What is, really, the "Best"?

Most of the world around - people, products, organizations, nations, what-have-you - everyone and everything is trying to be the best. It seems inane trying to define what the the best can mean. Do try defining it one of those poker nights - I'm promising you it won't be easy. Most of us know that this definition bit would be quite a painful and possibly pointless exercise. Now the curiosity point - when we spend so much of our energy trying to be the Best, won't it be worthwhile thinking about what it means?

Just to get you going, let me throw in a couple of colors on the palette. Is there an idea of two different 'Bests', from two viewpoints, e.g. the buyer and the seller? The best thing to buy (and therefore the best product to create?) could be, let's say, a reusable diaper. Once soiled, it goes for a wash and a dry and it's all ready to be used again. From the seller's viewpoint, this product could be a disaster. You are converting a stream of expensive purchases into one single purchase. Now who spends resources creating products - the customer or the company? The company, or the seller, has a different best - one diaper that has some sustainable claim justifying a higher price than the one currently selling. 

On the same thread of baby-products - can the best be too good for its own good? The feeding bottle is frowned upon because it makes it so easy for the baby to have milk that the baby will stop suckling. Can one formula feed be so tasty that babies refuse to have anything else? Tasty snacks are one kind of best, another kind of worst. Invasive species of plants could be another example - weeds a more common example. The Asian Carp in American lakes is yet another example and crows taking over cities from sparrows another. 

There can certainly be too much of a good thing. Disruptive innovation is based around the theory that products and technologies get better much faster than consumer's needs do. Again, being the best, at least in technical terms, may not be the best thing to be. How many mega-pixels or shaving blades do you really need? Or take the post iPod music systems - did any of us need the 11-band graphic equalizer? 

Interesting thought, perhaps leads to the point that 'good' has context around it, and maybe a limit too. We, or customers often don't qualify our expectation but that's what we mean. We want a hardy, native plant that's less-disease proof - but not the one that is so hardy that it chokes everything around and refuses to die. We want a product that 'works'. We don't want to run faster than the tiger - especially when it's just a pug chasing us. 

Interesting, right? 

Is there a link between Employee Loyalty and Customer Loyalty?

Well, employee and customer loyalty are different things, right? There are different programs, processes and owners that drive merchant or channel loyalty, customer loyalty and employee loyalty in many big companies. In other companies, all of these may not exist but what does exist, say customer loyalty programs, don't ever concern themselves with employees or partners. 

What if there was a link?

One end of the spectrum would be a great company, doing well, and selling a great product. Customers are happy, which is why the product sells a lot. Employees would be happier here than in a slumping company with sad products to push, no matter what the HR policies are. Employees of a successful company tend to gain more resume-value (e.g. doubled sales from X to 2X), have more promotion and increment chances since such companies tend to earn money and expand, and in general even if they're riding a wave, feel proud about their numbers. But while this logic may hold, there's a much better, simpler way to see the relationship between the two loyalties. 

A company is its products, its customers and its employees. 

Imagine a restaurant that you want to be loyal to, but that loses its doorman every week, chef every other week, barman now and then. Now what will bring you back? It can't be the food since the new chef will cook it a bit different, and it can't be the service. Most of all, you'd suspect the restaurant does something wrong by its stakeholders. Just the brand or the interiors can't create loyalty. And more than anything else, especially in the service industry, the product is a function of who delivers it. The trainer is the training, the salesman is the shop and the call-center employee is the company. Once these front-facing people leave, patrons think the place 'isn't what is used to be'. And it applies to product companies as well since IP finally resides in people. It's just that all of them aren't leaving together - else we'd know that KM systems can only do so much to preserve knowhow. 

Allow me to also claim, for a bit, that since a company is a set of employees, employee-loyalty is loyalty to other employees. Once a company loses some employees, it'll lose more since the act of employees leaving spoils the employer-brand ones and of-course, those that leave can poach. So if you think the doorman is okay to let go but not the chef, you may be right... but only till the doorman tells the chef about his great new workplace that also needs a chef. 

iDEA - Link Employee Feedback to Customer Benefits

Space-a-spade, most customer-benefits that are at the discretion of store staff do to placate a kind of customer that, honestly, one could do without. But tell me something, have you been to hotels where you have been nice to the staff and the staff to you? Then when you visit them again, they remember you and sometimes 'pull a few strings' for that upgrade or meal voucher? You probably don't know if the reverse has happened - when you shouted at the waiter and had your soup spat in. 

So what I'll propose here isn't completely new, but it still is, somewhat. 

What about recording the views of your staff against the customer's loyalty record so that you can reward the better people, not just the blackmailers, the churn-risks and the highest spenders (well, rewarding the highest spender happens rarely - loyalty programs  are frequently to reward the worst customers - but more on that some other time). The implicit, anecdotal, ad-hoc, hyper-local version of this anyway works, as described in the beginning of the article, but one could make it organized so that the information, like other loyalty information, is available across the points of service. This may not just reward the good guys, but help identify the serial offenders - those that slip in the strand of hair to get their meals free, those that stain the bed-sheet to get the champagne, those who think waitresses enjoy being flirted with and so on. 

Today these guys walk free of their past, actions remembered only for a short while by the particular people who encountered them till those particular people are in the same establishment and so on. This simple change in the customer record could take away their invisibility. The next time the customer walks into your bank, hotel, restaurant or shop - the screen will flash on the reception. And who knows, maybe in the long run, when you take away anonymity,    

I'm not sure if I've thought of all dimensions. Maybe there's more. Maybe there's potential for misuse, but that's like asking if you would trust your employees to give fair reviews. Maybe this system is against sometimes-nasty-but-overall-nice people or now-reformed people who are, like all of us others, noticed and remembered more for the bad than the good - but that's just a calibration issue. I don't know - sometimes it seems like an idea that should already exist, sometimes as something that needs more thought. 

What do you think?

ps: of-course at the base of it all is still the question around whom does your loyalty program reward - the bad customer (which is usually the case) or the good kind that you want more of. If you haven't answered that yet, read this post once you have.

What constitutes "good" inventory?

Is "good" inventory a lot of things to sell? In a marketplace context, we often speak of one platform having better inventory than the other. Please correct me if I'm wrong, but this is often a statement that comes out of an inside-out view. Let me try and explain. 

My usual method to feel the elephant in the room, regular readers know by now, is to ask questions. So, when we say a platform has good inventory, do the customers also say that? Is buyer-feedback good enough on this topic or is non-buyer feedback equally if-not-more important? Let's take an example of shirts. If you have a million shirts and none in my size, do you have good inventory? If you have a million in my size but none that I like? What if you have a thousand that I like in my size and like the ones I like, and I'm not able to find them using your search and browse? What if I find what I need but I don't like the price or terms of delivery? Feel the elephant? Isn't it bigger than we imagined? The end of all these paths is no sale. 

But like they say, no two silences are the same since both could be the absence of a different word.

Let's get the basics out of the way. Having a lot of products to sell, on the shelves, is not a guarantee to a perception of good inventory. Second basic, the perception we just mentioned, is reality. There is no other sense of 'good' or 'bad' inventory. Third, all enablers we keep worrying about - having the right sellers or suppliers on-board, getting them to list everything they can - are all just that - enablers, and the customer doesn't think of those as inventory. 

Consumer in, the first thing to build would be Demand. If the consumer doesn't want it, or is not aware that the category exists on your platform, why even bother? The second could be findability. Through browse or search, the consumer must be able to find or discover the product. The third bit could be decision-tools if needed (spec-compare, shade-match, size-converter etc) along with the completeness of range (could mean SKU coverage for standard cataloged products and width otherwise). Then there is the catalog itself, or listing quality if the category is uncatalogued - often a stumbling block for marketplaces. And the picture still isn't complete without the all-important wrappers of price, payment and delivery terms. If all matches, and these don't, it is still, after all the effort, not a sale. 

Before we link a perception of bad inventory to bad sourcing, therefore, we should check for where the funnel is broken. It is possible for customers to, rightfully, feel you have bad inventory for more reasons than that. 

The Fallacy of the Gambler's Fallacy - and Truth on Winning Streaks

I'm sure all of us have heard of the Gambler's fallacy. The Gambler, in short, knows probability but not well enough. If he sees five heads on five tosses of an unbiased coin, he believes the next time will surely be tails since over a large number of tosses, it's supposed to be 50% heads and 50% tails. What he misses is that each toss is independent - completely unaffected by what the previous tosses have thrown up. Motivational angle - if you try something like clear an exam, some event that, say, has a probability of 25%, you have the same 25% shot the fifth time - even if you flunk the first four times.

Wait, something wrong, right? Right.

If you clear that exam the first time, your chances of clearing it again are much better than 25% - it's close to, say, 50%. If you have cleared it four times, it means you really know the stuff they're asking, the probability now is close to 100% I'd say. Taking the same test multiple times, it turns out, are not  'independent' events, and events need to be independent for the Gambler's Fallacy to apply.

Now while we get that, to add to it, there's a very different behavioral, human angle to this.

As long as we carry our past with us, and as long as our attitude has a role to play in the outcome of the event, subsequent events in life are not independent. When we're on a 'winning streak', we approach things differently. We have high confidence, low fear of failure and that attitude inspires confidence in those we interact with, from an interview panel to an investor. When we're, to use a bad word, losers, we do many of these things wrong. We're doing stuff 'designed to fail' then. Arrogance, insecurity, inability to accept, learn and correct, downward spirals - they happen to us then. 

The financial markets will tell you for other stories, of expectations creating reality. Wins bring investments that can bring more wins your way. Failures dry up investor confidence, funding, and shots at success. So there's an external 'expectation' angle too. So, the interesting question is - is the Gambler's Fallacy a fallacy? or better put, what really are Independent events? Go read about the Butterfly Effect, go read Chaos by James Gleik. 

The Fallacy is fine, but do check the fine print on whether terms-and-conditions apply. 

Discontinuities and Corruption

- and putting the goal-post where the ball is

Often when the regime changes, specifically for a company, there is supposed to be a process of handover. If there isn't much of that, it's assumed to be a time to start with a clean slate. What is interesting is that it's also a time for the most common and the easiest kind of corruption - being insincere with your work.

Don't get me wrong, I'm not saying humans are corrupt when they get a chance - I'm only, for now, saying that it is a possibility. Humans are known to optimize.

When you take over a new position at a new company, you'll rely on the existing employees, juniors and peers, to give you background. Some times there are too many changes in a short while in companies. Sometimes a few exits snowball into an avalanche. It is common to assume the ship is sinking when mice are seen jumping ship. And at those rare occasions, legacy is in the custody of very few people. Those few people can change the history if they want. It gets even more complex when the previous leadership is not contactable or hostile and no longer interested in your welfare.

What that leads to is an interesting phenomenon that I have heard mentioned across companies. The goal post can move now - to where the ball ends up. If profits are down and turnovers are high, you'd be told that's exactly what we set out to do. If an irrational decision was taken, it was taken by the previous leadership. People will come to you mentioning past promises made to them of promotions and raises.

Most new leaders pass - there's so much more to be done in the initial few months that the archaeology can wait. Some dig in only to get trapped in the mud of conflicting versions and unclear evidence. No one wants to start off doubting peers and juniors. I'm still wondering what is the best thing to do, and how....

Who is your benchmark? Does that determine your success?

I remember being trained on the Baldrige Model quite some years back and quite liking the concept that a metric did not mean anything unless it had a trend, a comparative, and a benchmark or goal. the statistic (e.g. 15% gross margin) could mean anything, or its opposite, depending on the trend, comparisons and the goals. 

That brings me to an interesting discussion on choosing your benchmarks. Since that has such a huge role in defining your story, and since one has such a huge flex on deciding benchmarks, wouldn't that be the Achilles' Heel of determining your future actions, and your success? Example - if my headcount is 100, and a competitor is at 200 at the same business value, I could be at double employee-productivity. But then maybe another country in my company is operating at twice that productivity already. Maybe I can look at a benchmark in a different but similar industry and find another story there. 

Truth be told, a company is a group of people. People try to maximize utility (in theory, don't get me all behavioral here), and they will pick benchmarks that make them look good. I have rarely seen benchmarks being questioned, leave alone audited, in a company. Herein lies the loophole. 

But hang on, I am not even saying this is all bad intent - it could just be lack of thought, or information, or knowledge, or just legacy, that makes us pick the wrong benchmarks, set the wrong targets and get the wrong feeling about our market success. 

I like asking people for alternate benchmarks - give me one that makes you look good, one that makes you look ok / bad and one that makes you look pathetic. Then pick two - yes, two. One for the external world when you want to justify your performance and ask for your raise (make sure this one is logical and defensible though), and one that you use to push yourself and your team. 

What are your thoughts?

Battles in life are fought from where you stand

Very often, when one conducts strategy brainstorming sessions, two beautiful but often futile phrases, typically starting with 'if only' and 'only if' make their way into the discussion. If only we hadn't exited that one segment three years back, only if there was more money coming from the headquarters, and so on.

There is some beauty in thinking out-of-the-box, and in thinking about possibilities - my only issue with these discussions is that they take away time from the more here-and-now talks that are probably more useful, and maybe critical to have.  Competition has a model of eCommerce where they carry inventory, we don't. There's little point thinking only if we had the inventory model too. It's a useful discussion if you are thinking ten years ahead - if you're thinking just the next year, maybe there is other stuff to fix. Battles in life, not only organizational, but also personal, are fought from where you stand.

If I was standing on top of a hill in this battle, I'd roll a boulder. But if I'm in the valley, that's where I am and that's where I'll have to fight from. If I roll a boulder, it'll roll back on to me.

Maybe I should not be searching for boulders to roll. I should be thinking about avoiding stones that I'll get thrown on me. That's my today. When it's a good time, I should think about how to get on top of the hill. That's tomorrow. And if and when I do figure out a way to the top and get there, that's when I should look for a boulder to push. That's day-after.

Can Data go the Public Goods way?

We know Public Goods - we read about them in introductory economics. There are fishermen living around a lake that's become prone to overfishing, and now fishing it banned there. If one fisherman still goes out and fishes, it is his gain and everyone else's loss. If he does not go fishing, it's his loss and potentially, everyone else's gain. No prizes for guessing what happens. 

Now data, come to think of it, is getting easier to get. A whole lot of our lives right from our correspondence to reading to shopping lists to shopping to money have all become data. A whole lot of data sits in servers and the cloud, and at some permissible level of aggregation, all data can be and is sold. There is data about you that I have access to that you don't know I have access to - and this is still legal. Beyond what's legal, there's obviously a lot more that can happen. People can use this data, for good purposes (e.g. check, you have high heart-risk in your family, heart attacks peak in the winters, most happening within one hour of getting up, and you have run out of your medication...and so on) and otherwise (don't want to give examples here, but you get the drift, right from invasion of privacy to selling you crazy stuff to outright blackmail). So what will data operators do?

A lot of the data is just out there. There could be a traffic camera capturing your movements, your cell-phone operator knows where you are, social networks know what you like, search engines know what you search for, eCommerce guys know what you buy, and so on. The list is endless and includes your stock-broking-engine, your bank, your tax-software and everything app you have on your phone and every website you sign into. To make matters worse, all these guys are bombarding you with cookies that now know information across platforms and websites and try to make sense of it. 

There is the obvious risk of malpractice, data-leakage and hacking. And there are simpler risks like just the headache of irrelevant offers made to you, and others knowing what you are - which could be uncomfortable sometimes. There are Target-like examples of knowing too much. There could be violation of data-walls, the issue ot shared-devices and the joke about the wife who complains that the only thing my husband cleans at home is his browsing history! Or the cartoon about the wife who knows the surprise her husband has for her because the common PC is bombarded with retargeting ads for that gift. Mind you, this is before the internet of things hits us in our face.

Mature businesses don't want to use any data the consumer doesn't realize he's shared. But there are all kinds of companies out there at all stages of desperation. There are lax laws on this, one could always argue out a certain level of anonymity that is still insightful - in other words actionable and useful to a company. Today the cookie people get paid by the platform that gives them data as well as the platform that uses it. 

Now what does your crystal ball say? Can it go bad to the point that the Golden Goose of data is killed by some operators? Can consumers get miffed to the point that they (try to, it's tough) share data altogether, or at least lobby to get legislation around the use of data unless the operator has an explicit, simply-worded opt-in with a forewarning?    

What do you think?

Loyalty - so much more than RFM

What does RFM mean? Someone's shopped recently - does it mean the person is more loyal? Frequency is again a function of category - one should look at share-of-occasion and not frequency unless one is working within a closely defined category - which is rare. Monetary value similarly means less. These three factors perhaps are telling you which customers are contributing disproportionately to your company's value - but but not as much about how loyal they are and why. 

 

Talking of loyalty, the first distinction to be made is obviously between purchased vs. natural loyalty. Purchased loyalty - buying occasions induced by throwing money at the customer is more in the league of buying turnover and hence not really part of a loyalty discussion. The use of insights and analytics to this field will at best yield a better efficiency for interventions such as subsidy and coupons, but loyalty by definition is not this, right? Now that brings us to the rudimentary but complex topic of defining loyalty and more importantly, remembering the definition as we go about undertaking various activities under the garb of loyalty. For this discussion, therefore, paid loyalty is out of syllabus. 

The second most important distinction to be made is between attitudinal vs. behavioral loyalties. Both are important and in syllabus, but it is still important to put the right label when we speak - because both are fairly different animals. While behavioral is observable, measurable and clear, it cannot easily answer 'why' questions. One could have high exhibited loyalty just due to the lack of  alternatives, or better alternatives. It is a practical kind of loyalty to measure though, and a focus here ensures one is not wasting time running faster than the tiger. At the same time, it is important to remember that buyers can be loyal and potentially open to switching at the same time - not single but ready to mingle nonetheless. 

The attitudinal kind of loyalty is the holy grail of the 'why'. 

Storks mate for life. Wild dogs, ants and bees exhibit loyalty to the pack. Dogs may not show loyalty to their mates, but they're loyal to their human masters. Cats are said to be loyal to the house and the lioness to the 'position' of the most powerful lion. The logic of loyalty is certainly complex and non-trivial - and we haven't even started talking about humans.

We haven't spoken about how some people may be more 'predisposed' to being and staying loyal. This is something you could possibly measure - such people have clear favorites that don't change that often. in most cases - music, food, colors and so on. On the other extreme are 'variety seeking' people - who like to try different things and not get tied into a pattern. The first person, if ordering five dishes in a restaurant, will order four familiar ones if not five, while the second person will order only one familiar dish if at all, and others he hasn't even heard of - the more exotic the better. Of-course the perplexing question here would be are the predisposed people already taken? Or they still have 'open' slots for newer brands to latch on?

A close topic is the cultural context to relationships - in India, disloyalties to a girlfriend are commonly / socially forgiven, but not to a wife. Disloyalty to an employer is again, forgiven - but in Japan that too, is a matter of loyalty. Within various age-groups in India, the elder generation is probably still loyal to a brands like Bata and Tata, the younger prides itself on discovering new, cool brands every day.  

We haven't spoken about some categories being more prone to loyalty - more 'emotional' and less 'commodity'. Now who's loyal to a brand of memory-cards? But we are, to mobile phone brands, right? What about inherently infrequent purchases like double-beds? How many will you buy even if you're loyal to a retailer?

So clearly, we aren't having the debates we should be having - we're merely talking about which customers already bought more from us. We're talking about cross and up-selling, driving repeat and many things I completely respect - but loyalty is the wrong label for these conversations. 

After we separate the discussion around transaction incentives (don't you hate the term 'paid-loyalty?'), after we speak of customers predisposed to loyalty towards categories they care about, after we put the filter of financial and emotional viability on it - in other words creating loyalty drives meaning for the customer and the company, after we separate behaviors from underlying attitudes, then and only then would we begin to understand this noble emotion.  

ps: thoughts welcome - I think it's happening to a lot of other big words (e.g. Trust - familiar?) too. More on that later.