Archive for February, 2009

Facebook, smacked down again, invites customer input

Friday, February 27th, 2009

Facebook always does the right thing by their customers… once their customers have beaten them up for a wrong first step. A year and a half ago they stirred up the wrath of their community by proposing an ad-targeting system leveraging its users’ profile data, then backed down.

Now they’ve done it again. Facebook changed their terms of service, igniting another storm of outrage on blogs, Twitter and, yes, Facebook. They relented, returning to their prior terms of service, and yesterday announced that they will be seeking user input on community questions such as terms of service, and be more transparent, including this statement:

Transparent Process: “Facebook should publicly make available information about its purpose, plans, policies, and operations. Facebook should have a town hall process of notice and comment and a system of voting to encourage input and discourse on amendments to these Principles or to the Rights and Responsibilities.”

It’s easy to make fun of Facebook for their public embarrassments, but they do get the message their users are sending. Furthermore, they are pioneers in engaging with their users. There is no template they can follow. Facebook’s users, because they give personal and sensitive information to the service, is very sensitive to its use, and the web2.0 nature of Facebook means that its users are comfortable using web2.0 means to communicate. Quiet they are not.

It will be fascinating to see how more traditional companies deal with assertive user bases. As consumers find their voices on line (and efforts like VRM give users powerful tools to manage and communicate with their vendors), we’ll be reading more stories like this one. Will other companies learn from Facebook’s painful lessons?

Related post:
Zuckerberg learns

Customers are talking

Friday, February 27th, 2009

You may have noticed that the title of this blog has changed. After nearly three years, “Shop Talk: Innovation, Marketing and Alliances” has been retired. (Actually, it lives on in the incarnation of this blog that appears at Pennlive.com.)

I’ve begun to focus my professional activities around helping companies listen to, make sense of, and act on customer stories–that is, narratives offered by or involving customers, rather than survey data, eye movements, brain scans, or other measurement approaches. I’m calling this focus “Customers Are Talking”–hence, the new name of the blog.

At the beginning of the year, I set a goal to write one “Customers Are Talking” post per week. That has grown to 2-3 posts, and so now it’s time to make the switch.

While the content may not range as widely as “Shop Talk”’s did, I still retain the right to digress as necessary. Such is the privilege of self-publishing. And the Shop Talk name will live on in our occasional podcast. (New edition to premiere next week.)

Please leave your reactions, dissent, kudos, etc., in the comments.

P&G, in moving into services, can learn lessons from Disney

Wednesday, February 25th, 2009

I read with interest the recent HBR Editors’ Blog posting speculating on the difficulties Procter & Gamble might run into in its effort to create a chain of car wash franchises, called Mr. Clean Performance Car Wash.

When I read the post, written by marketing professors Neeli Bendapudi, Randle D. Raggio and Tassu Shervani, we were in the midst of a vacation in Orlando, Florida, at the various Disney parks. So, the connection between what P&G is trying to do now and what Walt Disney kicked off some fifty years ago came to me instantly.

The upshot of the HBR post is that product and services businesses are dramatically different, in particular the need for a service business to deliver an experience over and over again, consistently and of high quality, despite the innate variability of people, locations and customers.

With this in mind I monitored my Disney experience for the rest of the week for lessons that could help P&G.

  1. Brand gets people to try your service; blocking and tackling gets them to return. The Disney properties flaunt the characters, movies and TV shows at every turn. Yet after an hour at the park, you notice that trash cans are always close by, so that if you have an empty cup or candy wrapper, you don’t end up holding it for more than a few seconds before finding a place to discard it. As a result, the park is exceptionally clean for a place holding tens of thousands of guests.
  2. No detail is too small. Kids are royalty at Disney (a significant differentiator compared to most places where they are seen as messy, noisy attention-seekers–which, of course, they are). The bag checkers, waitresses, salespeople–in short, every “cast member” we encountered–took special care of our kids.
  3. Consistency reduces stress. Each of the four Disney parks we visited had a similar parking scheme, shuttle bus protocal, and entry design. Which meant there was very little standing around head-scratching and wondering which gate to go through or which bus to board.
  4. Customer recognition builds loyalty. Everywhere in the parks I saw guests wearing buttons saying “My First Time!” or “It’s My Birthday Today!” These simple gestures to recognize guests made their experiences special, built warm memories, and encouraged them to return.

I’m rooting for P&G in their Mr. Clean car wash project. The above lessons are like much good advice–easy to understand, hard to implement. Whether P&G can execute, and the marketplace and the economy cooperate, only time will tell.

Customers are talking – candid customers won’t give you 100%

Tuesday, February 24th, 2009

Two things happened to me recently that got me thinking about online product forums.

In the first instance, I was looking for an inexpensive hotel in Las Vegas. Deals abounded, but complications arose when I looked into the customer comments published online for each hotel. Here’s an extreme example:

Room was not in the main tower, it was right by the parking lot and the tunnel you had to walk through to get to the room smelled like puke and urine, also very hot. The door to the room beside us looked like it was ajar so I gave a little push, on the bed was a naked man laying there. Looked like he was waiting for someone to come into the room. I quickly closed the door and retreated back to our room. A few minutes later I looked back out and the door was ajar again. I think he was for hire. Was very scared because there was an adjoining door. It was very late and were very tired so tried to get some sleep. NOT! So much noise. Twice that night someone tried to open our door. Very scary. Cockroaches in bathroom in morning. Also very squeeky bed springs in room above that continued sqeeking for a long time (must be Viagra) Funny coincidence the room number was 169. This hotel is the seediest most unsafe disgusting place I have ever had to stay in. Never ever would go back.

Needless to say, I stopped looking for the lowest-cost deals after reading stuff like this.

Soon thereafter, I was one of a number of folks who received the same email from a friend, who had just opened a new business in town. She felt that a user review in Yelp.com, which had some criticisms, needed to be countered. To my friend, the negative statements were damaging. To me, as someone who works with helping companies listen to customers, the feedback was valuable and could be useful to her.

These two examples underline that even if you’re the Ritz-Carlton (never mind the hotel with the naked man on the bed), you will not get a perfect score from your clients. Not if they’re being candid with you. They will point out things that bothered them, that didn’t go perfectly, that are chronic weaknesses. Ignoring these forums or getting defensive is not only unwise, it’s self-defeating.

I wrote to my friend who has opened the local business. I told her that the Yelp review, while not 100% positive, did say many positive things (among which was that the reviewer had visited several times and planned to go back again–a strong testament). The negative things were accurate and, happily, could be easily addressed.

I recommended to her rather than try to debate the reviewer, take her comments to heart, act on them, and invite her back for another look.

I don’t know what to say to the owner of the hotel described above. Suffice it to say I won’t be staying anywhere near it.

Time for a humbler, more focused, wireless wholesale market

Monday, February 23rd, 2009

The US MVNO market is the greatest missed opportunity I’ve seen in my wireless career, stretching back almost 20 years. Through carrier resistance and MVNO hubris, a business model that works very well in Europe and Asia has floundered here. Strong, focused MVNOs, which manage their costs and market excellently, improve services and value for wireless users in many places outside the US.

Yet there may be a light flickering in the US market. It’s been several years since the meltdowns of Amp’d, Disney Mobile, ESPN and other high-profile players. The iPhone and its imitators have demonstrated the value of a (relatively) open architecture and application environment. And the carriers are still no better at rolling out truly innovative services than they have been.

Plus, nationwide carriers #3 & 4 (Sprint & T-Mobile) trail far behind the leaders in market share. This creates a strategic scenario where a customer acquired by a Sprint or T-Mobile reseller is relatively unlikely to poach the direct business of the wholesaler (and in Sprint’s case, they should welcome retaining customers by any means, even if they are transferred to an affiliated wholesaler). Therefore, the perceived opportunity cost of a full-on push into wholesale by these carriers is lower.

Who will be tomorrow’s resellers? Those that are laser-focused on markets unserved by the carriers. They will be smaller but profitable, with excellent, low-cost distribution channels. They will be true innovators, bringing high-value applications to their customers. They will have customer bases who purchase phones without subsidies. They will be able to create win-win agreements with the wholesalers.

In a perfect world, a Sprint & T-Mobile push will force AT&T and Verizon to re-enter the wholesale market. Then there will be a strong, vibrant, competitive market where resellers will have some control of their destiny.

And the biggest winner of all will be… the customer. You and I.

A Strategic Suggestion for Sprint Nextel

Friday, February 20th, 2009

What do you do if you’re #3 in a market and falling? Jack Welch of GE would have said, “Get out.” Sprint Nextel’s management doesn’t have that option at the moment, but their outlook appears dismal. According to an article by the New York Times’ Jenna Wortham, they lost 1.3MM subscribers while their larger competitors, AT&T and Verizon, gained a total of 3.5MM subscribers.

Not a winning trend.

Sprint is sorely in need of a strategic reboot, and I have a suggestion. Rosabeth Moss Kanter wrote the other day (”The Power of Old Ideas“) about an asset companies almost never use–the ideas and strategies they shelved in the past.

In Sprint’s case, that asset is wholesale. During the MVNO era earlier this decade, Sprint was (and still is) the largest supplier of wholesale wireless service. The others aren’t even close.

Wholesale employs outside partners–resellers–to brand, sell and support wireless service powered by the wholesaler’s network. In the 1980’s, long-distance wholesale from AT&T, Sprint and MCI launched dozens of vibrant telecommunications companies and greatly reduced per-minute charges for users.

But wireless wholesale never gained critical mass due to carrier neglect and strategic conflict–the direct channel was fearful that resellers would poach its own customers (see last week’s post on cannibalization). The cannibalization excuse always seemed weak to me–any wireless operator with less than 50% market share–i.e., all of them–will lose fewer customers to resellers than its competition.

Investment analysts complained that a wholesale customer had a lower ARPU than a direct customer. Which is true, but wholesale customers also have radically lower CPGA as well. Meaning the lifetime value equation for a wholesale customer isn’t bad (and may in fact be better than retail given the lower costs). Remind me to do those numbers some time.

All of the above, added to Sprint’s current growth (decline) trajectory, to me suggests that a full embrace of wholesale is a highly-differentiated strategy which would be impossible for competitors to match. And if I were the third-place operator, it’s one I would consider seriously.

Related post:
Netflix demolishes own business model

Ten bucks

Thursday, February 19th, 2009

When I was a teenager, the stores in our town stayed open late on Thursday nights between Thanksgiving and Christmas. In 1978 I worked at one of the local hardware stores and I was on duty one of those Thursdays. I had earlier that day cashed my paycheck. Around seven or so, business was slow and I asked the manager if I could take 15 minutes and walk up to The Gramophone Shop. I went in and bought a record I had had my eyes on for a number of weeks: Dire Straits’ first album. It cost, by my recollection, $8.98 plus tax.

Was that album worth ten bucks? It’s a stupid question. That album was part of the soundtrack of my late high school years. It was probably worth $100 to me.

Now it seems that people who spend ten bucks on music are stupid. Free mp3’s are everywhere, legitimately or otherwise. Subscription services and internet radio stations offer everything at the touch of a browser button. There’s a sea of music out there, just waiting for a listen.

But paying ten bucks for an album caused you to make a decision. (Not that those decisions always worked out. For example: the Knack’s second album.) You had to hear enough songs to get a good assurance that the album was decent, or take a risk that the one great song you heard was a pattern for the rest of the album. (Also not foolproof; see Sniff ‘n’ the Tears.)

Carrie Brownstein’s recent post on NPR Monitor Mix brought this to mind. Carrie lamented the decline of the record label, in this case the decision by Touch & Go Records to stop distributing the work of smaller labels. Wrote Carrie:

We are careening toward a paucity of experience and a paucity of means with which to evaluate music. I mean, can we really engage with art on a Web site and in a vacuum, without ever bothering to contextualize it or make it coherent with our lives or form a community around the work? If we never move beyond the ephemeral and facile nature of music Web sites — and let’s not lie to ourselves, that’s where it ends for a lot of us these days — then that makes us worse than blind consumers; it makes us dabblers. We have become musical tourists. And tourism is the laziest form of experience, because it is spoonfed and sold to us. Tourism cannot and should not replace the physical energy, the critical thinking and the tiresome but ultimately edifying road of adventure, and thus also of life.

To me, the process of getting recommendations, listening to a friend’s record, hearing something great on the radio (or a podcast), then making the decision to plunk down real money is, in Carrie’s words, an adventure–and one of the great pleasures in enjoying music. If everything’s at your fingertips, undifferentiated, you can sample, skip and flit around. You’re, as Carrie said, a tourist.

And to me that’s a bad thing. Free music isn’t only bad for musicians, it seems. It’s also bad for the audience.

Related post:
Must We Give Away Digital Creative Works?

Guest post by Denise Lee Yohn – The Economy Made Us Do It

Wednesday, February 18th, 2009

I’m delighted to present today a guest post by Denise Lee Yohn. This is the first time we’ve done a guest post. I’m curious about people’s thoughts on this–if you have an opinion, leave it in the comments. regards, John

It seems today’s tough economic climate has become the ultimate scapegoat for pretty much everything.

This past week’s New York Times Sunday Styles section included a piece describing the cleverness with which people have used the economy to get out of social obligations. From firing the nanny to avoiding a dreaded family reunion, the recession, it seems, provides a convenient excuse for folks who can’t bring themselves to deliver an honest, yet unpleasant message.

And Business Week just ran an article about how companies are trying to get out of contracts by arguing that the economic crisis should void legal obligations. Although the troubled economy isn’t technically addressed by force majeure clauses, companies in tight situations aren’t letting technicalities stop them from trying to pull one over their creditors and business partners.

Such behavior seemed somewhat comical to me until I found myself on the receiving end of a similar excuse yesterday. It came from a service rep who relayed a change in the company’s policy by saying, “We’ve been hit hard by the economy so we had to cut some of our services and that was one of them.” The momentary sympathy I felt for the company was quickly replaced by indignation against it for trying to excuse the change by blaming the recession. And my questioning of the wisdom of such a tack soon followed.

Now, I understand that economic pressures have forced companies to change the way they do business. They’re cutting back and by definition that involves tough decisions. I get that. What I find curious is executing the changes in a way that smacks of a“victim mentality.” Why would any business want to give the impression they’re helpless and desperate?! Companies weaken their brand perceptions with a thoughtless –sorry, it’s the economy — excuse.

If companies want to retain any measure of respect and trust with their customers (respect and trust being key drivers of brand equity), they should assume responsibility for the decisions they make and use these tough economic times as an opportunity to reinforce their relationships with customers. A message along the lines of the following would be a good first step in taking a proactive, brand-building stance: “Please accept our sincere apologies for making a change that we know adversely affects you. We are diligently working on ways to improve and will resume the suspended service as soon as possible.”

Communicating this type of message — and delivering a customer experience consistent with it — has the power to transform brand perceptions. Instead of being perceived as a weak player that’s relinquished control of its destiny, the business is portrayed as a brand with the integrity and customer commitment to come out of this economic storm even stronger.

With excuses to be found everywhere these days, I certainly hope we’re not seeing the beginning of a trend that makes adopting an excuse culture”– an acceptable way companies do business –– but I fear it may be. After all there’s an excuse, it seems, for everything from criminal acts to indiscretions by politicians. But business leaders should realize excuses erode brand credibility and equity.

Simply put, excuses are bad for business.

Denise Lee Yohn is an independent brand as businessTM consulting partner who inspires and teaches companies how to operationalize their brands to grow their businesses. World-class brands including Sony, Frito-Lay, Burger King, and Nautica have called on Denise to maximize brand impact. She can be reached through her blog, brand as business bitesTM.

From “Think Again,” a book about decisionmaking gone wrong – Marc’s mistake story

Monday, February 16th, 2009


Think Again” is a great new business book in which authors Sydney Finkelstein of Dartmouth University and Jo Whitehead and Andrew Campbell of Ashbridge Business School describe research in cognitive science and behavioral economics to explain how the decisionmaking process goes awry and, even more importantly, how our minds obscure the mistakes we make and keep us from understanding the weaknesses in our decision processes. [The authors also have a website for the book, including pointers to some of the underlying research and other goodies.]

The book is full of great storytelling, and this one in particular, about an executive named Marc, seemed very appropriate for the Mistake Bank:

Marc was the managing director of the French subsidiary of an international manufacturer of packaging machinery. He was considering whether or not to acquire a company that had a near-monopoly on manufacturing a specialized type of food packaging machine. While the company had a strong position in the market, there were several warning signs that it was a risky investment. The business was highly dependent on sales to one large meat processing company. Because the machinery was a form of capital investment, sales tended to be highly cyclical. The management team had recently lost some of its more talented designers and marketers, and performance was flagging. The current owners of the business were keen to sell.

These risks were particularly an issue because Marc had committed to his head office that he would deliver relatively stable performance. The previous year, Marc had personally persuaded the head office to provide additional investment to his subsidiary for low-risk acquisitions, and so his reputation was at stake.

As the transaction progressed, some members of Marc’s supervisory board voiced their concerns about the proposed acquisition. Despte this, Marc went ahead. A few months later, following the discovery of bovine spongiform encephalopathy (BSE), or mad cow disease, in French cattle, the meat-processing customer announced that it was putting discretionary capital expenditure, including the packaging machines manufactured by Marc’s company, on hold. The management team was unable to deal with the dramatic drop-off in demand. Profits plunged into the red. Marc’s superiors were shocked, and Marc’s career received a large black mark.

Marc described why he thought he had made a flawed decision. “I was under pressure to do this deal for my own interest. If I went ahead, then the costs incurred in auditing and due diligence of the company would be capitalized and added to the cost of the investment. If I backed out, then they would all be charged to my office as an expense. Because we had been pursuing this company for a while, those costs were quite significant–and I guess I was influenced by that. I had an annual target to hit–and the charge-off would occur at the end of the financial year, leaving me no time to find a way to avoid a big loss. Of course, in the end, doing a bad deal was much worse for my position. I guess self-interest clouded my judgment.”

Reprinted with permission from Harvard Business Press. Copyright 2008 Sydney Finkelstein, Jo Whitehead, and Andrew Campbell. All Rights Reserved.