Amongst my favorite Seinfeld episodes was that of “The Soup Nazi”.  As you may remember the story line, The Soup Nazi banished Elaine from his soup kitchen with his announcement “No Soup for You!” While the Seinfeld clan’s attraction to the Soup Nazi may have been soup of extraordinary flavor, the episode offers marketers a more compelling recipe.

In her brilliant book “Different”, Youngme Moon points out that in a mature market, added features that are not highly relevant to the customer offer little incremental value.  She offers the concept of differentiating strategies through “reverse and hostile brands.”

While the Soup Nazi’s fare was surprising good, the service was shockingly bad. I am not suggesting that our clients start insulting customers anytime soon, but there is lesson to be learned from the Soup Nazi.  Disrupters understand the need to find separation, even if it means not offering services and benefits offered by the competition. Southwest Air offers no amenities, but does offer free baggage.  Where United and Delta says yes, Southwest says no and vice versa.

Menchies and similar self serve yogurt shops have exploded on the scene.  Eat all the yogurt you want and we are not going to serve you.  By the way, you are going to spend about a third more than you would otherwise. The model is distressing to our waist line but stimulating to our business sensibilities.  Tart yogurt flavors are particularly hot as they offer the opposite of what we have been conditioned to expect; as sweet is ying, tart is yang.

For a good laugh with clients, I have occasionally handed out calendars from despair.com.  A spoof of the overused motivational posters, they have similar imagery that says things like “Consulting: Why find a solution when you can prolong the problem?” The calendars are popular because they are funny, but also because they are a shock to our senses.  When ordering such a calendar you get an email to the effect of don’t bother calling us. 

To be different may require the marketer to be entirely counter to the marketplace.  The iPad is revolutionary but lacks USB ports and other goodies.  Apple is unapologetic, as consumers intuitively understand the tradeoff.

We are drawn to things we can’t have, and thus one potential strategy in value creation is “the take away”.  To suggest that your product or service is only available to a select group of customers increases its value. When clients ask us to do Executive Coaching we say no (it is not in our core competency) which makes our Strategic Planning services worth more.  Customers know that to get something really good, they may have to give up something in return.

While I am not encouraging anyone reading this to go negative, I am suggesting we need to think more provocatively about creating products and brands that are not only innovative and different but counter to our thinking.  That may include cutting out benefits that we naturally assume are necessary, but may just be redundant. I wonder if George would go for the vanilla tart or caramel latte?

Yelp just scares the crap out of me.  For those of you who are unfamiliar, Yelp is a service where you can rate anything from the local bicycle shop to your CPA.  From Zagat to Trip Advisor, satisfaction ratings on the internet are in vogue. On eBay, potential buyers have three criteria, item, price, and supplier rating.

Imagine the ramifications.  How long will it be before your product or service is rated on the Internet by consumers or professional buyers?  The trend speaks to a need to get ahead of the curve and acquire real time, unfiltered feedback from customers.

All clients tell me they listen to their customers but their approach varies dramatically. Many are reliant on salespeople to do the listening for them. During the downturn and a period of massive discounting, many salespeople have become more tactical and often lack the consultative selling skills required to diagnose and synthesize customer problems.  Having the salesperson as the sole lifeline to the customer is like having the fox in the hen house; it is not as if many salespeople will self report eroding customer relationships when they may be the cause or at least a contributor.

While much has been written about customer satisfaction, many of the most common approaches are impractical for the small and mid-market business.  Electronic surveys are impersonal and yield poor results.  Snail mail surveys (sometimes with a spif or prize) get poor response rates and feel so 90’s.

We often complete client satisfaction and perception audits for clients as a pre-curser for strategic planning.  By far, live phone surveys are the most effective method, as they provide instant, unfiltered feedback and the ability to ask follow-up questions that garner more specific commentary.

While live surveys are more expensive than the other types of survey tools, client satisfaction seems like an endeavor worthy of investment.  Ultimately, the real value of such surveys is the problems you discover and the responses to open ended questions which can be the source of innovation. We never advocate an “annual” survey because you could wait up to a year to uncover customer issues.

Of course client satisfaction is not the end game. It is customer loyalty that is nirvana and is much more difficult to measure. The book “The Ultimate Question” points out that there is one question that is the best predictor of loyalty and ultimately profitability. The question is “how likely are you to refer a friend or colleague” as referring a product or service meets a higher standard than just being satisfied with it.

Like many things, survey tools may be imperfect but querying customers on their attitudes about your company is always better than no feedback at all. “Hey, hey, hey, that’s what I say!”

Ten years ago organic foods represented 1.2% of foods sold in grocery stores. Organics were hot and going mainstream as soccer moms stuffed lunch boxes with the purist carrots and over-priced apple juice.  A decade later only 3.4% of grocery sales are organic, merely a blip on the radar. 

It is often difficult to predict if the latest and greatest is a fad or legitimate trend. Is the iPad merely an extension of the iPhone or is it a game changer? Certainly tech savvy early adopters are already scooping up the new device, but will the masses adapt to a new way of viewing media?

Our mantra in our firm, in my book and in this blog is that marketers must consider converging factors, and no more is that more true than in evaluating fads.  Within a complex socio-economic environment, changing quickly with the advent of technology, there can be immediate swings in demand of a given product or service.

The key to converging factors and understanding trends is the acquisition of current and relevant information.  The ability to understand trends, and convert the opportunities presented into competitive advantage is both art and part science.  Science is required in the accumulation of hard data, whether it be from public sources such as government statistics or through private sources such as market research or trade associations.

The art is focus on customer wants and needs in order to preempt the market with products, services or features that may not be offered or are framed differently. Often innovation is not presented in the formation of a new product but through the delivery system by which it is presented. The iPad, like the iPod before it is not delivering new media but is providing an improved gadget for accessing music, books and the Internet.

Often, the best way to define a new delivery system is to reverse engineer problems that customers have, and try to find new ways to solve them. This requires a significant intimacy where the vendor can gain a deep understanding of how the customer functions.

In the fashion industry, designers and buyers must accurately predict styles as far as a year in advance, and move quickly to capitalize on emerging styles. Whether your source of information tends to be closer to science or art, the successful marketer has their ear to the ground and is paying attention to all the inputs that determine fad or fashion.

I thought I had seen it all until a Business Week article last week entitled “What a long strange business plan it’s been”.  As it turns out, the Grateful Dead was quite a commercial enterprise. The band was highly profitable, had a Board of Directors, and a successful merchandising division whose lawyers protected its intellectual property.  Was Jerry Garcia a better businessman than the average Joe?

The real lesson here is the level of engagement that the band had with “deadheads,” the iconic fans that would travel the country to take acid and watch 5 hour concerts. “The Dead” had a phone bank announcing new shows and preferred seating for their best fans, a bizarre form of psychedelic CRM. This makes me wonder, if The Grateful Dead, who probably didn’t know what city they were in half the time could run a business with this level of sophistication, shouldn’t all businesses be capable of this level of structure?

We should at least aspire to have fans half as loyal. It appears that the deadheads would do just about anything to consume the product (I am talking about the music) time and time again. What can you do in your business to create raving fans? There are stories of how no two shows were ever the same which would suggest that the band relished the element of surprise. Fans never knew what would come next, and that was a big part of their fascination.

Business should find ways to do the unexpected for customers, like send a Thanksgiving card or an In-N-Out truck to their location. It wouldn’t surprise me if Jerry Garcia did the unexpected and showed up on stage some day.

I am often asked if organizations should include Facebook postings and other social media in their marketing plan. For those of you interested in a precise answer, here it goes: it depends.

Newspaper revenue has fallen off a cliff (down 40% by 2003) while magazines have not fared much better (down 20%). Television ad revenue is down 15%, this year alone.  Meanwhile, online media is growing at a 7% clip suggesting that as a whole, total spending on marketing is undergoing a precipitous drop.

According to Kiplinger, targeted campaigns will reap 75% of all marketing spending by 2013. Marketers, armed with the ability to regurgitate millions of data points such as age, gender, location, income and household size will find ways to market online to very specific audiences.

In these cases, social media will provide an inexpensive method for targeting specific customers.  In the interim, most of us are just spewing on social networking sites with little return. There is certainly room for consumables to be marketed through social media. A recent study published in the Harvard Business Review showed a significant lift in the popularity of certain products and services when Facebook  and Twitter are used to mold the consumers’ opinions, including the use of online coupons and the like.

Yet for now, it is hard to imagine a professional services firm (for example) using such sites for anything more than impressing their younger colleagues. LinkedIn is by far the most useful site for professional networking, yet few people take the time to mine their database beyond their existing relationships (which seems redundant and far from the point).

My conclusion is that if your primary audience is B2B, the focus of internet marketing should be search engine optimization, blogs, and LinkedIn. I have many of my B2B contacts on Facebook, but it is a slippery slope (some have even verbalized their preference not to have any business interactions on Facebook). It can be hard to mix business with pleasure, and Facebook certainly presents the opportunity for the horse to get out of the yard.

Combinations of internet marketing activities can be very powerful, such as linking Facebook, Twitter and LinkedIn posts to your blog. Some have gone as far as outsourcing to marketing professionals that do nothing more than ghost for a business on the internet.

I may be old school in this regard, but I think for most of us that money would be better spent trying to orchestrate meetings with people our own age who will be more impressed with what we have to say in person than how clever my Tweet is this week.

As our economy slipped into recession, private equity investors retreated and sat on the sidelines. As a result, the wizards of Wall Street find themselves in a tenuous position. Without their capital deployed, they cannot generate the management fees required to sustain revenue. They are like caged tigers waiting for their prey to enter the den.

The average multiple in smaller transactions (less than $250 Million) fell in 2008 to 6.9 times EBITA from 8.7 in 2007. Yet, business owners waiting out the recession may be eager to pull equity out of their businesses, even though the stock market offers a poor investment alternative.  In Q4 of 2009, mid-market transactions spiked 77% from Q4 of 2008, reflecting a changing mood and the need for investors to see their money put to work.

Private equity firms currently sit on a projected $609 Billion in un-invested capital. The S&P alone has an aggregate $1.4 Trillion in cash. This may seem unintuitive to many, but any business that is growing and has positive cash flow is in a tenable position to attract investment from financial or strategic buyers.

May the sellers beware that tigers seek the slaughter and are highly selective about which businesses they acquire and under what terms. Those organizations that performed well in the downturn present less risk and are desirous to those seeking safe harbor from economic fluctuations.  One would imagine that private equity fund managers, with more time on their hands, may be even more difficult than under normal conditions. Almost always in control of senior debt, equity managers are notorious for buying organizations, moving out management and strangling corporate cultures.

In the ten years starting in 1997, the U.S. share of global public equity securities fell from 49% to 34%.  The turmoil in the European and Asian markets may be the impetus for more investment in the US of A. For those entrepreneurs that have run their businesses prudently, who offer growth and profit, the M&A market may offer significant opportunity in the years to come.

You may have fantasized about visiting exotic places such as Portugal, Spain, or Greece, but you may not want to plant any money there anytime soon.  All it took was tiny Greece to signal a potential default on its debt to send the U.S. markets spiraling like something out of a Greek tragedy.  With its deficit ballooning to 13% of GNP, Greece is one of many European countries saddled with debt.  With lower reserve limits, European banks carry more risk at times when liquidity is low.  European banks represent merely a microcosm of a bigger problem; the outliers, the seemingly trivial and unpredictable events, can trigger a global panic.

Volatility is not a recent trend. Over the course of a decade, we have experienced Y2K, 9/11, Katrina, Enron/WorldCom, the Asian Financial crisis, mad cow, the tsunami, the bird flu (H1N1), and influenza strains that have not yet been named. Volatility has become the norm.

In this age of uncertainty, entrepreneurs must have a greater level of preparedness because there are more variables to prepare for. We must be prepared for the things that we control and even the things that we cannot.

Such volatility requires a different mindset, where infrastructure is more flexible.  Depending on the nature of one’s business, we need to have more flexible labor structures, less inventory, and the ability to be nimble.  Perhaps more importantly, we must be ready to change like a chameleon, on a moment’s notice.

In October of 2007, DuPont’s CEO, Chad Holliday, visited a customer in Japan who reported a sudden squeeze on cash flow. Upon his return to the U.S., Holliday heard that U.S. automakers (who order paint from DuPont only 48 hours before applying it to new vehicles) were dramatically curbing orders.

Holliday took swift action. The following morning, Holliday deployed the company’s crisis management plan and put 17 teams in charge of curbing production. Within 10 days, every manager in the company had met with their employees to “re-clarify expectations.”

If a company of DuPont’s size can change on a dime, so can mid-market companies.  The volatile market place requires that we prepare cautiously, move quickly, and act decisively.

In a remarkable irony, the seat of Ted Kennedy (who spent his life fighting for health care reform) was lost to a Republican who has now shifted the balance of power in Congress. With the threat of filibusters looming, Republicans have new found leverage. Will Obama’s sudden drop in popularity translate into a more modest economic agenda?

I always say that within our firm, our role is not to provide all the answers; it is to ask the right questions. As the new realities of the new year emerge, one must wonder if some widely held assumptions about pending legislation (that affect businesses) must be modified to reflect the political climate. Clearly, health care and other legislation will be watered down. What are the ramifications of a Congressional stalemate?

• What will the new health care bill look like? Will employers be burdened with extraordinary administration such as employer coverage requirements? Will Congress levy a tax on preferred health care plans?

• Will the administration, desperate to maintain a majority during the mid-term elections and facing the reality of 10% unemployment, introduce a new stimulus package?

• With labor’s agenda stalled, will the law that would have replaced secret union ballots with card checks stall?

• How will bank regulators respond when financial institutions, still mired in commercial real estate debt, begin to default?

• Will TARP money be spent on infrastructure? Will the Afghan war drive military spending, or will deficit woes bring about an early conclusion to the war?

• What will be done about the Federal debt? At $107,000 per tax payer (did you know you had another mortgage?), not including the looming deficits to Medicare and Social Security, the Federal credit card balance continues to swell.

• Will marginal tax rates (due to increase to 39% in 2011) be reset?

In the face of such uncertainty, strategists must continuously review their forecasts. If you own a small business, you must seek out external (government, industry, competitor, etc.) predictive indicators and monitor the pulse of the economy and your sector before it is too late to react. Businesses are also well advised to revisit their budgets regularly and make rapid decisions based on demand and socio-economic trends.

It seems that corporate acquisitions have come full circle.  In the 80’s, behemoth conglomerates fell out of favor as many of them were seen as too fat and inefficient.  Over the last decade, specialization and commitment to “core competencies” have been the mantra of CEO’s and management consultants.

Yet a recent trend has emerged as companies are going vertical, and seeking out business combinations that enhance positioning within the value chain. Our firm has recently worked with several companies employing this strategy, at a time when PepsiCo is buying back bottlers they spun off in the 90’s, and Oracle is purchasing Sun to which Larry Ellison spewed, “We’re really brilliant, or we’re idiots.”

Two converging trends seem to be the impetus to a return of vertical integration.

• Complex computer and distribution systems make integration critical to the success of an organization.
• The movement towards thrift and efficiency amplify a basic rule of distribution-the last mile of distribution is the most expensive (the implication being that it is more important than ever to control the distribution channel).

Many U.S. companies who have outsourced manufacturing and service overseas are starting to see the  upside of owning their suppliers.  Recent activity begs the question, when do such acquisitions make sense?

Much research around M&A’s over the last few years has yielded data that suggests that return on investment in these deals is realized through incremental revenue, not through cost cutting and efficiency. With the staggering costs of completing such deals, shaving a point or two of margin does not provide a very enticing payoff.

Thus companies seeking alliances and mergers should be focused on acquiring companies that complement their business in a natural and synergistic way.  For example, buying a supplier of quality parts provides the opportunity of integrating systems which may optimize inventory, improve cycle time and enhance the customer experience. If such synergies translate into more revenue, vertical integration can contribute to both the top and bottom line.

As a champion of value creation, I wanted to vomit on Black Friday.  As abhorrent as the massive discounting was, it did serve as a reminder that customer expectations are always a moving target.  For retailers, the bar has been lowered to staying open all night and giving product away at cost.

 For those of us who seek value by providing better service, we must push the envelope with equal fervor. The service you provide is not defined by you or your competitors, but by Lexus, FedEx and Nordstrom. Customers have come to expect extraordinary service on their terms: quickly and efficiently.   Every interaction with a customer offers what one SAS executive refers to as a “moment of truth”. In a single transaction, an organization can have dozens of such moments with a customer.

 Every company should do a “touch point audit” at least a couple of times a year and assess every potential customer “touch”.  To complete such an audit, create a checklist of touch points such as web, email, phone system, reception, customer service,  invoices, packing slips, etc. that represent the opportunity to disappoint or delight your customers. We have all been to voice mail hell, had a customer service call mismanaged or used information on a website that was no longer valid.

 It is useful to have a 3^rd party conduct such audits. Another approach is to conduct customer interviews, peer to peer.  I once had a client send their CFO to meet with a client’s CFO only to find out that invoices were poorly labeled and confusing.  By making some minor adjustments to the design of the invoice, my client improved receivable cycle time with the client by 5 days.  The CFO may not seem like an important person in the value chain, but casting your net wide within clients is an important selling strategy, especially when every nickel is being scrutinized.  The point here is that today’s marketer must take the time to evaluate every conceivable moment of truth and design systems and processes that optimize (my favorite word) the customer experience.

 One source of innovation and strategic advantage is to take emerging technologies from other industries and apply them to your business.  In the 90’s, Dell was amongst the first companies to offer email confirmation and real time tracking of shipments.  As the technology spread, customers came to expect such a level of service for online shipments of everything from flowers to wine.  If you are not moving forward with richer customer experiences, service improvements and automation, you are likely falling behind.