Endless Encores: A Brief Excerpt on Profits

EE CoverWith the September 22, 2015 publication of my second book, Endless Encores, I wanted to share a few excerpts to catch your interest. Published by The Story Plant, this is a business parable about People, Products, Profits—in that order. This excerpt is from the chapter about Profits.

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There was a modest rumble in the room. A flight had been called. It was not Daphne and Paul’s flight to Los Angeles, but both were heartened by the rustling of computer bags and rollaboards around them as fellow passengers-in-waiting began ambling to the door. It had been a long night, but now it appeared the delay would not go on forever, nor the conversation.

“We have hope,” proclaimed Paul. “We’re going to get out of here.”

“Hope is the strength that keeps us going,” said Daphne, watching people around her happily begin to leave the airport lounge. Since their flight wasn’t leaving, she had no reason to follow them, but she knew her remaining time with Paul would be limited.

“When you set out to determine strategy, how do you think about building the business so it keeps growing?” continued Paul. “No sane executive wants to lead a company into the Dead Brand Graveyard, yet so many end up there. Suppose they have the best people and the best products. How do they get their head around a business model that is going to both work now and expand into the future?”

“That’s the greatest enigma of all,” answered Daphne. “You have to think about recurring revenue alongside new revenue. Some transactions have to be there without your prodding, so you can add new transactions on top of them. If you’re going to spend money to acquire new customers, you have to balance that with what you’re spending to retain the ones you have. If all you do is spend to acquire new business, your margins will be perpetually squeezed. No fun, I assure you.”

“My boss says that all the time,” agreed Paul. “If every year you start the P&L from zero, it’s virtually impossible to grow. You have to know there is some business already on its way from your catalogue of products, and on top of that you add new product introductions.”

“Smart guy, your boss,” said Daphne. “He gets the mix a lot of us miss. Maybe he was at the same Paul McCartney concert I attended.”

“The same boss who isn’t going to can me for this lackluster sequel?”

“Yes, that clever fellow. Let me ask you something about that catalogue of products, the base of recurring revenue. Do you cannibalize your own markets before the competition does it for you?”

“Well, we don’t put out the same videogames, so it’s not exactly possible,” said Paul. “But if you’re asking do we sometimes leave one out there longer than we should to extract the last bit of profit from it, yeah, we do that sometimes.”

“How does it make you feel?”

“Queasy”

“Me, too,” winced Daphne. “I think we all do it to some extent, but the key to all of this is balance. Yes, you need a base of recurring revenue, but if you don’t give your customers something new and exciting before your competitors do, they will sweep your customers into their camp. You have to study and manage the ratios of evergreen and introductory endeavors at work in all your sales channels. Remember, constraints on distribution are low, choices are high.”

“It’s staggeringly hard to find the stamina to pull a product from the shelf when it’s still selling,” said Paul. “R&D costs are ridiculously high. We need all the sales we can muster for contribution margin to make sense.”

“One of the hardest choices in business is to pull a product while it’s still moving. Again, what we are talking about is strategy. Of course you don’t want to leave more money on the table than you should, but you’ll often find you need to leave some. If you don’t do it, your competitors will happily obviate your offerings. That can be the end of one brand and the birth of a new one that is no longer yours.”

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Endless Encores: Repeating Success Through People, Products, and Profits by Ken Goldstein is available in hardcover and as an e-book from Amazon, Barnes and Noble, iBooks, Kobo, IndieBound, Indigo, and at independent bookstores near you.

“Focus relentlessly on the extraordinary.” Pub Day

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Stop Dropping the Ball

MittBallI get called frequently to help companies with their brands. Usually this involves helping identify the competitive advantages in products and services, articulating the unique selling proposition around innovations that constitute a customer promise, and then devising a sustainable communications strategy around that promise. That’s the hard part.

There is also an easy part. At the potential obviating of substantial advisory services going forward, here is an exceptionally simple way to solve half your problems. Ready? This applies equally to your personal life and your professional life. Copy and paste the following two words on the palms of your hands so you can see them every hour of every day:

Follow through.

Yes, it is that easy. A brand is a promise. There are three potential paths that follow a promise: (1) you fulfill the promise, wherein you satisfy and keep a customer, at least until someone leapfrogs you; (2) you exceed the promise, wherein you create an evangelist who markets for you; or (3) you violate the promise, wherein you create nasty noise in the marketplace that speaks ill of your offering at every possible turn.

When you break a business promise, you undermine the brand. When you break a personal promise, you undermine your own credibility. This is not negotiable. This is as hard-core real and irreversible as it gets. You need to follow through.

Here are several recent examples of broken brand promises:

  • My wife left her mobile phone on a plane. We went to baggage services. They couldn’t find it. They said they would call us the next day. They didn’t.
  • I went to pay my health insurance bill online as I do every month (I’m told recurring billing is for some reason not available on my plan). This time the system was broken. After on hour on the phone, I got a customer service representative who said she saw the problem in their system, that it would be fixed in 24 hours, and she would call me back. She didn’t call me back, and it wasn’t fixed. A week later I called again and began the process anew. This time another rep gave me entirely different instructions and said he had no idea why the previous rep had instructed me as she did.
  • We hired a contractor to do some work at the house. He didn’t show up. He didn’t call. When we rescheduled and he did show up the next time four hours late, my wife asked why he missed the previous appointment and was now four hours late. He said, “Well, I’m here.”
  • I filled out a time sensitive form online with a state agency. About a week later, I received a personalized letter via snail mail acknowledging my inquiry, conveying that the signer of the letter would get back to me promptly with an action plan. I never heard from him again.
  • A journalist for a high-profile financial periodical contacted me by email to conduct an interview about my book. I agreed and suggested a time. She asked if I could change that to a time that was more convenient for her and I agreed to that time. I gave her my mobile number. She did not call me at the appointed time. After 15 minutes I emailed her and asked if we were still on. Two hours later she emailed and apologized for missing the call because of an emergency. She asked if she could email me the questions. I said yes and she said she would send them. She never did.
  • A producer from a media company emailed me an inquiry to help his company launch a new venture. I said I would be happy to talk about it and suggested some times. I never heard from him again.

Yes, I know, everyone is busy. It’s completely normal to leave loose ends open in our fragmented, email overloaded lives. It can happen to anyone. It’s perfectly acceptable to leave people hanging if you have a good excuse. They will forgive you as soon as the words “I’m sorry” cross your lips.

Baloney! You’re living in a fantasy world if this is what you’ve convinced yourself, no matter if you are a rookie or a veteran. And you’re not as good as you think you are. Not even close. Otherwise you wouldn’t have left me blowing in the wind to be picked off by a competitor.

Winners say what they are going to do and then do it. I don’t care if you have to make lists of your lists. If you aren’t going to do something, don’t tell someone that you areand you’re scot-free off the hook. If you say you are going to do something and then you don’t do it, you lied. Yes, you lied. Or your company representative lied. And by transitive logic, your company lied. To a customer. That is the customer’s perception.

Think you can buy a big bubbly bag of advertising to win back the trust of that customer? Have fun calculating the ROI.

Think you can apologize and win back my trust? You can’t.

Maybe I have choices at the moment, maybe I don’t. If I don’t have choices now, I will soon. That’s what creative destruction is all about, old failed systems being replaced by better ones. Constraints on distribution are lifted from entrenchment every day. No matter what you have to offer, no matter how good you are at what you do, if you don’t show up as promised, you will be replaced. No one will feel sorry for you. No one will bat an eye when you crumble under your own incompetence or arrogance.

This really isn’t hard. In fact it’s as easy as it can possibly get. Make a promise, keep a promise. Follow through all the time. Do that and call me for the other half of your brand problems.