Transactional Quality and the Three-Legged Stool

There are several elements to a positive shopping experience: convenience, price, ambience/atmosphere, service, and availability, which combine to make what we call transactional quality. I’ve also heard transactional quality compared to a three-legged stool composed of quality, service (communication and delivery) and (lowest) price. In a competitive environment you can only get two of the three. If you choose the price and service then don’t count on the best quality. Or if quality and service are tantamount, then the price will be what it has to be. No one can afford to deliver all three, because they are at odds with each other. That’s why it’s called trade.

In thinking about transactional quality, take a moment to reflect on your own shopping experiences.

Is it really all about price? If it is, then how far are you willing to drive to get a better deal? Are the savings worth the inconvenience, the traffic, the cost of gas, and most especially, your time?

How about quality? Is the quality comparable at the discount store? Are you willing to eat a loaf of day-old bread in the next day or two, before it grows completely stale, in order to save 50%? How about bruised fruits and limp or mushy vegetables? Is the savings worth throwing away half of it out? Surely you’ve noticed that some name brand clothes are more durable and made of superior material. If it lasts longer and wears better, isn’t the quality worth more? We’ve all heard that generic items leave the back door of the same plant as the name brand stuff. While this may be true of some products, it’s not true of all generics, and it doesn’t mean they’re made of the same material.

How about service? Have you shopped at The Home Depot lately? ‘Nough said. (Though I do remember the days that wasn’t the case -before Nardelli became CEO). Spending half your allotted shopping time looking for someone to help you find what you need is probably not part of your plan. A commitment to customer service is often the deciding factor in customer loyalty. Cabinet manufacturer American Woodmark’s commitment to customer service is to address all reasonable, and sometimes unreasonable, customer demands. What better service guarantee can you get than that?

Ambience/Atmosphere? Are you a shopping snob? Of course you are. You like going to places where you feel good. They may cost more than the cheapest option, but the trade-offs may be worth it to you. So let’s not lie to ourselves. To use an example most of us can relate to: Who would honestly choose Walmart over Target? Is the 3-5% savings worth gritting your teeth and slogging through a disorganized store with harsh lighting, institutional colors, screaming children, English-is-a-foreign-language patrons, and not a checker in sight? Hmmmm…. that’s a tough call. If you’re still in denial then let’s use restaurants as an example. Surely you’ve noticed that as the menu price goes up, so does the quality of food, service, décor, cleanliness and patronage.

Then there’s convenience. Nothing brings the worth of your time to the forefront like convenience. If I go to the internet, how soon can I get what I want? Do I want it bad enough to pay for express shipping, or to drive across town to the storefront that has it in stock? How much time do I spend price-comparing? Ever noticed that pricegrabber.com and sites like it help you compare prices between various vendors. They often appear cheaper but then there’s shipping costs, which aren’t clear at first. And they each have a unique checkout process, which, it turns out, is not convenient either. Amazon, on the other hand, may not always be the cheapest, but is always cost competitive; Amazon has just about everything, and requires a standard of service from its third party vendors. The convenience of Amazon is that it’s a trusted source for internet purchases. That said, it’s still not as convenient as the storefront down the road that has a knowledgeable staff and the item on hand. So what is convenience worth to you?

Back to the three-legged stool of transactional quality- As a business owner which two will you choose? Keep in mind that this will say as much about your potential customer as it will about your products and services. Go cheap and you will have cheap, but demanding customers. You will forever be trying to cut corners and chase low-wage labor, a losing game. Produce and serve to a higher standard and you can charge for it. Its likely that your customers will see the value and be prepared to pay for it. But a caution to those who want to make a killing on a substandard product, people expect to get what they pay for.

Sales & Marketing: Old Models vs New

Quick poll, how many of you out there cringe a little (or a lot) with the idea of being confronted by a sales person in a store? How about at your front door? Did you just get the willies? Yeah, I think most of us do. Over the next couple of blogs I will be discussing what has shifted in the sales and marketing world over the last 50 years. And three distinct perspectives on sales and marketing: Consumer, Business Owner, Manufacturer.

“We’d like you to join our management trainee program. Where do you think you’d like to work?”

“…Oh, I don’t know. Maybe something clerical like HR or administrative?”

“How about sales?”

(Sales? Uugghhh!) “Sales sounds great!”

Those were my first thoughts when I was earmarked by the recruiter from American Woodmark to join their sales track. And yet, in retrospect I don’t think anything else would have fit as well. I think many of us have that same impression when we think of "sales". Uggghhh. Why do I need some smarmy salesman to tell me what it is that I need? These aren't the 1950's anymore Beave. If June Cleaver only flipped on her new flat screen TV she'd find that TV advertising has come a long way. No longer does the average consumer need a visit from the door to door salesman to be informed about a new product. Thanks to the internet and airwaves we are constantly bombarded with sophisticated ad campaigns disseminating information about the latest and greatest and why we NEED it. Consequently, as a consumer my attitude is that, if I need something I'll go to the internet, research it and go out and buy it. I don't trust someone telling me what it is I need anymore; they have ulterior motives. And I especially don't want that smarmy snake-oil-used-car-salesman anywhere near me or my front door. Probably leave a snail’s trail on my sidewalk.

Consumer:

Quick poll, how many of us like the idea of being the target of a salesman’s help?

It is apparent to me that if I as a consumer feel I don’t need a salesman to assist me with anything (but where to find the product), then marketing has done a superb job of informing their customers and persuading them to purchase their product. This is perhaps the largest change in sales and marketing since the 1950’s.

As a consumer what I want is an unbiased product expert. Someone I can go to with my problem to see if they have the right solution for me. The only time I’ll consult someone in the store on which product to purchase is when I want their specialized knowledge. If I like the sales person and feel he’s knowledgeable, and trust what he’s saying, I’ll probably ask his personal opinion. Haven’t you ever asked the food server to help you decide between two dishes that look good? "You work here, which dish do you like better?”

Business Owner:

So, in this world of abundant information, is there a need for sales people anymore? Funny you should ask. Up until recently I would have said no. But as part owner of a small business I find that I have a lot of problems that need solutions. I know there are businesses out there that have what I need, but I don’t know who they are, and they don't know that I need what they're selling, or that my only means of finding them is by flipping open the phonebook (I prefer local vendors whenever possible). So here’s the disconnect. Unlike consumer products I think business to business marketing is a lot less developed. I’m a business owner and need X service. How do I find that service? And what about all those products and services out there with solutions to problems I didn’t even know I have?

The model of sales and marketing to businesses, especially small businesses, seems mired somewhere along the 1950’s to present continuum. Their primary communication is still through cold calls and door-to-door soliciting. If your business has a need that you are aware of and looking to solve, you are probably finding the answers through industry publications, trade-specific websites and online forums, conventions, or local networking functions. After that, its Google and the yellow-pages. What kind of B2B sales rep do you need to help you? One that is professional, trustworthy and knowledgeable. One that makes it feel like a mutually rewarding, collaborative business partnership, rather than a one-sided transaction.

Manufacturer:

The other side of the coin is that of the vendor or manufacturer looking to sell their product or service. You specialize in making something, not selling it. You know there is a market for your product. People and businesses will need it and value it, if they only knew it was available. How to get the word out? Marketing can disseminate information to consumers through sophisticated ad-campaigns online and on the air. Business customers can get the word through the means already discussed (industry publications, etc.). But the problem with those methods is that the buyer must come to you. This is where marketing’s reach ends and sales begins. But how to make your sales efforts a laser guided weapon rather than a shotgun? High-Probability Sales is the way.

Licensing Your Brand

Las Vegas is a great place for a lot of reasons. It is one of those few places where the world comes to see you. Where else but Las Vegas can you get up and on a whim visit one of any half dozen major convention halls and learn about a different industry? Yesterday, manufacturing guru Philip Dahlheimer and I visited the Licensing International Expo at Mandalay Bay. I honestly didn’t know what to expect or what it was about. As soon as we entered the hall we were bombarded by vivid color graphics of cartoon characters, toys, and entertainment icons. I wanted to learn what was going on, but sitting down to a serious conversation with a representative from Ugly Dolls, Cookie Jar or Monkey Doodle Dandy just seemed anathema. And that’s when I saw the very serious looking Ducati motorcycle at the Dorna Sports booth. Phaedra Haramis from Dorna was kind enough to explain the industry in brief to us. The licensing industry is all about selling the licensed use of an entertainment image in exchange for royalties. So if you want to make a Garfield bobble-head doll or maybe a shirt or poster of “The Hoff” you need to strike a deal with the licensing agent to do so. Phaedra explains that the licensing agent’s responsibility is to first, vet the applicant to make sure that the product fits the brand’s image, quality, and reputation (Remember the Kathie Lee Gifford sweatshop scandal?). And second, review their business plan and sales forecast. The size of the royalty guarantee, immediately due, is typically based on the sales forecast projected by the business partner. This serves to ensure that the manufacturer executes the plan, and that their projections are realistic and achievable.

2/3rds of the floor turned out to be saturated with children’s characters, icons, images, toys, backpacks, games and so on. As a parent I was both overwhelmed and shocked by the volume of calculated advertising this hall held. Our kids don’t stand a chance, and neither do we if you can’t say no to them. The other third was a conglomeration of adult-oriented brands and celebrities: CBS, WWE, MGM, Dodge, Marlon Brando, and Chuck Norris to name only a few. Again, entertainment was the predominant theme; the only differences here was that adult brands tend to be represented by trade agencies rather than by themselves as the children’s product were. This says to me that children’s products are profitable enough that they keep their own licensing staff. In fact, licensing is probably a large part of their business model. Unless the adult brand has an almost religious following like Apple, Star Trek, or Dale Earnhart Jr., they tend to farm out licensing responsibilities to agencies. Licensing agencies are responsible for ensuring that their client’s image is honored by selecting partners who will maintain the integrity of the brand from production to pricing, and capture that extra revenue as well as halting piracy whenever possible. Price Waterhouse Coopers had a booth there too. They offer auditing services for any brands who want to make sure that royalty contracts are honored as agreed upon. The PWC rep said that 90% of them aren’t in compliance and a great deal of revenue can be recaptured through auditing. She emphasized that in today’s marketplace, brand imaging and licensing is global in scope, and can require representation in each market and country to earn revenue and protect the brand’s image.

Licensing is in essence, the opposite of the promotional products industry (where distributing your brand costs money). If a brand can graduate from one to the next, it has in a sense, “made it.”

To recap from a sales and marketing perspective, the power of brand imaging is incredible. Through it you can project much more than what your product or service actually does. By projecting a lifestyle, a belief, a feeling, an atmosphere or ambience your brand creates an emotional connection with the consumer. Some brands are so successful that they can command a fierce loyalty among their consumer base (think of all those Ford vs Chevy vs Dodge pickup stickers you’ve seen while stuck at stop lights,). Brand imaging and loyalty can be a powerful resource that takes hard work to grow, and careful balance to maintain. Sales and marketing professionals who know how to harness brand potential are poised to reap the benefits.