This Recession is not My Recession

This recession is not my recession
Practical suggestions on not behaving like a lemming.

by Andrew Szabo

(First published as an exclusive article for “Progressive Distributor”)

Few would argue that we are now in an economic recession. The pundits’ endless debate now centers onwhether it’s going to be long or short, the landing hard or soft, the impact on the financial markets, the effect on other economies and their effect on America and so on. My first question is: so what? The problem of this macro-perspective is that it speaks little of your business or mine, yet we often wallow in the media’s doom-and-gloom forecast.

Like lemmings, too many business leaders accept these editorials as a foregone diagnosis of the state of their business. It is a self-fulfilling prophecy: They become a contributing statistic to the depressed economy. Like lemmings mimicking another’s behavior, they react identically and fall off the cliff together.

Yet every downturn, crash, recession, or even depression has winners that succeed. Companies not only survive, but thrive, in the negative environment. What are they doing differently? If misery loves company, do the joyful seek a different path? I would suggest two key ideas that can significantly contribute to making this recession not your recession.

Stay out of it
First, resolve not to contribute to the recession. Make a choice not to suffer like everyone else. Instead, be proactive and prosper. Hyatt Hotels in the early ’80s is a classic case study in this behavior. The recession, never good news for luxury hotels, hit its peak during 1981-1982. Several cities already had a glut of hotel rooms but Hyatt resolutely went after new guests, rewarded loyal clients, made cuts only where they were not visible to the guest experience. They opened new properties, hitting the competition hard in several new markets where aging competitors were unable or unwilling to reinvest in their existing properties.

Get on the offensive
Second, take business away from your competition, which will increase your market share despite the total pie shrinking.

Sounds simple enough, but the challenge is in the implementation. There are only three effective ways to get more business.

  • Gain share of wallet. Increase business from your existing
    customers.

  • Promote loyalty. Encourage clients to continue to engage
    in profitable behavior.
    Target customer acquisition. Acquire new business from
    your competition that looks like your best customers.

Effectiveness in each of these areas is highly dependent on the quality of the relationship. Customer relationships are no different from marriages or friendships. They require an understanding of the other party (which entails investing time and other resources). Understanding your customer requires knowledge – gathering comprehensive information, behavioral knowledge and transactional data. It requires a disciplined investment of time and resources in an intelligent process. The technology that holds this all together is often categorized as Customer Relationship Management (CRM).

Practical solutions
Working with Sony soon after its successful launch of PlayStation, we ascertained that to increase market share and sell more games (their bread-and-butter in terms of margins), Sony would have to learn about their customers. Since it sold both the hardware and software through retailers, it had no direct contact or knowledge of its customers, except for the few warranty cards that purchasers returned.

By developing a cutting-edge relationship program that tapped into the psyche of gamers, we challenged the gamers to tell us who they conquered in what game. As a reward, they were admitted into the PS Underground, a “stealth” Web site and loyalty program that gave them inside information on new developments and tips on existing games.

Within 12 months, Sony built a base of 40,000 customer names into a comprehensive customer knowledge bank of 500,000 enthusiastic gamers with known genre preferences. This information was then leveraged into targeted, personalized, marketing campaigns that both gained a greater share of wallet and engendered loyalty, making them resistant to new game launches such as Nintendo 64. Sony crushed Sega, and greatly mitigated the threat from Nintendo’s launch of N64.

Although the implementation specifics are certain to be different from your industry, the underlying principles are directly relevant. Understand your customer by investing in the relationship: leverage the knowledge relevantly.

So how do you go about this?

  • Walk in your customer’s footsteps. What does a day (or days) in the life of your customer look like? By analyzing the interactions between your organization and the customer, you can identify key touch-points where data and information are gathered or exchanged.

  • What would the ideal path look like? Dialogues with an organization’s different stakeholders yield mission-critical customer knowledge requirements. Interviews with customers breed greater understanding of the customer’s needs.

  • Perform a gap analysis between the current and the ideal.

  • Throughout the process it is important to identify the systems (both processes and technology) that may aid or hinder the relationship and the ability to assimilate or leverage customer knowledge.

  • Finally, isolate key points of inflection, areas that are critically important and have significant economic impact. Improving these areas will yield the best return on investment.

Technology is not the ultimate panacea for cultivating effective customer relationships. Technology implementations, like CRM solutions, must be accompanied by a strategic process that examines the organization’s customer relationship practices and incorporates communication.

Whether you are a veteran player or a new entrant, experience reveals most have yet to master this combination of art and science called CRM. For example, the marketing department of a relatively new bank entered vital information about their customers into a contact management program. Loan information was entered into a custom-built system, and the regular banking information was entered into a third application. Despite professing a client-centric philosophy, the systems were disintegrated. No one performed a comprehensive analysis of the bank’s customers.

In summary, make this recession not your recession by choosing to grow your business wisely through the intelligent practice of effective customer cultivation.

Discontinuous Change or Incremental Change?

Discontinuous Change or Incremental Change?
by Andrew Szabo

(Originally authored in September 2000)

Alvin Toffler, in his introduction to Future Shock, said, “Change is the progress by which the future invades our lives.” September is often a month of change, the future is invading our lives a little … our children are back in school a new year – new teachers – a new grade. You may find the rhythm of business changes, and of course, we have all been hoping that the weather would change!

Well we finally got a brief respite this week with our first rain in 70+ days! But then it went back to 90-degree heat and no rain – unfortunately that was only an incremental change – we went from the 100s to 90s. No inspiration on change there. A perusal through my collection of business and marketing books was a little disconcerting. The problem with books on change: books are static; change, by definition, is dynamic. There is, then, almost always a lack of synchronicity between what the reader knows of change in life, and what he or she experiences on the page. It does not help that the topic seems to attract writers who–in many instances–never oversaw any change efforts at all. Thus, most books on change are stern little sermons about pulling up your socks and looking for opportunities in adversity, peppered with snake-oil aphorisms, mantras of dubious efficacy (“Reframe, restructure, revitalize, renew,” comes to mind).

Another popular approach is anecdotal: a story of how people did–or didn’t–survive whatever grisly processes a particular company was going through. Many strategic leaders at companies, abetted by a sense of urgency and bevies of willing consultants, have convinced themselves that all they need to do to change is to decide to do it and then tell the troops, in the manner of “Star Trek’s Captain Picard, to “make it so.”

But isn’t the urge and the ability to “make it so” two separate things? Any kind of change is an organic process composed of many competing elements, an inevitable, unavoidable force with a life of its own. “Discontinuous,” as opposed to incremental, change is especially so. It is shaped by external forces–technological, competitive and regulatory innovation or the decline and rise of whole industries and regional economies–that engineer a radical break with the past. I have found that my strategic work in the last five years increasingly deals with clients facing discontinuous change brought on by external forces. Naturally, the commercial applications of the Internet have been a pervasive driver to change.

Why are we so resistant to change? Is it the fear of moving from that which is known to that which is unknown? I have seen many companies go through: “rational” resistance to change; the search for people to blame; increased informal communication, faction formation; the emergence of informal leadership; realignment of relationships, etc. However, the radical redirect that discontinuous change heralds, often requires a transformation of the culture in an organization. It means changing the values and worldviews of its people. People don’t come by their values lightly and they don’t check them at the company door, so they surely don’t give them up easily. Psychologists argue that people experience change as loss — even if they accept the need or inevitability of it. Change, like loss, requires time to repair.

An interesting collection of s: “Discontinuous Change: Leading Organizational Transformation” was compiled by consultants from the Delta Consulting Group in New York. No one will be surprised to learn that C.E.O.’s loom large as change agents, though they might be surprised that the authors zero in on senior management, rather than the much- maligned middle management, as a major source of resistance to change. In addition, to believe they have a stake in the future and in not being an obstacle to change, middle-level employees must feel that the discomfort is being spread around equitably and that the company is willing to help them gain skills and opportunities they can use to move forward in their careers, wherever they end up.

In counseling our clients in branding and marketing matters, a quote from an esteemed colleague often comes to mind: “it’s like trying to ask a goldfish describe the water they are swimming in.” Discontinuous innovation compounds the problem in that they are often no longer in the gentle creek they knew so well, but they are about to merge into the perils of the Amazon River! Bon voyage — the future is about to invade your life!

Back to the Future

Back to the Future
by Andrew Szabo

Often I find myself counseling our clients to market with a customer-centric approach versus a product-centric approach. This thinking is supported by the results of a survey of global companies that I recently came across. The Economist Intelligence Unit and Andersen Consulting contend that “Customer Relationship Management” (CRM) is becoming central to corporate strategy. While only 18 percent of businesses surveyed are currently organized around customer type, the figure is expected to rise to 50 percent by 2002.

Since the Internet allows the (already unpredictable) customers to exercise even greater freedom of choice, major corporations must therefore craft a clear customer relationship strategy. Businesses are shifting their attention from attracting new customers to retaining profitable ones and fully realizing their profit potential. And, in some cases, they will “choose-to-loose” unprofitable customers.

“Focusing on customer needs seems the most basic, fundamental tenet of business. Yet, major corporations are just now beginning to blend strategic thinking, management resources, front-line support and technology to better understand and serve more sophisticated ers,” said Dale Renner, global managing partner of Andersen Consulting’s Customer Relationship Management practice. “In the wake of relentless cost-cutting, organizations are developing long-term customer relationships as a path to enhancing profitability … this shift is nothing short of revolutionary.”

Other major findings of the survey include:

  • Companies are becoming more sophisticated at tracking customer profitability. Nearly 50% said that customer profitability would be a critical measure by 2002, up from 26% today.
  • By 2002, 83 percent of companies expect to have customer data warehouses, up from about 40 percent today.
  • More than 60% of businesses believe that “changing customer demographics and needs” and the “pressure to customize” their offerings in light of these changes, now have the most profound influences on their business
    strategies.
  • This new sophisticated approach will be aided by the evolution in interactive technology, specifically the soaring popularity of the Internet. Companies predict their use of the Internet to collect customer data will surge 430% by 2002.

Since not all customers are created equal companies need to build viable relationships to intelligently gather more data and discern the differences among customers. This “customer knowledge” can shape their offerings and marketing propositions based on the relative value these customers bring to the enterprise.

At The Marketing Chef we are particularly excited by the Internet’s capability to build customer knowledge. In my previous life in direct marketing we were able to build databases over a few months using mail, within weeks by telephone, but now with the Internet we can literally help our clients build at the speed of light! In addition, not only is it faster but also it is qualitatively far richer. New levels of customer learning lead to an increased ability to communicate with relevance to a targeted audience that is interested.

So the future lies in developing intelligent relevant relationships …  a premise that dates back to the prehistoric dawn of communication.  Back to the future.

Networking – Ever Have Trouble Starting a Conversation at a Business Function?

NETWORKING – Ever Have Trouble Starting a Conversation at a Business Function?
(674 Words _ Less than 3 minutes to read)

Many of you may list “networking” as one of your marketing instruments, but how can you be more effective? There is a definitive art to initiating contact and creating meaningful interaction.

FIRST CONTACT:
Smile. You have about ten seconds before the person in front of you (subconsciously) decides whether they like you or not. With such little time few words can be exchanged, hence their judgment is primarily based on body communication. So lean in (a little), make good eye contact, touch them on the elbow or shake hands. Take the initiative and be the first one to say hello. All this shows attention, confidence and immediately displays your interest in the other person.

As soon as the introductions are made, visually attach a picture of their name to their face. When the conversation starts, don’t interrupt. Exhibit empathy and understanding by nodding your head and involving your whole body in engaging the person you’re talking with. And always, always, remember the other person’s name; use their name often throughout the conversation. Nothing is sweeter to someone’s ears than their own name. Always maintain good eye contact. If you start looking around the room you’re toast; maintain eye contact at least 70% of the time. The ability to initiate dialogue with people through small talk is a learned skill but can lead to big things, according to Debra Fine, author of The Fine Art of Small Talk. E-mail me for her top 9 tips in starting − and ending conversations.

INTERACTION: OK, you’ve initiated a dialogue, now how do you create effective interactions.

Secret #1: Focus on them. People like to talk about themselves, even the most reserved. Listen attentively. Remember God gave you two ears and one mouth – spend twice the time listening versus talking. Demonstrate interest in them and their problems and restrain your desire to talk about yourself, your organization or solutions. Ask questions that sincerely demonstrate you believe the other person’s opinion is of particularly worth. Focus on their triumphs. Find out their passions. Laugh at their jokes.

Secret #2: Be generous. There is a timeless Zig Ziglar quote, “If you help enough people get what they want, you will get what you want.” Whenever you meet somebody, try to make that person successful. That’s what made Keith Ferrazzi, (author of Never Eat Alone), a master networker, the youngest partner in Deloitte Consulting’s history and a top executive in his thirties with a network of relationships that stretched from Washington’s corridors of power to Hollywood’s A-list. Ferrazzi’s form of connecting to the world around him is based on generosity, helping friends connect with other friends. So don’t be a networking jerk. Don’t keep score. If your interactions are ruled by generosity, your rewards will follow suit.

Secret #3: With the appropriate cues have 3-5 simple “power questions” that can steer the dialogue towards potential indicators of interest. Here are some of mine … “I’m collecting people’s definitions of marketing for a book … what’s yours?” (P.S. Whatever their response, it’s never wrong).
“Do you believe you get the best return on your marketing investment? Why not?”
“Which marketing instruments work well for you, what’s not working as well?”
“What’s your biggest challenge in marketing your organization?”

Secret #4: Spread a few FUD seeds. Fear. Uncertainty. Doubt. All great motivators!
“My research shows 80+% of organizations fall into one or more of the three marketing deathtraps.” Invariably they ask me what they are.

Secret #5: Have a simple, brief but intriguing verbal/visual descriptor of your business clearly in your mind (10 seconds or less). “Marketing Symphony orchestrates strategic breakthroughs for firms by crafting a relevant, compelling, credible and differentiated message which is conveyed through the right marketing instruments that move the heart, mind and soul of your target audience.”

Conclusion: Ultimately, networking is not the end but the means to build generous relationships so that your prospects, clients and referral sources think of you first, often and well.
Happy Networking!