I believe they are the three elements of a process required to build long-term valuable customer relationships. Which is the primary value proposition of most businesses. (Buy once and goodbye forever is not a business model that works for anybody. If you can find one, please let me know.)
The three elements defined:
Marketing - to build awareness, interest, attraction and generate customer initiated action in your direction.
Sales - converting interested prospects into qualified, buying customers.
Customer service - ensuring that each customer is a satisfied, repeat customer.
Each step has to be done consistently well for the results to be achieved. But a choice still has to be made - which element are you going to be best at? Will you win from competitors on marketing, sales, or customer service? You cannot be best at all three.
From my experience as a second tier OEM brand name in computer hardware, we knew that we couldn't possibly out-spend or out-market the multinationals, but we could out-sell them -one customer at a time.
Winning on customer service was also a challenge - it's expensive to compete on warranty terms and technical support. So we went back to salesmanship in the service department - coaching staff on persuading the customer to be reasonable, patient, and give us another order, please!
So take a look at your own performance in marketing, sales and customer service - then choose, focus and build one of them into your competitive weapon.
Seth Godin has to be the best at capturing concepts and then communicating them creatively.
You may know him best from his books, if you've heard of "The Purple Cow", "Survival is not Enough", "Meatball Sundae", "The Big Red Fez" or his original claim to fame -"Permission Marketing". His Blog is also recommended reading for thoughtful inspiration on marketing and communications in general. (Click on the Blog link in the right margin.)
But even Seth Godin doesn't get it right all the time. And he admits it as he has re-issued his book "All Marketers are Liars" under the new title, (same contents) "All Marketers Tell Stories".
As he discovered, it may be a catchy title, but it is insulting and unappealing to the intended audience. Another lesson learned.
Maclean's magazine arrived in the mail today and it's hard not to notice the four catchy headlines for articles in this issue. Starting with:
"THE FLU SHOT SCREW-UP Can we fix the vaccination plan before it's too late "
And across the top banner:
WHY CANADA NEEDS THE MONARCHY (Even if it's these two)
Amiel: GOD HELP DOGS
INTERVIEW: CANADA VS. GARY BETTMAN
Now that's an issue that will get read today.
Are your marketing communications that catchy? Maybe too much sensational yellow journalism for you? (No coincidence this issue had a yellow cover?)
Still it's a key principle of marketing that images and colours may catch the eye, but headlines capture attention. If you can also qualify the reader and get their interest, then you've really got it right this time.
Our PSN Breakfast Series on October 15th went well with three speakers on "Entrepreneurial Challenges" including my own presentation on "The Seven Biggest Mistakes that Enrepreneurs Make". (Lots of nodding heads and smiles of recognition from the audience even if no one wanted to admit to having made all seven!)
If you would like to review the PowerPoint slides, including Chris Murray's "Success Strategies for Internet Marketing" and Margot Uson's "Winning the War for Talent", they are available at PSNetwork.ca
The Seven Biggest Mistakes that Entrepreneurs Make
Which ones are you making? How can you avoid them?
I was recently asked to do a presentation with my associates at a breakfast seminar for business clients. We had arrived at the title “Seven Biggest Mistakes that Entrepreneurs Make” before I had the list prepared, so I decided to do a survey of entrepreneurs and their advisors to complement my own ideas. The feedback was enlightening.
Here are some of the suggested “Biggest Mistakes” from the survey: “Cash flow, cash flow, cash flow”, “Afraid of Marketing and Sales, “Reactive, not strategic”, “Not delegating”, “Hiring too fast, Firing too slow”, “Not focused”, “Communicating too much, or too little”, “Not using consultants” (That last one was from the consultants, not their clients!)
The feedback also reinforced my own experience that it is OK to fail and make mistakes, as long as they are small, frequent, and early. It’s all part of the learning experience to get better. But big mistakes can kill your business.
Here is my final list of the Seven Biggest Mistakes that Entrepreneurs Make.
#1 Too Entrepreneurial Certain characteristics of entrepreneurs are necessary for them to be successful. But if over-indulged they can lead to big mistakes. These include the tendency to be too opportunistic and not be sufficiently selective and focused; to be too optimistic and miss or ignore the warning signs; to be too impatient and expect too much too soon.
Entrepreneurs usually have great confidence in their instincts and consequently rely on “gut feel”. The mistake is to neglect or ignore market feedback and analysis of the facts. Being action-oriented, the tendency is to react and “fire” before the “ready, aim” stages are complete. Painful surprises can result.
Many successful entrepreneurs have achieved a lot based on their energy, charm, charisma, and persuasiveness, but then get caught by selling on personality, not on performance. Clients start to notice that expectations are not being met.
Entrepreneurs are expected to be decisive and demonstrate “leadership”. Both can be overdone – deciding too quickly and providing too much direction so that input, initiative and creativity are stifled.
“Doing it my way” often means improvising and learning on the fly, or sticking with what works, until it stops working. The mistake is in neglecting to evolve and grow by optimizing systems and installing best practices and latest technologies.
All these mistakes can lead to serious consequences, as a result of being “too entrepreneurial”.
#2 Lack of Strategic Direction
Another consequence of the action-oriented entrepreneurial approach is the tendency to get lost in the daily details and completely neglect the original strategic plan and objectives. The owner-manager soon becomes pre-occupied by operating decisions and all the demands on his time from customers, employees and the constant fire-fighting. It leaves little time for fire prevention.
This situation is worsened as the entrepreneur concludes that the best solution is “do-it-myself”. Not delegating to staff or using external expertise may seem like the least-cost solution, but probably undervalues the owner’s own time and expertise and does not lead to long-term solutions.
The entrepreneur may have good awareness of long-term strategic issues and had them in mind when the business was launched. But they are now neglected, and the original Business Plan (if there was one) is not documented, updated or shared.
Lack of strategic direction is listed here as #2, but may be the Biggest Mistake that Entrepreneurs Make.
#3 “That was Easy, Let’s Do It Again!”
Another common mistake that can have devastating consequences on the business is the over-confident entrepreneur who concludes, “That was easy, let’s do it again!” So he or she leaps into new markets, new product lines, or even a new business or investment opportunity. It’s important to remember: Making money doesn’t make you smart.
Do you really know what you did to succeed? Or what mistakes and risks you avoided? Is now a good time to start something new? How much will the current business be impacted by new initiatives? Is your success really transferable?
Many successful entrepreneurs have made the mistake of jumping into a new venture – merger, acquisition, restaurant franchise or real estate investment – and blowing away the equity value they generated in their original business. Another big mistake to avoid.
#4 Focused on Profit
Being focused on profit doesn’t seem like a mistake. After all, isn’t that the whole purpose of running a business? No, actually. As I explain to students in their first Finance class, the primary financial objective of any business is “to enhance long-term shareholder value”. Many short-term profit-oriented decisions can hurt long-term value. Examples are many: cutting staff, maintenance or marketing expense; not upgrading systems and technology; accepting high credit risk or low margin customers; avoiding taxes, environmental or quality issues.
Most entrepreneurs are very focused on managing the bottom line by monitoring sales, gross margin and expenses. They always know those numbers.
But they are usually ignoring asset management, especially cash flow. The business may appear very profitable, but have constant cash flow challenges because management is neglecting inventory and receivables, in particular. And unfortunately it is not as simple as: Collect fast, Pay slow. Customer and supplier relationships can be at risk if cash flow issues force you to take that approach.
Managing the Balance Sheet also requires good management of debt and balancing short-term and long-term needs with short and long-term sources of funds. And the Most Undervalued Asset doesn’t usually even appear on the Balance Sheet: Human Resources. That leads to Biggest Mistake #5.
#5 Neglecting Key Relationships
The key relationship for any business is the one between its owners and the staff. Management and employee communications are essential to business performance and often not managed very well. Key employees need to be recognized and engaged. Mistakes made with key employees can jeopardize the whole business.
Similarly, don’t make the mistake of being distracted by the most annoying and persistent customer. Your biggest customers are not likely the “squeakiest”, just the most important. Don’t make the mistake of letting them be neglected.
Do you need to squeak more yourself? Do your suppliers appreciate you enough? Fast growth and profitability may be coming from one or two key customers or suppliers which can lead to over-dependence on their business. And your success may be convincing them that they don’t need you in the middle any more. Be wary.
Another key relationship not to be neglected: Is your bank a welcome and willing partner in your business? Remember “friends in need” have to be developed in advance.
#6 Poor Marketing & Sales
You know there is a problem brewing when you hear the entrepreneur explaining that “The product sells itself”, or “Price is all that matters”, or “Our Sales Reps need to do a better job”. These are signs of poor marketing and sales results. Usually the company is failing at both the strategic marketing level and at the execution of effective marketing and sales activities.
Not only are opportunities for profitable growth being missed, but the company may be on the downward slide to “out of business” without a well-conceived marketing plan and effective sales strategies.
#7 Distracted by Personal Issues
And finally #7 – Personal Issues that distract attention from good management of the business. Personalities and their issues can seriously affect business performance regardless of whether they are owner, management or staff issues. Sometimes they are simply ignored until they become a problem. Sometimes they are a result of too much success and behaving like a rock star.
Family businesses in particular run the risk of favouritism and having family matters interfere with business success. Managing personalities and corporate culture are a particular challenge in family businesses.
In Summary, the Seven Biggest Mistakes that Entrepreneurs Make:
Too Entrepreneurial
Lack of Strategic Direction
“Let’s do it again!”
Focused on Profit
Neglecting Key Relationships
Poor Marketing and Sales
Personal Distractions
Now the obvious question is: How to Avoid Them?
The answer is: Balance!
Each of these Big Mistakes is a result of the entrepreneur failing to achieve balance between opposing approaches and decision making processes. Avoiding these mistakes requires the entrepreneur and business owner to:
Balance the Entrepreneurial Approach with Analytical Input
Balance Strategic Vision with Operational Detail
Add the Head and the Heart to the “Gut Feel”
Manage for Long-term Value not just Short-term Profit
Keep Personal Priorities in your Plan but Out of your Business
I hope that helps you to grow and prosper in your own business and avoid the Seven Biggest Mistakes that Entrepreneurs Make.
It seemed like a strange combination on the same page of the Business Section in a national newspaper.
All the headlines were about GM and the risk of bankruptcy. One of America's largest and most important corporations in dire straits because of the economic circumstances. Should they get bailed out by the US treasury? Something must be done to save them and all the jobs that depend on GM. And across the bottom of the same page a full colour ad for the new Cadillac CTS with 556 horsepower for zero to sixty in 3.9 seconds at only $68,500. Just what we need for difficult times.
It seems to me that one message explained the other.
Bad management leads to bad results and the free market economy will help to decide who consumers (i.e. taxpayers) should support.
The value of a good company name struck me en route to spring skiing on Sunday. Flying by on the freeway I suddenly noticed two distinctive names that seemed to stand out in the row of businesses along the highway.
Stonedge and Simple Signman.
Memorable don't you think? A catchy, meaningful and memorable name is always a huge advantage in building brand recognition and corporate identity. Especially if it is a good fit to the business and its strategic positioning.
In working with entrepreneurs I often have to get them to re-think their planned business name after we've completed a thorough review of their corporate strategy and marketing communications plan because it is simply not consistent, not supportive, and often in direct conflict with the message and the corporate identity. For example; "J&B Java" for a retro '60's style diner and gift shop. Or "PBX Services" for an architectural and interior design consulting firm. It's worth the extra effort to try and be more creative and consistent with your marketing image.
You may want to invent a new word for your name, like Yahoo or Google, but unless you can spend a fortune making it known and putting it everywhere, like Starbucks or EXXON, then try something that is more meaningful and memorable.
Imagine the additional business that comes from customers who will instantly recognize who you are and what you do, as well as those customers that will more likely remember you for next time. Think of a good name as a valuable silent salesman - always working for you.
Sometimes we get so preoccupied with marketing and sales activities and all the associated details that we forget the original strategic objectives.
The basic objective, of course, is to generate and grow sales revenue. But to have sales you need customers. And to have sustained, profitable and growing sales, the best strategy is to develop loyal, long-term customer relationships.
So the marketing, sales and customer service activities should all be aligned to deliver a customer experience with you, your company and your brand that evolves from a first time buyer to a loyal, long-term customer.
The customer experience typically evolves through four levels:
1. Satisfaction with price and availability
On the first exposure to you and your business, customers will quickly, maybe even subconsciously, compare price and availability to their expectations based on prior experience with your competition. There will likely be no sale, and maybe no second chance, if this minimum expectation is not met.
2. Recognition of superior service levels
The first point of differentiation and the first step to building a stronger customer relationship will be when the customer recognizes that you offer superior service. You can demonstrate it in many ways – faster response to inquiries, easier access, more stock, better prices or terms, better delivery, better warranty service and support.
3. Appreciation of the value of your knowledge and experience
After the basic needs of price and availability are met, and you have distinguished yourself with superior service, the customer experience should then lead to an appreciation of the added value of your knowledge and experience. This will be demonstrated by applying your product knowledge, training, education and experience to educate the customer and give him/her the confidence to make better purchasing decisions. Now you are building a valuable customer relationship.
4. Connection on values, mission and vision
The final step in cementing loyal, long-term relationships will occur when the customer recognizes a common sense of values, mission and vision in the way you both do business. This connection will be developed over several interactions, particularly when problems are solved together, or you meet on non-business related issues.
The sooner you can meet customer expectations at these four levels, the faster you will build lasting and loyal customer relationships.
In the early days of e-business consulting most of us doing the e-missionary circuit were preaching the message of "Catch the wave or be drowned by it". Every business was being told to get on the Internet and get rich quick or stand back while the "new economy" took over their industry. Hype and hysteria were used to persuade entrepreneurs and investors to put large amounts of money into their e-business initiatives. They were motivated by either fear or greed.
Then the "old economy" rules hit the dot.com ventures and the bubble burst. Many investments ended badly. Some could be written off as an expensive learning experience. The hype and hysteria died and many businesses decided they could go back to business as usual. They were wrong.
The Internet revolution continues, albeit more quietly. The hype now focuses on Web 2.0 with highly interactive web sites and user generated content. Huge values are being placed on high traffic sites as they are acquired by Google, Microsoft, or the media moguls.
But businesses that are leveraging the Internet to their advantage are those that simply make the best use of Web marketing to attract business and online services to reduce costs and to build strong loyal customer relationships. Those are the e-business opportunities not to be neglected.
Much has changed on the Internet, but neglecting e-business is not an option. Remember fear and greed still apply.
