There's Gold in Them Thar Vending Machines!

Over the years, I’ve encountered a lot of strange things being sold from automated kiosk operations, from postal products and services to iPods to beer and spirits – although that last was in Japan, where they apparently sell much weirder things from vending machines, too. Some of these have been very impressive, such as the ice cream vending machines that use a vacuum pump on the end of a robotic arm to pull your purchases out of an internal chest freezer, or the ones that will thaw out a burger and fries, microwave them up to proper temperature, and dispense them – sort of an unhealthful T.V. dinner. But I ran across a news story today that takes the idea of there being gold in the vending machine business to a new level…

According to a story on the Gizmodo website a company in Germany is introducing a vending machine that sells actual gold bars and wafers – in 1, 5 and 10 gram denominations. The company is charging a 30% markup over the current market price, which worked out to be about $42 a gram when the story posted, but the machines check and adjust the price every two minutes, so they may have shifted by the time you get to the Frankfurt Airport and look. The website notes that given the high markup and small quantities involved it’s doubtful that these things will attract any real gold investors; the product is more of a novelty (and a magnet for thieves) than anything else. Although I suppose if they only install these things in airports, security may not be that big a problem; the real issue remains who will buy gold at those prices…

I’m not sure if the business model will work – they’re basically counting on customers wanting the unique experience of purchasing investment-grade substances out of the same type of device that you’d normally use to obtain pre-paid phone cards, munchies, or really bad coffee, which doesn’t seem like much of a basis for sales at a 30% surcharge. Granted, the novelty factor does work – I’ve purchased things from one of the advanced vending machines that sells iPods and accessories just for the fun of doing it, but all of those purchases were made at list price (e.g., the same price you’d pay in a conventional retail outlet) and under conditions where the convenience of getting the thing NOW outweighed the inherent risk of getting merchandise that doesn’t work with no way of returning it. It seems unlikely that gold will ever be a convenience item, and the company openly admits that they’re charging a huge markup on it, which just leaves fun…

On the other hand, I’ve been wrong about consumer behavior before. Maybe people will flock to the German locations where these machines are installed and pony up their Euros for the shiny metal wafers. If so, what other products will we start seeing in automated sales arrangements? Will you one day be able to buy jewelry, laptop computers, flat-screen television sets, or musical instruments in vending machines? Will this completely change the retail industry as we know it, or will these devices function more like the automated self-check you’re starting to see at more and more retailers, where live employees help you with everything about your shopping experience except the check-out process?

I would expect to see a lot of people – not just random bloggers, but a lot of folks in the vending machine and retail industries – keeping an eye on this project. Sometimes this sort of thing represents evolutionary change in an industry, as in the case of machines that sold bottles of cold beverage in the last century. And sometimes they represent expensive toys that never amount to anything, as in the case of the iPod vending machines over the past ten years. But most of the time, the only way to tell the difference is to wait and see…

Dude, Where’s My Dog?

I know I should stop writing about airline follies in this space, before this turns into the Airlines Being Stupid blog. After all, it’s not like we’re not seeing idiotic behavior from oil companies, automobile makers, movie studios and food makers, just to name a few. But if I’m going to write about developments in the world of business as culled from various news stories and personal observations, then I’m going to be writing about current events, and the last few years have seen more silly, self-destructive behavior in the airline industry than a diabetic having a shopping spree in a candy factory. The race for the bottom in that industry continues, with a new low point arriving last month when Delta Airlines managed to lose a passenger’s dog…

According to the story, which you can pick up on the Consumerist website, a passenger had adopted a dog in Mexico and was flying back to the States when his dog failed to turn up in baggage claim. He called the airline and was told that the animal was being cared for at the Mexico City airport, and would be delivered the next day, but when no dog ever showed up he called back and was told that no one at Delta had any idea what had become of his new pet or its carrier. The airline offered him a coupon good for $200 off his next Delta flight, which didn’t really help since the passenger had already decided he won’t be flying Delta again in the future, but would not compensate him for the animal’s medical care, the time and effort spent cleaning it and getting it ready to travel, or even for the cost of the carrier. It wasn’t until the Consumerist people got involved and dozens of derisive emails began piling in from all over the globe that the airline changed its tune…

Now, I’m not going to start ragging on Delta for these decisions; I think the Consumerist people have already done a fine job of that. I’m also not going to comment on the airline’s claim that the dog somehow got out of his carrier and escaped, which was apparently their fallback position when saying “what dog? What are you talking about? We don’t know anything about any dogs” didn’t work. In its particulars, this story isn’t really any different from the one a month or so earlier, when a passenger’s missing luggage was found abandoned in a flood control basin 20 miles from the airport: somebody wanted either the dog or its carrier or both and stole them. Or, for that matter, several hundred similar events each year, when light-fingered (or unusually stupid) airport personnel make off with something they think will be easy to sell, something that they think will be easy to trade for drugs, or something that they think will look really good in their living quarters. Instead, I’m going to ask you to consider how Delta should have handled this incident…

First off, the airline’s people should already know that losing someone’s pet isn’t the same as losing something easily replaceable, like typical luggage items. Second, they’ve got to realize that losing anything you’ve been paid to transport is going to annoy your customers, and losing something that you’ve paid hefty fees to have shipped is going to result in a major outcry. Third, they’ve got to realize that lying to get the customer off the telephone or away from the counter is just going to explode in your face if you can’t, in fact, produce the article promised the following day. And fourth, they’ve got to realize that this isn’t just a few hundred dollars worth of clothing, accessories, or pets they’re taking so lightly; it’s their entire relationship with the customer and anyone who will listen to that customer if he or she complains – which, in the Internet Age, means anyone with access to a computer…

I’m not saying that every lost bag and carrier should be treated like a major disaster that could potentially destroy your entire company; I’m just saying that sooner or later one might be – and when that day comes, you’re going to wish that you had a better policy in place than “Lie, blow off the customer, and then offer them something of no effective value to make them go away…”

I Don’t Think It’s Wrong…

From time to time the issue of whether a given business practice is “wrong” in moral terms will surface, as in the case of hotels raising prices during the Icelandic volcano eruption stranded travelers all over Europe. People who seem to be unclear on the whole “free market” idea will claim that charging as much people are willing to pay for something is wrong, while people who don’t quite grasp the concept of “price gouging” will say that over time markets will always correct themselves – which ignores the fact that in the short run, some people will try to screw as much money as possible out of people who have no choice. Clearly, no one is going to defend the concept of charging people a fortune during a crisis, but what always surprises me is the number of people who seem to think the whole idea of supply and demand is wrong. Especially when it comes to luxury items like expensive coffee…

Consider, for example, the new wave of super-premium coffee houses in New York, which are said to be charging up to $12 for a specialty cup of joe. You can read the Fox News story if you want to, but idea is that these establishments are taking much longer to custom-roast their own beans, producing a one-of-a-kind flavor, which presumably justifies the massive labor costs involved. This is nonsense, of course - the the Dana Street Roasting Company in Mountain View has been doing this for years, and the most expensive coffee on their menu is under $4 – but it’s no worse than some of the other insane coffee fads we’ve seen in recent years. My personal favorite (the story, not the drink – I don’t drink coffee) is still luwak coffee, which is made from coffee beans that have been eaten and then “eliminated” by a weasel-like creature called a luwak, a member of the civet family. Premium civet coffee can cost as much as $250 a pound, although you can get cut-rate versions on Amazon for as little as $50 a pound. But none of this addresses the question of whether this is right or wrong…

Now, I’m not suggesting that anyone should have to conform to my ideas about value; I’m just saying that paying somewhere between two and ten times the normal price for coffee beans that have been eaten and then pooped out by a weasel seems slightly insane to me; so does paying three or four times the usual price for a cup of coffeehouse coffee. But if there are people who can afford to squander money on this stuff, why is it wrong to provide it to them? Granted, these same people could purchase ordinary Starbuck’s coffee products and donate the residual $9 per cup to charity, but short of that, it’s hard to see how this product is hurting anyone. On the contrary; the sales should make it possible for the coffeehouse owners to afford their rent, pay their personnel, invest money in new furnishings and equipment when needed, and pay for their other operating expenses, thus creating jobs, generating tax revenue, and boosting the local economy. Which doesn’t change the fact that you probably had the same reaction to $12 coffee that I had…

In the movie “Loose Cannons” actor Dan Ackroyd’s character, speaking of another off-beat lifestyle choice, tells his partner (played by Gene Hackman) “I don’t think it’s wrong; I think it’s stupid!” I could the same about civet coffee and many other super-premium consumer products that make no sense in my world; and I’m sure all of you reading this (assuming that anyone reads this) could easily say the same about many additional products, services and experiences. It’s just important to remember that we may not always be speaking of the same things when we do this…

When Customer Service Goes Horribly Wrong

By now, most of you already know that I’ve spent a fair amount of time in customer service roles over the years, and I continue to think of these jobs as the worst-conceived parts of corporate life. In most cases, the only contact a customer will have with a company is with that front-line customer service representative (CSR), and will quite reasonably judge the entire company by their interactions with the CSR, since they have nothing else to go on. Unfortunately, that CSR is probably making minimum wage, or possibly a little more with bonuses for processing as many calls as possible each day, and is almost certainly being housed in a cube farm, denied anything resembling benefits or perks, and worked to the point of nervous exhaustion. In other words, most companies are placing the most critical relationships they have on the weakest link of their company, and still they can’t understand why they’re losing customers to the one firm in their field that’s actually paying for a better class of CSR. Although the story this week about someone actually trashing a customer’s front yard is still something special…

You can click on the link here for the local news account, but basically the woman who runs a dog-waste removal service lost her temper with a customer who had failed to pay her bill for a few months running. So she went over to her customer’s house and gave back four months worth of dog waste – all over the front lawn. The police were called when neighbors realized what was happening, and the irate service provider was taken away, clearly embarrassed at losing her cool in this fashion. Although the dog-waste removal person was quoted at the scene as saying that it felt really good to be tossing the stuff all over the place…

Now, I don’t want to be too critical of anyone associated with the story. The non-paying customer claims to have been preoccupied with medical issues for the last few months, which I can verify WILL make you forget basic things like whether the dog-poop-removed bill has been paid regularly. And it’s hard to blame someone who does a service as inherently unpleasant as cleaning dog waste out of people’s yards for getting a little irate with someone who does not pay their bill, ducks telephone calls, ignores reminder and overdue notices, and so on. The fact is, most people who have ever worked front-line customer service can tell you about at least one customer who they would really have liked to go and bury in dog waste, even if they didn’t actually work for a dog waste removal company at the time. But that really doesn’t change the fact that this is still about the worst example of customer service I’ve ever seen…

Why does he tell us this? I hear some of you asking. It’s not like any of you are in this business, or that you’d ever wig out and do something like this if you were. All of which is true, but recall what I said about how every CSR has wanted to do this at least once in their career. That means that your CSRs, if you have any working for you, have wanted to do this at least once in their careers. One of them might be considering doing so right now…

I’m not saying that we should all take better care of our customer service personnel; I’m not saying that better pay, job enrichment, or rotation through different departments and stations are actually critical, or that you should drop what you’re doing and look into such things. I’m just saying you should consider doing so at some future point, before one of your customers winds up with a yard full of dog waste, and your company is the one on the evening news…

Something’s in the Air

I read with great interest a number of news stories over the past few days concerning the volcano erupting in Iceland, and how the disruption of air travel over half of the world has led a number of hotels to jack up the prices they are charging stranded travelers. All in all, I’m not sure what I find more appalling: the lack of long-term customer relations strategy I’m seeing, or all of the comments you tend to find on such stories by people who don’t appear to have the whole “supply and demand” thing down yet. Although I suppose we should probably start by admitting that the whole situation is going to end up making somebody look bad, no matter what you do…

First of all, there have been a number of stories online about hotels raising their prices by as much as 400%, since they know the stranded tourists can’t just leave. I’m always a bit skeptical of such stories, because unless the city in which they are happening is alleged to have more transient passengers than hotel rooms in it, such things are pure nonsense. If a given hotel were to raise their nightly rate by 400% it’s much more likely that some competitor would take advantage of the situation by only raising its rates by 300%, or perhaps 200%, than it would be to follow suit; within a matter of hours the entire market would be competitive again. Unless we are talking about relatively small cities, places unaccustomed to high volumes of passenger traffic, or places where a monopoly on hotel rooms by one firm or owner exists (all of which are problematic for other reasons, too), this situation is unlikely at best…

But for the sake of argument, let’s suppose that there is a place somewhere in the world affected by the volcano where every guest room in town is already rented, and the hotels are all charging everything they can get away with charging. Let us further suppose that you own a hotel there, and you know that you can rent the room that just opened up for $400 USD per night this week. Why would you offer that room for $200 USD? Are you supposed to take a 33% cut in your profits just because somebody’s flight was cancelled? If so, should you make less money on your rooms EVERY time somebody has a flight cancelled? What about people who were just late getting up and/or too hung over to clear security in time, and wound up missing their flights; should you subsidize them, too? What about weeks when there’s a convention in town? Should you intentionally cut profits just because demand for your rooms is high?

Granted that in the case of an extraordinary situation, where tens of thousands of people are being affected in dozens of countries, it’s probably worth it in long-term goodwill to avoid gouging your customers for every dime you can get from them; it’s probably better not to hand your competition the opportunity to double their normal prices and still undercut you by 200%, if it comes to that. But all of the people out there in cyberspace who are wailing and gnashing about the cruel, heartless capitalists who are making money on a scarce resource by selling it for whatever the market is willing to pay for it need to take a moment and ask themselves if strict governmental control, international treaties, armed vigilante justice, or whatever other measures they’re advocating would really result in better travel experiences from the ones they’re having right now…

Large-scale experiments in Russia and certain other countries suggest that we’re better off the way we are. But that’s probably cold comfort when you find yourself with the choice of paying for another night in an expensive hotel or sleeping at the airport…

Stop Doing That!

Did you ever have one of those days when it seems like the world is messing with you? Like when you’re in the middle of telling someone that the mobile jumbotron (basically a flatbed truck with a thirty-foot television screen on either side, playing a variety of ads like the blimp in Blade Runner) is the worst idea ever, only to have the Strippermobile (essentially a large Plexiglas tank mounted on the back of a truck, with a stripper pole and several half-naked women inside it) drive past you? Or you claim that the individual you’ve just pointed to is wearing the most hideous necktie in human history, only to have someone else point to an even more reprehensible example on someone coming the other direction? When you write a blog about business topics, and particularly one that deals with business failures, this sort of thing happens a lot. But even so, it was kind of annoying to have to story about flying pay toilets break the day after I wrote in this space about airlines charging for carry-on luggage…

According to this story in the Mail Online, European discount carrier Ryanair has announced that it is going through with plans to put pay toilets on its aircraft; the company also says that it plans to remove most of the lavatories from its planes, leaving just one for every 200 passengers or so. In theory, this should save them the expense of maintaining and cleaning multiple lavatories, lower the cost of pumping the planes’ waste tanks (by encouraging people to go before they board or after the plane lands), and free up enough room to cram another half-dozen seats onto already cramped airliners. Whether or not there will be long-term consequences of these plans remains to be seen, of course…

The first question that comes to my mind is what does the airline intend to do about people who need to use the facilities but are unable to afford them? A one-pound fee (about $1.53 as of this date, although that changes from day to day) isn’t much, but it could add up over a long flight, and the people who fly no-frills airlines don’t tend to be especially flush in the first place. What about a family of five, for example, with three small kids who need to use the facilities a lot? Is it really fair to use a policy like this to squeeze, say, $20 worth of milk money out of them? My second question is, what are they going to do about people who really have to go but don’t have exact change on them? It’s already hard enough getting the cabin crew to make change for food and beverage purchases; what are you going to do about people who need lavatory change? Even more to the point, what are they going to do about people who have “accidents” because they have to go and can’t afford the pay toilet?

I’m not sure you could even pull a stunt like this in the U.S.; it seems like somebody would sue on the basis of this being unfair to people with medical conditions that make them have to use the toilet frequently, or people who can’t hold it for that long, or something. You can also imagine that the unions would kick up a fuss about maintenance personnel having to deal with biohazards when cleaning the cabin, or that other discount airlines would make a fortune off of mocking Ryanair for this policy while advertising that you don’t have to worry about having correct change when you fly their airline. It also seems like it would be difficult to develop much of a relationship with your customer base when you’re so clearly willing to demonstrate that you don’t really care about them…

The point is, I’m not trying to pick on the airline industry in particular; I don’t have any personal connection to the industry or any reason to mock them over the hundreds of other market sectors that appear to be sinking slowly into the swamp due to bad planning, laughable leadership and amateurish management practices. I didn’t even go looking for a follow-up to the last post; it just worked out that way. Like I said, some days it just seems like the world at large is messing with you…

Race to the Bottom

For some time now I’ve been watching as the airline industry indulges in a variety of new revenue-enhancing strategies – which means slapping extra fees on anything that doesn’t get up and walk away first, for the most part. With the advent of online travel sites, and their inevitable side-by-side fare comparisons functions, it isn’t possible to randomly apply higher fares without everyone in the world with Internet access knowing about it, so the airlines have started looking for other charges they can tack onto your bill to raise the amount they will make on your ticket. Which has led to some remarkably silly and counter-productive ideas, like checked bag fees, pillow and blanket fees, onboard food you have to purchase, and so on. But the latest scheme, from regional carrier Spirit Airlines, has to be the worst yet: they are now going to start charging for carry-on bags…

According to this story in USA Today, Spirit is going to be charging $45 to check a bag into the overhead bins – although this is lowered to $30 if you pay for it in advance (when purchasing your ticket, for example), and can be lowered to $20 if you join their still mysterious “$9 Fare Club” and agree to receive several dozen pieces of junk mail (and junk e-mail) each week for the rest of your life. Details of how much it will cost to join the “Club” or whether this will end up being a mileage-based perk instead are still not available. Essentially, if you purchased the right to carry on a bag you will also be allowed to board the plane first using a special boarding pass; if you didn’t, you will be stopped at the gate and required to pay the (much higher) bag fee on the spot. No one has explained how the airline plans to deal with the delays of running what amounts to a checkout lane before you get on the airplane, or what they propose to do with the luggage of people who won’t pay…

As a means of wringing money out of people who are (so far) refusing to pay to check their bags, I think it’s a remarkably silly concept, and I’d probably take a few moments here to mock them for it, but fortunately I don’t have to, because Jet Blue airlines has already done it for me. You can check out their web page about the competition’s new fee here, if you want to and I actually hope you do, because it’s hysterical – Jet Blue is advertising a carry-on bag that you wear like a shirt (or perhaps a shirt with the capacity of a carry-on suitcase) that you can wear when you’re not flying Jet Blue. It also ties nicely into Jet Blue’s positioning themselves as having the most comfort and the most leg-room of any major airline…

So can Spirit really make enough money on this stunt to make up for the fact that they’re annoying their customers, slowing down the boarding process, driving people away from using their service, and giving the competition the opportunity to not only outperform them but also mock them into the bargain? Only time will tell. And, I suppose, we must acknowledge that someday, someone might even come up with an even worse idea for an incremental increase in revenue from their business. But by the same token, we should all remember that this is how the policy of charging for checked bags got started – and that doesn’t appear to be going away any time soon…