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Rockfish Seafood Grill is one of only two out-of-town restaurants my husband and I frequent.  Well, we used to frequent it; it closed ‘our’ location in a carefully-planned scale back (precisely so it could maintain its stellar service across all its locations).  We loved Rockfish because it not only delivered great seafood in pleasantly casual surroundings and at a fair price, but also because it understood the concept of service.  The staff was as efficient and accommodating as any at one of Phoenix’s numerous ‘Gucci’ restaurants of national and even international acclaim (and that have associated ‘Gucci’ prices on a national and even international scale). 

Rockfish is gone, but not forgotten.  I plan to prepare crab cakes today, which made me fantasize about Rockfish’s remoulade sauce, one of the best I’ve ever been served.  So, I pulled up bing.com (thanks, Microsoft, bing is in fact a neat search, er, decision engine), found the Rockfish website, clicked on Contact Us, and clicked on Guest Relations to have Outlook open a pre-addressed blank email.  I wrote that I missed Rockfish, especially its remoulade sauce, begged for the recipe, and clicked Send.  Fifteen minutes later, I had a reply.  Yup, my email to Rockfish Guest Relations was time stamped 8:13 a.m. and the reply from Matt Baum, Rockfish Culinary Operations Manager, was time stamped 8:28 a.m.  I still can’t believe it!

All the sloppy outfits have jaded me; I expected Rockfish to reply, because they clearly ‘get’ customer service, but I figured it would take at least 24 hours.  Nope, Rockfish does it again!  They actually have people in Guest Relations.  They actually read email, a very time-sensitive medium.  They actually have people-in-charge reply immediately.  Gee, I miss them more than ever!

So, here’s the real point of this rave: Rockfish told me “no,” yet they actually further endeared themselves to me in the process.  Yeah, when’s the last time a company managed that with you?  When’s the last time you managed that with one of your own customers?  Take a lesson from Rockfish, then, in five easy steps:

First, dear Matt said, “Thank you very much for the kind words about Rockfish.”  Thank you.  Heartfelt!  Believe it or not, I don’t always hear “thank you” from companies I share my hard-earned money with; and, I certainly don’t often hear a genuine, from-the-heart “thank you.”  Matt didn’t just jump to answering my question; he didn’t just bang out “no.”  He thanked me for my compliment.  He read what I said and he responded to all of it.  He took a couple of seconds of extra time to take in, comprehend, and react to everything I put out to him.  Smart!

Second, Matt said, “We love to hear from our guests and hope that if you ever travel to Texas or North Carolina you will stop by and get the food that you crave.”  He didn’t miss a chance to market!  I can’t patronize Rockfish any longer in my neighborhood, but that doesn’t mean the restaurant should count me out; Matt took the opportunity to invite me back whenever I’m in other neighborhoods.  Smart! 

Third, Matt said “no” in the gentlest way and in keeping with Rockfish’s clever-casual personality: “The remoulade is a proprietary item and I am sworn to secrecy, but I can tell you that if you take your favorite cocktail sauce (red seafood sauce) and mix your favorite Tartar sauce with a little horseradish you would be in the right pond.”  He actually answered my question; no dancing around it in hopes I’d not notice he didn’t give me the recipe.  He gave me a real and legitimate reason for his “no.”  And, best yet, he gave me a ‘work around.’  Talk about going the extra mile…smart!

Fourth, Matt said, “I hope this helps and thank you again.  May the Fish Be With You!”  He wished me well while once again taking the sting out of his “no”; and while once again thanking me; and while once again embodying the Rockfish spirit.  SMART!

Fifth, Matt included a comprehensive electronic signature: full name, title, company name, company address, cell phone number, direct land line, corporate phone extension, fax number, and company website URL.  Both Matt and Rockfish make it clear they have nothing to hide; they want me to call, write, or come by.  They prove it by making it possible for me to call, write, or come by!  SMART!!!!     

We all have to say “no” to customers now and then.  But we can actually do it while endearing ourselves to those customers.  “No” does not have to mean “good bye.”  Take a lesson from Rockfish Seafood Grill.  And if you’re ever in a Texas or North Carolina location that has a Rockfish restaurant, do yourself a favor by dropping in.  You’ll get a great meal along with a hands-on lesson in effective marketing!

A friend of my husband’s just had her knee replaced and I went to the hospital to see her.  She was 48 hours out of surgery and I found her sitting in a chair in her room, waiting for the physical therapist.  She’d been waiting for an hour.  Seems he came in and got her into the chair—readying her for her first walk of the day—and then he left to get his partner.  He said he’d be right back.  My husband’s friend was happy to see me, since she couldn’t reach her “call” button and she was desperate to go to the bathroom; I went out into the hall and found a nurse. 

My husband’s friend wasn’t particularly miffed, she just tried to explain that when the physical therapist said he’d be right back, she assumed he’d be right back; or, that he’d return to say he would be delayed and, perhaps, even arrange to have her situated more comfortably while she waited.  She explained her feelings to the nurse in a most pleasant way, yet the nurse’s response was a waspish, “They’re very busy, ma’am.”  Yes, the “ma’am” had that strained I’d-like-to-call-you-something-else-but-I’m-too-professional-to-do-so tone to it.  I wasn’t really shocked, not in this day and age, but certainly was happy I wasn’t the one confined to that hospital room.  And, I made a mental note to ratchet up my own health maintenance regimen so that I wouldn’t someday be in that poor woman’s shoes, er, stitches.

I think sometimes “professionals”—those educated and/or licensed knowledge workers upon which many of us depend on a daily basis—forget that customer service is still required.  Of course, for “professionals” it’s called “client” service, or “client satisfaction,” or even “patient care.”  But, it all means the same thing.  It’s not just delivering competence, but also delivering courtesy/care/consideration/compassion.  And, maybe it’s even more important for “professionals,” since by definition doctors, lawyers, nurses, physical therapists, bankers, teachers, et al, are helping ensure our wellbeing…are advising us on or delivering upon the most critical aspects of our lives, today and tomorrow.  But, many of these people adopt an attitude of “I’m the expert here” and “I’m doing you a favor.”  They don’t want what they perceive as argument, challenge, or inadequate levels of respect.  (Yes, I know you can change bankers, doctors, lawyers, etc., but it is an exceedingly painful process in terms of time, money, and energy.  And, frankly, the banker, doctor, lawyer, etc., with whom you are working and who might be giving you the worst possible service, might in fact have the best available technical knowledge; in which case you might just have to take their c-r-a-p.)         

Anyway, I guess I’m trying to convey the real need for a customer-oriented mindset, even when you have clients.  That, and, for heaven’s sake, the real need for you to take care of yourself, lest you find yourself languishing in a hospital where “they’re very busy, ma’am”!

This post first appeared in Percolating! by Kup & Sourcer (www.kupandsourcer.com/blog) on September 7, 2007.

My prior post was a primer on establishing price.  Analyzing break-even is an important part of the pricing process; break-even analyses depend on fixed costs, variable production costs, unit price, and projected sales.  The whole point is to calculate the sales volume where the variable and fixed costs of producing the product will be covered.    

So, let’s look at an example of a break-even analysis for a “widget.”

Fixed Costs – The sum of all costs in producing the first unit; does not vary with production (until capital expenditures are needed).

• $10,000 one-time tooling charge 
• $6,000 first year’s phone/secretary ($500 per month)

Variable Costs – Costs that vary directly with production.  “Total Variable Cost” is the product of projected sales (number of units you expect to sell) and “Variable Unit Cost” (costs that vary directly with the production of one additonal unit).

• $3.00 to manufacture each unit (in lots of 10,000)
• $.25 to $.50 per unit shipping
• 10% sales commission (on price to the trade, not to the end customer (aka consumer)) 

Channel Costs:

• 40% retailer margin (percent of the trade’s selling price to the end customer (aka consumer)) 
• 60% mail order marketer margins (percent of the trades’ selling price to the end customer (aka consumer))

Break-even is the number of units that must be sold in order to produce a profit of zero (but still recovering all associated costs).

A break-even calculation for 20,000 units of the widget to be sold to the retail market (don’t forget that sales commission!) at an average shipping cost of $.38 would be: 

($10,000 + $6,000) = 20,000 (.9Price – ($3.00 + $.38)) 

.9Price – 3.38 = 16,000/20,000

.9Price = 4.13

Price = 4.13/.9

 

Price = $4.59 

 

A break-even calculation for 5,000 widgets (half of a lot) to be sold to the mail order market at an average shipping cost of $.38 would be:

(($10,000 + $6,000)/2) = 5,000 (Price – ($3.00 + $.38))

Price – 3.38 = 8,000/5,000

Price = $4.98

Obviously, we are assuming that a half-lot must only cover half of the fixed costs!

The break-even analyses can vary, depending on the assumptions you make around shipping, mix of sales between mail order and retail, etc.  So, you probably will end up figuring several different break-evens.   

Now, what to do with the break-even price?  Well, consider for our widget example that you want to allow 40% retailer gross margin…if you wanted to work purely off break-even, then, your price to the end customer (aka consumer) would be $7.65 ($4.59/.6).  Or, consider for our widget example that you want to allow 60% mail order marketer gross margin…if you wanted to work purely off break-even, then, your price to the end customer (aka consumer) would be $12.45 ($4.98/.4).  Think through your competitive and demand factors given these prices and also how these prices fit into your overall pricing strategy (see my “primer” post).  Tweak as necessary to come up with your final price for the widget!   

This post first appear in Percolating! by Kup & Sourcer (www.kupandsourcer.com/blog) on August 10, 2007.

A lot of theory and proven practice go into effectively pricing your product or service, starting with your overall strategy (skimming, harvesting, or penetration).  If the names alone don’t make the strategies clear to you, here are quick-and-dirty definitions:

• If short-run profits are your goal because you have a ”pioneer” position, then you probably want to adopt a skimming price policy—which means you’ll set your price high.   

• If short-run profits are your goal because of a decling market, then you probably want to adopt a harvesting price policy–which means you’ll set your price high and simultaneously cut costs.   

• If sales rate and/or market share are your focus, then you probably want to adopt a penetration price policy—which means you’ll set your price relatively low. 

Once you’ve figured out the right strategy for your particular situation, you have two options for calculating your actual price.  You can approach the task from a desired retail price angle or from a cost angle.  (Whichever you choose, you should “sanity check” your results from the opposite angle.)  

Taking the desired retail price angle means you’ll base your decision on demand and competitive considerations; then, if you have channel partners, you’ll back through all channel margins to establish your price to the trade.  Taking the cost angle means you’ll base your decision on your break-even analysis (the point at which your product or service stops costing you money to produce/sell, and starts to generate a profit). 

Once you’ve calculated and “sanity-checked” your price, you’d be wise to generate a simple cash flow statement to see if you can actually meet all your business goals at that price.  Then, keep an eye on your market and competition, because odds are you’ll need to adjust your price over time (you might even want to plan on price adjustments up front, when you figure your initial price).

It all sounds simple and it pretty much is, but you would do well to enlist the help of one or more seasoned professionals with marketing and accounting expertise.  Good luck!

This post first appear in Percolating! by Kup & Sourcer (www.kupandsourcer.com/blog) on August 8, 2007.

Working with an MBA student taking a marketing course, I got a chuckle when one particularly challenging assignment caused her to blurt out, “There is a lot more to marketing than writing jingles and planning photo shoots.”  She said she was surprised to learn that marketing “relies heavily on financial data and determining what to spend is difficult.”  

We marketing types—including our sales brethren—have faced this misperception since commerce began thousands of years ago.  But, the point of this post is not to elicit your sympathy or even your respect.  Rather, the point of this post is to motivate you to take your own marketing efforts seriously.  Do your market analyses, do your break-even analyses, plan your pricing startegies, run some financial models for three-year and five-year sales projections, analyze your competition…there really is a lot more to marketing that writing jingles and planning photo shoots.

This post first appear in Percolating! by Kup & Sourcer (www.kupandsourcer.com/blog) on August 3, 2007.

Maytag has spent big dollars over many, many years honing a brand image of quality, dependability, and commitment.  That Maytag repairman embodied reliability; you could count on him.  Well, I’m not so sure!

My husband and I read in the newspaper last week that Maytag is recalling a part on some refrigerators (seems it catches fire).  We did some Internet-based research and discovered our refrigerator was one of those included in the recall.  So, we arranged for the repair.  Yesterday the repairman arrived (on time!) and within three minutes the part was replaced.  All good.  Then, about six hours later, Maytag called…not to ask if all went right with the repair, but to see if we wanted to buy an extended warranty before ours expires in mere days.  Huh.  They knew we had a warranty; they knew it was expiring; they knew they wanted us to buy another warranty.  BUT, they didn’t know our refrigerator had a part under recall…or at least they didn’t bother to call us to tell us that; we had to read about it in the paper and do some research on our own and arrange for the repair on our own.  Not good. 

For all its hype that it does business the old fashioned way and cares about its customers, now what I think of when I think of Maytag is a phone call trying to sell me an extended warranty after no phone calls trying to warn me of a recall.  That’s an example of how reality can negate a brand!

US Airways has reversed its decision to charge for in-flight beverages because the extra revenue has not been worth the negative passenger reaction.  In a February 23, 2009 story by Dawn Gilbertson in The Arizona Republic (http://www.azcentral.com/business/articles/2009/02/22/20090222biz-usairwaysdrinks0223.html), Andrew Nocella, US Airways’ senior vice president of marketing and planning, said, “It’s such a minor issue in the grand scheme of things but was having a large impact on the perception of our brand.  We just came to the conclusion that it was distracting our passengers from all the other things we were accomplishing, in particular our great on-time performance.”

It surprised me when US Airways made the decision to charge for beverages because it did seem so at-odds with its brand.  If US Airways had a clear positioning strategy based on how it is differentiated in the marketplace, the decision to charge for beverages would have seemed at-odds to Nocella, too.

You see, a company’s overall positioning strategy is called its brand’s value proposition.  Value propositions answer the question: “Why should I buy your brand instead of your competitor’s?”  Winning value propositions answer that question in one of five ways:

1) Because buying my brand gives you more for less.

2) Because buying my brand gives you more for the same. 

3) Because buying my brand gives you more for more. 

4) Because buying my brand gives you the same for less. 

5) Because buying my brand gives you less for much less. 

So, how US Airways differentiates and positions its brand in the marketplace dictates the US Airways value proposition—fly with us because we give you more than the competition (which includes Southwest Airlines) for less; or, fly with us because we give you more than the competition (which includes Southwest Airlines) for the same; or, fly with us because we give you more than the competition (which includes Southwest Airlines) for more; or, fly with us because we give you the same as the competition (which includes Southwest Airlines) for less; or, fly with us because we give you less than the competition (which includes Southwest Airlines), but for much less.  And, everything US Airways does should resonate with—not contradict or conflict with—its value proposition.   

Southwest Airlines differentiates itself in the marketplace along the lines of product, services, people, and image—by being more efficient, more fun, and cheaper than its competition (which includes US Airways).  Differentiating itself thusly, Southwest has positioned itself as the no-frills, low-price airline.  So, Southwest Airlines has chosen and operates on a “less for much less” value proposition—that reflects the full mix of benefits upon which the Southwest brand is differentiated and positioned.  And, everything Southwest Airlines does resonates with—does not contradict and does not conflict with—its value proposition.

Southwest Airlines is very clear on its value proposition; apparently, not so US Airways.  By charging for in-flight beverages when competitors like Southwest do not, US Airways was not giving its passengers more—not for more, not for the same, and not for less.   By charging for in-flight beverages when competitors like Southwest do not, US Airways was not giving its passengers the same.  By charging for in-flight beverages when competitors like Southwest do not, US Airways certainly was not giving its passengers less for much less.  By charging for in-flight beverages when competitors like Southwest do not, US Airways was giving its passengers less for the same or more.  That’s a value proposition at odds with any airline’s brand and that’s a value proposition that won’t fly!

If you have a Liberal Arts background, you might recall Maslow’s Hierarchy of Needs. Abraham Maslow proposed it in his 1943 paper, “A Theory of Human Motivation.” In a nutshell, it describes a set hierarchy of human needs and contends that our basic needs must be met before we can seek to satisfy successively higher needs. One typical depiction of Maslow’s theory is a five-level pyramid—-the lowest level is biological needs, such as food and shelter; the second level is safety; the third level is love/community/sense of belonging; the fourth level is status/esteem; and, the top-most level is self-actualization. The idea that one must have the first four levels of physiological need satisfied before one can address the psychological level rings true on an intuitive basis…which would a homeless person who hasn’t eaten in a couple of days think is more important, shoplifting a can of tuna or participating in a panel discussion on the finer points of situational ethics?

So, what has all this to do with marketing? Why, it’s fundamental to marketing! Are you attempting to engage your targets—-prospective or current-—at the wrong level of their hierarchy of needs? Are you trying to sell a car to someone without a driver’s license; a Cadillac to someone with a used-Volkswagen budget? More essentially, do you provide services to clients, but your business model is suited to meeting the needs of customers (or vice versa)?

 Knowing whether or not you are targeting customers or clients (or both) is critical to developing effective engagement, service, and retention strategies. Think Wal-Mart for customers and Nordstrom for clients. Sure, they both sell clothing, but Wal-Mart caters to customers and Nordstrom caters to clients. What’s the difference? Wal-Mart shoppers pretty much know what they want and are fine with helping themselves, as long as they get the best price. So, Wal-Mart has designed everything around the self-serve, low-cost model. Nordstrom shoppers, on the other hand, demand knowledgeable and personal service, and are more than happy to pay for it. So, Nordstrom has designed everything around the full-solution, quality-at-any-cost model. Wal-Mart would eat into its tight margins if it hired consultative sales professionals to engage shoppers one-on-one; Nordstrom would go out of business if it left its shoppers to fend for themselves (without access to tailors for custom-fitting). Neither model is better nor worse on its own; each is just designed to meet a different set of expectations.

The Wal-Mart and Nordstrom examples are fairly obvious and straight-forward. The model that is right for you might not be so obvious. In fact, it might not make sense for you to use a single model all the time for all your customers/clients or products/services. However, you can easily determine the appropriate set of expectations by building your own Customer/Client Hierarchy of Needs. Then, you can easily design an effective model to meet that set of expectations by building your own Product/Service Hierarchy of Needs.

First, “map” your customers/clients and products/services on the two hierarchies—-at what level on the Customer/Client Hierarchy of Needs is each of your customers/clients and at what level on the corresponding Product/Service Hierarchy of Needs are they doing business with you? Then, analyze your customers/clients and products/services according to their relative positions on the hierarchies, noting where they line-up/match/connect or don’t. You want to consider three things in particular:

1) Do you have any customers/clients buying at one level of products/services, but being supported and/or marketed at a different level? As a general rule, costs and revenues rise with each level on the hierarchies. So, funding support or marketing tactics appropriate to a customer/client at the highest level on the Customer/Client Hierarchy of Needs, when they are actually buying at the lowest level on the Product/Services Hierarchy of Needs, is a waste of resources. Worse, you probably have a customer/client buying at the highest level on the Product/Services Hierarchy of Needs or a marketing campaign that could generate sales at the highest level on the Product/Services Hierarchy of Needs, that is getting short-shrift as a result or your misallocation of resources.

2) Which customers/clients have potential for buying products/services at higher levels? What would it take to get (and maintain) customers/clients higher on the Customer/Client Hierarchy of Needs, so you can sell them correspondingly higher on the Products/Services Hierarchy of Needs?

3) Are there levels of customers/clients and products/services that are partially populated or entirely empty? In other words, do you have gaps in your customer/client base (market sectors you have not tapped) or in your products/services offering (lines of business you have not developed)? Both gaps represent potential revenue/growth.

Thereafter, the sky’s the limit! You can extend market and account penetration by evolving customers into clients. Or, you can maximize margins by driving client relationships down to customer relationships (reserving consultant-level resources for clients). Or, you can survive industry shifts by changing your operational mentality from product-based to solutions-based. Or, you can reevaluate and hone your lines of business and, in the process, identify customers/clients/offerings that should be divested. Whatever the engagement, service, or retention strategies you end up developing, you will be most effective if you first use the underlying principles of Maslow’s Hierarchy to identify your targets’ needs/expectations.

This first appeared August 3, 2006 on Kup & Sourcer’s Percolating blog.

Have you or has anyone else in your company used that whine from childhood when a business partner let down one of your customers?  Well, you can be certain your customer doesn’t care whose “fault” it is, they just want you to fix the problem–-or at least act as though you care about it.  When you ignore an opportunity to aid a customer, even when you didn’t create the situation, you hand that customer your future to do with as s/he likes…and s/he probably will like to crush you.

I recall clearly a national florist who pulled the old “it’s not my fault” routine on me some years ago.  After rushing a friend to the airport to catch a plane to her father’s funeral, I stopped at the florist to arrange for a fruit basket to be sent to the family.  I was living in New Mexico and the funeral was in a small town in Florida.  The florist didn’t have a shop in that small town, but did belong to an international consortium with member florists there.  I thought instead of flowers, fruit would be appreciated as my friend and other family members all gathered at the widow’s home.  It was springtime and as I selected the fruit basket from a catalog I told the florist (more than once), “Remember, my friend and her family are Jewish and mourning the death of her father, please do not to send an Easter basket.” 

Well, wouldn’t you know, a big, bright basket of fruit was delivered to the widow’s home right after the funeral–-with a colorful Happy Easter pennant sticking out of the top, no less.  I know, because when I called Florida the day after the funeral, my friend was nice enough to tell me about it. 

I called the florist and asked for the person with whom I’d placed the order; the person I had asked face-to-face to make certain the fruit basket was funeral-appropriate.  When she got on the line she immediately began the old I-cannot-control-the-shop-that-actually-does-the-delivery-more-than-a-thousand-miles-away routine.  No “I’m sorry”; certainly no “Let me try to make it up to you.”  Just, “It’s not my fault.”

I was so angry with the way the florist handled–-rather, didn’t handle-–the situation, I made a point of telling everyone I knew about what happened.  Because the florist was a national chain, I told people all over the country.  I told people at the global Fortune 50 company for which I worked.  I told people at the two professional societies I was active in.  I told friends.  I told family.  And, I kept telling people for months.  And, so did my Jewish friend who’d received the Easter basket on the occasion of her father’s funeral; when she learned the florist did nothing about the mix-up, she told her friends, her coworkers, and her family, all over the country.

Eventually the shop closed.  Now, I know I didn’t single-handedly put it out of business.  In fact, I had nothing to do with its failure; the people at that shop earned failure for themselves.  And, the chain itself is still in business, so who knows if any of its other locations even felt a pinch.  But, I am certain I helped a number of people choose a different florist the next time they bought or wired flowers or fruit.  And, I know I will never, ever use that florist again, not anywhere.

So, it might not have been the florist’s fault, but that florist sure as heck paid the price for refusing to care.  What do you suppose your customers would do if your supplier, delivery service, or other business partner messed up something and you just said, “It’s not my fault”?  Can you afford to find out?

This first appeared August 11, 2006 on Kup & Sourcer’s Percolating blog.

Ask any chef, carpenter, artist, IT professional, you-name-it, and they’ll tell you the right tool–-used the right way-–is the key to a successful result.  It seems that many companies forget this fundamental truth, throwing not only the wrong communications tools at customers, but also in the wrong way.  I guess they think they’re being leading-edge or considerate (”Look at all the cool choices we’re giving you!”).  But usually they are just annoying customers to the point of losing them.

Take email and websites.  Electronic communications are immediate communications.  So, if you aren’t going to respond within, oh, two hours, then you’re not using the tool right.  Your customers email you or use an online form because they want an immediate response.  When a company takes days to get back to an electronic inquiry, they’ve usually already lost to a company that is more responsive.  And, what about customers without access to the Internet?  Be sure whenever you market your electronic communications you also include other tools; don’t leave ”unplugged” customers out in the cold.  

Another example is voicemail and auto-attendants.  The phone is a personal medium; you speak to people on the phone.  When your customers call you–-and, hey, you gave them your phone number-–they expect to speak with someone.  Forcing customers to trudge through endless choices for this department or that problem category isn’t using the tool as it was intended, nor as people want it to be used.  And, certainly, forcing customers to leave voicemail so you can get back to them (when it’s convenient for you; so sorry it might not be convenient for your customer) isn’t what they expect when they pick up the phone to call.  The only happy ending to that scenario is an almost-immediate call-back, no more than two hours delay. 

Whatever communications tools you use, make certain they are appropriate to your audience and that you put in place the back-end support structures to make the tools work effectively.  Otherwise, you will not enjoy the success these tools promise.  It’s no different than trying to drive a screw with a hammer or fold egg whites with a fork.  Can you say “exercise in frustration”?  Well, your customers can probably say, “I think I’ll try the competition!”

This first appeared August 18 ,2006 on Kup & Sourcer’s Percolating blog.