Don´t miss out on this incredible opportunity to ask your favorite personalities any question on your mind. Diversified celebrity and newsmaking personalities such as Meryl Streep, Daniel Radcliffe, Bill Keller, Robert Kiyosaki amongst others come together in a irresistible conjunction of wise thoughts and great facts.
Please be sure not to miss these great words of wisdom…
As a professor of entrepreneurship, I am often asked about the survival rates of new businesses. Students, entrepreneurs, reporters and many other people want to know how many new businesses live and die. Continue reading “Failure Is a Constant in Entrepreneurship”
Economists, particularly those of the ascendant Chicago school of free market enthusiasts, were in a triumphant mood at the beginning of this decade. Speaking at the annual meeting of the American Economic Association in 2003, Nobel Laureate Robert Lucas went so far as to say that macro-economics — with its focus on the stable maintenance of national economies — could safely be retired. “The central problem of depression prevention,” he said, “has been solved for all practical purposes.” Continue reading “Are Depressions Necessary?”
Budgets continue to be slashed. Brands are disappearing. Media is getting more fragmented. The only thing getting bigger is our federal deficit. So as a marketer, how do you capitalize on a world that is getting smaller in so many respects?
You could ignore it and keep doing things the same way — reaching wide and hoping for the best. Or you can face the fact that the world is changing and figure out how to benefit from it.
There are growth opportunities out there for those brave enough and diligent enough to dive into the data right in front of them: customer databases, profiling and enhancement data, real-time research, predictive modeling. You name it, readily available sources of information about your customers and prospective customers are voluminous. To date, brands from Yahoo to Coca-Cola have used transaction and behavior data to sort out their best consumers, targeting specific types of messages via specific channels of communication.
What marketers are starting to discover is that the target universe is smaller than originally thought. So small, in fact, that 4% of a brand’s consumer base is driving most of the business. This deeper dive into audience targeting is what I call the 4% Factor. Simply stated, it is another level down from the typical 80/20 rule of prioritizing (80% drive, 20% of the business) because, well, everything is getting smaller.
Four is the significant digit because it is this relative number that seems to rise to the surface every time a study is conducted or a program is measured, proving that those impacting your brand (typically characterized as volume, margin or advocacy) tend to be a relatively small number of the whole customer universe.
Examples as to the success of using this strategy are becoming more prevalent. For instance, Catalina Marketing, with its Checkout Coupon system, recently identified that 1% of Iams’ pet-food buyers accounted for 80% of the annual volume of the brand’s sales via the supermarket channel. And other marketers have experienced similar results, such as LaRosa’s Pizzeria chain, in which a small percentage of pizza consumers account for significant portions of various menu items (for example, 4% purchase 65% of calzones).
So what do you do about it? Embrace it. Start thinking about ways to employ addressable media, digital media, one-to-one marketing and, of course, social media to reach that core 4% of consumers who have the greatest propensity to identify and recruit others to your brand franchise.
The 4% Factor goes well beyond a loyalty strategy — it is a penetration strategy — designed as a competitive approach to protecting and growing your business. Simply put, start smaller to get bigger faster. It also tends to be a much more sustainable approach than traditional strategies of casting a really wide net, going through trial and then hoping to retain a percentage of new customers.
If you want to grow a business or product line that can react and adapt more quickly to future opportunities, consider these specific steps:
• Find: Discover and define your main source of volume, margin or advocacy by tapping into existing customer data. Combine that with outside resources such as enhancement data (information that can be appended to consumer profiles to shed additional insight about their demographics, psychographics and potential purchase behaviors) and details gathered via social media and other research tools.
• Filter: Sift through the data and intelligence by segmenting, profiling and using predictive modeling to develop a pool of target segments and markets.
• Magnify: Examine, select and prioritize the top three to five target groups. Test and refine through methods, such those found at iModerate, a company with research technologies that allow moderators of online conversations to dig deeper and go beyond the standard questions to gather detailed insights, as well as other primary interactions.
• Expand: Build out the selected communities via holistic communications strategies ranging from broadcast to social media in order to establish dialogue and grow the universe of new entrants and new advocates.
Today, brands are built by communities of like-minded individuals who share their brand experiences with others and those with whom they have some connection. Pinpoint those communities — or markets of business opportunity — and find creative ways to get them to help recruit your next customers.
This concept might not sound new, but this way of thinking used to be categorized with “below the line” strategies. It needs to become “above the line” to enable social media, mobile marketing, proximity marketing and other one-to-one approaches to be viewed as critical to brand and business building, as broadcast and print used to be. Call it a reordering and rethinking of the marketing-tool hierarchy. That is what I would call a smarter and faster way to grow, particularly in these economic times.
What was Clayton Christopher’s worst decision about making tea? The decision to make tea. “We should have outsourced production a lot sooner,” says Christopher, whose company, Sweet Leaf Tea, brewed its own for four years. “We would have been three times the size we are now.” Perhaps. But such a practical course would have deprived this start-up tale of its folksy moonshiner charm.
The son of a serial entrepreneur, Christopher worked for three years in his father’s medical-supply company in Beaumont, Texas, then lit out for Florida, where he captained a charter boat. During his travels, he met a tea merchant who regaled him with tales of the glories of the industry. Tea, decided Christopher, was the business for him. “There are so many channels you can go into: supermarkets, convenience stores, restaurants,” he says.
With just $15,000 in savings and a $10,000 investment from his family, Christopher had resourcefulness thrust upon him. Obeying the Texas health department’s demand that production take place in an enclosed area, he built an 800-square-foot wooden “tea hut” inside his father’s warehouse and installed drains, a water line, and a carbon filter cartridge to extract the chlorine from treated city water. Then he furnished the hut with state-of-the-scrap-yard equipment. A used air-conditioning unit cooled the water inside 50-gallon crawfish pots. King-size pillowcases served as industrial-strength tea bags. Christopher filled the bottles himself — two at a time — using a couple of garden hoses. To screw on the bottle caps, he used a Black & Decker drill.
If production was jury-rigged, the product itself was carefully crafted. Christopher spent five months sourcing tea leaves from all over the world. He tried 500 individual teas and another 500 blends before settling on a combination of 60 percent Hunan province and 40 percent Indian. Choosing a brewing process was easier. He used his granny’s. “She would brew a really strong tea for not more than five minutes,” says Christopher. “Then pour it over ice to stop the brewing process and lock in the flavor.”
As for market research: “It was just running around stores and buying different flavors of Snapple, Lipton, AriZona, Nestea,” says Christopher. “I knew they spent lots of money on market research and probably knew a thing or two.”
Flavor was Sweet Leaf’s competitive advantage — its only one. Christopher, who had taken on his boyhood friend David Smith as a partner, could not afford the fees markets charge for placement on store shelves. They were lucky to get their bottles, dressed in unattractive labels designed on Microsoft Word, onto the bottom shelves of convenience stores. “I’d dust off the cobwebs, set up the bottles, come back a week later, and one had sold,” he recalls. A breakthrough finally happened when Christopher persuaded 10 stores to let him place metal washtubs filled with ice and bottles of his tea near the checkout area. People started to notice — and buy.
Sweet Leaf’s first major customer was the Texas-based Market Basket chain. “They didn’t see a whole lot of products from Beaumont,” says Christopher. Other supermarkets followed, though it would be five years before Christopher and Smith nailed Whole Foods, which put Sweet Leaf on the map. “We called Whole Foods for about a year and sent samples but never heard from them,” says Christopher. “Finally, David got a postcard. You could tell the buyers had stacks of them in their drawers. It said, ‘Thank you. We are…’ then there was a line, and someone had written ‘NOT…interested in your product at this time.’ David was like, ‘Look! We got something from them.’ We laughed and slapped high-fives. At least they knew we existed.”
The partners hired college students to brew and bottle while they made deliveries in a refrigerated Otis Spunkmeyer van with 280,000 miles on it. They spent weekends in grocery stores, talking tea to shoppers and passing out samples. “At least 90 percent of our marketing went to free samples,” says Christopher. “You’ve got to get the product past people’s lips.”
But the partners’ homegrown plant couldn’t manufacture a shelf-stable product, which prevented Sweet Leaf from contracting with a beverage distributor. Instead, the two were forced to work through egg and milk distributors, who know their way around perishable goods but not around competitive, branded products. In 2002, the pair finally shut down their plant and signed up with a bottling company that pasteurized the tea, extending its shelf life.
Though Sweet Leaf is national now, some things haven’t changed. Free samples — at live music events as well as stores — remain the chief mode of marketing. The company spends about 8 percent of sales on freebies. And the Sweet Leaf staff still creates all the flavors. “Lots of beverage companies outsource their R&D,” says Christopher. “But the flavor is the most important part of the equation. No one cares more about your flavor than you do.”
Former General Electric Co. Chief Executive Jack Welch has some blunt words for women climbing the corporate ladder: you may have to choose between taking time off to raise children and reaching the corner office.
“There’s no such thing as work-life balance,” Mr. Welch told the Society for Human Resource Management’s annual conference in New Orleans on June 28. “There are work-life choices, and you make them, and they have consequences.”
Mr. Welch said those who take time off for family could be passed over for promotions if “you’re not there in the clutch.”
To continue reading subscribe to The Wall Street Journal and check out the link of this article…
Best Advice I Ever Got — Fortune magazine produced a wonderful series featuring the best advice people like Tiger Woods ever received in their life. For Eric Schmidt, CEO of Google, it was to “hire a coach.” He at first resisted the idea since he had been CEO of several successful firms, but John Dorr, the VC behind Google, insisted Schmidt meet Bill Campbell (also Steve Jobs coach) and it proved to be the best advice Schmidt at ever received. Take 60 seconds to read the role of Schmidt’s coach (http://money.cnn.com/galleries/2009/fortune/0906/gallery.best_advice_i_ever_got2.fortune/14.html) and possibly peruse some of the other Best Advice features. And thanks to Matt Heinz, Heinz Marketing (http://www.heinzmarketing.com) for bringing this to my attention.
Guarded Advice — I’m just returning from leading a workshop for an EO Forum and their executives in Bogota, Columbia. According to the EO members that hosted me (and my limited observations), Columbia is on the mend. Kidnappings are down from several hundred per year to just 40, and those were limited to the jungles. The present President is cracking down on the guerillas, security is visible everywhere (vs. sitting inside like before), and you could see people biking and enjoying what is one of the more beautiful (and clean) cities around the world. And with the challenges of nationalization of businesses in Venezuela and Ecuador, many major firms are setting up shop in Bogota. Its airport is also the largest cargo hub in Latin America. With a 48 hour work week (fun fact), they also seem serious about business. Anyway, my views of Columbia were moderated on this visit.
Worst Advice — FSB Story Request (July 10 deadline) — Megan Erickson is working on a story examining the downside to receiving external funding (on a state or federal level–small business grants, commercialization awards, government contracts or stimulus money, etc.) for small businesses and would like to interview small business owners who had negative experiences or setbacks that they attribute to having received grants, awards, and other external funding–as well as if/how they overcame them. Please only respond if you or a small business owner you know fits these exact specifications. Email Megan_Erickson@timeinc.com
Stimulus Package Advice — take three more minutes and read pages 11 — 13 of this eBook entitled “The Stimulus Package: What it Means for Growing Businesses“. (http://www.score.org/pdf/StimulusPackageeBook.pdf) Of particular note:
You can carryback net operating losses (NOLs) in 2008 (tax years beginning or ending in 2008) as far back as five years if you’re under $15 million in revenue. Using the longer carryback period ensures that current losses will be fully utilized to produce the largest tax refund possible. This can help with cash flow issues NOW.
You can fully depreciate $250,000 in furniture, computer equipment, off-the-shelf software, etc. in 2009 — and there are other accelerated depreciation bonuses along with limitations if you have over $800k to depreciate. Time to get everyone new computers!
Tax credits for hiring certain workers, including veterans.
There are certain energy tax credits for going green.
Produced by MyVenturepad in cooperation with SCORE and sponsored by SAP, the eBook (http://www.score.org/pdf/StimulusPackageeBook.pdf) explains what the Stimulus means to small and midsize businesses, including an analysis of the tax implications of the stimulus package by small business and tax expert Barbara Weltman.
Parenting Advice — Two Lies That Will Destroy Your Family — and Scott Nash, CEO of MOMs Organic Market (http://www.momsorganicmarket.com), sent along a July 4th copy of a newsletter to which he subscribes entitled “Celebrate Calm” which describes the two big lies that can destroy families and all relationships: Lie #1: If you were a good parent/spouse, family life wouldn’t be such a struggle and Lie #2: “It’s too late.” Click here (http://www.gazelles.com/Celebrate_Calm_2_Destructive_Lies.doc) to read. And I particularly identified with (and continue to experience) author Kirk Martin’s final point:
HUGE FINAL THOUGHT: The truth is that I made relationships difficult because of my own anxiety, internal tension, stress and rigidity. Plus I just never had tools to communicate differently and understand my family. It’s funny how everyone and every circumstance seemed much easier once I changed!
There are many matters to consider when setting up an offshore outsourcing deal—scope, location, roles and responsibilities, service levels, governance plans and price, just to name a few.
The effect of foreign exchange rates on the transaction tends to fall pretty far down the priority list at the negotiating table, if the outsourcing customer considers the issue at all.
But ignoring the currency exchange considerations associated with offshore outsourcing transactions can be a multi-million dollar mistake, say analysts. Unanticipated swings in currency valuation can increase a company's exposure to financial risk and drastically minimize savings.
"Many clients do not spend adequate time building a financial hypothesis of what [problems] currency fluctuations could cause in the short and long term," explains Sandeep Karoor, managing director of offshore outsourcing consultancy neoIT. "At best, loose terms and conditions get agreed upon."
Most U.S. companies think in terms of U.S. dollars. That's understandable; everything from budgets to their day-to-day business is doled out in greenbacks. And during the golden age of offshore outsourcing, the savings reaped from labor arbitrage alone were significant enough that any additional money left on the table from a lack of currency arbitrage was pocket change by comparison.
But that scenario is changing. "Today, with many companies entering into second- and third-generation offshore deals, the low-hanging fruit is already gone," explains David Rutchik, a partner with outsourcing consultancy Pace Harmon. "Companies need to look at currency implications as a way to drive down costs."
How Offshore Outsourcing Providers Profit from Falling Exchange Rates
Typically, an outsourcing buyer pays in its own currency to the offshore vendor—in the case of an American customer, the almighty dollar. Meanwhile, the provider pays for its offshore resources in its local currency. As the value of that local (offshore) currency drops, the providers' costs go down and the customer ends up paying more in dollars for the services provided than the services actually cost in the foreign currency.
For example, during 2008, the Indian rupee fell 23.3 percent against the U.S. dollar. A company with a $10 million IT services contract that would normally cost the offshore provider $8 million to provide (pocketing a 20 percent profit margin) would have actually cost the vendor less than $6 million, landing the provider a windfall of an extra $2 million.
"We have seen these margins translate into literally millions of dollars annually," Rutchik explains.
That's no mere pocket change in today's economic climate.
Offshore outsourcing providers—and multinational vendors with offshore subsidiaries—understand the impact that the complexity and unpredictability of currency markets can have on their business. Smart vendors have hedging strategies in place to deal with currency fluctuations that may prove unfavorable to them.
"In most contracts that have language around currency fluctuations, the terms tend to be service provider friendly, not client-friendly," explains neoIT's Karoor.
But a savvy offshore outsourcing client can negotiate terms that provide some protection for their half of the deal.
Next: Strategies for Mitigating Currency Risk
Methods for Mitigating the Risk of Currency Fluctuations
1. Ask the provider to bear the brunt of the risk of currency fluctuations.
Clients can negotiate to have the provider absorb the majority of exchange rate risk because the vendor generally has better capabilities for absorbing currency shifts, according to Forrester principal analyst Dr. Paul Roehrig.
In such an arrangement, the outsourcer bears the risk of currency fluctuations up to an agreed upon percent above or below a baseline exchange rate. This is usually referred to as "banding." If the exchange rate rises above the "band," the client pays more. If it sinks below the "band," the client pays less. To make this work, customer and provider must agree on the indices for tracking the currency, the frequency of monitoring fluctuations and the process for handling variances, says Karoor.
2. Pay in dollars tied to foreign currencies.
In this kind of deal, the customer pays in dollars, but the amount of the payment varies based on the movement of the currency where services are being provided. If that local currency tends to devalue against the dollar, the customer will wind up paying less and that savings may help to cover other financial risks like inflation, says Pace Harmon's Rutchik. The approach also tends to stabilize profit margins for the provider, so when the outsourcer is on the wrong side of the exchange rate, it isn't scrambling to cover those losses by cutting service.
3. Hedge against fluctuations in exchange rates.
Offshore outsourcing customers can, in theory, use the same hedging strategies that their IT service providers do. However, creating a dedicated team of financial analysts to develop and execute a hedging strategy would be a costly option for the casual outsourcing client—and extraordinarily risky if the analysts bet the wrong way on the future movement of the currency markets.
4. Pay for services in the provider's local currency.
Some customers, especially those with longer-term deals, prefer to pay in the local currency of the offshore provider—the Mexican peso or the Chinese yuan or the Estonian kroon. After all, the U.S. dollar trends higher against emerging market currencies over the long term.
But short term, the movements of the currency markets are more sporadic. There are periods where the dollar loses value against these currencies, so simply paying in local legal tender can end up costing during these phases. However, paying in the local currency can be cumbersome for clients who don't already do other business in the market, notes Rutchik.
5. Apply a "look-back" average to future payments going forward.
With this approach, the customer pays in dollars tied to local currency fluctuations but not in real time. Customer and vendor take the average currency fluctuation "looking back" over a certain period—say, the last six months. They then apply that average fluctuation against the dollar to a forward looking period of payments—say, the next year. This is repeated each year over the course of the contract term. This provides some stability for both parties each year, except in cases where the "look back" period involves some wild fluctuation in exchange rates, which is certainly possible.
Some offshore outsourcing customers ultimately may decide it's simpler to pay for IT services in fixed U.S. dollars even if that means some loss of savings.
But it's important to at least consider the options for mitigating currency risk, even for customers well into their offshoring contracts.
Says Rutchik, "Service providers are willing to renegotiate because they often have experienced significant margin expansion due to the currency benefits they have gained at the expense of the customer."
If you’re selling a business to business service and you can prove that it’s better, that it delivers more value, that it’s cheaper or more durable or more efficient, shouldn’t that mean you will close every sale?
Even hard-headed business people end up buying the thing they want, not the thing they necessarily need.
The real danger of relying on facts to make your sale, though, is that when the facts are no longer on your side, you’re toast. The low-cost supplier gets hooked on the easy sales that come from acting like a commodity, and if that changes, you’ve got little room to maneuver.
Great brands and projects are built on real value and a real advantage, but great marketers use this as a supporting column, not the entire foundation. Instead, they build a story on top of their head start. They focus on relationships and worldviews and interactions, and use the boost from their initial head start to build competitive insulation.
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