Why businesses fail (part 4): they don’t do the work needed to be different and better

We’ve all seen it. An entrepreneur opens a new business, but before long we notice it’s closed.  They ran out of money before the business broke even. The time and money they spent is gone, and their lender may have a claim on their home and other assets.

How does this happen?

peacock-mark-wheadonA wise person once said, “There’s lots of competition for average”. If you’ve identified an important customer problem, they probably found a way to address their problem before you came along. Prospects can compare ratings, reviews, and prices for you and your competitors online. If you’re no better than everyone else, why should the customer buy from you?

What should you do instead?

You need to create a competitive advantage based on what your target customers think is important. Federal Express knew that its customers needed fast reliable delivery, and their message was “when it absolutely, positively needs to be there overnight”. Superior product design has driven Apple’s success, while low cost keeps customers coming back to Wal-Mart and Costco. Whatever you think about the health value of their menu, McDonald’s wins with consistency, cleanliness and service.  The luxury hotel chain Ritz-Carlton focuses on the needs of their high-end customers, using the slogan “ladies and gentlemen serving ladies and gentlemen”. They share their knowledge with other companies through the Ritz-Carlton Leadership Center. Their quality is regularly praised in the influential Zagat Survey.

Whatever your customer’s definition of quality, you need to deliver excellent value at every point where the customer interacts with your company. This means your email newsletters, how easy your web site is to navigate, your sales process, delivery, billing, and customer service.

On the positive side, think about the online shoe retailer zappos.com. Their sales process is very smooth. They offer free shipping on all domestic shoe purchases. If you’re not satisfied with the shoes when they arrive, you can return them in the original packaging for free. You can return items for up to 365 days, as long as they are in the original condition and the original packaging. Zappos.com has a customer testimonial page with almost 10,000 testimonials. They set the bar pretty high for on-line and physical shoe retailers.

On the negative side, remember the YouTube video “United breaks guitars”? Lots of other people do. It was viewed more than 10 million times. And General Motors probably wishes it had done a better job replacing the defective ignition switches on the cars it recently recalled.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go to  www.pinellascounty.score.org.

Photo courtesy of Mark Wheadon via creative commons license

Why a great business beats a great product

Some of you may be thinking that a superior product should always win over a superior business. This story written by Ivan Widjaya in Small Business Trends should change your mind.

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“In most businesses, return customers and word-of-mouth are what will make you successful. Using the burger analogy, let’s run with a fictional customer service scenario about two different burger joints:

Exhibit A: The first burger place (Let’s call it “McGurdy’s”). Customers are greeted with a smile and the staff is taught to take their time answering any and all questions the customer might have. Each staff member is paid above minimum wage and the atmosphere is one of teamwork and positivity.

The burgers aren’t going to be featured on Gordon Ramsay’s signature menu at Caesar’s Palace, but the health standards are excellent, the service impeccable, and the food is on par with other fast food joints.

Exhibit B: The next burger place (“The Burger Pit”) makes the best burger mankind has ever tasted. This little shop is run under the thumb of one man; a surly old fella who screams orders at his staff, who get paid the minimum pay allowed by law.

The customer service staff jumps every time the old fella yells, often interrupting the customer service flow and interaction. The old man screams at staff for “talking to customers for too long” and tells customers who complain to leave his store and never return. The health standards are impeccable under the iron rule of the old fella, service is slow and disjointed, and the burgers are a fantastic experience to say the least.

Which would you choose? Naturally, customers will choose the best burger on the planet, no? After all, the quality of the product should dictate popularity. But it doesn’t.

Customers want to feel respected and listened to. Very few return customers would go to the Burger Pit over McGurdy’s because going to get the best burger means their patience is likely to be tried to the extreme, and they might have a downright unpleasant experience. The majority will go where the combination of product quality and service are best (a “happy medium” in the absence of a business that truly has all elements of their product and service covered.)”

To read the whole post, go to http://smallbiztrends.com/2014/02/customer-service-matters.html

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go online to www.pinellascounty.score.org.

Image courtesy of Thomas Laurinavicius via creative commons license.