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Customer Manufacturing Update |  |
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Dear Mitchell, Here is your September Customer Manufacturing Update. This month's white paper looks at the power of focus versus the allure of diversification as strategies for success. Your comments are appreciated.
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When times get tough or growth slows, many companies look at a diversification strategy to boost revenue. While this may increase revenue it rarely increases profits in the short term or the long term. Most companies would be better served with a strategy of focus than one of diversification. In this month's white paper, we look at this issue.
We were reminded again that what gets measured gets managed, and if you don't have metrics alignment within your team, you can end up at cross purposes. In the airline industry, gate agents are measured against on-time performance. We are not really sure what flight attendants are measured on, but it is not on-time performance. This disconnect was evident on a recent flight that one of our team took. As he was boarding the plane the "purser" (that would be the lead flight attendant on that flight) who was clearly needing to assert his authority over the gate agent and reminded the agent that he was the "... purser on this flight," was reprimanding the gate agent for allowing Coach class customers to board before he (the purser) had given permission. (The fact that this reprimand was going on in public is a whole other conversation.) The purser noted that he had "graciously" allowed the gate agent to board the First Class passengers before the plane was completely cleaned, but that the gate agent had clearly overstepped his bounds by then boarding the Coach passengers before the purser had granted permission. Such behavior was not to be tolerated, and he wanted the gate agent to know this, even though the cleaners had left the plane before any Coach passengers had tried to board. We understand the issue of complicating the cleaning process and the boarding process, which is not the issue here anyway, since the cleaners had left the plane. The gate agent was focused on his metric: getting the plane off on time. The flight attendant is not measured on that and has no empathy for that situation. Results: Teammates at odds with each other due to differing metrics of performance. Are your people focused on differing metrics, which may in fact be in conflict with each other? How is this impacting your customers? And what about employee morale?
People have many different definitions of Marketing. Unfortunately, most of it focuses on what we call the "back-end" functions of advertising, promotion, etc. Since that is where most of the money is spent, we understand that focus, but that does not suggest that is where the leverage is. We have stated for many years that more emphasis should be placed on the front-end of the process. If the U.S. car companies had built cars people wanted to buy, they would not have needed the so-called "brilliant" marketing that produced the price discount programs such as Friends and Family or Employee pricing. Just discounts to move product that was not as desirable as it should be. Marketers, and their employers need to remember something Philip Kotler said: " ... most of the impact of marketing is felt before the product is produced, not after."
One of the things which happens in any downturn is that people try lower priced goods and services. They may try private label over brand, or they may shop in stores they normally have not shopped in to try to save some money. What many of these people find is that the "value" they thought they were receiving at a higher price is not really greater value, or, in many cases, the value proposition for the higher priced goods or services is, in fact, reinforced. Some private label goods have consistently gained and kept market share after each downturn. Wal*Mart is quoted as saying they expect to keep virtually all of the new customers they are gaining as trial customers during this downturn even after the economy turns around. On the flip side, Apple iPhone sales are sky high even though it is the highest priced phone of its type. We were reminded of this phenomenon again in a short article by Rich Karlgaard in the May 25, 2009 issue of Forbes. As you might expect Rich travels a lot and has apparently been used to staying at Ritz-Carlton, Four Seasons and JW Marriott hotels. He notes that he has lately been staying at Residence Inn, Hyatt Place and Holiday Inn Express, with "no complaint." He points out that these hotels (and we would add Hilton Garden Inn and Marriott Courtyard to that list) do an exemplary job of hitting the business market with exactly what the business traveler needs, no more and no less, at a fair price. He suggests this is "disruptive technology." He likes that term because his good friend Clayton Christensen uses it and it is a cool, "in" term to use. We argue it is not really disruptive in any way. It is simply a focus on a segment of customers who need, want and demand certain things that are both more and less than is offered by the luxury hotels he cited. Not disruptive ... focused. That is, it is not really replacing these luxury hotels in the long-term, as a disruptive technology would. To this point, we suspect Mr. Karlgaard will be back with his "old friends," Ritz, Four Seasons and JW just as soon as he can, because as good a job as these business class hotels do for him, we suspect he prefers the value he receives from the luxury hotels.
We appreciate any feedback you can provide to help us make sure these Updates give you value each month. Feel free to respond to this e-mail with any comments or suggestions for future topics or ways we can make these Customer Manufacturing Updates more valuable to you.
Thank you for your interest, and if we can provide
any
additional assistance in sales, marketing, strategy, or
innovation to help you increase your sales,
let us know.
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