| Executive Times | |
| Volume 1, Issue 3 | June, 1999 |
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Asking customers and other novel ideas I don't know, how much do you want to pay? Several companies are experimenting with new ways to establish prices with customers. It's too early to conclude that the methods being used today are likely to dominate in the future or even survive, but they are certainly getting increased attention, and are shaking up those with vested interests in the current forms of price distribution. In a reversal of the traditional rule where the seller of goods sets the price, some players are asking customers first what they are willing to pay. Budget Rent a Car Corporation started an online bidding program for car rentals in May called BidBudget. In a market where the price of renting the same car on the same day at the same location already varies based on corporate and affinity discounts, this move makes a lot of sense for consumers and for the company. Consumers fill out a simple form at the www.budget.com site indicating the location, dates and car type desired along with the price they desire. Within a day, Budget responds with an e-mail notifying whether or not the bid is accepted. As we went to press, the site was still being developed. BankPhiladelphia began auctioning 12 month Certificates of Deposit online in May at www.usabanc.com, the website of its parent, USABancShares. The bank limits its exposure on the upside by setting a ceiling, and commits to about $1million in CDs each week. This site is also under development. When we last checked, they had a great Shockwave sound, but not much else. Stay tuned. Priceline.com has come up with a patented method for selling products and services. For airfare deals, they ask the consumer to make some selections, commit to pay, and then find out whether they got what they wanted. We checked out the airline reservation process and took a pass, finding cheaper and more certain deals elsewhere. It seems that to make priceline.com most effective, you need to be very flexible around times and airports. They. ve found plenty of customers willing to trade flexibility for savings. They are branching out into other items as well, including hotel rooms, new cars and home mortgages. Who sets the terms in your business, your company or your customers? How difficult is it for you to establish and communicate prices? Do you know what your customers think about your pricing approach? Are some of your competitors experimenting with different pricing methods in different distribution channels? Is it time for you to try some new ways to price your offerings? Can you help me win? Another emerging trend relating to customers involves evaluating employee performance based on customer satisfaction measures. All the reasons for doing this seem appropriate, but we've started to observe increased direct employee involvement to achieve high scores. As in Lake Wobegon, where "all the children are above average," many employees want to be sure that their ratings come in above average. At the Wyndam Milwaukee Center, a reservation clerk enclosed an evaluation card with the reservation section highlighted, along with a cover letter requesting a quick completion of the card. In the restaurant of that hotel, the server handed out cards and pens to everyone at our table at the end of the meal explaining that there was a contest to get survey cards completed. All five people at our table complied, giving her high scores. At a car dealership, the service technician asked directly for the highest rating about his performance when the survey arrived in the mail. He went on to elaborate that the car maintenance was completed on time, at the expected price, and a loaner car was made available, as promised. Our part in completing the transaction was to rate his personal performance as excellent. At some point, the use of these surveys as performance measures becomes skewed, and if customers become irritated by direct requests for survey participation, the whole purpose of the survey process gets compromised. Have you examined the dynamics of your customer satisfaction survey process recently? Do you have a good understanding of how your customers evaluate your business? How do you use the information you gather from customers? Are your performance incentives focused on service to customers or on achieving scores? Trusting Intermediaries One of the books mentioned in the Reading section below, Net Worth, focuses on the benefits to customers and companies in using intermediaries to give and get detailed personal information. The lynchpin to achieving this outcome is finding a player that both consumers and companies can trust. Who. s likely to be that trusted intermediary? Trust is built over time, and can be lost easily. Financial institutions seem to be well positioned to carry out a broader intermediary role, but many of them are suffering declines in trust as a result of the pace of change they are trying to manage. Bank mergers have often led to the loss of customers who feel less comfortable with a larger, more distant company. Banks seem to have more than enough to hold their attention without taking on a new role. Our bank knows us well, but still asks "Ingles or Espanol" with each ATM transaction. If not banks, then who? Companies like Intuit are trying to become a portal for consumers, and a consumer advocate. It may be one thing to sell Quicken, and quite another to get consumers to trust Intuit enough to share their Quicken personal financial data. How well do your customers trust your company's people, products and services? How well do you know your customers? Are there opportunities for your company to act as an intermediary for others? Are there intermediaries you can use to access new customers for your offerings? Border Crossings The boundaries between companies are undergoing dramatic change. Outsourcing has been around for a long time, but we're seeing more companies examine their competencies and change their areas of focus and attention. One recent example reported in The Washington Post in May (May 2, Page H1) highlights the changing roles being performed by Federal Express and Fujitsu . Fed Ex has become best of class at shipping and delivery. To manage their business effectively, they've had to develop effective information systems to know where every package is all the time. This combination of information and delivery has allowed Fed Ex to consider new ways of working with their customers. Fujitsu has had trouble matching the order fulfillment time of their laptop computer competitors. Fujitsu moved their distribution center to Memphis where Fed Ex receives parts deliveries from Asia, oversees assembly and then ships out finished products. Fujitsu now has the best turntimes. Fed Ex has reinvented itself to provide more services beyond shipping and delivery. Brent Meyers who heads sales for Fed Ex's electronic commerce unit commented that "It's hard to say which is Fed Ex and which is Fujitsu, we're so integrated." How do you make decisions about what activities to do yourself and what to outsource? Have you focused your business activities too broadly or too narrowly? How entwined do you want your business to be with selected partners? Are there other players more efficient than you are at parts of your current operation? Will you invest in improving your own efficiency, or will you cede that role to the most efficient? Where does that knowledge go? U.S. diplomats had visited the Chinese embassy in Belgrade, so, by extension, our government was aware of the location of that building. Thousands of federal employees keep maps updated. Yet, precision bombing led NATO to bomb the Chinese embassy. Who had the knowledge and who needed to have it? An employee at Los Alamos National Laboratory transferred files from the mainframe to a personnel computer, perhaps for ease of working with the files. It seems that the files were classified, and ended up in the hands of the Chinese government who later seem to have used the knowledge acquired to make weapons. Was this the work of a spy or a lax security system over old data files? Who is responsible for this? Genentech is in litigation with the University of California-San Francisco over the alleged theft of the gene used in creating the human growth hormone. One of the founders of Genentech has reversed his previous statements and now claims that he stole genes from his lab at UCSF and used them to begin commercial applications at Genentech. In many companies, much of the knowledge in the organization rides down in the elevator every night and leaves the building. The knowledge in the minds of workers is often untapped by a current employer and then walks to another employer who finds value in that knowledge. What does the average senior executive know about the knowledge in the minds of employees, and on the PCs at their workstations? What do you know about this in your company? How is knowledge shared and managed in your organization? Are the same people in different locations trying to learn the same things at the same time? Have you found ways to share knowledge across the enterprise? Every word is on the record One of the pleasures this Spring has been listening to the Disney saga. Michael Eisner and Jeffrey Katzenberg are the central players in a brawling drama over money, power and personality. It appears that Katzenberg negotiated a great contract with Disney that paid him 2% of the profits on the productions that were created under his leadership. He left the company before his contract expired, and the parties are now litigating over what amount Disney owes Katzenberg. That. s the boring part. The testimony has been more interesting when it comes to descriptions of the relationship between these two top executives. We read reports of the hearings in The Los Angeles Times highlighting how Eisner referred to Katzenberg as "his little midget" and "the end of my pompom." What a great reminder for all executives that all comments are "on the record" and that words spoken even to confidants can come out when least desired. We like Katzenberg's sense of humor through this. The Washington Post reported on May 20 that Katzenberg approached a reporter showing off a pair of just-purchased baby overalls and asked "Are those for me?" Have you heard the expression "Keep your friends close and your enemies closer?" Do you assume that everything you say might be remembered and used by the listener? When angry, how do you present your messages? If you read everything you said today in tomorrow's New York Times, how will you feel about what you read? Is phantom advertising the real menace? George Lucas struck some great deals around the latest Star Wars saga, The Phantom Menace . While there have been no ads for the movie itself, it. s earned over $100 million as we go to press. Free media coverage provided more than ample buzz. More than a brand, this is a cultural experience. Licensing deals ended up having licensees pay for ads to promote products or promotions related to the movie. So, there's been no need yet to place ads for the movie itself. Is this a brand that is so strong that ads aren't needed? Does it sell tickets to the movie when television viewers see the KFC colonel with a light saber? What do the Proctor & Gamble marketing mavens think of this? What are the ad agencies thinking? Lucas has managed the Star Wars brand so well that each step is well timed and is generating the maximum revenue. Does he get enough media attention without direct advertising? How are you presenting your brands to consumers? Are there indirect connections that can be more valuable than direct advertising? Are any of your business partners willing to promote your products and offerings? How important is it to be direct? Accessing the Internet at work Employers that have given Internet access to employees were concerned about workers spending the workday at pornographic sites. It turns out that. s the least of their worries. Reports are now coming in that employees are spending their time visiting financial websites. In fact, there's a lot of time being spent on those sites. At one extreme, some employees are boasting of being day traders while holding down paid jobs in cubicles, supposedly getting their regular work done between trades. White collar productivity has been a challenge to measure, but the ability to track sites visited and time spent on those sites paints a picture of employee behavior that causes alarm in some quarters. You may not want to over-react to employee Internet use, but this could become an area of high cost if overlooked. Have you examined Internet usage by your employees? Are you concerned? Legacies Bob Rubin departs as a Secretary of the Treasury like no other in recent memory. He redefined the role of that position to increase the effectiveness of the administration in economic affairs. He's played a low-key and effective role in maintaining a strong U.S. economy while helping respond to global economic challenges. As one of the few high-ranking government officials who regularly says "I don't know," rather than spin an answer, he'll be missed. One of our favorite Rubin lines came when the Dow Jones Industrial Average hit 10,000 for the first time. When asked about this, Rubin answered with a puzzled look: "It. s just a number." He went on to explain what was really important. Every other week, Meg Greenfield wrote "The Last Word" column in Newsweek. In a few hundred words she was able to unravel a complicated issue and help us see people and policies more clearly. She was skilled at peeling away the façade developed by flaks. Her keen intellect staked out positions with which we often disagreed, but always admired. While running the editorial pages at The Washington Post, she brought conservative voices like that of George Will to the paper to balance opinions. Meg Greenfield died of cancer in May and will be missed. Reading John Grisham comes through again with the perfect novel in time for vacation. Go ahead and take a copy of The Testament to the beach or wherever you. re heading. The pace is rapid for the opening pages, which is likely to be a good match for your disengagement from work and into leisure. The pace slows as the story develops, just in time to match your relaxation. Here's a sample of introspection near the end of the book: "At some undefined point in his life, pushed by his work and his addictions, he had lost his decency and shame. He had learned to lie, cheat, deceive, hide, badger. And attack innocent witnesses without the slightest twinge of guilt. But in the quiet of his car and the darkness of the night, Nate was ashamed& He was proud of himself for feeling so ashamed. He was human after all." In an unusual move, Executive Times threw back David Guterson. s (Snow Falling on Cedars) new novel East of the Mountains when we reached page 5. As tea aficionados, we were having enough trouble when the protagonist was having lemon tea for breakfast. Using a tea bag was disturbing. The final straw was when he added the tea bag to the water. We just had no interest in a character who didn. t know that you add the water to the tea, not the other way around. We. ll wait for Guterson. s next book. McKinsey guru John Hagel III follows up his best-selling Internet book, Net Gain, with a collaboration with Marc Singer called Net Worth: Shaping Markets When Customers Make the Rules. The earlier book described the impact of online communities; this one goes a step further and deals with the challenging issue of capturing and using information over the Internet. Given increased privacy concerns, Hagel and Singer predict the emergence of what they call "infomediaries" who will represent consumers and their profiles with companies who will be willing to pay a lot for richer customer profiles. We. re skeptical, but since Hagel hit the bullseye with Net Gain , it's certainly worth knowing about his current predictions. This book is targeted to senior executives, and if you have any interest at all in capturing customer information effectively, read this book. Upcoming Issues Some of the topics being considered for upcoming issues of Executive Times include:
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1999 Hopkins and Company,
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