Are Price Increases Looming?  Pay Attention to the Direct Thermal Paper Market

July 28th, 2015

In the last week or so, two major suppliers of direct thermal receipt paper (and other direct thermal grades), Appvion and Koehler, have announced price increases 5 – 7%, effective in late summer/early fall.  According to Appvion, “The increase is due to strong demand and increases in input costs, and applies to domestic and international customers.”   While it remains to be seen if the increases will stick, the timing of the announcements leads me to believe the companies’ management teams have confidence they can get increases through.  Most commodities are declining right now, as fears of a major slowdown in China escalate.  Given the current commodity environment, it takes a little chutzpah to announce an increase.  I applaud your leadership.

You better believe every paper mill (and chemical supplier and laminate supplier and label converter) is following this increase very closely (and you should too).  No offense to my friends in the receipt paper business but lately, they’ve been at the bottom of the food chain.  Demand has declined (emailed receipts don’t help!) and it is truly a global market where supply can be moved around very easily.  When supply exceeds demand, prices fall.  It’s not that complicated.  As I’ve written in the past, paper suppliers have gotten smart and fought that trend with consolidation, reducing supply.  The industry is also starting a pretty creative advertising campaign which you can read about here:  http://whattheythink.com/articles/74712-paper-industry-how-life-unfolds/?utm_source=WhatTheyThink+Newsletters&utm_campaign=82d9b44ddd-2015_07_21_Daily&utm_medium=email&utm_term=0_0e715f456d-82d9b44ddd-322089481  I give the industry credit for working on both sides of the supply and demand equation.  Paper is always going to be needed.  But if new markets for paper products don’t develop and the stigma of paper being bad for the environment isn’t erased soon, we will continue to see demand declines outpace supply declines.  Note I am referring to paper in general, not specific markets.  Believe it or not, there are segments of the paper industry that are growing.

If I were a betting man (I do enjoy taking some risks but I’m wise enough to know Las Vegas wasn’t built because people win.), I’d be surprised if the direct thermal suppliers get their fully announced increase.  They might get a little.  If the economy continues with slow growth as it is now, don’t be surprised if this emboldens others.  The last major increase in the pressure sensitive industry was in June 2011.  That’s 4 years ago.  Despite what the government says, a lot of our costs have gone up since then.  I’d bet money we will see at least one increase by this time next year.*

*Unless China is revealed to be a house of cards.  If that is the case, all bets are off and gather all the cash you can.

Don’t Forget Your Existing Customers

July 21st, 2015

I recently experienced a situation that is a case study in how not to treat existing customers.  I got sick of my cable bill going up every month with no change to my service.  Ads are everywhere touting bundles that cost significantly less than what I currently paid for my service.  I called my existing company.  I was very upfront with the customer service rep, saying, “I don’t want to switch because it costs me time and money.  You don’t have to give me the promotional price, but you’ve got to come down some.  I can get better service from a competitor for half the cost I’m paying you.  What can you do?”  She instantly launched into her script.  I was firm but polite, “Please don’t give me the script – just tell me can you do anything?  If not, I’m going to get a competitor’s price.”  She said the only way to cut my price was to reduce my service.  Wonderful answer.

I went online and got a competitive price.  It turned out I could save a lot more than I thought, almost 40% per month and get better service.  Before I followed through with switching, I again tried my existing cable company.  I told the new CSR the same thing I told the first one: I can get a much lower price.  You don’t have to match but you’ve got to come close.  She too launched into a script.  I told her not to bother – I was switching.  My seven years of being a loyal, overcharged customer are coming to an end next week.

In a cubicle somewhere, a brilliant MBA has calculated how the cable company can maximize its revenue.  He’s probably calculated switching costs and how many existing customers will leave if the company continually raises prices on them.  At the same time, management is rewarded for new subscriber additions so they discount for new customers.  I say all the time that numbers don’t lie.  But there has to be a context to the numbers.  What the brilliant MBA and management team are doing is maximizing short term revenue.  Especially in a day and age where we can cut the cord for cable, cable companies better be looking at Plan B.  Maybe they are and they don’t care if they irritate all of their customers because they know they’re going to lose them soon anyway.

We all love new business from new customers and we should.  But forgetting our existing customers or treating them poorly will result in bad outcomes.  Remember your existing customers – they got you where you are.  Treat them with respect.

Price vs. Value: There’s a BIG Difference

July 15th, 2015

I heard an interesting statement in a meeting last week.  “Most people know what they paid for something but very few know what they got.”  I started to think about that statement in light of our technological advances over the last 20 years.  The internet has created a wealth of price competition.  It’s easy to Google a product and get literally thousands of prices for that product.  Obviously, it is easy to determine price for most products.  It is far more challenging to define the true cost and value of that same product.

We have a recent situation where we lost a substantial order on price.  Our customer has come back saying the new labels aren’t working in the end use application.  It is a high speed application and the line was constantly jamming and the operator has to continually reset the line.  The customer audaciously asked us to match the competitive price so they could have a product that actually works.  The Seinfeld in me wanted to say, “Sure. We’ll match it but our labels won’t work either.”

In this situation, which is far too common in every industry, someone in purchasing found a lower price for a product.  He assigned no value to what it cost to use the product.  More than likely, his performance evaluation is very skewed towards hard dollar costs savings, not productivity.  Even if his evaluation is tied to productivity, he will blame the vendor for bad product.  Clearly, the value of the labels they are currently buying is well below the price they’re paying.  The few percentage points saved on the purchase of the product are more than absorbed in lost productivity.  It’s tough to put a dollar figure on that productivity.  It’s easy to see the price paid for the product.  We default towards easy.  As I’ve written in the past, as vendors, we default towards easy too and match prices like lemmings.  Remember, many lemmings die when they jump off the cliff in search of a better habitat.

In the price transparent world we now live in, the phrase “Caveat Emptor” is more important than ever.  Buyers, beware of just shopping on price.  Make sure you understand the value of what you’re paying.

 

You Better Have More Than Just a Product

July 7th, 2015

 

A lot has been written about how technology companies tie goods and services together to leverage the value of their customers and create a competitive advantage.  I recently received an Apple Watch as a gift.  I didn’t have an I phone, so the gift forced me to convert my phone from Samsung.  It gets better.  After much contemplation, I finally capitulated and set my nine year old son’s IPod up on the Apple cloud service.  My son  can text me now.  Today was the first day of texting.    Important communication now happens because he can text me:  my Apple watch buzzed in a meeting today with a text from my son, “What should I have for lunch?”  What he doesn’t know is I can now track his every move with his IPod.  Keep that secret for me, please.

Score one for Apple.  Its innovative watch created a huge competitive advantage in my household.  Apple has a great set of products and services that work well together.  Once you’re in their network, it’s hard to get out.  I submit that those of us in non-tech businesses also have competitive advantages we can use.  We don’t do it quite as well as tech companies.  We’ve got a lot of assets that can be leveraged to create a competitive advantage and tie our customers closer to us.  For example, we have physical plants that can be used for distributing more than our products.  Think about how much more valuable you are to your customers if you do more than just supply them with a product – you supply them with a service that helps them in another aspect of your business.  Think about how much more tied to you those customers become if you do more than just sell them something – you provide a service that they can use in addition to buying your product.  General Electric and other large industrial companies figured this out well before tech companies.  They financed equipment purchases for their customers.  More traditional industries have more traditional corporate structures that can create silos.  Tear down those silos and figure out if one of your internal departments can help your customers.  If you don’t, Apple (or someone else) will.

Invest in Relationships and Read the Declaration of Independence

July 1st, 2015

In an era of constant connectivity, it is a sad irony that we’re less connected than ever.  We rarely spend meaningful time with key customers, supplier partners, or anyone else.  We’re all “too busy” to spend a day or two with people critical to our business’s success.  That’s a big mistake.  Email and phone calls are great for communication but they’re not the best relationship tools.  There’s something to be said for spending time with people outside of the office environment, whether it’s the golf course, dinner, spa, or whatever activity you (or they) enjoy.  You get to know each other more intimately.  Through that deeper understanding of each other, trust develops.

This will probably shock a lot of you but  it’s OK to have fun in business.  We’ve become so focused on saving money and so afraid to look successful, I think we often forget that.  It’s OK to treat your team and your customers to a nice dinner.  It’s a good thing to say thank you and let you know you value their contributions.  Not enough of that happens in our world today.  A little gratitude goes a long way.   As we enter the second half of the year (time does fly), make it a priority to spend quality time with your customers and suppliers.  If you’re too busy for them, you’re probably spending a lot of time doing unimportant things.

Have a safe and enjoyable July 4th.  Do yourself (and me) a favor and read the Declaration of Independence.  Fifty six people signed the Declaration of Independence.  They are great examples of the power of relationships.

A link to the Declaration of Independence is below.

http://www.archives.gov/exhibits/charters/declaration_transcript.html

Customer Service Stinks Everywhere and It’s Our Fault

June 23rd, 2015

I’ve complained many times about how bad customer service is everywhere in the US.  It doesn’t matter where you are or what industry you’re in.  In general, customer service is pathetic.  We’ve supposedly moved to a service economy which makes this trend all the more frightening.  I’d rather deal with an app than many supposed customer service professionals.  Several factors have caused the decline in service.  Unfortunately, they all relate to us.

First, “You get what you pay for.”  We all want Wal-Mart prices with Neiman Marcus service.  The math doesn’t work.  A company can’t be the low cost and high service provider; those strategies don’t mix well.  It is acceptable (and encouraged) to drive miles out of your way to save a few pennies on gas.  With the consumers’ mindset focused on saving money, they won’t pay a premium for better service.  That’s a problem.  Second, and closely related, companies do a poor job of training people.  I was recently at a restaurant (a chain) and asked for my entree to be slightly modified.  The waitress said I couldn’t order my entree that way.  I ordered something else.  When the manager came by to ask the perfunctory, “How is everything?”, I told her I wasn’t eating what I wanted.  I explained to her what had happened and she said, “We could have absolutely done that for you.  I apologize.”  The waitress returned and also apologized and said somewhat sarcastically, “I wasn’t told that in my seven minutes of training.”  The “You get what you pay for” goes both ways.  If companies don’t train their employees, their service levels will be poor.  Third, and most importantly, service is poor because we are timid.  We all hear the comment from customers, “I can buy X from your competitor for Y% less.”  We immediately match the price we’re told.  We forget the customer calling us for a reason.  Something we do BETTER than that supposed competitor caused them to use their most valuable asset, their time, to call us.  We capitulate and match.  We then don’t have the financial resources to continue to compete with service so we start going down the path of lowering costs.  That leads to worse, worse training, and ultimately, delivering worse service.  And so the pattern continues.

Start fighting back.  Stop being the problem and start being the solution.  Don’t accept mediocre service.  Train your employees.  Training is an investment, not a cost.  Most importantly, have pride in what you do.  If what you do deserves a premium, get it.  Don’t be afraid.  If what you do doesn’t deserve a premium, find something new to do or start doing what you do in a different way.  (Special thanks to my wife for inspiring this blog!)

Three Business (and Life) Lessons From the NBA Finals

June 17th, 2015

I was hoping this blog would be about the Cleveland Cavaliers’ NBA championship or, at the very least, the grit and determination they showed making the NBA Finals a seven game series.  Alas, it was not to be, as Golden State won the title last night.  The series does lend itself to business and life lessons.  Here are three:

  1.  You can’t do it alone.  In case you missed it, the Cavs played the last 5 games (and overtime of game 1) of the finals without two of their best players, who were hurt.  LeBron James proved he’s the best player in basketball but basketball is still a team game.  He gave everything he had but Golden State had too much depth and too much talent.  LeBron is special because not only is he great, he makes those around him better.  But there’s a limit.  The best player (manager) can only get so much out of a teammate (employee).  Depth matters.  Talent matters.  Surround your superstars with talent and good things will happen.  A great team will beat a great player every time.
  1.  Stick to your plan.  Early in the series, even when the Cavs had a 2 games to 1 lead in the best of 7 series, Golden State’s coach, Steve Kerr, told his team, “They’re going to wear down.  They only play 7 guys; we play 10.  Keep fighting.”  Kerr was right.  It became obvious the Cavs were a step slow in games 5 and 6.  Kerr had a plan and he believed in it.  Certainly he made tactical adjustments over the games but he kept his strategy of using his competitive advantage of depth to win the series.  Figure out what your strategy is and stick with it.  The more I experience in business, the more I am convinced what your plan is doesn’t matter as much as sticking with it and executing it.  Too often, we get caught up in the “flavor of the month” and switch gears.  Changing strategies confuses employees and customers.  Remember Golden State’s success – stick to your plan and make tactical adjustments.
  1.  Home court matters.  I can’t say the Cavs would have won the series if they had home court advantage but I think it would have been closer.  Playing on your turf matters.  How many times have you heard a sales person say, “If I get the customer to visit my (plant, office, building site – fill in whatever you do here), I’ll close the sale”?  Why?  Because home court matters!  We have a little more swagger when someone visits us vs. going to their turf.  We’re proud to show off what we do.  I know it’s not always possible to get a customer to your facility but it is possible to provide them with a “home court”-like experience.  Take pictures.  Shoot videos.  (Have them professionally done please.)  Let your customers know you’re proud of what you do and you’ll defend your home turf!

Like 3 million other Cavaliers fans in Northeast Ohio, I went to bed a little disappointed.   I woke up still a little disappointed but excited about next year. When Kyrie Irving and Kevin Love are healthy, this is going to be a fun team to watch.  We have hope (being a Cleveland fan, that’s about all we have). That might be a bonus lesson.  What are you doing to give your team (and customers) hope?

Is a Paradigm Shift Towards Longer Term Thinking Starting?

June 10th, 2015

Over the last couple of years, a lot has been written questioning whether or not having a sole focus on shareholder value actually helps shareholders.  If you want to read a good summary, go here: http://www.theatlantic.com/magazine/archive/2013/07/stop-spoiling-the-shareholders/309381/.  “Conscious Capitalism” by John Mackey, the CEO of Whole Foods, is a bestseller (and worth reading).  In a nutshell, one of the challenges of having an extreme focus on shareholder value is managers tend to focus on short term results.  This focus prevents them from looking out into the future and making sure the firm is well positioned for that future.  A classic example is Blockbuster.  As RedBox and Netflix started to attack Blockbuster, the management team was earning record bonuses for producing short term profits.  Within a few years, Blockbuster was bankrupt.  Shareholders certainly didn’t do well in the long run.  Needless to say, neither did thousands of employees.

I recently attended a presentation by a major manufacturer.  The manufacturer had decided to outsource its US based customer service in order to cut costs.  There were of course some issues with the outsourcing process that irritated customers.  One customer pointedly asked, “Did cutting those jobs really help society?  Will it really help your firm in the long run?”  I don’t know the specifics of how the company decided to cut jobs; it very well have been necessary to cut costs in order to remain a viable entity.  What I do know is people are more likely to ask about how a company operates.  What I do know is the questions raised in the presentation led to interesting conversations in the hallway after the presentation.  It was very interesting to hear attendees, most of whom hold senior leadership positions in companies big and small, talk about how short sighted businesses have become.  Comments like, “Everyone’s worried about this month or this quarter.  Long term thinking is next quarter,” were very common.  It was interesting to hear  the commentary coming from people who are certainly interested in and paid to create shareholder value.  I think conversations about next year and the next 5 years are becoming more common among management teams.

I’m all for maximizing returns.  As I’ve written in the past, one of the biggest challenges business leaders face is balancing short run and long run strategies.  What might help short term profits might be a disaster for long run viability.  If you continually invest for the long run and don’t produce short term results, either the business will fail or you’ll be out of a job.  One activity I find helpful is keeping a list of quarterly, 1 year, 3 year, and 5 year goals.  I continually update it as our business evolves.  I also keep the historical versions as reference points.  Remember – failing to plan is planning to fail.  Hopefully, you and your company are planning for longer than the next three months.

Follow up on the No No’s Challenge and Finding Business is Work

June 3rd, 2015

I had some fun with the “no no’s challenge” and got some interesting comments from customers, friends, and employees.  It stretched my creativity to answer why I would prevent someone from working part time for full time pay and why bills still need to be paid.  I had to remind a few people – I kept curse words in my vocabulary.  I do have to say it was a success – eliminating the simple word “no” requires more thoughtful answers to questions posed to you.  I encourage you to try it.

So we’re stuck in this slow growth (or negative growth) economy.  What are you doing about it?  Pouting?  I admit – I do every now and then.  It is interesting to see our employees, our customers, and our vendors who take the slow growth economy as a challenge.  Those who actually, gasp, work to find business are doing quite well.  There are opportunities out there.  They require effort and knowledge to find.  If you can prove your product/service creates value beyond the customer’s purchase price, you can sell things/services.  In the label world, this often means process improvements , product performance improvements, or educating the customer about something beyond what they already know.  Explaining what you can do means a longer sales cycle.  Patience is a virtue most of us (especially me) lack but it’s a necessary virtue in today’s environment.  Customers don’t have the time to listen to a pitch that’s the same as everyone else’s.  If all you can sell is what someone else can sell too, you’ve got a problem.  Differentiation is the key to success.

Instead of wasting your time pouting about the environment we’re in that you have no control over or saying no to every idea that crosses your desk, try focusing on the products you have that are differentiated.  Think about other applications for them.  Try something different.  It just might work.

The “No No’s” Challenge

May 27th, 2015

Cynicism seems to dominate our culture today.  Snarky comments and putdowns come at us from every corner.  I fully admit to being drawn in to the environment of cynicism and sarcasm.  It hasn’t helped my productivity and it certainly hasn’t helped my attitude.  I’ve decided to challenge myself today.

I recently read a summary of the book “Yes, And” by Kelly Leonard and Tom Yorton.  ((I just bought it after reading the summary: http://www.amazon.com/Yes-Improvisation-Reverses-Creativity-Collaboration–Lessons/dp/0062248545/ref=sr_1_1?ie=UTF8&qid=1432731392&sr=8-1&keywords=yes+and)  They both work at Second City, the famed Chicago improvisation comedy troupe.  If you’ve never seen a live Second City show, put it on the bucket list.  The book focuses on how techniques improvisation comedians use can benefit the business world.  A major technique of improv comedy is saying “Yes, and…” instead of “No, but…”  Saying yes opens you up to possibilities instead of closing your mind to what you already think. It sounds like a subtle change.  Based on the success Second City alumni have had in all walks of life, I think it’s worth trying.

One recommendation they make is go through a day and don’t use the word “no.”  It’s probably the second most common word in the English language after “I.” (They also recommend having a conversation without using “I.”  I’m not ready for that yet.  Maybe after I read the book.)  I’m going to try eliminate saying “no” today.  I’m mentally preparing for my son to ask me for a BB gun for the 9,835th time!  This will also be a good test to see how many members of the I.D. Images team ready my blog.

Think about all the great products and services that have been developed, even in the last few years.  Did they come about because someone explained why it was impossible?  (Note my language – I’m trying.)  See what happens to your interactions with your colleagues and customers when you refrain from using negative words.  Let me know how it goes.