Tag Archives: Business and Economy

September 10, 2018 · 1:23 pm

Hurricane’s Comin’

I went to bed last night after watching my favorite weather forecaster give a rather dire outlook for this week. When I moved to North Carolina I opted for hurricanes over blizzards, I guess, and now it appears that one is headed right for us.

I ran out earlier to pick up a case of water bottles just in case the forecasts are accurate. The local Walmart had nary a bottle anywhere, and the long aisle of empty shelving reminded me that I wasn’t the only person who had this idea four days ahead of when this thing is supposed to pay us a visit. I’ve got lots of ice to hold the food and lots of wine to hold me so I think I’ll be fine.

On the drive home I thought to myself that it was pretty cool how everyone is going about their business and preparing. There weren’t any D batteries at Walmart either and there were lines at the gas stations I passed. People are trying, as we were constantly told in the Boy Scouts, to “be prepared.” Which leads me to today’s screed.

There is a hurricane headed for your business. It might not be on your radar yet or you may have red flags raised over your beaches, but you can rest assured that at some point a massive, devastating storm will hit you. The thing is that you need to have a disaster place in place and preparations made long before that time arrives. Was Chipotle ready for the massive e. coli outbreak? It almost destroyed them and they still haven’t recovered. What if the power grid fails for whatever reason and all of your refrigerated inventory must be thrown out? What’s the plan to deal with that and are there financial plans in place to recover?

You need a crisis response team and a disaster plan. Your key players from all your relevant business functions – operations, public relations, marketing, quality assurance, legal, etc. – have to have been briefed on the plan long before it’s executed. I’ve written before about how my organization’s web servers failed after 9/11 due to a lack of dust filters that forced the shutdown of the emergency power we were careful to have at our disposal. When the crisis had passed, we rewrote the disaster plan to account for yet another “just in case.”

Hurricanes happen. The question isn’t how to prevent hurricanes but how best to prepare and recover from any damage they cause when they do. I’m ready for this one. Are you?

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September 7, 2018 · 12:55 pm

The Great Customer Gulf

Foodie Friday is here at last and with it comes some great information from Earnest Research. My data tells me that screeds about research don’t score particularly well with many of you but I think what the study I’m highlighting today is an excellent reminder of a basic business fact that pertains to the balance between keeping customers happy and attracting new customers. Read on!

What the study examined was the top 10% of various restaurants’ customers by the frequency of visit and how that compares with the average frequency. As reported by The Franchise Times, the gap can be enormous:

At McDonald’s, that top 10 percent customer went 86.5 times each year on average. That’s 309 percent more than the average customer, who went 21.1 times through the year.  Even the most frequent Starbucks customers don’t reach that. The top 10 percent of customers by frequency went 80.7 times—though they visited 374.5 percent more than the average customer who stopped in 17 times.

Earnest researchers checked in on a handful of brands for this data (see chart, right). In green are national QSR chains, orange is national fast-casual restaurants and blue represents chains that are regional but have a traditionally strong customer base. While the numbers jump around a lot, the highest frequency customers come between three and five times more than an average customer.

Your reaction to that may be a large “duh” since the Pareto Principle is probably burned into your head by now. What impressed me, however, was the size of the gap. If you factor in “average order value”, the amount of money spent by the top 10% is huge even though as it turns out they tend to spend a bit less per trip. In real terms, for example, the difference between a top customer at McDonald’s and an average one means a $708 annual value compared to the average customer’s $187.

Money spent to keep a customer happy is money well-spent. Money spent to get a customer to become a more frequent customer is even better. While there’s no question that we all have to keep adding new customers to our base, once they’re there, we need to shower them with love, great service, and incentives to grow their engagement with you. The data shows it’s true in the franchised restaurant business and I’m pretty sure it’s true of yours too.

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Filed under Consulting, food

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September 5, 2018 · 11:11 am

Mental Images, Mental Mistakes

Shut your eyes and picture the typical “All-American” family. Go ahead, I’ll wait. OK – have that picture in your mind? What does it show? Mom, Dad, and a couple of kids? My guess is that if you’re Caucasian so is your picture, and I’ll bet the typical family is also quite heterosexual.

Here’s the problem with your mental image. According to the 2010 U.S. Census, only one in four American families matches that description. That was almost a decade ago and I think we’re all aware of the changes that have been happening with respect to familial, and societal, composition.

If you’re in marketing, that mental picture has some fairly important implications. It might impact how you make creative for your campaigns, how you plan your media, and how those decisions provide relevance and meaning to consumers. For an example, the folks at HP brought together 13 Chicago families of different races, ethnicities, ages, genders and sexual orientations. They were split up and another group of people was asked to reassemble the families.

Guess how many people could put the families back together? Exactly none. In general, they tried to find groupings of the same race, different gender, and heterosexual. Oops. But this has implications even for those of you out there who aren’t in marketing. It speaks to the broader issue of preconceived notions and how we can’t just form opinions without adequate evidence. Some folks are seemingly determined never to let the facts get in the way of a good story, whether they’re reporting something to their boss or just ranting among their friends. It’s really a bad idea.

How often do a new employee or a business prospect walk into the room and you make a snap judgment before they’ve even uttered a word? We all do it, unfortunately. In fact, it’s sort of a “truism” that hiring decisions are made quickly. Well, according to a research study, some of the interviewers did make snap decisions about candidates. Roughly 5% of decisions were made within the first minute of the interview, and nearly 30% within five minutes. I think that has to do with the preconceived notions in the interviewers’ minds about who they saw in the job as well as who they saw in front of them.

Rip up those mental pictures as best you can. Do the research, seek the facts. and THEN form the pictures. Ready, fire, aim rarely works, don’t you think?

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Filed under Huh?, Reality checks, Thinking Aloud

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