I have spent all my working life believing that when organisations serve customers better and seek to help people, then they do better than organisations who just want to extract money from people. When I started work in 1979 it took me some years to realise that my view was not always shared by those whom I worked with.
I worked in marketing in food and drink (initially biscuits, then chocolate and then soft drinks). I saw my role as being to help the organisation to
- find out what matters to customers
- make products better by creating things that solved problems for people
- ensure products were profitable
- ensure products were available in the right places
- run marketing campaigns to let everyone know about them.
As a result, we would get more sales and customers would keep coming back.
Now 38 years later, I still think business is that simple. It is simple to understand. The challenge is to work with the people, the finances and the products to do it. This is the primary role of a business owner, a marketer or a CEO. This is what will attract more customers, grow profitable sales and maximise value for shareholders.
We were frequently told our job is to maximise shareholder value. For the management team that meant hit the quarterly numbers and ensure the company could pay dividends.
Maximising shareholder value
For me, maximising shareholder value means being more attractive, more visible and more available to more customers. But this costs money, so I kept running into people who were worried about adding cost to products without a guarantee of extra sales and were sceptical about the benefits of marketing spend when profits were under pressure. So for others maximising shareholder value was about cost control and financial management. The customer could easily get lost in these financial discussions.
Sound financial management and cost control are essential for success. But quite quickly financial discussions can start to view the customers as a target that we should extract more money from for the benefit of the shareholders. The discussions are about capturing loyal customers, seeing how far we can push up prices, how low can take the product quality. This mindset is an extractive mindset and not an attractive mindset.
Industry disruptors
What I have observed over the intervening years is that the best businesses are those that have the best reputations. This is linked to the most enduring growth and profit performance. They all start with great products that solve a problem for people. The are dedicated to better products. This is particularly true of industry disruptors
- Easyjet disrupted European air travel with better flights (and cheaper ones) they made it easier to book and easier to travel. (Maybe they are becoming more extractive now they are more corporate)
- First Direct created bank accounts where every customer is left feeling totally taken care of
- Hiscox created insurance that pays out when you need it, with great claims handling and protects what you need
- Uber created taxis you cn get hold of when you need them with no effort
- Miracle Gro created gardening products that make it easier to
- Dorset Cereals reversed years of cereal manufacturers engineering cheaper products with cheaper ingredients
- Hotel Chocolat now fill our high streets with chocolate shops where Thorntons used to dominate
- Redington did it for pensions investment management and have helped trustees to reduce and eliminate pension fund deficits
The attractive mindset knows that the business can only grow by attracting more customers.
Align shareholders, employees and customers
There is a commonly held belief that the interests of customers shareholders and employees are at odds with each other. This suggests there is a conflict between them
- Shareholders want to give the customers less and charge them more
- Employees want to work less and get paid more
- Customers want to pay less and get more
This conflict does exist when you have an extractive mindset. My experience is the best businesses do not suffer from this conflict and the reason is that have an attractive mindset
Better products sell more and customers are very happy to pay higher prices for them. Prosperous growing businesses are fun places to work and attract better people. When the business seeks to attract more customers and seeks to attract better staff, this results in a virtuous circle of growth. When a business is working out how to extract more money from customers and get more for less from their staff, the business enters survival mode.
This blog and all my future posts are about observations on how this works, when it works, examples of it working and lessons we can learn from them. These lessons of the attractive mindset can be applied to business organisations, charity fundraising, political campaigns, club memberships or any organisation that exists as a group of people trying to get things done.
This is a hybrid of a campaign for better business and a series of practical insights you can use to make your organisation or business perform better.
I hope you will join me for the ride.
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Last night I was having a discussion with Robert Crowder who is the chairman of SkiClub GB and owner of Crowders Nurseries and www.crowders.co.uk. We were talking about retail and the role of e-commerce for garden centres in particular. Robert reminded me of such a simple truth that to maximise growth opportunity it is essential for the product and service to be available in as many channels as possible. Especially channels that are growing like e-commerce.
“Although we expect to report profits up on last year, trading profit is under pressure. This reflects the greater changes taking place across the retail sector. We expect those to quicken, especially in the next 12 months as the effects of weaker Sterling feed through. We will now accelerate aspects of our strategy. This will involve a period of significant change, investment and innovation to ensure the Partnership’s success.”
As well as being a pensions investment consultant and co-founder of Redington, Rob is campaigner for better financial education (