I am organizing a conference on Additive Manufacturing at the Innovation Campus of UOW in April.
It should be a really good event, so if you have an interest in the next generation of manufacturing technologies, I urge you to check out the web site and to register.
Here is a video that describes the event.
I am in Geelong today. I had to give a brief talk at a breakfast forum of scientists and business people yesterday morning which was a follow on from a previous event in Melbourne. It was hosted by Deakin University and
built on feedback from the last business forum breakfast event that the Centre of Excellence for Electromaterials Science held late last year.
The reason that it was successful was that unlike most meetings of this kind presented by scientists, instead of the scientists presenting their stump speeches about the work that they were doing and the big vision stuff – which came later in the day in a formal conference/seminar setting – business people were invited to get up in front of the gathered group comprising of some of the leading researchers in the field of energy conservation and talk about what they needed.
It was therefore an opportunity for the scientists to hear what was important and immediate. There were some really interesting problems posed – one of them being about how to inexpensively store the power generated by renewable energy sources until it is needed. Clearly one of the big problems associated with power generation via solar, wind, tidal, resources is that the generation event is not in sync with the need. So you have to find somewhere in the grid to store the energy until the demand is there. This has to be economical.
The outcome from this event was that I was able to get a commitment from several of the industrial representatives present to sit down at a near future time and start to drill down into the problems and create the beginnings of a specifications document. After all its good to share the information, but the key to success is to start working through the execution requirements. Armed with this kind of knowledge and insight one can start to understand the scope of resources that are going to be necessary and equally importantly how to structure the undertaking so as to meet the state and federal goals for providing funding.
All the great ideas ultimately get down to one key thing: Who is going to pay. The answer to that, of course, is the public. The public pays either through the continuing funding of research that those who understand how to write grant applications effectively are able to secure. Or the public pays because industry and research get together and develop solutions that are able to secure funding through the schemes that government provides via industry. Or the public pays because the solutions are not invested in and therefore energy costs too much in the first place.
One of the greatest problems for modern society is how to actually create benefit for the public from the money invested into academic research. Meetings of the kind that was help yesterday in Geelong are the first step toward building a very real process of making economic sense of research by giving its use immediacy and relevance.
In 2005 I bought a Prius. Its been a tremendous car. Fuel efficient, quiet, inexpensive to run. In fact it was so good I decided that when it hit 100,000 k’s instead of trading it I would keep driving it. At 140,000 k’s I thought I would find out how much it would be worth as a trade in on a new Prius. I was offered $10,000 and thought, “Why bother when it is cheap to service, cheap to run and is paid for. Might as well keep driving it”.
Just before it hit 200,000k’s a warning light started coming up on the dashboard. It was due for a service, so I took it in to the dealer who serviced it and asked them to check what the problem was. They serviced the car but said that there was no record of any problem recorded in the memory of the car’s on-board computer and that therefore it could not be a problem that required any service response. It was general warning light.
After the service the light didn’t come on again until just before the next scheduled service at 210,000 k’s. I took it in for its service. Asked again for the dealership to look into it. Same response: “There can’t be a problem because, (a) we can’t replicate it (I had given the dealership very specific instructions as to how to get the light to turn on – and I am convinced that they just ignored this), and (b) if it doesn’t show up on the car’s onboard computer we have no way of responding to it.
Once again after the service the light went off. Just before 220,000k’s surprise, surprise – the light came on again. This time I called Toyota’s Customer Care line to tell them that I was very concerned that I had a warning light coming on regularly and that the local dealer didn’t seem to be able to identify it.
By this time I had concluded that the real reason that the dealership couldn’t fix the problem is very simple: Their mechanics are trained to put the car onto the diagnostic equipment, which downloads all the internal system data from the car and then instructs the technician as to what to do. Its designed, I believe, to ensure the maximum efficiency and to reduce the level of human error on machines that have a fairly narrow set of operating specifications – unlike the cars of Henry Ford’s day. As a result, anything that the end-user reports on to the service manager is lost when communicating with the technician. This is important.
During the morning of the service I received a call from the service manager at Toyota in Nowra, Dave, who had very kindly picked up the car from my house that morning. He called to tell me that he had seen the warning light coming on during the time that he had driven the car, and consequently had stood by the mechanic at the time that the oil change was taking place. Apparently there wasn’t much oil in the crank case according to Dave. The verdict was that the engine was burning oil.
Now this is not really surprising in a car that has done 220,000 k’s with normal wear and tear. But what was really unsatisfactory from my point of view was that it took the dealer three services to actually pay attention to what I was saying, and it still wouldn’t have been diagnosed unless Dave had stood and watched as the mechanic worked on the car. My take on things was this: If there is a problem I want it fixed before it gets worse. If the “experts” don’t actually respond to me as the user of the car when I say there is a problem and the vehicle gets worse as a result, of if there was an accident as a result, then who is at fault?
I thought I would take it up with Toyota’s customer care people. I called them a number of times during this period and reported on the whole experience. I told them that I was rather unhappy and that I felt that there was an internal management system failure that needed to be addresses, and that I thought that Toyota should contribute to helping fix the problem – by helping contribute financially to identifying and fixing whatever mechanical problem was now present.
The phone staff at Toyota were quite terse. Not rude, and not at all disrespectful, but definitely put out that they had a customer on the phone who actually wanted them to do something.
In the meantime I had decided that I had several options available to me:
I started looking at my options for a replacement vehicle, and last Friday came very close to buying a Rav4. However, on my way to the dealership in Sutherland where the target vehicle was located, I decided to call Toyota one more time to find out whether they were going to come to the party. The customer care person I spoke to was so useless and stroppy that I got off the phone resolving that if Toyota didn’t change its tune I would totally disengage from the brand. So I sent a text message to the dealer saying the deal was off and turned the car around and headed home.
On my way back I got a call from the Toyota customer care manger, Dennis Smith. He was pleasant but was clearly not going to bend on anything. I explained to him that unless Toyota was prepared to acknowledge that there may be either a computer system problem or a management system problem they would lose me as a long term customer after a total of 8, count ‘em, vehicles (1 new Prius, 1 new Echo, 1 new Corolla, 3 new Landcruisers, 1 new Landcruiser truck, 1 second hand Corolla). He offered me a $100 service voucher as a token of good will, with the rider that he hesitated to even offer it to me because he thought that I might be insulted by it.
I wasn’t insulted by the offer, but it fell a long way short of what I would have expected at a time when I was seriously in the market to buy yet another new vehicle.
I told him that as a result of Toyota’s actions, or non-actions, they were about to shift a customer who had been a strong brand advocate for a long time into an extremely highly motivated brand critic.
I then went on line and did some really serious comparative research into price, performance, customer reviews etc for a number of AWD vehicles in the price range that I was looking at. That led to me going out and test driving 2 – the SsangYong Korando and the Kia Sportage (I had discounted the Hyundai ix35 from a drive because it is essentially the same vehicle as the Kia and the diesel engine for the Hyundai is build by Kia).
I ended up paying a little bit more that I had originally intended and purchased a Kia Sportage.
What is amazing about this story is that it just goes to show how a brand that can overtake the powerhouse global brands (in this case Ford and GM) based on a vastly superior manufacturing quality assurance model, can also fall foul of an inability to maintain an equivalent customer care model.
It almost seems like Toyota built up so much self-confidence as a brand that it couldn’t even consider its vehicles getting recalled. I think that they must still be in denial about the series of disastrous and very expensive recalls of the last couple of years. Its like the case of the banks in the US that didn’t factor into their risk modelling the possibility of real estate prices going down. When one hedge fund found this out they saw that there was a potential to take a bet against the house and win. Toyota is in the same spot.
When a company is prepared to sacrifice a long standing customer’s loyalty to a brand, and turn him (or her) against them for heaven knows what internal reason, you have to wonder why anyone should support that brand at all. They are no different to the giants that have been before them, who have failed: EMI Records who had the Beatles and the Beach Boys and who knows how many great acts, and failed. General Motors: (remember when they used to say in America, “What’s good for General Motors is good for the country”. GM had to be bailed out by the government. RCA who used to virtually own the whole ecosystem of transmitting and receiving equipment. Who hears of them now?
Companies reach a certain size and then feel that they don’t have to be in touch with their customers any more. When they do they fail. In Australia people who work for Toyota’s manufacturing operations wonder whether the federal government will keep writing checques so that they get to keep their jobs. That money comes from you and me as taxpayers. I don’t want to see anyone lose their jobs. But you can’t expect for companies that don’t understand that the corporate pyramid can only survive when it is upside down. At the top is the vast number of consumers who engage with the brand. At the bottom is management.
Toyota’s management and its policies are out of touch for it to remain in balance. Therefore it has only one way to go, to topple and fall.
You would think that it might be reasonable to assume that good companies aspire to provide great customer service, wouldn’t you. Some companies establish customer service as their primary goal.
The bigger the company, the more the focus on the customer, in my view. But how much do we, as customers, help them to achieve that goal?
All too often customers get on the phone to a company, already in bitching mode, and it goes down hill from there. When the service that you would have liked to have received doesn’t eventuate you start to magnify the problem in your own head and allow your anger to be taken out on the poor guy at the other end of the phone. If the operator happens to speak with a foreign accent and is at a call centre in India or the Philippines the problem can escalate further and faster.
It’s hard to imagine that things can improve when you start with this scenario.
The problem, that I believe happens all too often, is that the customer sets totally the wrong modality to get positive results. Problems with products or services are quite real, but may actually be a manifestation of a deep seated, poor or failed internal process within the supplier’s organization that is hidden from view to the management. And customer service normally doesn’t have sufficient clout to motivate that kind of organizational change except under extraordinary circumstances.
I have been reflecting on this because of a personal experience over the last four years that eight weeks ago I decided to stop being angry about and instead to fix. I decided that I had to use all the things that I know about companies and about people and teach to students get results. It was also an experiment since I had no idea whether the theory would work, and it needed for me to understand what was happening and adapt my strategy as new information became available and was processed.
One thing that I believe now is that any successful big brand has as a core philosophy a commitment to provide great customer service. Big companies with such a commitment spend a lot of money on training their staff and I find now that big company customer service employees are all tremendously polite, helpful and dedicated to delivering the optimum result for me as a customer. That is a great start and is the gateway to getting what you want.
Here is the strategy that I used and which you can too if you want to get results:
Log each call, for time, content and quality, just as they do. Keep notes. As a result, every time you speak to a new operator you can refer them back to a particular conversation and the date that you had it. If you want good customer service, there is a responsibility on the part of you as a customer to identify the processes that the company uses and then to mirror them as closely as possible. This is rule #1 of getting great customer service. Use their methodologies, because they work.
Rule #2 is as extension of this: Be as friendly as possible with the customer service representative, the operator, in fact every one that you deal with. It’s a kind of variation on Stockholm Syndrome. The quicker you can establish that you are in this together the more you will get empathy from the other party. In any case there is absolutely nothing to be gained and a lot to be lost from being uptight or rude, regardless of how you may feel. And remember, most of the people that deal with your customer service rep are going to have been rude and uptight. Give your customer service rep a good and memorable experience. They will work that much harder on your behalf. They may even drop a few interesting pieces of information about the company here and there that may be helpful in your quest.
Understand that the problems associated with technology – often the reason for the problem – are often as the result of complex management policies in entirely separate parts of an organization. Problems of this kind are difficult to fix and are going to become more and more familiar as technology intersects with business models and finance and businesses are not sufficiently adaptive for the speed of change.
The solution is all about establishing a common ground for solving the problem. That translates into getting both parties to understand that there is only one language that you will ultimately be able to use – economics.
Regardless of what the problem is, there is going to be a cost for the supplier. Obviously there is cost to the customer, you, in not having the problem fixed. When both parties start understanding that their common ground is economic you can get things done.
This will mean that you have to find a way to get moved up the customer service food chain to the point at which someone has authority. This will probably take time. It is not going to come from saying to someone, “I want to talk to someone more senior”. It comes from being super-nice to the person you deal with to the point that they really want to help, and realize that they are not equipped to do that.
You have to have patience. Patience is what enables you to get real results. Companies rely on the customers wanting instant gratification. They too want to get a problem solved quickly and move on, because all that customer service time costs money. What you need to do is to use that insight against them. When you phone a help line for a company and you hear that recorded message that says words to the effect of “We record your call to measure quality”, that is when you know that you need to reduce the speed of your heartbeat, lower the tone of your voice from angst to calm-and-measured, and get prepared to stay on the line for as long as is possible. But it needs to be with a human being and not a computer – ideally a human who is not in a low priced labour market, but instead is in your home country.
Whatever the problem is, fixing it has a cost. Some things cost more than others to fix. Some things require entirely different departments with different discretionary expenditure budgets to be properly fixed. Most of the time this kind of problem is out of the control of the customer service department at any level whatsoever. This is important. Because it means that you have to find another pathway to resolution, and offer it to your new best friend – the customer service guy.
The other important thing to remember is that everyone that you deal with has a list of known problems and a set of verbal responses to the problems in a well rehearsed, and probably written script that pops up on the service rep’s screen as soon as your problem is entered into a text box on their computer screen. Once you realize that the company you are dealing with already knows virtually every problem that can arise and has a planned – and costed – response to it, you are on your way to understanding how to deal with it.
The primary tactic by companies is to put you on shaky ground by positioning you in unfamiliar territory. That is most easily achieved by making the customer believe that there is a technical problem that is in a separate part of the system and therefore not able to be resolved. They will give you a technical reason that is constructed to put you off balance, and hopefully to get rid of you. Remember that from an economic point of view, they want to get rid of you as quickly as possible without actually doing anything. That keeps the costs down. Once you understand their script you can start using it against them. You may have to figure out how to do that.
Your ultimate goal is to keep their costs up. You achieve this by keeping them on the line.
Next, you have to escalate your problem to the point that someone higher up the food chain is paying attention. They will try to buy you off. You will be offered something that appears to help you and is designed to appease you. Whatever they offer will have material value. Your inclination at this point in time is likely to be relieved that you got somewhere and to just roll over and accept the proposal as a reasonable solution, even though it doesn’t go anywhere near what you want. You need to “qualify” your acceptance of whatever is offered. This is a key point in the service paradigm carefully scripted by the company’s lawyers. This is the part of the process where the company will have made a record of the customer – that is you – having accepted a “consideration” as an agreed “resolution”. All businesses have some kind of statutory authority they need to answer to in the event of complaint. If they are able to show in the records of dealing with you that you were provided with a consideration that you accepted, that was the agreed method for conflict resolution, you don’t have a leg to stand on if you want to take it further.
If, however, you respond to the offer by politely saying that you appreciate the kind offer, and are happy to accept it provided that it is not considered as acceptance of full resolution, then the record will reflect that. The probability is that at this point the offer will be withdrawn but you will move up the food chain one more notch, and hopefully get to a more concrete, economically better outcome.
Remember, once again, that this is not about solving your problem, it is about you helping them solve their problem. Their problem is to make you satisfied. Instead of saying to their customer service people in an irate voice, “Do you realize that this is costing me money?”, say to them, “Do you realize that I have plenty of time and patience, an unlimited supply in fact. And for every hour that I am able to spend with you or one of your colleagues there is a cost. By my calculations the continuing cost associated with solving my problem represents a negative margin contribution of $x”. This is how you get things done.
Send me your customer service experiences. I would like to hear how you have successfully negotiated good results – or where you have failed.
It looks like it is going to be a big year.
This year I will be back at University Of Wollongong teaching in the Arts Faculty – the same subject as last semester, ARTS301. I had tremendous feedback last semester from students. The subject is really about helping those about to graduate to understand how to create the optimum onramp into business.
I am also going to teach a strategic management course at the AIIM in Sydney, which should be interesting. And, while on the academic side of things, I also have some funding approved to undertake a research project that will examine the value that businesses place on Science and Engineering PhD students and which will enable direct engagements to take place between students and high tech businesses. I will be writing about this over the coming weeks. I hope that some of the material gleaned will become part of a forthcoming book. The goal of the research is multi-functional. Hopefully it will enable PhD students to build a greater appreciation of the need to build an understanding of what industry wants, it should also grow the network of end-users for UOW, and it will hopefully also yield some useful insights into the vision of industry in this country…. (and much, much more!)
I also have several corporate advisory opportunities lined up in conjunction with a firm in Sydney. These are focused in the online retail sector, and life sciences at this point in time. I am also hopeful that the hydrogen production technology business that is being spun out at UOW and which I wrote the business plan for, will provide some further interesting opportunities.
Whenever I look at a sector of industry these days I find that there is a lot of legacy thinking present that doesn’t fully appreciate the way that either the digital economy or globalization are impacting them. This, in spite of the fact that some very bright people have been hired to work for some of the major corporates that are affected.
I see certain parts of retail as the sector that is changing rapidly and moving toward tipping points in a number of places. The Australian retail sector is already in stress as it is impacted by online sales.The entry of Oliver Samwer and Rocket into online retail in Australia toward the end of 2011 with a focus on disrupting some of the existing online retail operators shows just how vigorous the competition is going to get. By their own admission he is a take no prisoners kind of guy. (See this story on him for an insight)
The irony is that the retailers who whinge the loudest about online think that they are having the lunch eaten by importers. The fact of the matter is that there are some products that are being shipped into the county at low prices, but the competition between local online retailers is equally fierce. What happens is the creation of a very well defined, but not overtly visible, two tier retail economy. The tiers of activity are ironically substantially defined by the discretionary income of the consumers. Those who have the least available cash purchase goods at retailers where credit is easiest and consequently pay the highest prices. Those who have the greatest discretionary income purchase at the cheapest price. This bifurcation of the market is going to influence advertising on mainstream media, which in turn is going to influence content purchase.
The value shoppers have the greatest capacity to continue to spend, while the high margin shoppers, are actually customers for high risk lenders with retailers acting fundamentally as re-sellers of credit. As a result we can expect the standard of content to become even more of a race to the bottom, to provide entertainment that can be built around ads for Harvey Norman and businesses that cater to the demographic that accepts paying high prices for goods! Ironically this should result in higher A+ viewers for SBS and the ABC, since the Foxtel franchise tends to recycle the same programming again and again, and notwithstanding its purchase of Austar is going to find that it is caught between the cleft stick of subscriber churn and increased costs of purchase of programming from the major studios.
At the physical end of retail this leads us to a point where the high priced shopping complexes which are reliant on foot traffic from high value customers will have decreasing foot traffic since their demographic will shop more from home to find competitive prices, not have to deal with traffic, and is not interested in the homogenized offerings of the major chains.
What that means is that the major shopping centres and their investors are going to start to feel the pinch. They will find that some of their smaller retailers just can’t compete. These are the retailers that don’t have the depth of financial resilience, nor the motivation to compete aggressively online. If these retailers don’t move online they will go under. When these businesses find that the foot traffic at the big mall is not converting into sales, they will quit. When that happens the rot will set in. The big retailers can find a solution, but the probability is that they will only look at the disruption from technology, and not look at a host of other things that are all part of what is very clearly a “wicked problem”.
Solving wicked problems is going to be part of the goal for this year.
This year has been incredibly busy. Next year looks set to be even busier – in my life certainly.
As we all seemingly accelerate toward the adoption of more toys, more technology, with more speed and more connectivity, I find myself seeing more clearly what is happening on another plane, and find that many of the people I meet and talk to are being blindsided by the enormous focus required from them to execute on the tasks that they have in front of them.
I believe that we all are unconsciously moving to a place where instant gratification is expected, required, and if not delivered, is a primary cause of our frustration and sense of personal failure.
It is one of the primary causes for the failure of some start up businesses, where the planning process is less important than the get to market. While I believe that getting to market is imperative and needs to take place in order to better understand market forces, I also believe that the information gleaned on the way needs to be incorporated into the plan with the plan morphing all the while in order to build a better engagement. Businesses who don’t plan for change from the outset are doomed to failure. And societies that are obsessed with instant gratification are bound to become frustrated by the inability to be satisfied and will ultimately fail too! (One of the people whose academic work in this field is really fascinating is Walter Mischel, who did the famous Marshmallow Test on children. If you haven’t read about it, I urge you to. It is actually much more important now for society, I believe, than the work that Stanley Milgram did).
I now believe that by developing a personal discipline of deferment of gratification I am able to take much more control of my life. By changing gear from need to desire, kind of like putting an item into the Amazon shopping basket for later on, the whole dynamic of financial and personal control is shifted. People who are driven by needs are frankly no different to junkies looking for their next hit. And most consumers who have Pavlovian responses to the calls for action that they are exposed to are no different.
Your new year’s resolution: Take control of the purchase decision by deferring it by a week or a month. See how much your life can change.
Last weekend my wife and were guests with a friend who is a barrister, and on the way to becoming a judge, all
being well. We were talking about the mobile devices that we each had. He does not have one. No iPhone, no iPad, no Blackberry – not even a good old fashioned mobile phone. His wife gives him one of hers when he goes travels so that she can get hold of him, but he doesn’t know the number of it and doesn’t know how to place a call on it.
He doesn’t want to. He doesn’t want there to be any digital footprint of any activity that may in any way complicate his life. Pretty smart, actually.
I remember hearing some years ago that the head of a major media company in the US had never ever had a credit card. He paid for things that he purchased with cash.so that there could be no forensic record of where he had been and what he had bought.
When you think about the globalization of trade and and the national limitation of legal systems it does seem to lead to an inevitable nexus that is going to create all kinds of problems for society as the legal system tries to deal with something that it has had to avoid having any experience of. Even more baffling than expecting a Catholic priest to provide advice on sex (I’m sure that many of them actually are celibate in spite of their bad press recently!).
We tend to forget that we are all in motion heading down vectors of varying speed and direction governed partly by our personal experience, partly by the geography that we live in and the bandwidth that we have access to, partly by our language and our culture – an incredible host of modifying factors. We observe what is happening around us with the belief that we have a similar vantage point to everyone else. The facts, however, are quite different and when we start looking at the heart of national governance we are starting to see some cracks appearing in the system.
We are now still only at the beginning of experiencing life in the digital economy – a totally globalized environment where a company like FaceBook is more valuable than most of the companies in this country and it hasn’t even gone public yet: where the recommendations to view content are growing exponentially.
On the other hand we have the political system in this country which celebrates the rise of the Arab Spring and the birth of democracy in countries like Libya. And then we see the rise of the movement to occupy Wall St. All this happening while our law makers, those politicians elected to power by the people, are really beholden to the lobbyists working for the major corporations.
And then on another hand again we have the judiciary, who are utterly out of touch with the whole digital economy, because they don’t need to make their lives even more complicated nor to create any possible vulnerability….
And I haven’t even got to the banks…
I can’t see this story having an orderly and happy ending. But I can see a lot more opportunities in developing more digital widgets that recognize that the system has no hope of righting itself until it has suffered a much bigger failure than anything we have experienced so far.
How far away might that be? Not sure, but my bet would be that there is no point in complaining about what any of us think might be wrong. There is no way back. We need to develop ever better technologies that apply the principles of productivity improvements in ways that have not yet been considered.
Last Thursday I went our for my morning walk with my wife, Robyn. She told me that we had a problem with our washing machine. She thought that the motor had given up the ghost. We have had it for some time so we decided not to bother with calling a repair man and to bite the bullet and purchase a new one.
We had a lot of laundry and a long weekend coming up, but as it was Thursday neither she nor I had an expectation of getting one. She made a couple of calls and told me that she had found the model she wanted – a Bosch. It was available from a nearby Harvey Norman store for just under $1,200, but the same model was also available from Joyce Mayne for under $800. I suggested that we should also check online with Appliances Online because we had bought a dishwasher through them which had worked out well on both price and delivery – because they don’t charge for the delivery costs.
I found exactly the same Bosch device at Appliance Online for $10 less than the quoted price from Joyce Mayne. The price included delivery, installation and disposal of the old machine at no extra cost.
At that point I got a phone call from a sales person at Joyce Mayne, who Robyn had called to check on availability. The sales lady said that the machine was in stock at the warehouse in Sydney, but that it would not be able to be delivered until next Thursday; there would be a $15 charge for disposal of the old machine, a $40 charge for delivery – and that she had dropped this price from the normal $45, but that this did not include installation.
I told her that I was looking at the same product online…. cheaper.
So she asked me what would happen if I needed a warranty call…. clearly trying to get me to feel uncertain about after sales support. I responded, because I have been through this with a number of devices, “Service calls are handled by the manufacturer not by the retailer”.
So on line I clicked on the “Preferred Delivery Date” button, requesting Friday, the following day expecting to get a call to say that we would have to wait until the following Thursday.
The website accepted the date, accepted my credit card and an automated email response came back, as they do.
The next day by 10.30am the new machine was delivered, installed and the old machine out of the house. Done. A less than 24 hour turn around from order to installation from a remote, pure play web business when a local, bricks and mortar business couldn’t match the value proposition on price, on delivery, on timing of delivery, in fact on any of the key purchase criteria that you would expect.
Is it any wonder that retail will never be the same.
Clearly the Appliance Online business must be built on having a direct ability to automatically access and indent inventory, access and book trucking, in a seamless way where there is only light touch human intervention. They presumably have no warehousing costs, no retail location costs, and so can set their prices at precisely the level that will capture the business.
On the other hand Joyce Mayne, as a discount business, has to deal with the cost of their retail space and employees, with the employees watch potential sales disappear before their very eyes.
Harvey Norman, one assumes, has an entirely different business model. Since they offer ultra long no-repayment hire purchase terms, I would believe that their model is to sell to people who can’t afford to pay cash, and therefore they take as much of the available margin as they can in return for having the relationship with GE Capital who provide the finance.
So in the future I can see companies like Harvey Norman surviving, but I can’t see how the big box discounters can compete with online.
Its not about imports that avoid the GST. Its about service and time of delivery and price. These three things mean that a company like Appliances Online will continue to build brand momentum and win, win, win.
This is not really a story about marketing. However it is something that you might want to know and to think about if you like food.
We eat quite a bit of fish in our household. I normally buy fish at a little hole in the wall fish shop in Kiama. The shop is tiny. It is perched out at the end of the harbour on its own, and away from the rest of the town. Its run by Steve and Ruth, and its been in Steve’s family for a couple of generations apparently.
Because I go to the store regularly, I have gotten to know a little bit about the people, as you do when you see people regularly. One reason that I go to this particular fish shop is that almost all of the fish that they sell is caught locally. A few species of fish that are popular, like salmon, come in from Tasmania but almost everything else is caught locally and is super fresh.
The other day I asked Steve whether the fish shop in Shell Harbour represented competition for him. This shop is in the big shopping complex there and has a lot of foot traffic and is always busy. Steve said that they probably were competition but that the people who came to his shop came for a different reason. The fish were different.
He gave me an example: the gemfish. The gemfish that Steve sells are caught on a line, by the local fisherman. The fish that are sold in the other shop are caught by the big industrial trawlers. I knew that when a fish is caught by a trawler it is caught in a big net that is dragged across the bottom of the ocean. What I didn’t realize is that when that takes place, the fish are caught up in the net for hours and hours, possibly a whole day, before the net is hauled up to the surface. While the fish are in the net they are being tumbled around like the clothes in a tumble drier. They bump into each other, bruise each other, possible even drown because they are no longer traveling in the right direction for their gills to work properly.
Steve brought out a gemfish and showed me the way that he could determine whether the fish was healthy. He showed me the beautiful colours of the scales and the sharpness of the eyes. He told me that when you get a trawled gemfish the scales are dull and so are the eyes. And the flesh is no longer firm.
It was a really fascinating story told by someone who clearly has passion for what they do and an intimate knowledge of his field. I suggested to Steve that he should shoot a video and put it up on YouTube – not to market himself or the shop, but just to inform people about fish. He is thinking about it.
Imagine though: How much more would we value the provenance of our food if we knew the processes by which they come from the source to the table?
I asked Steve and Ruth whether they sold much fish into the restaurant trade. My thought was, “surely chefs must value this sort of provenance?”. Steve told me that what typically happens with restaurants is that chefs send their staff out to pick up supplies and the staff are told to source very specific pieces of produce – 2 dozen 200 gram pieces of Dory – or whatever it may be. So the specifications by weight or size become the drivers for the restaurant rather than the quality!
Think about it next time you read that beautifully crafted copy on the menu of the restaurant that you are in!
But think too, about the possibilities that exist if you could market honesty and integrity. How valuable would Steve and Ruth’s product be if people understood the difference? They don’t charge any extra for what they sell, because they are hard-working honest-as-the-day-is-long people.
Their UVP is almost unique in the world we live in. Integrity.