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Competitive strategy

Channel choices

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in June 2016 and is posted here by their kind permission

 

Which channel will achieve the best returns for your business?

 

 

You face many choices of how best to get your products and services sold. The most common channels include a field or counter direct sales force, various models of reseller from freelance agents to sub distributors with their own resellers. E-Commerce is becoming a significant channel and self-service in stores has been around for years. Inbound and outbound telesales offers very wide reach; exhibition and catalogue sales work in many sectors like spare parts and curios. Then there are many mixed models; telemarketing followed up by salespeople is one example. For some the best or only channel may be defined by the product. High end cars need a network of showrooms and salespeople so branches or resellers are required, but music is distributed primarily over the internet. For most entrepreneurs making the right choice is difficult and may come with some risk; many companies stay with traditional methods even if that is not the best model for them.

Generally there is a trade-off between cost and control so if you want tight control be prepared to pay for it. Continue reading

How important is your brand?

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in May 2016 and is posted here by their kind permission

 

What does brand really mean to SMEs?

 

 

 

Brands and branding have become the focus of much marketing attention and some hype. Hands up all who recognise all or most of these brands: PrivateProperty™; Sorbet™; Rocking the Daisies™; Turrito Networks™; GetSmarter™; The Creative Counsel™; MiX Telematics™ and Paycorp™? These are all highly successful fast growing businesses which have featured as success stories in Entrepreneur in the past twelve months. Their chosen markets must have valued their brand for them to have achieved such remarkable successes, and yet they are far from household names. So just how important is your brand to your entrepreneurial business? Who should be familiar with it? What values should it portray?

Back to basics

A brand derives from the brand mark burned on livestock to mark ownership. Technically it is a trademark for a company or product, but in the modern sense it is the value which consumers place on the advantages or qualities of the person, company or product. There are many definitions of brand and branding and this adds to the confusion about what to do about branding your business and products. This is a good one: “Brand is the image people have of your company or product. It’s who people think you are.” Anne Handley with CC Chapman. Continue reading

Plan for a better year ahead

This year has been a bad year for many companies – here is how to make sure 2017 is better

 

 

The past 12 months have not been a great time for many businesses. It started with the economy struggling to recover from the effects of the double change in finance ministers, was threatened by potential downgrades to sub investment grade by the rating agencies and characterised by shocks like Brexit, the Trump victory in America, local government elections, the #feesmustfall movement and the State Capture report. The serious drought saw food prices rocket and water restrictions added to the difficulty of doing business. All these issues make buyers nervous, and nervous buyers will delay all but essential purchases.

On top of all this the South African national pastime of sharing bad news brought a mood of pessimism and resignation. We know that water restrictions and high food prices will continue well into 2017 and the ruling party will have an elective conference which could be abrasive in the coming year. What, you may ask will make this year any better than the previous one? One of the answer to that question is you. There are many things you can do to shield your business from negative external events, and to seek the opportunities that any adverse event brings. Continue reading

Strategic competitive positioning

 

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2016 and is posted here by their kind permission

 

Attack, defend, innovate or do nothing

 

 

We know that 2016 will continue to be a difficult year. Entrepreneurs I speak to believe competitive pressures are increasing as businesses chase shrinking markets. Price cutting is common as competitors do anything they can to get a slice of the limited business available. Some entrepreneurs may respond to this situation by assuming there will be less income and cutting costs to remain at least marginally profitable. Others will look for new markets or slash prices, and some will simply hope things do not become catastrophic. The problem with all these plans is that almost all competitors will to do similar things, so competitive pressures will be unchanged.

This is a good time to think strategically about positioning your business to get through bad times while increasing your competitive advantage. I suggest you take a deliberate competitive position and I have listed three possible strategies for your consideration, and a fourth which you could fall into if you do nothing. Continue reading

Are you driving your business or is it driving you?

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2016 and is posted here by their kind permission

 

 

Why so many strategies fail to deliver and what can be done about it

 

 

It is almost a caricature. The executives go away on a strategy planning weekend. They have a successful think tank and come back fired up with great strategies and enormous enthusiasm. Then the day-to-day tasks demand attention and three months later nothing has changed. The idea may still be discussed in management meetings but this is becoming embarrassing. Why did it all go wrong?

It is a lot easier to think about how to grasp opportunities and solve problems than it is to implement the plans. A central problem of implementing new strategy is that it usually relies on people who already have busy jobs with little time or energy to execute additional demanding tasks. The planning session seldom takes this factor into account so strategy implementation remains project-based and dependant on spare time availability within the busy management team. Nothing changes and the company drifts on as it always has.

Entrepreneur style

The style of many entrepreneurs may also be the root cause behind failure to implement strategy. The phrase ‘working in your business instead of on your business’ is almost universal. Entrepreneurs naturally fix problems, manage people on a daily basis, sell, manage the finances, pacify irate customers and liaise with suppliers because they have always done so, and are now very good at these tasks. They work long hours doing things that others would be less effective at doing. Working in the business becomes a comfort zone, and the area they gravitate to when the business faces problems. Continue reading

Customer base or new business?


This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2015 and is posted here by their kind permission

 

 

How should you deploy limited resources for best returns?

 

 

Entrepreneurs know that they do not have unlimited sales and marketing resources. You face the question of how to get the maximum output from what you have. Should your energies be directed at more sales to customers, or more customers? Is it wise to split your resources between these?

A partial answer can be found in the nature of the business. If you sell things that customers buy very seldom like flooring or wedding facilities, your effort should go towards positioning your brand as one to consider and delivering beyond expectations to grow word-of-mouth and referral business. Similarly if your product set is applicable only to a small total market and you are the major supplier you want to ensure that all customers use as much as possible of your product range.

In cases where you offer highly differentiated products or have a unique market focus your priority should be new business before imitators become a problem. Where you have a ‘me too’ product set, very similar to that of your competitors your first priority should be to ensure loyalty of your customers and differentiate by excellent service.

Some new business is essential. Customer attrition will come through closures, relocation and competitive attack. Costs will increase and without new business you will have to cover this increase with price hikes, which make you less competitive. Continue reading

The power of focus

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in October 2015 and is posted here by their kind permission

 

 

Concentrate your resources on the target to improve performance

 

 

It seems logical to spread your net as wide as possible, to develop all available sales opportunities and markets if you want to grow. This makes sense if you are the dominant player in the market with an abundance of resources, one who can afford to waste resources on loss making sales simply to deny them to competitors. For everyone else it is a bad idea. Military strategist von Clausewitz wrote “Where absolute superiority is not obtainable, you must produce a relative one at the decisive point by making skilful use of what you have”, echoing the much earlier Sun Tzu maxim of concentrating your forces where the enemy is weak.

This military strategy applies equally to business. If you concentrate your resources and focus on a particular target, you gain many advantages: Sales costs reduce, sales become easier through customer referrals. Salespeople become expert in the area and competitors recognise your expertise and go elsewhere, so your strike rate increases. Customer support and administration costs fall and service levels increase. Your company becomes the go to company in that market.

Alternative choices

By contrast trying to hit everything that moves is costly; implementation and procurement complexity increases, as does the risk of cancelled sales. Your people become frustrated because they continually need to learn new industries and seldom re-use their expertise. Poor customer service is frequently an outcome and you lose the power of relevant reference customers. Continue reading

Your sales machine

2015-august

 

This article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2015 and is posted here by their kind permission

 

 

Turn your whole company into an enthusiastic unit that aids and promotes your sales

 

 

 

It is in the interests of any employee to do anything they can to ensure the business makes sales, or at least not put sales at risk. Aside from loyalty to their employer, a healthy and growing business means everyone is better off and has improved prospects for promotion. Strangely there are employees, and some managers too, who damage the company through carelessness, incompetence or deliberate obstruction. They are hurting themselves as much as their employer.

Contrast that situation with companies where everyone is customer centric, and frequently attract praise from customers they have been in contact with. There are typically no unresolved complaints on consumer forums, and every employee seems to know why customers should buy.

Review yourself

To build a company like them, some introspection may be a good idea. Do you really deliver goods and services that meet customer expectations, or have customers had to lower their expectations to your standards? Think of the grudge purchases you make, or the times you have been distressed but did not change supplier after a bad experience. You cannot expect your employees to be champions if your company supplies shoddy products, uses untrained technicians and seldom delivers on its promises. Fix the real problems and you will be pleasantly surprised by the change in your staff. Continue reading

The right workload

2015 MarchThis article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in March 2015 and is posted here by their kind permission

 

Entrepreneurs work hard but should get the balance right

 

 

It is routine for entrepreneurs to work very hard for long hours. Hard work is a part of entrepreneurship, but how balanced is that workload? Do you handle customer complaints, check quality, answer e-mails, expedite deliveries, do progress chasing, and fix problems? These are all reactive. Your may also do some proactive work like designing the website, selling to customers, developing products and similar tasks. Even these may really be reactive – arising from the lack of a website, no trusted salespeople and customer gripes about product deficiencies. If this sounds like you, you are working in the business, not on it, and working at a low level as well.

You should be focused on beating competitors, innovation, customer retention, structuring finances, building the brand, managing budgets and forecasts, getting the right people in place and a host of other managerial tasks. These are working on the business not in it. At least some of your time must be devoted to strategy – have you got the right products? Are you in the right markets? Should you buy competitors or be bought? Is your buying strategy right? Your pricing? Does your structure support your strategy?

Life balance is equally important. Family, health, friendships, networking, learning, spirituality, hobbies, holidays and entertainment will often be sacrificed for long days working, but there is a cost. Continue reading

Breakout

2015 FebruaryThis article was written by Ed Hatton for Entrepreneur Magazine (South African edition), as the My Mentor column published in February 2015 and is posted here by their kind permission

 

 

 

Planning and executing real growth strategies

 

 

The year 2015 stretches ahead, and many entrepreneurs I speak to are still cautious. This is understandable, 2014 was a horror year of violent strikes, power cuts, limited postal service, slow economic growth and uncertainty. The temptation to proceed with caution into 2015 is very strong.

Beware though, caution can become a habit, business plans showing a modest growth on last year can become the norm. The company does not invest in new products, markets or channels, research, marketing and training are put on hold and the company develops a culture where innovation becomes too risky “for now”.

Breaking out from the limited growth habit can be a challenge, but a very worthwhile challenge, if only as a defensive move to stop competitors getting bigger and threatening you. Continue reading

Need a quick profit boost?

increased-profitsFive ideas you can implement quickly and inexpensively

 

All businesses need an occasional profit boost and very few would have the luxury of saying they were already making more than they dreamed of. Here are five relatively painless and inexpensive strategies to improve your business.

 

 

  1. Sell more to your existing customers by cross selling. Cross selling means you sell products in your range to customers who now only buy other products in your range. They may be buying products which you carry from your competitors and this is often because they do not know the extent of your product range. It does not matter that you have explicitly told them about other products in newsletters or advertising, they may not have noticed. Do this by listing your known customers, and then making a matrix of what they buy. You should have this information in your sales analysis. If there are too many customers, take a selection of maybe 50 or 100. Assuming you are sure they could use your other products, make a series of individual direct approaches by e-mail, messaging or in person. Offer trial periods, initial order discounts or anything to get their attention
  2. Stop throwing things away. Unless your organisation operates on very lean principles, chances are that you are throwing a lot of valuable stuff away. This will include packaging material scrap, damaged, stolen or obsolete goods, operational time, space, managerial time and a whole lot of other stuff. Start a ruthless campaign to cut down on waste. Pay particular attention to wasted time like idle time waiting for some needed thing to happen, wasted time making things which will have to be remade and wasted time in inefficient processes. Also pay attention to scrap and rework whether you are a manufacturer or distributor. Check the scrap bins and figure out ways to stop throwing away stuff you paid for. If you don’t have the right systems or training to manage that then buy them, it’s cheaper in the long term.
  3. Target a competitor. Pick your weakest competitor (you do have up to date competitor analysis, right?) and attack yheir weaknesses and cash cow customers with special offers, top rate service, better technology or whatever your business has which makes it different from and better than your competitors. (You do have a clear and distinct statement of your differentiation and advantages, right?). If you cannot do this chances are you either do not know what your competitors are doing or you have no clue why your customers buy from you. In which case fix that quickly before your competitor reads this and you become the victim of this strategy.
  4. Adjust prices up or down. Do this only on products where a small price change can mean a large change in demand (price elastic products). Often these are small items, consumables, service contracts, add-ons, some fashion items and minor luxury goods. The ideal is to identify a number of high volume price elastic products. Make a guess what would happen to sales at a couple of price points above and below the current price. Then draw a spreadsheet to show what the total gross profit will be at each price point. You will often find the best strategy is to increase the price rather than cut prices. The total margin may be higher and the costs lower because there are less deliveries and other unit sale related costs. If the cost to you is likely to change with volume then factor this in. Test the theory by changing the price on a few items and make sure sales follow your projections before making mass changes. Try to increase some items and reduce others so you don’t look greedy or desperate.
  5. Get rid of the junk. You probably have customers and products which are not profitable and suppliers and staff you support because of loyalty despite the fact they cost you money. Supporting loyal people and suppliers is a wonderful thing to do but then view this as charitable bequests, do not hide it in the mainstream of your business. You don’t need to be cruel in offering money instead of work, but helping suppliers to become competitive and finding more suitable employment for people who have outlived their usefulness in your company restores their pride and gives them new opportunities. You can now monitor the cost of your kindness. Then kill or replace the unprofitable products, even if it hurts (Keep thinking of Kodak, at one time the world’s second best known brand, which could never tear themselves away from film and make the switch to digital). Politely discourage the bad customers or sharply increase prices of the stuff they buy so at least you make some money from them.

Continue reading

Don’t slow down

2014_NovemberThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in November 2014 and is posted here by their kind permission

 

November and December offer many opportunities for alert entrepreneurs

 

 

You will all have experienced it – the dreaded November slowdown, with many anticipating the year-end holidays before South Africa shuts down sometime in December. Entrepreneurs complain that it is impossible to sell at this time of the year. Many can’t wait for the start of the holidays.

How much are you contributing to this business slowdown? Are you demotivated by decisions being deferred to next year? Have you gone into pre-holiday slowdown mode, and repeated that this is an impossible time of year for marketing or sales? If you have then you are part of the problem, and this is a self-inflicted limitation on doing business.

Can you really afford to have one quarter of the year, from the beginning on November to the end of January as a time of minimal sales? Is it really true that nobody buys at this time of the year? The truth is there is an enormous volume of business available at this time, but it will not come to you if you ignore the opportunity.

Opportunities

There is an old saying that “everything comes to him (or her) who hustles while they wait”. Many successful entrepreneurs have had great successes during the slowdown by catching competitors napping in preparation for the holiday, or being the only bidder for profitable business. Tenders are published now to limit the number of bidders – really awake entrepreneurs take advantage. To get a slice of the millions spent in the next couple of months you must be alert, work hard and look for opportunities. You should also plan and execute an assertive sales campaign. Continue reading

Competitive strategy

2014_AugustThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2014 and is posted here by their kind permission

 

Is this only for the big corporates?

 

 

Large IT companies spend millions on market research to see how they stack up against their competitors and use this information to figure out how to be different and better than them. Automotive manufacturers and importers watch every move competitors make, being first-to-market with a new fashion trend can mean the difference between a clothing brand outselling its competitors or disappearing. Even cities position themselves against other cities to attract tourists and businesses. Why should competitive strategy, a vital part of marketing strategy only be relevant to very large organisations? Why not your business?

Being competitive is a core requirement for all businesses irrespective of size. Not-for-profit organisations like charities, schools and religious organisations compete for funds, members and media attention. Very small business and start-ups must wrench business away from competitors or alternatives just to survive. Without a compelling message about what advantages they offer over others many of these organisations will fail as consumers take the easy route of buying the most popular, the most accessible or the most familiar.

Competitive

More than 30 years ago Michael Porter defined competitive strategy as “The plan for how a firm will compete, formulated after evaluating how its strengths and weaknesses compare to those of its competitors”. This plan should be focused on getting a sustainable advantage over competitors so it is much more than simply reducing price or having a special offer. Continue reading

Getting better margins

2014_AugustThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in July 2014 and is posted here by their kind permission

 

Are you paying enough attention to this profit generator?

 

 

The difference between turnover and cost of sales is the starting point of profitability. Entrepreneurs drive their sales aggressively and manage operational costs tightly, but seldom pay as much attention to the crucial issue of margin. This is missing an opportunity to increase profit substantially with a little additional work.

Margin (or gross profit) is the difference between turnover and cost of sales, and it often comes from a simple percentage mark-up on all cost prices. This is a lazy way of setting the amount of gross profit your business will secure, and ultimately the net profit. You can do a lot better than that.

There are at least four opportunities to increase the total gross profit: More sales, higher prices, lower cost of sales and changing the product mix to increase the percentage of high margin products or services sold. Naturally this last one only works if you do not have a one-margin-fits-all lazy margin strategy. A tip to sell more is to increase the average number of items sold per order. Even a tiny percentage increase can make a significant difference to total margin. Look at the example of burger franchises which invite you to add a slice of cheese to the burger. If just 10% of all customers buy that very high margin slice of cheese they make significant extra profit with minimal effort, and it is so simple. What can you do to increase the items per order? Extended warranties, service contracts and training all offer opportunities. Continue reading

Customer information

2014_AprilThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in April 2014 and is posted here by their kind permission

 

A seriously valuable marketing tool – and it is free

 

 

Good customer information held in a structured system will tell you whether customers are growing with you or reducing purchases. It will have a record of every meeting, sales order, complaint, compliment, reference given, products purchased, payment history, budget cycle, nature of their business, basic credit information and key contacts. All of these are stored somewhere in your company records anyway, but are they accessible in an effective customer information system?

If you have a good system you can research target markets, make individualised tempting offers to customers, cross sell products and plan campaigns in target market niches with a high likelihood of success. What a great marketing tool, and its free.

Using the information

One way of using this information would be to list of all customers in a particular line of business, and list which products all or most of them are buying. Now you could do a survey among them to find out how they are using the products, their degree of satisfaction with those products, and any needs which are not being fully satisfied by the products. With this information you can: Continue reading