There is a lot of truth to the saying that you have to spend money to make money. Many Americans dream of having their own businesses, but the majority never follow through with that dream. Why? A lack of resources and opportunities? For many, yes, but another predominant reason is…

FEAR.

They fear their investment will not pay off.

Each customer is an investment and represents hours of marketing efforts and expenditures. Each customer lost represents an investment that is no longer reaping dividends. Having customers, not merely acquiring customers, is crucial for business success.

In an article in the Journal of Marketing Research titled “Defensive Marketing Strategy by Customer Complaint Management: A Theoretical Analysis” by Claes Fornell and Birger Wernerfelt, numerous successful marketing strategies are identified. According to the authors, one crucial feature of marketing strategy is the company’s ability to identify and influence the flows of customers in and out of its franchise and into and out of the market. Fornell and Wernerfelt identify these flows as consisting of:

1) additional customer entry to the market,

2) brand shifting or change of patronage,

3) customer market exit, and

4) changes in purchase frequency.

There are many costs involved in doing business. One of these costs is turnover. When employees leave the organization, they represent investments that are no longer reaping dividends.

Turnover involves separation costs including:

• the costs incurred for exit interviews, and
• administrative functions related to the employee’s exit.
  

Replacement costs include:

• the costs of attracting new applicants,
• entrance interviews, testing,
• travel/moving expenses,
• preemployment administrative expenses,
• medical exams,
• acquisition and dissemination of information, and
• training costs.
  

Nearly everyone sets goals. Many people set goals at the beginning of a new year. These New Year’s resolutions are notoriously short-lived. By the end of January these goals are often abandoned or forgotten. Why is it that few people seem to be able to stick to their New Year’s resolutions and even fewer manage to make dramatic, lasting changes?

The answer has to do with the difficulty of changing. Goals inevitably involve making changes – either in our thinking or behavior. Whether it is our eating habits, exercise habits (or lack thereof), time-management, or organizational skills; it is difficult to change well-established habits. Once we become accustomed to thinking or behaving in a certain way, it becomes automatic. We no longer have to engage in cognitive effort to perform the behavior. Changing a habit however, takes a great deal of cognitive effort, especially at first. We must think about the behavior we want to change and how we will go about it.

The same is true in organizations. If change is difficult for an individual, think about how difficult it is for a company to make changes. Organizations are made up of many individuals and when a company tries to implement changes on a macro level, the individuals within that company may resist. But change is a necessary part of survival in today’s dynamic environment and when a company commits to making positive changes the rewards can be great.

By Ken West, Ph.D.

ADVICE. How do you feel about this word? Have you ever given someone advice only to find that the person did not take it? Recently a friend of mine told me about traveling by car with three other people. The driver became lost in a rural area at night and twice asked the three passengers for advice. My friend and the two other passengers gave suggestions that were promptly ignored. The third request for advice was met with silence.

Why do individuals ignore advice? Is it due to stubbornness, pride, or lack of confidence in the person giving the advice? The latter sometimes happens when we are young adults, especially when the advice is from our parents. It is funny how our parents get smarter and wiser as we get older! We learn for ourselves how wisdom can come from experience.

It is one thing to ignore free advice, it is quite another when you have paid for it, perhaps hundreds of dollars per hour. Talk to anyone who is paid to give advice, such as financial planners, physicians, mental health counselors, or lawyers, and they will all tell you that people often do not take their advice, usually to the person’s detriment. Businesses, like individuals, are also known to ignore advice on occasion. Ignoring good advice can be costly, especially in business. Ignoring the advice of a consultant can result in wasting time, effort and human resources. Such costs can add up to millions of dollars.