Some of my greatest lessons are usually prefaced with a spectacular piece of personal failure. For instance, there was the time I installed some untested software in a mission critical application (yes, it failed beyond my wildest nightmares).
And the time when I told my mountain bike mechanic not to complete the extra repair he strongly suggested, which ensured that two weeks later said bike fell apart midway through an 80km event.
Nevertheless, not wanting to endure the same pain twice, I am now super-cautious when it comes to any new software installation, and whatever the bike mechanic suggests gets done quick smart.
A few of my clients have shared their own personal painful business experiences, which like mine led to some interesting ‘learning experiences’. And, like me, they didn’t want to go through the same discomfort twice so they implemented the necessary change and moved on.
Making the decision to change is not always easy. For instance, last year I read a case by Andy Grove (the then CEO of Intel) that spoke about the resistance of the Mini Mainframe computer manufacturers to capitalize on the opportunity presented to them by PC technology. Their choice was to either change or remain the same. Change meant supporting a new machine that sold for less than their current offering, with its commensurate reduction in margin. It also came with such ease of use that there was little hope of bundling with each sale lucrative service contracts to support them. Needless to say they didn’t change. The net effect was that the PC server market grew quickly in sophistication, so much so that it eventually replaced the whole Mini Mainframe market they operated within, forcing them all to shut down their operations.
Thankfully, the changes that most of us are presented with are nowhere near as severe as this. And in most cases, we are able to flex our change muscles and move on. Nevertheless, last year I witnessed a selection of businesses, for whatever reason, sit back and decide not to alter their course. And guess what, in each case the pain has not gone away.
In fact, the change they now need to make is greater than the one first presented to them. In each case, the change they had to make was quite generic and as such could present itself to all of us. And so, based upon the lines of forewarned is the same as forearmed, here are some details of just three of these instances.
Now the smart ones among you will see two sets of benefits in here when reading through these notes. First, there is the obvious one of having the opportunity to plan ahead and decide how you could react if these challenges came your way. And then there’s the counter-situation for the more aggressive marketers amongst us. For this group, the list offers a few ideas worth pondering when considering how to inflict similar discomforts on your own competitors.
As per usual, commercial sensitivity means that for each example I have had to change bits to protect those concerned but I’ve done this in such a way as to still make the tale useful.
So let’s kick off with pain and change situation No 1.
Change #1 – When the Underlying Marketing Business Model Shifts
I’ll start with the most difficult of changes to face. Difficult because it requires the most change and as such leaves the majority dumbfounded and unsure where to start. All this occurs when the fundamental economics of marketing your service to your customers is turned upside down by a dastardly competitor who approaches the market in a very different way than the rest.
The company on the receiving end of this change operated within the health and beauty sector. They were locally owned and operate solely online. The range they sold was extensive, offered to the mid to low end of the market and, due to some very smart product sourcing arrangements, offered at the lower end price point. Their pain arrived with the entry of an overseas competitor offering like for like products. The competitor’s pricing strategy was similar or only slightly below their own. So, at the start is seemed that the market would be won in the online marketing area with similar budgets going head to head. Whoever implemented the right messages in the correct way would win.
But then the new arrival changed the game. As if overnight they seemed to dramatically overspend on new customer acquisition. Our client was willing to spend up to $25 to acquire a new customer. The competitor was marketing way above that – with estimated costs of up to $100 per sale. All for an initial gross order value that was, at a rough guess, at best 50% of this cost. $100 to receive gross sales of $50, with at best a 45% margin on this value! It just didn’t make sense.
Nevertheless, they continued spending marketing budget like this for a few months. Somehow they had configured their business to ensure it worked profitably while also spending four times more per customer than our client was.
Fortunately, I was lucky and found a few friends who were customers of this new operation and were willing to share with me the marketing they received during and after the sales process. It was quite impressive. To start, their website offered numerous up-sell options during the sales process to help squeeze as much profit as possible from each transaction. And then, once that first sale had occurred, customers received a steady stream of email and print-based marketing offering them a range of options to entice them to make their second and subsequent purchases. It was a profit-producing machine that let them push margins skywards. The net effect was that they were able to overspend others in the market by a factor of four and still make money.
To counter this strategy, I suggested to my customer a long list of changes. This started with their website, and then moved onto order processing and, finally, client follow-up. Now, of course, all this meant work and quite a bit of it too. It also required some cash, which was slowly diminishing as the full effects of this new competitor were starting to bite.
I shared with them all of the insights I had from seeing their competitors marketing first-hand but all to no avail. They thought their competitor would run out of money – they didn’t. And I could see the writing on the wall so we parted company. And so, six months later I see their competitor high up on the sponsored listings in Google while my ex-client is nowhere to be seen. Their market size has shrunk so much that even their AdWords campaign seems to have disappeared. All because they refused to accept that the pain wasn’t going to go away and that it was time to act and act fast.
Change Required #2 – Lack of Difference = Prospect Indifference
The Internet is a cruel space for those that offer ‘me to’ services or products. Prospects can react in split-second timeframes – all it takes is a quick click of the browser’s back button and BAM they are back to the search results screen.
The ‘pain’ experienced here comes from sending high-priced traffic to a website producing below-average conversion rates. In this example, we started with a client early last year who should have expected a one in ten conversion rate but was struggling with the reality of a one in twenty result.
When I printed out their sales page and compared it with their competitors – other than the colours and images – they told a very similar story. Each one stood for good service, great value and flawless execution. There was nothing obvious to help you compare one against the other. This leaves Mr. and Mrs. Consumer one option to guide their choice – price – a core reason why most in this market make below-par returns.
Anyway, I took my printouts and set them down on the customer’s desk, pointing out the landscape of sameness in front of us. And, unlike my previous tale of woe where the client refused to alter track, this time there was a willingness to change the website marketing strategy. My client looked at each page in detail and admitted there was a problem that needed fixing fast. The wider business team was involved as together they brainstormed how to alter their service to make it stand out from the competition.
It wasn’t a quick fix, but once done they had something that made them stand out from the crowd. So much so that once the site was updated with this new content, then conversation rates started to climb.
Change Required #3 – Becoming Too Big to Care
My last example highlights how the size of a company can affect (negatively) its ability to react to pain and change. Bad news if you are this size or rapidly growing towards it BUT good news if you are a minnow trying to market against giants.
The story starts with a single web page whose sole purpose was to produce a steady stream of sales leads for a particular service the company offered. It did this with a credible result of being five times more effective when compared with what the company had previously done. So everyone was happy with their online marketing strategy.
Then the market changed in two main areas. (Fortunately, there was a gold mine of survey information collected within the landing page data that quickly revealed this happening.) Firstly, the types of problems that prospects needed to solve had shifted. Over time, the market these prospects operated within had seen a sizable drop in overall demand. This meant that price was more of an issue than before.
The symptom of all this was similar to the previous example – falling conversion rates and a need to re-write the landing page copy. But no one seemed to care. The business was very successful in other areas and as a whole was growing like a weed. Roles were shifting almost on a quarterly basis and new staff were coming and going. It was hard enough to find someone who was now responsible for this part of the site, let alone convince them there was a problem to be fixed.
And as the days ticked by, their selling message became further off-market, pushing downwards the weekly lead counts. All this was occurring while their competitors (who, by the way, were smaller operations) were changing their content almost on a weekly basis. It was frustrating to watch such success slowly fall away but in the end I let it slide. There really wasn’t much else I could do. Their smaller competitors were slowly but surely ‘eating their lunch’ as they actively tuned their prospect sales funnels
to better suit the changed market.
OK, so where does this leave us?
Well, during the next 6 months of 2011 your business will be presented with a few market changes that may or may not fit within the realms of the ones mentioned here. Some of them will be preceded with some market ‘pain’ that may be more obvious than others. However, in each case there will be two options presented to you to fix this pain – either change or remain the same. Please be very careful when deciding which ‘pain’ deserves no reaction on your part.
And for those wanting to drive the market rather than have it drive you, then please take your pick from the three presented here or add your own. Just ensure your own pace of change is faster than your competitors and you will be the cause of some angst in 2011.