McDonald’s new CEO, Steve Easterbrook, accepted a huge problem as his to solve. The former darling of the fast food industry is losing customers. First quarter revenues fell 11 percent. And unlike IBM, which uses share buybacks to maintain earnings per share (EPS) growth in the face of declining revenue, McDonald’s EPS plunged over 25%. Meanwhile, McDonald’s ingredient costs, wages, and healthcare expenses are rising, thus making a quick turn-around challenging. As worrisome, franchise owners are rightfully upset. So what happened? McDonald’s failed to stay relevant to consumers, forcing the behemoth into catch-up mode. But being late to the party extracts a price. Former customers who had ruled the chain out as it fell behind might consider McDonald’s as a meal option again. But winning new customers’ will require more than closing gaps. McDonald’s is curbing antibiotic use in chickens, for example. It’s…
50 ways to lose your customers
Singer-composer Paul Simon’s classic song “50 Ways To Leave Your Lover” is about an emotionally torn man who “struggles to be free” of his wife. He learns, from his mistress, “The answer is easy if you take it logically.” Her advice? “You just slip out the back, Jack. Make a new plan, Stan. You don’t need to be coy, Roy. Just get yourself free.” Companies usually don’t want to slip out the back, leaving their customers feeling dumped. But companies can unconsciously induce their customers to say goodbye to the company’s brands – in ways as swift and sure as the song’s recommendations. I won’t bore you with fifty ways, but here are seven sure-fire mistakes leaders make that lead their customers to “slip out the back” or “make a new plan.” 1. Placing profits before people and customer experiences. Financial outcomes are…
What a Beat Street Coffee Co. & Bistro waiter could teach GM’s CEO
The waiter at San Antonio’s Beat Street Coffee Co. Bistro held the large vintage door for a long time while my mother entered with her walker. The restaurant’s hipster ambiance was just what she needed as a meal break from living with 24 other people aged 80-103 at Chandler Estate Assisted Living. Needless to say, neither Mom nor I looked like the other diners. But this waiter treated us throughout the evening as if we were his target market. The food at Beat Street is terrific, each menu item offering unusual ingredient combinations. It was the kind of food that attracts the first-timers the restaurant needs for a chance to succeed. Its service, however, is what will build the repeat visitors any restaurant must win to secure its future. After our second visit Mom asked the waiter if he was the owner. “No,”…
Reviving local retail through business model innovation
In the new Broadway-bound musical Hands on a Hardbody, ten East Texans seek to reverse their hard luck lives in a competition to win a Nissan truck. In one song, Used To Be, the contestants lament the loss of independent stores across Texas. “How will we know when we’re home,” the cast croons, “in a land filled with Walmarts and Walgreens and Wendy’s?” The musical captures much of what is hurting in America, the retail landscape being but one example. Office Depot, Staples and Office Max for example displaced local office supply stores while Walgreens, CVS, Walmart, Target and other national chains displaced locally owned pharmacies. National retailers then pressured manufacturers for cost reductions, creating ruthless competition that’s driven every last penny and non-essential US job out of consumer goods companies’ cost structures. The change from local to national had advantages. A developer…
Is Starbuck’s Instant Coffee a Smart Business Model Innovation?
Image by Getty Images via Daylife While Starbuck’s instant coffee may bring instant revenue (pun intended), will it enhance Starbucks’ brand value? I don’t think so. Instant Coffee pulls Starbucks further from a more differentiated value promise, a critical component of a winning business model innovation. Starbucks’ original value promise – the one that created its success – was a pleasurable place in the midst of busy lives to pause and connect with yourself or others. Starbucks made coffee into an affordable, luxurious time-out. Where Is Starbucks on the Slippery Slope to Commoditization? Starbucks’ push for global brand domination transformed its stores into miniature big box retail space, devoid of local content. Competitors copied the easy-to-copy coffee. No wonder McDonalds easily stole Starbucks’ customers by offering faster lines and lower prices for equivalent taste. Instant coffee isn’t the way back to uniqueness. Instant…