Cost Control Killed the High Street

A recent visit to East Leake Co-Op was not the usual pleasant experience. The nice lady who tells about the antics of her parakeet was not on duty. None of the normal tills were manned and the kiosk had a long queue of people wanting newspapers and small cardboard packets of highly taxed carcinogens. So, we took our trolley to the self-service till. And that is when my wife and I started to spoil each others day.

The experience made me think. Could it be that the rampant growth in the self-service till in supermarkets - where often cost saving is achieved to the detriment of value delivery - could be partially responsible for killing the high street?

We struggled to weigh several items of fruit (at least 5 a day) and to keep everything on the scale (we did have quite a lot of stuff as we were stocking up for a weekend away). Each beep and intervention by one of the staff watching us, led to another "exchange of experience" between my wife and I.

The simple act of buying life's weekly essentials is being transformed into trial by technology. Rather than a pleasant experience involving warm and friendly humans, those of us who have yet to turn to internet grocery shopping feel like we are being encouraged to defect. Once we are all shopping from home, the high street will be finished. And we will be partly to blame. We allowed large stores to wean us away from smiley friendly people.

There is a lesson here for all businesses: When you seek cost reduction, make sure you are not reducing the value delivered by more than the cost saving. The customer remains the arbiter of value - and can easily vote with their business.

Smart businesses grow on a formula that is customer centric and that makes sure that the customer receives the value most appropriate for the price point and the service level.

Ask yourself:

• Who benefits from the proposed change? The firm; The customer; Both

And then ask:

• What will happen when the customer starts to question the value?

Choosing & Managing Alliance Partners

At different times in the evolution of our businesses, we will all need to select, and then to manage, business or alliance partners at various times. The businesses we select to partner with can be fundamental to the success of our own ventures. It is essential that you select partners with whom:

• You have (or can build) an effective working relationship


• You share the same business ethics


• Both parties have something to gain when things go well


• Both parties are of a similar size – very large businesses often struggle to build effective working relationships with very small businesses – especially when the relationship is designed to complete an offering to the market

Managing the relationship can be tricky – especially if all the details have been left to “trust” and then things start to go astray.

Choosing a Business Partner

Before you start looking for a business partner, or even before you agree to work with a business that has approached you directly, you need to establish:

• Why do you need a partner?


• What does the potential partner offer that you cannot already deliver/ develop the capability to deliver?


• What are your selection criteria for suitable partners?


• What do you gain by working with a partner?


• What have you got to lose if it all goes wrong?


• Is the impact on both partners equal if things:
  Go really well?
  Go really badly?

Managing a Business Partner

A small investment of time at the outset to write down some of the basic details will save hours of arguing later on. The bare minimum of formal agreements (TAKE LEGAL ADVICE) must include:

• Confidentiality / Non-disclosure agreement binding on all parties


• A trading agreement which, where appropriate, defines:
  Who owns the relationship with the end customer
  Any revenue and cost sharing formulae
  Restrictions on approaching end customers directly
  Terms and conditions of business
  Responsibility for support
  …..


• Written objectives for the partnership

Best Practice

Regular, minuted, reviews with action items recorded and follow-up are also a worthwhile time investment.

Breakthrough Limits

Anybody who has watched a child experimenting with the world and been horrified at some of the things they will try out should recognise the lack of self imposed limitations in the young. Young people (and young animals) are constantly looking for the boundaries – to see what they can get away with. As we mature and get more “responsible” we behave better. We learn to stop trying things that we understand are bad. We also learn to stop trying things that might be good.

Ask yourself:

• What have I decided to stop doing recently that would previously have given me a boost?

The elderly often have a very well developed set of self imposed limitations.

If you find yourself placing restrictions on what you will try out, you might be missing out on some fabulous experiences. You may also be restricting the opportunities to grow your business.

Business Implications

In business, it is easy to find ourselves imposing limitations on our behaviour. And then we are disappointed when we fail to develop the business in direction we had hoped for.

Business Breakthrough

Often, the business breakthrough we are looking for can be delivered – as long as we:

• Change our behaviour and start trying things outside the range of our self imposed limitations
• Encourage others to take risks (in a safe environment)
• Are prepared to accept some things not working
• Are honest with suppliers/ customers/ employees that we are trying something different
  - And then we get them involved in the process

Profit From Consistency

Consistency is the key to a great customer experience.

If you begin to slip up or to forget things - your customers will assume that there are other problems with your business.

Why is consistency so important?

• Consistency assures your current customers of the experience they will have the next time they do business with you. If you did a good job this time, the customer will be more likely to do repeat business with you.
• Consistency helps retain those customers that would otherwise turn to a competitor.
• Consistency makes it extremely easy for your current customers to tell their friends about your business.
• Being consistently bad does not do you any good. If you consistently meet customer expectations, they will be satisfied.
• If you consistently exceed customer expectations, you will delight customers and they will turn into loyal, raving fans.

Be consistent with what works and offer the highest quality possible in goods and services and you will stand a much better chance of business success.

And on the buying side, consistently paying your bills on time ensures that the credit rating agencies will give your business the best possible report. It might seem unimportant, but a local business recently lost a bid because their credit rating was poor compared to their competitor.

Sceptical?

Why is are fast food franchises so successful?

Why are these three brands so popular?

• Costa
• Caffé Nero
• Starbucks

Sell the Sizzle - Not the Sausage

Having spent this week working on a proposition for a new prospect as part of a team, "Sell the Sizzle, Not the Sausage" has become a mantra for us. The problem we faced is the same one as is faced by most businesses - it is really easy to become focussed on the how and what and to forget the benefits that the customer is interested in.

Most business owners I speak to can talk for ages on the way their business delivers its products or services and how good they are at making the ultimate in widgets. These same people are so wrapped up in their widgets, that they forget the most important question a prospect will insist on having answered:

What's In It for ME?

We must focus our attention to answering this question with facts and data - in terms that mean something to the prospect. Our focus must shift from:

Features

to

Benefits

Next time you find yourself talking in strange dimensions that get you a puzzled look from your prospect, go on to say:

• Which means that - you will ......

And expand on the benefits that your customer will gain from dealing with you.

Great Expectations - Are Managed

Because of the snow, there has been a great deal of media coverage devoted to service performance in the last few days:

• Airports
• Eurostar
• Postal Services
• On-line Shopping
• Rail Services
• Road Transport

All of these areas have been affected by the recent poor weather. BA and BAA have come in for a fair amount of criticism - particularly in terms of their communication (or otherwise) with people stranded at a major airport.

One firm made me think about these issues in marketing terms. I ordered several items from Amazon last week - and was assured that delivery would take place in time for Christmas. When I re-visited the site on Monday (nearly 5 working days before Christmas) - the message was clear. It will not arrive in time for Christmas.

Amazon took responsibility for managing my expectations. And (as far as I know) - over-delivered - the parcels shipped to my home have all arrived in plenty of time - all apart from one that is not a gift.

Our local Pizza firm, in the next village is another great example of good expectation management. They always tell me that delivery will take place "Within the hour" - and most of the time manage a 34-45 minute delivery time. The main point is - they set expectations and then over-deliver on them - a bit. And that makes me loyal.

So, how do you communicate with your customers? Do you manage expectations properly? Are you guilty of letting people find things out the hard way?

Credibility in Hyped Markets

A Twitter reference from Robert Craven to a wonderful article (

Time to ditch the blood-sucking social media gurus)

in the Telegraph got me thinking. My mind jumped straight to a series of publications from Gartner about Hype Cycles - I even sent Robert the link. On reflection, my leaping mind may need a little more explanation.

Observation

Every new technology, social or business hype cycle (and there are many) attracts a range of people. Just as the California Gold Rush - one of the best publicised hype cycles - attracted fools, charlatans, crooks and wise people in large numbers, so each modern hype cycle attracts a similar group of people and businesses. And many, just as in the Gold Rush, end up disappointed.

The Dangers

When you fall victim to a hype cycle, you are in danger of suspending your normal business judgement. Then you run the risk of either:

• Investing time and money you cannot afford in some doomed venture, or:
• Paying for a service linked to your passion that you do not need, will not benefit from and delivered by somebody who, if your normal antennae were working, you would not normally deal with.

Current Danger Zones

I was at a business event earlier this month when an excellent, reputable (they really know their stuff) local business was speaking on the subject of sustainable energy sources and how to profit from them through rebates etc. I asked the speaker about the thieves and charlatans and the degree to which his industry was plagued with them. This triggered a quick summary of horror stories ranging from blatant over-charging through to dangerous (likely to catch fire) installations. As a reputable business, my new contact has joined a trade association and is working to normal business standards - in an industry where most of us will encounter the sharks first.

Here is my list of potential hype danger-zones (Gartner list more):

• Sustainable energy
• Cloud computing
• Tax schemes
• Social Media
• Unified Communications
• Tablet PC's
• Smart-Phone apps
• Franchises
• .....

Please bear in mind that in all these examples, there are many many reputable businesses working very hard to deliver excellent value. The problem comes when we start reading about things in general terms and they become "the next big thing" - and we start to falter in the general direction of suspending judgement. The markets were caught out in the .com bubble in just this way - they assigned huge values to business models that were, at best, mediocre - if not worthless.

Warning Signs

As soon as a topic becomes a common theme in business seminars, you should start to be more alert - especially if you are asked to find large sums of money to attend whole conferences dedicated to the topic. As soon as a topic starts to get hyped, you run the risk of letting your guard down.

What to Do

If you are operating a business in a hype zone, you will need to take a number of steps to ensure that you clearly differentiate yourself from the sharks. Some of the areas where you might need to be careful are:

• Write your business plan with great care
• Join the trade association
• Get approved (if your business involves skill in applying a technology, many vendors have a certification scheme - from vinyl graphics to software)
• Write down, and publicise, your code of business ethics
• Test your proposition with at least three sceptics
• Avoid statements like "of course they will buy it, it hasn't got a wire" (source available on enquiry!!)
• Base your market assumptions on a realistic model - just because there are around 10million dogs in UK households (K9 Magazine) does not mean that the market size for your wonder-dog-slipper is 10million.
• Make sure that you are constantly aware of your less scrupulous competitors and their impact on your industry or profession.