How do retailers create irresistible ‘customer flypaper’?

Jan 28, 2020 | Customers, Marketing, Small business

 

As a very young kid, I remember my grandmother having flypaper stuck around her kitchen. From time to time she would smear something smelly on it, which doomed any flies in the neighbourhood.

Wouldn’t it be nice to have ‘Customer flypaper’ for your business?

Once attracted,  they will never leave, simply because they never want to.

A secondary but ideal characteristic of that customer flypaper would be that those customers who were just there tyre-kicking, shopping for the cheapest price, or were inclined to just waste the time of you and your staff, would be repelled.

Nice. I have seen such a metaphorical commercial flypaper at work.

My aging mother lives in a major regional centre, and has a range of pharmaceutical and ancillary needs. A local pharmacy has created a veritable moat of flypaper around his ever increasing customer base, my mother amongst them.

How has he done this?

  • Focus. He focusses his attention on his current customers, personalising their experiences and interactions with the pharmacy and its staff. This is done by a combination of digital record keeping software, and old fashioned humanity. If you want loyalty from your customers, you have to earn it, as it is rarely just given, and then never lightly.
  • Differentiation. Finding something that is challenging to replicate, and adds value to a cohort of customers creates a powerful attraction. In this case, the pharmacist is a compounding chemist, so is able to combine and mix the medications in such a manner, that instead of taking a pile of pills twice a day, my mother is able to take just one or two.
  • Rewards. Current customers are rewarded, not by money, discounts, or any of the other easy to replicate offers, he recognises and rewards their psychology, their instinctive need to be a part of some sort of community. In the early 50’s, psychologist F. Skinner did a series of experiments, using rats and pigeons as subjects, since validated widely in labs, and obvious any time you walk into a location with poker machines. The psychological power of an intermittent reward can be compelling, for some, irresistible. This pharmacist uses intermittent rewards that confirm he cares about his customers. A vase of flowers sent when one is in hospital, a handwritten birthday card, remembering a grandchild’s success at school, all sorts of things that just demonstrate he, and his staff, care.
  • Service. Older people sometimes find it hard to get out and go to the pharmacy. So, there is a free delivery service, for your compounded few pills, all sorted into the times you must take them, packed in a daily and, morning/afternoon blister pack that even someone with advanced arthritis can open. This is all run on an account, so not only can you get the pills delivered, you can also ring up and get other items stocked delivered at the same time, paid for in one simple monthly transaction. Being cynical, I compared the prices of a number of the ‘grocery’  items my mother had bought in this manner to other retailers. While it was not the discount promotional price sometimes available in woolies, they were by no means capitalising on an opportunity to gouge.
  • Overheads. This pharmacy is located in a suburban shop, next door to a butcher, baker, and physiotherapist, with generous and easy parking outside the door. Not only is this convenient, it would be a cheaper place to have a store than in a location with heavy passing foot traffic, and leaves a bit more in the kitty for doing the things that really matter to customers.
  • Collaboration. There is considerable collaboration between the co-located shops. The pharmacist also collaborates closely with a number of the local GP’s and specialists to ensure that their patients receive the best possible care, and medications. Mums GP from time to time, varies the dosage of some of the things she takes, and communicates that change directly to the pharmacist. This ensures that the information is clearly communicated and understood, and adding a layer of added professional scrutiny to the mix of medications she takes.
  • The ‘original’ social media. Word of mouth is the original social media, and still by a country mile, the best. My sister who lives in the town, and helps Mum, often picks up bits and pieces in the pharmacy for herself, as well as Mum. The level of service and care evident, and the simple fact that the staff also know her, and her family, means not only would she not go anywhere else, but she will not allow any of her friends or acquaintances to go anywhere else.

All this adds up to very powerful ‘commercial flypaper’.

It is not easy to build, takes time, effort, and investment ,as well as a very clear strategy within which to build the tactics that act as the flypaper.

 

 

 

How to avoid being misled: Measure the drivers, before results.

Oct 9, 2019 | Management, Small business

 

The old cliché that you get what you measure, is right. You want more of something, make it a KPI, measure for it, and the chances you will get it are dramatically improved. The corollary is that you need to ensure that what it is that you are measuring is really what you want.

This obvious cause and effect is sometimes called The Lucas Critique, after the economist Robert Lucas, who in a 1976 paper, articulated the obvious fact that economic policy when implemented, drives changes in the  outcomes that were inconsistent with the assumptions made when the policy models were developed. This is because the assumptions remain fixed, insensitive to the changes in the behaviour the policy drove.

It put a mathematical framework around the better known Goodhart’s law, which simply stated is: ‘When a measure becomes a target, it ceases to be a good measure’ 

Therefore, choosing measures is a task of vital importance. You have to adopt measures that calibrate the drivers of outcomes, not the outcomes themselves, or you risk getting a lot of something you do not want, or need.

As a young product manager, I worked for a business that had sales volumes as the driving KPI for the sales force. Not unusual, and pretty well balanced, as the marketing function set the prices and therefore had nominal control over gross margin. However, sales personnel had control over promotional expenditure, which was budgeted as a percentage of sales.

Towards the end of the financial year when volumes were behind budget, an additional incentive was put in place. If sales budgets were achieved, the annual sales and marketing conference would be moved from the usual haunt just down the road in a dingy hotel, to a resort in the Whitsundays, and partners were to be invited.

The sales force went all out, and in the last 2 months of the year significantly over-achieved the sales budget, and we all went to a terrific location and had a holiday. However, the holiday came to a shuddering halt as the sales for the first few months of the following year came in. The sales force had achieved volume targets by stacking the retailers warehouses with product in the last two months of the previous year, boosting booked sales revenue, but delaying the timing of promotional expenditure to the new year. There was never a chance of catching up and achieving either the volume or net profit budgets in the following year. However, we did have a great time at the ‘conference’ .

You will get what you measure, just make sure it is what you want.

 

The often fatal flaw of the Family business

Oct 3, 2019 | Governance, Management, Small business

Family businesses have many advantages over publicly owned entities, largely around the pressures that apply to investment decisions.  They can, and often are, made with timeframes that would be unacceptable to a publicly listed company.

They also often contain the seeds of their own destruction.

On top of all the usual human pressures that exist in every enterprise, ambition, envy, personal gain, and all the rest, you also have the dynamics of family, and often multiple families, overlaid on the more usual pressures.

The mixture can be toxic.

It takes considerable leadership skill to address these added pressures, usually driven by the sense of entitlement that comes from: ‘it is our business, therefore we can do what we like’.  

There is no easy fix I have ever seen, but recognising a problem, catching it early and creating an environment where merit, and not bloodlines is rewarded, is a good first step.

This statement assumes two things: that there is a performance management system that is unbiased towards anything other than merit, and that there is a cultural understanding that bloodlines come second to performance.

A very unusual combination in my experience that requires rare leadership qualities, and extended self -awareness.

I have trouble thinking of a more challenging situation than having to fire your child, for whom you have built and nurtured an enterprise, because they are not the right person for the role they covet. The downside is if you do not, the non family members who are the backbone of the place will leave very quickly, or at best, tread water while it suits them, adding little real value in the meantime.  

Often an antidote is to have an outside advisory board of some sort that acts as a sounding board, advisor, performance manager, and sometimes executioner.

 

Header photo credit: Amar Chauhan via Flikr.

The two most valuable asset every business person must build

The two most valuable asset every business person must build

Aug 23, 2019 | Leadership, Small business

 

Every person in business has two crucial and potentially synergistic assets.

  • Your skill, capability, and distinctive way of adding value to a customer.
  • Your network.

One without the other is not much use, together they are multipliers of each other, synergistic.

A little bit of skill and a great network will deliver a living.

Great skill but no network will deliver a living.

Great skill together with a great network will not only deliver a great living, but it will also deliver personal satisfaction.

Skill x Network  = Leverage.

Leverage is the ability to do more with less, something we should all be striving to achieve.

We are social animals,  we need at a primal level to be acknowledged, respected, and trusted by others.

As business people, we all need to have at our disposal a range of skills and capabilities that make us attractive to our customers.

When we have both, the trust of others and capabilities that add value to others, not only are we likely to be successful, but it is more likely we will be a rounded, balanced and happy person.  

 

Two crucial learning tools for SME’s

Two crucial learning tools for SME’s

Jun 5, 2019 | Marketing, Small business

Rationally analysing the impact of decisions made, or about to be made, is a crucial and challenging  task.

Most people instinctively overestimate their ability to generate favourable outcomes from a decision, and underestimate the difficulties of implementation.

In my local shopping strip recently, an optimistic young couple opened a pizza place. A few seats, for eat in, but too few to be called a restaurant. They clearly invested quite a bit of money, and being a local I gave them a try, and had a conversation at the same time. The owner had not really considered the fact that there was a long established, and heavily patronised pizza place about 3 minutes  walk away, with better parking, and that there was a very pleasant and cheap Italian restaurant that has Pizza on the menu just 4 doors down in the strip. This is in addition to the wall to wall promotion of  home delivery pizza by the big chains. Even in the face of those facts recited to him, he remained very confident that they would succeed, without any solid reason why that was to be the case. To my mind it was blind optimism in the face of overwhelming   odds, and while the pizza was OK, it was nothing special.

I expect it to close any day.

Tool 1. A Pre-Mortem.

Had he done a pre-mortem, he may have avoided the mistake.

Let me explain.

A pre mortem is obviously,  the opposite to a post mortem, conducted after death. In this case, it is conducted before the final decision is made to invest.

In a corporate environment, you gather the responsible people in a room before the switch is flicked and conduct a simple exercise, with a challenge. “The project proceeds as planned, but you are now a year into the future, and it has been a disaster. Examine the reason for that disaster”.

This sort of thinking assists in removing the blinkers, of curbing baseless optimism, and of mitigating the impact of the noisiest proponent of a project.

Had the young couple down the road conducted such an exercise, they may have anticipated what was obvious to an outsider, even with a quick glance.

Tool 2. A Post-Mortem

The second tool is obviously a post-mortem, done after death. In a commercial context this is often described as an ‘After Action Review’ or AAR. In this exercise, you examine what worked as planned, and what did not, for lessons to be applied in the future. Post mortems are common after a capital expenditure,  a review of the degree to which the outcomes of a Capex matched the forecasts in the capital plan, but they are rare in my experience in other areas of an enterprise. They should be an essential part of every activity, as only by examining the logic behind a decision  with the benefit of hindsight, can we learn to make better decisions.

When it would help to have someone around who does this stuff routinely, give me a call.

Header cartoon is again by Hugh McLeod of www.Gapinvoid.com. While you may not be able to be the only one in the world, be the only one in the street, or locality, or you will fail. When you cannot define your differentiator to the few who might care, you will be in real trouble.

Solopreneurs still need a network

Solopreneurs still need a network

May 29, 2019 | Collaboration, Small business

 

The numbers of those running solo businesses has increased dramatically as the world has changed around us. Employment for life is a thing of the past, relying on your own resources has become  the common way to succeed.

Many do so as solopreneurs, for lack of a better term.

This does not mean they are reaching for the stars, it just means they are one of  the hordes of small enterprises offering services to others that used to be offered by corporations, have been outsourced, or not offered at all. The digital revolution has created many of them, filling roles and providing services that did not exist a decade ago.

The downside, and there is always a downside, is the isolation.

Human beings are social animals, we need others not just to get stuff done, but for our emotional and mental health, and yes, to create the next generation. Meeting partners in the workplace used to be where the most relationships began, but no longer.

As a solopreneur for  the last 24 years after becoming a corporate refugee, I have always acutely felt the loss of the social, supportive side of corporate life. The freedom experienced as a solopreneur is terrific, but it can get very lonely.

Rotary was started in 1905 in Chicago as a means for diverse professionals to meet, exchange ideas and experiences, and give back to their communities.  Meetings of like-minded people have occurred through history. From the earliest times, people gathered in common places to do business, exchange ideas, and gossip. The Greeks evolved the sophisticated processes we have scrambled and called democracy, the Romans gathered in the forum, artists gathered in Florentine workshops sparking the renaissance, Isaac Newton first exposed his ideas in coffee shops around London during the enlightenment, and the Salons of Paris spawned the impressionist movement.

We ‘network’ for business, to become known, liked and trusted, so others will refer us to their networks. It is a powerful motivation, now underpinned by digital tools, but at a deeper level, there is a range of psychological drivers that we as humans need, that are more powerful than simply getting a sales lead.

We need others to help think about the personal and commercial problems we face, to provide social and emotional support, gain insights from the experiences of others, challenge our thinking and automatic responses to situations, as a substitute for the service networks provided in corporations. 

If on top of all that, we can make a dollar by providing services to others, that is great, but the outcome of successful networking is human, not just commercial.

Header Photo is of the Queens Lane Coffee House in Oxford, UK, established in 1650.