Lessons from Sandwiches
I was recently coaching a great digital business based out of Halifax and we were looking at the issue of menu costs. The business theory is very simple; minimize choices on offer. By doing this, you reduce the inventory cost and the business becomes simpler.
He had tried this with his business and found that the revenues went down. I then remembered lessons I had learned from my experience at Amano (still miss you terribly Johnny RIP).
Consumers in our sandwich shop would always choose one of three sandwiches – and 80% of the time, they would have just one sandwich. But if you only offered the consumer the three sandwiches they want, they will really not like the lack of choice and go somewhere else.
This is very odd but it is a real phenomena. How would we feel about going to supermarket that didn’t allow us to ‘browse’? I know I don’t want to buy biscuits, but I want to see them there either to satisfy my sadomasochistic instincts or to congratulate myself on not buying them!
Most people feel the same way. Hence, you must avoid the temptation of only giving consumers what they want to buy? What they want to see and what they want to buy is not the same thing.
I also learned last week (during a fantastic pitching event in Winnipeg, Manitoba) that most consumers use the same formula to choose a bottle of wine at a restaurant. They will choose the second least expensive in any given category. Amazing and yet – they want choice. One of the whole points of a wine list is to be able to browse and choose thereby looking cultured.
This is not the same as ‘confusion marketing’ which mobile phone companies shamelessly use. This is where you deliberately confuse the consumer with too many choices and confusing ones, so that they choose one which is not the best for them.
Websites suffer from the same problem and Alan Sugar (whom I have to say really impressed me with his Biography) has always used menu pricing to help consumers feel they have choice in what they want to buy.
So the lesson; theory is great and just because you are doing something very clever in the digital world; basic rules of psychology still have to be understood and applied.
Alignment
There is nothing better than helping a client through the provision of a service that you just know is going to really help them. It is a case of all the interests being aligned. I remember watching a movie “In Good Company” (to be fair not a brilliant movie, but a great sales scene).
In the movie Denis Quaid is the senior sales person teaching a young up-start how to sell. They get a really good sale and Denis seems very pleased because he customer has got a good deal. “You really believe in this, don’t you?” asks the young up-start. “Of course, why else would you do it?” replies a slightly startled Denis.
There is a real truth in this and yet we all come across businesses and sales people where you sense the objective is just to make money rather than seeing making money as a by-product of providing a really useful service that adds value.
The business I have recently started up and am now focusing much of my attention on is www.springleads.com and I do not mean for this blog to come across as an advert for this business, but I want to use it to explain exactly what I mean by alignment.
My background is in sales and my career break came through my cold-calling efforts at PricewaterhouseCoopers. I was very good at it and went around the country training others across the firm on cold calling. It is something that I enjoy enormously and have a passion for.
With all of the mentoring I have done recently, I know that the big issue many start ups face is having to make many cold calls just to find the few customers that would be interested in talking to them. The most effective sales person in a start up tends to be the CEO, and yet the most precious resource they have is their time. Cold-calling for them is not a good use of their time.
www.springleads.com provides that service for them and for any other company that needs a large number of calls being made. So how did we set about differentiating between other call centres? Again through understanding the pain that start ups have, we were able to realise that having a set up fee and a minimum order number of hours acted as a barrier to many cash-strapped start ups. As such we set up a cost structure where there would be no set up fee and a flat £15 per hour.
Of course this is a plug for the business, but I hope it illustrates that when you are starting a business, it is important that you have (or you rapidly acquire) knowledge about the problem you claim to be solving. The other lesson is that you have to make money from the activity whilst still providing an enhanced service. So your cost structure has to demonstrate not just the needs you have – but also the needs of your client.
Ensure your personality and experience are aligned with your business and that most critically your business structure is aligned with the needs of your customers.