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Peter Lofrumento Consulting NYC

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Rethinking Your Competition

//  by Peter LoFrumento Leave a Comment

When It’s No Longer Who You Think It Is

Have you ever wondered why making dinner reservations on OpenTable is so easy while trying to get your cable company – like Optimum or Comcast – to answer billing questions is as painful as pulling a bad tooth?

Apples-to-oranges comparisons like this are quickly becoming the hallmark of how customers are judging brand experiences.

Image result for apple to orange comparison

Case in point: we were recently asked to evaluate customer brand experiences for a leading financial software company. Typically, you’d expect these customers to rate their experiences against their encounters with similar software companies.

But that’s not what happened.

Most customers took a broader view in their ratings approach.

When asked about their brand experiences with our client, customers made comparisons to account monitoring programs at American Express and earning rewards benefits similar to Amazon Prime.

Image result for amazon prime benefits

Customers have begun to expect the same high standard consumer experience across brands. 

Grant it, this is a small snapshot.

But perhaps it offers us a glimpse into a larger movement underway, often referred to as liquid expectations, where customer experiences with one brand seep into their expectations of another. It’s experience based on a much broader view of how they spend their money.

Image result for liquid expectations

The implication for your brand of such a radical shift in customer expectation is clear: customers will compare their experiences with your brand to their experiences with OpenTable, Amazon and Starbucks, even if you sell financial software, car insurance or commercial real estate.

In fact, it may no longer just be the direct competitor right in front of you that you should be most worried about.

But what can brands do to meet these evolving customer expectations?

A good start is to redefine your competition.

In our case, we helped our client to identify those companies outside of their direct competitors who are innovating in ways that could be adaptable to expanding their customer service programs.

The idea is not to provide a similar service, per se, but a similar experience which results in a positive brand response.

If you’re a CEO, COO, CMO or brand manager, here are few ways to navigate your customers’ liquid expectations and keep your brand competitive:

Image result for expand your view

1) Expand your approach: when creating brand experiences, look beyond your industry to see where else your customers are engaging and adapt.

For instance, not only did Uber upend the personal transport industry, but through UberEats, it helped create the on-demand expectation for food from sit-down restaurants. Uber effectively created a more fast and convenient way of accessing this new category.

2) Innovate: customers are now judging brand experiences based on what they see as possible in other industries. As your brand’s manager, consider doing the same. Look to other industries and adapt their innovation as a way of increasing personalized brand experiences.

Image result for disruption

3) Don’t fear Disruption: it remains an effective competitive tool. Take charge to reshape these expectations so you can foster greater brand engagement and loyalty.

Consider Vans sneakers, a brand that had been struggling over the last few years. It recently made a pop culture comeback with new online offerings that allow customers to create their own designs.

Image result for vans custom

The take-away: Customers now crave brands that offer products and services which combine the convenient and intuitive. If your brand is not evolving to meet this demand, you’re only frustrating would-be buyers.

To be more competitive, don’t simply focus on your industry. Instead, actively listen to your customers to determine what they are engaged in; remember, the real competition isn’t next door, it’s wherever your customers are spending the most time and money.

Image result for cable companies customer

Optimum and Comcast, are you listening?

Category: Blog, Management ConsultingTag: branding, competition, consulting, customer expectations, customers, management, management consulting

Talk Ain’t Cheap, It’s Priceless

//  by Peter LoFrumento Leave a Comment

 

How Private Equity Can Use Better Branding

Imagine that the former face of your prominent private equity firm is now more famous for lurid emails to his female assistants, losing important deals to competitors and telling everyone that you fired him after he quit.

Suddenly, your house is ablaze and what you say and how you say it becomes the difference between a severely damaged reputation and your firm’s future growth.

While this true-to-life example comes from a recent situation in which I was asked to consult, it highlights why brand building and communications have become more important than ever for private equity firms.

Think about it: if your firm has a strong brand, then you can withstand such reputational crises, fend off competitors and quickly regain a foothold with proper assistance.

Based on my experience, I’ll go further and suggest that a strong brand helps private equity firms source the best deals, raise the most capital and attract the most desirable employees.

It directly translates into higher awareness, greater cache and stronger deal flow. A strong brand can even result in proprietary deal flow, which means fewer of those troublesome auctions.

The downside to not having a strong brand? Private equity firms that ignore branding and effective communications put themselves at risk of competing solely on price (valuation and terms).

And please don’t confuse branding with making a cosmetic fix.

For example, remember when Bill Ackman’s Pershing Square Capital Management tried to ditch the term hedge fund for the less evil-sounding alternative asset manager? Or when Cliff Asness’s AQR Capital rebranded itself as a diversified asset management company, which came across as sounding so broad as to be meaningless to everyone within an earshot?

These days, due to the proliferation of dry powder and fierce deal competition, it continues to be a seller’s market. So it’s difficult for firms to find quality businesses at price points where their risk-adjusted target rates of return on invested capital are reasonable.

As a result, asset managers face increasing demands from stakeholders. And success is no longer just about returns, but figuring out how to differentiate your firm from the competition and then successfully communicate these advantages to limited partners, portfolio companies, investors, prospects and media.

Getting the best deals is no longer just about competing on price, but on what longer term strategic advantages your firm offers.

This is why private equity firms can benefit from better branding and communications.

Now, how do you accomplish that?

Whether you are in private equity or another business, the process is the same.

To start, be aware of the effective branding trends that are occurring in your industry, and then address them head on.

Here are a few to consider:

1) If you think you are communicating enough with your stakeholders, you’re probably not

These days, your stakeholders, especially investors and limited partners, are demanding proactive and transparent communication.

Don’t be fooled, they know you only call when it’s time to fundraise.

Further, their appetite for information is growing more insatiable. They want information about the portfolio companies in which you invest, from the management teams and competition, to market developments and diversity (an ever-growing concern for those firms whose clients include state and federal pension funds).

2) Differentiate or die

Ok, that’s a bit strong. But since competition is so fierce right now in fundraising and throughout the bidding process, private equity firms must develop and grow their brands or get lost in the clutter.

This means you have to clearly articulate your vision and values to stakeholders in order to win. Capitalize on positive news and demonstrate your expertise to everyone who matters.

A good place to start is refining your investment philosophy and identifying those core values that support it and allow your firm to deliver. Don’t simply focus on what everyone else does – past performance, transparency, excellence. Sure they’re important, but what will really set your firm apart from the clutter are those unique qualities that really position you as different and THE best alternative to the competition.

Also, keep in mind that these qualities have to be based in reality. In other words, demonstrable. Just because you say it, doesn’t make it so.

For instance, consider Goldman Sachs’ odd attempt at rebranding itself as a startup tech company. If Lloyd Blankfein’s pronouncements about being “a technology firm” or “a platform” didn’t convince you, then you had the same reaction as everyone else (Goldman is now a what??).

We can certainly credit them with trying, but it’s hard to create such a quick transformational narrative around a 149-year-old bank as being hip without doing the necessary branding work to get you there.

Don’t make the same mistake. Do the work.

For example, for our challenged PE client mentioned earlier, we conducted objective, third-party branding exercises to hone their messaging and narrative, developed a thought leadership program and identified key differentiating attributes. We then used this information to help reposition our client among its competitors to drive business. 

3) It’s about your portfolio companies, not just you

Certainly, the most effective way your private equity firm can demonstrate its performance is through the success of its portfolio companies. So use these successes as opportunities to articulate how your firm is supporting these investments.

This kind of information can boost deal flow, better position your firm as a leader in its field and help recruit the best talent.

4) Channeling success

Picking the right channels to highlight the value your firm brings to limited partners, portfolio companies and other industry stakeholders is as important as your message.

Whether it’s through the media, your website, thought leadership content, social networks or conference appearances, the question to ask is where are my prospective investors and partners consuming information?

That’s where you should be.

As private equity firms increasingly have to compete for dollars and deals, finding a way for your firm to stand out is now more critical to success than ever.

Branding and communications will enable you to differentiate yourself from the competition, and that means being bigger, bolder and braver in your approach.

Remember, what you say and how you say it matters to your stakeholders.

It’s priceless.

Category: Blog, Management ConsultingTag: branding, competition, consulting, corporate branding, management consulting

Sold Out!

//  by Peter LoFrumento Leave a Comment

Top 2 Ways to Beat Ticket Scalpers: Supply & Demand

We’ve all been there before. It’s Thursday morning and you realize that your favorite band or sports team is playing on Saturday. But tickets are long sold out and all that’s left is the unappealing option of paying a hefty premium to a ticket scalper.

I mean, er, ticket broker.

Kidding aside, the resale ticket market is booming. Northcoast Research recently estimated that this secondary market is moving north of $5 billion.

But why?

One reason is that to appear more fan-friendly, recording artists such as Metallica, The Chainsmokers, Jimmy Buffett and Green Day have been reducing the cost of their concert tickets well below market value. While seemingly good-natured, by making their tickets less expensive, they are allowing ticket brokers to capture much of the revenue without bringing lower prices to a majority of fans.

This occurs when ticket brokers take advantage of these lower prices and limited supply to buy concert tickets in bulk, and then resell them to fans at astronomical mark-ups.

During a recent consulting project for a major recording artist, we were tasked to come up with a solution for the second leg of her U.S. tour that would keep lower-priced tickets in the hands of her fans, while reducing the ability of brokers to acquire these seats.

During the first leg of her tour, our client charged $75 for every seat, regardless of location. This was well under market value. Brokers acquired a majority of the seats and marked them up to over 200% of face value. By pricing her shows under market value, our client was inadvertently doing herself a disservice as brokers captured the excess revenue through scalping.

After careful consideration, we offered a three-fold solution: first, we had our client increase the amount of her shows being offered on the second leg of her tour. This enabled us to increase the supply of tickets, ensuring that low-priced tickets would always be available to fans; second, we reserved a number of higher priced tickets for sale (‘VIP’ seating ranging from $95-$200); and third, we offered all tickets as paperless and instituted an ID system for ticket purchases to further exclude brokers.

The result was a relatively sold-out tour and virtually no broker involvement.

This strategy worked due to the law of supply and demand. Simply, excess demand occurred on the first leg of the tour because tickets were priced at $75 apiece. Since this price didn’t reflect true market value, the quantity demanded exceeded the quantity supplied and a shortage was created. After the entire quantity of tickets supplied was sold at $75 apiece to fans and brokers, demand still remained at various price levels which were above the $75 mark.

Ticket brokers, taking advantage of this low price and limited inventory, responded to this remaining demand by raising the price of tickets to market-clearing levels, capturing revenue that could have gone to our client.

By increasing the supply of tickets, we created a new ticket price equilibrium where market value now equaled face value.

In addition to these supply and demand effects, we also employed price discrimination by creating a two-tiered pricing schedule (VIP and general seating). This allowed our client to capture extra revenue as fans self-selected their seats within these two tiers. We knew that fans had different elasticities of demand, but we were unable to separate those elasticities. We therefore presented a price schedule, making sure that we marketed the new VIP seats as more exclusive. This helped us to distinguish among groups of buyers.

This sort of price discrimination was achievable because our client met three specific conditions: she was the price maker for the second leg of her tour; we identified at least two groups who were willing to pay different prices (low price seats (high elasticity) v. VIP (relatively inelastic)); and utilized paperless tickets and an ID system that prevented buyers in one group from reselling tickets to the other.

In this way, she was able to charge each group what they were willing to pay.

ticket scalping

Overall, winners included the fans that were able to see more concerts than usual, and for a majority of them, at a reduced price. And our client, who happily recaptured revenue from the brokers. Losers were the brokers, who suffered from reduced access to tickets and from us eliminating the difference between the market and face values of the tickets.

Our takeaway from this experience was that to reduce scalping, you should charge a more accurate price in the first place.

Now it’s time to order those tickets!

Category: Blog, Management ConsultingTag: business planning, concert planning, consulting, preparation, scalpers, tickets

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