Business Coaching

Why do your customers buy from you?

If you don’t know the answer to that question, you may one day lose them, as has happened recently with Netflix.

A big reason Netflix was able to grow as quickly as they did was the low cost of their product and the convenience of both purchase and payment. For less than $10 per month, customers got unlimited streaming video or DVDs. It was such a great value that Netflix became an industry leader and its stock grew exponentially, topping out at nearly $300 per share in mid-July.

The company had found a terrific niche. They were affordable and convenient and for one low price you could get both DVDs and streaming video. But then the company changed its pricing structure and things changed radically for the worse.

So what did Netflix miss? Why were their customers so willing to cancel their memberships?

If there’s one thing that Netflix clearly didn’t understand, it was why customers bought from it. They didn’t understand the need they filled and overestimated customer loyalty in a very crowded industry.

It’s important to remember that Netflix’ product range isn’t ideal. While their library is extensive, there are limitations but even with those limitations, at a low price and one monthly bill, it was a service that most could justify. You may not be able to see every movie or television show you want, but the ones you could see for the convenience was worth it.

But once prices were raised and there were two services, one for DVDs and a separate one for streaming videos, to be paid individually, customers balked because that convenience and ease of purchase was gone.

By not understanding why their customers bought from them they sent themselves into a downward spiral that has frustrated investors and put the company on a path from which it may not be able to recover.

Shares started the year around $180 and rallied in the spring thanks to a growing subscriber base, reaching that peak of nearly $300 per share in July. As of the last week of October, shares were trading near $78 and their U.S. customer base is shrinking to 23.8 million total U.S. subscribers as of Sept. 30, down from 24.6 million three months earlier.

By the end of the last quarter of 2011, Netflix expects to lose even more subscribers, estimating that it will have 20 million to 21.5 million streaming customers.

It’s clear from what has happened that Netflix didn’t understand why its customers used its service and they moved too quickly to change, which turned off a large portion of its base.

Netflix has learned this the hard way, but how can we learn from its mistake?

You have to truly understand why your customers buy from you. Is it convenience, is it price or is it the value they get just from buying from your business? What need does your business fill?

If you aren’t sure, ask. And most importantly, if you already know why they buy from you, be sure not to antagonize your customers by taking it away from them.

What is the purpose of advertising?

If you are to believe the advertising agencies, advertising is an art. Their goal is to make something interesting and make an impression on the audience.

But, for a business, the goal is sales. You might make a big impression, but if that impression doesn’t help the bottom line, what’s the point?

This principle is on display in Burger King’s advertising.

After going with “The King” based campaign that was weird and, at times, a bit freaky, Burger King has decided to go back to the basics and promote the freshness and quality of their food.

In today’s health conscious landscape the new campaign seems like a good idea and the company is already seeing some benefits.

BrandIndex measures brands using its Impression score, by asking people if they have generally positive feelings about a particular brand. BrandIndex’s scores range from -100 to 100, and are calculated by subtracting negative feedback from positive feedback.

Before the launch of Burger King’s new campaign in late August, Burger King’s Impression score was 24.4, or less than half McDonald’s’ 48.9.

Burger King’s score began jumping soon after the first spot’s debut, and by the end of August had reached 45.1, actually catapulting McDonald’s.

As of Sept. 9, Burger King still retained its edge, with a rating of 38.8 compared to 35.9 for McDonald’s.

This highlights the divide between what advertisers want to do and what businesses need to do.

Burger King’s “The King” campaign was edgy, at times funny and at times just plain weird. But what did it tell people about the product?

Nothing.

It created an impression, but hurt the company’s image with adults and others that don’t care about slick advertising, but do care about quality.

So when it comes time for you to advertise your business, what’s more important, flash or sales?

The answer is obvious so don’t try to be flashy or cutting edge. Just tell people what you do and why it’s better than the competition.

For Burger King, that’s letting people know they sell a quality product, a much more effective offer than some constantly smiling, nightmarish mascot.

From the car wash to the grocery store, you barely have to talk to a person to buy a product or service these days.

But one supermarket chain has decided it’s time to buck the trend of automated, self-serve checkout lines and get back to good, old-fashioned customer service.

Big Y, which is celebrating its 75th year in business in 2011, has decided to remove self- serve checkout from all of its 61 stores in Connecticut and Massachusetts.

“Our self checkout technology could not deliver on the service needs of our customers,” Big Y Vice President for Information Resources and Technology, Michael A. Tami said. “We were not able to provide the exceptional customer service through them that has made Big Y what it is today. While other chains are opting to replace cashiers with more self checkouts, we are adding cashiers to service more standard lanes.”

Self-serve checkout originated in the supermarket industry as a response to long lines at major supermarkets. But research has shown that self- serve checkout lanes often take customers more time than the standard, employee-staffed lanes and lack the customer service that many customers have come to expect.

And Big Y isn’t alone. Albertson’s, a major supermarket on the West Coast of the United States is also removing self checkouts.

This story highlights something that the Business Coaches at ActionCOACH have been preaching for years: don’t be afraid to change.

Big Y must have felt they were on the cutting edge and stepping into the modern age when they installed self checkout in 2003, but when they realized they weren’t getting the return on their investment, they decided it was time to cut their losses and get back to what they knew best: customer service.

So can your business make a change, discover it was the wrong move and have the flexibility to go back the old way or find a better way? Are you a flexible enough leader to make those changes when necessary?

As you probably know from your inbox, there are lots of people who love to kill time playing FarmVille, CityVille or Mafia Wars on Facebook and the company that produces those games, Zynga, is rolling in the dough thanks to this phenomenon.

According to Bloomberg BusinessWeek, Zynga has over 230 million active monthly users and posted a net income of over $90 million on revenue of $597 million last year. Those numbers are up almost five times over 2009 and in the first quarter of 2011, the company’s profit was nearly $12 million.

But how has Zynga posted such strong numbers when their products can be used for nothing?

Thanks to selling virtual goods, Zynga is doing very well, but when you look closer you see that, like most businesses, Zynga is a slave to the Pareto Principle, otherwise known as the 80/20 rule. Only Zynga’s numbers are far more extreme than the usual 80/20 split.

In reality, only about 10 percent of those registered users spend money on these games and less than one percent accounted for anywhere from a quarter to a half of the revenue the company produced.

If you happen to play FarmVille, you can purchase animals, crops, equipment and the like for just a few (real) dollars.

You can pay for these items through tokens earned by playing the game, but for those who don’t have the time (or energy) to play all the time, they can just pull out their credit card and buy what they need.

And some people spend an awful lot of money on virtual goods.

According to Bloomberg, there are as many as 200 people who spent more than $10,000 on Zynga’s virtual goods last year. And Zynga has made it even easier for these “whales” to buy from them, offering discounts as well as giving these people the ability to wire sums as large as $500 directly from their bank account to Zynga.

This tells us that no matter what you sell, the 80/20 rule is something that most, if not all, businesses have to keep in mind when marketing their products and services.

Zynga isn’t going to make any money marketing to the bulk of their users, but if they market to their “whales” let them know what they can buy, when and how they can buy it, they have a good chance at seeing an outstanding return on their investment.

So how do you take advantage of the lessons taught by the 80/20 rule in your business? How do you make it easy for your “whales” to buy from you?

When a business is marketed correctly, it isn’t based on price or even what is sold. Instead it’s based on the reputation of the brand itself and how that image connects with the customer base.

Take Red Bull for example. A couple of decades ago the energy drink industry was a very small one that was dominated by Gatorade while coffee was the energy drink of the working man and maybe a cola could provide that boost of caffeine you might need late in the day. Plus a cola tasted good.

Then along came Red Bull. Red Bull was the first energy drink of note and it had a strange taste people weren’t used to at the time. What Red Bull did have was a great way to connect with the customers they wanted and they also had a growing target market.

Over the last few decades, more and more people became adrenaline junkies or developed a taste for “extreme” sports.

Skateboarding, snowboarding, surfing and others were growing in popularity and the people that took part in those activities were exactly who Red Bull wanted as their customers.

So how did they connect with them?

They reached into that community and played an active role in building it. They sponsored both athletes and events, putting the culture on a bigger stage than it had ever been. Soon events like the “X-Games” were on television and there were the ubiquitous Red Bull signs in the background at all of these events. In fact, Red Bull began to sponsor, and produce, many of the events themselves.

Today, more than two decades after selling their first energy drink, Red Bull sponsors literally hundreds of “extreme” athletes.

They also sponsor a number of events around the world, including auto, motorcycle and plane racing, and their own “World Series” events such as The Red Bull X-Fighters World Tour, The Red Bull Cliff Diving World Series and The Red Bull Air Race World Championship.They even produce a monthly magazine that targets extreme athletes.

With all of the events and marketing that Red Bull does, it is important to remember that Red Bull only sells four products, their original energy drink, their sugar-free energy drink, Red Bull Energy Shot and Red Bull Cola.

Yet they sponsor hundreds, if not thousands of events every year in promoting and selling those four products and they are successful (over 4.2 billion cans of Red Bull sold last year alone) because they connect with their target market while building an image much bigger than that of just an energy drink.

With this kind of focus on both product and customer Red Bull has been able to expand not only its business, but the entire “extreme” sports category, creating an ideal synergy between their product’s image and their customer base.

Owners of small or medium sized businesses are often on an island, with no one to turn to when they need some help. The ones that most easily navigate those troubled waters are business owners who have learned what’s important and what isn’t when running a business and more often than not, they learn this information by working with some type of mentor.

Many people can take on the role of a mentor. A mentor can be a good friend who is willing to tell you the truth, not what you want to hear. A mentor can be another business owner who has faced those challenges in the past or even be a Business Coach who is, by definition an unreasonable friend who will always have your business’ best interests at heart.

So no matter who your mentor is, whether they’re just a friend, a family member of even a Business Coach, here are five things they should be able to do for you.

A mentor should hold you accountable:

Business owners may neglect the management and marketing of their business by postponing certain tasks and putting the non-essential ahead of the essential. This is a great way to doom a business.

When you work with a mentor, failing to complete your goals and having your business lapse is simply unacceptable. Your mentor won’t tell you what you want to hear, but what you need to hear to get your business moving in the right direction and keep you accountable for everything that happens in regard to your business.

A mentor will help you refine your ideas into practice:

You may have great ideas, but how will you see them through to implementation? There may be some ideas you can put into practice easily, but others will be raw and need to be refined before you implement them.

Working with a mentor, gives you access to their vast knowledge and wealth of experience. That alone will help you make the changes you need to make in an easier fashion.

A mentor will have a wealth of ideas to grow your business:

Your mentor has seen it and been there before. Through your relationship with your mentor, you will learn and understand principles of business you may not have known before.

Most importantly, you can use the lessons learned from your mentor and can apply them for the rest of your business life.

Mentors have the contacts you need:

Ideally, you should choose a mentor who has been in business and not only knows the basics of running one, but also has a good reputation with the community at large. In this way, you can use your mentor as a networking tool to grow your business.

Your mentor has contacts and knows where to find the information that can help you and your business. They are a valuable resource, so use them as much as possible.

A mentor is someone outside of your business, looking in:

You may be caught up in the day to day of your business, but the right mentor or even Business Coach takes a fresh look at you and your business.

A mentor or coach knows what to look for when it comes to the issues plaguing your business because they can see what your customers see. With this knowledge and vision, your mentor will always give you feedback that will help you build the strongest business possible.

So who are you working with to grow your business? Do you have a mentor or coach that is helping you along the path to success? If you don’t, what are you waiting for?

No matter where you go, despite cultural differences, certain things just resonate with people. Take situation comedies like Everybody Loves Raymond for instance.

There are versions of many popular American shows being made around the world these days, and while there may be some differences, these shows speak to the similarities we all share, even if we live in very different cultures or environments.

Cross-culture television is not a new innovation. Shows have crossed cultures for years.

Some American classics, like “All In The Family” and “Three’s Company”, were re-purposed from British shows and even contemporary hits like The Office was originally a British series before coming to America.

The trend is growing on an almost daily basis and while the country’s manufacturing base is eroding, America is one of the biggest exporters of television ideas to the rest of the world.

Shows as varied as “Married… With Children”, “The Jeffersons”, “Who’s The Boss” and even “I Dream of Jeannie” have been farmed out to other nations, years after they are no longer on the air.

Keep in mind we aren’t talking about simply issuing rights to show repeats. Each of these shows is unique unto itself. The characters and jokes are uniquely that of the home country, with plotlines taken from the original, American version.

So every culture loves television comedy, but not each television comedy is funny to each country.

Often American humor doesn’t translate into laughter in other countries, so production companies are taking the ideas and storylines of a given show and re-issuing them in the style of the nation they are in.

Hence, Everybody Loves Kostya.

So how does this relate to the challenges business people face every day?

Thanks to all the options around us, the world is a smaller place than it’s ever been and businesses that want to be truly successful have to have a global vision.

A key to achieving global success is understanding as much as some things are universal, there are small, seemingly minor variances between cultures that can make the difference between a business’ success and failure.

This is clearly on display for those that travel around the world and might be stuck in a hotel room watching the Chilean version of “Mad About You” or “The Nanny”.

The jokes might not be the same as the ones you remember, but the concepts translate, making the shows very familiar, while at the same time, unique to its homeland.

It’s that familiarity, combined with local flavor that has led to success for this concept. And that idea should stick with you as you try to build your business from a local institution, to a global power.

As much as the world changes, it stays the same. The recent purchase of Skype by Microsoft for more than $8 billion is an extreme example of this because, for all the talk about the brand of Skype itself, what Microsoft was really buying was Skype’s massive customer list.

In 2010, Skype had 170 million connected users who logged over 207 billion minutes of voice and video conversations.

There is massive opportunity for growth with Skype, but the company has been around since 2003 and hasn’t exactly been a big earner.

The company reported a $6.9 million net loss last year, on nearly $860 million in revenue. It reported $686 million in long-term debt, and slightly more than $1 billion in liabilities.

In the purchase, Microsoft assumed Skype’s debts and liabilities in what was, to this date, the largest acquisition Microsoft has ever made.

This isn’t the first time Skype has been bought. In 2005, Skype was bought by Ebay for $2.6 billion but the partnership did not work out and eBay sold its 65% share in Skype for $1.9 billion in 2009.

Microsoft plans to integrate the service into X-Box Live and the Windows Phone but there’s little doubt they already possess the technology to do this without buying Skype.

So why buy Skype?

For all those customers who are already proficient with the service and are naturally ready to buy other Microsoft products.

As Microsoft continues to lose market share (their stock price has dropped nine percent over the last year) the company needs to find new ways to compete.

Adding Skype’s customer list gives Microsoft access to customers that are relatively early adopters of technology, who’ll want to buy the latest, hottest thing, but might not have thought of Microsoft products in the past.

This deal is just another sign that as much as technology changes, the basics of business, like buying a customer list, stay the same.

The Free Franchise for the Forces program, from ActionCOACH, will award $7.6 million in franchises to 100 eligible Veterans from the U.S. Armed Forces in select U.S. states.

It is high time to honor the Veterans who selflessly put their lives on the line for this nation and this program will do that in a way that only the world’s number one business coaching firm, ActionCOACH, can.

Veterans who are successfully awarded an ActionCOACH Franchise will be in a unique position to help America’s small business sector continue to grow. Studies have shown that working with an ActionCOACH Business Coach provides a return of $7.50 for every dollar spent for businesses.

Furthermore, ActionCOACH franchisees have enjoyed a 20% increase in average quarter over quarter revenue in 2010.

Finally, an ActionCOACH Business Coach earns significantly higher income than other brands or independent Business Coaches in other systems do.

It is clear the military is a great training ground for success in the business world, as the majority of Veterans return home with skills in leadership, teamwork and integrity, which are integral to success.

A number of the top Business Coaches in the ActionCOACH system have a military background and one reason is that ActionCOACH follows a proven path to success with a disciplined approach which is an especially good fit for veterans.

As part of the giveaway, ActionCOACH will waive the $50,000 franchise fee as well as the training and tech fee of $26,250 for qualified and chosen applicants.

Candidates will still be responsible for ongoing royalties and marketing fees as well as their travel arrangements to and from Las Vegas, Nevada where training will take place in the months of September and October.

Free Franchise for the Forces is another initiative in which ActionCOACH focuses on abundance through business re-education.  In addition to this program, ActionCOACH also sponsors Coaching for a Cause and The Business Excellence Awards.

Tools like Twitter are designed to grow any business, brand or image, but, like with any new platform, there are many avenues of wealth still left to be exploited in its use.

Celebrities have been at the front of using Twitter to connect with their fans and deliver their message directly. That was what brought Charlie Sheen to begin using Twitter, and why over a million people follow him setting a Guiness World record by accumulating 1 million followers of his Tweets in less than 24 hours.

It’s been a few weeks since Charlie Sheen was seemingly on every television show and radio station offering pearls of wisdom before moving to Twitter.

Sheen’s very public meltdown (or publicity stunt) gave us such classic memes as “Adonis DNA and Tiger’s Blood” or “Riding on a Mercury Surfboard”, to name just a few, but it also gave him a public pulpit he’d never had before.

While much of what he said was, to say the least, loopy, it certainly helped grow his already well known brand and take it to a new level.

Sheen started his public tirade the old-fashioned way, on television and radio, but he realized he was missing the social media boat. He contacted Ad.ly, a PR company that specializes in using social media and celebrities for commercial endorsements.

Say what you will about Sheen, but he saw that there was an opportunity and found away to cash in.

Sheen is now a member of Ad.ly celebrity roster, which is more than 1000 strong and while the crazy Tweets have slowed down, there’s little doubt his followers will be seeing plenty of Twitter endorsements from him.

Sheen’s story is a great example of how a business or a person can grow a brand with Twitter.

Sure, he was already well known and had the big advantage of being able to say any crazy thing he wanted without serious repercussions but it begs the question, what are you doing with your Twitter account to grow your brand, and your business?