Being Understood

Have you ever looked at a brochure, web site, print ad or mailer and had to read it twice to figure out exactly what it was all about? Have you ever listened to someone talk about their business only to wonder what kind of product or service they provide? I am constantly amazed by the number of ads, business cards, brochures, web sites and logos that I see that leave me wondering just what it is that company does!

How can we clearly communicate what we do at a glance. And more importantly how can we communicate the BENEFITS that our target customers will receive if they deal with us.

“Marketing Mimes give us the ability to become instantly understood.”

Where They Come From:
In 1976 Oxford University biologist Richard Dawkins wrote a book called “The Selfish Gene.” In this book he introduced a new concept. Dawkins asserted that like a “gene,” a “meme” is a self-replicating idea that is passed along from person to person. He sited examples of memes: memorable tunes, ideas, catch-phrases, fads and so on. Just as genes propagate themselves in the gene pool by leaping from body to body in the form of sperm, memes propagate themselves by leaping from mind to mind in a form of cultural imitation.

What a Meme Does:

  • It is obvious in its meaning
  • It focuses on the outcome
  • It is self-explanatory and simplistic
  • It is easy to replicate in someone’s mind
  • It actively transfers information

Developing the Meme:
The meme is not necessarily a slogan, headline, or a tag but it is most effective in that form. It really is the core message of what you do. In some ways the meme is your branding position statement. Memes are often seen with a company’s logo. This is called a logo assembly. Here’s some tips on developing your meme:
First ask: What do my clients get as a result of using my service?
Next: Strip the phrase down to the essentials.
Try to strike an emotional chord with your meme
Make it easy to remember
Make sure it rolls off the tongue nicely
Examples of Memes:
The meme is not necessarily a slogan, headline, or a tag but it is most effective in that form.

Hewlett Packard – “Expanding possibilities”
Fiji Film – “You can see the future from here”
United – “Fly the Friendly Skies”
Service Merchandise – “One Call. Done.”
In Focus – “Project yourself”
Continental – “Work hard. Fly Right”
Best Buy – “Now that’s a great idea”
Jeep – “There’s only one”
Alamo – “Drive Happy”
AAA – “We’re always with you”
Moore Paints – “We make it simple. You make it beautiful.”
Testing the Meme:
Once you’ve developed your meme, you need to test it. When you communicate your meme, do people ask the right kind of questions?

Example:
I.T. Advertising – Not just pretty pictures and clever headlines – bottom-line RESULTS! Well that’s what advertisers want, right?The Small Business Hour – “Helping small business owners make better decisions.” – – – This begs the question, What kind of decisions?

MarketingQuestions.com – “Providing answers for small businesses” – – – This begs the question, What kind of answers?These are precisely the kind of questions that allow me to demonstrate how I am different, how I solve problems and how I may be the ONLY solution in some cases.HERE ARE SOME TIPS for writing good memes, taglines or slogans for your business:1) Start by noticing ads on billboards as you drive down the road. Billboard advertisers have but a couple of seconds to grab your attention and sell their product or service. Usually their copy is going to be a very good meme or tagline with a picture of the product or service. These are great examples of how to write effective taglines.2) Notice other media forms like magazine and newspaper display ads, business cards, brief radio and TV commercials. Observe the thing that caught your attention and makes the message easily remembered. It’s usually a concise and well-written meme.3) Write down everything you can think of that relates to your business. You may even start with a narrative description in paragraph form.4) Now, make a list of the top 25 or 30 things that are important and worth mentioning. Whittle that list down to 8 or 10 of the most important things you wish to say. Now eliminate repetition or things that are not really that necessary to your product or service. Get your list of words or phrases down to 3 or 4 central elements.5) Based on your final core selection, make up some phrases that will serve as your meme or slogan for consideration. Keep it short and use simple, everyday language.The authors of “Advertising: Its Role in Modern Marketing” (Dryden Press, 1994) list five rules for slogan writing. Dean Krugman, Leonard Reid, Watson Dunn and Arnold Barban say:

  • Make the slogan or meme easy to remember and unlikely to confuse.
  • Make it help differentiate the product (or service) from the competition.
  • Make it provoke curiosity, if possible.
  • Make it emphasize a reward or action.
  • Use rhyme, rhythm or alliteration.

I hope this has been helpful for those of you considering tag lines or slogans for a new business or even the introduction of a new product or service. Developing these kinds of promotional elements are precisely what we focus on in our classes and workshops.If you are interested in applying this kind of creative promotional strategy to your marketing effort, enroll in my “Out-Marketing The Competition Class.” This nine week course focuses on learning and practicing specific marketing methods and strategies that can be implemented very rapidly and cost-effectively in a small business. Participants will develop a complete marketing plan by the end of the class.

Attraction Reduces Friction

Friction is the force that appears whenever two things rub against each other. Although two objects might look smooth, on a microscopic level, they are very rough and jagged. No matter which direction something moves in, friction pulls it the other way. Move something left, friction pulls right. Move something up, friction pulls down. It appears as if nature has given us friction to stop us from moving anything.

We can encounter friction in relationships with people as well. When one person’s perception differs from another then there is “relationship friction.” Creating attraction is the fastest way to bring about change because we reduce or even eliminate friction. Typically friction is inversely proportionate to the amount of change we want to produce. For example, if we are looking to launch a new product, the typical approach would be to design and print product announcements and send them to customers. We may also develop press kits and send them to the media in hopes of published product reviews. By the way, I am not suggesting that these actions are ineffective, simply that launching such initiatives will produce some degree of friction.

Let’s assume we do in fact send the above mentioned product announcements and press kits. When this happens we unwittingly create friction in a number of ways. First, the customers that receive the announcement may say; “my supplier is just looking for a way to sell me more products at a higher price.” Or the media that receives the press kit might have so many press kits to review that there is just not enough time to do so. In other words, the time required to perform the review or the investment required to buy the new product rubs up against the perception of the potential value gained.

This force operates in the world of management as well as the world of marketing. What if we are experiencing a reduction in customer satisfaction levels? What if we needed to change the way our customer service representatives are handling clients? Again the traditional approach would be to launch some type of customer service training initiative. Again this would produce friction. First, the customer service staff will need to commit the time to attend the training. This will “rub against” the time they will need to invest, which typically would be dedicated to assisting customers. When announcing such training you may have even heard employees say, “Why bother and train us to serve the customer better when all this does is give us LESS time available to serve the customer?” Again regardless of your perception of the value of customer service training, the point I am making is that merely attempting the change creates some type of friction.Attraction is the opposite of friction. I like to believe that if we can reduce friction in our business relationships then we will be more successful in creating attraction. This can alter our ability to motivate customers to take action as well as employees to become more productive and committed. We will transform “adapting to necessary change” into LEADING revolutionary change! This is one of the reasons that I have created my “attraction principles.” I believe that with the right knowledge, mindset, and discipline we can actually “attract” a positive, desirable change, rather than being swept-up in unwanted change. Check out the Attract More Business Program and sign-up for our upcoming Attraction workshops. Seeking a way to put this into practice for your business? Come to our Attraction workshops! Go to: http://www.sbanetwork.org/classes/upcoming_classes.asp for more information!

A Dog Named Credit Manager

While attending a business conference in a rural setting, a business executive decided to take a walk. He hadn’t gone far before he encountered a large dog sitting in the middle of the road barking at everyone. Nearby was a young man who said to the executive, “He doesn’t belong to anyone; in fact he didn’t even have a name until some business types attending a conference took to calling him “Credit Manager.”

At this point, with a puzzled look on his face, the businessman asked, “Why did they name the dog Credit Manager?” The young man answered, “They said that they named him Credit Manager because all he does is sit around on his dead end and bark at everyone.”

The sales avoidance department, the ugly stepchild of accounting, and a necessary evil. Many business managers still think of credit and past due A/R management as a cost center and as a risk avoidance function. If the goal of a business is to avoid risks it should get out of extending credit terms and out of sales.

Wrong Area/Measurements
Traditionally the credit and A/R management area is found within the accounting department. The reason being to keep the sales guys from giving away the store and to safeguard the assets of the organization. Such traditional thinking often results in the credit / A/R management area taking on the characteristics of the accounting department.

Credit / A/R management is not an accounting function; it is a sales support function and those involved in credit and A/R management must be able to interface and communicate with just about every other area of the business as well as with customers, transportation companies and other vendors. Yes, the accounting department needs to know what is going on with the extension of credit and the management of what may be the largest asset a business has, its accounts receivable; but the primary goal of credit and A/R management is to support sales.

The other problem, besides the type of people involved, with credit being located within accounting lies with how it’s performance is measured, i.e. D.S.O. (Days Sales Outstanding) and % bad debt.

Measure for D.S.O. and % bad debt and the message being sent is that the job is to look for a way to say no, to reject any potential risk and should a customer ever become past due the job is to stop further credit sales. Measuring performance of the credit area by DSO and % bad debt results in the investment made in getting a customer to the point where they want to buy being lost; and along with the investment you can kiss off any potential future business with that customer.

Say Yes To Sales and Profit
Credit Approval should be defined from a perspective that the job is to fine a way to say yes to a profitable sale while remaining confident of payment. The risk associated with the “type” of business the customer is in, the “time” the customer has been in business and with “how” the customer has paid in the past must thenbe weighed against “the product value at time of sale.” There’s always a way to say yes based on terms and conditions of sale: down payment requirements, shorter terms, personal guarantees, third party guarantees, credit insurance, first born child. There’s always a way to say yes. Credit rejection should come from the customer, not the seller.

An enlightened credit department approaches credit approval from a perspective that the job is to find a way to say yes to every profitable sale.

Completing the Sale
When past due A/R management is placed within the accounting area and it’s performance measured by DSO and % bad debt it is referred to as “collections,” as the enforcement of payment.

An enlightened credit and A/R Management department understands that most past due accounts are good customers and that the traditional definition is out of step with the reasons why customers become past due.

A survey of 8000 businesses in a wide range of industries found that close to 25% of accounts receivable are delinquent at any given time, one day plus beyond terms, but less than 1% are written off as a bad debt loss.

Approaching the management of past due accounts, as the “process of completing the sale” recognizes that the large majority of past due customers are good, and that delinquent accounts represent lost sales opportunities. Customers who are past due may well take their next order elsewhere rather than deal with a vendor/supplier with whom they are delinquent. Keep customers current and you keep them buying. Mishandled “collections” may bring in the money, but may also create the loss of customers.

A successful client relayed to me, over a cup of coffee, that when she was a college student she had received a phone call from a bill collector working for a major retailer. She was past due and did pay the bill, but she has never again stepped back into one of the retailer’s stores and twenty years later she still resents the way with which she was dealt. Even more problematic than an affluent customer boycotting a retailer is the loss of a commercial customer’s goodwill; there are fewer of them and they have generational memory.

In Closing
Things are changing. More and more business executives are coming to see the role of Credit and A/R management as a sales support function. DSO and % bad debt still have a place as a way to gauge cash flow and losses, but the performance of the credit function is better measured by % of dollars applied for approved…and exceeded and by the % of A/R current to 30 days past due.

Who knows the day may come when some big , friendly, lovable dog without a name comes to be called “Credit Manager”.

This article was provided by our partner, Abe WalkingBear Sanchez.
The Author
Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of
cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com, WalkingBear has authored hundreds of business articles. A hard hitting and fast paced speaker, he brings life and energy to a critical business function whose true potential has yet to be realized by most businesses.

Atradius, Irish Institute of Credit Management, TEC, CU, CSU, Texas A&M, National Association of Credit Management – Kansas City, HTDA, BCFM, Poli Hi Solidur, Skinner Nurseries, Deardens, Rain Bird, STAFDA, IBM, Wisconsin Credit Association, are but a few of the groups, schools, companies and associations for whom WalkingBear has conducted programs.

WalkingBear can be reached through:
A/R Management Group, Inc.
P.O. Box 457
Canon City, CO 81215
(719) 276-0595
email: abe@armg-usa.com
www.armg-usa.com

Have a great week!

–Mark Deo

The Only Solution

It was literally unheard of a decade ago, yet today it is fast on it’s way to becoming America’s NUMBER ONE cold remedy!

How has this simple, non-prescription product become such an overnight sensation?
Victoria Knight-McDowell spent years brewing herbs and swallowing vitamin cocktails to ward off students’ bacteria, but the second-grade teacher couldn’t vanquish one of the world’s most common plagues.

She refined her herbal-vitamin remedies throughout the 90s, and she experimented on herself and her family. After nearly two years without a cold, she realized she had come up with the proper ingredients for her potion. She called it Airborne and managed to sell it to a local drug store on consignment! Airborne is now sold at Wal-Mart, Rite Aid, Trader Joe’s and just about any self-respecting retailer.

How has this unknown product risen from relative obscurity in one of the most competitive product categories in marketing?

By using the sixth rule of attraction… “Don’t be a better option, become the only solution.”

Mrs. McDowell didn’t create a BETTER option to other cold remedies. She literally formulated what was perceived as the ONLY solution to stopping the spread of airborne illness! Her solution is not just unique it is exclusive in several ways:

First, the product was initially marketed specifically to those who travel or often find themselves in public places. No herbal, vitamin or pharmaceutical product ever made a claim to such a tightly confined audience.

Second the product is aptly named so that it exclusively addresses this particular market segment… Airborne (as in “airborne” bacteria). This is quite simple and easy to remember.

Finally the formulation of the product itself is not only unique but quite exclusive. Airborne is the world’s first effervescent cold tablet. The marketing is built right into the product!

Think about this simple product and how they managed to win in such a fierce competitive arena. What can you do to make your product or service EXCLUSIVE? How can you aim your solution at a not a larger audience but rather a SMALLER market? How can you re-engineer you product or service to be “effervescent” – that is have a twist that makes it completely different than any of your competitors? Finally what can you do to build your marketing right into your product so that you are seen as the ONLY option in a sea of copycats?

For more information on how you can leverage the Rules of Attraction to gain greater market advantage go to www.attractmorebusiness.com.

Have a great week! –Mark Deo

Setting Ourselves Apart

Remember the star of the old TV series, Wyatt Earp? Hugh O’Brian was his name but he has a greater claim to fame than being do-gooder Marshall Earp. That is the organization that he established in 1958 called HOBY. HOBY is a youth leadership development program. Every year HOBY accepts only ONE sophomore from every high school in the world to participate in a world leadership conference.

I was honored to speak at the Los Angeles Annual meeting this weekend and I can’t tell you how exciting and rewarding it was to work with these kids – (see some photos of the conference – WOW! Talk about enthusiasm!). These are our future leaders and I am proud to say that we are in GREAT hands. My presentation was on entrepreneurship. We created what is called “the management game.” This is classic business game theory at work. Teams of nine students are formed and they are asked to create a new product, develop a marketing strategy, present it to the board and then perform a 2-minute commercial promoting their product or service.

My presentation focused on how the teams could differentiate their products and services. I talked about I.P.S. This acronym is a great way to remember how to differentiate your company, product and service and create marketing attraction. It stands for: Integration, Personalization, and Scarcity.

Integration
Today traditional advertising and marketing is more expensive and less effective than ever before. People are numb to sales pitches and they have a very short span of attention. Integrated marketing solutions help us to build the marketing right into the product itself. Think of Hotmail when they first began nearly a decade ago… When you sent someone a message using Hotmail, they received an invitation to join themselves. The marketing was built right into the product. Even more relevant today is myspace.com. Now with nearly 80 million members you can configure myspace.com to automatically send information to everyone in your address book if you like. That means that everyone in your sphere of influence knows what’s happening in your life. That’s super connectivity!

Personalization
Personalization is all around us in marketing today. How about the way that Scion automobiles have created thousands of choices for car buyers? It is probably the most customizable automobile ever built. Virtually EVERYTHING can be changed, type of body style, interior, exterior, sound, wheels finish, trim, etc. This allows buyers to truly personalize their Scion. All kinds of products and services are personalizing these days. I went to get ice cream recently (that means another hour on the treadmill). It was a place I’ve never been – Cold Stone ice cream. I was amazed at the way they have build personalization into the product. At Cold Stone, you create your own personal desert. You pick the ice cream, tell them how you want it prepared, the toppings and they mix them right into the ice cream. This all happens right in front of you in minutes.

ScarcityFinally, scarcity is another powerful marketing tactic that can be employed. Think about how many products have incorporated scarcity into their marketing. Apple’s I-pod when it first came out. The Xbox 360 – some kids waited in a line overnight just to be the first to get the product when it was released. Motorola decided to build demand for the Razr phone when it was first released by manufacturing only a very limited quantity.

Often times these three methods of marketing are counter-intuitive. We think that we should homogenize our product and design it for as many people as possible. Yet this is counter to I.P.S. and the Rules of Attraction. My advice to you is to think about ways that you can use these methods to create demand with your own company, product and services. When you do, you will find that you can spend less on marketing and reap far greater rewards.

Also, check out our Attract More Business Program that takes you systematically through creating a marketing attraction program.
I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mark@markdeo.com.

Have a great week!

Products That Deliver, Part 2

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The following is part two of last week’s article on product development.
Tired of reading already? Click here- LISTEN TO THIS ARTICLE.
This week we will be looking at some of the areas of product development that can help us to ensure that the products or services we are creating are timely, tailored to our marketplace and that everyone on the team is pulling in the same direction.

Collective Commitment
Everybody commits whole-heartedly and knowingly to a worthwhile vision. See my article on visions, missions, and goals. Make real commitments of specifications and schedules. Involve customers and suppliers. Justify project for ROI (Return On Investment) based on performance, time and cost. Finally, we must fully understand and be clear about the objectives. Management studies repeatedly cite lack of common understanding of project objectives as the number one most common reason why a project fails. You may have heard this in the office hallways: “How can we meet the schedule when we keep working on a moving target?” This is typical chaos with predictable results: nebulous corporate objectives evoking minimal commitment on the part of team members to accomplish the goals.

Seek to Inspire!
It is this kind of ‘bigger than life’ vision that a project leader must impart to the team. Emphasize the extensive importance of the project to your people; what is it giving the customer; where will it take the company; how will it advance their career? Consider this dramatic example…. A team of engineers was designing a very important piece of medical equipment. How did they know it was of such great importance? The project leader calculated the number of intensive care patients who were dying throughout the world for each day that this new piece of equipment was not yet ready for use. How’s that for a motivating sense of purpose? As team members are shown the range of valuables, enthusiasm and a deeper sense of meaning is cultivated, which is intrinsic to commitment. Steve Jobs, the founder of Apple, used to walk throughout the office and declare about the Macintosh Computer, “It’s going to be insanely great!”

Ideas from Clients
Defining requirements is much more complex than simply asking customers ‘what’ they want. The process must be able to handle customers who are not sure what they want or change their minds after they get what they asked for. We must develop tools for understanding the customer such as surveys, focus studies, and verification techniques. In addition, we must also use continuous customer feedback as a basis for creating better requirements.

Research
As businesses develop fresh ideas, launch innovative products, and expand, accurate and timely collection of data is essential. As fundamental as market research is to effective business management, too often the soaring price points and extended time lags associated with this work lead many to dismiss it as superfluous rather than necessary. There are numerous organizations devoted to service/product R and D. Some of my favorites are Find SVP, Brain Trust, and Lexis Nexis.

Competitive Intelligence
Competitive intelligence is a necessity for businesses of all sizes. You need to know who your competitors are and what they are doing in order to compete. By identifying the strengths, weaknesses, pricing, and incentive strategies used by your competitors, you can identify opportunities and make informed decisions about the future of your business. Knowing your competitors will allow you to develop strategies to market your strengths and maintain an edge. Prior to beginning any product/service development project, it is critical that we fully understand the competition.

Ideas from Inside Your Organization
The best ideas for new products or services can come from your customers or employees. Dean Schroeder, recent guest on the Small Business Hour, and author of the book, Ideas Are Free, states and affirms that “the key to a successful company is encouraging a corporate culture that swiftly recognizes and implements ideas and improvements. Managers who recognize this can increase profits and avoid budget cuts and layoffs.”

Stepping Outside Commonly Acceptable Practice
Consider the man who became the first person to pilot a privately built craft into space called this past Monday. He took his rocket plane, SpaceShipOne to an altitude of more than 100 kilometers (62.5 miles) — the internationally recognized boundary of space. He ascended into space at Mach 3, three times the speed of sound and accomplished what most have felt impossible. Do you think this will begin to shatter commonly held product development beliefs in the space industry? You bet! How can you step outside the Commonly Acceptable Practices in your business?

Speed
Not the drug; but rather a common precept to product/service development.

Sony has given us thousands of new versions of the Walkman since the product was launched in 1979. Every thing from tape to CD to MP3. If this week is average, we will harvest 250 or so new products aimed for American grocery and drugstore shelves. Speed is critical to success. Old-fashioned hierarchies are not only unmercifully sluggish, but their committee-born products are also usually dull as doornails when they finally arrive. But there’s more to life than speed.
Tom Peters admiringly talks about his friend at CBS who drove top management crazy. He would get an idea for a documentary, he says, and then take it to his bosses — who would usually approve. He would return to his office, sit quietly, and mull. And mull. Days would pass. Weeks would pass. Often as not, months would pass. “When in the hell is he going to go out on the road and shoot?” the hierarchs wanted to know. One day his office would be empty, and a few weeks later, he would be back with canisters of film in hand. Did he start editing? Fat chance. Back to office. Feet up. Mull. Massive accumulations of pipe ash. Eventually, he would head for the editing room, and a near perfect show would emerge. The sequence was repeated time and again, and the results were invariably so good that CBS’ muckety-mucks had little choice but to put up with his aberrant behavior.
Often improvement comes in fits and starts. Each week may bring 250 new grocery products, but the odds are that only a couple will last even two years. How many will really be significant? Fewer still. Does that mean all Proctor & Gamble product developers should spend five years peddling soap door to door to get a sense for the product? No. Ought P&G aim to extend its already lengthy product-development cycle in pursuit of breakthrough products? Hardly. Yet Tom Peters would say P&G — and CBS and Sony — ought to have a few folks on the payroll who march to a different drummer.

Products That Deliver, Part 1

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Everyone wants products and services that deliver tangible benefits and long-term value. They are good for customers, good for manufacturers, good for merchants, and good for the entire industry.

Then why are there so few of them? Tired of reading already? Click here- LISTEN TO THIS ARTICLE. Blame it on the marketing people, research department, or product/service development group. There isn’t a business in America that doesn’t want to be more creative in thinking through products and services.

Brainstorming new products, however, is only the tip of the iceberg in delivering real benefits and long-term value. It’s not enough to simply create new products because your competition has something similar. I see too many companies (product and service providers) playing follow-the-leader. In this new economy, there is less and less room for copycat products and services. In fact in many industries, being first with a concept and first to market are critical just to survive.

Look at the consumer electronics industry. I was in this business for many years and I know that merely developing another DVD player isn’t enough. In fact, it is suicide! Now your new line of DVD machines had better have record functions, DVR, unified remote, multiple A/V interfaces, as well as that special feature that ONLY your brand offers. If you’re an electronics buff, you know what I’m talking about. If you’re not, know this… You had better find a way to LEAPFROG the competition with your product/service offerings because simply slapping clever marketing onto “me-too” products just isn’t going to cut it any more!

With this in mind, I thought we’d taka a look at what gets in the way of truly revolutionary product/service development and what we, as leaders can do to turn these obstacles into opportunities. This two-part essay will focus on how to create products that deliver.

Managing Uncertainty and Risk
Risk minimization is not the same as risk management. Minimizing risk involves avoiding any chance of failure. Managing risk is taking gambles that make economic sense. There is always technical and market risk. We must fully understand these in the framework of our industry. Knowing the technical capabilities of our competition is paramount in developing a product/service development strategy. For example if IBM would not have underestimated the technical savvy of Dell perhaps their market share would be double what it is today in the computer business.

Specifications vs. Market Benefit
Alan MacCormack, a professor at Harvard Business School, was studying successful software development processes. He and his colleagues asked executives at a software firm to provide two case examples, one from a “good” project, and another from a “bad” one. Two projects were identified, each of which yielded products that had just shipped. Observing the state of these products over time, MacCormack and his researchers saw that the “good” project failed in terms of such factors as market acceptance, expert quality rating, and productivity. According to MacCormack, the project that management said was a good project “turned out to be uniformly bad,” while the project that executives said was “bad” was a marketplace success.
MacCormack discovered that what executives judged to be a “good” project was one where the specification was completed up front, where the design had been frozen, and the project had been executed efficiently. For executives, a “good” project was one that built the product that it set out to build. A “bad” project, according to executives, was one in which the results ended up looking completely different from what they set out to build. Yet the market reaction to the project that had gone through continual change was much better than the project that had a design that was frozen in time. Says MacCormack, “The way they thought about ‘good’ and ‘bad’ in that case was completely upside down. The people who were overseeing projects there assumed that the good projects were the ones that delivered to the spec. In fact, good projects are ones that deliver to the market.”

The Cost of Delay
I think this is a greatly underestimated variable of product/service development. When creating product/service development budgets we take into account all kinds of variables such as research, materials, staffing, testing, analysis, product launch and so on. We fail to quantify perhaps the most costly and critical element of the product/service development process…time. Specifically the cost of delay. Releasing a new product BEFORE its time has come can have a devastating effect on not only the cost of the product but also the entire reputation of the company and its brands. Take for example the personal computer. I remember having sold the VERY first personal computer to over 250 Target and Venture stores back in 1980! I was part of the development team at Atari, and I went on several in-store demonstrations inside Target stores. I laugh hysterically today when I think about the reception we received when we demonstrated to your everyday Target shoppers how you could use your Atari 800 to do your personal finances, play games and keep electronic records. People thought we were absolutely CRAZY! This was well before the Apple was placed in mass merchants. At Atari we were attempting to sell a product whose time had not yet come to a marketplace that even today, in 2004 is barely getting a handle on their needs for home computing.

Next week we’ll focus on product/service development research, competitive analysis, creating inspiration and outsourcing. I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mark@markdeo.com

Mark Deo Print this article.Click here- LISTEN TO THIS ARTICLE.

Outsourcing – “The Future of Business”

It seems that the 777 wasn’t BIG enough for Boeing. Rolling off the line this week is the very first mammoth Boeing 787. Dubbed the “Dreamliner” it has already sold 584 copies as of June which makes it the fastest-selling new plane in the history of commercial aviation.

For decades, Boeing has outsourced a portion of the work on its planes, and its reliance on sub-contractors has risen with each succeeding generation of aircraft. But with the Dreamliner program, the aerospace giant has reached a point where its role has changed. It now functions less as a manufacturer than as a project manager, supervising its first and second tier subcontractors, each of which may rely on scores of more specialized subcontractors. A recent article in CNN Money and FSB Magazine outlines the commitment that Boeing has made to outsourcing. In fact it states that Boeing has utilized 900-plus contractors to develop and build the aircraft. Boeing’s new manufacturing template has captured the imagination of the aerospace industry. Recently officials from Airbus announced that it will be relying more heavily on outsourcing to become more competitive.
I have said this before: “Corporate America is DEAD!” In fact, I believe those organizations that elect NOT to commit heavily to outsourcing will cease to exist in the next decade.When you consider today’s shorter product life-cycles, outsourcing provides a far more cost-effective strategy to product development. It eliminates ongoing capital investments required to constantly retool. In addition, outsourcing permits the experts in every area of endeavor to focus on mastering their technology. It satisfies a marketplace demanding ever-increasing levels of performance. And outsourcing is good for the business economy. It promotes competition, holds vendors accountable and lowers the effective cost of deliverables.So think about how you may be able to use outsourcing to improve the performance of your business. This can be accomplished for small businesses as well as larger ones. Outsourcing has helped me to deliver a better service to my customers and our entire organization is based on the outsourcing “network” concept. Maybe outsourcing can help you to achieve your dream for your business.

Return on Investment

In today’s economy many business people are looking at all kinds of ways to improve profitability. A wise man once told me that business is simple… make more than you spend!

But many translate this to mean cut as much in expenses as possible. Cut everything that is not an absolute survival necessity. WRONG! This is the worse strategy during an economic slowdown. My advise is to focus on getting a better return on your investment.I have outlined below some powerful yet simple advice on how to improve R.O.I. (return on investment). Increase volume Sell more of what you have. Here are some ideas how:Increase sales per customerThe largest amount of effort and expense goes into getting new customers. Why, because if your advertising yields a response rate of 2% then your doing well. Once they become your customer, you know who they are and can target them directly. Can you offer your existing customers more products or services ? See what happens to profit if you increase volume by 5%.Increase the number of customersIncrease capacity. If you have a big backlog of orders, are short of space or your people or machines can’t handle any more volume maybe you need to increase capacity. One of my favorite low-risk ways to increase capacity is to subcontract some of the work, especially if the increase in volume is non-recurring. This ties in with the collaboration philosophy which I often talk about. Of course you must ensure that the subcontractors work is satisfactory, they can deliver on time and they will not solicit your customer directly. Your cost of sales maybe higher, but your increase in sales will more than compensate.Increase PricesAre you charging all you can for your products or services. This question addresses how you set prices for your products and services. If your products and services have competition, then your prices cannot be significantly different than your competitor’s prices. Price is generally inversely proportionate to volume. Meaning that the more you charge, the less you’ll sell. What would happen to your volume if you increase prices by 10%? Will volume decrease by more than 10%? Will the customer’s you lose be the most undesirable ones, the ones that have the lowest profitability, give you a hardest time or cost the most to collect?Change your sales mixThe sales mix if the proportion of sales coming from different products or services). Are you spending a lot of effort on products that don’t generate enough gross profit? Maybe you should stop selling them or raise prices for these specific services. See what happens if you increase the volume of the higher gross margin product line by 10% and decrease the lower gross margin product by 10%. The idea is to focus on product or service lines that generate the highest gross profit.Reduce expensesEasier said than done! This is sometimes the hardest thing to do. Which expenses are to be cut and by how much? More importantly, what affect will the expenses have on sales? In fact that is the one question one should ask when doing any type of analysis. What affect will not spending on this or that have on present and future sales? Quantify it! Spending $200 a month on meals will generate $X in new business or my employees with be $Y more productive. Here are some tips to help you along the way.

Cut the fat – Look at each expense item line by line. Do you need all the telephone lines and cellular phones. Is the travel that you’re doing resulting in sales. Can you do with less office space. Are your employees productive? Do the employee have enough work or can you reduce staff and group responsibilities? Indeed if you cut staff then some employees will be laid off and moral may suffer, but if you go out of business, no one will have a job!Don’t cut into the bone – Some expenses you need to continue to incur because if you cut them you will jeopardize current and more importantly future sales. A prime example is manpower for product development or strategic planning. These ensure your future growth and profitability. Another expense which is difficult to cut is advertising and promotion. Indeed those trade shows and magazines ads are expensive, but if no one knows about you, then how are you going to sell. The idea is to target advertising so you have the maximum impact on sales.Understand the Difference Between Profit and CashThe Small Business Administration claims that most business failures are directly related to lack of cash flow. Many businesspeople will tell you that their profits may be skyrocketing but they are in a cash squeeze. How can this be? – Profit & Loss is calculated by deducting expenses from sales whereas Cash Flow is calculated by deducting cash disbursements from cash receipts. So if you receive the cash from your customer at the time you deliver the goods and perform the service, then sales and receipts from customers will be the same. If you give credit to you customer, then sales happen at the point you deliver the goods or perform the services whereas receipts from customers happen when you actually receive the cash associated with that sale.Improve CollectionsWhen you extend credit to customers you create a receivable which has a potentially negative effect on your cash flow. I advise my clients to measure their cash flow on a weekly basis. This can be done by preparing an aging of receivables. This involves calculating the amount of receivables owed based upon the time period owed. In other words, how much of your receivables is over 15, 30, 60 or 90 days past due. If your terms are net 30 days yet 50% of your receivables is over 30 days then they are past due. This will create a severe strain on your cash resources. I recommend that no more that 10 to 15% of receivables be more than 30 days past due. There are a number of ways to improve collections.Offer an early payment incentiveFor larger, high volume clients, a personal approach is recommended. Take the client to lunch and discuss it. Develop some creative letters that can be sent after a 15 days past due so they never get to 30 days. Establish a person within the company as the collections clerk that will call on behalf of you.Make Change Happen!I hope these ideas help you in improving both the cash flow and profitability of your organization. In my upcoming “All Day Workshop” I will be be demonstrating how to develop and implement a simple profitability and cash flow test on a monthly basis. I will be giving each attendee a sample of a custom spreadsheet that I have developed to accurately forecast sales and profit months in advance. This strategy has been invaluable to me and some of my customers.

Proper Pricing

Countless times I’ve heard clients tell me, “I have a better product, I provide better service, and I’m sick of customers telling me my prices are higher than the competition. If only I could convince my customers that my product or service IS worth a slightly higher investment.” In this article, we’ll discuss principles, approaches and techniques that will help you to build greater value, a higher product/service perception and improved profitability.

The Lowest Price
Let’s face it- securing the business often boils down to the lowest price, in one form or another. Are you cheaper than the competition? If not, you may be up for a battle of the wills. No matter what price you quote, many customers will automatically say it’s too high. That response is so deeply drilled into their mindset that just about every product or service they come in contact with gets the same reaction. The trick is to get beyond the knee-jerk reaction and into a reasonable conversation about their situation, needs, budget, and time frames. Until you achieve that level of rapport, price itself simply isn’t the issue.

Another facet of the price objection is the explosion of options every client faces. There are more varieties of products and more vendors to buy from than ever before. Multiply varieties by vendors and it’s clear that the total number of available choices has grown exponentially. This overwhelming amount of data can lead customers to making comparisons between options that aren’t strictly comparable- the proverbial apples vs. oranges debate. While the solutions being considered aren’t equal, the prospect is conditioned such that they can’t look beyond Price A vs. Price B.

The “I can do it cheaper” Strategy
An often used but ineffective strategy is the “I can do it cheaper” strategy. Why do so many small-business owners confuse low pricing with proper pricing?

Maybe the answer is because it appears as though the easiest way to attract customers is by offering low prices. Perhaps another part of the answer has to do with the fact that low prices often work well for big businesses, and a distinction is not made between big and small businesses.

We have all seen, however, small retailers go out of business after trying to compete with Wal-Mart or K-Mart on price. Even K-Mart themselves nearly bit the dust because of their aggressive pricing. Anyone who’s heard my show or seen me speak knows how I feel about cutting price. A great example was demonstrated when an Ikea decided to drop their price too far:

Would-be bargain-hunters in London suffered heat exhaustion as a crowd of thousands forced a flagship IKEA superstore to close on opening night. Up to 6,000 people flocked to the opening of the store, which was touting cut-price offers throughout the 24-hour opening, including a leather sofa for £35 ($65) until 3 a.m. The company had expected 2,000 customers.
–CNN.com

Think any of them will return? Maybe when they’re out of the hospital!

Harvard Professor Michael Porter, author of Competitive Strategy, tells us that “The presence of economies of scale always leads to a cost advantage for the large-scale firm … over small-scale firms.”

So why do so many small businesses charge low prices anyway? Porter says that small business owners “may be satisfied with a subnormal rate of return on their invested capital to maintain the independence of self-ownership, whereas such returns are unacceptable and may appear irrational to a large publicly held competitor.” In other words, small businesses often settle for less profitability than their larger competitors.

Give them a reason to pay a higher price
Why should your prospect do business with you over any of your competitors? Especially those that have lower prices? Do you have a “wider selection than anybody in the tri-county area” or do you “deliver within eight hours after the purchase”? Often your unique competitive advantage is the biggest benefit you can offer your prospects, so consider including it in your headline, bulleted copy, or your guarantee. If by chance, you don’t have any unique competitive advantages, then you better get some…fast. Not having a unique competitive advantage with which to show value results in competing solely on price – – and that’s a losing proposition (unless you have a significant cost advantage).

As I noted earlier, “Your price is too high” is an objection we all hear. In fact, if you aren’t hearing it then your prices are too low, you’re leaving potential profits on the table, or you just aren’t doing enough marketing. There is no single, sure-fire, works-every-time solution to this problem, but there are lots of great ideas. The more arrows in your quiver, the more options for handling it– and the greater selling success you’ll experience.

Here are some things that we discuss in our TeleClinic on pricing:

  • Profitably structure your rates.
  • Justify your pricing.
  • Deal with price competition.
  • Fight and WIN a price war.
  • Realize that selling cheaper NEVER works.
  • Use the unconditional guarantee.
  • Non-Commoditize your product or service.
  • Understand your competition’s pricing strategy.
  • Ensure you are priced 5 to 10% higher than the competition.
  • Offer something customers can NOT get from the competition.
  • Match the customer’s need with your value solution.
  • Use the revolutionary “Tiebreaker” philosophy.
  • Break down the price differential.
  • Develop the best way to charge for your product or service
  • Transform customer benefits into hard dollars.
  • Get the customer to calculate the cost of NOT buying.
  • Do NOT become defensive over the price.
  • Never apologize for your price.
  • Use option pricing.

Here is a great resource for pricing strategies on the web:
http://www.tutor2u.net/business/marketing/pricing_strategy_other.asp

Interested in LEARNING more about pricing strategies? Check out our latest workshop:

Attract More Business One Day Workshops
By popular demand, we are now offering the Attract More Business one day workshop. This full day workshop incorporates content from our “Attract More Business” learning program and 8 week class. The workshop will be held from 9am to 5pm on June 11, 2005 in Long Beach, CA and August 25, 2005 in Pasadena, CA. Attendees of the workshop are eligible for 2 follow up 30 minute coaching sessions. As a special bonus when you attend the Attract More Business one day workshop, you will receive our audio CD on “Branding in the 21st Century.”Sign-up at: Attract More Business One Day Workshop.