Order of Magnitude CEOs

Sometimes Word of Mouth About Your Great Offer is Not Enough - Where's Your New Business Coming From in 2012?

“Jeff, Do you know of anybody who may want to become a customer of mine?”

I was picking up my children from a local business owner’s retail establishment, who provides a service that I had originally signed up for just my older daughter, but now both my daughters attend on a weekly basis, if not more.

“Not off the top of my head Susan, but I will keep it in mind, what’s going on?”

Susan knew I really valued her offer as I had just committed to triple my monthly payment to her, so she let me know what was going on.

“Jeff, my business is struggling, I am having a hard time getting new clients.  In fact, your younger daughter Grace is my only new customer since October.”

“That’s rough Susan, as you know I really like what you are doing for my older daughter Sarah and I have high hopes for Grace.”

“Great Jeff, that’s nice to hear.  Most of the parents and their children really value the service I provide and I love what I do, just not enough families know about me. How did you find out about me Jeff?”

“Through a family friend who has a child, Maria, who is a few years older than Sarah.”

“Oh yes Maria, she is doing great, without bragging we’ve had a huge impact on her performance, after a rough initial start.”

“Oh yes, Susan, my wife and I know, Maria’s Mom wholeheartedly agrees that your offer has made a big difference in Maria’s performance.  As you know we are very pleased with Sarah’s improvement as well which is exactly why Grace is attending now.”

“But Jeff, then why am I not getting any other new customers?”

“I have to get going Susan, but do you mind if I ask you a few questions that might trigger some thoughts?”

“Sure Jeff.”

“How many clients try you out because they see your store?”

“I don’t track that, but I’m sure it’s close to zero, as we are not on a main road, as you know.”

“How much time do you spend networking and marketing with other complementary for profit or not for profit businesses in the area?”

“Not much Jeff, do you think that would help?”

“Perhaps Susan, how much do you spend on advertising, do you know which advertising works and which ones don’t.”

“I don’t like to advertise Jeff, it’s so expensive.”

“Susan - Do you have introductory offers for the first month to make it easy for families to try your service and make it a part of their life?”

“Not really, I’m afraid, customers would sign up just for the introductory period and then quit.”

“OK, last question Susan; do you know any other business owners in different locations that have a similar business as yours?”

“Sure do Jeff, I know a bunch of owners in different towns and some are doing really fantastic and others not too well.”

“The ones that are doing well, do you know what they are doing.”

“Oh Jeff, that’s not a fair comparison, they have visible locations from a major road, they advertise regularly and even get in the press, and they are friends with other business owners in town who help get the word out.”

“Anything else, Susan?” I couldn’t keep from wincing.

“Some even let people try the service for a month at a reduced rate and one even has a big spreadsheet where she tracks where her new business is coming from.  She is anal about tracking that stuff the way I am anal about providing a great service for my clients, like Sarah.”

“Interesting Susan, I got to get going but if I know of anybody who is a great fit I will send them your way.”

“Thanks for listening Jeff, but before you go, any suggestions on how I get more customers for my business?”

Don’t be like Susan, make sure you are investing in resources, staff and budget to market and get new clients for 2012 and beyond. 

You know what you need to do, you just have to make it happen!  And if you don’t know what to do, get some help.

Seek Customers that Matchup Best to your Offer or they are Going to Leave

 

“You don’t want my business, so stop telling me you do, because you really don’t.”

I was talking to Ted Jones, an ambitious owner, who was letting me know about a conversation he had earlier in the week with what used to be his local preferred bank.

“What do you mean Mr. Jones, we would love to get more of your banking business and to loan you money for your business. That’s what we are here for.  Can you step in my office and we can discuss your situation?”

Ted wanted none of it from the banker, “As my Dad said to me, fool me once shame on you, fool me twice, shame on me. “

“I don’t understand Mr. Jones, why wouldn’t we want your business, please elaborate.”

Ted replied to the confused banker, “I have applied a couple times to refinance my business loan with you and have been consistently turned down.”

“If your departments talked with each other, you would see that I have already moved a large portion of my money out of your bank in the last few months.”

“And why is that,” the banker replied as the banker finally started to get it.

“I found another bank that actually said they wanted my business and actually proved they did, they refinanced my loan.”

After Ted finished the story I asked him what the bank should have done differently.

“Jeff, when I first signed up with the bank a couple years back, they knew the kind of business I have including my revenue, profit, and growth trajectory. The bank seemed excited to have my business and wanted to help me grow. Now, I found out that the bank’s customer profile doesn’t match my profile - the loans they give are typically for much larger businesses that have been in business much longer. It’s been a big waste of time and a frustrating experience.”

If you are marketing and selling solutions for which you really don’t have a great offer, you may generate short-term profits and enable your sales team to earn commissions, but, you won’t be building a valuable company.

Instead focus on selling and marketing to customers where you can serve them long-term, otherwise, be prepared to have more and more frustrating conversations like the one Ted had with his now ex-banker.

One of the Secrets of Why Order of Magnitude Business Owners are "Lucky" - A Great Top of the Funnel

A few days back I was listening in on a conversation between two business owners.

“You’re so lucky,” stated Ernie, a business owner who supplies services to Keith.

“What do you mean Ernie?” Keith replied, looking genuinely surprised.

“Well Keith, I love the manager you just hired.  As you know I’ve been interacting with your new manager.  He is so motivated and a pleasure to be around.  I’ve been having a hard time finding good staff and I know some other owners who have been struggling to find talent as well.”

Ernie paused a moment and then asked, “What’s your secret, Keith?”

Keith replied, “It’s the same secret, if you want to call it a secret that I have been using to increase my client base every year.  Come close and will I tell you, we don’t want anybody else to hear,” Keith smiled as he was obviously joking.

Ernie didn’t see it as a joke though and he leaned closer to hear what Keith would say, forcing me to subtly take a few steps closer to their conversation.

Keith started talking, “Well, let’s take it as a given that you already have a good offer because if you didn’t, nothing else matters.  To add quality staff and to grow your customer base, it is important that you allocate time and resources to building the top of your funnel.  It’s a numbers game.”

“Go on,” Ernie implored, “What do you mean, building the top of your funnel?”

“For instance,” Keith continued, “for my manager position that I recently filled, I advertised consistently over the last month as well as I told business colleagues in the industry that I was looking to fill this position.  I ended up getting about 100 resumes, meeting 10 people in person and hiring the manager you have been with these past few weeks.  So, although it may seem “lucky” to you, to me I made my own luck by getting 100 candidates at the top of the funnel which led to hiring one great person who is a perfect fit for my organization.”

“Wow, that’s a lot of work just to hire one person,” Ernie blurted out.

“Yes it is, creating a big top of the funnel requires work,” Keith replied, “now do you want to hear how I got lucky at growing sales these past few years,” Keith smiled again.

“Let me guess Keith, a big top of the funnel.”

“Exactly”, Keith replied, if I want to sign 10 new clients, and I know from experience that only 1 in 5 leads become clients then I need a funnel that is….”

“50 leads” Ernie jumped in and then continued, “Keith - You can be certain you won’t hear me calling you lucky again!” 

“I don’t care what you call me just don’t call me late for dinner,” Keith deadpanned.

They both laughed as Ernie replied, “I can tell you one thing, you chose the right profession - good thing you’re a business owner and not a comedian.”

A tale of two dry cleaners – How is your Client Experience different than your Competitors’?

Roughly a year ago, I switched dry cleaners.  I was very happy with my current dry cleaner, but, a new dry cleaner opened near the train station stop that I take from NJ to NY, with a 40% off promotion, so I decided to try them.    I got into a routine and started to use them, although I noticed that the 40% off was not as great of a bargain as it first appeared to me since they had a much higher list price (although, I never checked).  They were convenient and I got into a habit.

A little while ago, after picking up my dry cleaning, I noticed a missing button on one of my dress shirts.  The next time I brought my clothes to the dry cleaner, I pointed out this problem to the person behind the counter. I didn’t think much of it, until she objected, “we did not do this!”  I replied, the button was fine before and I haven’t worn it since I picked up my clothing last week.   She agreed to take care of it but when I got the receipt I noticed a $2 charge.

“I thought we agreed it was your issue, why would you charge me $2?”  She just shrugged her shoulders in a nonverbal way to say “It is only $2, why are you making this a big deal.”

I agreed with her shrug but in my head I was thinking, “How would you treat me if I had a really big issue like I had with my previous dry cleaner,” as I gathered my clothes and immediately drove to my old dry cleaner.

As I was driving, I thought some more about what happened three or four years ago at my old dry cleaner, when I really did have a big problem.    Somehow, the son of the owner had their dry cleaning truck stolen, which happened to contain about a half dozen of my dress shirts.

How did the owner handle the issue?  He asked me to tell him the replacement cost and paid it without questioning me or even asking for a receipt for the shirts.  I remembered that incident as I drove directly back to my old dry cleaner and chatted with the son as I gave him my clothes.

He immediately knew my name, I gave him my clothes, I did not even ask for a receipt. 

“Your clothes will be ready Monday after 5pm Mr. Silbert.  Good to have you back.”

“Thanks Steve,” I replied.

It felt good to be home again and boy did I feel foolish for straying.

What have you done to make your client experience different than your competitors’?

If you make it hard to cancel you also make it hard for me to come back (or to recommend you)

 

I quit my local gym two to three months ago.  The experience at this gym had been a good one and at some point I thought I might return until I went through their cancellation process.

If I remember correctly, to quit the gym, I was given a blank piece of paper and asked to write down that I was quitting and the reason. I was then told that I would be billed for two additional months. 

After seeing my credit card bill with the charge on it from the gym a few days back, I decided to call them to see when I would stop being billed.   At first I was told that I had not quit, since they had no formal record of me quitting which made me slightly perturbed.

“Please check again,” I asked. 

“Oh yes,” came the reply a few minutes later, “you quit on May 17^th.”  

Progress.

“Are you sure?” I asked.  I did not remember the exact day but it seemed earlier than May 17th and I knew it was not on May 17^th as I looked over my calendar for that day.  I overheard in the background another person saying, ‘Yes, that is when he quit, May 17^th.”

I hung up the phone not knowing when my credit card would no longer be charged and not believing they knew when I actually quit.  Also, I did not understand the two month billing cycle policy for quitting, that is even longer than the cable company’s policy, I thought to myself. 

About five minutes later, I received a call on my cell phone.  Although I did not ask, this person appeared to be the owner of the gym who had gone through the cancellation process with me on “May 17^th”.

“We found the piece of paper, you actually quit on April 30^th.”

The owner of the gym then proceeded to do a nice job of explaining when my credit card would no longer be charged and that I could use the gym up until July 28th.

(I had signed up on the 28^th of the month, so that is the day they bill my credit card for the following month.  Quitting on the April 30^th meant I had to pay two additional times – May 28^th and June 28^th.  Since the gym pre-bills the membership, I actually had to pay for close to three additional months.  I did not agree with the policy, although at least now I understood it.)

I asked my wife, who is a Zumba instructor (and as I am writing this blog is attending the annual Zumba conference along with 6,000 other instructors from across the World) and is much more familiar with gym policies than me about the two month billing policy after you quit.  “Oh that’s standard, all the gyms do that.”

All I can say is if you have a difficult process to cancel that includes:

1. Your Customer filling out a blank piece of paper;

2. No documentation for the customer on the day they cancel and telling them the last day they can use your service;

3. Your customer not knowing when their credit card will stop being charged;

4. And, billing your client for two additional months (and in my case just under three months) after they quit

Then, unless your offer is rare, unique or has capacity constraints, making it hard to cancel makes it less likely an ex but happy customer will join again or refer somebody else to subscribe to your service.

 

Coincidentally, this past Friday I bumped into a good friend and business owner with a subscription billing model geared towards businesses, who was smiling as he came up to me near Penn Station as I was heading home.

“You’ll get a kick out of this Jeff.”

“Why so happy,” I asked.

“For the fourth time this year, a customer that cancelled their service called to request we start providing service again.  A good thing I made cancelling so easy,” he replied as he high-fived me to begin his weekend.

That's Not a Hat, That's a Hat - What Are You Doing for your Company to Stand Out in a World Full of Ordinary Offers?

My wife Michelle, her newly purchased HAT, and I returned Saturday evening from a vacation to Cancun. We were very fortunate that Michelle’s parents agreed to come to our house and take care of their granddaughters (thanks Miriam and Erwin).  The purpose of our trip was to relax and so other than venturing off the hotel property for some great meals and entertainment each night, we resolved to stay by the pool and ocean as much as possible and Do Nothing.  We generally adhered to this plan except for one day.

Midway through our trip, we got up very early, spent all day on a tour bus, which I personally abhor, going to a location that was several hours inland from our hotel in order to bake in the sun with no pool, ocean breeze, or pina coladas in sight, returning after the sun went down.  What would cause us to do such a foolish thing?

The answer is that we believed we would have a memorable experience that would stand out for us, the way Michelle’s new hat stands out in a world full of ordinary hats.  What could possibly make us think that?

It turns out  the place we visited had recently won an award, but not just any award, a really big award, an award that helps this tourist attraction stand out in a world full of ordinary tourist attractions. 

Our bus trip in the hot baking sun was to visit Chichen Itza, selected in 2007, as one of the  New Seven Wonders of the World along with Petra, The Great Wall of China, and Machu Picchu (I had to include the last one since Michelle is from Peru).  The funny part was that in 1999, we had vacationed in Cozumel, which happens to be the same distance to Chichen Itza as Cancun, but we did not make the trek.  This time, the chance to visit what was now designated an exclusive award winning wonder had pushed us over the edge to use one of our precious five days.  We are not alone in now wanting to visit the site, Mexican officials who actively embraced winning the designation, project a doubling in the number of tourists to visit Chichen Itza by 2012.

If your prospects have choices that are similar to your offer, don’t blend in, stand out – and the bigger and more appropriate ways your offer stands out the better.  It can be the difference in a prospect deciding to select your offer in a world full of ordinary offers.

(By the way, if you are wondering if the journey was worth it for me, the answer is Yes. Chichen Itza was my 4^th of the 7 New Wonders and each has been a journey to reach but as you know, at least for me, it is all about the journey. The hardest by far was the ride to and from Agra, the site of The Taj Mahal. All I can say is don’t go on a Friday, but that’s another story )

You want that Espresso To Go - Not Gonna Happen - What Business Owners can Learn from Café Grumpy and other NY Restaurants that say “No” to their Customers

 

“I have no way to stand out other than providing great service or the lowest price.”

This is a complaint I recently heard from a struggling business owner who is competing against many providers with a similar offer.

On the flip side, another business owner I know recently left his current professional service provider who provided great customer service and was relatively cheap compared to the alternatives. So why did he make the switch?

It turns out his current provider said “Yes” to every request without digging deeper to understand the implications of fulfilling the request. The business owner finally concluded that his current professional service provider wouldn’t be able to help him solve the really difficult issues his business would face in the future and thus it was just too big a risk to not make a switch.

If you read The NY Times this past weekend you might have come across a fun article profiling NY restaurants  that are getting noticed for saying “NO” to their customers based on their product or domain expertise:

A French bistro that serves great fries but you must hold the ketchup

A hamburger joint that won’t make you a cheeseburger, unless that cheese happens to be Roquefort

A bagel shop that won’t toast your bagel

And,

A coffee shop that doesn’t allow you to get your espresso to go (Café Grumpy)

(The links above all point to Yelp reviews where you can see that each establishment scored on average 4 or more stars out of 5 from their customers).

Don’t forget that you can differentiate based on your product and/or trust built through domain expertise.

For example, as an executive at M5 Networks, a business hosted VoIP phone system provider, I had to turn down signing up prospects that wanted to skimp on the connection between their office and the M5 data center. Sure, it may have been cheaper for the prospect in the short run, but I knew that an increased likelihood of their phone service being down was definitely not worth the risk for them and for us. 

Plenty of customers would end up signing with M5 anyway. Others would try a different provider that agreed to provide the inferior solution with a high percentage of these businesses migrating over time to M5 as they came to understand and appreciate the value of our domain expertise.

If you truly are the expert, sometimes telling the customer why they are wrong, is not only the right thing for your customer, it is actually the best way to build your business over the long-term, even if it means sacrificing some short-term profits along the way – eventually enabling you to attract more of the customers you really want.

When is a Chair not a Chair or When is Marketing considered Advertising - Language Matters: Make Sure Yours Is Powerful

 

Friday morning I read a blog on “Marketing” that I must admit got me perturbed, ok, mildly upset after only the second sentence.  Given that the blog post came from Fred Wilson’s AVC blog which is one of the best out there for the venture backed startup community and one of my personal favorites, I continued to read.  Fred, whom I don’t know, but everybody calls him “Fred” so I will too, was discussing the value of marketing in a startup.  So what got me “upset” that I had to immediately stop what I was doing, read the rest of the post and make only my second comment ever in his blog?  

It was his 2^nd sentence, “I believe that marketing is what you do when your product or service sucks or when you make so much profit on every marginal customer that it would be crazy to not spend a bit of that profit acquiring more of them (coke, zynga, bud, viagra).”   A very provocative statement, I speculate meant to draw strong reactions.  The only problem is that the language Fred used initially confused me since the details of the blog actually described 8 superb marketing tactics to acquire customers for the kinds of firms he invests in.  Fred was basically recommending that founders in the free consumer web space not outsource marketing and to spend $0 on one subcomponent of marketing that happens to be the most highly visible and discretionary aspect of marketing - advertising.

The language Fred used to describe marketing (or in my view advertising) formed an impression on his readership that drove a stirring reaction – with over 470 comments as I write this, the most comments for a blog that I recall seeing with the lead one by Seth Godin. Everything we do, every move we make, the inner voice in your head as you read this sentence, all communication with others and ourselves is via language.  What is the object pictured at the top of this blog.  You may call it a “Chair”, a lawyer may call it a weapon when it is used to whack an intruder over the head, a student may call it a bookshelf because it is where they put their books and a recent college graduate living in a cramped NYC apartment may call it a table as she sits in front of her TV eating her dinner. Having studied and practiced the profession of marketing, I have a valid view of marketing and advertising.  A developer or programmer launching a business will have a different and equally valid view on what is marketing based on his or her background to date.  Each of our interpretations is equally valid but unfortunately or fortunately depending on how you look at it, not all interpretations are equally powerful.  If my interpretation and language are more powerful (or less powerful) then I should be able to make stronger (or weaker) or more powerful (or less powerful) moves in the area of marketing (and advertising) than somebody else.   Language formed in our heads and that we express to others is how each of us and our firms got to the place we are today and will dictate where we go with our business in the future. 

Consider the power of language and the background of your audience when recruiting employees, meeting a prospective client or partner, speaking with the media or the content on your website, as well as communicating with a potential acquirer or investor.   Remember the language you use and the language they form and use with you is the only thing that exists, nothing else matters.  The language we use is the difference between winning a deal, making that next great hire, and in the end building a valuable firm.

Make sure yours is powerful.

(As for Fred Wilson’s own reaction, Fred pointed out in the comments section of this blog a day later: “The flaw in the post is I dissed marketing and then talked about 8 ways to do it.” Maybe your post was flawed Fred, but the language you used made it powerful!)

Are You the Local Maximum Provider in your Area - How Do Local Clients Describe You: “Best” Chinese in Albuquerque, “Best” Thai in Telluride, “Best” Car Detailer in Monmouth (or “Average” Sushi in Wichita)?

I got back from a snowboard trip to Telluride, Colorado with a short stopover in Albuquerque, New Mexico. When came it time to grab dinner in Telluride the night of the Super Bowl, we opted to do carry out at the “best”, at least according to the local residents, and only Thai place in town. Yes, “best” sounds funny in a town the size of Telluride for Thai but the food at Siam lived up to its hype, we were all impressed. Similarly, in Albuquerque the night before flying back, the choices were an average Sushi place or the “best” Chinese in town, with a name to match - Best Lee’s. It was no contest; we went with the Best (awful pun intended). When I got back to town this past weekend, my younger daughter got sick in my car and so I needed to get it detailed. Although there are many car wash and detail places in my neighborhood, my wife knew which one was best in our area, “go to the Auto Spa on Route 35,” she said. Although there many closer ones and I passed a few on the way, you know where I went, the Auto Spa - Blue Wave Auto Spa.

In almost any category, there is a market share game going on. So, if a category’s entire worth is $100X and 1^st place is worth $50X, and 2^nd is $25X, 3^rd is $12.5X, 4^th is $6.25X, 5^th is $3.125X, and so on you can see that there is a big difference between being the best and falling short not only in terms of your annual profit but in how you will be valued upon a possible exit down the road. In addition, being the best, also means it’s easier to have higher margins and charge a higher price, if you so desire. Even if the category is huge and you aim to just grab a small share, say 1% of a $10 billion market ($100 million), it is much more likely that the top players or best players in the space will end up driving your market share lower and lower and lower until it approximates 0. In my experience, being the market share leader in a small space that you can grow is much better goal than aiming to get 1% or 2% in a very large category.

You don’t have to be the absolute best at what you do like Amazon or Costco in retail, or what I like to call a global maximum, just be the best compared to the others in your area like Best Lee’s in Albuquerque is for Chinese, or what I call a local maximum.

If you don’t know it yet, who does your typical target customer regard as the best provider in your area or category (local maximum provider) at what you do today and what moves can you make to be the local maximum provider at something down the road?

Is Your Business a Volvo, Tesla, or BMW - If Your Business Could Talk to Prospects What Would It Say?

 

I was talking with a senior sales executive with two young boys who just bought a new car.  I asked what he got, “a Volvo”, he replied.  I had the same one word reaction pop into my head as I would have had 10, 20 years ago.  Yesterday at the local park in suburban New Jersey amidst hundreds of other vehicles I saw my first Tesla Roadster.  In case you’re not familiar with it, Tesla is a new manufacturer of cars exclusively focused, as their website proclaims, on making awesome electric vehicles.   The car immediately grabbed my attention as well as those around me.  It really is a beautiful car both in terms of aesthetics as well as what it represents as part of the “green” movement.  In this suburban NJ neighborhood filled with SUVs, Minivans, as well as a number of premium vehicles including Volvos, the Tesla stood out.  As I was looking at the Tesla, my immediate reaction after admiring it, was who owned it and what did it say about them the same way the Volvo purchase said something about my friend.

Cars are not that much different than businesses selling a product or service to a prospect.  Each car company is seeking to separate their brand of cars which basically does the same commodity thing as well as any other car on the market --  cars take people from Point A to Point B.  There are also niches within the car market, for instance SUVs, are mainly sold to suburban families (“the soccer mom”).

Let’s look at two different ways a premium subcompact car could sell itself to a prospective buyer. 

Car #1

Prospect:  “So what do you do."?

Car:  “I am a car.”

Prospect: “Cool, what kind of car are you?”

Car:  “I am a 4-door premium compact sedan with a 6 cylinder engine.  I get almost 30 miles per gallon and I have a 230 horsepower engine.”

Prospect: “Great, anything else”

Car:  “Sure, I have a 4 year/50k miles warranty.  Most of the other premium compact sedans will have similar stuff as well.  So do you want to buy me?”

Car #2

Prospect:  “So what do you do."?

Car:  “I am a car.”

Prospect: “Cool, what kind of car are you?”

Car: “I am known as the Ultimate Driving Machine.  I am not for everyone though.  I have been built from the ground up for drivers seeking a car that sets the performance benchmark for the sports sedan category.  Is that you?”

Prospect: “Great, can you tell me more about the car itself?”

Car:  “Sure, I have all the usual things you would expect from a 4-door premium compact sedan like a 6 cylinder engine.  I also get almost 30 miles per gallon and I have a 230 horsepower engine.   I also have a 4 year/50k miles warranty.  Most of the other premium compact sedans will have similar stuff as well, however, that is not why you will purchase me.” 

Prospect: “Great, anything else”

Car:  “Yes, I am more expensive than other premium compact cars so if you’re not looking for the Ultimate Driving Machine, I speculate I’m not a good fit for you.”

As you can see, although the cars are both the same, a BMW 2011 328i, the language is very different.  The second car takes a much more aggressive stand on what it is and who it is for, and, more importantly, what it is not. 

Please read both examples again with one major change.  This time substitute the business you are in (e.g. lawyer, accountant, banker, real estate advisor, retailer, IT consultant, software company ,…) instead of the car business.  For Car #1 talk about What you do and for Car #2 focus on Why prospects end up buying from you instead of the generic competitive provider that focuses on low price or specific features and benefits.  The easier it is to assess the major difference of your offer versus the offer of others, the more likely you will stand out.

Congratulations -- You have just developed your first iteration of your own 30 Second Commercial to stand out from the crowd.  Below is Volvo’s, Tesla’s, and BMW’s: