The past two months have been spent in caring for my mother-in-law.  This has involved living in the Philadelphia area for an extended period, a hectic but pleasant Christmas and more than sufficient time to think about what goes on about us while we are doing “work.”

Here is the first of my observations, with others to follow:

The University of Pennsylvania Hospital has a new pavilion dedicated to dealing with sick people.  The facility, from top to bottom is superb.  Each examining room (on the floor we visited) is equipped with the requisite examining table, a desk area with stool and two chairs.  One chair is of normal size.  The other is 50% larger.

This larger chair started a chain of thought that went something like this…the U of P wouldn’t put in larger chairs unless they were needed, they are needed because people are larger, people are larger because of the quality of health care and nutrition they receive when they are young…no they are larger because they are obese. 

A visual observation of other patients (very non-scientific) reinforced my thought about the obesity issue.  There are a lot of sick, obese people in hospitals today.  Why are they obese?  Too many calories, not enough exercise.

Obesity has become an epidemic, and if not stopped will soon overwhelm our medical system with costs that could be avoided.  Some have called for taking away obese children from parents which they see as a form of child abuse. Certainly there is a precedent for Government action, as the Surgeon General was the power behind attempts to ban smoking.

My recommendation is less draconian and stems from my business background.  Place a significant tax on sugars (all types, cane, corn syrup and anything else that adds empty calories).  This will make high caloric sugar based items more expensive, and the monies raised can be used to offset the increasing costs of medical care.

In the 1700s, all that was available was refined cane sugar.  It was so highly prized that it was kept under lock and key and taxed.  Per capita sugar consumption, along with obesity, Type II diabetes, hypertension and other related medical problems was low.   In the 1700’s the average Englishman consumed about 4lbs of sugar a year.  Today it is estimated that the average American will consume over 150lbs of sugar a year.  I don’t think our bodies have evolved over the past 300 years to accommodate change of this magnitude.

As with all simple recommendations, this one doesn’t stand a chance due to the significant lobbying power of the food producers who will see their profits plummet.  Others will say that it is a regressive tax on the poor, for if they want to eat sugar, it will cost them more as a percentage of their income than the rich. 

To the food producers and lobbyists I ask, how do you sleep at night knowing that you are killing people?  To those concerned about the tax inequality, how much are you willing to be taxed in the future to pay for even higher medical costs?

As you can see, sitting in an extra large chair, with time to think, took me down a path of advocating for significant taxes on sugars.  While this is probably an imperfect solution with unintended consequences, the alternative that is facing us as a nation appears much less palatable.

Your thoughts?

RHM 1/17/2012

PS  Wide seats have a larger impact than just in hospitals: http://www.nytimes.com/2012/01/16/nyregion/transit-agencies-in-new-york-area-consider-wider-seats.html?

As a graduate student many years ago, I recall reading a study about the unequal purchase of more expensive branded food items in lower income areas, especially when compared to the purchase of “house brands” in upper income areas.  Further investigation revealed that in the lower income areas,  the more expensive “branded” items were thought to be more trustworthy, i.e., had more value, while the less expensive house brands thought to be not equal in quality.  For those of limited income, this perception (or belief) drove the purchase process, a behavior that was exactly the opposite of the economic theory.  The same survey, conducted in the affluent areas, showed that the buyers there were more willing to take a chance, experiment if you will, on the lower cost house brands perhaps because they did not have as much to risk.

The implication of this 50 year old survey resonates today, as we struggle with 9+% unemployment and 25M+ people either unemployed or underemployed.  Marketers have to maintain or establish a brand that is trusted, to capitalize on a buyer who is reluctant to risk scarce resources on new products.  Conversely, if the trust is lost, so is the buyer.

This is reflected in this 2009 chart on Brand Trust from Concerto Marketing Group.

Maintaining a brand is one of the more difficult tasks.  In the market, the brand is under attack from competitors who are offering new features, discounts or blended services that are aimed at taking away the brand’s customers.  In the company, the pressure is on the development and manufacturing functions to make the same product, but at a lower cost.  While each change to the product/service may be subtle or appear inconsequential, the cumulative effect over time may cause customers to notice and reject the brand.  Or, the change can come from well intentioned causes, as NECCO found out with their wafers.  Regardless of the cause, once the trust in the brand has been lost, so is the customer.

Marketing’s role in this environment is clear… to do everything to maintain the status quo and to clearly communicate the brand’s value proposition.  50 years ago this was done by print and point-of-sale advertising, today it is done via Facebook pages, twitter and other social media tools.  The objective however is the same; reinforce the brand’s image, its message and its value.

At the same time the Marketing department has to fight the internal battle against changing the product.  This should include significant testing of any changes before allowing them to be introduced, as well as maintaining and expanding the same level of frequency and reach that was used to establish the brand in “good” times, regardless of the cost.

Typically, selling to a customer who knows you costs less than trying to sell to a new customer.  Knowing that customers trust your brand and are buying it provides a base or foundation…providing that you maintain that trust.  At the speed with which changes occur in today’s market, failure to maintain the buyer’s trust can be fatal to a brand.

If internal changes are planned for your brand in 2012, whether in formulation or resources, have you fully tested their impact?  (By testing I mean better testing than what Bank of America and Netflix did before they changed their products.)  Can you anticipate the external attacks and how you will respond?

RHM

11/7/2011

That the “Occupy” movement has gained visibility and traction over the past few weeks is an interesting commentary on our times.  The demographic studies done a few days ago as to who is part of the group seems to dispel the myth that they are white suburban hippy want-a-be’s.  What is clear at this point is that the group is dissatisfied with any one of the following:

• Lack of jobs and/or unemployment
• Student loans
• Mortgage rates/foreclosures/loss of housing
• Wall Street players making inordinate amounts of money
• The demise of the American dream that if you work hard, you will be rewarded
• The inability of elected officials to act positively

My interpretation of this social upheaval and dissatisfaction is less nuanced.   I believe that the average American is born with a fundamental sense of Fair Play.  We intuitively know when something is right and when something is wrong.  The “Occupy” people are expressing this feeling that something is not fair and is wrong, and they want it to be made right.  This does not mean that they want hand-outs, or a more socialistic society, or stronger government intervention.  They want things to be more in balance and more equitable.  (An example of the inequality can be found in this NY Times chart: http://www.nytimes.com/interactive/2011/10/26/nyregion/the-new-gilded-age.html?ref=politics)

What does this mean to Marketers?  Dick and I have written before about “under-promising and over-delivering” and the need to exceed expectations.  If my assumption about Fair Play is correct, the practice of exceeding expectations is now a requirement for every company. 

This does not mean lowering prices, or giving things away.  It means being responsive to customers, whether B2B or B2C.  For example:

• Making it a practice to solve a customer complaint on the first call, or within a designated period of time.
• Beating or meeting all communicated delivery dates, whether it is a product or services.
• Including all elements of a purchase at the time of purchase, not “nickel and diming” the purchase experience.
• Deciding not to charge for something that has been free or bundled in…the Bank of America debit card charge and Netflix streaming video change are two current classic examples of creating customer dissatisfaction.

I am sure that you can implement other actions that are specific to your business or service.  The point is that in America today there is a growing desire for Fair Play in all things.  Recognizing this, good marketers will ensure that their products and services do not run against this current, or if they do, make the appropriate changes.

Do you even know how your products are perceived in the market or do you act with the hubris of BofA and Netflix?  If this movement gains more steam will you win or lose?

RHM ­- 10/27/2011

Q4 is the usual time for pulling together plans and budgets for the following year.  In the past, I have written about the problems and issues that this process generates, but decided this year that a checklist might be of better use.

  __  Strategy, goals and objectives – Are the goals and objectives for 2012 articulated?  Is the strategy to reach these goals and objectives clearly spelled out, with priorities specified?

__  Budget and staffing – Is the budget for 2012, even at an approximation level, available?  Is the headcount forecasted to go up, down or remain the same?

__  Support groups – Are all the support functions (customer support, field services, product services, etc.) in line and capable of supporting the plans.

__  Events – Are all the major events/milestones known, i.e., new product introduction in Q1, major trade show in Q3, major partnership agreement in Q1?

__  Cost and profitability – For multi-product companies, are the costs, by product, going up, down, or remaining the same?  Will pricing remain the same or change?

__  Policies – Is there any need to change or modify customer facing policies or social media policies?  For example, has the current “Response” policy and procedure been effective?  Is the policy about employees discussing the company on Facebook and twitter clear and being followed?

__  Target market – Have you identified the target market?  Is it (audience) the same as it was in 2011?  Does it have the same segmentation?

__  Campaigns – Are there developed campaigns (strategies) to support all the marketing activities?

__  Marketing mix – Is the 2011 allocation of Marketing spend applicable to 2012?  For example, should more resources be devoted to social media, or to trade shows?

__  Tactical product pans – Will the 2011 tactical plan be effective in 2012?  Specifically is the “volume” product still competitive and profitable, is the “loss-leader” able to generate sales, and are there contingency plans in place in the event of competitive inroads?

__  Sales relations – Is there agreement on what constitutes a qualified lead?  Is Sales looking for additional support in the form of Product Managers?  Are Sales’ lost sales reports meaningful in helping to define the Marketing mix?

__  Social media – Which 2011 metrics have been the most useful to Management?   How can these be improved or expanded in 2012, and at what cost?  Additionally:

• Is this the year to redo your website?
• When is the last time you updated your SEO activity/measure?
• Do you have a content calendar with confirmed inputs for Q1, the year?
• Can you improve your utilization of content?
• Are you up-to-date on the latest Facebook, LinkedIn, and twitter changes?

This checklist is meant to be a memory jogger, as each company and situation is different.  The point is that in approaching the 2012 budgeting process without a checklist, key things can be overlooked or forgotten.  The importance of a checklist has been proven by pilots and doctors, and should be used by all good Marketers.  (See: The Checklist Manifesto: How to Get Things Right by Atul Gawande)

Have you constructed your checklist for 2012 yet?  How many items are checked off?  What other items would you add to this checklist?

PS.  If all this is confusing, you can find help in our Marketing Resource Optimizer (MRO) product.  Click here to obtain a copy of Part 1.

RHM  10/20/2011  

One popular strategy for companies is a growth strategy that focuses on sales (revenues), or market share (SOM), or assets, or profits.   Regardless of which growth strategy/target one picks, often overlooked is; are the management and its structure ready and prepared for growth.

Typically companies go from a very simple organizational structure to some form of corporate or divisional or strategical business units (SBUs).

Start –ups or small size companies are typically managed by one or two people (entrepreneurs) who have the vision and passion to get things started. The environment is usually flexible, dynamic, has little in the way of processes or procedures and is freewheeling. 

Unfortunately when the company hits a certain revenue size or development phases, the entrepreneurial skills become secondary or more bluntly, other skills are needed to move into the next growth stage.

Skills like marketing, sales, or financial become critical for the company to grow.  Again it is more often than not that the original founder does not have the required skills for the next phase.

Here are examples what some call “crisis of leadership” that happens every day:

A small software company was started by a very talented engineer and their initial revenues came from personal referrals, which helped the company grow to a certain point , then the stall point happened and no one seem to know what the problem was. After close to a year of stagnation, a consult concluded that this company was not doing any marketing what so ever, mainly because the founder believed “if we make it, they will come”.  Eventually the founder hired a marketing person and gave her ownership not only for creating some marketing programs but developing the next wave of market development documents.

Another example is about an extremely passionate person who started a charity organization and again grew it to a certain “donation level” and once again things came to a halt. In this case the founder tried to do everything from fund raising to printing the next newsletter. The problem was no one knew who was responsible for what and what their contribution was, so most just sat back and waited for the founder to take action.  Again, objectives and goals were personal and not for the overall benefit of the organization.

A third example is about Larry Ellison and Oracle.  Larry Ellison has great vision and a passion for his company, but Oracle also hit a stall point, but in this case Larry saw he was part of the problem and hired some financial experts and he focused on the next innovations.

For those at the top, here are some things to avoid according to J. Hamm “Why Entrepreneurs don’t scale” Harvard Business Review.

1-Don’t be to loyal to your comrades

2-Don’t become too task and detailed oriented

3-Be careful of single – mindedness,   because this can develop into tunnel vision

4-Don’t work in isolation, leaders lead, do not hide

If you see any or all of the above situations within your company, I would suggest seeking some outside advice in order to get a third party’s point of view.

Remember, a management strategy is just as critical as having a product or service strategy.  Not having a strategy is like sailing a ship without a rudder.

RHL  10/13/11

One way NOT to raise prices is to follow Bank of America’s example…increasing prices for a regularly used item with little or no concern for the impact.  The fallout for B of A has been catastrophic, ranging from members of Congress telling people to get out of that bank, to being denounced on the Jay Leno show as “screwing one American at a time.”  Masspirg has even put up a page on How To Close Your Bank of America Account: https://secure3.convio.net/engage/site/Advocacy?cmd=display&page=UserAction&id=3316

In today’s environment, buyers want and are demanding more.  You can raise prices if you offer more.  For example, what if Bank of America had done one of the following 3 things:

1. Offered to pay the fee at any ATM machine for a monthly fee of $5.00, on an opt-in basis.  I think the majority of B of A customers would have gone for this, as the convenience of being able to use any ATM at any time for a minimum cost is significant.  The cost to B of A in today’s electronic world…extremely small.  Plus the concept of offering something new and better would have differentiated them from their major competitors.

2. Borrowed from the phone companies, and instituted a volume plan, i.e., your first 10 ATM transactions a month are free, over 10 we charge your account $3.00, over 20 we charge $5.00.  Customers are used to rate plans and work with them.  While this may not have raised as much revenue, it would be acceptable by all, preserving the bank’s image.

3. Tied the $5.00 charge to a bundle of other services, i.e., your account now costs $5.00 a month and includes no charge overdraft protection, 3 credit reports a year, 50 free checks and your ATM card.  Here the impression is that there is a bundle of goods and services that differentiate the bank’s offerings from others, and have a perceived value to the customer.

The lesson learned from the Bank of America debacle is that you must know your customer, and fill their needs.  Today’s customers are value conscious.  They do not appreciate the arrogance of banks (who they feel were bailed out while the bulk of Americans are suffering) who arbitrarily raise prices with no value add.

In all likelihood your customers reflect the mood of the general population.  At the same time, as CMO you are probably being asked, along with your engineering and manufacturing counterparts, to increase profitability.  In pricing your products consider the buyer and give them more real or perceived value than they expect.  In doing so, you will be able to raise your prices without the severe backlash that has engulfed B of A.

RHM  10/6/2011  

This paragraph, in a solicitation email from Sherpa where they are trying to sell their 2012 B2B Marketing Benchmark Report, caught my attention:

To me, this reinforces the antidotal evidence that I have been receiving relating to “social media fatigue” “unproven results” and “inability to link social media actions to leads/sales.”  (See my prior post: http://firealarmmarketing.com/2011/09/20/expections-of-social-media/). 

Sitting through recent events at FutureM and MIT Enterprise Forum I was overwhelmed by “social media experts” who could talk on and on about how they successfully built brand and awareness, but could not translate this activity into basic business terminology, i.e., we did this and it drove X% incremental revenue.  I also find it interesting that the same old tired examples are trotted out (Dell, Zappos, etc.)…where are the new 2010/2011 success stores for social media?

Assuming a best-case scenario of a flat economy thru 2012, financial winners will be those that have significant market share and can exploit it (sell up, sell new features/functions) and those that provide differentiated products with significant customer service.

While word-of-mouth works well for consumer products, as the complexity and acquisition costs of a product/service increases in a B2B environment, other factors beyond a high Yelp score or backing by an influential blogger are required to close a sale.  In many B2B cases this requires establishing personal relationship with the buyer (something beyond tele-sales), extended Beta testing, and strong referrals from like-minded customers who have the product installed.

Perhaps we have gone too far with the social media frenzy and need to go back to some fundamentals.  I recognize monitoring what is being said about you and your products is a requirement, and that blogging and interfacing on community groups is essential to obtaining brand awareness and thought leadership.  These activities help, perhaps more than a cheap give away at a trade show or T-shirt, but they are no replacement for face-to-face contact that explains how your product is significantly different, coupled with a free beta test, backed up by strong customer testimonials.

Your thoughts?

9/28/2011 

Two months ago I stubbed my big toe.  Hard.  It still hurts.  After numerous x-rays, pain pills and doctor visits, the diagnosis is a “toe strain” and to “come back in two weeks.”  The doctors have done a poor job of setting my expectations, as I have no idea how long I will have to limp rather than walk normally, or what actions I should take to get better.

The expectations surrounding the use of social media are similar to what my doctors have told me…poorly articulated.  In today’s environment, businesses know that they have to use the new tools.  What they don’t know is how effective each will be and/or which ones will generate the most revenue.  In other words, no-one has been able to set the proper expectations because, frankly, no-one knows what mix of social media tools works best for each company.

The success stories that are trumpeted, i.e., Dell’s ability to move products, Zappos selling shoes with excellent customer service, Amazon’s growth, etc. can be viewed as being particular to each company.  In short, what works for them, may not work or even be applicable to you.

For example, I have yet to hear about a small hi-tech company with a limited number of customers (<2,000) selling high value (>$500K) products or services with a long sell cycle (>12 months) who can track their use of social media to increased revenue.  Many are blogging to gain thought leadership, and are using twitter as part of their customer service, but when pressed cannot say that these efforts have resulted in increased revenue.  They can point to increases in brand awareness and customer satisfaction, but linking the social media activities directly to leads in the pipeline and resulting sales is difficult.

Most corporate management is driven by expectations.  With established goals and objectives management expects people to work toward them.  In today’s world management’s goals are centered on increasing sales and decreasing expenses.  Activities that do fit into these goals are deemed expendable.  Since many of the social media activities in a B2B environment cannot be tracked directly to sales, and with the increasing pressure to cut expanses, support for the resources required to engage in social media “experimentation” may be diminishing or lacking.

Can you share a B2B example of how social media activity can be directly linked to sales?   Are you being forced to justify the time and resources spent on social media activity?  How are you doing it?  Let me know.

RHM  9/20/2011 

The Fed has promised to keep interest rates low for the next two years.  The housing “bubble” and foreclosures are keeping the housing market down, unemployment is now projected to be around 9.0%+ through 2012 and some are projecting a double dip recession.

Clients are asking for advice on Marketing strategies if we enter into a deflationary period.  In this context deflationary means that the buyer feels that the product/service he/she is going to buy will be cheaper in the future, so the right economic decision is to hold off on the purchase.  (In inflationary times, the opposite holds, they buyer thinks that the product/service will be more expensive in the future, and the right decision is to buy now.)

There are four main strategies in this race to the bottom.  One is to price your bundle of goods and services at the level of your fixed costs, which should result in a significant price reduction.

Pros – This action will drive added volume to your business with appropriate gains in market share and potentially thought leadership.

Cons – You will be seen as the price leader, which is often not equated to quality.  Additionally, if you are truly pricing at the level of fixed costs, you will have no flexibility if one of your competitors has a lower cost basis and matches your prices.  And, going forward you may have difficulty raising prices when the economy turns around.

A second strategy is to first unbundle all your goods and services, pricing them on an individual basis.  Then provide some of the goods, features or services on a no-cost basis. 

Pros – Greater flexibility in pricing; the value of each of you components can easily be seen and it will be easier to raise prices in the future.

Cons – A price leader could gain significant market share if you delay implementing this strategy.  And, this strategy requires an obvious, quantifiable value to the various pieces.  If this is not present, then the strategy cannot be implemented. 

Some fully integrated software products and computer “appliance” vendors may have difficulty in following the second strategy. In these cases our recommendations have been to revamp their product offerings into the classic “good, better, best” offerings, with visible and quantifiable differences between the three.  With this structure, the good product can chase the price leader down, while the better and best products are available for quality comparison.  Of course the expectation should be that the “good” product will be the volume leader.

A third strategy is to offer financing terms, i.e., volume discounts, trade-in/trade up programs, delayed payments, etc.  A working assumption is that you can afford to carry the cost of financing your sales.

Pros – Financing programs add to the “stickiness” of your sale, helping to ensure that the customer stays with you for a longer period.

Cons – Too many or complicated programs can confuse the buyer, making their comparison with lower priced alternatives more difficult, resulting in your offer being rejected.

A fourth strategy is to focus on the values delivered by your product, i.e., faster greater ROI, ease of installation, ease of use, etc. as compared to the lower priced competition.  This differentiation strategy requires that your values can be quantified and easily understood.

Pros – This strategy takes the conversation away from price to value which, if it can be quantified in your favor, should move the buying decision to you.

Cons – Competitors will rapidly close the value difference, either by introducing new products/features or lowering their prices, so continuing investment in product innovation and new product introduction has to be part of this strategy.

Looking at the Japanese experience and our previous periods of stagflation, a period of deflationary activity can be expected.  Understanding your buyer behavior and planning accordingly is the key to long term survival.

As CMO, do you know what your fixed costs are and the true unit costs of each of your product offerings and have you thought through a strategic approach for deflationary times?  Having this will allow you to have in place the right strategies when your competitors start a race to the bottom.

(This is additive to the article I wrote last year about the same subject.  See: http://firealarmmarketing.com/2010/07/22/deflation-and-pricing-6-suggestions-for-the-cmo/ dated July 22, 2010.)

RHM  8/25/2011

In one of my posting I asked the question, Who is Responsible for Customer Satisfaction?

 I stated that customer satisfaction is the responsibility of EVERYONE!

Everyone “touches “  the customer and how everyone performs their job relates to the customer being satisfied.  I also listed several steps for starting a customer satisfaction program within any company. Lastly, Marketing should always look at their activities from the customer’s “glasses.”

Several people asked about research on customer satisfaction and activities that a company can perform and linking it to either starting a customer satisfaction program or improving their current customer satisfaction program.   Well the answer is a definite YES!

There are a number of approaches, companies and experts on this subject, but they basically boil down to a relatively small number of activities that help improve customer satisfaction.

Fundamentally, customers (both B2B and B2C) are looking for value (see my posting on good value propositions) and value is benefit minus cost.    Given this basic premise, one can link activities that focus on benefits and cost, and if one improves on these activities it will result in an improvement in customer satisfaction and in most cases have a positive impact on the company’s revenue stream.

Two examples of this relationship are:  One, developing a quality product that addresses a customer’s critical issues, resulting in a perceived benefit and subsequent purchases of that product or service. (e.g. disposable diapers)  Secondly, by developing a great relationship with the customer base or creating a wonderful image of your company that will be viewed as a benefit to the customer and again resulting in a purchase of the product or service. (e.g., Apple, Disney)

Bradley T. Gale’s book titled “Managing Customer Value” talks about developing a matrix of attributes related to customer satisfaction consisting of “levers” that when improved will result in an increase to the benefit attribute or when levers addressing costs are improved will also increase the overall value and thus the potential for increased revenues.   The key point is incremental or small improvements in some or all of these attributes have a multiplying impact on the revenue improvement factor.    So just a 1-5% improvement in several areas can result in increased revenues.  

So, as I stated before, everyone can impact customer satisfaction and there are metrics that can be put in place that do not require a major undertaking to measure overall customer satisfaction AND increased revenues. 

Have you stated your customer satisfaction program; if not why not?

RHL 8/16/11