Monthly Archives: April 2011

Revenue Models and Memberships

I quit the Naval & Military Club when they decided that members should have a minimum spend at the Club each quarter, or simply be billed it anyway. This completely brainless revenue raising scheme accelerated the downfall of the Club, which went into liquidation in 2009.

Since that time though I had been thinking about how membership based organisations worked. I felt that they were somehow different from normal business in how they offered value, but a business partner of mine, ex McKinsey said “Members are just customers by another name”. “Not true” I thought, but I didn’t get a chance to really explore the concept until last week when the Churchill Club ran a panel session entitled “Member Value Management”.

The panel consisted of representatives of; a sporting club with 70,00 members, a not-for-profit environment group with 20,000 members and a for profit arts organisation with 7,000 members. Note: this is the number of fee paying members, not “facebook friends”.

For me the biggest takeway from the evening was that is all to easy to confuse the Revenue Model of “Fee Paying Member” with the way your organisation engages with its customers. Members are passionate and/or involved, regardless of what revenue model you use.

  • Consider the cable TV company Foxtel. It has a huge subscriber base that pays monthly fees, but would never call their customers a membership base. Their customers aren’t passionate about the Foxtel brand, nor do they want to engage with other subscribers. Foxtel is not a membership based organisation, but it charges membership fees.
  • Consider Holden Racing Team. It has a huge supporter base, most of whom act like customers, purchasing branded products and hospitality packages. This is a membership based organisation, but doesn’t charge membership fees.

So why do I pass this on? I realised that if your customers aren’t engaging with you and passionate about what you, they are just customers regardless of the label you use. It saddens me to say that this is probably the case with the Churchill Club, as our members just aren’t overly passionate about the club, nor want to get involved in putting on events. On the bright side though its the next opportunity for us that I want to address.

In regards to Naval & Military Club – they had passionate & engaged members, in fact 4,000 of them in the 1960’s. But unfortunately, the Club failed to change with the times and continue to provide value and preferred ways to engage. By the time the club closed in 2009. they had turned their 4,000 members into 1,100 customers, who weren’t passionate or engaged, and didn’t want to wear a major cost increase.

Follow the Signs

About 10 minutes into the trip to Eildon Dam for a picnic lunch on Sunday, we realised we hadn’t put the Sat Nav in the car. Bugger. Its not that the map book doesn’t work, its just that we feel the Sat Nav is a higher authority – i.e. we don’t argue when the Satnav tells us the route. But “No matter” we thought, its sure to be well sign posted, which also helps avoid arguments. One of the thing’s my wife and I have noticed is that when you are in tourist mode, you see all the tourist signs that help you get about. The same signs that are completely invisible when you are not in tourist mode.

This got me thinking about signs as part of a marketing plan. What should be on them and what makes a good one. So I googled “basics of sign design“, and found heaps of interesting tips such as not crowding the sign, fonts and colours to use, and thinking about whether it will be exposed to weather or not. Unfortunately there was almost nothing about deciding which content I should put on a sign, despite the fact they have been around since the Egyptians were building the pyramids.

So because I like to have conceptual frameworks for structuring my thinking, and wanting a signage plan for the Churchill Club, I came up with the following thoughts on sign content. There are three basic types of signs that we can create separately or combine.

Information Signs

Information signs form the backbone of any customer experience. Online its the button that says “purchase tickets here”. Offline they say “Push Here”, “Staff Only” or “Queue Here” etc. Its probably a good idea to role play as a customer, to figure out what you need. Try roles playing both the dumbest and smartest customers you can think of to determine how to stop embarrassing mistakes but without offending anyone.

Branding Signs

Its said that nobody ever buys from a billboard. That’s true, but when they lookup options online or in the yellow pages, they say “hey, I’ve heard of that group” When deciding where to eat – they want to know your restaurant does Thai, or Indian or something without actually going inside, and online they want to know who you are and what you do without having to read pages of your website. Figure out where you’re potential customers are looking (just ask them), and place your branding signs there to give your business mind-share with potential customers.

Specific Offer Signs

At least four times a week I picking up a menu to decide what I want to have. I may have already chosen Indian food, put the menu gives me the specific offers. Online its pretty much the same thing. When deciding to purchase, most people want a hard offer put in front of them that they can either accept of reject. The pricing also needs to be upfront so they don’t feel they have been scammed.

So what does this mean for the Churchill Club? Well online we are pretty good, but offline there appears to be a problem. We already have a number of banner branding signs, but we are missing some information and offering signs. A common problem is that when an unexpected guest or two turns up without booking, its likely we can fit them in. However neither the ticket price or how to buy one is obvious. It relies on me greeting guests and telling them. This can lead to an embarrassing moment when those wanting a last minute ticket find the price a bit steep. The solution of course is a sign next to the entrance with “last minute ticket prices”, and information on how to buy them. The other common problem is when new guests arrive, they are unsure of where our function room is. A temporary “Churchill Club upstairs” sign needs to be put downstairs.

But back to the start of the story. So on the way back from Eildon, we managed to stop in and have a drink with friends at the Badger Creek Camp ground, which wasn’t actually in our map book. We found it just by following the signs.

5 Steps to Becoming a Great Networker

I sat there one Christmas and watched the sales people walk in with baskets of goodies and bottles of whiskey, and wondered why there was nothing for me. Initially I thought it was because as the Accountant, I wasn’t particularly client facing. But after a fair bit of naval gazing, I realised it was simply because I wasn’t a people person. A bit more thinking and I realised that since every opportunity that had ever come to me, came from a person – maybe I should change my ways and become a bit of a networker, rather than just being good at my job.

networkingNow an old colleague, psychologist Peter Zarris says, “If you’re over 30 and you want to change, its going to hurt, and if it doesn’t hurt, you’re not really changing.” Therefore, having decided to change, I knew my journey to being a good people person and networker was going to hurt.

I looked around for information on how to become a good networker, and found plenty of resources, hundreds in fact. But they were all pretty much on what I should be doing, not how to get there i.e. Standards I wouldn’t live up to, or Tests I would fail. Therefore I decided to build my own “training programme” which I feel is now proven, so I decided to share.

1. Decide People are Important

Really, you have to believe in your heart that all people are important, and not just as potential clients/partners/influencers/friends/lovers. Everyone has their own unique attributes, that are almost always completely hidden from you – such as who their best friend is, or what their special talent is. Therefore networking isn’t just some strategy where you judge people and move them them on quickly if they aren’t of immediate use to you. Instead its a more of a life choice where you attempt to uncover who the person is, what they have going on in their life and appreciate them for what they are. It maybe that their value to you is an insight, a joke, a friendship, a service, or it could be that they have a mate or sibling that could be a potential customer. An added bonus its that when you have decided someone is important, it doesn’t require effort or a system to remember their name.

By the way, you are important too. There is no point networking if you think everyone is better than you, because they won’t want to connect with you. Now I’m not suggesting you be vain or arrogant, what I am suggesting is you get to know yourself, all your attributes and figure out what you have of value.

Top tip : Try mapping out all your attributes, not just business ones. By externalising them through consciously writing or drawing them, means you are forced to recognise them and you will remember them downstream.

2. Master the Art of Conversation

You can’t network if you can’t hold a conversation, and conversation is a hell of a lot more than just grilling someone or delivering a monologue about what you do. The art of conversation is about being able to talk freely and easily with others whether its small talk or expressing big ideas. Its about being a good listener and being able to understand exactly what people are saying, and how the feel about things.

Family and friends are a great place to practice the art of conversation – rather than being quiet and a listener at dinner, start getting chatty and ask people about their day. The more you practice the more relaxed you become. Small talk with strangers normally starts with me asking about the origin of their name. Not because its a technique, but because a name is the first thing offered, and I am endlessly intrigued by the origins of names. When I met Susan Youngblood last week, how could I not wonder where her name came from?

Top tip : Everyone likes talking about themselves a bit.

3. Overcome Shyness

Shyness is part of the human condition as we are all endlessly concerned that we will be rejected by strangers. My observation is that shyness doesn’t magically vanish as you become more senior, it just presents as gruffness or cool formality rather than an awkward silence.

To network effectively you need to overcome shyness and the only way to do that is to practice, practice, practice being relaxed with strangers.

The easiest way I have found is to start with quick conversations that are about the environment. “God its hot”, “That floor is really slippery”. Once you get comfortable with this, you can even start treating everyone a bit like a friend – connecting with them at a “we are all the same under the skin level”. Such as telling someone they are your “new best friend for the next 30 seconds”, while you share their umbrella and cross a road in the rain. However don’t stay overly friendly after the opening statement as its not that far a jump from nice guy to weirdo, when speaking to strangers.

Top tip : Always speak to strangers in elevators, they will be gone in a minute so it doesn’t matter if it goes pear shaped.

4.  Create Networking Opportunities

Now that you now how to do small talk and are no longer shy, its time to take your new found abilities out for a spin. Create some networking opportunities for yourself. This could be joining a club, going to an industry function or volunteering to assist a special interest group make things happen. They only thing I suggest you don’t do is go to networking functions. They are generally full of junior people desperately hoping you are an opportunity for them – and quickly discarding you if you aren’t. Yuck.

Top tip : Always do some research before going to a function. Its a lot easier to remember people’s names if you have reviewed the guest list or read the speaker’s bio.

5.  Systemise!

Now that you are networking, you need to grow and feed your network, rather than just have a series of transactions. The solution to this is to of course use technology, and develop the right habits and processes. So not only do you have a large network, you have mindshare with that network.

Firstly, never be shy to hand out business cards and make it a habit of having them with you. Secondly, add the new contact details you receive immediately into your contacts, or CRM system, or LinkedIn. Thirdly, send your new contact a short note, saying “nice to meet you” and confirming any agreements,

This way you will make the new connection “real” and you will have mindshare with them when they see an opportunity that suits you. You will also see a record of your network growing over time, which makes you feel you are achieving something.

Top Tip: Using a social network like LinkedIn means that you can constantly “feed” or add value to your network with little snippets, without looking pushy.

The Results

And the results? I have been living like this for about 5 years and it took me way out of my comfort zone, but now unsurprisngly its easy. I have gone from having 25 connections on Linkedin to around 900, my mobile phone went from having 100 contacts to 2,500. Consequently, I get a slow but steady stream of invitations to speak at forums and get involved in new opportunities.

Plus, I get plenty of Christmas gifts :)

4 tips for avoiding invisible failures

Have you ever noticed how successful businesses tend to have nice biscuits in the kitchen, normally something special, wrapped in chocolate, perhaps with a little dash of marshmallow or jam. Meanwhile businesses on their last legs, normally have a couple of broken Anzacs in the biscuit barrel. Not to say I don’t like Anzac’s, its just that broken ones seem to accompany businesses about to fail.

I’ve talked about the importance of recognising failure before, and I wanted to talk it about again this week as I have visited a firm with some “broken Anzac’s in the kitchen”. Failure has lots of attributes; it can be catastrophic or minor, likely or unlikely, frequent or rare even desirable or undesirable, and of course a whole lot of other things.

But the attribute I want to talk about today is the most insidious attribute of all, its visibility. Sometimes failure is obvious, its a “thanks but no thanks” response to a pitch. Hopefully, you learn, adapt and move on. But sometimes failure isn’t recognised because its simply invisible, meaning you don’t know you have failed and can’t learn, adapt and move on. Call me judgemental if you like, but consider:

  • The owner of an IT services partnership I have known for many years. He told me “We are doing really well, because we have managed to cover out costs for the last decade”. The two man firm was really just them being contractors, pretending they were in business and never noticed that their client list hadn’t changed over the last 5 years either. They never considered that with effort they could have more than this, they just felt “no work, no pay” was their lot in life. Their failure was invisible to them.
  • The owner of a small marketing firm, who told me “we must be doing everything right, because we are making about $500K profit a year”. He never got invited to pitch to new businesses, was never considered to be a trusted advisor and every day was hard work. In fact his business didn’t grow because he was leaking customers as fast as he could get them on board, and every ex-customer hated his guts.. He saw himself as a “winner” with vast success just around the corner. Because he wouldn’t recognise his failures, he changed his goals so that the $500K profit defined success. He altered his goals to suit the outcomes, so that he never failed and never changed his ways.
  • An executive in a large Australian Telecommunications business who was a friend of mine, and had held a series of strategy based roles. He moved through a series of business units that all failed after he left. In each case he felt that the reason for failure was poor execution, and it was never his strategy, despite the fact he was the common denominator. He refused to recognise that he contributed to the failure, so never learnt from it and was eventually squeezed out as he couldn’t impact profitability.

So failure can be invisible because it wasn’t in your aspirations, or you just won’t recognise it, or you trick yourself into thinking you are always a winner. But if you wanted to recognise this invisible failure and wanted to do something about it, there is a couple of things I think you can do.

1. Define success and define failure

You may be pitching a new product to 6 customers – getting two sales is outright success, getting no interest is failure. A result somewhere in between means you need to tweak your product, and failure means you should drop the product. Defining success is generally easy but rarely done, especially when its qualitative. Defining failure – or when you give up and try another tack is generally much, much harder to do. Not because its technically difficult, but because it makes people uncomfortable. However doing both gives you much more clarity on approaching any task.

2. Ask yourself what would getting lucky look like?

Some people just get lucky, they happen to sit next to famous people or potential customers on a plane and get on like a house on fire. People who never fly, normally complain about this phenomena. Exploring the question “What would getting lucky look like” helps you visualise outcomes that you may not be targeting, but capable of achieving. Therefore you can act, fail, learn and then alter your behaviour to achieve heights you never considered before.

3. Enjoy your competitors product

Have a good look at what competitors are doing and focus on what you like and their success. All too often we tend to feverishly focus on our own stuff the only comments we make about competitors is criticism. By looking at what competitors do well, you can see what your potential customers see and it open up new ideas of what your success could look like.

4. Notice the little signals

Sometimes success isn’t black and white, especially if its qualitative like being “valued”. And qualitative successes tend to have lots of little indicators along the way, such as; a client that wants to catch up for lunch, being asked to sit on a discussion panel, being cc’d on communications that don’t directly affect you. If you understand what the signals of success are, and they are missing, then you are seeing signals of invisible failure.

So why does all this have mind share with me at the moment? I got offered some broken Anzac biscuits last week by a company I was pitching to, and on leaving the premises I asked myself “Why would actually want to win their business? – It will be less lucrative, and they are sure to argue over every point in my invoices plus pay late”. By recognising the situation as a failure, I can create time on my schedule for much better opportunities. Perhaps with Tim Tams rather than Anzacs.

Revenue Model Innovation

Over a decade ago, I made the acquaintance of CIO of a major Bank, and asked him to become involved in my small IT services business which was growing like a rocket; 0-$2M revenue in year one. He declined, and said that “he didn’t find our business model scalable”. After the rejection I thought “how ridiculous, look at our growth!”

But since that moment, I have been thinking on and off about business models, trying to discern patterns and to have a conceptual framework to work within so that I could design better business models. I feel this is one of the core competencies of the entrepreneur.

Eventually, one of my understandings was that sitting between your product with all its features & benefits and your customer, was your revenue model. And according to Alexander Osterwalder and Yves Pigneur there are only 7 types of revenue models:

Asset Sales – Transferring ownership, normally as a one off transaction. Like a chocolate bar or car.

Usage Fee – The more a service is used, the more a customer pays. Like a hotel room or courier.

Subscription Fee – An access fee to a service. Like a telephone network.

Leasing – Granting the exclusive right to use a product. Like renting a trailer.

Licensing – Permission to use intellectual property in exchange for a fee. Like producing Disneymerchandise.

Brokerage – Charging a fee to be an intermediary. Like credit cards and stock brokers.

Advertising – Charging a fee for advertising a product or service. Like Television or event sponsorships.

The insight I had was that despite the industry, service or product, a good revenue model has two attributes that are common.

1. It creates an Annuity Stream

A system were you have to put energy into every sale you make is not much fun and its difficult to generate substantial returns. Engineering firms are forever chasing their next project. A much better solution is to sell once and then see the money rolling in month after month, known as an annuity stream. As your revenue grows, so does your profit margin as your direct costs decrease. By selling this way, you can also forecast the future and have increased confidence when decision making.

2. It maximises the price you can achieve

The two simplest questions to ask a business about pricing is “are you really covering all your costs?” and “Are you leaving money on the table?”. Its too easy for a new business not to factor in deferred costs such as maintenance or employee leave into its pricing, and finds out at the end of its first year, that it wasn’t actually profitable. Its also too easy to find out your customers would have paid much, much more for your service when you thought giving it a margin of 100% was being greedy. Pricing is always an incredibly complex issue, however all models generally fall into one of two camps. Its based on static variables such as list prices and quantity discounts, or its the cleverer  dynamic, based on market conditions such as you see with auctions and yield pricing. If you think of the dollars as a continuum, with cost to supply on one end, value to the customer on the other – your goal is to get your price as close as you can to the customers value without it being a barrier to sale, so you maximise your return. This requires experimentation and insight into your costs and his values.

So the trick here is to get creative with your existing revenue model and make it work harder for you, creating annuity streams and maximising price, without alienating your customer base. This is part of creating a Revenue Model that is scalable. How you do this, I’m not certain of just yet, which is why I am running a Churchill Club event on it. When I find out, I will be able to create the scalable model the CIO indicated I should have before he joined me, but then ironically, I probably wouldn’t have needed him.