Back in 2012, entrepreneurs Larry Finnson and Chris Emery braved the Dragon’s Den looking for an investment in their fledgling chocolate candy business. Their company was called OMGs, which I’m pretty sure doesn’t stand for Oregon Mexican Gunk, because nobody would want to eat that. Their candy is chocolate mixed with graham clusters, toffee and nuts, and I can attest it is delicious. Arlene Dickinson ended up investing in the company. I’d embed the clip so you can watch the pitch, but CBC won’t let me. The best I can do is link to it, so consider that done.
Do any of you remember Clodhoppers? Larry and Chris were the guys who built up that brand, and OMGs are very similar. Clodhoppers were ridiculously popular back around 2005-ish, and have kind of faded to obscurity since. Larry and Chuck sold the company, waited a few years, and now they’re back for more.
So I’m out filling the chips, and I notice that OMGs are starting to hit store shelves. I haven’t seen them in any grocery stores yet, (not that they aren’t in grocery stores, I just haven’t seen them) but I have seen them in gas station convenience stores, as well as Shopper’s Drug Mart. Because I am a growing boy (mostly growing out, unfortunately) I had to buy a bag. They are delicious. Ladies, if you’re looking for that chocolate fix, OMG OMGs are good. They’ll help when you get one of those chocolate cravings during your time of month. Or before. Whatever, like I’m an expert in that stuff.
Anyway, this isn’t a post about my snack choices. It’s a post about marketing, and how Arlene Dickinson might not be as good at it as everyone things.
For those of you unfamiliar with the show, Arlene’s background is in marketing. Her company, Venture Communications, is one of the largest marketing and communications company in Canada. She joined the company in 1988, eventually buying the whole thing, and now has a net worth approaching $80M, at least according to the info someone else researched on Wikipedia. I’m sure Venture has all sorts of clients that think the company is the bee’s knees, especially if they’re into 1930s slang.
So Arlene invests in OMGs, and is obviously giving the company some marketing help. This goes without saying, but there’s a special reason I know. Allow me to present the marketing for OMGs.
The entire marketing campaign is that the product was on Dragon’s Den. Seriously, that’s it? A 9-iron could have come up with that marketing plan. There’s no mention of how addictive they are. There’s no mention of all the stuff inside of them. It’s just “why, we were on Dragon’s Den. You should buy because of that.”
Now if I was in charge of OMGs, I might do the exact same thing for my marketing, mostly because I’m a cheap ass who doesn’t want to pay for stuff. So I’d take a simple and effective idea, and run with it. Which is all fine and good, because I’m not paid millions of dollars each year to market products. I’m just a guy with a blog and a larger than average… ego. You all thought I was going to say something else.
So anyway, based on that, I’d never hire Venture Communications to market any of my products. OMGs are still pretty tasty though. You should buy some, except that would hardly teach anyone a lesson on bad marketing. Maybe steal them? I dunno, I’m off to get a snack.
As I’ve alluded to approximately 2,355 times over the past few weeks, I’ve got some holidays coming. I’m kind of excited about them, can you tell?
I’ve narrowed my choices down to just a few – Orlando, Las Vegas, and a resort vacation to Mexico have made it to my all important top 3. I’m leaning towards Vegas, mostly because I figure it’ll offer the most fun for a guy who is travelling alone. This is where you all feel sorry for me not having a girlfriend. I’ve been to Vegas before, and it was a good time. Flights are cheap, so are hotels, and I hear getting a hooker to your room is as easy as ordering a pizza. Sounds like a sexy time. Although considering it’s Vegas, I’m sure picking up a drunk girl would be easier than making another Paula Deen diabetes joke. (Still topical!)
As I’ve researched hotels in the area, I’ve discovered a couple of things:
1) People are much too willing to pay a 2x premium to stay right on the strip.
2) Holy crap, do some people complain about the tiniest of flaws in their hotel room.
I read reviews from people who were mad about people walking down the hallways late at night, because they’ve obviously mistaken Vegas for Branson, Missouri. There were people mad because the casino was SMOKY. Not their room, the casino. Some of these people were so pissed off that they’d give the hotel a one star review for something that most of us would consider a minor inconvenience.
Keeping with the Vegas theme, let’s take a look at two hotels, right across the street from each other, The Excalibur and The MGM Grand. From my crack research (read: pulling stuff out of my ass), a typical night at the MGM will set you back $120. Take a short walk across the street to the castle themed Excalibur though, and rooms are going for almost half as much, $66 per night.
We all know why the rooms at the MGM demand a premium. They’re nicer, probably bigger, they’re in a swanky hotel instead of one infested by all sorts of wiener kids, and so forth. Sometimes they have UFC events there, which I’d argue should actually reduce the value of the rooms, but whatever. I guess people are into UFC.
But look at the fixed costs for a second. Since they’re just across the street from each other, we can argue the cost of the land is pretty much the same. It definitely costs more to build a nicer hotel and to keep it nice, but I’d argue only 10 or 20 percent more. Staff costs are maybe a little more, since you’d have to hire a few more fancy-pants chefs and whatnot. The expectations of cleanliness would be higher as well, which would cost extra too.
But all things considered, the Grand has to be making more money for MGM than the Excalibur. And from a quick glance of MGM Resorts’ 2010 annual report (2011 isn’t out yet) the MGM Grand had an operating income of $84M, while the Excalibur made less than half that, $39M. It was nice of the folks from MGM to break down results per hotel for us.
But wait, some of you are saying, does it really make more money? Isn’t the Grand a much bigger resort than the Excalibur? Excellent observation grasshopper. Let’s look at operating income per room:
Grand: $84M divided by 5,044 rooms = $16,653
Excalibur: $39M divided by 3,981 rooms = $9,796
(Aside: Thank God Wikipedia is back to normal. That was a rough day.)
Comparing these two hotels isn’t really the best comparison. One caters to families and to budget conscious travelers, while the other caters to trophy wives and to dudes with more money than brains. I would suspect convincing a girl to go back to your hotel room would be much easier if said room was located in the MGM Grand. And, you know, if she was drunk. You stay at the Grand if you want a better experience and maybe even more importantly, if you value the good experience.
I’m the furthest thing from a MGM Grand customer. I have only stayed in one hotel room in my life I was dissatisfied with, and that was only because of the location. (South Central LA. THERE WERE BLACK PEOPLE!) I put pretty much zero value on luxury. I go on vacation to do stuff, not to stay in my hotel room. I am not a travel snob.
Meanwhile, one of my buddies is. We went on a weekend trip a few years ago now, and he insisted we stay in the nice hotel that set us each back an eighty dollar bill for the night. He enjoyed the fluffy pillows and the spacious shower and the
dead hooker flat screen TV. He enjoys the finer things, at least when traveling.
What’s the point of all this? In business, you can either provide a commodity, or cater to the snob. The Excalibur strives to offer a very average hotel at a very average price. They’re catering to the average Joe. Meanwhile, the MGM Grand, which is right across the street, offers a better experience to the traveler who wants to indulge.
If you have a blog, and you’re writing yet another post titled ‘5 Ways To Get Out Of Credit Card Debt’, which category do you belong in? How about if you just invest in mutual funds or index funds and call it a day? How about if you work at Wal-Mart compared to Whole Foods?
Some of the world’s largest businesses are built by catering to snobs. How many Apple fanboys are there out there? How many of you are a little bit addicted to your $4 Starbucks coffee? Are there any BMW fans out there? There are a million other brands that cater exclusively to people who value a high quality product, price be damned.
And yet, as Wal-Mart, Coca-Cola, The Gap and Microsoft show, businesses can be successful doing the exact opposite. They cater to everybody. Snob businesses exist because of the shortcomings of these behemoths.
That’s the beauty of capitalism. Both types of businesses can exist, and both can thrive. Which one is better?
This post is going to be about ice cream. Well, sort of. Do not try to eat your computer monitor.
I don’t know about you guys, but I am a big fan of ice cream. It doesn’t really matter what kind it is, I’ll eat the crap out of it. Because of this sickness, I’m at the local Dairy Queen eating a blizzard about once a week. Yeah, I know, that’s probably not the wisest thing for a recovering fat guy to do, but stuff is okay in moderation, right?
So I end up at Dairy Queen after a long day of lugging around potato chips last night. I pay $5.76 for a medium blizzard (chocolate extreme, which might be better than sex) and I eagerly await my number. Now, normally when you get a blizzard, it looks a little something like this.
Notice the ice cream level in the cup. You’ll notice that, like in every single blizzard picture in history, the ice cream is at least half an inch above the top of the cup. This is what I’ve come to expect when I get a blizzard. In fact, back when I used to work at Dairy Queen over a decade ago, we were encouraged to make blizzards with the ice cream above the rim of the cup.
You can probably see where I’m going with this. Last night, my blizzard was not filled to the top of the cup. Hell, it was at least half an inch below the top of the cup. What did I do? Did I dress down the poor guy who made my blizzard, making him question his very existence with a profanity laden tirade? Did I pull the owner aside and calmly voice my displeasure? Did I let anyone there know that I was disappointed with my blizzard?
Nope. I came on the internet to whine about it. And, over the next few weeks, I will make sure to tell my friends how pissed off a half inch of ice cream made me. The good news for Dairy Queen is I have no friends.
There’s a couple of lessons about business that we can take from my situation. Hopefully the owner is reading this, assuming he actually reads English. He sure doesn’t speak it very well. I’m not going to reveal what part of the world he’s from, which means I’m not racist. Somehow.
The first lesson is, just like we learned from my toilet paper post, cutting the size of your product doesn’t really do that much for net profits. I’m going to guess that ice cream costs on a blizzard is $1.00. If they reduce that by 5% by not filling the cup all the way, ice cream costs go down to 95 cents. Considering the fixed costs of running a restaurant stay the same and so do the costs of the cup and the spoon, this isn’t really saving the restaurant very much money.
Secondly, every single blizzard picture in history shows ice cream above the top of the cup. Most Dairy Queen’s realize this, so they make the product that way. The company has worked hard over the years to establish this standard. And then, one rouge operator decides to buck the trend to save costs.
By doing this, he’s opened the door for me to get pissed off. And like I said earlier, I’m not going to take him aside and voice my disappointment. I’m going to vote with my feet, and take my ice cream business to the other 4 places in town that sell ice cream. Or, I can go to the grocery store and have my choice of hundreds of different flavors. Maybe it’s because we’re polite Canadians, but we just won’t complain about stuff like that. We’ll just take our business elsewhere, usually quietly.
The owner probably thinks oh, it’s just a little bit of ice cream. He’s guilty of not looking at the big picture. Restaurants need volume to make money. Rent costs the same no matter how many people go into the place. Cutting back the amount of product you give people is not a good way to drive volume.
This concept applies in your life too. No matter what you do, you have customers. They might be your bosses, they might be clients or they might actually be people who come into your store. Whatever you do, don’t disappoint them. Under promise and over deliver. Don’t say you’ll do something unless you intend to do it. Give the best value you can. With so many people out there who don’t see the big picture, standing out won’t be so difficult.
I went to Wal-Mart last night to buy some toilet paper. You see, I’m just like you! We’re relatable!
You frugalites (is that even a word?) aren’t going to like this, but I buy the nice toilet paper. It’s the BMW of ass wipe. It’s the creme de la creme of sh*t tickets. It’s Proctor and Gamble’s very own premium brand Charmin.
The reasoning behind my extravagance is relatively simple. I don’t want to wipe with scratchy toilet paper. This may be too much detail, but I do not want my finger poking though when I wipe. This just isn’t good. So I buy the Charmin. Hate it if you may, but you do have to admit that nice toilet paper makes for a better wiping experience.
You are enjoying reading about my ass wiping habits, right? Okay, I’ll get to the point.
So I’m in Wal-Mart picking up my usual thing of Charmin when I notice the sheet count, somewhat hidden on the package and written in a small font, but still legible. It read 264 sheets. I thought this was odd. I thought I remembered that the sheet count was a nice even number before. I paid for my toilet paper and came home, knowing I still had the wrapper from the old toilet paper I bought. In fact, I remembered, this wrapper was from months ago since I stocked up the last time Charmin was on sale.
I dug out the wrapper and sure enough the last package’s rolls each had 300 sheets. They reduced the sheet count by 12% and kept the price the same. Those sneaky bastards!
Being in the potato chip business, I’m well aware of this practice. I wrote about it way back in February. What companies do is slowly decrease the size of the product and charge the same price. This is a far better idea than the alternative of raising prices. Consumers will quickly go on the internet to complain about any price increase.
Back in January my chip company decreased sizes on just about every bag of potato varieties (but not corn varieties). Guess how many people noticed? If you did, congratulate yourself because you’re in a very small group.
One thing to note is decreasing the size 12% isn’t the same as a 12% price increase. Packaging still costs the same, so does shipping and marketing and a million other input costs. If the product itself represents 20% of the total cost to produce, then this is more like a 2% price increase.
If no one notices is it still a rip-off?
Proctor and Gamble
For those of you unaware, Proctor and Gamble is one of the largest consumer products companies in the world. Here’s a sampling of their best selling brands:
- Head and Shoulders/Pert Plus/Pantene
- Cover Girl
- Crest/Oral B
There’s more. I just got bored after typing out 10. Each of these brands does over a billion dollars in sales. Needless to say, the folks who run Proctor and Gamble know what they’re doing.
See if you can figure out the similarities with each of those brands. I’ll give you the answer by the end of the post.
What’s The Point Of All This?
There are 3 types of toilet paper customers. Which one are you?
1. I buy the cheapest toilet paper I can. Whatever’s cheap I buy. Store brand me baby!
2. I buy a decent brand, but only when it’s on sale. I’m a middle of the road shopper.
3. Give me the good stuff! I want to feel like I’m wiping with a pillow! My ass craves a comfortable wipe!
No matter what product you buy, those are essentially the 3 options you have. You can go with the cheap brand, the middle brand or the top brand. Whether you’re buying electronics or toilet paper or barbeque sauce, those are your 3 options. There might be 10 different brands in each category, but each aims for a certain kind of shopper.
Getting back to those Proctor and Gamble brands, which type of shopper are they aiming for? It’s not 1 or 2.
Proctor and Gamble’s brands can hardly be described as cheap. Pampers are definitely more expensive than their competitors. So are Gillette razors and Duracell batteries and every other example on that list. Their competitors undercut them on price all the time. Are they worth the premium price? For most of their stuff I’d say no, but that’s coming from the guy who’s willing to pay extra for their toilet paper.
So how do they get people to spend extra? It’s the marketing. Think about the commercials you see for these brands. They always focus on the advantages of the product. Pampers ads talk about how they absorb more baby poo. Cover Girl’s ads imply all you need is a little lip gloss and blush and you could look like Taylor Swift. Duracell is trusted by important things like fire departments and hospitals because they’re the best. Nowhere is price mentioned. Nowhere do the mention anything about being cheaper than the competition. They make you want to buy the product, price be damned. That’s good marketing.
Certain frugality bloggers get outraged when companies do this. Let’s not mention any names, you can just go back to this post if you’re curious about it. Rather than be outraged about companies trying to sell you things, you should realize it, give them props for doing such a good job and maybe look at buying shares.
What can this teach you about business? It’s simple really. Is your business catering to customer type 1, 2 or 3? If you’re a fellow blogger, how about your blog? Seeing Proctor and Gamble’s success, which customer do you want- the one who views your product as a commodity or the one who loves the brand? Proctor and Gamble gets it, do you?
I spent the day yesterday hanging out at my parents’ house, waiting around for Telus to show up to replace their modem. I waited patiently until 4:30, then I got on the phone to ask Telus if someone was actually going to show up. I was assured that someone was. It’s close to midnight as I type this, and my parents are still waiting for someone to show up. It’s the easiest fix ever, all they need is a new modem. (I took my modem over so my Dad could check his email.)
I’m sure just about every one of you has some sort of horror story when it comes to dealing with the phone company, or the cable company, or whichever. Feel free to share your most horrific of those stories in the comments section. I give bonus points for cuss words.
I’m much more curious about why these companies are so bad at customer service. I like to chat with the repair guy once he comes around, partially to be a nice guy and partially so the repairman remembers me as a nice customer. Whenever I talk to these guys, they all agree the company sucks at providing good customer service. They overwork their repair guys. There isn’t enough guys in an area, so work gets backed up. The company over-promises and under-delivers. When you call into the call center, the person on the other end clearly doesn’t give two craps about you, at least most of the time.
So why are companies so bad at customer service? Here are some ideas I have as to why:
I don’t have any first hand examples, but just about every big company has policies and procedures that are only marginally useful. Usually these procedures are thought up by middle management types that are years removed from front line service, with no thought about how the customer will react. Middle management has to come up with this stuff, mostly so upper management can see they’re doing something. Hey, you’d want to justify your existence too, especially if the alternative is being laid off.
They Still Think They’re A Monopoly
I remember when the Alberta government owned the phone company, (AGT- which stood for Alberta Government Telephone) along with all the liquor stores, as well as all sorts of other stuff. Alberta ended up selling all that stuff off, letting the private sector run what the government used to, with the notable exception of ATB Financial.
These former crown corporations were bought by other former crown corporations, or companies that were dominant in their field. Since Canada has such little competition in industries like wireless or television, these companies can continue to treat their customers like trash, content in knowing their competitors are doing the exact same thing. They’ll lose subscribers because of bad service, but so their competitors. It’s a perpetual motion machine of crap.
Even if more companies enter the space, well established companies will just buy them out. The field gets consolidated to a handful of players once again, and we’re back in the same boat as before.
No One Cares
I don’t want to paint everyone who works at these places as an apathetic moron. I’m sure there are some great employees out there. But, for the most part, the employees don’t care.
And why would they? An entry level employee in a call center is probably making all of $12 an hour. A company isn’t exactly attracting the best and brightest paying that much. Plus, the culture at these companies doesn’t exactly award going above and beyond the call of duty. Doing something innovative to retain a customer would be punished, not rewarded. Besides, the entry level employee isn’t given the authority to do anything anyway.
The reason things are like they are is because the company thinks of only one thing: profits. They figure if they keep costs down, the savings will go straight to the bottom line, making investors happy at the expense of customers.
As a consumer, this attitude translates to a pretty crappy customer service experience. Giving some sort of compensation for a bad customer service experience can help the company maintain a good relationship with a customer. If a company does nothing because it’s good for the bottom line, they can lose a customer who might have paid for decades. Which is the better long term decision?
The Company Has Intentionally Bad Customer Service
I’m convinced that companies have intentionally horrible customer service. They use confusing automated systems when you call. They give customer service reps instructions to give callers the run around. They randomly hang up on people who call in. I used to think all this stuff was just a result of crappy systems, but I’m now convinced some of it is on purpose.
For what reason? It’s simple really. If nobody calls in, then costs to run a call center go down dramatically.
Readers, can you think of other reasons why big companies are really bad at customer service?