Stress Test Your Business

One of the most important concepts my colleagues and I at ActionCOACH coach our clients on is being proactive.  Everything from our GrowthCLUB (90 Day Planning Workshop), our use of the ActionCOACH Business Chassis (5 Way Formula), to the alignment consultation we use to start each of our client’s coaching programs, is aimed at promoting proactivity.  Unfortunately, too many of the businesses I am introduced to operate on a reactive basis, reacting on a daily, sometimes hourly, rhythm of solving crisis after crisis after crisis.  The consequences of operating in reactive mode are many; lack of growth, low company morale, low or no profit, high levels of stress, and in some cases, bankruptcy! Chief among the steps toward proactivity is to periodically Stress Test your business.  Here are a few of the tests you must perform:
TEST Explanation
What if this works? “What if this works?” is one of my best coaching questions.  You cannot achieve continuing success without preparing for it.  This doesn’t mean starting a second shift before your sales increase, for example.  It does mean having the plans and processes for starting a second shift prepared as part of introducing your new product.
What if a key part of your business goes down? Machinery breakdowns, illness of key team members, storms, key team retirement or resignations, etc. are a fact of business life.  How much cross training and employee development is part of your daily routine?  How many strategic alliances have you developed?  Do you have succession plans?  Being prepared is a major responsibility of business ownership and leadership.
What is my customer retention? Low customer retention, and/or a low customer referral rate are leading KPIs, indicating a need to proactively redesign your operations.  Simply, if you are not at minimum, satisfying your customers, you have a big problem.  Of course, your goal should be to consistently WOW your customers.  Customers who are only satisfied are not loyal, raving fan customers.
  The results of these stress tests and others, whether good or bad, should lead you to proactive activities.  My colleagues and I at ActionCOACH are ready to assist you to stress test your business and to implement proactive processes.  All you need to do to start your proactive journey is contact us.  

Work on your business, not just in your business.

Net Promoter Score and Your Business

During recent coaching sessions, the subject of Net Promoter Score (NPS) came up.  My clients wanted to learn what NPS is and how it might benefit their businesses.  Thus, I thought this is a good time to share a few ideas about NPS. What Is Net Promoter Score? Simply put, NPS is a very simple, direct, relatively easy, and effective method to measure your customer’s (client’s, patient’s) loyalty to your business and the likelihood they will refer your business to others.  In other words, how healthy is your customer experience and your customer relationships?  It was developed by (and a registered trademark of) Fred ReichheldBain & Company, and Satmetrix Systems. Net Promoter Score was introduced by Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”.  NPS can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter).  An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of more than 50 is excellent. Why is NPS Important? Time after time in measuring conversion rate (as per the ActionCOACH 5-Way formula) by lead type, it is obvious that referral leads have the highest conversion rate of all lead sources.  Therefore, it is extremely important for your business to deliver a great customer experience (GCE).  A great customer experience will result in a high NPS.  A high NPS will enable your business to have a robust and consistently effective referral system.  The formula is

GCE -> HNPS -> NewCustomers -> Revenue -> Profit

Many successful ActionCOACH clients have achieved completely referral based businesses, with the ability to add as many new loyal customers as they can serve.  An added bonus to a referral based business is lower customer acquisition cost and higher lifetime customer value. How to Develop Your Net Promoter Score At its core, NPS is derived from a single question customer survey.  The question is

On a scale of 0 to 10, how likely is it that you would recommend our company/product/service to a friend, family member or colleague?”

Those who respond with a score of 9 to 10 are called Promoters, and are considered likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and making more positive referrals to other potential customers. Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviors. Responses of 7 and 8 are labeled Passives, and their behavior falls in the middle of Promoters and Detractors.  The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For purposes of calculating a Net Promoter Score, Passives count towards the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score towards zero. There are a variety of thoughts within the NPS consulting industry as to:
  • When to survey, and how often?
  • Types of surveys – relationship vs. transactional
  • Additional questions (if any), how many, what should they be?
  • How many people should be surveyed?
  • Format of the survey
There are many resources available to enhance your understanding and implementation of NPS.  This blog was based upon a great web article by Christian Reni ( https://customergauge.com/news/how-to-calculate-the-net-promoter-score/ ). If you wish to build your business on a solid foundation of raving fans who are both very loyal and who consistently refer new customers, NPS is an essential part of your toolkit.  My colleagues and I at ActionCOACH can assist you in building and implementing this important business building strategy.

Going That Extra Mile

I recently used eBay to sell a file cabinet that I no longer need.  Oh, the benefits of more and more of my business being conducted online.  Because of its size and weight, the file cabinet was listed as local pickup only.  When the auction was completed, the buyer paid immediately and contacted me to arrange a time to pick the cabinet up.  When I met Leo, the buyer, at my storage facility I was surprised to be introduced to a Chinese man in full business attire, three-piece suit, beautiful silk foulard tie, the works.  The buyer was accompanied by another Chinese gentleman, John, who was dressed in business very casual attire, khakis, polo shirt, sneakers, you get the picture. While John maneuvered the van into one of the loading bays, Leo and I took a dolly up to my storage unit to retrieve the file cabinet.  By now you are thinking what does this have to do with business? While in the elevator Leo explained that he was on his lunch break from Bank of America, and John is his client.  John, he told me, is in the process of opening a daycare center and mentioned that he needed a file cabinet.  When he asked Leo for advice on where to purchase a used file cabinet, Leo suggested eBay.  John had never used eBay so Leo went the extra mile, logged into his eBay account, placed the winning bid, completed the transaction, and accompanied John to pick up the cabinet and to translate.  For me, that was a WOW moment, I was quite impressed by Leo’s dedication to his clients. So, here are three business related questions I want you to consider:
  1. When was the last time a banker, especially from one of the giants, demonstrated that level client focused service? Or for that matter, what is the service level of many of the large businesses you regularly business do with?
  2. What is the service level you routinely offer to your customers? Do you WOW them on a regular basis?
  3. What would be the resulting increase to your bottom line if you separated your business from your competitors by raising your level of service to WOW?
As Brad Sugars, the Founder and Chairman of ActionCOACH said at our 2017 Business Excellence Forum last month, “Serve more to Earn more.”  Leo is certainly doing just that.  If you would like to make more by serving more, my colleagues and I at ActionCOACH will be happy to assist you.

Deliver What Your Customer Values

I am a picky eater; I tend to frequent restaurants with menus that have items and preparations that I like.  In addition, I prefer restaurants that are flexible, and I’ve walked out of more than one after hearing “Sorry, no substitutions.”   My wife, not so much.  She has a very brave palate and is always willing to experiment with the new and unusual.  So imagine our delight when we found a restaurant in the Stockbridge, MA area many years ago that had a menu that appealed to both of us. The restaurant was very successful and always crowded.  We appreciated the reasonable cost, the dependable quality of the food, and the reliable service.  The place was a home run for us and for the other residents and visitors to the Berkshires. A few years went by and for reasons that are unknown to me, the owner hired a new chef who promptly – and completely – changed the menu.  For some people this would be an adventure.  However, to my wife and me – and judging by the decline in customers – this was business suicide.  I know we are not returning when my wife tells me that she has trouble finding something to order.  Gone were our favorite dishes.  Gone were the selections that catered to the bland eater and the daring.  Worse, they instituted a “no substitutions” policy.  We kept checking the restaurant’s website hoping that the owner and chef would come to their senses and revise the menu.  No such luck. As you can probably guess, the restaurant closed within a few months of this change. In business, there are thousands of examples like this.   A successful business sells a product, then ostensibly to entice another customer base, creates a product that is not of value to the targeted new customer and worse, alienates the long time patrons.  Ultimately, the business fails. So, what is the lesson here?  As a business owner, you MUST understand three things about your offering:
  1. You MUST understand what your customers value, not what you value. Oftentimes, they are very different things.
  2. You MUST understand all aspects of your offering, not just the obvious. For example, the obvious offering of a restaurant is the food.  Patrons also value the service, flexibility, décor, parking, dress code, cleanliness, consistency, reputation and variety, to mention a few.
  3. You MUST understand that every customer will value something different from other customers. Joe will value the food, but Mary will value the ambiance. And they seldom value the same aspects that you value.
Failure to fully understand your customer’s value proposition and consistently deliver that value is a recipe for disaster.  Yes, it’s important to grow, to improve, and to innovate your product base to give people options and to attract new customers.  However, if you consistently deliver great value to your customers you will be blessed with many raving fans. If you would like to increase the value your company offers to your customers to accelerate your growth, my colleagues and I at ActionCOACH are ready and able to assist you.

2016 Business Excellence Forum – Blinding Flashes of the Obvious Part 2

More BFOs from Day 1 of the 2016 BEF, Troy Hazard continued. Troy told a story about car salesman who had sold him a luxury car in Australia where he lived before moving to the USA a few years ago. The salesman asked how often he traded cars in, Troy answered about every 4 years. The salesman began contacting Troy about every 6 to 8 weeks, by mail, email, telephone, you name it – when Troy moved to USA permanently the salesman continued kept in touch.  After about 4 years the salesman called to say it’s time for a new car.  Troy told the salesman that he permanently moved to US and salesman continued to stay in touch.  On a family visit back to AU, Troy dropped into the dealer and asked the salesman why he continued to stay in touch, answer … “I sold more than 100 cars to your friends.”  The business question to ask yourself is; How is my business staying in touch with our customers, members, advocates and raving fans? (See the following section – day one BFOs from Brad Sugars – The Ladder of Customer Loyalty). Next, Troy urged us to always have absolute clarity of where the money/profit comes from.  His example was an electrician who repositioned to being a Total Energy Solution. Troy also told us about one of his companies that had five salesmen.  Following a typical bell curve, at one end of the curve was a salesman who was only doing about $60,000 in commissions and was way below quota.  In the middle were three salesmen at or slightly above quota, earning $100,000 to $125,000 in commission income.  At the other end of the bell curve was a salesman who was pulling in about $275,000 in commissions.  Troy then threw a trick question at us, asking who he fired.  Most guessed the $60K salesman.  In fact he fired the $275K salesman, explaining that he was disruptive, not a team player, stealing leads from the others, didn’t embrace the company culture, etc.  The business question here is who on your team is not fully engaged with the mission/vision/culture of your business?  By the way, he also fired the 60K salesman. The final BFO from Troy Hazard was very simple; Change or Die, one change at a time!   Our next speaker was Brad Sugars, the founder and chairman of ActionCOACH.  Brad opened with the statement that “Profit comes from REPEAT BUSINESS.” Next Brad presented the ActionCOACH Ladder of Customer Loyalty. IMG_7935 small The first rung of the ladder is Suspect – a target or an ideal customer.

Suspects are moved up the ladder to Prospect via marketing.  Prospects have taken some action; responded to an ad, visited your store, called to ask buying questions, etc.  The BFO here relates to the ActionCOACH 5 Way Formula, “if the Conversion Rate is low, the Target is WRONG!”Prospects are moved up the ladder via sales to Shopper. Shoppers have made their first purchase.  The BFO that Brad mentioned here is “the 2nd purchase is 10 times more important than subsequent purchases.”

Shoppers become Customers when they make that all important second purchase.  This is where you begin to build a relationship with your customer.  Have a consistent point of contact and establish genuine know-like-trust in the relationship.

As you develop stronger and stronger relationships with Customers they can become Members.  Members will develop a sense of belonging.  The sense of belonging must be enhanced by superior, personalized customer service and continued relationship building.  The BFO here is Great Customer Service starts with doing business with those you want to do business with (see Target above).

Continued relationship building and consistent superior customer service will result in your Members moving up to Advocates.  A major BFO here is every customer defines customer service differently, that is why building strong relationships is the KEY.  Advocates will refer their friends and network to your business.

If you consistently deliver exceptional customer service and continue to build relationships, your Advocates will become Raving Fans.  Raving fans will refer all of their friends and their networks to your business.

Whew, this wraps up my BFOs from only the first day of the 2016 BEF.  Stay tuned, there is much more to come.

What is Your Product or Service?

As promised in my last Blog “Is Your Business Commodity or Value Based?” I would like to discuss the definition of your product, the total definition of your product, the real definition of your product.  First, a little background.  I have too often encountered business owners and professionals who stop at the obvious definition of their product, “I’m a pediatrician, I provide medical care to kids,” never either consciously or unconsciously going deeper.  And if the owner doesn’t fully understand what his or her company is delivering, what are the chances that their team consistently delivers the complete product?  That is why I consider understanding of the complete definition the product or service of a business one of the fundamentals of having an exceptional business. In my last Blog, I said “Once you have determined your clients, customers or patients (CCPs) definition of value, you must marry it to your product or service in order to have your UVP (Unique Value Proposition).”  Without a genuine UVP, you are doomed to playing the features leap frog game with your competitors.  So how do we marry our CCPs definition of value with our product or service? The answer is simple, but not easy.  You and your team must answer “Why should I be your customer?” from the customer’s point of view.  One way to accomplish this is to try this exercise that I use with my clients; make a list of 100 reasons someone who fits the profile of your ideal, not your only, customer should do business with you.  The easy part is putting the first five or six on the list.  After that it gets progressively more difficult.  I must be honest and tell you that only one client has gotten to 100.  After eliminating the duplicates, we got down to a list of more than 80 value elements, each of which were part of their Total Product Definition (TPD). Returning to the pediatrician, in addition to providing medical care to kids, her TPD includes such factors as; ease of parking, short wait times for appointments and in the waiting room, waiting room decor and activities, how friendly is the team, is the office child and parent friendly, to list just a few of the more obvious examples.  Note that the list should include both tangible and intangible items.  The tangible items, such as very short wait time, are easier to copy than intangible items such as having a friendly office atmosphere. Once you have determined your TPD, you must constantly communicate it both internally and to your CCPs.  That means you and your team must live it, breath it, understand it and consistently deliver the TPD to your market.  Your TPD is your competitive advantage, the deeper and more detailed it is, the harder it is for your competition to duplicate. My ActionCOACH colleagues and I will be happy to assist you in developing your Total Product Definition.

We Are Human, We Make Mistakes

I just returned from a family vacation to the Caribbean.  My entire family had a great time, lots of fun, beach, pool, golf and meals.  In addition there were many great conversations about life, family, the state of the world and business, with the family as well as friends, both old and new. Near the end of the vacation, the subject of customer service was brought up after a round of golf with my wife and grandson.  Upon arriving at the clubhouse we were delayed for more than 30 minutes waiting for both my grandson’s and my golf clubs.  It seems that both golf bags were misplaced after our round of golf two days prior. After the delay, we were offered loaner clubs and a couple of balls.  When I mentioned that I had no golf golf glove to the person behind the counter in the pro shop, I was answered with a blank stare.  We started our round of golf and after a few holes the very apologetic starter delivered our clubs.  He explained that they had some new employees who were putting golf bags anywhere they felt like, rather than the bins assigned to them.  Did this golf club miss an opportunity to wow me?  Did they fail to gain positive comments from me when my friends, associates and clients ask me how my trip was?  You bet they did!  They could have offered to credit my round of golf, but they didn’t.  They could have offered me a golf glove in addition to the two balls I was given, but they didn’t.  Any of these offers would have had much more perceived value to me than they would have cost the club to provide.  Instead, they offered me lame excuses and demonstrated that they do not properly train their employees.  More importantly, they failed to give me a reason to recommend their facility to my golfing community.  Simply put, they do not understand how to deliver true customer service. We are all human.  We all make mistakes, as individuals and as organizations.  It is how we respond to our mistakes that distinguishes us from our competition.