The Wrong Example

“Sir? You seem to be more deep in thought than usual,” I began, noticing the furrowed brow of The Effective Detective.

“What? Oh yes Watson, I’m sorry, I was reflecting on a recent email I received from a successful Internet marketer,” The Detective replied.

“It must have been quite an email to elicit such a response,” I prompted, hoping he would continue rather than slipping back into his reverie.

“On the surface, the argument made in the email was a pretty standard one. The writer was discussing a recent news report in which the reporter made some statements, which I would also consider rather naive, about how Disney was a bunch of greedy capitalists. His response was basically correct – that if you provide value, you deserve to be compensated for it.

“However, there is another aspect of this argument that is missing. You see Watson, I am most likely several years older than the young author of the email. I took my family to Disney World multiple times, and I have friends who have been going to Disney since my children grew old enough to no longer experience the wonder of a young child, but not old enough to want to relive that same wonder. And therein lies the lesson for today,” The Detective gave his usual pause to see if I indeed wanted him to continue.

“Please, sir, you have piqued my curiosity,” I nudged The Detective to continue.

“What I have heard from those friends is, for them, the value has decreased. In an effort to keep profits higher, or perhaps even increase them, it seems that shortcuts have been taken. Paint that would have been redone almost immediately has been left to peel. Maintenance has been decreased. The emphasis is now on the families who will only make it to Disney once. The ones that will spend the most amount of money in a single trip,” The Detective continued.

“But, isn’t that what a company should do? Find that price point that the market will bear, and provide up to the level of service that customers will expect,” I interjected.

“Yes Watson, that is the standard, and for a company Disney’s size, it may very well be the best direction for them to take. In fact it may be what their shareholders demand, and a high level of value is still perceived. My fear is that smaller companies and even solopreneurs take away the wrong lesson from this.

“Let me give you a simple example. Have you ever gone to a restaurant that recently opened; one  getting rave reviews? The food is good, the portions appropriate, the service is attentive. They delight their customers. What can happen is that as time goes by, the owners realize that they can increase their margins a bit if they use cheaper ingredients, or reduce the portions just a bit, or have a few less staff on hand, maybe even raise their prices along with those other changes. Now, the delight their customers initially felt starts to decrease.

“Unfortunately for them, they are not a cultural icon like Disney. Compounding the problem, they have more competition, and a far more limited market.  Business starts to decline, and they go into a death spiral of cutting costs both in what they provide and in their marketing, which in turn loses them more customers, until they finally close their doors.

“Small businesses must remember the lifetime value of a customer, not just the margin from a single visit. They must delight, or at least put out a consistent effort to delight, their customers every time, and they must consistently reach out to their tribe.  That will give them a thriving business. The model given us by larger companies is a tempting one, but it is, for most of us, totally wrong,” The Detective finished.

“Something to definitely ponder, sir,” I volunteered.

“Quite so, Watson,” said The Detective, slipping back into his reverie, ending our conversation for now.