Thursday, August 16, 2018

Brand Unawareness

A fellow shopping for auto insurance asked an unusual question: what repair shop would we use in his location for body work.   Some years ago, he had an accident and was sent to a shop that did rather a poor job, leaving him so displeased that he changed insurance companies.   And then, when he had another claim, the new insurance company sent his car to the very same body shop for repairs, and he was again disappointed.  He wanted to change insurers again, but wanted to make sure that the new company would not send him back to the same shop.

In the years I spent in the insurance business, I had listened in on many phone calls – a few hundred or so – and this is the only one I can recall in which a shopper took this level of interest in our suppliers.   Everyone cared about the price, and to a lesser degree about the kinds of coverage that price included, but nobody seemed particularly curious about exactly how the benefit of the product would be delivered: what company is really going to do the work that they are paying for in advance?

There are many buying situations in which consumers are unaware of the brands they are purchasing when the company with which they are directly transacting is merely passing on the product of another firm.   No insurance company, to my knowledge, has a nationwide network of repair centers that it owns and controls, but sends claimants to a local provider.   And where the product is a good rather than a service, the invisibility of its providers is clear: you have no idea what brands you are consuming when you order a meal in a restaurant, nor what company refined the copper in your computer.  You are only aware of the brand of the seller, not the maker.

And in the present day, where most firms are vertically dis-integrated and business operations are outsourced, chances are that when you consume any product, you are consuming dozens or hundreds of brands that you are not aware of.   The more complex the product, the more hidden brands you are consuming without being aware.  I would venture a guess that no-one, ever, has investigated the full supply chain of every product they use – there simply isn’t enough time in the day.

That’s not to say that the brand of a supplier is of no value – it is of great value to their direct customer, the reseller, though invisible to the ultimate consumer.  And in this space, the values of the reseller are significantly different: is the supplier reliable, will delivery be timely, is the quality of goods consistent, and so on.   These are entirely different to the values that customers espouse, or pretend to espouse, in evaluating the brand of the reseller.   They are generally concerned only with the last link in the supply chain.

Thursday, August 2, 2018

Targeting the Gullible Market

A brand is trusted by its existing customers because of its past behavior: if the brand kept the promises it made, then it is trusted to repeat the same behavior in the future, and this trust extends to any new promises that the brand makes to the customer that has already experienced its reliability.  But when approaching a prospect, who has not interacted with the brand, earning trust is difficult – the brand has not had the opportunity to keep its promises to the prospect, and the promise itself is not trustworthy because it comes from an unknown brand.

Granted, some level of trust depends upon the trustor – whether or not the prospect has a trusting nature.   In general, a brand that approaches any market can depend upon the trust of the most gullible members of that segment – but a more measured approach would consider the qualities of an individual who will trust without experience and seek to define a target market in which gullibility is baked in.

The inherent problem is that gullible people are not respected people – their peers and acquaintances know them to be exceptionally gullible and do not put much credit in their endorsements.    In that way, a brand that targets the gullible may have some success in gaining the initial trust of people whose recommendation carries little weight with the rest of the market.   Hence the short-term and unsustainable success of many new products.

And even the gullible market segment is not sustainable: the most gullible individuals can be fooled once into putting trust in a brand – but if the brand fails to keep its promise to them, then it will be difficult to make a second sale even to the same individual.   They are likely to extend credit to brands once, but not a second time once their trust has been violated.

One notable exception are individuals in whom there is an unfortunate coincidence of gullibility and narcissism: the person who has been tricked, but whose ego will not allow them to admit that they have been tricked.  These individuals will give rave reviews of horrible products, pretending to be satisfied so as to avoid admitting having made a mistake.  Going by the number of five-start product reviews on websites, there are quite a few of them, who feel compelled to repurchase and advocated for a bad product to maintain their self-esteem.

But, again, this leads to the problem of second-hand trustworthiness: it is not only the brand, but its users and advocates, that must be regarded as trustworthy in order for the brand  to gain acceptance in the broader market.  The testimony of dupes and fools is no more convincing that first-hand promises made by a brand, and it may in fact be more damaging to have the wrong kind of brand advocates.

Thursday, July 26, 2018

Generational Marketing Mistakes

Being as it’s about halfway through 2018, it seems that market researchers have suddenly become aware that the next generation is entering their adulthood.  They haven’t figured out what to call them yet (centennials, generation Z, iGen or whatnot) and there’s not a lot of agreement on when, exactly, the generation began (somewhere between 1990 and 2000, depending on what they’re trying to prove) … but apparently, they are understudied and there’s money to be made by being the first to market with a study that defines what this new generation is all about.   Even if it’s completely premature and wrong.

The same thing happened with the Millennial generation: studies came out describing their attitudes and habits when the generation itself was prepubescent and hadn’t had time to form attitudes and habits.  And sadly, the “findings” that were published in the early days tended to form a cognitive filter.  So the profile of the Millennial today – pushing forty, paying a mortgage, advancing in their career, and otherwise doing the “adulating” thing – has changed little from the time when they were teenagers still living at home and working part-time jobs.   

And though I would happily be proven wrong by time, I strongly suspect the same is happening with the market research on Generation Z: they are talking to teenagers about their spending and financial habits, about their tastes as consumers, about their attitudes toward the workplace – well before they have had any experience leading an adult life.   

I’d feel a bit less panicked about it if I were to see a present-day study of the Millennial generation – and better, to see it done by one of the experts who studied them prematurely, who admits to having jumped the gun and come to the wrong conclusion.  But sadly, these are the same “experts” who see the new opportunity in misrepresenting the next generation – to admit they were wrong in the past would be to discredit their present work.

And their clients are little better.   Rather than recognizing their folly and straightening themselves out, updating their research in order to better serve the Millennial market, they are simply moving along. They are writing off the last generation and pursuing the next, gearing up to make exactly the same mistake.  Lather, rinse, and repeat - and watch as history repeats.

Thursday, July 19, 2018

Chewy: Pooching Customer Recovery

Recently, a colleague of mine had an issue with an online pet store – which would be one of those unremarkable “yeah, these things happen” incidents except for how poorly the company handled the attempted service recovery.  

A bit of background: the colleague in question adopted a shelter dog that had a number of serious health issues – it’s an ongoing saga – and she ordered some medications from Chewy, an online pet supply store that has only recently opened its pharmacy business.   And here’s how they attempted to recover after bungling the order:



The lame humor in the message, bad puns that elicit more of a groan than a laugh, might be understandable and perhaps mildly amusing in the course of routine correspondence.    In the wake of a botched order, being cheeky with the customer is probably not a good choice.   And when the botched order prolongs the suffering of someone’s pet because it was a pharmacy order, it’s definitely not a good idea to kid around.

The second problem is that what is being described in the message, an inability to merge orders, has nothing to do with what Chewy had done wrong.   They had mishandled a prescription, initiating a game of phone-tag with themselves and the veterinarian to straighten things out, and causing further confusion as to whether the problem had been addressed.

The third problem is that the offer of a refund, which generally a nice gesture, is not something that helps recover from the problem: it is not that they caused the customer a loss of money, but a loss of time by mishandling the order.   A more appropriate action would be to expedite processing and provide free overnight delivery to help minimize further delay.

And the fourth problem is the missing fourth step of the basic apology model: to provide some reassurance that the problem will not recur in the future, so that the customer won’t be as hesitant to engage with the brand again.   To omit that step seems either arrogant (believing future business can be taken for granted in spite of the problem) or dismissive (not really caring if the customer does business with the brand in future).

In all, none of these things constitutes an egregious error – but it is the combined effect of a lot of small problems that makes this a model for poor customer service in a critical situation.

Thursday, July 12, 2018

Bad Ambassadors

The desire of brands to win advocacy is a generally good thing – it causes firms to think beyond the one-time sale, to providing a product that leaves customers so satisfied that they will not only repurchase but also advocate to other prospects in favor of the brand.   However, like any good thing, it can be done to excess – and at some point pursuing advocacy for the sake of having advocates becomes harmful to the brand.

The consumption of a product is for its functional benefits – but the consumption of a brand is often for non-functional benefits.   I add “often” because some brands are valued for their reputation for quality in terms of functional benefits, but in most cases products are commoditized: the offering of one brand is no better or worse than the next in terms of its functional qualities, such that the only difference is psychological.  This is generally true of most crowded markets where product offerings have become commoditized.

One of the chief psychological benefits is social recognition: Brand X and Brand Y are functionally indistinct, but are associated with certain social groups.  “We” use Brand X and “they” use Brand Y.   So the distinction between the brands is social identity – belonging to one group rather than another.   Hence a person chooses the brand that aligns with the identity to a group to which they wish to belong, and shuns the brand that aligns with any group whose membership is mutually exclusive to the desired group.

And therein lies the problem: when a brand is selected by a group that is considered undesirable by its existing consumers, the alignment of the brand becomes unclear: is it still aligned with “us” or is it now aligned with “them”?  And if it is no longer “our” band, then there is no longer any value to being associated with it – and possibly value in distancing from it because it is no longer in line with the identity of the desired social group (and is in line with the identity of an undesirable social group).

Where the undesirable group has selected the product of its own accord, there is very little that a brand can do to regain its esteem: brand exists in the mind of the customer.   If the brand decides to go with the flow, to embrace the new breed of customers it has attracted, it can remain viable, though the character of the brand and the qualities of the market it serves will undergo a dramatic transformation – in effect, the brand will have changed markets.    If the brand resists the flow, rejects the new breed of customers and attempts to retain its loyal market, it may find that it is fighting an uphill battle.   Success at this will be very difficult.

However, it is very often the case that the brand initiated this selection: it marketed to the undesirables in an attempt to grow its market, foolishly believing that its loyal customers would remain loyal even when the brand became adopted by the undesirable new customers.  It seems to be counting ambassadors, failing to recognize that not all ambassadors are good ones.  This is suicide.

Thursday, July 5, 2018

Putting People Before Profit

At a recent event, one of the attendees stood up and proudly shared a very dubious success story:  he had been listening in on a phone call in which one of his company’s service representatives was dealing with a customer who was closing an account, and the rep spent about fifteen minutes with the customer to talk them into keeping the account open with a one-dollar balance in case it would be needed again.   In the speaker’s opinion, the rep had done a wonderful job of saving the account.

Not everyone applauded at the end of his story – maybe three-quarters of the audience – though there is no telling how many of them thought the story truly represented a laudable success or were just clapping to be polite.   It is to be hoped that most of them recognize that what this fellow was praising as a success story was not at all a good thing, and a sign that the company is paying attention to the wrong numbers.

In case it isn’t obvious, the value of a one-dollar account is negligible.  At current rates, a dollar of capital might earn five cents worth of revenue while incurring about three cents in expenses, leaving the company with a two-cent gross profit every year the account remains open.   If the account remains open for fifty years, it will earn one dollar and, after G&A expenses, add a couple of dimes to the company’s bottom line.  Meanwhile, the fifteen minutes of CSR time likely had a fully-loaded cost of around 15 dollars.   Net loss, fourteen dollars, even if you don’t discount the value of future revenues for inflation.

The reason the speaker thought this incident to be a success is because he’s thinking of one statistic: the number of customers the firm has.  It’s likely because he’s being managed to do so – incentivized to grow and retain the number of customers without paying attention to whether the accounts he’s getting and keeping are at all profitable.   The more such accounts he creates and saves, the more his company loses rather than gains on the bottom line.   It's counterproductive performance, and the sign of a siloed and blindfolded culture in which each department thinks of its own goals regardless of their impact on the organization as a whole.  

The firm likely has enough good customers to keep it afloat – it can afford to take some losses.  But this is also a myopic perspective.  Every dollar in expenses incurred to retain unprofitable accounts is a dollar in interest that should be spent on retaining the profitable ones (or a quarter in interest, if the firm keeps the rest for itself).   I checked his company’s interest rates , and they are far below the market leaders – so much lower that it doesn’t make financial sense to do business with his firm.    Chances are, the cost of maintaining unprofitable accounts is at least part of the reason.

How many good and profitable customers are leaving his firm, which cannot pay to retain them because of the losses taken to retain unprofitable ones?  One can only speculate.   The truth is kept well away from the public, and perhaps is even unknown to decision-makers at the company, who continue to watch and press upon their employees to chase a growing head-count without consideration of whether the “heads” are worth having or how long the firm can sustain itself in this manner.

Thursday, June 28, 2018

Defending the Routine

Everyday life is boring and uneventful: people follow their well-worn paths and make little progress through small and safe steps, avoiding risks and anything that is out of the ordinary for them.   And as dull and boring as it seems, we are creatures of habit – and like being creatures of habit.  We will defend our humdrum lives against the incursion of anything that might change the status quo.

While we seek to minimize risk, we do not seek to eliminate it entirely.  We recognize, at times, there is a need to take unusual risks to make unusual progress.  It is not always acceptable to continue along the path of small and safe steps – but instead to take a calculated risk where there is a chance of loss but the potential to make greater than normal progress.

This is not something that most people seek to do often – an unusual level of risk is not part of daily life, and it is not sustainable.   Take any risk often enough, and the odds of failure will eventually play out: the risk-taker will lose, and if he has staked too much upon the chance, his loss will leave him unable to continue to take chances.   He will be physically, financially, or psychologically crippled and forced to change his habits to return to the mundane, until such time (if ever) he is able to recover the ability to step outside of the safe and the usual again.

And while there is an attraction to risk, our appetite for actually participating in a risky proposition is actually quite small.  We often satisfy our desire for risk indirectly – literature, film, spectator sports, and even history provide the vicarious thrill of seeing someone else take risks, attempting to empathize with the risk-taker rather than stepping into the actual role.  

For most people, most of the time, entertainment and fantasy is the extent to which they will engage in risky action.   For the armchair quarterback, his daily life is not at all affected by whether his favored team won the match – though he finds emotional rewards in witnessing this simulacrum of action.   Even if he has placed a bet on the game, it’s seldom enough that winning or losing will make a difference in his life afterward.

This considered, attempts to modify behavior in a significant way – to cajole an individual into deviating from his usual practice – is a very difficult proposition, and the prospects of success are limited if the consequences of gain or loss are significant.   



Thursday, June 21, 2018

Customer Loyalty or Customer Apathy?

In my research into customer loyalty, I’ve come across an interesting paradox: that customers who state that they are not loyal to a brand and even those who feel dissatisfied with its products intend to purchase the same brand the next time they have a need.    It’s not just an unusual few who respond this way: the majority of those who are dissatisfied intend to repurchase the very brand with which they are not satisfied. The percentages vary by product, but it tends to range between 65% and 85%.

In some instances, switching costs can be prohibitive.    There are financial costs, the need to learn to use a slightly different product, the effort and time of identifying a replacement, added difficulty to obtain it, and so on.    Even a less expensive brand may be more costly to use when the fully-loaded costs of acquisition and utilization are considered.

There are also the psychological costs of switching, not the least of which is the humiliation of admitting that the previous decision to purchase an existing brand was a terrible mistake.   Many people will doggedly pursue a course of action they know to be wrong, or repeat it, simply to defend their self-esteem for having made the decision to pursue it in the first place – and the magnitude of this humiliation is even greater when it is an item that is conspicuously consumed, such that others will recognize the change and take it as an admission of a poor decision.

There are also matters of prioritization: rare and lucky is the man who only has one problem to solve and everything else in his life is absolutely wonderful.   So a person may recognize the need to switch brands, and even have the desire to do so, but there are other things that are of greater priority for them – addressing their dissatisfaction with this particular purchase is not the most pressing matter they have to deal with, so they continue to accept partial success while they devote their time and resources to dealing with bigger problems.

There is also the threshold and tolerance for pain, both physical and psychological: a person may recognize something as a problem, but consider it to be a mere nuisance and not worth the time to deal with it.  Because it is not causing them enough pain, it is not worth dealing with.   As a rule, people don’t seek to fix small problems – they may complain, but unless the problem is serious, they are not motivated to invest effort to address the issue.

There is also the fear of change in general.   Even an unsatisfactory product experience is a familiar one, and there is doubt that a different product will actually yield an improvement.   What is unknown is unproven, and arouses suspicion – that it may be no better and possibly worse that the known imperfect solution.   And so, it’s more comfortable to deal with the devil you know rather than face the risk of making matters worse by changing routines.

I expect the precise reasons for “loyalty” to brands varies greatly by the product and its use – but the factors I’ve considered likely come into play to some degree for any dissatisfied customer.  But most importantly is that the statistics and these supporting reasons make it clear that loyalty cannot be taken for granted – or more precisely, apparent loyalty cannot be taken for genuine loyalty.   It may simply be apathy.

Thursday, June 14, 2018

The Pseudoscience of Irrationalism

In my studies of economics, I find myself stuck in the industrial era: the foundational works, which were generally written in the mid-nineteenth to mid-twentieth century.  I keep looking for more current information, considering the economics of the present day, and I am constantly disappointed by the quality of modern “scholarship,” which seems takes the opposite approach, giving further testament to the utter wrongness of the binary fallacy.

Specifically, there seem to be many unqualified scholars who play upon the obvious flaw of classical economics: that it is optimistic.  The classical economists took as a premise that men act intelligently at all times, with full awareness of circumstances and their own long-term self-interest in mind.    So the present-day economists switches to the opposite extreme, taking as a premise that men act unintelligently at all times, with no awareness of circumstances and no consideration of their long-term self-interest.

The problem with both schools of thought is that they suffer from binary thinking: all or nothing, always or never, black or white, with nothing in between.    The presumption is that if something is false, then its exact opposite must be true – which is childish, primitive, and utterly wrong.

Of the two camps, I still gravitate toward the classical – they are not perfectly correct, but they are mostly so.   Man is not a perfectly logical creature with flawless perception – but he is a generally logical creature with fairly accurate perception, in the modern day more so than a century ago because of the accessibility of information.  He is not a hapless fool, but can be fooled.

When an individual is seeking to pursue a personal goal, he tends to act consciously and deliberately, applying his reasoning to the best of his perception and intellect.   Very little is accomplished accidentally – though much is done imprecisely, with imperfect knowledge and imperfect reasoning.

The more challenging the circumstances, the less chance that imprecision will result in success.  If a person is to succeed in high-stakes situations, and to do so routinely, it must be by the application of his best knowledge and reasoning.   And for those who do not think for themselves, they are more likely to mindlessly emulate the success rather than the failure of others.

On a societal scale, the success or failure of a society is merely the aggregation of the success or failure of those individuals of which it is composed.   Hence a culture that fails to apply knowledge and reasoning is not sustainable, and will invariably fall to one that is superior in those regards.  But again, these are generalizations: we can recognize that imprecise or even improper action may sometimes lead to success, and the intelligent man recognizes that this is an exceptional situation whose occurrence is improbable.

And this is likely the proper reaction to the black swan: to recognize that it is an exception, an unusual occurrence that cannot be denied – its truth must be accepted.  But this does not mean that the appearance of an exception disproves a theorem, and it should certainly not serve as the foundation for a diametrically opposed school of thought, or an approach that is based on unusual circumstances.  

Such things are best relegated to the side-show: a curious novelty of no particular significance in the long run.    And this, I expect, is the fate not only of the theories, but the theorists as well.

Thursday, June 7, 2018

UI vs. UX vs. CX

At first, it may seem a good thing that user experience (UX) has become a popular trend - if done well, there is the potential to make significant improvements to a broad range of products and services that are currently rather inadequate and unsatisfying.    The problem is, it's not being done well, which not only makes things worse instead of better, but threatens to discredit the legitimate practice.

The problem that occurs when UX becomes trendy is that people who don't understand it attempt to do it, without actually learning anything about it, and the results are tragic.   This may be an individual practitioner who wishes to add a trendy new acronym to his resume without having any training or credentials, or a department manager who insists that his people can take on this task, even though they lack knowledge and credentials.

What facilitates this hubris is that UX is so poorly described - its nothing new, but an attempt to mash together two distinctly different disciplines:  user interface design (UI) and customer experience management (CX).  The first is concerned with usability (can a person use software on a computer or mobile device) and the second is concerned with usefulness (does a customer derive value from interacting with an organization).   

The relatively new field, or fad, of UX ttempts to encompass both - such that practitioners who have expertise in one area attempt to do the other.  The result is a compromise that leaves one of the two tasks sorely neglected: a person with a marketing background who knows a few tricks in Photoshop feels he can also do the design work, or a designer who can kludge together a survey feels he can do market research – so with an ample supply of narcissism and hubris, each believes he can do the others’ job as well or better than a bona fide expert.    Like stewardesses who think that their extensive flight experience makes them qualified to fly the plane.

That said, the guilt is not always with the employee, and is very often on the side of the employer.  I have been in contact with several UI practitioners who feel they are being forced into the UX space by their employers - who, without providing any instruction or resources, expect someone with an art-school degree to do marketing work ... or else.  So it's also true to say that, in their greed, firms wish to save the salary of a pilot by ordering the cabin crew into the cockpit.  

Whether they just wish to be trendy or have a desire to find a competitive advantage in saturated markets without making significant investment, they have forgotten the lessons taught by Adam Smith a few centuries ago, or Xenophon a few millennia before that, about the division and specialization of labor.   

Ironically, the lesson has only recently been remembered, or re-rembered, by IT departments, who are slowly recognizing that the generalist "unicorns" have burdened their systems with mountains of amateurish, inefficient, and poorly written code that will take many years and dollars for specialists to clean up.  So perhaps this delusion has simply migrated to the design/marketing wing, and one can expect it will drift elsewhere when that discipline finally comes to its senses.  

But while inefficient code can lurk for decades in the back-end systems, causing relatively minor problems that frustrate system users who are mostly employees, an ill-conceived experience is thrown directly into the faces of the customers - who have little tolerance for sloppy and inefficient service, and who are for most organizations the chief source of revenue.    The results of a poor UX are far more damaging, and potentially devastating to the firm.  







Thursday, May 31, 2018

Dissatisfaction and Psychological Motivation

The greatest and most certain source of customer dissatisfaction is the failure of a product to satisfy the need for which it was purchased – which in turn has many possible causes, the first of which is the misidentification or misunderstanding of need and the criteria by which the need will be fulfilled.  This occurs more often where the product is a good (which the customer lacks the skills to successfully employ, or even to select the right good) but is also quite common in services (when the customer has provided incorrect or insufficient information for the service provider to take the correct action).

The problem begins in the process of selection: the customer is unable to choose the correct product because he does not know what will solve his need – sales can be of some assistance, but because sales tends to focus on “selling” it’s rare to encounter a sales professional whose ethics can overpower his mercenary interest in talking to the customer out of buying the wrong product.   A perfect product, proficiently employed, cannot result in satisfaction if it is the wrong product in the first place.

To back it up another step, to select the right product to serve a need, one must understand the need – if the need is not understood, everything after it (the purchasing and use process) cannot succeed except by accident.

Where needs are practical, satisfaction of need is fairly straightforward because the problem can be objectively diagnosed and the results objectively assessed – the use of the product effected the exact change that was desired.  I would propose that for the great majority of products in the present day. 

But where the needs are psychological, satisfaction of need can be extremely difficult.  Who can say, with certainty, what will cause a desired change in emotional state – to make a person happy, or to mitigate their anger, even when that person is oneself?   And how can person who means to serve another know what their psychological state is and how it can be positively affected?  

It seems a trivial thing, but it likely has a very large financial impact on developed markers.  Given the evolution of customer services, we are as a culture extremely good at diagnosing and correcting functional problems – and I would posit that, with some exceptions, the “kings” have been worked out of most product experiences insofar as their ability to satisfy the customer’s functional need - they at least have the capability to solve the need if selected and employed appropriately, by objective and observable criteria.

Thus considered, it is the emotional criteria that are the most likely cause of the greater proportion of customer satisfaction in the present day.   It is not that the product does not deliver its functional purpose, but that its employment does not address the psychological need for which it was sought, not was the correct product even selected because the need was not sufficiently understood.

Thursday, May 24, 2018

Finance: The Third Level of Consequence

Where economics focuses on financial outcomes, it is functioning at the third level of consequence, ignoring two levels of consequence that precede it.  This may be the reason that the financial approach to economics finds itself so often frustrated, unable to form a reliable model or explain the phenomena that naturally occurs in the market.

The first level of consequence is corporeal: the human being is a mind that is contained with the fragile case of a body.  Therefore, the first consequences of concern at the prospect of any human action is the jeopardy it poses to the integrity of the body and mind of the actor.   Any injury or debilitation in pursuit of a specific goal is a permanent consequence, whose cost must be factored into the greater “budget” of life.  In general, we expect that we will maintain our present state – to emerge from any activity in more or less the same condition in which we entered into it.

Costs to corporeal integrity may be objectively calculated according to the projected value, accounting for the risk of damage and the value that is placed on the type of damage inflicted.   But while it is easy enough for an actuary to put a dollar value on the debilitation of another person, it is not so easy for a person to assess the value of their own debilitation – nor is accepting the actuary’s figures a sign of assent or agreement of value.  

The second level of consequence is social: the human being is a social animal, who benefits from participation in society.   There is no method to reliably quantify the degree to which we value the engagement with others nor the value that can be placed upon our identity and esteem in a social context, but they are nonetheless valued.   And just as we expect participation in an activity to have no effect on the integrity of our bodies, so do we expect participation to have no effect on our social standing.

It is likewise futile to attempt to monetize human relationships.   We may decide to engage in some activity that will harm our esteem by the same vague estimations of potential outcomes: how will our esteem and relationships suffer as a consequence of our involvement, and what is the likelihood of our involvement being observed or detected?   But what is the financial value of damaging a social connection?

It is only on the third level of consequence that we begin to consider anything that can be assessed financially.    On this level, we begin to consider the consequences an effect will have on property: whether we will gain or lose value, or the fundamental nature of property will be changed in an undertaking that decreases or augments its value to us.

Even then, assigning a monetary value to property is a highly subjective matter – even when one attempts to objectivize it, this is generally done by the market value of the property were it offered for sale.  That is to say, the value is considered to be that placed upon it by someone who does not already own it, not the value placed upon it by the owner – which is always greater.   If it were not so, we would choose to possess nothing, the money offered in exchange for it being more valuable to us than its possession – hence to possess anything at all is to value it more than its market price.

Thursday, May 17, 2018

The Meaning(lessness) of Life

A paradox to consider: we speak of time as being a precious commodity, but also as a nuisance.   We find that we have too much time on our hands, but in other instances we feel that we have too little.   Is this merely a an academic meandering, or are there practical implications to this duality in our perception of time as a commodity?

Perhaps the most undesirable time are the scraps of time that are spent waiting for something else to happen: you arrive at the doctor’s office on time for an appointment, but the doctor is running “a few minutes” late, so you are relegated to the waiting room.   Ten minutes pass, then twenty, then half an hour, then longer – and your irritation grows with each passing moment.  Most often, this delay is inconsequential – there is nothing else on your schedule and you had no better use for the time.  It’s simply the sense of being trapped for an interminable amount of time that creates irritation.

But even when the time is know, it is a nuisance.  Let’s say that you don’t arrive on time, but instead fifteen minutes early, and the appointment takes place at the proper time.   What do you do with those fifteen precious moments of your life?   Fiddle with your phone, pick up a magazine and read an article you’re not interested in, or make small-talk with your fellow temporal prisoners?   

Nothing that you do during this time is particularly meaningful or pleasant.   You usually don’t have the equipment to do something worthwhile, there isn’t time to leave and come back, there are few tasks that fifteen minutes is sufficient to complete or even make meaningful progress, and you often cannot give your full attention to something for the risk of missing your turn.

Daily life is riddled with these scraps of time – when you are ready but it is not yet time to go, when you have arrived and it is not yet time to start the activity you came for.  Our “standard” daily routine is arranged to minimize scraps of time, but any activity outside the usual is often accompanied by these “not yet” moments of waiting.   Think about a day when you must travel by airplane and check into a hotel for a meeting the next day – practically the entire day is spent waiting on something to happen.

There is also the time we spend in activities that are not meaningful in themselves, but are done in preparation for more meaningful things.   Take the travel example, the entire day is spend in activities that are not meaningful except as a means to do something else – the meeting that will happen the next day.   Or consider college education, which is four years of activity that is merely in preparation for getting a job in which you will do meaningful things.

And even on the job, are the things you do every day really that meaningful?   They are routine duties, done to earn a paycheck.   Does balancing the ledgers or counting the stock have a meaningful impact on the life of the worker?   Aside of receiving his wage, is there any motivation to do these things, or to do them well?

And even for meaningful work, is it meaningful to the worker?   Let’s say you are the doctor that others come to see, or a surgeon who daily performs life-saving procedures.   Aside of the salary you receive, is this meaningful work?   It is certainly meaningful to the patient – but is it meaningful for you?

It was not my intention here to go on a nihilistic rant, though it seems to be headed in that direction.   All of life is not meaningless, and there are in fact meaningful moments where the things that we do have an impact on our lives in some significant way.   But most of life is spent on those moments in-between – when we are waiting for something to happening, preparing to do something, or doing something that is valuable to someone other than ourselves.

None of these moments in time are meaningful, and as such most of them are entirely undesirable.  We may take some satisfaction in the good we do for others, and we may even take satisfaction in finding some way to pass the time – but the moments in life that are precious to us, those for which we seem to have not enough time, tend to be few.

As a general principle, paradoxes do not exist.   When you seem to have encountered one, you must check your premises.   And the flaw in the premise of the paradoxical value of time is that it is a commodity – that one second is the same as the next.   And in this regard, time is not a commodity: some moments matter, some don’t.  In all, I’m led to the conclusion that most simply don’t.

Thursday, May 10, 2018

The Newness of Personal Finance

In my studies of personal financial management, it has occurred to me that money and wealth are relatively new things.   Human beings have roamed the planet for about 200,000 years, developed agricultural settlements perhaps 10,000 years ago, and have only been handling money and wealth for about 100 years.

In the modern day, 92% of people (in the US, a developed economy) have checking accounts, and 76% of them hold investments (stocks, bonds, etc.) though generally only in their retirement accounts.  So money and investing seems entirely normal, but things were not always thus.

During the early twentieth century, only 8% of the (US) population lived in towns and cities. Even as late as the 1950s, 45% of the population was still rural, living in isolated agricultural communities that, in an economic sense, had not changed much since the advent of agriculture itself.

Granted, “money” has existed for longer than that but it was not part of daily existence for the vast majority of people.   Most people lived on self-sustaining estates, producing and handling the goods they consumed without engaging in trade.   Only the heads of estates and the merchant class routinely engaged in trade that would require the use of money.   

And even when money found its way into the hands of the working classes, it was seldom held for very long.   The worker’s wages were paid to landlord, grocer, clothier, and other vendors – sometimes the same day they were received, but seldom longer than a week.  Few people amassed wealth, and living hand-to-mouth was considered entirely normal.

Therefore it has only been since the 1950s that people have worked in professions in which they are paid in money, and had sufficient income to have money “left over” at the end of the monthly consumption cycle.   It was only since the 1980s, with the creation of personal retirement accounts (IRA and 401k) that most people became involved in investing, or even considered the necessity of saving money to pay for their own retirement.

So it is little wonder that people are so woefully unskilled at managing money and investments – it is something that is very new to most people, and not something that they can learn from their elders (even their grandparents lived in the hand-to-mouth age).  Given that the academic world is disdainful of financial topics and discussion money is considered a social taboo, there are few venues through which a person can learn to manage their money and investments.   

We are, for the most part, ignorant primitives doing our best to handle some new and unfamiliar technology without any instructions or guidance, and no established authorities that are willing or qualified to guide us.

Thursday, May 3, 2018

Drawing the Line

In the context of professional relationships, there are clearly defined boundaries for interaction – lines that it is socially inappropriate to cross, given the context of the relationship.   In general, these boundaries are drawn by functional necessity: if any interaction is not functionally necessary to success are the professional encounter, then it is inappropriate to the professional relationship.

This may be considered a function of economics: the time and effort that a person must spend in a professional encounter represents a cost that is laid out for whatever benefit is derived from the contact.   On the business side, we seek to minimize the amount of time employees spend serving customers in order to maximize the efficiency of the funds spent on wages.

This is also considered from the customer side as well, though the “hassle” of service is seldom monetized, people do consider the amount of time they must invest in a purchasing or service encounter.   It is not that they desire quickness, but they abhor wastefulness of their time.   

Hence it is desirable to both sides for the professional encounter to be as brief as possible.

Of course, this is a rather inhuman method of measuring the value of an interaction.  While those on the business side would be entirely satisfied by a minimal and sterile encounter between their front-line employees and the market, the “market” is composed of human beings, social creatures whose functional needs may be met by an encounter with an automaton, but whose social proclivities require something more than the bare necessities of a functional encounter.

The question is: where to draw the line?

On one extreme, an encounter with a sterile and officious service provider is unpleasant – and while such an encounter is very respectful of the customers’ time, it is an affront to their humanity.   On the other extreme, an encounter with a service provider who is overly social becomes equally loathsome – friendliness is pleasant, but if it is overdone, it can become overbearing and customers expect a certain professional distance from those who serve them.

One factor is likely the duration of the service: when making a retail purchase, it would be very awkward for the checkout clerk to engage customers in extended conversation.   But when getting a haircut, it would be equally awkward for the barber or stylist not to engage in conversation with the customer.

Another factor would be whether the service is recursive.  One generally does not expect a waiter to be overly friendly, but a customer who has lunch in the very same restaurant every workday and sees the same waiter five times a week will accept and perhaps expect a greater degree of social interaction with the service provider.

Another factor might be the nature of the product.  To provide assistance, a service provider must have a better sense of the context in which a product is used: a clerk at a grocery store might ask what meal is being prepared and how many are being served, one at a clothing store might ask about the occasion for which an outfit is being purchased, one at a hardware store might ask about the home and lifestyle of the client.   Arguably, these are functionally necessary questions for the service, but there is often a but of non-functional conversation that arises in due course.

Another factor is the level of service required or desired of the service provider.   In the previous example, a customer might welcome a higher level of service from the grocery clerk, who might presume to offer advice about the meal that the customer is preparing.   In other instances, the customer does not welcome such advice – he knows what he wants and just needs help finding an item.

Another factor is the degree to which the product relates to the esteem (social or self) of the purchaser or owner.   It can be generally observed that service at high-end stores is more “personal” than service at low-end stores.   Hence buying an expensive pair of shoes at a boutique is a far more social encounter than buying a cheap pair at a discount retailer.

At this point, I’m getting the sense I may have scratched the surface of a topic that goes much deeper than a blog post will accommodate – and likely there’s need for study in the domain of social psychology.

Thursday, April 26, 2018

Common Practices Aren’t Best Practices

It pains me, still, that imitating the competition is still rampant even in innovation efforts.   Inevitably, someone says “let’s see what other companies are doing” as a means to generate “new” ideas, generally followed by the insistence that it’s “new to us” when someone points out the obvious.  And all too often asking if any other company is already doing something similar is the first sign that an innovative idea is headed for the scrap heap without any further consideration.

The same problems arise at most firms – their attempt to distinguish themselves leads instead to the practice of imitating one another, and doing so mindlessly.   As a consequence, the common practices in any industry are seldom based on an examination of the results they achieve, but merely on their being done by others, on the assumption that they wouldn’t be doing something if it weren’t getting good results.  

Not only are the common practices adopted without question, they also tend to be practiced without question.   There is no question of their foundations, no research into their soundness, and no testing of their performance.   They are adopted without inspection and perpetuated without validation, often in spite of evidence that they are unproductive or even harmful.  This is not merely egregiously unwise, but reckless.

Compounding the problem, many firms turn to agencies and design firms, who have even less knowledge of their industry or their customer, to show them the way.   There is a great deal of bluster and precious little knowledge in these firms, yet their opinions seem to be regarded as reliable advice from reliable professionals – until the numbers come in sour, and then the firm hires a different agency to repeat the same cycle.  And given the recent shortening in executive tenure, even the decision-maker who engaged the firm is long gone by the time the damage is done.


But back on topic, the common practices of an industry may not yield good results at all, and even if they happen to be based on sound reasoning, it doesn’t mean they are practicable or applicable given the unique nature of your firm, goals, and market segment.    No-one can say for certain what will work for a given firm, and often it is not questioned whether it had positive results elsewhere.  The result seems to be the death of innovation, while under the banner of innovation we see a frenzy of imitating with reckless abandon.

Thursday, April 19, 2018

The Customer as a Brand

Consider this: every customer is his own personal brand, and his non-functional purchasing criteria (those that pertain to the social and psychological aspects of consumption) may be understood as curating activities.    That is, the customer has a brand that he wishes to uphold, or one that he wishes to modify, and selects products as a means to associate himself to brands that correlate with the desired perception of his own personal brand.

This may be more or less true of any product – where consumption is conspicuous, it is assumed that nonfunctional qualities play a more significant role because they impact social esteem.   But even products consumed in private impact self-esteem, and in this regard the latter may be more significant.

Where brands attempt to go beyond consumption and convince individuals to advocate on their behalf, the alignment of the brand to personal brand becomes even more significant.  A person will carefully consider which brands align to the desired personal brand, and will not espouse any brand that does not satisfy both social and psychological criteria.

Wrongful promotion, like any unwanted social advance, results in a negative reaction – the more aggressive the assault, the more aggressive will be the defense.    Where a brand is seen as ill-fitting, promotion can only cause it to become undesirable, even repugnant, to an individual who feels the brand does not align with his own.

There are also no universal qualities of brand.  Even those that represent youth, wealthy, sophistication, or other qualities with widespread appeal do not necessarily correspond to personal brand.  Status-seekers may wish to “pose” with a brand that represents qualities they do not possess, but most people are not so narcissistic and instead seek brands that correlate with their own true brand, or a brand that is only slightly and plausibly elevated from their present station.

And finally, it’s worth remembering that the maker does not determine the qualities of his brand – it is the perception of the brand by the market that causes it to have those qualities.   The individual who seeks to align with a brand is not seeking a relationship with the maker, but with other individuals in his society, regardless of whether they are consumers of that same brand.

The customer chooses the brand of the product, and it is that individual’s personal brand that creates the perception of the product brand among other prospects.   A product that is used by or otherwise associated with the “wrong kind” of person is the wrong brand, regardless of what the maker wishes the brand to represent.