Commoditization, is it happening to you?

28 11 2007

“We are living in an era where there are too many retailers serving too few customers and where there is no longer any brand loyalty or retail loyalty” Kevin Burke, President/CEO. The American Apparel and Footwear Association.

From this comment by Mr. Burke I believe the apparel and footwear industries are in the midst of an important struggle, to move away from their current status of a commodity business.

The winners will be those with strong design, distinct brand, and smart developed distribution systems. The same can be said for almost any current industry.

Too many retailers and points of sale? I doubt it. What I interpret from this comment is that there is intense competition between retailers, and instead of seeking exclusivity or innovation to attract and maintain customers, they are using the oldest,simplest trick known….lowering product prices and with it, the quality of the shopping experience.

It is a classic example of commoditization.

Manufacturers are also to blame. The rush to sell their product to high volume buyers insures loss of control of the marketing and retail channels.

The rush to sell everywhere, to everyone, at the same time allows and promotes price competition and price wars between the various manufacturers and retailers.

Too few customers? The real problem is overproduction. Current manufacturing focuses on high volume production and this encourages the standardization of product. The desire to reduce fixed costs drives manufacturers to seek out cheap world labor, increase productivity through mechanization (which encourages product standardization) and the outcome is a mountain of finished products, created all over the world, that are indistinguishable from one another.

Commodities. Most apparel and footwear companies focus on low cost, high volume manufacturing, they sell to wholesalers or retailers that also focus on volume. So suddenly branded products can be found in department stores, boutiques, grocery stores, flea markets and the Internet. The product is everywhere, consumers have learned that one should just look for it where the price is lowest.

This also makes it easier to pirate and sell a product to a growing network of sales outlets focused on offering a brand name for less.

No brand or retail loyalty?
If there is no customer loyalty (read as no perceived advantage to shopping with you versus the competition), and loyalty is important for continued growth, profit and success, then it’s time for a serious reevaluation of how one is doing business.

How can one stand out from the crowd, do something different and unique, and create a sense of exclusivity and prestige for the consumer?

This is the future.

Related Links

The easy way

10 top reasons for poor customer service and their solutions

Give this away

Are you listening to what the customer needs?

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Are you listening to what the customer needs?

9 09 2007

I have been involved in a series of meetings with business owners regarding problems in their companies. 

Declining sales and market share due to international competitors, inability to compete or a decline in the entire industry sector are some of the reasons mentioned.

Solutions that were discussed and debated including cutting costs of raw materials, increasing worker efficiency, lowering logistics costs, streamlining the administration and related costs, government intervention and protection, outsourcing and even forming alliances with the international competitors.

What struck me as incredibly odd was that not once were the customer’s needs mentioned.

Not once did anyone mention creating new ideas, products or services for the customer.

There was no discussion of investing in new technology because “things are difficult now”.

There was never a comparison made between the marketing and promotion, branding or image of the competitors versus the company’s marketing, promotion, branding and image.  Why not? 

Every comment or observation focused on lowering production and logistics costs to the customer, never on increasing the benefits to the customer.

All that mattered is “how can I sell at a lower price”.

That’s right.  The entire future of these companies, and in some cases entire industries are focused on how make their products for less.  How to beat the Chinese, Indonesia or Brazil or whatever developing country has access to cheaper raw materials or labor. 

Common sense tells us this is not a viable, long -term solution.

Each of these companies has stated in their publicity, website and in their mission statements that their focus is on the customer and on customer service.  Why aren’t the customer’s needs and future needs part of the search for solutions when sales are declining?

If the customer really truly cares only about price, your product is a commodity. 

If the customer only cares about price, they don’t care about your company’s service, advertising and promotion, attitude or participation in their business.

If you really think that the low price will guarantee the sale, cut out the customer or technical service.  Take away financing.  Take away delivery and logistics.  Forget environmental and worker protection.  Reduce your inventories.   Standardize your prices and order sizes.   Cut down on sales and promotion. 

Call me when your sales skyrocket and the money pours in. 

I suppose it’s normal when sales fall, to attack costs, and costs are a fundamental element in being competitive in certain goods and services.

It is not the only element.  It may not even be the most important one for your customer. 

It probably is the easiest area to change quickly, and requires no investment.  People like easy solutions that don’t require investment. 

The relationship with your customer, the ability to meet their needs with your product or service and allow them to make a profit is what makes business click.

How well do you know your customer? 

What problems are they facing?

Is your contribution to their product important, significant or fundamental in their success?

Do they see you as simply a supplier of a commodity or an integral part of their supply chain and future?

Have you explored how you can work with them to make them more competitive?

Once this has been accomplished, bring the results to the boardroom and start the discussion of how to aid declining sales and deteriorating margin.

Don’t stop with the easy solutions.

Look for the difficult solutions, the ones that require compromise and long-term commitment.

Look for solutions that require investment of resources; time, money, and ideas. 

These are the solutions that the competitor focused on cost is not interested in. 

These are the solutions that will provide confidence and mutual opportunities for growth.





Broken promises

28 06 2007

“The best way to keep one’s word is not to give it.”  Napoleon Bonaparte

It’s too easy to make a promise.

We promise the customer that the product will work, solve their problem, and maybe change their lives.

We promise our coworkers that our part of the work will be delivered on time.

We promise our business partners and suppliers that we they can count on us.

We promise to follow up after the initial sales call, that we will always be there with customer service.

We promise that our priority is the customer and the customers satisfaction.

We promise to hit the sales goals and meet the budget.

All our promises are all full of good intentions, it’s what people want to hear, it’s what we want to deliver.

But, can we guarantee that we will deliver?

Never take a solemn oath.  People think you mean it.  Norman Douglas

The best way to ruin your reputation and lower your ability to lead and manage others is to promise something and not deliver.

We make a promise because it gives others confidence, it seems to make negotiations easier and it reflects our hope that all will go as planned.

“All promise outruns performance.”  Ralph Waldo Emerson

A common error of new managers and leaders is the perceived need to make promises to their organization and team.

Don’t promise it.

Promises are very powerful compromises, but extremely fragile and difficult to achieve.  Take care when offering them to others.  

In the place of promises, offer firm plans, describe actions and possible outcome, dedicate the time and resources required.

Do more than you say you will.

Perform, don’t promise.

“It is an immutable law in business that words are words, explanations are explanations, promises are promises but only performance is reality.”  Harold Geneen





Give this away

30 05 2007

Right now I’d like you to copy, paste, print, and send the following quotation to everyone in your company.

Post it on the front door and in the break room.

Put it on every desk.

“Maybe the reason it seems that price is all your customers care about is…… that you haven’t given them anything else to care about.” Seth Godin Seth’s Blog: Price

Send it to all your suppliers.

Sure to start some discussions, finger pointing and overdue dialogue about the product or service you’re providing.

What do your customers think they are paying for why they buy your product?

What do you want your customers to CARE about, and pay for, when evaluating the purchase of your product?

What are you doing to make this happen?

Related Links

Seth Godin’s blog: Price

The power of something extra

The Easy Way





Oil and water

30 05 2007

Oil and water don’t mix.

That’s what I believed until today.  Oil and water do mix after all

In an organization there are departments that don’t mix well, or not at all.  Sales, finance and production departments are notorious for having problems or “not mixing”.

Each of these groups has a different way of thinking, they create very different processes and final products, it makes sense that they will not agree to, or understand what the other departments are doing.

Tension, misunderstandings, frustration and chaos can result if left unattended.

Sales and marketing is concerned with creating or identifying demand for the product and negotiating an agreement.  It’s about people and relationships, emotions, taking advantage of opportunities, being creative innovative and adaptable, exploring new ideas, making sure the customer is satisfied.  Uncertainty is a large part of every business day.

Finance focuses on numbers.  What did we do in the past, what are we doing now, what will we need in the future and how do we reduce or eliminate our risk.  Structured, predictable, logical, they label everything.  Their evaluation and decision making is based on guaranteed outcomes and not on uncertainty.

Production is concerned with efficiency and is also numbers driven.  Processes are studied, analyzed and standardized in order to maximize control and eliminate  errors.  They prefer set plans and actively resist rapid or constant deviations and modifications.  Believers in contingency plans and backups, logical, not fond of uncertainty.

The goal is to acknowledge that every group is very different, with different points of view, and that these differences are essential to the success of any organization.

The entire system (organization) benefits from the interaction, questioning, and controls required by each department.

If there is total agreement, all the time, something is wrong.

Leadership’s role is to provoke, question, listen, analyze and push this chaos toward a goal.

Successful leaders know how to make oil and water mix,  and make it happen on a regular basis.

Related Links 

New Scientist – Oil and water do mix after all

Are we killing team performance by over communicating 

Leadership, want the job or just the title and benefits

Leadership – who do you want to lead





Are you on the right team?

21 05 2007

 When the focus at work is on providing a great product or service to the customer (maximizing) the perceived value of the product is higher for the customer, and they are willing to pay more.

This translates into more profit for the company.

When our focus is on maximizing profit for the company, management tends to rush toward cost cutting and/or reducing product quality (minimizing) many times resulting in reducing perceived product or service value for the customer.

The customers may not buy your product now, resulting in less profit for the company.

It’s all about providing a product or service that will be appreciated, sought out and embraced by the market.

Creating a product or service that is valuable to the market.

The more people want YOUR product, the more money they will pay for it.

It’s about listening to customers, creating new ideas, innovating, and taking calculated risks based on your expertise and understanding of your business.

It’s not easy.  Creating has never been easy.

Success is not guaranteed.  In fact the higher the risk the higher the potential payoff and profits.

But it sure is more exciting and rewarding than cutting pennies off manufacturing, administration, sales and logistics costs.

It takes a different type of leadership, management and employees to make this happen.

What team do you want to work with, lead or manage?

Related Links

The 6 Fundamental Concepts Behind Every Successful Business

Successful Managers Should Be Breaking the Rules

Even governments market 





Start saving, buy now

27 04 2007

“Starting saving, buy now ”

That’s what the sign said.

Some marketers love this approach to sales.

Instilling a sense of urgency in the consumer, hinting that prices will never again be this low, and the added bonus that by spending money today you are actually saving money.

The marketer makes the assumption that the consumer wants to buy this product, but is waiting…for some reason.

Their hope is to push the decision-making process into the “buy now” arena, with the “threat” that prices may be rising soon.

It probably works with a consumer who is price oriented, and not too savvy in the world of advertising, marketing and promotion.

We all know that sale prices are part of a products life cycle.

Sometime, somewhere, some company or retailer will be offering the product at a discount.

Does anyone really believe that by buying now you will be saving money?

It seems to me that this advertising strategy insults the customers intelligence and common sense.

Perhaps I’m mistaken.

Maybe the businesses that use this advertising approach are really looking for customers that believe they are saving money by spending today.

Is there a consumer group out there that believes that “spending = savings” ?

Does this advertising “push” really help sales, company and brand image?

Related Links

The Easy Way

The power of something extra