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2010 – New Decade, New Gen, New Trends
March 1, 2010
Not only will we have a new generation of consumers, future employees and business owners but we can expect other significant changes in the coming decade. Here’s a quick bird’s eye view of some of the coming changes we can expect in the way we run our businesses.
Gen Alpha starts now
Babies born during the next 15 years officially belong to the next generation, named Generation Alpha. (That’s because, having used up the end of the Roman alphabet, we are switching to the Greek one.) After years of declining birth rates in the Western world we are set to experience a massive spike, even larger than the post war baby boom. Alphas are going to be the most formally educated in history. “They will begin schooling earlier and study for longer,” says social researcher Mark McCrindle. With information overload the established norm they will outpace even Gen Z in being more tech savvy and more materialistic.
Greater input from consumers
“Consumers will have much greater input into product design and development,” predicts Jim McKerlie, noted writer and speaker on issues related to privately owned businesses and CEO of digital agency Bullseye. Dell and its IDEASTORM (www.ideastorm.com) is a good example of this in practice. Mass production will be replaced with volume-based personalized production. Consumers will place orders so that they can get exactly the specifications they want; i.e. they will custom order goods or services, much as they did for tailored goods in the past. This might even result in consumers holding on to goods longer since they will fit their needs better.
Changes in supply chains
Supply chains will probably polarize into those that produce the goods and those that manage the customer relationship. Businesses will need to outsource those functions not core to their business. Knowing your business model and your unique value proposition will be vital to understanding what to manage and protect in-house and what to outsource.
“Take cars for example,” McKerlie says in Business @100MBS, “a buyer will log on and itemize exactly what make, model, options and color they want. They may even negotiate the warranty terms, financing terms and service agreements they want, and the respective price adjustments will be made to their order. This is a far cry from the current situation of selecting a car that is in stock or in transit, and then dealing with separate financing and after-market suppliers.”
Product tracking systems
Product tracking systems will be developed that maintain details of a product’s location, usage rates, service history and condition. Post-sale product management could take on a whole new meaning. If a small transmission device was placed within a product which recorded the level of usage, then signals could be sent back to the supplier indicating when a product service was due or when the product was nearing the end of its useful life.
Personalization vs. specialization
Personalization will replace even specialization. Look at the music industry where consumers download song by song exactly what they want from a variety of sources and construct their own listening programs. Niche operators of the future will need to consider how they might compete with this.
Collaborative networks rather than distribution channels
The new social media and tools such as wikipedia are good examples of the way customers will work with businesses to create solutions. This kind of collaboration will improve customer loyalty as well as the customer experience and client service. “The current one-way distribution networks where consumers are provided with information and products according to what producers decide will cease,” says McKerlie.
Used with permission from RanOne Inc., McQuaig & Welk, PLL are licensed RanOne Consulting Group Members.
Simple Direct Marketing Tips
February 3, 2010
Direct marketing is very much oriented towards immediate response. Direct marketers can tell you very quickly how successful (or unsuccessful) their promotion is, because they have the responses to prove it. So what is the most compelling tool that direct marketers use in order to gain that response? It’s the offer.
In general, direct marketing encourages people to respond to offers – such as, “Buy a dozen bottles of premium wine this weekend, and receive a free bottle of bubbly at no extra charge.” It is the offer (not necessarily a bribe) that has the power to overcome ‘prospect apathy’.
To have an impact you must cleverly target the offer to appeal to the intended audience. It’s not much use offering a free trial of a newly launched lawn mower to people who live in high-rise apartments. You must design the offer in such a way that it creates interest.
Essentially, there are four fundamental elements in direct marketing:
- price
- satisfaction
- payment terms
- incentives
One or more of these four elements feature in some way in all offers. Here are examples of offers that direct marketers have found to be the most effective over the years:
Free trial offer: In many categories this is probably the best of all offers and in direct mail it is virtually essential. The length of the trial can vary, with thirty days being the most common.
Payment offer: Offers such as “bill me later” and interest free credit are both very powerful concepts that regularly increase response substantially – which is why they are used so often.
Limited time offer: Setting a time limit often “forces” potential customers to make a decision and it adds urgency to an offer. Care needs to be taken in choosing the period, since too short a time frame can give prospects a feeling of being hassled, while too long a period leads to inaction and lack of response.
Free gift offer: People love getting something for nothing. Free gifts can be most effective when used sparingly in short, sharp bursts.
Competition and prize draw offers: These offers give the chance of winning a prize, add excitement and can certainly motivate consumers. However, keep in mind there may be legislation you have to adhere to and it is wise to check with your legal advisor before proceeding.
Discount offer: Discounts are popular and are most effective where the value of a product or service is well known. Discounts are better expressed in money terms rather than a percentage, i.e. ‘save $50’ is better than ‘25 percent off’. However, with discounting there is definitely a downside. Discounting eats into profits very directly and can adversely affect the image of a business. There is also the old adage, “live by price, die by price.” After all, your competitors can always discount further. Once you become known as a discounter, many customers will only buy from you when you offer discounts.
Alternative Finance Products – Can They Help You?
January 12, 2010
With the amount of available credit shrinking in recent times and financial institutions raising lending standards, more businesses are turning to alternative forms of finance to cover cash flow shortages and grow their businesses. Asset-based lending, factoring, invoice discounting, and merchant cash advances are a few alternative forms of finance that are becoming more popular. Although these forms of funding can help companies make it through tough times, business owners and managers need to be aware of their shortcomings.
Asset-Based Finance
Companies that are unable to secure traditional bank funding can turn to asset-based finance to cover their needs. With asset based finance, a company uses its assets as collateral to secure structured working capital or term loans. If the business is unable to repay the loan, the lender takes the asset that secured the loan. Asset-based loans can be secured by a range of assets including machinery, equipment, accounts receivable, inventory or real estate. In its most basic form, asset-based financing involves tangible assets. A business can pledge one or more its assets as collateral to secure a loan. Once the loan is repaid, the asset the lender no longer has a claim on the asset.
Factoring
With factoring, a business sells its accounts receivable at a discount to a third party, called a factor. The business receives its funds immediately. The factor takes ownership of the receivables and assumes the right to collect on them and takes on the risks of non-payment. Factoring is not a loan, so the factor isn’t concerned with the firm’s creditworthiness but looks at the quality of its accounts receivable. The main drawback for the business is that it doesn’t receive the full value of its receivables. This amount forfeited can be high in percentage terms when compared to traditional forms of finance.
Invoice Discounting
Firms wanting to improve working capital and cash flow positions can use invoice discounting, also called debtor finance, to borrow a percentage of the value of the their receivables. Under these arrangements, the business gets access to a revolving line of credit (sometimes up to 90% of the value of outstanding invoices) which it can draw upon. For the service, the lender charges fees and interest on the amount borrowed
Like an overdraft, the business only pays interest on the funds borrowed. In most cases, confidentiality is maintained so that customers and suppliers don’t know the business is borrowing against its receivables.
The main drawbacks of invoice discounting are its high cost compared to other finance options and the loss of the company’s flexibility to make other finance arrangements once receivables have been dedicated as collateral. Businesses can start to rely on the improved cash flow invoice discounting brings and may find it difficult to leave the arrangement.
Merchant Cash Advances
A growing number of businesses needing a quick solution to cash flow challenges are turning to merchant cash advances (MCAs), a new and controversial form of finance. Merchant cash advance providers offer businesses a lump sum payment in exchange for a share of future credit card sales. This form of finance has become popular among retail, restaurant and service companies that have strong credit card sales but have poor credit ratings and little or no collateral.
Under an MCA arrangement, the provider collects a set percentage of the company’s daily credit card sales until they recover the amount they advanced plus a premium. The advantage for the business is quick access to funds without the need for a strong credit rating or collateral.
The main drawback of MCAs is their high premiums, which can be over 30% of the money advanced. This has led some to refer to MCAs as ‘payday loans for businesses’. Unlike traditional lenders, MCA providers don’t fall under finance regulations because they are buying receivables, and not making loans.
Tight credit markets and stricter lending criteria have made it necessary for companies to look at alternative forms of finance. Although these can offer benefits, they need to be scrutinized for their potential shortcomings.
Used with permission from RanOne Inc., McQuaig & Welk, PLL are licensed RanOne Consulting Group Members.
Smart Ways to Invest Less for Higher Returns
December 11, 2009
There have been recent increases in business and consumer confidence in many developed economies and expectations are growing that the worst of the global financial crisis and its associated recessions may be over. However, the optimism is mixed with caution.
Consumers are looking for good value at a lower price and businesses are exploring ways to use new strategies and technology to invest less and get a higher return.
If you’re a business looking to work smarter at lower cost, consider these strategies.
Social networking
Traditional marketing can be expensive. Many businesses are using the internet to reach a large customer base at low cost.
Facebook now has 250 million members, and writers such as USA Today’s Jon Swartz suggest this has serious implications for business – both big and small. More than 100,000 small businesses are present on Facebook and 10,000 websites use Facebook Connect, which facilitates information sharing about sites. Facebook and other social networking sites such as MySpace also provide businesses with a low cost way to build business relationships.
Social networking sites also provide opportunities for viral marketing. Small businesses could use a variation on the strategy that Ford used when it launched the Fiesta into the American market. It let 100 bloggers drive the car for six months, provided that they wrote about it and uploaded monthly videos onto YouTube.
Some businesses are writing their own blog or using Twitter. The audience is limited to readers interested in your message. It’s a powerful form of relationship marketing that is cheaper than traditional methods such as newsletters or fliers.
Forming alliances
A US National Small Business Association survey found that 27% of business owners planned to form strategic alliances over the next year. It is partly a matter of cost-saving, something that can be important at a time when small businesses may be having trouble with cash flow or raising finance. The Wall Street Journal reports on a website business that, rather than pay for advertising and PR, bartered services by building websites for their marketers. Other businesses are joining forces to share expertise and workload.
Remote working and outsourcing
WorldatWork reports that the number of people working remotely at least part of the time increased 39 percent between 2006 and 2008.
During tough economic times, you may not want to use higher pay to attract or retain talented staff. However, you might be able to keep them in a non-monetary way. The internet makes remote working an increasingly feasible. It’s not for everyone, as it requires a results-based work culture. It’s also a way to reduce some costs, such as office space.
At a time when small businesses are reluctant to hire, it’s now possible to outsource professional services through the internet at a relatively low cost. Over 60,000 companies source professional services through websites such as Elance. They also provide an opportunity to outsource globally, not just locally.
Outsourcing IT
Hiring server capacity can be a cheaper option than running all applications from your own server. Only two per cent of businesses with under 100 employees currently do this but 37 per cent are interested in the idea, according to a Forrester Research report. BusinessWeek reports that businesses can currently outsource not only to large market players (such as Google, Amazon or Microsoft) but to many small ‘cloud computing’ service providers.
Pro Bono Work
If you’re working at less than full capacity, pro-bono work may be a way to not only keep staff occupied but build a presence in your local community. The Wall Street Journal reports on this as a customer relationship building trend that can also be linked in with low-cost marketing; businesses could upload videos to You Tube, documenting the pro-bono work.
Rebalancing product mix
A June Accenture study found that 67 per cent of consumers expected to be cautious about spending for up to three years. But people still want their little touches of luxury so find ways to offer these ‘treats’. Accenture reports for instance that while sales at premium coffee outlets have fallen, they have risen for some less fashionable vendors who sell more cheaply. Inexpensive treats such as the simple chocolate bar also seem to be faring well.
Used with permission from RanOne Inc., McQuaig & Welk, PLL are licensed RanOne Consulting Group Members.
Cross Promotion – A Low Cost Way to Grow Your Business
November 4, 2009
With marketing budgets under pressure, business owners and managers are looking for ways to do more with less. One of the most effective ways to find new customers with minimal expense is cross promotion.
Cross promotion is simply when two or more businesses combine resources to market their products or services to each other’s customers. The main criteria for success in cross promotion are that the businesses serve the same types of customers but don’t compete with each other.
There are hundreds of ways businesses can work together to achieve this. Here are a few cross-promotion ideas that can help you expand your market on a small budget.
1. Two businesses can agree to display each other’s brochures. An example is a pharmacy that displays brochures for a therapeutic furniture store. In return the furniture store will display brochures promoting the pharmacy. This is a good match because both businesses serve people with health issues.
Businesses can agree to put each other’s promotional materials in shopping bags when customers make purchases. Another option is to print promotional messages, or coupons, on each other’s cash register receipts.
2. On a business to business level, companies serving the same markets can include each other’s brochures when they send out invoices to their customers. For example, a commercial printer includes a brochure from a commercial photography agency that serves the same market. In return, the company providing commercial photography will include the printer’s brochure in its mailings.
3. Professionals can also benefit from cross promotion. For example, a financial planner, lawyer, accountant and insurance broker can produce a joint seminar where they speak about wealth creation and risk minimization. Each participant raises their credibility by speaking at the event, gaining access to new clients.
A key part cross promotion is credibility. By working with other respected businesses you instantly gain credibility amongst their clients. You also add value for your clients by letting them know about quality products and services you endorse.
If you haven’t done any cross promotion before, you can start by asking, “Who are my potential customers?” Once you have determined this, write a list of non-competing businesses that sell to the same types of customers as you do. You probably already know people in business who would be ready and willing to start a cross promotion alliance. First, it’s important you ensure that companies you cross promote with are reliable and offer quality products or services. Getting into an alliance with a company that doesn’t meet customer expectations can damage your reputation.
Once you have found a partner to work with, meet and brainstorm ideas on how you can best work together. Discuss the ways in which you currently make contact with your customers. Are there ways you can work together using these existing methods? If you have a retail business, you can focus on in-store promotions such as posters, displays, brochures and coupons.
If you are in a service or consulting business, you can promote each other in direct mail pieces, newsletters, on your website or in any other ways that you connect with your customers. As mentioned, joint seminars will raise the credibility of the speakers while giving them access to each other’s customers.
You don’t have to limit yourself to one business when cross promoting. For example, separate companies offering home renovation, interior design, painting, flooring, plumbing and electrical services can combine mailing lists and create joint promotions to send to their customers. These companies all provide home improvement services, but don’t directly compete with each other.
If you’re having trouble coming up with relevant cross-promotion ideas, here are a few more.
- Publish articles about one another’s businesses in the newsletters you send to your clients.
- Mention the benefits of each other’s products or services when speaking at local events, to the media, or to your customers.
- Promote your partner’s products during their slow times and ask them to do the same for you.
- Train your staff to promote your cross-promotion partner’s products or services.
- Give your partner’s product to your customers when they buy a large quantity of yours and ask your partner to do the same for you.
Used with permission from RanOne Inc., McQuaig & Welk, PLL are licensed RanOne Consulting Group Members.