Hats Off

Since more often than not the companies that are supposed to serve us don't, it would be very easy for this blog to degenerate into a critical whinge.

To break way from that I want to celebrate in this post a start-up company in the US (well Canada actually) who is potentially turning a typical consumer whinge into an opportunity.

Hands up everyone who enjoys dealing with an IVR (Integrated Voice Response) System in the companies we contact. You know, the phone systems all big businesses hide behind - "to be marginally driven mad, press 1"; "to be almost pushed to the limit, press 2"; "if you didn't think it could be worse, press 3 and be introduced to an entirely new set of maddening sub-menus". I know no one is holding up their hand because we all hate IVRs, but businesses all use them because they 'streamline the customer handling process' (in other words they save money).

www.fonolo.com is a new business which, rather than joining the rest of us to whinge about it, is trying to turn this frustration into a business opportunity. They have built a 'spider' which phones the IVRs and builds a database of their menu structures (in much the same way a web search engine 'spider' builds a search index), which they visually display for you on the web. You can have a look at the menu structure and dive straight into where you want to be. They call it 'deep dialling'. You press the 'call' button at the point you want; fonolo goes through the hassle of calling the company and traversing the IVR structure and then they call you to put you through when they have the customer service agent you need.

What a cracker of an idea!

You can even 'bookmark' frequently used 'deep dial' locations AND you can record and store the calls so you have a record if, for example, you are involved in a billing dispute with the company concerned.

Where was this service when I was having my run-in with my ISP telco provider???!!

I really hope this works for the team behind fonolo - it should. They have spotted an almost universal consumer frustration; knowing that companies are unlikely themselves to respond to these frustrations, instead of waiting around for that to happen, they have seen an opportunity and created a solution.

The most powerful new businesses in my view are those that overcome an evident customer frustration.

I'll be watching this one with interest.

And whilst I am handing out plaudits, let's take our hats off also to our own AAMI who seem to have recognised that we all hate IVRs and have come up with their own solution - get rid of it. As far as I can tell every phone call to AAMI is answered by a real person who solicitously asks how they can direct your call. Yay! That is a point of difference upon which to build a great customer-centric insurance company.

No Added Value

I went to the movies last night (The Dark Knight is way too dark for me by the way).

A bottle of water and a choc top to enjoy in the cinema cost me about a gazillion dollars from the snacks counter in the foyer.

Throughout the movie I was seriously disturbed by the crinkling, crunching and crackling of packets of food and the eaters who munched through their contents.

Why do we pay four times as much for a bottle of water or a packet of chips or an ice cream in a cinema? Is it just because we are a captive audience? (From a practical point of view it is because I so frequently forget to buy something at a normal store on the way to the cinema - curses!).

I could understand paying more if the cinemas had some sort of value adding proposition, for example, cinema food with noiseless packaging which doesn't crinkle and disturb other patrons. But they don't - the food is the same as you can buy outside the cinema. I could understand it if the business model in cinemas is one where you don't pay for the tickets but instead pay through the nose for the food (and maybe this is the model - maybe cinema tickets should be $30 each if we didn't pay ridiculous prices for food and drink - but if so they aren't very good at communicating this to we poor customers) - but this doesn't seem to be the case.

So, the only conclusion to draw seems to be that cinemas are taking the piss and gouging us. Why-oh-why would they do this? Because they can, and because we all mutely put up with it.

More power to them! But what a missed opportunity to add value and build loyal customers instead of annoyed ones.

A Green Nightmare - Clinging to the Past

Yesterday I got stuck on the way back home behind a flat bed truck loaded with Telephone Books being delivered door-to-door.

For heaven's sake, this is 2008!

Almost everyone has access to the web (68% of households now have broadband access in Australia) or a GPRS or 3G mobile phone. Finding a listed telephone number doesn't require wading through a mountainous book.

Why do they insist on dumping a useless book on our doorsteps. In my case, as soon as it arrives I strip the (non-recyclable) plastic wrap from it and consign the books straight to the recycling bin - but what a waste!!

Assuming the powers that be are not completely stupid or have their heads buried in the sand, I imagine there must be some obscure legislation that mandates every household has to have a free white pages phone directory delivered to their doorstep.

Why can't they simply make it opt-in and save themselves and the community many $ and generate some green kudos at the same time?

The situation is worse in the case of the Yellow Pages. I imagine all that keeps these books being delivered to our doors is the huge commercial vested interest Sensis (Telstra) has in keeping alive the myth that it is a tremendous advertising medium.

I haven't opened a Yellow Pages book in many, many years. Why would I when I can search for it all on the web?

I accept some people may still find the Yellow Pages useful and they too could opt-in to receive one. This though would expose the real (and diminishing) underlying economic value of the Sensis advertising franchise and so will presumably never happen.

Pethick's Next Feast

There was an interesting article about me by Amanda Gome in www.smartcompany.com.au this week.

http://www.smartcompany.com.au/Premium-Articles/EntrepreneurOnline/20080729-Pethicks-perscription.html?source=RSS

It was OK but I took slight exception to the inference that nudie (and ?What If!) had been failure.

Here was my response to Amanda:

Hi Amanda

By using the term “fallen entrepreneur” in a pejorative sense you potentially obscure both the facts and the lessons for other entrepreneurs.

It is true I was “kicked out” of nudie. I certainly wasn’t without fault in the proceedings but, at the heart of this was the fact that I had a very different vision and strategy for nudie than the board did. It provides a hard-won lesson for all entrepreneurs. When it comes to a contest between an entrepreneur’s vision and an investor’s money it is always the dumb money that wins!

I believed (and still do) that nudie is a powerful brand, and that as such we should have concentrated on brand development and marketing and outsourced manufacturing and distribution, via license, to another organisation that had a comparative advantage in those areas. nudie could then focus on what we did best and leave others to do what they did best. This seemed to me to be both a scalable model and an economically desirable one. The board believed nudie was a juice company and needed manufacturing and distribution to give truth to that.

I believe history will prove me correct (perhaps has done so already) and in part this is evidenced by the fact that the VC’s in nudie exited at a significant loss some two years after I had been “kicked out”.

But in any event nudie was a staggering success. It proved it was possible for a bootstrap start-up to tackle huge and profitable incumbent players in a mature industry, and create a brand (voted in 2005, two years after commencement, by readers of brandchannel.com as one of the top 10 “most influential brands” in the Asia Pacific region) and a business (turning over $18m a year after two years in business) that shook up that industry (have a look at the chilled juice cabinet in any supermarket now) in favour of consumers. It is a story which has and should continue to encourage and inspire budding Australian entrepreneurs and innovators.

The ?What If! experience is also one I am content with because, apart from the lessons I learned about the apathy big Australian businesses have towards innovation (and therefore their customers), it was a tangible demonstration of my increasing commercial maturity.

With ?What If! I stepped in as CEO to a 6 year old business which had been losing money for the previous 18 months. My initial objective was to turn that business around (as I had done successfully in the past, for example when I inherited a very dysfunctional, loss-making Encyclopaedia Britannica as CEO in the mid nineties). In the space of 6 months I determined that it would be possible to turn it around but that the size of the prize for doing so simply didn’t warrant the investment or the energy. ?What If! is a global organisation and they were better off investing in more lucrative and receptive markets. In the old days I would have seen it as a virtue to ‘soldier on’ and swing the business around. The more commercially mature me is more prepared to focus on the size of the prize.

I have three university degrees but have long held that formal education is not a patch on the benefits conferred by ‘lifelong learning’. Everything we do or experience in life gives us something – often it’s a lesson which we can build from. Particularly in the case of nudie, which I was extraordinarily attached to emotionally, the experience came with significant pain, but it still ‘gave’ me something personally and something to share with others.

I am applying all those lessons to Sultry Sally currently, and making those lessons available to other through my new business. I believe Sultry Sally will be a great success (both emotionally and commercially) and I am focussed on achieving that success by relying on the lessons of the past.

Two of the things I am very passionate about are the necessity of innovation in favour of consumers and the power of lifelong learning. One of the reasons the most valuable entrepreneurs in the US are those that ave at some time 'failed' is that they are presumed to have learned lessons from those failures. They'll take those lessons into their next venture. In Australia we have more significant cringe around the "f" word and therefore are often not as focussed on the benefits (and value) of learning from experience.

Short Termism Rules - Or How to Screw Your Customer

One of the reasons there is more innovation in small businesses and in private companies is because they often take a long-term view. Large (particularly public) companies are the opposite. They are forever focused on the short term.

Markets dictate it. They want to know (and reward) what is happening this quarter or this half, not what the plan is for 10 years hence. And in any event, even if market pressures weren't driving it, the people in big businesses would.

The average tenure of a CEO is something like 5 years these days. Other 'C Suite' managers often last even less. They want quick 'wins' to build their reputations.

The thing about 'winning' is that is almost always involves someone losing. The losers, when it comes to short term quick 'wins' for businesses, are often customers. We know it and that's why we customers frequently resent the brands we do business with.

The easiest way to gain a quick win is to focus on cost control. Building value through innovation takes time and investment and is never as easy.

Here are three current examples of how customers are losing while businesses reap short term gain. And in the process these businesses miss opportunities to cement solid (and valuable) lifetime customer relationships.

Ads on Pay TV
Pay TV in this country has been losing money for years so its shareholders have been 'investing' to support it. These losses have been, in part, because it has taken time to build a critical mass of subscribers. For the last couple of years it has turned around and Pay TV operators are now making money. The variety and quality of programs on Pay TV has never been better and people are switching to it in droves (at the expense of Free-to-Air TV). This is the context and I am not blind to it.

I have had Pay TV for years now and so have observed the recent changes. The one that really annoys me (and, based on the extent of conversations I have heard or participated in, I am not alone) is the seemingly exponential increase in advertising.

I haven't put a stop watch to it, but my perception is that now there is the same, or a greater, level of advertising on Pay TV as FTA. So my customer experience with Pay TV has fundamentally changed. My viewing is now interrupted at a rate which is egregious. And what has happened to my subscription cost - it has increased of course!

I wish I was strong enough to cancel the service in protest. But I'm not. My favourite programs are on Pay TV. So, I feel captive. And whenever we feel compelled to put up with a situation we can't change, resentment breeds.

I don't begrudge the long suffering shareholders in the Pay TV industry finally extracting some return from their patient investment. But why didn't they do it in a way which invited customer participation and therefore provided customer empowerment. For example, they simply could have explained the situation and the need.

Even more compellingly, they could have offered me a choice - perhaps, in the same way insurance companies provide lower premiums for customers who select higher excesses, they could have offered me a stepped level of subscription rates. Maybe at twice my current subscription rate I get channels completely ad free; at 50% more I get a maximum of 5 minutes of ads an hour; at the current rate I get 10 minutes of ads an hour and at 50% less than the current rate I get 30 minutes of ads an hour.

The point is, at the moment, I am an unwilling recipient of this change; it feels very much like I am being taken for a ride - I am paying a pretty significant subscription (certainly more than I was a few years ago) AND I am now being bombarded with ads at an unprecedented level which I know is making them more money. They are making (short-term) hay while the sun shines.

I resent them and if an option ever arose I would grab it as quickly as I could. I am not a happy customer or brand advocate.

A new credit card surcharge
I have had a wireless broadband modem with one of the telco carriers for 18 months or so. I use it as a back-up when my primary access goes down. I pay a fixed monthly charge of $34 and, at their insistence when I took out the contract, that charge comes off my credit card each month.

Last month I noticed the cost was $34.22. This month it became $36.26. I investigated and discovered that last month they started imposing, seemingly without consultation or communication, a credit charge surcharge. This month, still with no apparent consultation or communication, they added a $2 charge to have my bill delivered by mail.

I'm under contract for another 6 or 7 months. So I can't get out. They know I am trapped.

I have been paying by credit card and getting paper bills since I took out the contract. These were implied terms of the contract I took out. The cost of postage hasn't increased in the time since I took out the contract and there have always been merchant fees charged to them for credit card collections. In another business I too am a merchant who collects payments from customers using credit cards, and my cost of doing so hasn't increased in the last couple of years.

So, the costs of these elements has always been the same for my carrier telco. The change is that they have all of a sudden decided to pass the costs onto me - without my consent.

I can just imagine some bright accountant in the bowels of this telco coming up with the pitch to their boss. "Hey boss, we could reap an extra $X million a year simply by levying a credit card surcharge on everyones bill. It is so small no one will notice it and even if they do what can they do about it - after all they are locked into contracts".

Short-term gain at my pain. And what disintegrates in the process? Any pretence of a relationship between the brand and its customers.

Recent rises in bank charges and interest rates
For the first time in Australia, the major banks are increasing interest rates even though there has been no Reserve Bank initiated increase in official rates. The banks argue that their cost of borrowing has increased and they have been absorbing those increases; they also argue they are not passing on the full cost of their borrowing in the rate increases. Then they ask us 'why should our shareholder's suffer at the expense of our customers?'.

This argument - 'we have a duty to our shareholders' - is one which is frequently used by organisations to rationalise any circumstance where customers are getting screwed.

What it misses is that customers are shareholders too. A corollary to this sort of notion was the basis upon which Henry Ford built the Ford Motor Company. He flew against conventional wisdom and paid his workers more, in a world where the emerging capitalist machine argued that workers should be paid as little as possible, because he knew that his car for the 'every day person' was going to be bought by his workers and people just like them. By paying them more he was creating the ability for them to become customers and therefore fuel his growth.

Back to the banks.

We have all watched as their annual profits have soared to record multi-billion dollar levels in recent years.

Thanks, in part, to the same market ructions which are causing the increase in bank's funding costs, consumers are doing it really tough. Inflation is running at a higher rate than it has done for more than a decade; consumer confidence is at a 17 year low; petrol and food prices are through the roof; mortgage defaults are at the highest rate for years and on it goes.

So, at a time when the bank's profits are at an all time high, and consumer confidence and disposable income is at an all time low, what happens - the banks start increasing mortgage rates out of step with official rate increases.

Is this more short-term profiteering at the expense of a 'captive' customer base? You bet! And it breeds the same kind of resentment already described.

What if a brave bank had come out and said - 'We recognise our customers are doing it tough; we are going to take a hit for a year or two and support them; we're going to hold rates and that means instead of delivering another x% increase in profits this year we are going to have a y% fall in profits'.

What customer (existing or new) wouldn't want to be part of that bank? They could recoup some of their cost of funding by cutting out all marketing spending for the year because their customers would become word-of-mouth advocates. In fact they would be beating off potential customers with a stick.

Of course no bank CEO would ever contemplate such an option because it would be short-term suicide.


There is real value in long-term customer relationships where customers are advocates for your brand. Many (most) large businesses sacrifice this for short-term gain. Unfortunately it often appears to work, because their customers are held captive. But it breeds resentment which must increase customer servicing and marketing costs. There is an opportunity here for small, privately held businesses to take a longer term view, do things differently and build value.

Little Things

When people talk to me about building brands or businesses they tend to focus on the big things like their strategy, their ad campaign, their brand identity and so on. All very important.

But it is the little things which sometimes make the biggest difference and businesses shouldn't ignore them. It's a bit like a chain - it is only as strong as the weakest link.

I was reminded of little things when we went to pick up our new cars. We had to swap over the old ones and, as invariably occurs in such circumstances, we still had some emptying out to do. We ended up with a small armful of rubbish.

In the expanse of the pristine car showroom there wasn't a bin to be seen anywhere. So we were sort of stranded with our rubbish wondering what to do with it. We ended up walking into a sales person's office and finding a bin behind their desk.

This is not the first time it has happened to me in a car dealership, and not just when switching over a car. When I take my car in for a service there is usually detritus such as a take-away coffee cup or a few old parking receipts which needs disposal, but even in a service area, car dealers aren't inclined to besmirch their premises with garbage bins.

Of course this isn't about bins or the lack of them. It is though a very small sign that the dealership is not really putting themselves in the shoes of their customers. They may be trying to think of their customer but they aren't 'being' their customers and so are missing the little things that are grounded in true customer insight.

Businesses that sweat the small stuff are showing they really empathise with their customers and, as a result, are often creating significant points of difference for their business.

Oh, and whilst on the little things - what does it tell me when the clock on the brand new car is set 4 years, 3 months and 7 hours earlier than the delivery time as I drive out of the showroom?
Forgive the rhetorical question - it tells me they are sloppy when it comes to attention to detail and that is likely to characterise all their customer interactions.

Consumer Power (or lack of it)

It was actually quite difficult to buy our two new cars.

Like most consumers now do in advance of any major purchase decision, I had done extensive research on the web about the cars I wanted to buy. I knew their features and benefits; I knew how much they cost; I knew their pros and cons and had read numerous reviews.

Based on all of that I made a decision. Once having made that decision all that was necessary was to cut a deal.

I arrived at my chosen dealership seeking to cut such a deal.

It quickly became obvious that the dealership didn't want to sell me the cars in the way I was prepared to buy.

The first problem I encountered was a salesperson who was determined to walk me through all the details of the (first) car. I really didn't want to know. I had researched it all well before hand. Despite my attempts to avert him he remained determined that we couldn't get down to business until he had completed his sales routine around the car. Eventually I gave in and let him say his piece.

"Now", I implored, "can we talk turkey?" "But surely Sir would like to test drive the car first?", was his response. Actually, I didn't want to test drive the car I just wanted to see what the numbers looked like. The salesperson was scandalised. I could see the thought going through his mind - how could I possibly contemplate buying a car if I hadn't test driven it? At that point he seemed to make up his mind - I obviously wasn't serious - and I think that mindset set the agenda for the rest of our interactions.

It actually took me 3 visits to the dealership, and multiple phone calls, before I could come close to getting a deal done. Every time there seemed to be a new problem. For example, I wanted to buy two different makes of car. Both are retailed from the same dealership and this is why I chose the dealership, and persisted with them in the face of the difficulties I had getting the deal done. But clearly the business was not set up to accommodate someone who was trying to cross the brand divide. No one seemed to have an oversight function.

Eventually, in discussion we both (the dealership and I) got our differences on the table:

• They wanted people to be emotionally committed to a vehicle (for obvious reasons) prior to purchase;
• They wanted the prospective purchasers in the dealership, face-to-face with a salesperson to crunch a deal;
• They wanted to keep the sale of the two cars separate, in separate parts of the dealership;
• They wanted an opportunity to up sell and to cross-sell financial services and so on;
• They actually admitted, "We have a way of selling and we've found we are pretty comfortable sticking to it".
• I wanted a 'deal' based on the fact that I was prepared to buy two cars;
• I wanted their best set of numbers committed in writing;
• My preferred way of dealing was by email rather than wasting time going into the dealership;
• Mine was a rational purchase not an emotional one;
• I knew what I wanted and didn't want anything else or any extras.
• I felt harassed by their constant phone calls attempting to 'sell me' on something else.

We got there in the end but it could have been quicker, easier and happier for both of us. It wasn't a pleasurable experience.

They have fallen into the trap that so many businesses do these days. They want to force customers to deal with them on their terms, rather than being flexible enough to deal with customers in any way the customer chooses.

Consumers want choice. Not just in the products and services they buy but also in the way they buy them.