Loyalty Without Bribery

Phrases such as points program, loyalty rewards, frequent buyer, and loyal customer are often used in similar contexts. The central idea is that a company that rewards consumers for making repeat purchases can secure steady business from them over time. While this may be true, real loyalty is seldom involved.

thank customers with bribes?
Some marketers describe incentive programs as extending a thank-you gesture to keep customers coming back. Experts in business psychology liken the practice to bribery. They point out that repeat purchasing is not the same as true loyalty. Indeed, loyalty does not depend on discounts or give-aways. Real loyalty can be spoiled by bribes.

loyalty involves a relationship
Customer loyalty is a matter of business relationship management. In contrast to points programs and pay-your-bill-to-enter lotteries, there is a higher road to true loyalty. It is more profitable and requires a different view of the business relationship.

benefits involve costs
Many retailers use club membership cards with give-aways and points programs as buyer incentives. As intended, these generally do secure repeat business and keep customers from leaving for competitors. However, the benefits to these companies come at a considerable cost. Close study of card-based loyalty programs reveals the main advantage: consumer data from tracking customer purchases.

For example, when a grocery-chain customer has his or her card swiped at the till, a computer links the products purchased to his or her name. This contributes to consumer statistics involving the information that the customer provided in applying for the card. Thus, the give-aways and discounts associated with shopper’s club cards are a cost that grocery chains sustain to gain consumer information for targeted marketing campaigns as well as repeat customers.

real loyalty is intrinsic
Though retailers and their suppliers naturally seek more and better consumer statistics to sell more products to more customers, and to keep them coming back, true customer loyalty is left out of the equation. Indeed, loyalty and rewards do not belong together in the context of reasons why customers buy.

The dominant view equates loyalty with repeat purchasing: “If they continue buying from you, that means they’re loyal.” That makes sense on the surface, but lacks a basic understanding of what leads people to feel loyal. Actual loyalty fits with sentiments such as devotion and faithfulness. It has more to do with intrinsic incentives than extrinsic incentives.

loyalty must be earned
For a business to earn the true loyalty of its customers, it must understand that discounts and contests – examples of extrinsic incentives – are superficial. Customers want more – ideally in sync with their personal values, such as being treated sincerely as a valued individual.

For example, the greeter at an optician’s shop remembers every returning customer and always treats them warmly. If a competing optician’s shop offered a free iPhone as an incentive to attract new customers, it wouldn’t faze this shop’s loyal clientele. They’d never go anywhere else for eyeglasses or contact lenses.

frequent buyers might not be loyal
In a Gallup Management Journal article, WJ McEwen and JH Fleming write, “Without a strong emotional bond, customer satisfaction is meaningless.” (Customer Satisfaction Doesn’t Count, GMJ, March 13, 2003) Is there a strong emotional bond by the time you’ve bought nine cups of coffee then get the tenth free? Gallup: “These customers aren’t really loyal; they’re just customers who haven’t left yet.”

repeat bribery can be costly
Generally, retaining customers is much more profitable than attracting new ones. Even so, any company that gives away prizes or provides discounts must recoup the costs of doing so. Inevitably, the cost recovery comes from pockets of the same customers.

true loyalty is a win-win
When customers develop real loyalty to a brand, it leads to greater depth of the business relationship as well as mutual liking. The development of true brand loyalty comes from engaged personnel serving customers with sincerity. Engaged personnel who foster true customer loyalty work for companies that treat them well and operate under well-defined, service-focused values. Such companies can make good profits and dispense with the trinkets.

treat people well and prosper
No “loyalty” program based on extrinsic incentives can foster true loyalty. A company that consistently treats its customers and its personnel as liked, trusted, valued individuals creates a successful brand. A successful brand typically also has a meaningful mission statement and a name and motto that express compellingly what makes it distinctly valuable. Real loyalty to such a brand follows and lasting success may result.

- Glenn R Harrington
Articulate Consultants Inc.
www.articulate.ca

What Problem Do You Solve?

Remember the TV commercial with these lines?
Boy: What’s this stuff?
Brother: Some cereal. It’s supposed to be good for you.
Boy: I’m not gonna try it.
Brother: Let’s get Mikey.
Boy: He won’t eat it. He hates everything.
Both: He likes it! Hey Mikey!

How about the TV commercial with this line?
Elderly woman: “I've fallen and I can't get up.”

uncommon formula
These ads are famous for these lines. The first contributed to enormous success for Quaker’s Life brand breakfast cereal; the second, for the Life Alert Emergency Response pendant, which auto-dials an emergency dispatcher. Importantly, they also share an uncommon though effective approach to marketing: Identify the problem that you solve considerately, then identify your solution.

common problems
Many affluent parents struggle to get their children to eat a good, healthy breakfast every day. For some, this includes a struggle to resist breakfast foods that offer little nutrition and better resemble candy. Likewise, many adults worry about their mother, aunt, or other elderly family member who lives alone and could suffer a fall or other calamity from which help would be needed to recover.

comforting solutions
In the cereal ad, after the boys discover that the hard-to-please Mikey likes it, a voice-over describes Life as a “nutritious, delicious” cereal that even picky children like Mikey enjoy eating. In the pendant ad, less memorable is the dispatcher’s reply, “We're sending help immediately, Mrs. Fletcher.” Both ads offer to save consumers from the difficulties that they credibly portray. Both also triggered many people to buy what they were selling. So, why is the same formula not used in more advertising?

not for creative ad execs
When marketers take the route of simple, truthful authenticity – such as sympathetically demonstrating that they understand the problem that their product solves – consumers often reward them with success. These ads are good examples of this. Yet, the supreme status of creativity is so deeply ingrained in the ad industry that advertising executives often refuse to pay attention – or feel that they can do much better.

medals or sales?
Of course, there are many companies that might never advertise on TV. Even so, their decision makers could entrust their marketing budgets to creative people who think like big advertising executives. Too often, this means that their advertising is based on creativity and lacks a strong grounding in real user experience. Then, a new problem arises: Creativity wins awards for ad agencies. To win an award for creativity, an ad need not be effective at generating sales.

tell the truth
Before your company takes the creativity-first route in its marketing, remember that people want truth in advertising and that consumers want their problems to be solved. These basic consumer priorities carry more weight than being entertained by creative ads. Meeting these priorities effectively can be more profitable for the advertiser, too.

listen for it
So, how does a company with products or services to promote get to the truth and express it so that the market responds positively? Key messages in the words that the market uses come simply from attentive listening.

distil it
As a key-messages specialist, I coach my clients on how to listen to their customers, staff, and suppliers to learn where the value comes from. Then, what sources of value distinguish them from competitors. Listen attentively to enough people over a sufficient period and the truth of market perception becomes abundantly clear. Then, distil those sentiments for an effective, authentic key message.

give it to them straight
Authentic problem/solution key messages can be way more valuable than cartoon characters promoting colourful, candy-like breakfast cereal as fun to eat (what Quaker was up against with Life). When you credibly demonstrate genuine understanding of the problem that you solve, and present your product or service as reliably solving that problem, then plain facts can win over the skeptical – even the hard-to-please like Mikey.

- Glenn R Harrington
Articulate Consultants Inc.
www.articulate.ca

Authenticity Rules: A Reality Check for Creative Advertisers

One lovely day in the summer of 2002, I had an in-person business meeting scheduled with an Englishman. He was a new client and I had been advised by a colleague who also rode motorcycles not to reveal myself as a motorcyclist until after a new business relationship had been cemented. Yet, it was a beautiful day and my motorcycle was a 2001 Triumph, made in England. I considered the sunshine and the English connection (if my client noticed that I arrived on a Triumph) an excuse to ride to the appointment.

pass test in a blink
Within minutes of my arrival, the Englishman led me out to the parking lot to show him my motorcycle. When he read the name on the gas tank, he whispered, "A Triumph." Then, taking on a dubious tone, he turned to me and said, "Aah, but was any of it made in England?"

Fortunately, Triumph had placed a tiny Union Jack decal above the taillight. I pointed to it, said yes, and witnessed a change in facial expression that suggested I had just passed a critical test.

That day, my made-in-England Triumph delivered on the perception that authenticity equates with value. This is true of much more than motorcycles. Indeed, the perception of authenticity equates with value among informed and uninformed consumers in any market – so much that it often makes deep wells of creativity unnecessary in effective marketing.

authenticity = value
Because the concepts home-made and locally-grown trigger the impulse to buy, a small hand-made sign offering home-made relish made from locally-grown cucumbers helps to sell more hotdogs at a hotdog stand. Likewise, a poster of Shaun Cassidy from 1977 might sell at a garage sale today. The same poster autographed by Shaun Cassidy can fetch a high price on e-bay. These are further examples of how authenticity increases value.

You want the real thing?
Authenticity relates to truthful origins. The word comes from the Greek authentikós which means original. An authentic claim is worthy of acceptance or belief as conforming to or based on fact. An authentic product is original or made in the same way as an original – not false or imitation. Other concepts related to authenticity include real, actual, and genuine – all hallmarks of value.

Generally, people avoid substitutes or pay less for them when they can have the real thing. So, in 1969-70, Coca-Cola successfully advertised with the slogan, "It’s the real thing." When you buy a pair of Levi-Strauss jeans, the label declares, "This is a genuine pair of Levi's jeans." These companies understand the value/authenticity connection.

fakers keep out
Typically image-conscious teens still use the labels wanna-be and poser as insults. Likewise, the perception that a brand merely tries to be what it claims to be turns off consumers of all ages. People are also turned off by far-fetched claims. Below, a claim that Ladysmith, British Columbia has a "heavenly" climate exemplifies this.

Creativity better than honesty?
When marketers take the route of simple, truthful authenticity, their markets often reward them with success. Yet, the supreme status of creativity is so deeply ingrained in the ad industry that advertising executives refuse to pay attention – or feel that they can do much better.

Creativity is viewed as so basic a requirement in advertising that people in that line of work seldom mention it, except to promote themselves to other industries. Yet, while creativity that is also original may be lauded, danger arises when creativity is divorced from authenticity. The results from an Association for Consumer Research poll "strongly suggest that consumers are deeply skeptical of advertising claims. Moreover, public opinion has remained extraordinarily constant [about this for at least] two decades."* Thus, public opinion considers creativity insignificant at best when companies and institutions take their messages to market.

For an example of creativity gone too far, consider the climate in Ladysmith, British Columbia. Ladysmith has a mild coastal climate. The summers tend to be sunny and dry; seldom hot. Bringing months of cloud and rain, the autumn and spring typically seem to run together. Despite mild temperatures, the short days and persistent damp gloom of winter lead some residents into depression. Regardless, a brochure promoting condos in Ladysmith claims a "heavenly" climate year-round.

Ignore user experience?
One advertising agency that, incidentally, repeatedly wins awards for graphic design, apparently sees no place for actuality in the creative campaigns it develops. It uses a word-association game to generate campaign concepts. Let me explain.

If the client’s business were Mountainside Soapworks, for example, the agency’s staff would work with six columns of words on a whiteboard. At the top of each column would be the words mountain, side, mountainside, soap, works, and soapworks. The creative team brainstorms and lists associated words below these headings.

Under soap they list wash, clean, dirty, water, shower, sink, towel, bathroom, tub, and other words. Beneath works, they list paycheque, commuting, job, labour, boots, dress code, career, breadwinner, and others. The next creative challenge is to join words from the six columns into unlikely combinations. For example, dirty and commuting or water and career would be grouped with words from the other four columns. While the fun and creativity are underway, nobody bothers to consider the distinct benefits of using the client’s products.

Then, all at the creative briefing are challenged to draw creative sketches based on various groups of six words. The most creative sketches become candidates for the campaign concept. This is how a campaign built on a sketch inspired by valley shower boots hill flank suds job could be used to advertise soap.

The process undoubtedly stirs up fun and creativity. What about the actual experience of the product user, though? What consumer needs does this company’s soap address better than the competition’s? What can Mountainside Soapworks say about its products that would have the same appeal as the authenticity of a pair of genuine Levi’s jeans, or the try-me attraction of homemade relish made from local cucumber? Though the fruits of fun creativity might be appealing, when it comes to advertising, people want the truth.

true, genuine, relevant
From the smallest players to the largest, the advertising industry trumpets creativity as the key source of value. Creative Director is one of the most respected positions in the field and the phrase creative marketing is often used in the same sentence as solutions or success. John Grant, author of The New Marketing Manifesto, states, "Authenticity is the benchmark against which all brands are now judged."

Overloaded by sales pitches, consumers are gravitating toward brands that they sense are true and genuine. In a December, 2007 issue of Fast Company, Bill Breen writes, "To maintain its integrity, a brand must remain true to its values. And yet, to be relevant or cool, a brand must be dynamic." A brand's values – the emotional connection it makes – define its realism in consumers’ minds.

the law of candor
In contrast to the empty entertainment and unreal overstatement often used to lure buyers, authentic, credible, easily verified claims are valued like gold. Because the average person simply wants truth in advertising, there are examples of plain truth making market leaders – even when the truth is expressed boldly and frankly. Consider Buckley’s Mixture cough medicine. It tastes awful, it works, and it has held onto its status as one of the top-selling brands in the Canadian market for many years.

The same values that compel people to seek the authentic and shun the fake and vacuous are involved in demanding fairness and accuracy in reporting from the news media as well as truth in advertising. Indeed, there are laws requiring truth in advertising while misleading claims are widely considered the province of the corrupt. The statement, "They just make up this stuff" can paradoxically evoke pride in advertising executives and disgust in consumers.

listen for it
So, how does a company or an institution that has something to promote get to the truth about its products or services and express that truth so that the intended audience responds favourably? By listening for it.

distil it
In my experience as a key-messages consultant, the highest quality testimonials are not those asked for but those spontaneously provided. Accordingly, I coach my clients on how to listen to their clients, staff, and suppliers for the essential key messages, such as where the value comes from. Then, what sources of value distinguish them from competitors. To get that information in the words that the market uses simply requires listening – in most cases, trained listening.

quote what customers say
Listen attentively to enough people over a sufficient period and the truth of consumer experience becomes abundantly clear. Listen all the time and the larger sample size reduces the margin of error. Then, when you know how to distil the market’s sentiments, the result is authentic key messages of far greater value than a thousand word-association games could ever produce. Propagate those key messages to the market in the words that the market speaks and you can really hit the bullseye. No room for hyperbole. Plain facts can win over even the skeptical. Just like the name Triumph and the little Union Jack on my motorcycle.

- Glenn R Harrington
Articulate Consultants Inc.
www.articulate.ca

* source: John E Calfee, University of Maryland and Debra Jones Ringold, American University: Consumer Skepticism and Advertising Regulation: What Do The Polls Show? Advances in Consumer Research volume 15

Joe's Hotdogs - the full transcript

The Joe's Hotdogs story has two parts. The first part consists of a little journey along a beach, an exploration of thoughts and feelings on the discovery of Joe’s Hotdogs on this walk along the beach.

The second part of the Joe’s Hotdogs story is further exploration of those thoughts and feelings and their business implications. They are business concepts applicable in many different types of businesses serving many different markets.

So, you are taking a walk along a beach, let’s say on Vancouver Island, Canada. As you walk along the beach, you notice a bluff to your left and the ocean to your right. On top of the bluff, there is a sign that says "Joe’s Hotdogs".

You are not really looking for a place to eat, but the Joe’s Hotdogs sign has come to your attention. You decide, "I’ve already had my breakfast and I’m not hungry for lunch yet. I’m here for a beach walk, not to eat. Besides, I don’t feel like eating a hot dog."

As you walk along the beach, you begin to think to yourself, "If I were to order something from Joe’s Hotdogs what would I order?" Well, you might want a hotdog, you might want a footlong, you might want a veggie dog, or you might want a smokie. (I don’t know exactly what a smokie is, but it seems to be the kind of thing people buy from hotdog stands).

Well, you'd probably want a beverage with it. Maybe you are a coffee drinker, or a tea drinker, or an iced tea drinker. Maybe you'd prefer some kind of pop or juice. Would you like fries with that, or would you like onion rings? If you ordered a hotdog, maybe a veggie dog or a footlong, which garnishes would you put on your dog? Maybe you like pickles or relish. Maybe you like a particular variety of mustard. All these things rest in your mind as you walk along the beach.

Then, you notice a sign saying “This way up.” It doesn’t specifically say, "Joe's Hotdogs, this way", but you noticed that Joe‘s Hotdogs is on top of the bluff, and the path leading upward seems to be a fairly well-worn path. You see some people up there, and since the beach looks pretty much the same ahead of you as it does behind you, out of curiosity you walk the path up the bluff and you discover that there are a dozen or so people standing around this little hotdog stand that looks sort of like a little hut overlooking the ocean.

People are enjoying all types of hot dogs and drinks: different sodas and colas, different types and sizes of hotdogs with different garnishes on them. Some people are eating onion rings, some are having french-fries, and you happen to notice that there are some people ordering french-fries only. There seems to be some enthusiasm for the french-fries at Joe’s Hotdogs.

So, even though you just decided a few minutes ago, on your walk along the beach, that you really didn’t want anything from Joe’s Hotdogs, here you are, having climbed up the path on the bluff along with a bunch of people who seem to be enjoying themselves, and you’re curious. “Well gosh, maybe Joe’s Hotdogs’ french-fries would be good, even though I have already had my breakfast and I am not all that hungry for lunch. Maybe I should try Joe’s Hotdogs because I might want to come back some other time and I'll need to know if the hotdogs are worth the climb up that steep path.”

So, you step up to Joe’s Hotdogs counter and you order some french-fries. You notice a sign saying that they have homemade relish from locally grown cucumbers. You think to yourself, “I like relish on hotdogs. Let me look at the rest of these condiments.” You also notice that they have a variety of different buns. Because of all the enthusiasm for the french-fries, you order some with a dog and the homemade relish from the locally-grown cucumber, and of course, you order a beverage.

You end up spending ten dollars at a place where you had already decided you didn’t even want to go. There you are, standing there spending ten dollars.

You sit down to eat your food and you notice that there is somebody else coming up the bluff, just as you did, from the beach. They are just standing there checking it out, and you notice that person might be doing the exact same thing you just did: coming up the bluff out of curiosity. By-golly, maybe that person is going to spend ten dollars trying out Joe’s Hotdogs, even though they don’t have an appetite - just like you.

You dig into your french-fries and your veggie dog with the homemade relish. You resolve to yourself, “I am going to remember this place. I’m going to come back. I might tell my friends or bring family.” So, you bought a meal that you hadn't intended to, but hey, the service at Joe’s Hotdogs seems to be friendly, they seem to have happy people, there is enthusiasm for the fries, and you feel like you have really discovered something good. You are glad you made the hike up the bluff to Joe’s Hotdogs.

So that’s the story about the discovery of Joe’s Hotdogs.

Let me share with you, now, some lessons built into that story, which apply to a variety of businesses in a variety of situations. Not just hotdog stands, and not just businesses on Vancouver Island.

Well, first of all, there is encountering the concept: Joe’s Hotdogs.

As you were walking along the beach, you started running through your mind what your order might be, even though you had already decided that you didn’t want a hotdog. You thought of the possibility of foot longs, veggie dogs, and smokies, even though you don't know what smokies exactly are. You ran through a bunch of possibilities as to what their core service or core product was. The sign just said Joe’s Hotdogs.

Heck, you don’t even know if there is somebody named Joe who works there. Maybe it’s a man named Joseph. Maybe it’s a woman named Joesphine or Joanne. It doesn’t matter. The name Joe’s Hotdogs brought to your mind a whole line of hotdog-type products.

Most people in our culture assume that where you can buy french-fries, you can buy coffee, tea, iced tea, juices, and various types of pop. These things can be assumed in our culture from a place named "Joe’s Hotdogs". What would Joanne’s Handbags do?

The sign saying “this way up” was all that you needed to go up to Joe’s Hotdogs. There didn’t have to be someone standing there waving you up the bluff. There didn’t have to be a sign saying ‘Happy Hour discounts until such-and-such a time’. There didn’t have to be any incentive for you to go to Joe’s Hotdogs and order your ten-to-twelve dollars-worth of food – other than your own curiosity about the Joe’s Hotdog experience. So, “this way up” was all you needed to interrupt your wonderful walk, along the beach on Vancouver Island, and go to check it out.

The sign only had to say Joe’s Hotdogs to bring to mind a whole menu. Which turned out to be much more various than just hot dogs. You didn’t need any incentive other than your interest in the Joe’s Hotdogs experience.

All Joe’s Hotdogs needed was a sign for you to know that he or she is there; all you need to know is the way to find Joe’s Hotdogs. Specifically, this is the path up the bluff to go find him. No flashing lights. No people waving you in unnecessarily. This may go to show you that sometimes coupons and "Sale Ends Friday" or other kinds of buyer incentives are extrinsic motivations that people don’t need, because, if they are intrinsically motivated to explore your business, or to check you out, then they don’t need extrinsic motivations.

Extrinsic motivation is never heartfelt. Loyalty is.

Many companies use discounts and "Sale Ends Friday" tactics, and other extrinsic motivations, to get people to spend money with them unnecessarily. In fact, sometimes it is a little bit too much. People are often turned off by "Sale Ends Friday" and things of that nature.

Somebody’s own hunger, by the way, is a great way to sell food.

Once you get up there, you see other people – other people apparently enjoying themselves. That’s a sign.

Sometimes, all you need is to see or to know that there are other people like you (sometimes not like you) who are enjoying an experience – so much that you become interested in trying that experience. All that many consumers need to know is that there are third parties interested in what the seller offers, rather than being persuaded that they themselves should be the pioneer to try out the product.

Another lesson to learn from this story is that, sometimes, authenticity and uniqueness are themselves strong selling points. Homemade relish from locally-grown cucumbers might be all that some people need to get them to order a hotdog.

The relish isn’t necessarily claimed to be the best relish in the world, and it isn't necessarily award-winning relish, and nobody ever said that locally grown cucumbers are anything special. However, the novelty or uniqueness of homemade relish from locally-grown cucumbers is a draw for some folks. Authenticity is, generally, a draw for business. People like to buy the real thing.

If you can present what you are offering as the real thing, authentic or heritage or, in some way or another, attractive because of its novelty or specialness, then you do not need to convince the buyer that it is the best relish, or the best anything else, or that it is the cheapest. You don’t have to offer a guarantee or a warranty in some cases. Just the idea that it's authentic, that it's original, is enough.

I didn’t mention that the relish was good, but you ordered a hotdog, didn’t you? A veggie dog, that is. You read that the relish was homemade, which has an air of authenticity about it, and locally grown cucumbers sound like something special, too.

You ordered french-fries because other people seemed to be enjoying them. The truth is (I can make up the truth because this is my story), Joe’s Hotdogs sells more french-fries than anyone else on Vancouver Island!

Yes, there are quite a few eateries, restaurants, and lots of hotels on Vancouver Island. Indeed, it is a place where many a french-fry is fried. Joe’s Hotdogs, however, happens to sell more french-fries than anyone else. And you know what? That’s because their french-fries are good, and because the total experience of Joe’s Hotdogs, including the ocean view, is a positive one.

It doesn’t necessarily mean that Joe’s Hotdogs’ french-fries are the best french-fries in the world. Therefore, it is not a smart idea to assume that, if you have the best X Y or Z product, that the world owes you big volume.

Sometimes, having the best does not translate to having the most profitable or the busiest business.

Joe’s Hotdogs sells more french-fries because the french-fries are part of a whole package. Their french-fries do happen to be very good. Maybe they’re the best. Maybe they are not the best, but they are very good french-fries, served by friendly people with an ocean view, and you can get a hotdog with homemade relish made from locally-grown cucumbers. Those french-fries, as part of that whole Joe’s Hotdogs experience, happen to be the best selling french-fries on the island.

Something else that is important is that the Joe’s Hotdogs sign says “Joe’s Hotdogs”. The sign does not say, “Joe’s Hotdogs, with the best selling french-fries since 1976.” Nor does it say, “Joe's Hotdogs. Get your favourite coffee!” It does not say, “Joe’s Hotdogs. Come here for pop.” It does not say, “Joe’s Hotdogs. Come here for home-grown, homemade relish.” It just says, "Joe’s Hotdogs".

One of the lessons that come from that is that Joe’s Hotdogs’ reputation, through its name at least, is a simple one. The Joe’s Hotdogs name carries with it the cultural assumption that there are probably beverages. There are probably onion rings and french-fries. There might even be such things as homemade relish.

How does the name Joe’s Hotdogs imply that there might be homemade relish? Well, it doesn’t say McDonald's. People know that McDonald's does not offer homemade relish.

The name Joe suggests something that might not be true about Joe's: There is an individual named Joe, Joanne, Joseph, Josephine. Who’s to say who it is? Often a name carries enough implications that no one has to say “Joe’s Hotdogs with homemade relish” or “Joe’s Hotdogs: we have great french-fries”. The name Joe’s Hotdogs not only implies Joe's menu, but also, it implies the possibility of homemade relish more than the name Holiday Inn might, or more than the name U-Haul might.

So, a company name is important in ways that are subtle.

Now, sometimes people bank on or have strong expectations for their name. For example, "Why doesn’t the whole world read my mind? Don’t they realize that I have the best homemade relish?" These are unwise assumptions.

However, it is also unwise to name your company Low-Budget Rental and assume that people will buy lots of french-fries from you. Cultural awareness, especially including the implications of a name, is important in marketing products.

Just don’t get witty with your wording. The greater the number of people who encounter your concept, the lower the common denominator of their savvy.

How about the promise to yourself, "I am going to come back here again and I am going to bring friends or refer family"? Sometimes, all people need is to discover something, and if the discovery turns out to be pleasant, then they want to share it. The self-satisfaction of having discovered things is a powerful motivator for some people to bring their friends, to bring family, and to bring themselves back to a restaurant (or any other kind of business) where they might have never planned to spend their money.

You climbed up the bluff from the beach. You discovered that Joe’s Hotdogs really does have good french-fries. You discovered the experience of Joe’s Hotdogs’ homemade relish. That was a pleasant discovery for you, supported by witnessing others making the same discovery.

That makes many of us feel proud. So proud, in fact, that we want to share our discovery. There is a sort of… let's say… vanity discovering a new positive experience and having that experience for the first time. We’ll often repeat it or share it all over again.

Joe’s Hotdogs has the appeal of a place that you discover. Such an appeal, indeed, that one might say to oneself, “Gosh I feel good now. I’m glad I discovered this. I want to share my discovery with other people.” It would be good if they had a positive experience at Joe’s Hotdogs similar to yours.

In this way, you would have deepened your sense of satisfaction about your own discovery by having others try a new experience that you introduced to them. It may even help to deepen your friendships with those other people.

This is how referrals happen. It's not the only way referrals happen, but it is one of the key ways in which they do. Of course, referrals can lead to new customers and repeat business.

People like to discover things and to repeat the pleasant.

Note: There is nobody standing at the beach waving you up the bluff. There is nobody standing at the bottom of the beach telling you that some deal expires, or handing out a coupon. These are not necessary.

It is more important, as the story goes, to discover Joe’s Hotdogs, have a positive experience from Joe's, and to be proud of yourself for having made a discovery – rather than having saved fifteen per cent or gotten a dollar off, or something to that effect.

These are some of the lessons that run through my mind when I contemplate the Joe's Hotdogs story. I am sure you thought of your own business and marketing concepts, too. There are, of course, other lessons that can be taken from the story.

For now, I will leave you with this thought: Joe’s Hotdogs sells more french-fries than anyone else on Vancouver Island.

I didn’t say whether the hotdogs were good. I didn’t say whether the relish was good. However, Joe’s Hotdogs is a marketing success, and a well-branded company, whether there is somebody named Joe behind it or not.

Joe’s Hotdogs sells more french-fries than anyone else on Vancouver Island.


© Glenn R Harrington, Articulate Consultants Inc.

Value, Efficiency, and the Billable Hour

In the 1987 film The Secret of My success, Brantley Foster, a recent university graduate, finds himself laid off from his Wall Street job before his first day of work. Having just moved from Kansas to New York City, he persuades his uncle to get him a job. There, lessons regarding time, value, and money begin for attentive viewers of the film.

Work 2 hours; get paid for 7.
Early in his work for the mail room of his uncle's company, Brantley learns how to perform his job in a fraction of the time expected. He then keeps the mail room happy each day while using an alter ego to pursue activities better reflecting his ambitions - all in the guise of working full-time hours at his mail-room job.

Maintaining the illusion that it takes a full work day for Brantley to perform his job is important for the business insights that the film offers regarding time, value, and money.

Brantley's employer values the work performed at the level of a full-time wage, unaware of the time actually needed to do the job.
The film shows how efficiencies found and practised can free up human resources for other activities.
Despite his university studies in finance and his eagerness to prove his merit, Brantley has no incentive to point out that there is a more efficient way to perform his job. He uses the freed-up time for his own benefit; not his employer's.

These points apply to the fundamentally flawed but widespread situation in which tasks involving expertise are performed for clients who are billed by the hour. This article points to a better way for companies that charge by the hour.

Focus on time spent creates misalignment.
It is customary for clients to pay for the time taken to perform tasks while what they really want is not time at all. Rather, they want the benefits of those tasks performed expertly.1
Those logging billable hours for their work have a disincentive to use time-saving efficiencies that could save money for their clients.
Managers in the billable-hour paradigm necessarily view efficiency in terms of how much time it takes to perform tasks; not necessarily in terms of optimizing value.

A shift in focus from time spent to value provided realigns the worker, the manager, and the client in seeking optimal value through efficiency.

Productivity is about delivering results, not spending time.
In 1899, FW Taylor asked, "How many tons of pig iron bars can a worker load onto a rail car in the course of a working day?" With this question, a clipboard, a stopwatch, and statistical analysis, Taylor brought management theory to life and introduced the paradigm of simplistic, quantified measurement to manage and compensate workers.2

Though Taylorism has since come to be regarded as oversimplistic, the paradigm of the billable hour, and its associated incentives and disincentives, continues to dominate many fields in which tasks involving expertise are performed for clients who really just want value.

Better = more valuable.
In any field, a reliably better overall client experience equates with higher value and justifies higher price. This includes a paradox with the billable hour when quick service increases value and justifies a higher price but reduces time spent.

fundamental sources of value
Value is seldom directly related to time spent performing tasks. This list indicates the nature of value through 12 examples:

- reduced stress
- reduced cost
- reduced risk
- convenience
- pleasure
- increased profit
- importance or prestige
- entertainment or enjoyment
- respect or validation
- security
- comfort
- sense of advantage.

How much?
In many industries, goods and services sell for fixed prices. This is convenient because people naturally want to know how much something will cost before purchasing it. A fixed price also creates the incentive to satisfy clients as efficiently as possible. Fixed prices are not standard in some industries, though.

Many people are usually reluctant to ride in a taxi because of the uncertainty about the fare to reach their destination. Only in the absence of convenient alternatives do they take a taxi. Even then, it is common to regard the driver's route with suspicion. An inefficient route would cost more and the driver probably wants to charge as high a fare as possible.

The same psychological factors that underlie reluctance to take a taxi and suspicion of the driver's route also underlie, for example, reluctance to call a plumber or suspicion about the time a graphic designer logs in designing a menu. In both fields, by-the-hour billing is the norm. These concerns reduce demand for the goods and services of companies that do not charge fixed fees.

Purpose does not differ.
Businesses succeed by providing high value economically. This remains true of any enterprise that does not normally charge fixed fees:

- blue-collar trades such as carpenters, electricians, mechanics, and welders.
- white-collar professions such as accountants, attorneys, architects, and consultants.
- others who provide goods or services by using intellectual capital and tools such as dentists, designers, counsellors, and writers.

The paradigm of the billable hour is prevalent in these fields, even though their clients just want value.

Focus on value creates alignment.
The billable hour puts the interests of the worker, the employer, and the client out of sync. When that paradigm is abandoned in favour of optimizing value to the client economically, the interests of all three can align under fixed fees, possibly backed by a satisfaction guarantee.

A secret to success for companies switching to the value-focused paradigm would include this four-step sales/negotiation process:

1. Fully explore the problem that your client wants you to solve. For example, at a spa, have a conversation about why your client wants a facial. From that you can learn more specifically how to satisfy that individual.

2. Let the problem discovery discussion cover the rationale of the decision maker to engage your services. For example, maybe the decision maker wants a custom newsletter issued seasonally, like a tailor-made suit every quarter rather than an off-the-rack outfit that anybody could wear. The rationale might be the decision maker's belief that an authentic connection with clients better reflects the company's relationship with them, in contrast to most newsletters which do not generate a meaningful sense of connection with the issuer. Understanding the rationale helps to satisfy the need more precisely.

3. Summarize the basic problem and the rationale to gauge the importance of the work and arrive at a suitable budget. Then, work back from the budget to identify how to optimize value economically. For example, maybe the problem is an embarrassingly decrepit bathroom and the rationale to engage your services is that you specialize in bathroom remodelling. If you demonstrate comforting understanding of the problem and show professionalism about how to satisfy the client, then they might allot a $15k budget. Comprehend their needs well enough to reverse-engineer a good solution to their problem that ensures your profitability at that budget.

4. The first three steps reduce the risk for both parties. Many who go through the first three steps also have enough trust to pay more for a satisfaction guarantee. A satisfaction guarantee deepens the commitment and, if it adds a premium to the budget, likely increases the profitability of your performing the work.

Welcome to the value-focused paradigm.
Unlike Brantley Foster, people who work in the value-focused paradigm and find time-saving efficiencies point them out and share the benefits from doing so. When the scope of a project already underway must increase, a good purchase agreement allows the budget to increase in tandem.

Companies not already charging fixed fees but stuck in the billable-hour paradigm can make buying from them easier by fixing fees up front and guaranteeing client satisfaction. When buying from them is thus easier, they often find that the cost of making a sale goes down. The often-hidden costs of their personnel and operations not being aligned with the basic purpose of providing optimal value economically also decrease.

Fixed fees with a satisfaction guarantee can catalyze a value-focused shift to greater efficiency throughout an organization. This may lead to happier clients, more productive staff, boosted competitiveness, and increased profits. Let this be the secret of your success.

- Glenn R Harrington, Articulate Consultants Inc.

Notes
1: Ronald Baker: Trashing the Timesheet, Association of Chartered Certified Accountants, 2003
2: Matthew Stewart: The Management Myth, The Atlantic, June 2006
3: David Sandler: You Can't Teach A Kid to Ride a Bike at A Seminar p 164, Bay Head 2003

Glenn R Harrington is the Principal Consultant of Articulate Consultants Inc. Since 1996 he has specialized in consulting on authentic key messages as the basis for effective marketing, brand management, and client loyalty. His work frequently crosses over into management consulting where the matter of billing practices often arises as an Articulate value-add.
http://www.articulate.ca/