Beyond the Buzz with David Stanley

It’s hard to see the picture when you are inside the frame.

It’s easy for us to get wrapped up in our own perspective and think that we are communicating clearly. Scott Faircloth shared an amusing story about his six year old daughter’s “promotional” signage for her fashion show. He was kind enough to let me feature the sign here on the blog. Be sure to click this link to read his post. Scott brings out some excellent lessons that all marketers can apply. Here are a couple of additional thoughts for you to consider:

The Law of Unintended Consequences

The irony is that his daughter used some very sound marketing principles; certainly attention grabbing.  She would have likely pulled in a large crowd to her fashion show…just not the audience she wanted. You may think you are communicating a very clear marketing message, but what your audience is hearing is quite another.

Get an Objective Perspective Before Going Public

The daughter used a “plus sign” for the “and” which gave her sign an entirely different meaning. Before you send out a promotional message, take the time to have someone review it who can give you an “outside the frame” perspective. That extra step can be the difference between a positive ROI and a negative ROI. Little things do make a difference.

A big “Thank You” to Scott Faircloth for allowing me to share this story. Kids can be awesome teachers.

The decades long decline for the U.S. auto industry culminated last year with a government “take over” of two of the three domestic auto companies. The Wall Street Journal recently featured an article on Sergio Marchionne, CEO of Chrysler Group LLC. Since he is also the CEO of Italy’s Fiat SpA, he is technically not an auto industry “outsider,” but he is not a part of the culture that brought Detroit down. I found two key lessons from his observations and actions that can be applied to any business.

Lesson One: Don’t resort to discounting when sales are tough

Many businesses, especially the auto industry, tends to react to a decline in sales or market share by slashing prices. Here are a few insights from the article:

• In Detroit, “there’s almost a fanatical, maniacal interest [market] share.”
• “Unprofitable volume is not volume I want. We have a very good track record for how to destroy an industry – run the [plants] just for the hell of volume, and you’re finished.”
• He was frustrated by the use of hefty rebates and other incentives to maintain sales which is an industry-wide problem.

If discounting is the only thing you can do to try and create sales, you’ve got a very weak value proposition. Ford has created a more compelling car lineup recently and has not resorted to the level of discounting that has been a core part of the auto industry playbook in recent years. To show that this works in other industries as well, consider that Apple has been creating high demand products that aren’t cheap and has not needed discounts to sell them.

Lesson Two: Culture is important.

The culture in Detroit has been insular. Marchionne has tried to shake up Chrysler’s “plodding corporate culture” by ousting several veteran industry executives and flattening the company’s bureaucracy.

Have you ever heard the saying, “you can’t read the label when you’re inside the bottle?” Sometimes a company or  an industry culture gets so insulated in its thinking and practices that it takes a real shakeup to get things moving in the right direction. I don’t know why, but companies have a tendency over time to create bureaucracies, which leads to hierarchies and inefficiencies. This does not create a competitive advantage; it diminishes it.

Ironically (or maybe not), Ford brought in an auto industry outsider as CEO in 2006. They were the only U.S. automaker that didn’t file for bankruptcy protection or accept government bailout funds. Ford has also been gaining market share and profitability. They are building autos that people want.

What are the results of Marchionne’s actions? It’s too early to tell, but Ralph Giles head of the Dodge brand, says that Marchionne “has brought a refreshing energy” to the Chrysler workforce. Mr. Giles also had this to say: “We were starting to look at the product as a commodity, which is disgusting.” He also said that he has “resumes spilling off his desk compared with a year ago when he couldn’t find someone to hire to sketch cars.”

There are a lot challenging variables at play here that will determine whether or not Chrysler succeeds. Regardless, these two lesson we’ve covered today are a good first step, and are lessons that can be applied to every business.

So, how will you apply these two lessons to your business?

Could your business go from fending off a robbery attempt by Bonnie and Clyde to out performing big box competition? Meet Dougherty’s Pharmacy, an 80-year old retail pharmacy that has not just survived, but continues to thrive utilizing old-fashioned service and modern-technology in the face of fierce, large chain store competition.

Check out these numbers:

• Last year, sales per square foot were $2,000 – double those reported for CVS or Walgreens
• This year’s sales were even better – $28 million and above industry profit
• Customers drive from over 100 miles away to do business with them

Reading about Dougherty’s in a recent Dallas Morning News article, I came away with four fundamentals you can use to grow your business.

1. Offer products and services others don’t.

Dougherty’s offers product depth and services that aren’t found at the majority of big-box pharmacies (including Walmart).

• Compound medicines which provide made-to-order medicines
• Medical equipment
• An entire wall of Jobst support hosiery
• Certified nutritionist
• Home delivery

2. Use technology to create efficiencies that improve the customer experience.

“A $200,000 robot rapidly counts, fills and labels the 200 best-selling drugs with an accuracy rate of 99.99 percent.” (Accuracy is critical in the pharmaceutical business.) Dougherty’s has invested $1 million in technology since 2004. Your business probably doesn’t need an expensive robot, but you can still look into technologies that can improve your efficiencies and service quality. Dougherty’s uses a video screen to post customer names as prescriptions are filled.

3. Decide what not to do.

Being all things to all people is not a sound business strategy. Dougherty’s doesn’t sell groceries or flip-flops. The product/service offerings are focused around health and wellness along with their personal approach to business.

4. Understand that the personal touch still wins.

Changing technology doesn’t require an abandonment of old-fashioned values. The continuing rise in social media shows that people want to connect with each other. Friendly, expert personal service remains a key differentiator for growing your business.

Bonnie and Clyde may not be threatening your business, but small and large competitors are. Take the time to consider these four fundamentals. What can you learn from Dougherty’s to grow your business?

Consumer buying habits have changed. Nobody wants to pay full price anymore.

I heard this statement by a commentator on a CNBC yesterday. Then I get a marketing research newsletter by email summarizing a new study, entitled “Marketing to the Post-Recession Consumers,” by Decitica. The article states that the study “addresses the lasting effects of the recession in the way American consumers have internalized the recession experience. It’s particularly relevant in developing ‘positioning’ and marketing/merchandising/advertising strategies.” Sounds profound.  Here are some of the findings:

• The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid; and
• Marketing strategies that do not fully recognize the diversity of consumers’ recession experiences won’t have the desired potency in the post-recession world.
• Many have accepted this radical change as the “new normal,” and not just a cyclical phenomenon.
• The recession has caused a profound, deep-rooted change in consumers’ spending habits in favor a more restrained approach.

There are four distinct consumer segments emerging from the recession according to the study, identified as:

• Steadfast Frugalists,
• Involuntary Penny-Pinchers,
• Pragmatic Spenders and
• Apathetic Materialists.

Price has become the dominant consideration in the purchase of all kinds of products, concludes the study. Of considerable significance is the fact that half of Pragmatic Spenders are looking at price before other features and one-third say that brand name products are not worth the extra price, heralding what will likely be a long uphill struggle by marketers to shift the focus away from price, says the report.

Don’t Bet The Farm On The Reported Consumer Behavior Change

There have been similar studies to this one reported recently. Taken at face value, it looks like its time for a monumental shift in your marketing approach. Be careful – take a moment to get some perspective before you rush to change your marketing plan based on this type of research.

Depending on research that asks people what they think they will do in the future is very dangerous to your brand. You cannot predict what people are going to do based on what they say. You can only measure what they have done. People will give you what they believe is an honest answer about what they think they will do, but they really don’t know until they are faced with the decision. It’s just human nature.

Study What People Actually Do

I’ve been fascinated by the studies which have found that people who change their lifestyle after a major health event like a heart attack often do change their behavior for a period of time, but the majority typically go back to their old behaviors as they move farther away from the crisis event.

There is no question that the folks that have been hit hard by the recession have made changes to their buying behavior. But is this really a long-term shift?

If you have ever spent time with people who went through the Great Depression, you’ve seen a frugality that has carried through for their entire lives. While the current recession has been hard on many people, especially the 10% that are currently unemployed, it’s not any where close to the experience of the Depression of the 1930’s. When the economy recovers, can we really be sure that consumer behaviors have permanently changed? Will price truly be the deciding factor?

Be Compelling

Going back to the quote we started with that people no longer want to pay full price. Have they ever wanted to pay full price? No! It’s not about price; it’s about perceived value. In the absence of a compelling reason to buy, price will win out. It’s called commoditization. All things being equal, price is the default.

Apple recently reported an increase of 47% in quarterly profits. Why? People are buying iPhones, iPods, and Macs. Apple doesn’t advertise discounts to sell its products. They create compelling product offerings.

Radio Shack, once thought to be on the brink of irrelevance, is gaining traction in the highly competitive consumer electronics industry by selling more expensive, and more lucrative, wireless products from a broad range of suppliers.

Casual dining chains have reportedly seen a significant decrease in sales and traffic, but not Chipotle. There are only three major items on Chipotle’s menu: burritos, tacos, and salads. In a U.S. News & World report article, Chipotle’s Secret Salsa, Founder and CEO Steve Ells sums up its business model in a single sentence: “Focus on just a few things, and do them better than anybody else.”

It’s too soon to know if consumer behavior is really shifting for the long-term. But it’s not too soon to improve how you do business. Lowering prices and cutting expenses is the easy thing to do. The harder work is creating a compelling product or service offering. Are you willing to do the hard work?

Nobody watches TV these days. Nobody listens to radio. Advertising doesn’t work any more. It’s all about social media and online connections.

If you spend any amount of time online today, you’ll run across these declarations over and over. But while the pundits have been prophesying, they’ve missed the reality of what people are actually doing.

The November 9, 2009 Research Brief from The Center for Media Research reports a Nielsen analysis of a media study conducted by the Council for Research Excellence. The study found that radio is the dominant audio device. Yes, the almost extinct radio is the most listened to audio device – even over the ever-popular iPod.

Here are some of the key findings reported in the blog post:

• 77% of adults are reached by broadcast radio on a daily basis, second only to television at 95%
• Web/Internet (excluding email) reached 64%, newspaper 35%, and magazines 27%

In deeper analysis of audio media titled “How U.S. Adults Use Radio and Other Forms of Audio” Nielsen found that:

• 90% of consumers listen to some form of audio media per day
• The 77% who listen to broadcast radio surpass the 37% who listen to CDs and tapes and the 12% who listen to portable audio devices.
• Almost 80% of those age 18 to 34 listening to broadcast radio in an average day
• Broadcast radio is the dominant form of audio media at home, work, and in the car (79.1% daily reach; 122 minutes daily among users)
• Audio media exposure has the highest reach among those with higher levels of education and income
• Broadcast radio reaches those aged 18-34 at rates equivalent to the general adult population

The emergence of portable audio devices like the iPod and other MP3 players has been considered a threat to traditional forms of audio. This study indicates that the new technology has had a positive effect on radio consumption. “Radio was found to have a higher reach (82%) among those who listen to portable audio devices, compared to the average reach for all audio consumers.”

Here are findings from the study for key “advertising-based” media platforms:

• Live television had the highest reach and daily usage among users (95.3%, 331 minutes)
• Broadcast radio (77.3% reach, 109 minutes)
• Web/Internet [excluding use of email] (63.7%, 77 minutes)
• Newspapers (34.6%, 41 minutes)
• Magazines (26.5%, 22 minutes)

Key takeaway: Turn on your buzz filter – pay attention to what people actually do, not what they say.

A web presence is important for almost every business. Social media is growing and will increasingly have a place in the marketing mix. For now though, social media has a lower ROI for most businesses due to the time constraints it takes to implement and maintain as well as limited audiences.

“Old media” is still a powerful medium to connect with customers. The key is making sure you’re brand message is relevant. Have the pundits distracted you, or have you been watching what people actually do?

Starbucks has more than 11,000 U.S. outlets. McDonald’s and Dunkin’ Donuts have aggressively adopted a lower-priced coffee strategy. Many higher end brands have taken a severe in hit the recent economic downturn. Starbucks has even been closing stores after a period of aggressive expression. Conventional wisdom says that now is not the time to launch a marketing strategy for high-end coffee. Could conventional wisdom be wrong?

A recent post on this blog dealt with the concept of how to increase your market share in a difficult economy. Another post dealt with how to compete with the big boys. An article in the Wall Street Journal reveals a company implementing much of those concepts in a very challenging business category.

For over 20 years, IllyCaffè SpA, an Italian coffee maker sold its coffee in high-end grocers like Whole Foods, coffee shops, restaurants, and hotels. Their strategy to increase their market share is to team with independent coffee shops. This allows them to get their name out to more potential customers without the overhead of creating their own retail spaces.

Illy supplies the stores with Italian espresso machines, coffee cups, artwork, drink recipes and intensive training. The coffee shop becomes a certified Illy purveyor. In return, the shop must agree to serve only Illy coffee for at least three years. If cafes aren’t performing up to par, Illy provides additional training while reserving the right to terminate their certification.

These arrangements allow independent coffee shops the opportunity to feature an exclusive premium brand, and differentiate themselves from chains and other independents.

The article reports these results:

At Caffè Greco in San Francisco’s North Beach neighborhood, owner Hanna Suleiman says sales have increased by 10% and profits by 3% since the shop signed up with Illy a year ago.

Cafe Nineteen in Atlanta, which closed temporarily last year, reopened in June, having added an outdoor patio with red Illy umbrellas. Owner Sean Lupton-Smith said he began serving Illy coffee “so we could offer a consistent experience to our customers and be strong enough to stand up to the Starbucks around the corner.”

A 12-ounce Illy drip coffee in a white ceramic cup with the red Illy logo sells for $3 instead of $1.60 for his previously no-name cups of joe. Coffee sales have tripled to $750 a day. “We’re open until 2 a.m. and believe it or not, we sell coffee at midnight,” Mr. Lupton-Smith says.

It remains to be seen if this bold strategy will pay off in the long-term. Much of the success will depend on how well it’s executed. Tripling sales and higher profits margins are certainly a good start.

Consumers will pay more for a product or service – even in a deep recession, if they perceive it will meet a need or desire they have. Are you giving them a compelling reason to spend more with you, or are you running with the conventional wisdom crowd?

It’s a rare occasion when visiting with a prospective client if they don’t bring up concerns about competing with the big boy companies. This is true in retail and service categories. Of course, the main issue always revolves around price. So is it possible for smaller companies to compete with the big boys? Short answer: YES!

Here are 3 keys for competing with the big boys:

1. Don’t Focus on Price

Competing on price makes the product or service a commodity game. Price will win if there are no other differentiators. Value is an over used word, but it simply means a customer perceiving a better solution. Changing your focus to product selection, expertise, and/or service provides big points of distinction and can represent true value. (You don’t have to have all three to compete.)

I have a client in the home improvement business. The company has to compete against big box stores like Lowe’s and Home Depot. Third-party surveys conducted at the end of each project often indicate that my client had the highest bid, yet they still got the business. Why? Because they gave the homeowners confidence with the premium product and service they provide.

Another client is a specialty shoe retailer licensee. Unfortunately for my client, the shoe manufacturer sells under the same brand name to retailers of all sizes. But, my client is winning because he offer’s a deeper selection of styles, sizes, and widths. He also has fit experts in the store. We have never advertised a sale in the 7 years he’s been open. (What retailer do you know that can say that?) The results? He has had consistent sales increases each year and has one of the highest profit margins among his peer group.

2. Recognize That Little Things Can Win The Battle

Recently, a screw came out of an expensive pair of sunglasses I own. Consequently, the lens fell out. I looked in the Yellow Pages for optical companies that mentioned frame repair. None of the chain names mentioned the service, but a local company did. I went to the local company. They fixed the glasses while I waited and didn’t charge me a dime. Guess where I’m going when I need glasses? Guess where I’m telling people to go when I hear them talking about needing eyewear or contacts?

I wrote in an earlier blog post of how a hotel employee went the extra mile and purchased a Diet Coke for my client when the catering division ran out. That simple action along with an overall customer-focused experience we had during our meeting have put them at the top of the list to host the next meeting.

3. Be A Better You

I was fortunate a few years ago to work on a consulting project with Randy Curtis, a former VP of Creative and Media at Wal-Mart. Randy’s advice to businesses that had to compete against Wal-Mart, or any big chain, was to “be a better you.”

It sounds simplistic, but the advice is right on. There are plenty of opportunities for smaller business to compete with big boys. The key is to focus on what you’re good at, find points of differentiation, and build relationships. Product depth, personalized service, and expertise are great places to start. Again, you don’t have to have all three stand out in the marketplace to compete with the big boys and grow your business.

The question becomes do you know who you are? Answer that question, stay focused on what you can control, and don’t worry about the big boys. You’ll sleep better and make more money.

Who would’ve believed it? Despite the growth of online sales and all the buzz over social media, the lowly catalog remains a key marketing tool for many businesses. Why? Because it still works.

Jeffrey Ball, The Wall Street Journal’s environment editor, wrote an article dealing with environmental issues involved in creating and mailing catalogs. What I found really interesting is the data presented in the article that indicates how effective catalogs continue to be.

Surprising facts?

The article presents some interesting facts from the latest survey by the Direct Marketing Association of its members.

Among retailers who rely mainly on direct sales, 62% say their biggest revenue generator is the paper catalog (from the latest survey by the Direct Marketing Association). Only a fifth of those retailers said they draw their biggest sales from their websites.

That is why virtually no one expects the mail-order catalog to go away – even though only 1.3% of those catalogs generated a sale, the survey found.

The “old” promotes the “new”

Of course the U.S. Postal Service is concerned about any efforts that would cause a decline in the catalog mailings because advertising mail helps pay for universal mail in America.

To protect its catalog revenue amid the recession, the post office recently hired a consultant to conduct a study that concluded that consumers who received catalogs from a retailer spent 28% more on that retailer’s Web site than those who didn’t get a catalog. “The more often you mail,” the study said, “the more sales you could see.”

Beware of hype – Study actual behavior

We’re paying the price for the recent real estate bubble – prices of real estate were never going down, “it’s a new world.” Prior to that, we dealt with the aftermath of the Internet bubble – “it’s a new economy.”

If you listen to the current buzz, you will only do business online and your marketing through social media. Beware of buzz. You’ve got to pay attention to what people actually do. People research online, yet still go to a bricks and mortar store to make purchases. People still like picking up catalogs and physically looking through them before going online to buy.

Advertising is not dead. “They” say radio is dead. I’ve got multiple clients growing their business in this recession with radio. The “old” media still works and helps drive the online experience. The key is understanding the strengths and weaknesses of each type of media and utilizing them correctly.

The Internet and social medial will continue to grow in their marketing role. I recommend having a website to every client I have. Just keep everything in perspective and don’t pour your dollars into the latest buzz.

Stay focused on making your brand relevant to your customer. Then you’ll find that “old” and “new” marketing both work just fine.

It’s one thing for employees to follow policies of your brand culture. It’s another for them to understand why the policy and culture exists, and to make it an authentic part of their job.

A friend of mine called me about an experience he had at Chick-Fil-A today. When the Chick-Fil-A employee handed him his food, my friend was his polite self and said “thank you.” The employee responded, “it’s my pleasure.” He remembered the blog post I had written about this and asked the employee why they respond that way. She simply said, “you’re the customer and we’re here to serve you.”

That’s powerful. The Chick-Fil-A culture helps the employees to understand why they’re doing what they’re doing. When people get it they can do it.

Do your employees know why you do what you do?

Fine Print

There was a lot of buzz last week over the FTC’s new guidelines for endorsements and testimonials. Reviews are mixed, but a big positive in the new guidelines is eliminating the “results not typical” disclaimer many businesses use.

You’ve seen the diet ads featuring a celebrity or consumer making an amazing weight loss claim and then use the disclaimer “results not typical” in fine print. It’s the kind of claim that’s been giving advertising a bad image ever since advertising began. Now, if they use such testimonials, they will have to disclose the results that consumers can reasonably expect. Wow, now they have to be real.

Don’t Use Mail-In Rebates Either

Mail-in rebates aren’t covered in the new FTC guidelines, and they shouldn’t be. They’re still deceptive. You see this big ad for a low price on something, and then find the mail-in rebate in fine print. The businesses that offer these know that a certain number of people will forget, and they make it cumbersome for customers to file for the rebate to help discourage redemption. That’s irritating and no way to build customer loyalty. Either offer a discount or don’t.

A couple of weeks ago it was time to get new cell phones for my sons. We went to the AT&T Store. The boys found the phones they wanted. The price on the sign made the phone look really affordable. The boys found the phones they wanted. The price on the sign made the phone look really affordable. Then came the fine print: with mail in rebate.

The saving grace in this situation that the sales person was kind enough to print a copy of the customer receipt and peal off the original UPC code that was required. Basically, he stapled everything together for me so all I had to do was mail it in. Outstanding service by him, but AT&T gets a doofus grade for making the price dependent on the mail-in rebate.

Make An Offer And Stand Behind It

You don’t have to make a huckster claim to get attention and cause people do want to do business with you. Make an offer that means something to the customer and back it up.

I have a client in the home improvement business. One of their manufacturers has a new product with a 15 year warranty, except it’s not a “true” 15 years. The warranty is filled with fine print. It’s really a pro-rated warranty that doesn’t sound so good when you read all the way through it. The lawyers are happy, but the customers won’t be. The thing is that it’s an excellent product. It would stand-up for the 15 years in more cases than not. They’re just running scared.

Bottom line: if you have to resort to gimmicks, you’ve got nothing. Find ways to be remarkable to your customers without hiding behind fine print. You’re bottom line will thank you and your customers will too.