Tag Archives: Business model

Looking In The Horse’s Mouth

As you might have read the other day, I had a birthday. It was lovely, thank you, and in addition to numerous phone calls, texts, and social media shout-outs, I received a bunch of emails from companies sending me “gifts.” Yes, in quotes.

I’ve written before (in fact, just a couple of months ago) about the gifts many companies “give” us. I also wrote about how nothing is free several years ago, so my rant today isn’t exactly new ground. However, I think it’s an important enough thought for those of us in business that it bears repeating. I also am happy to point out how two companies got it right.

The vast majority of the emailed birthday greetings contained an offer that generally read “Happy Birthday! He’s a gift of $15 off on your next order.” Sometimes it was a percentage discount but you get the idea. I had to spend money to take advantage of the offer, and I had a limited window in which to do so, generally 30 days.

Let’s unpack that. First, what if I don’t need your product or service in the next month? I mean, a discount on an oil change is fine but I just had my oil changed (at your shop, by the way – you should know that). You’re revoking my gift because I was just in? Second, what if my typical order is a lot more than your general average order value, something else you should know if you’re actually on top of your data and not just auto sending something based on a birthday you have on file. Shouldn’t I get a bigger “gift” since I’m a more valuable customer? I got one restaurant that I go to infrequently sending me a $15 “reward” on my birthday that I could redeem only by installing and using their app and dining there. That would be in the next 30 days, of course. To which party is that a gift?

I’m a believer that gifts need to be unconditional. You should be giving because you want to and not because you expect something in return. Two offers I received actually met this criterion. The good folks at the Alamo Drafthouse Cinema sent me a free movie ticket. That’s it. I’m not obligated to buy food or drinks, I don’t have to bring a friend. I can redeem it via their app but I don’t have to – just present some ID and my account information at the box office. The gas chain I use frequently sent me a coupon for 200 bonus rewards points. I just have to have it scanned the next time I visit and they will be added to my account. I can redeem those points along with the others in my account for free stuff – gift cards, food, etc. And 200 points is significant – it’s what you’d get from spending about $25 with them. No strings attached. Happy Birthday!

It’s nice (and important) that we surprise our customers with gifts, whether that’s content, discounts, or something else. We need to do so without strings because those strings are quite visible and will harm the customer’s opinion of us, not enhance it. As I wrote in June, A gift involves altruism. If there is an ulterior motive lying within, it’s not a gift, right?

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Filed under Helpful Hints, Huh?

Symptoms, Diseases, And The Long Term

We’re into that time of the year when corporations are reporting their results for the last quarter. I tend to look at any single quarter’s results as a data point and since I’m a believer in watching things through the lens of the long-term, I mostly ignore anything strongly negative or positive unless it’s part of a long-term trend.

I’m sure it’s not a shock to any of you that the cable TV provider business is in a downward trend. I’ve written about this before and you might be one of the millions of folks who have cut their cable cord and gone pure streaming or supplement your streaming with an HD antenna to get your local TV over the air (everything old is new again!). Charter Communications is one of those cable TV providers who is watching their user base deteriorate. This last quarter, the company’s video customers sank by 150,000 subscribers, now totaling 15.8 million. At the same time, their Internet customers grew 221,000 to a total of 24.2 million, which also mirrors what’s going on elsewhere and the aforementioned trends. At the same time, these distributors are getting hit with increased costs for programming – what the cable networks charge the delivery guys to carry their programming (and in theory, the availability of which is why people pay for cable in the first place).

What the CEO said in making the results announcement, however, doesn’t mirror other CEO’s thinking and that’s what I want to highlight today:

Asked why the company doesn’t raise prices to cover increased programming costs, CEO Tom Rutledge said, “If you do a 10% programming price increase and lose 10% of your customers, you don’t really get anywhere and yet you’ve alienated a lot of people. In fact, that’s actually happening and has been happening. I expect continuous fighting for the foreseeable future.”

Mr. Rutledge gets it.  He is not confusing a symptom (customer loss amid increasing costs) with the disease (a rapidly changing business model reflecting consumer resentment at the high monthly out of pocket costs). Rasing prices would, in my opinion, accelerate the negative trend. It would stabilize earnings and make investors happy in the short term, but it’s not sustainable and would ultimately result in disaster.

More of us in business need to think that way. What’s a symptom and what’s the disease it reflects? What’s the right play for the long term even if it hurts in the short term? Does that make sense?

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Filed under Consulting, Reality checks

Intentional Mislabeling

Let’s start with a question this Foodie Friday. If I offered you two carrots, one of which was had a label that said “non-GMO” and the other didn’t, which carrot would you choose? “GMO” as I’m sure you know means that this food wasn’t made from genetically modified crops. Would that make a difference in your selection?

It’s a trick question, actually. There are no genetically modified carrots in the marketplace, at least not yet. Neither are there GMO strawberries. That won’t stop you from finding carrots or strawberries labeled as non-GMO though. You’ve also probably seen that many chickens are labeled as “raised without antibiotics” while others don’t bear that label. Does that influence your thinking? It shouldn’t: antibiotics have been banned on chicken farms for over a decade.

Some labels in food can be horribly misleading while others are not. “Organic”, for example, really does mean that the food was grown without synthetic pesticides and fertilizer. It’s a legal term meaning that there are penalties for its misuse. You might think that non-GMO foods are organic and, therefore, better for you. Unless they also say they are organic, non-GMO foods are conventionally grown using synthetic pesticides and fertilizers.

Why I bring this up in a business blog is that the misuse of these and other terms in marketing is not due to confusion about them. It’s due to the willful deception of the consumer by an unscrupulous marketer who at best is just jumping on a bandwagon and at worst is looking to charge more for an inferior product. Your “cage-free” chicken still lives indoors in a jammed coop and those “free-range” chickens for which you pay a premium probably haven’t been outside either. It just means that they have access to go outside if they can find and get through one of the few doors in the henhouse.

I’m a fan of clear, enforceable labels in all products, not just food. What the hell does “skin organics? mean on a cosmetics label? Chemical-free sunscreen? Not possible, yet some brands are labeled just that way. The labels don’t write themselves and as marketing people, we need to hold our customers’ interests paramount. Their health too since it’s rather difficult to get a dead consumer to buy much of anything. Make sense?

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Filed under food, Helpful Hints, Huh?