Differentiate … and win.
There has never been a better time than the present for business leaders to identify, analyse and differentiate between customers and consumers.
In families, business and government departments, the buying agent (purchase initiator) is seldom the actual or full consumer of the products or services which are ordered or secured.
Therefore, differing purchase criteria can be and usually are applied to decision-making.
For example, purchasing managers operate under differing performance parameters to plant managers, service division heads and research and development leaders.
Likewise, mothers (the typical and prime buying agents for up to 70% of families) are stimulated and influenced by factors which are different to husbands, Generation Y and Generation X offspring and almost certainly to aging parents (particularly relevant if the post war baby boomer female head of the household finds herself as part of a “club sandwich” family scenario, in which she is squeezed between the varying demands of three generations).
So, whom are we marketing to and trying to satisfy? In Australia, “Pester Power Purchases” which are those influenced by the pestering nature of young offspring demands are calculated to be worth some $80 billion per annum.
Ignoring the difference between customers and consumers can be an expensive oversight.
IT’S SO OBVIOUS
Let me share with you a valuable insight.
Each year I am involved with a number of interactive business development workshops as a facilitator, an external catalyst, a participant and in some instances a casual observer (usually following the delivery of a keynote address).
The focus is typically on the evolving changes in business and the marketplace. Participants are asked to project and visualise their businesses, products, services and clients in the period 3 to 5 years hence. Contributions can be and usually are fascinating, challenging and enlightening.
Some facilitators ask what is or could be planned to address those forecast trends or outcomes and implications. Often the answers are consistent and concise. Nothing.
I have often been moved to enquire what is being done now to ensure the attainment or retention of market leadership and advantages, given the shared foresights. That too can produce a blank sheet in response.
It seems so obvious that one should not and must not wait. Change over the next three years will be sudden, constant and substantial. When a problem arises, whether it be with personnel or operations, the time to act is now. Former US President George W Bush may have benefited from the simple philosophy, because the time to have considered the reliability of the New Orleans levees was before Hurricane Katrina. Why wait?
The message: Get on with it. Do it. Above all, think it, plan it, say it and do it … NOW!
There is no virtue in waiting for change to happen, as there is no evidence to elevate or assign some God-given sanctity to “the period 3 to 5 years hence.”
FIRST AID – APPLY CAREFULLY
The recent rash of price discounting (up to 70% off) and the related advertising promotions, merchandising and personal selling initiatives have ravaged some corporate, product and service brands.
Concepts like value, integrity, worth, quality and competitiveness have all come under scrutiny by discerning and sensitive clients and customers.
Some difficulty will be encountered by businesses with their endeavours to discontinue the sales strategy and mentality. Reintroduction of full recommended retail prices will stimulate some leakage of demand, referrals and repeat business. Remember, price reductions can also result in discounting the worth of the brand. Ponder, if you will, the words of Warren Buffett, the Chairman of Berkshire Hathaway:
“Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless”
Warren Buffet, “The Snowball” Page 604, 2008
Similarly, impediments to the company product and service brands can be effected because of staff retrenchments and related lowering of customer service standards, a lack of continuity of supply and poor product/service consistency.
Let me reiterate several points made in the December issue of these periodic ezines. The current marketplace and circumstances are neither cyclical or seasonal in nature. The current economy is the first phase of a restructuring of the marketplace.
Therefore, policy, strategy, product, service, pricing and staffing decisions will have longer term strategic ramifications. Actions taken in the current market will establish the market positioning for and in the future. Hence, it is imperative that close consideration be given to consequences beyond the immediate horizons and need for immediate cashflow.
The following article text has some relevance and possible benefits for all who own, are employed by, service, interact with and patron businesses regardless of their size.
MICRO FIRMS ARE NOT SMALL BUSINESS
Labels can be misleading.
By nature micro-businesses have five or less employees, including the owner. However, throughout the world micro entities are big business.
Systems, structures and resources are typically limited and often not cutting-edge. They are small. Many are dynamic and innovative. Individually, businesses in this sector have been greatly impacted by the current economic turmoil. Finance lead-times can be short and margins wafer thin.
Cashflow is often the true and central lifeblood of such entities. The categorisation “credit card” financial management is an over simplification and harsh judgement. However, these aspects and references are indicative of opportune realities for this business type and those who seek to service them.
Collectively, micro-businesses are numerically greater than the number of medium sized and major regional, national and transnational corporations which operate in Australia, New Zealand, Britain and North America.
The skill set and entrepreneurism of the owners are often insufficient to generate growth, beyond the initial years of trade, and to sustain competitiveness and advantage. That may explain in part why many in this subgroup do not aspire to substantially grow their operations. That mindset and parameter is often not recognised or respected by external consultants.
Increasingly, the greatest and most widespread needs for micro-businesses are integrated systems, structure and discipline. In short, support and infrastructure.
During the past three decades, major corporations have learnt and profited from the utilisation and marshalling of the capacity and drive of small and micro-business. Countless supply chains exhibit the evidence and consequences of downsizing, outsourcing, re-engineering with the proliferation of micro-businesses.
Buying groups, marketing networks, franchise chains and operating co-operatives provide immense scope if and when they are able to overcome one major impediment. That is, the allure of the desire for independence by small business owners.
DIVISION OF LABOUR
The lessons of the past have been lost on, or possibly have never been learnt by, many contemporary owners and managers of micro-businesses.
Frederick Taylor has long worn the label of the father of “Scientific Management”. His research, findings, philosophies and applications about the division of labour were the touchstones of mass production, which was instrumental in the growth and success of entities like Ford, General Motors and General Electric.
Regrettably, the science of mathematics work against micro-businesses. The capacity for division and multiplication is limited with a maximum workforce of just five.
Time spent on administration, marketing, selling and networking can be all consuming, with little immediate returns. The financial imperatives of generating cashflow and earning need to be forsaken, even if for a short time.
Conversely, a full commitment to “doing the job” can have significant adverse intermediate and longer-term consequences. Neglecting administration, marketing, selling and networking can be perilous. It’s a fine line between the two.
All too often micro-businesses do not have comprehensive, detailed and objective business plans. Cashflow projections documented by external accountants do not suffice. Many are in reality documented hopes, dreams and aspirations without addressing the issues of “why” and “how”.
So, one should be driven by and needs to respect the underlying philosophy of economics. That is, the allocation of scarce resources.
One epidemic which pervades the current crisis ravaged global marketplace, including among micro business owners, is short term, negative and small thinking.
A strong focus on cutting costs can and often will achieve the set objective … to save costs. The unanswered question is: “At what cost?” Growth, enhanced margins and increased customer satisfaction appear to be off the agenda. That is lamentable and often unnecessary.
Considerable value is possible from an effective and objective skills audit of all employees. Emphasis and priorities can be set, reset and refined. Complementary skills and resources may be necessary.
Most important and often overlooked is an analysis and determination of what is the driving force of the business. It may be production, services, sales, research, product development and logistics.
Cross referencing the two sets of findings can be enlightening, highlighting strengths, competitive advantage, gaps and deficiencies. It can also register and quantify the advantages of being part of grouping, regardless of its individual character and structure.
That is the true worth of the division of labour.
AN IMPORTANT FOOTNOTE
In these testing times, nepotism can and often does come to the fore. Looking after those in the nuclear and extended family is understandable, possibly laudable. However, in business it can be simply dumb.
The issue is not family employment, but rather skills deployment.
Our DNA and genes are not necessarily the best pro-conditioners for sound employment and deployment decisions, be it first, second or third generation.
Micro entities and business at large deserve better. That in itself is a rare, unique and disciplined science.
Barry Urquhart is Managing Director of Marketing Focus, Perth, a full service market research and strategic planning practice.
Barry is an internationally recognised conference keynote speaker, facilitator of business development workshops and author. He has worked with big and small entities throughout Australia, New Zealand, Britain and North America.
Barry Urquhart is author of the two largest selling books in Australasia on quality customer service, being:-
· “Serves you Right!”
· “Service Please!”
Tel: (08) 9257 1777