Wednesday, December 28, 2011

Defense of Usury

I was referred to Bentham's work as a reference on the topic of lending and interest: "Defense of Usury" is a series of letters, written presumably to a person [or persons] opposed to the notion of charging interest, at least beyond some arbitrary level, on borrowed monies. As such, it doesn't explore the topic fully or systematically, but there is quite a bit of food for thought.

The idea of usury is seldom considered today. While there are still laws on the books that set a maximum rate of interest, they are very liberal in what they allow, and vary from state to state, such that a financial services firm can simply move its nominal headquarters to the state that allows them to charge as much as they please.

And there is quite some consumer grumbling about it, but most individuals are informed enough to dismiss it: those that grumble the loudest are those who are charged the most, and they are charged the most due to either a bad history of managing their personal finances or lack of proof of a positive history - which, to any objective third party, seems justified in most circumstances.

Given the current financial crisis, caused by political pressure (or facilitation) on financial institutions to extend loans to unqualified borrowers at extremely low rates, public sentiment is, if anything, in favor of charging higher interest rates or denying credit altogether to those who are unable to repay. But the winds of politics are ever-changing and, perhaps a few years or decades after the present crisis, sentiment will again turn to demanding ready credit at low rates to anyone who has a pulse, and the cycle will repeat as it has throughout history.

But returning to Bentham, his defense of usury covers a broad swath of topics related to both consumer and commercial lending: allowing parties to negotiate terms to their own liking, the compounding of interest, the inability of high interest rates to discourage reckless behavior, and the like.

All of this could, perhaps, be shaped into a work that is more structured and systematic than a series of letters - but even such as it is, it provides a good survey of topics related to credit, and provides a reasonable explanation of the necessity of interest.

Saturday, December 24, 2011

Sweeteners, Bribes, and Lagniappes

I got into a theoretical discussion about the "little extras" that sellers give to buyers, the rationale behind the tactic, and whether it is moral or effective to do so. The present not is jotting down some points - I don't expect there's a meaningful structure or direction:

Basic Classification

There is a distinction to be made based on when and how the bonus is given to the buyer.

If the gift is offered prior to settling the exchange or agreeing on terms, it can be regarded as a sweetener - as in "sweetening the deal" to get the buyer to accept it. The sweetener is clearly a negotiating tactic, geared toward making the buyer more inclined to accept the deal that is offered.

A bribe is also given prior to the exchange, but the difference is that the sweetener is subject to open discussion and is not granted if the negotiations are unsuccessful. A bribe is granted without overt reference to the deal - and as such is meant to covertly ingratiate the buyer to the seller, to make the buyer feel he "owes" the seller something (agreement to the deal), even if the seller ostensibly denies this (which is expected).

A lagniappe is differentiated from both bribe and sweetener in that it is granted to the buyer after a deal has been accepted, and the buyer had no expectation that he would receive anything "extra" at the time the deal was struck.

Ethical Considerations

The lagniappe is likely the most ethically sound of the three. Because the buyer was unaware of it during the negotiation process, it cannot reasonably be said to have corrupted his objectivity in the negotiations. Even if the buyer expected the lagniappe for some reason, such as having heard from others that the seller is in the habit of giving them, it is the buyer's own expectations that have corrupted him, not anything done by the seller - which likely falls into the category of "foolish" rather than "unethical" behavior.

The sweetener also seems ethically acceptable. Because it is married to the negotiation, the buyer has the ability to consider it, as well as the ability to insist that the seller set the sweetener aside and resume negotiations for the merchandise that is the primary objective. That is, the buyer consciously and purposefully allows the inclusion of the sweetener, no differently that including or excluding any item from the exchange.

The bribe is clearly unacceptable, as a one-sided tactic that is intended to ingratiate the buyer to the seller and apply psychological pressure to accept a deal that might have otherwise been acceptable.

Naturally, this last bit was subject to some conjecture, but in the discussion, those who felt that a gift before a deal was acceptable were unable to provide a satisfactory rationale. "Just being nice," "It's a custom," and "It's a thank-you for taking the time to negotiate, even if a deal is not struck" seem disingenuous and just-because.

I can go so far as to say that if it isn't the seller's intent to skew negotiations in his favor, than it is not intentionally unethical behavior - but because we can never really know a person's intentions, and all will claim the most innocent of motives if asked, I don't expect that can be objectively substantiated - and the act of offering a bribe is inherently unethical, regardless of the purported intent.

Fiduciary Responsibility

All three forms of gift seem a bit more dubious when the situation is one in which the buyer is negotiating a purchase for his employer, rather than a personal purchase.

Where the negotiator seeks to obtain a lagniappe, sweetener, or bribe for himself, in the process of a business negotiation, it's clearly in violation of ethics. Even if he gains the most beneficial deal for his employer among the options available, it smells odd.

For the lagniappe, specifically, intent is important. If a vendor gives an unexpected personal gift to the negotiator after a deal is struck, it's likely not an ethical problem (though it may have the appearance of having been so) - but if the negotiator expected the gift, it takes on more of the quality of a bribe.

Where the negotiator gains a lagniappe or sweetener for his employer (he does not keep it for himself), I don't see an ethical concern. Because the negotiator gained something for his employer rather than for himself, he has not violated his fiduciary responsibility.

In terms of bribery, it seems to me that a bribe that is offered that benefits the employer is less likely to corrupt the judgment of the negotiator than a bribe that is given for the negotiator's personal benefit. The psychological "hook" of the bribe is reciprocation - because you have done something for me, I feel that must do something for you. The hook isn't set by doing something for someone else (because I did something for your company, you are personally responsible for reciprocating.) So while I'm still apprehensive, I am less so in this specific situation.

Lessons for the Seller

The consideration so far is focused on the motivation of the buyer, as was the discussion, but it has some implications for the seller.

Fundamentally, the question of ethics pertains to motivations - and while we can never truly understand the motivation of another person, we are (or should be) entirely clear on our own. We know whether our intent was to show gratitude to a person with whom we do business, or to use overt methods to make a deal seem more appealing, or to subvert the judgment of the other party. We know whether our intentions were ethically sound.

However, we must consider the perspective and situation of the buyer: if our actions have the scent of subversion, or if the buyer will suffer from the appearance that they were involved in an unethical exchange, we have likely damaged both their reputation and our own in the process, and poisoned the relationship.

As such, I would conclude for the time that:
  • A lagniappe is always safe when given to a retail buyer (purchasing for their own consumption) and is safe when we sell to a commercial buyer (who purchases for their employer). The only time it seems shady is if the lagniappe is given to a commercial buyer that benefits the person rather than their firm - it could have the appearance of an ethical violation, not that it actually is.
  • A sweetener is also safe when dealing with the retail buyer. It is also safe when dealing with a commercial buyer if the sweetener benefits the employer rather than the buyer. However, if the sweetener benefits the commercial buyer as an individual rather than his employer, it is unsafe.
  • A bribe is unsafe when dealing with a retail buyer, and unsafe when dealing with a commercial buyer if the bribe benefits the buyer rather than their employer. Where the bribe benefits the employer but not the buyer, it is not as questionable, though I can't go so far as to say it is completely safe.

Tuesday, December 20, 2011

Technology Merely Facilitates

If you give an illiterate a typewriter, he can't write a novel. He can't write a sentence, and if he manages to bang out a string of characters that happen to spell out a word, it's by random chance. If you set up a Facebook page for a socially inept brand, it doesn't become able to develop and maintain positive relationships. If it happens to gain even one additional sale, it's by random chance.

This problem stems from an overabundance of faith that technology, alone, grants competence - that a person or an organization who is completely unable to do something will be somehow transformed into an expert if the technology that experts use competently is made available to them.

When a person (or a company) is good at something, they can do it with a bare minimum of tools. Some of the most powerful, eloquent, and graceful phrases in the English language were scratched down on parchment with a feather. Those who wrote them didn't need a word-processor - though if they had one, chances are they would have at least been more prolific.

When a person (or a company) is not good at something, the most wondrous technology cannot grant them the abilities they lack. And this is the reason many companies remaon inept at using social media, and often do themselves more harm than good when they attempt to use it to connect with customers, prospects, candidates, and the public. That most companies have social media presences that range from the pathetic to the offensive demonstrates the magnitude of the problem.

This is likely the stem of the problem, but not its root. With time and effort, skills can be learned and some level of proficiency developed. But even before that can happen, there must be the desire to succeed. And that's where the problem begins: companies want to leverage social media to achieve financial results, but they don't really want to be good at social media - in the same way that they want money, lots of it and as often as possible, but many don't really want to serve the customer or provide genuine value in order to earn their patronage and loyalty.

And in that sense, it becomes clear that technology is not the savior of a firm that has poor customer loyalty. The problem is more in the culture of the organization - the real culture, as evidenced by their behavior, as opposed to the lofty language of their mission statements and the clever phrases they print in their marketing materials.

If a company genuinely desires to have a good relationships with customers, chances are that it already does. The adoption of social media will merely enable them to build relationships with their customers online exactly as they do in person, in print, and over the phone - and their efforts in the social channels will amplify their success.

If a company does not genuinely desire good relationships, but is parasitic and manipulative, chances are they have alienated their customers. The adoption of social media will merely enable them to affect people online exactly as they do in person, in print, and over the phone - and their efforts in the social channels will amplify their failure.

Friday, December 16, 2011

Appearance and Reality of Quality

The holiday season means end-of-year celebration banquets at many firms, and the experience of such an event discloses much about a firm: particularly, the contrast between the look and feel of quality that speaks volumes about the company’s own consideration of quality. Unfortunately, this is very often unflattering.

Having been to a number of these events over the years, I can say it’s not unique to one firm, and moreover I have the perception that it appeals to a great many firms who mean well, but fail on execution.

Plus one Minus Four

On the positive side, a company that provides a banquet at all is at least making an effort, which stands in stark contrast to the many that don’t. And when you first enter the banquet hall, it’s clear that the organizer has made an effort to impress, or to show appreciation of, the individuals who are invited: you immediately see the cloth napkins and metal silverware, the elegant centerpieces and d├ęcor of the banquet hall, and it’s clear that the company wants to give the impression of hosting an elegant event.

But then you are seated and you pick up the napkin, and notice its weight and texture: it is a cloth napkin, but the material is coarse and cheap. The flatware, likewise, has the appearance of quality, and is metal rather than plastic – but it is lightweight and flimsy. Literally everything you encounter is superficially upscale. And as much as you want to be impressed, you end up disappointed.

The appearance of quality is offset by the reality of the situation, as you have to wonder which of the following is true:
  • The company cannot afford to deliver genuine quality, but is striving create the impression that it can
  • The company could afford to deliver quality, but does not have a clue as to what “quality” actually means, and is incapable of delivering it in spite of a genuine desire to do so
  • The company can afford it, and knows how to do it, but has chosen not to provide it for this particular audience, because they think it would be pearls before swine - that the people in attendance would not recognize quality.
  • The company can afford it, knows how to do it, thinks that attendees would recognize it, but wishes to demonstrate that they do not deserve it.
Because it is a cultural taboo to express disfavor to someone who has gone out of their way to do something nice for you, even if it is unsatisfactory, chances are that the companies that host the event do not get negative feedback from the attendees. A polite person will say “thank you” and a fawning sycophant will offer high praise to curry favor – but in reality, they likely recognize the fact that your best efforts are not up to par, and have formed their own conclusion as to the reason why.

Do Employees Matter?

Even though many firms pay lip-service to valuing their employees, there remains a strong cultural tradition from ages past, in which there is a clear separation between the nobles and the peasants, the officers and the enlisted, the management and the workers – in which the former is considered to be a better class of person than the latter. And in this regard, as in so many others, there is often a schism between words and actions – the latter of which, as the saying goes, speaks louder.

Keeping to the example of celebratory meals, there is often a stark contrast between the kind of place an executive will take an important client for a business lunch and the kind of place the same executive will take an employee for a congratulatory lunch – the latter being less upscale than the former, which belies their true opinion of the status of the guest.

Or better still, consider that many firms have separate events for management and employees, where there are stark differences in quality. An executive event is held off-site in an upscale restaurant, country club, or hotel banquet room. An employee event involves gathering in a conference room with sandwiches brought in from the local supermarket’s deli counter.

In that regard, it’s clear that to some companies, employees really do not matter. They will claim (words) that a person who has given twenty years of service to the firm is a valued employee, but when their unit manager takes them out to lunch (actions) to celebrate the anniversary, the choice of venue suggests the same desire to undertake a superficial effort to create an false impression.

There are many who would defend such a decision, and who consider an executive who is overly generous in his treatment of his people to have a character flaw, in the same nature as a master who is kind to his slaves is a weak man. I can't subscribe to this point of view.

Do Customers Matter?

Ultimately, relationships are important, and those who recognize this make every effort to be attentive to relationships in all regards: whether it is with an employee, a vendor, or a customer.

It is not unusual for companies that have events to invite some of their key vendors and customers to socialize with the employees. On one hand, it agrees to the cultural value of egalitarianism to see everyone, of every rank and status, treated just the same. But on the other hand, consider that everyone is treated to the same coarse napkins and cheap flatware.

You can even go to the extreme of events that are customer-only. Not all firms treat customers very well, and there is also stark contrast in what is offered to a prospective customer whose future business the firm wishes to win, and an existing customer whose future business the firm has largely taken for granted. Even in this instance, the same principle applies.

The Rest of the Time

And finally, what about the rest of the time? There is again a contrast between the few occasions in which a firm undertakes an atypical effort to make a positive impression, and the rest of the time – the way that a customer will be treated on a day-to-day basis, in the course of regular business.

I’ve heard it remarked that the worst vendors throw the best parties and give the best holiday gifts. And while I’m not quite cynical enough to accept that as a general rule, I do believe that it wouldn’t be said at all if there were not some shred of truth to it. It would likely be more accurate to say that when a company gets quality right on special occasions, it’s no guarantee that they will get it right the rest of the time.

A vendor that provides high quality service will often also treat customers to high-quality perks – because they want everything that they do to convey their genuine commitment to quality. The fact that vendors who are not as committed to quality will sometimes imitate this as a method of deception should not be cause to disparage the genuine intent of others.

Likewise, a company that treats its employees or customers well may be devoted to quality in all of its relations. But again, some companies treat some of their relationships with greater care than others. It may be argued whether it is rightly so – but it cannot be argued that it is the behavior of a firm that truly values its people, its vendors, and its customers well.

Back to the Point

As usual, it’s been a long ramble that has taken me off the course I had intended to follow: the discrepancy between the appearance and reality of quality.

I had meant for this to be a meditation on the importance of getting the details right – making sure that the reality and appearance are not out of joint – but it took me in a different direction. That seems to happen quite often.

Monday, December 12, 2011

Better Equipment at Home

One particularly odd thing in era of technology is that employees seem to take work home with them fairly often because the equipment they have is more capable than the equipment their employer provides. I don't expect it is unique or unprecedented, and that there are various professions, going back centuries, where workers have brought their own tools to the workplace because what their employer furnished was not fit for the job, but it confounds reason that it should ever be so.

Yet when it comes to computers, particularly for those provided to design staff, it's common to hear someone remark that they will need to finish a job overnight or during the weekend because they have better equipment at home. Many employers do not provide adequate equipment, and most them forbid "unauthorized" equipment in the workplace - and make it very difficult to get authorization - but the latter is an entirely different problem.

I can think of only two places where I worked that the computer I had been provided by the company was better than that which I had at home for my own use. In fairness, I did freelance work in those days and needed a better system than the average "user" had - but given that I was doing the same kind of work for a smattering of small clients as I did at the office and was willing to purchase adequate equipment for the job on my own budget, perhaps that's even more damning?

The first of these companies was an Internet division stood up in a larger company during the early days of the medium (pre-1995), which threw massive amounts of capital at their green-field venture. In that place, the pendulum had swung so far in the opposite direction that UNIX systems that cost as much as a new car, and not a cheap model at all, were gathering dust in the offices of workers who didn't need that level of power. My sense is that many companies fear this will be the case if they provide high-end equipment to their workers: it won't be used, no ROI, waste of budget ... and unusual situations such as this likely provide a convenient example when making a case to set the bar very low.

The second company was a nonprofit organization where I worked in a department headed by an executive who fully embraced scientific management (per Frederick Taylor) and as such he truly believed, and was able to convince his superiors, that the quality of work depended on the quality of the equipment (among other factors - for example, he was also a proponent of training, which is an entirely separate train of thought, but it would follow the same track). Just as Taylor's coal-miners were highly efficient when they used shovels that were well-designed for the purpose and sturdy enough not to break, so is a designer or knowledge worker more efficient when he has a workstation that is well-designed for the purpose and does not crash, freeze, or lag often.

The exceptions considered, now turn to the typical situation, in which companies provide their designers the very same computers they provide to their accountants and clerical workers, albeit loaded with slightly different software. It's no more the "right tool for the job" than would be a coal-shoveler handed a garden spade with a slightly longer handle, and the effects are just as detrimental to quality and efficiency.

"Quality" of design work is much more difficult to define, even more so to convince someone else to disagree with your definition - but the frequency with which designers need to do work at home, using their own equipment, is primarily motivated by the desire to do quality work, and a plain indication that the equipment in the workplace is insufficient to do so.

Efficiency, however, is much easier to demonstrate in quantifiable terms: it deals with time, which is easily translated to money. It would likely be a conservative estimate to suggest that 30 minutes a day of each designer's time is wasted, either in waiting for a workstation to process a command (a sign of insufficient memory or processor speed) or to have to do a task "the hard way" because the company-issued software isn't capable of doing what they want conveniently. Multiply 30 minutes per day times a fully-loaded labor cost of $50 an hour (also conservative), times about 200 work days per year (ditto), and you arrive at $6,250 per year, times the three-year lifespan of a workstation, and the result is $18,750.

The argument in favor of purchasing cheap equipment is immediate cost-savings: if you have to purchase a thousand computers, the difference between a $1,500 model and a $4,000 model is $2,500, which multiplies to $2.5 million for a thousand workers. This is a significant cost-savings that the purchasing department can smugly claim is an achievement. But as a consequence, if the cheap computers waste only half an hour a day of the users' time, those costs are also multiplied by the thousand users - so the $2.5 million saved on the immediate purchase results in an $18.75 million loss in productivity. Clearly, that's nothing to be smug about.

This leads to a diversion on a favored topic of mine: the tendency of the corporate world to focus on short-term benefits to the detriment of long-term performance. I'll let it go at a mention without going into detail, as I've recently considered this very issue. I'll also avoid the side-trip to the topic of employee morale, the difficulty workers encounter on a day-to-day struggling with poor equipment and the disdainful reaction they get when they ask for anything better, but that too is a concern. And the topic of quality has already been carefully side-stepped, though the quality of the product results from the quality of the work, which results at least in part from the quality of the tools, the net effect of which is a poorer customer experience.

My sense, however, is that the topics I have avoided are even more detrimental to the long-term performance of a firm than the one topic I expect most decision-makers would understand: efficient use of funds, for the long-term impact on product quality, customer loyalty, and employee morale are likely far more detrimental than a few million dollars in savings. But I'll leave it at that.

Thursday, December 8, 2011

Lombard Street

While it was written more than a century ago, Walter Bagehot's description of the British money market in Lombard Street, which accounts for the causes of the financial crises of his own time, is an interesting read in light of the financial crises of the present day: we appear to have roughly the same system, and face roughly the same problems, and for roughly the same reasons.

The qualifier of "roughly" is necessary to account for certain differences in the two systems: In current-day America, there is considerably more credit used by considerably more people than in nineteenth-century Britain, we lack a valid commodity base for our currency, and the like - but much of these details seem incidental in light of the larger similarities: a central bank that maintains the reserves of all other banks, as well as the banks and government accounts of foreign nation, and the problem of maintaining a reserve that meets the apprehension minimum of an increasingly fickle and timorous consumer market.

And, as was concluded one and a half centuries ago, we deal with a problematic system that is so widely supported in spite of its failts that the only recourse is to make the best of it, such as it is, and work within it, such as we can.

Friday, December 2, 2011

The Back of the House

Retail firms place a great deal of emphasis on the "front of the house," as they (rightly) believe it to be the primary driver of the customer experience, specifically the customer's perception of the service, hence the customer's opinion of the brand. But at the same time, they neglect a significant portion of the customer experience because they assume it to be the "back of the house," invisible to customers and inconsequential to customer experience and brand loyalty - and on that account, they could not be more wrong.

This notion occurred to me as a consequence of a couple bits of conversation: the first was a conversation about a fairly upscale in which the bathrooms were disgusting and the second about the filthy conditions of an employee break room in a restaurant. As I considered what I had heard, it occurred to me that there are a staggering number of instances in which the back-of-house experience is sorely neglected, and likely done as a conscious choice to neglect rather than a mere oversight. And while the venue was brick-and-mortar retail, my sense is that some of this can be translated to the online user experience as well.

That said, here's the ramble ... I'm going to stick to the example of a restaurant, and consider components of experience that are typically neglected.

Core Product or Service

I'd completely skipped over this component, likely taking it for granted that firms that deliver a product or service make the quality of their core product or service a top priority, and had to come back to it later because I realized this assumption cannot be taken for granted.

Using the example of a restaurant, there are many places that serve food where the food itself is given very little attention. Some excellent examples of less-than-excellent product quality are in airport restaurants, or institutional food service (companies that provide meals in prisons, schools, and office complexes), or in most QSRs (fast food joints) where fast, cheap, or convenient is given precedence over quality and the customer is expected to settle for a poor product because they are just grabbing a quick bite.

Even in those instances, there is some modicum of quality, though sorely and purposefully neglected, or customers would not patronize them at all, or leave without eating the slop that is on offer.

I won't dwell on this component overmuch: there's much to be said on the matter but my present focus is on items other than the core product or service.

Primary components of the experience

This category of neglect includes elements or components that the customer can be fully expected to encounter during the course of their interaction with the firm in the course of the service experience.

Using the example of the restaurant, the food is likely given great attention - but the customer will also notice the plate on which it is served and the flatware they handle while eating it, the other elements placed on the table, the decor of the dining room, the attire and attitude of the server, and other elements while they are "enjoying" the main attraction of the cuisine.

Perhaps the management of such a restaurant considers these elements to be of little importance and a waste of budget to do anything to improve them: but the customer who is served food on a chipped plate, must eat it with a bent fork, season it with a clogged salt shaker, their eyes constantly drawn to the stain on a paper-tent tabletop promotion, served by a surly waiter in a threadbare uniform, on a rickety chair at a wobbly table, in a dining room with grungy cinderblock walls, etc. will likely be so distracted by the "unimportant" components of the experience that the quality of the cuisine will not matter.

From personal experience, I've had some very satisfactory meals in very shabby places. In some instances, the quality was such that I went back, sometimes repeatedly, to these shabby little places. Perhaps that disproves my hypothesis, but it's also worth mentioning that I never brought my wife to these places, never suggested to friends or acquaintances, and if I ever happened to mention them or had them mentioned to me, it was never without a disclaimer about the poor quality of everything but the food.

I wouldn't go so far as to say that the neglect of the primary components of experience is a frequent occurrence, or that most restaurants completely neglect such things, but it is at least widespread and is a strong differentiator between a good restaurant and a bad one.

Secondary components of the experience

This category of neglect relates to components that a customer does not "have to" experience in the delivery and consumption of the core product, but which they might encounter.

Using the example of the restaurant, there are parts of the facility the customer might encounter that they don't necessarily "need" to encounter while taking a meal: the waiting area, the lavatory, areas they might pass through on their way to and from the table, etc.

My sense is that the importance of a clean and well-appointed bathroom in a restaurant operation is so widely recognized that it doesn't require much elaboration - though admittedly I've been in a few where the message had not been heard or had been entirely ignored - and it would suffice to say that the same importance should be attached to every area the diner might venture and every staff member the diner might encounter during the course of their visit.

And granted, this being even further removed from the act of consuming the product, there is even greater tendency of a manager to take a so-what attitude toward it - but just as with the plates and flatware, they are parts of the overall customer experience that can detract from, and even undermine, the experience a business intends to deliver by its attention to elements that it considers to be more important.

Tertiary components (outside of experience)

This category applies to the brand exposure that occurs outside of the experience, either by happenstance or intention.

One component of this, related to the brick-and-mortar establishment, is literally the back of the house - that is, the back of the building, visible from outside.

This is fairly easily dismissed by the notion that people don't see the back of the building - which is really more along the lines of struggling to maintain the ridiculous opinion that it is utterly invisible. There are roads behind and beside restaurants where people will see the back of the building. If there is a high-rise apartment or office building behind the place, everyone who lives and works there will see it at some point, recognize it is the back of the restaurant, and the brand association is made to the appearance and condition of the loading dock, dumpster, and other things that the firm wishes to keep discreetly out of view.

I recall one instance where someone mentioned to me that they wouldn't eat at a place because they could see the back of it from their office window, and had a vivid collection of one summer day when they left a few cases of product - mayonnaise, eggs, and the like - setting out on the dock for several hours. Hearing that, I was a bit aghast: I had eaten at this place before, but never again after hearing that account.

The notion that "nobody ever sees it" is even less tenable when you consider the number of restaurants who offer overflow parking in the back. The (smaller number of) customers who can get a space in front may never see the back of the place, but the (larger number of) customers who have to park in the back will notice it, and walk right past it. Or consider a QSR with a drive-through window, where anyone who uses that service will see the back of the place, while sitting in their car and waiting in line, and who likely have the time to pay close attention to it.

The literal back of the house is an area that is likely to be sorely and intentionally neglected - hosing off the filth and putting a fresh coat of paint of things that were dismissed as invisible to the customer is likely regarded as a complete waste of budget - but it will matter, and it will become part of the perception of the brand.

Components of the non-customer experience

The "non-customer experience" pertains to people who are generally dismissed as unimportant by the business because they are not considered to be customers, and it's therefore reckoned that the experience they have interacting with a firm does not matter.

The most obvious subset of the "non-customer" group are the employees of a firm. Aside of the firm's treatment of its own people (a topic which can fill volumes), the impression employees have of a firm leaks out, and they have a great deal of influence with others who regard them as having the inside scoop on a business.

To go to the example of restaurants, it's not unusual to hear from an employee, or a "friend of a friend" of one, about the unsavory conditions in the areas of a restaurant that are off-limits to customers. And when word gets around that the people that work at a restaurant refuse to eat there, it's thoroughly damning to the impression others take.

Granted, food is a very sensitive topic, and people are particularly squeamish about it - so perhaps the example of a restaurant seems skewed. But the same applies to any retail operation: a clerk at a department store refuses to shop there, a salesman at an auto dealership chooses another brand of vehicle, etc. This is a clear vote of "no confidence" by the people who are most familiar with the brand, and whose job it is to deliver the customer experience, and a clear warning to anyone else.

To a lesser degree, the same can be said of other non-customers who are brought into the back of the house to do business with the firm: vendors who work on equipment, salesmen, job applicants, delivery persons, and anyone who passes through a door to a location customers are not permitted often see a very different image of the business than the carefully manicured front-of-house that customers see.

It's also worth noting that a person is not always a non-customer. They may be interacting with the firm in the role of an employee, partner, or vendor at the moment, but they might, and should, visit the establishment as a customer at a different time, unless something about their experience as a non-customer soured them on the brand.

***

This has gone on for longer than I intended, but I have the sense that it's barely scratched the surface of the components of a business that are very often ignored, to the detriment of customer experience and the perception of the brand.

And at the risk of making an overlong ramble even longer and more rambling, it stands to reason that the ideas that have been discussed in terms of a brick-and-mortar retail experience also apply to other kinds of customer experience of virtually any firm, and in virtually any channel.

Monday, November 28, 2011

Check Your Facts

I recently read Hammond's work on Branding Your Business, a tradebook that attempts, more than any other I have encountered, to take a comprehensive look at the notion of brand and the practice of implementing, maintaining, and leveraging it in marketing a product, service, organization, or individual. Given all the topics the author intestinally attempted to cover, I'm most stricken by the lesson implicit in the way the book is written: how fragile a thing is credibility.

It's not unusual for authors to make broad statements about "customers" or "businesses" without an explicit acknowledgement that the observation is a generalization based on personal experience. That much is implicit, and chances are that an author who claims three decades of experience has sufficient experience to generalize - even if he is completely wrong-headed, he's earned the right to some degree of credibility.

It's also not unusual for authors to assert "research proves" or "studies show" some point they care to make without citing the source of the information. Experienced professionals who are attentive and studious are exposed to so much research and study that it's often difficult to recall the exact source of a bit of information. But the danger is that some curious mind may look into it, and given the amount of information that is now conveniently available on the Internet, they may check your facts.

And here is where the trouble begins: memory is an imperfect preservative. An author may present a fact that is skewed in the original source - there's a lot of bad research out there and, if you make the mistake of assuming a source to be trustworthy, your own credibility is married to this assumption. An author may misinterpret research, or faithfully represent (as in re-present) it from a source in which it is misinterpreted. OR the author may quite simply get it wrong himself.

This happens sometimes, and it's expected that readers are generally forgiving, though less so for the print media (where we expect that the publisher has staff to fact-check manuscripts) than online (where a blog post is largely extemporaneous and there is no editorial team to polish it). People make mistakes, often with the best of intentions, and are given some latitude.

But when this is done constantly, the reader becomes overwhelmed by the amount of vague and specious references to research "facts" and the limits of trust and forgiveness have been exceeded ... in this instance, it happened around the middle of the book ... and the esteem an author means to call upon to engage a reader has consumed itself.

While this meditation has focused on the specific phenomenon of a book, my sense it applies to all communications in all media - and is particularly germane to the topic of this particular book: if building a brand is based on communication and trust, it is just as easily undone by playing it fast-and-loose with the truth ... and even when the intent is positive, and there is no clear motive for deception or misinformation, the impact is entirely negative.

Tuesday, November 22, 2011

What's Wrong With This Picture?

While I tend to react negatively to those who claim to be innovative when they are simply copying something that someone else has done, I have to concede that imitation is sometimes the right approach. Mindlessly copying a competitor or rigid adherence to industry standards as a default is clearly the path of a firm that is not merely unsuccessful, but which doesn't really care about achieving success - but there are instances in which imitation, carefully considered, is found to be the best tactic.

Take, for example, the standards and practices that are evident when you consider several products in the same category: products of the same type generally have a number of similarities, which enables customers to recognize without having to be taught what a given brand is, and is meant to do. Imitating others and adhering to a common practices helps the shopper to recognize what's in the package, what the Web site does, what kind of operation is behind the door. And while innovation is possible, it's still necessary to copy certain features that are common to the category.

The problem with the image above should be self-evident, but at the risk of being bombastic, I'll elaborate: soda bottles have a specific size and shape, and the customer has come to learn that and expect that the contents of a bottle is soda pop. Actually, I think that has been broadened, as juices and water are sold in bottles of similar size and shape - so it would be more accurate to suggest that the size and shape indicate that the bottle is something potable. It's certainly not a cleaning product.

And so, selling bleach in a bottle shaped like a beverage container is an unwise and potentially dangerous. It's unwise in that the consumer who wants bleach will not recognize your brand of bleach as such, and will not buy it. It's potentially dangerous in that a consumer who wants soda will not recognize your brand as "not soda" and drink it, at least a sip. And while the "reasonable man" standard should shield you from liability, the law has switched to the "dumbest ape on the planet" standard when it comes to consumer protectionism. Sometimes, that's not a bad thing.

That's not to say that innovation isn't possible. When it comes to soda, there's one brand whose packaging stands out. I likely do not need to name it, just the shape of the bottle evokes the name of the brand. Granted, it is roughly the same size, and kind of the same shape as every other brand of soda - but it's different enough that no-one who sees the bottle thinks of a different brand. And that is brilliant.

The question then becomes, for any brand, how closely one must adhere to a "product standard" and how much one can deviate from the same standard in order for customers to recognize your brand as unique.

At the extreme of innovation is the firm that sells its product in a unique package, unlike any other product, and intends to "teach" the customer the shape of the bottle is an element of their brand. Once the brand has succeeded, you will have unique identity and strong consumer loyalty. But getting there will be an uphill battle.

At the opposite extreme is the firm that sells its product in a package that conforms to the "industry standard" for all other products of the same category. The advantage is that you are leveraging the visual cues that the customer has already learned from other brands - they know that there is soda in the bottle, even if they do not recognize the brand on the label. But at the same time, you're running the risk of never developing an identity, never offering a peg on which the customer may hang their loyalty.

If it's an informed risk - the brand manager knows and accepts the consequences of the decision to imitate, it's arguably an intelligent choice. But more often than not, I suspect that such decisions are not the subject of logic - the imitator puts no thought at all into what he is doing, just copies others, mindless of the reason.

And to my way of thinking, failure to make a decision, to even think about making a decision, is worse than making a decision that turns out to have poor results. If you make a bad choice, you can recognize it and change it later. If you make no choice, and assume that copying what made others successful will also make you succeed, you'll forever be chasing the wrong things, steadfast in the confidence that the decision to imitate and conform is not the cause of the problem ... and it may not cause a problem, per se, but merely prevent you from succeeding.

But in fairness, it is not necessarily a decision made by a brand manager at all - the operations manager insists that his equipment will only work with standard bottles, the cost accountant demands the cheapest alternative and insists it will save a penny per unit, and the brand manager does not fight (or loses the fight) for ownership of packaging decisions. You could argue that he should have fought harder, but those of us with a few battle-scars know all to well that there are some fights you just can't win, given the culture of an organization.

Friday, November 18, 2011

Why E-Learning Sucks

I originally started this off as a post to summarize a book(let) I recently read on the topic of Mobile Learning - but immediately went off on a rant that took me in an entirely different direction: the egregious quality of e-learning. While I think it's great that instructional designers are excited about using the next generation of information technology (mobile), they have demonstrated profound incompetence in using the current generation (Internet), and never did make effective use of the last generation (computer-based training), so my expectations are very low.

I can likely omit a description of the hideous experience of training in the digital channels, because anyone who has taken a computer-based training module or Internet course has likely been deeply disappointed by an experience that seemed a frustrating waste of time that taught them very little. The average training module is little more than a forced march through poorly-organized information, in a slide-show presentation interrupted periodically by a few hokey animations to make it seem "fun" and a quiz at the end whose answers are so blatantly obvious that it can be passed without having paid any attention at all to the material.

And while the author of the booklet concedes, at times, that digital training leaves much to be desired, and makes a few suggestions as to how it can be leveraged more successfully, the most interesting parts of the book are the editorial passages that seek to lay the blame on anyone but the instructional designer for the sorry state of things - and with good reason: there's ample blame to go around:

The Sponsor

The sponsor bears much of the blame for the poor quality of digital learning - because he pays for it, gives it direction, and ultimately signs off on it. As such, the chief problem with digital courses is a sponsor who simply does not care, or cares too much about the wrong things, such as wanting the greatest benefit for the least cost.

Arguably, the sponsor is handed the task by an organization that provides him with inadequate resources to accomplish the task, and he must do the best that he can. And in many instances, training is intentionally a token effort - the company is required by law to inform its employees of something, or it can get a break on its insurance premium if it provides training to its people. It is merely seeking to meet a requirement to deliver training, to prove to another party that its people have taken training, and is not at all concerned whether it is effective.

The Student

Students also bear part of the blame for the failure of learning experiences - as it's entirely impossible, whatever the enthusiasm or resources of the instructor, to teach anything to anyone who does not want to learn. This is not unique to the digital channel, but the poor use of the digital channel has exacerbated the problem greatly. When presented with a learning opportunity in the workplace, the attitude is generally dreary - "I have to take a class" - and it is seen as an ordeal that will have to be endured but will ultimately yield little benefit. Some have enthusiasm about live training events, but very few show the same enthusiasm about a computer-based training module.

Again, the student can pass along the blame, as their negative attitude at the prospect of a new opportunity stems from their negative experience of similar situations - though I have seen situations in which the trainees at a course reversed their negative attitude within the first few minutes of a (live) class where the instructor was especially skilled in engaging them in the subject, that instructor must overcome the misdeeds of all the ones before him who failed to do the same.

The same burden is laden upon any "opportunity" to take digital training - poor experience in the past creates low expectations of the future - and it's likely more difficult to overcome than in an interactive situation, where the instructor can read and respond to the general mood of the student body. Because a pre-programmed course is static, it does not adapt itself to the level of interest of the student - theoretically, it should be possible to do so, but I've never seen it done.

The Programmer

The author lays a heavy blame on the technical staff who program interactive training experiences, and again with some validity: a good developer, one who seeks to meet or exceed expectations apply his skills to deliver better than what is required, is very rare. Many developers are only marginally competent in their core skills, at their attitude seems to be one of refusal and resistance to any challenge that takes them out of their comfort zone - they prefer to code what is easy to code, and balk when faced with a problem that requires them to invest much thought or effort in discovery or innovation.

The problem is further compounded when vendors are used to do programming work, which is commonplace. Vendors are in the habit of low-balling bids to land a contract - and when they have won a project, they operate much as any other business: to seek the greatest revenue at the least expense. Since "expense" is the time that their staff devote to doing a task, they seek to do it as quickly as possible to maximize their margin - and so long as it meets the (poorly) documented requirements of the contract, they see no reason to deliver one iota more.

The Instructional Designer

The author carefully avoids blaming the instructional designer, likely because it is the author's own chosen profession, as well as the business of the trade association that sponsored the booklet. So it's likely that if there was ever any intent to share any burden of the blame, it was quickly squelched.

But in my experience, instructional designers are guilty of the very same failures as they lay on the programmers: they lack competence (which is why most online courses are poorly organized and conceived) and are unmotivated to do anything that is unfamiliar (which is why the training modules resemble slide presentations). And when a "professional" is engaged as a contractor, they fall into the same mindset of profit maximization by delivering the very least possible.

The instructional designer can lay the blame on the other parties, mentioned above, and is likely justified in doing so if they interfered in the process of instructional design - put constraints on what the designer is permitted to do, or failed to deliver what was designed. I have the sense that this is often the case, but I also suspect that in a great many cases, the designer was not constrained and their design was faithfully executed, and they are merely seeking in arrears to lay the blame on someone else for their own poor work.


***

All things considered, I don't share the author's enthusiasm for the mobile delivery method. It presents new capabilities, not the least of which is being able to be constantly available to the learner, but given the way in which training and support have been poorly handled in the existing digital channels, I have little hope that mobile will be leveraged with much competence, either.

Sunday, November 13, 2011

You Don’t Need a New Logo, Part Two

My last post, cautioning that “modernizing” a logo effectively breaks the association of a logo to a brand, sparked a few follow-on conversations, one of which led me to a better analogy … and being fond of analogies, I had to work through it a bit more:

The analogy is that changing a company’s logo is similar to getting cosmetic surgery to improve your face – to erase blemishes, reshape certain features, and to be more attractive in a general sense.

Plastic surgery can go horribly wrong. A bad surgeon, or even an otherwise good one with a bad plan, can make a person look freakish and bizarre.

Likewise, a bad designer, or a good one with a bad plan, can completely wreck a perfectly serviceable logo.

This can be the consequence of considering a specific feature out of context: a person doesn't like their nose, picks out a better one, and once the surgery has been finished, the "new" nose doesn't look quite right in the context of their "old" face. And so, more and more surgeries are needed to make everything look right, all together - the outcome of which is seldom as effective as starting out with a comprehensive and holistic plan.

But the surgeon makes a good bit of cash, ruining someone's face one piece at a time - and I expect that designers or "image" consultants do the same thing to companies, starting with the logo and, when that doesn't work, moving on to other little changes in hopes that it will somehow come together and end up looking good ... or perhaps, not caring about the outcome, just the revenue they will earn along the way.

Even if the surgery goes well and the final effect is not monstrous, or even quite stunning, any change in a person’s face causes other people to fail to recognize them. Even little changes can break recognition, as different people focus on different features when they form the holistic "gestalt" of a person's identity. Lose a little weight, get a tan, shave your moustache (or grow one), or even change your hairstyle and people who have known you for years will remark “I didn’t recognize you.”

Regardless of whether they didn’t recognize you because you look so much better, or so much worse, the fact remains that they didn’t recognize you – didn’t associate the face they saw to the person they knew. Likewise, a change in logo causes customers to fail to recognize a brand with which they are familiar.

For a brand, this can be devastating – consider the (admittedly shopworn) example of Tropicana, whose sales plummeted when they change their logo and packaging. Aesthetically, most agreed the new design was better and more modern, but functionally, people no longer recognized the "improved" look of the brand as the brand they knew, and decided to try a different brand.

Cosmetic surgery is undeniably beneficial is when a person’s facial features are so disfigured that they are utterly repulsive. If your lazy eye, crooked mouth, or misshapen nose is the first thing people notice, and they avoid making eye contact because of it, then there's a good reason to change it, even though that means people will not recognize you and will have to "learn" your new face. Alternately, when a person gets so much media attention that they are recognized, and hated, on sight, it would be better to put on a permanent mask to hide their identity. In such instances, any change is for the better, and the individual would be well served to completely abandon their previous identity and start over with a different face, maybe a different name.

Company regrinds fall into the same category: when a brand’s reputation is utterly ruined, a new logo and even a new name is a quicker path to recovery than trying to salvage their reputation. But unless that’s the case, there’s much more to be lost than gained by a logo change.

This considered, a brand manager would do well to react to a designer who quickly proposes a logo change in the very same manner that a person might react to a stranger who tells you that “you ought to get a nose-job.”

Tuesday, November 8, 2011

You Don't Need a New Logo

You don't need a new logo. It's likely the first thing that anyone who wants to do any sort of design work for a business wants to get their hands on, and the last thing they should be allowed to tinker with, unless they can demonstrate a compelling reason for doing so. "Compelling" as in something other than their opinion of the aesthetic qualities. Here's why:

The logo of a business is a symbol that represents the business itself. It is a mnemonic device that has been ingrained in the memory of your customers and prospects to the point that the mere sight of this particular combination of colors and shapes causes them to immediately recall the name of your firm (even if the logo doesn't contain the name), the industry you are in, the products you offer, and the memories and emotions they connect to a firm.

The people who are familiar with your existing logo refer these connections without a deliberate process of thought. And while there probably aren't many who would claim to have spent time studying and memorizing your logo, they have done effortlessly. Meanwhile, you have likely put a great deal of time, money, and effort into establishing that connection, to connect your current logo to your brand in the minds of the customers. It was no accident.

And even if the logo is outdated or "ugly" in the opinion of some who favor what is current and trendy, your old logo is quietly and unobtrusively doing exactly what it is supposed to do. If people can name your firm when they see the logo, it works perfectly and needs no modification. If people can't name your firm when they see the logo, changing the design is unlikely to improve that.

In fact, any modification is going to be harmful. A complete change of logo largely breaks all associations that the old one used to represent. Customers don't recognize the logo, don't think of the firm when they see it, until they "learn" the new logo. And even then, past experience may not successfully associate to the new logo.

Even if the changes is minor, it will be harmful to some degree. Memory is a funny thing: some people remember colors, some remember shapes, some remember the negative space around shapes. Change any one of those elements, and you decrease the number of individuals who will remember your brand when they see the logo. The new logo may look "smarter" or "more contemporary," but it is not effective at doing the one thing it is meant to do: to cause a person to remember your brand.

There are instances in which a firm wants to break associations. Perhaps the firm has done serious damage to its brand, and the memories and associations to the logo are all negative ones that the firm would like to have discarded. Or perhaps the firm has not done anything particularly egregious, but wants to make some sort of significant change, such that they would be better able to transition if they could convince people to "forget" the memories and emotions they associate to the "old" brand and the "old" logo and regard them as new - to start over under a different brand and hope the past will be forgotten.

If either of those cases, a change of logo is in order, but not until the change or improvement has been largely effected or the negative incident has faded from the public's mind, such that the new logo can start fresh without carrying forward old baggage - or carrying forward as little as possible.

But if your business has not soiled its reputation, and if you do not wish to make a major change and be perceived as something different than you formerly were, and if you don't want to decrease brand recognition ... then there's absolutely no reason that you should be talked into letting someone tinker with your logo. Ultimately, it will do more harm than good.

Wednesday, November 2, 2011

Sponsorship and Affiliation

I attended a presentation in which a company announced it's a new affiliation with a sports team, a proposition that in my mind has always been questionable - but my sense is that's likely due to a lack of information that would help me understand the rationale for doing so.

Activities such as sponsoring sports teams or supporting charitable events have generally been lumped in the "other" category of channels, given scant consideration in textbooks and lectures by which marketing is taught. It's generally acknowledged that firms participate in "event marketing" to get exposure to the audiences that attend events or support causes, but little explanation has been given to the rationale and benefit of doing so. This became clearer.

Primarily, relegating sponsorship activities to public relations and corporate image marketing is likely a mistake that is dismissive of the potential of this channel. While it's true that consumers and the public in general "like," in a vague way, to see companies get involved in charitable causes, and that any mention of the company name builds familiarity and invokes some latent level of curiosity, it's more logical to consider these practices in the context of building brand.

Specifically, it's effective in gaining conceptual or emotional collateral by means of associating with an event or organization with which the same emotions and beliefs are already associated. Without declaring "we want you to think about us this way," the mere mention of the firm as a sponsor of an event, or the appearance of its logo in collateral promoting the event, quietly and indirectly suggests such an association.
  • A mining company that wishes to improve public perception might associate itself with a charitable event that raises money for an environmental cause
  • A manufacturer of automotive parts would want its logo on the fender of a vehicle that does well at NASCAR events
  • A washing powder brand would want to be associated with an event that raises funds for women's health (sexist, perhaps, but true that women drive brand choice for such products in US households)
  • Any product that wishes people to believe it cares about the local market would do well to sponsor a minor-league team or an event benefitting a local charity.
The subtlety of the tactic is more effective than any advertising in other channels. In the customer's perspective, considering all the contexts is which the brand is mentioned, sponsored advertising carries the least credibility. A thirty-second television commercial that attempts to convince viewers that a firm cares about something meets with cynicism - it is clear that "this is what we want you to think," and the implication that the viewer is gullible enough to believe the advertising adds insult. But when the logo appears in association to an event or organization, the rejection of the suggested association between sponsor and value or emotion is less evident.

The notion that any exposure to a target market is beneficial does not hold. Where an event or organization is in conflict with the values and emotions the organization wishes to associate with its brand, the association between the two is conflicted. To borrow on the previous example, if a mining company that was very recently involved in a highly public incident about pollution were to sponsor a 5K for an environmental cause, their motives would be transparent. A few months after the clamor has died down and the incident has faded from memory, the association would not be as readily rejected.

The need for the association to be harmonious is not limited to specific incident, but also applies to the innate qualities of a brand. That boutique cosmetics do not typically sponsor sporting events is not merely a matter of audience demographic, as there is a significant female audience for sporting events, but the qualities associated with one are not a good fit for the other. To be effective, association must be made to events and organizations that not only gather the attention of the target market, but that are evocative of sentiments that are supportive of the brand.

Saturday, October 29, 2011

The Intelligent Investor

I recently read Benjamin Graham's book, The Intelligent Investor, which is widely regarded as a foundational work on the topic of investment strategy - as much for my own edification as for knowledge of the financial services industry. I'm rather sorry to not have read it sooner: many of the principles of investment that are taught on the basis of "because I say so" can be traced back to this work, where the author provides ample evidence to support them.

In addition to providing solid advice for securities analysis and portfolio management, Graham calls into question the practices, and the very ethics, of the financial services industry: which has for so long been guilty of unscrupulous practices and unsound methods that it's a wonder there's a shred of dignity left in the profession. Though that's likely posturing, as advocating any practice requires denigrating those who do otherwise, it's also likely well justified.

But to salvage something of value from the general negativity of his opinion, it's that the demand for a financial services firm that truly does a service to its clients is still very much unfulfilled for the majority of investors. Those who have amassed portfolios of $1 million or more are highly desirable, and by most accounts well served, by wealth management firms - but for the rest of us, it seems we're left to the hands of firms that will gladly charge a commission for trades on which they provide no guidance at all, and the advice of those who claim to know the secret of making fortunes in the stock market, in spite of their own demonstrated inability to do so for themselves.

Ultimately, this situation practically guarantees that very few investors will ever amass much wealth - and those few that manage to do so on their own will be very much in the position of the Little Red Hen, who having toiled on her own to plow the field, plant the harvest, pull the weeds, and so on suddenly finds herself beset by "friends" who are ready to pitch in when all her efforts have produced something they wish to help consume.

I had a finance professor who once demonstrated how an individual who earns minimum wage can, over the course of their lifetime, amass enough wealth to retire a millionaire (given a modest raise each year and a reasonable rate of return) - yet know of few people who make considerably more that are on a path to the same destination, so the need is there, but the supply is lacking.

Perhaps I'd feel heartened if I saw one finance site that placed a flag beside the ticker symbols whose stocks were grossly overpriced, or tossed up an "are you sure about that" message when an investor buys a questionable security, rather than merely collecting a commission on a purchasing decision that's almost certain to have disastrous results.

But this would also be a sign of a long-term perspective, the absence of which I have often commented on topics related to customer service and business management in general. It's something I remain devoted to, but something I feel little hope of ever witnessing.

Tuesday, October 25, 2011

Mobile Sales Support

Jotting down some thoughts on a discussion about the use of mobile as a resource to be used by live salespeople ... my sense is it's not terribly good for that purpose, and can even be counterproductive.

The idea is a that a company can shorten sales training by providing each salesman with access to information about merchandise on a mobile device, so that he can access it while interacting with customers rather than having to commit it to organic memory. On the surface, this seems entirely rational and plausible, but I see a few problems:

Primarily, if being able to reference product information on a device was sufficient, there would be no reason to have a live salesperson. Instead, the firm could simply give the customer direct access to the same information resource (at a kiosk, or a mobile device of their own) and let them browse it for themselves - they don't need a salesman to run the search for them and read what he sees on a screen.

This is the common practice for electronic commerce, and its greatest weakness: it places on the customer the burden of finding product information for himself, which presumes that the customer has sufficient knowledge of the product line to conduct a search that will lead him to the right product. For a customer who is already familiar with the inventory, and has a relatively good idea of what he needs, an online catalog is entirely sufficient. It's especially good for routine reordering of products with which the customer is already familiar.

The value of a salesman, however, is in making recommendations of products that a customer is not already aware of. This may occur when the customer is buying a given item for the first time, and it may be valuable to up-sell the customer on reordering by suggesting they try a better product "this time." In that way, it may even help to retain the business of a customer who wasn't satisfied with the item they purchased previously. But this seems like a digression.

The novice salesman is faced with the same problem as the utterly clueless customer - he has no knowledge of the product line. He is further handicapped because he also does not have knowledge of the customer's needs - which puts him in the unenviable position of identify a good match between two unfamiliar bodies of information (product inventory and needs).

Giving such a person a mobile device loaded with product information merely makes him a wetware proxy to a search engine, which contributes little value and instead makes the process all the more difficult. Especially given that American culture values self-reliance and independence, his position is one of an unnecessary person that is making it more difficult for the customer to get what he wants.

The value of a salesman is his familiarity with products, and the ability to identify a selection that best meets the needs of the customer. The discussion leading up to the sale is one of discovery - the salesman knows his products, but must learn his customer's needs. In this way, it is matching a known factor to an unknown factor - which requires much less effort and has a higher probability of success than situations in which both are unknown.

But more to the point, matching known to unknown requires something to be "known" - in this case, the product line, which must be committed to human memory for it to be known at all (data accessible on a device is just information, not knowledge).

With a product inventory in memory, the salesman will be able to make a product recommendation quickly, revise it when the customer provides additional details, explain the reason for his recommendation, and remain constantly engaged in the conversation with the customer.

By contrast, a salesman who lacks product knowledge must gather information, then take his attention away from the customer to search for products, then repeat the search if the customer provides more information, and would have little ability to explain the reason a given product was recommended.

The situation would be damaging, if not devastating, to the customer experience. The customer would have only intermittent communication, and would have to wait periodically while the salesman interacted with his mobile device - which brings both the frustration of "down time" in the process, and the psychological effect of being repeatedly ignored. He would also have the sense that the salesman was not very competent, having to rely on his device to provide information and being unable to offer any rationale for recommending an item aside of stating that the system returned it it as a match.

All in all, I don't see such a mobile application as being much different than having a salesman carry around a binder of product information and constantly refer to it during a sales encounter - this has been possible for years, but I'm not aware of any instance in which it is a common practice.

And in that sense, there may be some utility in using a mobile device to contain product data - but in the same way that a binder of product information: as a training aid for salesmen to help them learn the product line, and perhaps as a reference the salesman could use if he was unable to answer a question. I think that a customer would tolerate a salesman who could answer most of their questions from his own memory, but would periodically need to check a reference to be sure of his facts.

But in terms of the suggested practice - to cut short sales training and make salesmen entirely reliant on product information stored (or accessed) on a mobile device - it seems fairly clear that this is unlikely to be a successful practice.

Friday, October 21, 2011

Reductio Ad Absurdum

I read a passage about using the question "why" recursively in order to determine the reasons that a customer actually buys a product. In a way, it makes good sense, but like many things, it can be taken too far.

This notion arises from the current situation of marketing - or more aptly, the attempt of marketers to gauge the nature of the current situation. It's seen as an evolution from marketing based on product features, to marketing based on functional benefits, to marketing based on psychological benefits, to marketing based on emotion. The technique is interesting but ultimately disintegrates into absurdity.
  • Why would I want to buy a hammer? Because it's good for driving nails.
  • Why would I want to drive a nail? Because you need to hang a picture.
  • Why would I want to hang a picture? Because you want to decorate your home.
  • Why would I want to decorate my home? Because you want your houseguests to be impressed.
  • Why would I want my houseguests to be impressed? Because they will think you are important.
  • Why would I want people to think I am important? Because it makes you feel good about yourself.
  • Why would I want to feel good about myself? Because you just do, that's all.
I can accept the first three steps. You could certainly sell me a hammer to drive a nail to hang a picture. You might also mention a handful of other reasons I might need to drive a nail, and I will be convinced that the hammer is a multipurpose tool that enables me to accomplish many different little goals, and well worth the price you're asking for one. But beyond that, the inferences are a bit stretched and it degrades into one of those Philosophy-101 syllogisms that use simple statements to arrive at a completely illogical conclusion.

My sense is that oblique advertising, the kind where you see a commercial like a montage from a Fellini film that leaves you with a "what the hell was that?" reaction, is likely based on such leaps of logic. And while it's true that there's a certain level of psychological benefit from owning a product, aside of its practical application, I don't have the sense it's the most productive way to go about selling things.

But back to the point: the chain of "why" ultimately results in a tautology, and the insistence that the customer wants something "just because." The problem is that this method of needs analysis encourages us to go so far into the theoretical that we lose sight of the actual, and to believe that we have not reached the "true" benefit of a product until we get to an answer that we are unable to explain, in spite of the fact that it is absurd or nonsensical. That is to say, using this technique will ultimately results in the belief that only that which is absurd or nonsensical must be important.

To some degree, this method may be useful in identifying ways to market a product that is extremely difficult to sell based on the appeal of functional benefits - but taken too far, it may become counterproductive. Most customers are not so naive as to be taken in by oblique advertising, and many are experienced enough to be suspicious of it: if a commercial message says little about the functional benefits of a product and attempts to engage the audience on an emotional or psychological level, it's a sign that the product isn't very good and the brand isn't very honest.

Don't get me wrong: I'm a fan of surrealism and I adore absurdity, which means I'll gladly watch a thirty-second film of a ballerina in a bowler hat throwing overripe apricots at a chimpanzee against the backdrop of an art museum ... but I don't think I'll buy the brand of hammer they're trying to sell me, and I'll likely have the impression it's probably overpriced and not very good at driving nails.

Monday, October 17, 2011

Odd Similarity: B2B and Nonprofit Marketing

I was reading a blog post about nonprofit marketing and was stricken by the similarity between the situation of nonprofit marketers to their counterparts in the commercial sector, particularly in business-to-business marketing.

The author's point was that the chief difference between consumer and nonprofit marketing is that in consumer marketing, the customer is purchasing something for his own benefit, whereas in nonprofit marketing, the donor is purchasing something for the benefit of someone else. In the case of nonprofit, the necessity of cost-versus-benefit and quality of service remain important to the donor who expects his contribution to accomplish something significant.

Granted, this is not evident on the level of the low-end of donors: the millions of people who will give in small amounts to charities really don't invest much time in considering how their donation of $20 or $200 is going to be spent, unless the charity itself is notorious for being wasteful or corrupt in its use of donated monies, which is why charities who depend on small donors and have few significant ones are (rightly) viewed with some suspicion. The situation is much the same for low-ticket purchases: where the amount of cash is small, the consumer doesn't do much research and isn't particularly disappointed when their experience of using the product is less than ideal, and the small-ticket vendor is not often very scrupulous (unless he counts on many repeat purchases over a long period of time, adding up to a significant per-customer income).

On the level of high-dollar patronage, where wealthy individuals or corporate sponsors contribute six figures or more to a charity, much more discernment is given to how the charity will use the money, with an eye toward ensuring it is used well, and that the beneficiaries of the charity actually receive some benefit from the use of their donations.

In terms of brand, a nonprofit organization that seeks to obtain large contributions must be able to demonstrate that it delivers value for dollar, and must maintain a spotless reputation for being fiscally responsible and effective in accomplishing their stated ends.

My sense is that the same is true of B2B marketing - even though it is pay-for-product, the person who makes the buying decision and approves the money to be spent is not the user of the product, but ideally decides to make the purchase based on how well the product will suit the needs of their users.

Considered in that way, the mind-set of the buyer in a business is similar to that of the donor to a charity - for better or for worse. The corporate buyer is inclined to seek the cheapest alternative that is "good enough" rather than purchasing a product that will actually deliver the full functionality others seeking to obtain - and ultimately, the need of the employee for an effective solution is done in order to deliver a benefit to the company or the customers they serve.

That said, the B2B customer does shoulder some of the blame when they are indifferent to the quality of product or service that is delivered by a vendor. It's the undiscerning customer that feeds firms that should rightly have no customers at all.

And in B2B marketing, as in charity, there are vendors who will happily serve both classes: some offer cheap solutions for the "good enough" buyer, and others offer effective solutions for the "must be good" buyer. And the lower the price of the good, the less they care about whether it actually accomplishes its desired goals.

Thursday, October 13, 2011

Mobile Apps versus Mobile Web

In the mobile industry, there seems to be an ongoing argument over which way the medium will evolve - to use "apps" that run on the mobile device, or to add functionality to a mobile Web site. My own sense is that the mobile Web will eventually "win" over apps, but there are reasons for and against it.

In general, I see the notion of an app as being contrary to the value users seek to obtain from mobile - they want access to any information they might need, at any moment they might need it, in any location they happen to be at the time. The Mobile Web has the potential to deliver this in a way that apps cannot.

However, the mobile Web is presently lacking in content, much as the Internet was during its early years. Up until about 1995, you were better off having a CompuServe or AOL account because you could do more with it than you could on the Internet, which was largely composed of collections of academic research - but eventually, the number of sites exploded to the point where the capabilities of the Internet surpassed online services and made them obsolete.

.... but that leads off on a digression that has already been talked to death, so let me try to get this meditation back on the rails ...

To have access to an app, you must download it in advance: that is to say you must know, or at least have a general sense, of what nature of information you might need in future. And in that way, the mobile device has little advantage, save compactness, over a written resource that a person might carry with them - it is in effect a digital backpack that you must load before you go out into the world.

Granted, some argument can be made that a user can access an app store at any time to download something he might discover a need for - so it's not strictly true that the mobile device is entirely cut off and limited - but it does take considerable time to download an app when, at the moment the user discovers a need for information, they want it immediately, not after a wait of several minutes while an application is downloaded. And then, he's stuck with an app cluttering up his device and consuming (limited) resources that he only needed once, in an odd situation.

The mobile Web, meanwhile, provides much faster access to needed information - again, with the caveat that the information is available at all - without the necessity to predict in advance what might be needed. And that's where I see the mobile Web winning: especially when you consider that the mobile device travels with you, wherever you may go, it's not feasible to know what information or resources you might need in any situation you encounter and load it into the device in advance.

You can predict some of your informational needs, but you will still find yourself in situations where you need something you didn't foresee and didn't prepare for, and if you rely solely on apps, you would be left as helpless as a person who didn't have a mobile device at all. Granted, the user is not required to choose one or the other - mobile devices support both, so the user can download apps for their predictable needs and refer to the mobile Web for the unpredicted ones ... but in terms of evolution, I expect the latter will surpass the former, just as the Internet surpassed AOL, when the volume of resources reaches critical mass.

To download (and pay for) an app to check stock prices is as foolish as to download a software program to your computer that does the same simple thing. Which brings to mind the notion of Apple Widgets (and Windows Gadgets), simple uni-tasking programs for doing things like checking the weather report, stock prices, or playing a game using a local application rather than going to a Web site for the same details. Neither of these caught on, and were laughed down by users and the industry alike. But is this not the same as mobile apps?

And while I'm chasing down analogies, consider the fate of the encyclopedia - not merely that a digital version has replaced the voluminous paper version, but that online encyclopedias versus encyclopedia applications. To sell (or buy) an encyclopedia on CD-ROM is virtually as silly as to sell (or buy) a paper copy. Some still do, and it's a matter of personal preference, but from an objective standpoint, the online version is superior to the CD-ROM version in many respects. And my sense is the exact same thing is true of the mobile Web versus mobile applications - likely, the list of advantages is about the same.


And still, I have my doubts.

The decision of whether to use an app or a mobile site is similar to the decision as to whether to develop a computer application or deliver the functionality via the Internet. And while the Internet is resplendent with informational resources, there are still a multitude of applications, written to be installed on a specific machine, from which users will not be parted.

Even when the limitation of location is addressed, users tend to prefer stand-alone applications for specific functions. Google Docs can be accessed from any computer with an Internet connection and is entirely serviceable as a word processing program, yet it still has not replaced Microsoft Word as the text editor of choice for a vast majority of users, who prefer to store and edit their documents locally in spite of the fact that they are locked to a specific computer.

My sense is that this will continue to be true of the mobile platform: even should every imaginable need for information be satisfied by resources on the mobile web, and connectivity is no longer in doubt (which was also a problem of the Internet in its early stages) there will be certain instances in which users will prefer to have a local app on their mobile device to perform a specific task.

So I find it highly doubtful that the "battle" will ever be won - users will turn to whatever they prefer to address their needs, and developers will continue to provide both mobile apps and mobile web capabilities. And neither is in necessary for one or the other to win at all - there's absolutely nothing wrong with having options and leaving it to each user to choose what best suits their purpose - it's largely the narcissism of UX designers to assume there is only "one best way" to do any task and seek to eliminate alternatives ... but that's an entirely separate meditation.

***

A sort of afterthought: the battle, such as it is, is being fought in the wrong field. The decision of "app or web" is too often made for reasons that have nothing to do with its serviceability to the user. The cost of development, or the capabilities of the developers, often drive the decision, with the belief that the user will happily accept whatever decision they care to make.

Given the poverty of resources on the mobile web in its current incarnation, the providers still have the power to make such decisions to suit their own interest instead of those of their users, and users will indeed have to live with the consequences of their decision for lack of a better alternative. But as soon as users catch wind of a good mobile site for doing a specific task, or better yet a handful of alternatives, the demand for an app to do it will likely dry up.