Jon Michaeli’s Blog


Verizon FiOS: A Case Study of Anemic CRM

I’m sure many others are laughing along with me as Comcast and Verizon spend ridiculous amounts of money attacking each other on TV, stretching truths and greatly exaggerating the other’s fallbacks. As is true of virtually all negative advertising, the message about customer benefits gets diluted in all the bickering. When it concepted the campaign, Verizon likely was aiming to replicate Apple’s “Get a Mac” ad series success, portraying a Verizon technician as cool and clean cut, and his Comcast counterpart as disheveled, overweight, and anything but hip.

But alas, Verizon is no Apple. Apple delights with elegantly designed products and fuels demand with brilliantly executed clean and bold marketing. Verizon is inherently disadvantaged as a tech hardware and infrastructure company. There’s no argument it provides cool services, but it cannot create the same emotional connection, because these days a landline phone connection is BORING, wired broadband is a commodity,  and credit for the sharp picture in your living room goes to your high quality HDTV.

But enough with the Apple comparison, as that is not the focus of this post. My point is simple. The hoards of cash Verizon and Comcast are spending to one-up the other in this fight would be far better invested in sophisticated CRM systems.

No question, price and number of HD channels are two factors to consider when choosing a cable provider. And internet speed is important. But at the end of the day, are the companies’ capabilities really all that different? On the other hand, if you buy a bundled package (i.e. at least 2 of these 3 – phone, internet and cable), before long you’re bound to have a technical issue with at least one of them. Lord knows, FiOS has had numerous outages and glitches since I started using them around 2 ½ years ago. Working in the high-tech/internet space, I understand complex systems sometimes fail and service upgrades often don’t go quite as planned. So, I’ve been patient with FiOS as they’ve gone through their growing pains.

But recently, when my credit card was triple charged almost $300 (i.e. $900 in total) due to a glitch on the FiOS website, I wanted answers, and I wanted them immediately. The fact that it happened in the first place is very disconcerting. That I still don’t have the issue resolved a couple of months later after speaking to over 10 Verizon reps (including a couple in the Collections Dept.), is inexcusable.

My initial experience with FiOS was great. The installation was fairly smooth, a local manager stopped by to inspect the work and ensure my satisfaction (he even gave me one of his cards), and they waived the installation fee of an extra phone jack for my fax machine. Judging on this one-time event alone, I would give FiOS a solid “A” for service. Therein lies the difference between simple customer service, and its far more powerful cousin CRM, which requires deep commitment to put systems, procedures and people in place to foster relationships with customers throughout the life cycle. It is here that FiOS has failed.

As one of the first subscribers in my town who’s still with FiOS, by definition, I am one of their longest standing (i.e. loyal) customers. My guess is I’m also in their upper tier of monthly spend at ~$160. And perhaps my best quality of all: I always pay my bill on time. Undoubtedly, these are 3 of the most important factors in assigning value to FiOS’ member segments. Not rocket science.

So CRM 101 should reveal to FiOS that if nothing else, I’m an above-average customer. Work even a little to keep me happy (e.g. a priority 800#) and show me you care (e.g. actually call me back when you say you will), and there’s a good chance I’ll stick with you. Take it to the next level and show you understand early adopter = influencer with potential for real evangelism, and watch how many people I bring to your service. And if segmentation is too much to ask, at the very least try following the no longer new Web 2.0 trends and establish a presence on social media channels, such as Twitter. Score one for Comcast, which is leaps and bounds ahead with its @ComcastCares initiative. Obviously Twitter alone is an insufficient strategy, but it symbolizes Comcast’s commitment to differentiate on service.

Hertz’s Loyalty Disincentive

Disclaimer: It is likely the commentary below applies to a broader set of rental car agencies, but as I have been tracking the Hertz website over time, my complaint is directed at this one company.

As a Hertz Club Gold member, I book with the company on a regular basis. And each and every time, I am amazed at how they try to take advantage of their best, and presumably most loyal and lucrative, customer segment. If your sole aim is to book as quickly as possible, or price isn’t a primary concern, you can easily pay 50% more than a typical visitor to the website.

For a recent one-day reservation in Las Vegas, I compared three different rates for a daily rental: 1) the standard rate (i.e. no discount code), 2) the “exclusive” Gold rate, which requires log in, and 3) the AAA-promotional rate. For a midsize “Madza 6 or similar” rental, the rates were $45, $65 and $19 respectively. That’s right, the “loyalty” rate was $20 higher per day than the rack rate and $46 higher than the AAA rate (which did not even require validation). Fortunately, you can still book the lower promotional rates while you’re logged into your account; you’ll just need to know (or learn) your way around the site and be willing to spend more of your precious time.

Yes, I am quite familiar with the business rationale behind price discrimination, but these rates were available on the same Hertz.com website at the same exact time, and none of the rates required manual entry of a coupon code. It seems to me like Hertz feels entitled to collect a huge premium in exchange for the convenience of having a car waiting when you arrive at the airport, the one real perk of a Club Gold membership. No wonder why it’s so easy to have the $50 initiation fee waived.

There’s always the chance, however slight, that Hertz has done thorough pricing analysis, and from a pure revenue optimization standpoint, this has proven the optimal result during the testing period. Still, I imagine that many other frequent travelers have had the revelation that Hertz considers gouging its premier customers as sound business practice, which no doubt has led to negative sentiment towards the brand. I’m relatively certain Hertz has no clue what that bad will translates to in terms of lost revenue in the medium to longer term.

My love-hate relationship with Amazon

I admit it. I buy on Amazon.com all of the time. The bottom line is prices are aggressive and the return policy(ies) are typically consumer friendly (this varies depending if you are buying from Amazon directly or from one if its merchants). If a smaller “category-killer” e-tailer is competitive on these measures, it has a good shot of earning my business. That said, if it’s a registered Amazon merchant, I’ll likely opt to buy through Amazon.com instead of on the company’s website, because I am less confident that the rinky-dink operation shipping out of its garage observes best-in-class privacy and security practices. And, I believe if a merchant feels accountable to Amazon – with the risk of being removed should Amazon receive too many complaints – it will be more inclined to resolve consumer issues quickly.

Amazon is approaching a “one-stop shop” in the truest sense, so I can get my online shopping done at one destination, without providing my credit card and shipping details multiple times. I know it’s lame, but I also enjoy the challenge of qualifying for free super-saver shipping with as close to the minimum $25 purchase as possible.

My issues with Amazon relate to user experience. In its effort to rule the land of web commerce in a head-to-head faceoff with eBay, Amazon has drastically complicated the browsing and buying experience and thoroughly confused shoppers. Average consumers don’t know that Amazon has two distinct business models, 1) taking inventory and shipping from local distribution centers, and 2) passing orders onto merchants who drop ship from their own stores or warehouses. Despite Amazon’s efforts to explain within the selection and checkout processes, most consumers don’t grasp why items do or do not qualify for free shipping or why they have to pay multiple shipping fees.

Perhaps even more difficult to understand is why the same product can show up multiple times on a search results page, often with a range of prices (if you’ve never experienced this before, just do a search on Melissa and Doug Deluxe Wooden Multi-Activity Table and look at the top 3 results). Again, this is because numerous merchants within the same category – or “department” in Amazon terminology – are selling the same product. Sometimes price disparities are due to games retailers like to play (e.g. charge a lower price and make it up in the shipping and handling charges), which consumers have grown accustomed to when viewing cross-merchant product availability and pricing on shopping engines like pricegrabber.com and bizrate.com. But, this is awkward and unexpected behavior for a single website. My favorite scenario is when Amazon has its own inventory to display, and its prices are higher than its merchants. This probably does not happen too often though, and when it does, Amazon still gets a bounty on the sale, collects valuable consumer data, and owns re-marketing rights.

So what’s the solution? For starters, I’d love to see Amazon more intuitively organize and display its departments, merchants and product selection. Perhaps it should consider mimicking the metasearch and parametric filtering combination used by Kayak.com (travel) and Indeed.com (job search), but instead of clicking away, keeping users within the Amazon storefront. This would make the seller’s name more visible, clarifying when Amazon is the merchant or just the middleman, who is charging which fees, etc. In addition, it could allow shoppers to drill down to the details (e.g. shipping fees, merchant rating) they need to gain comfort with the purchase and complete the selection. Then via an open pane in the window, customers would return to the main Amazon site where the purchase is funneled to a central shopping cart.

Why are big brands like Starbucks and Pepsico so darn sloppy?

Snap3So I’ll start off by admitting that I’m in a bit of a funk today. I don’t have much of an explanation, except that it’s Monday. The weather’s actually quite nice for early May in New England.

Right to the point. I have two beefs, and I’m going to cover them together, because neither is worthy of a post on its own.

My first one re-visits Starbucks’ pricing. I’m already bitter that not all Starbucks (e.g. airport locations, Barnes & Noble stores) accept my Starbucks card (yes I understand why), so I pay 40 cents extra for soy milk. Today, I ordered a tall latte with an extra shot (a regular tall has only one, so what’s the point?) and I realized I paid the same price as a grande (which has 2 shots), except a grande has quite a bit more steamed milk. I looked more closely at the latte pricing and noticed that adding a shot to a grande makes it more expensive than a venti (which has 3 shots and also a lot more milk). Yes, I’m familiar with the concept of volume pricing, but in principle the regular price you charge for a larger size should at the very least be higher than the price for the smaller size. Why? Forget business sense. Because if you don’t follow this common sense principle, consumers are bound to be bitter once they figure it out.

The other one strikes a chord, because it relates to a personal pet peeve I’ve already blogged about twice in my Turner Broadcasting and BMW posts. Pepsico already has egg on its face over the Tropicana fiasco. And now, a chief marketing pitch for the new Gatorade drink G2 has an obvious grammatical error (see Google search results image at top). The page and tons of other ads are plastered with the phrase “Less Calories” (instead of “Fewer Calories”). This should never have made it past even the most junior copy editor. Truly embarrassing!

What is Twitter’s saturation point?

Want a perfect example of hockey stick growth? Just take a look at Twitter in 2009. Unique visitors have climbed from ~2mm at the end of 2008 to ~10mm by the end of March, 2009. That’s a monthly compounded growth rate of 70%!

Twitter’s base platform is rudimentary at best, which is why 3rd parties have built ad hoc services, such as TweetDeck, TweetVolume and TweetPhoto (the most recent addition) on top of Twitter to help users manage and enrich their posts, organize their streams categorically, integrate with other social networks, and monitor chatter for CRM purposes.

But, as a tool to reach new customer prospects – especially for a bootstrap that cannot afford to hire a team of social media specialists – I cannot help but feel Twitter will soon follow in Facebook’s steps as cluttered, overwhelming, and tough to navigate. Granted there are some key differences. Perhaps two of the most important in Twitter’s favor are 1) The hurdle for participation is extremely low, and 2) Twitter simulates a real-time one-to-many conversation. That said, Facebook has its own strengths (e.g. more of a community feel, more robust in functionality acting as a one-stop destination site). Anyway, try creating an application and/or fan page as a cash-constrained startup on Facebook these days and see how little traction you’ll get without assigning a leading agency and devoting 24/7 to the project.

We’ve seen this before in the digital era. Look no further than email, where it’s now virtually impossible to gain mindshare. Lists quickly get stale, staying whitelisted gets ever more challenging, and standard email open and click thru rates have plummeted to the low single digits. Implement best practices such as list cleansing, personalization, database triggers and contextual targeting, and you’ll do somewhat better, but again there’s an opportunity cost for your effort.

No I’m not debating that new Web 2.0 techniques are quickly going the way of their digital predecessors like email and display advertising. But the fact that SPAM and “posers” cannot be eliminated beyond a certain point, the sheer volume of traffic will create tons of competition and “noise.” This is the very reason why I am not a big fan of social media outreach as a standalone strategy, especially for brands at the outset of generating awareness.

I’m far from the first to advocate for integrated marketing, but aside from its value as a multi-touchpoint, consumer life-cycle grounded strategy, I believe it is an effective solution to this problem. There’s no debate that understanding your customers and prospects, finding a way to effectively communicate your value proposition, and stating your goals are a prerequisite. But I believe the next best step is working within an initial budget and ROI goal to develop a “shtick” or hook that is compelling, differentiated, perhaps edgy, but definitely buzzworthy. This offers the best chance of plugging in to the influencer crowd of the social web, and it is in their hands to determine whether your brand is destined for true virality. But, for creative concepts to truly lead to successful execution, I believe the message (focused, simple and consistent) should be distributed across mediums and communication channels, leveraging other digital tactics, grassroots initiatives, and even more traditional methods, including microsites, street/stunt/event marketing, media outreach, and mobile ad campaigns.

VistaPrint – Great Product, Awful User Experience

I admit I’ve used VistaPrint several times now for business cards, address labels, even invitations for my wedding brunch! Plain and simple, the quality of the product is excellent, the prices are very competitive (you can get 250 free business cards and only pay shipping), and there are almost always web coupons on couponcabin, retailmenot and the like. (If you’re a repeat customer, you’ve likely received these coupons directly with your merchandise).

BUT, if I were not a savvy internet consumer, I would be extremely frustrated (at the very least) and angry (more likely) at the overly aggressive cross-sell and upsell tactics used on the website. As I understand it, VistaPrint heavily relies on this for its success.

Don’t get me wrong, as a marketer I strongly advocate increasing transaction size while you have a visitor captive in the shopping cart funnel (and even before). But VistaPrint takes this way too far; they clutter the screen with tons of add-ons, making it difficult to differentiate between your selections and their recommended items. Navigating to the final purchase page takes way too much time. At one point they even force you to choose between 2 options, one reconfirming only your items and another with their selections added. And if I’m not mistaken, the latter is placed at the top of the screen, requiring the user to scroll below the fold to see his original order. It’s truly a miracle if you make it through with only the merchandise you intended to purchase.

And it doesn’t stop there. After you complete the transaction, for a limited time, VistaPrint offers a discount on additional quantities of the same merchandise and other related items. The first time I experienced this, I was really PO’d feeling as though I had paid too much.  Now I’ve learned to game the system and place half of the original order at the higher price, then add the other 50% afterwards at a lower price. (Note: it takes only one extra click of the mouse to do it this way). I’m assuming VistaPrint doesn’t want to encourage this type of behavior, but who wouldn’t quickly figure this one out?

I’m left scratching my head. How has VistaPrint been able to get away with this for so long? They appear to be the market leader, but similar services are available, so at least to some degree, competitive forces are in play. Are VistaPrint’s prices so attractive that consumers simply tolerate it? Do they have far more variety and customization options? Do they market better than everyone else? Do they primarily target SMBs who can often make use of their complementary product recommendations?

I have to believe that ultimately in targeting individual consumers, companies must follow the guiding principle – “Generating higher sales at the real detriment of user experience may increase near term sales, but will be unsustainable in the long run.”

New Auto Tax Credits are Far From Optimized

This post is a bit off-topic for me, but as I recently bought a CPO (certified pre-owned) car, I was directly impacted, and admittedly I am slightly bitter.

Have you heard of Obama’s special 2009 tax break for new car purchases? It allows people to deduct state, local and excise taxes on their 2009 tax returns.

Here’s my beef.

If the deduction is primarily intended to help struggling US auto makers, then why make the credit applicable on imports as well? Since domestically produced cars cost less on average, the consumer benefit in absolute dollar terms will on average be greater for foreign car purchases.

If the deduction is primarily intended to stimulate consumer demand, then why make it applicable only on new cars? Relative to disposable income, the deduction is more meaningful to lower income individuals and families – who are more inclined to purchase a used car – than Americans buying $50,000 luxury sedans and SUVs (Note: $50K is the threshold where the tax benefit ends). And since relief is on a percentage basis, including pre-owned cars would not likely discourage discerning consumers from spending a premium on a 2009 model.

Aside from these arguments, if consumers deem the credit meaningful enough so as to alter their buying behavior and upgrade from used to new, used/new car inventory would go out of balance (esp. given heavy discounting on new cars today). If used car inventory levels creep up, automakers will lose pricing power on new vehicles. Naturally, the market would correct for this, deflating used car prices until the balance is restored. Unfortunately, the burden ultimately falls on the consumer, who now collects a lower price for his used car when he looks to trade it in to the dealer or sell it to a private party.

Did anyone proof BMW’s marketing slogan?

Posted in Uncategorized by Jon Michaeli on March 23, 2009
Tags: , , , , , ,

BMW bannerBMW should learn a lesson from Turner Broadcasting’s recent gaffe. Two month’s ago, I blogged about the incorrect English used in the prominently displayed message “More Movie, Less Commercials” on all TBS and TNT home movies. This message has since been removed.

Well, it seems BMW (a German company with a huge presence in the U.S. to know better) needs to retake the same 7th grade grammar lesson. Featured in the top banner on the BMW main home page is the following phrase “Less emissions. More driving pleasure.” Of course “Less” is incorrect in this context and should be replaced by “Fewer” or “Lower.”

Some might say you really can’t count emissions, so “Less” is appropriate. To those, I would argue that they are using the term “count” too literally. We can certainly measure the number of grams of CO2 a car emits, just as we can measure the number of calories we eat. Surely you don’t wish to argue that “Less Calories” is grammatically correct…

I just don’t get how a brand that is so refined and meticulous with its engineering, styling and design can be so sloppy in its marketing. Without a doubt, this one of the most heavily trafficked pages on BMW.com – the first page people visit when coming to the website – and therefore the company’s first opportunity to make an impression. (Actually it shouldn’t be among the most frequented pages, as I’d expect BMW would cookie me and automatically redirect me to the USA site for future visits, especially if I’m connecting via a U.S. IP address, but we’ll leave that gripe for another day.)

At long last, Starbucks launches pairings menu

Posted in Uncategorized by Jon Michaeli on March 10, 2009
Tags: , , ,

I’m not sure what took so long, but for the first time I can remember Starbucks has started to bundle coffee with its pastries into one package price. At least in my neighborhood, the options are very limited (I’m assuming this is a soft launch and the company is testing the market and will have more variety and price points if proven successful), but I still find the “tall latte and choice of oatmeal or coffee cake for 3.95 (all day)” too limiting and a bit arbitrary.

I’m guessing scones and muffins are the most popular pastries, and so the rationale is likely “We don’t have a problem getting full price for our ‘bread and butter’ products, so let’s continue to sell those as standalone items and instead start with those that are struggling and need some awareness and trial.” A slow, cautious approach makes sense – move too quickly, and the company could very easily cannibalize sales if higher volume associated with bundling doesn’t more than offset the lower margins of doing so.

I’ll assume Starbucks has mined the data and crunched the numbers, as the register receipts have all the information necessary to formulate a smart strategy. That said, I cannot help but feel the current pairings menu is too narrow to draw actionable conclusions for a more widespread rollout in the near future.

Obama needs a marketing campaign

At this point, is a single American adult unaware of how the economy is doing? You’d have to live under a rock somewhere not to be up to date. And it may not even be that easy, as there might be access to a WiFi hotspot under the rock. As always, we have the media to thank for the dreary play-by-play. The news gets worse by the day, and the stock market continues to plunge to new lows.

Then, once every few weeks or so, Barack Obama or one of his cronies addresses Congress or the Nation (formally or informally). They try to inject some hope into an otherwise dismal picture, Americans feel a sense of solidarity for an evening, only to wake up the next morning to the “doom and gloom” all over again. News of the day: Unemployment climbed to 8.1% in February.

Obama has already done far more than his predecessors to stay plugged into public opinion and show he lives in the 21st Century. He very effectively used social media to fuel his Presidential campaign, launched a series of websites, including change.gov and recovery.gov to educate people on the programs his administration is putting to work to stimulate the crippled economy.

Despite it all, Americans want to believe Obama’s intellect and “Dream Team” staff will start turning things around in the second half of this year. Amazingly, Obama’s popularity is the highest it’s been since taking office 6 weeks ago. Are his programs really that great or do his pure intellect and the convincing manner in which he speaks deserve the credit? Are Americans in denial or feeling such a sense of desperation that there’s no alternative but to put all faith and confidence in our fearless leader, else give up hope. Or, should we attribute his favorability to a combination of these factors? No matter what the root cause, there’s no disputing that Obama’s power with the public is unprecedented, at least in my lifetime.

Question: So, what does the government do now? Answer: Launch an Integrated Marketing Campaign.

There’s no disputing that recessionary times are to a large extent, a self-fulfilling prophecy. It starts with bad news: Americans are defaulting on their mortgages and forced to foreclose on their homes. People take notice. Big name banks are incurring billions in losses and taking federal loans to avoid bankruptcy. People begin to realize this isn’t just another hiccup in the nation’s growth trajectory. There are large scale layoffs, and the stock market plunges eroding trillions of dollars in wealth. People worry they too will lose their jobs. The nation’s car manufacturers receive billions in taxpayer bailout dollars to avoid bankruptcy (only to relieve the same scenario months later). FDIC announces by year end they will run out of funds to insure the nation’s banks. People panic! It’s a downward spiral, and the more momentum it gains, the more impossible it is to stop.

If we are to prevent the economy from plummeting even further into recession, there is a window of opportunity right now.  We desperately need some regular encouragement and positivity, proof points that the new government programs and spending are having an impact. I’m thinking case studies of real people and real situations that you and I can identify with. And not stuck on a website that requires people to go surf on their own.  Obama needs to deliver the message to people in their homes, on their PCs, and wherever else he can grab their attention. As an added benefit, the ads can promote the websites where so much useful, yet extremely confusing and constantly changing, information lives. I mean what percentage of folks really have a clue if they qualify for a mortgage refinance at a government subsidized rate?

Some will say I’m crazy – “You think the government should use taxpayer money to buy TV ads?” Well, as a new age marketer, I obviously would recommend a disproportionate share of the spend be on nontraditional forms (e.g. social media, grassroots and viral programs), but yes, I do think broadcast should be part of the campaign. And why not? The government gave billions to GM, and it is still blowing millions and millions of it on the same old ineffective and boring car ads. So, I guess I trust Obama will be far more judicious and creative in how the ad dollars are spent. Also note, I am advocating that a marketing plan should accompany new legislation and spending, and NOT replace it.

And if Obama can be successful in pumping just enough positivity back into our spirits, what has come crashing down can start to recover. It works both ways. If people and companies increase spending even a little and the economic numbers improve slightly, the prevailing opinion will be that we’ve seen the worst. Spending will increase a bit more, and the story continues.

On the other hand, if a vehicle with the power of a multifaceted and influential ad campaign does not materialize in the near future, Obama’s popularity will diminish, the public will lose confidence, and we will be in for a prolonged depression.

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