I hate to see businesses struggling. I feel that there is always room for everybody to enjoy success. What frustrates me though, is the inflexibility and just lack of basic business decisions that need to be made. There are ways to thrive in a competitive business environment. I understand that there is always a problem of being too close to a problem and I am 100% sure that this is the case for these local companies. Here are the four major things I see wrong with most locally owned businesses on Kauai.

1. Value Proposition - This is the most important, but often over looked concept in business. What makes your business different from all the other businesses in the market? What makes your store unique. When I look at many local businesses that are competing with mainland stores, I can’t see any clearly defined value proposition. They are all attempting to do exactly the same thing as the big guys, offering a little bit of everything, trying to capture the largest market share by offering something for everybody. What these companies should be doing is coming up with a unique value prop that compels shoppers to at least give it a try. If you can’t say clearly and succinctly in one sentence, what makes your business unique and better from your competitors, you don’t have a strong enough value proposition. If you can’t come up with why people should shop with you, why should they shop with you?

2. Define what you are competing on and stick to it - There are only three factors a business can compete on, 1. Price 2. Convenience 3. Quality. Examples of businesses who stick to these factors are Wal-Mart (price), McDonalds (convenience), Mercedes (Quality). The mistake I see many local businesses doing is trying to compete on the wrong factor.

The approach of all big box stores are to compete on price (or the illusion of price). They undercut the competition because they know that price is easily quantifiable to everyone. This is cheaper than this therefore I should shop there. The response by many local businesses is totally wrong, either a) they try to compete on price because that’s what the big guys are doing and get killed or b) they do nothing and get killed. No small local business should be trying to compete on price against a company who is better financially backed and can play with economies of scale. They should instead focus their efforts on convenience (delivery services, helping you to your car, personal shoppers, pick up service etc) or quality, (best quality products or services, do not carry anything that is not the best). Quality and Convenience can in some cases be the same thing so smaller businesses would be wise to focus on that.

3. Define your ideal customer – By attempting to be everything to everyone, you end up serving no one. Local businesses need to clearly define their target customer and do everything they can to market, and provide services and products that are relevant to them. Making changes to try to attract a larger market share is counter productive because you will lose your existing customer base which has been supporting you. Focus on that base and increase your service to them.

Defining your ideal customer is so key because not only will you know how to provide for them, you will be able to cut significant costs by eliminating products and services that they are not interested in. A great example of this Papaya’s Natural Foods. You will not see steroid and antibiotic infused beef at Papaya’s even if it is cheaper. Sure the economy may be hitting them as well, but I bet not as hard as other stores who do not have a clear picture of their customers.

4. Care – Caring about your customer is the single most underrated business principle lost on business on Kauai. Caring doesn’t just mean doing sales and specials. Caring means going above and beyond the expectations of your customers. Caring means giving your customers every reason to give you their business.

One of my favorite local businesses in Hawaii that I feel does a tremendous job with caring for their customer is KTA Superstores on the Big Island. They are the one local store on a neighbor island who has been able to deflect any outside intrusion from mainland or outer island encroachment. They are still the busiest grocery store on the island by far even though Safeway, Walmart, Costco, have all moved in to try to steal their market share. How are they succeeding when everyone else is failing? Not on price, their products are more expensive than most other places. They just care more than the other guys.

They created a brand called Mountain Apple brand which is a KTA exclusive brand which buys and sells products all grown or produced on the Big Island. When you buy a Mountain Apple Brand product, you are supporting the local island economy. Where do you think everyone and their relatives who provide goods for Mountain Apple Brand are shopping?  KTA offers a grocery delivery service that drops off groceries to senior citizens who can no longer drive (I’m not sure if they still offer this service). Derek Kurisu, VP of KTA, hosts a show on Public Access where he goes around the island showcasing individuals and businesses in the community. In fact it’s not uncommon to see Derek walking around the aisles of KTA saying hello to everyone shopping their and thanking them for their business. It would be easy for him to say he is too busy for this, he has a million things to do, but to him, showing his appreciation is just as important as anything else he has to do that day. All of this might sound like smart marketing which it is, but it boils down to one thing; CARING. They just care more and that is why they can’t be touched on the Big Island. Care about your customers and they will care about you. Simple but almost always overlooked.

I hope that many of the businesses here on Kauai will be able survive this current economic downturn. When it comes down to it, the companies who can recognize these things and implement change are the ones who will set themselves up to be successful in the long run. The marketplace is constantly changing the having the ability to adapt and grow instead of being stuck in the old ways is essential today more than ever.

Offer a subscription service targeted at men that reserve flowers for them for all important dates. Standard package would include, Valentines Day, Mothers Day, for additional fees birthdays, anniversaries, etc. The payment is a yearly subscription and will guarantee that there will be a flower arrangement available for each subscriber at a significant discount on these dates. The customer can either set the service to pickup or delivery (additional costs) and will automatically be sent an e-mail notification on or prior to these dates.

This is beneficial to the customer because a large number of men forget about these dates and are usually scrambling last minute to get flowers or hate buying flowers because it makes them feel unmanly. This way, it removes the duty of remembering the flowers for these dates and removes the unmanliness  of have to call the flower shop 3-4 times a year.

For the shop owner, this is cash on hand at the beginning of the year which can be used to budget recurring expenses. Also because flowers are a perishable inventory, this lets them know that at least a portion of the inventory will move regularly because of  these dates. Also, by offering different packages you may be able to upsell flowers for holidays that these men would not normally buy flowers for. Easter, Girl’s day, etc.

For a flower business to make this work however, would require a few things. 1. Their flower arrangements must exceed expectations of the customer. 2. The owner must make sure that the have those flowers available for their subscribers. This requires excellent record keeping and will probably need to find or create a software to track subscriptions and dates. 3. The shop owner must treat the subscription money accordingly and keep reserves to order flowers for the subscribers at each of their days.

Flowers are an experience product. As the flower shop owners, you are presenting an experience to your customer that they can in turn present to their loved one.  What determines a positive or negative experience is success or failure to exceed expectations.

Me: My partners and I run a website where we teach people how to play the ukulele online. We have around 7500 registered members now and get like 20k uniques a month. Not great but it’s a pretty good start considering we started with $300 and spent no money on advertising.

Them: Oh wow, so all those people pay to use your site?

Me: No, we give away all the content for free

Them: … How do you make money then?

Me: Well there’s a lot of ways, we sell ads, we have an online store… We focus on diversifying our income streams so we’re not dependent on one area of our business.  Right now we’re mainly focused on building our brand equity though.

Them: Why don’t you charge your members?

Me: Because that’s not how you do it online anymore.

Them: I don’t get it…

I think I go through some version of this conversation monthly when someone who is not familiar with the internet asks me what I do. Every once in a while,  a guy or girl will just come out and tell me, “You know, you should be charging for your content on Ukulele Underground.”  I usually just agree with them rather than objecting. The truth is, I don’t believe in that method of monitizing content online, I believe that business model is outdated and a thing of the 90s. When I say that method, I’m talking about locking down content in a paid subscription sort of way. In today’s market, especially when dealing with smart, younger, savvy users, you simply can’t do it. Here are my reasons.

1. People my age and younger who have grown up with the internet grew up with the concept that content on the internet is free. We grew up with the original Napster, these younger kids are pros at bitTorrent and file sharing services like mediafile. The technology and the services available today make sharing content easier than ever. If there is something these kids want to find online they will be able to find it. So why even attempt to charge them, they’re going to pirate it anyways. What makes it even worse is that there will be people who will pay for your content, and when they find out that others are obtaining it for free, they will feel slighted and cheated even if they did things the  right way. Just knowing that, I wouldn’t be able to sleep well at night.

2. Free content leads to faster growth. By leaving your content free and unlocked, you facilitate word of mouth marketing and your users will do your advertising for you. Now, for this method to work, your content will need to be legit but if you pump out good quality stuff regularly, they’ll keep coming back and they will bring their friends. If you instead decided to lock down your content from the start, you create a barrier of entry to your content that most visitors will not bother breaking. This goes back to my previous post about how online trust must be earned. If you give visitors no reason to trust you, chances are they won’t and won’t come back.

3. If your stuff is good, people will still buy it later anyways if it’s packaged correctly. On paper doesn’t make any sense at all. Why would anyone buy something that you can easily get online for free? Well the truth is, people do buy it.  They buy it because they think your content is awesome and want to support you, they buy it for gifts for their friends and family, they buy it as collectors items. Whatever their reasoning, people do buy content that they have access to online, even if they’ve already read or watched it. I’ve done so myself in the past.  The idea that if you give something away for free, noone will pay for it later just simply isnt true. We get tons of e-mails asking us if we’re ever going to put our lessons on DVD because people want to buy them. We probably will do this sometime in the near future.

At the end of the day, the fact that the vast majority of the people I interact with don’t get what we’re doing is great. Let them think I’m clueless and an idiot for giving away this stuff for free. My partners and I get it, and we’ll have the advantage and head start while they try to figure it out.

This get’s me so excited every time I think about it. Why? Because maybe, just maybe the good guys have a chance now. It’s going to be impossible, even for the largest companies to cover up crooked business practices when information is so readily available and easily distributed to the masses via the internet. There are no more information bottlenecks. If your company is getting negative reviews on the internet, maybe it’s because your company deserves it. On the flipside, when a customer has an experience with a business that exceeds his or her expectations, the opposite happens. They will happily tell everyone they know about their experience. Guess what? These companies deserve it too! In the web 2.0 world, you get what you deserve.

“What if those reviews are unwarranted!? I had a bad employee that did that, it’s not my fault!” You can make all the excuses you want, but at the end of the day it is still your company. Luckily for most cases, it’s not that difficult to remedy these situations. When people post negative reviews about things, they generally assume the company they are complaining about is not listening.

Step one, read the criticism, and ask yourself what you can change to prevent this in the future.

Step two, contact that person who wrote the review. Simply contacting the person who wrote the review says a lot. It shows that you care about your company and your customers.

Step three, give that person something unexpected. A free gift, a free exchange for the product they bought, a gift certificate, something that will make them want to tell others about their new experience with your company. A positive experience can more often than not erase memories of a negative one (to a certain degree, there are some experiences that create permanent views of a company).

Do all you can within reason to change that person’s perception of your company. Chances are if you did your job of creating a new positive experience, they’ll go ahead and and edit their review, or post an update, glowing about the exceptional customer service provided by your company. Now take into account there will be times that no matter what you do, you won’t be able to change that persons mind. I personally have had some experiences that I will never do business with certain companies again. Sometimes you’ll encounter a customer with an experience like that, it’s inevitable, but if you begin to see a lot of those customers, maybe you need to take a long hard look at your business.

“But that’s too much work! That’s too expensive! If word gets out that I do that, people will take advantage of it and it’ll cost me a lot of money!”  There is nothing more valuable than a satisfied customer. At the same time, there is nothing more detrimental than a dissatisfied customer. How much does a dissatisfied customer cost? How much in lost potential revenue will you never see because of a negative review? Is it more than a $100 gift certificate? More than an upgraded replacement product? What is the cost of that lost revenue of one dissatisfied customer? It’s not just a nice idea to keep tabs on what others are saying about your business, it’s imperative. If you don’t believe that contacting dissatisfied customers is worth the time and energy, I wish you all the luck in your business, chances are it won’t be around for too much longer. Who’s ultimately going to win is the consumer and the businesses who do good by their customer. Did I say how excited this makes me????

Linkage:

Predictably Irrational website

This morning (well actually yesterday morning, it’s past 12 o’clock) around 3:45 AM I woke up and went to my computer. I don’t know why I did, I just had a feeling that something was wrong. There was a blinking IM box from Seeso in Chicago, one of our mods for UU. We had been hit hard with spam and he was trying to delete them all but he didn’t have access to some sections. We began working together, banning all the accounts that he had identified. As I banned, more registered and posted spam posts. We kept deleting more spam posts, the other mods began to chip in. I eventually upgraded the software in hopes that that would be the fix, it slowed them down, but they still were registering and posting spam all the way into the early evening. It was the largest, and worst spammer attack we’d ever experienced to date. I banned well over 50 accounts in one day.

Sure I was pissed. I was pissed at those spammers for trying to ruin the experience of the UU forum members. But never for even one second did I ever think to myself, “Man I don’t want to be doing this.” At 3:50 am all I could think about was taking care of the members and making sure they didn’t notice too much of the spam.  It was like noisy neighbors waking up a baby and the baby starts crying in the middle of the night. You’re not pissed at the baby, you’re pissed at the noisy neighbors.

I’m actually very blessed in the fact that UU has grown the way it has. I don’t consider any of the people on the site a customer. To me, they’re all family, which makes it quite difficult to explain to people who run traditional businesses. I try my best to really get to know as many of them as possible. I care about what they’re going through, and I often find myself just checking up on them on myspace or facebook, just to make sure they’re doing ok if I haven’t seen them on the site for a while. At the end of the day, it doesn’t matter though if other people get it or not. People who are a part of UU get it. There is really the feeling that we’re all in this together and we’re growing this ukulele movement as one. I’m lucky, instead of just me and my partners doing it alone, it’s more like a village raising this child. And this Baby is going to grow up to be HUGE.

In business, no matter what business you are in, you must have a goal to help other people in some way. The goods or services you provide must enhance the lives of your customer in some way. If you can’t do that, you do not have a business.  Whether it be, what’s for dinner, buying a house, or help learning how to play the ukulele, at their core, all businesses solve someones problem. Demand is simply problems that need to be solved. If you’re not out to solve someone’s problems, you’ve got a company that has no demand.

Be honest with yourself and your idea. Will this product or service truly benefit others, so much so that they are compelled to tell everyone they know about it? If you can answer yes to that question, you may be on to something.

Peace.