What is Branding and what Does it Entail?

The importance of having a great brand supersedes all else in the restaurant business. Money comes and goes, there are busy days and there are slow days, employees come and go as well, but your brand is unequivocally the most important aspect of the business. Think of your brand like a lighthouse.  Out there is the great big ocean of stormy waters. It is cold, raining, and misty in the great big sea. There are many ships with hungry fisherman and sailors that need to dock and have a bite to eat. Your restaurant’s brand is the lighthouse.

Time and time again it will attract people, just like that Greek Siren. Except here we mean to do no harm to the fisherman and sailors, we wish to give them what they need. A hearty and healthy meal. People have known to trust the Zankou Brand for over 54 years, over three generations, two continents, and millions of happy customers. This type of love and dedication customers and fans have is not easy to achieve and takes time, dedication, and hard work. You have to constantly thrill the customer, not just satisfy them. And in today’s extremely competitive marketplace of $5 chickens available at places like Costco that is becoming more and more difficult to do.

According to Wikipedia, a Brand is very different from just a logo. A brand is all-encompassing, whereas a logo is simply the small icon most business affix to all their merchandise or food items. A brand is a name, term, design or other feature that distinguishes one seller’s product from those of others.[1] Brands are used in business, marketing, and advertising. Initially, livestock branding was adopted to differentiate one person’s cattle from another’s by means of a distinctive symbol burned into the animal’s skin with a hot branding iron.

A modern example of a brand is Coca-Cola which belongs to the Coca-Cola Company. In accounting, a brand defined as an intangible asset is often the most valuable asset on a corporation’s balance sheet. Brand owners manage their brands carefully to create shareholder value, and brand valuation is an important management technique that ascribes a money value to a brand, and allows marketing investment to be managed (e.g.: prioritized across a portfolio of brands) to maximize shareholder value. Although only acquired brands appear on a company’s balance sheet, the notion of putting a value on a brand forces marketing leaders to be focused on long term stewardship of the brand and managing for value.

The word “brand” is often used as a metonym referring to the company that is strongly identified with a brand. Marque or make are often used to denote a brand of motor vehicle, which may be distinguished from a car model. A concept brand is a brand that is associated with an abstract concept, like breast cancer awareness or environmentalism, rather than a specific product, service, or business. A commodity brand is a brand associated with a commodity. A logo often represents a specific brand, as do many trade names.

Source 1) Wikipedia http://en.wikipedia.org/wiki/Brand

Radio Advertising 101 For Small Businesses

Hundreds of millions of people listen to the radio every week in America. According to the data analytics company Arbitron, radio reaches about 95 percent of all Americans 12 years or older. Eight out of 10 adults listen to the radio in the car, and about three out of 10 listen to it at work. Radio is streamed on the Internet, enabling its reach even farther, nationally and internationally. By any reckoning, radio is an ideal medium to advertise on for small businesses. But running an effective radio advertising campaign takes a bit of know-how.

Los Angeles communications expert Bill McBee has a background in managing radio and print media marketing. In this interview, he gives a terrific overview of radio advertising for small businesses.

Give us some background about radio advertising.

Radio and print media are pretty much intertwined these days—you can’t do one without the other. Anytime you look at marketing as an ad sales person or as an advertising agency you have to look at the different aspects of what’s best for a client—because every client has different needs. To be a true marketing consultant, who is what you must consider yourself when you’re in advertising and sales, you have to look across the board into radio, print, billboards, online.

Radio is less expensive than TV and it still has a very good reach. The reach has gotten watered down over the years as radio companies have integrated Internet marketing and some print. And print, by the way, doesn’t necessarily mean newspapers and magazines because there are many different ways to cover print. One of the biggest radio stations in the Los Angeles area, which is great for reach, is Jack FM. That’s because Jack FM prints bumper stickers. So someone may not want radio advertising because he thinks it’s too expensive, but for a certain amount of dollars he can get a certain portion of radio advertising such as quick 10-second promotions. Besides, that he can get a coupon for his business on the back of bumper stickers that Jack FM gives out—say, 100,000 bumper stickers a month. So it depends on how many coupons on Jack FM bumper stickers a customer may want to hand out—a thousand, 2,000, or 5,000? So that’s targeted advertising that’s a form of print media. Plus the customer can get a 10-second promo around lunchtime that, for example, says: For so-and-so product go to so-and-so place … 10 locations. And now with smart phones, you can find out exactly where the closest location is to where you happen to be.

So you can’t define a marketing strategy through a single form of media. You can’t define it by radio or print or the internet alone—it’s all connected. Let’s take CBS Radio, where I spent some time working. How many station vehicles do they have? They say that for “x” amount of dollars we’ll give you so many radio blurbs or we’ll wrap the back of our station vehicle with your logo. You know how many thousands of people will see that logo on the road or at events? That’s all quantifiable money—that’s good marketing. It’s mixing radio promos with coupons, with wrapping a vehicle. And if you do it smart and if your consultants at, say, CBS, have your best interest in mind, they know about everything that’s available to you.

Let’s switch hats for a minute and go to print advertising. With print, you have to think what’s best for your business—should I go to Pasadena Weekly or Downtown L.A. Daily News? What’s the most local reach I can get for the money I have in the area I want? You have to ask yourself the “who, what, when where, why and the how” of advertising. That is,

1) Who do I want to reach; (target market)

2) What do I want to promote; (which item on the menu)

3) When do I want to promote (duration of advertising)

4) Where is my demographic; (what does the audience look like)

5) Why is that my demographic; (Align with right radio channel that caters to this audience because they listen to that kind of music)

6) Which methods will I use in order to reach to reach it?

So, remember, a guy who wants to sell you advertising can talk you into anything. But somebody who actually takes the whole picture and scope of a marketing plan will look at all of it. Somebody who wants to sell you $15,000 a week of just radio ads or $10,000 of print ads is wasting your money. What you’re looking for is added value. You want the most educated reach for what you want to do, and that’s why you need a true consultant—someone who doesn’t just sell you spots on a radio but support on the radio’s website, some sort of coordination with the radio’s street team. These are all things that you, the customer, have to ask for and include in your reach.

I’ve always thought of myself as someone who looks at each specific case. I’ll meet with you, shake your hand, ask you 10 or 15 specific questions and then say, “Let’s meet in a week or five days. “

There’s no better spokesperson for your business than you. That’s why whenever I met someone articulate or concise, I’d have him or her voice or write his or her own commercials because no one can talk more passionately about your business than you do. Then together we’d fine-tune it.

What if someone has a really low budget and wants to pursue a single advertising source such as, say, radio?

First of all, you can’t do radio on a low budget. And the reason that low budget and radio can’t exist in the same conversation is this: Let’s say you have a restaurant. And you have a restaurant in Burbank and one in Santa Clarita and one in Glendale. And a radio advertising rep from K-Earth 101 comes into you and says, Hey, I can put you together a package—it’s $8,000 a week. So as a businessman I would ask about K-Earth 101’s reach.

If you do your homework, you’ll know that it reaches L.A., Orange, San Bernardino. My point is that probably $4,000 or $5,000 of that $8,000 would be wasted because you’re over-reaching. People aren’t going to drive from Orange County to your Burbank location or your Valencia (Santa Clarita) location. Besides, K-Earth 101 doesn’t even reach Valencia very well. From knowing the radio market, I could tell you that the best buy for you would be 100.3 The Sound. Because The Sound reaches Burbank, Santa Clarita and Glendale.

And because they don’t reach as big an area as K-Earth 101, their ad rates aren’t quite as expensive, even thought they’re a highly rated station and have a lot of listeners. So your money would be spent better. Moreover, they have two frequencies—100.3, which is based in L.A., and 100.1, which is based in Santa Clarita. And they’re not reaching in Orange County or San Bernardino or any of the beach cities. So you’re getting more of a targeted reach.

It’s well known that commercial radio stations make their money by selling airtime to advertisers. However, their rates are still very expensive, given that more and more people now play video games or downloading movies and apps. A lot of people are very distracted by the new technologies and new media. I recently looked into purchasing a 30-second spot on Kiss FM, which is 102.7. It cost about $1,083 per spot. At a 30-second spot times 10, that’s $10,083. At such an expensive rate, how could a small business benefit?

If you’re trying to build brand recognition, 10 spots of airtime in a week won’t get you anywhere. Anybody who tries to sell you advertising for one week is not doing you any good. The minimum you want to run with anything is six to 10 weeks. Because nobody is going to even recognize your name for the first four weeks.

I do this exercise where I take a piece of paper and ask people to write down a list of television manufacturers. Some people who are really savvy can give me five, six or seven names. But do you know how many television manufacturers there are? There are 44 major ones. Most people can’t get past the top seven. And which one do you think is the highest? You would say Sony. But do you know how many millions of dollars Sony has spent to make them number one in your brain? The number one brand name in the world is who? It’s Coca-Cola. Number Two is who? Disney. And both of these companies spent billions over the years in order to achieve this level of brand recognition.

In February 1922, AT&T announced that it would start selling toll broadcasting. Business would underwrite or finance a broadcast in exchange for being mentioned on the radio. What has changed in radio advertising over the years? Advertising today is of course very different.

Back in 1922, the only radio stations in existence were AM. FM was only used in the military—it didn’t really exist. About 1967-68, a guy named Ray Donahue and his wife Rachel went to what I think was a church-owned FM radio station in San Francisco and said, Hey, let us play some records on your station. And they said, “Are you nuts. “

The Donahues said, “No, no, no, people want to hear this music on you FM station, and we’ll tell you what: So and so will give you “x” amount of dollars per week to let us play these records.” Well, the radio station was about to go broke. They accepted the offer—and as you can tell, it caught on.

Do you know who was the very first paid sponsor for FM music radio? It was the U.S. Army. They did it to recruit people. Right around 1968, automobile manufacturers saw a future in FM radio and they started putting FM radios in cars. The old cars used to have three AM buttons and two FM buttons. So the AM was way stronger and more programmable. But then the FM came in. And look at it now—you can get satellite radio on FM, and that’s a whole different ballgame because satellite radio is national. You can drive from the West coast to the East coast or from Canada to Mexico and never lose your satellite radio station. They have around 200 stations on satellite, from talk to comedy to music to religion to ethnic. And one company owns it—Sirius XM. It’s a subscriber-based system, and there are many channels within their system with commercials on it. You pay $100 or more to get satellite come to your car without commercials. So the growth from AM to FM has been amazing, especially in light of the broad scope of radio going just from talk to music to advertising.

Let’s talk a bit about reaching people through local nonprofit stations. My dad was a good friend of Rick Dees, who, back in the day was a very famous host of Kiss FM. They used to smoke cigars together.

My dad used to donate lots of food—Zankou Chicken—to the homeless through a program Rick Dees helped with. They would go out together and hand out blankets and food to the less fortunate every Christmas. What’s your take about giving back to the community through sponsored events, blood drives, etc.?

That’s fantastic. Again, it’s another way to get a lot of bang for your buck without paying a lot. Of course you have your food costs and people costs. Marketing for a good cause is a whole different issue. You have to partner with a different set of radio stations, most of which have a set cause they feel passionate about. Jack FM is tacos, autism. K-Earth 101 used to be big in the military, the veterans. Each radio station has one or more causes they stand for, and business people can target those causes.

You have limited reach—you get a couple of minutes in the morning. But it’s very tangible. In fact you might have noticed a spike in your business following your dad’s association with Rick Dees. Again, that won’t build your name or brand awareness. But it will build your “warm and fuzzy,” and there are still probably a lot of people who haven’t felt that for a while.

Interesting you said that because the first time the L.A. Times mentioned Zankou Chicken around 25 years ago in an article, our sales exploded that week. My family was in Disneyland when my dad got a great call on his cell phone and we went out and found a copy of LA Times in Disneyland, not that easy to do. I remember he was ecstatic. We had four times the revenue for a few weeks just after that, but then it died out and went back to normal.

Yes, that’s why it’s important to keep brand awareness going. Sony, for example, has maintained that top spot among TV manufacturers. They probably don’t advertise as much now—they don’t have to. They’re able to take that money while keeping their brand at the back of your mind. Another great thing for reach is radio station T-shirts. For example, K-Earth 101 does Earth Day at the L.A. Zoo every year. They have food trucks down there.

Let’s talk about jingles. The In & Out jingle, for example, is: “In & Out, In & Out, that’s what a hamburger’s all about.” A sixth-grader could have come up with that, and I actually think it’s kind of cheesy.

That’s why it works. It sticks in your head. Radio and television programming is geared toward no more than the average eighth-grader’s mentality.

General Mills was the first company that ever created a jingle—for Wheaties, the cereal during the Christmas of 1926. And they found that for a week or two after their jingle was aired, their sales soared. The twin cities ran out of boxes of their cereal for the months following this ad campaign. So how important is it to have a jingle?

It’s the most important thing in the world.

And sometimes it has to be an ad within a made up song—otherwise people tend to change the station.

A song is good. Some major musicians started their careers writing jingles. Barry Manilow—he wrote the Band Aid jingle: “I’m stuck on Band Aid because Band Aid’s stuck on me.” Billy Vera. I think Billy Joel wrote some jingles. These guys were jingle guys before they were celebrities. There was a Jif peanut butter jingle—”Moms like you choose Jif, choose Jif!” An Alka Seltzer jingle—”Plop Plop Fizz Fizz.” But the thing about jingles is, don’t put your money behind jingles if you’re not going to put the motor in the front to drive it. It’s great if you have a great jingle, but if you can’t afford to put it out there it’s a waste overall.

And by the way, on the subject of money, one of the most successful—and absolutely free—forms of advertising today is YouTube. I could think of proposing to you a three-minute video and guaranteeing a minimum of 500 to 1,000 hits on it. And you take that 500 to 1,000, who will tell a further 500 to 1,000 people, and pretty soon you’re up to 20,000 or 30,000 hits—20,000 or 30,000 people who have heard your voice, seen your shtick, and attached something to it. A smart marketer will link their radio ads to their You Tube and Facebook presence.

How about the use of a sound or just a funny line?

If you go back to the Wheaties ad, what became of it was a commercial of people sitting with their heads in their hands, looking exhausted. “Oh, you didn’t have your Wheaties today!” Which then took on a life that your life is going to be miserable without Wheaties.

Starbucks can do that now!

Well, Starbucks never put their money into TV or radio or advertising as such. They put all their money into getting into every single place they could. They got into airports; they opened a store in every corner. And the success of the Starbucks market is that when you go into one of their stores, every single one of them is the same. Every place you buy a Coca-Cola in the world it’s the same drink. And I asked a Coke executive why that was, given that water in every place in the world is different. And the answer was that Coke has a water purification system that makes the drink uniform everywhere. The only inconsistency I’ve noticed in the fizziness of the drink. The flavor’s the same.

How important is it for a restaurant to have a focused, core message in advertising? “We’re the Best Sushi in Town” or “The Freshest Lobster.”

That’s backwards thinking. Everybody has the best chicken. Everybody has the best barbeque. The print advertisers—L.A. Weekly, Pasadena Weekly—all have these “Best of” features: Best Restaurants in Pasadena 2014; Best Cafés in Los Angeles, etc. But nobody cares about “Best of.” Everybody is “best of” something. It means squat. What you have to think about is what is going to drive people to you. You don’t have to tell them you’re the best. They have to think you’re the best. Because you’re going to be the best compared to what? One customer may like your food. I may hate it.

To say you’re the best is a cliché. And clichés are to be avoided at all cost. Slogans are good, but clichés are bad. There’s a movie, Elf, with Will Farrell in it. He plays this innocent kid—an orphan—who’s raised on the North Pole and goes to New York to find his dad. He’s walking down the street and walks into a little coffee shop, and he screams at the top of his lungs, “Congratulations, oh my goodness, you’re the best coffee in the w-o-r-l-d.” And then later he goes to the same coffee shop with a date and he asks her, breathless, “How do you like the coffee?” She goes, “it’s OK.” And he says, “No! It’s the best coffee in the world.” And she goes, “This coffee sucks.” But in the front of the building, the coffee shop spent money painting a sign, “Best Coffee in the World” or” Best Cup of Coffee in New York City.”

So, you can’t tell people you’re the best. That’s a pitfall. Do you know the story about tabouleh? It was a poor man’s salad. In the old days, cooks took all the old vegetables—whatever was left over and wilted—and chopped it up really fine and soaked it with olive oil and lemon juice. That was tabouleh back then. And look at the dish now.

You have to say , “All our ingredients are fresh. All our flavors are unique. Decide for yourself.” Invite people to make their own decisions. Don’t shove your view down their throats. How many times do we tell ourselves “If I get that shoved down my throat one more time…”

But if someone else says you’re the best—a celebrity, say, like Gordon Ramsey—then you can use that quote. It’s off the hook there. Third party recommendations are always credible. Put those on your web site and plaster them everywhere.

How would a restaurant owner know which station caters to their crowd?

What you have to think about is who does that radio station attract—what demographic in terms of age, income and preference for music. Radio stations target their demographic by the music or content they disseminate. The Classic Rock station, KLOS-95.5—what do you think their demographic is? Men, 25 to 54. Their advertising is mostly geared toward men 25 to 54 years old.

I used to tell women around Christmas, You want to know what to buy your man for Christmas? Listen to KLOS for a week—you’ll get 20 ideas. Who do you think KISS-FM targets? Their market is probably leaning toward younger females, 12 to 24, maybe 18 to 24. All this information is part of the radio stations’ one sheet. Then you have to think about which radio stations duplicate each other. If you draw a pie chart you’ll see that KISS-FM, Power-106, KROQ and 97.1 AM overlap. What you want to do is get as much of a station’s unique reach, based on your own audience. Power-106, for example, has more teen listeners in a day than KROQ has in a whole week. But advertisers aren’t comfortable spending their money advertising to teens. So they veer away from that. Power-106 has 1.3 million teen listeners. That’s more than KROQ’s whole audience, which is 750,000. But KROQ’s audience spends more money. All this stuff is part of the formula.

When I look at Zankou’s age range, I would say it’s 25 to 54 years, men and women. So your basic radio campaign should look at the following factors: Who’s your core audience? How much do the stations that attract your core audience duplicate with their competitors? Is the station skewed toward men or women? What’s the income level of your audience?

One other thing: You want to have a marketing consultant who has same amount of passion as you. This whole thing should be drive by passion. Educated but passionate. If a salesperson doesn’t have a passion for what he does, you’ve got the wrong person.

What are the advantages of putting the name of a business on public radio, such as, say, Southern California Public Radio and the Southern California classical music station KUSC?

These stations have very low reach. Ask them how many listeners they have.

The other thing is that there might be stations on which a restaurant doesn’t want to advertise because they attract a certain type of audience the restaurant may not want because, for example, it doesn’t want people coming in who tag the restrooms.

That’s true. But you never want to put anybody down. I’ll give you an example of Morrissey Universal Nissan, near Universal Studios. Morrissey once wanted to launch a campaign in which they said that if you came in and test-drove an Altima you would win two tickets to a certain show. Now, Nissan is an economy car. I told Morrissey that when they do something like this they’re going to have a load of people coming in just to get those tickets and not purchase a vehicle. Maybe one out of 100 people might test-drive a car and buy one. Your sales guys would hate you. I told them it’s a bad idea. And they killed it. If they had people come in for a sweepstakes, that’s different. That way, they would keep their liability low.

Radio advertising can basically be broken down into two things: Brand awareness or direct response. You have to decide what you want. Let me give you an example. KLOS-95.5—their demographic is 25- to 54-year-old men. What do 25- to 54-year-old men in Los Angeles do? They go to jail. So who’s a good late-night customer of KLOS? Bail bondsmen. Who’s a big advertiser on Power-106 or KISS-FM? It’s usually businesses like inexpensive car dealerships—such as Galpin Ford and Nissan.

What should a restaurant’s call to action be on a radio ad? Should it give out a telephone number, a URL, or something else that ties in with the restaurant’s message?

Whatever it is that’s going to identify the restaurant—the easiest, quickest identification. Phone numbers are worthless. If you have a website that’s short and memorable, such as, say, ZankouChicken.com, give it.

What are your top three Do’s and Don’ts for small businesses that want to advertise on radio?

Let’s start with the Don’ts.

  • Don’t put all your eggs in one basket—the world’s too diverse for pigeonholed, scoped-in marketing.
  • Don’t expect immediate results—you’re going to be disappointed.
  • Finally, don’t be afraid to try new things. If people really want your business they will partner with you to try things. If you have an idea that something will work, push for it. For example, if I came to you and said, “Let’s try this first,” you should not hesitate to say, “Let’s give it a shot.” Try different things to help decide what works well for your brand. It may take a while to figure this out.

The top three Do’s:

  • Ask the person that you’re trusting with your money and marketing what they would do while starting out, and ask them to treat the campaign as if the restaurant were their own.
  • Give people choices—a wide spectrum of ideas. I maybe able to take your photos in one or two shots, but I’d take a hundred because I maybe able to see something that you like better in the one or two shots that’s missing from the rest of the 99 or 98 shots. And if we both decide that none of the 100 are good, then we’d go back together what we figure out next.
  • My third do is being action oriented. Get out there and just do it, learn from your mistakes and grow.

It’s not just about getting a song on the radio or appearing on television. It really is about helping people change their lives one day at a time.

Yolanda Adams

I’m obsessed with radio. It’s a good start to Sunday morning.

  1. L. Stine

That was the big thing when I was growing up, singing on the radio. The extent of my dream was to sing on the radio station in Memphis. Even when I got out of the Air Force in 1954, I came right back to Memphis and started knocking on doors at the radio station.

Johnny Cash


It’s not true I had nothing on, I had the radio on.

Marilyn Monroe

Nobody counts the number of ads you run; they just remember the impression you make.

William Bernbach

Strategic Marketing : Interview with Vartkes Iskenderian

It Doesn’t Stop at Advertising and Marketing: Why Operations are so Important and Why they are Linked

You don’t learn to walk by following rules. You learn by doing, and by falling over.
— Richard Branson, CEO, Virgin Group

Vartkes Iskenderian is one of the four brothers who helps run Zankou Enterprises, along with the company’s 260 employees. At 30 years of age, Vartkes is young and dashing—he’s often mistaken for talk show host Jimmy Fallon. He’s also very well educated. Vartkes has a Bachelor Science degree in marketing from Cal State Northridge, Los Angeles. He studied at UCLA Anderson School of Management’s MBA program but left midway through the program to turn his attention to the family business, where he felt he was needed. Vartkes gives us his insights here about strategic management and one of its key elements—strategic marketing.

Peter Drucker said in 1973 that strategic marketing is seen usually as a process consisting of analyzing environmental and market-competitive business factors affecting the corporation and its business units; identifying market opportunities and threats; forecasting future trends in business areas of interest for the enterprise; participating in setting objectives and formulating corporate and business-unit strategies; selecting market target strategies for the product markets in each business unit; establishing marketing objectives as well as developing, implementing and managing the marketing program; positioning strategies in order to meet target needs.

Obviously, that’s a long definition. But we also have a shorter definition: Identification of one or more sustainable, competitive advantages a firm has in the market it serves or intends to serve, and allocation of resources to exploit that.

So, what is competitive marketing or strategic management to me? I agree with Drucker’s definition and the other one to a large degree, and I disagree with them to a lesser degree. What Drucker said was obviously very broad. It included a lot of the operations side of business management. But strategic marketing is actually just that. It’s hard to distinguish between the marketing and operations sides of the business equation. Both are intertwined.

It may help to see the definition of operations and that of marketing. An operation is the condition of functioning or being active. It often includes running, working, and performance during a course of action. Running a smooth operation is essential to any business, especially a restaurant business. Marketing, by contrast, is the action or business of promoting and selling products or services, including market research and advertising. Both are extremely important and are often times intertwined.

Great discipline within operations is required to execute a business. Great marketing is also required to understand what a company is; what kind of value it offers; how the market is going to understand the company and make decisions that will benefit the company; and how to position the company in the larger world. That’s a very simple definition of strategic marketing. How it’s executed is what differentiates a business from others in the market.

Let’s take Zankou Chicken as an example. We’re a Mediterranean, fast casual chain. How many other Mediterranean, fast casual chains are there? Not that many. That is one important differentiating factor for us. But why are we different from other Mediterranean restaurants? Well, we put a lot of emphasis on the quality of our food. We depend on high volume to get the profits we need. If we get the same volume as most other companies on average, we probably wouldn’t do well. Our customers keep coming because we provide such good quality—fresh food, the highest quality meat that’s tasty and never frozen—at a competitive price. This is one of our great competitive advantages.

Now, how do we make sure the public knows this? We have to constantly educate the public—and that’s where marketing comes in. It’s called taking care of the whole package—everything from A to Z. I call it A to Zankou: How does the customer know about your business, all the way to how does the customer feel after they’ve had your food. How much cognitive dissonance do they have? How much buyers’ remorse do they have?

In psychology, cognitive dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time, or is confronted by new information that conflicts with existing beliefs, ideas, or values. The less cognitive dissonance customers have, the more word-of-mouth advertising they will do for you—completely free of cost. At the end of the day, if they feel good about having spent their money, the more likely they are to return to buy our food. All that is marketing. It’s the same with top companies such as Toyota—the more customers like their cars, the more likely they are to be loyal customers who buy the same brand name.

And that’s where the importance comes in of establishing yourself as a premium brand—a higher value brand that consumers are willing, able and happy to pay for. It all comes down to value: What is the customer paying and what is he getting in return? One way of gauging value is to ask if the value that customers get on a product is a lot more than what they’re paying for it. The more valuable the product seems to them, the more likely those customers will purchase it again. And remember, a customer’s perceived value is reality.

So if I buy Lexus cars for $50,000, how do they compete with other $50,000 cars? If Lexus beats its competitors for what’s available in the market for that price range—let’s say they have an amazing safety standard, or they offer an amazing warranty that will fix anything that goes wrong, or an amazing navigation system—the easier it is for customers to purchase a Lexus. Of course, a lot of other factors also weigh in. Social conformity, for example—how society sees the product, regardless of how good it is.

Conformity is the act of matching attitudes, beliefs, and behaviors to group norms. Norms are implicit, unsaid rules, shared by a group of individuals, that guide their interactions with others. This tendency to conform occurs in small groups and/or society as a whole, and may result from subtle unconscious influences, or direct and overt social pressure.

Value in marketing, also known as customer-perceived value, is the difference between a prospective customer’s evaluation of the benefits and costs of one product when compared with others. Value may also be expressed as a straightforward relationship between perceived benefits and perceived costs: Value = Benefits / Cost.

The customers get benefits and assume costs. Value is thus subjective (i.e., a function of consumers’ estimation) and relational (i.e., both benefits and cost must be positive values).

Often times consumers have a high perceived value for a product due to the company’s excellent marketing when, in fact, that product may not be so great when rated by objective standards. The perceived value is the entire experience, whether the product is a Lexus or a bagel.

Let’s say, for example, you walk into a café and you look at the beautiful décor. The furniture and surrounding are green and brown—these are earthy colors. You instantly think you’re in place of nature. The music is appealing, and so are the people. The service is good. And what you’re served is good, fresh quality food, and it’s probably organic. Oh wait, it is organic! All of that ties in together—and it all comes down to attention to detail. There’s no confusion—no cognitive dissonance.

Marketing plans are written out well in advance so that companies can reach their marketing objectives. So it’s absolutely crucial to have a written strategy that is communicated to all the employees of a company. It’s the same for a company’s mission statement, which is an extremely important document.

After all the years I have spent in business, I’m still learning every day how important a company’s philosophy is. And it ties back to the principle of having a strategic plan. What’s the heart of a company? What does it stand for? If a company doesn’t know the answers to these questions, it won’t know whom to hire. It won’t know whom to fire. It won’t know when it’s succeeding and when it’s not. And everybody will be discombobulated—all over the place. The more a company is focused on a few things—its core philosophy—and it works on those few things, the more it’s going to excel because everyone’s pursuing the same goal.

Ideas constantly come up within a company and it’s easy to forget what the actual goal is and why you decided on it. So before you act on all those great ideas, you should really have a plan—a road map. If you don’t have such a map you don’t know how to get from Point A to B, from here to New York. You could be in America for a hundred years but you still may not be able get to New York because you just don’t know how to get there.

The same is true of businesses. It could take a hundred years for them to get where they want to go because they don’t know where they’re going. So, the goal must be set first—and then you work backwards. If your goal is five years from today—or a year from today—you say to yourself, A year from today we want our customers to feel a certain way about our business, that we want to sell more to a certain demographic, or whatever. You should set the goal and then try to reach it from where you are. You ask yourself questions such as, “How do we get there?” What is it going to take? Who is going to get us there? Why are we doing this?

A lot of times, people tend to forget the “why.” But that’s what’s going to convince you and your team why what you’re trying to do is important to stay on course. If you or one of your team members have a different idea along the way, it will be the leader’s responsibility to remind everyone to stick to the initial idea—remind everyone about what was agreed upon and why. And that’s why all of that has to be documented, explained, constantly reiterated and printed out for everyone to see. If people at the top don’t feel strongly about the marketing strategy, then everyone else will feel that way. It takes a lot of communication to get where you want to be.

Companies often consider customers’ lifetime value. So what can companies do to keep customers for life? There’s a great book on the subject called Hooked: How to Build Habit-Forming Products by Nir Eyal, Ryan Hoover (Editor). It’s about how to get customers to crave your product or service. It all goes back to adding high value—through a meticulous culture. For example, I could paint a picture of a house for you. It could take me 10 seconds to do it. Or I could spend a week on the painting by spending time on how to make the house look better and getting some expert advice. Which picture are you going to like more? Obviously the more well developed one. It’s that simple. The more time and energy a company spends on a product or service, the more people are going to appreciate it. And the more likely they are to keep coming back.

Take Jiro Ono. He’s the Number One sushi chef in the world. He has a three-star Michelin restaurant in Japan called Sukiyabashi Jiro. U.S. President Barack Obama dined at the restaurant with Japanese Prime Minister Shinzō Abe on April 23, 2014. He reportedly did not finish his sushi though Prime Minister Abe said, “Obama said it the ‘best sushi I’ve ever had in my life.’”

There’s a documentary about him on Netflix called Jiro Dreams of Sushi. He doesn’t even serve appetizers. His food is very expensive. You’re in 15-20 minutes and you’re out. There’s no great service. All you get is a high quality product, meticulously made, with great attention. And every single day, Jiro is looking at ways to improve the product. That takes consistently doing the same thing over and over again and creating a strategy or process for doing that. The way he cooks his rice—he’ll do it a certain way and he’ll make sure everyone on his team understands how to do it exactly that way. It could take days, week, and years to do something—only to realize that it’s better if you did it another way.

The Japanese have had this philosophy for decades. From tech to food, no matter what the company is, they’re dedicated to making minute improvements every single day through investments in time, energy and focus. And it doesn’t always require money to improve quality. Often it’s just getting your team involved and having the strategies in place. Toyota is a great example. The culture of the company developed from the founder to every single employee. The philosophy behind it is known as kaizen—continuous improvement. Every single person has the ability to help the company get better. Kaizen literally translates to “Good change.”

Every strategic management plan must include what’s known as a SWOT analysis—that is, knowing a company’s Strengths, Weaknesses, Opportunities and Threats. It gives you a good picture of where you are and what you need to work on. Because remember, without knowing where you are, you’re never going to know where to go—and what it’s going to take to get you there. You have to ask yourself how to capitalize on your strengths. What are your weaknesses and how do they affect the market?

For all the importance of strategizing, there’s a certain point at which you have to move forward into action mode. You have to ask yourself whether all the time spent strategizing is working in reverse—that is, if we start working now, what’s the worse thing that could happen. You put one foot forward and see what happens. Of course, every situation is different, and there are different variables. It all depends on how much it’s going to cost to move forward, how many people the action is going to affect. But if you have put in the right time, you will know when you’ve done enough to move forward. If you think too much, you might have paralysis.

Although strategizing implies thinking, strategic management is not something that can be—or should be—done only from home. You’ve got to get out there. Because when you get out there in the trenches that’s where you will get to see people and anticipate problems. You come into contact with issues that your team members think they can improve. You feel people out—see if they’re right for a certain job and whether they’re performing to the standards that you have set. And the only way you can get a feel for all that is by going out and seeing it for yourself. It’s a process of constant communication.

Price elasticity—keeping costs down while maintaining high quality—is another very important factor. A company needs to know how any increase in the price of a product may affect customers’ purchasing decisions. If a company doesn’t understand this dynamic, then when it increases prices they might experience an adverse effect. That is, they might think they’re going to increase profits by raising prices, but in fact it might work the other way. Because there’s always a certain point beyond which customers don’t want to pay for your product or service.

Customers always have in their mind what the value of a particular product or service is. By having the right price, you look at the bar. If the value of your product or service is above the price you provide, then customers are likely to buy what you’re selling. The closer your price reaches the value of your product or service, the less likely customers are to buy it. So you always want to have value—and the perception of value—out there for everyone to see. In fact, the perception of value is really the true value of a product or service. That is, how do customers perceive your business—and how do they compare it to other alternatives. The higher the value, the bigger the difference between the value and the pricing you’re providing. If your price keeps going up, however, some people might not perceive that value to be that high.

But in certain industries it’s very doable to increase prices. You may think that all is well and you have no competition. But the truth is there is always competition. Taking this example and applying it to us, customers may not always want Mediterranean food, for example. In that context, any other restaurant that offers value is a competitor. So before you increase prices you have to know your industry well and know your competition. Raising prices should never be a game you play; it should always make sense.

Before increasing prices, make sure that you have looked into every alternative available. Can you negotiate a better price with your vendors? Can you cut costs somewhere in the company? Can you increase productivity? Anything that keeps you from raising prices is a good thing. Remember that the higher up prices go in an industry, especially in the restaurant industry, the more sensitive customers may be to the change.

But if you must raise prices, ask yourself if costs are going up everywhere and if customers know about it. If they do, then their perception of cost and value are in sync. And again, value isn’t just the quality of the product or service. It’s also the quality of service, the accuracy of service, and a host of expectations that go with all that.

How do we know that a particular media or advertising strategy is actually working? That can be difficult to gauge, especially with social media. But you can start with specific items. That is, promote a certain item from your product mix and do a projection about where you think sales are going to go. And then keep an eye on whether the product is selling more or less, timed with your social media campaign. Find a way of tracking the demographic details of customers who are buying the product. But remember, trying different strategies is easy. What’s difficult is keeping track of whether those strategies work or not.

Finally, my top three Do’s for Strategic Marketing:

1) Have the right people around you and put them in the right places

2) Be organized.

3) Follow through on your promises and make sure your team is doing the same.

My top three Don’ts

1)  Don’t micromanage. You can sometimes micromanage when you’re making products—food or machines. After all, you have to tell employees the right way to make products if they’re doing it wrong. There isn’t only one right way of making things.

But when you’re communicating with people, there are many right ways of doing things. Some people feel more comfortable doing things one way, as opposed to the other. So, micromanaging in that sense is bad because you’re limiting someone’s best and most effective way of doing things.

2) Don’t ever be content with where you are—always try to improve—don’t glorify yourself, and don’t ever become complacent. What you did yesterday is already past. The future is what matters more.

3) Don’t do too many things at once.

You cannot do everything at once, so find people you trust to help you. And don’t be afraid to say no. Jane Seymour

We cannot do everything at once, but we can do something at once. Calvin Coolidge


Editors Note

According to Emma Johnson, a Success Magazine contributor, here are 8 ways to helping create a premium brand like Vartkes was talking about.

Here are eight key concepts when creating or evolving into a premium business:

  1. Build the premium into your core values. Establish documents outlining the goals, motivations and tactics of the firm, and how each employee, vendor and partner will exemplify those values.
  1. Focus on customer service. Bolivar Bueno, founder of The Cult Branding Co. and co-author of The Power of Cult Branding, says small, nimble businesses are exceptionally poised to beat out big competitors with personalized customer care. “The key to succeeding as a premium brand is creating and controlling every aspect of the customer experience,” Bueno says.
  1. Measure metrics for success. Create a system for measuring customer service and quality control. “Aim for a 5 out of 5 in every category, and constantly assess your performance,” Bueno says. “Get the entire company on board with a mentality of excellence.”
  1. Narrow your marketing and sales focus. It can be very efficient to focus all these efforts on the sliver of the market that wants and can afford your product. Meanwhile, a business built on price-beating is forced to cast a much larger net.
  1. Communicate your difference. Sales and marketing efforts must explain why your business is, in fact, premium. What do customers say about you? What results do you promise?
  1. Cultivate hardcore fans by going above and beyond. One premium pet store competes against big-box mammoths by giving away whole pies during the holidays. A tire store owns its local market on the promise of driving anywhere in the region to fix a flat.
  1. Charge the right price. “Premium prices create expectations,” Bueno says. So the business must ultimately support those expectations with actual value.
  1. Easy on the discounts. Businesses that are new or in a lull can be enticed to offer coupons, deals and big sales. Beware. “Discounts are the crack cocaine of marketing,” Bueno says. “The first time you do it, you get a bump in sales, you feel awesome, and you want to do it again and again.” A wayward step on that slippery slope morphs you into a discount brand. (Don’t forget: Many online deals live on in perpetuity.)


Kaizen (改善?), Japanese for “good change”. It has been applied in healthcare,[1] psychotherapy,[2] life-coaching, government, banking, and other industries. When used in the business sense and applied to the workplace, kaizen refers to activities that continually improve all functions and involve all employees from the CEO to the assembly line workers. It also applies to processes, such as purchasing and logistics, that cross organizational boundaries into the supply chain.[3] By improving standardized activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen was first implemented in several Japanese businesses after the Second World War, influenced in part by American business and quality management teachers who visited the country. It has since spread throughout the world[4] and is now being implemented in environments outside of business and productivity.

Price Elasticity

Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price, ceteris paribus. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income).

The Art of Negotiation with Jack Nasher


The Art of Negotiation with Jack Nasher

January 16, 2015 / Leave a comment

Let us never negotiate out of fear, but let us never fear to negotiate. —John F. Kennedy

Negotiation is both an art and a science. But the art works best when you understand certain principles of negotiation. Jack Nasher, a professor of organizational behavior and leadership at Munich Business School in Germany, is the author of six books, including a bestselling book on negotiation titled DEAL, and another book on how to tell truth from lies during the act of negotiation.

Jack Nasher, born in 1979, studied and taught at Oxford University and is currently the Professor for Leadership and Organisational Behavior at Munich Business School. Jack is an expert on reading and influencing human behavior, particularly as applied to negotiations. He gives seminars and lectures for executives, consultants, and lawyers all over the world. His books became runaway bestsellers in more than a dozen countries – from Austria to China. Jack is currently the most widely read business psychologist in continental Europe and has been featured in over 100 TV and radio stations all over the world.

Educational Background

Jack went to school in Germany, France and the United States. He majored in philosophy and psychology, was appointed Research Associate of Holyell Manor at Balliol College, Oxford University, and completed his law degree with first class honors at Frankfurt Law School. After obtaining a master’s degree in management at Oxford University’s Said Business School, Jack completed his doctorate at the Sir Karl Popper Institute for Scientific Theory in Vienna.

Stints followed at the M&A law firm SkaddenArps in Munich, at the European Parliament and at the European Court of Justice in Luxembourg and as an Assistant Attaché, representing Germany at the United Nations in New York. In this chapter, he explains how to negotiate from a point of power and how to get what you want, skills that can be particularly useful in the restaurant industry.

Nobody is born a good negotiator. Some people have natural talent but everyone can learn the techniques of negotiation. Even if you learn all of the techniques in negotiation, you still won’t always get what you want. But you increase the odds—the chances—of getting what you want. So if you get what you want, every fifth time you have 20 percent more wins in the course of your life. If you look at these negotiation techniques, you will find that some of them you may already be using.

But I guarantee you that you’re not using all of them. If you add just two or three techniques to your repertoire you will greatly improve the overall odds. While negotiating the price of something, it’s always a good idea to be the first to put a number on the table instead of listening to an offer from the person you’re negotiating with, unless of course you have no idea of the value of what you’re negotiating for.

There’s a phenomenon called “anchoring.” Usually, the result of a negotiation is very close to the first price put on the table. So you, rather than the other party, should be the first to anchor a price. There is a psychological principle behind anchoring: Whatever number is on people’s mind influences their decision. And this has been proven in many experiments. In one experiment, people were asked to write down the last two digits of their social security number. Later, they were asked how much they would pay for a certain bottle of French wine.

The people whose social security digits were on the low side—say, 10—said they would pay $8. And the people whose numbers were on the higher side—say, 20 or 30—said they would pay three times as much. When told about the results of the experiment, they laughed it off. But the phenomenon works. While putting a number on the table, you don’t necessarily have to say that’s what you want. In a salary negotiation, for example, you can mention that other people in your industry are making a certain amount. That way, you will have put a number in the mind of the employer. And the number should ideally be as high as you can make it—as long as you can justify it. On the flip side, if you’re buying something, you should quote as low a price as you can—backed up with a reason.

So the way it works is, quote your price (high or low) and then signal openness in a polite manner. I once went into a negotiation where the other side wanted $150 million. The price we gave was $6.5 million. We knew we could never get away with it, but we had a justification for that price. And we were open to negotiating. There are also cultural variations in negotiating.

Take the Chinese style of negotiation, which is fluid and liable to last-minute changes depending on the latest circumstances. But Chinese contracts, like Russian contracts, aren’t worth much because the legal systems in China, Russia and other Eastern countries don’t usually work very well. A judge of the High Court in New Delhi, India, for example, calculated that it would take 466 years to solve every case on his desk. So if you are in a country where the legal system doesn’t work effectively, it’s a good idea to avoid the courts. And that’s why a lot of Chinese and Russian businessmen have handshake deals. They go out for dinner with you ten times before talking business. They do that because they want to get to know you first. And you have to have recommendations and so on—because the contract isn’t worth much. In the Western world you can sue people if things don’t work out, but not in China and large parts of Asia.

Here, in America, we complain about slow courts. But they do work. So the further you go away from a working legal system, the less value a contract has. I was recently leading a negotiation for an oil platform in Alaska. I was representing the buyer of this platform and it was almost a billion-dollar deal. When I came into the negotiation I found that the other side hadn’t done anything. Now, most people always say that you should prepare for a negotiation. But what does it mean to prepare? The most important thing is you have to know your plan “B”—what do you do if the initial negotiation doesn’t work out. You have to come up with a real number—what’s the value, the alternative price. If you don’t have a specific number to that you don’t have any power in the negotiation.

So, if you don’t do anything else, at least find out your plan B—as specifically as possible. If you go on a job interview, find out what an alternative company in the same industry would pay. And always work up your list—don’t work down—which means, don’t start with your favorite option. Instead, start with your third-favorite option—or the second one. If you do that, you’ll be very strong because you’ll be sitting there with all the alternatives at the back of your mind and by the time you come to your favorite choice you’ll be very strong. For many people it makes sense to see the outcome of negotiation as a “win-win” situation in which the parties cooperate and everyone gets something. But most of my clients don’t care about win-win. They just want to win.

They don’t care about the other side—they don’t care if the other side loses. They have a valid point. Further, win-win style negotiation doesn’t necessarily mean that the other side has to compromise. If the other party wants something that is very cheap to me—something I can easily concede, then getting a desirable outcome shouldn’t be a problem. For example, let’s say I want to buy a car and the car dealer wants me to pay $30,000 for it. Usually I would negotiate—starting at, say, $25,000 and we would go back and forth. But the question really is what can the other party give me that is of high value to me but cheap to the other party—and vice-versa.

So, I could say to the car dealer that I’ll give him $30,000 but that I want winter tires (if I live in Europe, for instance), and I want a warranty etc.—things that other customers are routinely charged $10,000 for, but which costs only $3,000 for the dealer. You shouldn’t focus just on the price while negotiating. Look for other stuff you can get—things that are valuable to you. That is a win-win situation in which we really bake a larger pie and different interests are fulfilled. That’s a really good negotiation. But it doesn’t always work. Sometimes it’s win-lose, and that’s when it gets rough. And that’s when you should use what’s called “table tactics,” such as anchoring—putting an extremely high number on the table. Sometimes negotiations lead to a “take it or leave it” situation.

The other party will refuse to budge on their offer. When that happens, you should immediately re-frame the situation by pointing to other alternatives. Framing any particular situation is a very important skill you should learn if you want to be an expert negotiator. Don’t let yourself be cornered. That only gives the other party more power. Politicians, for example, don’t fall into the trap of answering questions with a “yes” or “no”—they usually pivot around the questions and just say what they want to say. Another strategy is to ignore a “take it or leave it” offer. You can pretend not to listen and talk about something else instead. Never respond to a threat. Once you do so, you raise the stakes and the other party can’t withdraw from their threat because they lose face. Perhaps the two most important words in negotiating are “if-then.” That means, “If you do this for me, then I’ll do this for you.”

That’s what lies at the heart of the principle of reciprocity. And the way it works is that when the other side makes a concession, you, too, should make a concession. Never give away something for free, even if it means nothing to you. If you do so, you risk devaluing yourself—“reactive devaluation” is the technical term for it—and the other side can take you for granted. People don’t appreciate what they don’t work for. And never voluntarily make too many concessions. If you do so, you may find that you have reached a point where you want something but have nothing to give for it in return.


My latest book is about how to tell when people are lying. The last time you lied, how did you feel? Chances are you felt fear and guilt, which are the most common emotions while lying. So if you look at somebody who’s telling you something, and you see fear in that person’s behavior or something that suggest guilt, chances are he is lying. I could tell you what behaviors caused by fear and guilt look like, but actually we’re very good at detecting these on an instinctive level. We’re very accurate in detecting these two emotions. When we lie the eyes open wide and the mouth goes back slightly toward the ears. The voice has a higher pitch and is trembling.

There is a tendency to stutter or repeat things. These are typical examples of fear—what’s known as micro-expressions. So if you look for signs of fear and there is no real reason to show fear other than lying, chances are that the person is lying. And guilt looks like sadness. It’s even easier to detect. A lie detector—the polygraph—is designed to notice changes in behavior. Usually a significant change (such as a faster heart rate, higher blood pressure, increased perspiration, quick change in breathing patterns) indicates that the person is lying. In a negotiation, when you see changes in behavior or body language, it could be something fishy or really important to the other person. In such cases, you should jump to another subject and then come back.

It’s called zig-zagging. By going back and forth between different subjects you can notice what the hot issues are for the other person. You can tell what’s important to him or where he’s probably lying. Relationships are important while negotiating. Ask yourself whom are you generous to—people you like or people you dislike? If you are nice to people, they’re usually nice to you. That’s the principle of reciprocity. Bad negotiators don’t give anything. They are not kind. Mediocre negotiators give a lot. They are very generous. They overwhelm the other person and expect something in return but they tend not to get it.

A good negotiator gives a little and waits for a response. When he gets something, only then does he give back. It’s what’s called “negotiator’s dilemma.” If nobody gives, both lose. But if both give, both win. You should always know your Plan B—your “BATNA,” . BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In. It stands for “Best Alternative To a Negotiated Agreement.” But your goal should always be much higher than the BATNA. A lot of people go into negotiations and think, “Let’s see how I do.”

That’s not good. You should set very high goals. Any result you can justify somehow should not be your end goal. If you write your goals down, it’s even better because then you can commit to it. And the other important thing is to listen closely to the other party so that you know what they want and you can negotiate what you want. A lot of people think it’s not very important to know what the other side wants—that what they want is their only problem.

But if you don’t know what the other side wants you can’t frame what you want. A lot of times we think we know what the other party wants but we really don’t. That’s why it’s important to listen to what the other side wants. Suppose you want to sell a table. Let’s say $80 is the price is you want and you are offered $75. You relax and ask for $80 and you get it. But if your goal is $150, you wouldn’t relax. You would refuse to sell it for $80. You would have a lot of energy and motivation to negotiate for more. We teach this to our kids—you have to reach for the stars. And it’s true. If you reach for the stars, you get the moon. If you only reach for the moon, you often end up with getting nothing. After you identify your alternatives and set your goals, you should find ways to justify your goals.

You do this by looking for things that look fair—objective criteria. People tend to strive for fairness. In all cultures, people will refuse to strike deals that are good for them but seem unfair. So you have to justify whatever you want with seemingly fair criteria. Donald Trump is a good example. When he sells one of his properties in New York, he gets his analyst to write different scenarios: price per square feet; comparable properties sold in the past one year, over the past two years and over the past five years; return on investment. So he has different scenarios and different values. But he only picks the one that is best for him. He can pick out the various scenarios and use them to negotiate. When you buy a company you have various methods to evaluate a company. But you only pick the one that is best for you in a negotiation, based on seemingly objective criteria. There was an interesting study recently conducted, which showed that if you send somebody an email and you attach a PDF file, people tend to negotiate less with you.

That’s because it’s a PDF, as opposed to a Word document. It’s almost as good as printed. It’s always a good idea to get your team in line before negotiating. That way, everyone is on the same page and it prevents your team members from disclosing crucial information or arguing with each other in front of the other side. It also helps you if you don’t do well in your negotiation. And the flip side of that is to give your opponent reasons why the negotiation has been a good outcome for him so that he looks like a star.

That’s what’s called writing the opponent’s “victory speech” when you close the deal. You should always be in full control of your own emotions.  Thomas Jefferson said, When angry count to ten before you speak. If very angry, count to one hundred.You should always observe yourself as if you’re standing on a balcony and looking down on the negotiation. In that sense, it helps to withdraw strong emotions out of direct realm of the negotiation. The more you care about the situation, the more you feel personally involved, and the worse off you’re likely to be. That’s because you’re the worst person to negotiate for your own interest.

I, for example, am much better at negotiating for my clients than I am for myself. There’s a story about a famous Japanese samurai who won every battle because he perfected fighting with two swords. When asked why he won every fight he replied that he was always victorious because he never took part in the fights—he was always up on a mountain looking down at him fighting. So he was never attached to what was going on. If you can practice that, you will always succeed in negotiating. You will be unaffected by all the techniques of your opponent—trying to insult you or make you angry. You’ll be able to laugh it off as one big game. While negotiating you should bring your notes and printouts of your favorite alternatives. The printouts could be data, too, which you can use as objective criteria to show the other party to strengthen your position. It’s also a good idea not to have a deadline for a deal—or at least not to disclose any deadline.

That puts you in a more advantageous position. Think about it: who is more powerful—the one who needs a deal by 5 p.m. today or the one who doesn’t care? So never disclose your deadline. It makes you less powerful. If you have a deadline, try to get rid of it somehow. And always try to find out the other party’s deadline. Usually they tell you. If they don’t, try to postpone your meetings and see what happens. If the other person gets nervous, you know he has a deadline. If he doesn’t care, he’s either bluffing or he doesn’t have a deadline. The closer you are to the other person’s deadline the more power you have. When the Chinese negotiate, they put off the most important negotiations toward the end.

They call it “the long wait.” They will put you up in a hotel in a remote area and tell you that they have stuff to do. They’ll make you wait one or two weeks. And then, just before you have to leave, the negotiations start. Now, you could negotiate with them or you could leave. But remember, the one who comes to the other person is in a weaker position. So it’s a good idea to make people come to you. You’re always in a stronger position if people visit you. It’s the difference between a bartender and a waiter. We don’t have much respect for a waiter because he comes to us. But we have to walk up to the bartender and catch his attention.

One more example: Let’s say a deal is 90% finalized. The other party says to you that they will be sending a contract in a couple of days. But a couple of days later the contract has yet to come. What should you do? Instead of calling them and asking them what happened to the contract, you should call and give them a deadline. Tell them that your boss told you that he wants the contract by such and such day. So now they have a deadline. You could also do what’s called the “exploding offer.” You say, If you can send the contract by Monday, we can still do the deal. If you send it by next week, we will unfortunately have to take out some favorable terms to you from the contract.

So, my top three Do’s are:

1) Find out your Plan B—your BATNA.

2) Number Two: Set a high goal—an extremely high goal but something that you can still justify.

3) Number Three: Find objective criteria to support whatever you are negotiating for. And write all these down and commit to them.

My top three Don’ts:

1) Never go into a negotiation without having a plan—without knowing what you want.

2) Number Two: Never be inattentive to what the other party wants.

3) Number Three: Don’t give away too many concessions for free.

“The world is not fair, but not necessarily to your disadvantage.”


Editor’s Note


During the interview with Jack Nasher we also spoke briefly about politics, power, and many other issues. Jack gave some valuable insight that would serve the reader well. Among the valuable insights during the interview:

1) About the investment in time. The more someone invests time in a negotiation, the more vested they are in the outcome. Always look at the negotiation like a game. Never give your deadline, and if you can, assume there is no deadline. This puts the power play on your side, and the other side will feel more pressure to concede. Of course, there are deadlines, so if the other side knows what your deadline is they will use time against you and leave very valuable items on the agenda to the last minute, leaving you in a heavily disadvantaged situation.

2) In many cultures, food is used as a sign of generosity, often as a tool and gesture of goodwill. While this is fine in a friendly or family setting, it is not proper within the context of an important business negotiation.

Always come having eaten well before, and politely refuse any food. Remember the automatic, emotional response we all have with reciprocity. If we accept food or gifts from the other party such as free hotel rooms, taxi, or airfare, we may give away concessions during the negotiation that are far more expensive for our party than these things. Tread wisely.

3) Be very careful about the notes you leave behind. Jack told us an interesting story where he left his briefcase unlocked and took a bathroom break during a tense, expensive negotiation. The woman he was negotiating with must have opened the contents of his briefcase and looked at all his notes. He realized this later because she knew his exact deadline and had negotiated with him much better than she would have had she not seen his notes. She was able to get extremely favorable terms, terms she would never have been able to get had she not known his strategy. She also saw all my details he  had written for the negotiation, including what he wanted, his personal phrases and tactics that he uses, what he could and could not concede…etc. Even though she “cheated”, nobody cares because at the end of the day she won. So be very careful.

Always guard your notes, books, and briefcase like a brick of gold. If the other party gains access to it you will lose by default.

4) When it comes to negotiation, having the right knowledge equals power. Do your homework. Know what it is that the other party wants. Study comparable items in price to what it is that is being negotiated. Come ready and willing to work at it like it’s a game. Pace yourself and do not stress out.

5) Speak to everyone in your party before the negotiation. Know what it is that you can give as concessions and what you cant give away. Many negotiations fail because a person gives away something on behalf of the company or the board that later the owners are not willing to accept. In cases like this you will have worked very hard and wasted your time and have to start all over. I once negotiated an amendment to a lease and gave away a concession my party did not agree to. Because of this small concession, something I did not care about but my party did, I could not get an amendment I worked very hard for. I had wasted an entire 2 months of work, about $5,500 in legal fees, not to mention my sanity for the weeks preceding and after. It’s not worth it so know what you are able to give away well in advance and don’t give in to the pressure.

6) You have to pretend to be indifferent about the outcome of the negotiation. If you are the owner of the business and are negotiating for yourself, this will prove difficult. If the other party sees your courage, confidence, and power they will be more willing to capitulate. Remember, there is no way to truly be indifferent about any negotiation unless you have already discussed and mapped out a realistic “plan B” that Jack talked about with your entire team.

This “plan B” should always be in the back of your mind, and having determined what you want, if you do not get very close to it, you should always be willing to walk away. This will not only show the other side a position of power, but will ultimately give you a position of power in terms of real life decision making.

7) Know details about any negotiation the other side doesn’t want you to know. This will serve as your weapons during the negotiation. For example, taking Jack’s car negotiation scenario, most people don’t know that salespeople are under extreme stress to always sell in dealerships. They have quotas to meet, and their sales manager is always on their back to sell or lease 10 times more than the dealership across the street.

This stress for them is heaviest during the last 5 days of the month, when the numbers are adding up and they want to beat Joe Shmoe, the guy working the same dealership across the hall. So when you are negotiating to purchase or lease a vehicle, you can do all your research and shopping and sign the dotted line only during the end of the month, when the terms will be most favorable to you. I did this and negotiated for a new Mercedes at a dealership in Van Nuys I will not name. This dealership is the #1 dealership for Mercedes in Los Angeles. They sell or lease about 1200 vehicles each month, and the facility is a $300 million factory full of the most beautiful and luxurious cars on earth.

I came in because my wife’s car, a BMW, was giving her many mechanical problems. Finally, after it nearly caught on fire, we had enough and decided to get a Mercedes. I shopped and talked with the salesperson for hours. I came and went many times. I finally came in a week before the end of the month. I walked away getting a brand new car, the exact make and model and color I wanted, with about $20,000 off the sticker price. Granted this model was on its last year and the new model was going to have a whole new body, but still it was a remarkable deal. Everyone that heard about it was surprised I was able to negotiate this. It happened because I did my homework, forced the salesperson to invest many hours with us, and came in at just the right time.

8) Get a favorable additional term the last minute. I have gone through dozens and dozens of negotiations for everything from building million dollar restaurants, negotiating huge construction plans and permits with cities that are notoriously difficult to deal with such as the downtown offices of Los Angeles (notoriously anti-business with a take it or leave it attitude toward most businesses) to Burbank to Glendale and Anaheim. I have negotiated 8 leases, owned and leased multiple cars, and spent tens of thousands on renovations in two separate multi-million dollar homes.

Every single time, without exception, I have gotten something favorable to us the last minute before signing the dotted line. It’s a proud tradition now that I continue every time I negotiate for anything whether it building a new web site or simply reducing a hotel bill before I depart.

Always get a few extra concessions toward the end. Do this every time, and it will become a life-long habit that pays you dividends. Look back at all you got and see what you may have skipped out on. There will always be a few things you forgot. Having said this, good luck on your next negotiation and we’ll be seeing you at the negotiation table.

The 12 Styles of Leadership

“All are born to observe order, but few are born to establish it,” wrote Joseph Joubert, an 18th-century French Christian idealist and moralist who served as inspector general of the University of France and whose fine mind and pleasant personality strongly influenced the course of Romanticism. As leaders of movements go, however, Joubert was an enigma. Although he supported the ideals of the French Revolution, he was disgusted by its tyranny. “Liberty is a tyrant governed by his caprices,” he wrote, adding: “I find it hard to leave Paris, because I must part from my friends, and the country, because I must part from myself.”

Joubert was an obscure genius. A literary perfectionist, he didn’t publish anything in his lifetime, remaining content to think and write for himself in clear, concise sentences the necessity, value and beauty of virtue. It was only after his death that his wife arranged for a collection of his writings to be published in 1838, helping establish his reputation as a philosopher and critic as well as one of the world’s greatest aphorists.

Joubert’s life underscores a vital but widely underappreciated feature of leaders: The act of leadership is less about what leaders want and more about the needs of the people or organizations they lead: The most effective leaders are those who, like Joubert, recognize the demands of a particular situation and help people adapt to the challenges before them. Successful leaders are those who understand the various styles of leadership and have the ability to move among them with ease, adopting whatever style happens to be most suitable to the situation at hand.

There are arguably as many styles of leadership as there are leaders. But psychologists and business gurus have identified some broad categories that accurately and astutely sum up the qualities of extraordinary leaders. Based on thousands of studies, these styles of leadership can be narrowed down to a few dozen, each type described by a single word:

  • Charismatic
  • Authoritative
  • Innovative
  • Laissez-Faire
  • Situational
  • Pacesetter
  • Servant
  • Transformational
  • Visionary
  • Coaching
  • Transactional
  • Level-5

Let’s consider their various attributes:

Charismatic: From Winston Churchill and Margaret Thatcher in Britain to John F. Kennedy and Bill Clinton in the United States, charismatic leaders have walked the world stage throughout the 20th century and long before that. Hitler was a charismatic leader—a magnetic man who cast his evil spell on an entire nation and led it to ruinous war and genocide. On the opposite end of the spectrum from Hitler was Mother Teresa, a humble nun from Albania who made her home in India, where she loved and cared for the lowliest of the low, the unwanted, the wretched and the sick. More recently, charismatic leaders have included Steve Jobs of Apple and Vince Lombardi, one of the greatest football coaches of all time. For all his entrepreneurial talent, Richard Branson, the founder of Virgin Group, is widely considered to be a charismatic businessman who started out at the age of 16 as the owner of a single magazine called Student and went on to build a global empire comprising some 400 companies. “Dream big by setting yourself seemingly impossible challenges,” Branson was once quoted as telling Inc. Magazine. “You then have to catch up with them.”

An increasing amount of evidence suggests that charisma—or dynamic charm—is a valuable element of leadership. Without charisma, it’s virtually impossible for anyone in the world of politics or business to sustain a high level of public visibility, especially in the information age. Charismatic leaders tend to possess a great deal of self-confidence and a bold, overarching vision for the future designed to achieve radical change. Such leaders are typically optimistic and have the ability to articulate their vision while successfully communicating to their followers a strong sense of conviction in that vision.

The most dangerous leadership myth is that leaders are born-that there is a genetic factor to leadership. This myth asserts that people simply either have certain charismatic qualities or not. That’s nonsense; in fact, the opposite is true. Leaders are made rather than born.    Warren Bennis

We’re trained to see the world in terms of charismatic organizations and charismatic people. That’s who we look to for leadership and change, for transformation. We’re awaiting the next J.F.K., the next Martin Luther King, the next Gandhi, the next Nelson Mandela.       Paul Hawken

Authoritative: Daniel Goleman, a psychologist who wrote the 1995 bestselling book, Emotional Intelligence, coined the term “authoritative leadership” to describe the classic model of “military” style control over an organization. This form of leadership is also widely prevalent in the restaurant industry, which, like the military, employs a large number of people and whose success depends to a great extent on their smooth functioning as a cohesive team.

Authoritative leaders tend to be enthusiastic and skilled at mobilizing people toward a vision or a goal aimed at taking an organization in a new direction. They are excellent motivators who somehow convince their followers that everything they do has an impact on the organization, and that there’s little or no difference between their own best interests and those of the company they work for. They want to make a difference in the world. Beyond that, the authoritative leader gives employees plenty of freedom to innovate and experiment.

Let’s say that a once-popular chain of restaurants that specializes in pizzas is having a problem with sales. No matter how many times the chain changes its menu—each time likely re-designed by some know-it-all food consultant—customers remain unimpressed. Interior design improvements also fail to have any impact on revenue. The company’s board of directors hires and fires six CEOs in two years, and neither one of them is able to turn sales around.

In desperation, the company holds an offsite conference at a beachside resort, hoping that some downtime will boost employee morale and, with it, hopefully the bottom line. In one of the meetings, managers of each of the chain’s restaurants are invited to speak about what they think the company should do to change its dwindling fortunes. That’s when a manager everyone knows as Joe comes forward and lays out the broad outlines of a plan that will eventually pull the company from its financial doldrums.

“We’re really not in the restaurant business,” Joe starts out by saying. “We’re a company that makes high-quality pizzas that customers find convenient to get.” That—and nothing else—should guide everything that the company does, Joe suggests. His enthusiasm—backed by a clear, back-to-basics idea—are so infectious that the company’s directors decide to follow Joe’s suggestion. They give Joe six months to do just about whatever he wants. Joe wastes no time in crafting a new mission statement—focused on making gourmet pizzas conveniently available to customers. And then he embarks on a strategic planning process aimed at realizing the mission statement.

The key to Joe’s planning process? Make sure that every manager in the company clearly understands that the company’s success lies in finding new, innovative ways to sell pizzas in higher volumes than ever before. The managers, fired up by Joe’s vision and his confidence in them, begin acting like entrepreneurs. They find creative ways to sell pizzas at new branches—on streets corners and at train stations and airports—each one guaranteeing fast deliveries. The new strategy, under Joe’s command, has an immediate and positive impact on sales.

I was supposed to be authoritative, but at the same time had to be likeable, a quality that is a bonus, not a requirement, for men in the same position.     Dee Dee Myers

Innovative: This leadership style can overlap considerably with authoritative leaders such as Joe, who create ideas or set standards and inspire employees to work toward a collective goal. But arguably, one difference between the two leadership styles is that innovative leaders are not necessarily those who come up with creative ideas that lead to innovation. Quite often, innovative leaders will take someone else’s ideas—say, a subordinate’s—and then envision a path that turns that idea into a reality.

Besides being a charismatic leader, Apple CEO Steve Jobs was tremendously talented at innovative leadership. He had the uncanny ability to form a vision around an idea or set of ideas that inspired a host of people ranging from Apple employees to the company’s suppliers and business partners.

Innovative leaders such as Jobs tend to have powerful imaginations and exceptional communication skills. Like authoritarian leaders, they are also excellent motivators who inspire the necessary confidence and enthusiasm in their team members to work together to achieve a common dream.

Innovation distinguishes between a leader and a follower.    Steve Jobs

Business has only two functions – marketing and innovation.   Milan Kundera

Laissez-Faire: This is a French word that literally translates to : “allow to do”.  This is a policy or attitude of letting things take their own course, without interfering. Also known as the delegative style of leadership, Laissex-faire leadership is characteristic of leaders who follow a hands-off approach with employees, allowing them to make their own decisions about professional matters. Although this style of leadership is least associated with high productivity, it can be surprisingly effective in situations in which the people involved are highly skilled, independent minded and motivated. Because the people who work under a laissez-faire leader are experts in their respective fields and have the necessary know-how to work independently, they are able to meet goals with little or no guidance.

An outstanding example of a laissez-faire leader is Donna Karan, founder of DKNY. She started out as a designer whose fashionwear appealed to both men and women. But Karan has managed to build a global empire based on that appeal even though she devoted relatively a lot less time creating her own designs over the past dozen years or so. The reason for her success: Her vision continually inspires other designers who work for her. “I still get a thrill out of seeing my name on a store or on a billboard—but not because it’s mine,” Karan told the Wall Street Journal in a 2012 interview. “The name represents so much more than me. It’s the ‘we,’ all the hardworking people of our company, that I see in it.”

Surround yourself with the best people you can find, delegate authority, and don’t interfere as long as the policy you’ve decided upon is being carried out.   Ronald Reagan

The inability to delegate is one of the biggest problems I see with managers at all levels.  Eli Broad

You can delegate authority, but you cannot delegate responsibility.  Byron Dorgan

Situational: This leadership theory was developed by Paul Hersey, professor and author of the book Situational Leader, and Ken Blanchard, leadership guru and author of the now famous book The One Minute Manager.

This style of leadership revolves around the idea that a leader’s best course of action depends on a wide range of factors within a particular situation. Typically, a situational leader’s behavior is determined by the level of motivation and the capabilities of his followers. A key aspect of situational leaders is that the behavior of their followers determines the most appropriate form of leadership. For example, if an employee or team member happens to be a self-starter capable of accomplishing a task on his own, a situational leader would allow that person to work independently. By contrast, if an employee shows signs of timidity or uncertainty about how to accomplish a given task, the situational leader would provide the necessary instructions or training.

Develop an attitude of gratitude, and give thanks for everything that happens to you, knowing that every step forward is a step toward achieving something bigger and better than your current situation.   Brian Tracy

When we are no longer able to change a situation – we are challenged to change ourselves.   Viktor E. Frankl

I believe that God has put gifts and talents and ability on the inside of every one of us. When you develop that and you believe in yourself and you believe that you’re a person of influence and a person of purpose, I believe you can rise up out of any situation.   Joel Osteen

Pacesetter: This type of leader sets the pace—high performance standards, for example—for all team members, including, often, the leader himself. And although a leader who walks the talk sounds like he gets a lot of results, the evidence appears to suggest otherwise. According to Dana Ackley, founder and CEO of EQ Leader, Inc., a leadership coaching consultancy, pacesetters tend not to be successful in the goals they set out for their followers to achieve because they often can’t trust their followers. “Their self esteem rests on being smarter, faster and more thorough than everyone else,” observes Ackley, adding that, as a result, pace-setting leaders “unintentionally undermine the efforts and morale of those around them.”

But then again, to borrow a cue from situational leaders, pacesetters can dramatically boost their success rates by determining their followers’ motivation and technical skill levels: Team members who are highly motivated and skilled would have little or no trouble living up to their pace-setting leader’s expectations.

The pace of technological change in recent years has been both impressive and positive for consumers.  Mike Ferguson

Servant: Great leaders are servants, first and foremost, argues this style of leadership, which is at least a couple of millennia old if not probably as old as mankind itself. If you think about human relationships even a bit deeply it’s not hard to see that at some point in their careers leaders must have had a desire or willingness to serve others—and only after being successful in that endeavor did they go on to lead. Despite its humble name, the idea of servant leadership has nothing to do with servility. On the contrary, it’s about helping others—as captured in the true spirit of the term “government servant” or “civil servant.” To put it in more technical terms, a servant leader does nothing more or less than identify and meet the needs of his subordinates, colleagues, customers, clients or community members.

The term “servant-leader” was first coined in 1970 by Robert K. Greenleaf, an Indiana native who was director of management development at AT&T before retiring in 1964 and turning his attention to writing, consulting and teaching. In a seminal essay titled “The Servant as Leader,” Greenleaf wrote that the key qualities of a servant-leader were listening, persuasion, access to intuition and foresight, use of language, and pragmatic measurements of outcomes. And the best test of servant-leadership, he proposed, was to see if those served grew as persons. “Do they, while being served, become healthier, wiser, freer, more autonomous, more likely to become servants?” he asked, admitting that although he was informed by the Judeo-Christian ethic, his theory was applicable to anyone, religious, secular or atheistic.

The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.
Max de Pree

Leadership is about being a servant first.
Allen West

Transformational: This approach to leadership is marked by changes within individuals and social systems, with the ideal and end-goal of transforming followers into leaders. Transformational leaders are known to improve the morale, motivation and performance of followers by, among other mechanisms, merging their individual identities into that of the larger organization; acting as a role model for followers and challenging them to achieve higher goals; using the strengths and weaknesses of followers to optimize their performance.

Transformational leadership can be contrasted with “transactional leadership,” which emphasizes a quid-pro-quo relationship between leaders and followers. While transactional leaders have no higher goal than working within the given culture of an organization, transformational leaders strive to elevate the very culture of an organization. The effectiveness of transformational leadership can be gauged by a leader’s influence on followers, as measured by the feelings of trust, admiration, loyalty and respect for the leader among followers. The willingness of workers to work harder than originally expected is yet another measure of this style of leadership.

Over the millennia, the long list of transformational leaders includes the Buddha, Aristotle, Alexander the Great, Mother Teresa, George Washington, Franklin Roosevelt and Teddy Roosevelt.

First comes thought; then organization of that thought, into ideas and plans; then transformation of those plans into reality. The beginning, as you will observe, is in your imagination.     Napoleon Hill

Transformation is a process, and as life happens there are tons of ups and downs. It’s a journey of discovery – there are moments on mountaintops and moments in deep valleys of despair.   Rick Warren

Life is a moving, breathing thing. We have to be willing to constantly evolve. Perfection is constant transformation.
Nia Peeples

Visionary: In the early 1990s in South Africa, a joke had it that in light of then apartheid-era nation’s many problems, people had a choice between a practical solution and a miraculous one. The practical option entailed praying for angels to descend from heaven and fix things. The miraculous option was for South Africans, including the chronically fractious leaders of the majority blacks, to discuss issues until they found a suitable solution to the nation’s social and political ills. Incredibly, in his first speech after being elected South Africa’s president in 1990, F.W. de Klerk called for an end to apartheid and suggested that negotiations were the only way to realize a nonracist nation. As it happened, that speech set in motion a series of sweeping changes that included the release of Nelson Mandela from long imprisonment and the eventual freedom of black South Africans.

Those events in South Africa offer one of the most powerful examples of visionary leadership—both on the part of Mandela and, inadvertently, de Klerk. Visionary leadership typically occurs when everyone appears to be dramatically empowered because they own for themselves the vision of their leader, who has already planted the seeds of the organizational vision in their hearts and minds.

You have to have a big vision and take very small steps to get there. You have to be humble as you execute but visionary and gigantic in terms of your aspiration. In the Internet industry, it’s not about grand innovation, it’s about a lot of little innovations: every day, every week, every month, making something a little bit better.  Jason Calacanis

The visionary starts with a clean sheet of paper, and re-imagines the world.  Malcolm Gladwell

Visionary people face the same problems everyone else faces; but rather than get paralyzed by their problems, visionaries immediately commit themselves to finding a solution.   Bill Hybels

You don’t have to be a genius or a visionary or even a college graduate to be successful. You just need a framework and a dream.    Michael Dell

Coaching: The coaching style of leadership is focused almost entirely on the personal development of team members, resulting not only in better job performance but also better job satisfaction and decreased turnover of employees. The key to the one-on-one coaching approach is the relationships between leader and follower. We all know that the best coaches in sports have the ability to get inside the heads of those they’re trying to help. These are trained experts who know how to offer effective feedback. They know exactly when to push for better performance and when not to. They are masters of motivation and empathy. Coaching works best with those who show initiative and desire to grow professionally. And for that reason, it’s not for everybody: There’s no dearth of people liable to misconstrue coaching for micromanaging, thereby delivering a self-inflicted blow to their self-confidence.

People are remarkably bad at remembering long lists of goals. I learned this at a professional level when trying to get my high-performance coaching clients to stay on track; the longer their lists of to-dos and goals, the more overwhelmed and off-track they got. Clarity comes with simplicity.    Brendon Burchard

Selecting the right person for the right job is the largest part of coaching.   Phil Crosby

Failure is good. It’s fertilizer. Everything I’ve learned about coaching, I’ve learned from making mistakes.
Rick Pitino

In the end, it’s about the teaching, and what I always loved about coaching was the practices. Not the games, not the tournaments, not the alumni stuff. But teaching the players during practice was what coaching was all about to me. John Wooden

To be successful in coaching you have to treat your team like a family. The leader needs backing from everyone.
Morgan Wootten

Transactional: First described by the French sociologist Max Weber in 1947, this approach is more of a management tool than an esteemed style of leadership. It typically involves the management process of controlling, organizing, and short-term planning. Both Senator Joseph McCarthy and French President Charles de Gaulle were known to use transactional techniques.

The approach entails motivating and directing followers primarily through appealing to their own self-interest. The power of transactional leaders derives from their formal authority and organizational responsibility. A follower is expected largely to do nothing less or more than obey the leader’s instructions. And the leader usually motivates followers through a system of rewards and punishments.

Part of the transaction between writer and reader is the pleasure of building a community and encouraging people to play along.   John Hodgman

No transaction happens unless it is voluntary. It only happens if both of you think you win. John Stossel 

Level-5: One of the most remarkable business stories of the 20th century revolves around an ordinary man named Darwin E. Smith, who was named chief executive of Kimberly-Clark, a dreary paper company noted only for its steadily falling stock over the previous 20 years. In fact, the state of affairs at the company was so sad that when Smith was appointed CEO, he wondered if the board of directors had made the right choice, given that he was the firm’s in-house lawyer and clearly lacked the qualifications for the top position.

But Smith went on to head Kimberly-Clark for 20 years, presiding over a stunning transformation that made the company the leader in consumer products not just in the United States but the world over. Under Smith, Kimberly-Clark beat Proctor & Gamble as well as another rival, Scott Paper. What’s more, Kimberly-Clark earned 4.1 times more stock than the general market, outperforming respected companies such as Hewlett-Packard, Coca-Cola and General Electric.

Smith was a classic example of what management experts call a Level-5 leader—someone who combines tremendous personal humility with great professional will. According to a five-year study conducted by Jim Collins, who operates a management research laboratory in Boulder, Colorado, Level-5 leaders who possess both humility and an iron will—unusually paradoxical traits indeed—are “catalysts for the statistically rare event of transforming a good company into a great one.”

In fact, Collins goes on to say that Level-5 is the highest level of executive capabilities he identified during his research. “Leaders at the other four levels in the hierarchy can produce high degrees of success but not enough to elevate companies from mediocrity to sustained excellence.”

Level-4 leaders are those who can rise no higher than “effective” grade. That is, they are catalysts in what Collins refers to the “vigorous pursuit of a clear and compelling vision,” capable of stimulating higher performance standards in a group.

Level-3 leaders are “competent” managers—those capable of organizing employees and resources toward the effective and efficient pursuit of predetermined goals.

Level-2 leaders are “contributing” team members—those who further a group’s objectives and work effectively with others in a group setting.

Level-1 leaders are “highly capable” people who contribute productively to an organization through their talent, knowledge, skills and good work habits.

So besides the paradoxical qualities of deep personal humility and intense professional will, what makes a Level-5 leader? These—pay good attention, dear reader—are the “good-to-great” attributes of these outstanding leaders, according to Collins:

  • Level-5 leaders attend to people first, strategy second: “Get the right people on the bus and the wrong people off—then figure out where to drive it.”
  • Level-5 leaders “deal with the brutal facts of current reality—while maintaining absolute faith that [they’ll] prevail.”
  • Level-5 leaders keep pushing their organizational “flywheel, with consistent effort, momentum increases until—bang!—the wheel hits the breakthrough point.”
  • Level-5 leaders conceive of their companies as three intersecting circles: “what it can be best at, how its economies work best, and what ignites its people’s passions. Eliminate everything else.”

Level 5 leaders are fanatically driven, infected with an incurable need to produce sustained results. They are resolved to do whatever it takes to make the company great, no matter how big or hard the decisions.    Jim Collins

Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious–but their ambition is first and foremost for the institution, not themselves.    Jim Collins


  • The Wall Street Journal Guide to Management” by Alan Murray, Harper Business.
  • Wall Street Journal.
  • EQ Leader, Inc.
  • The Servant as Leader, by Robert K. Greenleaf.
  • Burns, J.M, (1978), Leadership, N.Y, Harper and Row.
  • Bass, B. M,(1985), Leadership and Performance, N.Y. Free Press.
  • Level-5 Leadership: On Leadership, Harvard Business Review, Jan. 2001.
  • Inc Magazine