In yesterday’s post I shared a critical designation, and strategic sales decision, that must be made early in the sales process. Are you making a “status quo” sale, or a “change” sale. Now I’d like to share part 2 – the implication of each sale and how to tell the difference.
In many ways, a status quo sale is easier than a change sale. But, as with anything, “ease” has its trade-offs. Status quo sales are far more susceptible to competition, commoditization, and price/margin pressure. It’s very hard to stand out when making a status quo sale, so the sales/marketing focus is much more tactical, with the tactics shifting frequently.
Change sales are harder to make, if for no other reason than change is involved. The upside is that they can have greater impact to the buying organization. Selling organizations that master change sales are able to avoid commoditization by bypassing the competitive environment and becoming a true resource to their prospects/customers – as I’ve written before – they’ve made The Shift from selling to stuff to selling results.
The danger here is that sellers frequently attempt to make change sales to people in the buying organization who worry about the present or past. This is just as damaging as when companies try to sell total value propositions to fundamental value buyers.
In a typical business organization 80-90% of the people are responsible for the present or past. If they’re who you are counting on to drive the sale, then you need to be making a status quo sale.
Only 10 – 20% of people in a company are responsible for managing and allocating resources to address what could be happening. They should be the focus of your sales efforts if you are making a strategic, change sale.
Be careful, while title is an indicator of one’s time frame it is often misleading. So, how can you tell if you’re talking to a future-oriented person or not? Two cues:
- Listen to them. If they spend most of their time talking about what could be, they’re future oriented. If they spend time talking about what is or was, they’re status quo.
- Look at their resource allocation authority. Do they allocate resources to deal with future possibilities or present-day realities?
Going forward spend a little extra time to make sure you are aligning your selling proposition to your buyer’s time frame.
In 2004, I wrote about the need to align your sales proposition with the value definition of your buyer. Over the last seven years, I’ve become increasingly aware of another critical misalignment that occurs in sales efforts every day – timeframes.
Far, far too often, sellers are bringing superior value propositions and promises of better futures to people who do not worry about the future. There are two types of people who work within companies:
- Those who worry about the future.
- Those who worry about the present (and past).
As a seller, you must make a critical decision early in the sales cycle (and in many cases even before the sales cycle begins): Are you making a “status quo” sale, or are you making a “change” sale?
A status quo sale requires very little change in behavior or approach on the part of the buyer. While there are too many possibilities to describe all status quo sales, you are promising an improvement in an area of work where your customer/prospect is already paying for something – be it a key process, a resource or even people. When your new customer makes a status quo purchase from you, they do the same basic things they did with their previous “solution.” The status quo sale is aimed at addressing the issues/problems/worries in the “now.”
A change sale requires the prospect/customer to change their approach is some way to be able to fully take advantage of (and therefore, fully value and pay for) the value proposition. A change sale can address key process or resources, just as a status quo sale can, but the issues/problems/worries it addresses occur in the future.
Tomorrow, I will share the implications of a status quo vs. change sale and how to tell what type of buyer you are dealing with.
It occurred to me yesterday that I’ve been writing a lot about the dangers of letting price competition damage your positioning and your margins, but I haven’t written much about the mechanics of protecting, and even raising your prices in markets like the one we’re in. So, today I’m going to share with you a specific example of how to enhance your margins.
First, you need to understand that you there are only two sales conversations you can be in:
- The What’s It Cost Conversation or
- The What’s It Worth Conversation
If you’re not sure which conversation you’re having, then you’re having The What’s It Cost Conversation. In my experience, 95% of sales conversations are in the “what’s it cost” category.
When your sales process is focused on your solution, it is difficult to impossible to escape “what’s it cost.” The reason for this is:
- The focus quickly goes to product/service features, attributes, and benefits; which naturally connect to costs.
- This focus naturally sets you up to be compared to other “solutions.”
- Further, because the focus is solutions oriented instead of diagnostically oriented, you must deal with a misunderstood or not fully understood problem. This often makes the comparison unfair and further commoditizes you.
- When this happens, you fall into the deadly specs/price trap. Think about what you want when you’re searching for solutions. We all want the solution that is good enough at the lowest price possible
It is far more effective, and profitable, to get into the “what’s it worth” conversation. To do this, you must change the focus of your efforts from a solutions focus to digging deeper on problems. As you begin to probe the problem and dig deeper, you can begin to monetize the value of your solution. In essence, I’m asking you to begin pricing the problem – not the solution.
Let me share a real life example to illustrate my point. At Imagine, we solve sales problems. We could easily be compared to a variety of training “solutions,” but a) what we do isn’t really training, and b) that would badly commoditize us.
Instead, we help our prospects and clients first understand their problem and understand the cost of the problem. In our business, like many of yours, we face a challenge that the difference between our approach and our competitors is not huge. We’re all saying many of the same things. These little differences, however, are huge when in comes to the results companies can enjoy.
So, to gain the price advantage that our results create, we must enable our clients to uncover just what the value difference is. That’s precisely what “pricing problems” and monetizing value does. Here’s how we do it:
Let’s say that your sales team produces the following:
- They average 40 proposals
- They average a 40% close rate
- So they’re closing 16 new opportunities on average
- The average sale was $30,000
- Average gross margin of 22%
This means that each salesperson is producing (on average) $480,000 in sales and $105,000 in gross profit.
The Little Difference
Let’s say that as a result of working with us you improve your results by just 5%. Now keep in mind, that a 5% difference is virtually imperceptible. But, this virtually imperceptible difference can lead to extraordinarily valuable results this 5% difference means:
- Instead of 40 proposals you average 42
- Instead of a a 40% close rate, you average 42%
- Instead of average $30,000 per sale, you average $31,500
- Your margins would go from 22% to 26%
- Total sales would be $555,000, up from $480,000
- Most powerfully, your gross profit you go from $105,000 to more than $142,000 – a 35% difference.
Now, if you maintained this performance improvement, you’d grow faster. So instead of growing at say 10% per year you’d grow 12.5% per year. That difference over a 10 year period of time would result in an increased gross profit of just under $1 million.
I ask you, what would that be worth?
With the problem fully understood and, more importantly, the cost of the problem clear, the proper context has been created to enable you to effectively discuss the appropriate solution (yours) and to have the solution properly valued.
My be is that your business and your approach create such value for your customers/clients. However, if you don’t build out your business case to enable customers to understand the value of your difference, it can’t be valued and your profits will suffer as a result.
I’m in New York City speaking to several groups of CEOs about creating demand. I love New York City – there’s so much to do, so many people to see (and watch) and so much stimulation. It was a beautiful evening, so instead of taking a cab or the subway back to my hotel I decided to walk. I arrived in one of my favorite places – Times Square.
I’m awed by Times Square. How could so much end up in such a small place? Think about your company, your products and services – what would you do if you had to compete in Times Square? How would you gain the attention necessary?
Guess what – you do compete in Times Square. Today, there is so much stimulus competing for less and less attention. Today, you must earn the attention of any one you wish to communicate with. To do that, you must create value all the time.
So the next time you reach out to prospect, ask yourself – are you creating enough value to deserve their attention?
I had a meeting yesterday with a prospect. The prospect made it clear that he didn’t think an effective go-to-market strategy could be developed without first going through a very in-depth assessment/validation process that involved numerous conversations and analysis with customers, potential customers and people who have turned them down.
Sure, maybe 20 years ago, focus groups, customer interviews, and traditional research provided insights that could bring a company real value. That value, however, has been on an accelerating downturn since then, and today, it can actually hurt the company doing the research because it creates an illusion of certainty.
Think about it. The world has changed fundamentally. Business is down, no one knows when or how the growth will return, and buyers are required to do more and more with less and less. So, what does this company (and BTW, I don’t mean to pick on this company as their desire is highly representational of business in general) want to do? They want to ask their customers what they want, why they buy or don’t buy, and what would they need to do to get these customers to buy (or buy more) from their company.
ARE YOU KIDDING ME?! Can you imagine the selection bias that would exist in that research? Remember, research is only as good as the data and those contributing the data that is used to create it. Who’s going to spend the time (even 5 minutes) to answer questions such as these? I don’t know about you, or your customers; but mine are so busy that they can’t get to the things that are important to them, let alone stuff that is important to me.
Yesterday, it may have been worth it for buyers to spend the time answering questions like these. They both had the benefit of more time on their hands and providing that type of information could lead to better offerings and service. Today, however, if a current provider isn’t creating adequate value there are an unlimited number of alternatives that are only too happy to innovate and take your business.
The First Unbreakable Rule For Creating Demand is Know and understand your customers better than they know and understand themselves. If you find yourself saying you need to hire someone to interview your customers, it’s a pretty good bet that you don’t know your customers well enough. All hiring someone else to “interview” will do is give you the illusion of knowing your customer better, while actually moving your further away from truly understanding them.
Here’s what you get when YOU seek to understand your customers: intimacy, deep relationship and an invaluable education. Understanding is an iterative process. It requires leadership. Leadership means, well, leading. It involves risk because, a) there is no certainty you are right and b) you’ll make mistakes. If you want to create demand (and enjoy the higher margins and growth that creating demand provides), it’s your job to figure out what your customer’s want.
If all you’re asking them is what they want, all you’re getting is what they know – and what they know isn’t enough to get them the results they want (if it were, wouldn’t they already be getting those results?). You’ll gain absolutely no advantage with these answers; and likely you’ll focus your resources on those areas that created value yesterday and are unlikely to create value tomorrow.
If someone else is asking the questions for you, all you’re getting is the interpretation of what a researcher (who has no true vested interest in creating market leadership in your space) hears. All the things that aren’t heard – or said – are lost. So, with research in hand, you’re still at step one to really understanding. Don’t get me wrong, the report can be great to provide “justification” to an internal board – but it has no impact on actually succeeding in the market any faster.
Gaining a true understanding of your customers on your own is hard work and it takes a long time. It sounds so much easier and faster to just hire an “expert” to interview them – but it’s not; it’s just the opposite. So, if something is hard work and takes a long time – when’s the best time to get started?
On a scale of 1 – 10, how good are you? If you’re like most people you probably do a lot of things where you would rate yourself a 6, 7 or even 8. I’d also bet, that if you’re really successful there are one or two things you do where you’d rate yourself a 9 or 10.
Recently, I was discussing issues surrounding a client’s sales team. I had observed that his top line sales execs (also VP level people in the company) were Demand Creators™ (a term I use to describe the top level of sales professionals), but that there was a huge chasm between his senior level and the front line sales staff – a chasm that could negatively impact their ability to implement a new go-to-market plan. The CEO replied to me that he thought I was underestimating his salespeople. He told me that while certainly his senior people were 9’s and maybe (his word) 10’s the bulk of his front line were still 7’s and 8’s.
I replied to him, that I agreed, but the problem is that the difference between an 8 and a 9 is the difference between – well – a lightening bug and lightening. Don’t get me wrong, if you’re at a talent level of 7 or 8 you’re quite good – BUT GOOD IS NO LONGER GOOD ENOUGH!!
Markets are too tough; buyers are under too much pressure; and the economics of the information age have completely changed the game. In sales, at least, you must build a sales team of Demand Creators (9’s and 10’s) if you are going to create economic value through your sales efforts.
What must a salesperson master to become a 9 or 10? Here’s a start:
- Business Acumen
- The Five Unbreakable Rules for Creating Demand™
- Diagnostic Protocol
- Their customer’s problems
You may say that there is little difference between an 8 and a 9. To get a picture of how BIG little differences are take a look at the money list for the PGA Tour in 2008. Vijay Singh led the tour, winning more than $6.6 million. He averaged 70.27 strokes per round. Kevin Stadler averaged 71.56 strokes – less than a 1.5 stroke per 18 holes difference. He won just under $600,000 – more than a 10x difference. Kevin Stadler is good – really good; Vijay Singh is great.
Just as a golfer must master all 14 clubs he or she uses in play; you’re sales team must master all the tools of Demand Creation if you expect them to drive superior results.
I hear it all the time: “I just need a brochure that explains what we do better,” or “If we could just create a piece that gets people to see how we’re different,” or “Hey, let’s mail our brochure to prospects and then they’ll be more likely to meet with us.” While I’m not (necessarily) against brochures or corporate collateral, the vast majority of them (like 95+%) are not only bad – they kill profits.
How? They completely commoditize you and your company. They’re like watching a home slide show, without the entertainment. High gloss and filled with we-do’s and pictures – here’s our warehouse, here’s our headquarters, here’s a stock photo designed to look like a client collaborating with one of our engaged employees, etc. They not only bore your audience, they make you completely indistinguishable from your competition (remember they have access to stock photos too).
I’ve said it before – and I’ll say it again (and again) – your buyer’s don’t have the time, the desire, or the inclination to care about you. What they care about is what you can do for them. What you need to provide is context. Stop telling them about what you do, and start enabling them to understand how what you do impacts them in relation to the results they want at this moment in time.
To do this, you must stop thinking of the world from your perspective and start thinking about the world from your client’s perspective. It means that you must know and understand you customer better than they understand themselves. It means start creating demand, rather than merely fulfilling it; and creating value in all (and I mean all) aspects of your business development efforts.
Now, if you want a brochure that drives profits, make it a book; albeit a mini-book. Think about the business books that you’ve read (and enjoyed). What did they all do? They created value by addressing your issues, rather than talking about themselves. They diagnosed issues and helped you design solutions. They stood on their own.
Think about your favorite business book for a moment. What do you think of the author? In the vast majority of circumstances, I know three things about your answer:
- You have no personal knowledge of the author or their abilities.
- You view the author as an expert and you trust what the author has to say.
- The author did not provide you a brochure to “prove” their abilities or establish credibility. (The closest an author comes to providing a brochure is a bio and there’s a reason the bio is usually at the end of the book – it’s the least valuable part.)
This is why content and a content development strategy is so important. It packages your wisdom and capabilities in such a way that buyer’s desire it and it makes you more attractive. It forces you to create value – whether the prospect buys from you or not. It also drives better performance from your employees because they better understand their importance.
Most importantly, a good content strategy separates you from your competition and allows you to grow your profits.
I’m fascinated by what is taking place at Newsweek. Newsweek, whose circulation once stood at 3.1 million, is looking to decrease – that’s right DECREASE – it to 1.5 million. They’re raising their prices, completely redesigning (or should I say completely redesigned) the magazine and the website. Gone will be the superfluous restatements of information that is available everywhere and instead they will focus on “in-depth reporting and argument.” They explain their new website this way:
Can they do it? Will it work?
My opinion is that if they can do it (which is a big if) – it will work. In an era where more and more people are throwing more and more crap out there, people are looking for a semblance of order. I applaud Jon Meacham (the editor) for moving in this direction, and I hope he will be able to stick with it. I’m sure they’re going to make some mistakes and it my hope that his board will allow him the time to find the right pace. Here are some points Meacham (and every body else) should pay attention to:
- Be really, really clear on who your audience is. This strategy can only work with a maniacal focus on who your customer is – and who it isn’t. I call this the first rule for creating demand: Know and understand your customers better than they know and understand themselves.
- Respect the audience. Make sure that the advertising you present to them is every bit as worthy of my attention as the journalism you are promising. Remember that your customer is your reader – not your advertiser. Too many media companies say this very thing, but then act in a completely different fashion. Don’t bombard me with data that doesn’t mean anything to me – if you do, I’ll stop paying attention and you’ll lose the very asset you are looking to monetize.
- Don’t take shortcuts (this is a subset of point 2). Allow the time it takes to create a new relationship with your readers – both old and new.
- Content is king. You are making a big promise – now keep it. Give me great journalism – and be a maniacal filter for me. Do those two things, and you will become must read.
I applaud Newsweek’s decision to focus on its core and to be great. I’m even thinking about getting a subscription.
What do you think? How can you apply Newsweek’s strategy to your business?
Today, I got an email from a company offering to lower my TCO. Yeah, I didn’t know what that meant either. After considering it, I think it means total cost of ownership. I have no idea who this company is or how good they are, and my intention is certainly not to embarrass them. The only reason I noticed the email is because it completely nailed the problem that small and mid-sized businesses (SMEs) are having in the market today.
The vast majority of companies across the board are complaining about three things:
- How difficult the market is.
- How unwilling customers are to properly value offerings – thus putting tremendous pressure on margins.
- How difficulty it is to get a prospective client to talk to a seller.
While I will certainly admit that competition today is fierce, and breaking the buyer code is tougher; the bulk of the problem is being caused by the inept way businesses are going to market. I was talking with a client of mine recently about the challenges he was having with a new salesperson; and I commented that the root of the problem was that long before the rep had an opportunity to say anything the rep’s actions and approach were commoditizing the company. So, no matter how well the rep “talked” they were going to be defined by their price.
Here’s a highlight of the solicitation email (again, I am showing this not to embarrass the company but to (hopefully) enlighten readers):
There are four fundamental mistakes the seller made here:
- I did not ask for this email.
- It created no value. (Points 1 & 2 make it SPAM).
- It pretends to make a promise; but because the promise isn’t clearly defined AND it speaks their language instead of mine – it means NOTHING. (BTW, the promise would mean nothing for either of those reasons, the fact that both occur just amplifies the problem.)
- Their slogan “change for the better” means absolutely nothing – does their competition stand for “change for the worse.”
Without meaning to, this company has clearly communicated that they mean nothing; that there is no compelling reason I should break from my current thought patterns and allow them into my world. As a result, the solicitation creates a result that is worse than having done nothing. If I wasn’t looking for this type of service, the solicitation does nothing to create demand, and if I were looking for this type of service, the message commoditizes the company and I’m going to burrow right to price. I’ll take up their sales time (increasing their sales costs) and decrease their margins at best or completely waste those resources at worst.
It’s unfortunate, because this company is so close to having a positive impact. The email looked good, and the intent of their message is good. I could (emphasis on could) love the focus on total cost of ownership. The reason I don’t (yet) love it is because: a) they talk about lowering my TCO and I have no idea what that means, and b) even if they did mention total cost of ownership – I don’t know what my current cost of ownership is, so I have no way of understanding the value of the offer.
If instead of trying to convert me to a buyer, they had taken to opportunity to begin a conversation, they would have been on to something. Every SME I know is looking for creative ways to reduce costs while improving their capabilities – THEY JUST DON’T KNOW HOW. And, until I know how to do that I am incapable of understanding them. With their current offer, even if I were curious how to lower by costs, I would be afraid to call them because they’ve positioned themselves (unintentionally) as a peddler rather than a trusted, subject matter expert.
This solicitation makes the single biggest and most frequent mistake of marketers – it’s asking me to think like the seller. Your job, as a growth executive, marketer or sales exec is to think like your customers. Stop making your customers think like you.
This is what the content revolution is all about – creating thought leadership; and allowing that leadership to lead the sales efforts. Sure, it’s harder than peddling your wares, but it’s got three key benefits:
- It provides bigger margins.
- It actually shortens the sales cycle.
- It makes you competitor proof.
So here’s what I’d recommend:
- Drop the slogan – it adds nothing and isn’t necessary. Speak to me like a person.
- Create a campaign that creates value for key buyers. To do that, the seller must first go through a painstaking process of understanding who their customer really is (which I can tell from this solicitation they have not done).
- Create content that supports their value proposition – and teaches me (the potential buyer) how to understand their value proposition in a way that creates value for me, the buyer, even if I don’t buy from them.
- Make a clear promise – one that is easily understood and valued.
I heard some of the most powerful advice for any growth oriented executive or salesperson:
Just because you can’t sell anything right now, doesn’t mean you can’t be useful.
The advice came from Dan Sullivan, the founder of The Strategic Coach – a lifetime focusing program for successful entrepreneurs (on a side note, The Strategic Coach is a great program. If you’re not familiar with it, you should check it out). The advice really hit the mark. I often say that the mark of a great salesperson is one who can “sell” when there is nothing to “buy.” Dan said it better.
The best companies, and the ones who are going to get through downturns stronger, are the ones that focus on being useful to their clients, customers, and prospects first, with making a sale coming in a distant second. The amazing thing is that the more you focus on being useful to someone, the more often, and the easier, you make sales.
Steve Yastrow‘s newsletter today was so on the mark that it’s scary. If you are at all serious about succeeding today and in the future, read his article now. Steve talks about two types of people: the hunkerers and the recalibrators.
He accurately points out that the only people with a chance of survival, let alone success, is to recalibrate. He shares how to do this and provides several resources that I personally vouch for to help you recalibrate.
Stop what you’re doing and read this now – you’ll be glad you do.
It should be no surprise to readers of The Fast Growth Blog that I am not a fan of mergers. Today’s latest “we’ll get stronger by merging” announcement between Merck and Schering Plough prompts today’s thoughts.
While it’s the big mergers that get the news, I’m hearing more and more of my clients (Imagine works exclusively with small and mid-sized business enterprises (SMEs)) float the idea of mergers as a way to get through the downturn in the economy). I’m hearing things like:
- “I had a conversation with one of my competitors and we got to talking about how we were dealing with the downturn. We thought, ‘Hey, why struggle when we could combine.’”
- “We’ve been thinking about how if we found a couple of companies that complement what we are doing, we’d be able to go-to-market more powerfully.”
- “You know, I’m getting frustrated working with limited resources. I’m really interested in what I could do with a ‘larger platform.’”
These all sound like logical, reasonable thoughts – worthy of consideration. They’re not. Why? Two reasons:
- Mergers rarely work. (I define “work” as after everything is said and done – do the resources (time, money and energy) that go into making the merger work produce better results than the same amount of resources going into growing the company/companies organically. Simply put, do I make more money for my resources after the merger.)
- All of the above reasons for a merger come from a position of weakness. The ideas are prompted because of frustration and struggles – not because of success and strength.
While I’m certainly over-simplifying (and possibly overstating) let me share the advice I give all of my clients who are considering a merger.
Never merge from weakness. Mergers from weakness fail 95% of the time. If you’re going to merge, only merge from strength. Mergers from strength only fail 60% of the time.
Now, I understand (and I hope you do as well) that no merger was ever undertaken where the parties merging didn’t believe it would succeed; yet most don’t. So realize, no matter how good the rationale for a merger is – the vast majority fail.
The reason mergers fail (especially for SMEs) is because they are a distraction. Making a merger work requires significant time, energy and focus to be spent on the internal areas of the company – not on the market. Additionally, if you want to find out what every weakness of a company is, merge. You’re sure to find them after the merger takes place.
Companies that are in a very strong position are capable (at times) of being distracted. Companies that are not firing on all cylinders cannot afford the distraction. They must be maniacally focused on the market – and nothing else.
Once you’re strong, feel free to consider the merger. Though my experience proves that once you get strong, executives no longer feel the “urge to merge.”
I’ve been thinking a lot of the title of a book. Three months ago on a trip to visit a client in Buffalo, I came across Jack Trout’s new book, In Search of The Obvious. (Please note that I have not read this book and while I like much of what Trout has written, I’ve also taken him to task for some old thinking.) While I haven’t read the book, I’ve been obsessing about the concept of the obvious.
Here’s what I’ve come to understand. Experts hate (HATE) obvious, because, well, it just doesn’t require any expertise to understand. Any six-year-old can understand the obvious. There’s no nuance in obvious – and experts love (LOVE) nuance. Here’s how Dictionary.com defines obvious:
I guess it violates cocktail party manners to “lack subtlety.”
Since I’ve been thinking about obvious, I’ve become shocked by just how difficult salespeople and entrepreneurs make it for people to understand them. We use complex words (too many and too embarrassing to mention), complex drawings, and complex concepts to highlight what need to be obvious conclusions.
Here’s the thing, unless you are selling a pure commodity to a fundamental buyer, your buyer has a lot more in common with a six-year-old than an expert. The more obvious the better. Obvious doesn’t mean stupid – quite the contrary. Obvious requires genius. Obvious is different. Obvious requires that you occupy the mind of your buyer, that you make your buyer feel understood. Obvious means you care.
Increasing sales and building a business have very little in common with cocktail parties; so drop the nuance and the subtlety and be obvious. It’s the key to fast, sustainable, profitable growth.
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.
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.