I love speaking to CEOs who have a growth mentality. They face the same challenges everyone else does, but they’re always moving forward. They remind me of a great Rocky quote: Success isn’t about how hard you hit, it’s about how hard you can get hit and keep moving forward. Growth-oriented CEOs are always moving forward.
I was speaking to a group of CEOs on Wednesday, talking about my favorite subject – Creating Demand and making competition irrelevant. The conversation led to one of my underlying philosophies: “To succeed in creating demand, you must take your value proposition (or promise) to such an extreme that your competitors either cannot or will not follow.”
Look past the excitement of that statement. What it says, is that anything that has the opportunity of being great has to look foolish on the surface. In difficult markets, the only sustainable strategy is to do something great. One of the great advantages of a recessionary market like the one we are in right now is that things can’t get much worse , so you not penalized for taking a risk in pursuit of excellence.
How great can “foolish” be? Check these promises or propositions out (they were all predicted to fail):
- Put a man on the moon and return him safely by the end of the decade.
- When it absolutely, positively has to be there overnight.
- Always low prices.
- A PC on every desktop.
- A low cost transatlantic airline that will put British Airways on its heels (Virgin Atlantic)
- Recreating the euro cafe experience in the US
- The airplane
- The printing press
So go for it, be foolish.
In my last post, I introduced The New Marketing Funnel and defined the phases of the process. In this post, I want to share how to utilize this process as the filter for every marketing action or investment you consider.
One of the great advantages of The New Marketing Funnel is that it finally puts to rest the age-old question: How does the selling function differ from the marketing function and where and when do they meet. Since (what seems like) the beginning of time, sales and marketing have been in a pitchfork battle – exemplified by the Harvard Business Review article The War Between Sales and Marketing. The New Marketing Funnel clearly shows how sales fits in the marketing function and how marketing both supports and stimulates the sales function.
With a clear understanding of each phase of The Funnel, the first question to ask when considering or reviewing a marketing activity or investment is which part(s) of the funnel is the activity designed to support. A fundamental key to effective marketing is to ensure that every effort is measured and assessed for effectiveness. While some marketing activities are easier to measure and judge than others, The Funnel makes it easier to assess any activity when you’re clear about it’s purpose.
Take blogging for example. I’ve been a blogging advocate for years, and I’ve encouraged many a businessperson to start blogging. That said, I know many people who started blogging only to quit because, “It didn’t produce any results.” I asked them what results it was supposed to produce. After much conversation (which I might add demonstrated that they had no clear objective to begin with), it came down to: we couldn’t measure any new business we were getting as a result of blogging – it was a big waste of time. Further clarification led to the realization that they wanted their blog to support lead generation.
Had they understood The New Marketing Funnel before they began to blog, they would probably have realized, before they started, that blogging would not “pay” if measured by lead generation effectiveness. (In my personal experience with this blog, I’ve found very little lead generation impact). The interesting thing about these companies is that their biggest problem wasn’t a lack of opportunities in the market, per se. The problem they had was getting prospects to understand their value proposition, and to get prospects to engage in conversation. Their direct sales efforts struggled overcoming the “relevancy barrier” (answering the question in a prospect’s mind why they should stop what they’re doing and listen to the salesperson).
The part of The Funnel that addresses this issue is lead cultivation. Had these companies focused on the objective of lead cultivation, the topics they wrote about would have been different, the salespeople would have leveraged the content to soften the market for lead conversion and the bloggers would have given the effort the time it needed. Why? Because they would have been clear about the purpose.
The Funnel doesn’t just work for blogging and other social media (though it will clearly define the power of such tools and tactics), and it doesn’t just work on the pre-sale portion of marketing. The Funnel helps direct actions that lead to increased word of mouth. Since before I ever had a thought about starting my own business (I was probably 6 at the time), I knew that the “best advertising” was word of mouth (WOM). Most small and mid-sized business enterprises (SMEs) rely on WOM for a meaningful portion of the new business efforts. Yet, few companies actually address the issue directly. The Funnel helps you focus those efforts.
Putting The New Marketing Funnel To Work
So, how can you utilize The Funnel to make sense of your marketing efforts? Here’s a 10-step plan:
- Identify and list all marketing activities that you conduct (big or small).
- Clearly connect every activity to at least one of The Funnel’s phases (it’s fine to have more than one – for example, blogging supports cultivation, selling, and loyalty & belonging for me).
- Any marketing activity that is not directly supporting at least one phase of The Funnel should be immediately eliminated.
- Describe how the activity supports the phase it has been assigned to (if you find the task of writing that description to be more pain than it’s worth – that marketing activity should be immediately eliminated).
- Define success – if the activity works what value would it provide; what’s it worth?
- Calculate the costs (time, money and energy) for each activity.
- Do a return on costs analysis – does the definition of success (step 5) provide a reasonable multiple for the costs. Any activity that does not should be immediately eliminated.
- Monitor your activities and compare the results to your expectations.
- Adjust accordingly.
- Identify phases of The Funnel that are not fully support and create activities that support those phases and meet the criteria in steps 1-9.
If The Funnel has done it’s job, you will a) be much clearer about your marketing efforts, and b) you will have cut some marketing activities. This biggest, most common marketing mistake I see SMEs make is they try to do too much. Better to do fewer things excellently than several in a mediocre fashion.
We have a tool called The Packaging Audit™ that can support this analysis. If you’d like a copy, send me an email (or leave a comment) with your contact information. I’d be happy to provide it to you.
The marketing function (at least as most business executives define it) has been undergoing substantial change over at least the last 10-15 years. Traditional communication mechanisms are no longer sufficient to create the environment to make profitable sales. The reasons for this are multi-pronged. Increased competition, information, commoditization and complexity have formed a great barrier to a company’s ability to connect with its desired customers.
In this two-part post I will share you with a new paradigm of marketing – what I call “The New Marketing Funnel” – that will enable you to transform old, ineffective forms of marketing to critical drivers of growth. In this post I will focus on introducing The Funnel and highlighting some critical errors of more traditional approaches. In my next post, I will share how to put The Funnel to work in your business.
While this post highlights my experience and take on this issue, I did not originate the idea (my apologies for not being able to remember the people who inspired this insight – I’d like to give proper attribution). Various marketing prognosticators have been talking about the need to focus on customer niches, establish connections and to co-create. This post, and my approach, is unique because it looks at how The New Marketing Funnel connects to the pre-sale phase, the selling process and the post sale process.
Traditional marketing has focused, almost exclusively, on only the first part of The New Funnel – lead generation. It then paid lip service to lead cultivation and conversion. The reality in most small and mid-sized business enterprises (SMEs) is that the area between lead generation and the selling process could best be described as The Land of Mutual Mystification. This resulted in a poor definition of lead generation and resulted in accelerated commoditization.
Now, let me define the phases of The New Marketing Funnel:
Lead Generation: Any activity that “leads” a Best Few Client™ to become actively aware of your company and/or your offerings. (Please note that while the buyer is actively aware of you, in the lead generation phase you may have no idea of the buyer’s existence.)
Lead Cultivation: The activities that allow your business to build a connection with those who are aware of you. This is where your positioning is established – where you have the opportunity to truly differentiate yourself (many times this is the only place where you have the opportunity). This is also the place where you can create demand. Lead cultivation should be designed to attract the right buyers to your offering – while repelling the wrong ones.
Lead Conversion: This is the point in the cycle where a selling and/or buying process is kicked off. The nature of the conversation changes from the general to the specific. Problems are clearly identified and the conversation becomes focused on key problems and issues.
This is the point where traditional marketing let businesses down and accelerated commoditization. While sales and marketing departments were talking about “lead generation,” companies defined a lead as one who was willing to enter a sales conversation – this is lead conversion not lead generation. This is why marketing communication became more about the “we-do’s,” features and stuff that businesses did, rather than on enabling buyers to feel understood. The focus on the conversation (and most websites) is too far down the cycle.
Selling Process: This clearly defined process is where buyer and seller are in a direct conversation about uncovering, understanding and solving problems.
Satisfaction, Loyalty & Belonging: Post sale is another place where traditional marketing let businesses down. Sure, it paid lip service to satisfaction and loyalty, and marketers discussed things like enhancing the client experience, but it never really lived up to the promise. The post sale process is where you secure your customer/client base and stimulate loyalty and word-of-mouth. The problem with most word-of-mouth is that it happens by accident and isn’t guided. Effective post sales marketing stimulates and guides effective word-of-mouth.
In the next post, I will share with you how to utilize The New Marketing Funnel to guide your strategy and tactics.
I was talking with a friend of mine, who is also a business owner. He was kvetching about some challenges he was having getting the people in his business to make the changes he wanted. My friend’s company is highly entrepreneurial, on pace to do about $3 million in revenue and he’s looking to position the company to do $10 million. He was asking me how Imagine Business Development might be able to help him develop a go-to-market strategy to accelerate his growth and his profit.
We got into a conversation about some of the barriers he faced to achieving such growth and the conversation turned to some of his internal barriers. While I’m paraphrasing to some degree, my friend said, “I realize that we’re not the easiest company to work with. We’ve had quite an entrepreneurial culture and most the people here aren’t really used to having accountability, but we’d be looking to you to help us get things done.”
Now, I’d like to say I’ve never heard those words before – I can’t. Actually, I hear them too often. I understand how difficult and challenging running a small or mid-sized business enterprise (SMEs) is. SMEs have to be better than the “big boys” and we’re given fewer resources to do it. We rarely have access to largest pool of top talent (they’re often busy slaving away for Fortune 500 companies). As the leader or member of the senior management team, there is so much you are responsible for that the most important question you find yourself asking is, “What am I not going to get done today.” With all of the challenges of running an SME (and the odds against you), the one thing you can not tolerate is a lack of accountability.
My friend needed to correct some critical misconceptions before working on developing or implementing a strategy. Chief among the misconceptions is that accountability is optional. I define accountability as, “doing what you say you are going to do, when you say you are going to do it.” Further, “if for some reason you are unable to, you alert any impacted parties before it’s an issue.” Additionally, accountability is a two way street – executives need to be as accountable to those below them on the org chart as they expect their reports to be – if not more so! In my experience, the number one reason that companies fail to build a culture of accountability is that the CEO expects people to be accountable, but fails or refuses to be transparent and accountable to the rest of the organization.
The thing about accountability is that it can’t be delegated, outsourced, or rationalized. You’re either accountable or you’re not. Here’s the other thing about accountability – it’s not something that should or needs to be managed. If you have a top performer, accountability is wired in. The leader’s challenge is to be clear on expectations because once you tell a top performer you expect something, they go to it. When John F. Kennedy said, “We will put a man on the moon and return him safely by the end of the decade,” the engineers got to work. Kennedy’s job was to provide the goods (the funding, the leadership, and the talent). Had Kennedy failed to provide the resources he would have looked stupid, rather than brilliant.
Let me put this as simply as I possibly can – developing a good strategy is useless if it’s not built upon accountability. Forgiving accountability for any reason is a death knell today. And that’s the part of my friend’s statement that really steamed me, “we’re an entrepreneurial company – we’re not used to accountability.” That’s ridiculous, and I’m sick of hearing it (I hear from lots of people). True entrepreneurs are the most accountable people in the world. We have to be – if we’re not, we go bankrupt. Here are some “entrepreneurial companies,” you tell me if they have a tradition of accountability:
Lack of accountability is not entreprenuerial – it’s lazy! And lazy won’t work.
I’ve written before, and often said, that a brand is not what you say it is, it’s what you’re customers, stakeholders and people who come in contact with you say it is. The point is that you don’t control your brand any more – the market does. The best you can do is contribute to the conversation. (BTW, I am by no means the first, nor the most highly qualified to make this point, it is fast picking up consensus.)
Much has been written about Apple and the power of it’s brand. Anyone who knows me knows that I’m a huge (HUGE) Apple fan. In December of 08, The Simpsons, spoofed Apple in the opening of their show. It’s worth looking at because a) it’s tremendously funny and b) it provides a great insight to branding.
I haven’t sparked as much conversation with a blog post or observation as I did with my recent post McStarbucks in quite some time. My employees, my friends, and my clients have all analyzed, taken issue with and empathized with the post. One client summed the feelings up best when he said, “Yeah, I guess I just don’t want to believe that [the points made in the post] because I’ve been such a fan [of Starbucks].”
The most frequent (and at times aggressive) question I’ve gotten in response to the post is simply, “Okay Doug, what should Starbuck do?” It’s a great question and one that I’m going to attempt to answer.
Before I get to my answer, let me state for the record that I focus on and immerse myself in the world of small and mid-sized business enterprises. Further, I focus predominantly on B2B and high-end B2C providers, so Starbucks (being large and retail) is out of my wheelhouse. I’m taking up this challenge for three reasons: 1) because it seems like a fun thing to do, 2) I think some of the thoughts can stimulate ideas within the base of companies that I work with, and 3) my mom taught me not to say anything negative if I couldn’t come up with a better alternative.
One final caveat – Starbucks started going down the wrong path several years ago. The issues they’re dealing with are complex and simple, one-line solutions won’t do anyone a lot of good. So take these ideas in the context they’re intended- to provoke thought.
- As mentioned earlier it took Starbucks several years to get into this mess, so the first thing I’d do, if I ran Starbucks, is realizing that it’s not going to be a couple of months to get out. Starbucks violated the trust of core customers. Trust building takes a long time, and it takes even longer to rebuild.
- I’d look at the roadmap Steve Jobs created at Apple (point of clarity – I’d look at it, I wouldn’t copy it). Apple was where Starbucks is. They violated the trust of their core customers and almost lost their franchise as a result. What did Steve Jobs do when he came back? He cut. But, he didn’t cut for cutting’s sake – he cut to get back to the core. The primary focus of Steve Job’s first 90 days as CEO was to review everything in the product pipeline and cut the number that they were going to focus on. I don’t have the facts with me, but I recall he cut from 22 to 4 (2 for the business/design market and 2 for the consumer market). Jobs told Wall Street, employees, and fans that Apple was going to get smaller before it got bigger again. Apple has maintained that focus and has rebuilt their franchise to one that is stronger than ever before.Starbucks can do the same thing, but they have to get back to their core – “the coffee experience,” or “the third place.” They’ve got to get back to those who can love them the most – coffee lovers. If they want to expand the market, start catering to tea lovers (I realize they’ve started doing this). Create battles, rivalries, whatever; but get back to the lovers. Starbucks is not going to fix this without feeling the real pain. It appears to me that they’re trying to fix things without pain.
- If you want cut prices, don’t cut the prices of your core offering – coffee (and maybe tea). Here’s an idea – cut the price of wifi. Make it free for anyone visiting Starbucks – whether they have a T-Mobile account or not (or whichever provider they are using – I haven’t been there to hang out in a while, so I don’t know).
- Make it fun, enjoyable and/or useful to hang out there. My experience at Starbucks of late can be summarized as: loud, chaotic, dirty and congested. Clean the place up and keep it clean.
- Reduce the offerings, don’t increase them. Here’s a general rule – increase in good times; decrease and refocus in bad times.
- Appreciate and love your customers. Not with discounts (I’m worth more than a $2 cup of coffee) or “frequent buyer” programs. Just make me feel appreciated and loved. I used to love the fact that when I went to my local Starbucks, I didn’t have to give them my order – they knew it. Today, I’m happy if I can get eye contact and a genuine, authentic statement from a “barista.”
- Cut the number of locations by 1/3 and focus on making the remaining 2/3 great – and I mean great. Anything less than great from Starbucks is not going to be enough to turn the tide. By the way, get rid of (or rename) the in-store kiosks in supermarkets and other places – the service there is horrible, the people aren’t trained and it destroys the brand.
- Focus, Focus, Focus. Decide how you are going to be defined and focus manically on that. What is Starbucks today anyway?
- Stop worrying about the competition. I’ve heard Howard Schultz refer to Dunkin Donuts and McDonalds more in the last three months than he did in his entire first go around as CEO.
- Get back to having fun. I don’t get the sense that Starbucks is having fun and that makes me less likely to go.
There you go, 10 quick ideas. What do you think? Do you want to add some more? Take issue with any of my suggestions? Let’s hear it.
Here’s what I don’t get – why are we giving the very same economists who completely missed this economic cycle the authority, credibility, and expectation that they have any idea when we’ll get out of the recession or how. My friend, client, and fellow blogger, Bob Corlett, points out that this time last year, only 2 of Business Week’s “esteemed” 54 economists predicted we’d be in a recession. I’d like to point out, additionally, that they made this prediction when (as it turns out from the “recession panel”) we were already in the recession.
I’m not complaining that they were wrong (though I’d like to add this to my complaints in college when I was forced to take a class that made no sense – but that’s a story for another day). My complaint is that we – yes, you and me – are allowing people who have no compelling history in predicting the future to create the narrative for how we should think. As a financial advisor, I was taught that past performance doesn’t indicate future results, and yet, we keep acting like it does.
Look, I admit that I have no idea when or how we’re going to get out of this recession. I have my theories – and I’d like to add that my prediction track record is just as good (bad) as the economic prognosticators. I have no control over this recession. I have little control over economic policy or any of the other things that dominate the news today.
- Here’s what I do control – my attittude, my behavior, and my actions.
- Here’s what I pay attention to – my customers and my market.
- Here’s what I know – there is a completely new reality. Of course, there is always a new reality, so the recession isn’t really different.
The recipe for success in this environment is the exact same as it is in any market condition:
- Know and understand your customers better than they know and understand themselves.
- Focus on the results you create for your customers.
- Create value in everything you do – especially in the sales and marketing process.
- Listen to the market – it is always right.
It’s time for a new narrative – we control our destiny. The fabulous thing about America is that every day, 300 million people wake up, believe and act in accordance with the belief that they can make their life better. The more we focus on that, the faster we’ll get back to a feeling of normalcy (even if it’s a new normal) and the better off we’ll all be.
Cessna has just launched a new advertising campaign – and I LOVE it. Cessna gets who their customer is, and they’re not worried about anything else. It reminds me of what Thomas Baldwin, CEO of Morton’s, said about staying focused on the things you can control.
Fast Company doesn’t like the ad; saying, “Where can we get a reality-distortion field, like the one the Cessna people have?” Cessna understands two critical items:
1. Fast Company is not their client, and
2. The only stance that provides any chance of success is an assertive, confident one.
Difficult times call for leadership. Leadership requires risk. Leadership, by it’s nature, is positive. In difficult markets, you must embrace the negative and stay positive. Recessionary markets are not for the meek or the weak of heart. Succeeding in a recession requires focus, confidence, aggressive action, and taking the long view. It’s not about winning the battle – it’s about succeeding in the war. Cessna gets that if they don’t drive an agenda they lose by definition.
Now think about this for a moment – what percentage of people in the country fit the psychological profile of a Cessna buyer; and have the need and ability to buy? Maybe .01%? If that’s the case, that’s the entire universe Cessna should pay attention to. 99.99% of market opinion doesn’t manner. What’s more – what if Cessna is being delusional? What if Fast Company is right and it’s foolish to buy a private jet or use Cessna’s services right now? There would be no point.
One of my favorite movies of all time is The Shawshank Redemption. It’s the story of Andy Dufresne who goes through several trials and tribulations – both physically and mentally. Andy never forgets that his goal is to get out and get to Mexico. Near the end of the movie, Andy is sent to solitary confinement for a considerable amount of time. Andy is released and starts talking to his close prison friend, Red, about his dream of going to Mexico. Red becomes worried about him and thought Andy has lost his will. The dialogue from the movie is right on for today; here it is:
- Andy: You know what the Mexicans say about the Pacific?
- Red: No.
- Andy: They say it has no memory. That’s where I want to live the rest of my life. A warm place with no memory.
- Red: I don’t think you ought to be doing this to yourself, Andy. This is just shitty pipedreams. I mean, Mexico is way the hell down there and you’re in here, and that’s the way it is.
- Andy: Yeah, right. That’s the way it is. It’s down there and I’m in here. I guess it comes down to a simple choice, really. Get busy livin’ or get busy dyin’.
For those who have seen the movie, you know that Andy did not lose his will; as in the next scene Andy escapes.
So how are you talking? Are you talking the language of living; or are you talking the language of dying? Cessna is clearly talking the language of living – and it’s the only language that makes thriving possible.
Last week, Amazon announced the new version of their e-book reader, The Kindle 2.0. They maintained the price at $359 (which is actually a price increase, because version 2.0 does not include a cover, it’s $20 extra).
I have the original version of the Kindle, and I love it. I travel a lot and I’m a voracious reader. Sure, it’s a bit clunky looking, and I lose a little of the feel of having a “real” book, but the Kindle has many advantages. The new version of the Kindle is much nicer looking, and fits what you’d expect from a mass consumer electronics item. I’m even tempted to get the new one – but I’m not about to pay another $359 to get one. Actually, I’m quite insulted that Jeff Bezos, bragged about how they were taking care of their “early adopters” (those who bought version 1.0) by “granting” us the first 24 hours to get an order in.
That, however, is not the mistake that Amazon is making. Amazon should cut the price of the Kindle to no more than $199 (and possibly even $99). Before regular readers of this blog think I’ve gone nuts, the reason for this has nothing to do with making the Kindle “cheaper.” It has everything to do with the concept I call What Causes Sales.
Kindle causes sales. The only reason to buy a Kindle (no matter how much it is) is because someone wants to read books. Further, when Amazon sells a Kindle they “lock in” a customer. I can only buy books from Amazon for my Kindle – all other bookstores become irrelevant. Therefore, the more Kindles that are bought, the more books must be bought from Amazon. What’s more, buyers of Kindle are grateful for the experience.
While Kindle is the top ebook reader today, there are several forms of competition on the scene, including Sony and more and more aps for the iPhone. What’s more, many of these competitors are “open source” meaning that you can buy the book from anywhere. Additionally, the biggest complaint about ebook readers is that it is still far too frequent that a title is not available and one must choose to either go off the Kindle (or other reader) and buy a copy of the actual book or skip reading the book. The fastest way to fix this is to get more titles – and the fastest way to accomplish that is to dramatically increase the sales base for ebooks.
Additionally, I’ve written about money making machines before. For Amazon’s book division, the money making machine is the purchase of books. It appears to me that Amazon is trying to make the Kindle a money making machine as well, however, unless they make the Kindle open source and dramatically change the business model I don’t think that would work. Amazon would be far wiser to lower the price to a level that book lovers will buy the Kindle just to have it and see what the fuss is all about.
Amazon has a great advantage to dominate this market the way that Apple has dominated digital music. Apple gave away iTunes and continuously and aggressively lowered the entry point for the iPod. This “caused sales” of music and Apple today is the dominant player. Amazon seems not to have learned this lesson.
The only justifiable excuse for this pricing decision is that they are keeping the price high to reduce demand so that they can manufacture them at an adequate pace (the supply of the first version of Kindle regularly ran out). If this is the case, it’s inexcusable that Bezos hasn’t built the capacity to support such a powerful divergent offering.
Will Amazon learn? We’ll find out soon enough.
Seth Godin has a great insight as to why “people don’t buy your offerings,” check it out. Godin is spot on when he talks about how testimonials, proofs, and even case studies don’t work. Buyers (and this time Godin focuses more on B2B) don’t care about you’re proof – they worry about your story (does it resonate), they worry about what their boss thinks, they worry about; well they worry about whatever it is they worry about. They are (just like you) irrational creature – embrace the irrationality and make more sales.
I’ve not written about one of my favorite subjects in a while – the customer experience. Today, I was having lunch with a client after a speech and we got to discussing how mediocre “customer service” is. Despite all the noise about “the customer comes first” and how companies need to be “customer centric,” service standards have changed very little over the last ten years.
After lunch, I returned my car to Hertz (where I’m a Platinum member – supposedly their highest level of service) and I noticed how long it took for an attendant to check my car back in and give me a receipt. I needed a receipt for reimbursement and I had plenty of time for my flight so it wasn’t that big of a deal, but it hit me just how much Hertz’s recent cuts have negatively impacted customers – the exact opposite of what you should be doing in a battle for customers.
Then I got to the Southwest terminal, where I was greeted warmly, jokes were exchanged and I was managed pleasantly. I then had a blinding flash of the obvious – every customer wants the same basic experience – to be treated like they’re the center of your universe.
I realized that when I’m buying something, when I’m utilizing a service, I just want to be treated like I’m the center of the business’ universe. I realize I’m not (and I’m okay with that), but for the moments that I’m “engaged” in a business interaction (and I’m the buyer), just try to make me feel that way.
The restaurant didn’t do that, Hertz didn’t do that, Southwest did – no wonder Southwest is so successful.
I was having breakfast at a hotel this morning before a speech. A business/sales meeting was occurring at the table next to me. I couldn’t help but eavesdropping to what was happening. In 30 minutes, I saw everything good and bad about how companies sell.
On the seller’s side, there were three people, while the buyer had two. The leader of the selling team was clearly smart, wise, and brought a tremendous amount of value to the table. While I’m not sure what he was talking about specifically, he clearly knew what he was talking about. He also told a good story.
The buyers listened attentively and said: “This sounds great. We’ve got a budget and we’ve got to stay under, so we need to know what the price will be and know that you can do it for a certain price.”
The tone changed completely, though not in an obvious manner. The seller, realizing that he had just encountered an “objection,” began to justify the offering. He made some really excellent points about how his offering, while more expensive than others, saved material costs in other ways. He added that the buyers needed to pay attention to the total cost.
While the seller still held the knowledge, he lost all of his strength of position. He became a “sales guy” rather than a resource. While I had to leave before their meeting ended, it had taken a turn for the worse, as the seller was discussing different ways the he could decrease “the investment required.”
While the seller may still have gotten his sale, he could have gotten it so much easier, without reducing his “investment” (code word – price). How? By starting out asking questions about the buyer’s constraints, problems and worldview. Had he asked questions he could have elicited the price concern before he provided his knowledge. He then could have made his “total cost” presentation much more powerful, serving to help the customer achieve their goals without violating their constraints.
The moral of this story – at your next meeting please, please, spend at least the first 15 minutes asking questions to understand the buyer’s world.
Robert Fritz, in his (great) book Path of Least Resistance: Learning to Become the Creative Force in Your Own Life, explains structural tension and how understanding this concept enables you to understand why people do what they do. Simply put, people will take the path of least resistance – which is typically going to be the path that presents the least pain or (this is important to understand), reduces the area of the greatest pain.
For example, understanding structural tension clearly explains why people tend to yo-yo with their weight loss efforts. As Fritz explains it (and I’m oversimplifying here), people who struggle with their weight tend to have competing beliefs. On one side, they have a belief that they should be healthy so they try to keep their weight under control; on the other, they have a belief that they like rich (fatty) foods. Rarely is their situation in balance.
When they feel healthy (their pants fit), they experience very little pain from the belief that they should be healthy. Because they feel no “health” pain, they focus on their belief that they like fatty foods – so they overeat. Overeating conflicts with their “be healthy” belief and, eventually, they feel more pain from not being healthy (their favorite shirt doesn’t fit). Because they’ve been eating what they like, they feel very little pain from the “I like fatty foods” belief; so they, temporarily, change their behavior and diet. This works, until people start complimenting how they look, their shirt fits again and they have been denying themselves their favorite foods. Because of the denial the “fatty food” pain, becomes increasingly acute, causes them to overeat and the cycle repeats.
So, what does this have to do with growth and the current challenges we are dealing with in the economy. Let’s take a look at two, typical beliefs held by growing companies: “expand opportunities” and “control or cut costs.”
When the economy and markets are good and revenue is more than covering expenses, businesses feel relatively little “cut/control costs” pain. So they get lazy and, in the name of “opportunism” and poor strategic planning, pursue opportunities with little discipline. This causes costs to rise at a greater rate than the rewards of their investments. As a result of rising costs or a change in market conditions, the “cut/control costs” pain increases significantly. Add to that the “opportunity binge” companies have been on, there is relatively little “expand opportunities” pain.
Just as people who wake up and realize they can’t wear their favorite clothes, companies go on a “crash diet” and cut expenses with little strategic thought. The lack of strategy and discipline that applied in the growth cycle applies equally in the cut cycle and mistakes are made, weakening the company. Keep in mind, the companies beliefs have not changed – they still believe in expanding opportunities, it’s just that the “cut/control costs” pain has become more acute that the “expand opportunities” pain. Eventually, the cycle shifts as the “expand opportunities” pain becomes greater than the “cut/control costs” pain. And the cycle repeats.
This is precisely where the vast, vast majority of business find themselves – they’re in the exact same position as people who struggle to lose weight. Just like the diet shows, gimmicks and shortcuts don’t work for people, shortcuts don’t work for businesses.
What’s the solution? Stop the insanity (yes, that’s a pun for those that remember one of the funniest diet gimmicks ever)! Fritz says that if the focus is on behavior – change will not stick. Over long periods of time, behavior always follows structure. The answer then is to change the structure and to integrate the beliefs. In business, this means that you have to stop looking at “cut/control costs” and “expand opportunities” as opposite ends of the spectrum. You must get out of the good market/bad market mindset. Companies should always be cutting, controlling, and expanding.
Here’s my challenge for you: How can you combine strategy, structure and people to enable you do get the work done by four people to be done better by three? If you’re always asking (and answering) that question, growth will become consistent and market conditions won’t control your destiny.
When all creativity is gone, when any new idea for value creation is lost, the answer appears – discount. News that Starbucks is launching its first value meal is the final nail in the Starbucks coffin. It is time for Howard Schultz to step down. For the group from Seattle that made “triple shot, grande, skim latte” sound normal to admit defeat. As a longtime fan of Starbucks, I am (unfortunately) not shocked by the announcement. Starbucks has been falling down the discount trail for some time.
Check out the article in USA Today – it’s a great lesson for any business owner/executive of how to contribute to your own problems. Some of my favorite excerpts, with my commentary in italics.
- The food and drink “pairing” program, which Starbucks actually refuses to call a value menu, rolls out March 3. The only thing worse than a premium brand discounting is trying to spin their way out of it. The company that used to pride itself for treating its customers as intelligent must think we’ve gotten really stupid.
- The move — something CEO Howard Schultz vowed he would never do — comes at a time when the coffee giant is spiraling down. No comment necessary.
- Starbucks, once the model of the New Economy, has been concurrently hit hard by three powerful forces: a recession, changing consumer habits, and growing competition from fast-food chains. The article overlooks the fourth – and most important force: Starbucks inability to stay true to what made it powerful and special in the first place. You can blame this on the recession, competition or consumers, but the reality is this is a problem made by Starbucks for Starbucks.
- The move by Starbucks is glaring evidence of how retailers and marketers have been forced by the economy to rethink game plans and long-held strategies. The move is not evidence of how the economy is changing strategies – it’s evidence that when you stop creating value, you start to kill your business.
- Additional price-cutting is expected at Starbucks soon. Enough said.
Starbucks was a great story. They did something special (and polarizing) for a unique group of people. For years, they were as focused on Who their customers were as Apple is. They didn’t kow-tow to their competition, they practiced customer-centered innovation. They grew aggressively and carefully. Then they believed they were the cause of their success. They forgot it was their customers who granted them what I call a Demand Creation Monopoly™. They stopped doing what made them successful to begin with. Then, when they realized they were in trouble, they acted in the very same way as companies they used to displace by trying to shortcut their way to success.
In today’s economy (and frankly in every economy we will see in the future), the recipe for success is clear – serve a unique set of customers uniquely well. Anything else will bring failure – sooner or later.
I was recently working with a client discussing how to go about implementing a go-to-market plan for a new offering. He said to me that it reminded him of an interview he saw with Conan O’Brien on Inside The Actor’s Studio.
While I didn’t see the interview (and couldn’t find a transcript) to confirm the statement, the point is worth sharing. O’Brien said:
“When the show hit the top of it’s game, we all realized that we didn’t really know what we were doing. Nobody really knows what they’re doing and there are two things to do with that. One is to be afraid. And the other is to be liberated by it. I choose to be liberated by it.”
In today’s world, nothing could ever be truer. The fact is we are all making it up. You choice? Be scared or liberated.
I chose to be liberated by it!