Wednesday, March 14, 2012

Growing customers - advertise to attract, reward to retain

In the last week or so, Constant Contact has released a new 'deals' product designed to give Groupon and LivingSocial a run for their money. Or more importantly, Constant Contact's SaveLocal aims to help small businesses control the deals they offer. With discounts they can afford businesses attract new customers by rewarding current customers that share their coupons with their network. It is an interesting concept, and just one of the tools that small businesses can use to attract new customers. But do deals just downplay the value of what a business offers, cheapening the product and the vendor?

The concept of SaveLocal, is that by offering rewards to current customers for sharing your coupons with friends, you are more likely to grow a local and loyal new customer base. Today's New York Times online article, A Groupon Alternative Aims to Offer Small Businesses a Better Deal talks with Constant Contact's CEO to flesh out the details of the way it works. When it comes down to it, the argument is that small businesses typically thrive on referrals and endorsements from current customers, since the new customers they bring in are likely to provide repeat business.

Groupon on the other hand does the opposite, focusing on a mass of previously unknown wannabe customers sharing with their bloated social networks, in order to satisfy the entry requirements for getting 50% or more off. The Groupon masses are likely to just take the discount and never be seen again. Which means that your discounted rate minus fees still has to cover costs, because a businesses is unlikely to recoup much from a new customer base. If profit margins are over 75% on your products (remember that Groupon takes half of your discounted coupon value, so you effectively see 25% of the full price) then Groupon can get you a flood of customers really fast. Some may come back.

This is the issue with deals to attract new customers: like any discount scheme, the customer's expectations have now been set based on the discounted rate. In future they may not want to pay double what they paid the first time. And if a sub-standard service was offered, there will be no repeat business anyway. There are not many wins in this.

For years, this approach to attracting and retaining customers has worked for companies big and small:

market for awareness, advertise to attract, reward to retain

Advertising your products at full price, spending 25-40% of your sales on advertising may ensure that your brand doesn't suffer a devaluation up front. With new customers in place from advertising, the SaveLocal approach can then help keep them loyal, since they've paid full price for the products and now feel rewarded for coming back again and again, and encouraging their friends to do the same.

So it seems that deals can be seen less as pure devaluation of your products and more as rewards for loyalty, as long as you use them right. Huge discounts to an unknown crowd seems like a risky proposition. I think I'll stick to marketing with valuable content (does this blog count?!), using free business listings (Manta, Google Places and Consected's own Roaming Local), Google AdWords for online advertising (contact me for a $100 coupon to get started - no obligations), and rewarding my current customers in very individual ways.

A post from the Improving It blog

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Thursday, March 01, 2012

Business excellence - how do you know you've got it?

There is a concept of 'excellence' that is often used in business improvement to show that we are doing something so well that everybody agrees that we are excelling at it. On the BPM ebizQ forum this morning, the question came up of what is process excellence, and what is a key metric to show it?

A great response from Steve Weissman sums up the difficulty of measuring any form of excellence:

It's sort of like pornography in that – as Supreme Court Associate Justice Potter Stewart famously once wrote – it's hard to define but "I know it when I see it."

My thinking was along similar lines, that excellence is hard to measure but easy to know when you observe it working in practice:

I'll suggest that process excellence is an emotional response to a process or set of processes. "Happiness" could be the very untechnical metric.

If everybody is truly "happy" with an organization's processes, there is a good chance they are excellent. When we don't have process excellence, it is hard to measure but easy to observe: users don't fully adopt them and there is rarely additional investment.

As with anything we do in business, happiness with processes just means that they are delivering the results that everybody wants without getting in the way. So maybe I could have suggested an even better non-metric to define business or process excellence:

If you don't notice that you are performing a process or activity because it is so easy and natural, and it has the desired results every time, you have probably achieved excellence,

A post from the Improving It blog

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