Thank Goodness McDonald’s Wasn’t Like JC Penney

This is a picture of Ray Kroc's first McDonald's restaurant in Des Plaines IL USA - now a museum.I have previously noted how JC Penney hired Ron Johnson to create a growth strategy for the company. He implemented a new strategy, and as anyone would likely realize, sales went down. Why, as I wrote in the prior post, is because existing customers see the change, and don’t like it in many cases before new customers can be attracted to it. Since JC Penney is a public company, their Board could not accept a sales reduction and they eventually fired Mr. Johnson so they could return to a previously unacceptable strategy, which appeared to look better after the sales loss due to the change.

How does this tie to McDonald’s? Most people are unaware of the history of McDonald’s. It was at one time a BBQ restaurant using what we have come to call the “drive in” with carhops business model. They were an early pioneer of this concept and were very successful. Even though the concept had its downside (loitering teenagers, less than wholesome food, etc.) the overall growth continued. However, the McDonald brothers were not sure it was sustainable.

They took the bold and risky move of thinking about reinventing their business. The result was the McDonald’s of fame, hamburgers, cheeseburgers, etc. A very limited menu based on efficiency of operations, and all that meant. They focused on limited choice and lower prices. The initial results were as one might expect … dismal.

Their current customers, for the most part, did not like the new approach and left. New customers did not replace them quickly. However, since they were not beholden to a disconnected Board of Directors, they were able to stick to their convictions. Roughly four months after the shift, sales began to rise and rise and…

As we all know, the brothers eventually sold their concept to Ray Kroc who turned it into a mega-business. But that never would have happened if the McDonald brothers didn’t realize they needed a different strategy to grow and would take the hit to make that happen. Too bad folks like the McDonald brothers weren’t on the Board of a company like JC Penney.

Mitch

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Working With A Target On Your Back

54938190 - businessman get success with red arrow on target at the back of his suit on dark background, business concept

We have noted for years in this blog that the CMO position has a high turnover rate. We even suggested in one post that this is because when things go bad, the CEO needs to fire someone visible and by firing the CMO they do that without really messing anything up because, “what does the CMO do anyway.” The CMO position continues to be one of the most ill-defined positions in the corporate structure.

A recent article in Advertising Age suggests that while the argument has changed, the CMO is still the #1 C-level exec with a target on their back if growth goals aren’t met. The article reports on a study done by Accenture of companies with over $1B in revenue and notes that the CEOs of those companies place their CMO as the #1 target for termination if growth goals are not met since they are allegedly responsible for “disruptive growth.” Seriously? Fire them if you like but spare me the delusion that the CMO is the Chief Disruptive Growth Officer (yet another title for the CMO).

While I will concede there may be a few CMOs with that kind of “power,” the majority are brand focused, which is a euphemism for advertising. Since advertising is simply one mechanism by which branding is accomplished, it is brand building that gets the focus. However, what CMOs have any authority over customer experience? They may create the video I watch where the various airlines tell me how important I am to them; but they have no authority over the employees on that same flight proving exactly the opposite in real-time. And that is just a simple example.

Do you really think the CMO at Intel (as a high-tech example) is focused on disruptive innovation? I doubt it. That is being done in R&D or within the product/business divisions.

I submit that most CEOs have no idea what to do with their CMO, who is really only responsible for the “back-end’ of Marketing. Given that Kottler and others have noted that the real leverage in Marketing is at the front-end, why have your “chief disruption officer” focused where the least leverage exists?

Again, I submit it is more about having a sacrificial lamb then about disruption.

Mitch

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Perception Is Everything

united-airlines-logoUnited Airlines announced Economy Basic fares last week. What an utter disaster it’s been. The perception of most people appears to be that United is taking away even more services from the beleaguered coach traveler. Scrooge.

The truth is far different and it doesn’t matter because perception is what matters. The perception is that United announced cuts in their economy fare offering including only being able to bring one bag on board. Last boarding status, etc. Jerks.

The reality is much different. United has offered two classes of economy fares for some time (not including refundable fares). Economy and Economy Plus. For the non-frequent traveler you could purchase a seat in the Economy Plus section (more leg room) for a fee if you so desired. Otherwise you were treated like everyone else on the plane. That is, with equal disdain and uncaring attitudes for the most part, despite videos to the contrary.

The announcement was actually about a THIRD class of Economy to be called Economy Basic. For an even lower fare, one could opt out of a preassigned seat and be limited to only one carry on, plus last group boarding. This was a bare bones fare to compete with bare bones airlines. The theory being you could get the extra value of flying on United (unclear what that actually is, but that is another conversation) while paying the bare bones fare of the lower cost airlines.

Not a bad strategy (delusional in terms of the value add they think they offer, but at least the passenger would have another low-cost option). Horrid announcement. But then if you don’t see yourself remotely through your customers’ eyes, it is easy to make such a simple mistake.

The biggest problem with communication is the illusion it occurs. Focus on how your customer and potential customer will view it, not how you or your C-Suite will view it.

Mitch

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A Modern Version of the Mafia Protection Racket

I had heard from people that Yelp’s reviews could be bought, which disappointed me greatly. I have come to believe, based on conversations with merchants, that it is materially worse than that. Yelp appears, in my opinion, to be holding retailers and small service suppliers hostage.

A recent example is from a nail salon my wife frequents that has had good ratings on Yelp. Yelp suggested to them that they should pay Yelp to help assure their good ratings were seen. As a small business owner the salon owner declined. Recently she has noticed several negative ratings on her Yelp page from people she cannot identify. When she asked Yelp for help they told her help would be $600 per month to push down the negative ratings and they could not tell her anything about who posted the negative ratings.

Seems suspicious to me that a business with effectively no negative ratings, turns Yelp down to pay them and suddenly she has negative ratings from unknown sources that can only be “pushed down” for a fee … monthly.

Sounds like a protection racket to me. Shame on Yelp, and I hope this kind of business practice on their part causes them to go away as a business.

Mitch

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Marketing/Sales Misalignment Continues

I am alignment12constantly amused by the people who believe that solving the Marketing/Sales misalignment problem can be fixed by better defining what should be done by Marketing versus what Sales should do, and how that has changed over time. Who cares?

Marketing and Sales is the core of your Revenue Production process. Just as Product Manufacturing companies learned that debating what belonged in Engineering and what belonged in Production was never going to fix the root cause problems in producing good products, the same is true of Customer Manufacturing. (For more on this you can read my book The Secret to Selling More).

I was recently ran across this blog post where the author spends time trying to persuade us that the root cause issue is to recognize that more of the “funnel” should be managed by Marketing, and doing so will fix the revenue short-fall issue. Poppycock.

Firstly, even customers who are buying from you now are still in evaluation mode, so who handles them, Marketing or Sales? Secondly, each company has resources and talents organized where they do. While I will accept that more of the prospect management process can be done non-face-to-face (something else I talked about in the book), whether those people are “marketing people” or “sales people” is not relevant to helping the right customer buy right. It is about facilitating their buying process effectively. Then you can worry about being more efficient.

Mitch

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Misunderstanding Marketing

As we assume most readers know, Wells Fargo has received some justifiably bad press over the last few weeks as their abhorrent behavior regarding consumer accounts has come to life. Their CEO finally resigned over it. And now, it appears their next phase is to “increase marketing” to “regain trust.”

What they really mean is they are going to run a lot of ads and other media to push their message that they are really good folks. That is just increasing the back-end of marketing as Ralph and I describe in our book Value Acceleration. And as Kotler taught, there is a whole lot more leverage in the front-end of marketing than in the back-end. Apple getting their products right in the last 10 years has grown the company tremendously while allowing them to spend less on the back-end of marketing than do their competitors.

So what is Wells Fargo doing about this issue other than spending on advertising? Even in their messaging they aren’t saying how they are changing what caused this to happen in the first place. One might believe this is all about being caught, not changing root cause behavior.

One does not regain trust with an advertising campaign. One figures out what it takes to regain trust (the front end of marketing problem); puts that effort in place and then one can promote it. But then, like many companies, Wells Fargo is doing it bass-ackwards in my opinion.

Mitch

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How To Sabotage Your Organization

60050776 - aggressive businessman in suit throwing burning molotov cocktail

Robert Heinlein wrote “Every generation thinks that it invented sex.”  But, truth be told, there’s nothing new under the sun … at least with regard to human behavior.  In case you think that everything that frustrates you about your organization’s lack of effectiveness is unique to it, take a look at this article over at Business Insider: The 16 best ways to sabotage your organization’s productivity, from a CIA manual published in 1944.  Here’s a couple of the CIA’s tricks:

  • Insist on doing everything through “channels.” Never permit short-cuts to be taken in order to expedite decisions.
  • When possible, refer all matters to committees, for “further study and consideration.” Attempt to make the committee as large as possible — never less than five.
  • Insist on perfect work in relatively unimportant products; send back for refinishing those which have the least flaw.
  • Hold conferences when there is more critical work to be done.

Ralph

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