20 Practical Performance and Profit Pillars continued --- Page 4 Trusted Advisors When you have erected the first Seven Pillars of Success, you reach a point where you have suppliers, vendors and advisors you have worked with and have come to trust. This is the point of the construction of the foundations that will determine almost all of your future relationships with outside firms. A choice is usually made early in the history of most companies. They either trust their advisors and suppliers or they dont. Lets look first at the majority of companies who choose not to trust their advisors. They give them very little information that might help the suppliers find ways of improving some aspects of the companys performance. The non-trusting company reveals nothing about their finances or their costs, always fearing that suppliers will use it against them or will inform their competitors on how they are doing. The non-trusting company rarely seeks advice or solutions from suppliers and advisors, preferring to have all the answers and to be in control of the relationship. These companies are often marked by secrecy, distrust and fear. Their employees learn to mimic these shortcomings, usually out of fear. The untrusting companies move from supplier to supplier, believing that you never put your eggs in one basket and that there is always another one or two percent to be had by vendor bending. The primary negotiation strategy is cost-reduction. Few long-term relationships are counted among the suppliers; the companys reputation among suppliers and vendors is a bit off. Usually, they insist on taking the 1% discount for 10 day payment at 30 or 60 or 90 days; after all, What are they gonna do, stop selling to us? Is this who you want as a partner in your future? Compare the foundation block of Trusted Advisors at another company, a trusting company. They surround themselves with their suppliers, vendors and outside advisors and explain to them their vision, products, distribution model, culture, tools, and niche depth. They give their Trusted Advisors the whole picture. Then they ask them to find ways for both the suppliers and the company to improve on performance so everyone grows and prospers. They believe that openness is better than darkness and that 20 minds are better than one mind. They allow fresh thoughts, new ways of doing things, different approaches to old problems, and ideas from outside the Throne Room. These companies flourish while the non-trusting companies lag behind. The trusting companies have relationships with suppliers and vendors that may extend back years. They have come to rely upon and trust one another and they give each other Most Favored Relation status. The primary negotiation strategy is how do we both grow? The trusting company offers the supplier a monetary incentive over and above the fair price for improving performance, profitability and growth. So much money is saved by not having to constantly find new suppliers; even more is saved by the value-added ideas and services that come as a beneficial by-product of the Trusted Advisor relationship. Yes, you can build a company based on suspicion and miserliness. It will probably do okay. But, you can build a spectacular company in a quarter of the time based on trust and mutual sharing. It will be a one-of-a-kind, a jewel, a treasure. Its all about choices. There is another very interesting difference between the two types of companies. The non-trusters almost always have a third-rate accounting firm and a law firm that has just recently begun to walk upright. The health care plan is not much; theres little training or executive development; the catalog paper is cheap; the website functions, but not well. Everything about these non-trusting companies is a bit tawdry, a bit wrinkled, a bit dusty. Yet, the trusting company is first-class in every regard. They have the best advisors, audited financials, nice facilities; there is an intern program to develop skilled employees just leaving college, a tuition reimbursement program for people who want to move up, regard for families and their welfare. Wherever you look, they are bright, glimmering and positive and they are surrounded by Trusted Advisors who are also bright, glimmering and positive. If one accepts the first Seven Pillars, how could one get to the pillar of Trusted Advisors and not understand the obvious implications for the future of the company? It is a part of the vision and the culture. If one must ask the question and make the choice whether to be a Trusting Company, then the choice has already been made. If the vision and the culture were properly constructed, the Trusted Advisors pillar is a given. Image As a company, you are as you are perceived to be. Perception, and therefore reality, is determined by the image others have of the company. The prior Eight Pillars, to a great extent, determine your image. There are several images: 1) an intellectual/philosophical image closely linked to vision and culture; 2) a niche image closely linked to products and service; and 3) a physical image portrayed by people, facilities, niche participation, and the Trusted Advisors you surround yourself with. As many of you have heard me say, the first place I go when visiting any company for the first time is the mens room. I can generally understand everything I need to know based on what I see there. If it is a mess or smells bad, then usually the companys performance and financial statements will be the same. The image within the niche is easily determined by talking with suppliers, vendors, customers and associations. Once again, my experience is a clean bathroom means a clean niche image. It comes down to the most basic elements of what is thought to be important. If standards are high, image is high. If standards are low, image is low. Image is a planned, intentional pillar. It is not left to develop on its own. Image requires a guiding force, a firm and resolute hand on the tiller. Image is the reflection of the owner. Urgency Ive had twelve lives and I have at least four more to accomplish. I have always had a sense of urgency. It is 4 a.m. and time to be up and doing. Tomorrow must be completely different from today. This is not a dress rehearsal, this is the play! We have just constructed a company on the Nine Timeless Pillars of vision, products, distribution model, culture, people, tools, niche depth, trusted advisors, and image. Get on with it! If you believe you have 40 years to devote to the game, you might think that you should devote a quarter of the span to creation, a quarter to growth, and half to maximizing opportunities. The first ten years are spent perfecting the foundation; the next ten are spent generating as much growth as possible; and the last twenty years are devoted to capturing and maximizing every opportunity to lead your market niche. Then you cash out and enjoy twenty-five years of meaningful involvement in those things that interest you. Then you die. Curtain. Thank you for attending. The point: It is finite. Get on with it! Stop dithering! Nothing happens without new customers. This is not something that ever stops. You need new customers every single day of every single year you are in business. Without new customers and, therefore, new customer acquisition (or prospecting as it was once known) you have no use whatsoever for the preceding Ten Pillars because you will no longer be in business. We are now locked in a great discussion of where those customers will come from. Will they come from catalogs, emails, paid search, organic search, cell phones, inserts, television, field sales, affiliates, or any of dozens of other sources (or what we now call channels)? The answer is, Yes. You need to be a world-class customer acquisition company using any source of customers you can find. Remember, the only possible reason for being is to sell more stuff to more people any way you can. If I was a direct merchant and you told me I could get more new customers by walking up and down Main Street wearing a clown suit and a sandwich board, I would go after that new channel of new customer acquisition. All of these sources are important. Some will be more important and some will be less important. They will change with time; all things do. But, for now, and for this discussion of foundation pillars, the numbers tell you what to do:
It is clear to me that your first and foremost Trusted Advisor remains your list firm. In all three primary channelsmail, telemarketing and onlineyour list firm is a highly skilled source of new customer acquisition. I grant you, it is no longer simply about lists; it is about lists coupled with analyses, models, profiles, statistics, consulting and raw computer power. It encompasses email addresses, telephone numbers, mail addresses, blogs, RSS and all of the other places where new customers can be found, but mostly it involves people and their names and various addresses. With the foundations in place, your first responsibility is to be a Master of Names and a Master Harvester of New Customers. It is still the Prime Directive of direct marketing. It makes little difference what channel; it is still about names. Yes, more of them may have to find you, but you have to build relations with Trusted Advisors who can guide you and help you meet the larger imperative of acquiring new customers, and that remains the list and new customer acquisition professionals. One of the great areas of strategic weakness right now is the abandonment of list testing and circulation planning to outside membership co-ops such as Abacus. It is a strategic abdication of the Prime Directive of new customer acquisition. My prediction is that those companies who circle back and retake the high ground of masterful list expertise in partnership with their Trusted Advisors will, in all channels, become formidable competitors in the increasingly complex multichannel world ahead. This is a Pillar, not a tactic. Without the solid plan and expertise for developing new customers, there is no reason to go on. Without the New Customer Pillar, you simply self-digest what remains of the business. Analytics To date, we have learned to measure a great deal of what takes place in our businesses. Compared to what we must measure in the future to maintain our niche dominances, we have only just begun our analytic apprenticeship. I believe we are on the threshold of a new breed of tools that will define, standardize for understanding, and organize analytics to become useful and deterministic. Our present analytics mostly rely on various subjective interpretations and they only reflect the past. The next generation will be conclusive and predict an accurate future. At that point, we will have useful tools and we will no longer have to finance the analytic learning curve. Whether those tools are housed in the individual companies or in the evolved list brokerage and management firmsthe new consultantsthe new Acquisition Science firmsremains to be seen. It makes sense to create one superb and powerful tool and share it among many. The cost is less and the maintenance and operation of the tool is best done on a consumption basis. What is glaringly clear to me is that this pillar requires internal understanding and far greater statistical and mathematical talent than we have offered up over the past 20 or 30 years. This is no longer IT; no longer Database Marketing; no longer a marketing or financial or merchandising domain. This is the board level dashboard and it must be translated accurately and precisely in language that corporate guidance can assimilate. If there was one pillar that I would spend more time on than New Customer Acquisition, it would be Analytics. I would not spend the time learning how to do the analytics, rather on how to find the right people and how to assure the communication of the findings into understanding for the future objective of selling more stuff to more people any way we can. Customer Service When the perception is that there isnt any, that is the time to dig the pillar deep into the foundation. We got here on our commitment to giving better customer service than any other commercial channel. Direct marketing was all about the 100% Guarantee. It is why we are trusted. From there, it spread to great Customer Service Representatives and friendly customer relations. And in the 25 years since our creation of that image and deeper culture of excellence in customer service, the retailers and Big Box operators never really caught on. When you think about it, theyre really kind of doofisses. Unfortunately, we have become much more focused on our websites than on our call centers. Many of us have outsourced those call centers; some as far away as Bangalore. I was reminded by a Customer Service Representative of my credit card company to Please enjoy looking at the stars and moon tonight. A nice thought and kind wish, but at that moment I was really rather more interested in tracking down my expired card replacement which no amount of stargazing could apparently produce. I still have the expired card and it has been a month. I dont hold out much hope. At least it has a zero balance and I have another card from a better bank that cares about my business. While very tied to the pillars of culture and people, customer service is also a strong competitive positioning strategy. You can make a lot of money with great customer service. You can lose a lot of money with bad customer service. Seldom do we look at it as a part of merchandising. I have come around to believing that is where it belongs. If the merchandising performance is to be improved, one of the first places to look for ideas is in Customer Service. We keep forgetting that the CSRs are the Keepers of the Customers. They are the people who actually know what the customers say, want, and like or dislike. Why, after all these years of nodding our heads and saying, Yep, hes right. The CSRs are the front line of customer retention and satisfaction do we blithely go on about running the company and ignoring the customer and never bother to use that knowledge as a merchandising strategy? Customer Service. On a scale of 1 to 4 with 4 high, our only possible target for this pillar should be an 8. Its money in the bank and a ten time multiple of earnings at the cash out. |
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