How to Avoid Becoming a Commodity!

These days more than ever the competitive advantage pursued by many is to discount and commoditize an industry. Prime examples of this include warehouse pharmacy stores, electrical retailing and hardware. As a result, the relentless pursuit of being the cheapest product and service provider has meant that the smaller, service focused business is eventually forced out of business.

In many circumstances, the failure of these businesses has been due to the smaller business forgetting what made it successful in the first place – rather, trying to compete on price only, which was bound to be unsuccessful. Why? Because only businesses that will succeed by discounting will be those that have the lowest costs of operation, including buying power and whose discounting generates enough volume to compensate for the margin given away.

Now, with the continued growth in on line sales, the challenge of meeting this additional competition becomes even greater.

Businesses need to reinvent themselves in this brave new world.

But there is still hope. Studies like the J.T. Kearney survey “What Do 81% Of Shoppers Do in Stores That Only 19% Of Shoppers Do Online” indicated that a large percentage of customers (61%) still prefer to shop IN STORES for many reasons. That means that stores can survive and thrive by making some adjustments in their physical and psychological offerings. The key is for retailers to understand and focus on how and why their customers shop, and then retool and redeploy the store network accordingly.

Categories where customers especially favor the personal experience of in-store shopping include beauty and personal care products; footwear, apparel and accessories; consumer electronics, pharmacy and grocery products, home and furniture, home improvement, and office supplies.

In an article written by Gilon Miller of Upstream Commerce some suggestions are provided to transform themselves into more interesting and attractive places:

1)    Make the store a place of DISCOVERY. A place where consumers can learn more about products, try them out (think Apple) and hunt for (or happen upon) hidden treasures. This, by the way, is part of the thrill of the hunt for product and pricing consumers say they want.

 

2)    Make the store a place of ENTERTAINMENT. Provide an exciting in-store environment that engages shoppers, especially those who enjoy shopping and consider it a social experience. This can be literal entertainment -- music, shows, happenings, etc. A more entertainment-focused venue builds longer-term engagement with the retail brand and the lifestyle it represents, says the Kearney Study.

 

3)    Make the store a place of great RELATIONSHIP. That is, make the store the ideal place for personalized service—before, during, and after the sale. (Customer quote: "Stores that treat me like a person and not a number get my business.")

 

4)    Make the TRANSACTION the key. A convenient, enjoyable transaction through
short checkout lines and service-oriented cashiers helps build brand loyalty. The point of sale also affords an opportunity to boost profits by upselling or offering value-added services.

In summary, it is as important as ever to make your store the place where people WANT to shop. What are you doing now to innovate and transform your business – to ensure that it will survive and thrive in the brave new world of community pharmacy? A new world where price is not the only determining factor!

Some possible actions:

·         Brainstorm each of the four points above with your team

·         Ask your customers (a Client Advisory Board may be a great start) – what are you doing now that customers value and therefore you need to keep doing? What could you be doing to make their experience better?

·         Look at other industries

·         Do something!

We have facilitated many Customer Advisory Boards, It’s something that customers can really value and provide engagement with the business. If you would like to know more about this process, feel free to contact us.

And finally, we wish you all a Merry Christmas and happy and prosperous new year!

How Do Your Customers See Your Business?

Businesses tend to focus on profits with no consideration as to whether these profits are good profits or bad profits.

Good profits would be defined as those profits earned from customers who are delighted with the products or services provided – so much so that they will voluntarily refer your business to their friends and associates - in other words, become an advocate for your business.


How do you know whether your profits are "good" or "bad"? Of course, the answer to this is to ask them! This can be achieved in a number of ways, including the use of customer surveys and customer advisory boards or focus groups. In the next month I will post an article on how a customer advisory board (CAB) can provide you a great insight into the mind of your customer - the CABs' that I have facilitated for clients have provided valuable feedback and suggestions  Just for now, I'll focus on customer survey.

Now, we all have received customer surveys in the past - you know the ones, a page or two of boring questions. And if you make any suggestions or comments, you really don't expect an response or reaction from the business.

However, the use of customer surveys with pages of questions does not practically give you and overall indicator of customer satisfaction - nor any indication of the underlying trends in your level of customer experience.

This shortcoming of the usefulness of customer surveys has been recognised in a book written by Fred Reicheld called "The Ultimate Question – Driving Good Profits and True Growth. In this book, Reicheld suggests that there is one, and only one question that needs to be asked in order to provide a simple assessment of where you level of customer experience is by providing you with a simple index.

That simple question is "How likely is it that you would refer us to a friend or colleague?"
And the simple index is termed the "Net Promoter Score" or NPS.
Want to know more?

The NPS has been used by business in the USA over recent years and is designed to give an indication as to whether you are earning good profits or bad profits. Good profits are profits which will be recurring because you have delighted customers. Bad profits are short term and are earned from customers who are "indifferent".

Delighted customers are "promoters" and indifferent customers are "detractors"
To gauge where a business is at, it needs to ask its customers the ultimate question - that is:

"How likely is it that you would refer us to a friend or colleague?"

The customer indicates that likelihood by marking on the below scale:

0          1           2           3          4          5          6          7          8          9         10

D___________________________________________________________P

Anyone who scores between a 0 and a 6 is a detractor
 Anyone who scores between a 7 and an 8 is a passive
Anyone who scores between a 9 and a 10 is a promoter

The net promoter score is the difference between the % of responses who are promoters to the % of responses who are detractors ie P%-D%.

Obviously a +ve score is preferred - however, many businesses have -ve scores. The aim to manage the trend so that it is moving upward. The advantage of monitoring this trend is that it is an indicator of future performance.

An additional question for those that scored below an 8 would be:
"What would it take for us to move your score to a 10?"

Further, you could also ask "would you be prepared to discuss your response with us?" - If so, they could put their name and contact on the form.

The net promoter score is an important Key Performance Indicator and should monitored monthly with your normal monthly financial reports.

Are you prepared to give it a go?


Ref: The Ultimate Question 2.0 – How NET PROMOTER Companies Thrive in a Customer
Driven World

Fred Reicheld Harvard Business School Press

Business Failures on the Rise - What You Can Do Now to Avoid Being a Statistic

Some 20 years ago I went to a seminar on business development and strategies for business growth. At that seminar I picked up one really critical principle - the principle known as the Pareto Principle or the 80/20 rule.

I subsequently purchased a book written by Richard Koch called "The 80/20 Principle" which provided a wonderful insight into this principle.

Simply put, the 80/20 rule asserts that the minority causes, inputs or effort usually lead to majority of your results, outputs or rewards. To put it another way, 80% of what you achieve comes from 20% of your effort - for all practical purposes, the dominant part of your effort is relatively irrelevant. This is totally contrary to what people normally expect.

So what does imbalance between effort and result  mean? Essentially:

·         80% of outputs come from 20% of your inputs

·         80% of consequences flow from 20% of causes

·         80% of results come from 20% of effort

What in general does this mean:

In Business

·         20% of products usually account for 80% of dollar sales value

·         20% of customers  usually account for 80% of dollar sales value

·         20% of customers or  products account for 80% of an organisations profits

·         20% of your expenses will account for 80% of the dollar value of your expenditure

In Society

·         20% of criminals account for 80% of the value of all crime

·         20% of motorists cause 80% of accidents

·         20% of those who marry account for 80% of the divorce statistic (sadly distorted by those who consistently remarry  and redivorce)

·         20% of children attain 80% of the educational qualifications available

In the Home

·         20% of your carpets are likely to get 80% of the wear

·         20% of your clothes will be worn 80% of the time

·         80% of intruder false alarms are set off by 20% of the possible causes

Have a good look at your life and business - I'm sure you will find that the principle will be well and truly alive. Being aware of this can enable you to reprioritise the things in your life and business to produce maximum results for minimum input!

Now the purpose of my introducing this principle to you is in support of a statement that I'm going to make - it's a hunch, but a pretty informed one at that!

80% of businesses are at best making basic wages for their owners. There you are, I've said it. In fact , I'll go one step further and say that 80% of those business owners are earning less than their best paid employee. That's a big statement I know, but a sad fact.

Now many will say that times are tough - and yes, there is no doubt that they are! However, my answer to that is that even in good times, they still were making wages at best. And that's not good enough for the capital invested in a business.

Now, I have one more controversial statement to make - of the 20% of businesses that were making a profit greater than a basic wage for their owners, in 80% of cases that was from luck, not any good planning or business strategy. So, let's now look at what we are left with - 20% of 20% of businesses or 4% of businesses out there are making profits greater than basic wages for their owners from good strategic  planning and execution. And I would put forward one further conclusion - and it is a variation from the 80/20 principle - that is I would suggest that these 4% of businesses would account for 80% of business profits  in the business community!

Now I see that is a disgrace in that most businesses erode economic value, not create it! How could that be? In the book "E Myth" by Michael Gerber (a must read book for anyone planning to go into business or already in business), Gerber suggests that for a business to be successful, the business owner must have (or buy in) three major skills as follows:

a)            Entrepreneurial skills - to identify and seek out opportunities
b)            Management skills - to manage the business
c)            Technical skills - to do the work that the business does

I will cover these concepts more in a later blog post. However, the majority of businesses owners go into a business where they are good at the technical work - however, their entrepreneurial and management skills are poor. So even though they are good at what they do, they work hard at the wrong things and their business fails. And by failure, I don't necessarily mean that they go broke - it just doesn't meet their expectations and ultimately decide that working for someone else wasn't really that bad in the first place.

It's exactly for this reason that we run seminars and workshops for business owners - to provide them with the skills and tools to improve their ability identify the things they need to do to "work on their business", not just in it.

Given the very poor profitability of the majority of businesses out there, we are astounded by the indifference shown by business owners to embracing the opportunity to improve their business and their lives -are you happy working harder and earning less than your employees? Sorry, to me this is madness and the sooner you get out of your business and let someone else take over with the right attitude, the better you and the community in general will be. Oh, and when you get out, don't expect a purchaser to pay the price you think your business is worth - sorry, it just ain't going to happen.

Here is a challenge for you in the new year - it's time to change. Make the time and effort to attend seminars/webinars and workshops aimed at improving your business management skills. Ask your accountant or contact your local chamber of commerce or industry group - they are sure to be running something that will be of value to you. We know that they can make a significant difference to your outlook and business performance.

Understanding Your Breakeven Income - Your Critical Key Performance Indicator for Your Business!

Hello

Its been a while since I have posted - too many distractions!

This week, I want to discuss why knowing your breakeven revenue is so critical in ensuring that financial viability of your business.

Particularly as you start out in business - you must know this. However, once you have worked it out, you must continue to review it as it will continually change as your business develops and grows.

Rather than providing you with a written explanation, I would like to share with you a video on GTP TV presented by David Hadley. In this video, David explains how break even is calculated and why it is so important for your business.

Please click on the link below:

http://bit.ly/oXBaN5

I'd love to know whether you regularly assess your break even sales or revenue for your business. Feel free to comment

Cheers

Chris