Was That a Goat?

Over the years I’ve written a lot of posts about Amazon for much the same reason that a sports blogger would write about the New York Yankees – love them or hate them you can’t ignore them, any more than someone in the business community can ignore Amazon. We’ve all spent time pondering Amazon, and watching them as they diversified from an online bookstore to a retailer of other kinds of media to a retailer of practically everything. Now it appears that the company has moved into providing random home and personal services as well, which appears to be taking them into some very strange waters indeed. Who would have imagined, back in the old days, that this modest Internet bookstore would one day grow up to be a place where you can rent a flock of goats?

I got the story off of the Business Insider website, but it looked too fantastical for words, so I went onto the Amazon site and looked for myself. Sure enough, there is an Amazon Home Services page which lists services available through the auspices of the company. Some of these include things that make perfect sense as a value-added adaptation for a retail company, such as service personnel who will come to assemble the outdoor grill you just purchased, or install the wall-mount for your new plasma-screen television. Some are just mundane things, presumably for people who don’t want to deal with Sears, get referrals off of Angie’s List, advertise on Craig’s List, and so on, like gutter cleaning and pressure washing services. And some of them are quite eccentric indeed, such as aerial yoga classes (yoga done while hanging from the ceiling on loops of soft fabric), language lessons (currently in Spanish, French or English, but keep checking back!), musical and vocal performers (hire a band for your next big event!) or hiring a goat grazing service…

As I have mentioned in some previous posts, goats are an extremely efficient and cost-effective way of clearing brush, or unwanted vegetation in general, from almost any terrain. They don’t require gasoline or electricity, don’t make much noise compared to chainsaws and wood chippers, dispose of the cut vegetation (except for the occasional goat dropping, which the Amazon page points out make excellent fertilizer), and can actually work faster than some human brush-clearing services (depending on the terrain and the number of goats, presumably). How much the service will cost depends on how much land you want cleared, whether it is fenced in or whether goatherds will be needed to keep control of the flock, and how many goats you want, but unfortunately I can’t tell you how it compares in price to other methods or contractors…

When I pulled up the Other Services page it was immediately clear that none of these services were available anywhere near my zip code. There weren’t any offers on the Lessons page, either, which is disappointing to anyone who wanted to learn aerial yoga in the Lansing area. Nor did I find anything under the Home Improvement or Lawn and Garden pages before I gave up. As was the case with Angie’s List and Craig’s List, there are no listings for services of any kind anywhere near where I live…

Now, in fairness, we should probably note that Amazon Home Services is a fairly new area for the company, and it may take them a while to get enough contractors listed to cover everywhere. We should also note that East Lansing is kind of a backwater – it’s a nice enough place, but it is somewhat remote when compared to Seattle or Chicago, for example. It’s quite possible that if you live in or around a major city that you would find plenty of offerings in every one of these categories (although I suppose the goats might be a challenge in urban areas). A much more serious point is that every other business referral service out there should probably take notice of the fact that Amazon has now entered their industry, because if they aren’t careful the same thing that happened to all too many local bookstores could also happen to them…

The Trouble With Franchises

Actually, there are a lot of problems with a franchised business model, both from the franchisor’s standpoint and also from that of the franchisee. If you have purchased a franchise from someone then by definition you have given them a large sum of money in exchange for the right to open a branch office of their business and contribute to their bottom line. You may not ever see a dime of that money back; you may in fact go bankrupt even before you make your first franchise fee payment, but the company will still get its money. In some cases this might work out very well, such as the McDonald’s franchises, some of which have been estimated as being worth more than the franchise fee in marketing advantages alone. In other cases it might be a nightmare, as it was for the Krispy Kreme franchise holders who were basically used as a revenue source to enrich the personal fortunes of the CEO and his cronies in the early 2000s…

As bad as that is, things are frequently worse on the franchisor side. As attractive as it is to have people paying you to expand your business, the fact remains that every time you sell a franchise you are putting your company’s honor, reputation, and financial future into the hands of someone who you can’t control, who has no reason to like you or protect your company beyond the need to recover their investment. This can lead to improperly maintained locations that give your company an unwanted reputation for slovenly management and unsanitary conditions, public relations disasters that impact the performance of other franchisees miles or time-zones away, or human resources atrocities so absurd that they get you mocked by scruffy bloggers all over the globe…

I picked up the original story from the local television station in Houston, but in case you missed it, there are reports of a Popeye’s franchise demanding that the shift leader in one of their stores pay back the money that was stolen during an armed robbery because it was her fault the registers had enough money in them to be worth stealing. When the woman in question refused, saying that she’d already been robbed at gunpoint and couldn’t have afforded to replace the money anyway, she was fired. This would have been bad enough, but it turns out that the fired employee is a mother of three children who is currently pregnant with a fourth – and now facing unemployment in addition to her other problems…

Now, I don’t know enough about employment conditions in Houston to comment on whether firing someone because your company was robbed of less than $400 makes any financial sense. Typically, we assume that recruitment/replacement costs for supervisory personnel run between one-third and one-half of the first year’s salary, which in this case would mean somewhere between $5,000 and $10,000 for a supervisor in the $8 to $10 per hour range; possibly much more than that. Unless there are so many employed first-tier managers in the Houston area that a replacement can literally be found sitting in the restaurant itself, this was already an asinine decision on the part of the business. But once the story got out things became even worse for both the franchisee and the company…

There’s only one Popeye’s location within a fifty-mile radius of my office, and I already don’t go there because I would literally have to drive past dozens of other fast-food restaurants to get there. And I know that our local franchise has absolutely nothing to do with Z&H Foods in Houston, except for the fact that both companies purchased a franchise to make and sell fried chicken and biscuits. But even knowing that, I feel rather more negatively toward Popeye’s in general than I did before I read this story, and even more so since the franchisor in this story is refusing to comment and just dumping all responsibility for this fiasco on the local franchisee. Just imagine how much worse that could get if everyone who sees this story, on the air or on the Internet, has the same reaction…

Still want to go into a franchised business model? I can wait while you think it over…

Financial Aid Starts Early

You may have heard the jokes – they go all of the way back to the Murphy Brown television series in the early 1990s – about how competitive preschools are, and how choosing the wrong one could start a fall of dominoes that will prevent your child from getting into the right grade school, middle school, high school, college and graduate school. Exactly how many people actually believe in such a sequence is unclear, but there are still news stories every few years about preschool programs that cost as much in tuition as most public universities, and the massive competition that occurs each year to get into the best. An offshoot of these jokes involves parents taking out student loans on behalf of children who are not yet able to dress themselves, or in the case of less wealthy families, seeking financial aid in order to achieve the same results. Unfortunately, this may be less of a joke than you’d think…

According to a story that ran last week in the New York Times, the problem with preschool is that it isn’t affordable for a very large range of families, especially in the case of single parents who also need after-school daycare. The example given is in Chicago, where even the public school system’s Preschool program runs in excess of $13,000 per year – over a thousand dollars per child per month – and private programs range upwards from there. There are low-income programs like Head Start, for families that qualify, but most people living above the poverty line can’t get their children into those programs, which only leaves student loans, personal loans, and the aforementioned financial aid programs. Programs which, it turns out, also leave large numbers of parents and their children out in the cold…

Now, we should probably acknowledge that the Daycare issue isn’t a new concept. For at least the last twenty years, and possibly more like fifty, many working-class families have had to decide between working a second (or third) job in order to pay for daycare, or just having one parent quit their jobs and stay home with the children. Indeed, if your monthly take-home pay is $1,000, and cost for childcare is going to be $1,120 per month, you probably couldn’t afford to go back to work if you wanted to. A single parent does not have that option in the first place, of course, and once we start considering child support and spousal support issues the whole matter of who actually qualifies for financial aid becomes even more complicated. The real question is what to do about it…

Greater funding for financial aid programs would seem to be one obvious approach, except for the fact that all of the existing financial aid systems are overtaxed, not just the ones available to preschool students – and the fact that funding for public education is already in crisis. As appealing as the idea of pumping additional money into local school districts in an attempt to increase the number of places available in public preschool facilities might be, it does not appear that throwing additional resources into traditional methods is going to help. The question that comes to my mind is whether there might be a private-sector approach that would help…

We have already seen examples of companies offering subsidized preschool programs as a benefit for their employees – offering the services at cost makes them effectively resource-neutral on the balance sheet, while at the same time helping to retain valued employees and raising morale. There can even be an operational efficiency improvement, in that employees who have children in daycare in the same building in which they work do not have to leave the premises and travel across town in order to look in on their children. Public support for such programs could be very cost-effective, since every child placed in private or corporate daycare would be one less individual competing for finite resources in public schools or from financial aid programs. But there might be an even more direct approach to the problem…

As of the last time I checked, there was no specific program available to fund new daycare businesses – but there is no reason that the Federal government couldn’t establish one, either through the Small Business Administration (SBA) directly or through the entrepreneurship programs that all of the Federal agencies are required to support. By doing so, they would be able to relieve pressure on both the financial aid system and the public daycare system, not to mention creating jobs for all of the caregivers who would then be employed by the private-sector daycare centers. You would need additional social services personnel to regulate such businesses, and some additional infrastructure to administrate the SBA programs, but you would also be creating profit-making businesses and gainfully-employed citizens, all of who would (in theory) also contribute to the tax base and put additional funds into the local economy…

I’m not saying any of this would be easy. On the contrary, any such program would require a great deal of resources to start and to run, as well as considerable intestinal fortitude on the part of the public officials that launched it. But at least we could get rid of some of these competitive preschool jokes…

That’s Not an Egg!

Some time ago in this space I speculated that Apple needed to come up with the next Big Thing in personal electronic devices, and noted that while the iPhone has been the mainstay of their business model for several years, there is a limit to how far they can develop the smart phone using the current technology. They needed to come up with a new product that would renew the company’s previous reputation for innovation and cutting edge technology, and I really doubted that the new Apple Watch was going to be that new product. Although, to be fair, I also noted that I didn’t have any better ideas, and pointed out that I could be wrong about the watch…

Now, I don’t suppose it will come as much of a shock to anyone that the product development people at Apple know their customers better than I do; that is their job, after all. I’ve been using Apple equipment ever since my family got its first home computer (an Apple II+) in 1981, but I’m still not one of the fanatic Apple fans who will buy whatever the company produces and then tell everyone in the world that this is the greatest thing ever (even if they don’t know exactly what it does). I own an iPhone, for example, but I’m writing this post on a Windows machine. Based on the news reports we’ve been seeing lately, however, I’m pretty sure that no one in the Apple-using community, or even anyone from the company itself, was expecting that nearly one million people would purchase the Apple Watch during the first six hours of the pre-order period…

You can pick up the original story from the Washington Post website if you don’t believe me, and I can certainly understand why you wouldn’t. The Post is estimating that 957,000 people placed orders, and that at least some of them placed multiple orders, with an average of 1.3 units per order and an average sale amount in excess of $500. Customers who ordered any of the more expensive Apple Watch types went even higher, with an average sale price of over $700. If these numbers are accurate, the gross sales amount on this new product exceeded $481 million in just the first six hours they were available for pre-order…

Now, I still have my doubts about the long-term prospects of the Apple Watch. For one thing, it seems that fewer and fewer people are even wearing watches these days – a lot of my students tell me that when you carry a device around with you that has a time and date function on it, a separate device that just tells you the time seems redundant. There’s also the fact that you need to sync up the Watch to some other Apple device (usually an iPhone) to use most of its functionality, and the fact that most of those functions are already present on the iPhone itself. But what this argument does not consider is what else the development teams may have learned during the process…

One of the most important factors in any R&D project is what you learn by doing it, and while this often gets overlooked when we talk about product development research, all of the same points apply. Sure, the circular hotdog never made it into production because it was the dumbest-looking thing anybody had ever seen, but the company that invented it has been making money on products that make use of the same meat-extrusion technology for at least the last 30 years. Apple’s first attempt at a small electronic device (the ill-fated “Newton” personal digital assistant) cratered hard, but the experience in building compact electronic circuit boards, power systems, displays and housings paid off when it came time to build the first iPod, and then again with the iPhone. And even if the company’s first attempt at wearable computer technology had failed, there’s no telling what they might have learned in the process…

That doesn’t look like it’s going to be a problem in this case (957,000 orders in the first 6 hours?), but I think it’s worth pointing out to anyone else who might be considering public statements questioning the development of the Apple Watch…

Do Not Meddle in the Affairs of Amazon…

I have written in this space before on a number of occasions about the issue of fake online reviews and the potential for abuse, including outright extortion, that they entail. The common factors in nearly all of these cases has been that it is generally quite difficult to combat fake reviews, either positive or negative, because it is difficult to catch the people doing it, and also because even if the offenders can be identified, most small businesses and solo practitioners do not have the money available to pursue legal action. Of course, we should probably note that the majority of the people doing this have the good sense not to call attention to themselves and to stay away from major businesses. After all, if they attempted to post fake reviews on a site belonging to a company with wealth and resources neither of those factors would protect them. A company like Amazon, for example…

According to a story in the SeattleTimes, later picked up by the BBC News page, Amazon is bringing suit against three different companies that had been selling a service that provides positive reviews on Amazon for the client’s products. Initially most of these companies were attempting to claim that nothing they did was wrong, let alone illegal, but I have trouble believing that this will go over in court well, either, given that the companies are called things like “buyamazonreviews.com.” Neither will the fact that the various review providers have been advertising that they can get the customer all of the 5-star reviews they want at the very reasonable price of $18 to $22 per (fake) review…

One of the less certain aspects of the case is whether it will remain a purely civil affair, or if there were also be criminal charges involved. Normally, Amazon will not post reviews from anyone who isn’t a verified purchaser of the product – that is, if they don’t have any record of your buying the product, they won’t let you post a comment about that product. In the lawsuit against “buyamazonreviews.com” Amazon is also claiming that the defendants have been using fake purchases and fake shipments – buying product from their clients through a series of dummy accounts and then receiving “shipments” containing only empty boxes. The allegedly faked reviews are already dodgy, from a legal standpoint, but the companies responsible for them can (and apparently do) claim that they are just finding satisfied customers and getting them to post positive reviews of the product. If Amazon can prove that the same companies are actively circumventing their verification system using faked purchases and fake shipments, it is going to be much harder to convince anyone that this isn’t fraudulent…

By themselves, a large number of five-star reviews aren’t likely to hurt anyone; Amazon will benefit from its share of additional sales, the company selling the products will benefit from the sales, and the review generation firm will make money on the deal. As a method to convince online shoppers that a given product is far more popular than its sales would indicate this strategy is far more problematic. And if the company making the product is able to secure extra sales using this method, but is then able to avoid demands for refunds when the product turns out to be less desirable than the fake reviews made it appear, then they have effectively defrauded the purchaser as well as discrediting the entire Amazon online review system…

Amazon contends that confidence in their review system helps to create confidence in their customers, which in turn makes it much more likely that electronic shoppers will chose to purchase goods from Amazon. If someone is allowed to make a mockery of the Amazon review system, the company claims, these result will be much lower consumer confidence, much lower sales of everything, and a significant cost to the company. If the court concurs this could be a very costly mistake for the review generation firms. If the Washington State Attorney General or the relevant U.S. Attorney’s office take notice and end up prosecuting this as a criminal case, things could get significantly worse than that…

I find it interesting that since this litigation began, two of the four companies named in the suit have shut down their websites and disappeared completely, one is refusing to respond to requests for comment by the media (and may also be in the process of shutting down and going away), and the fourth is trying to claim that they haven’t done anything wrong, including not breaking any laws. But I suppose we will have to wait and see what the jury (or juries) decide on this one…

Best. Billboard. Ever.

Over the years there have been any number of stories, television skits, scenes from movies and so on about advertising media that would be truly interactive with the target market – print ads or electronic media that would carry the smell or texture of food products, ads through which you could touch or feel the product, and so on. There have been a number of attempts to produce such things in real life, although they have largely been on the primitive side – scented inserts in magazines selling fragrances, for example, or billboards promoting bakery companies that emit the smell of freshly-made cinnamon rolls. But the ultimate version of this concept would be an ad in which the target customer could actually sample the product – taste it, ingest it, or the equivalent. The infamous “television chocolate” from Charlie and the Chocolate Factory is one familiar example – a television commercial where it is possible for the viewer to reach into the screen and pull out an (edible) bar of chocolate…

Needless to say, in real life there would probably be several more immediate applications for a device that can send physical matter over television transmissions, and even the fantasy writers have been unable to explain how you could input one chocolate bar into your transmitter and allow thousands or millions of viewers to draw it out of their personal set. So despite the incredible impact this concept would have on potential customers, it has remained in the realm of fantasy, or at best science fiction – until now…

According to a story posted online by the Daily Record (UK) Carlsberg Beer has set up a billboard near their brewery in London that features an actual beer tap. Anyone who want to sample the company’s product can simply walk up and pull themselves a glass of beer from the tap. It’s hard to say for sure, but it looks like they also have security personnel (or possible police officers) keeping an eye on the tap to make sure everyone stays orderly and no one tries just drinking directly from the tap until they pass out. Given that all of this is happening in England it isn’t at all surprising to see that a long and enthusiastic but extremely orderly line has formed to wait for the free drinks…

Now, I don’t imagine I have to explain why this stunt would never work in the US – or any other place with a definite restriction on drinking age. I can also see it being an issue in places where under-age drinking isn’t a major factor but drunken bad behavior (and riots) is. And in much of the world I would actually be less worried about people overdoing it when they drink from the tap than I would be about people showing up with gallon bottles, five-gallon drums or armloads of quart/liter bottles and trying to appropriate as much of the free beer for themselves as possible. But as advertising stunts go it’s amazing, and it makes me wonder if you could apply the same idea to other types of product…

What about a billboard that didn’t just make people walking by see and smell the product, but also made samples available to try? You could have garment ads that allowed people to feel the fabric, or ads for consumer goods that had working features you could actually try out – although I suppose that given the tendency in this country to use sex to sell literally everything, it would only be a matter of time before somebody tried to combine all of these elements and ended up with a billboard ad you couldn’t show on television without being hit by massive fines from the FCC…

Maybe it’s just as well that the concept has been limited to beer so far…

Blunder or Not?

Personally, I’ve never really seen the appeal of Twitter; I have enough trouble getting my thoughts down in 600+ word blog posts; there’s no way I’d be able to get anything I’d want to say into a single tweet. Consequently, I did not see the tweet issued by the Hostess company (presumably the new owners of Hostess) yesterday in honor of Opening Day for Major League Baseball. It’s a picture of a Hostess cupcake – a yellow cake with vanilla frosting version, instead of the better-known chocolate cake product, with red icing in curlicues on top – with the caption “TOUCHDOWN.” Seen from the top down, the red-on-white cupcake really does look remarkably like a baseball, or at least a cake made to look like a baseball. The problem, if problem it was, is that the term “touchdown” applies to a scoring play in American-Rules football, not baseball…

If you also do not twitter, you can see the image and read some of the tweets on the Business Insider page about the stunt. Apparently, when the supposedly “botched” advertising tweet launched, the sort of people who both follow commercial bakeries/snack food producers and comment on their advertising went berserk, sending thousands (or possibly millions) of derisive tweets into cyberspace to mock the company for not knowing football from baseball. The company responded with a second tweet, remarking on how excited they were at the return of “Sportsball,” which rather settled the matter as far as I was concerned: the term “Sportsball” is an Internet term which mocks real-world sports and people who spend more time watching professional athletics than running around in virtual communities online. I think we can conclusively say that the company knew what it was doing; the more subtle issue was whether or not this was a good idea…

It seems clear enough that Hostess is using this artificial “blunder” to draw attention to itself – in this case, from thousands of twitter users and anyone to whom they point out the original tweet. In a larger sense, though, what they are doing is trying to get the audience to look at the cupcakes, remember how good a Hostess cupcake tastes, and perhaps even associate the company and the product with the start of spring, the start of baseball season, or even with an amusing tweet, blunder or online event. Whether you remember the specific tweet and the “TOUCHDOWN” caption or not, the company will be closer to the front of your thoughts the next time you make a purchase decision that involves snack foods – or, at least, that’s the idea…

The problem with advertising of this type is that nobody, including the Industrial and Organizational psychologists who study it, knows exactly how it works. Sometimes called the “Sleeper Effect,” the concept is that some ideas grow in the amount of influence they have over someone’s perceptions instead of fading away as they forget about the source material. In this case, the idea would be that you remember Hostess snack cakes, and how much you like to eat them, while forgetting about a possibly artificial mistake they may have made on Twitter. When it works, it can have an impact all out of proportion to the size, importance or cost of the media that produced it. Most of the time, however, all you get are ads that offend people and don’t make any sense, while fading off of the public consciousness and having no long-term effect at all…

What makes this particular stunt so interesting is that it didn’t cost Hostess anything to do it, which means that if it fails they can always just try something else. Most ads of this type have involved more expensive media, which entails the risk of not making back more sales differential than you spent making the ad in the first place. But if everyone who makes or markets consumer goods figures out that they can use this method to cut through the clutter in current electronic media and get their ad into your mind despite the interfering “noise,” then it seems likely that ads of this type will become the norm, the world will fill up with new and more annoying “noise,” and whoever is making these tweets will have to find some other approach and start over…