base.

So how do you cure this problem? Just go have a series of conversations with various members of your target audience.

• Don't leave this to your sales staff.  They are too focused on closing another sale today.
  
• Don't rely on your marketing person to tell you what your customers think. They may be too “inbred” to be really objective.
  
• Don't rely on your customer support people. They're focused on giving customers quick solutions, them moving on.

You really need to do this yourself. Here are some thoughts on how to do it effectively.

With whom should you converse?

Start with your best customers. Actually, that may not be strictly true. You should stay in touch with your best accounts, but keep in mind that they may not be representative of your overall market. Oftentimes, the names at the top of the customer list are there because of special relationships, or unique product packaging, or other circumstances that aren't relevant to your other customers. So, for the purpose of this survey, you might start with accounts further down the list. They may be more typical.

How should you organize this conversation?

Ask if you can stop in and see them for a few minutes. Get out of the office and go to them. Let them know you just want a conversation about your business relationship, your products, and the market. Make sure they understand you aren't there to ask for an order. Maybe even take them out to lunch, in small groups. That can help the conversational atmosphere.

What should you ask?

The purpose is to get deeper insight into your customer's needs, their thoughts about your organization and the competition, and ideas about where the market is headed. Get them to talk about the issues that are most important to them, and you will develop a good picture of market expectations.

And how should you respond?

Consider this a general research project, not a problem-solving event. The important outward response is a simple Thank You for taking the time to meet.

The important inward response is your analysis of the ideas, trends, and patterns found. You may uncover some nuggets of gold here that will help you devise innovative solutions to your customer's problems.

So, there's this week's advice. Get out of the office. Engage your customers in some casual (yet productive) conversation. Don't ask them for an order. Just listen to the things that they think are important.

Your future lies in there, somewhere.

Microsoft & Sears; Apple and Samsung

This week's post is some marketing-related thoughts that passed through my mind recently. Hope there are some lessons here you can apply to your small business.

Microsoft and Sears

I have written about both of these organizations in the past, and I saw a line in Forbes that did a great job of crystallizing their issues:

“A former Microsoft senior marketing manager concludes: “I see Microsoft as technology’s answer to Sears. In the 40s, 50s, and 60s, Sears had it nailed. It was top-notch, but now it’s just a barren wasteland. And that’s Microsoft. The company just isn’t cool anymore.””

How True, How True!

In fact, Microsoft isn't just not cool, it has become downright boring. The recent technological advances from Microsoft have simply been improvements to their products to match the competition. In fact, (and this gets a little geeky) Internet Explorer 8 still doesn't come close to passing the Acid Test 3, even though the standards have been around since 2007.

In fairness, there are many successful yet boring companies. Utility companies, for example. However, all boring companies have one thing in common: people are unwilling to pay them a premium for their products, and both their prices and margins suffer.

Microsoft now has extensive competition in each of its product lines. Many of those competitors offer equal or better products than GatesCo (BalmerCo?), and even the OpenSource products (as is FREE) have become very good. One prime indicator of all this boring-ness is the stock price. It now sits at exactly the same price is was 5 years ago.

It may be comforting to think of your business operations as Predictable and Dependable, but if the buying public has translated those terms into Boring, you are in trouble. Time to shake things up!

Apple vs Samsung Court Case

At the other end of the spectrum is the always non-boring Apple. They won a huge patent infringement case against Samsung last Friday, and Wired, CNET, and the other tech sites are alive with chatter as to what this really means for the cell phone industry and, specifically, Google/Android/Motorola Mobility.

I won't comment on the technical or legal implications here. Just some marketing thoughts:

• They say imitation is the highest form of flattery. Guess Apple just didn't feel the love.
  
• The power you gain from offering something unique, something different is Huge. If you can patent that uniqueness, it become Hugely Huge.
  
• We can't know what Steve Jobs would think about the new iPad Mini, but I am betting he's smiling about this ruling. Litigation had become a major thorn in this side over the last few years.

Even though Samsung lost the case, they have made boatloads of money selling phones with all of those Apple-like features that the public wants. They charged less for their phones, offered hardware choices that Apple didn't, and made a ton of money as a consequence. Maybe they will think of this $1 billion judgment as just the cost of doing business in the smartphone space.

Most small businesses aren't into manufacturing and, therefore, don't use product design as differentiation. This usually comes in the form of services.

The Good News: Patents can't be used to limit your ability to out-service your competition.

The Bad News: If you can't find a way to stand out with your service, you're probably in trouble.

Comparative Advertising: Get Their Attention!

In my last post, I talked about how ALL advertising is comparative. Your audience listens to what you have to say, and compare that to what they know of the competition. Whether you like it or not, you are forced into this comparative position. The best response is to capitalize on it.

You can create a comparative campaign with three degrees of aggressiveness:

• Focus on the things you do well, and the competition doesn't.
  
• Focus on the things mentioned above, but state that the competition doesn't really do these things well, and suggest the audience check out the situation for themselves.
  
• Focus on the things mentioned above, and then state that the competition (which you identify) just doesn't do these things.

Lets evaluate these three approaches one at a time.

Focus on what you do well.

You should use this tactic at a minimum. Remember, the point of advertising is to be remembered. Bland statements like “been in business for 20 years” and “have friendly staff “ won't cut through the clutter. You need to draw attention to what you do that sets you apart.

Certainly, we can all think of examples where a company used a clever line in their ads to become memorable. My only objections to this approach are that:

• This tactic is more likely to work if the company is already well known, and
  
• It usually takes a lot of repetition (which is expensive) to drive this message home.

Consequently, my preference here is to become memorable with your content (what you do) rather than clever messaging (how you say it.) Either way, find a unique message that sets you apart, and hammer away at it.

Focus on what you do well, and state that the competition doesn't.

This is one notch higher on the aggressiveness scale, and has more impact. The general message is the same as above, but it is more direct. It doesn't just imply that the competition doesn't excel in the same way you do, it states that explicitly.

If this difference might not be apparent to your audience, and if you are confident in your position, you can suggest that they (your audience) check out the competition and find out for themselves. Frankly, unless the competitors mount a campaign in response, most of your audience won't follow-up on your suggestion. They will just take your word for it. They will assume you wouldn't make the claim if it wasn't true.

Focus on what you do well, state that the competition doesn't, and mention them by name.

This is only for the strong of heart, and needs to be handled professionally. If you really do things that customers find beneficial, and that the competition doesn't do, mention all of that in your ad.

For example: “We only use dried-cured peperoni on our pizza. Domino's, and Little Ceasar's don't.”
or “Our service department is open all day Saturday to assist you. Bill's Auto and the Auto Haus aren't.”

This is also only advisable for the nimble of foot, for the competition may respond in attack mode with their own ads, or they may just modify their practices to match yours. Either way, this ad approach can be very effective, even if it has only a short life-span.

Some advertisers object to this type of ad, because they believe it just gives the competition some free advertising. My opinion, however, is that the audience already knows who your competitors are, and your ads give you a chance to improve your position in the audience's mind.

The take-away here should be that all ads have a comparative element and, in order to be memorable, you shouldn't shy away from using that to your advantage.

It's the Comparison that Counts!

The Political Season is upon us. Perhaps it never really goes away, but it certainly is here in all its fury . My comments in this post are not about the politics, but rather the advertising. And, more importantly, the incorrect lessons that may be drawn.

The political ad is the ultimate in Comparative Advertising (today's subject.) Much of the advertising produced in this cycle takes direct, and critical, aim at the opponent:

• He will just raise your taxes.
• She won't support middle-class priorities.
• He is against creating jobs.
• She isn't really like us.

And with all of this harshness in our ears, we come to think of Comparative Advertising as a bad thing. Yes, this political form of the advertising science is bad. But Comparative Advertising in general is a wonderful tool, if used correctly, and the concept should be embraced.

In fact, this facet of advertising can't be ignored, because ALL ADVERTISING IS COMPARATIVE.

Every ad you run, even if it never mentions your competition, is comparative. This may not seem obvious at first, because the comparison doesn't really take place in the ad copy. It takes place in the head of the audience, the people you are trying to reach.

Whenever someone hears / sees your ad, they quickly digest who you are and what you do. Then, they slot you onto the hierarchical ladder of companies they know in your industry. This helps them simplify their choices. The top rungs of the ladder are their first choices when it comes time to buy. Obviously, getting you on one of those top rungs should be the goal of your advertising.

Who's in that position already, and how can you take their place?

People use many methods to determine which companies are on the top rung:

• The last company that provided a good buying experience.
• A company with a highly-creative ad campaign.
• The perceived “leader” in the industry.
• A company mentioned favorably by a colleague.
• The easiest company to buy from.
• And a dozen other reasons.

Every time you touch a prospect (with an TV/ radio ad, a flier, an e-mail, a handshake at the Chamber bar-b-cue, etc.), you get a chance to move up the ladder. And, even if you never mention the competition, the prospect is analyzing what you say and making that comparison for you.

Don't let the harshness of the political season and its horrible ads affect your advertising judgment. Recognize that your ads will treated in a comparative manner, capitalize on that fact, and build some positive comparisons into every contact opportunity.

Just how you do that is the subject of the next post. Until then, here's an idea:

Practical Tip of the Day:

• Look over your advertising material from the last year.
• Eliminate all of the bland verbiage like your name, location, contact info, and general platitudes.
• Make a list of what's left. That's what people (may) remember.
• Is there a pattern? Does it reflect the image you want? Will it move you up the ladder?

Dea(r)th of a Salesman, Part 2.

(With apologies again to Arthur Miller)

In last week's post, I wrote about the death of sales training initiatives. This week, I will focus on how sales compensation programs often don't provide the motivation that they should.

Three compensation strategies in common use are:

• The100% monthly commission program.
• The “extra bonus when you hit your target” strategy.
• The geographic quota plan.

Each of these plans can work, but they also have pitfalls. And, too often, I find them used in place of active sales management.

The 100% Monthly Commission Solution

Managers like simple plans. Simple to understand, simple to forecast, simple to implement.

An obvious strategy is to pay a commission on every sale. Period. No salary, no bonus, no SPIFFs, just a straight commission. This is easy to administer. No budgets, quotas, or targets are required. And it has a good cost control mechanism built in: if sales fall, so does compensation.

So, what's not to like?

In this scheme, the salesman very quickly sees that his ability to put food on the table this month is directly related to the number of deals he closes this month. And so, predictably, he focuses all of his attention on those “high-potential” prospects that are likely to buy this month. Those that need some extra attention, or aren't quite ready to sign, will (maybe) get looked at later.

Ironically, the common sign of a problem with this approach is the management complaint that sales people won't spend time on long-term relationship building activities.

If you want your sales staff to spend time working on long-term projects, you need to think beyond the 100% commission program. Options could include:

• A base salary with a lower commission rate on top.
• A bonus program that includes incentives for completing non-sales objectives (cold calls, relationship building meetings, competitive analysis, new account recruiting, etc.)
• A multiple rate commission plan that puts special reward on certain types of accounts.

Each of these can help shift the salesman's focus into different time frames and activities. Unfortunately, they also require a higher level of active management on the part of the Boss.

The “Extra pay when you hit your Target” Program.

This approach ties commissions and bonuses to annual targets or quotas. Again, this has a cost control benefit: those that hit the higher sales numbers get the extra amounts. It can be very effective, but you should be aware of the downsides.

First, targets set exclusively by senior management are often viewed sceptically by the sales staff. They are perceived as a strategy for Not Paying Commissions, which obviously decreases their motivational impact.

Second, they really only motivate the sales people that believe their normal performance will get them close to the goal. Those that believe they are very unlikely to hit their targets are not motivated to work harder. Similarly, those that think their normal efforts will put them well beyond the targets aren't motivated either. Consequently, only the staff in the middle of the pack will think of this extra money as a reason to put forth extra effort.

The Geographic Quota Plan

This common strategy bases sales quotas on population stats. It is certainly convenient, and takes the appearance of arbitrary decision-making out of the equation. It is also easy to sell to senior management, who may not know much about the sales staff, but can read a map and population tables.

Unfortunately, I have rarely seen a population-only quota system that actually works. Too many other factors can come into play:

• Different economic activity levels in the regions, for reasons other than population.
• Different competitive positions in the regions.
• Different strategic account penetrations among the regions, etc.

All of these factors can produce good and bad sales performances among the regions, not directly tied to the skill and efforts of the sales staff. As a consequence, motivation suffers.

I once worked in partnership with a company in Canada that had 7 sales reps across the country. Each rep had an annual sale quota based on population but, because of outside economic issues, one region significantly outperformed year after year (and one rep significantly out-earned all of the others.) In order to keep the plan “simple” and still keep it “fair”, the company took the expedient of capping that one rep's annual compensation. He responded by only working 3 days a week every summer, giving him more time to spend on his boat.

The point I would like to end with is this:

• It is easy to come up with a sales compensation plan that is simple to implement and manage.
  
• It is hard to come up with one that actually keeps all of your sales staff motivated, unless you add some significant sales management effort.

Keeping your sales staff motivated takes a lot more than just a simple commission plan.

Dea(r)th of a Salesman, Part 1.

(With apologies to Arthur Miller)

Far too often we hear the complaint, “I can't find enough good salespeople anymore.” I don't think salesmen are too hard to find, just hard to develop and keep because of prevailing business attitudes.

I like salespeople. I like them because they use their smarts, personality, drive, and initiative everyday in an extremely difficult environment. I like them because they persevere under very trying conditions. I like them because they enjoy being with other people. (Further, I like them because I am one!)

But they have become the most under-appreciated, misunderstood, and scapegoated employees in business today. I have two peeves about the way businesses treat their sales staff:

• Sales training has become almost non-existent , to the detriment of both the sale staff and the business. (The topic of this post.)
  
• Commission programs have become a poor and ineffective substitute for Sales Management. (Next week's installment.)

Why everyone benefits from sales training, and why it has disappeared.

The best known and most profitable companies in the past always had great sales organizations. (Think IBM and General Motors.) The activities of the sales department were the public face of the company, and a key differentiator between organizations. Successful companies put a lot of emphasis on sales training, to ensure the job was being done right, done differently than the competition, and done in a way to enhance the company image.

This approach worked well. Salespeople learned all about the product, and what the customers were looking for. They learned how the company's products helped the customers in their everyday life, and how they were superior to the competition. They also learned how the company expected to be represented to the buying public. That's the kind of training that makes salespeople and companies great.

Somewhere along the way, this concept got lost in the desire to hold down costs. The reasons given to justify reducing training efforts are:

• With high sales staff turnover, whatever training you do will just benefit the next company (competitor?) that hires them.
  
• If you hire salesmen from the industry, sales training is not needed.
  
• If you hire great sales staff, they will resent you trying to tell them how to do their job.

The answer to all of the above is three simple words. Ba. Lo. Ney.

The current issue of the Harvard Business Review has a great article on sales staff turnover, and a key element is the lack of training, mentoring and career development. So, if your turnover seems too high, INCREASE training, don't cut it back. Good salespeople want to be appreciated, and want you to show that by investing in them.

Another fallacy is that if you hire from withing the industry, more training isn't required. This logic only holds if your competitors do a great job of training. Yet, as the above paragraph states, if they were doing a great job of training, they probably wouldn't be losing their good salespeople to you. Further, sales training gives your staff the tools they need to differentiate your company from the competition. And that is something only YOU can do.

Finally, good salesmen are looking for leadership, and the training you offer is part of that leadership. Show them what you want done, why you want it done that way, and how it will benefit both them and the company. Good people will appreciate your efforts and your commitment to them.


So, What is the real reason behind this Lack of Training?

I think, often, small business senior management has become remote from both their customers and the selling process. They have completely delegated the selling function to others, and are too removed from the activity to feel comfortable in the training role. They use the excuses given above, and abdicate their responsibilities.

Everyone suffers. The Business. The Boss. The Salespeople. The Customers.

Practical Tip of the Day:

Option #1: Spend some time on the road with your salespeople. Find out how they spend their time, and what their accounts are saying. Firsthand. Look for patterns that training could improve.

Option #2: Look for some “Best Practices” opportunities. What are your best people doing that the rest of the staff could benefit from learning? The top people will appreciate the attention, and the learners will appreciate the advice.

Next Post: Counter-Productive Sales Compensation Plans.

The Competition Doesn't Count!?!?!?

This old refrain popped up recently while I was interviewing for a consulting project. When asked about his competition and their impact in the marketplace, the business owner told me his philosophy: “The competition doesn't matter. Just do a good job, and the customers will come to you.”

I've heard this line before, and my response is 3 simple words:

Ba. Lo. Ney!

This attitude harkens back to a simpler, more gentile business environment. During the Eisenhower administration, maybe. But that was long ago.


Today, Your Competition Most Definitely Matters.

It sets the parameters for the conversation you have with your customers. Every one of your sales prospects has an idea of the products available in the market, and their price. Where do they get all of that information? From your competition.

• They listen to the ads,
• research their websites,
• and talk to their sales people.

If your competitors offer a similar product to yours for about $100, and you are priced at $120, your customers will be asking questions.

If the competitors have the product in stock, but you need 4 days to deliver, your customers will expect you to have a solid reason for doing things differently.

If the competition allows people to place their orders over the web, but you make them come in and talk to a sales person, your customers will want to know why.

The buying public won't allow you to operate within a vacuum. They'll evaluate everything you do in the context of what the competition does.

I read a great line recently: “we live in the age of transparency”. That is absolutely true in the sales environment. Your customers are familiar with your competition, their products, services and prices. And that frames the conversation when you begin your sales pitch.

So how do you operate effectively in this atmosphere? You need to arm yourself with two critical sets of information:

1. An understanding of your primary competition, and how they are viewed by the buying public.
2. Some key points of differentiation that will help your prospect see you in a different light, and perhaps justify increased margins.

Those two statements are simple to write, but might take a small business years to master. However, in them lies the difference between being a top contender in the marketplace and being just an also-ran. The competition sets the parameters of the game. How well-equipped are you for the challenge?

Practical Tip of the Day:

• Don't ignore the competition; embrace the challenge.
• Do a “shelf-space” analysis of your competitors, inside the head of your customer base. Do some extensive interviews with customers and prospects. (If you are the Boss, do this yourself. Don't delegate!)
• Figure out why you aren't considered at the top of the list, and develop a plan for the next 12 months.

HOWEVER, don't try to become #1 by mimicking the current #1. But more about that later.

The “Main Thing” Thing

Stephen Covey passed away this week. Famous for his book “The 7 Habits of Highly Effective People”, Covey became well-known for his views on building values and principles into you daily life, at home and at work. He published 4 books, ran a successful seminar program, and founded the Covey Leadership Center.

It seems appropriate, therefore, to return to an underlying theme that runs through both his writing and mine: A clear focus beats a shotgun approach every time.

I had a conversation with a another consultant recently, and I came away surprised. I asked about his work, and he told me about the variety of projects he handles. I was waiting for his concise Aural Business Card (Click Here for post ), but instead I got paragraphs about his services, covering:

• HR and labor issues
• Team building
• Family business succession, and
• Enterprise system implementation.

I was amazed / floored / skeptical / amused. This guy obviously didn't buy into my “Focus is Everything” philosophy, and I didn't try to convert him.

I was reminded, however, of that great line penned by Stephen Covey:

The Main Thing is to keep the Main Thing the Main Thing.

What a fabulous piece of writing. And, as you may have read in an earlier post (Click Here for post) I absolutely agree. The secret to long-term success in small business is FOCUS.

• Find one thing you do well,
• that customers are seeking,
• that the competition doesn't bother to do,
• and make that the “Main Thing.”

An executive's job is to see that the company resources (time, money, brainpower, management bandwidth, etc.) are focused on this primary objective and don't get squandered on unimportant side issues. The sales people will want to chase after the last deal that walked in the door. Manufacturing will want to produce new products that fit in with their production line. Product Development will want to design something new and cutting-edge. Everyone wants to head off in a different direction.

Its the boss's job to keep them together on the same path, and headed toward the same goal. It is hard to do, but fragmentation of effort will destroy your brand and your margins.

If you don't have a “Main Thing”, start looking now. Your competition may not have one either, but you should assume that they are working on it. (Andy Grove's book title said it all, “Only the Paranoid Survive.” But that's another post.)

Like the man said: “The Main Thing is to keep the Main Thing the Main Thing.”

Words to Live By!!

For more about Stephen Covey and his writing  Click Here.

It Really Isn't all about Price!

Here is a little drama I come across, seemingly weekly.

The Boss: “My sales people don't know how to sell anything without a discount. Every day, they come to me and want lower prices in order to match the competition. They aught to be selling on our great features, not price.”

The Salesman: “ The Boss won't give us anything we can sell with. The competition is eating our lunch with better pricing, and we are losing a lot of deals.”

Enter the Consultant, who is supposed to save the day. After a little research, I find that both sides are correct to some extent. However, they'll never come to an agreement, because the issue is improperly framed. Here is the reality:

If you get to the end of the negotiating process and are losing deals on price, you actually lost the deal much earlier.

In a previous post, I wrote about how shoppers are looking for an answer to The Big Question (Click Here). In short, when shoppers are early in the buying cycle, they are looking for a reason to buy from you. Specifically, they want to know, “Why should I buy from you, rather than 6 other companies that do the same thing?” And they will continue shopping until they:

• Run out of vendors
• Get tired of shopping
• Find a good answer to The Big Question
• Run up against their buying deadline.

When your prospect gets to the end of the buying process, and only wants to talk about price, it means you didn't give him any other reason to buy from you. In that environment, it is hard to close deals, to build customer loyalty, and to maintain reasonable profit margins.

You can avoid this situation by giving your prospects some good reasons to buy (beyond low price) that set you apart from the competition. Is this easy? NO! But it is much better in the long run than cutting your margins to shreds.

Simply put, here's what needs to happen to get out of the never-ending cycle of price cutting:

If you are The Boss: It's your job to create significant value points (that are meaningful to your customer base) that set you apart from your competitors. It's also your job to see that this extra value is actually delivered to your customers, and not just talked about.

If you are The Salesman: It's your job to mention, re-enforce, and demonstrate the benefits the customer will get from those extra value points, and remind the customer that they make your product worth that little extra in price.

Now, Here is some Good News!

If, in the current scenario, you are always having to compete exclusively on price, it means that you haven't succeeded in giving the prospect a good non-price reason to buy from you. So, where's the good news?

It also means your competition hasn't done a very good job of convincing the prospect of their extra-value proposition either.

That's where your opportunity exists. This window may not last long however. Your competitors are probably working on this project right now.

Practical Tip of the Day:

1.) Talk to you salespeople. Get them to develop a list of what you offer, or could offer, that would set you apart from your competitors. HOWEVER, think of this list as just a starting point. Salespeople (even the best of them) tend to think in the short-term, and are influenced by the last customers they spoke with.

2.) Talk to your best customers. Put together a list of you best 15 accounts last year. Cross off the top 5 (who may represent special circumstances, and not be typical of your overall target market.) Go out and meet with the rest. Take them out to lunch. Ask them what they like about your company / products / services as compared to the competition. They'll have some useful opinions to share. Getting those opinions directly from the customer is far superior to just hearing them (in filtered form) from your sales staff.

3.) Talk to your suppliers. Especially the ones that sell to your competition. What do they see going on in the industry? What innovation have they been impressed with? It is amazing what people will share when you ask their opinion.

4.) Finally, use you instincts about where the market is going. Put all of this together and create some distance between you and the competition. This will improve both sales and margins, and make things fun again.

Wisdom from the “World's Meanest Boss”

I read somewhere recently that Harold Geneen, one of my favorite corporate executives, had made it on an all-time list of the World's Meanest Bosses. Geneen ran ITT back in the 60's and 70's, when size meant everything and conglomerates were the rage. He developed a reputation for always hitting his forecasts, and being impossible to work for.

Mean or not, he had some keen insights into the business world which I have benefited from and which I will share here, along with some Small Business applications.

Seeking the Truth

Geneen was famous for his monthly executive meetings. They were grueling, multi-day, 14- hours-a-day events , where he would grill his divisional managers about their performance and expectations. He would go through their reports line by line, looking for the facts. Or, as he called them, the “unshakable facts”. He went to great pains to sort out the opinions, and guesses, and hypothesis, and suppositions, and biases and wishful thinking, to get to the “unshakable facts”. I imagine he found them few and far between.

I bet you experience the same thing every day. People come to you with information, and want you to make a decision. Unfortunately, much of that information is false, or assumed, or only partially accurate. A long way from being “unshakable”. Obviously, if you get poor information you will be making poor decisions. If you want to make better decisions, the information, and the information source must be analyzed. (Geneen felt that was best done in-person, hence the endless monthly meetings.)

Boiling information down to unshakable facts, as presented by your employees, requires a lot of work. Lazy managers don't bother: they just accept with they are given, and blame their staff when things go wrong. A strong manager is always skeptical, until proof is provided. The stronger the facts, the better the decision-making.

The Greatest Executive Disease

Geneen came from the corporate world of the 60's where, as depicted on the Mad Men series, all serious businessmen had a bottle of booze in their desk drawer, and the senior executives drank expensive scotch. It was in this environment that he developed his famous quote about the Great Executive Disease:

“The worst disease which can afflict business executives in their work is not, as popularly

supposed, alcoholism; it's egotism.”

What a fabulous insight!!! Executive egotism has ruined more businesses than alcoholism and drug addiction combined. Not only is it more powerful, it's harder to recognize. People suffering from serious substance abuse are easy to spot in the workplace. The signs identifying an ego-driven executive are not as obvious. And too often, its the Boss: who's going to call him out???

Small businesses are run by entrepreneurial types, and a healthy ego is a prerequisite for success. Too often, however, the decision-making groups in these companies become “inbred”, and the executives end up believing their own press releases and reliving their past glories. The executive ego attitude of “my ideas worked in the past, and they'll work in the future” has caused many a business to lose its edge and its position in the marketplace.

Organizations that are successful over the long haul have mechanisms to constantly inject new blood and new ideas into their decision-making counsels. It is hard on the ego, but good for the business.

Practical Tip of the Day:

• What is the primary USP (unique selling proposition) that you are using in your marketing today? How does that compare with the message you used 5 years ago? (For more about the USP concept,  Click Here. )
  
• If it is the same, that could be an example of missed-placed ego. Just because it was your idea and it worked, doesn't mean it is still applicable.
  
• If you dig for the unshakable facts, you will find that the market has changed. So should your message.

For more information on Harold Geneen and ITT, Click Here. Or better yet, read one of his books.

Don't be like Harry Connick!

Yes, I am talking about Harry Connick, Jr., multi-talented jazz musician and actor, but this is really a post about your small business marketing strategy. I will tie the two concepts together in a moment.

I am a big Connick fan, and have been for many years. If you are familiar with his work, you will know that he has two very different musical sides. Sometimes he thinks he is Frank Sinatra, and does a great Big Band belter or gentle crooner, as required. Other times, he thinks he is Thelonius Monk, the
jazz pianist and composer famous for “dissonant harmonies and angular melodic twists” (wikipedia).

My musical tastes are idiosyncratic, so I enjoy both version of Harry Connick. However, when I pick up a CD, I have to study the musical selections to understand which Connick is present.

Connick is very good in both genres, and this approach to the jazz repertoire seems to have worked for him. But, as a small businessman, IT WON'T WORK FOR YOU!!!

You can't afford this bifurcated approach. As a business owner, you have a tough enough time establishing a reputation in one area of operational excellence, much less two or more. And while this may seem counter-intuitive, the smaller your business, the fewer things you should do.

To be specific, I am not really talking about the customer activities you undertake each day, but rather the things you talk about in your advertising and in your various image-building activities.

• Find ONE THING you want to be known for.
• Do that ONE THING very well, and much better than the competition.
• Then, talk about that ONE THING every chance you get, in your advertising, in the phone book, on your business card, in your emails, on your building and vehicle signs, ...everywhere.

That's the best way to build your brand inside the head of your customer base.

If you want to take on customers and activities that are off-message, that's OK. However, your best performance is going to be in the activities that you do the most often. And your reputation won't be enhanced by your successes in those non-core areas. The more you can focus on the ONE THING, and the more you can promote it, the more success you will have.

Is it possible to be successful by doing MORE than the One Thing?

Sure. McDonald's does. General Electric does. WalMart does. And so do dozens of other companies. What do they all have in common?

• They have been in business for a long time, and have well-established images
  
• They have HUGE advertising budgets to put behind each of their market segments.

Does that sound like your small business situation? Probably not. You may not even have enough resources to do a good job of promoting your primary focus, so spending dollars to promote your secondary activities will only detract from you main message and confuse your customers.

Avoid the Harry Connick dilemma. Stay focused.

Practical Tip of the Day:

• Gather all of you printed and electronic media advertising from the past 12 months.
• Analyze the primary message of each ad, and look for a common theme. If there isn't one, Make One.
• Build that one theme into every ad you run in the next 12 months. Your customers will respond.

And if you want to know more about Harry Connick and his music, Click Here.

Recent Advertising Stories that Caught my Interest

Two recent stories from the world of advertising caught my eye, and led to some questions which I will share with you.

1.) GM vs Facebook

Facebook has gotten a lot of press lately for its IPO and the aftermath. However, the Facebook story that interested me most occurred a few days prior to the IPO. According to the Wall Street Journal, General Motors will stop advertising on Facebook, after deciding that paid ads on the site have little impact on consumers' car purchases. They will maintain their Facebook pages and will continue working with other social media, but will discontinue its $10 million advertising buy.

Admittedly, this is pretty small potatoes in GM's overall advertising budget, but it may say something about using social media for commercial purposes. Obviously, with 800+ million users worldwide, and over 50% of North Americans using the service, those GM ads were getting a lot of views.

However, this large number of views didn't seem to be getting results for GM. In fact, I read recently that less than 5% of social media users regularly depend on those sites for purchasing recommendations.

Three things may be at play here:

• Type of Product – social media users may be more likely to respond to the opinions of the crowd, or their friends, when the risk is low. If you go to a new restaurant that has a lot of social hype and then find you are disappointed, your loss is pretty minimal. If, however, you buy a car that you end up not liking, the costs are obviously much higher.
  
  
• Age Group Attitudes – heavy social media users are likely to be under 30, which may not be the prime target for purchasing high-profit new cars.
  
  
•  Level of Engagement – After the GM announcement, Ford stated that they were pleased with the response to their Facebook ads, and were continuing their investment. Ford may have a more creative approach to its social media ads and a more comprehensive engagement process after you hit the Like button.

While its not precisely clear what's going on here, it is obvious that there will be a steep learning curve for most businesses before they turn social media into an effective marketing vehicle.


2.) Harry's Law vs the Tyranny of the Ratings

I have been a faithful viewer of Harry's Law (NBC) over its first, and last, two seasons. First on Wednesday nights, and then on Sunday, this was my “must see” show of the evening. Set in Cincinnati, the show starred Kathy Bates as lawyer Harriet Korn, and Christopher McDonald as the over-the-top Fieger-esque Tommy Jefferson. The show had great characters, solid scripts, and unique plot twists. It also got canceled after two seasons, even with decent ratings.

Yes, Harry's Law had decent overall ratings (rather unique for NBC), but it got canceled anyway. Why? Here's a quote from the TV By The Numbers website:

“Will the Harry's Law cancellation convince the doubters that total viewership is completely meaningless in broadcast primetime? A network's top total viewership show (but nearly lowest adults 18-49 rated show) was canceled. Doesn't get any more definitive than that.”

Yes, The show had a lot of great things going for it, but it wasn't “young” enough. But this isn't just a rant from an Old Fogey about how the youngsters are killing all of the valuable culture in our society. (I'll save that for some future blog.) This is merely a statement of my confusion on the subject.

Here is a quiz for you: What do the following advertised products have in common?

• Cialis and Viagra
• Knee replacements
• Faulty knee replacement law suits
• Walk-in tubs
• Ensure nutritional drinks
• The Owl magnifier
• Computer keyboards with oversized keys
• Arthritis medications
• Hoveround powered wheelchairs
• Depends undergarments

I am sure you see the pattern:  
These products aren't being pitched to youngsters!!!

The target audience for many of these products is over 60. Wouldn't a show like Harry's Law be a perfect vehicle for these companies? So why did it get canceled?

There may be some esoteric logic here that can only be discerned by all-knowing network executives, but it is beyond me.

Leadership Comes in Three Forms

I read a good book recently.

Actually, I've read several good books recently, but only a few have any bearing on the subject of this blog: Small Business Marketing Strategy. One that does, and has some trenchant philosophy to offer (translation: the author agrees with me), is:

The Discipline of Market Leaders
       Choose your customers, Narrow your focus, Dominate your market.
        by Michael Treacy and Fred Wiersema.

My reading list is eclectic. I don't spend a lot of time on “Just Released Best Sellers”. I do look for solid, non-fad ideas that can be translated easily into the small business environment. Although this book takes its examples from the world of well-known corporations, the strategies still apply on the smaller scale.

The book was written about 15 years ago, and many things have changed. In fact, some of the corporate examples used in the book have fallen from favor. However, their replacements as market leaders have succeeded by using the same strategies, which is an excellent validation.

The authors cover a lot of ground, but one key element is this:

All market leaders lead in one of three ways:

1. Operational Excellence
2. Long-term Product Innovation
3. Customer Intimacy

Lets look at these one-at-a time, and go through some examples.

1. Operational Excellence

These market leaders have a well-defined target audience, they offer only a limited numbers of products or services, and they use their intense focus to squeeze out costs throughout their organization and supply chain. This allows them to offer customers a very predictable and highly reliable buying experience at a low cost.

Typical examples would be McDonalds, Costco, Dell Computers, and Southwest Airlines. These companies have brands built around their operational consistency and the low pricing that it allows. In most every industry, you can name a low cost, tightly focused, operationally excellent company that is seen as a leader, and has significant market share.


2. Long-Term Product Innovation

These market leaders are often at the other end of the pricing scale, but they succeed because of their product reputation. A prime factor here is the words “Long Term”. This isn't the company with the latest, greatest product. Its the company with a tradition of innovation that has been earned over several generations of new products.

Some examples here would include, Johnson & Johnson, Apple, Nike, and Disney. One example used in the book was Sony, which was certainly a product leader for many years, but may have fallen by the wayside now. Then new leader in TV's might be Panasonic, and Virgin Atlantic might fit in this bracket in the airline industry.

Once you have a reputation for product excellence and innovation, the market rewards you with the ability to charge higher prices and earn higher margins. Its the long term performance that develops the brand, and its the brand that allows customers to feel justified in paying a higher price.

3. Customer Intimacy

With the advent of liberalize TV advertising standards, this term has taken on a new meaning. In this context, however, it means the ability of a company to truly understand all of the buying needs of the customer, and to offer customized solutions. In some sense, this is the opposite of the highly focused, “operational excellence” company.

Not that these companies aren't good at what they do. Rather, they offer a variety of products and services in an effort to create a unique solution for each customer. And, they charge for it. This type of market leader is going after the customer that can’t find exactly what they want off-the-shelf and are willing to pay more to get a precise solution to their problem. Some examples here would include IBM and Johnson Controls.

In this scenario, the company looks to create a long-term relationship with the customer, and seeks a deep insight into their needs. They also study how they customer benefits from the products / services offered. This deep knowledge allows the company to tailor solutions that fit the situation. The relationship has value to the customer, and is reflected in a higher pricing structure.

Applying these models to small business

In the Operational Excellence model, the secret is limiting your offerings and finding ways to squeeze costs out of your operations and supply chain. It is these cost reductions that allow for low prices while maintaining reasonable margins. I have some service-provider clients who have increased their use of automation, allowing them to offer faster results at lower cost than their local competition.

The Product Leadership model is harder to implement as a small business, because few of them actually create the products they sell. An exception, obviously, is the restaurant business, where many small operations have been successful by offering unique products and presentations to their customers. Another approach is to associate your business with a national product leader, such as offering specialized training and add-ons to Apple products, or becoming a local service outlet for a manufacturer with a major reputation.

Due to the close relationship between most small businesses and their customers, the Customer Intimacy approach may well have the most potential. I don't recommend trying to offer everything to everybody. Rather, you should pick a niche you want to specialize in, and then carry a combination of products and services that let your customers feel like they are getting a customized solution. You should also look for ways to make your business an integral part of their business success.

And now, the really hard part!

For each of these three models to succeed, they must be fully integrated into every aspect of your business operations. These are not simplistic “marketing veneers” that can be slapped on top of your existing business plan. They must be engineered into everything you do, and must be the focus of every customer interaction you have.

It took years for IBM to leave behind its Big Iron business and to get into services and consulting. It took even more time for the buying public to see how they had changed, and for them to once-again regain their leadership position.

The same can be said for most of the examples mentioned above. This isn't a quick solution to the problems of a mediocre brand, but it is an effective one.


Wiersema and Treacy have updated this great book. The new edition is entitled:

        The New Market Leaders: Who is winning and how in the battle for customers.

Fred Wiersema has written several other books about superior customer service. More information,  click here

The Sears Problem and Theory Validation

'Tis the Season for a great many things, including holiday shopping and evaluating the resulting retail profits. Some of this years' results seem to bear out the underlying philosophy of this blog.

As reported on the Dow Jones Newswire: “Sears Holdings Corp. (SHLD) plans to close as many as 120 stores and take a charge of up to $1.8 billion as the struggling retailer reported fewer sales during the all-important holiday season, again raising questions about the company's ability to regain lost momentum.” The article went on to say that the company plans to take the money saved by these store closings and re-invest it into the store facilities and in their customer loyalty program.

Investors aren't impressed.

Share prices have fallen 25% over the last 12 months, and fell by another 25% on the announcement.

SHLD owns the Sears and Kmart stores, with about 2200 locations in North America. These brand were the kings of American retail a few decades ago. So what happened?

Sears was the biggest name in department stores. They were famous for their catalog, and they were the place to go for appliances, tools, and quality clothes at reasonable prices. They competed against Montgomery Wards and JC Penny on the clothing, but nobody put the whole package together as well as Sears. Kmart was the top discounter in the nation, when the only competition was Woolco.

The competitive landscape has changed.

• I buy most of my clothes at specialty clothing stores.
• I buy tools at the big-box hardware stores.
• I can buy brand-name appliances at numerous retailers.
• If I want to shop at a discount store, I head to the big W.
• And no one but my 95-year old mother shops from a catalog anymore.

So what, one might ask, are Sears and Kmart particularly good at these days?  

NOTHING, it would seem.

Business mediocrity comes in many business forms, but the most common marketing example is the “Me Too” image. Neither of these companies do anything particularly noteworthy, and their marketing image is simply one of the many Me Too's.

Mediocre operations can survive when the competition is weak and the selling environment is strong. But when the competition is strong and the economy is weak, the mediocre have few advantages to promote. The only option left is to constantly lower prices, and they aren't well positioned to do even that. As a consequence, they often die a slow death.

Although it doesn't make the headlines, small businesses go out of business every day for exactly the same reason: They haven't figured out how to stand out, and the buying public sees them as just another “me too” operation. If your company falls into this category, NOW is the time to make some changes.

Practical Tip of the Day:

• What is your company known for in the buying community? Don't trust your analysis of this, take the time to ask your customers for their opinion.
• If the answer is “Nothing”, but your sales numbers are still OK, then your competition is in the same boat, and you still have an opportunity to succeed. Start looking for some key differentiation.
• If the answer is “Nothing”, and your sales are drifting downward, Now is the time to respond.

The Great Sales Training Myth

As mentioned in previous posts, I have worked for several organizations, in both sales and marketing positions. Some of these companies were very large and (supposedly) well organized, while others were small operations trying to grow any way they could.

One phenomena I often saw involved the Great Sales Training Myth. The purpose of the myth was to excuse management from having to provide any relevant training for the sales staff. It wasn't phrased that way, of course. Instead, what you heard was:

• “We hire only professional sales people, who are already trained.”
• “If we gave them more training, they would just leave and go somewhere else.”
• “The good ones would be offended if we tried to tell them how to do their job.”
• “If they would just work harder and sell more, everything would be fine.”

And to all of those bosses who used these excuses to save themselves some money and effort, I say You are Complete Idiots!

The sales staff is the customer-facing part of the company. These are the people who interact with your customers every day, for good or bad. If the sales staff doesn't create a great impression in the mind of your prospects, all of the money spent on advertising has been wasted. If the sale staff can't effectively close leads because they don't know (in detail) how customers use their product, then all of the marketing efforts are for naught.

A well-trained sales staff can make up for weak marketing, but it can perform twice as well when given the benefit of great marketing. But even a well-trained sales staff cannot make up for weak product or poor customer service.

Lets answer the four excuses listed above:

1. Even “professional” sales people bring both the good and bad experiences from their past employment with them. You should take the time to train them to seek the customers you want, to promote the benefits you offer, and to make the kind of lasting impression you deserve.
   
2. Good sales people want to be successful, and they want some appreciation for their work. If you don't invest some training time into your staff on a regular basis, they will look for other job opportunities that do offer the recognition they seek.
   
3. The “good ones” want new opportunities to succeed, and will be ready to soak up any good information you can offer. This assumes, of course, that you really know what you are talking about. The good ones don't want you to waste their time.
   
4. Finally, if you really think that having your sales people “just work harder” will bring great results, you most likely have deeper problems to deal with. It's usually a general marketing problem, not a sales problem.

Don't skimp on training and skills development with your sales staff. A small investment here can have a huge pay-off.

Practical Tip of the Day:

In addition to the points listed above, your sales people should be a great source of information about the competition, and your customers' expectations. Get your people together often, and listen with an open mind to what they have to say about their selling environment. It can be very enlightening.

The GE Marketing Position Strategy

General Electric is rather unique in the world of business these days: they operate as a conglomerate. A popular business format in the 70's, the conglomerate lost its luster in later decades as some of the largest ones imploded. But GE seems to be able to pull it off. And a key reason is their Market Position Analysis.

General Electric has numerous divisions and makes a wide variety of products, including:

• Wind Turbines
• Power Plant Generators
• Airplane Engines
• Advanced Healthcare Screening Devises
• Locomotive Engines
• They own ½ of NBC Universal
• and they do a dozen other things

I was intrigued with a key financial tool they used for managing investment across their various product lines. The process starts with an honest assessment of where each product ranked in its own marketplace. Each product was evaluated, and put into one of three categories:

1.) If the product was ranked among the top three in its industry / market segment, it was provided the investment necessary to keep it there.

2.) If the product was not in the top three but had strong growth potential in the near term, it was given the investment necessary to get it into the top three.

3.) If the product wasn't in the top three, and wasn't likely to get there, the investment of new funds was stopped, the division was milked for cash or, often, sold.

Here's the reason:

The top three companies in any market generally offer strong value, and have the pricing power to earn reasonable profits.

All of the other companies in the market end up competing on price, and earn little or no profits.

So GE invested its capital in products that were proven winners, and products that had strong potential growth. It cut its losses on those that never really made it, or had run their course.

Applying the lesson to small business

Contrary to the logic used by many entrepreneurs, a small business needs to be even more focused than its larger competitors. Here's why:

• The small operation has even less cash available to invest in non-winners.
• The small operation has even less management capacity to invest in low-profit lines of business.

We strongly recommend that each business periodically undertake a Line Of Business Review. This LOB analysis should be run for each segment of your operations (either product or services). It should detail not only your sales per each LOB, but also look at customer groupings and net profits for each segment.

It can be a lengthy process to do all of this analysis, but the results will help you do a better job of tailoring your business for the future.

Practical Tip of the Day:

Once you have completed your LOB analysis, ask yourself three questions:

1.  Which products are at the top of their field, and could justify a margin increase?
2.  Which products could be enhanced to get them to the top of their field?
3.  Which products could be dropped without having a negative impact on your bottom line?

The Tiered Elevator Pitch

For years, business people have been encouraged to develop an “elevator pitch”: Something that would describe their business, and could be given during a short elevator ride. As a management tool to help people focus on essentials, and to develop a succinct presentation, this has some benefit. As a marketing tool to help promote your company, it has limitations.

The most obvious being this: People who casually ask about your job don't really care.

It's like that adage about personal communications: “How are you?” is really a greeting, not a question.

However, a while back I came across this idea of a tiered introductory pitch which intrigued me. I couldn't find the reference in my personal library, and I don't remember the author (she was a Hollywood writer or agent, I believe), but I remember the concept and I think it has legs

Recognizing the problem mentioned above (most people don't really care about your answer), the tiered approach starts off with a teaser line. So, instead of saying “I am a real estate agent”, you might say “I help people find their dreams”. Instead of saying “I am an accountant”, you might say ”I am a master of the financial arts.

All of which leads to one of two responses:

1. “Oh, How interesting. Have a nice day.” (They weren't interested anyway.
2. “That's interesting. Please tell me more.” Or, “What do you mean by that?”

If you get the second response, they really are interested in hearing more, and you can give them a more traditional introduction that spells out what you do.

If you put some thought into this, you can even come up with a second line that is more specific, but still leaves some mystery. The listener is now truly engaged, and will pay close attention to your pitch.

Even if they aren't really focused on your answer, you have presented yourself as both interesting and memorable. That gives you an advantage.

This multi-step approach allows you to give your best, focused introduction to people who are really interested, and won't be bored with your answer. And having an engaged audience is always more fun.

Practical Tip of the Day:

• Throw this idea out to your staff, and see what they come up with.
• Perhaps, as a group, you can come up with 2-3 standard introductory pitches to use, depending on the situation.
• Once you find some appropriate lines, practice them until they feel comfortable, AND THEN USE THEM.

How Does Your Business Card Sound?

If you've read my previous posts, you know I believe in having a tight company focus. If everyone in the company is focused on doing a few things very well, you have a much better chance of success....if you also communicate in the same way.

One approach to improving your communication is known as the Aural Business Card.

Side Note: This is also sometimes called the Oral Business Card. However, “aural” (what people hear), is more important than “oral” (what you say), so I prefer the former.

Imagine yourself in the following setting: you are a visitor at a Chamber of Commerce mixer, with hundreds of attendees. People come up to you during the evening, shake your hand, and ask “what do you do?” How do you reply?

When we run this exercise at seminars, we get all sorts of answers:

• The long, rambling explanation that wouldn't fit on a brochure, much less a business card.
• The too-short reply that mentions the company name, but not what it actually does.
• The technical product description that few people can understand.
• And a few that are short, simple, and to the point.

The preferred form is the Aural Business Card: One or two sentences that state what your company does, and some additional point that sets you apart from the competition. It's an approach that people will remember.

Here is what it should include:

Part A.)  “I am with XYZ Company.” 

“I own...” or “I am a partner in...” also work here.

Part B.)  “We do ABC, specializing in DEF.”

Don't start this section with “I”, even if you are a 1-person business. Find a way to say “we”, or “our company.” Something that makes you look bigger than just yourself.

Make the ABC part generic enough that everyone can easily grasp what you do. Assume your audience isn't as conversant with your industry as you are.

Make DEF some feature that sets you apart from the competition. If that person at the Chamber mixer meets 10 people who say they sell insurance, he won't remember any of them. If you say you specialize in Key Man Insurance, you will be easier to recall.

 Some examples:

• We sell deli sandwiches at lunch time, specializing in mid-town office delivery.
• We manufacturer metal storage racks, specializing in industrial refrigeration installations.
• Our company provides bookkeeping services, focusing on independent retailers.

Have another 2 or 3 sentences ready and waiting for the person who wants more information. But wait until they ask before trotting them out: In the introductory stage, the more you say, the less they hear.

You can change the words to make them fit your situation, but you should have a statement available that covers all of these points.

Practical Tip of the Day:

Create your own tightly focused company introduction.
Practice it enough so it rolls off your tongue.
Get everyone else on your staff to use the same line.

It may take some work to create this introduction, but it's well worth the effort.

NEXT POST: The Tiered Elevator Pitch

Make a New Plan, Stan.

I have worked for companies large and small, US and Canadian, with Japanese and domestic management. I have seen a wide variety of planning techniques, strategies, and implementations. And, you won't be surprised to learn, much of the effort put into their planning was wasted.

In large organizations, senior management assembles The Plan at the start of the year. It is then set in stone, and set on the shelf to collect dust. In my opinion, a very poor approach.

In small organizations, by contrast, there often really isn't a Plan. Also a poor approach.

So what makes a Good Plan?

Successful companies see planning as an on-going process that periodically produces a temporary document, called The Plan.

The purpose of the process is to determine:

• What's working, and what's not
• What shifts in the marketplace are creating challenges
• What adjustments need to be made NOW to meet those challenges

The process should be a collaboration between those that are close to the market (sales, marketing, customer-facing staff), those in touch with industry trends, and those that can re-allocate resources.

The purpose of the document is to:

• Communicate the near-term goals to every staff member
• Coordinate everyone's efforts
• Keep resources from getting dissipated on secondary tasks

If your planning process hasn't providing the bang you had hoped for, here are some thoughts:

First, Scrap the Annual Plan

I saw this in action while working for Japanese organizations. They prefer a 6-month planning time frame, and base their performance compensation on the 6-month goals.

A 12-month program stretches out too far. Market conditions can change significantly over that length of time, making the plan irrelevant. Also, a 12-month deadline is so far off that the hard projects just keep getting push back.

A 6-month time horizon is long enough to tackle big projects, and short enough to keep everyone focused.

Next, Don't make the Plan about Numbers

The focus of the plan should be on:

• the projects you want to get done
• the people you want to train
• the new markets you want to open up
• the new products you want to get out on the store shelves
• etc.

It should be about the changes you want to make so that the company is better positioned for the future.

If you are doing the right things and focusing on the right issues, the numbers will follow. Putting too much emphasis on the numbers causes staff to take short cuts that look good in the near-term, but don't move the company forward.

Finally, Share the Plan with Everybody

Don't keep it a secret from your staff. Share the plan, share the logic behind the plan, share your belief in how achieving the plan will make the future better, and (often the hard part) solicit their opinions. The further you go down in the company hierarchy, the closer you get to the customer. And that's where you will find the ideas that can really make a difference.

Practical Tip of the Day:

• Can everyone in the company tell you what the key objectives are for this quarter?
• Do you staff refer to the plan regularly to see which projects should be given priority?
• If the answer is No, throw out the plan binder that's just sitting on your shelf, and start over.

Vive La Difference!

A technical term often used in marketing discussions is the USP: Unique Selling Proposition ( or, sometimes, Unique Selling Point).

It refers to something offered by the company that the competition can't/ won't/ doesn't match. It is a great way to get the buyer's attention.

Having a USP creates a superb marketing benefit, but only if it is actively promoted. Which brings us to today's topic:  Comparative Advertising.

I LOVE comparative advertising! I think it exemplifies what great marketing is all about.

The first time I remember seeing this approach was in a television ad for Wilkinson Sword Blades. This was back in the day when the US shaving market was dominated by Schick and Gillette. Wilkinson, the big British company, was trying to break into the market with its new, plastic coated blade. The commercial was simple: a small table, with 4 packages of blades from the major US companies. A hand appears, brushes the competitor's products to the floor, and places a pack of Wilkinson blades in the middle of the table. The announcer states that Wilkinson Sword makes the best blades anywhere, and the commercial ends.

The advertising community was shocked. Mentioning your competitors, particularly in a negative manner, just wasn't done. Complaints were made to the FTC (Federal Trade Commission), but they held that comparative advertising could benefit consumers and encouraged it, provided that the comparisons were “clearly identified, truthful, and non-deceptive.”

What constitutes “truthful and non-deceptive” has been debated in many court cases since, but that hasn't stopped the practice. Some great examples through the years include the famous “Pepsi Challenge” and, more recently, the very clever “Mac vs PC” ads. (Here is the Youtube link to those ads.)

The automotive companies make extensive use of this technique today, particularly in their truck advertising. The Ford ads with Dennis Leary, and the Chevy ads with Howie Long, both state their advantages over the competition. They tout their mileage, power, and towing statistics, and they name names. It is powerful, and persuasive.

So, why don't more companies use this tactic?

We can assume it's because:

• They wish to appear to be “polite”
• They don't want to mention the competition's name
• They haven't figured out a USP
• They don't want to encourage a counter-attack

In my admittedly-radical point of view, if you don't have a USP, you really shouldn't be wasting money on advertising. I am a big believer in addressing the customer in manner they consider relevant, and in answering the Big Question. As detailed in an earlier post, before someone makes a purchase from your company, they endeavor to find an answer to the Big Question: “Why should I buy from you, rather than 6 other companies that do the same thing”.

Comparative advertising certainly attempts to answer that question. Are your ads as effective?

Practical Tip of the Day:

• What sets your company apart from the competition?
• What do your customers like about your company, as compared to the competition?
• Do you promote those qualities in your advertising?

Letting Go is the Hardest Part

I had a great conversation over coffee the other day with an acquaintance that runs a small business in town. He'd read my posting touting the benefits of focused product lines, and had a major objection. His argument boiled down to this: He needs all the business he can get, and can't afford not to offer a wide range of products and services.

I understood his plight, and I paid for his coffee. But I don't agree with his analysis.

If his objective is to earn enough money to pay his bills this month, I can see his logic. If, however, he is trying to build his business for the long term, he should take a different approach. I recommend the following:

Part One: Find a unique niche that will provide both sales and profits.

This is a three-step process:

• Find a product or service at which his company truly excels, and
• the competition does not do particularly well, and
• that appeals to a significant segment of his market.

I know, that seems like a big, perhaps impossible task. Isn't everything already being done? Aren't the competitors already in the lead in these areas? Not necessarily.

Most competitors are not particularly innovative, and customers are always looking for new products and new ways to do things. There are often unexplored niches available to exploit. And all significant profits come from providing something the competition doesn't have.

Many business people will say they differentiate their business from the competition in some way. Observe them at work, however, and what you see is their daily attempts to convince customers that they are:

• Nice people to work with
• Willing to work hard for their customers 
• Always eager to offer a discount to get some business.

Two problems with this approach: It doesn't set them apart from the competition (who are doing exactly the same things) and it doesn't give customers a compelling reason to buy from them. (Read The Big Question post here.)

So get going, find the one big thing that will set you apart from the competition, and then move on to

Part Two: The really hard part, Letting Go.

The first part is undoubtedly difficult, but it deals with pragmatic, quantifiable issues. Part Two is much harder because it has an emotional impact. Part Two involves Letting Go of something.

• Your staff is already busy doing things they assume are important.
• Your management group bandwidth is already stretched working on existing projects.
• Dedicating time and resources to the new focus (as determined in Part One), requires eliminating some current activities.

It may be some products or services, it may be some territories or some specific customer groups. It won't be easy, and it may feel like you are being asked to cut off one of your arms. However, not all products, territories, and customers offer the same profitability or have the same future potential. They do, however, all soak up resources that would be better applied to the new focus.

Calculating what to eliminate may not be highly difficult, but actually Letting Go can be extremely hard to do. That will be the true test of your leadership skills.

Practical Tip of the Day:

Look for some new ideas that will set you apart from the pack.

• Listen deeply to your customers. What are they looking for that you aren't providing now?
• Listen to them again. What do they dislike about your competition?
• What are the innovators in your industry doing to set themselves apart? Are there any clues here you can adopt?

My Favorite Steve Jobs Quote

Tons of newsprint and an enormous number of megabytes have been dedicated in recent months to the wisdom of Steve Jobs. Every article seems to include the word “genius” at least once, and every utterance has been poured over looking for significance.

There are websites devoted to his wisdom, and several lists of his most famous quotes as the high-priest of technology. My favorite quote, however, comes from a more distant past; before his successes with the iPod, the iPhone, and the iPad. My favorite is also directly relevant to small business management.

Let's go back to the mid- 90's, and remember how the computer industry was structured at the time. The top players in the industry were:

• IBM, run by Lou Gerstner, a marketer with great credentials from his time at American Express and RJR Nabisco, the tobacco / snack food giant, and
• Compaq, run by Eckhard Pfeiffer, the former financial controller at Texas Instruments.

These were the biggest players in the industry, and had the lion's share of the business computing segment. Steve Jobs wanted to make the point that business buyers were best served by dealing with companies that had leading edge technology, comprehensive software-hardware integration, and leadership that would create great products both today and in the future.

While speaking to a conference of business leaders, Jobs said:

"Never buy a computer from a company where the CEO can't do the product demo."

(Note: I couldn't confirm these words in my on-line research, but that is how I remember the line.)

I was blown-away at the time with the wisdom and simplicity of the concept, and it applies today to every business, not just computers. Here's why: To do a competent product demo to a customer, you need to know

• The product, and how it compares to the competition, and
• The customer, how he uses the product, and what he wants to accomplish.

If you don't have both sets of knowledge, you won't deliver a compelling demonstration.

And if the leadership at the top of an organization isn't equipped with both sets of knowledge, the company won't have the focus needed to deliver long-term benefits to their customers. It doesn't matter which industry you pick, the concept is the same. For a company to succeed, the leadership needs to understand the product, the competition, and the customer. It also needs a vision about where each of these three components is headed.

I just finished a great book: Car Guys and Bean Counters, by Bob Lutz, certainly a “genius” in the automotive industry. He must be a genius; He agrees with me on this issue.

In a section discussing the decline of General Motors, he describes how car design decisions were being made by marketing types that had earned their reputations selling laundry soap at Proctor and Gamble.

He writes, “Shoemakers should be run by shoe guys, and software firms by software guys, and supermarkets by supermarket guys.” And, obviously, car companies should be run by car guys.

It doesn't matter what industry you are in, if the boss hasn't got in-depth knowledge of both the product and the customer, you will see that reflected in poor product development and weak marketing decisions.

Here's a great BusinessWeek article on the book.

Practical Tip of the Day:

How far down in your organization do you need to reach when its time to give a great demonstration to a new account? If the head person can't do a compelling demo, that's a sign of major organizational weakness.