The Currencies of Trade

The following post was written by Pam Duskocy, Director of Business Development for Schooley Mitchell. Pam sends out a newsletter on a regular basis. This one really struck a cord for me and I'm excited to share it with you.
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The Currencies of Trade
Every Franchise system should have a clear understanding of the following concepts. In addition, they should have a clear marketing strategy to help their Franchisees communicate to customers and prospects about how they will deliver these currencies as they operate their Franchise.

Trade. Give something to get something. Our inhabited globe has come a long way since the act of trade meant that ‘I’ll give you one caribou if you give me three baskets of carrots and a cord of wood’. However, that same basic tenet still drives all economic transactions. Value for value is the test. If we can create more value then we can get more value back when we auction ours. The only difficulty is that the definition of value is ever-changing. Therefore it would make sense that if we can figure out who defines value, we will be able to create and deliver more of it.

Remember from the discussion about Basic Business Concepts that ‘It’s all about the customer’. So if we accept that it’s all about the customer then it follows that the customer is the beast that defines value. Seems simple. Seems basic. Seems unchallengeable.

O.K. so how do we figure out what the customer defines as value? It seems to make sense that we need to find ways to ask the customers that we choose to serve. We need to ask them to define what they find more and more valuable. We also need to accept that the definition of today will not be the same definition of tomorrow. At some point, somebody figured out that the customer wanted a fatter caribou, and if a fatter caribou was delivered, then four baskets of carrots and some extra wood could be obtained. They probably asked the carrot guy.

Study of business customers in today’s world will reveal that there are some basic currencies of trade that hold value for the customer. Understanding these basic currencies will help to define the specific methods and characteristics that are required of the product or service you provide to meet the value definition of your customer.

Money
This is the most accepted version of currency in most people’s minds. In fact, money is used in our common language synonymously with currency. I propose that it is only one currency, albeit the one we trade with in commercial transactions most apparently.

In reality, it’s just the bridge between the caribou and the carrots. I mean, surely people don’t really want a stack of paper. No, they want the carrots if they’ve already got a bunch of caribou. Our forefathers have simply been able to structure a system where the paper can be traded for stuff, and stuff can be traded for paper – and we’re all willing to abide by this trading system.

So a dressmaker is willing to trade one of his dresses for some paper. The landlord is willing to rent part of her space to the dressmaker to display dresses in return for some of his paper. The grocer will accept the landlord’s paper for some carrots – no caribou required.

We all get this one. So if we know that one of the currencies that businesses desire is money, then our products and services must be able to help our customers gain more money. It seems simple but I’m not sure we have that goal firmly in mind when we illustrate our wares.

However, just like the system of trading stuff for paper is simple, so is the concept that we need to show our customers how they can gain more money by doing business with us. The better we can communicate that message, the more attractive our goods and services will be to our desired customers.

Time
Any desired commodity, currency in the case of this discussion, increases in value as it increases in scarcity. Although we were all hoodwinked into believing that the computer revolution of the 1980’s was going to make us so efficient that we would have gobs of time on our hands, I don’t think there are too many converts to that ascribed belief any longer.

When we discuss our clients’ need for more time in their respective businesses, during our training class for all new Schooley Mitchell Franchisees, I always relate the following story.

The scene was at a National Franchise Convention waiting for the kick-off speaker to begin the proceedings. There were several hundred Franchisors like me sitting in the convention hall, when from the back of the room this guy entered, flipping a head of lettuce up and down. He walked right up the middle aisle continually flipping the leafy orb. There were a few snickers because it was apparent to some that an inmate had gone over the wall at the local asylum.

With a determined look, and a single purpose in mind, this guy trotted right up to the front of the room, climbed onto the stage, and leapt behind the podium. With a greatly threatening look, he bellowed, “Somebody in this room tell me why this head of lettuce represents the most important concept that you must understand for your business to survive in the next decade!” He was completely fired up, spittle was flying, and he was turning red. At this point half the room was convinced of the asylum scenario, while the other half realized that this was actually the guest speaker.

Gliding down a bit from his commando high, he said, “O.K., I want to ask you a couple of questions.” He went on to say, “I want you to think back ten years, picture in your mind your local grocery store, and tell me how many square feet were dedicated to heads of lettuce at 79 cents each.” After a bit of a pregnant pause, someone in the audience yelled out, “30 square feet.”

Our now calm and seemingly rational speaker now asked, “O.K we can accept that answer, so now flash forward ten years to today and somebody tell me how many square feet are dedicated to heads of lettuce in today’s grocery store at 89 cents.” The answer came back as ten square feet.

The next question was, “Now somebody tell me how many square feet are dedicated to prepared salads at $4.95 each.” The revelation was clear. Yes, that’s where the other 20 square feet went – in fact, the current stores may even use more than 20 feet! The crowd was elated that they had solved the riddle.

Then in a very quiet, almost ominous tone he asked, “So what is that about and why does it matter so much to your business?”

His message was of course that it was about time. We are willing to pay good money, already conceded to be a valuable currency, to save ourselves time. We will pay a premium to avoid cutting carrots and cucumbers, and in my mind I plead guilty to the act.

In fact, he said, “Time is the currency of today’s economy, and you need to figure out how you are delivering time to your customers, or you will not thrive.”

The story hit hard, made a strong and valid point, and I have been thoroughly convinced of the importance of time as a currency of trade ever since. The challenge of course is to figure out how to deliver time to our customers. Before we can do that we have to figure out how we can make it clear to our customers that we will, in fact, help them to gain time through our wares.

Money and time are certainly the most recognizable and widely accepted of the currencies of trade. However, it is my belief that we also trade in Security, Knowledge and Prestige. These currencies will be reviewed in more detail in a subsequent release, but for now, suffice it to say that we need to feel secure, not only physically, but also that we have made the right decisions. We also crave knowledge. In fact, we live in a knowledge-based society now. The vast majority of people trade for prestige as well. Otherwise, why would we wear what we wear, drive what we drive, live where we live?

Money, time, security, knowledge and prestige make up the suite of Currencies of Trade. So the challenge is how to deliver these items, and how to make our customers aware of how we deliver them.

http://www.metafranchiseconsulting.com/

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