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Profitless to compete with Amazon?

Speculation about how Amazon will change Whole Foods is running rampant. I click on news stories only to find that experts are being quoted who have absolutely no real information about what Amazon plans to do. Why would Amazon tip their hand at this point anyway??

One thing is clear. The grocery business will be restructured. At least Krogers' CEO expects it will

Vox: The real reason Amazon buying Whole Foods terrifies the competition, 2017-Jun-20 by Matthew Yglesias

Competing with Amazon is terrifying for any incumbent business because the company’s executive team operates on a radical model whereby the company’s overall net income is nearly zero quarter after quarter.

That is by design, not because they can’t come up with any ways to make money. On the contrary, to the best of anyone’s knowledge many of Amazon’s specific lines of business — including, notably, Amazon Web Services — are perfectly profitable. But while Apple, Google, Microsoft, and Facebook hire lawyers and accountants to amass vast stockpiles of cash legally held in overseas tax haven subsidiaries, Amazon simply chooses to barely accumulate any cash at all.

That’s an enormous problem for every grocery chain in America, which already operate on razor-thin margins. Nobody thinks Amazon bought Whole Foods in order to siphon off Whole Foods’ operating profits in order to subsidize something else. A Whole Foods under Amazon’s stewardship will almost certainly accept lower profit margins than it does as an independent chain — and that spells trouble for everyone else in the grocery business. 

... 

Of course the nightmare scenario for the supermarket industry is that acquiring Whole Foods does allow Amazon to fundamentally crack the grocery home-delivery game in a way that leads Kroger to go the way of Borders.

But the reason the takeover is such a disaster for the industry is that the financial implications are bleak even if Amazon doesn’t succeed in bringing incredible game-changing innovation to the sector. Introducing a player into the market that doesn’t care about profit margins is going to be devastating to competitors who have to.

They won’t necessarily be put out of business, but they will be forced to respond to lower prices and lower margins with lower prices and lower margins of their own — making the current round of dividend hikes extremely difficult to maintain. From the standpoint of an executive at a conventional business it must seem extraordinarily unfair. 

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Expect a random walk with your prospects

Customer journey mapping has helped companies improve their customers' experience, but we have to be smart about the fact that it's just a tool for planning and for empathizing with our customers. How customers actually decide and adopt our services is very unpredictable, and we should keep studying the real data all the time.

VentureBeat: The 'path' to purchase is really a random walk, 2017-Jun-11 by Jason Carmel

As an example, a study by the travel company Expedia found that people make, on average, 140 visits to various travel sites in the 45 days before making an actual booking. That’s just one channel (web). Imagine how many other influences, from social media to TV, to friends and family, also impact that one purchase decision. Even in the most poetic sense, that is no discrete “path.” Yet the entire ad industry develops campaign strategies, buys media, and tracks success based on this fiction. This weights channel preferences to those that benefit from last click attribution, which subsequently weights budgets to those media as well.

It might finally be time to throw away the “path” metaphor altogether. This is by no means the first call or attempt to do that – we have seen purchase “stages,” “loops,” “funnels,” and “sine curves,” all striving, with varying degrees of success, to put a more nuanced framework of order around the chaos that is purchase decision making. But it is precisely in that adherence to “order” where most of these frameworks break down. Most of our decision making, some experts put it as high as 95 percent, happens at a subconscious level, influenced by dozens of known and unknown variables far beyond the marketer’s control. Forcing that messiness into an order is folly. It’s time we embrace randomness...

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Using micro-goals to stay on track toward our goals: the big picture is our enemy.

"Chunking," or breaking down a project into micro-goals, has long been recognized in productivity coaching. However, it's also extremely important in motivating co-workers. We tend to spend too much time on the vision and not enough time kicking around little ideas to move the project down the road. Recognizing the success of every micro-goal is vital. I love Scordo's quote... 

The big picture is actually your enemy.

Scordo.com: How To Achieve Goals: Micro-Goal It And Keep It Simple by Vincent Scordo

Now, I don’t have a window into Federer’s brain (only he knew what he was thinking on Sunday) but his keen ability to simply win the tennis match; namely, keep the ball between the lines until your opponent makes an error or misses a shot is a superb practical life skill.  Here are a few others that may help you achieve a few goals of your own (albeit maybe less impressive than 16 Grand Slam tennis championships):
1. Tune out unimportant variables.  When you want to achieve something specific it’s not good to act or think philosophically.  The big picture is actually your enemy.
2. Don’t change your style or approach if it works most of the time.  For example, if you’re a good saver and have had success with investing in low risk vehicles (like a traditional savings account, CD, bond, etc.) don’t begin buying large quantities of securities because the current trend is big returns on your money.  In the long run, you’ve probably picked an approach that has worked and switching tactics will not get you closer to a particular goal.
3. Surround yourself with people who think like you.
4. Avoid panic until the last possible moment.  Staying calm is a great life skill; in addition to preserving your blood pressure and heart the ability to maintain a calm mind helps you stay relaxed and avoid pressure and a muddled perspective (remember you want laser like clarity on your end goal).  Having said the above, I do advocate letting the steam escape at some point.
5. Prepare.  If you know how to do it and have proved to yourself that you can achieve a goal then doing it again is a matter of being well prepared.
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The Anti-Amazon: T.J. Maxx

A strong commitment to a clearly differentiated strategy is serving T.J. Maxx. One of the hardest things for a business to do is say, "no, that's not our customer," but they know what they're doing in ignoring e-commerce. 

Forbes: How Walgreens and T.J. Maxx Are Winning With Minimal Online Sales, 2017-May-25 by Barbara Thau

The retailer’s store vibe — disheveled racks, DMV-esque lighting, barebones customer service —belies the oft-cited “experiential” checklist of what a brick-and-mortar retailer is supposed to need today: mobile checkout options, sales associates with the chops of a personal shopper, and perks from cafes to cooking classes.

T.J. Maxx has none of that.

What they do deliver shoppers is the thrill of the hunt of designer duds for a song. It marks the work of a 1,000-person buying organization and global-sourcing gurus that collaborate with 18,000 vendors from more than 100 countries in a bid to fill its unglamorous stores with an ever-changing mix of fresh and surprising finds.

As a result, T.J. Maxx is “un-Amazonable,” Chen [Oliver Chen, retail analyst at Cowen & Co.] in another research note this month. That’s because “customers engage in an in-store treasure hunt, many brands have preferences not to be online, and average ticket and prices are sufficiently low relative to shipping costs of $5 or more.

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The very personal mass email

Heads up... I'm starting a quarterly update email. 

Most of you are too young to remember the Holiday Newsletter. Thousands of women (most with families) used to type them up every holiday season, have them copied (mimeographed or xeroxed), stuff and mail them to a dozen or a hundred people. Family news was the focus: who graduated, whose Little League team went to regionals, new hobbies, and the occasional divorce announcement. Once email newsletters became a thing, I had a friend who did an annual "what happened this last year" email that was wonderful to read. Then she found Facebook and now we get more frequent but less considered updates. I prefer the annual perspective... 

But annual seems to make things too important, so after reading the article excerpted below, I'm going to try the quarterly version. I will try to be entertaining. 

Fast Company: The Networking Secret That Only Requires Writing Four Emails A Year, 2017-Apr-30 by Jason Shen

For the past eight years, I’ve sent quarterly personal updates. Every January, April, July, and October, I send out an email to about 200 or so of my friends and colleagues. It’s a mix of what I’m doing at work; where my side projects have taken me; interesting books, movies, and articles I’ve enjoyed; and personal things like travel, events, deciding to move, feelings about an election, and sometimes even relationship or dating info.

Here’s the thing, though: These updates aren’t short. My last one came out to around 1,200 words, plus photos, videos, and links. It’s taken me a long time to find the right balance between thoughtfulness, familiarity, and polish when putting an update together...

 [He uses Mailchimp. I'll be using Vertical Response. Jason has lots of good tips...]

2. Decide how you’ll add people to your list. This means setting a few ground rules to make sure you’re only contacting people who you actually care about and are valuable to you. My rules are that they can’t be someone I just met last quarter, and they should be someone I’d like to be friends with forever, not just for “right now.” It can be a nice courtesy to give people a heads-up to new additions before the next update goes out.  ...

4. Don’t be shy about promoting something that’s important to you. If you’re on the hunt for a new job, or looking for tips for your trip to Peru, don’t be shy about asking for help, advice, ideas, or connections. This is your update, and the people reading it care about you and want to help you!

5. Be humble, personal, and presentable. I’ve found that it’s really important to keep it real when writing updates. No one likes a braggart (or a humblebragger), so lay off the overenthusiastic tone. Imagine you’re throwing a house party. The vibe should be personal, and it should feel personal, but that doesn’t mean you don’t pick up all the socks and underwear you had lying all over the floor beforehand.

6. When in doubt, just start a conversation. Don’t overthink it. Your first few updates might feel awkward, and that’s okay. It takes time to find your voice and tone. All you’re really doing is conversing with people you already know. Ben Bechar’s work modeling and quantifying networks suggests that developing more connections between people in your network strengthens the overall community.

So make introductions. Initiate discussions. Ask a question or bring up a topic, then start a smaller thread with the people to weigh in. As Becher explains, “the more you make yourself a bridge builder for others, the more they will value their relationship [with] you in return.” The more connected your readers are with each other, the more likely your update is talked about or brought up with someone who didn’t open it. You end up with more people keeping you top of mind for longer. “The stronger your community,” Becher adds, “the more you gain for the same amount of work.”  

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The real key to customer centricity: people taking care of people

When people inside a company are kind to each other, they will be kind to the customers. 

Harvard Business Review: Trust Your Employees, Not Your Rule Book, 2017-Apr-20 by Bill Taylor (new book, Simply Brilliant)

The entirety of the Nordstrom Employee Handbook fits on a single 5×8 card and involves exactly one rule. Here is Rule #1: “Use best judgment in all situations. There will be no additional rules.”

No wonder Nordstrom’s image and brand is built on heroic stories of above-and-beyond service and problem solving. Sometimes those stories even involve the airlines. In one case, an employee discovered that a customer had left her luggage (along with her flight itinerary) in the parking lot of a Nordstrom store in Connecticut. So he hopped in his car, drove her luggage to JFK, and reached her before the flight left. There’s no rule that can foresee that kind of problem or response!

Truth be told, life inside most giant organizations is much closer to the rules-obsessed culture of the big airline than the common-sense freedoms of a high-end retailer. Have you ever tried to explain your special family circumstances to a health insurance provider?

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Why the strategies of Google, USAA and Vanguard have been so effective

When we decide how we want to compete, we have to look at how we're going to fit into the market, both from our customers' point of view, as well as from our internal capabilities. 

Harvard Business Review: Strategic Choices Need to Be Made Simultaneously, Not Sequentially, 2017-Apr-3 by Roger L. Martin

The only productive, intelligent way to generate possibilities for strategy choice is to consider matched pairs of Where to Play and How to Win choices. Generate a variety of pairs and then ask about each:

  • Can it be linked to an inspiring, attractive Winning Aspiration?
  • Do we currently have, or can we reasonably build, the capabilities that would be necessary to win where we would play?
  • Can we create the Management Systems that would need to be in place to support the building and maintenance of the necessary capabilities?

Those "Where to Play" and "How to Win" possibilities for which these questions can plausibly be answered in the affirmative should be taken forward for more consideration and exploration. For the great success stories of our time, the tight match of Where to Play and How to Win is immediately obvious.

  • USAA sells insurance only to military personnel, veterans, and their families — and tailors its offerings brilliantly and tightly to the needs of those in that sphere, so much so that its customer satisfaction scores are off the charts.
  • Vanguard sells index mutual funds/ETFs to customers who don’t believe that active management is helpful to the performance of their investments. With that tight Where to Play, it can win by working to achieve the lowest cost position in the business.
  • Google wins by organizing the world’s information, but to do that it has to play across the broadest swath of search.

It doesn’t matter whether the strategic question is to aim broadly or narrowly, or to pursue low costs or differentiation. What does matter is that the answers are a perfectly matched pair.

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