Business is about today and tomorrow

Sole focus on the "here and now" can hurt in the future.

Premise #1
Businesses need products and services that are attractive to consumers in the "now". If a firm cannot sell enough in the "near-term", the "long-term" may not arrive for that organization.

Premise #2
Businesses cannot be so focused on their current product offerings that changing trends and consumer preferences are not recognized and acted upon.

Premise #3
Successfully balancing both premise #1 and #2 is difficult.

The example of the parking lot
While sitting outside a Starbucks in Burbank, CA (see 8-29-08 entry), the issue of balancing the near-term with long-term business perspective was parked right in front of me. Literally parked.

There were 24 vehicles in the parking lot on this Saturday morning at 7AM.
- the largest 11 vehicles were all from US automakers
..(12 SUVs/vans/pickups and 1 very large car)
- the remaining 13 smaller vehicles (all cars of various sizes)
..were from non-USA automakers

With gasoline around $4 per gallon, Toyota and Honda reported vehicle sales at very high levels during the summer of 2008. During the same period, American automakers' sales were poor. What caused US automakers to be in the position of not offering more fuel efficient vehicles when US consumers were craving them?

The lure of the high profit margins from larger vehicles (per unit profitability of pickups and SUVs have been - until recently - very high) was too tempting and became the prize of American automakers. Such a limited focus blinded executives from American automakers from possible opportunities and threats -- including the prospect of high fuel prices and the increasing green attitude of American auto buyers.

The impact of higher prices of fuel is not unprecedented. One only has to recall the high priced gas (with accompanying long lines at service stations) of the 1970s. Since such uncontrollable variables impacted the auto industry before, why were they missed by American automakers just 30 years later? The answer: too much focus on the "here and now" to the detriment of watching for (and reacting to) events and issues that would shape future consumer behavior, wants and needs.

Simplicity can be bliss

Product innovation and continual product improvement are two of the main mantras of US business. In many industries it is "improve or die".

However, product improvements and innovation for their own sake can be a strategy misstep and should be aligned with consumer desires.

Take In-N-Out Burger, for example. This western (California, Nevada, Arizona & Utah) burger chain has maintained a simple and stable menu (see picture) for many, many years and their customers love it. They offer just a few items but they do them all exceedingly well. No chicken sandwiches, roll-ups, salads or breakfast here. Just how many hamburger patties and do you want cheese? Only one size in servings of french fries, shakes and coffee.

.....

Obviously In-N-Out does not try to be the fast food outlet for every fast food buyer. They know their customer base and focus on them.

.......

Living in an area of the country without any In-N-Out Burger outlets, I continually get comments like "wish we had them here" from complete strangers when I wear one of my In-N-Out t-shirts.

.......

In-N-Out keeps its customers in mind and those consumers want few (if any) changes. Such simplicity and limited product assortment is not for all firms but businesses need to take care not to innovate their products away from their customers' desires.

Don't forget current customers

New customers not the only route to increased profits

While not taking anything away from the importance of new customers, current customers are often overlooked as a source of increasing sales.

How can this be? I think a major reason is that many businesses find it easier to track new customers than tracking increased sales from current customers. Businesses reward employees where data is available (i.e. attracting new customers) and, therefore, employees focus on new customers.

However, not looking at current customers as sources to increase profits is a mistake. By their very nature, current customers have an established relationship with the business... thus costs of their acquisition is lower than attracting someone that is not a customer.

An example

Dropping by a Starbucks one morning last week the sign above was prominently displayed (along with similar wording on the receipt). This "come back again later today" promotion has multiple potential benefits to the coffee chain:

1. Starbucks increases sales by bringing traditional AM customers back in the PM.


2. Starbucks gets the profits of the drinks ordered in the PM ($2 promotion price - actual cost associated with the drink = profit).


3. Builds the habit of stopping by Starbucks after 2 PM even after this promotion ends.

To do
The question is how can your business attract more purchases from current customers?

"Shoot straight" with customers

Be accurate,
.....don't overpromise.

On a recent trip I had the opportunity to eat at Pret A Manger -- a sandwich shop with locations in London and New York City. These busy eateries specialize in preparing "natural, tasty food".

One item I noticed was Pret A Manger's promise (see photo) that states:
"Just Made" organic when we can, always
preservative-free and "Just Made", of course

This product statement is straightforward and clear. It promises without overpromising -- note the "when we can" clause. From the crowds at the several locations we passed and/or ate at, it is a hit with customers.

Check your advertising carefully

Examine ads from customer perspective.

Like in everything else, mistakes happen in advertising. However, some mistakes result merely from the failure to look at (or listen to) the advertisements from the perspective of the intended audiences.

Taking the time to closely look at the words and images to anticipate how they will be received by consumers is a must. Sometimes businesspeople are so close to the ad or time pressed that problems are not found.

For example, the newspaper ad shown is for a "huge" sale going on at a local car dealer.

Stop... you might pay too much! Unless you shop at our dealership this weekend!
However, this appeal does not match up with the image just below it which indicates prices won't be slashed (see the blue arrow inserted on the ad). Oops.

It's not the end of the world. Maybe not many people noticed it... but those who would were likely interested in the advertisement (a.k.a. car shoppers!). In any case, it could have been caught and corrected prior to publication.

Deal with issues impacting consumers proactively

It's not a new idea...
businesses just need to do it.

Gas prices have skyrocketed and have impacted consumer spending far beyond merely buying fuel for their personal vehicles. This is due to increased prices across many product types as a result from higher fuel prices for production and transportation being passed along to consumers.
....
Consumers are feeling the pinch.

If consumers are changing some buying habits this summer -- from what vacations taken to trading in trucks and SUVs for smaller cars, etc. -- what are businesses to do?

Sitting on the sideline should not be an option.
Businesses need to be proactive in addressing such consumer concerns. While offering free or cheaper gas with a purchase is not a new promotion (see example advertisement), it is very relevant to American consumers during Summer 2008. Hotels, restaurants, museums, etc. are promoting how their organizations can be part of "staycations" for those limiting or dropping vacation plans and staying closer to home (see example advertisement).

Intregrating promotional efforts to maximize results

Pay attention to the "little" things.

Walking near a local Nordstrom store this morning left little room for doubt... there was a sale underway at the store. In fact it just wasn't any sale, it was a "HALF-YEARLY SALE".

How did I know? There were no posters, fliers, or bill boards in sight. The news was carried outside the store by customers... on the sacks they were carrying (above). Though this sale was limited to items in the men's department, such generic sacks could be used for sales in any department.

While businesses focus on advertisements in "major" media vehicles (radio, television, newspapers, magazines, etc.), it is often the little things that make a big difference.

No tomatoes = competitive advantage?

Salmonella in tomatoes should be turned into opportunity for eateries.

Over the last few days many eating establishments have been posting signs with the news that they are not serving tomatoes (due to the current warnings regarding salmonella food poisoning in raw tomatoes).

Obviously this is not the doing of fast food or sit down restaurants and customers seem to not be holding the issue about possible bad tomatoes against them.

However, no businesses that I've seen or heard about have tried to take this situation "by the horns" and do anything good with it.

For example, why not promote something like "while we have no tomatoes (like everyone else!), we'll give extra meat on your ham sandwich". The "extra" could be more fries, a price reduction on the order (due to lower costs due to no tomatoes), and so forth.

The point is... why not use this situation that is beyond local control and develop some offer of value to current customers and also be an incentive for new customers to give your business a try?

Be basic. Be creative. But at least consider doing something proactive.

How has it gotten to this?

Businesses versus their customers.... .... ..you've got to be kidding!

The title on the cover of the June 16th issue of BusinessWeek (see right) that arrived in the mail today highlighted the negative views some businesses have towards customers. It is sad to consider that businesses across industries look at consumers as a form of competition that need to be conquered. No wonder businesses complain of the lack of customer loyalty.

It is unfortunate that too many organizations fail to remember Business 101 and 501.

Business 101 -- customers are the only source of revenue.

Business 501 (graduate level) -- loyal customers are the most profitable customers.

When the situation gets to the point where a major business publication features your business against customers on the front cover in a replica of an old time boxing card handbill, it is time to make significant changes.

How would BusinessWeek represent your relationship with your customers?

Displaying benefits in your promotions

Over the last several weeks in television commercials, Kia Motors has shown the benefit of their lower vehicle prices in terms that are both timely for many in their target market and with clear imagery.

You may recall seeing Kia advertsiements for their Sportage and Rio 2008 models that highlight safety, features and warranty but really trumpet how much each is priced less than leading competitors. What makes these ads effective is how the savings are shown... Kia shows how many grocery carts full of food the savings would buy (and several thousand dollars will buy quite a few carts full of food).

In a time when consumers are feeling the pinch of high gas prices (approaching $4 per gallon) on their household budgets, Kia leaves no doubt about what the savings from their vehicle prices can mean for the buyer. A picture is truly worth a thousand words.

The commercials will be added to this post when available.