Shotgun or Rifle?

May 20, 2008 Comments Off on Shotgun or Rifle?

How often has a cold-caller approached you with, “I have a product that will wow you!”? How often has this verbal spamming tactic led to a sale? I expect that your answers are ‘often’ and ‘never’.

I can’t begin to count the number of times I have observed contractors marketing their firms when vying for a spot on a vendor program. They will enthuse about their business experience, their national reach, their certified experts, their incredible software, their ability to service the quirkiest customer, their loyal staff, their temperature-controlled storage facility, their fleet of well-equipped trucks, and their drying equipment. The barrage concludes with a reference to difficult claims where they saved the insurer thousands of dollars despite working with a gormless adjuster. The shtick ends when two copies of a plastic-covered spiral bound booklet containing a PowerPoint presentation full of fuzzy photos slide across your desk.  This is your cue to do jubilant back flips straight into the contractor’s wallet.

Then there are the less pushy types that call at odd hours every two weeks and leave cryptic voicemails saying they have spare capacity and are willing to take on some more work and they have 35 years of experience in wrought iron railings.

Every marketing guru on the planet will tell you: Know your customer. Make sure the value you sell responds to customer needs that may change from customer to customer. Don’t assume your entire market has a set of needs that correspond exactly to what you want to sell. Be customer-specific. Don’t deliver the same message to everyone. Position yourself to provide specific, measurable value to each customer in ways distinct from your competition. Don’t use a shotgun where a rifle is needed.

Here’s a 10-step primer:

  1. Dissect the competition: What drives your most successful competitor? What ruined failed competitors?
  2. Know the value of your target markets: What do they spend in your main market? What will they spend in the future?
  3. Articulate your strengths: What do you bring to the table? If you can’t identify anything meaningful, take up another profession.
  4. Be flexible: Be prepared to work on aligning your key strengths with your target markets.
  5. Zero in on compatibility: Don’t sell on price to a service-driven insurer or vice versa.
  6. Get your business processes aligned with your value proposition: Make sure you can really support this compatibility. Develop a relevant common service platform. Don’t expect to get away with Hyundai processes for Cadillac services
  7. Be consistent: Once you’ve developed a common service platform, make sure it works 100% of the time.
  8. Market that consistency: If it works, flaunt it.
  9. Be real: Deliver on your promises from the top down. Every employee is accountable to provide flawless service to every customer every time. Make no exceptions.
  10. Measure the results: Don’t just say you’re good. Prove it. Be transparent with the results of your service.

Only by aiming your strengths at a customer’s needs will you succeed in delivering true value; research your market thoroughly; don’t try to be all things to all markets; blow away the competition.

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The Price isn’t Right!

May 9, 2008 Comments Off on The Price isn’t Right!

Many businesses harbour delusions of trouncing their bigger competitors on price. Let us get this said up-front: Competing on price alone is suicidal for smaller enterprises.

A major misconception is the notion that price alone drives business competition. Yet think about the last time you shopped for an SUV. Think about the last time you bought anything with a designer label. Those products exist even though they buck the low-price trend. In fact, those products flourish because they are expensive. Instead of lower prices, they offer lavish after-sale service, a superior shopping experience, personalised service, carry greater cachet, or have a reduced risk of defect.

If you think, “Those products have nothing in common with the crazy market I operate in – no adjusters, no manipulative insurers, no demanding policyholders, and no complicated software. Heck, my services have been marginalised to the status of a commodity,” you are wrong. They all have their own version of your competitive problems. No, the reason they flourish is that they have made a choice. They have chosen to lose on price leadership but to win on differentiation. 

Consider the logic of this statement: There can be just one price leader in the market (it doesn’t matter whether this is a local or regional or national market). This leader is usually the biggest player – think Wal-Mart. The business principle behind the size advantage is simple – they can distribute fixed costs over more units than anyone else and thus charge a lower unit price.

Let’s take a look at those big guys – the cost leaders. They’re very similar to each other: large pyramids, rigid controls, big on status quo, heavy on reporting, not a heck of a lot of innovation going on.

Now think about those expensive brands I referred to earlier – the ones that chose the path of differentiation. Novelty and modernisation drives them. They don’t want the whole enchilada. They spend on finding new ways of servicing their chosen market segments. The secret is getting fewer customers to recognize a difference that is worth paying for.

“OK,” you say, “that’s all well and good when it comes to fancy goods but our customers don’t want to pay big bucks for Cadillac service. We live in the real world.” You might as well grab a live wire and dive into a pool.

Competing on price makes you a sitting duck. Every one of you has had a price-related headache with an adjuster along the lines of “You’ve overcharged. I’m going to knock 15% off your final invoice or else my supervisor will (insert violent action) my (insert body part).” All you can do is cry into your handkerchief and maybe charge the next job a bit higher to make up the “loss.”

Dry your eyes. There is a simple solution. All you need is a magnifying glass and a shot of sodium thiopental (that’s “truth serum” in case you’re not a Schwarzenegger or ‘Kill Bill’ fan). Here’s how it all comes together:

Use the magnifying glass to scrutinise your organisation’s capabilities and determine how you deploy these capabilities. Look deep. Here are a few cost-killers that force your prices up:

  1. Are you a mitigation expert moonlighting as a restoration contractor?
  2. Are you a residential loss virtuoso handling an abundance of commercial business?
  3. How long do you wait at your local building materials store for service? Queues are your retailer’s way of telling you they see their employees to be more valuable than yours. Can you do anything about this? Have you tried?
  4. How many times have you revised a job estimate because you and the adjuster never agreed a scope at the outset?
  5. How often do you go back to a job to tie up loose ends (sometimes something as silly as cleaning up cigarette butts and coffee cups)?
  6. How often are your invoices returned because the paperwork is incomplete?
  7. How often do matters escalate to you because someone down the line didn’t answer a customer’s calls?

Now the truth serum: Do you have strategies, systems, and a structure that supports the kind of losses you actually handle? Are you actively identifying and managing your business sources, your target market, your supply chain, and your available resources? Of course not! Life isn’t that simple. You take what you can get or you don’t make a living.

Take that magnifying glass out again. This time take a close look at your customer (identifying your true customer is the subject of a later posting – for now we’ll assume it’s your favourite insurance company).

Now shoot that serum again. Do you know which of your products, services, and processes that customer values the most? Have you actually sat down and discussed their needs? Do your customer surveys elicit only the good stuff (to put into brochures or on websites)? Do you dig deep enough?

Now take a look at the other end of the business chain – your suppliers. Do they know what services and products you value? Have they actually sat down with you and discussed your needs? Are they doing positive things to meet your needs?

You know the axiom ‘if you’re not measuring it, you can’t manage it.’

So, assemble all the information you can – but make sure it’s real, that it’s specific, that it’s current. Yank out the magnifying glass; take a close look at the data. Pump in the serum. Are you really serving your customer? Is your supply chain serving you?

Assuming you’re still on your feet, sit down and list all the value-creating opportunities you’ve identified. There may be just one or two. There may be dozens. Work out a way to attain these opportunities in every single action and statement you and your employees do and say. Then play ‘pass it forward’ and get your supply chain on the same wavelength.

You know the axiom ‘better to be a master of one trade than a jackass at many’. That one plays right across the entire supply chain. Think hard about this.

Destroy all thoughts of ‘nearly right’ and ‘good enough’. Excellence in everything is paramount. Get your processes aligned so that you breed value creation. Embed systems to monitor how value-driving processes work and reward the people who make them work.

As a business owner or business manager (same responsibilities), your #1 job is to create recognisable, proprietary value. That is, processes, services, or systems that your customers (not you!) acknowledge set you apart from your competitors.

Higher priced businesses who deliver better value will defeat lower priced competitors who don’t every time. You can bet your life on that.

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