Too Few, Too Little, Too Much:
Why Direct Marketers Fail . . .
And Ten Ways To Make Sure You Don't
(continued page 2)
No direct marketer can long remain at the same scale of business. To do so is suicidal. But, no direct marketer with $20 million in sales can afford to use the same economies of operations that worked when the company was $4 million in sales; yet, all too often this is exactly what is happening.
The concept of partnership rather than the traditional customer/supplier relationship is essential. You must work with suppliers that have an adequate scale of operations to bring you an advantage and cost efficiencies. Your suppliers must be able to pull you forward rather than try to play catch up to your requests.
SOLUTIONS:
A. Establish a goal of reducing your costs by a specific amount, say 15%. Calculate each area of cost to determine what you must do to reach this goal. For instance, examine printing, telephone costs, fulfillment services, collection fees, credit card processing costs, and all other outside service costs.
B. Sit down with existing suppliers and give them the opportunity to respond to your cost reduction program as a long term partner. If they choose not to respond, identify a second supplier of one scale larger than your existing supplier and determine if they are interested in helping you grow.
C. Establish target cost reduction benchmarks for each partner and each level of growth. Share that information with your supplier-partners and solicit their innovation for meeting and exceeding the targets.
6. Too little customer talk
Even though the revolution of customer-focused marketing has come, few direct marketers are talking to their customers in meaningful ways. There may be no element of marketing as blatantly ignored, lied about, denied, or otherwise artfully dodged, as the amount of time invested in and the quality of the dialogue with customers. Everybody says they are doing it; only a handful of companies really are. Every company has copies of all the right books; only one or two people have actually read them.
Most of the ways in which companies talk to customers are meaningless. Customer surveys question what happened not what was expected. The expectation of the customer is the only thing that counts and on a scale of one to ten, all customer expectations are tens. Unless you have open, direct lines of productive talk right into the heart of hundreds of individual customers daily, you still don't get it.
If you believe as little as 15 percent of your time should be spent talking directly with the people who pay the bills, then you personally are spending 33 full days a year in one-to-one dialogue with your customers. You are finding out what they expect, what they think, how they see your company, what their product needs and ideas are, what their price sensitivity is this year, and a myriad of other concerns, interests and quirks that you must know if you are going to keep those customers coming back.
After years of focus on the customer relationship, most of our direct marketing CEOs have still not talked with a living, breathing customer in years. The dialogue starts and stops with TSRs and CSRs. I shop hundreds of catalogs, both business to business and consumer; not even once has a senior manager called to ask what I think or how I was treated as a customer . . . not once in the last ten years!
SOLUTIONS:
A. Today, pick up the phone and talk with 5 of your top customers.
B. The following day, talk with 5 of your worst customers.
C. The third day, create 5 questions that you would like to ask any of your customers. Concentrate on questions that uncover expectations and help you build a better, customer-oriented business.
D. Within one month, have your managers and supervisors doing the same thing on a daily basis.
E. Make daily customer telephone calls a ritual part of your everyday business.
7. Too much missing, flawed or unreliable information
Direct marketers are failing or are in danger of failing because they are making increasingly more important and more expensive decisions based on too much missing, flawed or unreliable information. At almost every company I consult with, information is on a "fly by the seat of the pants" or a "guesstimate" basis. Where information is organized, it cannot be verified; where information is not organized, there is no recognition of the importance of the formulaic nature of business to business direct marketing.
At a time when information technology is at an all-time high in international direct marketing, the reality is that maybe only 10% of our consumer and business to business direct marketing companies have absolute information.
Direct marketers fail because they don't know -- to the penny -- the cost to acquire a customer; to the penny, the lifetime net profitability of that customer; to the penny, the advertising support cost of that customer over the next one, two and three years; to the penny, the profitability of an advertising vehicle or channel; to the penny, the net profitability of each product. In short, far too much reliance is placed on the bottom line and not enough on the intervening lines of operation.
The sick businesses are in a state of denial; the unhealthy businesses are working with bad numbers; the symptomatic businesses are worried that they may not have reality in hand; the healthy businesses can answer all the important questions without any doubt as to the validity of the knowledge.
SOLUTIONS:
A. Name 4 bits of information/knowledge that your company needs to make better marketing decisions.
B. Name 4 bits of information/knowledge that your company needs to make better merchandising decisions.
C. Name 4 bits of information/knowledge that your company needs to make better promotion decisions.
D. Isolate absolute information for 1 of each of the three categories above. Then do 2; then 3; then 4.
E. Two months from now, answer absolutely no less than 12 specific information/knowledge measurement questions concerning your sales, products, economics, and customers.
8. Too much money left on the table
Direct marketers too often suffer from "prices and charges paranoia." Without exception, the fear of charging too much or charging for a service results in leaving money on the table.
You can get more money for the product, for the service, for the wisdom, for the information if you ask for it and target the right level and segment of the market. You can get more money for speed, efficiency, innovation, and uniqueness if you will ask for it and deliver what you promise without fail. You can get more money for exquisite service and for anticipating and meeting the expectation of the customer before the fact.
You can charge more for handling, for shipping, for subscriptions, for continuity programs, for unique products, for almost everything. Ever since the first price, someone has asked for a discount and a merchant has given that discount. And, ever since the first price, a merchant somewhere has made enormous amounts of money by asking, instead, "How can I get more?" This is not a sin.
The leaders have met the specter of margin erosion face to face and have decided to pursue high margin business and to add significant value that brings adequate financial reward for the risk. The risk level is increasing in consumer and business to business direct marketing; only the bold will survive.
SOLUTIONS:
A. Abolish all thinking that says, "We can't raise prices." Rather, encourage thinking that says, "How can we charge more and make the customer even happier?"
B. Prove to yourself and your company that price is not necessarily the number one concern of the customer. Isolate and test two segments of your customer base for each of: product prices, price multiples, shipping charges, handling charges, service fees, and all other price variables that you must contend with.
C. Create 4 new marketing, promotion and merchandising approaches that increase the value of what you are offering to your customers. Begin turning the dominant thinking in your company away from price protection and more towards price enhancement.
D. Ask 500 customers this year what they would pay more for. Then listen to what they say and try it!
9. Too much market constriction
Direct marketers are, by and large, not thinking broad enough. The global expansion of the markets has been ignored by too many corporations and opportunities for rational international expansion are not being captured. The expansion out of comfortable, familiar markets has been too restricted. The development of products that expand the market reach and has been too slow and too constrained.
Both consumer and business to business marketers will suffer from a failure to thrive if they continue to employ tunnel vision relative to markets. Just because you have been in the electrical equipment business for the last 75 years is no longer a valid reason why you remain only in that one market; just because you have done business only in the U.K. is not a valid reason why you are not doing business in other parts of the world.
Advancing and growing direct marketers are often doing 50% or more of their business internationally. The home markets are a solid core, but growth is coming from the global marketplace.
SOLUTIONS:
A. Relax at least two market restrictions within the next 6 months. Open your thinking to a new market segment, a new product concentration, a new distribution channel, or an entirely new business expansion and complete the research, the definition and the pro forma financial work. Then do it!
B. Identify, define, and research one foreign market for your products. Find 5 reasons why you should do business there rather than 5 reasons why you shouldn't.
C. Seek alliances, licensing deals, royalty arrangements, partnerships, and other creative ways to expand internationally. Do not concentrate only on start-ups, acquisitions and 50-50 partnerships.
D. Create a "Foreign Market Expert" on your staff -- or do the work yourself - - and begin strategic planning for foreign market and product expansion on a formal and organized basis.
10. Too much fulfillment error
Direct marketers are shipping too many of the wrong or defective products, too slow, too late, too often; out of stock is anathema to survival. Technology and fulfillment is now driving business to business marketing, not the traditional marketing practices of the past.
Product shipping errors are far too prevalent in the sick companies. The wrong size, color, count, specification, or any other element of product satisfaction is unacceptable. The excuses of "the people," "the system," "the computer," or "the manufacturer" simply no longer wash with an experienced, jaded and demanding customer who no longer is reluctant to go elsewhere to get what is desired.
Fulfillment delivery times of one, two, three, even four or more weeks are totally outside the acceptable customer limit today. The revolution created by express delivery is now the norm; if you aren't preparing your company for same-day delivery anywhere, as evidenced by Viking and others, you will ultimately fail in the fulfillment-reliant future of direct marketing.
SOLUTIONS:
A. This week, target one fulfillment problem for total elimination. Begin the battle plan, the logistic planning and launch the assault to prove to yourself and your company that you can win any fulfillment battle you choose to engage in.
B. With one fulfillment error success, target no less than 5 problem areas for absolute solution within the next 12 months. These don't have to be major or earthshaking. As long as you constantly eliminate time and mistakes you are on the right track. Set goals and accomplish them!
C. Become a speed freak and an overnight delivery service partner. Move now to absolute same day shipment and delivery tomorrow. It's the only way that you will be in the vanguard of same-day delivery in the coming years.
D. Rethink your fulfillment process and turn it inside out so that the customer is fulfilled before the needs of the business. "We can't ship products in under 3 days because it takes 3 days to move the order through our system" is a ludicrous concept when you think about it, but it's where most direct marketers are still stuck.
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