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10 Common Mistakes Managers Make That Hurt Their Business

06/12/2015 08:03 pm ET | Updated Jun 12, 2016

Fortunately (and unfortunately) many people that start and run a business often don't know the problems and difficulties they are likely to face. Why do I say fortunately? If they knew about all these problems, they probably would not start the business in the first place. Regarding the unfortunate part, if they don't quickly learn about, anticipate, and fix these problems, they are likely to join the majority of businesses that fail.

For those that have started businesses or assumed managerial roles, I want to provide you with some of the common mistakes that people in authority make so that you can perhaps anticipate and avoid them or come up with quicker solutions when they occur.

Mistake 1: Focus on money rather than people

Anybody that understands business knows that businesses need to make money. If they don't, they will die. However, those that understand how to create a successful, sustainable business know that to make more money, you have to focus on the people. What people? Customers and employees are perhaps the most important on the list. In fact most studies show that happy employees make for happy customers, and happy customers make successful businesses. Zappos.com, Nordstrom's and Google are just a few examples.

Mistake 2: Do what they know rather than know what to do

Ineffective managers tend to do what they know rather than know what to do. Because of insecurities, they stay within their comfort zone and try to squash any ideas or initiatives that will take them outside this zone. In other words, they tend to kill innovation. If they do not already have the the skills required, effective managers quickly learn what they need to do a great job, and they do it.

Mistake 3: Kill the healthy chicken to make soup for the sick chicken

Weak managers think inside-out and invest in what "they think" the company should be doing. They too often divert resources from successful products or divisions to shore up unsuccessful ones for political or other non-productive reasons. To be successful, they need to think outside-in, or find out the needs the target audience wants filled. The marketplace should be their guide -- not what's in their own heads.

Mistake 4: Target the wrong audience

I have been in so many meetings where managers sit around a conference table to discuss and argue about who is the target audience. When this happens, I tell them that rather than talk amongst ourselves, we need to go out and find the right target audience. Most companies guess wrong from time to time - even the biggest and best. Procter & Gamble did when it introduced Febreze. They had the wrong target audience and positioning strategy. Once they did some research and fixed their mistakes, Febreze has become one of their most successful products.

Mistake 5: Fail to differentiate

Unfortunately, what too many companies fail to achieve is uniqueness in their branding and products. Without uniqueness, companies have a lot more competition and fewer tools to beat competitors. As a result, most companies are forced to compete on price. That impacts the image of the company and its products, gross margins, and profits. If customers have no good reasons to buy yours over the other choices, they typically won't. Apple went from a company headed for the graveyard to the most valuable company in the world because, if you want their products, someone in the distribution channel has to buy them from Apple.

Mistake 6: Communicate features instead of benefits

Less successful companies focus on the features of their products. More successful companies focus on the benefits. Features are inherent characteristics of a product. Benefits are what those features do for a particular segment of the target audience. Buyers buy benefits over features. Effective marketing and sales people know this. As a result, they sell more products in less time. They focus on unique benefits in their branding, product development and promotion strategies and executions.

Mistake 7: Failure to listen and respond to the marketplace

Too many managers are good at directing and telling their subordinates what to do. Too few are good at listening. The problem is that they do not understand that subordinates are talking with the marketplace 24/7. They are hearing customer complaints, learning what customers like and don't like about company products and competitors, getting ideas for new products, and absorbing all sorts of the other valuable information. They should be trained to collect, analyze, and report this information to the decision makers so that they can make better-educated decisions. This typically does not happen because too many organizations don't have the knowhow or systems in place to listen to the marketplace and react quickly to the feedback.

Mistake 8: Competing on price

As an outgrowth of the previous mistakes, too many companies do not have sufficient competitive advantages to win. Their products become commodities. When that happens, just about the only strategy left is to compete on price. There are many problems that result from competing on price alone. Here are just a few.

  1. Gross Margins are too thin. When gross margins are thin, usually the only way to make money is to sell in volume. As a result, only the leanest and meanest companies can survive. In most markets, there is room for only one low price leader. They need scale to (1) Buy in volume to lower costs, and, (2) Survive unforeseen events.
  2. Targeting the least loyal. Customers that buy solely on price are usually the smallest and least loyal segment in most markets. When a competitor offers them a lower price, they leave you in an instant and run to the competitor.
  3. Die from unexpected disasters. Only the bigger companies survive in a cutthroat competitive market because they need greater capital to cover unexpected disasters such as "bust" economic cycles (financial meltdown of 2008), natural disasters (Katrina and Sandy), and competitive disruptions (digital photography replacing film).

Mistake 9: Ignoring buyer convenience

Distribution strategies that ignore new technologies or make it more difficult for customers to obtain products under changing environmental conditions can spell disaster for businesses. Many travel agents lost their added value when the Internet became a more convenient way for people to book their own travel. Uber invented a more convenient way to provide on-demand car service - hurting less efficient alternatives. Many retail stores and entertainment venues have suffered as a result of traffic and parking problems in congested metropolitan areas combined with the added convenience of online alternatives.

Mistake 10: Failure to use complaints to improve the business

Too many managers sweep problems under the rug rather than use customer complaints as a way improve their businesses. This is related to some of the other mistakes. It is given its own mistake category because it is so important. Why is it important? Studies by Marriott, TARP, PIMS, and Opinion Research detail the positive profit impact from providing good customer service and properly handling complaints, which ranges between 25 and 85 percent. Complaints are signals that should not be ignored. They are opportunities to fix product defects, extinguish fires before they turn into conflagrations and develop closer relationships with customers. The companies that ignore complaints are the first to fail during financial downturns, when disruptive competitors enter the market, or better alternatives become available.

Learning to avoid these mistakes

While there are many other common mistakes I could have listed, in the interest of your time, I chose these ten. I hope that discussing them above will help you to identify, mitigate and/or avoid them in your business. Best of luck.