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The Single Most Important Question In Business
As business owners, we hear all the time that word-of-mouth is the best form of marketing. As a result, we focus on building our referral network - the group of people that know what we do, and can act as advocates for our business into the broader community. This is what word-of-mouth marketing is all about. (And if you don't believe me, go and visit your local BNI.
It follows then, that one of the biggest opportunities for referrals is to make sure our customers are happy. We need to make sure that we are giving our "smiley" happy customers every opportunity to recommend our business to their friends - empowering them to be "fans" of our business.
Satisfied clients, actively recommending your business to their friends will certainly help to grow your business - but it is something that can be difficult to measure.
I recently came across some interesting research by Frederick F. Reichheld in the Harvard Business Review titled "One Number You Need to Grow."
Essentially, this explores the relationship between customer satisfaction and top-line growth, concluding that the single most important question that should be asked as part of any customer satisfaction program is: "Would you recommend this business to a friend?"
This applies to all business, large and small. Big business is getting on board this research, and some are starting to measure it with an approach known as Net Promoter Scores - or NPS for short (Oh, how we love acronyms - LOL!)
If you're interested, you can find out more about the science behind Net Promoter Scores here.
In the meantime, I have two important questions for you:
Would your customers recommend your business to their friends?
When was the last time you asked your customers this question?
“Thank you for calling the Creative Business Seminars.... If you would like to become more creative ............Press 1 without touching your handset!”
A cartoon by Randy Glasbergen caught my eye this weekend and it got me thinking – just what makes one person more creative in solving problems than another? Are there techniques that can be used by normally non-creative people (such as myself) to make them more creative?
After all, businesses are always talking about being more creative: 10 new Creative marketing strategies, 7 Creative selling techniques to name a few that do the rounds. (By the way- just for the record - Small Fish does not endorse creative tax minimising strategies in case you were thinking that).
Anyway, it seems being creative isn’t just about finding creative solutions to problems. It seems there’s more to it than that, like for instance starting off by understanding the problem in different ways.
I heard it once said...pretend the problem is a jigsaw puzzle. Now break it up and turn over the pieces in your hands. Look at them again and again...what do you see? Straight edges, corners, middle pieces?? Reds together, greens and blues...I’m sure you get the idea. By looking at the problem from different angles you discover unique solutions from a different perspective.
Another writer suggested using creative “jamming”, like a jazz group. Jamming entails giving the problem to a group of people and getting them to give it a good “working over”. Pass it around, tear it apart, put it back together, and turn it over again and so on. The group often sees more than the individual.
Another way is to “tell a stranger” ... This entails describing the facts and situation to someone not related to the problem. Get them to explore the problem with you and get them to ask you questions. By verbalising the problem, putting it in your own words, you are more likely to view the problem differently, and this opens up creative solutions.
So there you have it – if you have a business problem you’ve been struggling with, GET CREATIVE with it....and of course you could always get your business coach to help you.
My friend Patrick Halliday showed me this article on decision fatigue. I hope I'm not being too much of a geek showing it to you but it's really interesting if you can get through it.
For the attention-poor, here's a summary:
Making decisions is tiring. We get sick of it and less good at it the more of it we do. By the end of a long day of decision-making, we are making poor decisions - reckless and short term focused or deciding not to do anything. Our brains get depleted of the ability to make decisions. There's hope, though - food helps - if we take a break and we eat, we pick up (and it explains why we get cravings, too).
People with the best self control which is related to decision-making) structure their lives so as to conserve willpower. They don't schedule endless back-to-back meetings (oops), they avoid temptations like all you can eat buffets and they establish habits that eliminate the mental effort of making decisions all the time.
Here's the learn for business owners:
Plan your days and your weeks ahead, using your diary or a tool like Groundhog Week (Conserve your decision-making energy).
Eat properly, feed your brain.
Make important decisions early in the day, before you are tired.
One of the biggest challenges in business can be identifying your target market. Who are they? Why do you need to know who they are? What benefit is it to you and your business?
I have heard many people try to educate others on how to identify their target market and why it is important. I have struggled to educate people myself. At a recent BNI meeting I had 10 minutes to educate other business on my business. I pointed out my target market, I could hear the gasps and whispers in the room. Oh my god – she just said she ONLY works with women between the ages of 28 and 45! When in fact, that was not at all what I said! What I said was that the demographic that was MOST profitable to me was women between the ages of 28 and 45. Does this mean I have no male clients? No it doesn’t! Does this mean I have no clients younger than 28 and older than 45? Nope!
This is my best effort to explain it to you and I hope it makes sense. If it doesn’t, you're no worse off than you were before!
Firstly – your target market (in my words, not in business text book words) are the customers that have the longest lifetime value to your business. They are the most profitable to your business.
Think about a Fish and Chip Shop (mainly because I am hungry, but also because it is a nice simple way for me to explain using a “fishy” analogy). The Fish and Chip Shop need to sell $20 worth of product to make 150% profit. The profit declines as the average purchase declines. The aim is to attract the customer that spends a minimum of $20 in one transaction. They use only the best quality products including low cholesterol oil.
The Fish and Chip Shop has a very smart, gorgeous, funny business coach (hmm…who could that be?). The business coach suggests that they need to do some advertising but on a limited budget - the Fish and Chip Shop want to make sure they get as much bang for their buck as they can.
How do they accomplish this? Simple… Advertise to the clients who have the largest value to your business. The most profitable customers are the ones we want to attract!
These are the clients that
Purchase regularly (1-2 times per month)
Purchase more than $20 of food
Live close to the shop
See value in a quality product
These are NOT the clients that
Purchase sporadically (3-4 times per year)
Purchase less than $20 of food
Do not live close to the shop
Lets now consider the types of clients the Fish and Chip Shop attract. This is clearly not an accurate full list, but stick with me, it will start making sense!
Families (high profit)
Singles Men (medium profit)
Teenagers (low profit)
Now lets think about whom from that list you want to advertise to? The immediate answer most businesses give is “everyone is my customer”. While this is true, not every customer is profitable.
Who do you want to advertise to? Is it the single man, the teenager or the family? Of course it is the most profitable which is the family. A family doesn’t make the decision to purchase together – usually mum and dad make the decision so we have just broken your target down even further!
From figuring out who is profitable, the Fish and Chip Shop can now use their marketing dollar to influence mums and dads who live within 2kms of the store. Instead of spending $1000 on an advertisement in a newspaper circulated to an area 4 km outside of the shops location that is mostly read by retirees, we can focus efforts on a letterbox drop to homes (not units or retirement villages) in a 2km radius of the shop.
This is of course an overly simplistic view and I have no clue how profitable a serve of flake, chips and scallops are but I hope that helps you understand why you need to identify your target market.
From a young age, you are being encouraged to ‘be nice’, ‘play fair’ and ‘do unto others as you would have them do unto you’. It all makes perfect sense.
But it can be difficult. Especially in business. It’s easy to forget these basic rules when you are bombarded with messages of negativity - like the 6PM News, and often it feels like everyone is out for a piece of you. Internet scams, telemarketers and an avalanche of marketing urging you to buy, buy, buy! Is there a place for kindness in this materialistic, self-absorbed world?
If the sound advice of your grandmother is not enough to convince you to live a life of kindness, how about medical evidence that it will help you live longer and better? Dr David R. Hamilton has written a book called ‘Why Kindness Is Good For You.'
It’s a great read, but here is the basic message in a nutshell.
We have been designed to be kind to each other. When we are, our body functions better, is more resistant to disease and aging and we feel better.When we turn our back on kindness, our blood pressure rises, free radicals roam our bloodstream doing us harm, and we are prone to depression.
Other facts about kindness, happiness and compassion:
It’s contagious – the human brain is tuned to detect and mimic kindness.
It’s addictive – displaying compassion releases endogenous opiates and these powerful chemicals can replace the highs produced by morphine or heroin with a ‘helper’s high’, a far more natural and positive experience, I’m sure you’ll agree.
Happiness makes us richer. People sometimes equate money with happiness. In other words, if I have lots of money, I will be happy. Dr Hamilton references research that suggests things work the other way around. He cites a study by Robert A Emmons that measured the happiness of a group of US college students over 16 years. Those who were happier at the beginning of the study actually earned more during the evaluation period. The happiest in the group earnt $25,000 more per annum than the least happy!
But don’t take my word for it… give it a go and see for yourself.
Click the picture below to reveal a list of 50 random acts of kindness to get you started. I look forward to hearing your results.
Like a lot of people out there, I have had my share of corporate travel. In a previous life (one I left to join the world of small business to avoid) I was based in the Middle East for nearly 6 years and travelled internationally nearly every week. This takes its toll on lots of things such as- missed family time and outcomes associated with this, time wasted at airports and lounges, eating bad food, another city, another hotel room etc. etc. Not quite the glamour I initially thought. I have early visions as a child thinking that friends who had parents who travelled had the best job, from my experience it isn’t all it is cracked up to be!
So I left this life and came back home to Australia, partially to escape travel, only to end up in Perth and then every few weeks still spend time flying back and forth to Sydney. So I didn’t quite escape! Now I am back on the east coast and spend less time travelling, so the daunting side has reduced, to more of a novelty. The only bit of that past life I miss are the people in all the cities I went to, but social media, email (and phones) can eliminate that gap easily.
As the circle has now nearly turned a complete revolution as a small business owner, I pose the question to all as to whether you now dread the travel side of the business world and why?
Do you work smarter and utilise technology such as Skype, GoTo Meetings, conference calls etc. or do you still insist on the face to face?
If face to face is still important, have you taken the time to consider the cost of a trip to you or your business? It isn’t just the airfares and hotel and meals, but the time you are away at your hourly rate doing ‘other things’, it’s the time away from family events or school events which cant be replaced as well. There is a big sacrifice to those who live this life whether in corporate or in their own business!
Maybe I’m just being all philosophical as I sit in a café in Melbourne after flying down here for two days this week. This has meant re-scheduled meetings, missing an event and being away physically. Some of these things just can’t have a price put on them, but I guess it is a necessary evil as the world gets smaller and smaller!
In a recent article I posted to our Small Fish Blog ‘What makes a great business owner?’ the behaviours of great owners were discussed. To continue with this theme and to look at some more specific behavioural data, I have conducted some analysis of businesses I have had contact with recently as a coach.
These results come from the mini audits of 87 business owners, who took the opportunity to try the Free Coaching Session Small Fish provides. (I have to plug this and say it is a great way to seek some feedback, ideas or thoughts on how you can improve your business if this is what you want to do!). Just click here or email me if you have an interest in having one for your business!
So, what did I discover?
From the 87 business mini audits, the following was discovered:
75 employed staff (balance solo operators)
8 actually have regular structured staff meetings
7 provide incentives, feedback or reward processes for their team
6 have a formal business plan (I think about 2 had actually looked at it since completing)
5 have a Marketing Plan
4 tracked Marketing activity for ROI each time
6 obtain and review financial information on a monthly basis (i.e. P&L)
4 knew their break-even point
These are some alarming numbers, and I am sure all those reading will not be on this list!
Clearly not all people I meet want to become clients for a number of reasons such as time, cost, don’t want to change, not ready, feel they’re doing ok, etc. This is fine and to each their own.
The key point and take away from this is not to sell coaching, but to advise if you are guilty of any of the above. The first step is to recognise your gap. Once you know where you need to modify things, you have to WANT to change. This is where those who seek external help flourish; they have identified a need and want to amend that gap in their behaviour. Don’t waste money on coaches, consultants, training etc. unless you really are serious about change and willing to commit. It isn’t easy, but the business benefits longer term will truly make you a great business instead of just chugging along and doing Okay.
I wish you all the best and hope to see these hit rates change as we all become better (and even great) at what we do.