Tag Archives: Business model

Tasks And Experiences

Happy Foodie Friday! This article came into my news feed this morning. It’s about Walmart’s store of the future, where robots can fill grocery orders up to 10 times faster than humans. Pretty spiffy and it’s an interesting read, but it also got me thinking about a pretty important distinction about which I think you may want to ruminate.

When I go to the grocery store (every Thursday!), I have a list of things I want to buy. Most of the things on that list are there because I’ve planned out meals for the week and I need things to make those meals possible. It’s a pretty straightforward task. Other things are on the list because I use them in general and they’re on sale. Maybe I have a coupon that for them that is expiring. Maybe they’re on sale AND I have a coupon (can you feel the excitement?). Again, it’s pretty cut and dry – here’s the thing on the list, buy it and bring it home.

That’s really only half the trip, however. Inevitably, I find things to buy that aren’t on the list. I’ve found them as part of the shopping experience. Maybe it’s an unadvertised sale, maybe some local produce came in and looks spectacular. This is experience-oriented shopping versus the aforementioned task-oriented shopping.

Back to the article. It’s lovely that Walmart (and Amazon and others) are extremely efficient in servicing these orders, but they’re only serving the task-oriented shoppers. In-store discovery is impossible when there is no in-store experience. That’s why you always see “people who bought (the thing you’re buying) also bought (another thing).’ I think it’s also why Amazon is moving into physical stores, both through Whole Foods and their own “register-less” stores. Obviously, serving the task-oriented shopper is only half the battle.

I think it’s the same in other businesses.  Almost every business interacts with customers, partners, vendors, and employees in a task-oriented framework. When you stop and think about it, good businesses make sure there is an experience-oriented aspect to the relationship as well. What I mean is an experience that the participants can enjoy for its own sake and not as a means for accomplishing a task or achieving an extrinsic goal. Maybe it’s just drinks after work with no agenda. Maybe it’s a round of golf. All of my best business relationships had both task-oriented and experience-oriented aspects.

Think about how you interact with your customers. Is everything a task where items get ticked off a list or is there an experience that’s part of the relationship? How can you bring that balance?

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Filed under food, Thinking Aloud

I’m Sick Of Scammers

Another year, another scammer surfaces. I’ve written many times in this space about marketers who try to take advantage of people’s limited attention spans and fear of all things “official”. The mail delivered another example of one to my doorstep the other day and I want to tell you about them. Admittedly, part of this is venting but another part is a very real concern that many marketers have lowered their standards to a point where they’ll do just about anything to drive business. It’s even worse when the business itself is a scam.

North Carolina, like many states, requires that all businesses file an annual report with the Secretary Of State. If you’ve never done that, it’s a very easy process that can be completed online in about 3 minutes. I had to do the same thing when my LLC was registered in Connecticut and the process was equally easy. You check a few boxes and pay the fee. Easy peasy.

In the mail the other day was an official-looking document – 2020 Annual Report Instructions Form.  The blanks in the form were already pre-populated with my LLC’s information. It also contained the language from the general statutes about having to file an annual report. I thought it was something the state had sent until I gave it more than a cursory look.

In a different typeface was a sentence that said this was being sent by a third-party who would file my report for me. Just send along the $292 fee and that would be that. Of course, the filing fee is only $202 – the other $90 was what this company was scamming me for. The grift IS the business – there is very little, if any, work involved otherwise.

My first thought when I saw the form was, oh, I’ll do this online, as I do pretty much everything. My next thought was “wait, this isn’t the state, this is a scam.” The thought after that was “some percentage of business owners are going to fall for this.” It has all the right information and it’s very official-looking. Of course, anyone can get that information on the state’s website and matching the state’s form and typeface isn’t exactly rocket science.

I admit there are a couple of disclaimers that the company is not affiliated with the state but why should anyone have to read very carefully to avoid being taken advantage of? Are they providing a service? I suppose so, but why not offer the service in a clear manner instead of trying to obfuscate that you’re charging $90 to save someone a few minutes’ work?

If you market a product or service, the road to profitability isn’t made easier by misleading or scamming your customers. Let’s not do that. Even better, let’s shine some sunlight on those scammers who do.

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Filed under Huh?, Thinking Aloud

Concessions

Let’s go to the movies this Foodie Friday. I did the other day. If you’ve been spending time at home streaming your entertainment and none at the theaters, you might not be aware that things have changed dramatically at the old cineplex with respect to food. I happened to go to my local Alamo Drafthouse, which features recliners as well as a large menu of food and beverage.

You are probably aware that theater owners make more money from concessions than they do from admissions. You might have noticed that most movie concessions are high-margin items such as popcorn and soda. Still, I generally didn’t spend much more than $10 on food and beverage. Boy did THAT change at the Alamo. Even factoring in the additional labor costs for the servers bringing the food to my seat, I’m pretty sure that the theater owner netted a heck of a lot more from me than they might have in the past.

The Alamo overall is an interesting model. There are fewer seats in the theater but that really only reduces the take from admissions. My guess is that the concession net more than makes up for the fact that there are fewer bodies in the seats. Of course, my Alamo also has 10 theaters under one roof, ranging from 50 to 100 seats. What I like about this from a business perspective is how they’ve rethought the business model and focused on the part of the business that makes an owner money. The concessions are a significant upgrade. There are craft beers, top-shelf cocktails, and even a vegan menu. Sure there is popcorn but it’s served with real clarified butter. It’s also a bottomless bowl. There is also an herb popcorn that is tossed with that same butter and fresh herbs. Do I give a second thought to paying $8.50 for it? Nope – it’s delicious. So are the sandwiches, pizzas, and salads. $45 on drinks and food? Even at a 20% margin, my concession purchases yield the business owner as much as my previous bill might have been in total.

Any business can learn from what the Alamo and other theaters are doing as they transform their business models in the face of unlimited streaming options. It’s the Wille Sutton Rule – go where the money is.

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Filed under Consulting, food, Thinking Aloud

Something For Nothing

I went to one of the warehouse club stores yesterday to make some bulk purchases. If you’ve ever been in one of them – Costco, BJ’s, Sam’s Club, etc. – you know that one feature of walking around the place is that there are usually free samples. You can taste the latest and greatest in meats, cheeses, and frozen things to cook while you’re too busy to make something yourself. That got me thinking about the fact that you really don’t see a lot of sampling elsewhere.

I’m a fan of the free trial. It gets customers walking through your door and using your product. What I don’t particularly like are those “free” trials that require you to fork over your credit card. Free means without strings, right? In particular, if you’re a business that is built around what I think is the gold standard – recurring revenues – you ought to be spending a good chunk of your marketing dollars on free trials.

It’s relatively simple math, right? What’s the lifetime value of a customer? What does it cost you to offer up a free trial – a visit, a free month, whatever? What is the conversion rate of those freebies – how many of the trials become regular customers? Recurring revenues are predictable and generally pretty stable. I bet you’ve signed up for subscriptions of some sort and forgotten you’ve done so or don’t use them as often as you thought you would. For a business, that’s a customer without costs, and that’s a nice margin!

When I talk to people who are looking at franchise opportunities and who don’t have a particular brand or industry in mind, I usually talk to them about the businesses with recurring revenue models. Things like cleaning services. Not a sexy business, but very profitable and that, in part, is because of the recurring revenues. Same thing with spa businesses or some hair salons that feature memberships. Are those businesses that can offer a free trial? Maybe if you’re an out-of-the-box thinker. Giving a converted customer the ability to give away a free trial to a friend is another great way to expand your base at very little cost.

Here is the thing about free trials leading to recurring revenues. As with any business, you have to maintain a high level of customer service. After all, when someone’s credit card is getting dinged each month and your business appears on their statement, it’s an opportunity for them to reconsider.  If they walk away, no amount of free sampling will get them back most of the time. Everyone loves something for nothing. The opposite – nothing for something – is very much NOT true!

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Filed under Consulting, Franchises

McRib And You

The big news this Foodie Friday is the return of the McRib sandwich. It’s only going to be around for a limited time and only at select McDonald’s stores (which is about 10,000 of them). If you’ve never had one of these babies, it’s a pork patty formed to look like pork ribs (but boneless) on a bun with pickles and onions and a fair amount fo a sweet barbeque sauce.

I’d be very dishonest if I said this concoction appalls me since I’m a fan of the thing, or at least I was before I both quit eating a lot of carbs (45g in this baby) and lived in a place where real BBQ pork sandwiches are easier to find than a decent deli. When it hit the market back in 1981, it was a dud. It’s been released every so often since into a limited number of outlets and it sells out.

There is something any business can learn from the McRib or the pumpkin spice craze at Starbucks or Dunkin’. It’s the smart tactic of giving customers a reason to come back. There is a restaurant here in town that I patronize on a regular basis. The food is quite good but there are rarely any specials. It gets boring, frankly. I’ve tried pretty much everything on the menu. Something special might get me to make a special trip as opposed to the every 10 days or so when I want a really good burger.

There is something else. Here is a quote from a marketing professor at Northwestern:

For fast-food chains in particular, which rely on familiarity, holiday items can offer consumers some variety. “You need consistency because that’s the brand mantra,” said Chernev. “But no matter how much you like something, consuming something different … increases the enjoyment of what you consumed before.” Chernev says it’s a neat marketing ploy: Although a specialty item may be exciting on its own, it can also remind consumers how much they like the basics.
In my mind, it’s like how being on vacation often reminds you of how much you like being home if that makes any sense. In any event, every business needs to think about how a special product promotion (vs. a sale price promotion) can provide an overall lift to the business.  Got it?

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Filed under food, Helpful Hints, What's Going On

For Yourself, Not By Yourself

I left corporate America at the end of 2007. In the dozen years since I’ve worked for myself. Oh sure, I have always considered the clients for whom I consulted to be my bosses, but at the end of the day, I was on my own.

If any of you have been, or are, in a similar circumstance, you know that it’s both a liberating and terrifying feeling. There is the freedom to spend a beautiful day at the beach or on a golf course instead of working. After all, you’re the boss. Along with that freedom, at least for me, there was always guilt that I had taken the day to play or run errands rather than grinding it out as I had done for the 30+ prior years of my business life. I guess the Protestant work ethic applies even to Jews…

While I’m still working for myself, the last year I’ve not been BY myself. As a franchise consultant, I’m a part of a much broader network of several hundred other coaches. We share information, I have access to ongoing education about franchises and how to do my job more effectively, there is someone doing collections for me, and the network actually even finds leads for me if I want. I’m in business for myself but not by myself, as is the case with any franchise.

Candidates (people considering investing in a franchise) sometimes ask why they should go with a franchise instead of using their capital to start up their own business. The statistics answer that question for me. 90% of new businesses fail in anywhere from the first five years to as little as the first four months. 90% of franchises are still in business after five years. There is a reason for that, which is that you’re investing in a proven concept. The mistakes have been made, the operation has been refined, marketing plans have been tweaked, and all of that is being handed to you as part of your investment along with training that can last from a few days to weeks, with ongoing mentoring and education for much longer. Pretty spiffy, and a route I wish I had taken a dozen years ago instead of trying to figure it all out on my own.

So what can go wrong with a franchise? I think the two biggest sources of problems are when franchisees don’t follow the model or when they are undercapitalized. In the first case, ignoring the model is basically throwing away what you paid for and diminishing your success rate quite a bit. In the second case, ANY business will fail if it’s undercapitalized no matter how well-run it is. Counting on immediate cash flow to support the operation (or your ability to eat!) is short-sighted. That’s why franchising makes even more sense since there is a track record of what capital is needed to get the business up and running for the first few months. It’s actually so clear that the franchises put those costs in their Franchise Disclosure Document (item 7) and those are numbers I have and discuss with folks as they are looking at investing.

Being in business for yourself is great. It’s even better when you’re not by yourself. I can show you how to make that happen for you. Just click here and let’s get started.

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Filed under Franchises, Thinking Aloud

Pumpkin Spice

This Foodie Friday, we’re taking a leap ahead into Fall, and if Fall means one thing to most people, it’s pumpkin spice. I know – you were thinking football, but no, my guess is that far more people are affected by the pumpkin spice thing than the pigskin thing. It’s a relatively recent development as spice companies didn’t actually make “pumpkin pie spice” until the 1950s and that became “pumpkin spice” in the 1960s. Some candle company began marketing a pumpkin spice candle in 1995, Starbucks picked up the flavor after many small coffee shops did, and the rest is food history.

Today, I saw what might be the last straw in the craze: Pumpkin Spice Spam. This is not a joke – it will be available only online and there are already cans of it out in the wild. Apparently, it doesn’t taste too bad – kind of like breakfast sausage. While I’m generally a believer in the “anything worth doing is worth overdoing” philosophy, I think we just might have hit our limits here, although one might wonder where that limit lies after pumpkin spice hummus, Four Loko, Pringles, gum, and vodka, to name only a few of the products that are out there.

There is a serious business point to be made here. Pumpkin spice is a flavor and a scent, and of course, you can add either of those things to a product to make it seasonally relevant, at least to some people. That doesn’t necessarily mean that you should which is the broader business point. There are often moments in business when we’re confronted with what some might call opportunities while others might see them as dilemmas. A bank might be able to make more money if it charges its own customers a fee to use their own ATMs or to have a debit card. That’s a bad idea.

There was a great piece published years ago called “Companies and the Customers Who Hate Them.” It talked about charging penalties and fees especially in the cell phone, cable, and banking industries. It concluded:

One of the most influential propositions in marketing is that customer satisfaction begets loyalty, and loyalty begets profits. Why, then, do so many companies infuriate their customers by binding them with contracts, bleeding them with fees, confounding them with fine print, and otherwise penalizing them for their business? Because, unfortunately, it pays. Companies have found that confused and ill-informed customers, who often end up making poor purchasing decisions, can be highly profitable indeed.

I don’t think that adding pumpkin spice to an already good product is on a level with some of the outrageous fees we’re charged as consumers but it illustrates the point that just because we can do something in business doesn’t mean that we should. Not only do you run the risk of having seasonal merchandise go unsold (unhappy retailers!) but also of having customers question your sanity. Neither is good business in my book. Yours?

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Filed under food, Huh?, Reality checks