July 30, 2021 – Do You Have Friction?

Main Idea:

What causes you to hesitate to go to a ball game?  Do you enjoy upgrading your cell phone? Why do you hesitate to go to the dentist?  How much fun is it taking a 3 year old to the grocery store with candy everywhere?  Do you dread having to swap out your work computer?

Expansion of the Idea:

I was recently notified by my cell phone company that my phone will no longer work after January 1, 2022 due to technology changes.  My phone isn’t that old but technology is constantly changing.  I hate changing phones for two reasons.  First, it takes a week to get the new phone working with all of the apps.  Second, the terms of the deal on the phone are always changing and I never know if I am getting a good deal or a bad deal.  As a result, I put off replacing phones or upgrading when I should. 

I was reminded of the basic concept of business friction in a book that I recently read called Friction: Passion Brands in the Age of Disruption by Jeff Rosenblum and Jordan Berg.  The whole concept is that we should be creating passionate fans of our businesses by eliminating friction that exists in our industries and in our businesses.  I know that I had tried to make my business easier to do business with but this concept of friction goes much deeper.  Eliminating friction is about creating businesses that our customers are passionate about.  It is putting us in alignment with our customers. 

General examples of friction could be:

• No one answers the phone

• Website is out of date and doesn’t address questions

• Cost of switching services is too great

• Service problems are not fixed quickly

Specific examples of friction could look like this:

• CPA firm – tax surprises

• Law firm – surprise on the bill

• Retail store – long lines or insufficient inventory

• Distribution company – packages are delivered late

• Construction industry – inability to adhere to time tables

• Service industry – won’t tell you when they will be there

• Auto repair – car isn’t fixed after you pick it up

• Lawn maintenance – ruts from cutting right after rain

Friction is everywhere. In the past couple of years Covid has amplified the problem.  I know in my industry the biggest issue is business and tax surprises.  To the extent that I have been successful in helping clients plan better, I have reduced friction.  But I know that I have a lot of other friction points that I need to improve on.  All of us have these problems.  It is up to us to identify what these friction points are and then to create systems and policies to help eliminate them or at least mitigate them.  Some things are out of our control.  However, even when things go wrong and they will, we can communicate with our customers and keep them informed.  Sometimes that is all we need to do. 

Questions to Consider:

1. Make a list of the top 5 friction points in dealing with your business.

2. Add on the next 10 friction points.

3. Discuss this with your team and add on additional friction points.

4. Make a plan to work on the points

June 16, 2010 - Are You Charging the Right Prices?

Main Idea

Have you ever picked out something to buy, taken it to the cash register, and been told by the sales clerk that the price is less than what was marked on the shelf?

Expansion of Idea

Yesterday, I went into Office Depot to pick up some thank you cards.  The cost on the shelf was $7.00.  When I went to pay for the cards, the cost was $4.50.  This says a couple of things.  First, I don’t have a clue what I should be paying for these cards.  Beyond that, the store lost $2.50 on my sale.  Third, how many sales did they miss because they marked it at $7.00 when it possibly should have been marked at $4.50.  I don’t really know what price it should have been marked at.  I liked the cards at $7.00 because it wasn’t that much money and the cards were what I was looking for.  Either way, the store was probably either losing sales or losing profits because of a system issue.  By itself this is not the big of a deal.  However, I have had this happen to me a fair amount over the last year. 

• How much money have you left on the table because of a system issue in billing customers? 

• How many customers have you turned into ex-customers because they think your prices are too high as a result of a coding error? 

• Are you maximizing your revenue by not allowing true sales to be properly charged and collected? 

• Are you doing something for free that you should be charging for? 

• Are your systems too lax and money is literally walking out the door? 

• Do you truly know what fair market value is for your products? 

• Have you compared them with your competition? 

• Do you know what your costs are and whether or not you are making money on all of your products? 

Even if you think that this is not a problem, it is a good idea to periodically check your systems.  Most of the problems I see are with major companies and they have whole teams of people checking this stuff.  Small businesses think that they don’t have the time to double check this.  But then they wonder why they are having cash flow problems.  In the last two weeks I have learned about two different small businesses near my home that have gone out of business.  I have been in both of these in the past and their customer service was very good in one business and in the other business was good.  Is it possible that they had sales that they did not collect for? 

Suggested Areas to Start

1. Evaluate your sales pricing

2. Evaluate your sales systems

3. Evaluate your return policies

4. Look for unexpected events such as pricing issues.  Are there bigger systems issues?

May 21, 2010 - Does Your Business Create a Buzz?

Main Idea

Are there businesses or stores that you can’t stop talking about?  Do your friends get tired of hearing about them?  Do you have customers that talk about your business like that?

Expansion of Idea

Word of mouth advertising is the best way to generate new customers.  Every sales guru in the world will say the same thing.  Yet most of us do not focus on this as a way to get business.  We spend our time and resources on direct mail, cold sales calls, websites and email blasts.  We absolutely need to do these marketing steps and there are definitely benefits of these methods. 

However, generating a buzz by creating raving fans can do more for our businesses than any other marketing campaign.  For one thing, it solidifies our relationships with our customers.  That, by itself, is enough of a reason to work on this.  This buzz also provides a secondary benefit because people talk.  And when people talk and are excited about something, it catches on.  Word spreads and you start getting referrals.  Does Apple really need to promote the I-phone any more?  There is a third and largely ignored benefit of creating a company with a buzz.  It energizes your team.  When you are doing great work for customers, it can fire up your whole team.  It can transform a normal business into a place where people love to work.

The real issue for most of us is to focus on creating the buzz.  Do you show up at work trying to figure out how to create a buzz for your customers?  Are you intentional about adding value to the customer and also about improving the systems and processes in your business?  How can you take a boring business (like a CPA firm) and turn it into a business that has raving fans in the marketplace?  For my firm and for most of my clients, our long-term success is directly tied to how well we handle these issues by creating advocates for our firm. Satisfaction is not an option.  We have failed if we just satisfied our customers.    

Points to ponder:

1. Are your clients satisfied?  Or, are they raving fans?

2. What could you do to raise the service levels?

3. What could you do to add value?

4. Read the book “Raving Fans” to get some ideas on raising customer service.

May 7, 2010 - What Are You Testing?

Main Idea

What is the one significant difference between highly successful companies or individuals and people who just get by?  How do teenagers grow into responsible adults? 

Expansion of Idea

When you were growing up, you tested everything.  You may have tested eating dirt.  You definitely tested your parents.  For those of you who have teenagers, they test everything.  As a parent it frustrates you.  However, it really is a necessary part of learning.  It establishes things that work and things that don’t work.  It puts boundaries in place.  It enhances the curiosity of kids.  Testing is a great instructional tool. 

However, somewhere in our 20’s or 30’s a lot of us stopped testing.  We started getting comfortable with the status quo.  The impact of that is that we lead moderately successful but unfulfilling lives.  Instead of great success we have moderate success.  We have made the core assumptions in our lives sacred and untouchable.  This is a real problem in society and business today.  The world is changing so fast, that we have to constantly analyze our assumptions and test new ones.  We may need to decide if we should continue to offer a particular service.  It may be a system that worked in the past but doesn’t work so well now.  Why don’t we look at these alternatives?  Part of the problem is that we are comfortable.  The other part is that we are afraid of sticking our neck out.  However, there is an inherent link between risk and success.  The real issue is for you to decide what you want, comfort or success.

Points to ponder:

1. Are there assumptions in my business life that need to change?

2. Are there systems that you have a hunch need to be updated?

3. Do you have new ideas that you are afraid of trying? 

4. What tests can I set up to see if any of these ideas make sense?

March 31, 2010 - How Curious Are You?

Main Idea

How many questions per hour can your kids ask you when they are growing up?  How many questions per hour can you ask your teenagers?  Why do all of these questions pop into our heads?  How do they help?

Expansion of Idea

What is the value of asking questions?  When something or someone is important to you, you want to know more.  It is very easy to ask questions and then follow up on the questions and then follow up with more questions.  One time when my kids were about 5 years old, my wife was taking them by car from my office to the library which is almost next door.  She stopped counting the questions at 20.  They were very curious about something and the questions just flowed.  At that age it is really neat to see their personal growth and development. 

Questions are a key piece of this growth.  Why is it that this curiosity suddenly vanishes when we grow up?  The proper use of questions can really build relationships, fix customer service, help with personal development and gain wisdom.  This only works if you care about the answers.  However, if you ask a question about something and then have the follow up question, and continue drilling down, you will hit the core answers after 5 or 6 questions.  This is where the real important information resides.  If we settle on surface answers, we get surface solutions which are not really solutions.  Curious George does have it right when he is trying to see what is under the yellow hat.  We need to stay focused and keep looking for answers.

Questions to ask yourself

1. What do I need to know more about?

2. What problems do I have at work that could be avoided by asking more questions?

3. How can I raise sales or customer service by getting to know my customers in a deeper way?

4. How can I learn more about my coworkers and how to more effectively work as a team?

5. Make a list of your own questions.

April 8, 2009 - Do You Have Special Growth Systems?

Main Idea

Do you think you can grow your business by focusing on systems?  Are there key points where your systems, or lack thereof, determine what happens next?  Have you thought about the power of questions in your customer service delivery?

Expansion of Idea

Growth systems can take many different forms.  They may be a carefully displayed sign, an unusual question, a prompt follow-up, or a valuable piece of advice.   These systems can be critical in helping potential customers deal with you as opposed to your competition.  There are small windows of opportunity for you to help a potential customer buy from you.  Your job is to figure out how to help these potential customers make the right decision. 

Too often we compete on price because that is the only thing that the customer can evaluate.  Your job is to separate your products and services from the competition in a creative way that is not focused just on price.  You must add value as defined by the customer.  When you can consistently do that, you will create a customer for life.  If you think this is theoretical, I want to leave you with two words, “HAPPY MEAL”.

Suggested Areas to Start

1. Make a list of key contact points with potential customers.

2. Evaluate your processes in handling the interactions.

3. Measure how effective the systems are in converting potential sales into actual sales.

4. Brainstorm ways to improve those processes.

March 18, 2009 - Do You Know the Average Value of Your Sales?

Main Idea

Do you know how many customers you have, how often they deal with you and how much they spend?  When was the last time you met with your sales or customer service representatives and focused on increasing how much your customers spend with you?  Do you know what percent of your customer’s wallet you have?

Expansion of Idea

A key part of growing your business is to increase the average value of each sale.  A good starting point is to look at your prices.  Are you charging the right prices?  Everyone looks to cut prices to increase sales but you are just giving away margins.  (Yes, there are times to cut prices.  However, they are not as often as most people think.)  Maybe there are specific items or services that you are selling below your competitors.  Raising prices on those items will fall through to your bottom line.  A good example is a convenience store.  They may have to be competitive with the price of gas and maybe cigarettes.   Everything else is priced significantly above a grocery store. 

The other part of increasing the average value is to make sure that you are capturing more of your customer’s wallet for the items that you sell.  Almost all of us have competitors that deal with our customers.  Rarely does any firm capture 100% of its customers business.  I could argue that, even if I do a client’s tax return but do not do the tax returns for their kids, then I have not captured 100% of the family business.   A car dealer may sell a car to a family, but then it does not do all of the maintenance.  A wholesaler may have a good customer which purchases one product line direct from the manufacturer or from a competitor.  All of us have situations where we can increase the amount of sales by expanding our definition of our customer, by inquiring how we can provide additional services, or by just providing great service.

Suggested Areas to Start

1. Get baseline measurements of the average value of your sales.

2. Pick one customer and brainstorm how to increase the value of the sale.

3. Question your Questions.

March 11, 2009 - How Do You Increase Customer Sales Frequency?

Main Idea

Are your customers loyal? Do they come back to your business time and again? If not, why not? What measures do you have in place to track client retention?

Expansion of Idea

Increasing the number of times a customer chooses to deal with you is an important factor to increase your profitability. Some argue it’s the most important factor. According to Frederick Reichheld (author of The Loyalty Effect), a 5% increase in retention (of the right customers) can produce as much as 125% increase in profit! 

How do you retain customers?  If you can deal with them on a frequent basis, it is significantly easier to retain them as customers.   You have an ongoing connection.  Too often, we ignore our existing customers for the new customer.  When we focus on our key customers and their true needs, we will find additional ways to serve them.  It may not always be a sale, but keeping the constant contact will help sales in the future.  This may require a little creativity.  It also may cost a little.  However, you can compare that cost with the cost of acquiring a new customer.  Which is cheaper?  The hidden costs of customer turn can get fairly big.  Part of your marketing budget should be dedicated to increasing customer transaction frequency.  This is probably the part that will pay off immediately. 

Suggested Areas to Start

1. Get a baseline on how often customers deal with your organization.

2. Compare a loyal customer with one that does not deal with you as often.  Brainstorm with your team on how to improve the connections with the customer that deals with you less frequently.

3. Get feedback from your customers regularly.

4. Pick one customer and try to improve your personal connection.

March 4, 2009 - Are You Focused On Growth?

Main Idea

Are you focused on growth right now?  Or, are you in a sandbag mentality and digging in for the continuing onslaught of negativity and bad news? 

Expansion of Idea

Attitude is a choice.  I choose to believe and fight for growth.  You can lose a lot of sleep worrying about what is going on in the world.  But there are wonderful opportunities also.  We just have to work for them.  Over the next four weeks we are going to address the four ways to grow your business. 

Today’s topic is to pursue new customers of the type you want.  Customers want to deal with businesses that are focused on service and are not depressing to deal with.  That means there are opportunities for growth because too many businesses provide awful service and are just waiting for the end of the world. 

The key for small business owners is to define the characteristics of your best customers and then decide how to get more of them.  This could by marketing, by referral, by phone solicitation.  The how will be determined by the nature of your business.  Unless you are focused this way, you will slowly wither and die.  How did you get your best customers?  Do you have a referral system?  When was the last time you checked in with a customer just to see if you could help? 

Suggested Areas to Start

1. Figure out what kind of customer fits your organization.

2. Brainstorm ways to connect with that specific clientele.

3. Go after those customers.

4. Fire customers that are wasting your time.

5. Meet with other business people and compare notes.

February 18, 2009 - Do Short Term Decisions Impact Our Long Term Brand?

Main Idea

Have you ever done anything in the heat of the moment and then 10 minutes later or 10 days later you regretted it?  Do you have a process to test your decisions and see if they make sense from everyone’s perspective? 

Expansion of Idea

On the front page of the Wall Street Journal a few weeks ago, there was an article that discussed Saks Fifth Avenue and their actions during the Christmas shopping season.  The gist of the article explained why they slashed their prices to a ridiculously low level.  The main reason was to beat their competition.  The problem with this is that their suppliers were very upset because Saks changed the fashion designers brands.  In addition, they totally changed their business model, probably for a long time. 

Most retailers did something along this line.  I am not going to judge whether or not it was the right business move.  I do not have the facts.  But I do want to talk about the impact that these decisions have on our business model and our branding.  Our branding is something that most of us do not spend enough time on because it is an intangible.  It doesn’t show up as cash in our bank account in the next week.  Our branding is our identity as business people and organizations.  It is what we are selling.  Our decisions and actions during these uncertain economic times can frequently change the brand and ultimately determine our future.  It doesn’t do much good to cut customer service levels so that you can limp through the current situation and at the same time lose customers whose lifetime value could be hundreds of thousands of dollars. 

During times like these, it is critical that decision making go through a process to evaluate the effects and actually be part of your longer-term plans.  We have to get away from strictly reactive decisions and become more proactive in our decision making.

Suggested Areas to Start

1. Define your process for making key decisions. 

2. Add customers and employees, if necessary, to provide filters.

3. Evaluate recent decisions and see if they could be handled better.

4. Communicate with your team.

February 11, 2009 - Who is In Charge of Marketing?

Main Idea

Who in your organization is in charge of marketing?  What is marketing?  Do you outsource this?  Do you do it cheap in house?  Or can it be a philosophy of business and a unifying theme for your employees to follow?

Expansion of Idea

Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. The term developed from the original meaning which referred literally to going to market, as in shopping, or going to a market to sell goods or services. (from Wikipedia)

Most people view marketing as something that the marketing department or sales department do.  And yes, they may be the point person in the marketing campaign. However, marketing needs to be something that almost every job in an organization does on a daily basis.  How many times have you been cut off by someone in traffic and you can tell by the emblem on their car what church they belong to?  That is marketing.  Or you have a problem with a bill and you call customer service.  That is marketing.  You walk in a restaurant and they have expensive prices on the menu and cheap tables and paper placemats.  That is marketing.  You tell a customer that you will call back and you do, 4 weeks later.  That is marketing.  You answer the phone on the 15th ring.  That is marketing.

Suggested Areas to Start

1. Define marketing in your company.

2. Define how you fit into the marketing plan.

3. Identify one idea to improve your organization’s marketing

4. Lead your team to embrace this idea.

5. Brainstorm how to implement the idea.

6. Put it in practice. 

February 4, 2009 - Can You Afford to Cut Your Prices?

Main Idea

When is the last time you bought something on sale? Do you get jazzed when you get a great deal?  Can home builders generate sales by reducing prices?  Can you predict the next great big sale at Macy’s?  In this economic time, many retailers are offering deals and discounts to draw in customers. This can have a positive effect on the wallets of consumers, but how does it affect the company? How many additional customers will they need to make up the difference?

Expansion of Idea

Pricing is a critical piece of a business.  Most business people do not fully realize full relationship between price cuts and survivability.   For example, if your company has a margin of 30% and you decide to reduce your prices by just 10%, you will have to increase your sales volume by 50%.  Assuming you are able to generate that 50%, you may then need to consider hiring more staff to accommodate the increase in activity. This can be a death spiral. 

What most people do not think about is that sometime it is better to increase prices.  If you are providing superior customer service, some customers will not change.  The key issue is how many you will lose.  If you look at the example of a margin of 30% and you increase prices by 10%, you can afford to lose 25% of the customers before it adversely affects your profitability.  Before jumping the gun on slashing prices, do your research and determine how much business you will have to pick up to make up for the loss of profits.  Then make a wise choice on adjusting your prices.

Suggested Areas to Start

1. Know your gross margin. 

2. Communicate that margin to your team.

3. Evaluate the effects of price cuts or increases.

4. Brainstorm how to avoid price cuts.