Price is the easy, safe tool, but the smart companies aren't just getting customers they're keeping them

Feb. 1, 2013
Today's company must accept the challenge of change, use the ultimate weapon of this decade execution and be the catalyst for action by daring to be innovative


Today's company must accept the challenge of change, use the ultimate weapon of this decade — execution — and be the catalyst for action by daring to be innovative.

In “Compete for Today, Build for Tomorrow,” Sam Geist of Geist & Associates Inc said all companies want to sell more products, but research shows that 90% of what we learn is outside our business, which means we have to step back and take a broader look.

“Tomorrow is going to change, and it's changing faster than ever,” he said. “We're managing in a world where we don't realize how things are changing. The problem with competing today is that it's foreign to us. If we stand back and really take a look at today's marketplace, there are too many products, too many services, and everyone is after everyone's business. They're all promises: ‘Buy our service. We're better than somebody else.’ Unfortunately, there's too much of everything.

“The other issue is that today is more competitive than we ever dreamed of. You have competitors you didn't even realize you had, and they're looking at your customer base and saying, ‘I can do it better.’ It's a global marketplace today. The center of the world is not in the United States anymore.”

Geist said seven of 10 marketers use price to drive their business. Why? Because it's the easiest, safest tool. But he believes that when you use price to drive your business, you become a commodity.

“Somebody will always beat you at that game,” he said. “There is always a lower price. It's gross-margin erosion. The dollars we have in our business are smaller today. Re-engineering and downsizing is a reactive move to having less dollars in our business. My message the last three years is the opposite. Mine has been, ‘re-engineer for growth.’ The purpose of business is to get and keep customers. How do we get them? More importantly, how do we keep them? That has everything to do with finding new customers and adding value to the existing base so the existing customer base gives us more business.

“In the last 60 days, what have you done for the client base to provide the how-to and the why, before they ask you? If they ask you, that means your competitors knocked on their door. And from my perspective, that's your responsibility. Technology has changed the business today. We live in a very connected world, and that's caused value chain deconstruction. There's nowhere to hide, and our customers have more information than we do.”

Geist cites another term: disruptive transformation. This means that the business model we grew up with — in which we made a product, sold a product, made some money, and opened another location — has changed in front of our eyes.

“We have to understand that,” he said. “This new model is so totally different. The technology of how we connect with our customers is not the technology of building products. It's the technology of disruptive transformation where all of a sudden, the distribution is totally different.

“What is average age of a social networker? 37. That changes the whole perspective. It's our responsibility, our mandate to understand how this new technology is changing. There are 20 million bloggers in America, one billion people on Facebook, 50 million apps at the Apple store, four billion photos on Flickr, 200 billion tweets a day.

“So my question is: Who's living in your backyard? Who are you competing against? Most of us think social networking is for 15-year-olds. I'm not telling you to be a social networker, but we must understand the new roles today.”

The necessity of change

He said change is tough. But not changing is terminal.

“BlackBerry had it all,” he said. “But no, you get blinded by success, and you think your business is going to last forever. It doesn't work that way. Sears. When was the last time you went to Sears? There's no reason for Sears to be around anymore. Kodak. It took $32 billion and eight years to reestablish themselves in an industry they invented. Now they're selling off their IT.

“We have to learn to let go of yesterday. That's one of the toughest things in business today. You will wake up one morning and say, ‘Where have I been? Who is my customer?’ And what do you really know about your customer? A business with no customers is no business.

“Women today are the market. Women look after details. It's a changing landscape today. You have to look at who your customers are. How close are you to their needs?”

He said there are three issues:

  • Stress

    “When was the last time you sat down with your team and asked, ‘How do we make it easier to do business with our company?’”

  • Time

    What can your company do to save your customers time?

  • Trust

    People do business with organizations that are trustworthy.

Geist said expectations have changed. Everyone wants more for less.

“Get used to this new reality,” he said. “With this expectation, satisfying the customer is yesterday. Today, we're judged on the client preferral index. How well are you connected with the customer base? What makes you different? What do you stand for? Differentiation is a competitive advantage. You need to get your people to exploit your difference. When you take price off the table, what do you have left? You need to look at change as opportunity in work clothes. And technology's really changing the business model.”

The key word: execution.

“There's a disconnect between knowing and doing,” he said, “between the idea and what we do with the idea. It's the #1 problem you face — the #1 problem corporate America and the world face. We talk but don't do. We have but we don't utilize. I call that strategic intent. That's over-promising and under-delivering. We talk but don't do.”

“It's all about execution, because over-promising and under-delivering is serious stuff.”

He said a major study showed that 23% of companies believe they lose customers because of execution, but 72% of customers actually leave because of execution/service. So there's a 49% disconnect between what companies think and what customers think.

Similarly, 50% of companies believe they lose customers because of price, but only 23% of customers actually do.

“How much time does your organization spend on strategy and how much on execution?” he asked. “I'd advise you to reverse it. Strategy's cool. We love to sit in meetings talking strategy. It's cool. But execution is work.

“Starbucks would have never achieved what it did if its execution was 6 out of 10. Execution gives us the license to expand the brand. Price is price. Value is the total experience. It's the totality of doing business with you. It doesn't matter how you rate yourself. It's what your customers rate you. When's the last time you bought a head of lettuce? There's an 88% margin on bags of lettuce sliced and washed. So how do we bundle our family of services? How do we get our customers to buy a package and not an individual item?

“If you want the margins, you have to give the service. You have to have the relationship. You can't do what you did yesterday, because price is what you pay, and value is what you get. And value is defined by the recipient, not the provider. So selling is out. Solution is in.

“In the end, it boils down to creating value by delivering results. Maybe we need to simplify it for customers. But ultimately, the responsibility lies on us. If you want to sell more, you have to give more. If you want to give more, you will get more margin. But if your company doesn't execute, if you're sitting on a 6, it doesn't work.”

Where is value created?

In the center of a business. Strategy will get you into the game, but execution is the game.

“It's the distribution channel you count on,” he said. “It's the resources you use. The biggest resource we have is people who work for us. If you take all business in North America and put them on a balance sheet and look at the expense side, 41 cents of every dollar on the expense side on average is for the people. It's the biggest underutilized resource we have. Everybody says their people can do more. If so, why aren't they? They're the face of your brand.

People can be part of the execution solution. It's a failure to communicate. The great problem with communication is the illusion that it's been accomplished.”

Here's how that's done:

  • Simplify

    “Don't use 12 words when you can use six words. Complexity alienates.”

  • Focus

    “Focus on what you want to achieve and move from generalities to specifics. When you're talking in specifics, you're getting a commitment.

  • Get them to take ownership

    “When you spell it out for them, they'll do it.”

About the Author

Rick Weber | Associate Editor

Rick Weber has been an associate editor for Trailer/Body Builders since February 2000. A national award-winning sportswriter, he covered the Miami Dolphins for the Fort Myers News-Press following service with publications in California and Australia. He is a graduate of Penn State University.