Do Business Well

MOST ENTREPRENEURS are very proud of their products and/or services and believe that their value is what determines the company’s success. Certainly all the attention in recent years given to the quality of American products versus those of foreign companies underscores the importance of having pride in your product or service.

I don’t mean to suggest that the emphasis on product features and quality is wrong. Rather, I believe it is misguided for many companies because it throws their entrepreneurs off target in terms of the planning process and the written plan. Two issues are primary in viewing the product or service:

A. The market and what it values should determine the particulars of the product or service. The owners of a company that arranges auto repair services for corporate owners of large fleets and has $3 million in annual sales decided to develop a new software product that would remind the fleet owners about the need to do such regular maintenance as oil changes and tune- ups. The company invested $200,000 in developing and attempting to sell the product before realizing that low-level fleet managers didn’t have the authority to commit their companies to the product, which might cost $50,000 annually for a fleet of several thousand cars. Getting in to make a sales pitch to high- level financial executives proved extremely difficult.

In their desperation to salvage the product, the fleet repair company’s owners decided that auto dealers might welcome the maintenance reminders as a service they could sell to individual consumers. But this time, before launching the product, the owners hired a market research firm to confirm that interest really existed. They discovered that auto dealers liked it not only because they could sell it as an additional service but also because it encouraged consumers to use the dealership for oil changes and other work. And consumers liked it because it kept their warranties valid.

Suddenly, the same product, which had been rejected by one market, was adopted enthusiastically by another. The business owners learned an important lesson: let the market determine your product characteristics. They also came to appreciate the importance of planning since the process of putting together a written plan would have alerted them much earlier to the need for market research.

B.Given the fact that a market exists and is prepared to buy, can you deliver what you promise in a timely and cost-effective way? One of the worst things a business can do is to identify a viable market, obtain orders, and then fail to produce the product or service on time or meet the quality standards expected by customers or adhere to the price quoted. This has been a notorious problem in the computer software industry. Prominent companies announce that new products will be available on a certain date and then don’t deliver because of snags in the development process. They then must announce delays, which naturally undermines their credibility with customers. These companies are large and prosperous enough that they can absorb the losses, but smaller companies often can’t.

Even worse is to deliver on time but come out with a flawed product. I know of one case in which a maker of a special component for refrigerators delivered a new version to a major appliance manufacturer, which then discovered that the component was flawed. The appliance manufacturer canceled its orders and the small components company was nearly thrown into bankruptcy.

People Express encountered difficulties in its early days because demand for its services was so great that its phone reservations system, airline capacity, and other functions couldn’t handle the load. Video footage of unhappy travelers at Newark and other airports on the evening news didn’t help the upstart airline’s growth process. While People Express survived, entrepreneurs should be aware that failure to plan adequately for such problems can lead to the downfall of an otherwise viable business.

Clearly, then, marketing and product issues are closely related. The relationship of these issues varies somewhat depending on the company’s stage of development (see the box on page 118). In considering the product/service section of the plan, here are issues that must be addressed:

1. Product/service features: How many bells and whistles?

Here you want to determine exactly what your product or service consists of. You can best do this by asking yourself a series of questions about what you include and don’t include in your basic offering.

For instance, if you are offering interior design services for businesses, do you also make available architectural services? Do you help buy furniture and fixtures for clients? Do you provide follow-up consultation after the initial design is complete? If the answers are yes, do you include these services in your basic design package or do you charge separately?

If you are making a food product for retail sale, do you rely on dehydrated ingredients or use more expensive and fragile fresh ingredients? Do you use easy-open packaging? Do you provide a call-in service for consumers with questions or complaints?

Entrepreneurs naturally want to produce the best possible product or offer the best possible service they can. They are aware of the increasing emphasis being placed on quality and of the intensity of the competition’s desire to please customers. At the same time, you can fall into the trap of trying to offer too much. Makers of technology products often make this mistake as their engineers try to build in as many options and features as possible. The problems arise when, first, the product isn’t completed on time and, second, when its cost is higher than expected.

In composing the business plan, you must explore two points about features in depth. You should begin by listing the major ones your product or service incorporates. You may think you’ve got them all in your head, but the task of writing them down is often revealing. Suddenly, you may realize that you’re trying to do too much or too little. Or you may find that you’re not sure a particular gadget or service is really necessary, given its cost.

In the latter situation, you may find yourself going back to the marketplace or to your salespeople for answers. Sometimes, a more comfortable handle on a carrying case or a clearer instruction sheet accompanying a product can be very important to the buyer—and inexpensive to add. On the other hand, features you thought were important—and are expensive—may turn out to be unimportant to the buyer.

Possibly related posts: (automatically generated)
Product/Service Issues: What Are You Selling? part 1

• What Are You Selling?
• Product/Service Issues: What Are You Selling? part 3
• Financial Issues: How Are You Doing?
• Ask Yourself: Would You Invest?
• Writing the Business Plan
• Financial Issues: How Are You Doing? continue..
• A perfect Business Plan to Cash Money in, Start to Work from Home today
• Targeting Your Plan
• Marketing planning stage: implementation through the marketing mix
• What All Plans Must Cover

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