Business Bell Curve – (Part 2)
I am, by nature, observant and this has been very useful for me, in my work. For this article, I am taking into consideration a number of businesses that have come to my attention in recent years. They are not or have not sought my professional assistance, although I have occasionally given some free advice that pride has prevented the receiver from making good use of it.
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Two young women opened a coffee shop in West London about three years ago. They wanted to offer traditional Italian (Sicilian) food; in their opinion they were to provide regional food of good quality and at reasonable prices. When I met them I expressed my concerns but with the lightness of their youth they thought they knew best (as the majority of business traders often does). Nine months ago they closed down. They failed to recognise what their customers wanted and they failed to implement business strategies for the local marketplace.
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This brings to mind a coffee trader from Italy that I have recently met at an exhibition in Excel. “My coffee is the best” – she kept saying to me and, despite having asked her several times “sell it to me” – her reply remained the same “it is the best… the mountains, the water, the altitude etc.”
Please remember – “People don’t buy products; they buy solutions to a problem”.
Even if the coffee was picked by vestal virgins or “passed” by the civet cat from Indonesia (and sold at $100 per ‘shot’) – “the best” is very much a subjective perception. Something is perceived as special only if the person has the specific concept in their own perpetual experiences [experiences have to be a certain way in order to justify beliefs – (psychology, Davidson,1986; McDowell,1994)]
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Selling a swimming costume to a woman size 8 and to one size 18 will need a completely different approach. Sales-personnel, of all trades, seem to forget that all individuals are one or more of: Visual, Auditory, Kinaesthetic and Auditory Digital – or if you prefer – everything we do inside our mind and body can be described in terms of things we: See, Hear, Feel, Smell and Taste. These are simple and proven facts.
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The following eleven points represent very much the psychological trait of most ‘customers’ – read them all, carefully:
- People are naturally suspicious
- People look for value.
- People like to see it, hear it, touch it, taste it, or smell it before they buy it.
- People are egocentric.
- People justify decisions with facts.
- People think in terms of people.
- People love to buy.
- People make decisions emotionally.
- People are always looking for something.
- People buy “direct” because of convenience and exclusivity.
- Most people follow the crowd.
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There is a very busy bakery in West London that has been selling the same “ghastly” products for many years. The locals seem to love this bakery and there are always long queues at lunch time and on Saturdays too. When I asked some of the locals why they liked it so much their replies were: “it is local/convenient”, “it has been there for many years”, “I have been going there since I was a kid”, “it is cheap” and so on. Here, concept 11 applies and the “Herd Mentality” too (Sigmund Freud, Wilfred Trotter) > people simply love conformity. Apart from a few saying “it is cheap & cheerful” – the quality aspect didn’t cross the mind of many. There are always a few exceptions to the rule – the point is – do not imitate “lucky strategies”, they often don’t work!
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A few days ago I was talking to a manager in a central London wine and cocktail bar. The Italian man had only been in the UK for a few months but he knew exactly what to propose to his British clientele. When I asked him “how many other wine/cocktail bars have you visited in London?” he replied: “none”. His business assumptions were made on the basis of his experience, outside the UK, without taking into consideration the local customs and culture; needless to say that the place was almost empty.
“You don’t need to reinvent the wheel; don’t ignore the most logical solutions”.
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A family opened a restaurant/coffee shop just over a year ago. They are already struggling. They have done a lot of ground work and marketing prior to opening their business. They looked at the local competition, they went to the other side of London to pick up some ideas and really considered the whole marketing idea of their new venture, really carefully. However they have made and are making mistakes based on wrong assumptions. They are too emotionally involved in their business to see clearly. They haven’t considered any of the 11 points above and, to-date, they still have not identified the kind of clientele that they want to attract. They are too much of a restaurant/coffee shop hybrid to be able to attract the fine dining crowd they would now like to attract while, at the same time, are fearful to make the changes needed in case they will stop attracting the casual coffee shop customers they currently have. We often start with an idea based on a business plan or based on a personal dream. If we want to be successful we also need to implement changes.
This motto is one of my favourites: “When you’re up to your neck in alligators, it’s easy to forget that the initial objective was to drain the swamp”.
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Many companies selling good watches, for example, are yet to realize that their products belong mainly to the fashion industry. Similarly to the coffee company above, some companies might have designed really good watches and also at very competitive prices but cannot sell them because they have failed to create a market. [You might wish to read – There is almost no difference between a watch that costs £300 and another that costs £7,000].
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Ealing has many pizza restaurants, including some of the best in London. Some of the not so good cater for the “Herd Mentality” (those that go for the ‘brand name’). Generally speaking, these restaurants are all very busy, the good, the best and the not so good. Business idea!? Open a new pizza place – mainly take away. Why not, it is a good idea, as all pizza places are very busy in the area. What can go wrong? This business owner has done completely the opposite to the owners of the family restaurant described above. He has done no marketing and also has no idea about local competition. Result!? He wanted to sell a product that was more expensive than all the other pizza places and with low quality ingredients too. He closed down within a few months.
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I have had a curious discussion with a potential client recently. He is in finance (Forex) and he would like to attract more customers.
The financial rewards that come from being successful in business are of course important to many entrepreneurs, and are key factors in motivating them to work hard, being their own bosses and take tremendous risks.
This Forex guy, in 22+ years of trading, has not been able to focus on where he or his business is actually going. An intriguing statement by him was “I don’t want to make a lot of money, otherwise I have to pay taxes and other expenses and register the business.” At the moment he is making around £19’000 per annum. Potentially, the sky is his limit, but he could, most probably and based on his business plan, easily turn around £1 million per annum. Taking away, as he says, all headaches and costs, he should still put in his pocket around £400’000 per annum. I am still waiting for his response as he is worried about headaches and costs (?). It takes all sorts!
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If a popular “cake” is made by a few bakeries and it retails from £1.10 to £1.50 maximum, what makes a business owner think that he can sell it for £1.90? His cakes are not selling, unfortunately for him. A good way to capture clients would be to offer them a free coffee. There is logic and profit in what I am suggesting.
Similar to the vast majority of businesses, the selling price for this cake comes, mainly, from the Business Plan. The Marketing “mix” / 4Ps, is taken as a fixed formula (product, price, place, and promotion). For example 1) Premium Pricing – The price is set high to indicate that the product is “exclusive”; 2) Psychological Pricing – The seller here will consider the psychology of price and the positioning of price within the market place.
The mix is very important as many shops set their prices too often, too high.
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Above are just a few example of why most businesses are not successful and this is the cause of the fast changes in the scenario of our high streets. We know that over 70% of businesses fail within five years (50% within the first 2 years). The other 30% can see long term success but it is not easy to stay on top of the crest – “The Bell Curve”.
Many struggle to get to the top of the Bell Curve but those that do get to the top – should really stay there. It is not easy to get to the top or, most importantly, to stay there.
Based on points 8, 9 and 10 above, customers are also keen to be part of any new successful business for a lot of different reasons. However, the roots of the business are important – what made us shop or become a customer of a certain place/business? Price, service, atmosphere, quality, choice and so on come to mind. If success brings your business to the top of the Bell Curve – congratulations. However, can you stay at the top and offer those likeable experiences that made you famous in the first place? Remember what made you become good and allowed you to reach the top.
Being at the top could also mean that you have set good standards. The problem now is that not only you must keep the same high standards (which are already the best) but customers will now expect even more from you. Customers will now also inspect every aspect of your business/service/quality (because they are used to the best).
Anything which clients might perceive as been wrong will attract objections from them. So, if the business changes in any way – it becomes too busy, too crowded, cannot deliver on time or it is too noisy, for example, it will no longer be the original, favourite place.
While the business has reached the top, it is now creating annoyance within the “old and faithful” customers. Can the business really ignore them? It could ignore them, as being at the top means recognition and new customers coming all the time. However new customers are not faithful – they are simply “using” the business for their needs and advantage until it suits them. In the long term, it could be months or a few years, by following this “new customers” path the business might fail due to “general indifference”. The customers attracted by the fame will have turned their attention elsewhere; to the new kid in the block.
Those businesses that have reached the top of the Bell Curve must check their accounts very carefully – their sales, every month. If at the top of the Bell Curve they reached, for example, £10k sales per week – are they now still able to average £40k+ per month? If the answer is no – don’t blame anybody else, don’t find excuses, your business is on… the down “curve”.
This brings to my mind a client of mine I assisted many years ago, near Piccadilly. His large shop was selling only chocolates and was taking about £110 per day. I sent him on holiday. Within three weeks, after I made several changes, the takings increased to £800 per day. It was so for the next four weeks until he came back and took “control” of the new business. Four weeks later, when I paid him a visit, his sales had dropped to £250 per day. He told me: “You don’t understand, there is a recession, people don’t have money to spend in my shop”! Pride took over good business sense and he closed down a year later.
When we think that we are failing, is it worth considering spending a lot of money to enhance the business? No, it is not. The answer and solution come from observing and listening to customers’ needs and objections – remembering that most of the objections are actually silent. Customers will simply not come back as often as they used to or, even, will not come back at all anymore, but they are not telling you why.
If it wasn’t so dramatic one could say that Gordon Ramsey’s episode on ‘Amy’s baking company’ was actually funny. In spite of Gordon Ramsey’s good marketing advice ‘Amy’s baking company’ have closed down. The owner’s pride was too strong. It is one of the most watched videos on YouTube and a classic example of what a business owner should not do.
Most business owners should really focus on their skills and let others (Ramsey, Polizzi or marketeer like myself) target on useful solutions.
As I am on the subject of skills, I would also like to add a comment to business investors. Of course you have put your money into the business but, very often, you do not have the skills to run it, just like a bank manager would not be able to – please give time to the business and to those in the know-how to succeed.
In a fiercely competitive world, the survivors and winners are those that recognize their special strengths and adapt. But, equally, also acknowledge the importance of partnership and alliance to their success, aware that one alone cannot expect to have the expertise and resources to solve every problem, grasp every opportunity, and meet every challenge. © Copyright – A.B.M. Procaccini
Article by A.B.M. Procaccini – Coach & NLP Practitioner
