Business is certainly tougher now than it was this time last year.
When things are good, it is easy to make money. When there is a big shake up in the market such as the recession, the question is “What do we need to do to survive?”
But it is important to realise that when this recession is over, it will not be business as usual. The consumer will have changed, the way we do business will be much different. Technology will have changed the way we run our offices, how we manufacture product, the consumer will get more information online and buy more online. The customer has always been king, but when we come out of this recession, they will be even more powerful.
Companies that are not utilizing today’s technology to reduce costs and improve efficiency and productivity in every aspect of their business, who are not strong on the web, who do not offer extraordinary customer service, need to make changes immediately. In the new economy, efficiency in manufacture and marketing and delivering precisely what the customer wants, will be critical.
You will also need to clearly differentiate your business. You become successful by NOT doing what everyone else is doing. Harvard Business studies show that of 51 different business categories, 45 of them are commoditised.
Whether you succeed or not comes down to just 5 things.
- How well you differentiate yourself
- Your efficiency and productivity
- How effectively and cost efficiently you market your product or service
- Your leadership
- Your passion
You MUST seize the initiative … the way we do business is changing … it takes leadership, passion and courage to change the way YOU do business. And in a recession we must change how we do business.
Most business people attribute the business failures and high unemployment to a collapse of the financial system. I think the collapse of the financial system is just part of it. I believe the problem is a much more fundamental one.
The consumer across the world has been profoundly influenced by the technology revolution. Each time new technology is introduced and computers updated, so is the consumer. And this pace of change is increasing rapidly.
The public have more access to information, they seek immediate answers and gratification and require not only personal service, but personalised service and they want it now.
Technology savvy businesses are more efficient, provide better products and don’t just supply the market’s needs but predict them. The public are also very rapidly becoming increasingly community and environmentally aware. This is beginning to affect every decision they make and everything they buy. The public also expect the companies they deal with to be good community citizens. It is interesting that it is the legacy companies that are failing. It is legacy company employees who are being laid off.
The reasons business is in trouble
If you talk to business people about why their businesses are in trouble, you get 3 answers: Credit has dried up, the customers are just not spending, events beyond our control just overtook us.
These are just excuses, the real reasons are;
- If most companies had been run properly in the good times, they either wouldn’t need credit or it would be available
- Customers are still spending, just not quite as much and more selectively
- Events didn’t overtake them, they just were not prepared.
Let me ask a couple of basic questions. Firstly of the management people:
Do you have state of the art technology for managing:
- Day to day processes
- Variations from the expected
- Continuous KPI assessment in each department
- Sophisticated customer analysis
- Segmenting and predictive customer software
- Sophisticated customer complaint system
- Customer service training and monitoring
Do you have regular in-depth meetings with customers, do you predict what products and services customers will buy from you in 2, 5, 10 years’ time
Shell have regular meetings predicting what gas stations will look like in 5, 10, 20 years’ time. What products will they sell? They now sell gasoline in supermarkets, predicted 15 years ago. Do you know what your market will look like in 10 years?
Do you have an exceptional web presence, do you employ search engine optimisation and offer enhanced online product ranges?
Are you getting a strong ROI on your marketing investment? Do you think 50% of your advertising and marketing is working? Usually less than 10% of businesses believe their marketing is effective. That is not acceptable. What are they doing to change it? Usually nothing.
Unfortunately, very few companies answer yes to any of these basic questions.
Let’s ask the marketers a couple of questions.
Why do marketers use meaningless terms like Reach, Frequency, Impressions, CPM or terms like Investment, ROI, Yield?
This is a major problem, marketers don’t talk the language of business. They still live in their own little protective, non accountable world.
How many marketers can provide a ROI for every marketing investment they make – advertising, PR, merchandising, entertainment and so on? We have the ability, with today’s technology, to measure absolutely everything. Yet marketers are primarily unaccountable.
Final question for marketers. How many of you still predominantly use traditional media for marketing – TV, radio, print? This will ensure your marketing is highly inefficient and ineffective.
These few questions demonstrate that most businesses are technologically illiterate, have poor performance measurement, don’t predict consumer patterns now or in the future and their marketing is stone age and not working, marketers are not thinking in the language of business and marketing measurement is non-existent.
Studies have highlighted other reasons why businesses have not been able to ride out this downturn.
- it is important for leaders, whether they are marketing mangers or the CEO – to be good communicators, yet Roy Neirenburg (The Art of Negotiation) Berkeley California found: “81% of Business Managers have extremely poor communication skills.”
- innovation is critical to success in today’s technology driven world, and 73% of corporations believe: “Innovation creates strategic competitive advantage” yet: 62% of corporations believe: “Our corporate culture is the key restraint to innovation”
And yet companies believe they are struggling because credit became tight?
The credit issue simply highlighted the fundamental weaknesses in their business structures.
Before I go through the strategies for being successful in a recession, it is important that we understand what works in marketing and what doesn’t…otherwise what I tell you will not make sense.
So before we get into specifics of how to Make Your Business Recession Proof, let’s go back to basics. I am going to begin by debunking some of the MYTHS of marketing.
Most business leaders and marketers think having great products or services, competitive prices, strong brand awareness and satisfied customers are important. 87% of all marketing focuses on one, or a combination of these 4 elements. According to studies done by Chiat Day and others, 95% of all marketing today does not work.
The reality is that if you focus on any one or any combination of these you are focusing on the wrong things and you will fail.
Let’s look at them one at a time.
Product: Is there any difference between the product you sell and those your competitors sell?
You say your selection is better, what do your competitors say? The reality is that 92% of customers see like products as interchangeable. They don’t give a damn whether they buy from you … or someone else! Therefore you can’t differentiate your business based on the products or services you offer unless your product is unique.
Price: Everyone says they are in a price sensitive business and the first thing most businesses promote is price. If everyone bought based on price, everyone would drive a Scoda, not wear brand name clothes and buy supermarket generics. The reality is only 13% of people buy based on price.
87% consider other factors more important; reputation, service, return policy, ease of purchase and so on. Price driven businesses continually reduce their ROI and become less competitive. But if you promote price, of course people will buy based on price.
Brand Awareness: The reality is that brand awareness today is worth little, brand loyalty is dead. Brand Equity is the key to tomorrow’s brand success.
Satisfied customers: 62% of “satisfied” customers don’t return. Customers deserve to be satisfied. To get them back, you have to “knock their socks off”.
How many of you keep in touch with everyone they ever sold a product to? This doesn’t include “postcards”, emails or other such useless communication. I’m talking about meaningful communication. You will not “knock their socks off” with a postcard or an email.
How many of you have segmenting and predictive software? This enables you to predict what people will buy so you can be proactive rather than waiting for some to buy. This demonstrates to the customer that you understand them and care about them. It also generates a lot of income
In my experience, most business live on advertising! Yet Harvard Business School demonstrates that unless you get 4 out of 5 sales from word of mouth or repeat sales you will probably fail in the medium to longer term. Over 50% of my business today is developing word of mouth strategies for corporations.
So price, product, brand awareness and satisfied customers do not drive your business, so what does? The marketing keys that do work are:
- Know What Business You Are In
- Sell Emotional Benefits
- Consumer Purchasing Benefit
- Great Communication
- Know Your Customer
- Differentiate Yourself
What business are you in: Before you can effectively market and promote your business, you must know what business you are in. Leroy Merlin are NOT in the hardware business, they are in the problem solving business. People go to them when they have a problem. We increased sales of a hardware chain by 257% by simply making that distinction. You MUST be selling what the customer is buying, otherwise there is a disconnect. In 30 years of marketing I have never found a business where what the company does is the business they are in.
You first question must be “what business am I really in??”
Sell Emotional Benefits: Every decision people make is emotional. People only buy emotional benefits. They make the decision to buy emotionally and then justify it pragmatically. Emotion triggers the preconscious mind recall. Yet most marketing and advertising, particularly print, is not emotional at all. You need to commit the customer emotionally to get a sale. Ask yourself, “How emotional is my sales pitch?”Customer Purchasing Benefit: You need to determine your most powerful point of difference.
What do you think of when you think of Volvo? Safety and reliability. This key point of difference has sold millions of cars. What is your CPB? What makes you different? What makes a customer call you first? A good CPB can mean the difference between success and failure.
Communication: You must be a great communicator with both customers and members of your team. Most of us are poor communicators; we don’t listen, we don’t have empathy. We don’t speak the language of our customer. How many of us know NLP? Everyone in business should understand NLP. Any businessperson that doesn’t know NLP is playing poker with a deck of about 10 cards.
Know your customer: It is also critical to have great relationships with our customers. Most of us don’t even know our customers. We lump them all in together … usually in demographic categories. You can’t guess what customers want, we are usually wrong!!
We should know the customers spouse’s name, children’s names, favourite sports, religion and so on. This enables us to communicate, be empathetic, show them you are interested and care, to tailor communications to hit their hot buttons. You need to really carefully listen to your customers, and then build on relationship.
Differentiate: How do you differentiate your business? There are only three real ways you can differentiate your business today; Position yourself differently, Add Value and Great Service, Think Outside the Square. Most businesses are very bad at differentiating themselves.
Let’s look at how important Added Value and Great Service is.
Firstly, it is 15 times more expensive to get a new customer than to retain an existing one. So why wouldn’t you focus on retaining existing customers? I find it remarkable that most businesses have a marketing and advertising budget, yet practically none have a Customer Retention Budget.
Secondly, let’s look at some PriceWaterhouseCooper studies:
Contribution to ROI. In successful companies, Customer Service makes up 31% of the contribution to ROI, up from 26% five years earlier, compared with 15% for New Products (down 1%) and 8% for Advertising and Promotion ( down 6%).
Driving Business Growth: Customer Service makes up 42% of the contribution to Business Growth, up from 34% five years earlier, compared with 29% for New Products (down 2%) and 28% for Advertising and Promotion ( down 7%).
Customer Service Leaders: Can charge 9-13% more than competitors without losing customers and grow 25-405 faster. Great customer service leads to very happy customers and word of mouth.
Why is word of mouth so important? If you need more evidence, these figures from the Rockefeller Institute on why people stop doing business with you are staggering.
- 1% die
- 3% move
- 5% stop using product
- 9% attracted by competitors
- 14% dissatisfied
- 68% felt the company didn’t care.
This 68% hadn’t done anything wrong, the customers just felt unloved. To be successful, you need advocates, people raving about you.
Let me ask you a question. Have you had a fantastic customer experience in the last week?
A more important question is; Have you given a customer a fantastic customer experience in the last week? If the answer is no, you have a lot of work to do.
Because technology and the way we do business is changing so rapidly it is critical that we keep learning. Even though I have been a marketer for 40 years, I still put aside 4 hours a week to go to the local major book store, whether it be Dymocks, Barnes & Noble or Waterstones, depending where I am to catch up on new business releases. Sometimes I read the whole book, other times just a few pages.
According to Harvard Business School, “A primary reason for lack of success is that ONLY 11% of business owners or managers have ANY ongoing learning.” Do you have a business coach? Do you listen to CD’s in the car? In order to be successful in the future, we will all have to continually increase our knowledge base.
Remember: If you are not learning, someone somewhere else is, and if they know more than you, they will win.