The Secret of Incremental Degradation

Issue #2185

• WEALTHY: Is your zeal for a good deal sacrificing quality? (Michael Masterson)
• HEALTHY: Eat this to squash DNA damage (Kelley Herring)
• WISE: Gary Hirshberg on maintaining quality

ALSO IN THIS ISSUE:

• Questions that a marketing expert wants you to answer about your product
• A "filler" issue that could be turning your words into trash (Suzanne Richardson)
• It’s Good to Know… about healthcare communications
• Add "acumen" to your vocabulary

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"I lost my fear, opened my mind and listened and I cannot believe the result."

Hello Bob,

I finished The Billionaire Way about 10 days ago. Now I promise you I did not cheat on this so hear me out.

I started the first two or three days I think and there was a transaction I was involved in that I was not comfortable with but had an emotional attachment to. I sat down one night and crunched the numbers and made some tough decisions, all emotion aside.

Then about two weeks into the program there was the day when we had to exclude our emotions and cut off dead baggage. Wow, I felt like yeah, OK I’m getting this because I just did that.

OK so now I’m tearing along the program, accepting things that I am already doing and working on the things I am not comfortable with. Vigilantly everyday, watching the DVD after the kids were in bed and working my work book.

Two days after I finished the program I saw an opportunity which I could assess very well given my clarity of vision, my assessments of my talents and the work I had accomplished.

It is my joy to tell you that I am founding executive of a new international network marketing company, the likes of which have never been seen and I have already built my team Australia wide within 10 days, using the billionaire way techniques.

I lost my fear, opened my mind and listened and I cannot believe the result. Thank you so much…

Regards,
Kathy

Learn more about The Billionaire Way program today…

"Quality, quality, quality: never waver from it, even when you don’t see how you can afford to keep it up. When you compromise, you become a commodity and then you die."

Gary Hirshberg

Two Business Concepts Every Entrepreneur Must Understand, Part 1: The Secret of Incremental Degradation

By Michael Masterson

If you are involved in a growing business, there are two complementary concepts you should be aware of.

One explains why a business or product, after a long string of success, suddenly fails. This concept is called incremental degradation. The theory goes that you can eventually ruin your business by making many very small downgrades in the quality of the product or service you offer. These downgrades are usually implemented to cut costs. You might, for example, switch to a cheaper grade of paper stock for your sales letters. Or reduce the number of screws you use per stud from six to five.

A good example of what I’m taking about was a soda that originally had 32 flavoring ingredients. But then a cost-conscious executive noticed that they could remove one of those ingredients - at considerable savings in production costs - without affecting the taste. Removing a second ingredient some time later also saved the company a lot of money… again without noticeably affecting the taste.

They repeated this cost-cutting strategy a dozen times over two years with no problems. But then, people suddenly stopped buying it. Why? Because the taste had finally deteriorated to the point where the decrease in quality was obvious.

The moral is that small reductions may go unnoticed by your customers and have no measurable impact on sales. And since they result in savings, they will produce short-term benefits to your bottom line. But in the long run, the accumulation of these incremental degradations results in something noticeable. Suddenly, sales slump and profits tumble.

Understanding this concept will dissuade you from trying to eke out more profits by reducing the cost (and thus the quality) of your products - a common, yet fundamentally destructive, business practice.

As the soda-company example above illustrates, the effect of small reductions in the quality of your product may not be immediately apparent - but if it continues, your customers will eventually stop buying it. And when that happens, it will be too late for you to do anything about it because your relationship with them will have been irreparably damaged.

Quality matters. You either believe it or you don’t.

I once worked for a business that sold knock-offs of name-brand perfume. It was, as I recall, about a $10 million business at the time. I had the idea of sending out all our products in beautiful boxes and establishing a Tiffany-like standard of customer service. I thought that would distinguish us from our competitors, who were continually cutting the quality of their packaging and reducing customer service to save money.

I presented my idea to the company’s CEO, arguing that although it would reduce profits in the short run it would increase them over time as the marketplace became more aware of the increased quality we were providing. He listened, but wasn’t persuaded. He argued that our customers didn’t know the difference between good and bad packaging and didn’t care. "We are giving them a good value for what they are paying us, aren’t we?" he asked.

I agreed.

"And we are making only a 12 percent profit, right?"

I agreed again.

"Okay then," he said. "Don’t be bringing me any more ideas about spending more money. Tell me how we can spend less."

So we cut costs to keep up with our competitors, but the entire knock-off perfume industry continued to degrade. And despite all the cost cutting, our profits never increased because the market became even more competitive. After a few years, it "died."

Well, it didn’t die entirely. One company, which was (and still is) run by a friend of mine, implemented my strategy of gradually increasing the quality of their packaging and service. And today, that company is in the $50 million to $100 million range, thriving primarily because of the goodwill they have established with millions of customers over the years.

Many businesspeople brag about cutting costs. And that’s not surprising, since the image of the penny-pinching, multimillionaire industrialist is such a fundamental part of business folklore. (Think John D. Rockefeller.)

For a business to grow, it must be profitable. And if you want your business to be profitable, you have to spend less than you make. But that doesn’t mean you should cheapen your product or customer service. Yes, it is less expensive to deliver a bottle of faux perfume in a manila envelope than in a box with ribbon tied around it, but what is the psychological impact on the customer of the one versus the other?

When you sell something, you are starting a commercial relationship with your customer. The customer will expect something from you based on the promises and claims you made in your advertising. If you deliver less than he expects, he will be disappointed in you - and that, my friend, is not a good way to begin this relationship.

If you begin the relationship by meeting or even exceeding his expectations, he will think well of you - and he will be more inclined to buy another product from you. But when you deliver that second product, he will still scrutinize it with some degree of skepticism. He’s been fooled before by other commercial relationships. It will take more than one or two very good transactions before he fully trusts you and puts you in his mental A category.

We all have those mental categories, don’t we - ranging from, at the lowest end, the D category for people and companies that have cheated us to the A category for people and companies we trust completely?

When you begin a commercial relationship with a customer, you should assume that you are in the C category. So doesn’t it make sense to work hard to move on up to B and A rather than stay at C or - worse - fall back to D?

Businesspeople who like cost cutting too much - who are willing to reduce the quality of the customer’s experience to increase profits - are setting themselves and their businesses up for disintegration. Truth, as the old bard said, will out. And in today’s world of Internet communications, the truth about your company’s product quality and customer service will be made public - whether you like it or not.

I am not entirely opposed to cutting costs, though, so long as you do it this way:

1. Cut costs when you can do so without degrading - in any way and to any degree - the quality of the product. If, for example, you find a supplier who can provide you with the same service or product component for less (and you aren’t sacrificing a good business relationship with another supplier to get it), go for it.

2. Pass those cost reductions to your customers. From Thomas Edison making electricity more affordable to Henry Ford making automobiles cheaper to Bill Gates and Steve Jobs making personal computing accessible to the masses, the greatest business fortunes have been the result of reducing product costs and, thus, increasing the value of the commercial relationship with the customer.

This is very different from cutting costs for the purpose of increasing profits. You have to be very careful not to cut costs simply because you can. I know some businesspeople with that mentality who actually get a perverse pleasure out of putting the financial squeeze on vendors, suppliers, and employees. I remember one colleague of mine gloating over the fact that his printer was "losing money" on a job he had contracted him to do.

The concept of incremental degradation reminds us of the danger inherent in that kind of thinking. As a businessperson interested in growing a profitable, entrepreneurial business in the Internet age, you should make it your job to increase - not decrease - the value you give to your customers.

Which brings us to the second key concept I want to talk about - one that I have been advocating to my clients for about 15 years. This concept is closely related to incremental degradation, but it is more positive and actually more powerful. If you can teach it to your employees and make it an integral part of your business culture, your business growth will be almost guaranteed. I’ll tell you all about it in Friday’s ETR.

[Ed. Note: Michael Masterson is one of the core contributors behind ETR’s new Internet business-building program, which gives you an all-inclusive, A-to-Z blueprint for starting your own powerhouse Internet business - from learning how to pick a product and set up a website to discovering copywriting secrets from the masters, techniques to help you create an e-mail list, the best ways to market your product, and more. Our hotlist has first access to the 250 spots we’ve opened up for this breakthrough program, but keep reading ETR to take immediate action when and if we have any spots left.]

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Worth Quoting: Marc Benioff, Chairman and CEO of Salesforce.com, on Getting Through to Your Market

"Is your product better than anyone else’s - is it easier, more efficient, simpler? Can you explain to people how it’s better? Can you position it correctly in their minds? That’s what you’re talking about - consciousness. When you talk about disruption, a market is just a group of people. Can you sell it, distribute it, get people to try it? Can you get it adopted? Then if you get that customer satisfaction, it starts all over again."

(Source: Business 2.0)

A Little Liposuction for Your Writing’s Problem Areas

By Suzanne Richardson

Every word you write is a signal, directing your reader to toss your letter or e-mail in the trash… or keep reading. So whether it’s a memo to your boss or a sales message to your customers, you’ve got to make sure that every word you write is working toward your goal. (And I’m guessing your goal is NOT for it to end up in the garbage.)

That means trimming the fat. You can do this by (1) packing your writing with active, exciting verbs and (2) using active voice instead of passive voice. You can also chop away "fluff" - words and phrases that don’t add anything to what you’re trying to say.

One of the most common "filler" phrases I slice and dice is the "there/that" pairing. Take this sentence, for example: "There are companies all over the world that are looking for copywriters."

Snooze-fest, right? But if you excise the "there/that" pairing, the sentence becomes snappier and more lively: "Companies all over the world are looking for copywriters."

Let’s try it again: "There can be multiple products that will solve your customer’s problems" becomes the much jauntier "Multiple products will solve your customer’s problems."

It’s a simple operation. Cut out the "there/that" pairing and your writing will be stronger and more effective.

Reader Feedback: "Michael challenged me to take my copy from ‘okay’ to ‘great.’" 

"Michael Masterson’s recent article ‘Taking Your Business - and Your Employees - From Good to Great‘ reminded me of something I’ve been meaning to share.

"I’ve been fortunate enough work with Michael as a freelance copywriter this year. He challenged me to take my copy from ‘okay’ to ‘great.’ He pushed me to deliver the best copy for the product, requiring multiple rewrites at times. Each time I went through this process with him, I learned something new. So today, I want to tell him how much I appreciate his feedback.

"Thank you, Michael, for pushing me to higher levels of performance. I’m glad you didn’t pat me on the head and say, ‘Good job.’ I would have missed out on learning what it takes to strive for excellence in all my writing."

- C.G.
Dallas, TX

[Ed. Note: Want to get your name and opinions published in ETR? Let us know how reading ETR has helped you - maybe even changed your life. Send your comments to ReaderFeedback@gmail.com. Include your name and hometown… and we may print your e-mail in a future issue.]

Autumn Veggies That Slow Aging

By Kelley Herring

The pumpkins, sweet potatoes, and winter squash piled high in your local farmers’ market offer much more than autumn decoration. These orange-hued fall foods are a rich source of age-fighting nutrients called carotenoids.

New research shows that foods high in carotenoids may help protect against the DNA damage that contributes to the ravages of aging. Because DNA divides and is copied over and over again throughout the course of a lifetime, small flaws in your DNA can make a big impact on your health. While copying flawed DNA is responsible for little imperfections (like crow’s feet), it is also the culprit for a much more serious concern: cancer.

So fall in love with the flavors of autumn and give your body the benefits of a cornucopia of carotenoids. Enjoy mashed sweet potatoes, roasted winter squash (try Butternut and Golden Nugget), and even pumpkin pie (made with a whole wheat pie crust). And don’t forget to add a little healthy fat to your orange-hued foods. Because carotenoids are fat-soluble, it will help your body absorb more of these age-fighting nutrients.

[Ed. Note: Kelley Herring is the founder and CEO of Healing Gourmet (www.healinggourmet.com), and the creator of Healing Gourmet’s Personalized Nutrition Software. Learn more about how simple lifestyle choices can improve your health by reading ETR’s free natural health e-letter.]

It’s Good to Know: Healthcare Communications

A language barrier can be frustrating enough when you’re trying to get tech support for your computer from someone 10,000 miles away, but the limited English skills of some immigrants to the U.S. can be deadly during emergency situations.

To prevent misunderstandings and speed up their care, many hospitals and ambulances are spanning the communication gap by using a large board with pictures on it. Patients merely need to point at the pictures that represent their medical problem (such as pain or breathing trouble) and the part of the body that’s affected. They can also point to the name of the language they speak so a translator can be called in quickly.

(Source: CNN)

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Word to the Wise: Acumen

"Acumen" (uh-KYOO-mun) - from the Latin for "to sharpen" - is quickness of perception or discernment.

Example (as used by Ellis Amburn in Subterranean Kerouac: The Hidden Life of Jack Kerouac): "With Leo’s rare combination of editorial acumen and business know-how, he might have become a publishing giant had he not permitted his drinking and gambling to hold him back."

[Ed. Note: Become a more persuasive writer and speaker … build your self-confidence and intellect … increase your attractiveness to others … just by spending 10 VERY enjoyable minutes a day with ETR’s new Words to the Wise CD Library.]

Michael Masterson
Copyright ETR, LLC, 2007