Strategy has been described as creating a “pattern” in your decision-making to illustrate the interconnected way data and decisions come together. Each decision you are called to make adds to the pattern, either moving you closer to your goals, or leaving you struggling at the edges. Strategy Links welcomes you to a library of resources ready to help you succeed!Read More
Strategic Communications Plans are the illumination for an organization, showing the way forward. They go “hand-in-glove” with Communication goals & objectives, tactics &metrics.
Knowing how to communicate and engage with those who are most important to an organization is critical to overall effectiveness.
When people tell me they have no idea where to start on writing a Communications Plan, I tend to believe them.
And when those same people tell me they have no idea what they should be communicating about, I worry for them.
“Strategy without tactics is the slowest route to victory; Tactics without strategy is the noise before defeat.” — Sun Tzu —
These Strategic Planning resources move us from where we are, to where we want to be. It’s all about getting everyone on the same commitment page- working toward the same goal(s).
When it comes to Risk, doing nothing is not an option. What level of Risk Management competency do you want to achieve across your organization? Where will enhanced Risk Management activities deliver the greatest value? The answers to these questions is the beginning of wisdom… and Risk awareness.Read More
The powerful truth about this thought is that in the same way it can help you become effective on a daily basis, personally, it is also the #1 secret to Strategic Planning professionally.Read More
When entrepreneurs are coming up with ideas for a business, or ideas gel and someone utters those immortal words, “Hey, this would make a great business!” guaranteed, no one is thinking about the overall strategy at that moment.
But perhaps they should… According to a 2012 Huffington Post article:
“Shikhar Ghosh, a Harvard Business School lecturer, has released research that shows venture-backed startups fail at a much higher rate than previously thought, The Wall Street Journal reports.
About three out of four new firms that take venture capital fail to deliver projected returns, Ghosh told the WSJ. That stat, the Journal notes, dwarfs previous estimates by the National Venture Capital Association that pegged the startup failure rate at 25 to 30 percent.”
“Over the past decade, public stock markets have outperformed the average venture capital fund,” Kauffman said. “For 15 years, VC funds have failed to return to investors the significant amounts of cash invested, despite high-profile successes, including Google, Groupon and LinkedIn.”
Venture capitalists “bury their dead very quietly,” according to Mr. Ghosh. “They emphasize the successes but they don’t talk about the failures at all.”
Most start-ups have a good idea of what they want to accomplish, yet surprisingly few have a clear idea of how to actually get there.
The graphic above shows the 4 main phases of the Business Life Cycle, from ideas and creation to the wind up or exit strategy for a going business. Let’s take a look at how strategy moves you forward from one phase to the next.
Even if you have already started your business, or you are working for an already established business, it’s still a good idea to go back to the creation stage when the ideas for the business were being batted around. Ask the questions that will help you write the strategy:
The answers to these questions will give a clear starting direction to write the strategy, as well as identify areas where the direction is not agreed upon by all of the senior leaders. I can’t stress how important it is to get everyone on the same page in a business. (Click on the heading links to read more on the specifics of writing your actual plan, step by step.)
Too many businesses are run like rock bands where creative leaders get together to put out a product, each having his/her own vision of what the end will look like, only to dissolve in disaster or takeover by/ouster of key members.
The strategy you need in this Ideation phase will address the 3 start-up questions above at minimum, but as you develop the business model, in addition you will also need to address:
2. Tactics: What do we need to implement to reach the forecast benchmarks? (Do we have an advertising budget, a marketing plan, the right Training and staff?
3. Metrics: How will we know if we are on target to achieve the forecasts or badly missing the marks? (What measuring tools will we use?)
This is the phase that most business people associate with a strategy- the well-known Strategic Plan and Business Plan. Banks and Venture Capitalists will require a sound Business Plan before making a decision to fund a start-up.
However, a Business Plan to set up and run a business is not the same as a strategy for staying in business, although many people will treat them as if they are.
The Small Business Administration lists the Essentials for a Business Plan as:
In looking closely at the SBA Essentials list, you’ll notice that each of the sections except the Financial Projections looks at the present or past (Market Analysis takes in historical performance for your niche market).
By contrast, a Strategic Plan looks at the present and future. That’s a significant difference, and one that really shouldn’t be ignored.
Creating a Strategic Plan to go along with your initial Business Plan is smart business and is helpful to your case for funding. But beyond that, it is progressive, future-driven business for you.
Knowing not only where your business fits in the current landscape, but also how you plan to step your way forward, allows you to keep everyone inside the business on the same page, allows employees to know what their specific role/contribution is in moving the business forward, and ideally, gives you benchmarks to determine if you are heading in the right direction quarter after quarter.
When initiating your business, or coming to work in a newly established business, you need to know the answers to three questions:
Use these answers to craft your yearly Strategic Goal(s). This may be the same or similar Goal(s) each year, or you may create stretch goals that are vastly different each year. Either way, keep in mind what makes a good Goal. Make them S-M-A-R-T. (For more on this, take a look at Applying the #1 Secret to Strategic Planning).
Getting your business off to a strong (and SMART) start makes the job much more productive, and successful, and moves you into the middle years smoothly.
In the Innovation phase, the business is up and running, everyone is on the same page (ideally) and knows where the business is supposed to be going, and knows what he/she must contribute each day to make it happen.
Metrics are necessary to measure each month (or quarter) how closely the business is tracking with benchmarks agreed upon by senior leadership.
Words of Advice: Don’t let more than a quarter go by without checking progress. It’s too easy to get off track, and all too hard to get back on track.
In the Innovation phase, we also see new product/service streams being launched. Market analysis will tell when the time is right to launch new offerings to existing clients and to gain new clients to move the business to the next level of growth.
The Strategic Plan should lay out the growth actions as Goals with Objectives such as:
Goal #: Stabilize existing product/service offerings at 3% growth year-on-year
Notice that each of these examples is Specific, Measurable, Action Oriented, Results Driven, and Time Sensitive… SMART.
Your Innovation phase Strategic Plan needs to have measurements to keep current activities on track, ideas to explore within certain time-frames, and incentives to keep moving forward.
This phase is the most important and most complex. You may find that, as the business grows, you need to create cascading plans for each department or division.
To do that,
Let’s look at an example of a business that needs innovation. In the case of a typewriter repair shop, to continue to envision being “the premiere typewriter repair facility in the greater metropolitan area” would be crippling. This business market is not expanding and has limited potential.
Once you have an overall target, create each Department/Division Strategic Plan from that base. Analyze the vision by understanding how each department contribute to its achievement.
If the Company vision is to become “the number 1 ‘business productivity equipment’ sales and repair facility in the greater metropolitan area,” then determine what it will take from each department to achieve it; that’s the part each department plays. Create one departmental strategic plan for equipment sales; another for equipment service; another for customer care; and maybe even another for Human Resources if HR is responsible for a Training and development program in addition to hiring and talent retention. Make each plan practical. Start with the overall strategy for the business and ask the department “What must we do to make this big vision happen this year?”
Each department or division contributes in unique ways and needs to develop measurements (metrics) to understand whether it is successful or not. This is the importance of department specific metrics and data.
It would be unwise to have all data lumped together to the point that one department or division supported the entire company. For example, if Sales achieved 150% of its quota, or benchmark, but Service was not having much repeat business, and therefore barely getting by with 60% of its quota, this would signal a problem area. If all data were viewed together, the resulting revenue total could obscure problems in Service to go undetected.
Though the benchmark overall was exceeded by 10% when combined, and which may be cause for congratulation, it masks the underlying instability in Service. Departmental Strategic Plans allow each to focus on growing or identifying end of life issues early enough to take appropriate actions.
Every product or service has a useful life. The market changes and moves on. Think about how difficult it would be for that typewriter repair shop in our example to stay in business if it only focused on that one product and service. The market has long since moved on for this business.
There comes a point in every business life when the road “forks” if you will. There are two choices that will come, sometimes sooner than later, and should be planned for far in advance.
The saying, “Diversify or Die” isn’t an idle slogan- it’s a rude truth of business. This leads us to the next phase.
In this phase, we see the opportunity to diversify away from the core or initial product or service, and begin the cycle again with new ideas or exit the market altogether and cease doing business. (Often we see this via retirement at which time a business is sold or shuttered.)
Look at our typewriter repair shop example once again. Let’s create two scenarios: Shop A that innovates and Shop B that ceases business.
In the innovation phase, or the period of established daily operation, each typewriter repair shop has the opportunity to scan the market place and see the signs. By tracking sales and repair data, both should see the vigor of the business declining despite increased advertising and marketing efforts.
Shop A manager studies the decline and decides to branch out into computers and automated business systems, invests in Training its staff in new technologies and gradually tips the scales toward the future.
Shop B, however, cuts staff to reduce overhead, implements more ad campaigns and uses social media to reach new customers which helps for a couple of months, but repeat business is becoming slower and slower. Within the year, unable to cut staff any further, the shop goes to half days, and closes on the weekends. This unfortunately has the unanticipated effect of cutting off walk-in traffic by customers who can’t get into the shop during the half-day schedule. Soon the owner must decide to close or sell. Seeing no interest from others in his market, the owner of Shop B decides to close at the end of the year and call it quits before he uses up all his retirement savings.
By anticipating a “useful life” (10 years, for example), and determining when you will need to introduce new products and/or services in the future, the business is able to plan a smooth transition and work the announcement into existing marketing plans.
The SBA website we linked above also has resources for planning your business Exit Strategy for Getting Out.
It’s worth taking a look at what an exit from the marketplace entails. This enables you to have that action plan on the shelf for when the time is right.
Ideation. Initiation. Innovation. Cessation.
The 4 phases of business life all require continuous planning to account for changes and unexpected occurrences in the market.
A good Strategic Plan should be revised as often as needed- usually not more than once each year, nor less than every three years- in order to keep the business in touch with market changes.
Your business strategy should grow and develop and change with the business, but always remain grounded in the stable mission and vision that created it. The point of strategic planning is to create a kind of “user’s manual” for how to grow your business.
Think “Big Picture” when designing strategy for your business and you will grow your business successfully through all the phases of your business life cycle.Read More
My memory is no doubt different than many of yours. I experienced 9/11 from an international workplace, in Central Asia. The hit-or-miss infrastructure made the communication issue more difficult than usual. We couldn’t connect with family at home, and they didn’t know if we were ok either.
As I’ve said before, that day we found the truth in the saying, “The best thing about Life, is Life itself.”
Please take time this week to look at our communication tips here to ensure your company procedures are taking advantage of all the new tools that social media is offering in the way of protecting your life and the lives of those you care about.
Today, we want to take that one step further. I came across this infographic (below) that provides a ton of information for you to consider.
Our thanks to Emergency Management Degree.org for originally posting this interesting bit of data. I came across this gem on Melissa Agnes Crisis Management, who credited it back to Social Media Today Using Social Media as a Crisis Management Tool [INFOGRAPHIC] (posted May 2, 2013), who pointed us to its source on emergency-management-degree.org. All of which says, social media is very good at sharing information!
This adds new information to use in conjunction with our Decision Matrix, posted on the Crisis Communications page linked here.
Image compliments of Emergency Management Degrees
The value in using these two sources together is that you can see on this Infographic, the type and number of users, and how they use these various channels. From there you can decide, using the Decision Matrix, which social media channel will work best in a given scenario, and can go about planning what tools you need to implement these new channels in this way.
To really integrate these tools in your company protocols, I suggest having a monthly conference room “Table Top” exercise (as FEMA likes to call these working sessions).
Beyond these questions, there remains one critical component.
The number one item on your list needs to be “Tone at the Top” – senior leadership buy-in and support. Without the champion in leadership, getting compliance is exponentially more difficult.
These are just a few of the areas that need to be considered… in advance!.
Please leave a comment or use the Contact Me page to send a message or question. We’re always happy to help make your communication smoother in a crisis.
We wish you good luck and good preparation!
Thanks for Linking Up!
For those who may want to share any of these stats, below is the text version of the graphics above. Please accredit the original sources mentioned above. Thanks!
TEXT: Sources for Infographic:
The editors at Emergency Management Degrees decided to research the topic of:
Using Social Media as a Crisis Management Tool
– YouTube stats – 1 billion unique monthly users
– Facebook – 1.06 billion monthly active users, 680 million mobile users, over 50 million pages and 10 million apps
– Pinterest – 48.7 million users
– Tumblr – 170 million users, 100 million blogs
– Twitter – 500 million total users, more than 200 million active users
– Vimeo – 12.6 million users
– Word Press – 74 million blogs
– News cycle is instantaneous.
– After Hurricane Sandy, Justin Auciello created a Facebook page called Jersey Shore Hurricane News to report updates in real-time with 191,000 “likes.”
– Two-way communication between governmental agencies and the public.
– Social media management in a PR crisis helps 1) evaluate conversations about the brand to determine if they are positive or negative; 2) assess the level of threat and prioritize it; and 3) determine how to respond.
– Case study – Progressive Insurance. Progressive failed to respond timely which may have helped to control the situation and manage the brand: 51.33% of the social media comments were negative, 40.67% were neutral and only 8.00% were positive.
– Case study – American Red Cross. In 2011, a Red Cross employee accidentally tweeted something personal about drinking Dogfish Beer to its network of 260,000 followers. The Red Cross deleted then turned the incident into a fundraiser with Dogfish Beer asking fans to donate to Red Cross.
– Using Ushahidi, Japan earthquake in 2011, Ushahidi created the largest crisis map to date with more than 8,000 reports via social media identifying shelters, food, cell phone charging stations and road closures.
– 72% said the most common way they hear about news is from family in friends by talking in person or on the phone.
– 15% get news from family and friends through social media sites.
– 25% of 18-to-25-year-olds get their news from social media.
– Pros & Cons of Social Media News and Crisis Reporting
– Pros – Immediacy, anyone can report news, news is disseminated quickly, cell phones can reach virtually anywhere
– Cons – Limited space (Twitter, 140 characters), inaccurate information, potential lack of journalistic integrity, citizen journalists putting themselves in harm’s way to get a story
How many communications specialists know what Brand Management, IP protection, or reputation assurance efforts actually look like? Do you know exactly what each of these entail? Hmmm, not many hands went up for that one, so let’s do more than talk terms today. Let’s get down to the mechanics of how brand management, and protecting your intellectual property and reputation can affect your company and you.
Today’s example is a case of a team’s creative work being used without appropriate source crediting. I’m familiar with this case, because I happened to miss their source link. (USC’s Online Communications Degree (http://communicationmgmt.usc.edu/). An error on my part, to be sure, but the silver lining is that this creates an opportunity to discuss protections and why you need to create a strategy to ensure it gets done right.
THE SCENE OF THE CRIME
With a basic social monitoring program in place, my error was highlighted. Jaclyn said, “I did some regular Google searches to find the image,” referring to the infographic I had analyzed in my post. She went on to describe why, saying, “I’m given a window of time to promote a piece, and during that time, I just do some simple searches utilizing related key phrases or sometimes image search to see who’s sharing the piece online.”
It was in one of those searches that Jaclyn reviewed my work (which she liked- always a plus!) and noticed that I had given correct attribution credit to Mike Allton of Social Media Hat, where I had initially found the article I was quoting along with the infographic, but had not picked up the source credit for the USC team who created the infographic that everyone was keen to share with the world. (Good job USC team, and my apologies for not getting it right the first time around.)
The good news in this example is what Jaclyn did next.
Protecting Your Intellectual (and Creative) Property
How To: Taking steps to correct the accreditation/attribution error(s)
A.) For a case like this one on a blog, contact the author or publication to provide proper sourcing and request it be used in an update to the post or article.
Here’s the example of Jaclyn Lambert’s email to me:
Jaclyn brought the error to my attention, stated the case, asked for corrective action by providing the sourcing needed. Very pleasant and straightforward, no acrimony. It was so nicely done that the correction was actually made within an hour of reading her email.
B.) For larger-scale issues: Writing a letter to the editor works well for national magazines and such, plus it gives them an opportunity to print the correction and make an apology. The ‘win” in both of these methods is that your property gets highlighted twice, proving, as they say in Hollywood, “there is no such thing as bad press.”
Prevention is Worth a Pound of Cure
My Take-Aways from this?
Take-Away #1: The first thing I learned is that when I am creating visual materials for myself, I want to be sure to embed my sourcing with the body of the chart, infographic, photo, or other IP, thereby making it less likely to miss out on my due attribution, recognition, for my hard-won creativity and professionalism.
Conversely, I also want to ensure that I (or my staff writers) make it a “best practice” to look closely to make certain we have the attribution done properly to credit others who share with us.
In social media, as much as we want our words and ideas to be accepted, promoted, and discussed, we also want to make sure people sharing know we came up with the thoughts.
Take-Away #2: I need to strive to always be aware of where my materials are being shared, and how, as Jaclyn demonstrated so well. This is where a strong social media ‘listening” or monitoring process generates its ROI (Return on Investment).
Before we wrap this up, we have one more excellent example of Brand Management and Protection that comes via a major oil company in Houston, Texas. This is an example of how paying attention to details pays off big time when you want to make your case for brand infringement or other mis-use.
A project we were working on involved donating a large quantity of “logo” t-shirts to a school in a country where drilling was taking place. It was intended to be a bit of promotion with a social/goodwill aspect included, a two-fer if you will.As the team was packing, the large box of 250 T-shirts was delivered- but… with a note to shred them all. You see, the logo had the color bar under the name placed 1/8″ too far away from the letters. The logo guidelines for the company clearly stated how much white space (clearspace) could surround the lettering, and this wasn’t meeting the requirements.
You and I (and all the geologists) would say, what’s an 1/8″- big deal! But the lesson we learned is that in the courts, if we didn’t enforce the rule of copyright all the time, we could never claim infringement or mis-use any of the time.
Goodwill should never blind you to action when brand protection needs to happen. Ensure that you can have both protection and action by monitoring the use of your logo (or, any IP, etc.) in advance. Make sure users know the rule and don’t tread on legal issues when trying to do good work in the company name.
This is an interesting side of the branding and marketing issue. One I am actually glad to have the opportunity to discuss. (Not good that it was me who made the error, but, mea culpa!) I made the mistake, I got the corrective request and made the repairs needed. This is my apology and I’m taking the opportunity to effort to share what I have learned. It’s part of being in business.
Conclusion: I hope this gives you some ideas to think about. Specifically:
–Put yourself in the position of Jaclyn’s team… what would you have done? Think about the process: Discovery, Assessment, Options, Action, Resolution.
–Put yourself in the writer’s place… how would your company have handled it? Would you ignore the error and hope it goes away? Would you fess up and correct it? Do you have a culture in place that allows for mistakes AND blame free corrective actions? Or is the culture in your company punitive and blame laden?
–Do you have policies in place like the Oil Company that state what people can do with your logo or branding materials? Are they on your intranet or website? Do employees have a printed copy that they initial as part of the HR file to assure compliance and notification of changes?
This could be a good time to think more about these questions and the policies and procedures you have in place to deal with the eventual “What If…” scenarios.
I hope this has brought some positive ideas for you as we have worked through this real-life case study.
What Take-Aways do you have that you’d be willing to share? I’m always interested in hearing how this “hot-wash” or analysis process has helped you, or to listen to any questions that you may have as a result of the discussion.
Feel free to leave a comment below, or use the Contact Form if you prefer a one-on-one comment, your choice.
Most of all, thanks for Linking Up today. See you next time on Strategy Links!
View the original post and infographic here: Digital Age & Communication Management
Learn more about USC’s Communications Online Degree Program here.Read More
What caught my eye was the author’s comments that being “mere communicators” means having a more narrow focus and reduces the value that team members can add to clients. Clearly Mr. Holmes has never read any of the advice we are working on here! Of course this isn’t a debate about which function is better suited to serve the company interests, rather it’s an issue as to whether Mr. Holmes’ assessment of the job that Communicators do is disingenuous. Have a look and make your own call:
“Posted on April 19, 2011 by Paul Holmes [http://blog.holmesreport.com/]
Richard Edelman makes the right call in response to internal suggestions that Edelman redefine itself as a communications agency rather than a public relations firm.
I’ve made the case many times, but I’ll do so again. Communication is an important part of public relations, but viewing PR people as mere communicators narrows our focus and significantly reduces the value we can add to clients.
Consider a scenario: your company has been responsible for spewing toxic sludge into a pristine stretch of river, destroying wildlife and polluting the water supply. Your CEO comes to you for advice.
I know what the public relations advice in this scenario should be: stop spewing toxic sludge. What’s the communications advice? Lie? Craft a compelling narrative to convince people that toxic sludge is good for them?
The fact is that there’s no “communications” solution to this problem. It’s a problem that requires a change in behavior. Managing the relationship between an organization and its publics—public relations—requires good behavior and good communication, and if we define ourselves exclusively by the latter we are doing a disservice to ourselves, our profession and our clients.”
There are a number of assumptions being made in this piece that I take issue with, and there are also some good words of advice that you can take away from this post.
First, let’s tackle the obvious misconception. A good Communications team should and does do more than just serve as a “spin machine” for a corporation. In the absence of a dedicated Office of Public Affairs, the Comms department may well serve internal and external functions. Good communicators serve as the “canary in the mine” if you will, by monitoring corporate actions and public reactions, by finding ways to be more transparent with stakeholders and alerting management when certain actions go against the grain of the strategic plan laid out and adopted for the future. (If you aren’t doing all of these -and more- take notes!)
This means that when actions are contrary to the values stated in the company Charter or Strategic Plan, the Communications officers would be (certainly should be) on the leading edge of that discussion. Keeping dialogue open and honest is one of the functions of a Communications Department. As a matter of fact, if we don’t do it who will? If PR deals primarily with public and media relations, doesn’t it make sense that the internal communication function needs a strong Comms team?
In Mr. Holmes’ piece, the hypothetical CEO comes to the Comms office seeking advice.
In reality, however, it should be the other way around. The Comms department should have their finger on the pulse of what’s going on, and the minute there is even a whiff of chatter about wrongdoing or inappropriate action on the part of the company, the Comms group should be opening the dialogue with the CEO or other management figures on potential brand damage, stakeholder issues and legal ramifications to be concerned about. Mr. Holmes, that’s the way I would want my company running, if I were your sludge-making CEO.Good social media monitoring, stakeholder engagement and social responsibility puts the Comms team in touch with social groups and monitoring agencies as part of brand management and reputation assurance efforts. Rather than an interest in spin or public deception, the Strategic Communications Plan, which the Comms team is charged with implementing and monitoring, should address transparency with stakeholders and our publics, complete with metrics to measure the progress by the company in achieving the reputational position in the market that it planned for.
I get that this article and quote are not actually about an either or case. I get that Mr. Holmes is concerned about the specific incidence of Edelman and it’s perceived niche. A good PR agency must be many things to many people. But I object to the “mere” communicators label. To tell PR folks that if they do all the things a good Communications department would be doing is to make them mere anything is to sell the team short. (Yes, I do get passionate about good communication, and doing good work for the companies we serve. And I would challenge you to do so as well!)
Mr. Holmes is correct in stating that there isn’t a purely “communications” solution to the hypothetic situation he laid out, because as he points out, it is a behavioral issue. There is no win, one side over the other. It is a call to action for all communicators, internal and external, to create open lines of dialogue before there is a problem and to be continuously aware of how corporate actions can affect brand value and reputation.
My challenge to you is to take this message to heart: If you behave like “mere communicators” you will be perceived within your company as such. If you are a high functioning Comms Team, keeping watch on the social chatter, the print and social media mentions, and the internal behavior of your firm, you will be appreciated and respected for making sure that every ambassador for the firm walks the walk, and talks the talk, each and every day. And those are the folks I would trust with my company. Wouldn’t you?
So let me close by coming back to Mr. Holmes, a quote from his next post on this subject, wraps us back to where should be… the future.
I could go off on a rant about the fact that the PR business has allowed itself to be defined so narrowly, has strayed so far from its roots, and has so utterly betrayed the principles of pioneers like Ed Bernays and Arthur Page, but really what more is there to be said about that? So instead let’s focus on the future.
I totally agree… in our future, what’s up?
Tomorrow we’ll continue our Brand Management/Reputation Protection series with a very interesting post about a protection issue dealing with a post I made last week, Communication Management in the Digital Age. Jaclyn Lambert of USC’s Online Communications Degree caught a brand and IP issue and called it to my attention in a great email. We’ve had an interesting conversation about how we can use this as a teaching moment (for me as well!) Tune in tomorrow for that post.
As always, thanks for Linking Up!Read More
There are profits customers expect a company to make- fair margins on goods sold and services rendered.
And then, there are “bad profits”- the kind that consumers become irate over and threaten a mutiny.
In an August 27 article from Joel Peterson, Chairman at Jet Blue, this quote caught my eye:
“Baggage fees are what LinkedIn Influencer Fred Reicheld calls “bad profits.” These are earnings that come at the expense of customer relationships. Whenever customers feel mistreated or abused, the profits from that customer are “bad” ones. Naturally, neither accountants nor Wall Street distinguish between good and bad profits. Every dollar of revenue looks the same. But customers remember. As Reicheld points out, average firms book “bad profits” from nearly 1 in 3 customers. In the airline industry, it may be closer to 50% of customers who feel coerced, misled and ill-treated.”
“Closer to 50%”? Why would a company take “bad profits” from any customers, let alone 30%, or even 50%?
We see this happen often, in more than just the airline industry today. That isn’t to say that it’s right, or that we tolerate them, we get angry about it. But, what about your own business? Are you ever guilty of abusing your customers for the sake of profits?
“Whenever customers feel mistreated or abused, the profits from that customer are “bad” ones.”
Have you ever had:
How so, you say? Well consider the “Law of the Satisfied Consumer.” Consumers want the situation rectified, not papered over with a coupon for a future visit. If they are unhappy, there will be no future visit, and thus no remedy to them. Which means you still have a loose cannon out there!
Radio and television studios used to say that for every letter they received from a disgruntled viewer, they presumed 500 more were not written.
Further, retailers use the 1:9 ratio for customers. If 1 customer is unhappy, he will re-tell that story to 9 others. And, with the cost of gaining a new customer being 6-7 times more than keeping a current customer, that adds up.
So the “Law of the Satisfied Customer” is simply this. If it costs you $70 to get a customer, you’re looking at $10 to keep him. Face value math isn’t that tough.
Conversely, using the 1:500 ratio from the studios, we can figure for every one customer ($70) you know about losing, there could be hundreds of others who are unhappy and just go away without notice. Instead of losing $70, you could be losing as many as 500 times that much… potentially $$$ thousands.
To illustrate, here are 2 true stories… One example of “good profits” and how to communicate with customers to gain loyalty. The other? Let’s just say this actually happened and I’m still using this example, years after the fact, as a perfect example of “bad profits”. (We’ll keep it all anonymous this time.)
First the good profits- a heartwarming story of goodwill from TOMS Shoes. Doing good, giving back, using customer purchases to create goodwill. Great communication that everyone is happy to share. We don’t feel misled, abused or begrudge the fact that a fair margin is made because it enables this kind of warm fuzzy.
— Mike Allton (@mike_allton) August 31, 2013
And now, for the other side of the coin…
Mu husband and I moved to a new town, and while waiting for our home purchase to settle, we stayed in our motor home- not the greatest solution, but at least we had beds and a small kitchen that were our own. What we didn’t have were laundry facilities, so we took our cleaning to a local dry cleaners to the tune of about $80 week.
One day I drove to work and hung my suit jacket, still in the cleaners’ plastic, on the back seat, putting it on when I got to the office. It was then that I noticed something about the right sleeve that didn’t look or feel right. The fabric was scrunched up like it had been scorched by an iron.
This was a new suit that I had only had a few weeks- it was purchased in our new town for my interview. After work I went by to show them the jacket and see what the story was. And here is where the “Law of the Satisfied Customer” became vividly real.
The clerk said it “couldn’t have” been them, I must have done it. Perhaps, but since I had just bought it and didn’t have an iron in our temporary quarters, it wasn’t possible in this case. She reluctantly said, Ok, I don’t think we can fix it but let us take a look.” [Strike 1]
I came back in two weeks after hearing nothing. [Strike 2] The clerk said they were sorry, but they were unable to fix it. [Communication 101: The customer doesn’t care what you can’t do. The customer cares about what you did or will do!]. As we spoke about the situation, I mentioned the amount of business I had brought in already. I said I realized I was not a large volume client, about $80 each week, but that business should be worth keeping. (Let’s say that I would have generated about $2,000-$3,000 per year in business.) The clerk acknowledge that we would be considered “a medium account.” I assumed that meant my business was of at least some value.
Long story short, 9 weeks later, after having me sign and complete an “Affidavit” – a damage claim waiver saying they accept no responsibility for the damage- the company agreed to process a claim check for $90.46. After not hearing anything for yet another 3 weeks, I went to the District Branch office to speak with the District Manager, who again reiterated the damage claim waiver before handing me the check. [Strike 3]
Once I had the check safely in my hand, I spoke once more to the District Manager. But this time it was to talk with him about the value of a customer- and the consequences of “bad profits”. I told him that once they had made up their mind about paying for the damage, they should have worried less about whose “fault” it was, and more about how to keep the customer they already had. I was not only so thoroughly put out about the 12 weeks it had taken to settle this, but also ashamed of the punitive process they had in place. Had they been so burned by customers before that they had to shield themselves with an “Affidavit”?Was $90.46 really worth making me drive 60 miles on my day off to replace the jacket, numerous phone calls to follow up on their progress, as well as making multiple trips to complete forms and pick up the check? Did they consider this good customer service? (By the way, this is their own slogan above… Really!)
Let’s see, $90 against $2,000? Nope, by my math it wasn’t a good trade. Neither was it an example of good customer service.
So on the plus side they might have saved $90.46, but they stood to lose at least $2,000 of my business and let’s say 1 or 2 other customers changed over to a competitor as a result of our conversations, that could add maybe another $1,000 or so?
I don’t know about you, but if my CFO told me we were going to give away $3,000 but keep 3% of that amount… well you figure it out. I don’t believe I would be keeping that CFO around long. I believe that would be a case of “bad profits”.
The Brand Management take-aways from this post today?
Don’t let yourself- or anyone on your team- become guilty of taking “bad profits”.
Create a plan for making customers feel loyal and want to share your goodwill.
Don’t fall into the trap of being short-sighted over $90.46.
Take the long view and decide everyday to go for the high percentage move; keep happy customers on your side.
Sound familiar? Most likely, either from you or someone you work with.
Frequently these days, I hear from colleagues and business acquaintances who are caught in the current sequestration/cut-backs cycle and are now being ‘asked’ (with only one right response available, of course) to take on more responsibilities, to carry on with fewer people.
Whew, talk about stressful!
Fortunately, they came to the right place- and so have you! Step 1 is to sort out where you are in the process of what you’ve been tasked to do. (If you have specific questions, feel free to use my Contact form in the main menu and drop me a line, or if you want to discuss with others as well, leave a comment in the Comment area below.)
Start by taking a look at our Resource Links page and looking over the information available under “Basics” or “In Depth”. You’ll find some great articles, diagrams, and video clips to get you started in developing your Strategic Plan, updating your Corporate Vision, and so on.
If you’re brand new to this facet of planning, I’d suggest a quick brush up on some basics, presented quickly in this clip from Investopedia about organizational structure. This will help you visualize the relationships between people in your company and how they fit into your strategic plan.
Though it’s only a minute or so, it will give you some ideas to keep in mind when writing your Strategic Plan. Specifically if you have a Board of Directors, you’ll see what they are looking for in a Plan, what your goals will need to target as achievements, and so on.
Next up is a diagram from the multi-page “Developing Strategy” paper (linked below) by Harvard Business School and Palladium research dealing with four questions you need to answer to write your Strategic Plan:
For the full report, click here… Developing Strategy. Additionally, I’ve written about this topic as well on our Elements of a Strategic Plan page. The two resources are complementary and go together well to provide you with a good overview as you get started.
Your next step is to assemble the answers to the four questions above, any information you have about the Mission of the company, how they developed (or if you need to work with a team to create) the Vision and whatever you know about the company values. These items form the basis for creating or updating your company’s Strategic Plan. Use the links in our Strategic Planning section to walk you through putting it all together.
Coming up… I’ll be tackling more custom options, so make sure you leave a comment below to let me know what areas you need specific help and resources for. Strategy Links is made for you so take advantage of the chance to ask for just what you need to know. We’re here to help!
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In a new article from Social Media Hat, guru Mike Allton gives us some insight into ways that the Digital Age has affected not only the way we do business, but the way we manage communication as well.
Mike knows his stuff. He’s a nationally known Social Media Consultant in St. Louis, Missouri and has been working with websites and the Internet since the early ’90s. He is active on all of the major social networks and enjoys helping business owners learn how to leverage the Internet to promote and grow their business.
Today’s infographic does a great job of illustrating changes that you should be considering in your business and communication strategies, or perhaps (yikes!) these thoughts will cause you to get up to speed and just create a strategic plan in the first place. Better late than never! ( If you’d like more information on How To Create a Communications Plan, check out our Communications Strategies page.)
Let’s talk about 3 ways Digital Age communication is affecting your communication management right now.
1.) It has dramatically changed HOW we communicate; we’re no longer waiting at the office for a late call, or sitting at home by the phone for a message. 50% of US adults use smartphones; 84% are online each day; 87% communicate with others via Social Media.
2.) The Digital Age has changed WHERE we communicate; we can take a meeting while teleworking or traveling. 24% of adults work outside the office for some portion of the week- an average of 6 hours is spent teleworking each week.
3.) And, it has changed with WHOM we communicate. International trade has exploded with the advent of being able to conduct a transaction in near real time. 84% of those online each day use email to communicate. In one month-January, 2013- over $46bn was booked in import/export trade with China. Needless to say, that couldn’t happen if we were still waiting for customs documents by to arrive by mail.
But… with all these great advances, it’s easy to overlook the challenges that technology brings with it. Today’s digital advances also mean we have to recognize accountability-that someone needs to be keeping track of what is done “for” the business: whether after hours, outside the office or from non-business equipment. You need to consider an email policy- how long to keep and what to delete. And, yes, it is that important.
Does your business strategy implementation include steps on updating Liability & Responsibility Policies to cover employees who act on behalf of your business from non-business locations? Do you have protocols that govern the documenting of business conducted outside the office or on non-work time, say at social events? These are just some of many situations that digital age communications have made possible, and made management accountable for.
Take a look at the Infographic below and see how this could change your view of your overall Business and Communication Strategies.
Infographic Source Credit: USC’s Online Communications Degree (http://communicationmgmt.usc.edu/).
Thanks to the USC Annenberg School for Communication and Journalism at the University of Southern California! (And, Jaclyn Lambert for bringing this correction to my attention! Way to protect your IP!)