Average is Dangerous

By Bill Hawkins

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A few weeks ago I interviewed the president of a large retail organization. We talked for 30 minutes about the economy, his leadership team, and the challenges in his industry. Then he summarized the entire conversation in three sentences: "In the past you could be average. You could provide average products with average service and do just fine. Now being average means you may not survive." Since then I have talked with over a dozen executives in diverse fields (automotive, insurance, medical, retail, technology). So what is changing?

Unexpected Competition:
Sirius Radio has always relied on their varied and unique programming to distinguish themselves. In March major league baseball released an iPhone application that will stream games from all 30 teams. Sirius customers get that now. Only iPhone will additionally offer video clips, live score updates and do it all for $10 for the entire season. Sears is offering to service your car while you shop. Walmart is in the grocery business and Google just announced they are entering the Venture Capital market with 100 million dollar commitment. As one executive pointed out, "The consumer is measuring you against competition that didn't exist until now."

Well Informed Consumers:
More than half of patients research their symptoms and alternatives before visiting a doctor for a major health issue. They won't hesitate to ask what pace maker is going to be implanted, what medications prescribed. Pharmaceutical companies advertise prescription drugs directly to the public because it works. Few people directly call hotels or airlines anymore to make reservations. They shop for the best price. Before visiting the local auto dealership, a car purchase begins with building your ideal automobile online and finding out what the dealer pays for it from the manufacturer.

Speed of Competitive Response:
What happened to the yearly sales plan? If your sales promotion, pricing, or product introduction is successful, the competitive response is immediate. One senior executive explained, "At my level we used to track numbers by product, by location on a monthly basis; now it is daily. We need to be prepared and flexible to change our product mix, pricing, and strategy in real time in response to what customers and our competition are doing"

Customers Are Demanding:
The current state of the economy has created a new breed of customer. These customers are focused on cash – they don't have enough of it. They cannot easily borrow it and they are spending as little of it as possible. Over 60% of all organizations now rate "financial pressure to cut costs" as one of their top two priorities, up from 36% only three months ago. Retail operators are seeking rent relief from landlords and getting it. Double-digit rent reductions are not unusual. Your customers or potential customers are experiencing pain and want to know what you are going to do to help them.

What You Can Do

Help Them Reduce Costs.
Almost every organization (including companies doing well) have had budget cuts. Customers are saying, "If you want me to buy from you, help me reach my objectives with a reduced budget." Now is the time to look for ways to reduce transportation costs, bundle products, change the packaging, offer bulk purchase, extend warranties, or show flexibility in payment options. Accenture, for instance, just introduced a new claims and underwriting program for insurers that costs less and reduces the time it takes the insurance company to implement solutions. Offering products that cost less and save time is a winning combination any time, but now it is especially rewarding.

Help Them Innovate.
It is hard to find an organization that hasn't downsized. Some departments have experienced reductions of 30% or more. The head of customer service in one company explained "In this troubled economy customer calls are actually more difficult and more time consuming. We are doing it with less people" These people have moved past the point where everyone is asked to work a little harder. The challenge is to get more done with less. Their energy is committed to getting today's work done. The resources (time, people, and money) just aren't available to do much else. The average organization is understandably having very difficult time in this environment. The best organizations, however, will grow to be closer than ever with their customers. They understand that to earn the business, they need to partner with their customers to help the customer save money and become more innovative.

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