Understanding Customers: Social Media Teaches Another Lesson
Marketing is the understanding of your customer for the cost-effective process of selling the right product or service at the right time and at the right price.
Inexplicably, Verizon joins the list of big companies failing to understand how poor research and judgment would draw fire from their customers and social media.
You might recall the wireless company announced a controversial $2 fee on their customers for making one-time telephone or Web payments. It was to take effect on Jan. 15, 2012. Less than 24 hours after making the announcement, Verizon was forced to rescind the scheme.
Why?
Verizon was lacking in discernment, and the fee announcement instantaneously drew the wrath from thousands of jolted customers.
Social media was buzzing. More than 100,000 customers signed a Change.org petition demanding the company change course. A regulatory agency, the Federal Communications Commission, announced it would investigate the issue.
In turn, Verizon was startled into reality. It was a sharp reminder that Verizon misread the situation. To be fair, Verizon isn’t alone.
Just two months ago, Netflix backtracked on its decision to break up a division – morphing its DVD rental service into something called Qwikster. Poor sales caused the CEO to take a cut in his remuneration.
In November, Bank of America incurred the wrath of thousands of customers when it announced a $5 charge for using debit cards. Thousands of customers became credit union members.
What were they thinking? Why aren’t such companies aware of the implications of the Digital Age and the economy?
Apparently, executives need to spend some time in sales with customers. Companies need to think 1930s for business success. Consumer attitudes are changing.
Verizon, Bank of America and Netflx should have enough marketing sophistication to understand the economic elasticity of consumer attitudes and fees. To the businesses, they were only charging a little extra money. To their customers, it was a strong perception of greed and unfairness.
Add social media to the mix and the companies face a firestorm. Not only is it a waste of corporate time and money, such naiveté leads to a dilution of their brands and weakening of sales.
The Internet launched an era of consumer awareness. That was both good news and bad news for business. It gave Web users unprecedented power – power for them to research brands and prices – and power to share critical information with countless other users.
And given this economy, Internet users and all consumers are more concerned than ever about value. So it’s important for companies to use best practices to optimize their brands and manage their Web reputations.
It’s also a good time to review PR-crisis management tips, research their customers and make certain that they’re discerning correctly.
Again, the lesson: Marketing is the understanding of your customer for the cost-effective process of selling the right product or service at the right time and at the right price.
From the Coach’s Corner, before you’re tempted to make a possible catastrophic decision about fees or prices, consider eight simple strategies to give you pricing power.
“The only thing that’s worse than being blind, is having sight but no vision.”
-Helen Keller
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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Public Relations Expert Provides Crisis Management Tips
Dec. 16, 2011
Appearances count. But universities, presidential candidates and businesses have all demonstrated a lack of awareness about good public relations. Given their significant status, we would expect them to exhibit world-class PR expertise in their crises.
But that’s not the case. Best practices in crisis management have been practically non-existent.
Consider these examples:
- Penn State and Syracuse – their sexual abuse scandals
- Herman Cain was forced to quit his bid for the GOP nomination following his weark and untimely responses to the sexual harassment accusations
- Rick Perry – his meltdown after a fast start in which he seemed invincible
- Bank of America’s controversial debit-card pricing fee, which prompted countless Americans to switch to community banks and credit unions, and a downgrade in the bank’s credit rating
- Anthem Blue Cross of California is facing multiple lawsuits as a result of policyholder perceptions of predatory increases in healthcare premiums and deductibles
Undoubtedly, in each situation, they would benefit from expert PR counsel.
“Businesses, politicians, sports figures and celebrities should all have a crisis plan because, sooner or later, they’re apt to need to activate it,” says noted PR expert Devon Blaine. “If that need never arises, at least they were prepared in case it did. There’s no harm in being a good Scout!”
Ms. Blaine has been the president and CEO of The Blaine Group, Inc. in Los Angeles since 1975. She has countless successes. So when she talks, clients listen and profit.
First step – preparation
“We’ve all seen what happens when people are not prepared,” she asserts. “Herman Cain is the perfect example. And he had a 10-day heads up prior to the Politico article coming out! Most people don’t have that advantage.”
She says even with a crisis plan, there are important financial considerations.
“…even if a crisis ends up being well managed despite the lack of advance preparation, managing the situation is needlessly more costly than it would have been had plans been made in advance,” Ms. Blaine explains. “The quality of the response may also suffer.”
She advises against complacency.
“Everyone believes that it will ‘not happen to me,’ but it can…and does…even to extremely small businesses such as our client that imported all of the wheat gluten from China that was used in every recalled pet food product a few years back,” she cites as an example.
“Had they had a crisis plan prepared which identified the vendors needed to mitigate risk, i.e., FDA attorney, crisis public relations firm, other legal counsel, etc., before they needed all of the above on an emergency basis, they would have paid a small consulting fee in advance and been ready rather than retaining all of the above on a last-moment, already-into-the-crisis emergency basis at top billing rates.”
Here are her excerpted answers to my crisis-management questions:
Q: What are the keys to crisis management?
A: There are many, for example:
- Knowing what the potential crises could be
- Planning and preparing in case the unthinkable should occur
- Knowing who does what
- Ensuring that the “chain of command” is known and adhered to in their office
- Having a trained spokesperson who will address the media
- Knowing what media to outreach to so that you are proactive rather than reactive
- Ideally, having an ongoing positive media campaign in place, based on the theory that the best defense is a strong offense…if your business is viewed as a good corporate/community citizen, a crisis will harm the business less, and perhaps not at all
Q: How do you suggest preparing for crises in business?
A: Ideally the management team will brainstorm what they believe could go wrong in the business and then bring in a professional risk manager and crisis public relations person to brainstorm with them. A walk through the facility will also identify other potential trigger points, i.e., doors that are left open and provide access to the company’s computer server, to other sensitive data, to products where quality control is essential, etc.
Q: How do you suggest preventing a crisis?
A: Conducting business in a prudent fashion is always the best way to prevent a crisis, however, there are issues beyond your control that can go awry, i.e., buying product from a manufacturer that operates with less than optimum ethics, importing toys that are decorated in China with paint that is toxic to humans, etc… unless you have control over each part of the process, there’s room for error. Visiting your vendor before doing business with them can help to control this but does not 100 percent ensure that you’ll not encounter a problem later.
Q: In the event of a crisis, what are best business management practices?
A: Openness with the press and honesty are the best practices. Sometimes issuing a “controlled statement” is the best way to proceed, especially when management needs to focus on resolving the problem rather than being available to the press 24/7. It also prevents the possibility of a “burnout moment” and guards against a response that is not empathetic… as we saw in the recent oil spill crisis. Absolutely never respond with “no comment.” It is better to say “we are aware of the situation and we are looking into it,” which gives no more information yet sounds caring, concerned, involved, active and responsive rather than evasive.
Q: What are your suggestions for testing your crisis plan?
A: In an ideal world, your management team will work with a crisis planning team such as that which The Blaine Group offers with its Reputational Risk Management Solution Product and avail itself of the opportunity to have key management roll up its sleeves and “play” a board game where a crisis is enacted and everyone plays out their role. We recommend this be done on a quarterly basis to ensure that everyone stays fresh. It is also a good idea for your spokespeople to be trained and for there to be “refresher” sessions every few months.
Q: What should be done PR-wise immediately following a crisis?
A: See the response above regarding best business management practices. And, more important, think about what should be done before a crisis, i.e., being a good corporate citizen and making sure that you’re acknowledged as such in an ongoing positive corporate communications campaign.
Q: What should be done during the crisis aftermath?
A: See best business management practices above. Also, ensure that there is a steady stream of information released as you have answers to the situation that occurred.
Q: What should be done once a crisis has ended?
A: If there has been a problem with one of the company’s products or their product has caused their customers problems, there’s an opportunity to generate goodwill by setting up a program that not only ensures this won’t happen again but also instructs their customers in how to handle such a crisis. Be certain to communicate that all underlying issues have been addressed.
Resource link: Ms. Blaine’s Web site.
(Note: I’ve been very familiar with the expertise of Ms. Blaine since 2004. She is a fellow member of Consultants West, www.consultantswest.com, a roundtable of veteran consultants in the Los Angeles area.)
From the Coach’s Corner, Ms. Blaine also explains the secrets to marketing success in recessions.
“If I was down to my last dollar, I’d spend it on public relations.”
-Bill Gates
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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Legal War on Wall Street Chicanery Isn’t Finished
May 23, 2011
Three years after Congress promised answers in the big banks’ roles in the financial scandal, there are none – only questions.
However, New York Attorney General Eric Schneiderman is investigating Wall Street’s role in the mortgage quagmire and housing bubble, according to published reports. Mr. Schneiderman wants documents from Bank of America, Goldman Sachs and Morgan Stanley.
Even as a free-market advocate, I remain troubled by several unanswered questions:
- The banks’ roles in the role that led to the housing bubble?
- Regarding securitization details, the merging of countless bad home loans into securities, which were sold to investors – insurance companies, mutual funds and pension funds?
- Were the banks really that incompetent or was it a case of ethics?
- What will be done to prevent the future devastation of investors?
- What will be done to stop all the illegalities, including the robo-signing in the foreclosures of homeowners?
- What about a moral compass to halt the practice of giving multi-million dollars to employees at firms bailed out by taxpayers?
Ostensibly, Mr. Schneiderman is not alone.
“These days the Justice Dept. and the Securities and Exchange Commission are investigating Wall Street with tactics, such as wire taps, usually reserved for professional criminals and terrorists,” blogged Dr. Peter Morici, a business professor at the University of Maryland, and a former Chief Economist at the U.S. International Trade Commission.
“Apparently, those agencies recognize what Treasury and the Federal Reserve simply won’t admit – insider trading, robo foreclosures and peddling dodgy securities to unsuspecting investors are good old fashioned fraud,” he wrote. “Like the corruption tolerated by Third World autocrats, those practices handicap American capitalism in global competition and undermine prosperity.”
He cited the subpoenas for executives at Goldman Sachs and SAC Capital advisors.
“Punitive settlements and convictions-resulting from investigations into insider trading at Galleon and SAC, shoddy mortgage foreclosure practices at Bank of America, and shady marketing of mortgage backed securities at Goldman Sachs-ultimately, would curb cynical behavior and ever bigger paydays on Wall Street, and improve returns for stock investors,” he asserted. “As importantly, it would redirect American capital and talent toward more productive, jobs-creating purposes.”
Dr. Morici indicated stocks aren’t an optimized investment.
“In February 1998, the S&P 500 first closed above 1000-since corporate profits are up about 210 percent but equities less than 35 percent,” he recalled. “Corporate profits rose 6 percent annually but investing in stocks paid a disappointing 2.3 percent a year.”
Why else?
“Buying stocks doesn’t seem to pay, because too much of the profits created by innovators with ordinary investors capital is captured by hedge funds, Wall Street trading desks, private equity houses, aggressive M&A shops, and then paid to Wall Street executives and traders,” he wrote.
Dr. Morici suggested an eye-opening thesis.
“In the drive for ever bigger compensation packages, Wall Street’s best and brightest violate boundaries of ethical behavior and the law,” he explained. “Not all of our problems can be laid on Wall Street’s steps, but its culture of entitlement and sharp practices impose enormous burdens.
“The carnival culture on Wall Street is attracting too many young people to business schools to study economics and finance, instead of pursuing physics and engineering,” he added. “That’s why the best business schools are overwhelmed with applicants from Connecticut and California, while engineering colleges depend on students from China and Asia, who will then return home to compete with American businesses.
He believes that the obscene Wall Street paychecks hurt individual shareholders and pension funds, alike.
“The absence of significant appreciation in equities for more than a decade means that many retirees dependent on IRAs and other defined contributions vehicles can no longer live comfortably, and many baby boomers who have been pushed into such pension vehicles can’t retire,” he wrote. “Their money may be working hard, but only for Wall Street titans and not for them.”
He maintains the financial chicanery costs jobs.
“These days, too much money and talent are directed to financial engineering-efforts to design the next complex derivative-and not enough is going into physics and real engineering-designing electric cars, new materials, and products and services that will define U.S. global competitive success and prosperity for the next 25 years,” he maintained.
“Increasingly, venture capital and stock investors look abroad for the best returns, and this deprives small and moderate sized U.S. companies of capital needed to expand and invest in new ideas and create jobs,” he added.
So, what can Mr. Schneiderman, the Justice Department, and the Securities and Exchange Commission accomplish – while the Treasury Dept. and Federal Reserve appear incoherent?
“Prosecuting Wall Street will do a lot to curb abusive practices and excessive compensation, make stocks and IRAs sensible investments, redirect capital and talent into productive purposes, and get the American growth machine back on track for our children and grandchildren,” concluded Dr. Morici.
Agreed. At one time, my free-market philosophy would have differed on this scandal. But not now. The economic liberty of countless people is at stake.
From the Coach’s Corner, Dr. Morici’s analyses are regularly published in this portal’s Economic Analysis Op Ed section. His short-term forecasts for the U.S. economy are published here.
Here are links on the background of the financial scandal:
Will Goldman’s Scandal Prompt Cultural Changes on Wall Street?
Sen. Cantwell Is Right to Question Risky Derivative Dangers, Geithner
Is it Time to Police Pay at Wall Street Banks?
“There is two things that can disrupt business in this country. One is war and the other is a meeting of the Federal Reserve.”
-Will Rogers
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Terry Corbell is a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Will Goldman’s Scandal Prompt Cultural Changes on Wall Street?
Updated July 15, 2010 – 3 p.m.
On the same day Congress passed sweeping financial-reform legislation, Goldman Sachs & Co. agreed to pay $550 million to settle fraud charges. The charges accused Goldman of fraud in mortgage investments. That includes $300 million in fines assessed by the Security and Exchange Commission – the largest in SEC history.
The remaining balance of $250 million goes to the victims.
You might recall that Goldman’s mortgage-related investments were designed with participation by a Goldman client, Paulson & Co. Paulson bet those investments would not succeed, and they didn’t.
Goldman is now forced to assess its procedures in such financial mortgage deals. The catalyst was the investments that cost investors nearly $1 billon, but the deal netted Paulson huge sums of money. It was also part of the mega mortgage meltdown that helped to exacerbate the nation’s economic downturn.
“This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” said Robert Khuzami, the SEC’s enforcement director.
A federal judge in New York will rule on the settlement.
The case against Goldman gathered steam when a published report added impetus to fraud allegations against Goldman. The Sacramento Bee alleged Goldman secretly worked to dump “billions of dollars in risky mortgage securities and buy exotic insurance” in anticipation of the housing bubble. But the report said Goldman hid its actions from the Securities and Exchange Commission for nine months in 2007 (“Goldman didn’t disclose its subprime mortgage hedges”).
At issue: Opponents eventually proved that Goldman’s gambling was so relevant – investors would not have bought Goldman’s offerings.
The furor over that controversial 2007 mortgage derivatives deal underscores the fear of many Americans that the market is rigged against them because Wall Street is a haven for questionable behavior.
The Security and Exchange Commission’s triumph over Goldman’s handling of the collateralized debt obligation (CDO) in subprime mortgages shows the Wall Street sheriff is back and is flexing some muscles.
Furthermore, Goldman’s failure to disclose that a hedge fund manager, John Paulson, helped select the underlying securities and then bet against them to make more than $1 billion is bad enough.
It’s looked even worse after Bloomberg reported Goldman knew it was under investigation for nine months but failed to disclose the investigation in their financial reports to investors.
Such omissions triggered the shareholder legal action.
The resulting headlines are reminiscent of the financial-greed scandals involving the 1980’s shadowy behavior of convicts Mike Milken and Ivan Boesky, as well as the principals at Enron and Worldcom.
Several questions have arisen:
- Is the SEC action really the tip of the iceberg of upcoming legal challenges?
- Will it lead to a stock market correction?
- Will it end the entitlement attitudes seemingly held by many investment bankers?
- Will it improve the culture in the financial sector?
This case was an ideal situation for New York’s litigious community.
It led to a decline of Goldman shares – 13 percent – as well as the shares of other financial companies trading in CDOs, including Deutsche Bank AG, Morgan Stanley, Bank of America (the parent of Merrill Lynch) and Citigroup.
In addition, a Chicago online publication, ProPublica, reported on questionable bets by Magnetar and allegations of conflicts of interest by the latter three financial firms. Magnetar denied culpability and none of the three banks denied or commented on the allegations.
Indeed, the same day that the SEC acted against Goldman, April 16, a Dutch bank leveled similar charges against Merrill Lynch. Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank, cited Merrill Lynch in a $1.5 billion CDO.
Sadly, regarding Wall Street’s entitlement attitudes and culture, the consequences might not be severe enough to prompt an attitude adjustment.
Not to be cynical, here’s the bottom-line question: Are there enough moral compasses on Wall Street to put a stop to the chicanery? Probably not.
From the Coach’s Corner, for more on Sen. Cantwell’s efforts, see “Sen. Cantwell Is Right to Question Risky Derivative Dangers, Geithner.”
