Went to the gym once. Didn’t work.

You’ve probably heard about things that didn’t work in someone else’s business. The story probably included an assertion that whatever isn’t working for someone else also wouldn’t so won’t work in yours. The tool itself is generally irrelevant. More often than not, the problem is a lack of consistency.

Execution isn’t easy. We do the wrong things. We do the right things at the wrong time. We fail to prioritize, or prioritize poorly – often doing the urgent rather than than the important. Each of those things have their own solution, tactic, or cure. The challenge is executing every day, every hour, every appointment – as appropriate for the solution, tactic, or cure. To be as effective and efficient as possible, all of these things require consistent execution.

We all have a ton of things to do. It takes a systematic intent to consistently eliminate tasks of no / low value, making room for the high value work our peers and customers need most.

Consistency gives

Consistency has a number of benefits. If you are consistently good, people will depend on you / your company – and soon get to the point where their expectations are that you will always do, say, and deliver what they expect. This clientele will tell people. Some of them, the most rabid types, will tell lots of people. A small percentage of them will practically take it as an insult if one of their friends or colleagues don’t use their consistent vendor.

Consistency gives your clients something steady to latch onto at a time when many of them feel there is little they can depend on other than themselves. Outside of your spouse and perhaps a few others, do you have a vendor you can depend on no matter what? One that you would bet your business on? Think about the peace of mind that would give you if you had that kind of vendor (or vendors) in place.

Consistency is a quality you can sell, price higher, and use as leverage when competing for a new customer. Anyone can make a single sale. Consistent vendors make that sale while claiming an asset – a new, long term customer.

Consistency takes

Do you have vendors or places you do business with as a consumer where you always have to remind about delivery or deadlines? Do you frequently have to correct a vendor’s work or invoices / paperwork? Do their work habits force you to be the one who must consistently follow up about promises, on-time delivery, service windows, quality and completeness? Is that the exception or the rule?

How does that make you feel? What’s it feel like the next time you have to purchase or get service from a vendor like that? Do you dread it?

Are you repeatedly changing vendors in an attempt to find one that you can consistently depend on? How does that feel?

Does your business track churn?

Churn happens when a business gets X new customers and loses Y customers each month. If you have to track it, you’ve probably got a churn problem. Maybe it reflects the direction and growth of your MRR (monthly recurring revenue) due to your business model.

Churn happens because customers cannot depend upon multiple vendors in your market. Yes, others are part of this as well, otherwise new customers wouldn’t be filling YOUR bucket that’s also leaking customers every month. Some may be new to the market, but a reasonable percentage of those new customers are coming from other vendors who aren’t taking good care of them. How long will you keep them? Consistency is a factor.

If you ever ask a former customer who churned away from you, they will almost always say they left because of price. Price is an easy excuse to use and it’s one they know you will be least likely to argue about. However, churn is rarely about price. More often than not, it’s the last straw after a customer has lost patience in the consistency of your product / service quality. First they get frustrated, then the investment seems like a waste, and finally, they’ve had enough.

No one gets into business to intentionally be bad at something. It takes effort. Wasted motion. Lost focus. Lack of intent.

Process by process, employee by employee, consistent execution improves quality. Going to the gym once doesn’t produce ideal results. Neither does inconsistent execution.Photo by Dan Harrelson

The premium price lesson taught by craft beer

The craft beer explosion in the US over the last 5 to 10 years is a great lesson in premium price / premium product / premium services and customer ascension.

So what is the big lesson to learn from craft beer? Is it that you could make beer that only a certain percentage of the market will drink? Is it that you can put anything from talcum powder to motor oil in your wort as an ingredient and someone out there will want to drink it? Is it that you can charge for one pint what previously would have been a tolerable price for a six-pack?

But I don’t WANT an $80 diaper!

Those answers are all accurate at some level.

However, the biggest lesson is that in any market (including yours), there is a percentage of the market that’s willing to pay a premium price for a premium product. Products and services have had “Good, Better, Best” for years. Despite that, there are still many businesses out there that only offer a single product line with very little variation or options, premium services, or the opportunity to “ascend” to the next tier of product buyer.

These opportunities are not limited to automobiles, cigars, locally brewed beers, or any other thing. You can buy cheap toilet paper and you can buy fancy toilet paper. Speaking of, there are companies making a living selling diapers that cost $80 each.

While I don’t want to buy an $80 diaper, it’s clear that some portion of the diaper buying public does. That’s the trap that you can’t let yourself get caught in. It doesn’t matter that you and I aren’t interested in an $80 diaper. All that matters is that enough people are buying them. The same goes for a bottle of craft beer that might cost $12, $29, or much more. The challenge is finding a product that fits a market.

Premium price changes everything

In whatever you sell, there is almost certainly a premium price product or service opportunity – or both. You’ll never know where the price ceiling sits until you test it. We’ve all been offered an up-sell (want fries with that?), but this is different. Successful efforts typically result in a new tier of products and/or services. Sometimes, it reveals a completely different type of customer. It also allows ascension for some of the customers you have now.

Testing new product / service / price tiers could result in a new way of doing business for a subset of the people you serve. It may also reveal that there are additional price / product / service tiers between your existing regular and premium-priced options.

A successful “bar” that closes at 8:00 pm?

Montana micro-breweries are a fascinating example of finding an undiscovered tier in a market. They operate under a number of restrictions that impede their growth, including (recently raised) limits on the number of barrels they can brew each year.

Two additional restrictions that would ordinarily seem fatal to a traditional drinking establishment have instead created a new market tier.

First, Montana breweries with a taproom / tasting room may only serve 48 ounces (three pints) per patron per day. This might seem like a rather punitive restriction, but it doesn’t work out that way. First, most craft beers have a higher alcohol content than “regular” beer. As a result, three pints per visit is usually enough. Ever seen a bouncer in a brewery’s taproom? I haven’t. You’re more likely to see families and friends meeting together with their kids. Yes, in a taproom.

Second, Montana brewery tasting rooms cannot serve beer after 8:00 pm – at least not without getting a more costly / complex alcoholic beverage license. The traditional thought process would presume the 8:00 pm close dooms the tasting rooms. Instead, they’ve become gathering places after work, or before/after shopping and/or recreation. You’ll often see groups in a tasting room that you’d rarely see at a bar.

Without the typical late night hours of a bar, employees get home early enough to do some homework, put their kids to bed, or get a decent night’s sleep before their “real job”  (or college).  Likewise, these businesses avoid the occasional negative late night bar behavior that some places have to contend with.

While these limitations are restrictive, they’ve created a consumption tier that all but eliminates the negative behaviors sometimes associated with traditional bars.

The question is – what could be the premium-priced craft beer in your business?

The Pace of Change

If things have seemed a bit frenetic in your business lately, you’re not alone.

Many markets are experiencing a rapid rate of change – and in fact, the rate of change is accelerating. As a result, businesses, governments and even National Football League officials are struggling to keep up.

For example, if you watched the Super Bowl Sunday night, you could see it happen on almost every play. The offense would go into a formation, the defense would react before the play started and the offense would react to that, again, before the play started – with the quarterback changing the play or aspects of the play multiple times in the seconds before the ball is hiked.

Ask Florida State

This sort of pace isn’t unique to the Sunday’s game, it’s a normal part of football these days. If you saw Oregon play Florida State in college football, you saw a similar thing. Rather than using half a minute to stand around and talk about the play, Oregon was averaging a play every 16 seconds – meaning 16 seconds after a tackle was made, they were hiking the ball to start the next play.

For Oregon, this is normal and their conditioning and play calling is designed around it. For most opponents, the pace causes confusion and wears out their defensive players to the point that Oregon often rolls over exhausted defenses in the later stages of the game. The pace of change in the game is not what most opponents’ physical training or play calling training is designed for. As a result, teams often end up reacting on a play by play basis, rather than working their plan. Sometimes, it isn’t pretty, as Florida State found.

This sort of pace isn’t accomplished by simply speeding up the normally slow parts of the game. To execute at this pace requires smarter players, smarter coaches, better technology, as well as training regimens, on-field communication and play calling mechanisms designed to play non-chaotic football that feels chaotic to opponents.

The pace of change in business is no different

Things are no different in business these days and if your market hasn’t experienced it yet, it’s possible that you simply haven’t noticed, or you’ve perceived it as a temporary bump in the road that’s made things feel a bit more chaotic than normal. Be very careful about seeing this as temporary. From what I’m seeing and reading, that bump in the road is a new normal.

The accelerated pace of change has been obvious in the technology space, where there are well-known graphs showing the ever-shrinking time it’s taking for broad market technology adoption to reach a solid level of adoption.

This chart shows the rate of technology adoption accelerating from 1873 to 1991, yet the pace of change during that period is nothing compared to the adoption rate of the last 10 years, where reaching 50 million customers has gone from several decades (telephone, radio) to at most, a few years.

While the adoption time to 50 million users for the iPod (three years) vs. the radio (38 years) may not seem important to your business, the changes hitting your market are accelerating.

Is keeping up…enough?

In the fastest markets, keeping up is incredibly difficult – if not impossible. Yet some are not only keeping up, they’re pushing the changes.

Historically, when the speed of a technology or business function accelerated, it took a while for the level of quality and safety to reach steady state. These days, systems are often built into “the next big thing” (for this quarter) that enable quality and safety to remain stable.

Waiting for things to slow down…isn’t going to happen. If your business is affected by these changes, the methods you use for planning, tracking, finance, execution, supply chain management, manufacturing, hiring, security, business models and many other things have to keep up – and keep keeping up at an accelerating pace.

Keeping up while needing to accelerate your ability to keep up…that’s the trick.

The dangerous thing is thinking that your business isn’t affected by this. Finding a business that isn’t affected by 3D printing, robotics, artificial intelligence, “big data” or cloud computing isn’t easy.

What’s easy is fooling yourself into thinking that it might not affect your business.

Defending your business

Business is not easy and we (business owners) make it harder by making what will later seem like silly mistakes. Hopefully, we learn lessons from those mistakes, much less a bit more often.

That isn’t necessarily the hard part.

Sometimes, business gets tougher because we get the wrong kind of help. The kind of help I’m speaking of includes things that your clientele and staff might do or say, things that get published in the news, or even changes to regulations that don’t affect your business directly, but affect how your clients run theirs.

One of your jobs as owner is to anticipate and build defenses against situations that could threaten or even destroy your business.  You should anticipate these things, defuse them, prepare for them, and work around them.

Anticipating these situations is what allows you the time to defuse, prepare for and work around them – that’s really what defending your business is all about. Most of these situations will present themselves whether you like it or not. The secret is being prepared for them in advance.

Clients and Prospects

Most client and prospect related situations can be avoided with proper sales and service training. A number of these will come to you in the form of sales objections, misinformation, price shopping and other things that your marketing is designed to deal with.

Reacting to these situations in the moment will often produce a solution that hasn’t been well thought out – and usually hits profit first, while setting precedent you don’t want to set. Anticipating and training for these things will prevent the need to react rashly in most cases.

Media, Industry and Gurus

It’s easy to place the blame on the media – particularly today when some news outlets act more like news creators and take part in less than authentic clickbait campaigns to get your attention.

Media includes far more than the local or even national papers. It includes the trade organizations and industry groups that affect your market, and the “guru” types who command attention of your market.

The key is to be monitoring everything you can that relates to your business, your clients, your clients’ business and any external entities that affect them. There are plenty of automated tools out there to make this easy.

Monitoring isn’t enough. You have to lead the market by taking a position on what’s going on. Some will follow, some will not.

Regulatory Changes

There are a couple of angles to consider.

One is for the business that simplifies the act of dealing with government agencies of any kind, at any level. These businesses also live and die by the frequency and volume of changes in those regulations.  It can be a bit of a roller coaster ride.

Ideally, you need to make sure that these regs aren’t the sole reason your clients do business with you. If your model is designed and totally depends on the ability to help those who need to work within the regs and nothing else, you’re at risk. Rather than depend on a single revenue stream, use the knowledge you’ve gained about these client and their business to find ways to help them in addition to the ways you help them deal with regulatory challenges.

Another angle is all about staying on top of the changes that affect your clients and leading them in the direction that keeps them out of harm’s way. Any efforts you make to combat these issues are a different, and perhaps simultaneous, path while the rest of your efforts are still at work.

Equity

One particularly strong way to defend your business is to build equity into your business model.

You might think that you can’t do this because you don’t deal in real estate or stock, but that just isn’t so. If your business model allows you to know that you have sales booked for the next 30, 60 or 90 days (if not beyond) – that’s the sort of equity I’m speaking of.

Having those sales booked in advance, regardless of how you’ve done so, gives you the flexibility and freedom to make better decisions when defending your business, because you aren’t thinking about how you’ll make payroll next week when making those decisions.

Defending your business is one of a business owners’ strategic responsibilities. What are you doing to defend yours?

Focused on the holiday, now or the future?

It’s that time of year when business owners are pulled in many directions. The end of the calendar year has a way of doing that.

Some of us are focused on the year we’ve had, some on this month’s performance (which could make or break the year), and some on the future.

While all of those things are important, it’s a good time to remind you of the difference between “working on vs. working in the business” and how important ON vs IN is to getting your business out of what feels like survival mode.

Working IN the business

Almost all of us do this to some extent. What exactly does it mean?

Working IN the business is about taking care of today’s production and quite often, dealing with the crisis of the day – whatever that might be. It’s about making sure clients are happy, products and services are getting delivered – and in some cases, taking part in that creation/delivery.

In short – this is you, the owner/manager, working as an employee of the business. There are times when this is essential and in the smallest of businesses – the solo business owner – it’s how you generate revenue. The thing you need to be cognizant of is making sure working IN time doesn’t become a substantial majority of your work time month-in, month-out, even if you’re the only one there.

If you’re an employee reading this, I hope your employer’s owner and manager(s) spend more time working ON, than IN, but this isn’t always possible. Sometimes, everyone has to knuckle down and get work out the door.

If you’re an employee who thinks they’re doing this – see what you and your peers can do to take even one thing off their plate without being asked. Every little bit helps. If you’re worried about overstepping your bounds, ask.

If nothing else, asking the question should send the message that you have the best interests of the business on your mind.

Working ON the business

Working ON is what allows the business to worry less about what’s happening next month, much less next week or tomorrow.

Why worry less? Because you’re doing enough working ON to be pretty confident that things are booked for that day, week and/or month.

How does a business worry? When you wonder how you’ll make payroll next month, you worry – and it’s reflected in your comments and actions. When employees notice things that tell them money is tight (or really tight), they worry – and it’s reflected in their comments and actions.

These comments and actions reflect on your business. They send a message to your client, your banker, your family (and your staff’s families) and others.

Working ON includes planning and executing, but it’s also very much about communications. Making sure everyone understands what will happen next month and the month after, how those impact the rest of the year’s plans is critical to getting everyone on board.

Are you simply too buried in working IN to work ON this month? If so, take a minute to make an appointment with yourself in your calendar later this month or early next month. Spend that appointment time planning your year so that this time next year, you’re spending more time working ON more so than working IN.

Some examples would be worthwhile, eh?

Since I talk about this fairly often, some examples of “working ON” would be useful.

Spend time on asking yourself these things:

  • What can be systemized?
  • What should never be systemized?
  • What can you do to take the risk of purchase off of your client by providing them with a meaningful, no “but clause” guarantee that they’ll trust?
  • Who are our best clients, how do we keep them, sell more to them, and find more like them?
  • Who are our worst clients and how do we get rid of them? You know who the painful ones are.  Either fix what’s wrong or get rid of them. They can poison your business.
  • How can we avoid having letting the market and your customers beat down what we do into a commodity?
  • What upsells and follow up offers can we make at the time of purchase that make sense based on what the buyer bought. Remember, the hottest buyer in the world is one in front of you. Did you satisfy ALL of their needs and wants?

 

Does your business reality match theirs?

If you happen to pay attention to any of the business turnaround reality shows on TV (I see them on rare occasions), you’ll know that the pattern is the same for most of them – regardless of the type of business.

Typically, there are some quality and cleanliness problems, a management issue or two (or five),  a lack of performance that’s often attributable to training and consistent systems and processes, and last but not least, a lack of attention to the numbers.

In some rare cases, the businesses seem to be more of a hobby or an escape than an actual business – a situation that never escapes the consulting expert, and always infuriates them.

On the rare occasion when I see these shows, three things always come to mind:

  • How could they have let the situation get this bad?
  • How could they not see these obvious problems, much less fail to address them?
  • How do business owners who read my stuff feel when seeing these shows?

If you haven’t seen one of these shows, here are the things you should be looking for in your business’ reality.

Filth

One of the universal failures of the businesses in these shows is that they’re consistently filthy. Some are worse than others, with some downright unbelievable.

The reason this can get out of control in your business is the gradual creep of muck. You get used to a certain level of clean and it never again seems to be the kind of clean you’d want to see in a place you’d visit.

My wife and I visited a Cajun restaurant in the south earlier this year and found the dining room’s tile floor filthy. It was hard not to wonder if they simply got used to the dirt.

How are you doing on the filth factor?

Management Vacuum

Another consistency of the businesses profiled in these shows is a partial to total lack of management.

Sometimes, the problem is the owner(s) acting as if the business is a hobby (and often creating a massive distraction – much less money suck), while in others, it’s a failure to delegate and then use the time savings to actually manage the business. Managers in these businesses often have owner-instigated conflicts that prevent them from exerting any authority on day to day operations – making them ineffective at best.

Do any of these situations sound familiar? Ask your manager(s) about it. If you sense hesitation…

Systems and Processes

One of the most common problems in these businesses is a lack of order and consistency.  Many of them have no point of sale system or have nothing more than a cash register to balance at the end of the day.

In the episodes where food and drink are part of the business, food and drink costs are always out of control and highly variable from serving to serving and drink to drink.

They not only have inconsistent production (and thus inconsistent quality), but they also tend to have no measurement / tracking / purchasing controls in place. They have no idea how much they’re spending on food and drink or if they are even turning a profit.

Key to the resolution of these problems is creating systems to manage and track materials, sales and purchasing. Yes, I know… this seems like Doctor Obvious speaking, but you would be surprised at the times this has been missing from businesses in these shows (and in my personal observation).

Do you know how much that $8.95 meal costs your business? Don’t serve food or drink? You still have production costs of some kind.

Training

A tightly integrated issue with systems and processes is staff training. Inconsistency in these businesses starts with a lack of systems and processes and ends with inconsistent (or non-existent) training of the staff.

A universal component of the reality-show-fix is a combination of new systems, processes and staff training on those systems and processes.

Systems and processes combined with training breed consistency, which breeds quality.

Watching the numbers

Beyond cost of production numbers, a common issue for these reality show businesses is a disconnect between what the business is doing sales and cost-wise and what the owner(s) / manager(s) think the business is doing.

Do you know what your real numbers are?

What’s the reality at your business?

Big Data, Small Business

Last week, we talked about questions.

Questions tend to produce answers and more questions, which can result in a pile of stuff that overwhelms a small business.

As a business and client base scales, these questions produce data that you can use for guidance, decision making and to ask even better questions. Again, this can result in a pile of stuff (data, in this case) that overwhelms a small business.

A common reaction to this phenomena is to ignore the data, or to be so overwhelmed by its volume that you can’t discern anything from it. Entrepreneurs tend to want to do it all and if they can’t do that, doing part of it seems like a failure. It isn’t.

Identifying your big data

Let’s look at one of the questions from last week’s post and see which ones are likely to produce decision-making data.

How does this impact our key performance indicators? Examples: cost per lead / new client / sale / deployment, support load, lead time, etc.

This implies that you already know your cost per lead, cost to acquire a new client, cost per order/sale, cost per deployment, average lead time per product/service and the support/customer service load your products and services require. Not gut feel, but actual numbers.

Actual numbers are important because our gut is often right when it comes to strategic decisions and the like, but it seldom has a clue when it come to numbers like cost per lead – particularly if you’ve never watched it.

Lead cost, sources, media and campaigns

For example, what impacts cost of a lead at your business?

Lead source is a good place to look.

You might get leads from referrals (cheap and strong, warm leads), from local TV ads, from local newspaper ads, from different media in your education-based marketing, from the phone book (yes, some businesses still depend on those leads), from direct mail (likewise, still quite productive if used properly), from your website, mobile app, and so on.

Each of these have different creation and distribution costs. Each will produce a different lead flow, much less volume and types of client. While in the beginning, you’re likely to lump all of this data together, at some point you need to break them out by media and eventually, by campaign.

You’ll want to do that so that you can answer questions like this:

  • How do you know which media produces the most profitable clients?
  • How do you know which campaign (and on which media) produces what number and type/quality of client?
  • How do you know if a particular campaign works well on one media, but terribly on another?
  • How do you know which media (or campaign) tends to produce clients that are high maintenance to the point that you tend to fire them or not accept them in the first place?
  • How do you know which media produces the best (however you define that) clients you have? Is there a specific type of campaign that does this?

From time to time, an owner will tell me that their businesses doesn’t do any marketing so this kind of thing doesn’t help their business. If that’s really true, you’ll usually have referral sources that produce more and better leads than referrers do.

Would it be helpful to know who is sending you the best referrals?You probably have a gut feel on this, but are you sure that it’s accurate?

Thinking back on those questions

Given the detail on the one question of cost per lead, you can see how this can become overwhelming in a hurry. Don’t fall victim to that. Take it a step at a time.

You may start with another metric. Cost per lead is important for almost everyone, but it isn’t always the best place to start.

When you ask questions like “How did the pilot program go?” – it might provoke follow up questions about the data collected during that pilot which would support the “How did it go?” question.

If those answers aren’t backed with data, then that might provoke you to add data collection to your pilot projects in the future. This will take more time but it will produce better answers that don’t depend on gut feel or a need to be right.

Better answers are what we’re looking for.

What are your compelling reasons?

This past week, I’ve had several conversations revolving around why people don’t buy, why people stop buying, how we can get them to use what they bought and how we can get them to switch to our product instead of a competitor’s.

These conversations all have the same foundation: Giving people a compelling reason to change.

Whether we’re talking about buying, changing what they use, or using what they’ve bought, people need compelling reasons to change what they’re doing – even if they’re not doing anything.

Without compelling reasons – buying and implementing is much harder

It seems obvious that making it easier to buy is important, yet some businesses do their best to make it hard to give them your money.

However, buying isn’t the only obstacle to overcome. That’s why I’ve told the software setup story as many times as anyone would listen.

Selling them is one thing, getting them to use, adopt, implement it is quite another – and in fact, it’s more important than the sale over the long term.

If you don’t care what they do after they buy your stuff, it’s an indication that your business model is broken, even if you’re selling that stuff like crazy right now. Someday, that will change. When it does, how will your current business model work?

If you aren’t focusing on making sure they implement what they buy, your business model might not be broken, but your management of it is. You wouldn’t plant a crop and never watering or weed it, so why would you make a sale and then make no effort to cultivate the use of what you sold them?

That’s what the software setup story addresses and as you can read, I’ve been there.

What’s their point of view?

One of the things that fails business owners most often is assuming that their clientele is just like them. To be sure, there some cases where that’s true, but in others – it’s simply wrong.

The danger in this is that people buy, implement and change things for reasons who may not have considered, or for reasons that are meaningless to you. If that reason is the primary driver in decision making for your market and you miss it because their reason means nothing to you, closing a sale could be quite an uphill climb.

Even if you’re shy, you have to ask questions.

What are the obstacles to change? In many cases, they might want to change but think they don’t have the time to retrain their people, adjust their internal business processes and deal with yet another change. Solving that requires your value proposition to be clear, compelling and long-lasting.

What are the real reasons they might change? What truly causes the pain they feel? What keeps them up at night? What makes them worry about their future? Why is changing worth it at all if the outcome is the same? Same reports, same Excel spreadsheets, same profit?

If you don’t know the answers to these questions, you’re going to struggle to sell to them even if you have exactly what they need and want to take away their pain.

I don’t sell things that make the pain go away

If you aren’t making someone’s business pain go away, your clients are probably some portion of the general public. You might want someone to buy your cosmetics, or perhaps you’d like them to give your dry cleaners a chance vs. them continuing to use the one they use now.

Think about the risk people take when they change from Maybelline to Bare Minerals or from One-Hour-Martinizing to Joe’s Hometown Cleaners.

How do you currently communicate that trying your stuff is so easy and so risk free that if it doesn’t work out, they lose nothing?

Once you’ve done a great job of taking risk off their plate, you still have the task of proving the value of switching.  How are you doing that these days? Put yourself in their place.

Imagine a bank asks you to switch to their bank from the one you currently use – the one where your direct deposit goes and where your bill pay stuff is all setup and working smoothly.

Or consider switching from Windows to Mac or iPhone to Android.

Now you understand how they feel when you ask them to switch.

 

 

Earning return business

When you make client service decisions, do you weigh the cost of losing the client in your decision?

I’m talking about the hard cost of losing that client, not the often fuzzy, sometimes made up, and frequently inaccurate cost of a loss, that usually includes the 10-20 people (on average) that an unhappy client will tell after a poor experience – even if it’s their fault. While that does tend to happen, it’s this unhappy client I’m focused on, not their friends, family and coworkers. That’s the one you’re almost sure to lose in a badly handled situation.

What will it cost you if that person never comes back? Not their friends, not someone who reads what they say on Facebook, but them.

Let me describe a recent adventure at Best Buy to give you some context.

Best Buy?

A couple of months before the iPhone 5S came out last year, Best Buy (BB) had an offer to upgrade from an iPhone 4 to a 5 at no cost. The only catch, which I didn’t view as a catch, was that we had to renew our cell contract with Verizon.

We’re happy to reward their early investment in Montana cell infrastructure by remaining with them, at least until they give us a reason not to. As such, renewing was a zero friction event. More like a two free phones event.

BB has a different device insurance than Verizon and we felt the coverage was better, so we put BB insurance on our phones. The one part of Verizon we aren’t a fan of is the corporate stores, so handling all warranty/damage claims in BB seemed like a much better idea. Little did we know…

Earning return business sometimes means bending the rules

My phone recently developed a loose charging socket, probably from me catching the cord on something too many times. Near the end, I had to get creative to get it to charge. So I go up to the nearest BB store and show it to them. The guy at the counter starts the replacement process and checks their records. He says our insurance was cancelled for non-payment.

Hmm. We dig further and find that our debit card number changed in February. We didn’t think about the connection when that change occurred, and they couldn’t charge the insurance to the old card, so the cancel was legit. Unwise, but legit. After a single email to get our attention – they cancelled it.  The email went to an account that gets a lot of spam and isn’t one that I monitor, so it was missed.

While still in the store, I ended up on the phone with the BB insurance guys. Staying mellow paid off, as the agent was willing and able to reinstate the insurance without paying back premiums, setup future payments with the new card number, tweak the email address and allow us to continue the warranty replacement process.

Yes. You read that right. They didn’t even charge the unpaid months in the past.

Preserve and Protect Lifetime Client Value

The potential lose-a-client error, in my mind, was them allowing the insurance to cancel after a simple email. Are you that willing to let a recurring charge client go away? Pick up the phone, people.  One email is not enough effort.

Here’s why: Had they denied the claim, which was clearly their right, I would probably never do phone business with BB again. If they handled it poorly enough, they could have lost all my BB business.

But that isn’t what happened.

Someone is presumably training the folks at BB insurance to think about the long term and what marketing people call LCV – lifetime client value.

The question you have to ask is “Is the incremental value worth the lost lifetime client value?”

In BB’s case: Is it worth the incremental replacement cost of a phone, minus the payment of insurance premiums, to keep a BB client? I think it is, particularly compared to the cost of losing a client, perhaps forever.

In my case, it could have added up to decades of purchases by my wife and I, and perhaps our kids. I suspect that would add up to more than an insurance company’s wholesale price of a refurbished iPhone 5.

Are you thinking about the incremental cost of the service you provide vs. the lifetime client value when training your staff? You should.

Accelerated change redefines your market

Last month, Harvard Business Review’s Brad Power wrote a short piece about something software people have known for years, even if they ignore it: The rate of change is accelerating.

http://blogs.hbr.org/2014/06/how-the-software-industry-redefines-product-management/

An excerpt from Power’s piece:

I spoke with Andy Singleton, CEO of Assembla, a firm that helps software development teams build software faster. He told me the story of Staples vs. Amazon. As you might expect, Staples has a big web application for online ordering. Multi-function teams build software enhancements that are rolled up into “releases” which are deployed every six weeks. The developers then pass the releases to the operations group, where the software is tested for three weeks to make sure the complete system is stable, for a total cycle of nine weeks. This approach would be considered by most IT experts as “best practice.”

“Best practice”? Not really, but let’s continue:

But Amazon has a completely different architecture and management process, which Singleton calls a “matrix of services.” Amazon has divided their big online ordering application into thousands of smaller “services.” For example, one service might display a web page, or get information about a product. A service development team maintains a small number of services, and releases changes as they become ready. Amazon will release a change about once every 11 seconds, adding up to about 8,000 changes per day. In the time it takes Staples to make one new release, Amazon has made 300,000 changes.

While this situation is old news to software businesses and even to some non-software businesses that develop their own software, the thing you need to be aware of is that this accelerated rate of change and implementation stretches far beyond software.

You may have heard the phrase “software is eating the world“. In many cases, that’s about software disrupting and improving businesses and sometimes eliminating jobs. It’s also about technology and accelerated change in businesses that haven’t traditionally depended on technology.

This rate of change is reaching into many other niches – some faster than others. The question isn’t “Will it touch yours?”, instead the question is “When?”

Consider Amazon

You might be thinking that Amazon is a relatively new company so it was easy for them to start off producing systems as Power’s piece described. Trouble is, that isn’t the case at all.

While Amazon Web Services (aka AWS – the cloud services side of Amazon) has been around since 2006, Amazon has been around since the mid ’90s. They had to remake themselves to pull this off – but they chose to do so before someone else forced it on them.

Three dimensions

A few years ago, if you were in the engineering prototyping business, you might have a turnaround of a few weeks to a month, depending on the type of pieces you prototype.

Then one day, a 3D printer showed up on a local doorstep. Without a massive capital expense, delay and shop build out, a local engineer could now start turning out prototypes your clients could touch and feel in hours or for larger items, a day or two.

Perhaps you can work with that person to partner on projects and you both win. If you don’t, who will?

You can have a 3D printer on your doorstep tomorrow. What makes you different from the lady down the street who owns one?

The choice

Today, you probably have a choice in the matter.

You can either determine what needs a remake or restructure and make those changes (and experiments) on your terms, or you can wait and let someone else determine the time frame and terms for you. Most of us would prefer not to have someone else calling the shots.

I know, you’re busy. You’ve got this fire and that fire to put out. You’ve got soccer games to get to. I get it. I have those too and so do many other business owners.

It might be hard to justify any sort of disruption, even in thought, if your business is humming along on all cylinders right now.  That’s exactly what the disruptive businesses want. Keep doing what you’ve always done, because it’s still working.

Meanwhile, someone out there is fighting the same fires, perhaps as their business hums along, and all the while, they’re restructuring their business for this new reality.

What if they’re in your market? What if you did it first?