Customer retention

I've recently had to buy quite a few pairs of trousers in an attempt to revitalize my wardrobe in that area. For some strange reason it's a lot easier to casually pick up jackets, coats, and shirts rather than trousers and jeans. I've even bought shoes online in a vim. But trousers need consideration. Anyway, without getting into the whole debacle, I would like to highlight an issue related to marketing and customer retention...

As everyone who has passed Marketing 101 knows, traditional view holds that it's a lot cheaper (and more profitable) in the long run to retain customers rather than continuously attract new ones. That's why most companies in most businesses would do better to shed the transactional mode of business and focus on building relationships. Relationships are based on trust. And trust in business is created via successful deals. Now, in consumer business, at least, it's very easy to create long-term customer relationships by rectifying mistakes that you've made and compensating the customer very generously. If the customer's bad experience can be salvaged into a good one, you'll also be able to tap the viral marketing mechanism: the customer will undoubtedly tell his friends about the good service he got.

So, back to trousers. I bought a new pair of... uhmm... Swedish designer jeans from Beamhill and a pair of Pal Zileri trousers from Fere. Both had problems. The cloth of the jeans wore down and got a hole after two weeks of use and the trousers, after being initially adjusted, started to unravel from the back seem. Now, at this point the two different companies went two very different routes. That's why I will continue to be a customer of one company, but stear clear of the other.

First, the Pal Zileris... I took them back to the store and I was met by a shocked salesperson, who seemed genuinely apologetic after I told him about the somewhat awkward situation. Then we laughed and agreed that it's a good thing that men wear jackets to cover their rear. The salesperson then proceeded to ensure me that although the tailor had gone home for the day (to be fair, I was at the store at around 5.30 PM, and they were closing pretty soon), they would fix the trousers first thing in the morning and I would be able to pick them up pretty much as soon as the store opened. All of this on top of the fact that they kindly enough gave me a discount and threw in free alterations to the trousers in the first place, and even then they delivered within 24 hours since I was in somewhat of a hurry that week. Brilliant service.

Then on to the jeans. Amazingly enough the cloth itself wore out with the jeans. And in two weeks! That can't be possible! I take them back to the store and the salesperson takes them and my contact information and promises to be in touch the following morning as she is unable to make a decision on how to proceed by herself and has to consult her boss. Ok, fair enough... Then, the following day... No call. I get interested about the situation as those were the only pair of jeans that I had at the moment and swing by the store just before closing time. The same salesperson is there, this time telling me that yes, I'll get a new pair and that I can pick them up the following day (Day 3). Not any mention of apologies for not following up on the promised call, which then resulted in me making a pointless trip to the store. Well, come Day 3 I go to the store just before closing time and this time there is another salesperson, who I explain the situation to, and just as I'm finished the first salesperson comes along and it turns out that this new person is in fact the boss of the initial salesperson. And now it turns out that the jeans are still not at the store, but I can go fetch them from some obscure location elsewhere. Or I can wait and have them possibly fetch the jeans to this store tomorrow.

At this point I'm quite annoyed at the fact that I've made two pointless trips and still don't have my jeans. My annoyance might've become obvious after I told them that let's just schedule my pickup for next week, so that they would have seven whole days to be able to handle the simple transportation to the store. They insist that the jeans will be available the following day (Day 4). Ok, I'm somewhat skeptical, thank, and leave. Then after 30 minutes I get a phone call from the store saying that the jeans are there. Excellent! I didn't typo the phone number that I gave them. Up until now I was fairly convinced that there was a possibility that I wrote the wrong phone number. Anyway, what am I supposed to do about the situation now? The information is useless as I've already gone home and don't feel like making a fourth trip to the store.

Ultimately I ended up getting the new jeans, and I've been wearing them now for slightly over a week. Right now I'm fairly jumpy and I have this strange feeling that the jeans are slowly coming apart again. Let's hope that they won't, since I do not want to deal with this company again. Actually, if the jeans do come apart, I'm just going to take them back and leave them there. I don't really even care about the money as it was just slightly more than a day's pay, but let's just say that if they don't offer any tangible apology, I'm going to be slightly sad for them.

Let's just hope that the jeans will now last. And I'll never buy anything Swedish ever again, just to be safe...

Asymmetricity of information

The internet is truly a game changing disruption. I've noticed this again recently as I've shifted even more of my shopping online. It's actually quite logical: if you're buying more or less standardized products, the main differentiator between sellers is price. Right now I'm looking for sunglasses. I've narrowed my search down to one pair that I'm fairly interested in, and there is only one place in Finland selling that specific brand of sunglasses. I haven't been there yet, but I'm imagining that they are most likely charging a premium. Fortunately, however, I've been doing my homework and calculated the price that I would have to pay if I ordered them from abroad (including shipping and handling, taxes, and customs fees). Another dimension to this is the currency market, which gives me an additional discount to offset the fees with. So now, thanks to the available information related to the product's price as well as an efficient method of transporting goods globally, I'm going to be in a lot better position to negotiate with the local merchant about the price of the pair of sunglasses that he is selling.

The interesting thing about this is, however, that it's precisely in the asymmetric distribution of information where the merchants make their profits from. Used car merchants used to be in the brilliant position to basically lie and cheat the customer, since the customer was seldom able to value the car as well as the merchant could. Now with the rise of the internet and an access to global used car markets, the buyer can calculate some different scenarios about what it would cost to obtain the car from some other dealer. So in a sense the customer is now able to value the car being sold in a lot more precise and better way. This has sent the used car dealers scrambling for the hills. One Finnish dealer was actually saying in a newspaper that the internet should be destroyed, because it's killing business. That may be, but I for one see the positive aspects in this: business shouldn't necessarily be based on lying and cheating the customer but on creating tangible value add for the customer. If you're not creating value, the globalization of markets will soon drive you out of business. And that's how it should be...

Ethical financing

I was recently in Turku during a student-oriented binge drinking spree. The idea was that people would go around the bar boats in the river Aura and have a drink in each one and collect stamps to obtain a small cloth patch that they can then stitch onto their student overalls. My freshman year came and went a long time ago, but some friends of mine were still able to abduct me from the office and drag me to Turku, so there I was...

After a couple of hours of crawling through bars, we ended up meeting some casual acquaintances from Helsinki. Amongst the group that we met was a person studying economics and finance at Helsinki. I found her quite interesting as she obviously disliked my blatant way of firing opinions and my perception of the world. She insisted that she would become an ethical financier once she graduated. This sparked my interest as the issue is very topical, but I don't think that the finance world will ever change. In my view people will remain greedy and the people on Wall Street will continue to see the world as a zero-sum game. Somebody wins and somebody loses. I don't think there's inherently anything wrong with that: as an analogy we could look at boxing. I don't think the boxers in the ring have any sort of ethical problems when they go head on and try to knock the other guy out. It's only if they come out of the ring and start punching bypassers that it turns somewhat questionable; everyone knows that it's not too nice to punch random bypassers on the street.

Similarily I think financiers and the lot will act extremely rationally in the future and attempt to optimize against their own gain. And that there isn't inherently anything wrong with this: more money is better. Saying that you are an ethical financier is sort of like going in the boxing ring and saying that you'll only use your left hand: you're doing a stupid move and giving the other guy a very big advantage over you. What's the point? I personally won't be giving any of my money to a person who is going to most likely make a loss with it because of some personal agenda and ethical beliefs that they advocate. Instead I want the person investing my money to maximize my money against the timeframe that I'm working.

Now, the observant reader will notice that we completely omitted the definition for "ethical" investing/financing in this context. That's something that my ethical financier and I didn't get around to talking, perhaps because of the many beers that I'd already had. But regardless, I don't think that's the real issue at hand. I would say that within the boxing ring and within the markets, the only unethical things are the things that are made illegal by law. It's not nice to manipulate the markets and use inside information, and so on. But the thing here is that in my opinion the ethical issues should be tackled by the regulator. They should act as the referee and determine what should be allowed and what shouldn't be allowed. One thing that should have become clear from this financial meltdown is that the free markets very rarely are able to moderate themselves over a longer period of time. They always get greedy and the game gets tougher. That's when the regulator should step in and the referee should separate the boxers and make sure that the situation doesn't get out of hand.

The argument I'm trying to provoke here is that if your job is winning, you should not hesitate to use the angles and destroy the opponent. If you look at star athletes, I don't think they go into competition thinking about whether or not it's ethical to beat the opponent. They work within the boundaries that are set by the rules and they do their utmost to win. It's very difficult to start making rules if you're the one who is competing: you can't remain objective enough. And you shouldn't bother yourself with stuff like that. It should be the regulator who needs to understand what the rules are and how they should be developed.

Interestingly enough I don't personally, for instance, engage in derivatives trading. Not because of any ethical reasons as such, but because I feel that I don't right now need derivatives to protect my portfolio and on the other hand I don't want to engage in speculative behavior with derivatives as the risks are too high for me. But derivatives are good for some things and less good for other things. The million dollar question, I guess, is how the regulators will tackle the question about speculative behavior with derivatives: is it ok or should it be regulated? And other such questions...

The new BMW Z4

... it is also a paint brush, so how convenient is that? Aspirational over rational arguments every day of the week, when it comes to cars. You should never get a car that you're merely satisfied with; you should get a car that you actually want. And right now I want quite a few different cars... You know, for different occasions...

On thoughtlessness

We went to see Angels & Demons last week with R and for some odd reason I always get very annoyed at the movie theater. Granted, the movie itself wasn't as horrible as I was afraid of, but it seems that the typical moviegoer these days is not capable of being in any way considerate when it comes to the experience of other viewers. One of my pet peeves is how people are checking their phone in a dark movie theater. Just maybe it's not a good idea, namely because when the backlight of the phone's screen kicks on in a dark room, your movie viewing experience is degraded as your view is automatically turned to the new source of stimulus. And when this happens every ten minutes you can't help but complain to the person (if they are close to you) and wish that you'd have a bottle to throw at the person if they're sitting further away.

Another brilliant thing to do is to leave the movie theater in the middle of the movie in disgust. Nothing's better than directly and immediately protesting against the shitty quality of the plot and acting than to march out in protest. That may work in a theater where the actors are present and attempting to perform (and I have to admit that even I haven't dared disrupt theater presentations in this way, even though I've seen quite a few rather appalling ones in my time), but for some odd reason I think the protest is lost on the fact that at movies you don't have a direct feedback channel available to the actors or the producer or the director. So please, fly to California and bitch and moan at them, but please don't do it in the movie theater. The only thing you accomplish is the same that you get when you play with your phone: the other moviegoers will be wishing that someone would decapitate you.

It's funny since I recall that I've bitched and moaned about these things before. But all seems to not be lost yet as the people playing with their phones seem to know on some level that they're doing something wrong. Or at least I get this feeling when I tell them to lose the phone and shut up. In my experience everyone thus far has put their phones away without trouble. Maybe it's because we Finns inherently adhere to rules or maybe it's because I look scary or something. But from my point of view it doesn't matter what the reason is as long as it continues to work in the future as well.

Alfa

On microblogging and such

Antti, a friend of mine, was recently writing about the issues with micro-blogging services like Twitter. He also reflected his own personal usage and identified the requirement to commit oneself to the micro-blogging as of the single biggest issues for him and the services in general. I see the point, but do not necessarily agree on the potential impact that it has for the systems.

Social software like blogs and social networking sites do require some level of activity. If I don't blog anything here for a while, the few readers that this blog has will disappear. I disagree, however, with the notion that the commitment needs to be that big. Even less so with sites like Twitter. If I don't post anything in a while, it doesn't really matter: I might be away from network connectivity or something similar, but I doubt that people would send search parties to find me. I can't help but feel that Antti's example is not necessarily that realistic. The real value from these services comes from the network externalities. The more friends you have using the systems the more you get from them in the form of updates and such. Even if you're not too active yourself, you can still follow what other people are doing. And when you do post something yourself, you're contributing something to the system, making it that much more valuable.

Now, the systems do indeed require activity, but for me this activity comes from intrinsic motivators. I don't blog for others; I blog for myself. I may update my Facebook status or send a tweet to notify other people, but again I do this out of free will, not because I feel that I have to do so. Antti does, however, brush upon one point that is relevant here: if you feel that you "have to" update your blog and if you are driven by external motivators, you are of course a lot more likely to stop blogging and using Twitter than if you were doing it for yourself instead of other people.

While most of the social software these days does benefit from network externalities, I do feel that there is one very tangible threat around the corner. While technically the more information that goes through the network has traditionally meant more value for each node of the network, the same problem lurks nearby that Google has been tackling for the World Wide Web since the mid-90s: creating some sense into the chaos of information tidbits. So the risk is that as our social links go increasingly online, there need to be proper tools to filter and manage the information that spreads in the network. A fine and very tangible example of this is the Facebook phenomenon of quizes: many people feel a need to fill out tons of different quizes to supposedly learn something interesting about themselves. These quiz notifications go out to all of the friends in the network, but even with some hundred contacts the problem is easily that the quiz notifications drown all the other signals in the network and thus actually reduce the value of the network by increasing the noise level and making it more difficult for me to pick up the signals that interest me.