July 2006 – Steve Pohlit

How Advertising Promotions Backfire

How often have you been attracted to a hot promotion only to discover the product is out of stock? This is one of the fastest ways to weaken customer loyalty and completely defeats the purpose of attracting new customers.

Boston Market has been running a family dinner promotion. The price point is $19.95. While I was not stopping for that special, I noticed a steady stream of customers ordering that special. And while I was there – they ran out. The manager was apologizing and letting people know another location nearby was still in stock. She also said the other location had a line of customers and only four dinners left. That was not a good suggestion.

A friendly crowd soon became quite irritable. Goodwill and the credibility of any future promotion was compromised. Now this was not the only issue in that location when I was there. The wait time was quite long. Boston Market is a fast food restaurant. The food is already prepared and simply needs to be served or packed for take out. The people working there moved as if the store was empty. It’s not their fault. The pay is low, the labor pool of people who will work for low pay is small and so you get what you pay for. This is systemic problem in the service industry and will not be solved until management recognizes the huge
opportunity for increased profits that will be realized when they have people working who will give customers customer service. This is not just about the pay scale, it is about having the right number of people available to provide customer service.

Now back to the advertising and more specifically the advertising process. Most retail companies have an advertising calendar because time is required to finalize a campaign including any print or electronic media that will be used. For a business the size of Boston Market, this is not small task nor is it cheap. So now all this work goes into a advertising campaign and what happens. first there is no customer contact information required on any of the coupons. Nobody asks you to fill out a satisfaction survey. So all these people come into your business to spend money and you have no idea who they are and no system in place to invite them back. Next you proceed to run out of product that you are promoting. In defense of Boston Market there are only so many whole chickens you can roast at one time and if customer traffic blips I can see where running out of product can happen. Every effort should be made to minimize out of stocks and when they do happen, have a substitute product lined up and a generous bounce back coupon – FREE would be good. Yes I am suggesting that if you are promoting a $19.95 family dinner and if you run out, give them a bounce back coupon for $19.95. It will cost the restaurant less than $8.00 and you will probably win a customer for life.

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Steve Pohlit is a business consultant helping companies achieve extraordinary increases in revenue and profits. "How To Increase Profits by 30% or More In 90 Days or Less" is a free course found at www.stevepohlit.com "Blogging for Profits" is another free mini series Steve has developed and is offered at his blog www.stevereports.com Steve’s newest service, www.successtips.com offers others to contribute articles and advice as well as promote their business. CEOs of companies with revenue exceeding $10 million annually are invited to contact Steve for a complimentary consultation.

Leadership Is The No.1 Key Success Factor

Leadership is the most important factor in predicting business success or failure. A company’s strength or weakness is determined by its leader.

Recently, I started working with a privately held company that is owned by a family and where a number of family members work in the business. This is a very common picture. What is also common whether the business is family owned or not is a lack of clear direction and day to day discipline where resources are focused on the most important revenue and cost drivers.

I regularly hear a list of excuses and over time while I am working at different companies in different industries, the list is nearly always the same. In nearly every case when I ask a question as to why a certain work function is not performing it invariably comes down to a family member in the job or some loyal employee in the job that has established their way of doing things and the company’s leader is afraid of upsetting the apple cart.

How To Establish Strong Leadership In A Business

When I talk about this subject and give examples of ineffective leadership, most people think I quickly recommend replacing the person. Since some of my clients are family owned companies and the CEO is often the head of the family in addition to being head of the business, replacing that person is not an option. Even if the company is not a family owned business, replacing the CEO is far down the list of preferred options for strengthening the leadership position.

The process of strengthening leadership is detailed in my free course “How To Increase Profits by 30% or More in 90 Days or Less” which you can subscribe to at www.stevepohlit.com This article will further enhance your understanding as to the actions I have taken with clients that have been successful in creating leaders that have helped their companies build revenue and profits.

I have found most leaders do not have a clear plan for making money and so they cannot guide their organization to success. The second most common issue I find is that where a leader does have a plan for making money, they fail to follow the steps that are needed to be taken each day and each week to implement the plan. I would say that among the CEOs I have counseled, most know what makes them money, most know how to make more money, but many do not have the disciplined process in place to make it happen.

My most recent client is a great example and is the motivator for me writing this article. This client absolutely knows how to do the work of their business. The CEO is a master of this work and teaches others how to do this work well. They are awful at knowing how to make money at what they do. In fact, they do not get receive accurate information on their business performance and without change they never will because there is nobody employed in this company who has the training and skills required to produce the information they need. We are fixing that. This is more common than you think. Even where there are people trained on providing required information, it is often too little and too late.

Step number 1 is to make sure there is a clear understanding of what makes a company money and how. Step number 2 is to fine tune the day to day resource allocation so people spend their time making money. Day to day means every day and this is where we run into problems. It is not human nature to follow a disciplined schedule every day no mater how important the tasks are to making money. This discipline deficiency factor is often most acute among CEOs who are entrepreneurs and CEOs who are leaders because they were born into it. So it is important to teach them Steps 1 and 2 first and then if that doesn’t work another person is likely to be needed as the company’s day to day leader.

Recently in Business Week, Jack and Suzy Welsh advised a family member concerned about business direction to recruit a CEO. I really hesitate to disagree with Jack since he has been so successful as the now retired CEO of G.E., but in my experience many companies do not have the experience to hire an experienced and highly qualified CEO. Some that come to this conclusion will rely on a recruiter. This can work but is very risky. Of course I am going to recommend the right consultant. Are there others besides me that will guide you on the approach that I recommend? Yes I am sure there are. If you decide to talk with your banker, attorney, outside accountant, tax accountant, prospective consulting firms or your neighbor, here is what you need to do first:

1. Make sure you have a clear definition of what makes money in your business and how much. This means you need to have good information on revenue trends and gross margin by categories of revenue source.
2. Objectively define your human resource strengths and weaknesses.
3. Accurately forecast your near term cash inflows and expenditures. The worksheet I provide in my free course that I mentioned earlier details how this should be done.
4. Outline what you believe is the best near term strategy for your business (12 months or less) based on your company’s history and performance in the past six months.
5. Take a couple sheets of paper and see what your actual organization chart looks like. Enter the pay for each person you include on this functional organization chart.

The above five steps are not all you will need but when someone is advising you on how to run your business or how to recruit a leader, they better be bringing up at least four out of five of the above or you should be running away from that meeting as fast as you can.

Does a strong leader guarantee business success? There are no guarantees but a strong leader who is fixated on the handful of actions that make the most difference in revenue and profits will give your company the best chance for success long term.

To Your Extraordinary Success,
Steve Pohlit, Business Consultant
www.stevepohlit.com
www.stevereports.com

P.S. I am developing a new blog at www.successtips.us You are invited to check it out and submit your own success tip.

Blogging for Profits Issue No.9 How To Use The Powerful Motivators Recognition and Praise In A Special Blog To Help Grow Profits

You probably have noticed companies in the hospitality industry encouraging customers or visitors to acknowledge outstanding service, or to comment on their dining or hotel experience. Maybe you have read a survey card delivered with a the check at a restaurant. There are businesses where you are asked to write a note or complete a form if an employee did something extremely well and made the experience at that place of business more pleasant than you expected. Some companies send on line and off line surveys asking for feedback.

All of these programs were started and then duplicated by someone who realized that by asking for feedback you demonstrate you are interested in doing things better and want your customers to be happy. Employee recognition programs were started by someone who knows that praise and recognition are the two most powerful motivators.

Blog are a great tool to further enhance the customer comment and employee recognition programs. This article details how using blogs for customer feedback and employee recognition should be structured. When implemented properly, revenue and profits will increase as direct result of this effort. In this Blogging for Profits series, every issue is focused on how to use blogs to increase revenue and profits. All prior issues can be found at www.stevereports.com Register now at the main page and read all the issues starting with No. 4 Issues 1-3 are posted in their entirety at the blog.

Trends In Your Niche Markets Are Opportunities For Increased Sales and Profits

Companies in the retail industry often face significant challenges to achieving consistent growth in revenue and profits. Large companies with very recognizable brands like Dell, Wal Mart, Home Depot and Microsoft as examples have all recently reported issues that have affected profit trends.

No company had ever succeeded long term with a low price strategy. Go to Wal Mart’s web site a look right below their logo. It reads “Always Low Prices…Always!” Now they are modifying their product offer in many stores in an attempt to become appealing to shoppers with more money to spend. Will it work? I wouldn’t do it. However, I am not their CEO and they didn’t ask me. Why are they doing it? They see the results being reported by Target, Kohls and others who appeal to a customer base more affluent than the typical Wal Mart shopper. Is Wal Mart a leader or a laggard on the spending trends? Laggard.

What about some of these other companies? Microsoft was to big and clumsy to recognize how fast and furious Google’s model took hold. They also ignored Apple and the iPod until the results kept hitting them in the face. Firefox has 12% market share and open office is growing at a rapid pace. The information on these trends and others are public information and largely ignored by Microsoft. Now it is an underperforming company.

Not that long ago McDonalds was in the news as being one of the companies that was experiencing difficulties with profit performance. Now that has changed and McDonalds has been reporting very good sales and profit growth in recent quarters while some of the leaders in recent past like Cheesecake Factory, Outback Steakhouse and a number of others have been reporting softening sales and profit.

What’s changed and what has McDonalds done different to capitalize on the changes? The Federal Reserve has just announced the continuance of their “let’s kill the economy program” with the 10th or 14th or whatever in a row increase in interest rates. Then there is the ongoing international issues which continue to keep the price of oil at record highs. So while unemployment remains relatively low, the costs associated with credit card debt and gasoline prices affect a lot of things including where people eat, how much they will pay for a meal and how far they will drive when it is optional. McDonalds is lower priced than many of the sit down restaurants and offers an increasing number of food items that are not as high in calories and cholesterol causing ingredients which leads to another shift in demand patterns. With the increased awareness on price due to the pressures of higher fuel costs and interest expense, this is a perfect opportunity for restaurants to implement loyalty programs with meaningful incentives. It is also a great time to be spending more on the customer service experience in the restaurant. Of course just the opposite is occurring with increasing regularity.

There is frequent publicity on the obesity issue in the US. This new story for the media seems to have had an impact on what foods people order to eat. McDonalds recognized this trend and started adding appealing salads to its menu about three years ago. The salad category is accounting for a significant portion of their increased sales and profits. At the gym I visit there is a big poster ad for McDonalds grilled chicken salad. Not only is it big, it is appealing. Applebees is devoting more of its menu to health conscious customers but I have not seen much change in the Outback chain or others. I have noticed more convenient stores offering a wider selection of higher quality foods including soups and salads. Many convenient stores seem to notice what people want faster than other companies and adjust.

Many of the examples used in this and other articles are taken from information published about public companies. This information is readily available as public companies are required to report on their business to their shareholders. This information often offers tremendous insight as to strategies that work and ones that don’t. Today’s Success Tip: pay close attention to the trends for your niche markets and adjust your offer accordingly.

Steve Pohlit, Business Consultant
“Helping Business Make Extraordinary Profits Now”
www.stevereports.com
www.stevepohlit.com

Blogging for Profits Issue No.8: Increase Sales and Profits of Less Popular Products and Services With The Help of Your Blog

Blogging for Profits issue No. 8:
Increase Sales and Profits of Less Popular Products and Services With The Help of Your Blog

Reviews of recently released book "The Long Tail" by Chris Andersen summarizes his focus on niche markets and the resulting sales and profits from product sales that are generally obscure to the mass markets but appeal to special interest
groups.

Ed Dale and Frank Kern are guiding thousands through the updated 30 Day Underachievers program. This is designed to teach you how to identify a profitable niche market and create a product that will meet a need in that niche. If you are an internet marketer or otherwise interested in using the tools of the Internet, you will be well served to pay attention to this program (www.underachieverlife.com).

This series is about how to achieve a dramatic increase in profits for your business by developing and managing a blog. In The Long Tail Chris says only 20% of the items offered by retailers are hits. Of course it is by no coincidence this is consistent with the 80/20 rule I have mentioned in previous issues. In summary, 20% of the items, or customers account for 80% of the revenue and profits. Ed Dale and Frank Kern teach you how to identify the top 20% of the keywords in you niche market research. I spend most of my time helping clients identify and focus their resources on the top 20% of their offer. In other words spend 80% of your time on the 20% of the items that account for 80% of your sales and profits. Rich Shefren teaches this extensively to his coaching students. Read his interviews with two students at http://www.strategicprofits.com/interview

Part of what both Rich and I advocate is the leveraging of skills. For example if you are great at sales, it would be a mistake to have you devote a lot of time to maintaining the accounting system. I am sure you understand the principle.

Register for Blogging For Profits and read all of this
post plus issues 4-7 in their entirety. Registration is FREE at
www.stevereports.com

Biggest Successes Result From Simplicity

Do You Recall Economics 101 by Father Guido Sarducci on Saturday Night Live?

I remember most of the skit like it was played this morning. Father Sarducci would explain how he was able to master four years of economics theory by learning one principle: The Law of Supply and Demand. He said it was the only law anyone who studied economics remembered.

The Law of Supply and Demand is easy to understand. If you lower the supply and keep the demand constant, price will rise until the demand equals supply. Father Guido Sarducci successfully explained this principle in about 5 minutes to a Saturday night crowd up late and heavily influenced by recreational medication and alcohol. Even with those most challenging environmental factors, most of the audience in the studio and in front of their TV sets learned more about economics in those five minutes than in any economic classroom.

Many economic theories are hard to master. The law of supply and demand is relatively easy and it works. The notion that complexity is required for something to work is wrong in most cases. I see countless examples every week of companies working to make business hard? Here is another recent example:

USA Today reported on the disastrous test results experienced by passengers boarding Southwest Airline’s flights originating in San Diego. What Southwest was testing is the procedure already perfected by nearly every other airline which of course is assigned seating. Southwest decided to came up with their own definition of assigned seating. They literally assigned you a seat and it didn’t matter when you made your reservation, showed up at the gate or where your preferred to sit. Apparently some people arriving early and preferring a window seat in the front of the plane were assigned middle seats in the back of the plane. In summary, Southwest pissed off a lot of people and as a frequent flyer of Southwest and other airlines, I could imagine not being a happy camper.

So what does this have to do with Father Guido Sarducci? The lesson is keep it simple and do what has been proven to work. I am astounded that the leadership of Southwest Airlines could not have copied the already perfected system of assigned seating developed by other airlines and tested that. I am even further amazed the CEO of Southwest basically downplayed how rattled some of the passengers were by this stupid test. I noticed he was not part of the test group. I also notice Southwest employees flying Southwest board before all other passengers. I believe if the executives and other employees were automatically put in Group C or in middle seats of their assigned seating test things would change fast at Southwest.

There is another important item about Southwest as report by USA Today. Southwest has raised prices nine times in the past 12 months and their stock price has hardly budged. I just checked fight availability on a midweek flight from the Midwest to Florida. Looks to me like it is nearly empty a week in advance. I wonder why?

Let’s bring this back to your business. The simplest thing to do is look at your business from the perspective of your customer. If you have a retail store, shop it or hire a mystery shopper. If you have a customer service center, call them. If you develop information products that you sell on line, ask your customers 90 days later how they have benefited from the product and what else they would like to have seen included. If you have a membership program, and someone drops out, stay in touch to find out what it takes to get them back. Recently I discontinued a membership program where I was paying a lot of money each month – much more than $100. I have not received one call or even one email asking me why. This is really amazing considering how much money it takes to get a person to sign up for the basic plan yet alone the plan I was in.

Now here is a big bonus for those who have read this entire rant: Follow Your Instincts! I have said this before and will be saying it in many articles in the future. Every client I have worked with knew the fundamental solutions to the issues they asked me to help them with. For a whole host of reasons they didn’t act and accepted inertia. In nearly every case the solutions were obvious and intellectually simple.

Right now list the top 3 issues that are holding you back from making breakthrough profits in your business. Then starting right now, spend at least 80% of your time solving those three issues. Once solved, do it again and keep doing it. Simple stuff.

Be well and prosper,
Steve Pohlit, Business Consultant
www.stevereports.com
www.stevepohlit.com
“Helping Business Make Extraordinary Profits Now! No Reports..Just Results”

Blogging for Profits Issue No.7: Earn Massive Profits With Your Message

Blogging For Profits Issue No.7 Earn Massive Profits With Your Message

1.Is one blog enough for your business?
2.What is the goal of your blog?
3.How often should you post information?
4.How do you measure the effectiveness of the time and energy spent in developing and writing the information in your blog?

These questions and more are answered in this issue. Follow this series and you will earn massive profits for your business – guaranteed!

Register for Blogging for Profits now at www.stevereports.com and receive all the back issues starting with Issue.No.4 The first three issues are posted in their entirety on the blog.

The Buzzwords May Change, The Profit Growing Principles Do Not!!

(This article links traditional business with entrepreneurship. The focus is on sound success principles that are proven to work and not on their labels.)

Phred Dvrak writes in the Wall Street Journal that management trends fade quickly. He refers to consultants as fashion surfers and uses dramatic declines in articles published on programs including “Business Process Reengineering” and “Total Quality Management (TQM)” as evidence of his statement. In a nutshell, he believes consultants jump on the latest management theory buzzwords as a means to sell work.

There are a lot of consultants in the world. Like any other profession, there are those who are totally professional and absolute experts at what they do and there are those who are not. Most people in business have their favorite experts. There is a growing list of very credible experts in specialized field and every industry. There is also a growing list of people who pretend to have a lot to offer but really don’t.

The best experts consistently offer guidance based on proven business principles. In a previous article I discussed the importance of testing and cited two retail stores with dramatically different results. If you read material published by direct marketing experts, they have been advising testing for decades. When you read the books and articles published by management experts, the ones who have actually successfully operated one or more companies, you will consistently find they focus on creating a culture for consistent improvement in business performance. It doesn’t matter if the the process is called Business Process Reengineering, TQM, Six Sigma, Kaizen or anything else. What matters is that a company maintains a consistent discipline to examine all details of their business for the purpose of improving business performance.

It is not that hard to know what to do. Every owner or CEO I have worked with always says “I knew what to do. I just did not consistently implement.” My course How To Increase Profits by 30% or More in 90 Days or Less, which is available FREE at www.stevepohlit.com is mostly about the disciplined process of making money in your business.

Consistent discipline is the hardest part. Most CEO’s don’t follow a disciplined management system in running their business. I get paid to remind them and their team how to do use an focused sequential process for running their business and most of all I show them the consequences of not doing that. Sometimes I am called in when the patient is critically ill and they are looking for a way to reverse the slide. Sometimes they are too far gone.

A disciplined approach to running your business applies to multi-billion international companies and home based entrepreneurs. John Reese discusses the benefit of rational work long term. He consistently reminds his readers that his current success is a product of working consistently on his business for quite a number of years. Read Dan Kennedy’s book on time management. You will quickly understand the discipline he applies to his business. Everyone I know who has achieved a measure of success with their business has experienced disappointment, financial setbacks, the wrath of creditors and family members. However, they remained focused on their goal and followed a disciplined plan of action to achieve the goal.

In my own career, I have experienced huge success and huge failures. Today I work in two arenas. I work with traditional businesses helping them get stronger and I work on further developing my entrepreneurial interests using on line and off line tools. Many days I am more successful making sure my clients follow the work plan than I am following my own work plan. So I have stepped up my efforts to be in the right mastermind group and I am considering having a business development coach to assist me in accelerating the development plan for my business by holding me more accountable and challenging my priorities.

Most of us need to reinforce the importance of following a work plan to accomplish our business goals. Now this assumes you have clearly written goals and a work plan designed to accomplish those goals. Most people and companies do not have a current definition of their goals, a current work plan designed to achieve those goals and feedback system designed to monitor progress. As a consultant, I help business with that process in all areas of their company and it works very well. As a consultant I know this process works for entrepreneurs which is why I may I am stepping up my own process for achieving optimal results for my own business.

Steve Pohlit, Business Consultant
www.stevereports.com
www.stevepohlit.com
“Helping Business Make Extraordinary Profits Now! No Reports…Just Results!”

P.S. Issue No.7 of the very popular, Blogging For Profits will be published in three more days. You don’t want to miss another issue. Register now at www.stevereports.com Registration is free.

Market Tesing for Maximum Profits

Zale Corp. vs. Signet: One Tested…The Other Didn’t…Look At The Dramatically Different Results

Ann Zimmerman and Kris Hudson reported a very interesting article in the Wall Street Journal that describes the dramatically different results of two very large mass market jewelers – Zale Corp. and Signet. Zale’s jewelry division is headquartered in Texas. Signet which owns Kay’s Jewelers and Jarid is based in the UK. Both companies target market share in the huge U.S. market.

If you are in business, you must read the papers and magazines that deliver lessons and ideas that will help you. A quick review of the articles I publish reveals many examples taken from publications that are used as valuable lessons. Today’s article is no different.

In direct response marketing circles there has always been a lot of attention to the importance of testing. That industry uses what is called the “control”. This is the direct mail piece that has a predictable rate of response when mailed. Once established, writers are challenged to beat the control. The best copywriters, the ones with long running controls, make a ton of money because they deliver the goods.

I was trained in retail by some of the best in the industry in the 80’s. Then I worked with fashion retail, mass merchandisers and specialty stores. The divisions of The Limited were particularly skilled at identifying fashion trends that were popular in foreign markets, replicating enough of an item for a market test and then if the tests met their expectations, they would quickly mass produce the item and fly finished production to their US distribution center where the garment would be in the stores in a matter of weeks.

Every successful retailer is constantly testing market response. Every successful internet marketer is constantly testing market response. Market testing is critical for maximizing profits at companies. So what was Zale Corp. thinking when they implemented a complete change in jewelry merchandising strategy following a lackluster Christmas selling season in 2005? I don’t know and if it has worked the story might be different. But moving from a mass market strategy to an upscale market strategy in a matter of months chain wide end in a financial disaster for Zale and possibly the end of the careers for a number of people at the company including the CEO. Signet on the other hand is following a strategy of consistently testing and modifying its product offer based on the results of the testing. They base their merchandise strategy on listening to what the consumer wants as evidenced by how they spend their money.

I have been in business long enough to know that the former CEO of Zale Corp. probably has his side of the story and it is different from the message published in the WSJ. However, the financial results of the two companies speak for themselves and reinforce the importance of testing.

The roadmap to success in business is relatively easy to follow. Every day I am working with companies who realize hire me because they know they can be doing better and need a refresher on the fundamentals of doing business. Testing is one of the fundamentals for most businesses. If you are not doing it, or if you do not have a formalized testing process in place with the details of the tests being run presented at management meetings, start now.

Steve Pohlit, Business Consultant
www.stevereports.com
www.stevepohlit.com
“Helping Business Make Extraordinary Profits Now! No Reports…Just Results!”