Monday, 26 July 2010

Customer benefits and their costs

A customer buys a package of benefits when they buy your product or service

- Some of these benefits are more important than others to your customer – some they may not want or value at all, some are critical and some they may not even realise they get. This will be different for each customer

- Some of these benefits cost you more than others to provide – some cost you a lot and some are free – or may even reduce your costs

- If you understand the relative value and cost then this allows you to make adjustments to your product, pricing and proposition so that you optimise revenue and margin

o This is the basis of the low-cost airline model. The benefits that were removed were valued less by passengers than the price reduction made possible by re-designing the airline process

How can I use this in my small business?

- Make sure that you understand all the benefits included in your product or service and that they are highlighted in your proposition

- If appropriate, develop different services to incorporate different packages of benefits (gold, silver and bronze for instance)

- In individual cases, understanding relative costs and benefits will help you negotiate with the customer

o You can make sure that they are comparing like with like in terms of the complete benefits package by you and your competition

o You can discuss which benefits they are prepared to forgo if they are asking for a price reduction

o You can offer additional benefits that cost you little or nothing but which the customer values in order to close a deal

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Monday, 19 July 2010

Why a business owner needs vision

Why have a Vision Statement?
- The purpose of creating a Vision Statement is to provide you, the business owner, with a clear picture of what you are going to achieve through owning your business

- One of the seven habits of effective leaders (as defined by Steven Covey) is that they always start with the end in mind. Even if your eventual exit from your business is many years away it will be worth far more and the exit process will be far easier if everything you do contributes to that exit

- If you do not have a clear vision how will you know which path to take or which decision to make? A clear vision will help you make those key decisions along the way

- The vision for your business will help you set short, mid and long-term objectives. When you set those objectives you should ask yourself how they contribute to achieving your vision

- The vision for your business will help you evaluate how you spend your time. Ask yourself frequently “How does this activity help me achieve my vision?” If it doesn’t, why are you doing it?

- It will help you communicate what is different and better about your business to staff and customers

What makes a good Vision Statement?

- It must be motivating for you. It must be something that you think is worth achieving and which matches your values and beliefs

- It should describe a particular point in time. This might be when you plan to exit or when you plan to achieve “success” as you see it. It should have a date

- It should describe what the business will be in concrete terms – how large, what it will be known for, what it will be able to do

- It should have a personal goal that describes how you will be spending your life. This might include your working life or your personal life or the options you would have by then

- It should have some concrete financial dimension – usually sale value, turnover or profit

- It should be written down

What do you do with your Vision Statement when you’ve got one?

- Use it to develop your internal and external Mission Statements which communicate to staff and customers what it is you do and why. (You wouldn’t normally share your Vision Statement directly with anyone else)

- Read it frequently. Use visioning or affirmations to picture yourself and your business at the point of the vision and look backwards at all the choices you made, the successes you had and the obstacles you overcame to get there – starting with the things you are doing today

- Use it to set your short, medium and long-term objectives and to validate your current strategy and decisions

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Monday, 12 July 2010

Why customers leave

- The most-often quoted study is one attributed to, variously, The American Society for Quality, the US Chambers of Commerce and a book called “Lessons from the Field” by Howard Feiertag and John Hogan. This gives the following reasons for customers leaving:

o Death or moving away – 4%

o The influence of friends and relatives – 5%

o Competitor marketing and special offers – 9%

o Dissatisfaction with product or price – 14%

o Perceived indifference of the supplier – 68%

- A study by RightNow Technologies says

o 73% of customers leave because of poor customer service but the supplier thinks that only 21% leave because of customer service

o The supplier thinks 48% leave because of price when in fact only 25% do so

- Mercer Management Consulting research shows that for a selection of retail outlets, only 15% to 30% of customers are price sensitive – that is, they would change supplier for a better price

- So retaining customers is not (usually) about price – it’s about letting the customer know you care

So if you love your customers can you charge what you like?

- No. You have to be competitive in your market - but superior customer care and marketing mix (USP, positioning and so forth) means you get to keep most of your customers and still charge a premium

- Low prices won’t keep customers if they think you are indifferent to them. Worse, using low prices attracts disloyal customers. The worst strategy of all is using low prices to make up for the fact that you and your staff really don’t care

It’s really difficult and expensive to get all my staff to provide great customer service

- It might seem so to start with – but the rewards are huge

o According to a study by the global business consulting firm Baines a 5% increase in customer retention can increase a company’s profitability by 75%

o Reichheld and Sasser reported that when MBNA America reduced its 10% defection rate to 5% their profits rose by 125%

- What we’re really talking about is values and beliefs. It’s the way you behave and what gets measured and what gets rewarded.

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Monday, 5 July 2010

Why do you need job description?

Why have job descriptions?

- Job descriptions are an essential part of co-ordinating and motivating employees

- Without a job description an employee does not have a clear understanding of what they are supposed to achieve and how their performance is measured – and you have no way to hold them accountable

- The process of creating and reviewing job descriptions is an opportunity to discuss and clarify the role – to reinforce two-way communication

What should be in a job description?

- Job Title

- The role that the position reports to (not the person)

- Main purpose of the role. One or two sentences that describe the main output of the job.

- Responsibilities

o The tasks and deliverables of the role - keep this to a maximum of six

o One sentence each

o Include only the permanent elements of the role – not transient targets or projects

o Be generic rather than specific: “Conform to current operations procedures “ rather than “Carry out procedures x, y and z”. Do not duplicate procedures or manuals.

- Dimensions

o The budget controlled

o Number of direct reports

o Regional or product boundaries

- Key challenges of the role

- Performance measures

o The key deliverables: “Performance against sales target” or “Customer satisfaction score”

o Keep this to a maximum of four

o Don’t include actual targets – these may change

- Required attributes

o Technical knowledge or skills

o Experience and qualifications

o Personal strengths: “Able to work on own initiative” or “Aptitude with technology”

Implementing job descriptions

- Use a standard template – or possibly two, one for management and one for other roles

- Where a new job description is required then get the post-holder to write it using the standard template (you still need to review and own it)

- Use generic job descriptions where you have more than one person doing the same job

- It gets more difficult to write a job description the more junior the role. It is difficult sometimes to identify performance measures for a clerical assistant. Nevertheless, if you are to develop a high-performance team then every employee needs to understand what they are supposed to be doing and how their performance will be measured

- Job descriptions should be no longer than one side of A4 - try these employment templates

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