Fatal Error #27: Do they graduate or quit

Fatal Error #27: Do they graduate or quit

You are going to hate me for this one because I am going to tell you that you should WANT your best people to leave you.  No, I am not nuts.  I am simply a pragmatist.

Think about it.  If you have a true superstar, that once every 10 year person... can you really afford to pay him or her once he/she reaches their potential? Be honest - you can’t!

Therefore, you either hold them back in hopes that it takes them longer to figure out they have more potential than you can provide, or they leave on bad terms because they realizes you are trying to hold them back.

Here’s a better option: You let them grow as fast as they can.  You harness the power of their rising stardom.  You nurture and grow them and pay them as much as you can as long as you can. Then, you help them get that better job and celebrate it.

Now you have undying loyalty and gratitude from an employee that knows they could not have gotten there without you.

Think I am nuts?  Accounting firms have done this for years.  They hire the best and brightest out of school in huge numbers, knowing that only a fraction of them will be working there in 5 years.  Then they work hard to help these young auditors get jobs at their clients for big raises and big promotions.  Why?  Because guess who the auditor will be for that client?

Here’s the bottom line:  Ask yourself, do your best people quit you or do you graduate them?  There is no 3rd option.  If they are quitting you, you are failing them and yourself.  You can do better for them and your company will prosper as well.

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Extraordinary Guarantees and Your Business Model

I am a big fan of by Dr. Christopher Hart’s book, “Extraordinary Guarantees: A New Way to Build Quality Throughout Your Company Ensure Satisfaction for Your Customers.” In the book Dr. Hart lays out a blueprint for improving margins and sales via exceptional guarantees. He offers several examples including a powerful one of a New York company that captured a 60% share of their market with a product priced at double the normal rate.

I could not agree more with Dr. Hart’s commentary on guarantees as a powerful business model tactic. However, the business landscape is currently cluttered with guarantees that are anything but extraordinary. Here’s my personal hate list of lousy guarantees:

  • Price matching. Please-- you try to get away with overcharging me then offer me the same price I could have gotten elsewhere if I only would have been smart enough to go there first?
  • 110% price matching. This is a slightly less horrible option. I overpay at your store and now I can stand in line at customer service and duke it out for $3.44. Here’s the math. I buy an item for $53.12 but find it for $49.99 elsewhere. I get the $3.13 difference plus a whopping 10% bonus of $0.31. This is well worth my headache standing in line at customer service……right. I am guessing you, like me, have never taken anyone up on one of these unless it was over $50 or $100….if at all. So what’s the point of having the guarantee, to attract the hyper-price sensitive customers that are willing to stand in line for $3? It reminds me of the movie Christmas Vacation when the out-of-touch Grandmother offers the grandson a quarter to rub her bunions. She felt like a quarter was a nice reward. The grandson felt differently. This type guarantee offers too little reward for too much work.
  • Warranting an item for a period of time less than it should function problem free. I just bought a washer and dryer from a major manufacturer. Most of the machine is
    warranteed for a year. Whoopee! I fully expect a major branded appliance to last a year without breaking. That’s not a guarantee, that’s honoring your defects.
  • Scam-type guarantees. These guarantees seem too good to be true….and they are. Free toothpaste for life if you don’t love our new flavor. This sounds great until you realize you have to travel to Uruguay to visit the prescribed dentist to check you out prior to receiving your “free” toothpaste. A guarantee should make the customer more comfortable with the offering and quality of the product, not less.

Here’s an example of a guarantee done right. I recently stayed in a Crowne Plaza hotel and found the sign below by my alarm clock. We will wake you at your set time or your stay is free. No excuses or yabuts; no exceptions or *’s; and enough skin in the game to make it interesting and worth my while.

More companies need to leverage the power of extraordinary guarantees like Crowne Plaza. Dr. Hart suggests in his book that these guarantees increase customer satisfaction, allow for increased pricing, and force operational improvements (Crowne Plaza cannot afford to give away too many free nights so I am guessing they tightened up their wake up system).

What cool ideas have you seen companies use for extraordinary guarantees?

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Cool business model or waste of time

Cool business model or waste of time

The power of a brand

51XfcDZ3QGL._SY344_BO1,204,203,200_

Fix them or fire them?

Business Model Innovation for Speakers

Tide Basic

Unbranding and your business model

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Fix them or fire them?

The power of a brand

51XfcDZ3QGL._SY344_BO1,204,203,200_

Fix them or fire them?

Business Model Innovation for Speakers

Tide Basic

Unbranding and your business model

iStock_000005021610Small

Does a cool idea = a great business model?

Article source: http://feedproxy.google.com/~r/BusinessModelInstitute/~3/ViK170AtmUg/


The power of a brand

The power of a brand

51XfcDZ3QGL._SY344_BO1,204,203,200_

Fix them or fire them?

Business Model Innovation for Speakers

Tide Basic

Unbranding and your business model

iStock_000005021610Small

Does a cool idea = a great business model?

Article source: http://feedproxy.google.com/~r/BusinessModelInstitute/~3/oOb-5E3a22I/


Business Model Innovation for Speakers

Business Model Innovation for Speakers

Tide Basic

Unbranding and your business model

iStock_000005021610Small

Does a cool idea = a great business model?

Wheel with notation

The Business Model Wheel as a Brainstorming Tool

Business Model Wheel Color

Business Model for Dummies Author QA

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Unbranding and your business model

Unbranding and your business model

Proctor and Gamble (PG) plans to introduce a lower-priced version of #1 selling brand Tide. Tide Simply Clean and Fresh will be price in the mid-tier category vs. the premium category for regular Tide. Here’s what has PG salivating –According to Nielsen, in the most recent year, 41% of American households bought value-priced laundry brands, while 30% bought mid-tier brands and only 29% were buying premium brands.

Tide Basic

This is an interesting decision that has a potentially profound impact on PG’s business model. Clearly, PG feels the sting of recession-burned and still stingy consumers and feels it needs to add a solid product in the mid-tier category. However, this decision may raise more issues than it solves:

- PG enjoys industry-best margins at 49.6% vs. competitors Unilever (45% approximately) and Clorox (42.9%). Do the benefits of increased market share outweigh the reduced margin? It’s safe to say the new brand will not cost much less, if any less, to produce. It will simply be sold for less.

- PG built a world-leading company by creating powerful distinctive brands. Does diluting the world’s top detergent brand with a cheap sub-brand help or hurt?

- Is PG making an incorrect assumption that Tide can increase market share at all.  Tide currently holds about 40% of the detergent market. Isn’t there a possibility that the Tide brand is hitting the point of diminishing returns and a lower priced product will simply switch premium buyers to mid-price buyers, leaving market share approximately the same? Will PG steal market share from competitors or just themselves?

- Is the dual brand confusing? What is the difference in the minds of consumers between “good Tide” and “cheap Tide”? This seems like no win situation. If the consumer perceives a difference between the two, they ask “Why is Tide making a poor substitute of itself?” Three years ago, PG tried a Tide Basic brand but consumers felt it did not clean as well so the brand was dropped. This is dangerous to the billion-dollar brand.  If consumers don’t perceive a difference, the consumer simply says, “Thanks for making Tide cheaper,” and buys the lower margin product.

- Would PG be better off launching a new brand or a “with the power of Tide” brand? Launching a new brand is expensive but it seems safer to leverage Tide with a “with the power of” statement than actually branding the product as Tide. If the product did not clean well, the consumer could assume the product did not have enough of the power of Tide.

PG has used a similar approach with Bounty paper towels and Charmin adding “Basic” to the name. Introduced in 2005, the basic versions sell for about 25% less than regular Bounty and Charmin. PG views these basic versions as a success that add new mid-priced customers. The Tide concept appears to be version two of the same plan. In PG’s defense, Bounty paper towels have approximately a 40% market share like Tide, so if the Bounty Basic plan is working, perhaps the Tide plan will work also.

Whether the Tide Simply Clean brand adds market share or not, it unearths a disturbing consumer trend – shrinkage of premium brand demand and a shift to “less is more” brands. Similar to dollar store growth during the recession, will PG be fighting more and more frugal consumers looking for “good enough” brands vs. premium brands? How will this affect PG’s typically high margins?

This move tends to fly in the face of general business model principles- excellent margins, powerful brands, etc.  PG is endangering the #1 detergent brand and chasing lower margins. This move bastardizes Tide rather than innovates. PG is one of the most innovative companies in the world, but this product is disappointing. They should innovate at the top of the market instead. For instance, new Tide pods and pre-measured packets carry the highest margins in the industry. Risking a top brand to marginally grow sales is NOT innovation. If PG wants to attack the low end of the market, they should employ the proven disruptive innovation principles set forth by Clayton Christensen in The Innovators Dilemma.

Do you think a mid-priced Tide brand is a good move?

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Does a cool idea = a great business model?

Does a cool idea = a great business model?

When I met the owners of NoChar Inc. and the showed me how their product can protect a town from burning down in a forest fire or how it can protect a man’s hand from a torch, I assumed they had to beat off customers with a stick.

It turns out there is more to creating a powerful business model than a cool product or idea. NoChar’s product is unmistakably cool and valuable. However, NoChar still has some work to do on their business model.

Products do not sell themselves, even great ones. That’s where the sales performance model comes into play. NoChar’s business model is very strong in the marketing areas but needs work getting this great product into the hands of customers.

If you were NoChar and had a great product but only average sales, what would you do?

Business_Model_Wheel-Monetization

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The Business Model Wheel as a Brainstorming Tool

The Business Model Wheel as a Brainstorming Tool

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LegalZoom Should Consider the Franfiliate Business Model

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