Winter Olympics Vancouver – What is the Best Measure of Success?
We’re all familiar with the medal tally that comes out of any Olympics, summer or winter and there’s much conjecture about the relevance of the medal tally. From the recent Winter games that were completed in Vancouver, the overall medal tally (i.e summation of gold, silver & bronze medals) was as follows:-
United States 37
Germany 30
Canada 26.
Based on the overall tally Australia came in 18th with 3 medals.
However, if success is ranked by gold medals then the leaderboard is
1. Canada
2. Germany
3 United States and Norway.
Australia comes in at 14th.
Recently though there was an article referenced on the Freakonomics website, where they recast the medal count by market value. The gold and the silver medals are actually 92.5% silver, while the bronze medals are mostly copper. So the gold medal, which is really just gold plated, is valued at $537, the Silver medal is valued at about $300 and the bronze medals are valued at about $3.40.
When the medal tally is ranked by market value then it is as follows:-
1. Canada $9,635,
2. United States 2nd $9,377
Australia was 14th with $1,374.
However, if you count every medal won by a country, i.e. one for each player, on the hockey team and the bobsled and so forth, then Canada was very much clearly out in front with $41,000 of value and 68 gold medals. The USA with 12 gold medals and had a market value of $25, 719 in value and based on this measure Australia was 15th with $1,374.
Now these are an interesting aside, but the interesting question is “What is the best measure of success that we should be looking at from an Olympics?” As you know, I always try to boil it down to the one main number, the one main thing we focus on and I’ve been trying to consider in my mind, what is the important measure for the Olympics.
Now as a little context, some years ago I had some involvement with the New Zealand men’s kayak team for the Athen Summer Olympics. I assisted in taking some video, during their training and providing other support roles as they were training on the Maroochy river here in Queensland (yes it was the New Zealand team).
The conversation with these people in thea New Zealand team was purely focused on the Gold Medal. Two of them went on to win silver medals, and they were happy to have won a medal, but there was no doubt that they believed that they’d lost gold, rather than won silver. Also the athletes looked at what their personal best times were, and they looked at how that compared to where they’d been.
I’m not going to conclude or give an answer on this post. I am going to ask for comments but, I believe that the athletes would say its gold medals, or personal best times.
It’s interesting to think that the media focus has been significantly on the gold medal tally, but I would like to see what the tally of personal best achievements was. When we think of the motto of the Olympics, ‘Swifter, Higher, Stronger’, I think it’s probably in the spirit of the Olympics to look at the personal best times.
But of course, if I was a Canadian I would be looking at value based on market value and counting every gold medal awarded to every player, because this places them with 68 gold, 15 silver and 8 bronze to a value of $41,043. A clear winner, go Canada!
Are Putting Your Customers Through Unnecessary Processes?
In the last post I covered the issue of the unnecessary fees and charges that are being imposed by businesses small and large. Further on this line of thinking, too often businesses are making their customers or clients go through processes which may make sense from the internal operation of the business, but in no way make sense to the customer.
Recently I had to get a washing machine serviced and also an air conditioner fixed. I had a look at a website of a particular company (a small Brisbane company) that stated that they had a division for washing machine repairs and also air conditioning repairs.
So I contacted them and mentioned that I had these repairs and I was put through to the air conditioning division, where I then spoke to a person about the air conditioner and then I said “I need to also book in somebody to come and have a look at the washing machine repair.” To which my reply was “That’s not my division, I will need to transfer you back to the main switch.”
So back to the main switch I went and it was like calling for the first time. I then got transfered to the washing machine division and I go to go through all my information again because this was the washing machine division.
I had given all my personal contact address details, phone numbers and everything to the first person, but I was asked to go through the process again because their internal operations were obviously separate and they couldn’t, in any way, merge the two. It was an unnecessary process and this just happened to me very recently so I am highlighting it. However, there are many examples that I could utilise.
We need to think of business from the customer’s perspective. We need to understand what is success as judged in the eyes of the customer; how are they experiencing our business?
It is only through a deep understanding of the customer that is both understanding of the behaviour of the customer, through observation, but also understanding the numbers that come out of dealing with our customer base. We need to understand exactly what they don’t like about our processes and redesign it to remove the unnecessary processes. The end result of unnecessary processes is customers who are not completely satisfied.
The repairs to my washing machine and air-conditioner have been completed successfully. But what is the story I am telling people – it is the story of the first contact.
Price is Not based on Cost.
Recently a graph of relative prices of various liquids was posted on ReflectionOf.me blog. The graph shows that HP Black Ink is the highest relative price with oil being the lowest. The comments people are leaving are also interesting. A lot are railing against Hewlett Packard and there is a discussion of the cost of the various liquids.
But PRICE is NOT based on COST.
Price is set by the value the consumers perceive. Price is affected by the competition and sometimes by the heavy hand of regulation.
So why would HP Black Ink so higher relative to other the liquids?
Remember price is a marketing tool. The price of the ink needs to be taken with the price of the underlying printer. For the consumer level printer HP make nothing. They have set the price low to get the printer into your house or office and then they can sell you the ink and make the profit.
But please price is not set by the cost of the item.
How are you setting your prices? If you are not differentiating your product or service from everybody else then you will be lead down the both of lower price. HP are differentiating their printers from the competitors which then leads to the ink sales.
Price is a marketing tool
A few points on the pricing emotions.
In this post I outline just a few points on the psychology of pricing. People tend to buy emotionally and justify intellectually. How many houses have been bought for emotional reasons? Then afterwards intellectually we say it’s a good investment.
There are three pricing emotions:
1. Price resistance.
2. Price anxiety or buyers remorse.
3. Payment resistance.
In educating our clients during the sale process we need to be able to address these pricing emotions. The mere obtaining of sticker shock is not necessarily a negative as once a client is educated to the value then they will often be your best customers. It’s a known fact that the luxury car ads are aimed at existing customers more than potential owners. These companies understand that after making such a large purchase, customers want reassurance that they have made a good decision. People don’t go out and buy a BMW because they saw the ad on the TV. But those who have bought the latest and greatest BMW or Mercedes or what other marquee brand and have spent a significant amount of money need to be assured. These companies understand that they need to address these buying emotions. It does not mean that they are addressing it by reducing the price, it means addressing it by educating their customers.
Prices need to be set at the beginning or as early as practical so that we get the pain out of the way and then deal with the pleasure. We get the ability to educate the client on the value at they are receiving but of course, we need to understand the value equation to be able to do this.
Pricing is a marketing issue. Pricing by itself as has been countlessly realised in the dust heap of business will not lead you to business success but pricing coupled with great service, understanding what the customers expectations are and delivering value can lead to increased net profit, increased revenue to the business and increased loyalty of your customers which in the long run will be the best growth strategy for your business. Don’t neglect pricing.
The 5 C’s of Value
In my previous post I discussed that pricing is a marketing strategy. In this post I discuss the need to look at the value being delivered to the customer.
So let’s look at the 5 C’s of value:
1. Comprehend the value being delivered to the customer.
2. Create value for customers.
3. Communicate the value you create.
4. Convince customers they must pay for value.
5. Capture value with strategic pricing based on value, not costs and effort.
So many businesses look at the services and products that they offer from their perspective. But to be able to determine the appropriate price, you need to firstly comprehend the value to the customer. Why are they buying that service, what problem is it solving, what pleasure is it obtaining or pain is it avoiding and then what is that worth to them?
In business, we need to be able to create the value. We need to be able to create this value so that we are actually delivering the value to the customer. We could create value by the experience in dealing with you. It could be by the result of using or delivering the product or service. Value must be created.
The customers don’t always comprehend exactly the value that is being delivered to them and accordingly an important part of any service strategy of a business is educating the clients of the value being delivered. Often time the customer may think of an aspect of the value but have not thought through every aspect of the value. Alternatively it may be that they have not quantified the real value being delivered. Never assume – educate your customers on the value being delivered.
The fourth aspect of convincing people that they must pay for value is also very much tied up with the education of the customers. Now remember that not all customers are going to want to pay full value. Those customers, you don’t want to deal with. We only want the good customers who are willing to pay for the value. There are plenty of these paying customers once they have been educated because these are the ones that we can earn a profit from and have a far more enjoyable business.
Finally, once we have understood the value equation, we then can determine the pricing strategy.
Old vs New
I have been visiting my in-laws in Taree (mid north coast NSW, Australia) area. This is a town with about 25000 people. There is an interesting business case study happening in this town. To keep things in order I have keep the name of the stores out of this post suffice to say that the stores in question are electrical goods retailers.
There is one store who has been in Taree for a long time. This store we will call OLD. It is a second generation business and the current owner is in his 70′s. The store is a disorganised mess. It is poorly set out. Also there is the main front section and then you go through a back door to another section (that is if you know where to look). The floor desperately needs attention. However they have a great reputation for service and sourcing anything you may want. Because of the time in town however they have a loyal customer base.
In recent months a new (new to Taree, but has a number of stores in NSW) has opened. This store is very well set out, well stocked and with a large range of items. The store feels fresh, clean and modern. The staff seem helpful and courteous.
Both stores stock similar goods and apparently their prices are similar. Which store will win the bigger business? My in-laws previously a loyal customer of OLD recently bought from NEW. When I asked why, they could not directly answer. However when I started to ask for impressions on the store, the issue of presentation and range came to the fore. (It was not price).
So even though OLD had a loyal regular customer, they lost the business because of the competitors range and presentation of the store.
Too many businesses do not pay enough attention to presentation. It is about the little things that matter. That is the floors, lighting, cleaniness. We notice these items subconsciously.
Remember just because your customers are regular repeat now, be warned that you need to keep fresh.
Service is King (Deliver more value)
Following on from the previous post regarding what is important when the economy has a slow down I know explore the second important item for business. Service is King. In a downturn customers / clients become very choosy in who they use. This applies to the general consumer as well as the business client. Now I hear some people say they become price driven. I say they become more conscious of value. They want value for their money. So it is not about reducing prices, but rather about delivering better value. Not only do businesses have to be more conscious of the value being deliver but they have to make sure that their clients understand the value. AAn often complaint in service business is that client X just does not understand the work/effort etc that has gone into the service. It is the businesses responsiblity to firstly understand what is important to the client and to educate the client on the value being delivered. Take the effort to truly understand what is important to the client. What is it exactly that they are after? Then deliver and exceptional service. With this exceptional service and an educated client your business will thrive in any recession. How can you find out what is important to your clients? Ask them. How can you deliver better value? How can you improve your service?
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