Stoddard BD

So Prove It!

2010-12-03T00:27:00.000-08:00

Your prospect may be thinking it, or may be saying it, or may be pounding the table with his eyes popping out of his skull and the veins in his neck ready to burst.

At some point you must show proof. What is proof? Proof is defined as a demonstration which proves in the mind of the prospect the results you are claiming.

And that is the rub. You may be in love with your demonstration, but your prospect may still remain unconvinced. Benjamin Franklin observed: A man convinced against his will, is of the same opinion still.

I've seen it happen to others and it has happened to me.

Why do proofs fail? Here are a few common reasons:

The prospect hasn't been prepared by you. Which is to say the explanation leading up to the demonstration has failed to prepare the prospect for the punch line.
The proving demonstration failed to operate correctly. Very costly mistake due to lack of your preparation. Every demo needs a few dry runs and a dress rehearsal. Make sure the operator is rested, relaxed, and ready to respond to questions.
The demo doesn't fit the prospect's problem. Nothing worse than having the right answer to the wrong problem. Manufactures who focus only on selling what is inventory frequently find they are demonstrating products for which a need existed three years ago, but the need was filled better by a newer product 6 months ago.
The demonstration lacked zip, organization, and precision. I recall having the Hitachi general sales manager in Australia look at a machine I wanted them to sell. Hitachi is crazy for "fit and finish." The machine we were demonstrating didn't fit together well, there were welding splatters all over it, the paint job had several noticeable sags precisely at eye level. [Remember a static machine is a demo of the manufacturers ability.] Later we showed the sales people and the dealers that the machine worked very well. That evening on a river cruise and steak fry the general sales manager complained, for the 15th time, about our fit and finish. I'd had it with his pestering. But he was right; I had to admit it. Finally I blurted out the truth: "Well, it does look like hell, but it sure works like the devil."

A demonstration is like a great movie. It must start off with a bang, have a climax, and then finish off with a great ending. If you have trade shows coming up, remember these points.

p.s. Just had a demo go bad and I wasn't allowed to be on hand for the demo....owner didn't want to spend the money for me to be there. It was a $3.5 million deal. Before the owner got it going and tested to make sure the bugs were out, they invited the customer to see it. The customer had to fly/drive about 800 miles to see it. Machinery only worked about 50%. So the customer got the privilege of seeing a busted demonstration.

"It takes 5 years to train a power plant operator"

2010-11-26T12:32:00.000-08:00

When I heard this from the operations manager of a large coal fired power plant in Thailand I was dumbstruck. He went on talking and my mind headed into outer space. I wondered to myself why training a power plant operator was related to the earth orbiting the sun, and why it took 5 orbits to do so. After coming back to planet earth I composed myself and asked the operations manager the obvious question. He thought then said "well it takes 5 plant shut down/start ups before we consider an operator fully trained." I thought that makes sense. He went on to say, " We only shut down the plants annually." He had conflated two facts and come up with a policy likely to generate a shortage of operators.

Better solution: Invest in simulator training for his operators. Simulators are not so dependent on the number of times the earth orbits the sun. Actually in a month an operator can have many, many more shut down/start up experiences. In fact it is not duration of time that determines proficiency but rather repetitions that builds skill.

Myths and Drowning

2010-11-19T05:16:00.000-08:00

The ancient Greeks and Romans developed myths to explain natural phenomena that otherwise defied explanation. These myths were projections of people's own fears, and the natural human intellectual desire to fill the void. While it is easy to understand why myths were developed, it is vital to realize these explanatory myths were not fact based.

Business owners both in ancient times and today may likewise suffer from believing in myths and with the same results as the ancient Greeks and Romans.

A few myths:

"Make a better mousetrap and the world will beat a path to your door." Nearly every inventor, programmer, engineer, designer, Phd, seems to suffer from this powerful delusion. If you fall into one of these groups, there is a 99% chance that you truly believe this. Those suffering from this delusion should ask themselves the question: If a tree fell in the forest but no one was there to hear it would it make a sound? It is profoundly amazing that in the presence of even the simplest lemonade stand business owner how widely spread and how deeply felt this myth continues to exist.
"I can't afford to advertise." Clearly a myth related to Myth Number One above. Advertisement is the communication with prospective customers/clients about you what you can do for them. If you don't effectively and frequently tell them, how are they to know? Can customers/clients actually buy products and services of which they are unaware? If you don't invest in communication you will never have a business, and you will barely have a practice.
"No one without my experience could do what I do as well as I do it." This is both myth and egotistical arrogance but is fed by the way technical people are educated and trained. The reality? Most people claiming 10 years or 20 years experience really have only a few months or years experience repeated over several years.

Are these myths confined to one culture? I've done business in more than 40 countries and have found these myths thriving, especially among technically trained and heroically hard working professionals. They suffer and wonder why their business does not thrive. They blindly thirst while stumbling about in the oasis. They are doomed as they stumble back into the desert only to dehydrate and die all the while wondering why they could never find the sweet water of success. Myths are unforgiving.

How can I help someone suffering such terminal 4th stage drowning delusions? It's not unlike helping non swimmer avoiding drowning. I must be careful lest I am pulled down with the victim and we both drowned.

Reducing Marketing Risk

2010-11-15T14:32:00.000-08:00

When considering a marketing plan, it is wise to divide your customers into four groups:
1. Customers who know you and know your product or service.
2. Customers who know you but your product or service is new to them.
3. A product or service known to potential customers who as yet do not know you.
4. A product or service which is unknown and for whom there never has been a customer

These 4 factors are presented in order of lowest to highest level of risk. Risk here is related to both marketing budget and schedule plus expected cash flow from these investments.

To understand how to market to the first three groups of people, please give me a call and we can devise a plan which will work.

To understand how to market to the last group, call someone else. It's a mystery to me.

What is hot?

2010-11-10T15:14:00.000-08:00

Renewable energy! Hybrids! Solar and wind!

All the best and brightest minds are working feverishly to make these new energy solutions work. The kind of brains that gave us the nuclear bomb and nuclear power plants, the internet, personal computers, the mouse, software, and hardware have been updated. Look to the men and women who have electrical engineering degrees to lead the technical vanguard.

The new version of those brains are working out how to make photovoltaic panels out of clear glass panels. They are closer than ever before.

Thousands of megawatts of solar plants are in design, under construction, and even more thousands are being sought be governments of oil starved third world countries. Countries where there is little oil but where there is abundant sunshine are scorchers in the summertime. Those countries increasingly need to have "factories" where knowledge workers can be educated and trained. Without a/c it won't work.

Imagine if all the glass tower windows in Singapore could generate electricity....

Drive through the pass west of Palm Springs. It's suicide for low flying birds! But awesome for a/c users in Palm Springs.

Renewable energy has the "big mo." That's big momentum.

And my recently graduated step daughter agrees. If you are looking to get with a hot growing trend get on this one and ride it for the next decade.

Where is today's gold mine for construction equipment?

2010-10-25T08:02:00.000-07:00

I can tell you the obvious: not North America.

And I can tell you there are three areas you must develop to move construction equipment today.
They are Russia, Poland, and the Kingdom of Saudi Arabia. I've visited projects in all three countries in the past six months.
Here's why.

1. Russia. Major motorways underway between Moscow and Saint Petersburg.

2. Poland. Major motorways underway financed by the European Bank for Reconstruction and Development

3. Kingdom of Saudi Arabia. Just in the past 5 months contracts have been let to move more than 300 million cubic meters of sand; that is the equivalent to three times the amount of material moved to build the Panama Canal. Plus there is a Women's University City underway a few miles from Riyadh. This city is complete with the university, dorms, shopping center, parks, recreation areas, and a monorail system winding through the city to transport the students....only women. In a few months a Sports City will be announced. These "city" projects are the hub to the King's develoment of the country. The first city to be built was completed several years ago called Al-Jubail. The program manager was Bechtel. And there are more cities in design.

Previous kings built airports. The current king is commited to roads and railroads and they are being built in record numbers of kilometers.

Here are some facts and elements you must consider about some of the newly announced Saudi projects [these are based upon my personal observations]:

1. Some projects are as much as 1,000 kilometers from the nearest supply point [of any kind of supply]

2. You will be working in blowing beach sand.

3. Heat to 130 degrees F.

4. 1,000 kilometer long logistic chain

5. A single two lane road

6. NO airport

7. Build your own man camp

8. Find workers from the region and supervisors to run them

9. Some used equipment, but mostly new

10.And much, much more. We can discuss when you call me.

What are contractors buying:

1. Fleets of on road dumpers

2. Fleets of ADT dumpers

3. Fleets of pull scrapers and tractors

4. Fleets of water wagons

5. Fleets of fuel tankers and lub trucks

6. Plus all support equipment to operate and maintain

And Stoddard Consulting can connect you with the top 10 Class A contractors in Saudi Arabia.

Call me at 530.383.9079 or email me at stoddardconsult@yahoo.com

Why do I use Yahoo Email? I can access it anywhere I can connect to the web. Can't do that with others.

What's New

2010-10-25T07:45:00.000-07:00

Solar isn't new. It's been around for centuries. In fact, my grandfather created a solar hotwater heater from an old car windshield installed in the roof of his California home to focus the sun's rays on a coil of copper pipes wrapped in black tape. That invention provided extra hot water for my grandmother and their seven active children.

Last Wednesday the USTDA hosted a conference in San Francisco of renewable and clean energy governmental and private parties interested in participating in the development of new plants in Morroco, Egypt, and Lebanon.

Amazing working going forward on in these middle east countries where the hydrocarbon is in short supply. Imagine: 97% of Morroco's energy relies on imported hydrocarbons.

Both Morroco and Egypt have governmental agencies with land, permitting, garunteed feed, and rates based and paid in US cents per kilowatt hour.

American companies are not in the lead. The Germans, French, Spanish, and even Italiens are all active in the area, yet there is plenty of room for all.

Each of these countries has in excess of 230 days of sunshine, and millions of acres of desert just waiting for solar panels and wires to create clean energy and improve the lives of millions of people while providing power developers handsome rewards for their efforts.

Do you wish to participate?

Stoddard Consulting offers unusal expertise and levels of contacts in each of these three countries as well as the Kingdom of Saudi Arabia.

John Deere scrapers sitting idle

2010-02-26T10:37:00.000-08:00

Last week I visited a John Deere dealership and a construction equipment rental company. The Yuma dealership had 9 1810E scrapers sitting idle, the Yuma rental company had 4 1810E scrapers sitting idle. The Cat dealer had aboiut 10 acres of idle equipment sitting in their yard in Phoenix. 13 scrapers sitting idle in the middle of construction season tells the real story behind Obama's stimulus program.

Europe is dead

2010-02-26T10:29:00.000-08:00

European construction activity is as cold as the weather. No money=no projects. Major project to build new airport in Spain near Valencia was cancelled a year ago, and there is no hope of reviving it. Companies such as Caterpillar, Bell Equipment, K-Tec Earthmovers have scaled back their plans for business development.

Czech Republic, Slovakia, Hungary are stuck in neutral.

European Bank for Reconstruction and Development is going slow on everything, just like your local banker.

Manufactures are being forced to consider extended terms, rental, export development financing in order to obtain orders.

Outlook is grim, and that is being positive.

Big Projects in Saudi Arabia

2010-02-26T10:27:00.000-08:00

American construction equipment market is stuck in neutral untill real projects start up again. Meantime working is going strong in Saudi Arabia. Dubai is slow but Abu Dhabi is strong. Nothing happening in Yemen...no money.

Saudis are building roads and railroads. Strong infrastrure growth.

Heading there on Sunday for two weeks.

Companies! Command employees R & I

2009-04-13T04:06:00.000-07:00

What is R& I?

R&I is a favorite catch phrase invented by the Business Guru Dr. Steven Covey. It stands for "resourcefulness and initiative." He commands his staff to focus on their R&I when the situation begins to unravel, or when a problem appears larger than life.

What is FUD?

One of my favorite acronyms for business leaders who are floundering is: FUD. It stands for "fear, uncertainty, and doubt." FUD immobilizes leaders. How can it be diagnosed? If a leader calls for a "prevent defense" it is a sure sign, in the best case,the leader is trying to buy time while a strategy is being devised. In the worst case, the leader is in a panic, trying to prevent chaos while wringing the hands.

It really is ugly out there

2009-04-09T22:12:00.000-07:00

Being in the international area provides one with additional perspective on the current economic crunch. Major construction equipment producers have seen increases in inventory, reduced cash positions, lower orders.

This situation will last at least untill the Fall of 09.

Why?

All these "shovel-ready projects" , many of which must be rebid, are not so ready. Prior to the owner rebidding the project, many of the owners will redesign and re-spec the project. Old bids will be invalid. New bidders will need to be found in many cases. That process will take 6-9 months depending on the project.

And if they projects are ready then to start in the Fall of 09, then the Fall rains and snows will begin to slow up projects beginning in the north and northeast.

Not until Spring of 2010 could we see a response to the stimulus.

So what are the targets of construction equipment makers? The Middle East; China; and Indonesia.

What products will succeed? Not small rental items. Large equipment which are very efficient will be in strong demand. Large equipment with technological innovations will lead out.

The lesson? Go big or go home.

2009-02-11T22:44:00.000-08:00

Dream Big

Dream big; plan in detail.

Why?

Because it seems anything of consequence takes twice as long to accomplish, costs twice as much as originally thought, and delivers half the effect sought.

So dream big if only to ensure something of the dream is realized.

Cheers!

Eric

Helping Elephants Dance Part 2

2009-01-01T02:28:00.000-08:00

Helping large organizations advance change requires a clear process strategy. In Part 1 I discussed the importance of understanding expectations for the change outcome.

One must realize expectations come in two forms: explicit and hidden. At the beginning of the change process many expectations are trumpeted loudly and broadly up and down the cubicle filled office spaces.

Trumpeted expectations must be taken into account. In some cases they must be edited to become: time oriented, desireable, and achieveable.

Equally important are the deeply held yet unmentioned expections of key players. If they aren't mentioned must they be taken into account? Yes, because these unmentioned expectations can prove to be the undoing by key players of any organization change project. Two examples:

1. Carl was a construction manager overseeing from Houston a major Bechtel/Proctor and Gamble project in Canada. Earl the Bechtel site manager reported directly to Carl, received his performance appraisal and bonus recommendation from Carl. During initial discussions of expectations I found time to discuss with Carl his expectations for the project and uncovered a gem: he expected this project, in order to be a success, to lead to additional work. At first this seemed reasonable. Upon further discussion with the project team this expectation held by Carl had to be rejected. He so agreed. Rejection was necessary because the team could not do anything about future Bechtel business opportunities.

Only expectations which are under the control of the team can be allowed to be recognized. Unearthing unreasonable expectations held by important senior players is critical to success.

2. Phillip was the vice president from Proctor and Gamble for the same project as in #1 above. During the change project phase were expectations were being uncovered he dropped a technical bombshell: he wanted no cracks in the concrete slab floor. His reason was to maintain a clean manufacturing environment. This expectation had never before been disclosed. Had it been so the engineering spec for the concrete would have been written differently. Since he was a major player in calling the project a success his heretofore undisclosed expectation required rewriting the concrete spec; which was done.

In conclusion it is vital to have all expectations disclosed. Some can be accommodated, and some must be declared out of bounds and be so agreed by the holder of the expectation.

Come to think of it, this is also important in making a marriage work! Zounds!!!!

Part 3 to follow.

For more information contact the author directly at stoddardconsult@yahoo.com

Happy New Year!!!!

2008-12-09T09:45:00.000-08:00

The last two commandments

Commandment No 9: Organize not by personality but by function.

When business are first being established, personality rather than functionality is them demonstrated theme. People's preference and personality are selectors for positions rather than competence in a particular function. The influencers in this early stage of enterprise life are: relationship to the CEO; equity participation; lobbying pressure; pressure from key vendors, suppliers or even customers.

With time the CEO must endure the beginning postings with the realization that soon the competent employees will be identified through performance rather than by urgent request.

Employees seem to fall into three categories: finders, grinders, and minders. Finders will migrate to marketing and sales jobs. Grinders will migrate to operations jobs. Minders will migrate to accounting/finance/hr.

Of critical importance is never to allow each of the three groups to emphasize there contribution as being more important than the other two. All are needed in portions and required by the business plan. There is and will always be a natural tension between and among the groups. That tension is productive in that it provides the "checks and balances" needed to keep the organization focused on cash flow.

Commandment 10: Believe in Yourself

This is a call for personal courage in the face of disappointment, disaster, despair, and discontent. There will be countless reasons, many legitimate, for you to fail. Here are some old bromides which seem to refresh a CEO:

Your selfworth is never the same as your net worth.

"Never, never, never, never, never give up." Churchhill

What doesn't kill me makes me stronger.

"Never take counsel from your fears." Patton

If it was easy everyone would or could do it.

Second effort brings touchdowns.

The difference between success and failure is getting up one more time than you are knocked down.

"Don't lay there, wrestle!" My last wrestling coach. The sign writ large was displayed so that it could only be read if you were laying down and looking up at the ceiling. Very motivating.

Well those are the 10 Commandments of Business. To summarize:

1. Be customer oriented.

2. Know the life-time value of the customer.

3. Use direct response marketing.

4. Work on your business, not in your business.

5. Garuntee satisfaction.

6. Receive weekly profit and loss statements.

7. Perceived value establishes price.

8. Reward behavior you wish repeated.

9. Organize not by personality but by functionality.

10. Belive in yourself.

To discuss and get help call 530.383.9079 or email me at stoddardconsult@yahoo.com

2008-12-03T13:54:00.000-08:00

Commandment 7: Perceived Value Establishes Price
Wow!.... did I learn some lessons from engineers about this rule or commandment. First sub-rule is don't let engineers deal with price....it is way beyond them to comprehend anything but cost+10%.

This commandment requires outside-in thinking. Most engineers and operators think inside-out.
What? Listen close. Outside-in thinking requires us to observe and absorb what the market is telling us about our product, price, promotion, and place decisions. Listening requires humility...also known a "teachableness." Listen GM, Ford, and Chrysler....you are ARROGANT and not teachable....and so you are going to shake the money tree instead of giving us what we want.

A story to illustrate.
When ready to graduate from BYU, I had bought a new Mustang so needed to shed the old chrome and blue 1958 Oldsmobile with the flower decal and the aftermarket a/c unit. We had been driving it for 3 years; it had 200,000+ miles on it..but what a screaming engine!!!!

I listed it for $100. No calls, no buyers. Puzzled, I didn't know what to do. Since I couldn't lower the price, I raised it to $300 and felt guilty doing so. [Inside-out thinking was working overtime.] At the new price I received about a dozen calls, and one fellow actually came over to see the car. He asked for a test drive. We drove around the block. Half way home the engine stalled, the balking ignition switch failed in the middle of the intersection, and the radio quit.

I figured he would walk away. He did. But only after he gave me the cash and I gave him the pink slip.

I couldn't understand what happened.

Here is what happened: nobody wanted a $100 car...it offered no hope of salvation or operation. However, a $300 car offered hope. The customers view determind there was value at both the new price point and with the demonstrated performance.

Commandment 8: Reward behavior you want repeated
Logical enough. But seldom used.
If you want continued performance reward it. The reward must first be appealing to the person. How often the person rewarded comes next. Both are vital to insuring the behavior is repeated.

So there are three elements which require very close attention:
1. First, specify exactly what behavior you wish repeated. The more precisely one does this the more likely the reward system employed will work. Done sloppily the reward system won't work because the person whose behavior is being targeted won't get "it."

2. Second, establish a list or catalogue of rewards which are known or believed to be attractive to the person. Care must be taken to insure inside-out thinking does not rule the day.....outside-in thinking is critically important.

3. Third, determine either at what interval or what rate the reward will be given. Determine if the rate or interval will be either variable or fixed. This design element requires careful and systematic analysis before a final solution can be employed. Much trial and error is likely to be required. Even for the smartest of you.

Finally, start rewarding the behavior you want repeated. Actually it can be done simply and quickly but it does require premeditation...aka...thought.

Call me for further discussion. 530.383.9079 or email me at stoddardconsult@yahoo.com
Note: I am not the author of all these ideas. We all stand on the shoulders of those who came before us and who ride along with us. To them I give great credit for lessons learned.

2008-12-01T11:27:00.001-08:00

Ok, so on with the rest of the 10 Commandments of Business.

Commandment # 4: Work on your business not in your business.

Great, so what does that mean?

It means putting down the hammer, or the computer, or stop driving the truck or airplane and work on where your business is going to go. Doing the work can be hired out. Deciding what work to do can only be done by the owner or the CEO.

This doesn't mean one does it in a vacum, one uses the best brains available.

Too many CPA firms flounder because the owner is busy with the eye shades on from December to April, takes a rest after the 15th, and then starts the cycle again. But he never gets new clients because he is too busy doing the work!

So take time to work on your business, not just in your business

Commandment #5 Guarantee Satisfaction

Sounds simple or hard depending on your business. There are all kinds of ways to approach this without fear of going broke or being sued. What matters is if you have a service or a product.

Services

If you offer services, the way to offer the guarantee is to repeat the labor for free or a reduced fee to resolve the problem.

Products

With products you can offer performance guarantees which reflect parts and labor for a specified period of time for their replacement.

Key point: If you aren't willing to stand behind your product or service then your customer will hestitate and begin to look for new options.

Commandment # 6: Review your profit/loss statement weekly

With the advent of computer aided accounting systems the ability to develop a cogent dashboard with practical metrics has never been easier. One just must know what the cash flow is.

The CEO of Terex www.terex.com , Mr. Ron DeFao, told me this about profits, margins, and cash flow:

"Profits for the investors, margins for the ego, and cash flow for the CEO." We were talking at the enormous construction equipment show, Intermat a few years ago. An interesting perspective from a CEO who specializes in taking failing family construction equipment businesses, buys them up, paints the products white, and starts marketing them again. When Ron comes calling, your family business should pay attention. I know of one 90+ year old construction equipment manufacturere who arrogantly showed him the door. Their plant burned down, and they are still milling around trying to figure out what to do two years later.

Review the company p&l statement at least weekly and take appropriate action.

Check back for the next three commandments. They are comming soon!

How to Make A Big Change Happen: aka Making Elephants Dance

2008-10-20T16:41:00.000-07:00

Part 1 Realizing Just What You Are In For
[This is going to take a few installments.]

Making elephants dance is no trick for amateurs. Neither is making a major organization change such as introducing SAP or any other "big thing."

So how does it happen without running off the talent, tanking the company, or giving the competition the break they were looking for?

Does one just bear down harder?
Make threats?
Promises bonuses if everyone will just wait and see if this bird will fly?
Make more threats?

Or trust in that tried and failed strategy called: "Hopium".

A big change or project is [really is] a big deal.

Most M&As fail: more than 60%. Bean counter's dreams of that bottom right cell on the spread sheet never quite come to fruition. The investment bankers who sold M&A have long ago ridden into the sunset in their new hot cars. You are left with what's left. Grief, pain, and yet-to-be-realized expectations.

And that last word, expectations, is where we are going to start.

Yep, after the "vision" has been surveyed and savored, after the dreams of "hopium" have swirled away, what we have left are expectations.

There are two kinds of expectations from two kinds of people with which one must contend.

First the expectations. There are those which have been spelled out in the agreements, contracts, press releases, technical specifications.....and those which have been omitted but continue to be held but which still will come into play when determining if the project and you were a success or.......or the reason you are now out of the loop and pursuing special projects, leaving to spend more time with your family, or just unavailable for comment. You thought you won, but somehow there was no ticker tape parade.

Next the people. There are those involved in the deal: the merger team; the action squad; the raiders; the project team; the red team, blah, blah, blah. All those people who are in the know, hope they are in the know, want to be in the know. And then.....and then there are people who are organizationally above you them and beside you them who form the contextual interface.

Ignore them and the change will fail.

But you ask, how can a project or big change be measured on anything but stated objectives, agreements, tech specs, ROI, measured progress, etc., etc., etc., etc. Silly rabbit!

Check the next post, Part 2, and I will start walking you through how to make a "big change" and use strategy and tactics which have worked and will work...and much better than furrowing one's brow, working longer hours, and searching for that elusive hit of "hopium."

Note: the actual field data used to generate these conclusions is based on the authors work as senior consultant with www.Bechtel.com, Proctor & Gamble www.PG.com, the Williams Companies www.Williams.com, www.ExxonMobile.com, the World Bank www.WorldBank.org, the United States Trade and Development Agency www.USTDA.gov, and Chief of Party at the United States Agency for International Development www.USAID.gov.

Note: If you would like a copy of the full article, please send me an email so requesting.

Commandment Three: Use Direct Response

2008-10-20T10:16:00.000-07:00

Commandment Three: Use Direct Response Advertising to Grow Your Business

[See special note at the end of this article.]

There are two kinds of response advertising according to M.J. Stoddard: direct and indirect.

What are they?

Indirect response advertising seeks as it's first priority to build awareness.

Direct response advertising seeks to gain a direct response from the customer to the business.

Let me explain as both are useful and employed around the world. Before I explain it is important to realize that product distribution channels availability helps determine whether direct or indirect advertising is used.

If every corner grocery store is able to carry your product then your object is to create an exhilarating awareness in your customer so they will feel compelled to run down to the store and buy your product. That is when indirect advertising works very well.

On the other hand, if you have 10 dealers in the US who sell your product but have little walk in traffic and rely on sales people to go out and get sales, then you would select direct response advertising to your customer to drive them into those 10 dealerships. The sales force will gather some of the customers but not nearly all that are available.

Also if you are introducing a new product, you will be seeking both customers and dealers. You have no choice but to advertise direct. Dealers will come after customers. Dealers tend to be skittish about new products. Dealers are not the first to work with a new product, the customer is.

In direct response marketing you want....a direct response from the customer. That means a phone call or a customer walking in your door or the dealers door. You want the customer to take the action you are requesting. You want much more than awareness. You want action.

After customers are established then willing dealers line up to cash-in on your efforts. That's good. When the product starts to fade [and EVERY product has a life span] then dealers are the first to dump your product even though some customers will remain. That's bad, but that's life. Study product life cycle for more on this subject. [Companies are also subject the same life cycle especially when they are built around one product or service.]

Use AIDA!

In direct response subtly is fails. Your advertising will not likely win awards, but it should win customers and sales. Awards are won by ad agencies who do indirect response ads. When you develop your direct response program a failure to use AIDA guarantees a failed marketing program.

What is AIDA: Simple!

Attention: you must grab your customers attention

Inform: you must tell your customers exactly what this products or service will do for THEM!

Desire: you must generate a positive emotion in your customer while informing them about your product or service. It doesn't matter if you are selling nuclear reactors, steel, coal, or lipstick....no emotion or desire = no sale.

A: Ask for the sale and get the money. First three rules in business I learned in the Middle East are: 1. Get the Money, 2. Get the Money, and 3. Get the Money. To get the money you have to ask for the sale.

[My brother M.J. teaches fledgling opera singers in the US and Europe how to grow their wings and fly; he came up with this apropos acronym.]

Funny story about asking for the sale. I was ready to pop the matrimonial question to my wife and I said this: " I would sure like to marry you." She said nothing. And nothing. And after ten minutes still said nothing. Suddenly it occurred to me that I had NOT ASKED her to marry me. I quickly recovered and asked. Immediately she said yes. I asked what happened, she told me she wasn't sure if it was a proposal or just a general comment. Zounds what a fool I was.

Remember, always ask for the sale. You are NOT there to make observations or general comments about business.

Next, unless your are Coke or Ford, a direct response marketing and advertising better be the objective of your ads.

SPECIAL NOTE: If you would like the other 7 Commandments send me and email and I will send you the whole article.

Cheers!

Know the Life Time Value of Your Customer

2008-06-10T10:42:00.000-07:00

Commandment #2: Know the Life Time Value of Your Customer

We know the customer is the most important element of a business. The most expensive act any business can take is to lose a customer. That cost is stunning when considering the LVC.

So here is why losing a customer is so expensive: The Life Time Value of a Customer [LVC]

How do you calculate this? Simple. LVC = The sum total of money a customer will spend with you. Example: Suppose you owned a clothing shop with a demographic of young women between the ages of 18-24. Now suppose the average customer spend each month was $200.

Over six years that customer will be about $14,400.00 with you!

Armed with that knowledge the following comes into sharp relief:

1. Customer service: poor customer service drives away customers. If, after six months of spending at your shop the customer is outraged and decides never to come back, you just lost $13,200 in revenue. A very expensive mistake.

2. When customers walk they talk. When customers like a product or a store they talk about it. When they don't like a product or store, they are likely to slam your product or store at a rate of about 6x. That means you are continuing to lose business. More of those $14,400 nuggets that fail to even show up.

3. Strategy in focus. Plenty of strategy consultants talk about qualitative research, but few if any talk about LVC. Knowing LVC will refocus, refine, and realign your strategic objectives.

4. Cost per sale. With a clear knowledge of LVC you will be able more accurately determine what your annual ad buy should be. In addition, you will have an absolute standard against which to measure your cost per lead and ad cost per sale.

The Brits skidaddled and a million+died

2008-05-05T10:26:00.000-07:00

Before I go to another post regarding business I return to Iraq.

What happened when Ghandi forced Churchill to succumb to the hurry-up wishes of the Indians and the British population?

More than 1,000,000 died in the ensuing bloodbath. Muslim hacked Hindus and Sikhs. Hindus sacked, burned, pillaged, and bombed the Muslims.

And thus Pakistan was born.

Ghandi didn't care if more than a million people had to take a bullet to make India independent. The man of nonviolence received his wish.

Today sectarian violence still is a fact of life. Rickety trains burst into fire and passengers die in a fiery rail-bourn inferno.

Why are we in Iraq and Afghanistan?

The real reason?

Well there is only one reason and it has several locations: Auschwitz, Dachau, and more.

It is just not in our guts to let people go unwillingly into that dark night. True, we did nothing about the Ruwandan genocide and Darfur is proving extraordinarily difficult.

Check the next post for more Business Commandments.

What We Told The Soviets

2008-04-30T09:25:00.000-07:00

Before the wall came down, before Yeltsin was elected, and while Gorbechov was still in power, I was invited to visit Russia with my brother. We were there to give a series of seminars on the free market and to help the victims of the Chernobyl reactor disaster.

Passing through security in the Pan Am JFKTerminal, Dan Rather and CBS news declared Desert Storm had started. I gulped and boarded the flight to Moscow...Heart of the Evil Empire.

For the next 6 weeks Mark and I barnstormed the USSR giving thousands of Soviets the essential message of free market capitalism. It was Mark's gig but we worked like a couple of tag-team wrestlers.

We spoke to audiences of 500-1,500. Most were educators or engineers. None were in business. Business was illegal and anti-social...they called it "speculating". "Speculators" were considered something less than bottom-feeding sucker fish. My how times have changed.

To be concise and clear we presented to them The Ten Commandments of Business.

But instead of the traditional Soviet approach of sitting behind a desk on stage and ominously reading the lecture into the microphone to the hundreds assembled who were all taking copious notes in their bound diaries, we disposed notes, of coat and tie, and microphone. We walked the stage, both peppering the audience with our questions, and fielding their questions. Interacting with an audience was unheard of. We did it. They loved it. Nobody left before the day was done.

Time has now past those heady days into memories and journals.

But the Ten Commandments of Business still apply. Strange that even US business leaders frequently and perilously neglect them.

So in the next few posts I'll reiterate them one-by-one.

Commandment Number One:The most important element of a business is the Customer.

No customer=no business. "Dot-com"-ers and their professors forgot about that. Zambians trying to sell cooper also forget it. Bechtel engineers find it hard to believe...or to stomach.

Example: I spent 10 years at Bechtel in management and organization development beginning in the construction department of the Refinery and Chemical division. Proctor and Gamble[P&G] had been a prime client but we had no projects in more than 4 years despite having done excellent work in the past and despite P&G continuing to build but using other firms.

We were now proposing on building new project to build a plant in Canada. But we were nervous about winning the job because of some "undefined unhappiness" on the part of P&G. I sought to understand why. The last job had been completed on-time and within budget: a clear victory for both Bechtel and P&G. Why then no follow on work. I dug deeper. Speaking to P&G I learned that they had developed a hatred for the Bechtel Site Manager and decided that he was a permanent but unspoken impediment. We removed the impediment and won more P&G awards.

We had been victorious on the project but alienated the client. We had no customer and we won no more work until we solved the customer problem.

The most important element of a business is the customer; ignore it at your peril. Just like K-Mart is doing.

Next posting will discuss:

1. The Biggest Mistake businesses make and

2. The Most Expensive event in a companies history.

Dreams,Ghosts, Opera, Iraq, and Panama!!

2008-04-25T10:32:00.000-07:00

Somebody said young men have dreams and old men see ghosts.That is the state of the political race today. Obama has ambition laced dreams and McCain sees the ghosts of McNamara, Rumsfeld and his fallen, flaming nomex suited comrades in Vietnam's rice patties. And Hillary neither dreams nor worries about ghosts; she is pure ambition and guile. A true Lady McBeth...beware to any Banquo! Is a America ready for a woman president? Was England ready for a woman? No doubt, when she turned out to be Lady Margaret Thatcher. I know Margaret, Hillary, and you are NO Margaret! [Apologies to Sen Lloyd Bentsen]

Don't fix the mortgage crisis. They tried that in Africa a decade ago. The result: no mortgages available. You want a house... save up and buy it. No loans. Want to build an apartment complex? Build the first few floors, leave the verticle beams exposed on the top floor with rebar exposed....when you have enough cash build a few more floors. Makes for a strange view....all those verticle concrete pillars with rebar sprouting up like hairs in an old mans ear.

Opera is making a comeback. Hope so anyway. Have a daughter, Olivia, trying her hand at it. Tough to break in. Many auditions to get roles. But plenty of Baby Boomers are getting tired of 2.5 minute songs that are nothing but ear candy. We want something that is longer, has more texture and is more than even a two-dimensional HDTV can give. Nothing beats live music. Right Martina? Keep the pit full of musicians, no sound machines please! We don't want a karaoke version of "Tosca"!

I used to have a travel company doing river cruises in Russia. People loved them. Great two week adventure. Great art, music, visuals. Imagine hearing Tchaikovsky's Seasons as you glide on a smooth river surface through the early fall color changed aspen forests. Intoxicatingly peaceful. I was there last September and it was as beautiful as ever. I want to go again with friends that like great music, art, ballet, and going from Moscow to St.Petersburg. Let me know if you want the details.

How is Iraq? As my dipolmat son says: "Not as bad as CNN would tell you, but not as good as Fox would claim." Ummm......sounds like the truth. He's trudging away saving ag in Afghanistan. Been getting a lot of ink lately. I guess the heavies trust him to stay on message.

The Panama Canal Authority is enlarging the Pacific side of the canal. The world's richest man, Carlos Slim, has a company that won the bid. Heard the Bechtel didn't have the executive leadership to handle it. Dirt moving contract has been reported as $3.5 to 5.5 Billion. Lots of dirt and rock. They are using Terex shovels and Cat 777 ATD to haul it away.