Should Companies Focus on New or Existing Customers?

I've read two very interesting articles this week about customer focus:

In Keep Those Customers! on Inc.com Howard Greenstein says that companies focus so much of their energies on obtaining new customers that they ignore the customers they already have.  Christopher Penn, Vice President, Strategy and Innovation at Blue Sky Factory Email Marketing, quantifies this perspective:

A good marketer in general can move 10% of the attention they create into qualified leads. With good customer retention, good service, good product, you have a huge amount of control about keeping your customers. They’re yours to lose.

Not everyone agrees.  In Dear Catalog CEOs: New Customers, Kevin Hillstrom at MineThatData.com points out that no matter how customer-centric your company is there will always be customer turnover.  He addresses the idea of building customer loyalty directly:

If there were easy ways to increase customer loyalty, everybody would be doing it and loyalty would dramatically improve and the economy wouldn't be a mess, right?

His suggestion: "Focus a disproportionate amount of time and energy on finding new customers."  His point is that there are far more ways for companies to acquire new customers than ways for them to improve their customer retention rates.

A successful company should strive to both earn new customers and to please existing customers, but often resources are spread thin.  Which should be the priority?  Should companies give the majority of their focus to existing customer relationships or to creating new customers?

Do Meetings Have to be Boring?

I've mentioned previously how frustrated I get with meetings, and I know I'm certainly not alone.  I spent most of my afternoon today in an especially dull one.  There were four or five different presenters, many of whom repeated things that had already been said.  Everyone read from Powerpoint slides.  It was painful.

I wanted to write a few thoughts on how to make meetings less torturous, but unfortunately my brain has shut down for the day.  Luckily I found some posts that present some great ideas:
Make Meetings Fun
How To Make Meetings Less Boring, Super-Soakers Included

I don't recommend trying anything from this post, but if you do please let me know :)
Tricks to Liven up a Meeting

Tiger's Apology Is Too Little, Too Late

I have tried my best to ignore everything about the Tiger Woods scandal.  His personal life is of no interest to me, and frankly I'm sick of hearing about it.  That being said, I had to watch his recent apology to see how he handled it.  If you haven't seen it yet check out the video:

http://www.youtube.com/watch?v=Xs8nseNP4s0

I'm not sure many people watching will view his apology as sincere.  Why did he wait for 3 months to issue an apology?  Did he think it would blow over?  Did he think people would just forget about it?  He had an opportunity to speak up early on (he did vaguely apologize for his "transgressions" on December 2nd) but this press conference only took place after he lost several sponsors. 

Businesses tend to make this same critical mistake.  They often try to salvage their image by denying any wrongdoing:

Ford and Firestone blame each other for deadly tires

Occasionally companies do it the right way:

Tylenol's quick recall causes only slight dip in stock prices

Don't wait for the public to demand an apology.  Once a mistake has been made get in front of it as quickly as possible.  Accept full, unconditional responsibility.  Apologize.  Then perhaps you can move forward.

Keep Yourself and Your Employees Well Informed

One of the things I like most about small businesses is that they can be much more flexible than larger companies.  There are fewer layers of management to convince, no board of directors or shareholders to placate, and far fewer regulations to consider.  Because of this fewer resources are wasted on generating mountains of reports and a never-ending series of meetings.

But some reports and meetings exist for practical purposes.  All companies need to have insight into their business.  Every business should be able to answer some basic questions:

• Are we making a profit?  
• If we are not yet profitable are we doing the right things to become profitable?
• Do we have enough available cash to run our business?
• What are the amounts in our Accounts Payable?
• What are the amounts in our Accounts Receivable?

There are countless other questions that should be asked regularly.  Most large businesses so this automatically as part of their month end closing process, and small businesses should do the same.  It is important to do this every month to catch problems early and ensure that the company is moving in a productive direction.

It's equally important to make sure everyone in your company knows how the business is doing.  While you don't necessarily want all employees to have full access to your financials (unless you have an open-book management policy), make an effort to let everyone know about your successes and failures.  A quarterly or semi-annual meeting with everyone is a great way to keep employees informed, and it can also be an forum to receive valuable feedback.

Social Media Isn't a Substitute for a Marketing Plan

I found a couple of articles online regarding social media for small businesses:

http://www.businessweek.com/smallbiz/content/jan2009/sb20090116_666697.htm

http://www.reuters.com/article/idUSTRE59759L20091008

The Business Week article explains that social media is a great tool for small businesses because it's a great way to reach a large audience for free.  The Reuters piece, however, suggests that 75% of small businesses don't find social media at all helpful in their business.  The article quotes Maria Veltre, executive vice president of Citi's Small Business segment:

"What this survey indicates to us is small businesses are very, very focused on running their business and on generating sales and managing their cash flow and doing the things that are really important, especially in these economic times," Veltre said. "I don't think quite yet the social media piece of it has proven to be as significant."

I think both articles are right.  Social media presents an incredible opportunity for small businesses, but it has to be based on a solid marketing plan.  And any social media used must be consistent with that marketing plan.  Creating several accounts with differing messages (or forgetting to update them) won't help your business.  It might actually hurt it.

Charging a Premium

There's an Irish pub I used to frequent when I was an undergrad.  One day I glanced at the drink list above the bar and was surprised to find that an Irish Car Bomb cost $10.  That's expensive!  Curious, I asked the bartender why one drink cost so much more than everything else they offered (most drinks were $5-$6).  I expected him to tell they were bigger than usual, they used a special blend of whiskey, something that justified the high price.  He told me the real reason: "We don't like to make them."  Wow.  I didn't see that one coming.

Years later it makes perfect sense to me.  Sometimes a client asks for a service you'd rather not provide.  Rather than turning business away (especially if you want repeat business) charge a premium.  If they decide you're price is too high, great: you didn't want to do it anyway.  And if they accept your price you make extra money.  Good news either way!

Specialize Your Business

Many small businesses make the mistake of trying to sell their products and services to everyone.  It makes sense at first: selling to more customers means more money, right?  Not necessarily.  Different customers want different things, and it is extremely rare for one good or service to satisfy everyone's needs. 

Take television, for example.  Back in the old days there were three networks: NBC, ABC, and CBS.  They all produced similar programming choices (local news, half hour sitcoms, one hour dramas, etc.).  A particularly successful show could most American households to watch on a regular basis.  Today, however, there are too many viewing choices to count including newer broadcast networks like Fox and CW, cable, premium cable, satellite television channels, and the internet.  Many of these networks are highly specialized like themed networks (i.e. Comedy Central or the Travel Channel).  The internet is ultra specialized and consumers can find exactly what they want, when they want it. 

The Lifetime Channel does not show James Bond movies.  The Food Network doesn't air Nascar races.  They stick to what they're good at.  That's just smart business.

It's All in The Way You Package Things

Many companies try to sell additional products and services to their existing customer base.  This can be a great opportunity to strengthen an existing relationship, but if done wrong it can alienate great customers. 

Since buying my house a few years ago I have used the same lawn care service to fertilize my lawn, spray for weeds, and spray for insects.  I've always been satisfied with their services, and last spring when I hired them to trim my trees and bushes they did a wonderful job.  Despite these positive experiences they nearly lost my business.

Last summer I began receiving "up-sell" calls trying to get me to purchase extra treatments, weather-proofing, and whatever else they could offer.  The calls came regularly enough that I recognized the phone number when they called.  One day in November I received a call from a representative telling me about a new de-icing product they were offering as an alternative to rock salt.  The rep suggested that if I wanted to buy the product they could drop it off when they came out to winterize my lawn the following week.  I declined, and he thanked me anyway and said they would see me the following week.

A couple of minutes after the call I realized that I had been conned: I hadn't previously scheduled the treatment, and this guy just tricked me into accepting a service I didn't want!  I called the company's main number and canceled the treatment.  I told the woman who answered how angry I was that they tried to dupe me and that I wanted to cancel all of their services.  She apologized profusely and offered me a discount on my first few treatments next year if I would stay with the service.  She also assured me that they would put an end to the constant phone calls.  I grudgingly agreed and that was the end of it.

A few weeks ago I came home from work and found a package of ice-melter from the company with a note asking me to accept it as a thank you for being a customer.  I like that.  I just used it on my driveway last night, and if it works well enough I may consider purchasing some in the future.  It's nice to be treated like a customer rather than a target.

The Frustration of Meetings

As I mentioned in my first post I'm enrolled in an MBA program.  I really like it for the most part, but I have one complaint: too much group work!  I learn much more when I'm able to go at my own pace.  I can skim through things I find easy and spend more time focusing on things that don't come quite so easily.  Plus we are all juggling full time jobs and taking evening classes, so getting together to have regular meetings can be unbearable.

The idea behind group work is that members can draw upon each others' knowledge and experience, and therefore the whole is better than the sum of its parts.  This hasn't been my experience.  This article in Colgate University's student newspaper shares my opinion:

We feel frustrated when our group members don't put in their share of the work or are unwilling to compromise when it comes time to produce a cohesive work. We feel disappointed when the project turns out disjointed and not up to our standards. We never feel any kind of intellectual fulfillment or pride like which the project is supposed to give us.

First let me say that group participation and effort aren't a problem for me.  I'm guessing that applies more toward undergraduate projects than to most MBA programs.  But we're all reasonably smart, have diverse backgrounds and experiences, and have different ideas about how to approach a project.  In order to reach consensus we all must be willing to give up some of our own unique ideas.

Colleges believe group projects are a useful way to simulate the "teamwork" of typical business environments.  Unfortunately they are right.  The more people that participate in a meeting at work, the less likely it is that the meeting is productive.  There may be plenty of discussion, but very little decision.  Receiving input from others can be invaluable, but receiving input from too many people can be crippling.

Are Superbowl Ads Worth The Cost?

A 30-second commercial slot during this weekend's Super Bowl broadcast will cost $3.01 million (excluding production costs).  The USA Today Super Bowl Ad Meter ranks the commercials for each year’s game by how much viewers liked the ads as they aired.  First place on the Meter for 2009 went to a Doritos commercial, a surprising upset over Anheuser-Busch that broke their 10-year winning streak.  

PepsiCo, Doritos’s parent company, spent millions on Super Bowl commercials for other products as well.  Despite the entertaining advertisements PepsiCo experienced a 1.5% decrease in overall sales between 3^rd quarter 2008 and 3rd quarter 2009 (Q4 has not yet been released).  To be fair the Super Bowl commercials weren't directly responsible for PepsiCo's disappointing year, but did they help in any way?  Did they increase brand awareness?  Did they attract customers that otherwise would not have been drawn to Pepsi or Doritos?  Probably not.  

At least PepsiCo can afford it...

Marketing Doesn't Mean Much If You Lack Substance

Whenever I tell someone that I started a blog a month ago I get all kinds of advise on what to do, most commonly

• advertise with Facebook
• advertise wth Google AdWords
• join every social networking site possible

All of these pieces of advise have merit, but I can't help but notice they have a common theme: advertising my blog.  What about content?  A few people gave me advice on SEO tactics without even asking what this blog is about or why I wanted to start it in the first place!  This brings to mind two problems in the way many small businesses try to generate new business:

1. Far too many small companies believe marketing means advertising
2. Far too many small companies focus on finding customers before they have a product or service to provide them with

I will focus more on increasing traffic to this blog soon, but my first priority is making sure it's worth reading. 

Don't Resist Change: Embrace It!

I recently had an opportunity to hear a small business owner speak with a group at school.  He owns a retail store that is struggling to stay afloat.  Sure, the current economic climate has much to do with his problem, but his business has been losing money for a few years now.  Many members of the audience gave him some helpful suggestions, including working with more specialized (niche) customers and building a website to showcase products.  Most suggestions were met with responses like "I don't have the money to put into that" or "that's not where I see the business going."

It's a shame, really.  One area where small businesses have a distinct advantage over large corporations is their ability to adapt to a rapidly changing environment.  There is no board of directors to convince, no stockholders to placate, no executive committee to endlessly deliberate: just one or two people at the top that either pull the trigger or don't.  Often companies are scared to make changes, even if their current operations are flailing.  These are a few examples that come to mind.

Xerox and the Personal Computer

Xerox developed one of the first PCs, the Xerox Alto, in 1973.  Though they used the devices in their own facilities they ever attempted to market them to the public.  An excerpt from their Wikipedia page:

Xerox itself was slow to realize the value of the technology that had been developed at PARC.  After their unhappy experience with SDS (later XDS) in the late 1960s, the company was reluctant to get into the computer business again with commercially untested designs.

In 1979 Steve Jobs visited Xerox's Palo Alto Research Center and was impressed by the technology.  He incorporated the graphical user interface into his products, making Apple Computers an early leader in the personal computing market.

RIAA and Digital Music

The popularization of the personal computer created huge changes for every industry, though some resisted more than others.  The Recording Industry Association of America (RIAA) had never been thrilled that consumers could share music by dubbing tapes or recording compact discs, but in the mid 1990s digital music presented a problem: consumers plugged into a network could share music files with the click of a button.  And everybody was connected to a network!  File sharing service Napster became a household name, and in July 2001 The RIAA finally succeeded in shutting it down for allowing users to illegally share copyrighted music.  However, the RIAA should have been more focused on developing a way to sell content online rather than fighting to keep music off of the internet.  Six months earlier in January Apple introduced iTunes.  Now studios must distribute through that channel (and split their profits) if they hope to reach an audience.

Book Publishers and eBooks

I like this example because it's happening right now.  eBooks should, by all rights, be great news for publishers.  They get rid of printing and distribution costs, and they make stock-outs irrelevant.  Also, illegal downloads are nowhere near as likely as in the early days of digital music.  Change is frightening though, and some industries will resist change even if it's overwhelmingly positive.  Amazon's Kindle was an overwhelming success for eBooks in 2009.  Apple is already (tentatively) partnering with several publishers for its upcoming iPad.  Does that mean the publishing industry is learning from past mistakes of Xerox and the RIAA?  Judge for yourself:

Fear the Kindle
Book Publishers Starting to Delay eBook Releases
Wary Publishers are Fighting the Future

No matter what industry you work in change is always just around the corner.  You can either embrace it, or you resist and get crushed by Apple.