Wednesday, November 24, 2010

Time and Money

Have you noticed how the situation you are in effects your attitude to spending money, to your assessment of how much should be spent and when to bargain?

It is strange how different times and places create different behaviour in us. When haggling abroad we can get very excited about fifty cents. Most of the time, we’ll have a default amount to be worried about, maybe 20-50 Euros. Of course, we put an extra zero on if we are spending money of someone else, such as our employer. Then there are other times, for example during moving house, when we are making so many purchases at such speed that we lose our discipline. How many of us have casually bargained away a couple of thousand Euros when buying or selling a house? Think how much haggling in Greek markets that equates to! And then there is the fitting and furnishing. There is a period when we just value progress more than value, where we are prepared to make major decisions and fritter away cash at a rate we are not used to.

Maybe it is a good thing, as otherwise our stress levels might escalate out of control and our capacity to damage relationships with it. There is obviously a trade off with time and stress involved. Yet I’m sure many of us look back at a moving time months later and ask ourselves how we managed to spend so much so quickly and with so little discipline. I’m not sure there is a solution, beyond being aware of the risks.

Though I do know it is worth stepping back a bit and doing some currency conversion when on holiday. Fancy rejecting that beautiful top just because the trader wouldn’t come down from three Euros to two Euros! Enjoy a good haggle, then spend anyway, as long as you have space in your luggage. If not, nowadays you might find the top costing you forty Euros, courtesy of Ryan Air.

These thoughts are prompted by my recent house moves. It is said that moving house trails only death and divorce in the degree of stress it gives us. I think I’ve moved up to 20 times in my life – in contrast to one divorce and not many deaths of loved ones – and I’ve always thought this was a bit exaggerated. It is tough, but not that tough really. Anyway, here are another couple of thoughts from the house move.

First, moving always reminds me of the respect I should give manual workers. A couple of Fridays ago I endured a day of heavy lifting of furniture and I hated it. My body is still complaining at me two weeks later and the bruises on the insides of my wrists are still there. This was after a small shift compared with what the professionals put in day after day. Admittedly they have some tools and some techniques to make their burden lighter, but even so fair play to them for what they achieve. With the influx of Asians and East Europeans, it is hard to make much of a living doing this sort of thing, yet manual workers work hard, hard, hard.

Next, my love for IKEA was only made stronger by moving. What a marvellous concept, and what flawless execution. Everything about IKEA just oozes quality of operation and customer service. The selection is fantastic. The design is superb, balancing creativity with cost and practicalities such as parcel size and ease of assembly. The workers in the store are well trained. And every aspect of the experience has been tested again and again. My main visit was during the day on a Friday, and the experience was a pleasure, at least until the heavy lifting started. Even paying the bill was fun, as we tried to push five trolleys through the checkout, and the total was small for what we bought. Then I had to go back on Sunday afternoon for a return and a couple of extra purchases, which allowed me to observe IKEA and full stress level. Despite the crowds of people everywhere, their relentless operational focus meant that the bottlenecks were ironed out. The visit was hardly fun but still impressive. What a great place. And how on earth do they deliver that quality at that price in their restaurant?

Finally, I’m sure it is available if I look on the internet, but I’d love to have had access to a simple checklist of items to keep handy during the chaos of the move. Some are obvious, such as keeping a kettle handy at both ends for workers and yourself, and keeping a close watch on true valuables like jewellery and passport. But we made many mistakes with less obvious items. Would you believe we sent over a kettle and coffee but forgot to send any mugs? You can never have enough black bags or kitchen towels. I kept a close eye on my mobile but managed to bury the charger, thereby rendering the mobile useless after a short period just when it was most needed.

So roll on move twenty one, I’ll try not to make any mistakes. And welcome back to normal times, with spending returning quickly to a more comfortable level.

Friday, November 19, 2010

Multiple Brands

The Economist business section was on good form last week. A great article about partnerships was built with humour around the autobiography of Keith Richards. But I was also interested in another article, about hotel chains.

The article focused on the Accor group of France, owners of many brands from the high end Sofitel, through Mercure and Ibis down to the no frills Formule 1. Most of the writing was about a change of CEO, and the wisdom of owning versus franchising of hotels. This was a debate we often had at Shell and has become common among owners of brands built around locations – it is interesting that the new CEO of Accor came from McDonalds. It is always tempting to shift outlets from the balance sheet, since this immediately creates cash and return on investment. However, these are mainly one-off effects and the downside is loss of control of the brand. I prefer companies who hold on to at least a share of core assets, such as Accor.

Not discussed in the article was a second issue, that of having a stable of brands with different customer offers. In fast moving consumer goods, this is common practice – witness Proctor and Gamble or Unilever, but also players like Diageo. These own many excellent brands and focus their marketing on these rather than the parent. Indeed not many people know which detergents are Proctor and which ones Unilever. Occasionally, these giants even pit brands with very similar propositions against each other.

For retailers built around outlets, however, the practice is much rarer. My theory as to why this is starts from the history of the companies and their resulting culture. In Tesco, or McDonalds, or even Shell, strong internal functions include property management and operational control, whereas brand management (of the offer rather than the store) comes later in evolution. By this time, the owners brand is so strong, and so supported by senior management, that the arriving consumer marketers are forced to use the umbrella for everything. The disadvantages are that the outlets tend to be so diverse that creating a distinctive image becomes difficult, and it also potentially hampers diversification (as opportunities must fit the dominant brand identity). For poor players, this can be argued as a good thing of course, making costly errors less likely.

Tesco and others have a neat partial solution of using sub brands. So we have Tesco extra, Tesco metro, Tesco express and so on. This allows the strong core brand to spread to new markets, but they have to be careful not to stretch too far – so for example pricing in convenience stores has to walk a tightrope – high enough to make a margin with the higher operating costs and rents, yet not so high as to damage the reputation of the core brand.

I tried to start this debate in Shell a couple of times. We had reached a situation where Shell retained a consistent good reputation as a fuel, but not always as an outlet. Furthermore, the need started to arise for very different types of outlet to compete, ranging from highway sites to outlets with fancy stores to local low cost operations. Then, in some markets, came the unmanned station. In these, more or less the entire staff cost and a substantial part of the land and maintenance could be eliminated altogether, at the cost of sacrificing part of the offer and the income from the shop. Where shop potential is low, land tight, IT well established, and staff costs high, this is an attractive proposition.

I had seen unmanned station work (for the competition) in Scandinavia and saw massive potential in other European markets (for us). But I ran into several internal blockers. The shop function at the time believed they could do good business anywhere. Dealers wanted to stop unmanned growth, since it threatened their livelihood. The branding department could not see beyond the Shell brand, with its large budget for them! Unmanned had started to gain a toehold, but was often seen in Shell as a low cost solution only to keep poorly located outlets open. As an aggressive, low price high volume proposition, Shell was not ready.

Part of this became a branding question. Aggressive unmanned sites have to offer a discount to grow scale. Yet how could we do this under the Shell brand, which had at best a neutral reputation for price? I argued the radical solution of using Shell as the fuel brand only, while using a range of different brands for the sites. So you could have “highway”, “complete”, “local”, and “unmanned”, all selling clearly branded Shell fuel. The Shell brand would be on the pole sign and the pumps, a bit like an oil brand would be normally.

We would then take the next logical step of having distinct organisations for the different outlet brands, in principle competing with each other, but with some rules to prevent value destruction. That way an organisation could develop with the right aggressive Easyjet type) culture for the unmanned, and so on. As well as sharing Shell fuel, the organisations could also share services like pump maintenance to leverage scale.

This was one of the most radical ideas I had in Shell, and it still rankles with me that I didn’t manage to make progress with it, for I’m convinced it would have been a winner. Who knows, perhaps it still could be? I remember one night trying to think of parallels in other industries, as a way of supporting my argument. The best I could do were people using sub-brands, which for me would not be radical enough for us.

Then some months later, and too late really, I had a brainwave and found my case study. Accor. Stupid really, I must have slept 20 nights in Accor hotels while trying and failing to come up with me example, and it was right in front of me all the time. As a result, since then I’ve always followed and admired Accor. The growth of Formule 1 is an excellent case study, and now has many imitators. It seems to me that this company creates exactly the business model to utilise multiple brands to appeal to many consumer segments.

Just like we could have done in Shell.

Tuesday, November 9, 2010

On Deafness

I am slightly hard of hearing. I think many people have this problem and quite a few are not aware of it. Further, I believe that not enough has been done to make our lives easier. Compare with poor eyesight. The high street is full of opticians, diagnosis is nearly universal, correction products are effective and readily available, and there is even a maturing market for structural correction. For poor hearing we can make none of these claims, yet I believe the adverse effect on daily life is as great. Why the difference?

Although my separated wife often accused me of not hearing her, I didn’t take that as decisive evidence and I never had any other tests, so for years I lived in ignorance of a hearing problem. Then I had a sinus issue which led to various tests including one for hearing, and it was there I was told that both ears were weak but especially my left one. Most likely I have had the problem for years and years without being aware.

We all know that old people go deaf. My mum has been going deafer and deafer for twenty years or so. Her relationship with hearing aids mirrors that with much other technology. She went through a long phase of denial, then rejection. Then she quietly got herself an inferior (ie cheap) product yet refused to apply it, and then would not train herself to use it. Now, finally, she has a decent product, but she still refuses to use it often (for fear of the cost of new batteries). Hence she so far has not got used to the new way of hearing, and still struggles to put the things on correctly. Most of the time she still asserts that she is not deaf but others mumble.

Rather like the woman in Fawlty Towers, Mum is not the easiest customer, but I do think her experience offers some lessons. Although they have got smaller, hearing aids seem far too difficult to put on. It took her ages to find a shop to help her, and their products were poorly explained, poorly marketed and came with terrible customer service. And the product has all sorts of negative elements beyond size and awkwardness to fit. They are hard to get used to, need many batteries, are very fiddly, and still leave problems with extraneous noise.

What is it like to be a bit hard of hearing? The funniest and best explanation came in a novel by David Lodge called “Deaf Sentence”. I recommend this to anyone, but especially if you are a bit deaf yourself. A good analogy is taking part in a conversation in a language you know reasonably but not perfectly. You pick up the general drift but seem to miss the punch lines of jokes and nuances. You can ask people to speak more slowly and repeat things, but, out of social politeness and embarrassment, you tend to limit the times you do this. Instead you make assumptions, sometimes wrong, about what is said, and you pretend (even to yourself) that you understand more than you do.

Hearing difficulties are also very situational. A one on one conversation in a quiet room is usually OK. Many people at a dinner table is much more difficult, especially if the furniture is metallic and there is background music or noise from nearby tables. You also hear a lot worse with a cold or having recently been on a plane.

Now I know that I am a bit deaf and have moved beyond denial, there are things I can do. I can favour my better ear, whether in choosing my seat at a table or even a side of the bed. I can avoid some situations, or just ask people to compensate. But often there is little choice but to accept the problem. I do wonder how much damage I did to my career or even my social life while wandering around blissfully unaware yet plainly handicapped. Might this apply to you too? Maybe it is time to get a hearing test.

I have recently learned of a surprising number of other non-geriatrics who are partially deaf, and my guess is that there are many more out there who don’t know it. Think of all the people you know who talk unnecessarily loudly. The majority of these will be a bit deaf. They don’t hear, so talk a bit louder in the hope that others will talk louder too, a bit like when we shout down our mobile phones in public places.

Now I finally get my ears tested, the experience hardly fills me confidence. The test involves listening for a series of noises and pressing a button when you hear one. The noises tend to come at fixed intervals so you can score well with guessing. One time, it was half way through the test before I realised that I could see when the nurse was activating a noise and that I was responding visually rather than orally. I once took a test with a cold, hardly a representative time. And once I was asked to repeat words, only they were in a foreign language (Dutch, as I was living there) and I plainly had a disadvantage compared with natives. So there seems much room for inaccuracy.

Perhaps the test is not well developed because the basic line from the doctors seems to be that essentially nothing can be done to improve hearing. If it was bad enough, I could get a hearing aid, otherwise it was just a matter of putting up with it until it got even worse with age. And it should be bad before getting a hearing aid because of all the downsides to the products listed above.

So let us sum up what we have here. We have a complaint that is very common and seriously debilitating. There appears to be no structural solution, and development of solutions generally seems to have been very slow and poor. Society does nothing to make life easier for sufferers, for example by encouraging testing or promoting hearing-friendly environments.

All in all, this feels like a lost opportunity. Again, compare with eyesight. The way things are going with laser surgery, in twenty years time everyone in developed countries will have perfect sight.

If I am right, I wonder why. Perhaps one reason is the social stigma of accepting you are deaf – it is so linked to extreme age. If we could create acceptance, that might set off a snowball of open dissatisfaction leading to better efforts at solution. So who will join me in calling for government, entrepreneurs and society to do more for the hard of hearing?

Oh sorry, should I say that louder? Perhaps you didn’t hear me.