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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Top 10 reasons for poor customer service and their solutions

13 11 2007

Customer service, the interaction between the client and the supplier is an integral part of the purchasing and user experience, and as such, is the key to continued success in business.

What are the reasons for poor customer service?

Top 10 Reasons for poor customer service and their solution

1.    People are not trained.  When an organization does not spend the time to fully train their people the consequence is poor service.

Solution:  Dedicate resources (time and money) for training and reinforcement.   Employees should be fully informed about company goals, the products and services.  Emphasis and training should be focused upon the importance of listening and responding to the customer’s requests.  People can only do the job if they are given the right tools and objectives.  It costs money to train people.  It will cost more if you decide not to train them.

2.    People don’t care.  Selecting the correct personality is crucial for your business success.  Apathetic or self centered personality types have no place in a business that requires customer contact.

Solution:  Focus the selection and evaluation process to identify personalities that do not fit the required profile.  Get the wrong people out immediately, it also sends a clear message to everyone.

3.    Sabotage.  Angry or frustrated employees can actively work to sabotage and try to destroy the company.

Solution:  Keep honest and open communications with employees.  Informally and formally review performance, goals, objectives and feelings to stop potential problems before they reach the customers.  Get these people out of the front lines immediately.

4.    Employees don’t believe in the company, product or service.  If the image, marketing and promotion of the company is quite different from the reality, workers will not be able to sustain a positive attitude in the face of problems they know exist.

Solution:  Be honest.  Work closely with customer service, marketing and quality control to identify real problems and fix them.  Don’t let  marketing advertise over problems, solve them.

5.    Personal problems reflected in work.  When an employee’s personal life is in crisis or out of control, they may exercise control, aggression and negativism toward customers in an attempt to put some part of their life in order.

Solution:  Clear communications with employees:  If their personal life is affecting work performance, talk about it.  Time off, access to counseling or just listening may prevent more serious problems.

6.    Burnt out.  Too much negative, too many complaints can lower a person’s level of commitment and move their positive and helpful attitude to an apathetic one.

Solution:  Constant communication helps to identify who is burning out and why.  Get customer service people together to talk of success and how to deal with the frustrations.  Provide recognition or incentives for excellence in dealing with problems.

7.    Not providing the correct solutions to customers, lack of empowerment.    There is nothing worse than dealing with an employee who listens to a problem, then shrugs and says they have to ask someone else in the company to intervene and provide a solution.

Solution:  Give the people on the front lines the authority, power, tools and ability to solve problems.

8.    Don’t see the benefits – don’t understand their role in the company. 

Solution:  Employees project an image of the company.  They are the company.  They should be reminded of their importance and value to the customer and to the company.  Incentives, recognition, training and constant reinforcement are important.

9.    Apathetic from hearing the same problems over and over.  A fundamental role of the customer service division is to provide constant feedback on how customers view the company, the products and the service.  If this feedback is not analyzed and acted upon by upper management a feeling of apathy and frustration is created.

Solution:  Set up a model and procedure for the accumulation, analysis and implementation of solutions for the problems identified by customer service.

10.    Incentives/salary not tied to results.

Solution:  If you insist that the company depends upon people, and that people are the key to success, implement compensation packages, evaluations and incentives that support and reinforce this.

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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.