Consumers Need Good Brands

Consumers need brands, both good and bad, to help them navigate a world in which their choices are almost infinite.  Consumers have so many choices today that there is little reason for them to buy anything that does not give them enjoyment and/or provide a rich experience. The experience of buying things is better when it involves a good brand. 

Good brands do three things for consumers:

  1.   Save time.
  2.   Project the right message.
  3.   Provide an identity.

Save Time: Good brands save time for the consumer because there is no need to survey an entire product category.  Psychologically, the best brand equals the best product. Consumers who know that two products are exactly the same tend to choose the one with the stronger brand name even if it is more expensive.

Project the Right Message: Brands tell others what you think about yourself and them.  Brands may bring people together by reinforcing relationship or self-identifying groups of people as a community who share the same values.  Strong brands help consumers save face in the event of trouble; even if things don’t work out (like a broken dishwasher or new office computer network) there may be less-fault on a responsible party for choosing the brand with the best reputation. 

Provide an Identity: Consumers self-define themselves by education and accomplishment which is often manifested by the products they consume.  Good brands give people an identity that makes them feel secure.   Advertisers of branded products constantly tell their constituents that by buying their products they can join a special group who are connected by the same values and status.

Tribes are making positive strides to change stereotypes in the minds of consumers by building a strong brand.  Take the sector of convenience stores as an example: 

Convenience Stores: Beginning in 2009 and formally organized in 2012, the Tribes of Washington and surrounding states formed an association, The Tribal C-Store Summit Group, whose mission is to encourage economic success in Indian Country by uniting tribes involved in the fuel and convenience store industry to share best practices, build effective relationships with vendor partners, and leverage the strength of the membership group.  The benefit to tribes is a non-political centralized infrastructure that provides resources to improve operations through education, troubleshoot problems, and leverage the collective size of the group to bring resources to member-tribes.  The benefit to customers is friendly service in clean stores that offer good value for the product offered.   

Improving a tribe’s brand in the convenience store space is important as it contributes to greater overall positive-brand recognition of a tribe which produces mutual benefit to other tribally owned enterprises like gaming and seafood operations.

Forecasting and Planning

Forecasting is a process that helps the people of an organization understand how their actions affect progress to achieve goals and which objectives a company is driving towards.  Forecasting is a management tool that allows a team to see into the future and prepare in advance of an event or season by communicating what the various departments within an organization will do to help each other.  Through inter-organizational communication, opportunities for improvement are recognized as obstacles are defined when a team thinks through the process of what needs to be done. 

Forecasting usually starts with an income statement that includes sales, cost of goods sold, gross profit, operating expenses, net income, and debt service.  If an operation contains multiple product sales like in the seafood business then it is wise to forecast margins by species because the sale of each species is likely to have different margins.  Margin is the difference between sales price and cost of goods sold.  Margins produce gross profit that is then used to cover operating expenses.  It is a best practice to forecast sales for each species by month, quarter, and year.  Management is then in better position to understand historical performance by species and factors effecting prices so management may plan for the upcoming season(s).        

Sometimes, those involved in the forecasting process react with hesitation to participate because the process is new and they are unsure of how to proceed.  Often this materializes as a list of reasons why forecasting is difficult to make work.  This reaction is natural.  Forecasting is a way to give everyone on the team a voice.  Each team member has the opportunity to listen and learn how the actions of people, the cash flow conversion cycle of product sales, and use of profit to sustain the living organization blend to make the operating company work.  Companies that forecast invariably come in close to what they forecast and better position themselves for growth, defend against competitors, or catch a break in the market.  

Identify Risk and Mitigate

As companies throughout the world use capital to drive growth by means of expanding existing enterprises, starting new firms, purchasing existing businesses, or joint venturing with an organization owned by someone else who has skills necessary to compete in the marketplace, they are relying on management to assess risk in order to move an organization forward.  Risk is the potential of losing something of value.  Value may be gained or lost when taking risk resulting from a given action, activity or inaction.  Risk is everywhere, constant, and should be respected instead of feared.  Identifying risk is a practice that tempers ambition through a list of “what-ifs,” scrutinizing whether a company has the financial, human and technological resources necessary to reach its goals.  Highlighting risks will allow a team to find ways to mitigate risk and increase the probability of success by dealing with issues before they become a problem. 

Example:

ABC company is considering the purchase of another firm that will increase gross revenue, expand services to customers, and likely to increase net profit.  The acquiring firm’s management develops a list of risk points which are things that could go wrong if un-mitigated.  Finding ways to mitigate risk will help the acquiring company understand if they have the capability to absorb another firm.

Financial Resources:

Risk:   In order to attract financing the purchase will require a 20% minimum owner contribution having the effect of decreasing liquidity and increasing long term liabilities on the balance sheet.  Insufficient liquidity resulting from cash depletion and ongoing principal and interest payments associated with the new debt may cause the operating company to become insolvent which could result in business failure.

Mitigation:   The operating company has planned for growth by retaining earnings within the operating company so that they can afford to pay up to 50% of a business purchase.  If the company uses their savings to make a 30% down payment and finance the remaining 70% of the purchase price, the debt service coverage ratio based on historical income is 1.50x.  Based on this information the operating company has the financial capacity purchasing an existing business.

People Resources:

Risk:   The Company being acquired drives revenue through service activities which requires employees to have specific skills to complete revenue producing jobs.  Failure to provide service at equal or greater than previous levels may result in loss of revenue and decrease profitability.

Mitigation:   Staff will be retained at both companies.  Both the operating company and the acquisition serve the same sector but occupy different stages of the supply chain.  If anyone from either company left, the total workforce is likely to be able to absorb the workload and continue operations.  The acquisition results in greater workforce stability due to a larger labor force with a wider range of skills than compared to before the acquisition.

Technology Resources:

Risk:   The two operating companies have different financial systems.  Using two systems requires an extra step to consolidate financial information and may increase the labor required to derive quality feedback from historical operating activities.  Slow or inaccurate information is likely to inhibit management’s ability to make informed decisions about how to operate the company which may result in underperformance and decrease profitability.

Mitigation:   In the short term it is possible to operate two separate systems but as an order of priority after acquisition, an action plan will be implemented to absorb one company’s system so that only one operating system remains.

The risks highlighted above are internal to the organization.  External risks may be related to interest rates, commodity pricing, economic cycles, legislation, regulatory bodies, and the actions of competitors that may impact the company.  Remember, the purpose of highlighting risk points is to identify the things that may negatively affect operations so that management is able to anticipate issues and deal with them before they evolve into problems.  There will be a time when the correct answer is ‘No, we can’t do that right now,’ which is a natural outcome to a successful planning organization.