Complex Selling Made Effective

Lessons Learned from Starbucks On Managing Channels during Tough Economic Times

Louis Columbus

Last night during the MBA course I teach on International Marketing we discussed the continued price wars Starbucks is inviting with its scaled down coffee blends and the introduction of low-price cups of coffee.  The class debated whether chasing lower prices during recessionary times was the right strategy or adding services and value was the better approach. Soon the discussion expanded to include indirect channels and channel partners in general. 

Here are the key take-aways from the discussion:

1. Using pricing as the only differentiator is the catalyst of consolidation and the maker of red, red oceans in any industry.  We are reading Blue Ocean Strategy in this course; it’s excellent and worth picking up hence the red ocean reference.  Starbucks may have just made their own ocean quite a bit redder by focusing on price alone.  Clearly a bad move in tough economic times.

2. The original concept of the bistro, or meeting place, is being sacrificed for efficiency. The class concluded that relationships need to be back at the forefront and efficiency, while important, cannot be trumped by what people need most, which is a place to hang out and unwind between school, work and home.  Relationships matter more when consumers are making trade-offs, the class concluded.

3. Services are now substandard in many Starbucks, and the inclusion of free WiFi, a more attractive lunch menu and even light dinner menus was considered more attractive than just cutting the cost.

The bottom line, the class concluded, was that Starbucks is playing a dangerous game of initially setting high expectations with customers, then toggling them down with price, then working to increase them.  In tough economic times staying consistent on expectations and regularly exceeding them is all that matters.

Multi-Channel Management: The Hard Work Is Just Beginning

Louis Columbus

Cincom Manufacturing Business Solutions

Coordinating all sales channels to make sure customers get consistent messaging, branding, and the same buying experience continues to be a mantra many retailers and analyst firms endorse. With good reason: research suggests that multi-channel shoppers are more likely to use one retailers’ channel to define price points and another retailers’ to define availability, and select where to make their purchase based not on retail brand loyalty but value.

These are the findings from a recent study completed by Opinion Research Corporation where they key take-away from their study is that customers who rely on multiple channels to make purchasing decisions are not necessarily more loyal or profitable. A brief synopsis of the study is presented here in PDF.

Additional findings from the study include the following:

Even a well-coordinated multi-channel management strategy does not guarantee average amount spent across all channels will be greater for the multi-channel retailer. Clearly single channel-based selling is a losing proposition ($44 for retailer brand versus $78 for competitor), the greatest positive difference for multi-channel management strategies is when two channels are used.

Big box retailers including Borders and Home Depot (17%) and mass merchants such as Wal-Mart and  Target (16%), department stores (14%), and restaurants (11%) show the variation in percent of consumers using multi-channel management strategies by retailer.

While the majority of multi-channel shoppers purchase in a brick-and-mortar stores, 70% view websites as a viable shopping channel and 42% see websites as a trusted purchasing channel.

Multi-channel management strategies in retailers across industries have greater challenges than ever based on this research.

First, there is the issue of gaining loyalty and not just being shopped on price and availability. Second, there is consistency of brand execution. This is very tough to do in multiple channels. This study shows that multi-channel management isn’t a one-and-done proposition but a mindset in companies doing a good job at at.

Get Lean ... Get Sales

The Benefits of a Lean Front-Office

Front-office functions can provide remarkable opportunities to improve order processing times, eliminate waste, and increase profits. Often, businesses implementing lean manufacturing target their manufacturing processes and overlook creating a lean front-office. However, you may find that over 95% of the lead time in your order is lost in front-office functions – and only 5% of the lead time in the actual production of the product.

If you’ve never thought of your front-office as being a prime area for improvement in lead times, cost, and quality, it’s time to take a look. The Cincom Acquire Guided Selling, Product Configurator, Quote Management, Project Bidding and Estimating, and Contract Order Management capabilities can help you trim the fat and deliver a lean front-office.

Value Stream Mapping Identifies Waste

Value Stream Mapping is a helpful tool for creating a lean front-office. Value Stream Mapping is designed give you a look at the big picture, identifying every step in a customer order’s path across your entire system, from order input to final product shipment.

Value Stream Mapping helps you understand how each existing step in your order process contributes to or detracts from your overall value stream. Value Stream Mapping helps you identify the source of bottlenecks, waste and delays, and aids in improving inefficient processes to eliminate waste and add more value. Lean front-office processes analyzed include quote and order management, product configuration, application engineering, BOM generation, sales configuration and analytics, and channel and customer management.

Lean front-office benefits include:

• Eliminating redundant approvals
• Improving the flow of paperwork
• Restructuring how orders are handled
• Reducing long lead times
• Eliminating defects and mistakes due to incomplete or inaccurate information
• Simplifying complex tracking systems