Would You Do It For a Penny?

I was reading a story on the MSNBC site today about some of the shady dealings associated with a new penny auction site, and registering the sort of complete lack of surprise that you feel when a slice of bread lands buttered-side down or an egg falls off the table and breaks. It’s not that I have any knowledge of malfeasance within that industry, or any reason to believe that any specific company might be a scam set up for the sole purpose of separating the gullible, the greedy, or the credulous from their money – it’s just that the business model allows for so many options that could be used for unscrupulous purposes that it’s difficult to imagine that someone within that sector isn’t exploiting them. Of course, the same could be said for many other business sectors as well, but it’s not often that the very name of an entire industry is a scam in itself…

Penny auctions, if you’ve never encountered one, are called that because they operate somewhat like a standard online auction, but each bid is only one penny higher than the last one – so if the current bid is $2.00, you could bid $2.01 for the next bid. Sounds great, doesn’t it? Especially if the item being auctioned is something expensive, like a laptop computer or a new car. In theory, you could win something at auction for pennies on the dollar – which is the point, of course, as well as the appeal of these sites. What the television and online advertising usually fails to mention is that your bid of one cent doesn’t actually cost you a penny to make; you have to buy “bids” from the company running the site, which can cost anywhere from a few cents to a few dollars, depending on how many you buy and from whom. If you spend 25 cents per bid, and it takes you 400 bids to win an auction, you’ve spent $100 in bids, not the $4 in raises you’ve theoretically made…

Even worse, from where I’m sitting, is that there’s no transparency in these auctions – nothing that would stop the company operating them from having one of their employees make fake bids to raise the bidding and require you to keep expending your “bids” until you’ve given them enough money to make a profit on whatever item you’re bidding to get. Naturally, this is against any number of laws, either for auctions or gambling, and occasionally both, but a lot of these companies are located offshore (like any other shady e-business, in fact), and are unlikely to face criminal prosecution any time soon. It would also be incredibly difficult to prove; even if you could document that bids were being made by an employee, it would be much harder to prove that the company itself was behind this, and the employee wasn’t just bidding on things for their personal use…

Worst of all, though, is the fact that every person involved in the “auction” except for the eventual winner is losing money. In a conventional auction, on EBay or in the real world, the only bid that costs anything is the winning one – everybody else just folds up their money and puts it back in their wallets. In these “penny auctions” every bid you make costs you money – which means that no matter who wins, the company itself makes a fortune off of the bidders. At that point, the fake Craig’s List ads referenced in the news story (ads for expensive merchandise at absurdly low prices that redirect anyone who responds to them to a penny auction site) aren’t even necessary. Like a Vegas casino, the House always wins, and these sites could actually give away a $100 item for $10 if they wanted to – because all of the other players in the game will already have spent $1,000 trying to “win” it…

Too Many Choices

Some years ago my father had need of an additional clerical worker for his business, and decided to place an ad in one of the online job systems, since that is a cheap and effective way of gaining many choices of people to interview, and because one of the duties of the new position was going to be Internet research anyway. In the event, this strategy worked much too well for comfort, in the sense that within minutes of posting the ad there were over 900 responses, from as far away as Maine and Argentina, and including people from all of the professions and every conceivable walk of life. In this group of replies were an amazing number of people with no clerical skills at all, who were not actually interested in the position in the first place, but had just set up their computer to apply for every job meeting certain parameters – which appeared to be any job offered within an English-speaking country. As the minutes went by the numbers continued to rise, albeit at a slower rate, until the office manager decided they’d had enough and closed the listing…

Now, back in the days before there were Internet job sites, none of these issues would ever have come up. People had to write cover letters, or at least address them, address and envelope, and invest in a stamp. And while stamps were cheaper back then, if you were sending out dozens or hundreds of resumes each day, they would still have added up after a while. In addition, if you were going to write an actual cover letter addressed to a person’s name and addressing the specific requirements mentioned in a job ad, there was a hard limit to how many applications you could mail in one day, especially since you were writing these letters on a typewriter and couldn’t just change the headers in your Word document. Then you had the issue of finding that many ads to respond to in the first place, since the local newspaper would only have so many of them on any given day, and inevitably, the vast majority would be for jobs outside your qualifications. Assuming, of course, that you had any qualifications in the first place…

Even worse, though, if you were a human resources specialist or a hiring manager in those days, was placing an ad with a telephone number. With no need to invest money or time, dozens or hundreds of people would call the phone number, and at least half of them would be people who knew they had no hope of landing the job and were either desperate or bored. I always suspected that a large percentage of those people were actually on unemployment and/or welfare, and were using the telephone calls as “proof” that they were looking for a job, so their case manager would disburse that week’s benefits, but from a functional standpoint it didn’t make a lot of difference. Whatever their reason for wasting my time might have been, it still kept me away from both my actual job and taking with legitimate candidates. I had no idea that within a few years things were going to get much, much worse…

The basic concept of information overload is probably the single largest problem in our new information age. No matter how extensive or detailed your data might be, if you can’t access it or process it – if you can’t find the one relevant fact that will solve your problem or accomplish your purpose – then you might as well be sitting at a government-surplus desk with a typewriter and a large stack of badly-written letters and resumes to read through. So when you find that dream job, that suits you perfectly and for which you are perfectly suited, and wonder why you never get a call back, just remember that somewhere some poor human resources specialist or hiring manager is probably looking at an inbox with thousands (if not tens of thousands) of applicants, and seriously considering changing careers to go into poultry farming – or any other occupation where information overload isn’t part of their daily routine…

Retail is Imploding

Some time ago I wrote about the retail sector (in America and elsewhere) being on fire – and unfortunately, the people running it didn’t seem to grasp that fact. For the record, I don’t believe that the retail sector will ever fully go away until we reach a post-scarcity economy or invent Star Trek-type “replicators” – not that there’s much of a difference between those scenarios. No matter how universal acceptance of e-commerce becomes, there are always going to be those people who want to physically pick up and examine a product before they buy it, and those products that cannot be shipped from a centralized warehouse without raising their price too high to include a profit margin. But just because the industry itself isn’t likely to fold any time soon, that doesn’t mean that individual retailers won’t go under in the meanwhile – and if they actually start charging people just to try out merchandise, it’s likely to be sooner rather than later…

You can check out the original story from Adelaide Now online if you want to, but apparently retailers of specialty merchandise in South Australia are getting fed up with people trying on clothing, testing out high-end camera equipment, getting fitted for wetsuits, and so on – and then leaving without making a purchase because they can get better deals online. Some of these merchants are talking about charging a “fitting fee” or assistance fee of some kind to make up for the lost time and effort, and possibly to replace some of the sales they’re losing to the online competition. The difficulty I foresee with this strategy is that if you start charging people who never intended to buy anything from you in the first place for assistance in figuring out what size, type, features or other characteristics they want, it will not make them any more likely to purchase anything from you…

Now, one could quite reasonably argue that the retailers in this story are effectively being taken advantage of by these online shoppers. After all, the retail stores have to pay their employees to assist these freeloading comparison shoppers, which means that the online shoppers are effectively getting a service for which they are not paying. This is especially true in cases like the wetsuit customers, who will require up to 30 minutes of assistance in order to find the correct specifications, or people who are actually trying out digital cameras, who can take even longer. But while I agree that this is a definite drain on the finances of the retailers, my point here is that imposing this type of fine will not encourage this type of shopper to either purchase anything from your store or pay you your assistance fee; it will only encourage them to find some other way of gaming the system. Meanwhile, this type of fee will almost certainly cause existing customers to stop shopping in real life and start looking for their needs online…

Reading through this story, the thought that came to my mind is that the retailers who are considering this strategy seem to be missing the point – which is to say, they seem to be basing their approach on the assumption that online retailers are some sort of historical aberration, and if the online stores would just go away, everything would be grand once again. At the risk of stating the very obvious, online retail isn’t going anywhere, any more than human greed and self-interest are; if real-world retailers want to succeed in this electronic age, they have to base their competitive strategies on the conditions that exist, not the ones that they wish existed. This can mean moving online themselves, lowering costs to compete with the online retailers, offering services that an e-business can’t, or concentrating on the immediate gratification of taking something home the moment you buy it – which won’t be possible with an online purchase until teleportation devices or the aforementioned replicators become available…

It might even be possible for a real-world retailer to reverse the concept of a “fitting fee” and start offering customers an actual real-world shopping service – come in and we’ll show you all of the features and options available, and even hook you up with the best place to purchase what you want. But just trying to block people from using you to get better deals online will just make things worse…

North of the Border

I was badly disappointed a few years back when GM discontinued the Saturn line of cars and shut down the plant in Spring Hill, Tennessee. I’d been following the progress of the Saturn division from the beginning, and it’s probably fair to say that I wanted it to succeed as much as anyone who wasn’t a major stockholder did. Saturn was General Motors’ attempt to apply all of the advanced management techniques that the competition had been using to gain various advantages over them for years to their own production lines. If successful, Saturn would have proven that an American company could not only adapt to new conditions and new strategies, but could actually compete with newer and more technologically advanced organizations on their own terms. Unfortunately, it didn’t…

Now, I’m not going to re-open the arguments for and against closing down product lines that are not turning a profit; we’ve covered that concept in this space often enough, and the simple fact is that while closing down the Saturn line was unfortunate for the people who worked there, and for the communities where they lived and all of the businesses that either supplied the line or were supported by the employees, it isn’t reasonable to expect GM to continue operating the plant at a loss. Even with the best will in the world, the company would only be able to keep going for a limited time before they went under, taking out all of their remaining factories and bankrupting their employees as well as their investors. Even if General Motors was some kind of idealistic crusade (and it’s not; it’s a business) there would be no point in harming millions of people in order to help a few thousand – especially if those few thousand would still experience the same results in the end…

So the company shut down the Saturn division, moved as many of its people as it could to other facilities, and began cutting costs wherever it could, including some highly unpopular ideas, such as using the NAFTA provisions to shift production of some parts to Mexico. It has been a bad time for a lot of folks in that industry, and not a good one for a lot of companies and their suppliers. So I was very pleased to stumble across a story in the New York Times business section about GM planning to re-open the Spring Hill facility. Part of it is just that the company is going to re-tool the factory to produce two new midsize designs, which will keep them from having to disrupt any of their current assembly lines and save on delay costs and similar issues, and part of it is that the new union contract allows for multiple tiers of employees, making it more economical to employ Americans in Tennessee than Mexicans in Mexico…

How all of this will work out – or whether it will work out at all – remains to be seen. The past year has seen some remarkable improvement from GM, and if they use the Spring Hill facility to produce vehicles with some of the new technologies they’ve been talking about (especially clean diesel, biomass diesel, plug-in electric hybrids, or hydrogen fuel cell technology) this could be the beginning of a new revolution in the industry; the 21^st Century equivalent of the rise of the original General Motors corporation. But if they can’t learn from the events of the past two decades, I’m very much afraid that they will be destined to repeat that same history at least one more time…

Don’t Knock It

I was skimming through a bunch of news aggregation sites the other day when I ran across a new idea in value added that I thought might be worth sharing with you (assuming that anyone is actually reading this). We’ve talked about the concept of Value Added strategy in this space a few times, but for anyone joining us late, it’s the idea of adding something to an existing product in order to make it more attractive to potential customers, which usually means giving the product a function or value it didn’t have previously – hence, literally, “adding value” to it. There have been some dandy examples hitting the market in the past year (my favorite is a product that purports to be a primer and paint all-in-one, but I have to admit that the wireless photo-printer is good, too – snap a picture, hit print, and your pictures are ready on the printer rooms or miles away), but some products are harder to add value to than others – such as real estate, for example…

I don’t mean to suggest that value added is a new concept in real estate; far from it, in fact. Most of the developments in the real estate industry over the past century or so have revolved around adding value to a house to make it something beyond a large covered area in which to store your belongings. Thus, you have such additions as central heating and cooling, built-in appliances, network cable runs, and communities of people with similar social and economic needs with facilities you can use, like pools and basketball courts. The problem is that, as so often happens with added features, all of these things have become standard, or even expected, to the extent that they are no longer selling points. These days people will expect new appliances and pre-run cabling in any new house, and concierge services in any community or development. Even community facilities and services are starting to pale, leading to increasing efforts to come up with some new amenity that will draw the purchaser’s attention. I’ve never seen anyone try offering free booze until last week, however…

A story on the Associated Press by way of The Southern.com tells the story of a woman trying to unload a townhouse in the Chicago area who has decided to include a $1,000 credit for the bar across the street after failing having trouble finding a buyer. I’m sure that the sort of people who disapprove of alcohol, bars, or anything else that people do for run will start complaining about this offer any time now, assuming they haven’t already – but the idea struck me as pure genius. Partly because this offer has the potential to add very real value to the property (anyone who drinks on a regular basis would find such a credit to be extremely useful), but also because the bar in question is a neighborhood landmark that has been in business for 113 consecutive years, and anyone wanting to meet the neighbors, make friends in their new neighborhood, and generally feel a sense of community right after moving in could make use of such a credit in ways that have nothing to do with alcoholism…

I find myself wondering if other sellers shouldn’t be looking for similar perks to offer with their property. If you were selling a family house in a suburban neighborhood you could offer a credit at a local daycare facility or preschool with the sale; if you were selling a resort property on an ocean or river you could include a boat, a surfboard, or credit in a local shop selling beach and swimming apparel; if you were selling a house in a bedroom community outside of a major commercial center you could offer a credit to the local auto repair shop or gas station, and so on. Some of these would work better than others – if the preschool is one of the ones with a nine-year waiting list and your offer included a spot on next year’s roster, the perk might be worth more to some buyers than the house itself – but the possibilities are certainly there. As silly as the idea might sound at first glance, it’s entirely possible that you could turn the Real Estate Crash around on this one simple concept: more value added…

I’m not saying it would work. But don’t knock it until you’ve tried it…

The Ethics of Networking

A question came up the other day about some of the social networking sites that are specifically geared toward business connections, and I thought it might be worth taking a closer look. Most people are aware of some form of social networking site by now (if you’re not, you probably wouldn’t be reading web logs, either), and most business people either use one of the general-purpose services to which they subscribe to make business contacts (and gain information about people and companies), or else join one of the services that have been set up for that specific purpose. As is the case with most social networking systems, your status within the network (and the amount of utility your membership will bring you) depend mostly on how many people you are connected to, both directly and at one or more degrees of separation. This in turn means that most really serious users will spend most of their time asking anyone they encounter (in the real world or online) for permission to link to them – which raises the question of what responsibility you have to the rest of your network…

When you accept a “friend request” or the equivalent on a purely social network, all you are saying is that you know the requestor – or that someone you know might have done so at some point and you didn’t want to be rude. No endorsement of that person is either made or implied; you can’t possibly vouch for thousands of people (the so-called “monkeysphere” research suggests that you can’t really know more than a hundred or two people in the first place), and certainly no one would expect you to. But in a business setting anyone you associate with (even very casually) is assumed to be someone with whom you have a business relationship, be it vendor, customer, partner or competitor – which is to say, businesses don’t just “hang out” together, and it’s assumed that anyone you just “hang out” with is a personal, rather than business, connection. The problem is that you may not always feel comfortable about people making that assumption…

In any large organization of which you have ever been a part, there will have been people you respect and admire, people whom you utterly despise, and a large majority of people about whom you have no strong feelings whatsoever. If you grant a friend request to any of these people, however, there is a non-zero chance that anyone seeing the connection in your network (or theirs) will assume that you approve of this individual, and in fact that this is an informed choice you have made based on your knowledge of this person. If it’s one of the people you actually respect and/or admire, this might be correct, but if it’s someone from either of the other two categories, there could be real trouble for you in the future…

By the same token, anyone who makes such a request of you is (by definition) also offering you a reciprocal link, and stating unequivocally that they consider you to be worth of such a connection. Unless your own network is extremely large (e.g. it already includes everyone in the other person’s network) you will probably stand to gain something from this exchange of favors, and as such, it would be both unwise and rude to decline the offer – unless you have some reason to be dubious about the person making the request. You certainly wouldn’t add anyone to your personal social network who you knew to be a criminal, a predator, or an incompetent; it would reflect badly on you and it might expose the other people in your network to harm. So I have to ask: do you have any responsibility to the people in your business connections network to ensure that any new addition to your network is worthy of being there? Or can you safely assume that everyone online knows that no guarantee or warranty is created by extending or accepting a contact, and that they will make their own judgments about everyone connected to you?

It’s worth thinking about…

Would You Believe…?

I was leaving my favorite coffee house yesterday when a paper on the coin-op rack outside caught my eye; it was a USA Today issue, and the headline said “Airline bag fees as high as $450.” I thought it must be a misprint, or at the very least, that I was reading it wrong. So when I got home I looked the story up on the USA Today Website. Turns out they weren’t kidding; the era of the $400-plus airline fee is upon us. According to the website, Continental, American and United are all charging $400 or more for an overweight bag (anything from 71 to 100 pounds) on their international flights, with American taking the record at $450 per overweight bag. Now, as absurd as this might seem, it is still just for overweight bags on very long flights; the regular fees can’t be this outrageous, can they?

Well, if you continue reading, it turns out that they can. Spirit Airlines, who have been leading the way in airline fees for some years now, is charging $38 per bag for domestic and $43 per bag for international flights – and that’s for your first bag. Spirit also charges $30 for carry-on bags, if you pay for them in advance online, or $40 if you wait until you get to the airport. But they’re hardly the only ones pushing the envelope in this area; Delta is charging $250 to change an international ticket, and even some of the discount carriers will charge a quarter to a half of that for the same “service.” Probably the most outrageous of all, at least from where I’m sitting, are the charges to book a “free” ticket using frequent flyer miles; US Air charges up to $90 for these if you make your reservations by phone, and up to $50 if you make them online. Rather a lot for a “free” service, I can’t help thinking…

Now, we’ve all heard the arguments in favor of airline fees, and I regret to say that some of them even make sense. It’s true that if you don’t need certain of these services, you can save a lot of money by not using them – and it’s also true that if you don’t need a specific service, it doesn’t make sense that you’re being automatically charged for it. Unfortunately, that’s not how these programs are turning out. On most airlines people are bringing ever-increasing amounts of carry-on bags in order to avoid paying the fees for checked baggage, which is making boarding slower and more difficult and contributing to increased crowding in what are already overcrowded overhead bins and seating rows. There’s also some indication that the increases in fees are making it harder for people to fly, and are therefore cutting down on the number of passengers, which is just making the industry’s revenue problems worse…

At the heart of the matter, though, is the fact than many of the airlines have started using fees as revenue generation methods, in order to cover the increasing cost of jet fuel, landing fees, and other expenses. In theory, these fees would appear to be more palatable to customers than just raising fares – and indeed, most flyers are still choosing their flights based on price, not on which airlines offer the lowest fees. What keeps getting overlooked in this discussion is that Southwest Airlines, the only major carrier that does not charge baggage fees, is also the only major airline that has been consistently profitable in recent years. I can’t say for sure that this is cause and effect without examining the books of the companies involved – but the conclusion about constant fee increases looks straightforward enough to me…

Repurposing Done Right

I’ve been ragging on people for some incredible business-related stupidity for the last few entries, so I thought it might be nice to cross over to the other side of the street for a minute and talk about somebody doing something correctly. A topic we’ve been hearing more and more about over the last few years is repurposing: using a firm’s resources to do something other than their original purpose, either because the new business model is more lucrative or because the original purpose is no longer part of a viable business model. Thus we’ve seen old factory buildings renovated for use as retail stores or restaurants; computer monitors recycled as fish tanks; hotels converted into condos, and dozens of other examples. But I don’t know where you’d find a better example than the company in Las Vegas that has repurposed a bunch of heavy construction machinery into a recreational venue…

According to a story in the Associated Press by way ofMSNBC, an entrepreneur in Nevada had rented an excavator to dig a large trench on his own property when he noticed how much fun he was having playing with the giant earth-mover. Quickly realizing that what he found entertaining might entertain other people, and that the state of Nevada had a lot of stalled construction sites to play in and a lot of heavy machinery sitting idle, he set up a company called “Dig This” which allows customers to play in what amount to a giant sandbox, using real construction equipment instead of Tonka trucks. Customers pay up to $750, for which they receive a ten-minute instructional period and are then allowed to operate whatever machines they want to. So far, business appears to be booming…

Now, I don’t want to suggest that every exercise in repurposing will be this easy, or this simple. Like a lot of the best ideas, this one is so simple that almost anyone would call it a stroke of genius, and most entrepreneurs will consider themselves likely to come up with one business concept this good in a busy career. I’m calling this story to your attention not so much to suggest that you go out and look for business opportunities that apply some resource to a purpose for which it was never intended so much as to encourage you to start thinking of resources in terms of what you can do with them. Because that’s one of the only ways you will ever gain an advantage on your competition…

If you study strategic management (not that I am for one moment suggesting that anybody ought to) you will discover that there are really only three kinds of strategy: you can do something better than the competition; you can do the same things for cheaper than the competition; or you can specialize on just part of the market and be better or cheaper than the competition – or sometimes both. In the Internet age, it’s generally best to assume that any asset you can purchase will also be purchased by your competition; that any technology you didn’t create yourself will also be acquired by your competition; even that information you gathered or discovered will be compiled by the competition, assuming they don’t just reverse-engineer your own operations and steal your approach outright. But even in this strange new world, it is still possible to take your various resources and set out in a new and hopefully unexpected direction with them…

Is there some new business venture available to your company? Some new purpose to which you could apply your firm’s assets? Maybe you should think about that…

Stop Making My Case For Me

One of the problems that come up from time to time in a business context is that the standard of what a “reasonably prudent person” would believe is not a universal constant. In civil litigation, the standard used to judge someone’s actions is what a reasonable person would expect in those circumstances, which leaves room for things that you wouldn’t expect, could not be expected to anticipate, couldn’t imagine actually happening, and so on. What makes this a problem is that even if all but one of the 310 million people in the U.S. think something is unreasonable, the one person remaining may not; and if that person is the owner of the company you work for, he or she may do something so completely outrageous (and outstandingly stupid) that even sarcastic bloggers like me can only read the story about it in open-mouthed amazement…

Take, for example, the case of a woman from Salt Lake City who has filed suit against her former employer citing sexual harassment. According to the complaint, her former employer gave her a schedule that included "Mini-skirt Monday," "Tube-top Tuesday," "Wet T-shirt Wednesday," "No bra Thursday" and "Bikini top Friday," along with a wide variety of verbal, physical and occasionally graphic vulgarities far too disgusting to enumerate here. These culminated in a document “authorizing” her boss to sexually harass her, which the plaintiff was given the choice of signing or being terminated. As truly staggering as these behaviors are, I can’t help thinking that the most mind-blowing aspect of the story is that the employer actually put all of these demands in writing – and that the plaintiff has been able to produce them as part of the court documents…

My point in calling this to your attention isn’t that I’m worried about any of my readers (assuming I have readers) doing anything this mindlessly idiotic; the details in this story would have been exceptional even fifty years ago, and are national-news headlines today. My point is that somebody out there – someone who was able to launch and operate his own business, in fact – thought that these behaviors were completely reasonable. He may be the only person in North America who would think so (although I would hesitate to bet money on that), but for the purposes of this one business relationship, that does not matter; his treatment of this employee is so outrageously bad that even a prime-time sitcom would hesitate to portray any character that delusional. Assuming the facts of the case are as stated, this individual is truly doing things that would make you doubt his sanity in a business context. The problem is, he’s not the only one…

The fact is that most people have some irrational belief, bias or blind spot which can affect their behavior. For most of us it’s something harmless, like the belief that the Los Angeles Dodgers are the greatest baseball team ever (they are), that cats are better than dogs as family pets (they absolutely are), or that broccoli is evil (just take my word for it, all right?), but you can never assume that any given person is going to behave in a fashion that you would consider reasonable, just because state and federal law require them to do so. And if you do make that assumption, it is entirely possible that strange, unpredictable and outrageous things will happen to your business, as well – and that you won’t be ready for them…

Not So Funny Now, Is It?

You may have heard a story that’s been going around the Internet for a few weeks about a restaurant in Montana that was listed under the “Animal Carcass Removal” heading in the local telephone directory. It has been the occasion for a lot of local humor, and eventually made it onto the Leno show as part of the “Headlines” segment. Of course, the owner of the restaurant didn’t find it all that funny, since it was interfering with his business – and totally destroying the brand imagine he had spent the last few years building up. In retrospect it seems likely that the company that published the offending phone book wasn’t taking the case all that seriously, in that they made no effort to remove the listing or compensate the owner; they even repeated the listing in the next year’s book. But I would imagine that the whole thing suddenly became a lot less amusing when the restaurant owner decided to sue…

You can pick up one version of the original story on MSNBC if you want to, but the facts of the case appear to be that the owner of the Bar-3 Barbeque restaurant declined to purchase yellow pages advertising from a company called Dex Media, and may have been forceful (if not actually abusive) to the Dex salesperson. In retaliation, the Dex employee changed the restaurant’s business category from “Restaurant” to “Animal Carcass Removal” in the next edition. The publishing company is not disputing that this happened, but they contend that the listing is not their fault because the restaurant owner was mean to their salesperson and should have known that there might be retaliation for this behavior. They’re also claiming that their employee was acting outside of his or her job responsibilities when he or she changed the listing, and should therefore be the one held responsible for the prank, not the company itself. And in any case, the publisher claims, the restaurant assumed responsibility for any errors or problems when it allowed its information to be published in the first place…

I don’t know how Montana law works in these cases (and I don’t have a law degree anyway), but the business law class we had in MBA school suggests that all of these defense arguments are nonsense. The incorrect listing isn’t an error; it’s a deliberate act, and is actionable as such. There is no legal right to retaliate against anyone for being mean to you outside of the playground, and any adult who claims that in any court is likely to be laughed right out of the building. And in any state with a strict liability provision in its tort law, the argument that a company is not responsible for the actions of its employees is simply wrong. In California, for example, this case wouldn’t even get to court; the plaintiff’s attorney would ask for summary judgment, and immediately get it…

I call this case to your attention because it’s easy to see what probably happened here: a salesperson at Dex was abused over the telephone when his or her sales pitch went sour – or believed that he or she had been ill-treated by the restaurant owner. The salesperson retaliated, and the manager of the publishing company either wasn’t paying attention or let the matter slide, possibly in support of the “abused” employee, and possibly because the manager thought it was funny, too. But, unfortunately, the point of running a business isn’t to have fun or create humor, and the court is unlikely to see it in that light either. The publisher’s actions in this case are completely understandable and totally human; unfortunately, they’re also a very bad business decision…

A Matter of Trust

I saw another amusing little story on the Consumerist last week that got me thinking about some of the responsibilities of running an online business, and how they differ from any similar operation in the real world. The story was about a guy whose wife started getting emails from an online florist service, addressed to him, thanking him for his gift to “Margaret” and then (in subsequent messages) asking if he wanted to send an additional gift to Margaret, or a Valentine’s Day surprise, or a Christmas gift, and so on. This rapidly deteriorated into a difficult situation for the poor fellow, since his wife’s name isn’t Margaret, and she was more than a little hacked off at the idea that he’d been buying flowers for another woman…

Now, on the face of it this just looks like a funny story; something out of an old sitcom or a bad movie. In real life, people don’t start making assumptions about infidelity (or worse things) just because one computer mailing list somewhere got an entry crossed up – or, at least, that’s the common assumption. However, it seems a bit flippant to assume that such an error couldn’t possibly cause any interpersonal difficulty for anyone anywhere in the world; or, in other words, it seems probable that while the odds of such a problem actually advancing to the point where it destroys marriages, ruins lives, and causes expensive lawsuits that will also bankrupt the company making these charming little slip-ups are relatively low, it would be irresponsible to assume that they are zero. Unfortunately, that’s exactly what the online florist in this story is doing…

You can pick up the original story here if you want to. In this case, it would appear that everything has been sorted out, at least to a point; the man in our story is still married and his wife appears to have accepted that this was just a computer error. But what if it hadn’t turned out this well? We’ve already discussed the case where a well-meaning cell phone company tried to save a customer some money by merging the billing for her account with those of the rest of her family’s cell phones and wound up exploding her marriage when her husband found out about her long conversations with her lover and used that as the starting point to expose her entire affair. In that case, the woman whose affair was exposed is suing the cell phone company, and may well recover enough that the gaff will not seem funny anymore. What would have happened to the florist service if the fellow in our story really was having an affair?

My point here is that fifty years ago this sort of problem would never have occurred; the Internet didn’t exist, and while misunderstandings about purchases were still possible (there’s an episode of the Andy Griffith Show where one happens in Mayberry) there were very few companies that could plausibly destroy lives all over the world with nothing more than crappy database management. Even one generation ago this sort of thing would have been a novelty at worst, and sitcom script material most of the time. Today, anyone doing business over the Internet could make such an error on any given day, and end up causing real human suffering as well as incurring massive liability lawsuits and going bankrupt…

I’ve said this before, but it bears repeating here: the new age of Internet commerce offers some amazing opportunities to everyone in the business community, but it brings will it a whole new range of potential hazards – just like any other new technology does. This time the story has a happy ending, but the next time it might not – and the next time, it might be your company in the cross-hairs. It might be worth your time to take a moment and think about that…

Going to Extremes

I was reading another story online the other day about the so-called “Extreme Couponing” trend when I got to thinking about the ethics of the situation. If you’re not familiar with the concept, Extreme Couponing is a show on the TLC cable network about people using bushels of manufacturer’s coupons and the occasional store coupon to get absurd savings on large quantities of products; some proponents of this activity claim that you can obtain your groceries for virtually no money if you clip enough coupons and are willing to go to the extremes needed to cash all of them in. The show and its attendant publicity appear to have touched off a national obsession with coupon clipping, and shoppers are turning out with ever larger numbers of coupons and demanding every larger discounts – resulting in an almost inevitable backlash…

You can pick up the original MSNBC story, which contains links to some of the other recent news items about the situation, but the basic idea is that more and more retailers are refusing to accept the dozens or hundreds of coupons that “extreme” couponers insist on redeeming for each purchase, and a fair number of companies are complaining about couponers demanding discounts for items similar to the ones on their coupons, or using multiple coupons for a single item when both the store policy and the coupon itself say “one per purchase” – and getting ugly when denied. It seems clear that cases like these are wrong, and possibly illegal, while a shopper trying to redeem a few coupons and save a few dollars each week is just using a promotional offer to save money while improving the company’s sales – exactly as he or she is supposed to. But where do we draw the line? What constitutes a reasonable use of coupons, and what represents an intentional gaming of the system? And, perhaps most difficult of all, who gets to make that decision?

In past posts, I have noted that anyone who wants you to destroy your company in order to benefit themselves is not really a customer, and you should not consider that you owe them any of the same responsibilities you might have to an actual customer. In the case of extreme couponers, if the store can turn in the coupons it collects to the manufacturers who issued them and recover the cost of the discounts, then it seems reasonable to do so. But if the store can’t recover the costs – if the issuer will not cover the discount the store is being forced to offer, or if there are other operating costs involved – then the store may be losing money on each item sold, and will eventually go out of business. This is especially problematic on food items, where the profit margin is already less than 2% (frequently much less). Such transactions may benefit the shopper, but only in the short run. If your local supermarket goes out of business not only will you have to travel further to purchase your groceries (which costs money), but your community will also lose jobs (at the store and at all of the companies that once supplied it), tax revenue, property value, and sales to adjacent businesses. If this goes on long enough, it will eventually have a negative effect on everyone, including the extreme couponers themselves…

I don’t have any easy answers regarding the extreme couponing movement, but I will note that losing customers who don’t actually bring you any profits will not harm most businesses, and that if every market starts issuing strict rules about how many coupons may be redeemed by each household on each day, the worst offenders may have to find another way to get food and other products for free. I would not place any bets on their failing to do so, however – or that whatever they try next won’t be even worse for the retailers in their sights…

The Ethics of Realism

We’ve been hearing a lot lately about how the current generation of college students is less interested in hard work while simultaneously demanding greater recognition in the form of higher grades – it’s a favorite topic of the sort of commentator who enjoys telling us about the breakdown of our educational system and the pending destruction of our civilization as a result. I mostly ignored these stories until very recently; the stories aren’t all that different from the ones that ran thirty years ago about my generation, especially when you account for the differences in the world these students are training to enter. My generation didn’t have all of the online time-wasters that this generation does, and we’d never have gotten away with using Wikipedia as a primary source for research data. But we had time-wasters of our own, and just as little concept of what the real world was going to be like, and I didn’t imagine that the new crisis being “viewed with alarm” by the media would be any different…

Then I became an educator myself, and I began to realize that, as usual, the truth lies somewhere between the two extremes. My students at MSU are something of an elite; having made it into one of the top undergraduate business programs in the Western Hemisphere, they are by definition in the top 5% of all business students at their level. One might think that this would make them less susceptible to the dissipation and feelings of entitlement that the conservative commentators are always going on about, but the ratios of good students to those who are either marking time or avoiding work does not appear to have changed much from when I attended college in a third-rate university twenty-nine years ago. The more interesting question, at least from where I’m sitting, is what are we supposed to do about it…

As college instructors, we can’t really do much about the work ethic or work habits of the young men and women we instruct. I tried to make it as easy as possible, by issuing a detailed schedule as part of the syllabus, reminding my students of deadlines, and providing exercises in class that build on each other and the assigned material. At the same time, I made a point of trying to interact with my students as adults – the way I would with younger colleagues who had been assigned to me in a work setting, not the way a teacher treats a class of rambunctious teenagers. This had mixed results; my best students claim to have gotten a lot out of my classes, and a some of them have written to me well after graduation to say that they were experiencing exactly the conditions and challenges I told them about. A few have even asked my advice about work issues or projects they are working on now. None of this kept some of my students from grubbing for better grades, however, and protesting that they deserved an “A” despite not doing any of their coursework…

The question I’m driving at here is whether instructors like me are doing our undergraduates any favors by trying to make our classes as much like the real world as we can. Should we have cracked down on these behaviors; run the program according to the standards we were held to a generation ago (which might give even the most work-averse of our students a fighting chance in the real world), or just accepted that since most of their competitors would have been given classes with no work in them and straight “A”s just for showing up, we were hurting their future chances by trying to give them challenging work and grades they actually deserved?

Or to put it another way, do we as teachers have an ethical responsibility to give our students the training (and the grades) that they need, rather than the things that they want (and feel they are purchasing)? In some of the other professions and disciplines things are probably different, but in Management all we can do is give our students tools that may or may not help them to accomplish their future tasks; the best student who ever lived could attend the best business school that has ever existed, and he or she might still never use any of the things they learned in class. That being the case, should we even try to demand performance from our students, or just give them all “A”s and hope for the best?

It’s worth thinking about…

Showing Loyalty to Whom?

I was on the Consumerist website the other day when I ran across a story about the AMC Theater chain discontinuing its previous loyalty program (a free smartcard deal, where every time you buy tickets you swipe the card, and after so many visits you start to earn free items) and replacing it with similar program where you have to buy in each year. We’ve seen more and more companies going to this approach – the idea being that casual users either won’t buy into the program or won’t use the card more than once or twice a year, so the rewards program will only reward people who use it often enough to cover the cost of having the rewards card in the first place. However, according to the Consumerist poster, the AMC people were also aggressively trying to sell membership in the program – to the point of asking eight times during a single visit to the theater complex. I thought it raised an interesting point about these programs, and was worth a closer look…

The basic idea of a loyalty or frequent customer rewards program has been around for decades, predating most of the current technologies used to facilitate such things. Each time a customer spends money at your business (whatever that might entail) they receive a marker – such as a punch made in a small paper card – that acknowledges the purchase; once a specific number of markers have been accumulated the customer earns a specified reward. This sort of punch card system has been used for everything from food and beverage to dry cleaning and car washes over the past five decades, but it has a few problems. In addition to the obvious issues of fraud (how do you keep customers from just punching their own holes at home?) and loss (how to you handle someone who claims to have lost a filled card, or to have not received their “punch” the last five times they came in?), there’s the additional problems that a punch card does not tell you which of your locations all of these purchases were made at, or anything else about the customer except that they come to visit you often…

For all of these reasons, many companies have introduced an electronic version of the rewards card. Just by swiping your card you can qualify for any number of specific benefits, and the company gets to track your purchasing habits – and movement patterns, if you frequent more than one of their locations. If the card application includes basic demographic data about you (and most of them do) the company can harvest its own sales survey data without the bother or expense of taking actual surveys, and improve their product mix to suit you (or your demo group, at least) better. It’s also possible for the company to provide you with special offers that are tailored specifically to you. This is a major savings to the company, and can be a revenue center in its own right (if they can find someone who wants to buy their demographic information). It can be difficult to get people to give you detailed demographic information, and some people will be averse to carrying extra cards around in their wallets, but for the most part these programs are a huge win-win for the company and the consumer…

Unfortunately, such programs still aren’t free. There are still costs associated with collecting, processing and analyzing the data, not to mention the actual discounted (or free) merchandise or services offered to participating customers. Hence some companies will try to recoup the costs, either by charging a fee to use the program or by offering “rewards” that don’t actually cost them anything. This can work, of course, assuming that the benefits to the customer outweigh the cost of having the card; our purchase at Barnes and Noble was actually cheaper with the charge for a year of their loyalty program than it would have been without the card, so even if we don’t buy anything else from that company this year, it was already worthwhile. But if you’re charging too much, selling too hard, or making too many attempts to close, you’re likely to annoy the customers and ultimately lose their business outright…

I can’t help wondering if some of these companies have lost sight of the original purpose of such programs. It they’re using these cards as a profit center and ignoring their primary function as a marketing tool, they’re going to lose customers; it they do it too often they’re going to destroy whatever profitability these programs might have had left – and eventually the company…

Sometimes It’s True…

I was reading Bob Sullivan’s “Red Tape Chronicles” blog on MSNBC.com the other day, and I saw one of his posts about things people are doing to stay alive in the current financial crisis. In this case, it’s a woman in her thirties with a law degree who was laid off after nine years in practice and after failing to find any other employment took a job as a stripper. She’s back in school, working on a new master’s degree, and says that the flexible hours and high pay are making the re-education possible, and as soon as she can get a new job she intends to quit stripping, leave town, and never speak of this experience again. The lawyer-turned-stripper says that while the experience has generally been unpleasant – and has occasionally been degrading, frightening, or completely disgusting – it has also taught her some important lessons about people, life, and reversal of fortune. I was immediately transported back to another time, in another place…

In January of 1987 I took a job as a resume writer – since that was still a thing at the time – with the American Resume and Writing Service in Los Angeles. At the time, there were five or six national companies that wrote resumes for people, but ARWS was the biggest, as well as the one that happened to be hiring when I needed a job to pay the bills. During the next few years I held a number of management positions with the company, but it’s the days as an office manager and writer that stick with me – and that led directly to my current occupations of manager, consultant, and teacher. I wrote resumes for a huge cross-section of people, ranging from minimum-wage high school kids to executives making more than I ever expect to; from tour managers for major musical acts to college professors, and at least one Navy SEAL. And one of my clients was a medical doctor who had paid her way through college and medical school as a stripper…

Now, I realize it’s an old story. I have been told several times over the years since (by police officers of my acquaintance, among others) that just about every stripper will claim to be dancing in order to pay for some much more reputable pursuit, and will insist that as soon as she achieves that goal she’s leaving the club and never coming back. It’s much the same rationale that waiters in my home town give – that they’re only waiting tables until they can get a full-time acting gig; or that writers will give you about only driving that cab (or, in my case, writing other people’s resumes) until they manage to sell that screenplay (or, in my case, novel). I’ve delivered pizza for a living, sold several things that I really wish I’d never heard of, and worked 25-hour shifts managing a drug store; I can tell you from extensive personal experience that ANYTHING you do to survive that doesn’t unnecessarily harm another human being isn’t wrong – and that, all things considered, there are worse ways to make a living than taking your clothes off in public…

My point is that my resume client really had gone to medical school, and had been in practice as an MD for a number of years when we first met. Unless she had paid her way through medical school in some fashion that would be MORE embarrassing to tell a total stranger about than being a stripper, I have no reason to believe that her story wasn’t true. This proves that some people who become strippers may be kidding themselves (or you) about funding a new career and a better life, at least some of them aren’t – which means that the woman Sullivan spoke to might be telling the truth, too. It’s something to think about the next time you’re about to call shenanigans on a story that you’ve heard a thousand times before…

Sometimes, it’s true…

Don’t Know Much About Marketing…

One of the most aggravating things to a writer is that most people don’t understand what it is that we do – and therefore don’t value us. When I was a professional resume writer, for example, many people who would never dream of asking a doctor to cure them for free or a carpenter to build them something for free or a taxi driver to take them somewhere for free would assume that I’d just love to write something for them gratis. In some ways, though, the misconceptions that the marketing people go through are even worse. Many people don’t understand the difference between marketing and sales in the first place, and even people who should know better seem to think (for reasons that escape me) that there’s nothing to developing and implementing a brilliant and innovative marketing campaign. Which still doesn’t explain how anyone at Toyota thought that an Internet promotion in which you can anyone you want receive a series of threatening (and creepy) emails from an (apparent) stalker was a good idea…

You can read about the story on the Threat Level column over at the Wired online site, but the basic idea was the Toyota set up a website where you could sign up anyone you wanted to be stalked by any one of five creepy and scary online characters – the idea being that people in the key demographic for the Matrix automobile (males in their 20s) love this sort of practical joke, and would appreciate the company’s hip, edgy sense of humor when it was finally revealed to them that they’d been had. Unfortunately, almost anyone (even a small child) could probably have figured out that if you can register anyone you want, someone would use the prank system to sent the “stalker” messages to someone who was not only outside of that key demo group, but who would, in fact, freak out at being stalked. That someone is now suing the company for $10 million USD, and there is every reason to believe that she will get it…

Now, one of the problems involved with starting any new marketing campaign is breaking through the massive wall of advertising and other information with which every potential customer is being bombarded, all day and every day. Viral ad campaigns have been so successful, at least in part, because they aren’t like thousands of other ads, and because they operate outside of the usual advertising channels. Certainly, the idea of a promotional campaign that allows you to prank your friends is a novel idea, and the company appears to have gone to some remarkable lengths to make the whole thing believable. One of the “stalker” personae is a heavy metal musician, for example, and the company’s advertising people went so far as to create a web site for the bank this persona is in, including recording songs for an album and putting MP3 files of those songs up on the site. They created social media identities for the stalkers, listed information for them on websites, developed blogs, and in short built up a web presence for these make-believe monsters that is more extensive than that belonging to most real people. It seems a lot of effort for something so completely misguided, but then I think that’s the point…

I’ll admit that despite minoring in Marketing both times I was in graduate school, I really don’t know that much about the science. It’s a complex, statistically-intense analytic discipline, and much of what the Marketing scholars do remains beyond my grasp even to this day. But I know a lot about sales, having made my living that way several times, and even more about strategic management, having studied, taught, and earned my living doing it over a great many years. And for the life of me, I can’t imagine how anyone could have believed that this campaign would help to sell cars in the first place, let alone failing to realize that the prank system would be used to do real harm to people who wouldn’t think that such a prank was amusing in the first place…

No Sugar Added; Value is Another Matter

Over the past few years I’ve become much more familiar with various sugar-free products than I ever wanted to, due to medical conditions that need not concern us here. Some of these have been amazingly bad – to the point where I’d rather just do without the category of food, or eat very small amounts of it, than endure any more of the sugar-free version. Some of them have been surprisingly good – to the point where, if you didn’t know better, you’d actually think it was the real thing. But the vast majority are simply passable, in the sense that you’d never mistake them for the real thing (or enjoy them as much as the real thing), but you can eat them with a reasonable amount of satisfaction. A common complaint about these products, however, is how much more they tend to cost than the sugar-laden regular versions, either in absolute terms, or in cost per unit of weight and/or volume…

In some cases, the price increase is understandable. Artificial sweeteners are generally more expensive than sugar, and in the case of protein-based fillers (such as nut meats, for example) the additives can be much more expensive than simply using the traditional ingredients. In others, it’s just a matter of charging what the market will bear, in that there are going to be some consumers for whom the sugar-free and reduced-carbohydrate options are the only choice that doesn’t involve eliminating those foods from their diet. But where the whole matter becomes baffling is when you encounter a more expensive version of a food that is both hideously expensive and inferior in quality not only to the sugared equivalent, but to other sugar-free products in the same category…

A case in point would be the sugar-free chocolate introduced about five years ago by one of the super-premium chocolate retailers. I won’t name them, since I’m not really the litigious type, but you’ve probably encountered their regular products before, and you may have wondered how they manage to get people to pay such an enormous markup on products that are not that much better than the average chocolate candy. On seeing the new, sugar-free candy bars in their store at the mall near our house in California, I decided to purchase one and see if it would live up to expectations. Much to my dismay, it didn’t. In fact, this overpriced product (at $4 USD for 1 ounce of alleged chocolate, it’s the most expensive candy of its type) was not only worse than any sugared candy I’d ever tasted, but also worse than any sugar-free product with which I am familiar. This would be bad enough in a discounted product, but at those prices I felt it was an outrage – especially when compared to the best products in the category…

The best sugar-free chocolate on the market today, if I am not partial, is the hand-dipped items marketed by the See’s Candy Company in the Western United States. See’s products aren’t exactly cheap (the sugar-free versions range from $1.20 to about $1.40 an ounce), but at less than a third of their super-premium competitor, they’re still much more affordable – and much, much better. For everyday value, however, you’re not going to beat the Russell Stover products, which range from about 60 cents to about 80 cents per ounce, and are nearly as good as the Sees products. The interesting thing is that the Russell Stover products with sugar are unremarkable in my opinion (they’re about standard for mass-produced American chocolates), but the sugar-free selections are some of the best value for the money currently available. What I can’t fathom is why the super-premium company mentioned above can’t match their quality despite charging five to seven times more…

Now, I admit that candy is a matter of taste, and that some people out there would almost certainly disagree with me regarding the relative quality of these products. I question, however, how many of them would actually find the more expensive products to be 700% better than the humble but tasty Russell Stover equivalent. Sometimes the super-premium price does not reflect the overall product value, and sometimes it’s more about brand name than actual quality. I’m not suggesting that you take my word for it – I’m suggesting that you comparison shop for yourself. Especially if you find yourself in the market for sugar-free chocolate candy…