SlideShare a Scribd company logo
www.Kinesis-CEM.com
The Death Spiral:
Strategies and Tactics to Fight Commoditization
www.Kinesis-CEM.com
The Death Spiral
 Spatial Disorientation
 Natural Tendency of Plane to Spin
 Natural Attempts to Correct Worsen
The Problem
www.Kinesis-CEM.com
Industry Challenges
“Prices have come down a lot -- definitely in the last two years. Again, it's more
competition. A year ago I was bidding against three companies, and now I'm
bidding against five or six companies.”
“I have been a mystery shopper for almost six years and I have seen the rates and
the reimbursements decline considerably in the past few years….Recently, a shop
that used to perform for $15 was reduced to $11.50 with the explanation that due
to current economy the company has been forced to reduce the pay for the shop.
One of the things that are not taken into consideration by the companies seeking
MS services is the fact that they will get what they pay for. I will no longer do
that shop, but, people who are just starting, and less likely to do a good job.”
- Luisa Creutzberger, Gold Certified Shopper
- Mike Green, Speedmark
www.Kinesis-CEM.com
Kinesis Profile
 Situation Analysis at Start-Up
No Dynamic Sales People
Limited Start-up Capital
Intellectual Capital:
Technology Development
Survey Research
Mystery Shopping
 Business Plan
Stressed the Importance of Client Retention
Immediate Need for Revenue & Margin
Integrated Value Chain
Proprietary Technology
Broader Offering
www.Kinesis-CEM.com
Kinesis Profile
Kinesis Net Revenue Sources
Mystery Shopping
32%
Customer
Surveys
30%
Technology
Partnerships
38%
Kinesis Per Shop Price Distribution
(Excluding Reimbursement, Design Fees & Executive Summaries)
1%
50%
27%
8%
0%
11%
3%1%
32%
22%
8%
0%
27%
9%
0%
25%
50%
75%
100%
Under $30 $30 - $49 $50 - $69 $70 - $99 $100 - $149 $150 - $200 Over $200
% of Shops % of MS Net Rev.
www.Kinesis-CEM.com
Kinesis Profile
 Overall Client Satisfaction 4.5 (5-Pt Scale)
 4.8 (80% Top-Box) For:
 Willingness to Help
 Cares About Needs
 Trust & Confidence in Kinesis Staff
 Provides Individualized Attention
 Value Relative to Cost 4.4
 2 Year Client Retention Rate 99% (as % of in rev.)
www.Kinesis-CEM.com
Back to Our Problem
“Prices have come down a lot -- definitely in the last two years. Again, it's more
competition. A year ago I was bidding against three companies, and now I'm
bidding against five or six companies.”
“I have been a mystery shopper for almost six years and I have seen the rates and
the reimbursements decline considerably in the past few years….Recently, a shop
that used to perform for $15 was reduced to $11.50 with the explanation that due
to current economy the company has been forced to reduce the pay for the shop.
One of the things that are not taken into consideration by the companies seeking
MS services is the fact that they will get what they pay for. I will no longer do
that shop, but, people who are just starting, and less likely to do a good job.”
- Luisa Creutzberger, Gold Certified Shopper
- Mike Green, Speedmark
www.Kinesis-CEM.com
What’s Happening?
 The Google Effect
 Specialists in Value Chain Reduce Barriers to Entry
 Strategic Choice By Some Firms
 Clients Burned by Past Experiences
 Competition from Other Industries (IVR)
 Shrinking Market?
 Incomplete Industry Standards
 Industry-Wide Brand Problem
www.Kinesis-CEM.com
Why Are You In Business?
Owners
Employees/
Contractors
Customers
Value Creation?
www.Kinesis-CEM.com
What’s Happening?
 Commoditization & Price Problems are Value Problems
 Self-Reinforcing Cycle
Value problems create market forces that depress prices
Depression or prices reinforces value problem
 Death Spiral
www.Kinesis-CEM.com
The Solution
 Both a Strategic & Tactical Issue
 Role of Emotion in Purchases
 Customer Value Equation
IT CCP
QR
CV
++
+
= Where:
R = Results
Q = Process Quality
P = Price
CT = Other Tangible Costs
CI = Other Intangible Costs
www.Kinesis-CEM.com
Strategic Solutions
 Value Proposition: The unique added value an organization offers
customers through their operations.
 What’s your Value Proposition?
 What do Starbucks and Dick Morris have in common?
www.Kinesis-CEM.com
Tactical Solutions
 Tactics are Useless Without Strategy
 Not Every Sale is a Win
Angels & Devils
 Not Every Client is a Match
www.Kinesis-CEM.com
The Sales Funnel
 Supports Consultative Value
Proposition
 “The Opposite”
 Alignment
 Value, Quality & Benefits
 Accurate
 Qualification in Approaching Stage
 Heavy Investment in Prospecting
Prospecting
Approaching
Analyzing
Proposal
Sale
www.Kinesis-CEM.com
Educate Prospects/Clients
 Define Clear Objectives
 Keep It Simple
 Talk About Price & Value
 Seek Partner Rather Than Vendor
 Obtain Front-Line Buy-In
 Provide Adequate Internal Admin.
 Plan For Change
www.Kinesis-CEM.com
Comments & Questions
“Prices have come down a lot -- definitely in the last two years. Again, it's more
competition. A year ago I was bidding against three companies, and now I'm
bidding against five or six companies.”
“I have been a mystery shopper for almost six years and I have seen the rates and
the reimbursements decline considerably in the past few years….Recently, a shop
that used to perform for $15 was reduced to $11.50 with the explanation that due
to current economy the company has been forced to reduce the pay for the shop.
One of the things that are not taken into consideration by the companies seeking
MS services is the fact that they will get what they pay for. I will no longer do
that shop, but, people who are just starting, and less likely to do a good job.”
- Luisa Creutzberger, Gold Certified Shopper
- Mike Green, Speedmark
www.Kinesis-CEM.com
Thank You

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MSPA Presentation

  • 1. www.Kinesis-CEM.com The Death Spiral: Strategies and Tactics to Fight Commoditization
  • 2. www.Kinesis-CEM.com The Death Spiral  Spatial Disorientation  Natural Tendency of Plane to Spin  Natural Attempts to Correct Worsen The Problem
  • 3. www.Kinesis-CEM.com Industry Challenges “Prices have come down a lot -- definitely in the last two years. Again, it's more competition. A year ago I was bidding against three companies, and now I'm bidding against five or six companies.” “I have been a mystery shopper for almost six years and I have seen the rates and the reimbursements decline considerably in the past few years….Recently, a shop that used to perform for $15 was reduced to $11.50 with the explanation that due to current economy the company has been forced to reduce the pay for the shop. One of the things that are not taken into consideration by the companies seeking MS services is the fact that they will get what they pay for. I will no longer do that shop, but, people who are just starting, and less likely to do a good job.” - Luisa Creutzberger, Gold Certified Shopper - Mike Green, Speedmark
  • 4. www.Kinesis-CEM.com Kinesis Profile  Situation Analysis at Start-Up No Dynamic Sales People Limited Start-up Capital Intellectual Capital: Technology Development Survey Research Mystery Shopping  Business Plan Stressed the Importance of Client Retention Immediate Need for Revenue & Margin Integrated Value Chain Proprietary Technology Broader Offering
  • 5. www.Kinesis-CEM.com Kinesis Profile Kinesis Net Revenue Sources Mystery Shopping 32% Customer Surveys 30% Technology Partnerships 38% Kinesis Per Shop Price Distribution (Excluding Reimbursement, Design Fees & Executive Summaries) 1% 50% 27% 8% 0% 11% 3%1% 32% 22% 8% 0% 27% 9% 0% 25% 50% 75% 100% Under $30 $30 - $49 $50 - $69 $70 - $99 $100 - $149 $150 - $200 Over $200 % of Shops % of MS Net Rev.
  • 6. www.Kinesis-CEM.com Kinesis Profile  Overall Client Satisfaction 4.5 (5-Pt Scale)  4.8 (80% Top-Box) For:  Willingness to Help  Cares About Needs  Trust & Confidence in Kinesis Staff  Provides Individualized Attention  Value Relative to Cost 4.4  2 Year Client Retention Rate 99% (as % of in rev.)
  • 7. www.Kinesis-CEM.com Back to Our Problem “Prices have come down a lot -- definitely in the last two years. Again, it's more competition. A year ago I was bidding against three companies, and now I'm bidding against five or six companies.” “I have been a mystery shopper for almost six years and I have seen the rates and the reimbursements decline considerably in the past few years….Recently, a shop that used to perform for $15 was reduced to $11.50 with the explanation that due to current economy the company has been forced to reduce the pay for the shop. One of the things that are not taken into consideration by the companies seeking MS services is the fact that they will get what they pay for. I will no longer do that shop, but, people who are just starting, and less likely to do a good job.” - Luisa Creutzberger, Gold Certified Shopper - Mike Green, Speedmark
  • 8. www.Kinesis-CEM.com What’s Happening?  The Google Effect  Specialists in Value Chain Reduce Barriers to Entry  Strategic Choice By Some Firms  Clients Burned by Past Experiences  Competition from Other Industries (IVR)  Shrinking Market?  Incomplete Industry Standards  Industry-Wide Brand Problem
  • 9. www.Kinesis-CEM.com Why Are You In Business? Owners Employees/ Contractors Customers Value Creation?
  • 10. www.Kinesis-CEM.com What’s Happening?  Commoditization & Price Problems are Value Problems  Self-Reinforcing Cycle Value problems create market forces that depress prices Depression or prices reinforces value problem  Death Spiral
  • 11. www.Kinesis-CEM.com The Solution  Both a Strategic & Tactical Issue  Role of Emotion in Purchases  Customer Value Equation IT CCP QR CV ++ + = Where: R = Results Q = Process Quality P = Price CT = Other Tangible Costs CI = Other Intangible Costs
  • 12. www.Kinesis-CEM.com Strategic Solutions  Value Proposition: The unique added value an organization offers customers through their operations.  What’s your Value Proposition?  What do Starbucks and Dick Morris have in common?
  • 13. www.Kinesis-CEM.com Tactical Solutions  Tactics are Useless Without Strategy  Not Every Sale is a Win Angels & Devils  Not Every Client is a Match
  • 14. www.Kinesis-CEM.com The Sales Funnel  Supports Consultative Value Proposition  “The Opposite”  Alignment  Value, Quality & Benefits  Accurate  Qualification in Approaching Stage  Heavy Investment in Prospecting Prospecting Approaching Analyzing Proposal Sale
  • 15. www.Kinesis-CEM.com Educate Prospects/Clients  Define Clear Objectives  Keep It Simple  Talk About Price & Value  Seek Partner Rather Than Vendor  Obtain Front-Line Buy-In  Provide Adequate Internal Admin.  Plan For Change
  • 16. www.Kinesis-CEM.com Comments & Questions “Prices have come down a lot -- definitely in the last two years. Again, it's more competition. A year ago I was bidding against three companies, and now I'm bidding against five or six companies.” “I have been a mystery shopper for almost six years and I have seen the rates and the reimbursements decline considerably in the past few years….Recently, a shop that used to perform for $15 was reduced to $11.50 with the explanation that due to current economy the company has been forced to reduce the pay for the shop. One of the things that are not taken into consideration by the companies seeking MS services is the fact that they will get what they pay for. I will no longer do that shop, but, people who are just starting, and less likely to do a good job.” - Luisa Creutzberger, Gold Certified Shopper - Mike Green, Speedmark

Editor's Notes

  1. 3.5 year old company 1-million in revenue. Still small The situation analysis at start-up drove the resulting business plan. Business Plan: Client retention and the loyalty curve. Retention significantly increases profit because it amortizes sales costs across more years. Analysis of our margins, sale and marketing expenses and fixed costs has determined that we need our clients to remain with us for at least 5 years to recoup sales and marketing costs. With limited capital, Revenue and Margin were critical. * Revenue: Needed to leverage every asset to generate revenue * Margin: With limited Rev and capital, relatively high margins were critical. * Assume: Margin 30%, Fixed Admin, Sales and Marketing 25% = Net 5% -- 5% Improvement in Margin doubles net (10%). Integrated Value Chain – Initially there was a need to keep variable costs variable, also Some places in the value chain we added value, some places we didn’t. Kinesis adds value in Sales and Marketing, Client/Project Management, Technology, Analysis and Consulting, Were we didn’t we’ve made a strategic choice to integrate other partners into our value chain. (Scheduling, Editing, Non-Web Based Survey Data Collection). We use this integration as a sales point, leveraging the strength of the value our partners add. Tech – One partner is a talented developer Broad Offering – need to leverage every available asset lead to a broad offering - It made to sense to limit ourselves to being either a survey research firm of a MS firm. - If possible we wanted to leverage our technology to generate revenue (TRANSITION TO NEXT SLIDE – REV CHARTS
  2. The need to leverage every available asset for rev. produced the following results. Kinesis Net by Rev. Source 38% tech partnerships 32% MS 30% Survey – NONE OF IT IVR Lets look at mystery shopping 1/3 MS PRICE DIST. See how the need for margin influenced MS pricing 14% of our shops produce 36% of our mystery shopping profits The reulkts of this business plan NEXT SLIDE SAT & RETENTION RESULTS
  3. The results of our appriach NEXT PAGE, BACK TO OUR PROBLEM
  4. We are all under extrodinary pricing pressures With what most of us will agree are
  5. So What’s happening? The Google Effect. In a sales enviornment, information is power, in the past 5 years this power has shifted dramatically to buyers. Specialists like Kerrns, Profit & SASSIE reduce barriers to entry into the market place Lets face it, it’s very likely some firms for what ever reason as putting significant price pressure on the industry. While I think a healthy market has room for a variety or pricing strategies. I’m scheptical that such aggressive strategies will work in the long run. Client burned form past experiences: Disputes with employees Questions of shopper skills & creditbility More interal admin than planned Flat trend lines / undifferentiated scores Lack of responsiveness by vendors Difficulty demonstrating ROI Competition form other industries (IVR) – I don’t fear IVR, ask me why sometime Shrinking Market? It is a result of all of the above problems. We don’t know the market size, but antedotaly we hear evidence it might be shrinking The Fundamental Problem: Tom Asacker, Vegas Speaker “Sand Box Wisdom” – after hearing a litney of complaints about the market, opened his address by concluding we had an industry-wide brand problem. - Behind most brand problem you will generally find a value problem. NEXT SLIDE VALUE CREATION
  6. Question: Why does your business exist? Why are you in business? We are all in the value creation business. We create value for all stakeholders: Owners Customers Employees/Contractors
  7. Self-Reinforcing Cycle Value Problems create market forces that depress prices – as clients perceive less value and adjust the price they are willing to pay accordingly As a result of the price depression, providers cut costs, which hurts quality, which reinforces the value problem. Sound Familiar? The Death Spiral
  8. The Solution is both a Strategic and Tactical Issue Strategy and Tactics need to account for: The Role of Emotion in the Purchase Process The Customer Value Equation – which is the Ratio of Results plus Process Quality to Price plus Other Tangible and Intangible Costs of Aquiring the service NOTE: Price is only one of five variables in the equation. There are 4 other variables we can manipulate to address our value problem.
  9. Value Proposition is The unique added value an organization offers customers through their operations. What’s your value proposition? Do you have one? Is it unique? Does it add value? Does your Value Proposition center on mystery shopping? – Just my opinion, but if so, you’re exposing yourself to commoditization risk. I don’t believe the shop, or the mechanics of the shop is the value proposition. It is a necessary vehicle to deliver value, but it is not the source of value. What do Starbucks and Dick Morris have in common? Starbucks – Coffee is a commodity. How does Starbucks get you to pay $3.00 for 10-cent cup of coffee? – The are therefore and excellent model to follow in fighting commoditization. Who here patronizes Starbucks? Why?….. Starbucks is a B2C business, lets look at an example which is more relevant to our industry. Dick Morris - Any one know who Dick Morris is? Dick Morris is a political consultant, who after ’94 mid-term elections Clinton turned to for advise. He was paid a percentage of the media ad buy for the ‘96 campaiong and made millions in one campaign. Why is he relavant to us? – In reality all he is a political polster, fields political opinion polls. But his value proposition had much more to do than political surveys. His Value Proposition was in designing a campaign strategy. But how is was paid had nothing to do surveys or even consulting, he received a commission based on the ad buy. Like a Mystery Shop, the Political Survey is critical to understanding the electorate, but while critical, it is not the source of value. The Clinton could care less about the mechanics of the surveys, what they valued was the strategy and they were willing to pay millions for it. Conclusion Think if terms of why companies perform Mystery Shopping What benefits do they want? (Personal & Professional) What are the consequences of failure? (Personal & Professional) What pain do they want to avoid? (Personal & Professional) How can you position yourself to solve these problems.
  10. Not every sale is a win. There are deals that are just not worth having. They take resouces away from your current profitable clients and from going out and getting the clients you want. Not every client is a match. Going back to the cleint retention theme, if goal is to have a long-term mutually benifical partnership with a client, if it isn’t a match, wh invest in the relationship. (Kinda like dating or marrage).
  11. We are all familiar with the Sales Funnel model. Here is how I define the stages of the sales process. Prospecting Approaching Analyzing Proposal Sale Supports Value Proposition: Synfeld “The Opposite” – George has an epiphany that following his natural instincts has lead him nowhere, so he determines to do the opposite of all his natural instincts. As a result he sets in motion a series of events which land him a beatiful girl friend and a job with the NY Yankees. Our sales approach is the opposite of sales. Treat people as you would want to be treated. I refuse to sell early in the process, the early stages are not about selling, they are about laying the ground work, advancing the sales process, and qualifing the prospect. Tell the SSI story 2) Alignment In synch with the client’s slaes process, both in terms of time and people. 3) Value, Quality & Benefits addresses early. This is how we protect ourselves against price pressures. I use the MS Goes bad Article. 4) Be accurate. - Tell the WesternWireless story – Again these types of practices hurt the MS brand. Heavy Qualification in Appoach Stage – Determine if WE want to advance the sale. Buyers “happy with current vendor but seeking price” - we move against the grain Buyers who don’t appreciate the technology On-line auctions. – move against the grain. Heavy Invest in Prospecting
  12. Keep it Simple – If the questionniare is ugly, ask them to go do a shop, how much did they remember, how accurate do they feel they were. Price & Value – break the low bid prices down for them.
  13. We are all under extrodinary pricing pressures With what most of us will agree are