Marketing is More Than Advertising

I find it interesting when I speak with new acquaintances and they ask me what I do. I’ll typically respond with “I’m a marketer” or “I’m part of a marketing team.” Nine times out of ten, the response I’ll get back is “Oh, you do advertising.” I used to be surprised with this response, given that advertising is really just a small part of the marketing discipline. Now, I have come to expect it.

Of course, advertising is a part of the marketing mix. It comes in many forms, as shown in this recent media share chart.

advertising_spend_by_catetory_2013
Average allocation of advertising budget for marketers in 2013. Source: BIA Kelsey.

Each of these categories is part of the advertising spend, with each component offering unique advantages and opportunities, depending upon what you are selling and where your audience resides.

Continue reading Marketing is More Than Advertising

Marketing Strategies to Deal with a Disruptive Event

disruptive_event_microscopeIn my last post, I presented a real-life disruptive event that manufacturers of microscopes are now facing – the emergence of a new competitor selling a product that apparently is unbreakable, can be transported to literally anywhere in the world, and, could retail for $.50 each.

I chose this example not only because it is a current, but because of the severity of the disruption. Professional microscopes used by research facilities or drug manufacturers likely cost thousands of dollars, so the price difference is significant, to say the least! Here are some observations and tips I would suggest, if I were the one responsible for realigning the strategic direction of an existing Microscope manufacturer.

Why are you in Business?

I don’t mean to imply you should just recite your mission statement, or to try and present the merits of preparing one. I am simply suggesting you look to your roots and decide why you are in business in the first place? What is the reason you started your company, or in the case of large, publicly traded companies, what difference are you trying to make in the world? Assuming it is more than just collecting a paycheck, a careful reflection on this point will help guide next steps.

For example, if your mission was to provide under-developed countries with medical assistance through the production of affordable microscopes, then I would propose you now have two choices: (1) Join forces, or (2) Exit the industry. Manu Prakash and his students at Stanford have built a better “mousetrap” as the expression goes, so you really can’t expect to disrupt his breakthrough – it is unlikely.

Alternatively, if your mission is to provide the highest quality instruments so researchers can gain insights into the deepest depths of molecules, atoms or whatever else these individuals do to help find cures to diseases, then your response might be different. The paper microscope was created to serve markets where the primary purchase decision is based on cost, ease of use and transportability. The research market, however, has money to spend and is typically is located in a developed nation where breakage issues are not a driving factor of a purchase. So, this market might see value in features that better serve its needs.

Product or Market Differentiation

Marketers like to call this strategy product or market segmentation. Ideally, it is best to “own” a particular market segment. Narrow the focus on what you think you can “own” so as to provide the best possible product to serve the specific needs of that particular group of buyers.

For example, it may be that a larger model is better suited for research purposes. In this hypothetical scenario, it might make sense to “go big” and introduce a much larger version with specific features that a researcher might highly value. This way your product gets positioned as serving a different need, so will less likely be compared to the paper product. A great way to execute upon this concept is to come up with a new name for the market you seek to dominate – it will help to make the buyer feel more comfortable, and that they are not overpaying for a product that could be purchased for under a buck!

Service Differentiation

Another business strategy to make your offering different than the rest is to include or associate a type of service with the physical product. In the software world, some clients have highly sensitive data, processes or actions that are being performed by their software at all times of the day or night. These clients will happily pay for 24/7 service to be available at a moment’s notice to fix an issue if it comes up, so as to avoid lengthy downtime. In the same way, some of the microscope manufactures might decide to come out with a highly sensitive, highly accurate model that might be the Ferrari of models – both in terms of performance and nurturing necessary to maintain that performance. Clients interested in this type of product might be willing to pay extra for the support or maintenance services associated with such a high end machine, making the focus being more on providing the valuable expertise to keep the equipment running at all times. This is certainly a different business model than that of providing the “buck” model.

To conclude, when faced with a disruptive event, it is often helpful to first think about your business purpose. This insight is more than just to include in the writing of a business plan – it can genuinely be a life saver to help you get over the shock of a disruptive event that might happen in your industry. With this insight well thought through, the choice of a responsive action might be easier to see, identify and put into place.

Do you have a disruptive event that occurred in your industry? I would be curious to hear what you did and how it played out. It will be interesting to read about the microscope manufacturing market in about 2 years to see how these industry players decided to respond.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

 

What is Your Business Plan to Deal with a Disruptive Event?

black_swan_eventHaving worked in the technology industry for the past 20+ years, I have seen a few significant changes and technological breakthroughs. Most of the time they are unexpected – there is a reason why these are called “disruptive.” Few can truly see it before it happens.

According to Wikipedia, Nassim Nicholas Taleb coined the term “Black Swan” as a theory to explain:

  1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology
  2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
  3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

The bottom line is you won’t see it coming, and the announcement that brings it to light will be shocking, to say the least.

A Microscope for the Masses

One of these events just occurred last month. I read about it on Yahoo! News on March 24, 2014, where it was announced that Manu Prakash, a professor at Stanford University and his students have developed a new microscope that is literally “built” out of a flat sheet of paper, a watch battery, LED, and optical units that when folded together, much like origami, creates a functional instrument with the resolution of 800 nanometers – basically magnifying an object up to 2,000 X.

Adding further impact to this breakthrough, apparently it is unbreakable, can be transported to literally anywhere in the world, and, could retail for $.50 each.

What do you do if you work for Carl Zeiss, Leica, Nikon or Olympus, some of the leading microscope manufacturers in the world? I suspect these companies are right now doing their very own business plan evaluation to try to answer this question.

How Would you Respond?

I suspect that the day the news announcement was made, there were a few “oh sh%@” comments that made it through the halls of these manufacturers! No one likes to be surprised, and everyone usually, at least initially, thinks the worse.

To start, this is an interesting case study that will unfold before our eyes. The reason is that from a humanity perspective, this really is a good thing. Now under developed countries might have a way to scan for blood diseases, in locations that were never before deemed possible. New medical breakthroughs might even result. Lives might indeed be saved from this invention.

So, from a public relations perspective, the last thing a company should do is to attempt to discredit the competition, or in any way try to make the product sound inferior or to be avoided. In fact, words of congratulations might even be in order, almost from a peer-to-peer perspective. Here is where crisis PR avoidance tactics should be studied and adhered to.

Simply stated, what these microscope manufacturers might now have to do is to redefine the marketplace such that their product line is differentiated enough from this new competitor that there is still a need for purchasing their product. This is one of those “easier said than done” statements. The classic case is the buggy whip manufacturer story. The disruptive event of inventing the “horseless carriage” or automobile basically wiped out their industry – leaving the only defendable segment being that to provide Hollywood props for movies such as the Indiana Jones series.

According to Mindspring.com in their review of the Microscope industry, Carl Zeiss and the E. Leitz component of Leica are mostly German made. They tend to be more expensive than the Japanese made Nikon and Olympus. Their segment is the very high end, likely for researchers. Sometimes they are worth the extra money and sometimes not. In the bio-med market, Nikon and Olympus are the real powers, likely due to either features offered or a reputation they have developed within this industry.

In my next post I’ll offer some strategic tips on how one might tackle such an event, and how that strategy might be part of the foundation of what your business plan story should tell.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+.

What Story Does your Business Plan Tell?

what_is_story_of_your_business_planMost people have a pretty good idea of what a business plan is, and what should be included in it. If asked, I would suspect that many people could also tell you that a business plan should include an overview of the business, what the product or service is, the markets being pursued, the competition, as well as some sort of financial model.

In the same way, if someone asked me how an airplane worked, I could tell you that lift was involved, and that the shape of the wings creates a vacuum, which that then helps the plane to get airborne. But, I don’t think you would want me actually building an airplane …

In some ways, this analogy applies to business plans. There are subtleties involved as well as a good deal of work, which might preclude your ever getting the plan completed. In the end, if your being funded is dependent upon having a plan, it might be worth reaching out to someone who has actually written one before.

As a business plan writer who has written over 25 different plans, I understand that each one serves many needs and provides content for different audiences. For example, one of the sometimes overlooked attributes of a business plan is that it must tell a story – about you, your idea and your vision – and how new funding will make your story come true. If your reader can’t quickly get the story, it is unlikely they will agree to fund your plan.

The Vision

Business plans sell a “vision” or a “dream” of what you see that a new business could be, could operate as and could deliver value to your target audience. Your initial audience are investors, potential partners and initial employees you will need to launch your vision.

In this way, a business plan is really a marketing document that is written to pitch your idea to this group and get them excited about the prospect of “getting in” on the ground floor. This sense of urgency of what a fantastic opportunity that awaits must be communicated. You need to tell a story of how your business can provide a greater good, or how it can help address a common challenge. And, if it is done right, your business could then earn everyone a nice profit at the same time.

If this sounds like what is driving you to prepare a business plan, then you should recognize you have a story to tell. Just like a great Public Relations campaign, you have a story to get into your prospects (i.e. investor’s) head. So, it is time to think like a PR professional, at least with regards to the structure and content you decide to put into your business plan.

In my next post, I’ll offer five ways to turn your business plan into a great story.

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies.  

What is Your Exit Strategy?

business_plan_exit_strategyThere are many reasons to start a business, ranging from launching a new product, defining a new market segment or fulfilling a passion to address a market gap. Regardless what your reason is for creating a business, if you need outside funding, then you need an exit strategy. Why? Because an investor needs to know how they will get their money back in the end. After all, they are investing in your business with an expectation of making money.

As I speak with clients, this is sometimes a difficult concept to understand. I hear questions such as “I don’t want to sell my business?” or “How do I know what its value is in the future?” These are reasonable questions that need to be addressed as part of writing a business plan.

Valuing Your Business

With regards to the “mechanics” of business valuations, there are a few different approaches. In the end, however, value is most closely tied to the revenue your business generates, either in the current year, or what “proforma” revenue is expected to be next year. Having said this definition, it is still part “voodoo” and part science. A recent article on Bloomberg pointed out that MLB teams are now theoretically 35 percent more valuable than just a few months ago – ten teams are now valued over $1 billion! See article here.

If you are a buyer, you will likely push for current year’s revenue, and vice versa if you are the owner. In some industries, gross revenue is a suitable measure; in others net revenue is an industry standard. Personally, I think that gross revenue is a better guide to evaluating income opportunity. Net income reflects both the market potential PLUS how well you can keep a lid on costs. Expense management is more closely tied to how you, the operator, manage your business. Either way, a number can typically be negotiated as a reasonable baseline for valuation.

Industry Potential

The next factor to consider relates to what industry you operate, to then incorporate an expectation of future growth. The rationale is simple: If your industry is expected to grow rapidly, then there is a higher expectation of value, which translates into a higher income “multiplier.” As a buyer, I will pay a higher price if I think my investment will grow more in the future.

Having worked in the software and high tech industries over the past two decades, I have seen some of the highest income multipliers in the business – as high as 10X! Other industries don’t have such lofty expectations, so may only have an income multiplier of 1X. What this means is that a buyer will only pay 1X income as a purchase price.

Exit Options

Now you have evaluated a valuation strategy, the last step is to identify how you will sell your business. Here are five options to consider, each of which can provide your investor with in an exit strategy:

  1. Another new investor can replace your current investor’s position
  2. An outright sale of the business can occur to a new entity, such as another owner or business
  3. The current management team or owner can do what is called a “Management Buy Out” or MBO or “Leveraged Buy Out” (LBO), which means that new debt is issued for the current team to buy the business themselves
  4. An Initial Public Offering (IPO) can be performed, leading to public ownership of your business through shares on a stock exchange. Note that this exit strategy typically requires a minimum level of income in the $100 million range or more, so this exit strategy may not be right for everyone
  5. A trade could be arranged whereby you now own a different asset in exchange for relinquishing control of your business

An exit strategy is a necessary component to a business plan’s financial model, as it demonstrates that an investor’s money will not simply “disappear” once you collect the check. An exit strategy is part of an investor’s lifecycle. Without this expectation, it is unlikely that any new businesses would be funded, creating enormous problems for those entrepreneurs seeking to challenge the status quo or those inventors that have the next greatest thing that we don’t yet know we can’t live without!

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies.  

5 Reasons to Write a Business Plan

new-years-resolutionThe tradition of stating a New Year’s resolution is interesting. As the clock nears 12 midnight on December 31st, a popular topic is “what will you accomplish in the new year?” It makes sense … when a significant milestone event occurs, it is natural to reflect on what we have already accomplished, and what the future might hold.

I suspect, however, few New Year’s resolutions actually come true. There are many reasons for my belief, ranging from the alcohol consumed at the time (I said what?) to the motivating factor behind the pronouncement (showing off on a first date?) to simply how much thought was put into the statement. Most importantly, however, is the fact that these resolutions are seldom documented in writing.

Research suggests that the simple act of writing down a goal has a profound impact on actually achieving it. According to a study presented in an article published by the Chronicle, the student-run newspaper of Duke University, it was concluded that:

  • 80 percent of Americans say they don’t have goals
  • 16 percent do have goals, but they don’t write them down
  • Less than 4 percent actually write down their goals
  • Less than 1 percent review them regularly – but – this small percentage of Americans that do end up earning 9X more over the course of their lifetime

These figures are breathtaking. This research suggests 99 percent of Americans are missing out on significant earnings potential, based on the simple fact that they are not writing down their goals and reviewing them. Why might this be the case?

The Importance of Documenting a Plan

My theory is that the act of writing down, and ideally sharing a goal with others, makes you accountable. And, it makes it harder to forget or “de-prioritize” those goals, which you initially set out to accomplish.

Pictures are another helpful technique to be more committed to accomplishing your goals. Do you want to purchase a home? Find a picture of your dream home as your wallpaper on your laptop or PC. Then every time you use your computer you will be reminded of that goal. The logic and psychological effect is the same if you write down your goals.

A Written Business Plan as a Documented Goal

Those interested in starting their own business face a huge challenge, one that can be quite difficult to accomplish. Any help you can do to make this goal become a reality is probably worth investing in, which brings me to this list of 5 reasons why you should write down a business plan if you are serious about starting a new business or expanding an existing one:

  1. Writing a business plan makes you more committed – writing down your plan, and following through with it all the way through funding will keep your momentum moving forward; the act of writing it down forces you to take your plan more serious and puts the odds of success more in your favor
  2. Documenting your plan and sharing it with others holds you more accountable – you simply can’t hide when you go public with these types of statements, which will be a great motivating factor to completing your vision and sticking it out
  3. Better articulation of your vision for a new business creating a detailed plan that is in writing forces you to think in a more comprehensive manner, to better evaluate if your idea could actually work; there is a big difference between talking about an idea and documenting it in writing
  4. Developing a cash flow statement tied to your business idea helps you to better understand how to monetize your idea, adding further testing and review to evaluate if your plan could really work, and you can indeed launch your business
  5. Devoting the time to either hiring a business plan writer or writing it yourself demonstrates commitment to your audience – as you present your idea to potential business partners, investors or potential employees; the presentation of a written plan shows your audience that you have invested time, effort and resources into your plan, so it will be viewed more seriously

Hiring a business plan writer as a third party to challenge your thoughts and evaluate if your plan could really work is a great way to test your vision and lay out all your cards on the table. Getting a third party involved lets investors know how serious and committed you are, just as writing down goals improves the likelihood that you will accomplish your goals.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

When is the Right Time for a Business Plan?

Choosing a time to write a business plan is challengingOne of the questions I hear frequently is that of timing … when is the right time to devote the time and effort to prepare a more formal business plan? It is an important question, and one that must be considered carefully. If you write too soon, your idea may be completely different than what you ultimately go to market with. If you wait too late, much of the benefits will be foregone. How far along in lifecycle in your future business does it make most sense to more formally document your vision?

To start, there is no one “right” answer. Some will argue that there is no point in writing a plan at all, at least in the beginning, as so many factors are subject change. I am reading an interesting book right now by Clayton Christensen titled “How Will You Measure Your Life?” In it, the author talks about the need for two business strategies – a deliberate and an emergent one. I found this analogy quite good. In order to begin a new venture (or adventure), it is necessary to have an initial direction to follow. The author coins this initial decision as being a “deliberate” strategy. He gives the example of Honda entering the U.S. market with a large bike that will directly compete against Harley Davidson’s products. Soon, however, it became apparent that this strategy wasn’t working, as evidenced by a lack of sales. Meanwhile, a group of employees began using Honda’s smaller bikes off-road, and were having a great time doing so. This “unplanned” activity and market segment became an “emergent” strategy, which ultimately gave Honda a foothold into the lucrative US market for motorcycles.

Using this author’s methodology, a formerly written business plan can be a great tool to validate an initial or deliberate strategy. This effort can give you a way to rationally defend your initial decision to pursue a new product or market expansion. As part of this process, you will either gain a greater comfort level with what you are doing, or not. Regardless, valuable conclusions will result (do I “stay” or do I “go”?)

An emergent strategy, however, might be best viewed as opportunistic, and one that might need further validation prior to making the investment in preparing a full, formal business plan. This approach then lets you be open to new “emergent” opportunities while at the same time realizing that you did pick your deliberate strategy for a reason – you need to give it a fair review and effort to validate that it either works, or that it doesn’t. Writing a business plan on the initial deliberate strategy is a great approach to help validate if this initial idea is indeed worthy of the effort.

Christensen states that about 93% of all startups change their strategic direction at least once before getting it right. So, flexibility and preservation of initial capital are clearly critical for survival. But, an initial direction is still needed before you can begin engagement in your idea.

Two Reasons to Write a Business Plan

The role of writing a business plan is really two-fold. The first is to better clarify the strategic direction you want to purse with your business endeavor. If, for nothing else, the act of writing down your objectives, strategic direction and competitive differentiation forces you to really think about these critical thoughts. You can’t go to market unless you are really comfortable in telling your story. Writing it down in a business plan forces you to review all the points, including those you might be inclined to gloss over for lack of interest.

The second role of writing a business plan is to get funding. An outside bank, business partner or venture capitalist will want to have some sort of documentation explaining in detail what it is you plan to accomplish. After all, it is their money that you will be investing. At this point, a more formal business plan starts to make sense. Note that while an angel investor might prefer to hear your “elevator pitch” and in a few minutes, and then decide whether or not they will fund you, it still is very helpful if you have gone through the exercise of more formally reviewing your target market, competition, product positioning and pricing strategy to better understand how to turn a profit.

Alternatively, if by flushing through your new business idea in greater detail, you discover that there is an inherent flaw in your plan, it is better to have found out earlier versus investing considerable effort, resources and money into an idea that really couldn’t work.

The Right Time

Getting back to the question of timing, as you come up with an initial idea for a new business or product line extension, it probably doesn’t make sense to prepare a business plan. First, you need to do some “gut” checks to see what sort of viability your idea might have. That review process might include talking to industry experts, potential business partners, friends and family. If your business involves the manufacturing of a new product, then it might also make sense to get an idea of what costs are involved and what possible patents might be required in order to avoid potential infringement issues.

Once your initial review is accomplished and you feel comfortable your idea definitely has merit, now is probably a good time to consider writing a plan that captures the salient competitive and marketing requirements to get your idea off the ground. Through that process, you will soon realize whether or not your idea could work, at which time it is highly likely you will need to consider the use of outside funding. As your plan will be virtually complete by that time, having the plan already written will let you continue forward without delay.

 

Gordon Benzie is a marketing communications professional and business plan adviser that specializes in preparing and executing upon business plans and marketing strategies. Gordon can be found on Google+

5 Reasons to Hire a Marketing Consultant

By Gordon Benzie

direction_to_follow_to_hire_marketing_consultant

Most business professionals have a budget or a fixed level of resources to work with. Those working at startups must be extra vigilant, as extended budget overruns could sink the company. When you are operating within these types of constraints, it is easy to get into the mindset of thinking “I can do it all,” or “I have to do it all” because I can’t afford to pay someone else to do what I can do, which in the end gives me a greater chance for survival.

Entrepreneurs justify these actions under the umbrella of “I can do this task better” than anyone else, further validating the decision to “in source”. Interestingly, this philosophy can be either highly beneficial OR detrimental to a young, growing business’ success. It just depends. An Entrepreneur that spends the time to really understand their client’s needs by giving them a lot of personal attention might be doing the right thing. The same logic, however, may not apply to other activities.

Because of this ambiguity, I thought it might be helpful to provide a checklist of five potential benefits to consider in your decision to hire a third party marketing consultant.

  1. To obtain a third party perspective from someone who doesn’t have a vested interest in your current marketing strategy, lead generation or messaging campaigns. A consultant will be more likely to point out an inconsistency or ambiguity of your current programs, simply by what questions are asked. Fresh eyes and ears are valuable as a “bouncing board,” such as what your objectives are or who you’re trying to speak to.
  2. To remove (or at least reduce) politics from making the right marketing decision. Consultants are less likely to be as caught up in office politics for the simple fact that they are typically brought in to “fix” an already acknowledged problem. If you really need to know if a marketing campaign proposed by the founder or CEO, it might be difficult for a Vice President of Marketing to express concern.
  3. To provide a weighted perspective to break through tough, “logjam” decisions. Product naming exercises are one of the most challenging marketing tasks to perform, right before creating a whole new website. In these complex and often emotional thought processes, a third party consultant can operate better as an intermediary to break “ties,” or even better, to provide the rationale and leadership to make better decisions. If you are paying for a marketing consultant’s advice, why not actually use it!
  4. To hear an “outside in” perspective, ideally from a perspective gained while working in other industries. Quite often, the marketing challenge you are facing has been dealt with already in another industry, so why re-create the wheel? Well-seasoned consultants benefit from the simple fact that they have worked with clients in similar situations in other markets or geographies. Embrace these other viewpoints to gain greater value from your investment in your consultant.
  5. To address an issue faster than trying to uncover it yourself, for a problem that might be new or unknown to your marketing team. A consultant typically understands they are there to fix one or a few specific issues, so won’t focus as much on “justifying” their existence to keep collecting a paycheck, as a new hire might be more inclined to do. Of course, there are always exceptions, but consultants typically are laser focused on quickly identify the problem and then remedying it with the fastest solution available. I would propose that this concept further applies to those outside consultants who are in strong demand, as they have other billing clients eager to hire them next.

Hopefully these perspectives help to give you an expanded perspective on why it might not be the right choice to apply the “DIY” philosophy to all marketing activities. It might make sense to hire a consultant if the value delivered is accomplished quickly, or if an issue is fixed that you may not have even understood exists. Of course, there are good consultants and there are bad ones. Each of these objectives all fall by on the wayside if your consultant is not experienced in solving your problem. But, once you find a good one, it can be an excellent investment of your resources to periodically bring them in for a marketing “tune up,” or to review of your current campaigns to help assess whether or not you are on the best path to success!

Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies.  

Thinking Smarter Isn’t a Business Plan

think_smarter_business_strategyBy Gordon Benzie

Last week I read an interesting and well written article in the Wall Street Journal on the challenges that Alcatel is facing, titled “Alcatel Chief Is Out as Turnaround Stalls.” As you may recall, about six years ago France’s Alcatel merged with U.S.-based Lucent Technologies (former equipment division of AT&T) to create a telecom-equipment giant. Their ambitions to become a global telcom equipment leader have fallen short. Competition is tough. They compete in many lines of business, while at the same time, their revenues trail the competition, which has precluded their ability to make the necessary investments in research and development. These factors among others have translated into massive losses over the past seven years, and ultimately, CEO Ben Verwaayen’s job.

Alcatel-Lucent’s business strategy was to be an end-to-end supplier serving all telecommunications companies in the world, in virtually every markets. That means being everything to everyone, with a product line that includes everything from the submarine cables that wire together continents to the software that phone companies use to calculate and send out phone bills every month. Wow. That is a “big ass” strategic goal. In fact, I would argue it probably isn’t feasible, at least not within a high technology industry where product innovations are significant and competition is fierce.

Interestingly, when asked what the management team was going to do differently to avoid continued year-over-year losses, one of the “official” responses was “they simply have to be smarter than competitors about where they place their technology bets.” I am sure this statement sounded good in the interview, and certainly no one would argue against it. But, I am not so sure I would feel comfortable with this response if I were a member of their board of directors.

There are a few things wrong with the statement “we’ll just have to be smarter.” First, if that is all it would take, then why didn’t you do it six years ago when the merger was first completed? My next concern is that of execution. How do you lead a company to change its decision-making and business strategy by just “being smarter”? Is there a course you can take to accomplish this goal? If so, sign me up … I could always use with being a bit smarter.

The reality is that you simply can’t expect a group of employees and their managers to “get smarter” so they can make better decisions. You can lead by example as CEO, providing insights as to where new market opportunities might be, as well as to show how to operate more efficiently as an organization. I am with the belief that people are probably already doing the best work they can, or least are making the best decision they know how to … the idea to simply “make smarter decisions” is not likely.

Is it possible to embrace a new strategy and take a different direction? Of course. In fact, that is exactly what is needed. The expression of “you can’t please all the people, all the time” comes into play. Perhaps taking a perspective to consolidate and further refine their business might work better here, as a way to be more effective and focused with both strategy and execution. However, this shift would likely involve closing down divisions, which might be difficult for a French firm where strict labor laws prevent such actions.

Sadly, I suspect that if something isn’t done soon, there will be a far worse situation than just a few divisions shutting down … the entire company may go under, which certainly would be a shame. Should the management team try to make the smartest decisions to avoid shutting down? Of course. Making the smartest decisions you can is always the best course. But maybe a bit more strategy is needed than simply making smarter decisions.

Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies.  

Communicating Pricing in a Multi-tiered Distribution Model

It is no secret that companies regularly charge different prices for the same product. Just look at the airline industry as one example. Nearly every seat has a different price, which can vary depending upon the day of the week, your status as a frequent flyer and how close the flight is to departure. The strategy behind this pricing decision is valid – lost seat revenue from departed flights can never be recouped. Airlines must try to fill every seat for the highest possible rate to maximize revenue. This pricing dichotomy can create a potential communications challenge, but only if the rationale behind this difference isn’t reasonable.

I would propose that the car rental industry’s pricing strategy doesn’t make sense, and as a result, that industry is communicating poor messaging resulting in a loss of consumer loyalty and repeat purchases. Speaking from my own experience, I see the purchase of a rental car as a commodity item, one that is identical regardless of what provider I choose to patronize, with one exception – Enterprise. They will bring the car to you. This is great service, and truly a competitive differentiator.

Here is my source of confusion – if you take the time to create an online profile with your preferences, including personal identifying information about what you like to rent and where you like to rent, this privilege you are bequeathing to the car rental company comes at a price – you are charged a higher rental fee! One might think that a “preferred” member should at least be given a coupon or some sort of advantage for going through the hassle of creating the online profile..

Let’s assume there is some sort of loyalty program that gives repeat buyers a discount. If that were the case, then the choice to purchase through a third party might be worth less to a car rental company – a commission must be paid to these purchases, reducing the economic value of such a purchase. The reality is just the opposite, and the price difference is unbelievable. At Hotwire.com, I can rent an economy car for $15 per day, provided I can create an alert and check back periodically to when that rate comes available. Alternatively, if I go directly a car rental company and try to book the same car, the price is about $80-$90 per day, for the same period, same location and same type of car, a rate increase of 400-500% higher. The only difference is that the $15 rate is non-refundable, so clearly there is some value in being able to cancel without penalty.

Perhaps, this is a reasonable pricing decision and worthy from an economics perspective to continue this practice. I don’t know, as I am not privy to this information. My point is that from a consumer messaging and business communications perspective, this discrepancy simply doesn’t make sense. For example, the car rental companies could offer a “refundable” and “non-refundable” rate, if that is indeed the source of the extreme pricing difference. Then, it starts to make sense.

In the same way that an empty “seat” on a flight represents revenue that will never be recaptured, rental cars sitting on a lot overnight represent the same opportunity cost. Clearly, a multi-tiered pricing strategy is logical. The challenge how do you execute a sensible pricing and communications messaging strategy that can be a win-win for both the company and its customers?

Does your business or industry have its own pricing “nuances” that only you, as an insider, understand? If so, maybe it is time to fix them.

Gordon Benzie is a marketing adviser and business plan writer that specializes in preparing and executing upon business plans and marketing strategies.