Monday, March 2, 2009

Strategic Planning Analogy #243: Buy My Goods

Imagine, if you will, that you are walking down a city street and encounter a street vendor selling his wares. The Vendor says, “Buy my goods.”

You respond, “Why should I buy it?” The Vendor replies, “So that I can make my sales quota.”

Confused, you ask the Vendor, “But what does your product do?” The Vendor replies, “It provides income to myself and my family when I sell it to people like you.”

A bit baffled by his answers, you ask yet another question, “Is it better than the competition?” The Vendor replies, “It is for me, because I don’t make any income off the competition.”

At this point, you are getting rather angry and perturbed by the vendor’s selfish responses, so you ask one final question, “What’s in it for me?” The Vendor replies, “The satisfaction in knowing that you helped me earn a living.”

At this point, you walk away without making a purchase.

I doubt that a vendor like the one in the story sells many goods. There is nothing in his sales pitch oriented towards customer benefits. All he sees are his own personal benefits. Rather than sounding like a salesman, he sounds like a beggar asking for money.

Any business person would know better than to act like this, right? Not so fast. Although perhaps not as blunt as this salesman, it seems that many businesses these days are so pre-occupied with their internal issues that attention to the customer’s point of view is not getting the attention it deserves.

The principle here has to do with orientation. A lot of businesses claim to be consumer oriented, but if you look at their actions, it seems like the consumer was forgotten. The current bleak economic situation seems to be making the problem worse, as fear of bankruptcy crowds out thoughts of consumer orientation.

Look at the auto industry. All they seem to be talking about are internal issues—problems with the unions, problems with the dealer networks, problems with credit lenders, problems with regulations, and so on. To the consumer, this is just a lot of “blah, blah, blah.” The message consumers hear seems to be, “Buy from me so that I don’t go bankrupt.” …Sounds a lot like that street vendor.

The customers don’t want to hear about your problems. They just want a good car at a good price that meets their needs. If you cannot do that, then you must be a bad manager, and why should the consumers support that?

The focus on the compensation at financial institutions is sending a similarly poor message. They also sound like our street vendor, with all the talk about how much income and bonuses they make off our transactions, rather than what the customer gets. In fact, it was the ridiculous way in which compensation was given to mortgage firms that caused the housing crisis in the first place. The orientation was on how to get my personal reward for signing up another bad mortgage (internal orientation), rather than providing good financing for the consumer (external).

Circuit City decided that sales help was an excessive cost (an internal focus), so they eliminated their best sales people. Without that consumer-oriented selling force, sales plummeted and now Circuit City is bankrupt, never able to recover.

An internal orientation may look good for a short time. The mortgage firms had a few great years. Circuit City got rid of a lot of costs. However, the long-term ramifications were devastating.

Never take the customer for granted. Try to win over their business every day. And if you screw the customer now, they WILL screw with you later.

Consumer orientation is essential for long-term health. When putting together a consumer-oriented strategy, three factors should be kept in mind.

1) What Problem Am I Solving?
Consumers purchase things in order to solve problems. And the problem they are trying to solve is not how to get you a big fat bonus. Speak in the language (the context) of the customer, and show them how a purchase will solve a pressing problem they are trying to deal with. In these tight economic times, discretionary spending is shrinking dramatically. If you want to sell in this environment, show how your purchase addresses an essential need.

2) Why is my Solution Superior?
Being able to solve a problem is good. Being the best way to solve the problem (at least for some segment of the population) is even better. If you want to win, your strategy must create a point of superiority. I am shocked at how many times I’ve asked a top executive the question “why would a consumer prefer your brand over the competition” and gotten a blank stare in response. This is a question for which every executive should have a rapid and plausible answer.

If you cannot articulate a reason why consumers should prefer you over the competition (other than the silly answer from our street vendor), then don’t expect the consumer to be able to figure it out. Nobody has a monopoly. There are always alternatives. Put into your strategy a believable and defendable reason why you are the best alternative.

3) Why Should we Continue to do Business Together?
Questions 1 & 2 tend to be more rational. However, there is also an emotional element to choice. Are you creating an emotional bond that makes the customer want to keep coming back?

There are lots of ways to sell someone a product or service that will turn them off from ever wanting to deal with you again. Avoid these and build a strategy around emotional bonding.

At the end of the day, businesses succeed by selling something to someone at a profit. As a result, the consumer is a critical target to orient your strategy around. If all you do is perfect internal procedures or maximize internal rewards, you may cruise along fine for awhile, but eventually the customer will figure out that they are not the focus and they will go somewhere else.

Have you ever noticed how quickly after it starts raining that the streets are filled with vendors selling umbrellas? Now that’s consumer orientation in action, reacting quickly to changing consumer needs.

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