Category Archives: Business Development Ethics

Princess Cruises: Cloudy Marketing

Originally published 07/24/09

The letter I received from Princess Cruises begins “Enjoy your next cruise for FREE.” A picture of a Princess Cruises Rewards Visa Signature Card appears below, containing a beautiful photo of the bow of a Princess cruise ship taken against a shimmering ocean and a clear blue sky. Ah, Summer! And who couldn’t use a leisurely cruise vacation?

As I skimmed the offer described in the letter, my eye landed on a curious anachronism: a closing and a signature, followed by a name and a title, “Judy McConnell, Loyalty Program Manager.” But something was missing! There was no additional contact information. No phone number, no email, no address. Was Ms. McConnell the sender, as the signature implied? And why would a loyalty program manager close a direct mail promotion with “Sincerely,” and not offer a prospect a way to contact? I wanted to find out whether the omission was by design, or by accident. It took one call to learn the answer.

I contacted the toll-free phone number that Princess inserted in three places in the letter. “Could I speak with Judy McConnell?” I asked. There was a pause, followed by “There’s no one by that name who works here.” “But she signed a letter I have in front of me.” The voice on the other end responded that I had reached Barclay’s (the company that manages credit card processing for Princess), and that if I wanted to speak to someone at Princess, I would need to call another number–missing from the letter.

The Barclay’s agent then gave me the number for Princess, and the customer relations representative there informed me that she could remove my name from the mailing list, but otherwise, this was the “end of the road” for my inquiry. My request to speak with Ms. McConnell was denied. Resolute, I called the company’s Santa Clarita, California office directly and left a message for Ms. McConnell. She hasn’t returned my call.

I looked closely at the credit card solicitation again today. Just how many points would I need to receive my “next cruise for FREE?” Hard as I tried, I couldn’t find that number anywhere in the letter, so I called the toll-free number again. The Barclay’s representative told me she couldn’t find out unless I provided the “Personal ID Code” from my letter. Uncertain whether this would open a credit application process, I decided to contact Princess instead. Surely Customer Relations would have the answer in just a quick keystroke or two. After one call transfer, and a few minutes to “research,” I received a straightforward number (drum roll, please): 150,000 points to earn a free cruise up to $3,000 in value (ah, so if I book a cruise that costs over $3,000, it’s not exactly “free”).

I ran the math. If I took advantage of the 10,000 point bonus for signing up, that’s $140,000 in charges to earn my cruise. If I charge $2,000 a month that’s . . . let’s see . . . 70 months, or almost six years, to achieve my reward! Next cruise for free? Is Princess suggesting that will be in 2015? Wouldn’t they want me as a customer before then?

If I read their letter literally, obviously not. What an odd loyalty program!

Pfizer’s Ethics Violations Hurt All of Us

“At Pfizer I was expected to increase profits at all costs, even when sales meant endangering lives. I couldn’t do that.”

The sales representative who blew the whistle on Pfizer’s illegal marketing practices, John Kopchinski, made that statement about his now-former employer.

Mr. Kopchinski was fired from the company in 2003. He won’t miss his job. He received over $50 million from the US government for his efforts to prosecute the $2.3 billion fraud settlement from his former employer—the largest such settlement in US history. The product he was assigned to sell, Bextra, is a discontinued medication approved for arthritis and menstrual pain.

Paying $2.3 billion for “fraudulent marketing” should cause every marketing professional and salesperson to break into a nervous sweat. Murky ethics are amazingly common. They begin innocuously, then escalate. According to Mr. Kopchinski, what started as “aggressive promotion” of Bextra mutated into illegal practices. As he put it, “the ethical line kept moving.” And the pharmaceutical industry’s shady sales practices moved back into the spotlight this week, when John Oliver’s Last Week Tonight segment detailed more skeletons tumbling from pharma’s marketing closet.

I’ve seen it elsewhere. Ethical risks are shrouded in code-speak: “we’re a ‘revenue-focused’ organization,” or “our company champions an ‘aggressive sales culture.’” Anyone who doesn’t take heed from Mr. Kopchinski’s ethical-line observation faces the same risks. In Pfizer’s case, the problems didn’t begin with stereotypical predatory salespeople and percolate upward—they began at the top. As the saying goes, “the fish starts rotting at the head.”

How can bright people working for well-regarded companies commit such ruthless dishonesty, when they wouldn’t think of stealing their next-door neighbor’s pension check—arguably a far less-heinous crime? Unfortunately, the answer is all too simple, and all too common: by insulating the perpetrators from the victims. Here’s Pfizer’s approach:

Sales commissions: According to the NPR health blog, a “$50 bounty (was) paid to reps when they got doctors to add Bextra to the standard care for patients before and after surgery. These care protocols would direct patients to take Bextra, often at high doses, a few days before a knee operation, for instance, and then afterward to control pain.”

Telemarketing scripts directed to physicians: Salespeople were coached to tout greater efficacy and safety for Bextra compared to Vioxx, a competing painkiller from Merck. The US Food and Drug Administration never approved these claims.

Sales culture: OK. Let’s call it by its real name—intimidation. “If you don’t aggressively sell your products . . . you’re labeled a non-team player,” Kopchinski said, adding that only by promoting Bextra for unapproved uses could he achieve management’s revenue goals.

You can see the evidence in clear black and white, and it’s all creepy. What was Pfizer’s management thinking? Caught with its pants down, Pfizer cut a check for $2.3 billion. Everybody—just shut up, leave the chicanery behind, and let’s move on! Problem resolved.

But is it? At the same time that jolly Pfizer managers were gloating over PowerPoint slides depicting beautifully soaring revenue curves, people were suffering or dying from taking medications for unapproved uses. Yes, that’s rock bottom. Bad ethics don’t get any worse than that, and even a $2.3 billion mea culpa won’t enable the company to sweep its dark tactics under the rug. A plan to sell cigarettes in elementary schools seems more benign.

Which brings Pfizer’s indiscretions to the everyday salesperson. We’ve all experienced what happens when “baggage” is brought into a sales meeting. A salesperson is often considered guilty before he or she proclaims innocence. It’s understandable. Along with evaluating the performance and features of a product, prospects scrutinize a salesperson’s motivations and integrity. But as Pfizer’s deceit has shown us, prospects now need to look further, and to question whether the top management of a vendor’s company has a moral compass. The answer to that question could reveal buyer risks that were previously unimagined.

Going, Going, Gone! e-Commerce Erases More Than Paper Money

Originally published 09/24/09

Imagine a meeting of Major League Baseball team owners as they collaborate to improve their financial results. You’re in the room. A scrawl of operating statistics covers several flip charts. Alternatives ranging from increasing ticket prices to cutting fan perks are discussed. But at the end of the 10-hour meeting, one option prevails: beginning next season, the pitcher’s mound in every stadium will be moved a modest six inches closer to home plate.

Great excitement follows. Owners can take the results to the bank, and players and fans won’t even notice! How? The executives figure that the shorter distance will make it possible to play a full game in just under three hours, down from the current average of three and a half. They reason that six fewer inches of throwing distance cuts the decision time for a hitter to swing, resulting in more strikeouts. More strikeouts mean less playing time, and less playing time means shorter operating hours for stadiums. (There were about 33,000 strikeouts in 2008.)

Eyes light up as numbers are eagerly keyed into pro-forma spreadsheets on flickering laptop screens. The thirty-minute per game reduction will save millions of dollars of operating expenses for every team. Lower labor and utility costs! Faster fixed charge coverage for expensive stadiums! The savings will drop right to the bottom line!

If you think the boundary-changing idea sounds preposterous, think again. This principle behind this imaginary gambit isn’t fantasy in e-commerce. The difference is that the boundaries are abstract and the money is real—to those receiving it. Want proof? This year, banks are projected to earn $38.5 billion in overdraft charges by shifting a long-assumed boundary called “I accept the charges.” How? According to a recent editorial in The Washington Post (Overdrawn and Uninformed, 9/22/09): “. . . from time to time, you may have found yourself inadvertently making a debit card purchase that exceeds your remaining funds. Alas, the way you may have found out about the overdraft was a notice from your bank, days later, informing you that you owe a $30 service fee. The bank just automatically floated you a small loan and charged you for it without giving you a chance to accept or reject the offer.”

Missed the boundary change? Don’t worry. Thirty-eight and one-half billion dollars in 2009 overdraft fees suggests you’re not alone. The bank extracts money through a silent, virtual ka-ching, with binary 1’s and 0’s flowing to complete the seamless transaction, absent the faces of Jackson and Hamilton. And that’s just the point. Customers don’t attempt to intervene because the experience fails to excite the same area of the brain that real money does—a phenomena that author Jonah Lehrer describes in his book How We Decide. A small transaction-boundary shift yields a $38.5 billion reward—a sensational feat that now has the attention of Congress.

Elsewhere in e-commerce, changing abstract boundaries also keeps fiscal 1’s and 0’s moving from payer to vendor. Ever receive a charge on your credit-card statement for a “trial offer” you didn’t really want? It’s probably because you didn’t remember to “opt out” after you “opted in.” Where, exactly, was boundary for the transaction? It’s clear as mud.

Opt in/opt out. It’s today’s tool of choice for e-commerce boundary changers. Remember Facebook’s Beacon Debacle, in which a man purchased a diamond ring (for his wife?) from overstock.com, and 720 Facebook friends were informed about the transaction? As Christopher Caldwell wrote in The New York Times (“Intimate Shopping,” 12/23/07), “Facebook designed Beacon so that members would be able to “opt out” by clicking a pop-up window. But these windows were hard to see and disappeared very fast. If you weren’t quick on the draw, your purchases were broadcast to the world, or at least to your network . . . Privacy advocates urged that Beacon be made an “opt in” program, which members would have to explicitly consent to join . . . Facebook agreed to this approach. The Beacon fiasco gives a good outline of what future conflicts over the Internet will look like. Whether a system is opt-in or opt-out has enormous influence on how people use it.” No joke. And on how much revenue can be generated, as well.

Of course, boundary changing has as much to do with our (presumably) private information sold to others as with the flow of money. Did you “accept” the data-collection cookie that resides on your hard drive? Better check the Terms of Use. “Increasingly, there are no limits technologically as to what a company can do in terms of collecting information . . . and then selling it as a commodity to other providers,” said Representative Edward Markey in August, 2008.

These examples prove that dollars can be taken and lost in the blurry zone between asking for specific approval to complete a transaction, and simply assuming assent for things that formerly required it. Whether it’s baseball or banking, with scalability, a little boundary shift goes a long, long, way.

Transaction or Transgression? Social Selling Creates Questionable Practices

Originally published 12/9/9

Q: How can you tell when a salesperson is lying?
A: When he or she is using a keyboard.

The popular salesman joke, modified for social media. More contemporary, but equally unfair: not every salesperson is dishonest, and deceit isn’t unique to salespeople. Social selling is inherently collaborative, and misguided motives can exist at many points in a selling network. As customers, we often don’t know—or don’t want to. Human evolution has always depended on trust–even when it’s shaky.

Bernie Madoff’s Ponzi scheme, 2009’s Granddaddy of all Sales Scandals, reminds us of the power social forces play in organized theft. According to author Stephen Greenspan (“Why We Keep Falling for Financial Scams, The Wall Street Journal, January 3, 2009), “the basic mechanism explaining the success of Ponzi schemes is the tendency of humans to model their actions—especially when dealing with matters they don’t fully understand—on the behavior of other humans.” Ka-Ching! Human behavior has never been more accessible—or more viral. And there’s an unlimited supply of things people don’t understand. What could be a better tool than social media for the unscrupulous salesperson—or his employer?

But wait! Didn’t the advent of the socially empowered consumer create barriers for deceptive sales practices? After all, fast-talking, moussed-hair salespeople were replaced by information and the Wisdom of the Crowd. No sales pressure, no manipulation, no deception. Um-umgawa! Consumers have the powwa! But even with price comparisons and product reviews in the palms of our hands 24/7, we’re still duped. We fall for deceptive sales practices, and companies sell chronically bad products.

Why? According to Robert Shiller, (Animal Spirits Depend on Trust, The Wall Street Journal, January 27, 2009), “The term ‘animal spirits,’ popularized by John Maynard Keynes . . . refers to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people’s somewhat rash, impulsive decision-making is not discovered.”

For some vendors, “suspension of suspicions” looks like raw steak. Fritz Nelson, Executive Producer of TechWeb TV wrote “assuming a business already believes in using the Web to listen to, follow, and engage customers—and most important, get them to act,” (my emphasis), there are important opportunities to try ideas that will lead to success (A Web Presence Needs Sizzle, For Shizzle, InformationWeek, November 30, 2009). Nelson doesn’t advocate breaking trust, but when it comes to honesty and good customer experience, not every company views “success” the same way. The question becomes, does the end—success—justify the means?

Here are some examples. You be the judge:

Listen to: In 2008, The Washington Post reported “Several Internet and broadband companies have acknowledged using targeted advertising technology without explicitly informing customers.” (Some Web Firms Say They Track Behavior Without Explicit Consent, August 12, 2008).

Follow: The article “Prescription Data Used to Assess Consumers (The Washington Post, August 4, 2008), reported “The practice . . . illustrates how electronic data gathered for one purpose can be used and marketed for another—often without consumers’ knowledge.” Some social media tools bring the stalking practice mainstream. According to blogger Dan Tynan (“Social Media Search: A Stalker’s Paradise,” January 7, 2009) , “Spokeo is a search engine that uses email addresses to find people across the social Web. Give the site your log-on info for Gmail, Hotmail, Yahoo Mail, or AOL – or just upload your personal address book; Spokeo will scour 41 social networks and collect all information associated with each email address. Blog entries, Linked In profiles, Flickr photostreams, Twitter tweets, Digg comments, Amazon wish lists – and a whole lot more – all on one tidy little Web page. And every time they add new content, Spokeo lets you know.” (The company asks on its homepage, “Want to see something Juicy?”)

Engage customers: Under the guise of discussions, social sellers have exploited LinkedIn groups to hawk products, prompting this recent group discussion board comment from Axel Schultze: “Many of us are here to conduct business. But none of us are here to get “sold”. We have enough email spam. As such some of you noticed that we began to ask some of you to move your “announcements” to NEWS and took the liberty to remove it from the Discussion Board.”

Get them to act: It’s called post-transaction marketing. Linda Lindquist, a Movietickets.com customer, describes her experience. (Internet Scam or Post-sale Bargain? Senators Expose Controversial Offers That Follow Online Transactions) “On the confirmation page was a coupon stating, ‘Get $10 off your next purchase.’ So, I clicked on the coupon because it seemed that it was a legitimate offer from Movietickets.com and I thought they were a reputable website,’ Lindquist told a Senate panel investigating online marketing tactics. Little did she know, Lindquist had consented to a paid, monthly subscription to a ‘coupons and discounts’ membership club run by a company independent of Movietickets.com.”

Social selling incorporates ideas that offer significant opportunities for creating and executing business strategies. But like any good idea, it’s possible to abuse it by pushing it too far. The more things change, the more they stay the same. True that!

Further reading:

NJ Telemarketer Admits Role in Big Internet Scam, October 30, 2009

The Post Transaction Marketing Wall of Shame: Hundreds of Well Known e-commerce Sites Rip off Customers, by Michael Arrington, November 17, 2009

Astroturfing–A New Ethical Dilemma, by Francis Buttle

Before I Sell to You, Please Tell Me Your Immigration Status

Originally published 4/30/10

“We discussed that you have the budget, and that your purchase time frame is 30 days, but tell me, what is your immigration status?”

Don’t be offended. My question has nothing to do with your last name or your accented English. . . It’s just that . . . I’ll be honest: a sales problem I have is that not every prospect buys from me. If our sales team finds 10 illegal immigrants, our boss said we’ll be able to sue our local police department. Which is great, because at least we have another way to make money if deals don’t close. We’ve already planned for the revenue in the forecast. And I’ll tell you something else, since SB 1070 passed, we don’t get as many leads. Our prospects worry that their inquiries could lead to litigation, so they just don’t contact us as much. I don’t like it, but what can we do?

Above all, I want you to know that my company prides itself on building trusted customer relationships. Win/win. All of that. It’s how we’ve always done it. I’m so glad you know this isn’t personal. It’s just due diligence. But enough about my business problems. Let’s move on to yours. What keeps you up at night, Mr. Gonzalez?”

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