Earlier this month, I gave a lecture on critical thinking to an association of Hungarian economists in Targu Mures. At the end of the conversation, I was asked two questions: what was my first impression of business in Romania when I arrived here six years ago? And, what advice do I have for a young person looking to start a business?
As occurs all too frequently, it was not until after I gave my answers and sat down that I realized I wished I had answered them differently. After only a few minutes of reflection did I see how the two answers were perfectly related and how important they both are now as much as ever. Here is how I wish I had answered:
My first impression upon coming to Romania was of a reality that unfortunately remains as true today as when I arrived. Actually, I noticed it even before I arrived. After changing planes in Italy, I was on a Tarom flight to Bucharest looking through the in-flight magazine when I saw an advertisement for a Bancpost-American Express-Tarom credit card.
Having spent 12 years at the world’s largest credit card issuer and the pioneer of affinity/cobranded cards (and then several years after that teaching and writing on the topic), I immediately shook my head and saw what a financial failure that product was likely to be. I knew firsthand that this type of three-branded arrangement existed in other places, but replicating what you see from outside – without understanding the very challenging particulars that lay beneath – was a recipe for disaster. And from what I was reading, this was not going to work.
It was not until after I landed and began to live here that I found more and more examples of exactly this syndrome, whether in banking, in media, at retailers, in restaurants, or even inside American-inspired bars and cafes. Yes, the veneer looked the same – the products and logos and menus and concepts – sometimes, in fact, they were even more American than they were in America.
But it didn’t take long to discover that the product and messaging and service and flavors were but superficial in appearance and misunderstood. Indeed, there was generally a lack of any deeper understanding of the structure and of the strategy within the businesses and products that are required for success.
Six years later, unfortunately, I see little improvement. There still remain too many examples of this fundamentally wrong approach. And too many companies, from banks to newspapers to retailers to restaurants, still fail to understand. Most of them, especially Bucharest newspapers, seem to have no concept as to why they’re in business.
As I know the credit card and loyalty businesses rather well, let me give you a few examples I observe from that sector. In the several years after my introduction to that Tarom credit card (which, by the way, has moved to another bank), I came across the BCR Zambet card, a confused and expensive product that I’ve criticized before for not knowing what it was or why it existed. And after obtaining the bank’s internal presentation some time later, I could see the confusion. There were lots of superficial benefits, but little recognition of the challenges.
Then I noticed Raiffeisen’s cobranded SMURD MasterCard, which I confess led to a sad laugh. The demographics might be good, but clearly the basics of card affinity are not well understood. And then there’s a Steaua card – again, a good idea in other places, but a seriously dubious product here.
Or look at the other big banks and the hundreds of things that were copied and brought here: a credit card for doctors, for small businesses, for entrepreneurs, for students, for shoppers. Discount cards. No-interest borrowing. Points and rewards. Elaborate cash-backs. In each case, I guess, someone saw them in other countries, or read about them somewhere.
But also in each case I can tell you it doesn’t take long to see that too much is wrong – from ineffective benefits to badly constructed messaging to misconceived positioning to card designs without purpose to descriptions intended more for bankers than consumers – overall creating dozens of different products either virtually indistinguishable from each other or giving potential customers no good reason to want them.
And while I don’t know their profitability, these card programs must be attractive to issuers. Some banks are now willing to effectively pay you 100 lei to sign up or some other amount if you bring them your friends. But that’s not likely to work either as short-term acquisition does not necessarily translate to long-term utilization – not with the customer marketing that you find here at the banks.
In fact, of all the bonus and loyalty cards being offered here (whether from banks or any of the retailers), not one that I’ve seen is truly conceived and structured as anything but a product – not a program – and loyalty, to succeed, is not a product to be sold. No. Paying cash for new customers is not a way to build loyalty.
The fact is these could be tremendously successful if done correctly in this market. But there is not a bank or retailer here that seems to fully understand how to correctly position these loyalty, advantage, bonus points, or affinity programs – whatever you want to call them. Instead, it appears they have merely designed card products to look the way they think they should and they are probably wondering why none of them succeed as well as they do in other places.
In other words, what I found when I got here – and still find all too often – is that Romania has businesses that do everything done elsewhere. But all too often, they throw products on the shelves and compete mostly with price and waste a lot of money on new customer acquisition. And when all is said and done, it appears they lack the essential understanding of why these products exist or where they’re headed in the future.
One of the more common excuses I hear is that this or that product was already tried and it didn’t work. Or times have changed and the product won’t sell. Or it’s only been 20 years – you have to give it more time. What this typically means is the person has failed to understand. My guess is they did try that product as they saw it someplace else with the attitude that “I’m a smart person, I can see how it’s done.” But the truth is, they cannot. They never tried the product the way it actually exists someplace else. So they never tried the product the way it needs to succeed.
And that, very simply, takes me to the answer to the second question I was asked.
What advice do I have for young people and entrepreneurs looking to launch a new business? It sounds so obvious, yet it’s so often overlooked. Understand your business – better than anyone. Because once you truly understand what goes into a successful product and then design it accordingly, what you’ll be offering is precisely what your customer wants – not only what you’ve seen without understanding from a distance.
Your business does nothing without customers. And the best type of customers are the ones who like you. Customers who value you. Customers who like doing business with you no matter your industry or the flavor of your product.
And how do you create that? Through the design of your products, the delivery of your services, the internal procedures of your business, and the treatment of your employees. Everything aligned to satisfy your customers.
Whether you are a bank or a newspaper or a shop or a neighborhood restaurant, it’s not enough to offer your product and then pay for new customers. You must inspire your employees, create a business that others enjoy and be a good neighbor (whether you’re local or on the web). Your customers will feel it and the profits will come.
And never forget that it all starts with you.
Yes, the opportunities are out there. Others’ lack of understanding is like a gift made for you.
That’s how I wish I had answered those questions.