Your customer’s lowest low. Washed away.

In the case of Portland Oregon’s Plaza Dry Cleaners, a picture really is worth 1000 words.

I’m guessing Plaza owner Steve Young knows at least one thing that’s on his customers’ minds – particularly those who might not be able to afford his service at a time when they most need it.

Imagine the loyalty this builds in someone who is dealing with the fear, humiliation and anything else that goes with being unemployed. It’s such a kind act for people in his neighborhood.

Are you entering the conversation already going on in your customers’ minds? Steve did.

Outstanding.

News story from the Oregonian

Visiting Portland? Live there? Get your stuff cleaned at Plaza

Plaza Dry Cleaners
909 NW Everett
Portland OR 97209
(503)241-5417

Profit is not the problem

In Steve Denning’s Forbes commentary this week, he mentions a presentation made by author and Harvard business professor Clayton Christensen decrying U.S. business schools’ focus on numbers-above-all, saying the pursuit of profit is killing innovation and the US economy.

The pursuit of profit is not the problem, nor is profit itself.

What the always interesting and provocative Christensen veers away from (to discuss related issues) is that the problem occurs when the pursuit of profit is taken to the extreme.

I’ll say it again so the naysayers hear me as clearly as possible: The problem is not profit, nor is the problem our quest for profit.

Profit is good. Profit is one of the fuels that drive communities, families and businesses to do more and better things.

The problem occurs when profit is the only value a company’s management uses to decide right from wrong, good from bad, do it from don’t do it.

When that occurs, we end up with exactly what Christensen talks about – and that’s why he called U.S. business schools to task for it.

No numbers?

I do not mean that you should make all your decisions from some touchy-feely “Let’s all sing kumbaya” kind of place.

Remember that I teach all sorts of measurement mechanism for all sorts of things, from internet, to customer retention, to improving direct mail response, to finding your one number and so on. Remember that I talk about finding little things to improve profitability all the time.

Yet you should also remember that in that same context, I do not suggest that these improvements should be found at all costs. Nor do I suggest that you eke out these little bumps in profit at all costs.

There’s no doubt that financial ratios, profit and other financial measures are critical parts of business decision making.

These numbers do not/should not stand alone. It’s likely there will be times where you must focus solely on dollars, often due to short term needs. Over the long term, your situation won’t always be that way and your decision-making won’t always be so focused on the short term.

Christensen’s point is driven home particularly well by the quarterly reports make or break the stock prices of stock exchange listed companies. The nature of quarterly reports encourages short-term decision making. In some cases, shareholder lawsuits reinforce that these short term decisions should be driving the business.

But that is short-sighted.

However…

You simply cannot exclude character, ethics, economic sustainability, community sustainability or consideration of what is best for the customer and your staff from the decision making process and expect things to end well.

When the only thing on your mind is the numbers, the decisions of national retail chains who start their After-Thanksgiving sales at midnight the Friday after Thanksgiving seem downright obvious.

It’s just math, so the discussion leading to a decision sounds like this: “The earlier we can open, the better the chance we can get the sale and the more it’s about us”. Sounds a bit like “How early and then supposedly influential can our Presidential primary become?”, doesn’t it?

Re-read that: “You simply cannot exclude character, ethics, economic sustainability, community sustainability or consideration of what is best for the customer or your staff from the decision making process and expect things to end well.”

I saw a sign in a local store this week (this is not a chain or franchise) saying they would be open at 4:00 am on the Friday after Thanksgiving. Perhaps they are hoping that they’ll catch some traffic heading to (or worse, back from) the box retailers who have midnight to 4:00am openings.

Really? 4 am in a small mountain town?

The Race

Don’t get me wrong. Black Friday shopping hours are just a symptom.

This is about the core fundamental business values being instilled in students today and the importance of having someone in your organization with the gumption to say “That looks great for the numbers, but is this all we’re about?”

Whether it’s said or not said, others will watch this process, learn something from it and model the behavior when they make a decision.

Sometime in the wee hours of Black Friday, I hope some introspection happens.

Indivisible

Coffee
Creative Commons License photo credit: Selma90

Howard Schultz is doing what few large corporate CEOs have done: Following up rhetoric with leadership, action and money.

While I prefer freshly-roasted beans from local roasters and rarely do Starbucks outside of airports, I will stop in this week in order to support this.

The post title? It’s inscribed on a wrist band you get if you donate $5 to the job creation fund the Starbucks Foundation started.

http://www.reuters.com/article/2011/10/03/us-starbucks-idUSTRE7921M320111003

 

Being Noble

As you probably know, Borders is now gone. For those like me who live in rural areas, Borders took a chance on our community and many appreciated it.

Earlier this week, Barnes and Noble bought some of their assets. I assumed that Barnes and Noble would do something like this, and I’m pleasantly surprised at how they are handling the assets they purchased.

Classy *and* smart. Think about that when the opportunity to acquire a business crosses your path. I’ve been through this process first hand. How you handle it from day one had better be square. You just picked up a pile of customers who in most cases are total strangers to you and vice versa.

Here’s the email I received.

Dear Borders Customer,

My name is William Lynch, CEO of Barnes & Noble, and I’m writing to you today on behalf of the entire B&N team to make you aware of important information regarding your Borders account.

First of all let me say Barnes & Noble uniquely appreciates the importance bookstores play within local communities, and we’re very sorry your Borders store closed.

As part of Borders ceasing operations, we acquired some of its assets including Borders brand trademarks and their customer list. The subject matter of your DVD and other video purchases will be part of the transferred information. The federal bankruptcy court approved this sale on September 26, 2011.

Our intent in buying the Borders customer list is simply to try and earn your business. The majority of our stores are within close proximity to former Borders store locations, and for those that aren’t, we offer our award- winning NOOKâ?¢ digital reading devices that provide a bookstore in your pocket. We are readers like you, and hope that through our stores, NOOK devices, and our bn.com online bookstore we can win your trust and provide you with a place to read and shop.

It’s important for you to understand however you have the absolute right to opt-out of having your customer data transferred to Barnes & Noble. If you would like to opt-out, we will ensure all your data we receive from Borders is disposed of in a secure and confidential manner. Please visit www.bn.com/borders before October 15, 2011 to do so.

Should you choose not to opt-out by October 15, 2011, be assured your information will be covered under the Barnes & Noble privacy policy, which can be accessed at www.bn.com/privacy. B&N will maintain any of your data according to this policy and our strict privacy standards.

At Barnes & Noble we share your love of books â?? whatever shape they take. We also take our responsibility to service communities by providing a local bookstore very seriously. In the coming weeks, assuming you don’t opt-out, you’ll be hearing from us with some offers to encourage you to shop our stores and try our NOOK products. We hope you’ll give us a chance to be your bookstore.

It Starts With Trust

Earning, retaining and regaining the trust of your customers has been central to this blog from the beginning.

We talk about a lot of different things that all come down to creating an atmosphere of trust with your clientele. That trust will build a relationship and that relationship, even if impersonal, is what makes business personal to your customers.

A few questions came out of recent conversations on these topics and the best ones were these:

  • How can an impersonal business relationship truly be personal?
  • How does a vendor recover from a massive loss of trust?

Come on, Steeeeve

How can an impersonal business relationship truly be personal?

Easy…it starts with trust.

For example, I have a relationship with Apple CEO Steve Jobs. Do we know each other personally, like I do some of my readers? No.

Despite that, I know enough about him from his behavior and the behavior of his company to trust him – at least enough to invest in his company’s products and recommend them to others who trust me.

His behavior and the behavior of his company over time tell me a few things:

I trust that when he walks on stage to speak about new products:

  • He is going to announce things will often seem as if they were designed specifically for my use. Not because he has me on speed dial, but because his company has habitually built products which do just that.
  • He is going to announce products that will be publicly available today or very soon.

 

How is that different from others?

Some companies build something not to fill a need their customers have expressed,  or a need that they’ve discovered through vision and research, but because (for example) they compete with Apple in some other way and perhaps feel obligated to compete there too.

Those conversations seem to start with “Wouldn’t it be cool if…” or “Well, if so-and-so did it, so can we…”

When you come to market with a product with that much R&D behind it and no one blinks… somewhere, somehow, your company simply isn’t listening well.

Example, HP just cancelled WebOS and their TouchPad tablet one day after Best Buy publicly complained they’d only managed to sell 25,000 of the 270,000 devices they ordered. While it seems to me that this is a strategic buying error on Best Buy’s part, it isn’t as if HP can’t be held accountable for making a product that can’t compete in the marketplace. No question that the iPad and other devices hurt them badly, but they’ve known about the iPad since at least January 2010.

Again…listen well.

Some vendors announce new products years before they plan to ship – and in some cases they never deliver them. In the most extreme cases, they pre-sell them and then fail to deliver. Some repeatedly toss out anticipated release dates and never meet any of them. Try recovering from a misstep like that, even if it wasn’t intentional.

Trust starts in the mirror

How does a vendor recover from a massive loss of trust?

At the risk of being Mr. Obvious, you start recovering by earning back the trust you lost (or earning what you never had).

Start with this: Say what you’ll do, then do what you said. If you stumble, own up to it. Seem too simple? Laugh it off if you like, but as Tom Peters says “There’s not much traffic on the extra mile.”

Some of you will point to Jerry over there and you’ll say “He’ll never come back no matter what we do.”

You might be right, but more Jerrys will leave if you keep acting the way you do now. If you don’t change, how can you expect them to? Even if you don’t get Jerry back, there are others who will recognize your efforts with each bit of trust you earn.

Each customer you lose because of something you did to lose the trust of that customer. You delivered late. You didn’t deliver at all. Your quality was poor. You treated them poorly.

These problems can be repaired. Just like trust.

 

Help Them Buy Better

Nap @ Västra hamnen
Creative Commons License photo credit: bjaglin

A few days ago, Seth Godin asked why ethical marketers wouldn’t be “eager to have aggressive, clear and well-defined regulations” (about marketing).

He set the context by talking about the lies used to sell sunscreen, noting that lobbyists kindly helped the FDA water down proposed sunscreen regulations.

To quote Seth:

Why aren’t ethical marketers (of any product) eager to have clear and well-defined regulations, creating a set of honest definitions so that they can actually do what they set out to do–make a difference and make a living at the same time? If you’re busy competing against people willing to cut corners, I’d think you’d want the rules to be really aggressive, clear and obvious.

Yes, clear and obvious regulations would be great, but the assertion that we need more regulations to deal with them requires that I call BullSeth.

Enforcement and Influence

The enforcement of existing regulations in a fair and consistent manner is the primary issue.

Selective enforcement of these regulations is sometimes used to send a political message to some industries while others are left to their own honor or lack thereof.

At times, the agencies responsible for enforcement find themselves taking direction from elected officials who often take direction in the form of campaign contributions. At other times, these agencies do whatever they like, regardless of regulatory boundaries created to manage their work.

Before the everything-is-one-party’s-fault types weigh in, keep in mind that this ISN’T a (R) problem or a (D) problem. It’s universal regardless of the animal you represent.

A healthy business / consumer / economic environment doesn’t require oppressive business marketing/advertising regulations like Germany’s, we need those who represent us to use the existing regulations in a fair and consistent manner AND continue to improve them.

Smart businesses can’t sit around and wait for that to happen.

Don’t Wait, Educate.

Waiting for these changes isn’t going to cut it. Smart businesses educate prospects and customers about the quality choices they have.

That doesn’t mean your marketing has to be boring (far from it). It doesn’t mean your marketing can’t be compelling, entertaining, motivational and most importantly, effective – but it can be all those things without breaking existing laws, much less new ones.

In the meantime, we have to do our part to eliminate the slimeballs. Yes, I absolutely mean put them out of business, even if it means a game of Whack-a-Mole as they close one and start another.

Ethical business people don’t do enough to call out the slimy behavior of their competitors. Neither do consumers.

Buy Better

Meanwhile, people continue to take it from the cretins Seth referred to, rewarding these “businesses” for their behavior.

If folks keep buying from them and media outlets keep accepting their advertising, do you really think they are going to change?

Have you ever contacted a media outlet about the advertising they accepted from vendors advertising one thing and delivering another? Sure, it’s your word against the vendor’s. And yes, the media outlet will likely claim they have no responsibility for what appears in their paper, on their station or on their website.

I think you’re smarter than that.

The power of the customer to deal with these vendors comes simply: STOP BUYING FROM THESE IDIOTS.

It’s Just Word of Mouth

Businesses can help them do that.

Customers have lots of resources that enable them to take control, including Yelp, Urbanspoon, Angie’s List, Trip Advisor, etc. These services help people find businesses that deliver what they say and avoid the ones who don’t.

In a perfect world, we shouldn’t need any of them. Until we get there, we all have to help each other by calling BS when it’s warranted and giving kudos as well.

Too few businesses pay attention to those services. If you think no one is using them to make daily purchasing choices in your little town, you’re dead wrong – particularly if your area is frequented by tourists. You need to be monitoring them, addressing issues, “claiming” your business so people can find you, and encouraging consumers to share their thoughts there.

Encourage your customers to use tools that help them buy better. Provide them when you can. Help them stop buying from the wrong people.

Are you a dot or a line?

Even if you aren’t a venture capitalist or someone seeking the help of one, the concept of lines and dots is important to understand.

For you, today’s guest post from VC Mark Suster is all about the relationship you have with clients.

More accurately, it’s about the relationship they feel they have with you.

If they trust you, there’s little they won’t do.

What are you doing to support their trust in you? What are you doing to undermine it?

Never underestimate the “little nobodies”

Today’s guest post comes from Amber Karnes, who did a great job of analyzing the rise and fall of Urban Outfitters most recent product thievery and how social media played a role in the fall.

One of the messages small businesses should get from this is buried deep within this quote from Amber:

When I worked as the webmaster (and often-shouted-down social media champion) at Fortune 500 railroad Norfolk Southern, I had a hard time explaining this concept. Their PR heads would say, â??Why should a big corporation worry about cultivating a relationship with some railfan who only has 600 followers? Shouldnâ??t we go after the big ones? These little nobodies canâ??t do us any damage.â? Well, today proved the opposite.

Take care of your fans and they will take care of you.

Need evidence? There is now a 3 or 4 week backlog at the Etsy store of the business that UO ripped off.

PS: Thanks for the heads up, AG.

Follow up: “Nobodies as Influencers”

The Difference

30th St. Station
Creative Commons License photo credit: A. Strakey

Ever considered “The Difference” businesses sometimes create between different types of customers in the same market?

It’s the difference between “them” and “the other them”.

Let me back up a bit and set a little context.

On numerous occasions, I’ve urged you to add premium services to your product and services mix.

One reason for doing this is that these premium services add higher profit margin services and attract more loyal customers. That doesn’t mean they are better people than the entry-level spenders. They’re higher loyalty customers because when price is a primary decision point for buyers, it’s natural (and proven) that loyalty to the vendor suffers.

That’s also the hopefully obvious reason why I nag you not to compete solely/primarily on price. No one ever sent their kids to college, bought a boat or went on a dream vacation using the profits made competing with WalMart on price.

Another reason I’ve suggested this is that these “higher rung” products and services provide a bigger profit margin per transaction, making it easier to afford to serve entry-level and/or more price-sensitive customers whose profit-per-transaction is smaller.

SIDEBAR: This is yet another reason to know your numbers for each product, each service and each customer type/tier that you serve. If you want to hire someone new, you can figure out how many “whatevers” you need to sell (or how many upsells you need) in order to fund that position.

Mister Flip Flop?

Now wait a minute. I just spent all that time talking about higher loyalty customers and bigger profit margins and then I justify it by talking about it making it easier to afford to do business with entry-level customers? Isn’t that a bit of a flip-flop?

Not really.

As you know, some entry-level customers will eventually climb your product/service ladder and transform themselves (perhaps with a little help from you) into the high-value, frequent buyer customers that I repeatedly suggest you court. Get enough of them and they will help your business hit its break-even point a bit earlier each month.

You should know (back to that sidebar) how many of these entry-level customers become a premium customer. That lets you predict future business more accurately. I suspect it’s obvious where that gets you.

One key to growing the premium customer part of your business is doing an ever-improving job of identifying what’s different about the customers who make that step up from entry-level. Work hard to identify these differences so that you can offer those customers timely opportunities to become premium customers.

Finally, after all that, we’re back to a difference, but not “The Difference”. You should be able to list these differences on command if I called you at 2:37am.

If you can’t, you need to get to know them a LOT better.

Fast, Cheap or Good

The most often seen characteristic in my recent observation of “The Difference” is about time. Premium customers tend to buy products that arrive on their schedule and use services that let them dictate the when. This usually comes at a premium price.

For example, when traveling from San Francisco to NYC, you can fly, take a bus or a train. If you fly, there’s a chance you’ll be late, but you’re more likely to be late on the train or bus. The premium/entry line in U.S. air travel has been smudged to the extent that it often feels a bit like third world bus travel.

“The Difference” also appears in how customers are treated when products/services aren’t delivered in the time promised. It reminds me of the old programmer’s joke: “Fast, Cheap, Good – Choose any two.”

Entry level services tend to dictate the when to the customer, and if the when is late or otherwise fails to at least meet common expectations, it’s likely that the vendor will apologize, yet do little or nothing to improve and move on to repeat the cycle. To quote a friend in Spokane, “And we wonder why they leave.”

Customers treated in this way get frustrated by the late, uncaring appearance of the services they use, but the price often has them.

Where “The Difference” again crops up is how these vendors treat those folks: Like a “them”. I can’t tell you how many times I’ve seen entry-level customers treated horribly.

It’s a mistake that can cost you an incredible amount of sales, both short and long-term.

Shrink The Difference

Where you can intervene is simple: Stop treating everyone “in coach” (so to speak) as if they are at worst, criminals, and at best, a bother to you.

Result: You’ll move more to “First Class” and see the results in your bottom line.

The New Math aka Economics 101

A friend told me recently that his family filed a homeowner’s insurance claim for slightly under $600.

After filing no claims in over 20 years of keeping their insurance with this company, this was the 3rd claim in 5 years.

During that 5 years, their annual insurance rate went from $1300 a year to $4000.

After the 3rd claim was paid, their insurance was cancelled without warning.

Do the math

Somewhere, a bad piece of software or a misguided underwriter just killed a 20+ year customer relationship.

That aside, let’s do the math.

Even if a family had no other insurance with this agent/company (highly unusual, I suspect), they’ve been worth well over $20,000 to this insurance company.

In this case, ALL their insurance is at that company. Think they’ll move it? If they fired this customer over a $600 claim against a $4000 per year policy, it wouldn’t surprise me to see the family move their coverage elsewhere. All of it.

At $4000 a year, the recent claim is nothing.

Yet because they didn’t really look at the math the right way, they just discarded a customer with 20 years of loyalty over $600.

If this family keeps their home another ten years, that’s a loss of $40,000 in premium revenue, not counting the other insurance policies they have.

Who does the math at *your* business?

Are you throwing away thousands of dollars by not paying attention to the Lifetime Customer Value generated by recurring revenue?

Please do the math.