Aug 18, 2021 | Customers, Marketing
Your unique value proposition is the reason people will consider engaging with you, and when there is a choice, you, rather than the other options.
The clearer you are about the focus of your expertise, and the value it delivers, the easier it will be to attract customers/clients, and therefore, monetise it.
What single thing do you deliver to customers for which they will pay?
Complete this sentence: I use my expertise to assist people to ……………………………….
This forces you to distil your expertise down into one simple sentence that defines your value proposition.
You must be specific, avoid cliches and generalities such as ‘improve performance’, ‘be better’ and ‘deliver value’
In my case, the sentence is not ‘I use my expertise to improve business performance’. Instead, my sentence is; ‘I use my expertise to help people grow and build profitability.’ Depending on who I am talking to, I substitute the word ‘people’ with ‘SME manufacturers’ or even more specifically ‘suppliers of widgets’.
What differentiates you from other experts in the field?
What you deliver, and the manner of delivery must be different in some way from alternatives. The differentiator is what engages potential customers to you rather than to someone else. Therefore, ‘Better’ or ‘Bigger’ is not sufficient, they are generic claims that anyone can make.
These points of difference do not make you the right choice for everybody, it makes you the perfect choice for a very few, or at any point in time, just one person. When you are their only choice, where else will they go?
In my case, the differentiator is long experience, and success across corporate, government, and SME businesses. I have an unusual combination of expertise across strategy development and implementation, marketing, accounting, and operations management. While I am primarily a strategic marketer, having run manufacturing businesses, and having deep knowledge of ‘the numbers’ and how to interpret and use them, makes me unusual. This can be valuable to modest sized businesses that tend to have areas of weakness in management expertise outside their core skill.
Who needs what you deliver?
Those that are actively seeking it. There are often many people who might need what you deliver, but those who are actively seeking it are the only ones who will see it when it is presented to them. For example, a tax accountant can help anyone who needs an accountant, but their ideal customer is someone actively seeking advice on tax, today.
How will your expertise benefit your customers?
When you buy something, you expect a beneficial outcome, something that eases the pain, scratches the itch, solves a problem, or just makes you feel better.
Another sentence to be completed from the perspective of the ideal customer.
Those who use my expertise go from …… to…..
Again, in my case, the sentence is ‘Those who use my expertise go from frenetic activity that seems to go nowhere, to developing and deploying strategies that deliver sustainable profitability’
How do you best connect with, and deliver value to your potential customers?
This is the million-dollar question, and one that should be always left until all the above has been done, at least in some sort of draft. The answer to the question is hiding in the answers to the previous ones you have asked yourself, and the choices you have made as a result.
The choices about how you do this are myriad, which is what makes it so tough. There are many ways to set about communicating and engaging with potential customers. You must make choices, which will miss many potential customers, but will optimise the expenditure of your resources of time and money in connecting with those who are most likely to value and pay for your expertise.
Aug 16, 2021 | Lean, Management, Operations
Anyone who has read ‘The Goal’ by Eli Goldratt, the original brain behind the theory of constraints, will remember the story in the book about Herbie, the slowest walker in a scout group in a cross-country walk. Herbie was the bottleneck, in that he set the pace of the others, as the group did not want to leave Herbie behind in the woods.
One solution would have been to just get Herbie to walk faster, but that would have moved the ‘bottleneck’ position previously held by Herbie to the next slowest walker.
Whatever they did, the line of walking scouts would spread out, particularly going uphill, and then squeeze back in, going downhill. A walking accordion.
How do you prevent such a hard to manage outcome?
You get everybody to walk at the same cadence, with the same step length.
Standardisation of all aspects of the stride of each scout and the distance between each, would ensure that they stayed exactly together, in unison.
Armies call it ‘marching’.
I call it ‘Standardisation’ when applied to any context other than ‘walking’.
Marching enables groups of soldiers to arrive at a destination at the same time, in unison, that both gives the soldiers a sense of ‘belonging’ and looks intimidating to any opposition who might turn up to fight. Remember the opening scenes of the movie ‘Gladiator’? The Romans were in their ‘Centuria’ operating as one, but in coordination with the Centuria around them. The ‘barbarians’ who substantially outnumbered the Romans fought as individuals. You know who won. (I know it was a movie, but the lesson remains)
Standardisation to a cadence is the best way to finish the most work in any given time, as the variation and resulting shortages and backlogs are eliminated. ‘Flow’ through the system is optimised.
When you want to evaluate something new, you have a standardised system to test it on, and can therefore see the results of the change of one variable to the outcome. If favourable, you can then apply the single change to the entire system to improve it.
Going back to marching. The US army marching cadence is a standardised 30 inches for each step. Every soldier steps 30 inches every time. If the standard step was 31 inches, and the cadence of the march remained unchanged, it would represent a 3.3% increase in the distance marched in any given time.
Standardisation and continuous improvement, an essential element in optimising the performance of your business.
PS. 24 hours after publishing, I stumbled across this article by Brian Potter which goes into a heap of detail on exactly the topic of this post. For those who want a deep dive, I recommend it.
Aug 13, 2021 | Communication, Marketing, Social Media
There are a huge number of choices to be made when considering how to best reach and communicate with your ideal customer.
None are disconnected from the others, but like anything, all have their ‘sweet spots’.
Each has its place, and the better you know the habits and motivations of your ideal customer the better able you will be to make informed choices about when and how to reach them. You also must choose how much of your limited budget should be allocated to the various options, and what resources are required to optimise the choices.
Referral.
The original and still by far the best way to engage with a customer is to have someone they trust refer you to them.
Referral is the gold standard, leading to the challenge of how you make yourself ‘referrable’.
Website.
These days not having a website is like not having a phone in earlier times. You must have one even if it is just to capture the opportunities that emerge. However, not all websites are created equal. Many I see are next to useless. You can spend a lot of money on a site, and get little or no traction. However, done well, it is your digital ‘Home base’, the place where people find you and see if you might be an option for them, usually before you even know they are in the market.
Content creation & marketing.
This is everything from a comment on a Facebook or LinkedIn post to long form e-books, webinars, and courses. The objective of this material is to drive people back to your website, or directly to you, and to establish your position as an ‘authority’ in your field. Those looking for information, reassurance, or just a bit of help would usually prefer it came from someone with the authority derived from knowledge and experience, rather than cliches and blather. Your website is your digital home, you own it, you make the rules. The ‘rented’ platforms, Facebook, LinkedIn and all the rest, are not yours, you do not own the relationships built there, and the platforms can change the rules any time they like. These changes are made in their interests, not yours.
It is also true that the ease of posting to these rented platforms ,means they are filled with stuff that is fed back to you by algorithms, rather than by your choice. They record every click, measure the time spent on every page, and capture what you do with it, so they can sell it to people who want to reach you. It is a two-edged sword. It is too easy to load up rubbish: a dog crap on the footpath is just a pile of dog crap, but somehow, once someone photographs it and uploads it, that pile of crap becomes ‘Content’.
Analogue.
Never forget the power of analogue tools. TV is still a hugely potent means to reach customers, despite the claims that TV is dead, it is not. Neither is radio, magazines, books, catalogues, and all the rest of the analogue communication channels. Too often analogue communication is dismissed as no longer useful, usually by those who have never used them to know. How often would you not open a personally addressed ‘snail mail’? Never I suspect, which compares well to a personally addressed e-mail coming from a source you do not recognise. The e-mail open rate hovers around low single figures, testament to the power of analogue, when used well.
Social Media.
Social can be enormously powerful, which is another double-edged sword. It is often the ‘glue’ that holds the other pieces of the puzzle together. The downside of course is that it can chew up resources faster than a plague of locusts will consume a field of wheat, and have about the same impact on the unwary.
Imagine you sell engineering services to renewable energy suppliers. You are unlikely to be able to communicate what you offer to the buyers you need to speak to on Tik Tok.
However, that same person may watch Tik Tok over the shoulder of their 16 year old kids, but when they do, they will not be looking for engineering information.
It is called ‘Social Media’ for a reason.
None of these work independently, all have their own ‘sweet spot’ all cross fertilise and compound, but are next to useless in the absence of a specific target. Your media choices must come after the work to build a strategy, the assessment of your current situation, and the plan that defines your message, and who you need to reach and engage in order for you to be commercially successful.
Aug 11, 2021 | Customers, Marketing
I like the word ‘Sticky’ it resonates somehow, and says, ‘hard to get rid of’.
As a kid, we had a ‘sticky’ dog in the family.
I remember we once left the dog by accident at a relative’s place across Sydney after a visit. When we realised we had left the mutt, Dad had to drive all the way back, and; no dog. About a week later, ‘Sticky’ turned up home, hungry, bedraggled, and obviously on the losing end of a fight somewhere, but the tail was wagging madly as he stumbled through the gate. Sticky. Don’t you wish customers were similar?
What makes a “sticky” customer?
How can you measure ‘stickiness’?
Customer loyalty, repeat business, lifetime value, brand building, all sorts of cliches refer to the central notion of a “sticky” customer.
A ‘sticky’ customer is someone who for one, or a range of reasons, strongly prefers to buy your product over alternatives.
We all know it is more expensive to find a new customer than it is to sell to an existing one, so it is paradoxical that many businesses spend more on finding new customers than they do on retaining existing ones.
So, what makes a sticky customer should be a subject of some consideration.
Some ideas.
Barriers to exit.
Once you have a customer, create high barriers to exit. Love them to death, remove friction, ensure that you are anticipating their needs.
Amazon is an exemplar.
I am a customer, I buy lots of books, and other odds and ends from them.
What I look at, then buy, and at what price is all recorded, and based on the history, they recommend other things to me, that are often very good recommendations.
Last Christmas, my wife was moaning that she had no idea what to get me, and while I was saying a good business shirt would be nice, my mind was recalling the recommendations I had just received from Amazon. It occurred to me that, holy cow, Amazon knows what I would like better than my wife of 40 years!
High barriers to entry for competitors.
The music industry has been disrupted by digital, the old model no longer works, as the barriers to entry that were high, became low. Anyone could publish their music online. Lady Gaga created new barriers to entry by building a “personal” relationship with a highly targeted audience, “live” on digital platforms. She has replaced one high barrier, the cost of creating and marketing a record with another, the cost of creating a ‘sticky” fan, who shows the “stickiness” by buying, online.
The further from commodity you can take your product, the better. Price does not play a role in the purchase decision, so long as it is in the bounds of the customers’ expectations.
Technical excellence on some key parameter.
Porsche has consistently demonstrated engineering excellence, but was going broke in the 80’s relying on the 911 exclusively. They took the strategic decision to leverage that technical excellence into adjacent areas. The entry level Boxster, then the Cayman, less entry but not the 911, then the 4 X 4 Cayenne, then the four door Panamera, and now is flooded with money.
Reducing customer churn usually offers huge benefits, and now Porsche is delivering a range that meets the preferences of all those who valued the engineering excellence and power of the Porsche brand, across a range of life stages and styles.
KPI Index
It is in this context that I use “the KPI Index.’ This is not your usual key performance indicator, of which customer churn and cost of new customer acquisition should be key ones, but ‘Kept Promise Index.’ The main reason an existing customer will move elsewhere is because you failed to meet their expectations in some way.
The product was not to specifications, delivery was slow or not to promise, there was damage, the price crept up, or the communication was messed up somehow. There are many reasons businesses fail to keep their promises, explicit and implicit to customers, and eliminating them will increase ‘stickiness’.
Detailed understanding of customers.
Some years ago, I worked with an insurance broker on this very topic.
Insurance is not a happy purchase, it is purchased reluctantly, grudgingly. Almost all the brokers marketing effort to retain clients, which on first glance should have been effective, was in the last few months of a contract, but his churn rate remained stubbornly high, squeezing profitability. I spoke to several former clients who had not renewed to try and figure out why, and the picture became clear very quickly.
After they had signed up, often after the broker had made a significant effort, they were left alone until the renewal was becoming imminent, unless they had a claim. They felt they were being ‘used’ by the broker, rather than being delivered a service, and the effort put in just prior to renewal was just a hard sell job, which was resented. We took a portion of the marketing budget and reallocated it to communication in the first 3 months or so of the contract, as well as instituting a regular newsletter type communication which offered all clients a means to stay on top of trends and instances that might affect them and their business. We also amended the renewal communications and spread them out over a longer period. The churn rate dropped rapidly, and the satisfaction scores went up, along with profitability. None of this was rocket science, it was just looking at the problem with a set of outside eyes based on customer experience.
Continually improve your customer interaction processes.
Based on customer feedback and understanding, focus on customer retention, every day.
NPS, and feedback from customers, and former customers, are ways to identify points of potential ‘friction’ in the customer retention processes, and progressively eliminate them.
All the tools trotted out as improvement tools in a factory: Lean, six sigma, and their toolboxes are very useful in diagnosing the customer experience, and improving it.
Generally, these are simple tools, not requiring any sophisticated maths or software, just a bit of simple observation, data collection and analysis.
The very best data source is to ask former customers why they left. That information can give you a wealth of insight into sources of improvement to reduce churn and increase Share of Wallet.
In business, we are faced by the same dilemma every day.
We only have so much resource, time, skill, the question is what do we spend them on?
We can only do so much, way short of everything we can think of, so we all recognise that the trick is to focus on what is important.
The distraction of what is urgent but not important is the greatest threat we have, successful people focus on what is important, but not necessarily urgent, recognising that in doing so they are making choices about what not to do, to the longer-term benefit.
Why would it be any different as we consider how best to retain customers?
Aug 9, 2021 | Change, Operations
Standard accounting practice is to calculate a standard cost of goods sold, and apply it to the P&L to calculate gross margin. It is a system that has worked well, is well understood, and can be tuned by the use of variances.
It does however have the significant and usually unappreciated flaw of not reflecting the reality of the flow that occurs through a factory.
Standard Cost of Goods Sold is generally comprised of the direct material, and direct labour used to produce products, tuned to machine rates. Usually, the standards once set are in place for a lengthy period, with adjustments made for variances via labour and material variances on some sort of timetable, usually budget time. If the standard says that there will be $50 of material used, and you use $60, there is a variance that needs to be explained, and if not a one-off, included into the standard COGS. Similarly with labour direct costs. If the standard is that 100 units are produced during a shift, and you produce 110 units, you have a positive variance, your labour has been more productive than the standard indicated, your machines have run faster or for longer on the shift, so the standard should be adjusted.
The challenge however is to make the standards dynamic, so they do not hide inefficiency or the opportunity for productivity increases. In their most dynamic form, the standard COGS is dispensed with, and replaced by an actual cost of goods sold, which reflects the actual costs incurred.
Lean practitioners call this producing a value stream P&L.
Inventory purchased for resale or transformation can only be consumed in three ways:
- It passes through the manufacturing process and is sold
- It is scrapped during the manufacturing process, or after it as inventory becomes redundant for one reason or another
- It is stored as finished goods inventory to be sold or scrapped.
Every business I have ever seen has purchased materials for all three buckets. The improvement task is to reduce them all, done in a number of ways:
- Reduce scrap during manufacturing
- Increase the flow of manufacturing to reduce WIP
- Reduce the lead times for delivery of materials, introduce JIT deliveries.
- Manufacture to order, or as close as you can to it.
The impediment to this improvement is often the accounting process itself.
The balance sheet records inventory, no matter its type as an asset, and a reduction of inventory is a reduction of assets. This is not a great thing to an accountants eyes, and often contrary to the KPI’s of executives. The only benefit from an inventory reduction that can be seen on the balance sheet is the freeing up of cash, to be used more productively than being tied up in inventory to be sold or scrapped. However, you must look closely, as it is just a transfer from inventory to cash, that often goes unremarked.
I encourage all manufacturing businesses seeking factory efficiencies to move from a standard Cost of goods sold calculation to a dynamic one. It is an easy transformation to say, but is in my experience often a very hard one to ‘sell’ to financial management, and even harder to implement. However, the effort will be worthwhile, as it will deliver way more sensitive management of cost of goods sold calculation, and is one where ‘coalface’ staff can play a role that delivers satisfaction and engagement to them, contributing to improved productivity.
