Archive for the ‘Thriving in a Weak Economy’ Category

June 5, 2013

Vistage Arizona All Member Meeting in Phoenix

On June 5 close to 250 Vistage members and guests will gather in Phoenix for our annual All State Meeting. If you are lucky enough to be a Vistage member or a prospective member guest you will be treated to two of the all time great Vistage speakers. Brian Beaulieu of ITR Economics will talk about strategies for prospering in the coming economy. His last Phoenix talk was worth more than $1 million to one member company. Herb Meyer, former special assistant to the Director of the CIA under Reagan will help us make sense of the international scene. Contact me for more information.

Brian Beaulieu has been an economist with ITR Economics since 1982 and its CEO since 1987. He is also Chief Economist for Vistage International and TEC, global organizations comprised of over 13,000 CEO’s. At ITR, Brian has been engaged in applied research regarding business cycle trend analysis and the utilization of that research at a practical business level. For the past 25 years, he has been giving workshops and seminars across the US and Canada to thousands of business owners and executives. Prior to joining the ITR Economics, Brian was an economist for the US Department of Labor where he worked on the health care component of the Consumer Price Index. Brian is co-author of the book, Make Your Move.

Herbert E. Meyer served  during the Reagan Administration as Special Assistant to the Director of Central Intelligence and Vice Chairman of the CIA’s National Intelligence Council.  In these positions, he managed production of the U.S. National Intelligence Estimates and other top-secret projections for the President and his national security advisers.  Mr. Meyer is widely credited with being the first U.S. Government official to forecast the Soviet Union’s collapse — a forecast for which he later was awarded the U.S. National Intelligence Distinguished Service Medal, which is the Intelligence Community’s highest honor.

Mr. Meyer is author of How to Analyze Information and The Cure for Poverty.

Formerly an associate editor of FORTUNE, he has authored several books including The War Against Progress, Real-World Intelligence, and Hard Thinking.  Mr. Meyer and his wife, Jill, are co-authors of How to Write, which is among the world’s most widely used writing handbooks. Mr. Meyer’s essays on Intelligence and Politics have been published in The Wall Street Journal, National Review

 

CEOs believe that in three years, U.S. will be the world’s most improved economy

SAN DIEGO, JANUARY 4, 2012 — After precipitous declines during the prior two quarters, CEO confidence bounced back at year’s end with the largest quarterly gain since the start of the recovery in 2009.  The Vistage CEO Confidence Index was 98.8 in the 4th quarter 2011 survey, up from 83.5 in the 3^rd quarter, and reaching the highest level since 105.2 was recorded at the start of 2011.  The Q4 2011 Vistage CEO Confidence Index reflects responses from 1,641 US CEOs, surveyed between December 12 and December 22, 2011.

Every component of the confidence index improved.  Expected gains prompted CEOs to plan increases in employment and fixed investments, as they anticipate higher revenues and profits during the year ahead.  Persistent economic and political uncertainty remains a top concern, mentioned by nearly half of all CEOs, fueled by the debt crisis in Europe and the failure of Congress to address the national debt, with two-thirds saying that the national debt had negatively affected their business plans.

The recent surge in confidence may have longer-term implications, as 49% of the CEOs surveyed believe that, in three years, the US will be the most improved economy in the world, with China posting 17% and South America at 14%.  According to Vistage Chairman of the Board and CEO Rafael Pastor, the three year outlook is very telling and good news for our economy: “This is not the opinion of pundits or economists; these are the CEOs who are leading our economic recovery and will be responsible for improving the business and employment picture in the US over the next three years.  This is a good sign of better days ahead.   Basically, these CEOs are saying that, despite the stalemates in Washington, and the volatility around the world, they and their enterprises will innovate, grow, and hire in the ways the rest of the world can’t.”

SURVEY HIGHLIGHTS

Economic Growth Rebounds. More than twice as many CEOs thought that the economy had improved in the latest survey compared with one quarter ago. Improved economic conditions were cited by 41% in the 4th quarter, up from just 18% in the 3rd quarter.  Just 12% thought the economy had recently worsened. When asked about prospects for the year ahead, additional economic gains were expected by 40%, twice the 20% recorded in the 3rd quarter. While CEOs were still less optimistic than they were in the closing quarter of 2010, the data signal a stronger 4th quarter GDP and modest positive growth in the year ahead.

Majority Plan New Hires.

Net increases in employment were planned by 55% of all firms in the 4th quarter of 2011. Although only barely above last year’s 54%, it was the highest percent that planned job additions since 2007. Just 6% planned net declines in the number of their employees during 2012, scarcely above the all-time low of 5%. CEOs were nearly evenly split on whether the recent sharp decline in unemployment represented the start of a sustained trend or just a temporary blip.  When asked what Congress should do to create more jobs, 33% of the CEOs said “make the current tax cuts permanent,” followed by, “provide employers with hiring incentives,” at 17% and “increase spending on infrastructure” at 14%.

Revenue Prospects Improve. Revenue growth was expected by 73% of all firms in the 4th quarter survey, up from 62% in the prior quarter, and much closer to the year ago level of 77%. Revenue expectations were twice as favorable as at the recession low, when just 36% expected higher revenues in the closing quarter of 2008. This recent improvement came despite the expectation by six-in-ten firms that the prices that they would receive for their goods or services would remain unchanged or fall during the year ahead.

Profit Outlook Edges Higher. Increasing profits were anticipated by 55% of all firms in the 4th quarter of 2011, between last quarter’s 47% and last year’s 63%. While the worst impact of the recession on profits is clearly over (just 9% anticipated declining profits, down from a peak of 36% three years ago), the expectation of higher profits is still well below the peak of 74% in the 4th quarter of 2003.

Investment Strengthens. Planned investments in new plant and equipment were reported by 42% of all firms in the 4th quarter of 2011, the highest level since 48% was recorded at the start of 2011. Just one-in-eight firms reported that they would reduce their fixed investments during 2012. While the number of firms that plan to increase investment spending is well above the low of 18% recorded at the close of 2008, it is still below its peak level of 57% set at the closing quarter of 2005. This commitment of investment funds to secure future revenues underscores these CEOs’ expectations of a modestly stronger recovery in 2012.

Social Media.  60% of Vistage CEOs reported using social media to grow their businesses.   When asked on which social media platform they are most personally active, 41% stated LinkedIn and 26% answered Facebook.

Presidential Politics.   When asked which Republican candidate for President will emerge as the 2012 party nominee, Mitt Romney led the pack with 49% followed by Newt Gingrich at 29%, and “unsure” at 18%.   None of the other candidates registered at higher than 2%.

about the Vistage CEO Confidence Index

The quarterly Vistage CEO Confidence Index, established in 2003, is the nation’s largest and most comprehensive report of the opinions and projections of small- to-medium-sized business CEOs about the U.S. economy. The Q4 2011 Vistage CEO Confidence Index includes responses from 1,641 US CEOs, surveyed between December 12 and December 22, 2011, with a margin of error of 1.6 percentage points. Since its establishment in 2003, the Index has proven to be a leading indicator for changes in GDP and Employment, two to three quarters hence.

about Vistage International

Founded in 1957, Vistage International, Inc., headquartered in San Diego, California, is the world’s leading chief executive organization, serving more than 14,000 members in 15 countries.  Vistage member CEOs participate in chair-led advisory board peer groups, receive one-to-one coaching, learn from expert speakers, and interact among a global network of CEOs from a broad range of industries.  In a 2010 analysis, Vistage CEO member companies in the U.S. substantially outperformed in growth the average comparable Dun & Bradstreet companies over the last five years.

media contact

Leo Bottary Vistage International, Inc.
858.509.5854  leo.bottary@vistage.com

“2012 is going to be a recovery year … and it’s going be a year of economic expansion in the U.S.,” states Alan Beaulieu, the CEO of the Institute for Trend Research (ITR). Alan and brother Brian Beaulieu, the President of ITR, gave a positive outlook on America’s economy from 2012-2013 during a Dec. 16 Fridays with Vistage webinar.

The respected economists base their upbeat view of the economy on several factors including:

• Positive rates of change in global industrial production, retail sales, commercial and industrial loans at commercial banks
• Improving employment numbers
• Decreasing rates of change in delinquency rates for commercial and industrial loans
• Some upticks in housing starts and the Purchasing Managers Index

Trends indicate the economy will continue to improve through the first half of 2013 with the second half slowing down due to probable tax increases enacted in the beginning of the year. They predict a possible recession in 2014 but not nearly as dramatic as the one experienced in 2008. Although, several factors that could escalate it are the financial turmoil in Europe, tax increases, a rise in interest rates and a possible increase in a particular commodity price such as gasoline.

Businesses should take advantage of the positive climate in 2012-2013 but need to be mindful of 2014, the economists shared. Regarding preparation for 2014, Alan suggests that businesses should “grow market share . . . make sure you have enough cash and make sure your credit lines are where they ought to be.” They warn that producer price pressures due to inflation and increased demand could cause your cost of production to go up through 2013 but those costs can eventually be passed on to customers. Also, they say to be mindful of setting your price points too high going into 2014.

Alan and Brian encourage what they term as “make your move” items, which are those things a business needs to act on in order to stay competitive in a changing environment. As a result of an improving economy, the “make your move” items that a business owner should focus on are capacity constraints such as understaffing or inadequate training. Any constraints that a company is facing at the current level of business will be compounded moving forward as demand for products and/or services increases. Failure to address problems could result in delays to customers and the risk of losing market share to competitors.

Other factors business owners should concentrate on include: “positive leadership modeling,” “hire ‘top’ people,” “invest in customer market research,” “judiciously expand credit to your customers,” and “review and uncover competitive advantages.”

In regards to Europe’s current financial turmoil, Alan says that he’s “reasonably confident” that liquidity freeze-up will be avoided thus allowing a soft landing over the next couple of months. However, there is a potential that “unreasonableness fueled by fear and rumor” could invoke mass withdrawals at banks resulting in markets turning downward quickly.

Although they expect continued weakness in Europe for the first two quarters of 2012, the economists predict some rebound in the second half of the year. Also, the media’s attention has been focused on the financial weaknesses in Europe rather than the current strengths occurring in the U.S. and elsewhere in the world.

From Vistage Village, Thanks to Editor Paul Diamond

Introduction

“Business as usual” is undergoing a transformation brought on by changing consumer tastes and dramatic economic pressures. Companies now have to find new ways to appeal to consumers scarred by the economic crisis of 2008-2009. These consumers spend less and save more; many are jobless, many lack trust in businesses, and many expect the government to provide a high level of service.

Business operations are under numerous other pressures, including constrained credit, economic uncertainty, threat of increased inflation, low dollar valuation, excessive consolidation in many industries, the rapid pace of innovation, rising commodity prices and a constant pressure to do things better, faster and cheaper.

The good news is: business is reorganizing and finding its way forward. To help you ensure the future of your business, we offer 12 trends that span the range from new consumer attitudes and emerging disruptive technologies to the latest marketing and business operation practices.

Think of these trends as opportunities you can seize to give your customers more of what they want.

Consumer Trends

Trend 1: Short-Termism

The financial crisis that brought us to the brink of monetary end-times made consumers realize that governments, institutions and even brands don’t have a good sense of the future—and they certainly can’t control a quickly developing crisis. Consumers have become fearful of what might happen next, and they no longer trust that enterprises operate towards a stable, long-term future.

“People are thinking more about the here and now, and less about things that may or may not last a long time,” says noted trend analyst William Higham, author of The Next Big Thing—Spotting & Forecasting Consumer Trends for Profit .

“This sentiment leads us to buy based on our immediate needs. It also makes us want to take greater responsibility for ourselves across a range of sectors, rather than relying on media, politicians, professionals or brands, who we feel have let us down. For example, we are increasingly self-diagnosing and self-treating; scheduling media at the times we want; and making our own playlists rather than buying new compilation albums.”

Additionally, people now understand that the pace of innovation rapidly outdates expensive technology purchases. The relative usefulness of smart phones, navigation systems, laptops, software, and televisions lasts no more than a year, sometime only months. When it comes to new technology purchases, consumers have learned to adopt a “wait-and-see” attitude.

Trend 2: Brand Aid

Companies are now building brand loyalty by helping their consumers navigate through today’s complexities and difficulties.

“These brands want to be seen as helping consumers through life,” said Higham.

Brand aid typically takes the form of advice, information or free services provided to the public. Examples include:

•      Microsoft: Publishes a free online magazine, Home, offering unbiased Internet guidance

•      Charmin: Offers free public restrooms for shoppers in New York’s Times Square during the holiday season

•      Evy Baby: This diaper company places branded changing rooms in Turkish

shopping malls

•      American Express: Created openforum.com to help business owners find success

Higham thinks the trend will expand to an entirely new aid market: “Tomorrow’s consumers will pay a premium for brands that help them avoid activities that are either difficult, time consuming or unpleasant. This will be a particularly strong driver in the luxury sector, as definitions of luxury evolve from ostentation to experience and more recently convenience and privilege.”

Trend 3: Conscious Consumerism

You know those people who buy something only if it’s organic, eco-friendly or made locally? Soon most of us will make our purchases based on such highly selective, specific criteria.

“Companies should think about their consumers in terms of what, why and how they purchase,” says Higham. Impulse buying is waning, giving way to purchases that are driven by enduring core values. “With less money to spend, there will be a reduction in impulse purchasing and a growth in conscious consumption: where individuals limit purchases to products that matter to them. Brands will increasingly need to provide a meaningful reason for consumers to buy their products: from strong aesthetics to durability, heritage to sustainability. And they will need to target their products more specifically to particular attitudinal and needs segments.”

Trend 4: Simplification

One of the key trends of the 2000s was the growth of choice. But a backlash has begun, as more and more consumers suffer choice fatigue. “Consumers will increasingly seek, not unlimited choice, but an edited choice,” says Higham.

Simplification creates three distinct marketplace opportunities for nimble companies, including:

• Recommendation as a service: Recommendations and shortlists of options that give us the right choice rather than an abundance of choices will become increasingly popular. Additionally, products that reduce the need to make a choice will benefit from this trend.

• Single-occasion products: Certain single-occasion products such as birthday cakes, wedding gowns and event insurance have long been with us. Now companies are elevating daily activities into occasions that pair with their products. “You can buy bottles of wine made to be drunk with specific dishes like fish or chicken; or coffee brands that are made to be drunk at specific times of the day.” This pairing serves to simplify choice.

• Multi-use products: “If you own a single device that acts as phone, camera and music player, you don’t need to decide which of several single-use products to take with you when going out.” Multi-use products are marginalizing certain types of single-use products.

Trend 5: Mobile Purchasing

Cell phones are becoming virtual credit cards and mobile credit-card processing terminals. In Japan and Sweden, consumers have long been using cell phones to make purchases. “Mobile purchasing answers a real need in marketing—closing the deal conveniently,” says Philippe Cesson, Vistage speaker and president of Cesson 3.0 , a social media and training company.

“Just as customers embraced online shopping for its convenience, they will also embrace mobile purchasing.” The U.S. has been slow to adopt the technology, but currently has four forms of mobile phone transaction in use, and these may become widely adopted, though who knows which technology will ultimately prevail. The four models for cell-phone transactions are:

• Swipe your phone: Customers can securely swipe their cell phone and use it just like a credit card, making for a quicker transaction. Businesses can use this technology to gain more sales and increased conversion. One provider, BlingNation , is spreading this technology via community banks, which provide local merchants with a phone-swipe terminal and checking-account customers with a small adhesive tag that sticks to the back of their phone. Swipe the tag over the terminal to make a purchase. The transactions are processed directly by a local bank which results in lower fees than merchants normally pay for credit card transactions. This system is currently being tested in two Colorado towns. It appears to be work well for high-volume, lowprice purchases.

• Accept payments with your phone: You can now buy a small card reader made by SquareUp that hooks to your iPhone, Android or Blackberry. When a customer wants to buy something from you, they simply swipe their credit card through this gadget connected to your phone, then they sign their name on your phone, and the transaction is complete. You can also email a receipt to the buyer. This solution works well for traditional businesses that want to sell items off-location at trade shows or festivals, and for consultants, one-person businesses, or artisans who want to accept payment by credit card but either can’t get a merchant account or don’t want one because of the fees. With this service you don’t need a merchant account and there are no contracts or monthly fees. The cost per transaction hasn’t been disclosed yet.

This service, which aims to be available in Q2 2010, is brought to you by the people who invented Twitter—expect it to be highly disruptive to traditional merchant accounts.

• Enter your phone number online: Customers shopping online can enter their cell phone number to check out and pay. They must reply to a text message sent by the site to complete the transaction. The customer then pays the charge on their monthly cell phone bill. Using a cell phone number is a lot quicker and easier than entering credit card and address info online, and it appeals to younger people and those who may not have a credit card. What’s the rub? The transaction fee is painful—as a merchant you must give 35 to 50 percent of the sale price to the mobile carrier that processes the transaction. These fees may drop in time.

• Transfer money via cell phone: You can now transfer cash via text message. Both the sender and recipient need to register for a free account with a provider such as

Obopay.com ; once that’s set up, sending money costs 25–50 cents per transaction, and the money can go directly from and to bank accounts. For small business owners it’s an easy, inexpensive way to send or collect payment overseas. Wave goodbye to the fees, long forms and bank visits associated with wiring money.

These nascent mobile commerce platforms will likely battle it out, VHS-vs-Betamax style, while most of us will be on the sidelines with a wait-and-see attitude. Forward-thinking companies should dive in now, even if they risk adopting a platform that goes the way of Betamax.

“Payment by cell phone empowers merchants to conduct business everywhere and at anytime,” says Cesson. “One consequence of this technology is that it opens up every social interaction to potentially become a sales interaction.”

 

Marketing Trends

Trend 6: Emotional Branding

“Companies will increasingly base their brand on emotion, to avoid basing it strictly on price,” says futurist and Vistage speaker David Houle . “Brands with strong emotional content will command the highest prices.”

Most successful brands establish a deep emotional connection with their customers, says Vistage speaker Ronald Strauss, author of Value Creation: The Power of Brand Equity . Smaller businesses, he says, think of their brand only in terms of marketing collateral, logos, letterhead, and colors. Many CEOs are not yet tuned in to the emotional aspects of branding.

“Giving your brand emotional content is not easy,” says Strauss. “You must first learn to think of your brand as an organizing lens for how you run your business. You then have to understand how your stakeholders look at your brand and how you create or destroy value as your business delivers, or fails to deliver, on its brand promise.”

Strauss offers these tips for small businesses to build an emotional-based brand:

•      Acknowledge and recognize your customers. Have an ongoing relationship or loyalty program with your best customers. The program should make them want to tell their friends about what you do for them.

•      Figure out how to best serve your customers by studying what they do to serve their customers. Help them serve their customers better.

•      Infuse your brand with values that drive your products or services. People want to feel part of something bigger than themselves, and values such as quality, creativity, luxury, respect and integrity achieve this.

•      At every touch your customer has with your company, treat them consistently well. This makes them feel important.

•      Create satisfying experiences for your customers. People value sensory, pleasurable, intellectual, safe and consistent experiences. For products, these attributes are often achieved with packaging and design. For services, they are achieved by building trust, which comes from consistency of treatment.

The most common failure of brand to resonate emotionally, says Strauss, is when customers perceive indifference.

Trend 7: Reputation Management

Just as you have to keep your credit score in good standing to own a credit card, you’ll soon have to keep you online reputation in good standing if you want to be trusted or have influence online.

“Reputation measurement will become a massive economic enabler as we get better at assessing it,” says futurist Ross Dawson, who authors the Trends in the Living Networks blog.

Already, within certain domains, user reputations are displayed. eBay displays a

“reliability ranking” for each seller based on how much positive feedback they get from buyers, and “Ask Vistage” displays a bar above each user’s name that shows how much they participate.

A few sites, such as klout.com, attempt to score reputations. But none yet has cracked the code of offering a comprehensive reputation score.

“Assessing a business’s online reputation is becoming more sophisticated,” says Dawson. “Soon we’ll be able to create measures that tell how trustworthy and knowledgeable a person or business is based on their online networks, as well as positive or negative reviews, information they share, how that information is ranked and which sites link to it.”

Look for reputation management to become as important to driving business online as search engine optimization is now.  For small business owners, you should start building your reputation and your business’s reputation now. According to Dawson, here’s what you can do to start:

• Find out what’s being said about you now. There are many free tools to discover this.

• Participate in social media so that you become more visible and have a “right of reply.”

• Ask those who genuinely like what you do to recommend you or your work on online sites.

• Don’t do anything online you wouldn’t want people to find out about—because they will.

Start building your reputation early to get ahead of the trend.

Trend 8: Behavioral Segmentation

Segmenting your customers by demographics will soon be an antiquated practice. Smart companies are building robust profiles of individual customers.

You can create such profiles based on what your customers do on your website—what content they view, what offers they respond to, what they buy, what information they enter during registration, which emails they respond to, and any other data you can collect on them. Once you build a profile of your prospect or customer, you can use the information to predict what offers and content they are likely to respond to and thereby increase your sales conversion rates.

“Behavioral segmentation is a more sophisticated way to segment your customer than traditional demographics,” says Dr. On Amir , Assistant Professor of Marketing at UCSD’s Rady School of Management. An expert in consumer decision-making, Dr. Amir says that many companies don’t have the internal knowledge to build websites that track behavior and present the most compelling offer to users based on their profile.

“The actual back-end programming is easier than figuring out what you want your program to do,” he says. “The challenge is with the goals, not the programming.”

One cornerstone of successful profiling is determining how different users respond to different offers. Companies use multi-variant testing (also known as A/B testing) to present different offers to similar customers and figure out which offer has a better conversion rate. The goal of testing different messages can vary depending on what type of business you’re in. For example, publishers may use it to serve the exact content a user wants without them having to go looking for it, online stores may use the information to cross-sell and up-sell customers, while small businesses can use it simply to figure out which web page their customers respond to best.

Sites such as Amazon and Netflix are leading the way with powerful recommendation engines based on vast stores of user data. Industry experts use many terms to describe behavioral segmentation; these include psychographic segmentation, customer profiling, web personalization, and behavioral targeting. Could a business practice with this many names be right for you?

“If you think your company can benefit from segmenting your customers,” says Dr.

Amir, “then it’s worth the investment.”

 

Business Operation Trends

Trend 9: Green,The Second Act

No business can escape the need to address sustainability as it goes more and more mainstream. Soon Wal-Mart will require all products to have a sustainability rating.

“If you don’t understand green, you’d better get started,” says Vistage speaker David Houle. “Green means saving money and lowering expenses. If you believe in this, you should go green; also, your customers will be demanding it soon. Your customers are going to ask you about your total carbon output, and if you don’t have an answer, they may find a new supplier. A carbon footprint will become part of the business balance sheet in the very near future.”

But wait, things get more granular.

“More consumers will demand product footprinting—a holistic, lifecycle picture of the climate impacts of your products and services,” says Ryan Schuchard, Manager of Environmental Research and Innovation at Business for Social Responsibility.

What can you do to get ahead of the trend?  For starters, get a carbon audit performed on your company, so you know your precise carbon output when customers ask for it. If your output is less than industry standards, than make a big deal out of it; otherwise, make the number publicly available with the commitment that you’ll look for ways to start reducing it.

If you want to go a step further, get a lifecycle impact audit done on your products.

Look to your industry association to publish consensus-based standards for products in your sector. Start reducing your impact and advertise what you’re doing—it’s one competitive advantage of the future.

Trend 10: Collective Intelligence

“We are now creating a collective intelligence that will filter and respond to what’s worthwhile,” says futurist Ross Dawson.

What does collective intelligence mean for the average business owner? It’s the opportunity to distill the “wisdom of the crowd” in a quick, cost- effective manner and get solutions for your pressing business issues. Here are some examples:

• Crowdsourcing: When you broadcast a request for work you need done and people online willingly help, that’s “crowdsourcing.” For example, say you need to name a new product or want to rename your company. Go to the site namethis.com and post your request. Users of the site will offer names and vote on them. Once submissions are in, you pick the one you like best. It costs $99 to harness the crowd’s brain—significantly less than recruiting the services of a branding agency—and the money goes to the person who picked the best name. Here are 10 crowdsourcing sites explained .

 

• Freelancers on demand: “You can now access the best talent from around the globe to work on your projects,” says Dawson, who points to sites such as elance.com, odesk.com, freelancer.com and rentacoder.com. On these sites, companies can post job listings and freelancers worldwide can bid on them, usually in an auction-style format.

Caution: while this instant job bidding works well for small and non-complex tasks, it’s not always suitable for large or complicated jobs.

• “My Ideas”: Companies are now gathering the opinions, ideas and recommendations of their customers and then surfacing the most popular of those. Mystarbucksideas.com is an example of how to tap the wisdom of crowds to innovate and figure out what your customers want.

“We now have tools to quickly access the knowledge and views of a large number of people,” says Dawson. “Business leaders should think about how they can best use collective intelligence.”

Trend 11: Evolution of Traditional Sales Models

 

The traditional sales process is being disrupted and transformed by robust websites, social media, online reviews and customers who value speed and convenience in purchasing.

“For over 100 years,” says Vistage speaker Sam Bowers, “the cold call was the way the potential seller and buyer met each other and where information was shared. The salesperson educated the potential buyer about the features and benefits of the product or service. Marketing was nothing more than the support arm of the direct sales effort.”

Smart companies are no longer “selling” goods and services. In the new paradigm, customers do their research online and read user-posted reviews and then figure out what they want.

Many companies are dismantling their sales forces and replacing them with marketing teams. Some companies, says Bowers, may have to straddle the old and new sales paradigms for a while and incur double costs, as certain industries still rely on the old sales process.

“Now the process has been reversed,” says Bowers, “We attempt to get the client to come visit us. Pull marketing instead of push selling.”

So what are the elements you need to have in place to “pull in” customers? Here’s a partial list:

• A robust website that offers detailed information about your offerings

• An easy way to buy your products or services online

• Real (and honest) reviews posted on third-party sites by your customers

• Targeted ads that point to your website

• A website that is optimized for search terms

Vistage speaker Tom Searcy, founder of Hunt Big Sales, agrees with Bowers and adds that the traditional mechanisms that triggered large sales are dying quickly.

“The trade show was where you saw big equipment or large capital purchases,” says Searcy. “Trade-show attendance is down 15 to 20 percent year over year.”

“The new initiation points for big purchases take place online in places like Linkedin groups or industry-focused user groups. Now when people look for a solution, they get recommendations from peers, then they read online reviews and view videos, then they go to a company’s website. People don’t call the manufacturer first, and they don’t take cold calls.”

“As you move up in the size of expenditure and complexity of purchase,” says Searcy, “trust and credentials become key influencers. Trust used to be built over three to four presentations and dinner meetings with a sales person, but we don’t have the time for this anymore. Now the trust curve is built online.”

To create trust in the marketplace, Searcy recommends that business leaders take the following steps:

1) Capture your legends, fan base, users and products on video and put it on your website.

2) Build your credentials by actively publishing articles and white papers, blogging, speaking, and contributing to LinkedIn groups on your area of expertise.  You can also sponsor independent research and publish it. HTS RESERVED. 221_1541_021710

3) Affiliate your business with independent thought leaders. Sponsor their talks, publish their white papers, and invite them onto your board of directors or advisors.

4) Get prized certifications and credentials in your industry.

5) Partner with organizations that have market mass; for example, become an exclusive territory distributor for a big-name product or service.

“In the new sales model,” says Searcy, “thought leadership trumps personality and even relationships in generating trust. If you focus on that, you will have better opportunities coming to you.”

 

Trend 12: Constant Business Pressure

Constant business pressure, due in large part to slow growth, is a hallmark of the “new normal.” Businesses must now focus on creating products and offering services that are better, faster and cheaper than the competition.

Trend analyst and Vistage speaker Morris Segall, President of SPG Trend Advisors, notes that several factors have combined to force businesses into the “better, faster, cheaper” paradigm. Those factors include: low consumer spending, high unemployment, low growth in consumer incomes, more restrictive and expensive credit, and an aging population.

“Tight controls on cash-flow have been a requirement for operating during the recession,” says Segall, “and businesses will need to continue operating with tight controls and creative flexible business models going forward.”

Segall offers this advice for companies that need to better control cash-flow and manage the balance sheet:

•  Improve working capital by increasing asset turnover, lowering debt, and efficiently managing assets such as receivables, payables and inventory.

•  Compensate for low unit-volume sales growth and a competitive pricing environment by employing stringent cost control and planning practices.

•  Control labor costs by outsourcing, upgrading to new technology and migrating to more creative, web-based marketing and sales. Additionally, businesses can choose to do more with fewer workers by providing more extensive training, allowing them to take on more tasks.

•  Control other costs by revamping processes and distribution systems, and by partnering with other firms to share costs or augment product and service offerings.

•  Seek horizontal business opportunities to generate revenue with moderate additional capital investment.

• Use a flatter management structure (one that shortens a chain of command and relies more on a team concept) to reduce pure management expense.

• Incentivize workers to achieve individual and entity goals, thus aligning their achievements with company success.

• Improve your customer service. Going forward, first-rate customer service and customer service initiatives will define successful companies. Employers should look for workers who can be more complete, more productive and better informed in their jobs to provide great service.

“Being a more productive and efficient firm is not the entire solution,” says Segall.

To offset slower growth in traditional business lines, he suggests that companies look for opportunities in industries and sectors that have revenue growth potential. Such growth opportunities will come from:

• Healthcare and public education reforms that require technological and process revamping

• Agricultural innovation that attempts to produce more food on less arable land with less water

•  Water development and conservation to manage a shortage of potable water worldwide

•  Energy conservation technology development and expansion

•  Electric power grid and mass transit systems expansion and modernization

•  U.S. exports to fast-growing overseas economies

•  U.S. government spending and procurement increases

•  State and local government outsourcing of services

•  Government and corporate spending on worker retraining

•  Real estate rehabilitation and recycling in a shift away from traditional and more costly new development

“The new economy,” says Segall, “will require innovation, renewed commitment to customer service and solutions; and, above all, every business owner and manager will have to be an entrepreneur to steer their businesses to success.”

by Michael Canic, PhD

The economy remains weak and uncertain. Glimmers of hope and clouds of despair alternately give way to each other. So with 2012 just around the corner where are the strategic opportunities?

1.  Customers: Know their hearts

Customers are as anxious as everyone else. That provides an opportunity for you to meet their emotional needs. Like their need to feel confident. More than ever, customers need to feel they’re making the right decision in choosing you and that you can reliably do what you say you can do. Your job is to instill them with total confidence. Can you point to similar successes you’ve had with other customers? Do you have impeccable references that will speak on your behalf? As powerfully as you can, you need to convey your expertise, not just your experience.

Next, your customers have an emotional need for comfort. Comfort in knowing they have one less thing to worry about. If you can anticipate and prevent even the smallest problems, respond urgently and comprehensively if they should arise, and take action to make amends for any inconvenience, then you are relieving their anxiety and providing comfort. Not to mention providing value well beyond your product or service.

2.  Competitors: Know their pain

Sure, you’re going to take some hits. Just make sure your competitors take more. In tough times companies turn inward and often forget to monitor their competitors. Yet the pain of your competitors can provide you with strategic opportunities to differentiate yourself in ways that customers value.

Have your competitors cut back on inventory? Then emphasize your supply of stock, and quick and reliable delivery. Have they closed branch locations? Focus on your local presence and relationships. Are they on the ropes financially? Discount pricing might squeeze them out of the market.

Your competitors’ pain may be your opportunity. Track them closely.

3.  Associates: Give them reason to believe

Anxious employees want to believe everything will be all right. Give them reason to believe. Ramp up your employee communications:

• Explain the vision – not just the “what” but the “why”, and why it’s attainable
• Outline the roadmap – show them the path for achieving the vision
• Speak with conviction – the more you convey that you believe, the more they will believe
• Involve them in the “how” – encourage their ideas and their critique of your ideas; let them know you’re in this together
• Celebrate more than you think you should – for successes big and small

During difficult times, morale is especially sensitive. Devoting extra time and attention to engaging employees means you’re likely to get the discretionary effort you need to outperform your competitors.

4.  Offerings: Repackage and restructure

Customers still want and need your products and services. Maybe it’s a question of repackaging them and restructuring your value proposition.

If customers are less willing to commit then make it easier for them by offering free trials, shorter contracts or smaller shipment sizes. Consider unbundling your offerings or developing “light” versions. If the concern is downstream costs then adjust your warranty policy and provide service incentives. Is cash flow their issue? Offer flexible payment options. Do they need to make do with what they have? Start a consulting division to help them optimize their existing equipment.

You don’t have to figure it out. Challenge your people to develop creative ways to repackage your offerings and restructure your value proposition.

5.  The Business Model: Attack your assumptions

There’s nothing like intense pressure to force the question: is our current business model still viable?

Consider the decline of independent bookstores. Only recently has that trend slowed. Why? Because many of them changed their business model. Some have focused on products that complement books: cooking utensils next to cookbooks, small travel items next to travel books, vases next to gardening books. Others have added service: free door-to-door delivery within city limits. Some stream in-store readings on their website and offer to mail signed books for online participants. Still others have formed alliances with competitors to jointly promote and host special events.

If your strategies are still not getting you where you need to go, then it’s time to question your fundamental assumptions – your business model.
Every situation provides strategic opportunities. Uncertain times are no different. Focus on the fundamentals: customers, competitors, employees, your offerings and your business model. While you can’t do much about the economic clouds of despair, you can provide a silver lining.

 

Michael Canic is co-founder and president of Bridgeway Leadership, a strategy + execution consulting firm with offices in the U.S. and Canada. Bridgeway’s focus: Making Strategy Happen through a relentless focus on alignment, commitment and execution. As a consultant and advisor, he has helped dozens of businesses and other organizations across North America achieve quantifiable results.

 

In a  recent Podcast with Vistage International Speaker and Institute for Trend Research Economist Alan Beaulieu, Alan lays out three action items for business owners to take in the midst of the current volatility and uncertainty.

1. Watch out for employee burnout. You haven’t been in a hurry to hire but this is not the time to burn out your best players either. So hire to fill skill gaps or to avoid burnout, very important. And with your employees putting out the efforts they are, you’re also going to be giving out some raises. If you have employees that are not stepping up, not only do not give raises, but see who you’ve got sitting on the bench who IS willing to step in and step up.
2. This is the time to borrow as much money as you can before inflation returns. Negotiate with the banks. Even if you have lots of cash on hand, borrow what you can and invest in your businesses for the long haul. Invest in those things that will produce cash and help you move into new markets–places like Brazil or in Texas where you may not be but where, depending on the nature of your business, you really need to be.
3. Last, make sure you are investing in your firm in terms of your competitive advantages, marketing position and statements. Invest in customer service. When customers are reluctant to spend in the first place, they demand more for their money, including customer service.

This is actually a time of optimism and opportunity as we go through 2012 and into 2013 as opposed to the doom and gloom that we’ve just endured. Even in the midst of uncertainty, there are things we need and ought to be doing. Go get them done.