Thoughts From The Cake Scraps

As I laid out in my last post, the hottest business trend of showing deep discounts just leverages the current sale-oriented culture.  While one can find these deals in nearly every email that passes through the inbox, it is not more plainly laid out then with GroupOn where stuff is simply 50% (ish) off all of the time.  Everything they are selling, every day of the week.

Rather than delve into whether or not GroupOn takes advantages of small businesses, I am going to stay focused on the business concept that drives GroupOn – discounts compel people to buy.  Sometimes they need the item and most of they time they don’t.  The thing is, the deal is just so darn good and the discount so darn large people are left asking themselves “how can I not buy this?”

The reality, of course, is that we’re still in the early phases of this broad based discount solution and businesses are still trying to figure out if there is a way to effectively use it as a marketing channel.  Regardless of how it turns out, this is clearly a marketing expense and, therefore, will come out of the marketing budget as part of the promotion cost.  Small businesses may not have the data or wherewithal to figure out the true cost, but my guess is that they will find out via word-of-mouth or their own P&L statements, even if they don’t have the gory details.  With this in mind, let’s focus on the major players only for the sake of discussion.

When a company runs a promotion as significant as a GroupOn, they are surly going to be tracking everything they can to figure out if it was a good deal or not.  Did the promotion drive enough incremental sales to cover, not only the cost paid to GroupOn and the cost of the goods/service provided, but also of the subsidized behavior (people who would have purchased anyway)?  That’s a lot to overcome.  The business benefit, for the moment, is more that it can help make a company look cool and interesting.  It may even draw people back into the brand that have been away for a bit.

Still, it is all a marketing expense.  It comes from a marketing budget.  And this is what people fail to realize.  A good that is on clearance is discounted because the business needs to move through the inventory and is, therefore, not a marketing expense.  The loss of margin dollars comes out of a different part of the budget.  The consumer is actually getting a deal here because the goods used to be sold at full price.

This is not the case with a deal like GroupOn (or LivingSocial).  Since these are marketing expenses, the cost of a marketing is built into the cost of the product.  That fact that you, as an individual, get the full price product for 50% off doesn’t change the fact that, in total, it didn’t cost the company anything.  They simply didn’t run a “Buy one get one” promo or a “Gift with purchase” promo.

What this means for the sustainability of this heavy coupon culture is that it will only continue to work so long as there are enough consumers willing to continue to buy the product without a marketing promotion.  My prediction is not that the discount culture will go away (although I am skeptical of the long-term viability of operations like GroupOn) but that you’ll see the same companies or the same types of companies use that type of promotion and that it will become stale.

For the moment I, as a consumer, would – and do -  jump on that discount train but my prediction is that it won’t last as it currently exists.  After more and more companies run those type of promotions we’ll start to see clear trends emerge.  As those trends become more solidified even the less advanced businesses will start to see that “business of selling product/service A are never featured” and there will be more whitepaper style publications on the success or failure of the promotions.

While not as overdone as Black Friday, as Black Friday has a good 20 year head start, I would keep an eye on this.  The simple truth is that a company cannot give away goods at 75% off (50% discount and then 25% to deal provider e.g. GroupOn) and not raise prices.  The promotion is simply too deep and too short lived (versus a longer buy one, get one) to last.  The math doesn’t work.  So get the the deals now, while business still have not “marked ‘em up to mark ‘em down” and don’t fully understand what the expected cost really will be.

And remember, the “deals” at Coach Outlets actually have a higher profit margin than the full price regular stores on 5th Ave.

Did you get a deal recently?

This has been a Thought From The Cake Scraps.

As a marketer, I’m acutely aware of the benefits of a well ran promotion.  And as a (top 30 under 30) direct marketer, I know the coupon/promo code is a valuable tool for attribution.  Still, lately I have become frustrated with all of the discounting going on.  I’m going to break this up into at least two parts to make it digestible.

Case 1: Black Friday

Remember when Black Friday used to mean something?  Remember when it was a day of unheard of deals, available only that one day?  It was great, wasn’t it?  When it first started in the 1970’s, and really grew in the 1980’s, it was a day of great reveal.  Nobody, it seemed, knew what deals would await them.  Later, websites were created for the sole purpose of revealing the circulars which retailers tried to keep as quiet as they could.  And then, what started out as a heavy shopping day due to most non-retail employees being on vacation, started to creep.

The creep started in a fairly innocent way.  Stores would have day-after-Thanksgiving sales.  And then The sales grew bigger and door-buster sales started to emerge.  Stores needed the foot traffic and they needed people to shop with them before they shopped elsewhere.  Prices, for the moment, could only go so low.  Next, stores started to open earlier.  First it was 6:00, then 5:00, then 4:00.  Once the process started there was no turning back.  The every year the door-busters came earlier until they opened at midnight.  They could go no earlier.  Just kidding.  This year Walmart is opening at 22:00 Thanksgiving night.

While stores are racing to open earlier than ever, the tentacles of Black Friday started to invade other channels (including Cyber Monday).  Signs, circulars, and emails started proclaiming “Black Friday Like Prices”.  Amazon.com made the whole week a week of deals.  I even saw “Black Friday in July” slogans to tell me just how good of a deal I was getting over the summer.  As Black Friday neared, stores no longer strived to keep things secret.  In fact, they now actively release circulars early and those sites that used to leak the deals are now commercialized versions of their old selves.

The immediacy of the day has been going downhill for quite some time.  Then, Walmart pulled a game-changing move – again. In 2011 they will not only match competitors Black Friday prices on Black Friday (as they did in 2010) but are offering a price match that “is both forward looking and retroactive”.  Basically, as long as supplies last, you’re good to go all season long.  Talk about a lack of urgency.

Now, the important thing to keep in mind is that I’m not sure what the alternative is for these stores.  The fact is consumers have a finite amount of money to spend on gifts and if a store doesn’t attract them in and get the consumer to spend at their store, the consumer will just go someplace else.  Ultimately the consumer is the one who decides when enough is enough.

Will you be heading out at 22:00 on Thanksgiving night to shop?

This has been a Thought From The Cake Scraps.

Hope.  Of all the things that motivate an individual to act, an action creating hope is one of the most powerful.  Doing something that creates the possibility of a better and brighter future is an amazing draw.  Better yet is when we’re able to partake in an act that has no immediate expense to ourselves and still creates the chance for a more fulfilling future.  When a company is going through the process of finding a new CEO it is hope that prompts them to make offers considered excessive by the general population.  Let’s explore that idea.

While this post comes fresh off my attendance of eMetrics, it has been on my mind for a while and the conference just reinforced the view I had.  CEOs matter. Leadership matters.  A company lacking leadership will not only flounder with the problems of today but will also be unequipped to deal with the issues of the future.

For this reason, when deciding on a new leader a company desperately wants to find the right person.  If they believe they have found that person they become willing to do whatever it takes to get them.  They promise “golden parachutes” of benefits to draw these leaders away from their current positions and provide a compensation package even more compelling.

Hopefully they never have to pay out the parachute.  Hopefully the compensation is small compared to the value created.   Hope. Hope. Hope.  That is all the company has when making that hiring decision.

Not convinced?  Two words provide the study that makes the point: Steve Jobs.

The impact of his second stay with Apple cannot be overstated. He took the company where he wanted it to go and made it the company it is today. Could anybody else have done that? Did anybody else have the connections he had? Would they be the same expert salesman?  Did they have the ability to say no to almost everything such that the company could focus on a few things that will change the world?  Many would argue the answer is a clear no.  Steve had the whole package.

You probably own an Apple product.  Having your life so impacted by an individual, consider, if he were alive today and in “free agency” what would you say is fair pay for him?  I’m sure he had all sorts of golden parachute options baked into his contract.  Stock options, salary, etc.  All of the things typical of the “fat-cats”.  And yet, his leadership changed lives of consumers everywhere and grew Apple to one of the largest companies (by market cap) in the world.  Apple didn’t know that when they signed him on. It was a hope.

There may have been no better fit for Apple, but I’m certain there are other similar situations every day – companies believing they have found the right leader for their market, for their size, with their location, with their brand, etc.  The company hopes it has hired their own version of Steve Jobs.

But sometimes they fail.  In fact, in a recent article in Forbes, while the readership overwhelmingly voted Steve Jobs the best CEO, the editors disagreed saying he couldn’t do what he did at Apple in other verticals.  If Steve had decided to move on (unlikely) the price another company would have offered could have been astronomical.  Still, there is no guarantee it would have turned out.  He could have failed.  How ridiculous would that pay package look?

Case study after case study shows that the leader matters.  Picking the wrong one can destroy a company and, with it, the jobs of all those underneath.  When thinking of it in these terms – the fate of shareholders, employees, and customers – through the lens of hope, it is not so difficult to understand why pay has gone so high.  Global competition has increased while the internet has made the cost of making a mistake soar.

So remember, the next time you hear about how much your company pays your CEO realize they’re looking for their own Steve Jobs.  You probably don’t have all of the details and it could be that CEO’s performance that is keeping you employed at all.

Then again, they could just be overpaid.  This is simply one take on an alternative point of view.

So, given his impact and the enormous value he created, could you overpay Steve Jobs if you knew losing him meant throwing away all Apple products (and the $75 Billion in cash Apple has)?

This has been a Thought From The Cake Scraps.

Circles are all the rage with Google Plus but, as any usability person will tell you, they are a pain to manage.  That is why the Groups option in Facebook never got much traction.  You have to be dedicated to keeping the lists current and managing the settings on the pages.  Google tried to address this issue by forcing you to add people to a circle, but it is still a pain and still rather confusing.  Facebook just took another stab at it.

I say just look at how people currently use social services and make a solution that solves this issue.  Hint: it is not this silly all-in-one view that both Facebook and Google Plus have taken.  The answer is right in from of them and the interfaces solution lies with Hipmunk.

In Hipmunk you can create several searches in a tabbed view while remaining in the same browser tab.  The searches may be similar, but obviously different as well.  The key is that you have a central place to manage multiple threads, each thread in a unique tab.

When you look at the social landscape there are clear breaks.  Facebook is for family and friends.  Twitter is for the masses.  LinkedIn is for work.  All are social; all are distinct.  The answer is one interface that blends all of it together in a central place with unique tabs.

Circles and groups fail because you manage where you share it at the end of the sharing process, right before you click share.  Think about how much easier it would be to share to “Google+Professionals”, “Google+Friends”, “Google+World”.  Sure, have the concept of Circles live within this interface.  Make it so you can share on +Friends and add the +Work circle to the “Share With” list.  Have a Limited Profile list etc.  The point is that by creating an interface that makes is unmistakably clear where you are sharing people can effectively manage their online presence.

Then bring it all together by having a central stream where the content flows into and make it clear (w/ an icon) where the post was originally shared from (+P, +F, +W or something cool).  Or, maybe you don’t need a central stream.  Maybe that’s what people say they want, but they don’t actually want it.  Maybe the solution is that people naturally silo themselves into distinct groups and providing a central tool that allows them to select the silo they wish to view is the answer.

Google Plus is so close to this with the mandated Circles concept but still falls short.  Get people to a central place to manage these different aspects of their life first (look at the success of TweetDeck).  Then focus on how people would like to see them integrated, if at all.  Right now I see these companies trying to solve for a problem (a central place for everything) which doesn’t seem to have much demand while they ignore that people want – to separate certain aspects of their life into silos.

Hipmunk has it right – give us tabs.  One place, many views, and a central place to manage to distinct aspects of my social presence.

Does that sound like something you’d use?

This has been a thought from The Cake Scraps.

Walls are amazing things when you think about it.  They are what divides one space from another.  They define boundaries of rooms and space.  And yet, if one takes a moment to think about it, there is not much to a wall.  Just a stretch of material, however thin, spread out across a space.  Walls don’t even have to be solid; some of the most important walls have gaps in them!

No matter what kind of wall it is, walls are all around us.  It seems like every day you hear a speech about people that want to break down walls or you read an article about walls people have built up.  Sometimes people want to build up one wall while taking another down.  Regardless of the direction the wall is going, I feel like they are always applied to large issues.  That the election of a non-white president was breaking down racial walls.  That politicians need to tear down walls and work across the aisle.  The problem is that these are Great Wall size issues and, while important and worthy of discussion, are not the things you and I probably deal with on a daily basis.  Instead, I urge you to think about the smaller walls you might erect, perhaps without even thinking about it.  Walls that are mere inches or fractions of inches in thickness rather than several feet or yards wide.

These small walls can have a profound impact on interactions -  just think of a bathroom with no walls for the stalls.  Small walls can make all the difference – both for better and for worse.  For example, not including certain functional areas, individuals, or groups on the distribution of a memo or report can build a wall.  Withholding information can create a wall.  Not giving the full context of an email string when talking about the end result can build a wall.  Not taking the time to make a quick fix for somebody can build a wall.  You get the idea.

The beauty and the burden of all of this is that the choices are all yours.  You decide how to interact with people and how to treat people.  You decide if you are going to pause a moment to see if everybody is on board or if you are just going to keep talking.  The largest walls start small and then layers are added over time.  Be careful about how you create your walls.  Relationships are what makes things work or not work. Connections make business happen.

Are you building walls?

This has been a Thought From The Cake Scraps.

Given that the raid on Osama Bin Laden was Tweeted as it happened it would be tempting to say that newspapers are dead.  Had the announcement from President Obama happened any later perhaps the headlines for the next day would have missed the announcement completely.  I could almost see the “Dewey Defeats Truman” moment happening all over again.  Twitter supporters will further fuel for the Twitter fire by pointing out that the information was first leaked via Twitter.

The problem with saying that Twitter has replaced traditional media is that it overlooks a few critical factors.   One factor is that the Twitter-sphere makes mistakes.  Things that are not true can grow quickly – such as when Rep. Giffords was reported dead.  You may point out that news organizations also get stories incorrect, and you would be right, but a story published online can be updated and corrected so that when people go there they see the more up to date information.  No such function exists for Tweets.

Additionally, we have to make sure that we are differentiating between the spread of a news item and the creation of that news item.  A story may get legs on Twitter but the story may not have broken by Twitter.  Even when no link is provided back to the original article many news related Tweets are probably inspired by some traditional media content.

Finally, there are some straight up problems with Twitter as a news source.  When there are 3,000 tweets per second flowing in on a topic I would assert that gaining useful information is quite difficult.  For instance if I told you that Osama Bin Laden was killed and that you had 5 minutes to get me details on it using only Twitter you would be helpless.  There is no organization to the content.  It is Finnegan’s Wake, present day.

In a similar vein, Twitter does not provide a forum to go into any detail on a topic.  Sure, there are many items in which 140 characters will be more than enough, but there are also a large number of stories that need a bit more than that – say a paragraph – or even a lot more than that – a full article detailing the timeline of the raid.

No, Twitter will never kill real journalism.  It will aid in the sharing of articles, but that just helps traditional news outlets.  Sure, the face of news will change.  The tools of the trade will change.  The way news is distributed will change.  Twitter is just a tool and at the end of the day I think people find the old adage holds true and one does well to heed it: Knowledge is power.  People will keep reading past 140.

Has Twitter killed traditional news for you?

This has been a Thought From The Cake Scraps.

Smart lazy people are the lifeblood of any company, big or small.  They are the people that are in the trenches, doing the work, getting things done, and contributing real value by approaching problems with a sharp mind.  But most of all, they are a little lazy.

A friend of mine coined this term when we were hunting for the ideal candidate to add value to the marketing analytics team.  Now, he was speaking tongue-in-cheek, as he often did, but the underlying idea is actually quite valid.

An individual who is ‘smart’ will really contribute in the trenches by understanding what the end goal truly is and distilling all of the input into a focused and actionable output.  But they may be so focused on the end result they will do whatever it takes to get there, no matter the effort required.  While this can be awesome, it can also be a waste of time.

A ‘lazy’ person is someone who hates repetitive tasks; they just want to get the task done so they can go grab a snack or another cup of coffee or (better yet) go and dig in the data because it is just fun.  But, while focused on automation of reports or dashboards, they fail to understand what is really being asked and only deliver to specifications.  Delivering only what is asked instead of what is needed is an easy pit to fall into.

Combined you get a smart lazy person – an individual who approaches a problem and understands what it takes to solve it and then goes and finds a way to automate it so they can move onto the next task in the list.  They don’t want to spend their time doing mindless repetitive tasks.  They want free time so they can take on additional responsibilities and projects.

In reality, these people are not actually ‘lazy’, rather, they are in love with optimization and hate to see waste.  They care about the larger picture and realize “How do we get there?” is just as important as “Why are we trying to get there?”

Take a moment and think about your own approach to issues.  Is there an opportunity for you to be a little smarter or a little ‘lazier’?

This has been a Thought From The Cake Scraps.

An eight – above average but falling short of the best. This is what I find when I ask people about their Excel skills.  In fact I would wager that this is what most people would say about their skills with any tool provided one thing.  The sole criteria for being an 8 is that they have used the tool enough such that their usage would be self-defined as frequent or occasionally (as opposed to used once or once a year).  The problem is, of course, that we don’t live in Lake Wobegon.  But if you ask people, person after person will tell you an 8.

I am not immune to this.  In fact, I claim to be an 8 of 10 in the business non-statistical application of Excel.  To me this means that I am not responsible for knowing the advanced mathematical and statistical formulas used in Excel, nor do I know how to write advanced VBA code from scratch.  What it does mean is that I know my way around PivotTables (and getpivot – both syntax options), am well versed in formatting data/graphs, can use a variety of text formulas (len, mid, right, left, proper, etc.), lookup formulas (vlookup, hlookup, index, etc.) and other advanced worksheet formulas (indirect, match, find, search, sumif, etc.), know how to create a dynamic named range, write basic VBA code, and create basic custom number formats (including if/then logic).

I know that I have shortcomings as well.  I don’t have the syntax for custom number formats memorized, array formulas still take a bit to figure out (and I don’t often think to use them), my VBA skills could use some polish, there are a bunch of keyboard shortcuts I don’t have memorized, and I don’t use many advanced Excel Add-Ins that turn it up another notch.  I’m sure there are others, but the point is that I know I have room for improvement and see examples of really talented individuals when I read blogs or when I am searching for an answer to an issue.

The point is that I feel like I am a well informed 8.  I am not saying I am an 8 because it just feels right.  I’m saying I’m an 8 because I put in time to learn what I don’t know.  I have been in rooms where I’m not the best, but clearly quite a bit more advanced than a large percentage of the room. And yes, I would wager money that I am not so smart that I can escape the unknown unknowns.  So I am an 8 and I know it for a fact.

And hence the 8 of 10 Paradox.  Or, rather, the Downing Effect wherein “people with a below average IQ to overestimate their IQ, and of people with an above average IQ to underestimate their IQ” and “the ability to accurately estimate others’ IQ [is] proportional to one’s own IQ”.  Applied more broadly it is called the Dunning-Kruger Effect.

So remember, as you go through life, people will always be comparing themselves to others.  Knowing your results in comparison to the average just makes us feel better.  But there will be times when there is not quick test score to compare; no easy benchmark to measure against.  There will only be an opinion.  At that moment you should really stop, be honest with yourself, and consider which side of the Dunning-Kruger effect you are on.

I give this post an 8/10.  What would you give it?

This has been a Thought From The Cake Scraps.

In @garyvee ‘s most recent book, The Thank You Economy, Gary makes a compelling argument for the use of social media.  If you know of Gary you know that he has been a huge proponent of social media – despite hating the term ‘social media’ – and he has had a strong and steady rise into the spotlight.  The Thank You Economy, TYE for short, is the essence of all of his bravado, condensed into an easy-read book that you’ll work your way through in a matter of hours.  I give this book an 8 of 10 and would classify it as a long-form personal opinion (with a dash of how-to type talk and examples).

The good news is that people that have not followed Gary and the social media trend (or have and don’t buy into it yet), this book is a great summary.  Unfortunately, the opposite is also true.  If you are a true fan of Gary and you follow his tweets, talks, Wine Library TV (now Daily Grape), Facebook (yes, he got /gary), etc. then this book will not hold any surprises.  It will still be entertaining and may motivate you to some extent to go get after it, but it will not share some massive new insight that was heretofore unknown.

Regardless of your exposure to Gary, the book is an interesting read with a unique perspective on the social media landscape – told from somebody on the bleeding edge of the trend and by an individual who couldn’t believe more in its power.  He references the very well known Old Spice craze and shares his thoughts on how businesses need to get back to the basics.  He often reminisces about old-school (“your grandparents generation”) ways of doing business, where they always knew your name.  Back when shopping was an intimate experience and a place where people met.

Oddly, it is an amazing parallel as people now share more than ever on websites and websites know more and more about an individual with every click.  In a very real sense the ‘shopkeepers’ do know you by name.

I actually found the most interesting part of the book after the conclusion in the area titled “Sawdust”.  Here you get a rapid fire series of topics, some as short as one line, that Gary provides his opinion on.  For any Gary Vay-Ner-Chuk fan(a Vaniac) this is a part of the book the really rings true.  You can almost see him jumping from topic to topic in his trademark over-the-top ultra-sure manner that makes him so engaging to watch.

What are your thoughts on social media?

This has been a Thought From The Cake Scraps.

It has been quite some time since I tore through a book but Tony Hsieh‘s account of his life, struggles he faced, and visions for the future of Zappos was easy to finish and hard to put down.  I give this book an 8.5 / 10 and would classify it as an “inspirational” type book.

To start at the end, Delivering Happiness is about the path to the current Zappos brand promise to deliver happiness – quite a bit more broad than the “largest selection of shoes” that was the promise in 1999.  Continuing from the end backward, the book takes on the sale of Zappos to Amazon, the early (and tough) days of the company, Tony’s selling of LinkExchange, and it starts with some stories of what made Tony the person he is today.  I think the thing that really makes this book so easy to read is that it reads more as a story than any sort of handbook, guide, biography, or company history.

The book was particularly pleasant for me because I would stop and make parallels to my own youth along the way.  It was fun to think about some of the things that I did growing up – some of the ‘business’ ideas that I tried and failed at.  It also reinforced the simple truth: CEOs of the most successful companies were just kids at one point, making mistakes and learning along the way.  This is a truth that would do many good to remember when they stumble in their lives.

There were also moments of reflection for me while reading.  Having worked at one of the great customer service companies, Lands’ End, I share a passion for the customer.  A belief that we should try and help the customer.  Some of the parallels of the companies are amazing.  But at the heart of it one this is clear – both were the passion of their founders.

One point that I want to emphasize is an idea that I have had for a long time and it is interesting to hear it from a leader like Tony, that a brand cannot exist with out a company culture that matches it.  When looking for employment, schools, or areas to live this is a key thing to keep in mind.  A nice job or a fancy house or the most elite school will do you no good if the culture doesn’t fit.  You will not be happy.  And, as is pointed out at the end of the book, the short term ‘pleasure’ happiness is not enduring.  It is fleeting.  A passion is what leads to longer term happiness and being part of something  bigger than yourself lasts longest of all.  Are you making choices to be happy?

Have you read this book?

This has been a Thought From The Cake Scraps.