Manipulation vs inspiration

There is barely a product or service on the market today that customers cannot buy from someone else for about the same price, about the same quality, about the same level of service and about the same features. Even if you truly have a first-mover’s advantage, it is probably lost in a matter of months. If you offer something truly novel, someone else will soon come up with something similar and maybe even better.

But if you ask most businesses why their customers are their customers, most will tell you it is because of the superior quality, features, price or service. In other words, most companies have no clue why their customers are their customers. This is a fascinating realization. If companies do not know why their customers are their customers, odds are good that they do not know why their employees are their employees either.

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If most companies do not really know why their customers are their customers or why their employees are their employees, then how do they want to know how to attract more employees and encourage loyalty amongst those they already have? The reality is, most businesses today are making decisions based on a set of incomplete or, worse, completely flawed assumptions about what’s driving their business. Are you still with me?

There are only two ways to influence human behavior: you can manipulate it or you can inspire it. When I mention manipulation, this is not necessarily pejorative; it is a very common and fairly benign tactic. In fact, many of us have been doing it since we were young. “I’ll be your best friend” is the highly effective negotiating tactic employed by generations of children to obtain something they want from a peer. And as any child who has ever handed over candy hoping for a new best friend will tell you, it works.

From business to politics, manipulations run rampant in all forms of sales and marketing. Typical manipulations include: dropping the price; running a promotion; using fear, peer pressure or aspirational messages; and promising innovation to influence behavior—be it a purchase, a vote or support. When companies or organizations do not have a clear sense of why their customers are their customers, they tend to rely on a disproportionate number of manipulations to get what they need. And for good reasons, manipulations work!

Also, many companies are reluctant to play the price game, but they do so because they know it is effective. So effective, in fact, that the temptation can sometimes be overwhelming. There are few professional services firms that when faced with an opportunity to land a big piece of business, haven’t just dropped their price to make the deal happen. No matter how they rationalized it to themselves or their clients, price is highly effective manipulation. Drop your prices low enough and people will buy from you. We see it at the end of a retail season when products are “priced to move.” Drop the price low enough and the shelves will very quickly clear to make room for the next season’s products.

Playing the price game, however, can come at tremendous cost and can create a significant dilemma for the company. For the seller, selling based on price is like heroin. The short-term gain is fantastic, but the more you do it, the harder it becomes to kick the habit. Once the buyers get used to paying a lower-than-average price for a product or service, it is very hard to get them to pay more. And the sellers, facing overwhelming pressure to push prices lower and lower in order to compete, find their margins cut slimmer and slimmer. This only drives a need to sell more to compensate. And the quickest way to do that is price again. And so the downward spiral of price addiction set in. In the drug world, these addicts are called junkies. In the business world, we call them commodities. Insurance. Home computers. Mobile phone service. Any number of packed goods. The list of commodities created by the price game goes on and on. In nearly every circumstance, the companies that are forced to treat their products as commodities brought it upon themselves. I cannot debate that dropping the price is not perfectly legitimate way of driving business; the challenge is staying profitable.

Wal-Mart seems to be an exception to the rule. They have built a phenomenally successfully business playing the price game. But it also came at a high cost. Scale helped Wal-Mart avoid the inherent weaknesses of a price strategy, but the company’s obsession with price above all else has left it scandal-ridden and hurt its reputation. And every one of the company’s scandals was born from its attempts to keep costs down so it could afford to offer such low prices. Remember, price always costs something. The question is; how much are you willing to pay for the money you make?

I cannot dispute that manipulations work. Every one of them can indeed help influence behavior and every one of them can help a company become quite successful.  But there are trade-offs. Not a single one of them breeds loyalty. Over the course of time, they cost more and more. The gains are only short-term. And they increase the level of stress for both the buyer and the seller. If you have exceptionally deep pockets or are looking to achieve only a short-term gain with no consideration for the long term, then these strategies and tactics are perfect.

Beyond the business world, manipulations are the norm in politics today as well. Just as manipulations can drive a sale but not create loyalty, so too can they help a candidate get elected, but they do not create a foundation for leadership. Leadership requires people to stick with you through thick and thin. Leadership is the ability to rally people not for a single event, but for years. In business, leadership means that customers will continue to support your company even when you slip up. If manipulation is the only strategy, what happens the next time a purchase decision is required? What happens after the election is won?

There is a big difference between repeat business and loyalty. Repeat business is when people do business with you multiple times. Loyalty is when people are willing to turn down a better product or a better price to continue doing business with you. Loyal customers often do not even bother to research the competition or entertain other options. Loyalty is not easily won. Repeat business, however, is. All it takes is more manipulation.

See you where great leaders are found!