Archive for 2010

Business is not a Hobby

Thursday, July 8, 2010 by:David Zahn
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An out of state friend and I decided to get together after not seeing each other for over a year. While enjoying New Haven pizza, he began to tell me a tale of woe related to his Father’s business. According to my friend’s story, the father has been developing a real love for nature and the outdoors after having worked an office job for over 30 years. So strong is this interest, that the Father has visited national parks, studied rock formations, botany, history, and is now rather expert in certain areas of the country. The Father blogs frequently about his insights, and has developed a following among others with the same interests.

Running a business is not a hobby

But is it a Business?

While many business owners enjoy their job, think of their customers as friends, have fun doing what they do, and do not consider what they do to be work – few successful entrepreneurs would call it a hobby. A hobby is defined as, “an activity engaged in for pleasure and relaxation during spare time,” according to the Encarta Dictionary. There are two conditions that separate a hobby from a business:
1. Pleasure and relaxation – the business may be enjoyable and the work may even be relaxing for the entrepreneur, but the primary reason for the business is not to provide pleasure and relaxation. If that is what the business owner seeks, then the chances of a business failing because the other important components are not being met is high (those other components are; serving customers, making a profit, managing costs, etc.).
2. Spare time – a hobby is what is done AFTER work or business. This is a small point, but does point out the priority of focusing on business and addressing hobbies in non-work or committed time.
Where the Trouble Entered

My friend’s Dad decided that since he was often approached by others he had encountered through his hobby to offer his insight, experience, and wisdom in choosing what historical sites to visit, what time of the day to take photos, which tours to go on and which to avoid, etc.; he would open his own tour guide business. He decided that since he was likely to re-visit many of the sites others wanted his insights about anyway, he would charge a nominal fee and have them pay his expenses and even pocket some additional money for his efforts.

Problem 1: – Corporate identity – he chose to refer to the business as something akin to “Cheap as Air Tours.” With a name like that, the sense of receiving value for the cost was clearly on the low end. The prospect interested in a premium experience would be turned off and the importance of fees or cost became a real prominent determinant in the decision to use his services. Rather than focus on the tourist’s experience, uniqueness of activities, or some other differentiator, cost became the reason to choose the business.

Problem 2: Profit – having backed the business into a pricing competition with other tour companies, the proprietor was now forced to be less expensive than others or fail to live up to the company’s promise or pledge as communicated by the company name. So, the balancing act now became how to provide the service of being a tour guide at the least possible cost in order to still make profit, or to provide a larger or better experience and risk doing so on a smaller margin or even at a loss (something no business would ever do, but a hobbyist interested in sharing the experience with others might consider doing as a way of experiencing the joy of the hobby with others).

Problem 3: Marketing and Sales – while the blogs and various sites that the Father contributed to did create some initial interest among fellow hobbyists, the sustaining of a pipeline of prospects would require more aggressive marketing and sales efforts. To do so though, would require investment into website development, printed materials like brochures, advertising, etc. Unfortunately, the business is not currently able to spend on marketing and sales in a consistent and fully committed way as the profits generated to date have not been sufficient to afford that kind of expenditure. Of course, it is a conundrum in that if the investment is not made, then the profits will not ever be there.

Running a business requires rigor, discipline, management, and oversight based on creating a profit-producing entity. A hobby is a pursuit that one derives pleasure from and enjoys as part of one’s downtime or relaxation activities. While it is not impossible to create a business from one’s hobby, the skills one uses and applies are very different and require a perspective that is focused on metrics and measurements that most hobbyists do not consider when pursuing their passion.

Public Power uses Social Media Effectively

Wednesday, July 7, 2010 by:David Zahn
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Of all of the “hot topics” discussed in the business pages of newspapers, journals, industry publications, on blogs, in electronic bulletin boards, etc, none seem to be more topcial than the use of Social Media as a component of a company’s marketing efforts. However, for all of the theory, salesmanship, and enthusiasm around the potential of using Twitter, LinkedIn, Facebook, and other social media, few companies have approached it in a strategic way that shows results. 

Public Power offers reduced electricity costs and has maximized the use of social media to develop a dialogue with customers.

 

Danbury-based electric power  provider, Public Power (http://www.ppandu.com)has been successful in applying their social media efforts to communicating with prospects, customers, and others interested in reducing the costs of electricity. For many homeowners, the cost of electricity has become an onerous and they are unsure of how to take advantage of the opportunities presented by a deregulated industry and the benefits that may exist in switching providers. 

Public Power sees itself as akin to the energetic smaller company to the larger monolithic corporate giants that traditional utility companies have become.  Even more important than the money saved on the generation portion of the electric bill through their services, Public Power provides a progressive customer appreciation program that allows customers to receive deep discounts on products ranging from vacations to jewelry to everyday items including groceries.  According to the way the program works, a household can expect to receive $125 savings dollars per month and they are given $500 savings dollars when you sign up. However, they use social media to offer impeccable customer service not only via phone, but also through email, Facebook and Twitter. 

The Strategy’s Intent 

To their credit, Public Power realized that interaction with their customers and neighbors was a vital part of an overall branding and advertising strategy. However, unlike other companies that have delved into social media, they don’t believe in using social media in a “spammy” manner to advertise, so their interactions are genuine and of the highest quality. Rather than plaster the cyberwaves with self-serving messages, they  truly want to get to know the people within the areas that they service and in the process, hope to familiarize those people with the offering and company’s mission. 

Social Vs. Traditional Media 

Bob Gries, CEO of Public Power sees a clear distinction between the roles of social and traditional media. “They don’t compete at all. When a person sees a billboard or watches a commercial, they’re possibly engaged for 30 to 60 seconds. When you interact with people and they know that you are being sincere then you can generate truly unique interest in your service. We like to think that we care more than anyone else and that insanely high level of caring will beat out a commercial any day.” 

In terms of how to measure the success or evaluating social media efforts, Gries admits it is difficult to measure the exact success of a social media campaign because; “it’s almost impossible to track; how can you know if someone interacted with you on Twitter, had a great conversation and then that interaction influenced a sign up through a broker few weeks later. To get an overall feel for the success of the campaign, we step back and look at everything in a more global manner. We look at how many people are interacting with us on a daily basis through our different platforms. We also compare ourselves to our competitors that are on this space; in that particular regard, there’s no comparison and we are very proud of that.” 

There are Cautions 

Lastly, Gries notes, “There are 2 things that you have to watch out for in this space. The first is consistency. You can’t jump in with both feet for a month or so and then stop, especially if you are a commercial brand. It makes the company look fickle and uncommitted. The second is sincerity. People can detect insincerity a mile away, so if you don’t plan on caring a ton and exuding that in your message, people will be able to tell and it will reflect poorly on your brand. ” 

Social media provides an excellent opportunity to leverage the organizations’ ability to communicate in a much more direct way with customers, but it also comes with certain expectations and requirements.  Just like one would not try to talk incessantly about themselves when meeting someone at a soc gathering; it is poor form to do so through social media.  Rather, the tone of direction of the conversation is best directed at how the customer stands to benefit through the efforts of the company.

Serious Side of Fun

Tuesday, June 29, 2010 by:David Zahn
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Businesspeople are always on the hunt for ways to have fun at work to spice up their dreary office jobs, repetitive assignments, and projects that score high on the boredom scale. However, there are businesspeople whose job it is to provide fun for others. Those in the hospitality industry cannot survive on the business generated by the one or two night hotel room guest. Rather, they are constantly on the hunt for ways of selling services that include party planning, catering services, meeting facilities and more.

The Landscape

One of the best in the business works for the nearby Holiday Inn, in North Haven, convenient to Route 91 and Route 15. 

To contact Jillian Nurmi, Sales & Catering Manager use hinhsales@wnwhospitality.com

Jillian N. Nurmi, Sales & Catering Manager recognizes the importance of differentiating her property and her staff from the abundance of competitive options.  She very succinctly identifies her competition as, “anyone else that has meeting space to sell.  Whether it is a restaurant, banquet hall, or another hotel – if they have space to rent our or provide catering, then they are a competitor.”  Her focus is so laser sharp about this point, that she shares, “if they are booking a wedding, corporate event or a baby shower at their venue – that is one less piece of business that we received.”

With the competitive marketplace being so crowded, Nurmi prides her efforts and those of her staff as being differentiated from other competitors in the following ways:

  1. Providing “one stop” shop capabilities (meeting space, catering, overnight rooms, and a restaurant all on site without having to coordinate with multiple suppliers and vendors)
  2. Collaborative relationships with local service providers to supplement her property’s offerings (florists, DJs, photographers, videographers, linen rental companies, and providers of the unusual touches from balloons to cotton candy machines and  entertainers)
  3. A sales department that has broad experience across multiple client needs. Nurmi herself grew up celebrating Christmas and Hannukah and can easily transition and speak knowledgeably about parties for a  communion or baptism with one guest and then speak about a Bar Mitzvah with another.  The traditions and customs of the various parties are second nature to her.  Others in the sales department are focused on corporate or weddings and can put prospective customers at ease with their comprehensive understanding of those needs.

Sustaining the Enthusiasm

To the outsider’s eye, it would seem that it would be easy to become jaded about being in the business of staging and conducting parties.  Afterall, for the guest of honor it is a once in a lifetime event, but for the staff of the facility, it is just another day of work.  Jillian Nurmi is quick to dispute that.  She admits to getting excited every time she meets someone new and begins to visualize how to best handle their event needs.  She shared, “when people see me excited about their event, it makes them begin to see an even greater potential than they initially had envisioned.  I suggest ideas based on my experience that the client may not have considered.  Many people don’t have a clear vision of what they want and that is what I am here for.  People’s lives are very busy and it is our job to take this one evengt and make it worry-free.”

In terms of her staff, Ms. Nurmi proudly confided that her property is family-friendly and that the staff has been trained and is held accountable for integrating the fun aspects with the business necessitites.  As proof, she escorted me through the lobby and pointed out the staff joking with guests, animals being petted, even holding babies and inquiring about family members.  Nurmi further challenged that it would be unlikely to see that level of engagement at the Four Seasons Hotel!

Making It Happen

While a job dedicated to having fun and sharing smiles may seem like an ideal way to make a living, Ms. Nurmi does share that there are aspects to the business that require a more formal and process driven component.  Among those things are:

  1. Meeting several times prior to the event to check and double check that all needs are surfaced, wants and dislikes are identified, staff that will participate in the event are introduced to the clients, etc. 
  2. Not being a clock watcher – the job is not a 9-5 position.  Ms. Nurmi even wonders, “given that hotels are open 365 days a year no matter what the weather, traffic conditions, or economy, why even put locks on the front doors?”
  3. Having the patience to slow down and make the connection with people.  As she explains it, “we live in a microwave world of emails and virtual contact where everything has to be done immediately.  While we are very responsive to our clients and prospects, it is incumbent upon us to slow ourselves down and remember that this is a one-time event for the customer and ensure that they get the best ‘bang for the buck’ and present the customer with the options to make their party a unique and memorable one and not merely a carbon copy of any other event.”

While her business is the delivery of fun to customers and can be measured in smiles and laughs; Ms. Nurmi is also very aware that she only gets one chance to make each event the best it can be. Her future and the property’s future business depends on how well she can translate the good times into a serious business success.

When Negatitivity is a Positive

Wednesday, June 16, 2010 by:David Zahn
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Most business people can easily rattle off reasons why customers should purchase from their business rather than from the competition.  The ease with which most entrepreneurs can slip into discussions of their; experience, business model, qualifications, testimonials, etc. is almost second nature.  While it is important to be able to answer that question convincingly and with clarity; there is another question that all too often remains unasked and therefore unanswered.  Even worse, because it is neither asked nor answeered, it remains unacted upon.

To be the best, sometimes it helps to think the worst.

Why Not?

Equally as important as asking why prospects should buy your products or services is the need to ask the question in reverse.  Why don’t people buy your company’s products or services? When shoppers choose to buy something the business offers, but the customer chooses to buy it elsewhere – what are the reasons or contributing factors to that decision?

While it is not productive to ONLY seek out the bad, the mistakes, and dwelling on the negatives of lost opportunities and missed chances; there is value in truly considering what causes the customer to choose NOT to purchase from the business.  Once identified, then the business can determine whether it is worthwhile to change how it markets, sells, manufacturers/produces products or services to better fit the needs of the prospect that chose not to purchase with the company.

Where to Look

By taking an honest assessment of the business from the perspective of the prospect or customer and seeing what about trying to purchase from the company creates a hurdle or an obstacle, the business owner can remove those hindrances in the future:

  • Is the product or service a good fit or match for customer needs?
  • Is it priced fairly?
  • Does the prospect or customer know the product or service exists or is available for purchase?
  • Are marketing materials, advertisements, Public Relations efforts aligned with the reality of product or service performance?
  • When interacting with employees, do customers have a positive experience or not (do they have to wait unduly?  Are their questions answered accurately?  Are customer service calls handled efficiently? Is the store or website or any other contact the customer has with the company a pleasant one?

How to Start

As opposed to just mercilessly flogging oneself over every shortcoming and error from the past, it is advisable that only the most recent losses that SHOULD have been sales be reviewed. There is no sense going back into the long ago past and no relevance to review the prospect contacts where no real opportunity existed.  Once isolated on those exchanges alone – review:

  • was the value being offered by the company viewed similarly by the prospect or was there a misalignment between price/benefit/capabilities of the product or service?
  • Was the “sale” much stronger than the ability to deliver (the advertising worked to generate interest, but the clerks answering the phone did not have necessary information to answer questions)?
  • Did the conversation get too technical too quickly?  Far too often, the customer is not as well versed in the technology of a product’s performance and can get confused when the discussion becomes overly complex before the BUSINESS needs have been addressed.
  • Was there too much talk about the business and not enough questions asked of the prospect? The client or customer is approaching the business to get their needs met – not to be lectured to about the company.
  • When websurfers come to the website, where do they linger?  How long do they stay?  What are they looking for (determined by what pages visited) and how well do you explain how you do that or provide that?

Taking Action

Once you have honestly and earnestly reviewed your business and identified why prospective customers chosoe not to make a purchase with your company, it is time to take the necessary steps to remove those hurdles from future encounters.  Put into place the necessary changes that make sense to avoid losing those customers in the future.

However, do not merely copy what the competition is doing or try to replicate every other supplier of products or services the company sells.  Part of what makes the business unique and in many ways desirable to the existing customers and future prospects is the differentiation that the company has in the marketplace.  So, investigate why prospects choose not to purchase, make the changes that are appropriate, but do not lose the critical point of difference that makes the business identifiably unlike others.

Everyday Counts in Customer Service

Friday, June 11, 2010 by:David Zahn
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A close friend of mine recently shared a horrific experience she had with a major retailer that manufacturers their own product brand Her experience should serve as a wake-up call to EVERY company that thinks that customer service, repair, technical support, or other “after the sale” functions are less important than sales and marketing

She wrote a letter to the CEO of the company, which I will only excerpt here to make the salient points needed to communicate the importance of the function and customer care

Loyalty must be Earned Constantly

“I am – or more accurately was- a long time loyal (name of company) customer. My first credit card was a (name of retailer) card. I have owned (store brand) products for over 20 years. I have bought (another store brand products the retailer is known for) for my home. Over many years I have shopped at my local (name of retailer) store as well as on line for everything from clothes to lawn tractor parts. All of that ended today. “

The shopper had a long history with this retailer and was pleased to be among the customers for this particular retail outlet. However, as a result of a poor interaction, that is now called into question. The interaction is detailed below:

“Four years ago I purchased a (store brand “big ticket item”). This past week it stopped working. Clearly this was unexpected as my previous “big ticket item” lasted 15 years with the same type of use. I went on line on (date) to schedule a repair appointment. My appointment was to occur Saturday (specific date) from 8:00 am – 12:00 noon. This is how my day progressed.
• When no technician was present by 11:30 am, I called your 800 number
• I was told I was on the schedule for repair service and a technician would be calling me to inform me of his or her arrival time
• At 12:30 pm I still had not heard from the technician nor had a technician come to my home
• At 12:30 pm I again called your 800 number. I WAS ON HOLD AWAITING A CUSTOMER SERVICE REPRESENTATIVE FOR 49 MINUTES.
• A representative named Justin took my call. After listening to my information he put me on hold to call the department that schedules technician services.
• After being on hold he returned to tell me no technician was in my area today and I would need to reschedule. No attempt was made to reschedule for later on the day of my appointment. I informed him that was unacceptable and asked to speak with a supervisor. Justin put me on hold again and then explained that all he could do was transfer me to the escalated unit because “that’s all my supervisor could do”.
• I was ON HOLD FROM 1:05 PM TO 1:30 PM awaiting a representative from the Customer solutions / escalated unit
• I spoke with a representative named Nancy who put me on hold to check with the department that schedules the technicians. She informed me that no technician was available to come out to my home today because someone was a “no show” for work.
• I was furious. I had called at 11:30 am and was told I would receive service and a call from a technician. At 1:30pm that day I was told someone did not show up for work and so I was not going to receive a service call. I had not received a call that morning informing me that no technician was available in my area and requesting I reschedule for another day.
• Nancy put me on hold again to try and reschedule for later today. Our call was disconnected.
• I called your 800 number again and explained I needed to speak with the Customer Solutions unit. I was transferred.
• At 1:45 pm I was speaking to Kristin in the Customer Solutions Unit. Our call was disconnected.
• I called your 800 number again. I spoke with a well- meaning representative named Danni who tried to get a hold of Nancy in the Customer solutions unit for me. She was unsuccessful.
• Danni put me on hold from 2:05 pm to 2:15 pm as she tried to get in touch with the Customer Solutions unit herself. She indicated she could not locate Nancy. She also informed me that unit was experiencing difficulty with their systems today. She transferred me to her supervisor
• I spoke with her supervisor whose name is Arthur. He could not get a hold of the Customer solutions Unit. He could not arrange for a technician to come out today nor could he cancel my service agreement. He did let me know that the system had automatically rescheduled my appointment for (future date); a date I did not request, was not consulted about nor could I accept. I indicated that I wanted to cancel any further appointment as well as cancel my service agreement.
• Arthur transferred me to Cynthia at (another 800 number). She indicated that she could cancel contracts but not service agreements. Arthur had transferred me to the wrong department. Cynthia put me on hold to reach whatever department actually can cancel service agreements. She also canceled the appointment scheduled for (date previously established) that I did not accept but was scheduled anyway. She stayed on the line and warm- transferred me to Louis at (still another 800 number).
• Lewis canceled my service agreement and let me know that it would take at least 72 hours for the money to be credited back to me. He offered me a $50.00 gift card as I had been so inconvenienced today.
• This call ended at approximately 2:45 pm. I had been on the phone for 2 hours and 15 minutes. The only resolution was to cancel my service agreement, cancel my appointment and share my story as to how I became someone who will not shop at (name of retailer) again.”
The retailer has yet to respond, has not taken steps to make amends beyond the token offer of a gift certificate, and this longtime customer has taken to the internet, networks, social media, and every other way she can think of to get the word out about her dissatisfaction. Any company that refuses to see how responding to their existing customer base is critical deserves the same fate as this retailer.
Burying the carcass will be rather simple – all that will be left is the shriveled up remains of a once proud retailer that has lost the way that it once so clearly had mastered

Sales Myths

Friday, May 28, 2010 by:David Zahn
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The vision many have of sales people

Of all the misconceptions that arise when entrepreneurs or business owners think about starting their own company; no area is more misunderstood than the sales function.  Many business people have a mistaken impression of what it takes to succeed in sales.  Furthermore, what passes for sales training often promotes ideas about the process that are doomed to fail. When uninformed or naive business people follow the formulaic approaches to selling that these trainers present as skill-building, the results are often a disaster.

The truth is that many sales people begin with a strike against them in the eyes of certain buyers because of past interactions with sales people that were less than satisfactory.  When many people think of sales people, the image that comes to mind is that of a fast-talking, manipulative, exploitive, and dishonest person that is focused solely on making a sale and not at all of helping a prospect or customer achieve their objective(s).

Common Sales Myths

  • Myth:  Scan the office and comment on a picture, trophy, or find something that aligns you with the buyer

Reality – Many buyers are offended by this and see it as being a “tactic” that is insincere.  So much so, that Walmart refuses to allow vendors into the buyer’s offices and forces the conversation to occur in a windowless, artless, non-personal space to avoid any chance of that  happening.

One buyer for a major southwest retailer actually would purposely react angrily when a vendor or supplier would comment on what a lovely wife he had or what cute children he had (by looking at the photos in his office) as a way to disarm the vendor.  He would exclaim, “how dare you comment on my wife and my kids – don’t think you can get familiar with me!”  Of course, he was not really offended by the comment, but had heard the same comments over and over and realized that they had been trained to react to the office decorations and he wanted to maintain the control of the sales call.

  • Myth:  Buyers buy from friends

Reality – Buyers buy from people they envision can solve problems within their own organizations. Especially in sales that are heavily technology-based and require purchase of software or hardware that the purchasing organization has not used before – the buyer wants to know that should something go wrong; there is one person that s/he can call to get it fixed.  I had one buyer tell me that he wanted to know that if something went south, he knew which one neck he had to choke to get it right.

  • Myth: Sales were lost because competitor had a better price

 Reality – More sales are lost to “no decision” than to competition.  Even when sales go to the competition, it is not because of price in a large percentage of instances – but because the winning sales person/team did a better job of meeting a need and helping the buyer “visualize” a solution.

  • Myth: Buyers are swayed by product features

Reality – Buyers are buying a business answer and not a product. What the buyer is purchasing is a solution to a problem (losing money because… or, have an opportunity to increase productivity/increase efficiency/reduce turnover/etc.).  Sales will often “blame” marketing for the lack of product features when the reality is that the sales person has not done a sufficient job of converting the prospect’s business issues into a solution provided by the product or service.  No one “buys” a feature – they buy what it provides for them!

  • Myth: Lower price wins

 Reality – if all things are equal, sure a lower price is more attractive.  However, the role of the sales person is to ensure that all things are NOT equal and that there is value to doing business with him/her/the company that exceeds the “savings” of the lower price.

 Insight

There are organizations that are focused on developing sales people and that offer research and training to improve how people perform the sales function (one of them is a division of the American Society of Training & Development).  However, it is essential that people who are involved in selling don’t forget that a sale does not occur UNTIL a buyer is ready to make a purchase.  If the selling approach does not mirror how people wish to buy; then the selling effort will fail.

Finding Improvement Ideas

Tuesday, May 25, 2010 by:David Zahn
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One of the most difficult things for a business person to do; and even harder for a successful business person to perform, is to take stock of their own internal company’s processes, methods, and strategies and crtically assess whether there is room for improvement or the introduction of new ideas.  After all, the business person likely started the business, at least in part, because there had been an identification of some way to better meet the needs of a market than was currently available. 

In fact, if a business is not working hard to evaluate whether it is still as effective as it once was, it is likely losing ground to their competitors that are looking to improve and incrementally add to their products and services.  Therefore, it is essential for the business person to do the following:

  • attempt to buy or use their own business’ offerings as a customer would.  Call in to the business and see how one is greeted, how customer service is handled, how sales people treat customers
  • spend time working on the front lines with employees doing the work, and not just directing or managing from above
  • study how others outside of the direct competition are differentiating themselves from their competition (it is often easier to talk to non-competitors than it is to try to get competitors to share their secrets – and the learning is likely more illuminating from non direct competitors as in most instances, the entrepreneur will be very familiar with direct competitors already and will not likely learn as much by studying their approaches).

CEO of Build-A-Bear, Maxine Clark recently worked in Container Stores to identify business building ideas.

A Day in their Shoes

The website, Marketing Profs recently shared how the CEOs of The Container Store and Build-A-Bear agreed to spend a day in the other’s company.  However, rather than staying in the executive suite; the CEOs spent the day on the front lines working with employees serving customers.  Not unlike the popular television show, “Undercover Boss” where the CEO consents to work within his or her own company to learn more about the challenges inherent in their own company’s policies and procedures; the two CEOs learned much about how to improve their own company’s offerings by spending time working in a non related company.

The Learning

Among the things the website shared were that both CEOs came to appreciate how important employee commitment is to the success of the endeavor.  Without the employees performing at their peak, the businesses lost their edge and point of difference.

The different; incentives, performance measures used to evaluate employees, motivation, etc. that each was exposed to led to their re-assessisng their own employee management approaches.  Each CEO found at least a few things to include within their own company that they saw work elsewhere.

The merchandising, techniques communication standards, and sales discipline demonstrated were other areas that each CEO believed they could incorporate into their company successfully and improve upon.

Improvement is not Always Organic

There is a tendency among successful entrepreneurs to begin to believe that they are the origin of all good ideas and that they are smarter than others.  So much so, that they will often exclude ideas offered by others as being lesser than those ideas that are “home grown.”  Progressive CEOs are well aware that this is a dangerous habit to fall into, and work diligently to seek ideas from all sources.  If one relies solely on the ideas that are self generated, it is hard to break out of the established ways of looking at problems and employing the standard approaches to solving them.  The truly revolutionary ideas are the ones that propel a business forward, and those are as likely to occur outside the industry as within (and may actually be more likely to come from people who don’t know, “that is how it has always been done”).

Product Promotion Pause

Monday, May 17, 2010 by:David Zahn
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When running a business in tough economic times there are challenges that are even more critical to meet than at other times. Among the most essential challenges are:

  1. Acquiring new customers
  2. Holding on to existing customers and reducing the chance that they will choose to purchase with a competitor
  3. Getting existing customers to purchase from a business through either more frequent shopping occasions, or by maximizing the purchase or transaction size on each purchase occasion.

Of course, this is all easier said than done when competition for the consumer’s dollar is so high and consumers are cautious about the choices they make for essentials and discretionary products.

The competition for the shopper's spending has increased and led to promotions.

Promotion

One of the tried and true ways of attracting a shopper’s attention to a business is for that company to run some promotion (often price discount, though not exclusively, as prominently displaying a product either in a store or in marketing materials sent to prospects and customers can also be used) on a product that is likely to be of interest to a great nmber of prospective customers.  By promoting a product, the business is either educating new customers to the availability of the product or reminding existing customers that the product is available and is priced more competitively than it is available at the competition.

In the ideal scenario, customers will flock to the business in search of the promoted product and sales will increase as customers purchase the promoted product.  A secondary benefit is that the customer may choose to make additional purchases either on impulse, or even planned purchases with that business as a result of choosing to shop with that business on the basis of the attractiveness of the promoted product’s availability at the price.

Promotion Considerations

However beneficial a promotion may seem on the surface, there are considerations that the business owner would be wise to consider before deciding to run any particular promotion:

  1. Is the promotion attracting NEW shoppers that would otherwise not shop with that business, and are therefore incremental sources of revenue?  Does it appeal to existing shoppers or customers of the business, but gets them to buy products that might not otherwise have purchased?  If all tht is occurring is that existing customers of that product are forming the universe of shoppers, the promotion is ineffective.
  2. How much business is being subsidized? – When the promotion is run, do existing customers respond with additional purchases?  For instance, if a store were to reduce the price of an item by 20%, does it lead to shoppers choosing to purchase additional units of the product, or do they choose to only purchase the same quantity as they ordinarily would?  The ideal would be to incent the shopper to make additional purchases, or again; it is deemed an ineffective promotion.
  3. Impact to forecast – If the promotion were not to be run, what would a reasonable forecast of sales for that product project?  As a result of the promotion, what is the expected level of sales for that product?  If the difference is insignificant or marginal, then the promotion should be reconsidered as it is not driving sufficient increase in business

Promotions are an often used tool to try to generate excitement within a targeted base of shoppers, customers, or prospects.  However, there is more to running a promotion than simply reducing the price paid by the customer of a business wants to be successful in their promotional efforts.  Running a poor promotion will just serve to further reduce the profitability of a company as one’s costs increase, but there is no additional revenue received to offset it.  An interesting perspective on this challenge is offered up in a podcast found on this site http://www.cpgmatters.com/051710.html

In subsequent articles the issues of shopper loyalty, conversion, and leakage will be addressed as they pertain to building solid relationships with shoppers and maintaining the strength of the business.

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