Momentum Co Blog

Currently there is a lot of hype surrounding the new coupon-based sites including Groupon, Scoupon, Living Social, plus numerous other spin offs.

Whilst each varies, the general concept remains the same. The website offers a special deal to “community” members and the deal is activated when it reaches a certain level.

For example, a day spa might offer a package for 60% off the normal price, with the goal of attracting new customers.  Sounds like a good deal doesn’t it?

Well for the customers it’s a great deal. They get cheap products and services. For the coupon website it’s also a great deal, because they structure promotion in such a way that they can never lose, taking up to 50% of the revenue plus transaction costs.

But what about the business? Well … I am not so sure. Providing the deal is activated, you’re guaranteed to get plenty of new customers. So what’s the problem?

Firstly, I have problem with deep discounting. It devalues your product or service and attracts the wrong type of customer, those who only buy on sale.

The deal also raises other questions. Can you afford to fulfill all the activated deals? What will your existing customers think, will they start asking for discounts? How many of the new customers will come back when the price returns to normal?

The coupon business has been around for years, particularly in the US, and whilst the internet makes it appear more attractive, in my opinion it’s a lazy marketing approach that yields poor quality customers.

When you ride a bike, you move both legs to turn the pedals. By moving them together it helps you accelerate and then maintain your speed.

Let’s say though you take one foot off the pedal and let the other leg do the work. Initially you don’t notice much, but after a little while your “working” leg becomes tired and your speed decreases. At this stage, it’s natural to put the other leg back on the pedal to share the load and get back to speed.

In business, we often we fall into the trap of taking one foot off the pedal (we stop selling) and put all the pressure on the working leg. But unlike riding a bike, the slowing down isn’t obvious, nor is the fatigue.

So what signs should you look for?

The most obvious place to start is by looking at your sales pipeline. When was your last new business meeting? When was the last time you added a new projects to your sales forecast? If the answer is not recently, then it should be addressed (start turning the “sales” pedal).

You may also want to look at your operational structure. Do you have staff dedicated to business development or is it shared across the business? Lack of a dedicated business development resource can often lead to lumpy sales periods, which can cause cash flow and staffing issues.

So what should you do?

Years ago I worked for a business that had recognised this was a problem and made structural changes to the business. First of all, they split the role of an account manager in two, creating a dedicated business development role (for selling) and a client service role (for doing). The results were immediate, cash flow became more consistent, but most importantly revenue and profits increased.

The lesson: keep both feet on the pedals to avoid the slow down.

We’ve all done it, we come up with a new product or solution and then get all excited. We then put together a basic business plan including financials to justify the investment of our time and money.

You allow for expenses, and then project the income, with sales starting off at a trickle and then growing exponentially in Year 1 until Year 5, until you’re rich!

Well not quite, but I am staggered by the amount of businesses I encounter that have unrealistic and in some cases, delusional sales projections. They’re usually misled by one or a combination of the following factors:

• The price they can sell for ie. overestimate what market will pay.
• The size of the market they’re selling to ie. the market is not that big.
• The time required to make a sale ie. takes longer than expected.
• The cost of delivery ie. underestimate costs which impacts profit margin.

The sad thing is that these same people rarely test their concept in the market, until it’s too late.

My advice is this – do the basic planning, but test your product or service first. Ask around and get some feedback, and don’t just ask your friends. Take the feedback on board, revise it and then get it into the market place.

Put simply, save yourself the pain and be realistic.

A few weeks ago I visited one of the world’s largest fast food restaurant chains to buy an ice cream dessert. After placing my order of four (not all for me), it became apparent the ice cream machine was malfunctioning and its output had ground to a halt. After nearly 15 minutes, with not a word of explanation, the staff member came forward with two desserts (not four) and offered me a refund.

Not what you would call fast food.

It short, the system failed them, or in this case a machine. However, something else was severely lacking, communication and initiative.

Now don’t get me wrong, I am not criticising the staff nor the system (it’s the best in the world), but it’s important to remember that systems have constraints, particularly when things go wrong. In this case, initiative and a bit of common sense would have suggested to stop selling desserts until the machine was fixed.

Lesson: Your customer knows that things can go wrong – just let them know how you plan to fix it.

Have you ever gone to a shop and wanted to buy something and left empty handed? I have, in fact it happened last week.

Over a couple of weeks I had researched which laptop I wanted online, but preferring to buy it from a store, I decided to visit a well-known retailer of electrical goods.

On arriving at the store, I noticed the price was a little higher than I had seen at other retailers, so asked if he could match it. He asked which retailer had it cheaper. Not recalling the exact one I mentioned a name and he disappeared out the back to return (with a cheeky grin) and a laptop showing a competitor’s website and a price which was more or less the same.

Acknowledging that it obviously wasn’t that competitor, I asked what was the best he could do. Still not budging, I asked whether they had the laptop in stock. Having only the floor model left, he still refused to budge.

So I walked out. No sale, nada, nothing.

Now you could think I was just being frugal, but I actually would have bought their floor model at their list price, if the sale person had been more flexible.

But what annoyed me the most was that this same retailer ran an advertising campaign that week spruiking that “we don’t just match computer prices, we smash them”.

Lesson: If you set an expectation in your marketing, you’d better tell your sales people.

It could be a restaurant, a hair salon or even a fashion outlet – but we’ve all seen the signs on a storefront window saying “Under New Management”.

To be honest, I have never really understood why a new owner would do this, as it sends a negative message. It essentially suggests that the last owners did a poor job, but we will make it better. Talk about starting on the back foot!

If you’re looking to buy a business that is ailing then it’s important to get to the bottom of why it’s not doing well. Most of the time management has nothing to do with it and it is more likely related to brand perception, product offer and/or location.

This “Under New Management” advice doesn’t just apply to retail outlets; it applies to any business or opportunity. Put simply, if it looks like a dog it’s probably a dog.

Recently I started working with a new supplier, they’re a small company, but they do great work. The company had come recommended to me by a friend, which always gives you a level of confidence.

That said, I still wanted to be comfortable in my own mind that they could do the work.

From the very beginning they were exceptional. They were quick to get back to me and confirm my requirements and then they presented me with a quote, which in short, was the most professionally presented quote I have come across to date!

Like many quotes it was only one page, but it was beautifully laid out and included everything I had asked for down to the last detail, including a timing schedule.

Now I won’t go as far as saying the quote was the only thing that won them the job, but I will say it gave me complete confidence that they would deliver what they promised.

Now think about your quotes – are they winning or losing you business? A little extra time and effort can make a big difference.

Before Christmas I was chatting to my mate Joe about an experience he had with a wholesaler of industrial products. Joe was looking for a small part to suit a product he was developing. After locating the wholesaler who stocked the part, he called the company to place an order.

The conversation went something like this:

Joe: “Hello, I would like to place an order for part (x)”

Salesperson: “No worries, how many would you like to order?”

Joe: “500”

Receptionist: “Sorry, the system won’t allow me to order that amount”

Joe: “Do I have to order more?”

Salesperson: “No it’s too many; we only can do orders of 100”

Joe: “Sorry, I don’t understand. I want to order more from you but I can’t”

Salesperson: “Hang on, I will have to ask my manager!”

We use systems and processes to make things more efficient, but they should never get in the way of doing business, and in this case, making a larger sale.

I must admit I was a bit of a sceptic in the lead up to the Apple’s launch of the iPad. That was until I tried one and then went out and bought one the following day.

Not only are they great fun to use, but they are also pretty practical for consuming and displaying content (they’re not that great for creating content, but that’s not really their selling point).

Pretty soon I was taking it along to meetings and showing my clients. One client in particular was quick to adapt and they are now taking using their iPads for presentations and demonstrations when they are on the road. The feedback and the reaction from clients have been impressive.

Less than a decade ago, desktop computers were the standard and laptops were rare and expensive. Then as laptops became more prolific the desktop became slowly less popular, particularly in the home environment. Now tablet-based devices, like the iPad, are doing the same thing to laptops.

Technology can give you a jump over your competitors, giving potential customers the perception that you smarter and better than your nearest rivals.

Of course it doesn’t have to be the iPad, it could be something else like video conferencing or remote computer sharing. Just make sure you adopt it before your nearest rivals do!

Yesterday I was driving into the city and noticed a new billboard for a national optometry business. It was in a very prominent location and would have cost a small fortune.

The irony of it all was that I couldn’t read it. The text was too small and I don’t even wear glasses (perhaps they’re being clever).

This is quite a common mistake with billboard advertising – even for big companies.  Just because it reads well on your computer screen it doesn’t mean it’s going to read well from my car at a distance of 100 metres.

The result was that I only got part of the message – it’s like missing the punch line of a joke!