Posts
I am shortly to be involved with an initiative designed to get more small businesses using web search engine marketing. Part of the key to this is that it is available even to those businesses who don't have a website.
Many small (or micro) businesses are stuck in an outmoded paradigm where they have turned their back on the web. They are often fearful of it because they don't see themselves as part of the web generation; sometimes it is because they feel it is unnecessary for their business; sometimes they are mystified by it and don't really know how to approach it. There are myriad reasons (or excuses).
Part of this outmoded paradigm is to continue to allocate the majority of their advertising dollars to the good old yellow pages.
During conversations to plan for this initiative I was asked by those behind it what one thing I could say to small business owners about why they should be concerned with the web. My answer was simple - Even if they are not denizens of the web, the vast majority of their potential customers will be. You make it difficult to for them to access you at your peril.
If you are going to fish in a pond, fish in the one where the most fish are. Get onto the web.
Tuesday, April 21, 2009
Business Lessons Through Tragedy
We can't fail to be moved by the tragic story of 17 year old David Iredale who lost his life on a bush walk which went wrong in 2006.
The greatest tragedy of the entire story, emerging during the inquest, is that it appears his death could have been avoided. It has been reported that his repeated calls to the 000 emergency number were met with sarcasm, insensitivity and slavish attention to an ill-conceived script. Vital information from the calls, which may have helped pinpoint where David was lost, was apparently not passed onto police until some days after the calls were made.
According to reports :
"The court heard a major failure of all calls was that relevant information David provided about his whereabouts was not recorded or passed on to police rescuers. The operators had been "fixated" on asking for a street address because it was in accordance with their training and the steps they were to follow within the computer program."One particular call, the last call we received from Mr Iredale, the calltaker's demeanour appeared quite uncaring, not responsive to information received and the distress that was evident from the caller," Superintendent Payne said."
The operators were 'fixated' on a scripted call procedure and they allowed this fixation to override their common sense (and perhaps compassion). In this case this slavish adherence to procedure my have helped contribute to a death. Most of us can understand that no street address can be provided for a walker lost in dense bushland - it is common sense.
Perhaps there are factors here which might mitigate the actions of the triple-0 staff - maybe it has been proven that deviation from procedure in emergency calls causes more tragedy than it averts - after all in many emergency situations, such as the evacuation of an aircraft, failure to observe procedure may risk other's lives.
Most of us in business don't live in a world where our actions have life or death consequences (thank goodness), and this blog is about business. But, there are business situations where systems and procedures are allowed to overrule common sense in the same way as occurred in the David Iredale case, and it is generally to the detriment of the customers of the business.
How many times have you bumped into a futile conversation with a call centre operator which defies all common sense; or tried to fill out a web form which demands a field which you can't fathom before you can move on?
I once had a situation where I had four separate accounts with a major corporation. I had always wanted one consolidated account but after some of months of trying to organise it I gave up - their systems just didn't allow it. Apart from the fact that this meant frustratingly that I had four separate monthly payments to make rather than one it wasn't much of a bother - until I moved and had to change the billing address. I phoned to change the billing address and first had to "identify myself" to the operator. We went through the long list of questions and my responses until I heard the magic words , "OK, thank you sir, I have identified you so now I can update your address details.", which he proceeded to do for the first account. I then asked him to change the details for the next account and the first thing he said was he would have to ask me some questions in order to "identify me"! On the same phone call to the same operator, for four separate accounts in the same name, I had to go through the same identification process four separate times. As I got increasingly annoyed, he kept on telling me "it was procedure" and he had no choice other than to go through it. I kept on pleading it was nonsense and it was clear to me that he agreed but he had to do it anyway.
Common sense and empathy are the two most valuable attributes any business can apply when dealing with it's customers - unfortunately so many businesses mistakenly don't allow them to come to the fore.
Organisations, particularly larger, distributed ones, need procedures and some rules if they are to function efficiently. But if you really want to satisfy and delight customers, and even potentially turn them into evangelists for your brand, you need to make sure you build 'escape hatches' into processes which allow common sense to override dogma.
It shouldn't be an afterthought. It is fundamentally important in engineering a customer experience in a high growth business.
The greatest tragedy of the entire story, emerging during the inquest, is that it appears his death could have been avoided. It has been reported that his repeated calls to the 000 emergency number were met with sarcasm, insensitivity and slavish attention to an ill-conceived script. Vital information from the calls, which may have helped pinpoint where David was lost, was apparently not passed onto police until some days after the calls were made.
According to reports :
"The court heard a major failure of all calls was that relevant information David provided about his whereabouts was not recorded or passed on to police rescuers. The operators had been "fixated" on asking for a street address because it was in accordance with their training and the steps they were to follow within the computer program."One particular call, the last call we received from Mr Iredale, the calltaker's demeanour appeared quite uncaring, not responsive to information received and the distress that was evident from the caller," Superintendent Payne said."
The operators were 'fixated' on a scripted call procedure and they allowed this fixation to override their common sense (and perhaps compassion). In this case this slavish adherence to procedure my have helped contribute to a death. Most of us can understand that no street address can be provided for a walker lost in dense bushland - it is common sense.
Perhaps there are factors here which might mitigate the actions of the triple-0 staff - maybe it has been proven that deviation from procedure in emergency calls causes more tragedy than it averts - after all in many emergency situations, such as the evacuation of an aircraft, failure to observe procedure may risk other's lives.
Most of us in business don't live in a world where our actions have life or death consequences (thank goodness), and this blog is about business. But, there are business situations where systems and procedures are allowed to overrule common sense in the same way as occurred in the David Iredale case, and it is generally to the detriment of the customers of the business.
How many times have you bumped into a futile conversation with a call centre operator which defies all common sense; or tried to fill out a web form which demands a field which you can't fathom before you can move on?
I once had a situation where I had four separate accounts with a major corporation. I had always wanted one consolidated account but after some of months of trying to organise it I gave up - their systems just didn't allow it. Apart from the fact that this meant frustratingly that I had four separate monthly payments to make rather than one it wasn't much of a bother - until I moved and had to change the billing address. I phoned to change the billing address and first had to "identify myself" to the operator. We went through the long list of questions and my responses until I heard the magic words , "OK, thank you sir, I have identified you so now I can update your address details.", which he proceeded to do for the first account. I then asked him to change the details for the next account and the first thing he said was he would have to ask me some questions in order to "identify me"! On the same phone call to the same operator, for four separate accounts in the same name, I had to go through the same identification process four separate times. As I got increasingly annoyed, he kept on telling me "it was procedure" and he had no choice other than to go through it. I kept on pleading it was nonsense and it was clear to me that he agreed but he had to do it anyway.
Common sense and empathy are the two most valuable attributes any business can apply when dealing with it's customers - unfortunately so many businesses mistakenly don't allow them to come to the fore.
Organisations, particularly larger, distributed ones, need procedures and some rules if they are to function efficiently. But if you really want to satisfy and delight customers, and even potentially turn them into evangelists for your brand, you need to make sure you build 'escape hatches' into processes which allow common sense to override dogma.
It shouldn't be an afterthought. It is fundamentally important in engineering a customer experience in a high growth business.
Sunday, April 19, 2009
Kochie's Business Builders Bushfire Special
A special edition of Kochie's Business Builders was aired on the Seven network yesterday. It was an episode about the plight of business owners affected by the Victorian bushfires.
We were filming in the area for three days and unfortunately the final program was only a half hour episode so there was much that was filmed that couldn't be aired.
Fortunately you can find it all in the "Video Extras" section on Kochie's Business Builders website - "Surviving a Disaster Extended Version".
There are some key insights which struck us all as we spent time in the affected region:
If you are in business I encourage you to think now about how you would cope if a disaster strikes. As I say in the program, you don't want to be doing that thinking in the stressful post-disaster environment when you judgement might not be as acute as it is now.
We were filming in the area for three days and unfortunately the final program was only a half hour episode so there was much that was filmed that couldn't be aired.
Fortunately you can find it all in the "Video Extras" section on Kochie's Business Builders website - "Surviving a Disaster Extended Version".
There are some key insights which struck us all as we spent time in the affected region:
- There probably isn't enough focus on businesses when it comes to support - both charitable and government. In regional communities it is small businesses who provide employment. In the case of Marysville, for example, there was one business premise left standing in the main street - the bakery. All the businesses will need to rebuild and re-establish themselves and until they do there won't be a great deal of employment in the town. Much of the support thus far has been directed (appropriately) at re-building homes, but unless the local economy is rebuilt concurrently there won't be much for the residents to do. A separate focus is required to getting businesses back on their feet.
- This is no time for solos solutions. The community needs to work as a community to get back on it's feet. Sticking with the Marysville example, many businesses are waiting to see whether other businesses will rebuild and reopen before deciding what they will do. Most are waiting to see whether the residential accommodation providers will re-establish first. Many business operators leased their premises and landlords are waiting to see whether other businesses will re-open before they make a decision to re-build. It is easy to understand this waiting game - many of us would do the same - and it will be easy for the business community to fall into paralysis as a result. Everyone needs to move together and that requires leadership and an openness to embrace (figuratively) other business operators, even erstwhile competitors.
- The importance of business interruption insurance was very clear. A number of businesses had insurance for their buildings but not for their business continuation. It may take months or even years to rebuild and re-establish and it will be virtually impossible for those who don't have an income stream to sustain them until they get back on their feet.
- Some sort of rudimentary disaster recovery planning is vital for all businesses. In the US about 55% of businesses who experience a 'disaster', and have done no disaster recovery planning, fail within 12 months. This is significantly higher than the failure rate for businesses who have done some planning.
- Recovery for many businesses is going to require some lateral thinking and perhaps some strategic shifts. For Buxton Trout Farm, for example, it will mean diversification of revenue streams; a shift away from holiday maker customers to day trippers; and some pretty clever concomitant marketing.
If you are in business I encourage you to think now about how you would cope if a disaster strikes. As I say in the program, you don't want to be doing that thinking in the stressful post-disaster environment when you judgement might not be as acute as it is now.
Friday, April 17, 2009
What looks like a problem can become a marketing coup
When nudie was subjected to a devastating arson attack which destroyed the factory and office, we were obviously set back. But I believe every dark cloud contains a marketing silver lining. I used the nudie fire as the basis for a concerted media campaign which positioned us as an underdog and effectively put nudie on the map.
These days, in moments of black humour, I joke that I wish every business I am involved with had a lucky break like an arson attack to propel it into the stratosphere.
I read today about the plight of Damien Tscharke, a vigneron who for the last five years has been making "Girl Talk" wines using albarino grapes - of Spanish origin. They have proven to be so popular that other wine makers have raced in and planted albarino grapes as well. And now it appears that the albarinos are not albarinos at all. They may in fact be a French varietal -savagnin blanc - which is not the same as sauvignon blanc. Apparently those tricky Spaniards exported the wrong root stock and all the Australian vignerons who planted albarinos have been duped.
As I read he story I imagined much figurative cursing and gnashing of teeth amongst the growers as the cry has goes out - "Ruination!! Oh woe is me! Its the wrong grape!"
Indeed Mr. Tscharke is quoted as saying, "It's the largest volume wine we make, we have several hectares under cultivation, and I'm facing significant financial losses potentially."
Initially I was tempted to dismiss it as a storm in a teacup. So, its the wrong variety of grape - who cares? It looks the same as it did yesterday before they knew, it tastes the same, it makes the same wine it has done for five years now. What's the big deal, it all seems like humorless nonsense to me.
And then it struck me that this is Mr. Tscharke's fire! What fun he can have with it on his "Girl Talk" labels - "Girls, have you heard? They're keeping schtum at head office, but there's a rumour we aren't who we think we are. The French sabotaged our Spanish sugar daddy's and we aren't albarino we're trashy savagnin blanc instead!"
There is an endless stream of marketing creativity and publicity which can be generated from this slip up. Far from being the undoing of the enterprise it could be the making of it.
All that is required is to look at it as an opportunity rather than a threat.
These days, in moments of black humour, I joke that I wish every business I am involved with had a lucky break like an arson attack to propel it into the stratosphere.
I read today about the plight of Damien Tscharke, a vigneron who for the last five years has been making "Girl Talk" wines using albarino grapes - of Spanish origin. They have proven to be so popular that other wine makers have raced in and planted albarino grapes as well. And now it appears that the albarinos are not albarinos at all. They may in fact be a French varietal -savagnin blanc - which is not the same as sauvignon blanc. Apparently those tricky Spaniards exported the wrong root stock and all the Australian vignerons who planted albarinos have been duped.
As I read he story I imagined much figurative cursing and gnashing of teeth amongst the growers as the cry has goes out - "Ruination!! Oh woe is me! Its the wrong grape!"
Indeed Mr. Tscharke is quoted as saying, "It's the largest volume wine we make, we have several hectares under cultivation, and I'm facing significant financial losses potentially."
Initially I was tempted to dismiss it as a storm in a teacup. So, its the wrong variety of grape - who cares? It looks the same as it did yesterday before they knew, it tastes the same, it makes the same wine it has done for five years now. What's the big deal, it all seems like humorless nonsense to me.
And then it struck me that this is Mr. Tscharke's fire! What fun he can have with it on his "Girl Talk" labels - "Girls, have you heard? They're keeping schtum at head office, but there's a rumour we aren't who we think we are. The French sabotaged our Spanish sugar daddy's and we aren't albarino we're trashy savagnin blanc instead!"
There is an endless stream of marketing creativity and publicity which can be generated from this slip up. Far from being the undoing of the enterprise it could be the making of it.
All that is required is to look at it as an opportunity rather than a threat.
Wine Clubs
It seems that out of every second envelope I open these days spills a letter, brochure or flyer for a wine club associated with the initiator of the post. I decided to count them up.
Apart from the monthly mailing I get from the Wine Society, and the bulky post I get from Cellarmaster, both of whom are in the solos business of selling wine, I have received another eight entreaties to participate in wine buying from other organisations in the last fortnight alone.
They come from credit card companies, retailers with charge cards, airlines, industry and professional associations, and a whole host of others. Newspaper publishers even want to get in on the act and insert invitations with the renewal notices for my newspaper deliveries. Today I received a letter announcing the National Trust was launching a new wine club for it's members. What has wine got to do with the position or brand values of the National Trust?
It strikes me that almost none of the myriad wine club offers can demonstrate a point of difference. They all claim to have wine no one else can get, from boutique little wineries that are so small that they can't supply the majors; they all claim to be able to provide wines which I can't find in any high-street retail shop; they all claim to know more about wine than anyone else, or to have a more extensive selection or a better selected range. The fact is that to an average punter like me they all appear the same and the clamour from them is deafening.
This seems to be analogous to how many business operators get into business in the first place. Rather than thinking about customers, and what they want or need, they think about what they can do.
You can imagine the thought process behind some of these wine club launches. They sit down and think along these lines - 'We might be a professional association, but we have a database of university educated professionals, who have high disposable incomes and in surveys of our member base we have found 6 out of 10 have an interest in drinking wine; they trust us and are affiliated with our brand. We could provide them with wine and it would be seen as a 'value-add' and will generate some incremental revenue for our association. Most importantly we like wine ourselves.'
And so they get into the wine business. And how do they do that? Of course they need scale to make the economics work, and they don't really know anything about procuring, selling and distributing wines, so they outsource their wine club to one of the handful of providers who also supply wine club services to all the others. So they have the same offer as everyone else differentiated merely by the badge of their association.
They get into the wine club business because they can. Not because they have a startlingly different proposition or perspective; not because they have spotted an unmet need, an opportunity to step into a gap; probably not even because they have abiding passion for wine.
Powerful, high growth businesses are those that do something differently and better than anyone else does or can do in favour of their customers. By innovating and creating value for their customers they build at least a temporary monopoly which allows the creation of enterprise value. This is what nudie did when I created it and this is why it grew like a weed, carried along by the energy and enthusiasm of it's delighted customers.
If you are going to build a business don't do so just because you can; ensure you stand out from the crowd and deliver something to your customers they can't get anywhere else. Otherwise you risk being just more junk mail.
Apart from the monthly mailing I get from the Wine Society, and the bulky post I get from Cellarmaster, both of whom are in the solos business of selling wine, I have received another eight entreaties to participate in wine buying from other organisations in the last fortnight alone.
They come from credit card companies, retailers with charge cards, airlines, industry and professional associations, and a whole host of others. Newspaper publishers even want to get in on the act and insert invitations with the renewal notices for my newspaper deliveries. Today I received a letter announcing the National Trust was launching a new wine club for it's members. What has wine got to do with the position or brand values of the National Trust?
It strikes me that almost none of the myriad wine club offers can demonstrate a point of difference. They all claim to have wine no one else can get, from boutique little wineries that are so small that they can't supply the majors; they all claim to be able to provide wines which I can't find in any high-street retail shop; they all claim to know more about wine than anyone else, or to have a more extensive selection or a better selected range. The fact is that to an average punter like me they all appear the same and the clamour from them is deafening.
This seems to be analogous to how many business operators get into business in the first place. Rather than thinking about customers, and what they want or need, they think about what they can do.
You can imagine the thought process behind some of these wine club launches. They sit down and think along these lines - 'We might be a professional association, but we have a database of university educated professionals, who have high disposable incomes and in surveys of our member base we have found 6 out of 10 have an interest in drinking wine; they trust us and are affiliated with our brand. We could provide them with wine and it would be seen as a 'value-add' and will generate some incremental revenue for our association. Most importantly we like wine ourselves.'
And so they get into the wine business. And how do they do that? Of course they need scale to make the economics work, and they don't really know anything about procuring, selling and distributing wines, so they outsource their wine club to one of the handful of providers who also supply wine club services to all the others. So they have the same offer as everyone else differentiated merely by the badge of their association.
They get into the wine club business because they can. Not because they have a startlingly different proposition or perspective; not because they have spotted an unmet need, an opportunity to step into a gap; probably not even because they have abiding passion for wine.
Powerful, high growth businesses are those that do something differently and better than anyone else does or can do in favour of their customers. By innovating and creating value for their customers they build at least a temporary monopoly which allows the creation of enterprise value. This is what nudie did when I created it and this is why it grew like a weed, carried along by the energy and enthusiasm of it's delighted customers.
If you are going to build a business don't do so just because you can; ensure you stand out from the crowd and deliver something to your customers they can't get anywhere else. Otherwise you risk being just more junk mail.
Thursday, April 16, 2009
More on value and efficiency (and Picasso)
Apropos my comments on value. Particularly the notion that value of input does not necessarily equal value of output. In actual fact powerful and profitable businesses are obviously those where the value of the output is significantly more than the value of the input - these businesses are highly and effectively leveraging their inputs.
Putting some numbers around this might help to illustrate this.
The traditional services business model works like my painter in the previous post.
Let's say he takes 100 hours to do something and he charges out at $60 an hour. This means the job is invoiced at $6,000. But if my perception of the value of the finished product is only $4,000, the business has problems. There is a $2,000 value deficit. It may be an inefficient business and, because of the perceived value deficit, it is producing frustrated and unhappy customers. This is unlikely to be a high growth business.
What if there was a business which took 40 hours at $60 an hour to produce an outcome that was perceived to be worth $4,000 to the customer. Instead of $4,000 or $2,400 the business invoices $3,500. In this case there is a value increment of $500 perceived by the customer. This business has a highly leveraged value creation process and can effectively make what economists would call a 'super profit'. It is also creating happy customers. This is very likely to be a high growth business.
It reminds me of a story, supposedly true, I heard some time ago about Picasso, whose reputation was already secure at the time.
Picasso was apparently meeting someone for a drink in a tapas bar in Barcelona. His companion was running late and whilst he was waiting for him to arrive Picasso began doodling on his napkin. As he put his pen down one of the other patrons in the bar, who had recognised Picasso, boldly approached and proffered - "Maestro, I couldn't help but notice your doodling on the napkin. I would be very happy to purchase the napkin from you". "Certainly", replied Picasso, "the price will be US$10,000".
"How could you possibly charge $10,000?", blustered the would-be buyer, "I watched you and it took but a few minutes of your time to create".
"Yes", said Picasso, "But I AM Picasso and it has taken me 40 years to arrive at the point where I can create a work of art, worthy of bearing my name, in a matter of minutes".
Whereupon one of the other patrons in the bar who had been observing the exchange leapt to his feet and said "Picasso, I'll give you $12,000 for the napkin if you'll just sign it".
This story illustrates a number of points including the power of brand (in this case Picasso); the apparent disconnect between effort (input) and value creation (output); the customer perception of value; and the value of wisdom and experience.
Clearly by the time of this story Picasso was already a very effective, efficient and valuable business.
Putting some numbers around this might help to illustrate this.
The traditional services business model works like my painter in the previous post.
Let's say he takes 100 hours to do something and he charges out at $60 an hour. This means the job is invoiced at $6,000. But if my perception of the value of the finished product is only $4,000, the business has problems. There is a $2,000 value deficit. It may be an inefficient business and, because of the perceived value deficit, it is producing frustrated and unhappy customers. This is unlikely to be a high growth business.
What if there was a business which took 40 hours at $60 an hour to produce an outcome that was perceived to be worth $4,000 to the customer. Instead of $4,000 or $2,400 the business invoices $3,500. In this case there is a value increment of $500 perceived by the customer. This business has a highly leveraged value creation process and can effectively make what economists would call a 'super profit'. It is also creating happy customers. This is very likely to be a high growth business.
It reminds me of a story, supposedly true, I heard some time ago about Picasso, whose reputation was already secure at the time.
Picasso was apparently meeting someone for a drink in a tapas bar in Barcelona. His companion was running late and whilst he was waiting for him to arrive Picasso began doodling on his napkin. As he put his pen down one of the other patrons in the bar, who had recognised Picasso, boldly approached and proffered - "Maestro, I couldn't help but notice your doodling on the napkin. I would be very happy to purchase the napkin from you". "Certainly", replied Picasso, "the price will be US$10,000".
"How could you possibly charge $10,000?", blustered the would-be buyer, "I watched you and it took but a few minutes of your time to create".
"Yes", said Picasso, "But I AM Picasso and it has taken me 40 years to arrive at the point where I can create a work of art, worthy of bearing my name, in a matter of minutes".
Whereupon one of the other patrons in the bar who had been observing the exchange leapt to his feet and said "Picasso, I'll give you $12,000 for the napkin if you'll just sign it".
This story illustrates a number of points including the power of brand (in this case Picasso); the apparent disconnect between effort (input) and value creation (output); the customer perception of value; and the value of wisdom and experience.
Clearly by the time of this story Picasso was already a very effective, efficient and valuable business.
Focus on Value
Value is something which is created by businesses in the work they do (how often do we talk about "value add"; "added value"; "the value creation process" and so on?) . A bit like beauty, it is also in the eyes of the beholder - it is a perception. The art and process of selling and marketing is to create, for customers, a positive perception of value.
Interestingly this notion of 'value creation' means that value is an output or an outcome from a business process. In the current "down market" (as our American colleagues have been quick to euphemistically call our situation) customers are more focused on value than they have been in many, many years.
And yet so many businesses seem blind to this customer need; to the requirement to deliver real value. In fact many don't seem to have any concept of how their customers might perceive value.
I seem to have had a few of these tough and frustrating conversations with service providers in the last few months where I have very clearly felt that they have not delivered value. There is a common theme in the way they deliver their defence - they fall immediately back to two points:
I'll come back to the first point in a moment, but to address the second point, it is my contention that there is no point having a dog if you are going to do the barking! It is not my role as a customer to police the input process of my service providers.
To provide some context for this, my concerns have ranged from situations at home, such as one involving a house painter, to work, such as various marketing services providers.
For example, my house painter did some touch up work around the house over an extended period of a few weeks. Some days he was there, others he wasn't; some days he started early, others later. Mostly he worked alone during the day when we were at work and was long gone by the time we arrived home. We were pretty relaxed about the arrangement both because we had no time pressure to complete and because we have used this painter for a dozen projects over the last 8 or 9 years. When he finished the bill was presented and it blew me away. It was thousands and thousands of dollars. I simply didn't believe that the output represented many thousands of dollars of value, so I queried the bill.
The response was that he had arrived at the bill by looking at the number of hours spent on the job and that if I had been concerned about the possible cost I should have called a pause earlier in the job (in other words I should have monitored and policed the hours involved).
Now I could have possibly averted the price 'sticker shock' by getting a fixed price quote and, perhaps if we didn't have such a long standing relationship with the painter, I would have, but that misses the point.
I don't believe there was thousands of dollars worth of value in the work that was done. I am the customer. The service provider is responsible for my perception of value. Telling me the number of hours spent doesn't cut it as a solution. The number of hours are an input to the process and they are a measure of efficiency not a measure of the value of the output. We all know of people who are more efficient than others - some painters might do twice as much in an hour as others.
There are ways the painter could have changed my perception of value. For example, he could have taken me around the house and shown me places where there was intricate cutting-in work necessary which was extremely time-consuming but vital for the quality of the finished job; or he could have shown me places where extraordinary surface preparation was required before painting; or he could have shown me places where there were 5 coats of paint and so the surface was so hard it could resist minor scratching unscathed; and so on.
Instead he told me the number of hours involved multiplied by an hourly rate. Since this is only a measure of efficiency that leaves me with a perspective that he must have been inefficient and I am paying the price - ergo, the output is not valuable. Despite my many attempts to get him to see things from my point of view, the painter simply couldn't step into my shoes as a customer.
When customers don't see value they don't come back and they don't spread positive word-of-mouth (even worse, they often spread negative word-of-mouth).
The key lessons in this for successful business are:
Interestingly this notion of 'value creation' means that value is an output or an outcome from a business process. In the current "down market" (as our American colleagues have been quick to euphemistically call our situation) customers are more focused on value than they have been in many, many years.
And yet so many businesses seem blind to this customer need; to the requirement to deliver real value. In fact many don't seem to have any concept of how their customers might perceive value.
I seem to have had a few of these tough and frustrating conversations with service providers in the last few months where I have very clearly felt that they have not delivered value. There is a common theme in the way they deliver their defence - they fall immediately back to two points:
- "But look at the amount of "input" (which is usually time or materials) we have used in creating the outcome",
- "You should have intervened earlier to prevent the inputs (costs) mounting up"
I'll come back to the first point in a moment, but to address the second point, it is my contention that there is no point having a dog if you are going to do the barking! It is not my role as a customer to police the input process of my service providers.
To provide some context for this, my concerns have ranged from situations at home, such as one involving a house painter, to work, such as various marketing services providers.
For example, my house painter did some touch up work around the house over an extended period of a few weeks. Some days he was there, others he wasn't; some days he started early, others later. Mostly he worked alone during the day when we were at work and was long gone by the time we arrived home. We were pretty relaxed about the arrangement both because we had no time pressure to complete and because we have used this painter for a dozen projects over the last 8 or 9 years. When he finished the bill was presented and it blew me away. It was thousands and thousands of dollars. I simply didn't believe that the output represented many thousands of dollars of value, so I queried the bill.
The response was that he had arrived at the bill by looking at the number of hours spent on the job and that if I had been concerned about the possible cost I should have called a pause earlier in the job (in other words I should have monitored and policed the hours involved).
Now I could have possibly averted the price 'sticker shock' by getting a fixed price quote and, perhaps if we didn't have such a long standing relationship with the painter, I would have, but that misses the point.
I don't believe there was thousands of dollars worth of value in the work that was done. I am the customer. The service provider is responsible for my perception of value. Telling me the number of hours spent doesn't cut it as a solution. The number of hours are an input to the process and they are a measure of efficiency not a measure of the value of the output. We all know of people who are more efficient than others - some painters might do twice as much in an hour as others.
There are ways the painter could have changed my perception of value. For example, he could have taken me around the house and shown me places where there was intricate cutting-in work necessary which was extremely time-consuming but vital for the quality of the finished job; or he could have shown me places where extraordinary surface preparation was required before painting; or he could have shown me places where there were 5 coats of paint and so the surface was so hard it could resist minor scratching unscathed; and so on.
Instead he told me the number of hours involved multiplied by an hourly rate. Since this is only a measure of efficiency that leaves me with a perspective that he must have been inefficient and I am paying the price - ergo, the output is not valuable. Despite my many attempts to get him to see things from my point of view, the painter simply couldn't step into my shoes as a customer.
When customers don't see value they don't come back and they don't spread positive word-of-mouth (even worse, they often spread negative word-of-mouth).
The key lessons in this for successful business are:
- It is necessary to focus on, understand and deliver value to customers. What value is your business delivering?
- It is your responsibility to manage the customer's perception of value.
- Value (i.e. as an output) is in many instances divorced from the quantity and value of the factor inputs.
- It is vital for businesses to be able to stand in the shoes of their customers if they are going to understand customer value perception.
Subscribe to:
Posts (Atom)