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.

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Using positive reinforcement to win customer loyalty

22 02 2007

We respond positively to positive feedback, recognition, and reinforcement of our behaviour and activities at work or home.

We get angry or lose interest in an activity, goal or organization if we don’t receive this “pat on the head” or “cheer-leading” on a continual basis.

Our customers also need reinforcement and recognition in order to maintain their motivation and good feelings toward your company or products.

What are you doing to make sure they get it?

Does the customer feel like you are just “going through the motions”?

Does it feel real?

Are you really showing that you care?

What sets you apart from your competitors AFTER the sale?

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Why do we fail

22 12 2006

No one likes to fail.

We can feel foolish, outmaneuvered, incompetent, insecure, unlucky, silly, angry, overwhelmed, frustrated and in some cases afraid to try again. after suffering a defeat.

Failure is an integral part of the learning process.

Failure is required in order to become successful.

Rare is the successful individual, product or organization that has not met adversity, failure, defeat and loss.

One of the keys to success is the ability to accept failure, learn from the experience and try again.

The fear of failure is so great in some organizations that it freezes innovation, thwarts change and stifles growth.

Organizations try to reduce or limit failure by passing on historically successful methods and accumulated knowledge to new members.

Many times this information is not useful and out of date because the elements, players and dynamics of today’s challenges are quite different from those of the past.

Use the following list to analyze your current projects (and possibly prevent or limit failure), or use the list after a setback or defeat to identify where you can improve.

Reasons for business failure can be broken into 4 main groups:

Planning

  • No plan
  • Incomplete plan
  • Wrong calculations
  • Poor or incomplete interpretation of data and research
  • Failure to take into account all factors
  • Lack of experience
  • Failure to evaluate competitor reactions correctly
  • Failure to anticipate consumer response
  • Significant difference between planned and actual costs
  • Poor cash flow calculations
  • Unrealistic goals and expected outcomes
  • Underestimate risks

Information

  • Didn’t collect all the pertinent information for planning
  • Product or service was not wanted or needed by customer
  • Lack of knowledge of market
  • Lack of knowledge of customers
  • Lack of experience in the industry
  • Lack of experience in manufacturing
  • Lack of experience in sales and marketing
  • Lack of experience in administration

Operations and Follow-through

  • Lazy, didn’t do the work required
  • Undisciplined
  • Unorganized
  • No control of suppliers
  • Did not stop in time and take corrective actions
  • Did not recognize warning signs
  • Ignored warning signs
  • Did not seek professional assistance
  • Lack of attention to logistics details
  • Failure to focus on customers needs, desires and wants
  • Poorly trained personnel
  • Lack of initial capital
  • Not enough capital to maintain operations for first years

Factors outside of our control

  • Important changes in technology
  • Environmental factors
  • International, Federal, State or local government laws, regulations and legislation
  • Aggressive competitor(s)
  • Act of God
  • Change in fashion and trends
  • Theft and fraud

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What can we learn from the piracy business model

10 10 2006

Here is a interesting way to view, prepare for and compete against businesses copying and pirating your content or products.

Piracy is a business model. Anne Sweeney, co-chair of Disney Media Networks and president of Disney-ABC Television Group, announced during a keynote address at MIPCOM. While her focus was on the pirating of media content, the same message applies for manufactured goods.

“It exists to serve a need in the market….. Pirates compete the same way we do – through quality, price and availability. We don’t like the model but we realize it’s competitive enough to make it a major competitor going forward.

What’s so amazing about this?

Taking the piracy is a business model approach allows us to analyze the business model and how it is acting or reacting to the economic fundamentals in the market.

Instead of locking up our company secrets and seeking punishments for the pirates, we can analyze why and where our “competition” is taking advantage of us in order to strengthen and modify our business model.

None of this changes the actual situation. But it might change business strategies and planning when you realize they are competitors and they are here to stay.

What are the advantages of being a pirate, and the disadvantages?

Why are there opportunities for them? What should I be doing that I’m not?

How can I change my organization to take back the market from the pirates?

Once weaknesses in the piracy business model are identified they can be exploited. When strengths are discovered, they can be integrated into our own business model.

The fight against piracy should begin with a focused analysis of the market environment, existing business models and new strategies on how to adapt to the changing market conditions and exploit them to your advantage.

We can stop focusing on the individual “pirates” and their control or capture, and move toward competing intelligently against them.

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The easy way

9 10 2006

Despite all the attention on the power of marketing in order to create and maintain a successful product and business, there are still many organizations and people who don’t want to, or don’t know how to market their products.

They want others to buy their product because they are less expensive than the competition.

It’s the easiest way to sell, requires no planning, no marketing, no effort on the part of the salespeople or the organization. Quick short term results.

Everyone is in the market with the same goods, all screaming and shouting for the customers attention. The customer finds the seller by accident or luck, and proceeds to bargain and negotiate for the lowest price in the market. Very colorful.

It shows a lack of responsibility, lack of marketing, and lack of imagination on the part of the seller.

The owners say: “We need more profit, cut costs and sell more”.

The sales managers say: “We can sell more, but the product is a commodity, what can we do, cut the costs and we can corner the market”.

Production says: “We’ll cut costs, get cheaper raw materials and tweak the design”.

Buyers tell suppliers: “We can try your raw materials or products and see if the market accepts that price, but you have to give me a better price if you want me to buy more”.

Salespeople tell the sales manager: “I don’t know if I can meet that sales quota, it’s not up to me, it’s up to the market to decide”.

Salespeople tell the customer: “We’re cheaper than the competition, buy now”.

The competition is doing the same thing you are.

The customer faced with similar products and lack of information says: “Give me the one that costs less”.

Where was the marketer during all this?

What should they have been doing and saying to the organization and the customer?

If your product isn’t distinct, different or better than the competition. If you are not educating your customer about the advantages of your products and services. You will never have to the chance to market your products.

You will only be able to offer them for sale.

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Managers choice, rules or limits?

22 09 2006

I found myself in strong disagreement to this post on Lifehack.org, Reining in the Rule Breakers.

I understand the need for policies and rules to insure employee safety. This post might be appropriate for those situations. It also might be justified when attempting to standardize jobs and activities that require no creativity or individual decision making in order to function correctly. I sense the post was geared to managers dealing with these type of positions.

This approach toward strict adherence to the “rules”, just smacks of a 1930’s factory or grade school, and is the exact opposite of what I feel a workplace in 2006 requires to remain creative, enthusiastic and productive.

I do think it’s important to define limits. Very different from rules. Limits give maximum or minimum boundaries, but do not bind individuals into procedures and don’t stifle creativity.

It is important to define goals and objectives, basic coordinated procedures and time limits. Allow the team, organization or individual to find the best path to the goal. Before you scream chaos and anarchy, understand that standard operating procedures and existing policies will normally be the jumping off point for most of the organization. Any changes that occur to those procedures will often be evolutionary, not revolutionary.

Focus your energy and your people on objectives and not on blindly following the rules.

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Showtime – how do you want to live your life?

8 09 2006

I’ve had limited experience in show business. The highlights of my entertainment career include the magic show I produced and starred in at age 8, various band performances, and a walk-on supporting role as a wise man in a Nativity play. Oh wait, I forgot to mention, my biggest show business role. I was involved in retail sales.

Retail sales can be a limiting and brutal environment, physically and emotionally. But it is one of the best environments for learning and practicing how to perform with and for others.

Retail sales is all about people, it is not about merchandise. Listening to what people want and helping them find it. You are performing all day, and when you realize this, it can be an exhilarating and fun experience. You can prepare, rehearse and modify your performances daily.

What am I talking about? Performing? Exactly. If you assume the role of an enthusiastic, informed and helpful person you can give something to each person you encounter during the day. You will feel great about yourself and the client or co-worker walks away with an unexpected gift of meeting and connecting with a positive human experience.

I was involved in the fresh flower industry. Olga and I opened a “bucket-shop”, which at the time was an innovation, and dedicated ourselves to making every customers experience distinct and important.

No one buys flowers because they have to. They are sought when one wishes to celebrate a birthday, anniversary, birth of child, graduation, religious holiday, or wedding. They might be using the flowers to recognize an illness or death, as a thank you, to recognize a special person, to say I love you or I’m sorry, or as a emotional pick me up.

Flowers are objects that represent an emotion. Customers were not buying flowers. They were seeking a symbol of their feelings or the feelings they wished to transmit. Isn’t that true about most consumer items?

Understanding this, how can you NOT be enthusiastic about coming to work and giving your best performance?

During the time clients were in our environment, we were part of their search to represent their emotions, our advice was of great importance in order to find the right symbol, the perfect flowers. It was much more than a commodity transaction.

It’s important to recognize that false enthusiasm isn’t going to work. You have to believe in yourself, your abilities and knowledge. You have to believe that you are going on-stage everyday, and that your “performance” has to be genuine. You have to listen to the people around you, and determine what they are really seeking, and help them get it.

People used to stop in and visit us to get a shot of enthusiasm and positive attitude. There was always a smile, a greeting. The environment was light, fun, open, accepting. It was an amazing experience for us and for the clients. We gave a positive attitude, and customers gave us back more positive attitude.

All it took was our dedication to providing the best “performance” we could manage, everyday, no matter who was in the audience.

It’s “showtime” in your life every morning (remember Rob Schneider’s performance in “All that Jazz”?). It’s your decision to assume the role you are going to play. Will it be the angry, grumpy, distracted, negative you? Will it be the upbeat, enthusiastic, focused you?

It’s “showtime” right now.

It’s always “showtime”.

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