Tag Archives: Strategic management

Wanting And Needing

If you hang around the candy aisle of the supermarket long enough, I can pretty much guarantee you that you’ll hear some kid yell at their parent that they “need it” with a large bag of candy in their hand. At that moment, I think the kid believes it. Hopefully, the parent explains the difference between “needing” and “wanting”. Hopefully, that’s something you can recognize in your business life too.

A need is something you must have to survive. As humans, water, food, and shelter are about the extent of those needs (I put clothing and warmth under the shelter heading). As a business, the fundamental need is to make a profit. Without that, no business can survive over the long term. In order to make those profits, you need money coming in, which means you also need customers who will pay you for your product or service. As with any need, once we have satisfied it we can move on to the “want.” You want customers who are happy so they stick around. You want customers who are pleasant so you can interact with them without drama. You need to have people working with you who are loyal and knowledgeable so they support your customers. You want them to stick around for the long term at a reasonable cost to the business.

The hard part for me when I began consulting was that I think I probably spent too much effort helping clients get the wants and not enough time focused on the needs. Rookie mistake, one I don’t make now. I’m not surprised when a client and I get into the need/want discussion and there is a bit of a disconnect. With early-stage companies especially, you have to get the needs shored up.

I try to focus on telling clients what they need to hear, which is not necessarily what they want to hear (see what I did there?). I did the same when I was part of a larger organization, sometimes to my detriment, I’ll admit. I did learn that the people who can hear things that are true but sometimes unpleasant are the ones with whom you want to work. They have learned that the bag of candy is a want, but those wants might not be affordable or necessary. They might even be detrimental. Make sense?

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Filed under Consulting, Thinking Aloud

David And Goliath

I’d like us to think about David and Goliath this Foodie Friday. In the food service world, there are a few Goliaths – McDonald’s, Burger King, and Starbucks to name a few. There are far more Davids – everything from mom and pop restaurants competing in the same quick-service space to regional chains. It’s interesting to see how the little guys try to compete with the big ones and there is a lesson in that for any of us in business.

I’m often surprised at how some Davids think they can just “me too” their way into success by following the strategies and tactics of the big guys. I guess the thinking is that one wouldn’t have to grab a whole lot of share from a big guy to have a wildly successful business. They drop pretty large crumbs.

I was reading something recently that reinforced my surprise. It’s a study by Sense360, a restaurant consultancy. It found:

McDonald’s has been admired for its value-oriented strategy that’s led to its market dominance and resurgence. Many QSRs have tried to replicate McDonald’s winning strategy, with little success. That’s because they’re copying the wrong things and not taking away the key lessons that would lead to a better result.

What McDonald’s and other Goliaths do is to formulate very detailed customer personas. They identify key consumer attributes and build their strategy around attracting the core customers they’ve profiled again and again. Those personas are NOT the same across different brands, so trying to use strategies designed to attract them may not fit your customer profile at all. For example, the quality of food at McDonald’s is, according to the study, a very minor reason why their customers go. Advertising the quality of your food as a way to grab a McDonald’s customer is going to fall on deaf ears.

Obviously, the Starbucks customer has different concerns and priorities than the McDonald’s customer, which is exactly what the study found. Therein lies the lesson for any of us. What we all need to be doing is looking internally and see what we can do well that is different from what our competitors are doing and which resonates with OUR customers, not theirs. What will give my business and my brand an opportunity rather than going head-to-head with someone who has more resources than me, often moves faster to adapt to market changes, and has a different customer anyway.

David beat Goliath because he managed to hit him in a weak spot and not because he went after his strength or waited for him to tire. That’s the sort of thinking we need to incorporate in our business planning, don’t you think?

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Messing Up Moviepass

Do you have MoviePass? I do and I think it’s fabulous. For roughly $10 a month (about the cost of a ticket here) you can go see one movie a day as long as they’re not IMAX or 3D. Too good to be true? It really seems that way but I’ve never had an issue using it.

You might be asking yourself how do they stay in business? Lots of other folks are asking the same question since I gather they have to pay the theater the full price of admission when you use the pass. I go to an average of one movie a week (4/month) which I gather from this article on Recode is more than average. They’re recently starting charging a premium if you want to see a very popular movie right as it’s released, but that’s a minority of what’s out there. Still, they must be losing money on most users so how do they stay in business?

In a word, data. I go to see some movies in the theater that I might ordinarily wait to see on pay cable or via streaming. I often hit the concession stand, which is where the theaters make most of their profit. Good deal for them, right? Where Moviepass is thinking they’ll make their profit is from understanding the moviegoer and selling that data. That’s why they’re so inexpensive – to scale quickly – and they’re hoping to become so ubiquitous that they end up getting a cut of the increased attendance they are generating (the 3 extra trips to the theater I make in a month!). With me so far?

A friend of mine also has a Moviepass that she was given as a gift. Her 6-month gift ran out the other day and she went to renew. Here is where the fun begins and where we all can learn a little something. There is no way to renew a gift subscription. Seriously. She wanted to convert the gift to a regular subscription on her own credit card and Moviepass won’t let her. Instead, they require that you start all over and create a new account using a different email. Let’s think about how many things are wrong here.

First, you’re a data company. By demanding an existing customer start all over, you’re blowing off all the data you’ve collected on them to date. Second, since Moviepass requires a physical card to work, you now must issue a new card. Besides being an expense for you (create the card, ship the card, etc.) it’s extremely inconvenient for the customer. Third, I’m anticipating that since an account is married to a device, there will be an issue when she gets her new account and tries to tie it to her existing phone. You can’t use your pass without using the app and the app is tied to a device and your card. There isn’t a single reason I can think of that makes this a smart policy.

This silliness has forced many customers to reach out for customer service (a cost!) and from the heated postings on Facebook, Reddit, Twitter and elsewhere, it’s resulted in a lot of lost business for Moviepass. One of the main advantages of the digital world is how there is far less friction in many transactions. Online commerce brings your shopping to you and you never leave the house to lug stuff home unless you care to. Moviepass seems to have found a way to increase friction among its existing customer base – those who received gifts and want to remain as customers. Not very smart in my book. Yours?

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Filed under Consulting, Huh?

Building A Disaster

Have you heard about the Build-A-Bear fiasco? Build-A-Bear Workshop declared last Thursday “Pay Your Age Day.” Customers could come in and build a bear at its workshops across the U.S., Canada and the U.K. for the price of their age rather than the $50+ it normally costs. Not a bad deal if you’re an 8-year-old or even a 35-year-old parent. The response was overwhelming, with mile-long lines in some places. According to The Washington Post, some waits were seven hours long.

It’s great that there is a large, enthusiastic audience wanting to build these bears, but that’s about the only ray of sunshine here. Some stores gave customers who were turned away a $15 voucher. As a parent, I can tell you that the voucher does little to placate a disappointed child. They were counting on a new furry friend. Many of the ones turned away were members of their Bonus Club, a frequent buyer program, already and others had to join to get the discount. In other words, their best customers. Yikes!

The CEO went on TV and said: “There was no way for us to have estimated the kind of impact, those kind of crowds.” He added, “We did put a notice out for people that we thought the lines could be long, and we worked with the malls, but it was beyond anything we could’ve ever imagined.”

That’s the point for any of us who run promotions. You need to imagine what an overwhelming response will do to your operation. In this case, maybe they should have had people sign up to take advantage of the promotion in advance (and get their emails as a bonus) to get places in the line, much as one does at a concert to get in “the pit”. Maybe extend the promotion for a few days to let those people into the store at predetermined times. Heck, maybe take space in unrented stores in the mall and add capacity. Be creative, consider lifetime customer value, and spend what you need to in order to prevent a disaster.

No good deed may go unpunished and companies that disappoint their best customers rarely go unpunished as well. You with me?

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Growing Older But Not Up

Jimmy Buffett wrong a song almost 40 years ago called “Growing Older But Not Up.” He wrote the song after breaking his leg in a charity softball game while running the bases. It’s a song I think about fairly often as I’m aging.

Our bodies grow older and change but we still think we’re eternally 25 and able to do all of the silly things we did then without consequences. We sometimes fail to recognize that we’ve changed and we need to deal with the world differently:

Though my mind is quite flexible
These brittle bones don’t bend.

Amen, brother. He was 34 when he wrote that and he says he’s still behaving badly at 71 though to a far lesser degree. The only constant is change, right? I think so, although I wonder sometimes if many in business recognize that this country is changing as it grows older too. I mean that literally. The country is aging, and it’s probably one of the most important changes affecting everyone in business. My generation, the baby boomers, are living longer, the birth rate is down among younger people, and we’re an older population. Here’s a tidbit:

Census figures show that fewer than 17 percent of U.S. counties reported a decrease in median age from April 2010 to July 2017, with the majority of those counties clustered in the Midwest. Nationally, the median age rose to 38.0 years in 2017, up from 37.2 years in 2000.

Doesn’t sound like much of a change but it represents the reason why we see many more ads for drugs (older folks are generally sicker), bigger cars, retirement accounts, and other things. So the question to you is how are you preparing for, and dealing with, the demographic changes that are happening? We’re becoming a more diverse nation too but that’s a much more complicated answer than focusing on age.

You have a couple of choices. You can reexamine your product mix and see if it appeals to people over 50. I’m not sure that Facebook thought it was a senior product but that’s what it has become as young folks are using it less and less. If it has appeal, maybe you need to be targeting that older segment, or at least testing.

The other choice is to deny the change. You’d be like Jimmy, trying to pursue things that reality makes less possible. Your heart and mind might be the right place but your market has changed and you need to adjust your thinking. We can all complain about the changes to the market but we can’t reverse them. Make sense?

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Old Bay Bacon

It’s Foodie Friday! A friend of mine made some bacon a while back that might have been the best bacon I’ve ever had. It wasn’t so much that it was a nice thick cut nor that it had been perfectly cooked although both were true. Something had been added to the bacon that enhanced its overall porkiness (bacon fans know what I mean) and threw in some extra flavors for good measure. I was smitten.

I asked what was done and the answer was Old Bay. Yes, that Old Bay, the one you have hiding in the back of your spice rack to add to the shrimp and crabs you never quite get around to boiling. While the chef used the same technique I do for bacon (400-degree oven, bacon on a sheet pan for 20 minutes or so, maybe on a rack if you’re feeling ambitious about clean-up), they had sprinkled the raw bacon with Old Bay. It was transformative.

You might not be familiar with Old Bay if you don’t live here in the eastern U.S. It’s a spice blend long associated with Baltimore. Invented in 1940 by a German immigrant fleeing the Nazis, it became ubiquitous in the Chesapeake area and is one of my favorite spice blends. Celery salt, mustard, pepper, bay leaves, cloves, pimento, ginger, mace, cardamom, cinnamon, and paprika – 18 spices in all – make up this magic dust.

There’s a business point or two to be made here. First, we can’t be afraid to try new uses for old products or people. I would never have thought to put Old Bay on bacon but it’s magic. Maybe you haven’t asked a senior member of your staff to do UX testing on your new digital presence, but why wouldn’t you? If someone who, in theory, is less adept at the digital world can appreciate what you’ve done, odds are that your real target will like it as well. Or take an old product like a tape that was invented to keep ammo cases dry, change the color, and voila! Duct tape. Or maybe a heart medicine that had an unusual side effect in many men and suddenly, Viagra.

Second, to my knowledge, Old Bay’s recipe has never been changed. There’s always a tendency out there to tinker with successful products through line extensions or even wholesale revamps of the product. Resist it. Look at Craig’s List – it’s still pretty much the same as it was when it launched 23 years ago. No bells and whistles, no streaming video, just classifieds and a whole lot of success. Create new things but don’t dilute the brand and don’t ever jeopardize the cash cow. There is Old Bay flavoring in many products, but the core product – the spice blend – has never changed.

Sprinkle a little Old Bay on something – bacon, a Bloody Mary, popcorn, almost anything – and remind yourself that greatness can endure even as we find new ways to incorporate it into our businesses.

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Facebook, Sears, and Kodak

When I was a lad several decades ago, many Americans did their shopping at Sears and took their pictures with Kodak film (I can explain “film” to you youngsters if need be). More recently, my kids might have shopped at American Apparel or Claire’s. What all of those formerly huge companies have in common is that they are all nearly dead. The reasons for that range from bad management to dumb financial deals to changing tastes to the digital revolution. In every case, however, I think there is a common thread of a failure to understand their customers in the context of the customers’ changing world.

We have something similar going on in my mind with Facebook. It’s huge and seems invulnerable but one might have said the same thing about Kodak or Sears 50 years ago. First, think about how the world is changing for their customers. Privacy has moved from something that digital folk like me were babbling about many years ago to something that is on everyone’s mind. In an April survey of 1,051 US adult internet users by Janrain, most respondents said they are not in favor of websites or apps using what they learn about them online to target ads. In fact, 70% of them want some very restrictive laws, similar to the E.U.’s GDPR, passed here. I don’t think there is any doubt that a tech backlash is going on and the more consumers and lawmakers find out about the sloppy (at best), invasive, and maybe criminal (at worst) data use by large tech companies, the greater that backlash is going to become.

Facebook’s entire business is built around invading your privacy. Two points from eMarketer:

More people are becoming suspicious of sharing data through third parties. In a March 2018 survey from Raymond James, more than eight in 10 US internet users said they were at least somewhat concerned about how their personal data is being used on Facebook. Similarly, in a Gallup survey of 785 Facebook users in April 2018, 43% said they were very concerned about invasion of privacy. That’s an increase of 30% in 2011.

What has resulted is that people, especially young people, are sharing less content. The entire reason Facebook is valuable for most people is that content that their friends, classmates, and family post. It’s the network effect – that value of the network relates to the number of people on that network.

I’m not shorting Facebook stock today but I’m not so sure that unless they get their privacy house in order that won’t be a bad play down the road. Less content means fewer active users which leads to less revenue. Will they all move to Instagram (a Facebook company)? Maybe, but probably not since that’s not what’s occurring now. As each day brings a new headline involving a bad actor and data, another nail gets pounded into the coffins of companies that don’t respect their customers’ privacy and wishes. Privacy and data use are no longer just food for geek chats. They’re on the front page. How long can Facebook or any company last if they don’t figure this out? Longer than Sears or Kodak?

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Filed under Consulting, digital media, Reality checks