Wednesday, May 28, 2008

Turn your weaknesses into strengths

I was at a Walgreens today picking up a prescription. Now I should mention that I am not a fan of Walgreens but it was just across the street from my doctor and I am a big fan of convenience. Nothing against Walgreens BTW, just that whole industry bugs me. I am also, BTW, not a big fan of needing prescriptions but anyway, I digress.

I went to the window that said "Drop Off". Surprisingly, it was just next to the window that said "Pick Up". I give them points for simple instructions. Anyway, I was mildly annoyed by the fact that there was just one person there so I wondered why they need two windows.

I handed in my prescription, they made a copy of my insurance card and told me it would take 15 minutes. Also mildly annoying because they're just picking something off the shelf not grinding stuff with a mortar and pestle. But no big deal. The woman was nice and the interaction was quick and efficient. More points for Walgreens.

So I sat down and waited. After a few minutes I looked to my right and one of the chairs in my row had a Homedics chair massage attachment. Walgreens had a sign above it listing the price with some other info. You could sit in the chair and get a demo of this product (i.e., a massage).

Well now my boring wait for a prescription (weakness) turned into free massage time (strength). I briefly entertained buying one. In the end, I didn't. But that's not the point. They turned the wait into a value-add moment for me. And I will remember that. Even better is the fact that they actually sell that product. Some people will buy it. But everyone who sits in that chair will remember Walgreens fondly.

o.b. Tampons is another example. o.b. doesn't have an applicator. I'm told that for many women, this is a weakness. They like the applicator. But o.b. turns it around into a strength in their communication (see their website). They make it about discretion and comfort because of the smaller size and they talk about the environmental angle because there is less waste. Not everyone will appreciate that, just like some people would rather get their prescription faster and forego the free massage. But Walgreens and o.b. don't need everybody. They have each turned a weakness into a strength. Which seems like a pretty good idea to me.

Monday, May 26, 2008

The phony allure of marketing ROI

It's hard to read the marketing literature today without seeing an article on how tough it is for CMOs and how demanding companies are to see a return for their marketing investment. There is so much angst and so much ink spilled talking about how to measure the impact of marketing. Especially around "new" media that do not benefit from the supposedly robust measurement systems we have for TV advertising.

Give me a break!

Can someone please tell me the ROI of CEOs? Yeah, sure you can talk about what happens to stock price, earnings... during the tenure of a CEO. But that is hardly a robust analysis. The CEO doesn't do all the work. So can someone please tell me how many companies are measuring the ROI of their CEO?

How about their CFO? How about the members of their board? How about their R&D department? How about their cafeteria? How about their travel department? Sure, you can measure what your travel policies save you by getting employees to stay at cheaper hotels. But what about what you lose in employee time or goodwill? Who is doing the ROI work on that?!

The fact is that companies do all sorts of things that they do not measure at all. And many other things that they "measure" only by checking them against crude and ancient assumptions. But when it comes to marketing, suddenly everyone is a careful scientist. Nobody wants to make a decision. So you get marketing mix models, copy testing, BASES, etc.

I'm not saying companies shouldn't use these tools. But they need to stop falling for the trap whereby they measure the things that are easiest to measure and then with the old "what gets measured gets done" thinking, lock themselves into a myopic approach to the world.

If we want to treat our businesses as laboratories guided by empirical data, then let's apply that across the board (literally and figuratively).

Borders misses the point

I was at an innovation conference last week in Boston. Borders books had set up a booth to sell innovation related books. OK. That makes sense.

But they really missed a chance to shine.

They had a table of mostly hardcover books. Many looked quite interesting. But I'm thinking: who wants to carry back a bunch of books. OK, they offered to ship. That's good customer service. And to be fair, they were quite nice about the whole thing. It was a good experience.

But they sold about $5000 worth of books at the conference. With two people manning the booth. That cannot seriously be the point of attending a conference. They had an opportunity to position themselves as true innovators. In product or service. Heck, anything. They could have offered to send me an email on the spot with a link to a PDF file that I could use to download the book when I got back (with cost savings since it's cheaper for them). Or they could have offered to put it on a flash drive. Or they could have offered to have it delivered to the Borders closest to my home or office while telling me about the book signings or events they were hosting in store.

And all these ideas are not super innovative. I didn't invent them. Imagine what they could do if they sat down and brainstormed for a few hours. They had a bunch of innovators at this conference from some high-powered companies. I'm pretty sure that the reputational benefits they could have gotten would have far exceeded $5000.

Monday, May 19, 2008

Movie prices are set to rise. Don't let them!

I recently posted my request to you all to boycott movies for a month. They cost too damn much and we need to remind this industry that we matter more to them then a handful of pampered Hollywood superstars.

Apparently both of the people who read this blog have insufficient clout at the box office.

Well check this out: Movie prices may rise by as much as 30% because the price of corn has gone up and movies make a large share of their profits from selling popcorn. I've had it! Let them stop paying actors millions of dollars for a movie. How about those folks get paid a more sane salary. Then they can afford to maintain or even lower prices for what used to be America's affordable entertainment for families.

Where to draw the line?

It is the nature of boundaries to create incentive differentials. Entities are generally designed to maximize their own utility without regard for the utility of others so there is one set of incentives for what lies inside of an entity's border and another for what lies outside. Furthermore, there are an infinite number of boundaries we can draw, as matter can be broken down into forever smaller particles on the one end, and as individuals and groups of individuals can choose to create larger or simply different aggregations of people on the other. Not all of those boundaries are salient to all decisions or considerations. One must, therefore, choose boundaries with extreme foresight and caution.

[Notes: There is a wealth of debate on what, precisely, individual humans seek to maximize. I mentioned utility not in the technical sense but as an exemplar of a broader category of potential primary objectives that drive human behavior. I don't take a stong position here on what that objective is. Rather, I am concerned with the impact on objective-maximizing behavior (whatever that objective may be) of decisions regarding which boundaries to attend to. Also, I recognize that sometimes people engage in behavior that appears to place a higher value on the utility of others. I would simply argue that this can always be explained either by a perception they have that their long-term utility is better served by minimizing their short-term utility or by their focus on a boundary other than their skin.]

My skin creates a boundary between me and every other organism (and any other entity) which - if I accept the saliency of that boundary - causes me to value my own survival, success and pleasure more than that of others.

Nations are set apart from other nations primarily through geographic boundaries. These boundaries create incentive differentials as nations are generally more inclined to protect and preserve that which falls within their boundaries more than that which falls without.

Corporations are set apart from other business entities by several parallel boundaries: between their employees and the employees of other companies, between their assets and the assets of others, between their intellectual property, brands, ideas and those of others... These boundaries creates incentive differentials. Companies seek to maximize their own value and generally do not concern themselves with the value that may accrue to other companies (insofar as their own value is independant of the value of others). Boundaries are also drawn within a corporate entity such as between functions, business units, teams and regions.

It is critically important to note that:

1) Boundaries are arbitrary. We draw them where we do as a matter of will. The question is not whether they are right or wrong, but whether they serve our purposes or not.
2) Boundary selection has very tangible implications on incentives and decision making.

When I say that boundaries are arbitrary, I do not mean that there is no reason for them to be placed where they are. I just mean that there is no law of nature that says they must be placed there, or, if there is, that there are many other boundaries that are equally sensible. Matter is fluid and continuous. The fact that we consider our self to stop at our skin and not include the air around us, the bike we are sitting on or the person we are embracing, is a decision. One that happens to be fairly conventional and normative, but still a decision. I recently read an article ( that talks about the difficulty in determining where to draw the line between our bodies and the thousands of bacteria species that colonize us (and perform often critical functions). Certainly national boundaries are arbitrary. Someone got there first. That's how it happened. But there's no reason it had to be that way. And business boundaries are the same. We buy and sell parts of each other wth regularity. And we all understand that these boundaries are easily changed.

The impact of boundary selection is also very clear. Within one's body, there are many examples. One could select a diet that might be optimal for weight management but suboptimal for cardiovascular health. Similarly, in the moral dimension, one could find a conflict between two deeply held principles and opt to pursue one at the expense of the other. But in both cases, the very need for a decision is predicated on the fact that there is a boundary drawn. Once a boundary is drawn, there is an incentive differential that often leads to the need to make a decision favoring what lies on one side of the boundary over what lies on the other.

In business, it is very much the same. When we choose to pay attention to certain boundaries, we typically find incentive misalignment that leads to suboptimal results for the entire company. This could be a product launch in business unit A which will compete with business unit B. Each business unit has an incentive to maximize its own performance. The shareholders have an incentive to maximize the return of the corporate entity. Who do you think wins? Or, function A can have an incentive to minimize product returns and function B can have an incentive to maximize revenue. Who wins? Is the company better off?

In all of these cases, the selection of which boundaries to consider "real" is critically important. We are not forced by nature to pay attention to the boundary between Marketing and Finance. We don't even have to have separate departments. That's a choice we make. And when we do, we create an incentive differential that has to be managed.

So make sure you: 1) know which boundaries are the salient ones for your organization 2) determine the impact of those decisions and 3) figure out whether you'd be better off erasing some boundaries and/or adding others.

Thursday, May 15, 2008

Will you pretend to love me if I bribe you?

I'm pretty sure nobody takes this route on their quest for true love in their personal life. So why do marketers continue to market this way?

We give coupons to consumers to "incentivize" them (please people, this is not a word) or to reward loyalists.

If you're giving a coupon to a consumer because they can't possibly understand what your product is all about unless they try it and it is too costly for most people to want to take that leap of faith then I suppose I'm OK with it. (Although you really should find a way to tell your story so that people can understand it.) Even so, you should be targeting those coupons to the right people. When you just blast them out, you're more likely to put them in the hands of people who will already want to buy your product without an incentive.

But you better make sure that your product (or, really, offering) is exceptional (as perceived by someone other than you). If it is, they will buy it. And they will not need an external incentive. The offering should be its own incentive.

Now, on to loyalty. My dictionary defines "loyal" as "unswerving in allegiance". If you need to reward your consumer (i.e., bribe them) with something that is non-essential to the relationship, then they are not loyal. By definition.

It's OK to reward a loved one with a gift. It's a symbol of your relationship. It is not the cause of your relationship. If it is, you do not have love. You have mutual expediency. And the reward cannot be the essence of the relationship. It makes no sense to reward someone for loving you by loving them extra that day. The love has to already be there on its own. You can reward them with something external to the essence. Something that symbolizes the essence (flowers, diamonds...)

When you give people a coupon, you're just giving them your offering for free. But your offering is the essence of your relationship with them. If you have to give that away for free then they do not truly value it. You do not have love.

Better to find the people that really love you than to seek out consumers and ask them to behave as if they love you (i.e., buy your offering) in return for a bribe (i.e., the coupon). It doesn't make sense in your personal life and it isn't any smarter in business.

Don't be a tease - you're not that cute

I recently became a fan of Diet Cherry Chocolate Dr. Pepper. I love the product. It was very hard to find though so I emailed the company asking them how I could get the product.

Here is what they sent back:
Dear Mr. Schorr:

Thank you for contacting us about Dr Pepper Diet Cherry Chocolate. Your comments and inquiries are appreciated because they provide valuable feedback about our brands.

We would like to advise you that the Dr Pepper Diet Cherry Chocolate was only a limited edition flavor and it is no longer being produced. We will be forwarding all of your comments over to the appropriate department for review.

Our Company has been making great brands that make a splash for more than 100 years. We are proud of our family of products and are committed to providing a wide range of choices for all individuals.

Thank you for taking the time to contact us. We hope that you will continue to purchase and enjoy our products.


Consumer Relations

Now first of all, you will notice this is quite impersonal. I'm not feeling very loved here. I'm not even feeling like they get I'm human! But maybe more importantly, this is totally boneheaded! They put something attractive in front of me. They got me interested. And then they pulled it away. It's not coy, it's stupid because now I'm annoyed by them and I'm moving them off my radar screen.

I can imagine the marketing discussions they had. Something about trying to pique interest, to be relevant, to be innovative, to create a sense of scarcity... But in the end, all they have done is piss me off.

Now they might have mitigated the negative impact if they were a little more honest with me and they tried to cushion the blow. If the flavor just didn't do well they could have been up front about the fact that even though I liked it, not enough other people did. Or they could say that they're constantly experimenting with new flavors... And they could have suggested I try some other new flavor they have and sent me a few coupons. (Note: I hate coupons in general. This will be the topic of my next post but in this circumstance, it is appropriate.) But they didn't do this. They were impersonal and didn't try to make up for a ham-handed way of trying to be interesting and mysterious.

So here's what I sent back to them:
I would like to advise you that my consumption of Dr. Pepper was only a limited time event meant to coincide with your production of Diet Cherry Chocolate. I will now return to the diet carbonated beverage I was previously consuming - one that I can rely on to be there when I need it. Please let me know when you are ready for me to rejoin your franchise. By the way, I am an extremely heavy consumer of diet soda. Let me clarify: I am not an extremely heavy person who consumes diet soda. I am rather of moderate weight but I drink a lot of diet soda. It's quite silly actually, but what the hell. I like it.

And that, my friends, is how you lose a customer.

Monday, May 12, 2008

Boycott Movies!

Movies have just gotten too damn expensive. I'm really tired of paying so much to finance the ridiculously lavish lifestyles of the Hollwood elite. Enough is enough. Let's all stop going to the movies for one month.

UPDATE: OK, a friend pointed out that maybe the post above is too terse. [Thanks for the feedback.] So let me elaborate.

The movie industry needs us viewers to go to the theaters, buy DVDs, watch their offerings on cable, etc. in order to make money. Going out to the movies should be the great equalizer in America. Let's face it, not everyone can afford to go to the opera or a Broadway show. And not everyone wants to. But we should all be able to enjoy at least lowbrow movies without feeling it financially. I'm tired of ticket prices going up and up. Especially when the quality of my experience has not increased.

And to top it off, the studios are paying many millions to stars who really don't need all that money.

So, I propose that we remind the movie industry that at some point, prices are too high and demand falls. I suspect a one month boycott of movie theaters would be a good kick in the pants.

Now who's with me? (I feel like John Belushi now...)

Sunday, May 11, 2008

Risky compared to what?

The risk management approaches typically employed by companies seem off base to me. (I think financial services companies usually do this well when not caught in the throes of the lunacy that overtakes them every few years.)

The error is in the baseline assumption they make. That assumption is usually one of a risk-free world. Therefore, any initiative they are considering can only increase their risk profile. If they perceive the reward as higher than the risk, they proceed.

But I think this sets too high a bar. Because they do not consider the risk of doing nothing. Risk is just a part of life. In a dynamic world you are always at risk of obsolescence. In other words, you must run forward just to stay in place.

By forcing ourselves and our managers to answer the "compared to what?" question, we can hopefully adjust the baseline so that more initiatives will be approved.