Archives for: January 2012

The Basic Formula for Business Success

what makes a business successful

What drives business success? What is the one thing any business can do to increase its chances of surviving, thriving and growing?

We are always looking for a single thing that can give us success, the ephemeral silver bullet. It’s called the delusion of the single explanation (read more about this one and 8 other delusions here). In business, like in most cases, it is always a combination of factors that results in success. Strategy is probably at the top of the list. Other factors include execution, passion, culture, and some may even say luck (timing is usually a better description).

While I believe Strategy is the #1 factor, I was looking for a formula to create a strategy that could be applied broadly, to almost every business, of any size and industry, to increase its chances of success. I think I found it.

The Formula for Business Success

Long time ago, probably in the early 90s I saw a magazine ad for Lotus (I believe) which had a central message designed to make small business owners feel empowered. The headline read:

Give Customers What they Want, Make Money, Repeat

Since, it stuck in my mind because of its simplicity and power. I am sure most people read it and thought “d’uh! – of course!’. Some of the most powerful concepts in business and in life are hidden behind simple phrases like this one. Often we fail at the basics. Often we get distracted by complex stuff and ignore the basics. My college professor used to say “Marketing is common sense, which is the least common of all senses. Never underestimate the Power of Simplicity.

Why is this simple customer so powerful? Let’s break it apart:

  • Give Customers what They want – offers four insights:
    • Giving customers what they want is very different than giving customers what you sell. This means you must change your marketing and your entire organization around customer needs, not around your products.
    • Second, it means you must first find out what customers want. really listen about what they want and make fundamental changes to deliver it. Like Domino’s when they changed the recipe for their pizza based on customer feedback.
    • Third, it means you need to decide who is your customer. It is very hard for a business to try to satisfy every kind of imaginable customer. You need to understand market segment,s buying behaviors and the type of customer you are better suited to serve. You can start with  simple terms – do you want to serve a quality oriented customer, a price conscious customer or one that values full service?
    • Fourth, the ‘Give’ talks about the delivery model. I think about it as understanding how your customer wants to consume your product. What format, what pricing model, what packaging, what place, etc.
  • Make Money – This is about having a fundamental understanding of your business metric. Understanding your cost to acquire a customer, your fixed and variable costs, cash flow, profitability, margin, cost of capital – start with the basics. If you talk to owners of small businesses, you may be surprised how many have no clue about many of these metrics. The same can be said of product managers, marketers, and even large companies. Remember the dot com bust? The focus on making money also means your business must be market driven, not technology or buzzword driven. Another no-brainer that is often the cause of business failure.
  • Repeat – This is a key part. It talks about building the culture, the processes and the company around these basic principles. Listening to customers once is not good. Looking at your balance sheet every now and then is not good management. These need to be habits. Even more than that, they need to be made core of the way you think about your business – as an entrepreneur, as a CEO or as a product marketer in a large company.

I hope this formula can help you and your business, or at least re-think your overall strategy.

What drives business success? What is the one thing any business can do to increase its chances of surviving, thriving a...

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Is Your Loyalty Program Demonstrating Your Loyalty?


Like most business people with global responsibility, I fly quite a bit. I have been a Platinum member for a couple of years and have flows withAmerican almost a million miles now. A few weeks ago I headed to the counter and asked to be added to the list to get upgraded.  After all, I have 18 segment upgrades in my AA Account.

“No can’t do. You cannot use your segment upgrades anymore” said the AA Lady. Wait…what? Last year because I was transitioning to a new job, I did not fly much, and when I flew other airlines were more convenient. I did not get enough miles to qualify for Platinum – or Gold. I missed by just about 2,000 miles. I was demoted from Platinum elite member to member.  And if you are not Gold, you cannot use your earned segment upgrades. American won’t allow me to use the upgrades I earned by being a loyal flier for years.

Then, I got an email yesterday where American is asking me to pay $559 to retain my elite status at Gold and enjoy benefits such as checking two bags at no extra cost, which I get at Southwest.

What American does not get is that I am the same guy they used to pamper with free upgrades to business class on an intercontinental trip, complementary access to lounges and other perks. Now that I am traveling again, I don’t feel compelled to use AA – for them I am just a guy. In reality, I am a business traveler, and I spend more than I would like on travel – and American knows it.  American’s loyalty program failed to prove loyalty to me as a customer .

American has lost my loyalty and the loyalty of thousands of customers. Now American is in bankruptcy and at their current market ($218 million) Apple could buy the airline with the profits they make in a day and a half. But the goal is not to pick on American or rant about my experience, I am using it as an example of having the wrong idea about what a loyalty program should be.

“ Loyalty programs should be about demonstrating loyalty to your customers, not about bribing customers to do business with you”

Here is the problem: Most Loyalty programs are focused on rewards, which ends up being the same as bribing the customer to do business with you. Ironically, there is no loyalty in bribery: as soon as the bribe stops, customers will go elsewhere.

What if you thought about a loyalty program in a different way? What if the goal of your loyalty program is to demonstrate your loyalty to customers? Customers that feel appreciated, that feel they trust a company, that believe a company will stand by its principles, will become a loyal customer. Customers will be loyal because they will want to do business with you. Not because you bribed them. Seth saysLoyalty can be rewarded, but loyalty usually comes from within”

Maybe that’s why Forrester Research found no correlation to a small negative correlation between customer loyalty and having a loyalty program.

The key driver of loyalty is good, consistent, trust worthy service that meets the needs of your customers.

The old customer marketing funnel based on the AIDA model (attention, interest, desire and action) is obsolete. The new marketing funnel needs to be customer focused. The new customer model is CSLA (horrible, but hey, acronyms suck anyway):  Costomer -> Satifaction -> Loyalty -> Advocacy

  • You create a Customer when they buy a product or service from you
  • Customer becomes Satisfied when you meet or exceed expectations
  • Satisfaction drives Loyalty, which is repeat purchases
  • Satisfaction  and Loyalty make the customer an Advocate that promotes your product or service via word of mouth

Like most business people with global responsibility, I fly quite a bit. I have been a Platinum member for a couple of y...

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Building a Global Online Strategy

The World is flat. If you have a website or run an online business, it is global by definition. As a business grows it starts thinking about how to optimize their online presence to better serve customers around the world.

Photo courtesy of wilmack via Creative Commons

The way it usually works is that a subsidiary uses part of its marketing budget to create a local site and local content. Over time this problem gets bigger and bigger, often ending up with multiple websites with no coherent strategy. The result is uncoordinated infrastructure investment efforts, inconsistent experience for customers, back-end integration challenges, privacy governance problems and continued investment in localization.

What is missing is a global online strategy. While building a global online strategy must be done in a way that is relevant to your own business, I want to offer a few ideas or best practices that could help:

1. A single online infrastructure and one global user experience.

In a world of global consumers, political boundaries and languages are becoming somewhat irrelevant (not totally, of course). Customers travel, migrate, commute and deliver services globally. B2B companies have subsidiaries and regional offices in multiple countries. Privacy, compliance and user experience governance is better done centrally. With all this under consideration, it makes more sense to have a single, adaptable, global site.

This means a single global infrastructure that allows you to have a single strategy, one investment and consistency across regions on aspects such as your content delivery network strategy, PCI/HIPAA compliance, video management platform, personalization, back-end/ERP integration, privacy compliance, CRM strategy, URL shortening, social strategy, etc..

It also means having a central point of view and strategy for user experience: registration, social integration, newsletter subscriptions, profile and personalization, order history, and other preferences.

Web infrastructure is not cheap: content management systems can be expensive, especially if you are buying one for every region. Implementation and maintenance (people) costs are usually about 10x the cost of the software, which means using Open Source instead of a commercial app can have marginal cost savings benefit, sometimes negative if open source requires more customization and maintenance. Maintaining multiple content management systems can get quite complex, especially when you consider content federation, syndication, localization and content lifecycle.

2. Define your language translation strategy and priorities

The two key pieces of information you need are country (for shipping as well as to present local stores, events, promotions, etc,) and language – these should be ideally two separate preferences.

Plan your user experience to allows international visitors to find their locale (country and language) quickly and can change their preferences easily. Their current IP address should be used for suggestions only – you don’t want all your sites to switch to Japanese if you travel to Tokyo for a week.

The first decision is to decide what languages require support and in wat priorities based on your business strategy. Start by understanding the revenue contribution from each country, primary languages – and most importantly, what countries and customer profiles require a localized online experience.

It could be that your target customer in a particular country actually prefers English content. This is common for technology buyers who perceive (correctly) that English content is more compete, more up to date and more accurate (free from translation mistakes).  It could also be that your buyer is more comfortable in English but the actual end users require localized language. It could be that the culture in a particular culture requires localization as a business courtesy and a sign that you care for customers in that country and respect their nationality.

Once you understand priorities, a site map should be used to determine what content needs to be translated. Some companies translate only the top one or two levels on their website, others only pre-sales content, others a mix based on more complex decision-making. A best practice I have observed when one the top-level of content is translated is that at content that is not localized is still made available but there is a mark on the link (as simple as an asterisk) that indicates the content behind that link is in English. Once you have this, you should start forming an idea of the amount of content required to support each additional language.

The next step is to decide on your localization process. It can be as sophisticated as manual, outsourced translation by native speakers to using Google translate. A balanced approach could use assisted translation: machine translation that is reviewed by translators for accuracy. Using a standard dictionary for consistency of use of technical terms, informal language expressions and phrases is a best practice here.

A very important, and often overlooked, part of this process is to think about how will you update content. This means having a strategy not only to translate the initial set of content, but also considering ongoing process to update content based on what changes in the original site. It also means building the dependencies between localized and original content in case the original content is retired, updated or deleted (i.e. for legal reasons).

3. True internationalization requires taking into account Culture

Building a global online presence is tricky because of all the little things that change from culture to culture. Certain colors, terms or images may be offensive in a particular culture. Certain words change meaning from country to country. There are historic cultural sensitivities that impact, for example, using Spanish from Spain in Latin America. Religion, business practice, privacy and many other factors come into play.

For large organizations. it is useful to establish a central location (i.e. a Wiki) with guidelines and tips to make content more culturally sensitive. This means, what colors to avoid, what tone to use when addressing specific cultures, what type of advertising or messages could be considered inappropriate, etc.

4. Centralization with Local Empowerment

Centralizing your online presence after the local marketing team has built a country or regional site can present organizational challenges. The local team should welcome the fact they won’t have to invest time and resources maintaining online infrastructure, however there will be a concern over loss of control and a legitimate need to be able to have control over local promotions, local activities and local content.

The worst possible outcome is that the new global site becomes the excuse for poor regional financial performance. This can be avoided if you involve the regional teams from the beginning of the project, if they provide input in the requirement gatherings phase and if the site is built to enable some degree of local control.

Most modern content management systems enable delegation features that make it easy to determine what parts of the site can be changes by regional teams and which ones should not. It is important to define these rules from the beginnig. For example, for brand consistency and IP protection, the global/corporate team should be defining global logo usage, site images, colors and overall brand image.

Local teams might have the ability to create certain number of pages, control local offers, maintain the local event calendar, promote local case studies, feature local press activities and influence the SEO strategy to include keywords relevant in a particular region. In other words, they could enjoy the benefits of a global site while still maintaining some level of autonomy and power to influence their local business.

All the decisions and points above have budget and process implications. How will they affect corp/local budget distribution? Who will pay for localization? what to do with existing web-aligned people in the regions? etc. No one said this would be easy.

5. Global Site as a Service and Governance.

This brings an interesting concept: The global online team as a service. For a central/global web team to be effective there needs to be an agreed SLA with the regions/subsidiaries and a defined process for capturing feedback and allowing them to participate in the definition of future development of new features and enhancements

Reciprocally, the local team must agree to abide by a set of agreed rules, made very clear in a policy document with specific enforcement controls, for aspects such as buying and using domains, social media participation, launching and maintaining tactical regional microsites, and probably most importantly, a customer data strategy, which brings us to the last point.

6. Customer Data and Privacy Strategy

In some countries, violation of privacy laws is punished severely and could result in people going to jail. In many global companies, a violation of the policy (creating a microsite around corp guidelines that allows customers to register or sending an email with an excel file with names and email addresses) results in immediate termination of the employee.

You probably have heard of the Google execs that went to jail for allowing an end-user to upload illegal content to YouTube in Italy, even after the video was taken down quickly after it was flagged. This is an extreme case, of course, the intention is not to scare you but to make you aware of the importance of the legal aspects one must consider, starting with privacy laws.

A basic set of guidelines will define what information should be captured, what re the guidelines for allowing people under age to register and what is considered ‘under age’ in each country, clear policies for handling PII (personally identifiable information) including how it should be stored (a central repository with encryption) and deletion, credit card information handling and PCI compliance, opt-in/opt-out, global unsubscribe and customer preferences.

It is a lot of work, yes. Is it easy? absolutely not. But it is certainly worthwhile. The Web is quickly becoming the most important customer interaction channel for all types of organizations – it already is for many. The good news? once you build a global online presence based on a solid strategy your company (and hopefully you) will enjoy its benefits for many years to come. I hope this posts helps you get there.


The World is flat. If you have a website or run an online business, it is global by definition. As a business grows it s...

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A Pricing Lesson from the Concorde

Are you pricing your products right or are you leaving money on the table?

The Concorde was one of the most innovative machines ever built. The first and only supersonic commercial aircraft capable of flying at twice the speed of sound is also one of the most beautiful machines ever built. The Concorde story provides an interesting lesson on pricing.

During the first 6 years of operation, the fantastic Concorde lost money for British Airways. Losses were so bad, in 1982 BA’s boss Sir John King gave the responsibilities of the newly created Concorde division to  Captain Brian Walpole and gave him two years to turn Concorde losses into profits. If he failed, BA would terminate operations, shutting down Concorde for good.

The COncorde team decided to do some market research. They asked businessmen how much they thought a Concorde ticket cost. The answer, “Most of them didn’t know. It was their secretaries or travel companies doing the bookings. When they were asked to guess, because they were senior, very important people, they all guessed that the fare was higher. ” – explained Captain Jock Lowe, Concorde resource & Planning Manager.

This insight led to a new pricing strategy. Captain Lowe described “So very simply, we said, we’ll charge them what they think they are paying. And so we put the fares up”.  There was a discrepancy between what the company was charging and the value customers saw in the product. Have you asked your customers how valuable is your product or service to them?

Concorde ticket prices were doubled to over $7,000,  one way, in today’s prices. As a result, Concorde was repositioned to provide a super-elite class for bankers, the rich, and the famous. Concorde became the place to be seen.

Despite the high price, sales were very strong.  For one particular day, half the tickets for its first fare-paying London-New York flight were sold out in the first two hours of booking, (source).

Concorde started making money. Lots of it. “We made about $500 million pounds in net, clear profit.”. Estimates point to $50 million pounds in profit per year. That’s significant, even for a company the size of BA.

Many companies build their pricing strategies based on cost + margin. Often, there is a predetermined margin based on an overall pricing strategy or on a corporate profitability target. The story of Concorde sows us the power of market-based pricing and the importance of understanding the true value of the products and services your company offers. Do you know what is the price elasticity of your products?

Source: “Concorde, Flying Supersonic” – Smithsonian TV, 2010

Concorde photo courtesy Flickr user Howard N2GOT – Creative Commons

Are you pricing your products right or are you leaving money on the table? The Concorde was one of the most innovative m...

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