The Blueprint

Cheap versus Free

I recently read the book "Free" by Chris Anderson the author of The Long Tail.  It is a good read and really makes you think.  I don't agree with everything he says nor do others, but the one point he makes that really made an impression on me is the huge difference between cheap and free.  One example he gives is an experiment that is done by Dan Ariely the author of "Predictably Irrational".  They placed a table at a university where they were advertising chocolates.    They had Lindor Truffles for 15 cents (a high end chocolate which typically sells for much more), and Hersey Kiss's for 1 cent.  73 percent chose the Lindor Truffle over the Hersey Kiss.  They then decided to lower the price of each candy by one cent.  The Truffle was now 14 cents and the Kiss was 0 cents.  69 percent chose the Kiss.  What Ariely came to understand through this experiment and others is that the brain is constantly deciding how to allocate resources.  When faced with a choice where resources don't have to be allocated (i.e it is free) the brain is relieved from having to do work.

How does this affect your market?  This is not just true for free goods, but also free services.  If there is no charge for deliveries or no penalty to ask for a faster turn around I will choose whatever I want because I don't have to allocate any resources.  This is not a new thought of mine.  This was actually in my first post on this blog.  Chris Anderson and Dan Airely just did a better job of explaining it.  More on this later...

Without Consistent Quality Nothing Else Matters

I've been working with some customers to find new and different ways to measure their business.  Some would call this business intelligence.  With the right tools to gather information and right analytical methods interesting trends can be tracked and key performance indicators (KPI's) developed to measure the pulse of your business.  These analytical tools can help you make more informed decisions to become more profitable, competitive and to weather the storm of the changes affecting the industry.

One thing that has caught me off guard is the impact that poor quality is having on reprographers businesses.  If you are loosing face with your customers because of poor quality there is nothing more important to measure.  This impacts your profitability.  It affects your ability to retain customers, and your ability to attract new customers.

Advances in design technology are only increase the probability of errors.  To get out of this vicious cycle companies must document their workflows, set up systems to track errors, engage employees to find the root cause of the errors, and make adjustments to the workflow to ensure these errors are eliminated or minimized in the future.

Acceptable Service Levels

I had an interesting discussion with an IT director of a large reprographics firm.  He was complaining about the service levels of telecommunication firms.  He was saying the service level agreements (SLA's) commit to 99% uptime for network services.   When you look at the numbers that just not acceptable. If you assume 2,000 working hours in a year that means that you can be down for 2.5 days per year [2,000 * (1-.99) / 8 ] and still be within what they consider acceptable.  As your business transforms into a more IT centric business where interaction between offices, partners and customers is dependent on the network, 99% is just not good enough.  Those numbers also assume working hours.  One of the benefits of some of the Internet based technology is your customers can interact with your company in non-traditional working hours.  This means you could be "down" for much longer than 2.5 days.  The conclusion this IT director came to is he must take charge of the situation.  If 99% uptime is the best his vendors can provide then he needs to create his own back up plans because 99% isn't good enough for his business to operate and is certainly not acceptable to his customers.

Are You Nickel and Diming?

Everyone is focusing on covering the cost of additional work required to meet customers demands in the digital world (i.e. charging for digital services), not to mention dealing with price erosion on core printing services.  Isn't it frustrating when a customer accuses you of "nickel and diming" them?  You are trying to run a profitable business.  Seth Godin has an interesting blog post on this subject.  I believe the market needs to move to true "a la carte" pricing that allows customers to choose which services they require or have service level agreements with customers where they get certain services included in a subscription fee.  The challenge is conditioning your customers to move to that business model.  It is also important that it fits into the way they charge their customers (i.e. charging the owners)

Getting Honest Customer Feedback

After struggling to find a special screw for 45 minutes at Home Depot and getting very little help from their "knowledgable staff" I saw this upon exiting the store. Hey for a chance to win $5,000 I will have to rethink my experience. Is the management trying to measure the customer experience?

Intravenous Business Relationships

We all talk of having strategic relationships with our customers, but Seth Godin in his book "Permission Marketing" categorizes stages of loyalty or trust in a commercial relationship.  The highest level is what he calls "Intravenous".  This is the relationship you have with your doctor when you are in a life threatening situation.  You put your trust into the doctors hands to save your life and you trust that he will charge you a fair price for his services.  You trust that the doctor will do the absolute right thing.  Many companies have intravenous relationships with a law firm or an accounting firm.  They trust that the law firm or the accountants are working in their best interest and rarely question fees.  This is the ultimate type of business relationship to have, but must be treated with the utmost respect.  All profits derived from this relationship must be without any doubt "good profits".  As soon as the customer believes that you are abusing the intravenous relationship and extracting value instead of adding value the relationship will end abruptly and the chance of resurrecting the relationship is slim.

Customer Satisfaction Surveys

In case you haven't noticed I am a firm believer in the principle and methodologies communicated in Fred Reichhelds book "The Ultimate Question".  I recently stayed at a Hilton Hotel in London England.  I had a bad experience.  I am a frequent customer of Hilton Hotels and felt an obligation to provide them some feedback when they sent me a customer satisfaction survey.  It was a nice Web survey to make it easier for me to respond...yeah right!.  I went through page after page of questions.  There were so many pages that they required a status indicator at the bottom to show me what % of completion I was in the survey.  Every time I gave an indication that I was dissatisfied the screen changed and expanded.  Ten more questions appeared to ask why I wasn't satisfied.  The more I answered the further I was on the % completed indicator.  I was getting worried that I might spend the whole day just to finish.  It seemed the only way to finish was to either quit or to start giving satisfied or "not applicable" answers.  I reached the point of dissatisfaction that I was committed to finish just to show how dissatisfied I really was.  I finally go to the point where I could type in a free form response.  Here it is.

Your surveys are awful.  Hopefully this doesn't get filtered out by the survey company, MarketMatrix.  If you own stock in MarketMatrix sell it.  This survey is way too long.  I spent over 15 minutes just to communicate to you I had a bad experience.  I will never respond to one of your surveys again and you will no longer know how satisfied I am.  Read the book the "The Ultimate Question".  Fire your survey company and do it yourself!  If you'd like to talk to me please give me a call.

Following the methodology in The Ultimate Question they should have asked the following questions:

1. Based on your recent stay at the Hilton London Euston Hotel would you recommend this hotel to a friend or colleague? (Please rate us from 0 to 10).
2. If we didn't score a 9 or 10 what do we need to do to score a 9 or 10?  If we did what was the most important factor that influenced your decision?
3. May we contact you to discuss this?

If they use this methodology; the number of responses they will get will increase, the goodwill from their customers will increase, and the data they collect will be more meaningful and measurable.