Monday, October 28, 2013

Smart People Are Difficult

I was listening to a webinar about managing knowledge workers.  The main thrust of the presentation is that management practices were developed in a time when a company consisted of one "brain" and many hands to carry out the work - but in the present day companies require people to be creative and innovated, yet they still manage them like drudges.   As such the most valuable people have a deep sense of dissatisfaction, do much less good than they are capable of, and leave to find greener pastures.

All of this is good and well, but most of the presentation was about the "problems" that mangers face when dealing with smart people - and it came out as a long litany of complaints that are ... well ... maybe at least a little bit fair fair.   I wanted very much to deny it, but the speaker had a lot of things to say that were entirely undeniable.   While smart people are very valuable to organizations in the present day, they can be very difficult at times.

That is likely an understatement.  Considering the litany of complaints below, "difficult" is perhaps too gentle a term.

How Smart People Feel About Their Work
  • Smart people are very attached to their ideas and are deeply disappointed when their ideas are not implemented exactly as conceived.   If any of their ideas is rejected, modified, or set aside, they are inconsolable.
  • Smart people are sensitive and possessive about the projects they work on, and they remain tenacious about completing a project even if they sense it is not leading anywhere, ever hoping that it might have tremendous value that won't be realized until it's proven out.
  • Smart people are attracted to intellectual challenges.  They will devote the majority of their effort to a problem that is hard to solve and are less interested in problems that are easier to solve even when the return on investment is higher.
  • Smart people will be drawn to a solution that is elegant, intricate, or unusual - even when there is a simple, straightforward, and unglamorous solution that would fix the problem better and faster.
  • Smart people have little tolerance for the mundane and tedious necessities.  Any activity that is not using them to their full potential is making them worse, or at least rusty, at what they do best. 
  • Smart people care about status and recognition, but not in the traditional form of money and titles.  Instead, they seek the respect for their capabilities as demonstrated when their ideas are given resources and support.  
  • Smart people are immune to compliments.  Vague expressions of praise from someone who doesn't understand what they are doing is disingenuous and a bit of an insult.   Regardless of how they behave they never think their work is perfect and lose respect for those who can't see its flaws.

How Smart People Feel About Their Managers
  • Smart people hate being managed.  They feel they are most effective when given a problem and are left alone to solve it, and find attempts to "assist" or "collaborate" to be wasteful, controlling, and intrusive.
  • Smart people are attuned to subterfuge and suspect it, particularly of management.  They readily recognize the tricks and tactics of manipulation, and are offended not only at the attempt to control but the presumption that they aren't smart enough to see through the act.
  • Smart people are never happy about having their work approved or controlled, particularly when those who approve their work are traditionalists who seek to squelch innovation in favor of keeping to business as usual.
  • Smart people resent a manager's demand for them to "show" progress to others.   They spend a great deal of time thinking and researching before they take action, with long periods of quiet time between short bursts of activity.
  • Smart people resent being reminded of the bigger picture.   They are perfectionists who will often delve into the details and feel that the bigger picture will take care of itself if all the little things are done correctly.
  • If a manager shows support of smart people, it will make them all the more aggressive in promoting their ideas.   If the manger doesn't support them, they will shut down and look for an exit.  There is no middle ground.
  • Smart people have an ambivalent relationship with managers, expecting to be supported without any interference in their work.   For the same reason, many smart people make very poor managers from other smart people because they cannot step back from the work.
  • Smart people are not impressed by rank and title and very often have contempt for those who have been elevated in an organization for playing politics.   They care about what other smart people think of them, but do not regard managers as particularly smart people.
  • Smart people are loyal to their work but not to their bosses.  They recognize that a manager has his own agenda (generally of self-interest) and recognizes that a manager's priorities can be shuffled at any moment, so long-term loyalty is not advisable.
  • Smart people expect to be recognized and rewarded without having to beg for attention.  They believe that if someone is a good manager, that person will be aware of their value without needing to be told.
  • Even when a smart person has a good leader, he seldom recognizes it, and is more attuned to leadership mistakes than successes.   The highest compliment a smart person can give a supervisor is that "you're not getting in the way too much."

How Smart People Feel About Their Companies
  • Smart people seldom mention the place they work to others.  They are identify what they do, but feel that the company they work for is incidental - their pride is in doing something, not in belonging somewhere.
  • Smart people want to pursue the ideas they are passionate about.  They will reluctantly attend to the mundane and administrative duties, but would prefer to spend their time solving problems and achieving goals than dealing with corporate necessities.
  • Smart people are highly independent.  While many require the resources of a company to pursue their work, they feel that it is their work alone and resent the tendency of the company that provides these resources to wish to control the work. 
  • Smart people believe themselves to be unique and indispensible to their companies, but consider their companies to be commoditized and easily replaced.   Any firm in the same industry would value their ideas just as much as the one they happen to be working for, and some firms would value it more than their present employer.
  • Smart people also recognize that not every idea will pan out, and expect that their companies are quicker to punish their failures than reward their successes.   They believe their employers thing they're "only as good as their last mistake."
  • Smart people challenge the traditions of their companies.  Anything "old" is automatically assumed to be wrong and they will quickly fall in line with an opposing position by default.
  • Smart people seem socially awkward but are highly organizationally savvy.  They see a company as a system, with people and functions and rules.  While they prefer to focus on work and avoid political games, they are not at all naive and can be quite dangerous.  They are expert gamers.
  • Smart people care little for climbing the corporate ladder and often place their reference points outside of the organization, seeking mentors in those who have been successful elsewhere (and with whom they are not in direct competition).
  • Smart people may appear to be loyal because they are not looking for work, but they expect that work is always looking for them.   The best employer is the one that most values them, and if their own firm takes them for granted they believe that there are others who will be aggressive in recruiting them away.

How Smart People Feel About Dumb People

  • Smart people abhor "dumb" people - they do not have any respect for those who are mundane an institutionalized, who like routine duties governed by rules and procedures, and who prefer to stick to business as usual.
  • Smart people take a deep pleasure in breaking the rules and succeeding, because it proves to the mundane sort of person who believes in procedures and standards that such things are entirely unintelligent and counterproductive.
  • Smart people do not like teaching others or sharing knowledge.   They cling to the notion that "knowledge is power" and feel that those who want to access their knowledge without rewarding them for it are stealing what is most precious.
  • Smart people are blunt and candid.  They feel they already have the best idea and discussing anything else is merely a waste of time until the other person recognizes they are right, which is inevitable.

How Smart People Feel About Other Smart People

  • Smart people want to be connected to other smart people to share knowledge and discuss ideas, but are more drawn to people who are smart in different ways so that they can benefit from collaboration between different subject matter experts rather than competing to be the most esteemed expert on the same subject.
  • Smart people are very competitive with one another, particularly those who are smart in the same subject areas.   They can admit that someone is smarter than themselves, but not without grave resentment.
  • There is no greater feud in the workplace than occurs between two smart people who are convinced of mutually-exclusive ideas.   They are convinced that they are right and anyone else, no matter how smart, is utterly wrong.
  • At the same time, smart people begin to doubt the intelligence of anyone who fails to argue with them at least a little but, before ultimately accepting their ideas.

How Smart People Feel About Themselves

  • Smart people feel "they are their work."   When a smart person introduces himself, he will tell you what he has accomplished or what he is working on, right after their name (which they may not even mention).
  • Smart people never feel that they are adequately valued - though "value" is not always about compensation alone, but the resources and latitude provided in support of their efforts.
  • Smart people are not bystanders.  Even when they are not taking action, they are carefully observing, figuring out how "the game" works and how they can win should they decide it's worth their effort to enter the arena.
  • Smart people tend to be ungrateful.   When they are recognized or rewarded, they generally feel that they have earned it and likely feel that they should have been recognized more generously and sooner than they were.


I would like to argue against all of this as a stereotype of smart people, but at the same time every one of these points is valid to some degree about the smartest people I have known - though admittedly, most of them seem conscious of the "smart" stereotype and try to avoid it.   Meanwhile, quite a few not-so-smart people I have encountered play out these characteristics in a exaggerated manner as they are attempting to appear to be smarter than they are.

In the end, I have to fall back on an old adage - "there are no stereotypes without prototypes" - and if this portrayal of "smart people" is a gross caricature, it is not entirely without basis in the real behavior of real people.

Thursday, October 24, 2013

The Death of Competitive Negotiation

I recently read Richard Luecke's book on workplace negotiations, which focused largely on the tactics used to resolve differences and gain cooperation in the context of an ongoing relationship - which is distinctly different to competitive negotiation, in that tactics that gain a short-term advantage at the cost of damaging the relationship with the other party must be avoided.  In reading the book, I was struck by the notion that competitive negotiation techniques are applicable to a decreasing number of situations - to the point that, for the everyday person, the value of competitive negotiation is practically nullified.

The most familiar instance in which negotiations become competitive to the verge of hostility is in negotiating large-scale infrequent purchases.    It used to be that buying a house or buying a car was regarded as a highly competitive negotiation in which the parties would not refrain from backstabbing and punching below the belt - but it seems to me that this is a dying practice in the automotive and real estate industries.   Vendors who neglect to consider the value of a relationship stand a significant competitive disadvantage, and harm their long-term viability by being overly aggressive in the pursuit of short-term profit.

While a vehicle or a house is an infrequent purchase, they are seldom one-time purchases and the experience is not forgotten by the buyer.   When it comes time to purchase again, even years later, the memory of their experience will lead them to seek a different vendor, and when others ask them for referrals, they will certainly relate negative experiences with vendors and thereby dissuade others from doing business with vicious negotiators.

This can be witnessed in the correlation of certain statistics, namely those that measure customer loyalty and those that measure customer advocacy.   The two are not the same, though they are often mistaken as such, and they are very strongly correlated.

Information technology is likely to be credited: prior to the Internet, it was difficult to get ratings and reviews of most vendors from reliable and unbiased sources.  It was random chance that a person in a prospect's circle of acquaintances had experience with a given vendor and could say anything at all - and even if they had such information, they tend to be reluctant for reasons of social etiquette and self-esteem to say something negative or admit that they had been taken advantage of in a negotiation.   There is much less reluctance, and much greater opportunity, for people to be forthcoming and honest online.

Moreover, the online medium has a quality of permanence: a person may be counted upon to forget the negative aspects of an interaction if it is stored entirely in organic memory, but digital memory is accurate and persistent.   If they chose to share their negative experience, it remains a part of the digital record for far longer than it may remain in human memory.   Additionally, the fact that they have made statements "publicly" will cause individuals to be more resolute, as changing their mind about a vendor is not a private decision, but one that will also be perceived publicly, and perceived as a lack of integrity or honesty.   To publish a negative review is to swear an oath to personally avoid the vendor.

As such, the more gentle tactics of collaborative negotiation are likely worth a great deal more consideration than they had been in ages past, and the hardball tactics of competitive negotiation are becoming largely extinct - or more to the point, those who leverage those tactics are becoming largely extinct.  I expect that's a good thing.

Sunday, October 20, 2013


In a previous consideration of cross-selling and upselling tactics, I stumbled across the notion that, in some instances, steering the customer toward a less expensive item that is a more appropriate to their needs is the smart move.  It doesn't really fit the definition of "upselling" because that is a short-term tactic mean to gain as much revenue from the customer in a single selling session - so it stands to reason it should be considered an entirely separate tactic, which I'll call "right-selling" for lack of a better term.

My sense is that right-selling is not very widely practiced or considered, though that's largely based on personal experience and conversational accounts of others whose typical encounter with a salesman involves an unpleasant process of having to decline upgrades and features they didn't want in the first place and do not see the value of purchasing.   It's clearly a practice of trying to sell more today at the cost of creating a customer who will be more inclined to buy from someone else the next time they are in need.

And therein lies the problem of upselling: it is a trade-off designed to increase short-term revenue (and likely profit, because the mark-up on "deluxe versions" and "additional features" is significant) that is indifferent to the consequence of losing of long-term customer value that may be greater.   I will concede that in some instances,  the math works out the other way, such that the short-term revenue gain is worth the long-term loss when future values are discounted - but these instances are likely rare.

Some vendors, and some entire industries, are infamous for this kind of practice.   The example that comes to mind is Best Buy, and appliance retailer who is very pushy about extended warranties.  The last time I purchased an appliance from them, I had to decline their extended warranty four times - once from the clerk who "helped" me select the item, again from the department manager, a third time from the cashier, and a fourth time from the delivery crew.  This is likely the reason that the last time I purchased from them was about a decade ago - and likely it was also the "last time" in the sense of "never again."

On the other hand, some vendors have won my loyalty by right-selling.  For example, auto mechanics are infamous for attempting to sell additional and unnecessary services to customers who need a simple repair.   In fairness, sometimes the damage is more extensive that the customer realizes and more work is genuinely necessary, but mechanics have upsold services too often and too clumsily for customers to trust in their honesty.   In my own experience I have had two repair shops that right sold me - telling me that I needed a less extensive and less expensive repair than I had described to them.

The benefit in doing so is that they won my loyalty, almost instantly.  I have not considered, and would not consider, going anywhere else for automotive services they offer.  (The only reason it's two shops rather than just one is that I moved to a different city.)   I do not expect that I am alone in this, as being right-sold is a very common element of referrals and testimonials I have received from other shoppers.   These people, too, were delighted by right-selling and have given their loyalty to the vendor who practiced it.

The general principle to be derived from these case studies is that customers have a set of expectations - they know what their needs are and have a sense of what it ought to cost to meet them to a satisfactory degree - and where there is a mismatch, they are suspicious.   If the vendor attempts to sell them a more costly solution, they immediately suspect mercenary intent and trust is undermined.   If the vendor suggests a less expensive alternative to meet their needs, they just as immediately recognize that the vendor is concerned about their needs rather than his own profits, and trust is seeded.

The "immediately" in those phrases is significant because there is eventually a reckoning that considers the ultimate outcome of the purchase.  Regardless of whether the customer has been up-sold or right-sold, they will base their final and lasting assessment over whether the purchase solved their needs.  A "successful" (from the vendor's perspective) up-sell that renders no perceived benefit amplifies their sourness about the vendor's motives, and a successful right sell that results in a product that does not solve the problem undermines their confidence in the vendor's competence.   Both are bad for long-term customer loyalty.

So in the end, it seems to come down to the same basic principle: know the customer's needs and sell what is necessary to meet them.   The loyalty of the customer is won or lost, reinforced or undermined, with each and every transaction - and whether it's cross-selling, up-selling, or right-selling it's about offering a product or service that provides a genuine benefit to the customer.   That is not a trade-off for making a profit, but the method by which profit is made.

Wednesday, October 16, 2013

The Economic Value of Leisure Activity

In an article about economics, the author briefly mentioned hobbies, sports, and other leisure activities and dismissed them abruptly as having no significance to economics.   I disagree, and wish to elaborate on the reasons, hence this note.  The author didn't elaborate on the statement, so I can't be sure of what he truly intended - just tossed it out there as if it were an incontrovertible truth - but my sense is that he dismissed leisure activity from the economic world because it has no effect on the market.   But I would argue that it does.

Economics is Not (Just) About Money

First, and this is likely a bit esoteric but nonetheless important, economics is not about money.   Many laymen make the error of thinking so, but economics is about the manner in which human needs and desires are satisfied and money is merely a tool by which people obtain the goods and services that satisfy their needs and desires.   Even in a market in which there is no money and people barter for goods, that constitutes economic activity - and I sense this frustrates economists because they are unable to reduce the activity to readily-digested number, so rather than admit their embarrassing impotence, they want to dismiss any non-quantifiable activity from the world of economics.

I would go further to assert that economics is not even about trade.   Trading your products (or labor, for most) with others to get things that you desire more is one way of satisfying your needs.   If you choose to catch your own fish rather than purchasing one at a supermarket, you are still acting in a way that satisfies your needs.   It is true that your activity means you do not have to trade, but it would be a misleading distortion to therefore exclude it from economic activity.   It decreases trade because you have done something for yourself, but it has not decreased economic activity because it is, by definition, an economic activity.

Economics is about the Satisfaction of Need

Second, consider a different part of the definition of economics - that it is a way to satisfy both needs and desires.   The separation of need from desire is tenuous at best because it is generally accepted that there are psychological needs that constitute a very fuzzy borderline between needed and desired.   In more concrete terms, leisure activities satisfy a need (or desire) for mental stimulation and entertainment - and as such it fits the definition of economic activity because it is action in pursuit of satisfaction of need.

As such, a person who is engaging in an activity for his own entertainment (or mental stimulation, which is a form of entertainment).   In concrete terms, some people fish just to enjoy the activity of fishing - they release rather than consume the fish that they catch.   But this is not wasteful activity because it is a form of entertainment.   This further decreases trade because such a person does not amuse himself by engaging in trade - rather than purchasing a ticket to a play, he spends a leisurely afternoon entertaining himself by fishing.   And again, while this decreases trade it is still an economic activity.

Leisure Activities Influence Trade

Third, it's also worth mentioning that leisure activity does in fact have a positive impact on trade - entertainment alone constitutes billions of dollars in trade, as does the trade required to engage in a leisure activity.   There are some activities that require no goods or servicers to undertake, but I would suggest that such activities are very rare - for the most part, leisure activity necessitates trade.

Going back to the example of the fisherman: even if he consumes the fish he catches, they were not "free" by any means.   He still had to purchase a rod and reel, tackle, bait, equipment, supplies, and other things necessary to the activity - and he may even have taken a fishing vacation and hired a boat or rented a cabin for the purpose.   In this manner, leisure activities actually creates trade as well as economic activity.  Moreover, I would also estimate that when it comes to leisure interest, much more is often spent on the activity than would be spent in purchasing a finished item - the cost of the fisherman's tackle and equipment are more than he would have spent just buying a fish.  And so, it is likely that leisure activities increase the amount of trade in a market.

There is the matter of the fisherman's "labor" - and one might argue that his time might have been better spent doing more productive things.   In the material and monetary sense, that may be true.  But again, the fisherman produces entertainment for himself - and given that many material goods are purchased for the purpose of having entertainment (you do not purchase a concert ticket to have a scrap of paper), then the time that such a man spends at fishing are entirely productive.


Perhaps this argument seems a bit finicky, but I have the strong sense that money is a tool of trade and trade is only a subset of economics - such that dismissing anything that is not readily fungible or quantifiable is a serious mistake that makes economics less accurate and less useful than it ought to be.

Saturday, October 12, 2013

Imaprted and Experienced Impressions

I wrote an article on brand basics for another blog, in which I touched on the notion that people who have never experienced a product often have a strong impression of the characteristics of a brand (boys too young to drive have ideas about automotive brands, middle-class people have ideas about luxury brands, etc.) – and I’d like to spend a little more time meditating on that notion.

In brief, there are  “imparted impressions” that arise from learning about a brand, “experienced impressions” that arise from interacting with a brand, and some interplay between the two.   These are terms I’m using in this meditation – if they happen to correspond or conflict with any existing terminology, that’s entirely coincidental.    I’m unaware much thought has been put into this.

Imparted Impressions

Imparted impressions are ideas that an individual has accumulated about a brand or product with which he is experienced.   Consider my opening example of boys who are too young to drive, and yet who still have very decided opinions about automotive brands.   The impressions they have formed are likely to be highly influential in the consumer choices they will make when they get old enough to actually need the product, and in that regard they are important.

Imparted impressions are received from a myriad of sources, but it generally comes down to media depictions or word-of-mouth descriptions of a brand experience.    Such impressions may come from those who have experience of the brand, as well as from the many who don’t.   It is highly unlikely that the copywriter at an advertising firm has driven the precise vehicle that he is describing to potential buyers, or that when middle-class people who about luxury brands have any experience whatsoever of owning or using them (and may never have seen them).  Each is creating a fictional account, which others are expected to accept as fact (though there’s some argument over what percentage of the audience grants credibility to such accounts).

Because an imparted impression is a fiction, it can be anything so long as it does not exceed the limits of the willing suspension of disbelief.   And it is likely that even the most ludicrously improbably qualities can be attributed to a brand if the information is coherent among sources … if five people you know and trust all use the same adjectives to describe a brand, it becomes credible regardless of the fact that all five of them learned those adjectives from an advertisement written by a copywriter who had no experience of the brand.

Experienced Impressions

Experienced impressions, as the name implies, derive from actual experience of interacting with a product.   My expectation is that these impressions are much stronger and more credible than imparted expressions, as no matter how much we are willing to believe in a second-hand account, hands-on experience is far more credible.

There may be some gray area between imparted and experienced impressions in this regard:  a boy who has ridden in a car or has seen one on the road develops an impression based on experience – and his experience is valid (he actually did see the car).  Though this is experience is still considerably shallower than that of a driver or an owner, it is still valid experience, in that it is perceived of real objects and received as sensory data, and as such it is not entirely fabricated or conceptualized from nothing.

The gray area is further extended by cognition, as it has been shown that we have perceptual filters that seek to accentuate or deemphasize elements of real experience that do not match our preconceptions – such that we experience what we expected to experience in spite of some negligible evidence to the contrary.   Human memory also likely dulls experienced impressions, as we may not remember correctly – or we may doubt a valid impression if we suspect that our memory may be hazy, even if it is accurate.

That said, our experienced impressions of a brand are generally the most accurate and credible ones – such that once we have experienced a brand, it creates a strong impression that is extremely difficult to change.

Interplay between Experienced and Imparted Impressions

I’ve already mentioned selective perception – which is one method by which imparted impressions may mar experienced ones.   If we have been subjected to repeated accounts, from advertisers or from credible individuals, that a given product “tastes sweeter” than a competing brand, we are somewhat likely to perceive the brand to have a sweeter taste than we would if we had not been primed to believe so.

However, my sense is that the potential for an imparted impression to override sensory experience is greatly exaggerated.   We might fool ourselves into thinking something tastes sweeter than it actually does, but it is highly unlikely that the imparted impression of sweetness will maintain in the face of an experience impression of a product that is not sweet at all, but may be bitter.

I would expect that the degree of difference between imparted and experienced impressions may be influential – if the difference is but slight we will give our imparted impressions the benefit of the doubt – but also that the degree to which the difference is critical to the fulfillment of core benefits.  That is a, person who values “sweetness” in a product will be less likely to be mislead by imparted impressions than a person who values other qualities and for whom the sweetness is incidental.  He will simply not be paying close enough attention to that attribute to notice.

And so, for the most part, our experience impressions will override the imparted impressions – and the difference between the two will create a sense of delight (when something is better than promised) or disappointment (when something is worse than promised).  It could be argued that the best outcome of all would occur when there is no difference, and experience is exactly as promised – though while I have a sense this would impart a sense of comfort, I would also be inclined to think that the lack of difference would go unnoticed.   Of course this product tastes sweet to a customer who already believed that it would – so it’s no surprise, neither better nor worse, and hence unremarkable.

Implications for Marketers

In all, my sense is the implication for marketers contradicts the long-standing tradition in marketing to depict a brand as being far better than it actually is.   When this level of expectations is set, dissonance is likely because the eventual experienced impression that will be conveyed is going to be far worse than the imparted impression that marketing succeeded in creating – and in the end, it’s their own fault.

If a brand is to create delight in the consumer, marketing and other sources must have an imparted impression that is worse than their experience will eventually bear out.   It is only in this way that customers are impressed by the quality of the brand when they discover the experience to be better than expected – and the greater the difference, the stronger the delight.

At the same time, it is unlikely a product will be appealing at all if marketing sets expectations too low.   It is likely that advertising should seek to create an accurate impression in most regards, but to choose some elements to understate to leave room for customer delight to develop.

It also occurs to me that the ability of imparted impression to override experienced impression is generational.    The Silent and Boomer generations desperately wanted to blend in and be like everyone else, and to be compliant to authority – such that if “television said” something they might be doubtful of their own experience when the two are out of joint.  Generation X and the Millennial are far more individualistic, and are more sophisticated when it comes to the media (and particularly advertising) –hence less likely to be doubt themselves and go along with what “everyone else says” when their genuine experience proves to be different.


As with many of the pages on my online notebook, this has been quite a ramble – but I have the sense that the key ideas are worth closer consideration and comparison to research findings.   I have the sense they will bear out, and that the implication is a need to adjust marketing to support a more positive customer experience.

Tuesday, October 8, 2013

Realistic Expectations about Conversion

In a discussion about ecommerce conversion rates, someone dragged out a list of statistics on shopping cart abandonment.    The list included various research studies on the topic, and cited rates of 55% to 72% around an average of 67.45% - which is a little surprising because that figure hasn't changed much in nearly twenty years.  

I recall hearing 70% back in 1995, at which time ecommerce was new and it was generally assumed that the number would plummet once consumers became comfortable enough with the security of Web sites to provide a credit card number online.   But in the present age, most members of the Silent generation, for whom the Internet was something new and scary, have largely exited the market and even the Baby Boomers are becoming less relevant in many consumer goods categories.   So I don't expect that fear of electronic bogeymen is the reason that conversion rates online are so dramatically low.

Instead, I speculate that there is a much less emotional and much more insidious problem: that of customers who shop multiple places before they purchase.   I expect that even as comfort with the online medium has increased, so has shopping behavior.  Given the recent financial crisis, and also given the steadily eroding consumer purchasing power over the last two decades (annual pay increases have been less than consumer inflation, so people have more dollars but less spending power), people are living leaner and investing more time in comparison shopping and deliberating optional purchases.

Consider a different statistic: the number of Web sites that a shopper typically visits before making a purchase.   If I recall correctly, this has generally hovered around seven though the range is much greater depending on the nature and cost of the specific product in question.   So even if a site gets an immediate purchase from a statistically average number of consumers, it would mean that only one in seven of individuals who visit will purchase ... a maximum conversion rate of 14.3% and a corresponding abandonment rate of 85.7%.

Admittedly, this figure would be the web site abandonment rate, and not merely the shopping cart abandonment rate.  The latter should be lower because it excludes visitors who bounced out of the site before interacting to the point where a cart was created at all.   So it's not strictly an apples-to-apples comparison, but should suffice for a theoretical musing such as this one.

A different statistic also shows that customers visit a web site an average of 3.5 times before making a purchase - and while I haven't seen a breakdown by product type or cost, I would expect there is also a broad range around that average as well.  But taking it as given, that would mean the even if every potential customer would eventually purchase from a site, its per-visit conversion rate would be 28.6% and its abandonment rate for a single session would therefore be 71.4%

Putting the two statistics together, what if we assume that 14.3% of customers will purchase from a given retailer - but each of those customers will visit the site 3.5 times before purchasing?   The result is that the site will have a 4.1% conversion rate and a whopping 95.9% abandonment rate.   And looking at some of the research into ecommerce in general, that is well within the calculated range for web site conversion.

But more importantly, a look at these facts should quell the tone of panic over the low online conversion rates for ecommerce sites.  Considering the shopping behavior of consumers, it seems to make perfect sense, and a firm with a 67.45% abandonment rate (32.55% conversion rate) would be doing amazingly well.

Friday, October 4, 2013

Secrets of Selling Services

I've recently read Stephan Schiffman's book on the secret of selling services.  The author's premise is that selling services is different to selling goods because the lack of a tangible artifact makes it difficult for customers to understand and take interest in the purchase - but as I read it occurred to me that there really isn't a difference between the two, and what is a "secret" in selling services is merely something that has been ignored by those who sell physical goods, and greatly to their detriment.

The reason I take issue with the author's premise is this: even when a good is being sold, the customer is still buying a benefit.   That is to say that whether I choose to purchase a lawnmower to cut my own grass or contract a lawn care service to do the job, I am ultimately seeking the same benefit.  The trust I put in a person to perform the task well is essentially no different to the trust I must place in a product to which I would contribute my own labor.

This has been incorrectly ignored for many years by manufacturers of consumer goods, but I don't think it has been ignored by customers.   The price paid for an item far exceeds the cost of the components and materials from which it is made, and even the labor of fabricating it, because what the customer is seeking is the solution to a problem and considers the degree to which he values the problem being solved.

When a product fails to accomplish its intended end, there is the sense that some part of its failure may be attributable to the way in which it is used, and it does seem to be a common attitude among manufacturers that the customer is to blame when the product fails to deliver its benefit.    But I have the sense, just from my overall impression of the way that people talk about products that fail, that the tendency of the customer to accept personal responsibility is fading - to which I would add, rightly so.

Another facet of the author's premise is that a service is bought and paid for on an ongoing basis, and that any failure of a service to deliver the expected benefit will lead the customer to refuse to renew the contract, and even seek to cancel the existing one.    I cannot disagree, but again do not sense that this is unique to services.

Customers will return goods that "don't work" and will certainly consider other alternatives when the good has been consumed or reaches the end of its lifespan if they are not satisfied with the outcome.   A seller of goods who considers each sale to be a one-time purchase, rather than one purchase in a continual chain of purchases, is very short-sighted.  So again, the necessity of customer satisfaction to ensure the continuation of business relations with them is not at all unique to the services sector.

All this considered, I do not have the sense that the author is teaching anyone the secrets of selling services, so much as mulling over aspects of selling services that are reasonably well known, but may indeed be secret to those who are selling goods and who take too shallow a perception of the value that customers seek by purchasing goods, which further blinds them to the reasons customers return merchandise and fail to develop loyalty to them.