My Drug of Choice
Wow. That title ought to get me some hits on the Google - doncha think? But really this post is about …
And about how I got get free drugs from people who are doing it wrong. I have rosacea, a disease that makes my face break out like a teenager with acne. One of the treatments is a low dose of antibiotic. So they make one that’s time released so I only have to take it once a day. (It doesn’t help much but my doctor says we have to give it a year.)
The drug is basically tetracycline. You can buy 300 capsules (250 mg) of tetracycline for $30. Mine is time released (a common process that I can’t believe adds that much cost) but which cost $311 for 30 capsules of 40 mg each. You do the math. Never mind. I did the math. Mine cost 25.9 cents a mg. The other cost 0.04 cents per mg. Mine cost 648 times as much. Six hundred and forty eight times! Just for making it time released.
But that’s not the story of treating your customer’s wrong. That’s the story about the health care in the US and I already wrote about it. I don’t actually pay $311.00 each month for my drugs. Yes I have health insurance, but the deductible is so high ($10,000 per year) because it’s an individual plan that unless something catastrophic happens I’m paying for my health care myself.
No, the reason I don’t pay $311.00 is that the doctor gives me a card which allows me to get 30 pills for $25. So maybe if every one pays that much the real cost is 2.08 cents per mg – only 52 times as much as non-time released. Go figure.
It turns out the pharmacies in my area all want new customers. So it’s easy to find a coupon that gives you $25 in savings, gift cards or whatever if you bring a new prescription to them. And many places in my area do this. So guess what I do? Each time I get a refill, I bring it to a new place and get $25 off of a $25 prescription so I get my drugs for free.
So what are these pharmacies doing wrong?
That’s a very stupid thing to do. Your existing customers are the cheapest ones to market to. Not the ones you should be forgetting about. It’s not as easy to measure your results with existing customers. You don’t know if they would have bought anyway. And this leads me to suspect the reason these pharmacies are doing is wrong.
Somebody at corporate probably figured every new prescription customer was worth $XXX because they would keep their business for a while, they would buy other things while they are in the store etc. So they figured it was worth $25 to get them in.
And you know what? They might be right. I’m not like most shoppers. So maybe the $25 they didn’t make on me is just the cost of doing business. Maybe the whole promotion does pay off. Maybe. I doubt it. But even if it does make money for them it’s probably not the right thing for you. Why?
You can’t take what works at a $500 million dollar company, scale it back 100 fold and expect it to work at a $5 million dollar company. The scale doesn’t work like that. These big pharmacy chains are faceless companies to me and probably most of their customers (and employees). You aren’t – or you shouldn’t be.
picture source: flickr.com/photos/lollyknit/889117554
I’ve been saying for years, that there are only three things any company must do to succeed. And as simple as that sounds, I was wrong. The revised three things are:
1. Create Value that people want to pay for.
2. Find those people and sell to them.
3. Build an organization that does the first two, over and over again at a cost below what your customers want to pay.
I used to say the first thing was “Make something people want to buy.” That’s subtly but significantly different from the way I say it now. What made the change? Three reasons.
Reason #1: COSTCO. Costco doesn’t make anything but they are one of the most successful companies around. They do create value that people are willing to pay for by finding stuff, bringing it to an accessible location and pricing / packaging it in a way that is appealing to their market. So from that perspective it makes sense to think of creating value rather than making something.
Reason #2: Passion-blinded entrepreneurs. These are folks that get so fixated on the thing they’ve invented that they don’t listen to the market. Either they believe that because they love it everyone else should too; or they refuse to listen to how the market wants to buy it or use it. So I thought changing the emphasis from “making something” to “creating value” would get those people to consider engaging the customer more. Maybe.
Reason #3 – For a business to succeed, you don’t do these thing independently from one another. It’s not like you create value. THEN go out and sell it. THEN build an organization. The best companies create value that is easy to sell and take their organizational strengths and weaknesses into account when doing so. It’s all of a piece. I thought saying “create value” makes it seem slightly less distinct that “make something”.
As I said – a subtle difference, but a significant one.
What a dumb question. If you’re a parent, I doubt you’ve ever gotten an answer that comes anywhere near what you’d call satisfactory. And if you’ve ever had a parent, I doubt you’ve given such an answer.
Because it’s the wrong question.
I was reminded of this watching the Republican political convention. For some reason we had on the PBS channel (we usually watch on C-span so we don’t have to listen to pundits) and one of the “reporters” was asking someone in McCain’s campaign about the choice for VP. In case you’ve been under a rock for a week, you know that the pick and how it was handled is pretty big news.
The question was “Did you vet her well enough?”
Why waste prime time asking a question when I know what they’re going to say? I don’t mean I know the answer – that’s a judgement call. But when you’re a reporter talking to someone in the campaign, it’s the wrong question. She should have asked “When did the campaign first learn about xxxx?” or “How many people were interviewed in the vetting process?” or any number of factual questions which would give more of a hint at the vetting process, especially when you can see if the person avoids the facts.
So what does this have to do with running your business? Simple. Asking the wrong question will make you think you have an answer when you don’t. If your kid says “School was fine” does that mean it was? Maybe, maybe not. It probably means they don’t want to talk about it anymore.
There are lots of questions you want to ask of prospects, of customers, of employees, of suppliers. But if you don’t ask the right ones, you’ll think that school really was fine. And the risk is you’ll be wrong and not know it.
Takeaway:
[tags]business, entrepreneur, parenting, school, CEO skills [/tags]
Here’s a great story by a guy whose company was off-shored out of business. In the process of going out of business he laid off his customer service department before dumping his production department, He found out that customers were happier without the customer service department. [The bigger story is here you may have to pay money or time (watch an ad) to read it - well worth either investment.]
Why?
It made me realize customer service is like middle management. It might have served a purpose at one time, but with free and simple communications, and ubiquitous information it’s probably time to re-think if the old structure is the best way to accomplish the goal. The real benefit of technology is to flatten organizations. But that requires using technology not just to do things in the same way (only faster). Rather you must use technology to do things that were not possible before. That’s what cutting edge organizations do.
Takeaway:
[tags]entrepreneur, management, customer service, technology, small business[/tags]
Right after I tell you that you have a lot of bosses comes this article by Joel Spolsky about Seven Steps to Remarkable Customer Service. That’s Seth Godin’s definition of Remark-Able: Being so good, people remark.
Takeaways:
[tags]customer service, entrepreneur, customer, small business [/tags]
What a thrill it is when that day finally comes. That is the company founder’s joy. Also the company founder’s deception. Also (potentially) the company’s destruction.
Joy
Well duh! Now you can finally do what you know needs to be done without someone with their own agenda getting in the way. I think we can all relate to this one.
Deception
Of course you have a boss. In fact you have lots of them. The customers are your bosses. When Scott Adams (creator of Dilbert) quit working for the phone company and went out on his own (Dilbert was quite a success by then) he called it “boss diversification”. But this isn’t just a word trick. That’s why it’s a deception. These bosses don’t even tell you when they’ve fired you. And they rarely give you a warning. So they don’t make it as easy for you to know how to please them. Yet pleasing them an absolute requirement for success. Usually the only signal you have is that they’ve decided to buy (or not) and by the time you get that signal it’s often too late.
So your customer base should be considered a diverse, silent boss.
How could it be different?
If you treated them like you want employees to treat you what would you do? You’d make more effort to decipher their behavior. You’d probably test things more and pay attention to how they react to what you do. This is hard with a boss as diversified and silent as your customer base. Testing is tedious. Changing just one thing at a time so you can test feels limiting (just like having a boss). Recording the results can be inconclusive or ambiguous.
But it must be done. The difference between success and failure is due to how good you are at pleasing your boss.
Destruction
Thinking you have no boss can be your downfall. Why? Think about this, when you have a boss, they usually control what you do, how you do it, and how much money you have to spend on accomplishing your goals. That’s why we all went to work for ourselves isn’t it? (See JOY above).
Yes, but to get permission or budget approval your boss made you jump through hoops. In the best of times, that means you had to clarify your thinking, do a cost benefit analysis and show how your ideas would serve the good of the company. Don’t you appreciate it when your employees do that for you?
Without the boss requiring that – you can just take off on a whim, use nothing more than your gut to justify changes in direction or huge spending outlays. I don’t mean to disrespect your gut. I’m sure it’s wonderful. But clear thinking and careful analysis has it’s place too. Without a boss, it’s too easy to ignore these activities and not hold yourself to account.
This has caused the death of many, many companies.
How Could it be Different?
Put in place a structure for the kind of analysis your company needs before every major (and many minor) decisions. Use a board of director if you can – an advisory board at least and [warning shameless plug alert] a coach.
The good news is that you can still decide to go with your gut; approval won’t be based on corporate politics (unless you allow it); and you still have the final say. But finding a way to require some rigor will ultimately help the company grow to please the real bosses – your customers.
Takeaways:
[tags] entrepreneur, customer, boss, management, small business, CEO [/tags]
Probably not. You might even go out of your way to make him happy. It’s amazing to me how many people don’t see customers in that light.
I know customer don’t have the commitment to your success that a boss does – but pleasing them is still the only way to keep your paycheck from bouncing. And I don’t believe the customer is always right. Saying they are is demoralizing to your staff. But even when they’re wrong, you don’t need to treat them like they’re jerks.
But shouldn’t everyone in your company go out of their way to make the customer happy? Is it too much to ask that they look you in the eye, speak in clear understandable language, act like if you’re interrupting them, it’s for something more important than what they were doing?
The truth is a lot of this starts at the top in a company – do you hire, train and reward based on these kinds of things? Or do you just expect them to happen?
Fast Company September 2006 has a great issue on this topic. with a great article about Lewis Black – a very funny guy – that you can read on line. I think you’ll have to wait a month to read the whole thing on line.
Takeaways.
I saw a commercial last night on TV. A guy was pasting up billboards of women dressed in swanky clothes. As he turned away to get the next poster, the women in the ones he’d already posted winked and waved and moved around. The posters had a single word across the top (I believe it said “Transform”). I was thinking: I know this is about women’s clothes, but who paid for it and what do they want me to buy? Neither the visuals nor the audio gave me a clue. Till the last few seconds when the word KOHLS came on the screen. [Raise your hand if you knew that Kohls is a department store with 749 stores in 43 states catering to suburban women]. I said to my wife that if you didn’t know what Kohls is, the commercial would be a waste of money. My wife replied with two words: “Women know.”
Far be it from me to doubt the veracity of that statement. The problem was I was thinking of the commercial as a way to get new customers when actually it was a way to communicate with their existing ones – Preaching to The Choir. It all came together this morning as I put on a tee shirt to run (OK walk) on the treadmill. The shirt said, in big letters “I LOVE YOU MAN” and had a Budweiser logo. Remember that ad campaign? I doubt that it, or the talking frogs (or was it lizards?) got anyone to order a Bud for the first time. But it probably gave those already in the Bud flock something to feel good about and a reason not to stray.
Leaving aside the question of why women feel good about clothes and men about grunting amphibians, let’s look at the concept of Preaching to The Choir. Seth Goodin would probably argue that if your product is so bland that you have to resort to an animated swamp to differentiate it then commercials are a horribly wasteful way to do this. I don’t disagree. However, the need remains to connect with your customers after the sale. Another way to say it is, give your customers some reason to have a relationship with you that goes beyond the product.
Relationship beyond the Sale
This is why companies give out hats with their logo on them, why companies invite their best customers to an annual golf outing or such. If you think the relationship ends with the sale, you’re being very short sighted. For two reasons. First, it’s usually cheaper and easier to make your next sale to an existing customer than to a new one. Second, some percentage of those customers will become promoters for you if you give them a reason to.
Harley’s got it’s HOGS – Apple computer has evangelists – Jimmy Buffet has his Parrot Heads. Who do you have? I know, you’re going to tell me that you make ball bearings, which don’t exactly lend themselves to a lifestyle choice; or that you install wood floors and your customers only buy from you once; or that all this hoopla is too expensive. Well OK if you say so – let your competition get all the goodwill and referral business.
Personalize it
With a little imagination, and personalization, preaching to the choir can reap huge rewards. None of these ideas will appeal to all your customers. You can’t do a mass media thing. But that’s the beauty of a small company – you can get to know your customers and develop ideas that may only apply to some of them.
Takeaways:
Not all your customers are good to have. Some are great. Some actually cost you money. Some are just so-so. Dharmesh Shah has some good ideas on ranking your customers. His post is geared toward software companies. For other types of companies, I would add things like
There is no set list of what makes a customer valuable – a lot depends on your goals and your business style. A client who might be great for one law firm, may be terrible for another.
Obviously a lot of this involves judgement – it’s not all quantifiable – but that doesn’t mean you shouldn’t track it. Before you tell me that’s too much work, let me toss this into the mix. When I wrote the 5 numbers a business owner needs to know, I left one out. Here’s the 6th. How many customers do you need to meet your goals? The fewer you need the less daunting the task of tracking and ranking your customers.
Some service companies need less than 50 clients. They could start from zero and hit that number in a year by making one sale a week. How many does a hair salon need? A lot fewer than a supermarket. Figuring out what that number is, helps you get that many. Ranking them helps you have the right number of the best customers. That will make your business more profitable and more fun. Isn’t that what it’s all about?
While we’re on the subject of customer service, let me tell you about my BBQ grill. I got my first Weber at a garage sale. It served me for several years. www.weber.com
When it finally rusted out I decided to buy a new one. I even splurged the extra $5 to get red instead of black. I got it home and unpacked it and noticed a couple small bubbles in the paint. No big deal. But being a business owner I value customer feedback. So I actually filled out the customer registration card (which I rarely do) and mentioned the paint bubbles.
A couple days later I got a phone call from Weber. The woman told me the product was guaranteed for life and that I could return it for a new one. It really wasn’t a problem I said, very small and only cosmetic. Besides I’d already put mine together and didn’t want to lug it back to the store.
That didn’t satisfy her. She said she’d be happy to send me the new parts free, and I wouldn’t even have to send the bad ones back. It was obvious she didn’t have to check with anyone for approval to make this offer. Well, the parts in question were the bowl and the top which make up the guts of the unit (except for legs and grills). So they practially sent me a whole new unit for free, just to keep me happy – which I already was. I ended up giving the new “grill” away to our nanny and her boyfriend.
I’ve moved a few times since this happened, and I don’t remember where the red weber is (I think my ex-wife has it). But I can tell you I still cook on a weber. I’ve got two of them in fact.
Takeaways:
This site is hosted by BlueHost.com. I’ve used them for about 6 months. Never had a problem but that’s not a lot of time to tell. What it is plenty of time to tell is that they have WONDERFUL Customer Support.
I’ve emailed support requests several times. Each time I hear back very quickly and, more importantly, in English – not techspeak. They read my whole question and tell me exactly what I need to know in the right context. At one point they even changed the main domain of my account for me – something that I didn’t think they’d do, at best, would tell me to do it myself, but they did it right away.
Now I get an email saying they are increasing their support hours from 24/6 to 24/7 Way to go.
Takeaways:
The war analogy doesn’t work because business is not a zero sum game. A great business makes the pie bigger for everyone. And in war, you’re focused on the enemy (ie your competition) but in business you’re supposed to focus on the customer.
The sports analogy doesn’t work either. It’s all about getting in the zone – where you make decisions based on instinct, and training – instantly without thought. Great for sports where key plays happen in seconds, and the rules never change.
The best business analogy I can think of is sex – the seduction, not the act itself. And I’m thinking of seduction in the olden days like the bumper sticker says: “Remember when air was clean and sex was dirty?” Back then you couldn’t even mention – much less advertise in the newspaper – for exactly what you wanted. And then there was a tension of guys wanting sex only and always and girls not ever wanting to “give it up” – until they did. Why this analogy works is because:
It takes two to do it.
You can’t sit in your room all day inventing stuff – you have to find a customer. Otherwise you’re just making a product, not a company. Drucker said the very purpose of a business is to make a customer. Hubba Hubba.
You each want something the other has.
You want their money more than you want your own widgets, and they want what you provide more than they want their money. So business really should be a win-win (that horrible phrase). You both win in sports or war.
You don’t quite know what the other wants and can’t always believe what they say.
Sure you sell widgets, but they buy the value the widgets provide. They won’t always tell you what that value is or how much they’d really be willing to pay for it. Often because they don’t always know. Just like when you fill out an on-line dating form. Don’t the choices seem a bit arbitrary? In our abundant society so much purchasing is based on feeling and desires and the stories we tell ourselves about what’s going on rather than needs and easily specified facts. To succeed you have to tap into unspoken emotions – and they can’t just be your emotions.
Fundamentalists aren’t allowed to have sex standing up because it leads to dancing.
Dancing is a great analogy too. You each move differently, yet together you make something that’s more satisfying than you’d be able to do on your own. You’re constrained by the rhythm of the music, and the moves of your partner – but isn’t that where the excitement comes from?
First comes love, then comes marriage then comes baby in the baby carriage.
OK. So no analogy is perfect. You can get laid on the first date (so they tell me) but you rarely get married on the first date (unless you’re Brittaney Spears). The relationship between business and customer takes many forms, so I guess we’re back to the modern day sex era. There are times where a one-nighter is all either party wants. But there’s usually a lot more than that. And too many businesses refuse to call anyone back the next day.
Takeaways:
Most people don’t think – they just think they think.
Here are some interesting ideas about how decisions are made. (The first three come from a book about web site design by Steve Krug called ‘Don’t Make Me Think‘).
Takeaways:
Geek Squad will fail even if the geeks do a great job, because the company doesn’t give the customer what they want AND because it gives them something they don’t want.
Geek Squad is the service that comes to your house to fix your network – rolled out nation wide by Best Buy.
Great idea. Solves a problem. I’m assuming their geeks are competent.
The problem is their marketing image is cute. And cute gets annoying. Especially when I’m already mad that my network is down. Call their 800# and you’ll have to listen to what feels like hours of a guy talking in a DRAG NET voice about how the squad works. Just connect me damnit! Stop giving me what I don’t want.
Then it won’t give me what I do want. They have set “packages.” Hook up two computers for this price. This much for each extra computer. But what if my computers are already hooked up and I want someone to tweak it? Or if I’m having problems moving the modem and switch to a new location? The woman on the phone tried to figure out a way to price what I wanted based on the boxes she had on her screen. OK I said, we’ll do it. THEN she told me they “wouldn’t have a geek in my area” till a week from Tuesday. Why didn’t she tell me that up front?!?!? I couldn’t wait that long.
I looked up David Blaise at PC Service Technologies. His website is still under construction (since 1995 it looks like) but he talked to me like a real person. Figured out how much I knew and what I didn’t know. Solved my problem quick and cheap. If you’re not near Milford, Connecticut I doubt he’ll “have a geek in your area” anytime soon.
If you can’t figure out how to scale quality then stay small.
Seth Godin has a great post on taking responsability. It ends with this wonderful line:
Is “I accept responsibility” the new “Your call is very important to us”? Probably.
And, for the record, a client once gave me a gift of Shari’s Berries. They were lucious. Thanks again, Rodger.
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