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...

How to Make Money in a Recession

Sorry to keep talking about the economic downturn.  With all the negative press, which is only making things worse, we all need some constructive information.  Here is a video from Cameron Herold.  Cameron was the COO of 1-800-GOT-JUNK.  While he was there the company grew 500% in 3 years and was ranked Canada's #2 best place to work in 2007.  Some of his advice is certainly bold but it gets you thinking.

What is Our Moat?

Based on my previous post some in the reprographics industry have asked "what do you see as our moat?"  The industry is changing.  Reprographers are adopting technology to improve their efficiency and value proposition to their customers.  I don't believe the "moat" has much to do with which technology products a company chooses (although that is an important decision).  The long term or "enduring moat" is the skills, expertise and systems that are developed in the process of implementing and delivering technology in construction workflows.  I've heard recently of companies implementing a new plan room and said it was pretty easy because we have developed processes and our people have been trained on other plan rooms.

There are companies that can easily deliver technology solutions in an ASP model over the Web (i.e. Google, Yahoo, or even Autodesk).  These companies could deliver solutions more easily than a reprographer at a lower cost.  Where I see the "enduring moat" for reprographers is the infrastructure.  At the end of the day the construction industry is a local business.  Reprographers have a local presence, sales people, customer service representatives, service technicians and vehicles.  Most importantly reprographers have a relationship that allows them to interact face to face with construction stakeholders on frequent basis.  Technology solutions that require this "moat" are where reprographers will see enduring success.

We Don't Care.... We're the Phone Company

I had several IT managers contact me and empathize with my previous post.  It seems that even though competition was introduced to the telecommunications industry somehow we have reverted back to the same poor customer service that existed when there was a monopoly.  For those that know me well they know of my god-given gift to relate any situation to a Saturday Night Live skit.  We'll here's a SNL skit that is starkly familiar to conversations IT managers have with telecommunications companies providing network services.

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)

One of Those Bad Days...

Sometimes when a day gets off to a bad start it is only the beginning. Apologies in advance for the language and infamous actor...you get the point.

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.

Isn't All Profit Good?

In the book "The Ultimate Question" Fred Reichheld distills customer loyalty into an extremely simple yet compelling metric called NPS or Net Promoter Score. He describes how most companies rely solely on traditional financial metrics like revenue and profit, but explains that these are short term measurements of success and are not highly correlated with long term sustainable success.  He describes the difference between "good profit" and "bad profit". Good profits are when you make money turning customers into enthusiasts and bad profits are derived from schemes such as locking in customers, tricking them through deceptive promotions, or hard selling techniques. Good profits create value for customers and bad profits extract value from customers.  Companies can hit short term goals with bad profits and sometimes more effectively than with good profits, but customers who had bad profits extracted from them will count the days until they can find an alternative vendor.