Direct Marketing Article
5 Myths Every Business Must Avoid to Survive
By Vivian Hairston Blade
At a recent stockholders meeting, the Vice President of Sales for a global
manufacturer, reported: "The economy has been tough on our industry. Sales
volumes significantly declined and have not nearly returned to pre-recession
levels. The company has laid off employees, cut expenses, and,
unfortunately, has had to cut price to remain competitive. Competitors have
cut price as much as 40% on some products. We're 'under-water' on critical
components our customers need. But, we have no choice."
Sound familiar? Could this be your company?
Like so many businesses during the recent recession, this company is having
a tough time bouncing back. Consumers' wallets and businesses' checkbooks
continue to be tight. In fact, the Price Index for personal-consumption
expenditures, excluding food and energy, had bottomed out in late 2009, but
is showing signs of being unstable again.
While sales and profits continue to struggle, employment will remain
stagnant and the economy will be slow to recover. It's a vicious cycle.
Every company feels the trickle down effect. Customers have reset their
expectations. And, companies attempt to cut price to retain customers, grow
share and increase top-line revenue.
But is this really a viable business strategy? Focus on short-term revenue
hinders investment in substantially improving the quality of your business
for the future. Though not sustainable, many companies still operate on this
5 Myths Every Business Must Avoid
It's time for you to take a look at 5 Common Myths that keep companies
'sprinting' to the finish line. If you want to survive the recovery, avoid
these failed strategies to stay ahead in the 'marathon'.
Myth 1: Customers demand lower prices during a recession.
When customers stop buying, the first reaction is to drop prices to jump
start spending. When price is the carrot, buying behavior changes and
customers wait for even deeper cuts.
Myth 2: You have to follow competitor price moves during a recession
to stay competitive.
Competitors use price wars to protect share. You soon find that suffering
profits can't sustain the business for long. Rarely does volume make up for
the loss in revenue!
Myth 3: We're good at what we do. Customers are privileged to do
business with us.
Sorry to disappoint you. But, it's not about you! Companies with this
attitude find that customers don't stick around long.
Myth 4: Customer retention initiatives are a cost that won't pay
Companies that treat customer retention as a cost will allocate only a few
resources to protect their greatest asset. Their efforts fail to improve
retention or increase sales and, therefore, support dwindles.
Myth 5: Customer retention is the responsibility of the Sales and
Customer Service departments.
Service Recovery is not a customer retention program. Only 1 out of every 19
unhappy customers complains. That's just 5%. And of the 95% of unhappy
customers who don't even complain, more than two-thirds decide to buy
elsewhere. Recovery as a retention strategy just doesn't work!
A Look in the Mirror
Do any of these myths plague your company? Where do you feel the effects?
Does the number of customer defections surprise you? What are these
defections worth in Revenue? Margin?
Are you spending more on new customer acquisition? How much more does it
cost to win a new customer vs. retaining current ones?
Are your customers really "price conscious” or are they really "value
Studies show that when customers believe they get more "value” for their
money, they are much more loyal and spend more with those brands.
Why Invest in "Value-Based” Customer Relationships?
Companies that take a long-term view of investing in "value-based” customer
relationships are rewarded with double-digit growth and profitability that
compounds over time.
Does this mean higher costs? More often, investing in "value-based” customer
relationships means reducing your costs or being able to charge more for
highly valued products and services.
"We're not fighting for the highest volume but for the best reputation,
customer satisfaction, and the best profit,” says Dieter Zetsche, CEO,
Diamler, on the prospects of surpassing Toyota's Lexus as the No. 1 luxury
U.S. brand, Business Week, August 2, 2010.
"Most marketers & corporations are now looking to reduce costs in order to
improve the bottom line. While they do, it will be important to remember the
favorable economics of keeping and growing customers vs. finding new ones.”
Donovan Neal-May, Executive Director, CMO Council, Forbes.com.
VALUE is about how you make your customers successful. Don't forget that
customers define VALUE and expect you to deliver VALUE, at a minimum, to
meet their fundamental expectations if the relationship is to continue.
Keep in mind that a change in the economic climate causes the needs of your
customers to change, which requires a change in how you respond to their
Your tools – 5 VALUE Creating Imperatives (TM)
How do you effectively deliver greater VALUE in this tougher environment and
remain profitable to survive the recovery? Integrate these 5 VALUE
Creating Imperatives (TM) into your business operations.
Take a closer look at each imperative. As you review these brief
descriptions, challenge your current thinking, culture and processes!
V - Voice: Give your customers one! Be disciplined about listening to
their challenges and needs.
A - Accountability: Hold leaders accountable for customer voice and
for action that responds to customer voice.
L - Levers: What is most important to your customers in how you help
them succeed? How do they depend on you?
U - Unbelievable Experiences: Create experiences that surprise &
elate your customers! Focus on those levers that drive your customers'
success and relationships.
E - Engage & Empower: Customers & Employees are your two most
important assets. Engage them. Empower and trust employees to take good care
of customers and build collaborative relationships.
How well do you execute in each of these areas? How much VALUE do your
customers really feel?
Each of these VALUE Creating Imperatives requires a discipline to become
part of your organization's DNA. These are critical to your success for
improving your customer retention and making your business more profitable,
no matter what the economic environment.
Be unequivocal about creating promoters who sing your praises... customers
who know you are committed to their success and who are committed to your
About the Author:
Vivian Hairston Blade is President & CEO of Experts in Growth Leadership
Consulting, LLC (EiGL). Her professional certifications include GE Certified
Lean Six Sigma Master Black Belt, Black Belt, and Green Belt, and Certified
Net Promoter Associate. Through a combination of coaching and training, EiGL
Consulting helps Fortune 1000 companies execute value-based strategies by
building high performance, high quality, and high service-level
organizations. For more information, please visit:
www.eiglconsulting.com or contact: