Category Archives: Business Development Strategy

Fandango’s VIP Club Inspires No Loyalty

I don’t usually blog about my bad buying experiences, but occasionally there’s a debacle that oozes horrible from every pore. When that happens, I take it as a civic duty to write about it. It’s a way to help others avoid the folly I’m about to describe.

This incident started last Saturday when I asked my octogenarian mother to accompany me to dinner and a movie that evening. We agreed on Three Billboards Outside Ebbing Missouri. I went online to select a showtime and seats.

I was presented four purchase options. One was to buy directly through the theater’s website, and the other three were through different ticket services. The theater’s webpage loaded slowly, so I bailed and clicked on a link to a ticket broker called Fandango, a service I had never used. The Fandango page popped right up, and I quickly selected two adjacent seats. My mom and I would go to the 7:40 pm screening, which allowed a leisurely 6 pm dinner, and an unhurried amble around the block to the theater. Perfect for mom!

But not long after I completed the ticket transaction, it began to snow. A lot. Then, right on cue, my cell phone rang. It was Mom. “Hi Dear. It’s really a mess out there. I’d rather you not drive over,” she said. “Let’s do this tomorrow.” Her tone of voice imparted that any protest would be futile.

“Sure,” I said. “I’ll swap the tickets. We’ll go Sunday.”

“Call the theater and tell them your mother doesn’t want to venture out in the snow,” she helpfully suggested, adding, “They’ll understand.” Awwwww! How adorably pre-internet!

“Well Mom, it’s like this, I bought these online through a ticket bro . . . .” I cut myself off in mid-sentence. My mother does not use the Internet or email, so my e-commerce explanations have always ended with her changing the subject to something less baffling. I pivoted to a simpler, more dependable assurance: “Don’t worry, Mom. I’ll take care of it.”

After I hung up, I armed myself with my newly-minted Fandango confirmation number and pulled up the Fandango website. I navigated to the section for refunds and exchanges, and populated the requisite fields. Although I’m not a chat fan, that was my only option for interaction. I clicked Submit.

Immediately, Fandango returned a little informational box that showed I was #82 in the service queue, and the expected wait time for chatting with a chat-person was fifty-seven minutes. Fifty-freaking-seven minutes! For a ticket exchange. Fortunately, the box dynamically updated my position in the queue, which meant I could do other tasks while I endured the inconvenience.

The queue melted slowly. 78 . . . 66 . . .61. I felt like the 50’s and 40’s went on interminably, but still, I hung in there. When my position nudged south of 40, I felt encouraged. Over halfway there . . . Can’t be long now . . . 10 . . . 9 . . . 8 . . . It’s happening! Finally, #1! Yes, there is a God! But please – this would be a terrible time for a power failure, or for my router to spontaneously reboot. Relief. Then . . . It happened. The Fandango chat-person I had waited almost one hour to chat with burst onto my screen, like a long-lost friend. “Hi. I’m Chelsea.”

I explained my issue by typing, “I purchased one adult and one senior ticket for tonight’s 7:40 show of Three Billboards at AMC Shirlington, and now it’s snowing in Virginia, and the senior doesn’t want to go out in the snow. Can I exchange my tickets for tomorrow?” Chelsea replied by asking me to be patient while she “investigated.” Investigated? This didn’t bode well.

A few minutes went by, and with her investigation apparently completed, Chelsea responded that I could have a refund, but Fandango requires that I enroll in their VIP Club to process the transaction.

“You’re kidding, right?” I typed, concealing the magnitude of my dismay. Had I used all caps and followed my question with six exclamation marks, Chelsea would have had a more accurate impression.

“No, I’m not,” Chelsea retorted. It was the most meaningful clue I had indicating she wasn’t a chatbot. But her response was wrapped inside bloated Fandango policy mumbo-jumbo that I was too angry to parse. Over an hour had transpired since I initiated my exchange request, and Fandango was browbeating me into joining their VIP club. That seemed wrong. Here I was having a terrible experience, and Fandango wanted me to sign up for . . . their VIP Club?  Damn the ticket exchange! Joining the VIP Club for the sole purpose of exchanging my ticket would send Fandango the wrong message.

As you probably guessed, my chat session with Chelsea did not end on an upbeat note. I’ll just say that if she had any confusion regarding my opinion about the exchange policy, it’s because she stopped reading her screen.

At this point, I became wistful about my mother’s quaint suggestion to call the theater to facilitate the exchange. It reminded me that in many ways, online commerce has not lived up to its promise. Contrary to what pundits often assert, it certainly hasn’t “put the customer in charge.” Far from it. This vignette underscores how, for consumers, the most banal transactions have become unbearably complicated.

Pre-Internet, a moviegoer tendered payment to a cashier at the theater’s ticket window, a machine would spit a generic paper ticket, and an usher would rip the ticket in half when the patron entered the theater. The experience was pretty easy for customers, but cumbersome and labor-intensive for theaters. But the bigger pain for theater operators was their dearth of information. Which consumers went to which movies? How often? What were their demographics? Who did they go with? What were their buying proclivities? They knew very little, and what they did know required expensive and time-consuming research.

Today, information power has swung all the way to theater operators and their channel partners, where it’s likely to stick. Every activity involved in a customer’s movie journey is tracked, measured, archived, and data-mined. And in Fandango’s case, contrivances such as VIP Club membership as a vehicle for ticket exchanges have been established to fatten their information power even further. The ancillary systems driving an online ticket transaction in 2018 are so deep and expansive that it would take hours to figure out how it all works, and even longer to understand where the data goes. Sure – it’s sophisticated, but from the customer’s point of view, it’s hard to think of what I have described as progress. “Your position in the queue is now . . . 82. Please be patient while we investigate . . .”

I don’t blame bad customer experience on technology. I blame it on the executives who misuse it. When that happens, you get Fandango, hour-long service queues, unresolved transaction problems, the coldness and anonymity of online chat, and weird demands to join a VIP Club that you have no interest whatsoever in joining.

My resistance to joining Fandango’s VIP Club emanates from a widespread marketing practice euphemistically called engagement, and marketers delude themselves into believing that customers find it appealing. Many routine activities that consumers do online uncork a torrent of follow-on stuff from vendors, including post-purchase satisfaction surveys, confirmations, confirmations of confirmations, reminders , promotions, deals, newsletters, thank you correspondence, updates, and gratuitous advertising. All from the one-off car rental I made with Budget when I travelled to Chicago in 2017, or the pair of comedy club tickets I purchased from Ticketmaster. Extinguishing outreach from these vendors and their “partners” compares to scraping a wad of chewing gum off my shoes – you never quite get rid of it. “What part of unsubscribe don’t you understand?” Little wonder that I cringed when Chelsea delivered her membership ultimatum.

Back to Fandango and their VIP Club coercion. I have a question for marketers to ponder: if a person bolts from your company after completing just one transaction, and he shrilly Tweets to four gazillion followers that he’ll never buy from you again, is that churn? Or, does the scenario merit a category unto itself?

Fandango, if you’re listening, some lessons for your next strategy meeting from this permanently alienated one-time customer: 

  1. If your business model adds friction to the most basic transactions, tweak your model.
  1. Develop scenarios for the most common service transactions – say, a ticket exchange. Then figure out how to blow your customer’s socks off with how easy it is to accomplish through your service.
  1. Sell your new customers (you know who they are!) on your VIP Club by first delighting the daylights out of them (see #2). From there, your VIP Club membership sales pitch will sing, and conversions will soar!
  1. Integrate your ticket exchange process to an open-source weather or road condition app. A tiny bit of BI (Business Intelligence) would have tipped off your service software that the reason I contacted Fandango was to reschedule a movie reservation.
  1. Accept that not every person who purchases through Fandango wants a relationship with your company. Some just want to purchase a movie ticket. Shouldn’t you design a way to make that happen profitably?

There’s little doubt that information technology enables better outcomes for both customers and businesses. Like with any technology, as some problems are solved, new ones are created. Pre-Internet, our professional watchword was “give customers what they want!” IT has encouraged a mutation of that ideal: “give customers what we want them to want.” In that regard, Fandango has made their intentions abundantly clear through their ticket exchange policy.

A post-script: The weather cleared up, and my mom and I saw Three Billboards the following night. I thought the movie was OK, though not great. But my mom and I had a wonderful time together.

Considering a Career in Sales? Find Something Different!

“Do you know what a sales interview is?” a friend of mine quipped. “It’s one person lying about the future, talking to another lying about the past.” My friend knew his joke contained truth. Newly retired from B2B sales, he wasn’t sanguine about the future of the profession. As we chatted over lunch, I added a few of my own anecdotes and observations. It was a lively talk. No need for alcohol.

Selling ain’t what it used to be. It’s possible that my friend stowed his sales bag for the last time because he was burned out. Though, at age 61, it was probably the right time to get off the bricks. The rest of that afternoon and into the next day, I thought about what he shared with me. I ruminated on the meaning of his dark joke. I considered how I might respond if a young person sought my advice about whether to pursue a sales career. The assessment that followed my introspection did not come easily, but here it is: look elsewhere. Today, there are better choices.

When I began my business career in the early 1980’s, things were different. Salespeople were respected. While most of us toiled in offices with a boss sitting nearby, salespeople had autonomy. They worked variable hours. They dressed well, and from all appearances, they lived well, too. At many companies, salespeople could expect higher-than-average income, often garnering better pay than managers. At a time when level of education predicted lifetime earnings, selling careers flamboyantly defied the calculus. A salesperson’s earning ability depended more on his or her motivation, tenacity, and street smarts than having a college degree. It still does.

At the manufacturing company where I worked my first job out of college, you could easily identify the cars that belonged to the salesmen (the company had no female sales reps): big, new, four-door, and well-appointed. A sales rep’s car did not just provide transportation, it proclaimed success. An important message for customers and coworkers to hear.

As the company’s IT Manager, I had nebulous goals. But the salesmen were measured on one thing –  revenue production. And they were paid accordingly. No mealy objectives, no ambiguity, and no boss holding sole power to dictate next year’s income. If salespeople felt anxiety about their compensation at risk, their job perks and upside income potential eased the pain. For these reasons and others, I too became drawn to a sales career.

When I was hired for my first sales job in the 1980’s, Marketing Representative was a common title for entry-level salespeople. Dale Carnegie, Zig Ziglar, and Brian Tracy were popular role models. I read their books, and listened to their tapes on the way to sales calls. Their messages brimmed with optimism, and were consistently inspiring. “Success is getting what you want . . . Happiness is wanting what you get,” Dale Carnegie wrote.

I learned that great power came from an unwavering belief in yourself. Good stuff. Today, those messages can still be heard, but they’re muted beneath the torrent of condescension and humiliation that spills unabated into my newsfeeds. Mislabeled as coaching and tips for self-improvement, today’s writing upbraids the rank-and-file. It carries titles like Salespeople – Shut up and listen!, and Salespeople Can’t Sell Anymore . General Patton would be proud.

What happened? The sales profession has lost its allure. Technological, economic, and social forces have combined to erode many of the once-valuable tasks that sales professionals provided. None have been profound than Artificial Intelligence (AI), data warehousing and distributed information systems, and investor demands to increase profits.

AI: AI has displaced thousands of repetitive, tedious sales tasks, and enables buyer self-service. Lead qualification and content fulfillment, once large drains on selling time, can now be performed better, faster, and cheaper by using algorithms.

Data Warehousing and distributed information systems: The ubiquity of customer information has allowed companies to knock down the massive walls that once surrounded the sales organization. Today, almost any employee can make rain, or generate revenue. In departments as disparate as customer support, maintenance, and route delivery and logistics, employees can take an order, recommend upgrade services, sell new products, and make other changes without referring customers to a “sales desk,” or an assigned salesperson.

Investor demands to increase profits: Spending excess has always been a popular target for the CFO’s scalpel, and sales operations contain conspicuous fat. Peeling back the covers on Sales, General & Administrative expenses reveals copious spending hiding in plain sight. Cutting high sales salaries, generous incentive pay, over-the-top benefits, Quota Club, annual golf outings, and season tickets at sports events, quickly gains approval from investors. “Think about it: If you have to ply your clients with gifts or meals to get them to do business with your firm, then your product  probably isn’t worth its price,” Andy Kessler wrote in The Wall Street Journal this month (The Expense-Account Racket, December 4, 2017).

Young people will find sales and business development careers less promising than when I started out. Some key issues:

Money. Meh. Commonly used as a recruiting tool, the promise of high income for salespeople is often illusory. A chunk of annual comp is “at risk,” which means what’s actually earned might be less than what’s projected (recall my friend’s joke at the beginning of this article).

The University of Virginia McIntire School of Commerce Destinations Report for 2017 reported average total compensation for its newly-minted grads who accepted sales and sales management jobs: $61,300. Tepid, compared to other business disciplines listed in the report. Among McIntire grads, the best coin goes to investment bankers, who were rewarded with a list-topping average annual comp of $115,000. Finance holds the #2 spot, at $90,294. (The average starting pay for 2017 undergraduates across all categories is around $50,000, according to Money magazine.)

Career path. You might think I’m mansplaining, but I’m not. There are two well-established trails:

  1. Revenue you produce meets or exceeds quota – keep your job
  2. Revenue you produce is less than quota – get fired.

If you crave living in northern reaches of the corporate org chart, the likelier route to get there goes through finance. “About 30 percent of Fortune 500 CEOs spent the first few years of their careers developing a strong foundation in finance. This is by far the most common early experience of today’s CEOs,” according to an article in Forbes.

Autonomy. Thanks to CRM software and advanced analytics, selling has become the most scrutinized, measured, and micro-managed business activity. “Drive higher quota attainment across your entire sales team by recording, transcribing, and analyzing their sales conversations,” one product website says. Some reps might welcome the assist. But I question the reasons. If a sales rep or manager needs software and spreadsheets to learn how customers perceive his or her words, or if they struggle to recognize positive things to say, maybe they’re in the wrong job. Or, maybe management simply doesn’t trust them to have adequate judgement.

Culture. A sales organization’s mission is to produce revenue, and its activities are aimed toward that goal. That’s a good thing if you don’t mind thinking about money above all else. But if you’re moved by more than how much business you will close this quarter, or the gross income figure on your W-2, that can become stultifying. Further, employers are often conflicted about sales. Sales VP’s expect reps to open accounts and build customer relationships, but they feel threatened when customers become more loyal to a sales rep than to the company. Hiring managers promise high income, but ratchet it back when they feel reps earn “too much.” It’s a power game, and companies try to maintain hegemony. As one district sales manager I worked with described it to me, “My ideal rep is a young guy with a stay-at-home wife, a mortgage, a baby, and another one on the way.” I’ve heard similar sentiment from others. A rep in a consumption trap can be controlled.

Goal conflict. Almost every sales position faces this problem, and it can be gut-wrenching to navigate. “Above all, make your number!” versus “Serve our customers!” It’s hard to keep two masters happy. But companies put their reps in a moral vise when they tie job security and pay to revenue results.

I don’t mean to imply that sales experience isn’t worth having. In fact, hands down, nothing prepares a young person better for success than gaining the rare combination of skills needed for converting prospects into buyers. This knowledge transfers to every business discipline, and provides understanding for how an enterprise achieves its central mission: acquiring – and keeping – customers.

You can’t learn any of it in a college classroom, and no other business experience provides a person anything more useful. People who have sales background understand not only that revenue doesn’t roll in on its own, they know the nitty gritty details of face-to-face selling. If you can get the opportunity to sell door-to-door, work as a sales intern, or have another sales experience, take it!  And if the work pleases you, stay with it. But keep your options open. There are other careers that are possibly more rewarding, and they can also benefit from your energy, effort, and passion.

From accounting to zoology, every career has its unique set of warts. Those that sully professional selling are no better or worse than any others. But whatever career you choose, make sure the warts that exist are warts you can live with. And as many in sales have learned, stay vigilant, because new ones grow all the time.

“Today, it is estimated there are anywhere from twenty thousand to forty thousand distinct occupations in the United States,” writes Robert Moor in his book, On Trails. “Rapid changes in technology, culture, education, politics, trade, and transportation have combined to allow people access to an array of lifestyles that was previously unthinkable. In the aggregate, this is a positive development, proof that our life’s paths are evolving to meet our varied desires. But a side effect of this shift – halting, gradual, and unevenly distributed as it may be – is that life’s options continue to abound until they overwhelm . . . Collectively we shape [life’s pathways], but individually they shape us. So we must choose our paths wisely.”

Skepticism: An Antidote for Statistical Malpractice

Michael Shermer, founder of the Skeptics Society, doesn’t suffer fools. He questions assertions that others accept as fact. He challenges claims of “scientifically proven” when he doesn’t see any science. He examines experimental hypotheses, and weighs research methods and data. “The principle is to start off skeptical and be open-minded enough to change your mind if the evidence is overwhelming, but the burden of proof is on the person making the claim,” he says, adding, “I would change my mind about Bigfoot if you showed me an actual body, not a guy in an ape suit in a blurry photograph.” [emphasis, mine]

Just like those grainy images of Bigfoot, marketers often use shaky evidence to support contrivances of irrefutable proof. They crow that numbers don’t lie, and latch onto statistical tidbits to drive home their points. “Studies show . . .” The cliché preamble to a sales pitch.

“Hands down, the two most dangerous words in the English language today are ‘studies show,’” Andy Kessler wrote in a Wall Street Journal editorial, Studies are Usually Bunk, Study Shows (August 13, 2017), “If a conclusion sounds wrong to you, you’re probably not a hung-over grad student.” Snarky, but I get his point. Heavy partiers make poor skeptics. What about the rest of us?

Marketers routinely spin study percentages into clickbait. A Frinstance: 39 Shocking Sales Stats that Will Change the Way You Sell, from which I drew this sampling:

  • Email marketing has 2x higher ROI than cold calling.
  • 92% of all customer interactions happen on the phone.
  • 92% of salespeople give up after four “no’s”, but 80% of prospects say “no” four times before they say “yes”.
  • 44% of salespeople give up after one follow-up call.
  • 68% of companies struggle with lead generation.
  • 50% of sales time is wasted on unproductive prospecting.

The article gives separate sources for each of these nuggets, but from there, tracing their provenance becomes convoluted.

No matter. Many stats get bandied without scrutiny. They’re embedded in tweets that are liked and re-tweeted. The shares are shared, and those shares get re-shared. And on, and on. Along the way, the original meanings of many numbers get warped or over-amplified. Flawed findings mutate into hallowed truths. As these clipped numerical snapshots flow through the social media pipeline, they lose meaning, and transform into verbal nothingness: “44% of salespeople give up after one follow up call.” Since I don’t know the research definition of give up, how it was measured, or the operational meaning of a follow up call, it’s impossible to draw any insight from this statement. But the person who shared it in this article has a goal, which is to change the way I sell.

“There’s some kind of weird thing that happens to people when mathematical scores are trotted out. They just start closing their eyes and believing it because it’s math,” says Cathy O’Neil, author of the book, Weapons of Math Destruction. Statistics persuade. That’s often the point of using them. They can give authoritative glamor to sales pitches. They can also be used for malevolent purposes, like distracting prospects from seeing truth, as Coca Cola recently demonstrated.

Coca Cola funded faux research through the now-defunct Global Energy Balance Network (GEBN). The objective was to promote the falsehood that preventing obesity didn’t depend on people eating less, or (most importantly) drinking less soda. Instead, the wonks at GEBM told us that people just need to be more active. A message Coke knew that people wanted to hear, and advanced their revenue objectives at the same time: Getting thin didn’t mean anyone needed to give up their habit of swilling a 40-ounce Big Gulp.

Try this out: In a search window, type, “% of marketing content goes unused by sales” – quotes and all. Just now, my top three results (out of 3,150) are “80%,” “70%,” and “60%” respectively. Further down the stack I see “90%.” If you’re not sure what to believe, you’re in good company. Still, I get a strong vibe: content sucks. And not just content in general, but my content.

The not-subliminal message: “Be really, really dissatisfied with your content strategy, and remember, we content gurus can fix it!” Expectedly, with every link, I found a company with a product or service to dig prospects out of a rut they probably didn’t even know existed.

Jordan Ellenberg, author of the book How Not to Be Wrong, refers to the practice of hyping stand-alone percentages as statistical malpractice. By cherry-picking a study’s percentage or finding and stripping away its context, additional results, ancillary data, explanatory detail, and caveats, its meaning becomes corrupted. In this way, instead of imparting understanding and knowledge, statistics serve as mathematical bling to trick out a marketing message.

Unless you are skeptical, you’ll miss the flip side of these percentages, which conveys a different reality. Based on the percentages from my original query, anywhere between 10% to 40% of content is used by sales. Marketing teams create content for many different purposes, and looked at this way, the statistic (whichever one you choose to believe – 60%, 70, 80, or 90) seems less dire. Further, content creation is innovation, and when compared to another measure of innovation efficiency, for example, the 85% failure rate of new consumer product introduction, these numbers become less alarming. Relief! Perhaps you can wait another year before hiring an intern to spiff up your company’s content.

Guidelines for the aspiring healthy skeptic. James Loewen, author of Lies My Teacher Told Me,  recommends questions for vetting history textbooks. I’ve adapted his points for marketing and sales:

  1. Why was the study conducted?
  2. Why were the measurements chosen? Which ones weren’t – and why?
  3. In presenting the findings, whose viewpoint is reflected – and whose was omitted?
  4. Do the points of the study/article cohere? Are they logical? Are they believable? What explains the anomalies?
  5. Are the findings corroborated elsewhere?

Many biz-dev articles I read decompose rapidly when tested on numbers 4 and 5. If the “Top 3 success traits in a sales person are [X], [Y], and [Z],” what explains salespeople who are successful despite having a completely different trio of characteristics? And I’ll wager that another study of customer interactions could be conducted using a different sample, yielding a substantially different result from “92% of them happen on the phone.” All too often, those sharing such information are happy to reply to accolades posted on their articles, but don’t respond when pressed for more detail or clarification. I’m assuming they’d rather not be bothered.

According to Andy Kessler, “Many of the studies quoted in newspaper articles and pop-psychology books are one-offs anyway. In August 2015, the Center for Open Science published a study in which 270 researchers spent four years trying to reproduce 100 leading psychology experiments. They successfully replicated only 39 . . . Add to this a Nature survey of 1,576 scientists published last year. ‘More than 70% of researchers have tried and failed to reproduce another scientist’s experiments,” the survey report concludes. ‘And more than half have failed to reproduce their own experiments.’” If we chose to be similarly introspective in marketing and sales, our performance would likely not fare any better.

I’m under no delusions that my squeaky complaining will slow the tsunami of statistical malpractice. But if asking these pointed questions causes anyone to pause before hitting the Retweet button, or to hesitate before chiming “spot on!” following a study gratuitously calling itself authoritative, then mission accomplished.

Daniel Levitin, author of A Field Guide to Lies,  provides a counterpoint to hyped statistics, one that underscores that the burden of proof must always be on the person making the claim:

“Statistics, because they are numbers, appear to us to be cold, hard facts. It seems that they represent facts given to us by nature and it’s just a matter of finding them. But it’s important to remember that people gather statistics. People choose what to count, how to go about counting, which of the resulting numbers they will share with us, and which words they will use to describe and interpret those numbers. Statistics are not facts. They are interpretations. And your interpretation may be just as good as, or better than, that of the person reporting them to you.”

What makes statistical malpractice insidious isn’t that percentages are purposefully shocking. It’s that the numbers are actually fairly ordinary, and pander to our biases. Everyone has experienced a salesperson who is slovenly or unmotivated. It’s not a stretch to believe a “finding” that 40% of them give up a customer pursuit after perfunctorily following up. Effective time management plagues nearly everyone. Who would be astonished to learn that 50% of sales time is wasted on unproductive prospecting? This is the “secret sauce” in statistical persuasion: find a bias, and harden it with a number. Never mind that terminology like give up, struggle, and unproductive are too fuzzy to have meaning in an experimental sense.

Grainy images, be damned. No matter what, people still really want to see Bigfoot.

Companies That Abuse Privacy Might Feel Consumer Fury – Again

The company Ashley Madison offers an audacious capability: extramarital affairs.  “Ashley Madison is the most famous name in infidelity and married dating,” proclaimed the company’s marketing pitch in 2015. “Have an Affair today on Ashley Madison. Thousands of cheating wives and cheating husbands signup everyday [sic] looking for an affair . . . With Our affair guarantee package we guarantee you will find the perfect affair partner.”

A great value prop for those seeking such experiences – until July of that year, when hackers broke into the company’s data files.  The thieves coined a name for themselves, The Impact Team. A modest appellation, considering the extensive collateral damage their activities produced.

Mission accomplished. The Impact Team’s cyber-haul included 25 gigabytes of profiles describing the people who signed up for Ashley Madison’s services. Many records included email addresses ending with .gov and .mil (the domain extensions for the US government and Department of Defense, respectively), which stoked curiosity, to put it mildly. Had the hackers compromised the US nuclear launch codes, there would have been less panic in Washington.

But unlike most hackers, The Impact Team was motivated by more than extracting ransom. Impact Team ostensibly wanted to preserve morality, citing that the reason for the hacking was Ashley Madison’s facilitation of marital infidelity. Another website, EstablishedMen, was also targeted. Both are owed by parent company Avid Life Media (ALM), which rebranded as Rubylife in July, 2016. “Too bad for those men, they’re cheating dirtbags [sic] and deserve no such discretion,” the hackers wrote. The Impact Team threatened to expose the identities of Ashley Madison’s customers if ALM did not shut down the websites.

There was more. The hackers complained that although ALM charged users $19 to delete personal data from the Ashley Madison website, the company did not fulfill its promise – not fully, anyway. Instead, ALM simply relocated the “deleted” records to its backend servers. “Too bad for ALM, you promised secrecy but didn’t deliver,” the hackers said. Clearly, the hackers feel that philanderers deserve honest treatment from vendors.

Despite getting caught with their cyber-drawers down, “Avid Life Media defiantly ignored the warnings and kept both sites online [Ashley Madison and EstablishedMen] after the breach, promising customers that it had increased the security of its networks. That wouldn’t matter for the customers whose data had already been taken. Any increased security would be too little too late for them. Now [those customers] face the greatest fallout from the breach: public embarrassment, the wrath of angry partners who may have been victims of their cheating, possible blackmail and potential fraud from anyone who may now use the personal data and bank card information exposed in the data dump,” according to a story in Wired Magazine published shortly after the incident (Hackers Finally Post Stolen Ashley Madison Data, August 18, 2015).

The Ashley Madison hacking was not the first incident involving a vendor that failed to adequately protect customer information from hackers. There was TJX, parent company of retailer TJ Maxx in 2003 (94 million stolen records), Sony PSN in 2011 (77 million), Target Stores in 2013 (70 million), Home Depot in 2014 (56 million), and eBay in 2014 (145 million). In fact, of The Nine Biggest Data Breaches of All Time (Huffington Post, August 20, 2015), Ashley Madison doesn’t even make the list.

But if someone maintained a list titled Most Awful, Ashley Madison would rise to the top. Ashley Madison scared the bleep out of everyone because the incident compromised not only financial information, but lifestyle preferences – the kind an individual would not likely share with friends or family. Purloined credit card numbers can be deactivated, but evidence of promiscuity and related information, well, once liberated, those horses aren’t heading back to the barn.

Should companies care about protecting personal customer information? The question is not rhetorical. By being opaque with customers about what they were doing with their sensitive data, Ashley Madison apparently didn’t care enough. Some could say they didn’t care at all. And their cyber-barriers weren’t insurmountable for the dedicated hackers on The Impact Team. Post-Ashley Madison, people began to think about their information in the IT cloud, and the associated risks to personal privacy. “Click to submit!” – software developers have made sharing personal data all too easy.

People worried about where their private information goes, where it’s stored, and who might have access to it. They began to imagine voyeurs who might crave such information, and they wondered what criminals could do with it. Consumers realized they couldn’t entrust their privacy to firewalls, encryption, secure data storage, and other jargony techno-obfuscations that marketers routinely use to sweeten their “privacy assurances.” Poignantly, Ashley Madison meant that most consumers did not need any imagination to understand the outcomes when vendors are lackadaisical about data governance.

Customer worry becomes a marketing worry. If customers can’t trust that their privacy won’t be abused, they won’t trust the many mechanisms that happen in online commerce, notably, allowing their primary information and data exhaust  to be collected, stored, and analyzed. If – when – that happens, marketers will experience a setback in solving a perennial problem: Finding the likeliest buyers. Right now, marketers depend on both to fuel their ravenous lead-generation engines, and to close transactions. With every data hacking, regulators raise their hackles, and customers become ever warier. “Hell hath no fury like a woman scorned!” The same for customers when their trust and privacy are abused.

Fury – aka The Do Not Call Registry. In the ’80’s and ’90’s marketers got increasing blowback from agonized customers who felt their privacy had been violated, a development that directly contributed to the US Federal Trade Commission establishing the Do Not Call Registry in 2003. The registry’s intention was to curtail what became a reviled business practice: marketers using telephone contact to prospect for new business. Many telemarketing calls were made to residences, and numbers-driven marketers didn’t care about customer experience, often prescribing the calls to occur at dinner time, when prospects were more likely to be home.

Telemarketing began with the advent of the telephone, according to Wikipedia. It flourished in the 1970’s, when marketers got savvier about effective tactics, which were widely shared as “best practices.” That was the beginning of its demise.

The primary customer data needed was culled from lists of residential phone numbers, and ZIP Code directories, all available to the public. For marketers, the telemarketing sales channel became stupid-easy to switch on, and – this is crucial –  wicked-hard for customers to avoid. Before caller-id and call blocking, the only choice for a customer when a telemarketer called was to not answer the phone, and wonder whether they had just missed something important. Vendors became addicted to the low costs and revenue results. For senior executives, self-regulating one’s cash cow did not have wide appeal.

Yet, Do Not Call was a bellwether in the customer fight for privacy, and it caught on like wildfire. While today, it appears that Do Not Call doesn’t have sufficient penal claws to deter vendors from flouting its provisions (my home regularly receives numerous daily phone solicitations, despite being on the registry), its symbolic message is stunning.  Today, there are 217 million numbers on the list. Since its inception, that averages to 42,465 numbers added per day for 14 years. I consider that an “opt-in” success story that should make any CMO drool with envy, albeit for the wrong reasons. The message to marketers: “Do not intrude on my privacy. Do not abuse my personal information. Because if you do, you’ll lose your privilege. Sincerely, Your Customers.”

When it comes to privacy, marketers have no scruples. None. COPPA, The Children’s Online Privacy Protection Act was enacted to prohibit the collection and use of personal data from children under 13 years old. But there’s a problem: “More than 50 percent of Google Play apps targeted at children under 13 – we examined more than 5,000 of the most popular (many of which have been downloaded millions of times) – appear to be failing to protect data,” writes Serge Egelman, research director of the Usable Security & Privacy group at the International Computer Science Institute, in a Washington Post article, We tested apps for kids. Half failed to protect their data (August 7, 2017).  For example, when parents download an app from Google’s Designed for Families section in the Google Play store, they assume data about their child (or children) remains safe. Turns out, that’s a bad assumption.

Which kid-generated data is compromised? Device serial numbers (which are often associated with location data), email addresses, and other “personally identifiable information,” according to Egelman, who wrote that his company found such data had been transmitted to third-party advertisers, and that the nature of the data meant that those companies could engage in long-term tracking of these children.Fortunately, Egelman has developed a website for parents to check the “privacy behaviors of the apps” his company has automatically tested. Just when we thought it was safe to allow our children to stay inside and play on the computer . . .

Personal privacy: why ongoing consumer trust isn’t assured. “Today your data can be of four kinds: data you share with everyone, data you share with friends and coworkers, data you share with various companies (wittingly or not), and data you don’t share,” writes Pedro Domingos in his book, The Master Algorithm. As consumers, we’re betting that as companies like Facebook, Amazon, and others gain more data, their learning algorithms improve, returning more value to us. But Domingos says that the “problem is that Facebook is also free to do things with the data and the models that are not in your interest, and you have no way to stop it.”

“When we say we’ll protect your data, you must believe us! . . or not.” Today’s marketers extoll privacy in their customer messaging. After all, they smell money. “Onavo Protect for Android helps you take charge of how you use mobile data and protect your personal info. Get smart notifications when your apps use lots of data and secure your personal details,” the copy on Onavo’s website assures us. But Facebook, which spent $150 million to acquire Onavo four years ago, hasn’t been fully transparent what it does with the data. One thing is certain: Facebook didn’t plunk down $150 million because they fancied the name Onavo. “Facebook is able to glean detailed insights about what consumers are doing when they are not using the social network’s family of apps, which includes Facebook, Messenger, WhatsApp and Instagram,” according to an article in The Washington Post, Facebook’s Affinity for Copying Seen as Stifling Innovation (August 11, 2017) . How private is the data? Will Facebook use it for benign purposes? Will customers experience harm? I don’t know, and the answers aren’t provided in corporate fine print and written disclaimers.

In another example, this year Princess Cruises announced its Ocean Medallion bracelet that promises passengers a unique personalized travel experience:

“It’s cruise planner meets concierge — a guide that you can access everywhere — on touchscreens throughout the ship, your stateroom TV and your own mobile devices. Ocean Compass helps you navigate your ship and your cruise, like streamlining the boarding process, personalized shore excursions invitations, ordering your favorite drink and more . . . Upload your documentation and set your preferences ahead of time so you can swiftly walk on board and communicate everything your ship needs to know about you.”

And:

“Customize your personal Ocean Tagalong™ by body shape, color, pattern and marks (like tattoos) to best reflect your “alter ego”. This responsive digital companion follows you from initial registration to the end of your cruise (as well as rejoin you on future cruises). You’ll find it online within your profile, during interactive PlayOcean games like Tagalong Sprint, as well as through Ocean Portals found onboard Medallion Class ships. Tagalongs even evolve throughout the cruise, reflecting your unique personality and interactions, and will collect ‘charms’ that show off your achievements.”

To me, Ocean Medallion is a marketing name for sophisticated surveillance technology, and there’s “Ewwwwwwwwww!” by the bucket load throughout this cheery write up. Clearly, I’m not the type of customer Princess wants to reach, and I’m sure they’ve heard similar sentiments from others. They’re looking for a much different prospect. One who absolutely, positively cannot stand to separate from technology. Not even for a minute. I can distill Princess’s prose into a single sentence: “We know much about you even before you begin your vacation, and we track you from the time you come aboard, until the time you disembark.”

Where does Ocean Mediallion’s digital information go, who sees it, who uses it, and for what purposes? That’s not spelled out anywhere I looked on the company’s website, though I have little doubt that they have PhD data scientists who know. And it’s not reassuring that Carnival hasn’t updated their privacy policy since December 5, 2014, according to its privacy policy page. Just finding that out required a circuitous content journey. Good thing I liked the photos.

In today’s digital era, batches of delicate personal customer information are produced, captured, selected, sub-selected, curated, sorted, stored, compiled, combined, listed, cut, “value-added,” repackaged, warehoused, transmitted, sold, and shared, like rail cars of soybeans. Your data, e-shot, helter-skelter to the world! A massive logistics system operating in subterfuge, trafficking the data minutia of a human being’s existence, one individual at a time. Without industry self-enforcement, strong governance policies, and legal restrictions, tell me there’s not another Ashley Madison-type wreck about to happen, or already underway.

There’s an entrepreneurial opportunity here, in case anyone wants to step in. Pedro Domingos suggested one in how he envisions a new business model for privacy protection:

“The kind of company I’m envisaging would do several things in return for a subscription fee. It would anonymize your online interactions, routing them through its servers and aggregating them with its other users’. It would store all the data from your life in one place – down to hour 24/7 Google Glass video stream, if you ever get one. It would learn a complete model of you and your world and continually update it. And it would use the model on your behalf, always doing exactly what you would, to the best of the model’s ability. The company’s basic commitment to you is that your data and your model will never be used against your interests. Such a guarantee can never be foolproof – you yourself are not guaranteed to never do anything against your interests, after all. But the company’s life would depend on it as much as a bank’s depends on the guarantee that it won’t lose your money, so you should be able to trust it as much as you would trust your bank.”

I wonder whether a company can honestly commit to never acting against a customer’s interests, when those interests inevitably change. Still, I like his entrepreneurial vision.  In the meantime, Domingos asks, “Who should you share your data with? That’s perhaps the most important question of the twenty-first century.”

Author’s note: This article is the second in a series about consumer privacy. You can read the first article, In the Digital Revolution, Customers Have Nothing to Lose But Their Privacy by clicking here. In an upcoming article, I’ll outline important keys for corporate data governance.

Is Maximizing Shareholder Value Poisonous?

If you grab your favorite marketing book and boil away process diagrams, statistics, and literary fluff, just two words will remain: create value.  Easy-sounding advice, but for most executives, it’s wicked hard. An ideal place for opportunists to step in and promote simple answers and quick remedies.

Business leaders have an insatiable appetite for how-to’s on value creation. And they get a nonstop barrage of erudition from practitioners, self-anointed experts, and academics who cobble salads of trendy verbs, nouns, adjectives and industry jargon, producing inscrutable sentences to solve the insoluble. Maximize/Optimize/Leverage [fill in words]! Measure this! Control that! Be laser-focused on [name of thing]!

Some recommendations show great insight. But others are obvious admonitions and bland platitudes hawked as panaceas, hacks, and fixes for whatever strategic impediment wanders into a CXO’s crosshairs. Useful or not, many are shamelessly aimed at a goal few have dared to question: maximizing shareholder value.

Until now. People have started to recognize that maximizing shareholder value has a central role in harming other stakeholders. The problem is growing. In the name of maximizing shareholder value, crucial employee benefits are being slashed, workers and contractors are hired and churned at whim, and producers with sketchy labor and supply chain practices are awarded contracts – as long as they maintain the highest quality at the lowest cost. Who cares if the widget was made in a firetrap factory by laborers required to work 80-hour weeks, with no overtime pay differential?  Magnanimity and fairness, once emblems of corporate pride, have been expunged from C-Suite vocabulary. Hey, stock prices don’t increase without trade-offs!

Customers are suffering, too – mentally, physically, and financially. Faulty product designs cause injury or death, as we saw recently with GM and Takata. Companies weaken customer service, often under the guise of improving it. “As part of our commitment to our loyal customers, we are now automating . . .” Every customer support rep I’ve spoken to this year has dutifully reminded me that I can take care of my transaction or inquiry through a website. “I can step you through setting up a profile, if you like . . .” Part of the script, I suppose, but what a humiliation to be required to pull the rug out from under your own job, one conversation at a time!

With public trust in corporations waning, a new type of social-media superhero has emerged: the “disaster specialist,” to rush in post-debacle and patch things up with aggrieved customers. They bring “field-tested industry best practices.” Reassuring to know, if you’re prone to repeating widely-publicized mistakes. And when employee morale tanks, a different group of consultants waits at the door, promoting “surefire” ways to rekindle worker passion. Meanwhile, in the executive office, all’s well. Why worry, when your stock price streaks on a heavenly trajectory? There’s a hefty bag of bonus money waiting at the end of the rainbow.

This is a perverse system, in every sense of the word. In the name of maximizing shareholder value, companies routinely decimate their vital infrastructure and brand equity, then pay steeply to repair and rebuild. Some companies complete this circuit more than once. “The non-investor stakeholders? Let them eat cake!”

Maybe if we humanized those likeliest to get hurt, things could improve. For starters, we should stop calling investors, employees, customers, and vendors stakeholders, and instead refer to them as people. “It would be a funnier story if it weren’t for the tragic aspects of American capitalism in the 21st century,” wrote Matthew Stewart in a Wall Street Journal review of Duff McDonald’s book about Harvard Business School, titled The Golden Passport (Schools of Mismanagement: a Modern Business Education Provides Theories and Metrics But No Moral Center, April 22, 2017).

How did this happen? Stewart writes that in the 1980’s, Harvard Business School “suddenly embraced the notion that managers are just a shareholder’s idea of roadkill – and that it is positively bad for shareholders to possess anything resembling a moral conscience. If there is a villain painted in a single shade of black in Mr. McDonald’s version of history, it is Michael Jensen, the economist and Harvard Business School professor who supplied the intellectual rationalizations for the leveraged buyout boom, the CEO compensation boondoggle, and the rampant financialization of the economy. In Mr. McDonald’s tale, Mr. Jensen shows up ‘spewing out ridiculous blanket claims such as . . . “shareholders gain when golden parachutes are adopted.”’ Forty years ago, I drank the same Kool-Aid as an undergraduate business student.

For his part, Jensen was influenced by an op-ed article by Milton Friedman that appeared in The New York Times Magazine on September 13, 1970 (A Friedman Doctrine – The Social Responsibility of Business is to Increase Its Profits) that has become “the most read, misread, and referenced article ever written by a Nobel Laureate economist.” wrote James Heskett (Should Management be Primarily Responsible to Shareholders?, Harvard Business Review, May 9, 2017). “And It’s still being argued today. Friedman argued that the best way for managers to contribute to the social good was by maintaining a single-minded focus on profit, acting as agents for shareholders who put their capital at risk investing in their companies . . . Of greater importance than the issue posed in the article’s title was the proposition that followed: Because shareholders are owners of a corporation, professional managers and directors are their agents, primarily responsible for carrying out their wishes and creating value for them.”

According to Stewart, Harvard Business School produced “magic sticks that promised to answer every human need with a handy spreadsheet. In the more recent chapters of the history, the scariest parts are where the faculty take the spreadsheets off campus.” Among the locations Stewart is referring to is the customer-facing side of business. The retail sales floor. The Point-of-Sale terminal at Target, Home Depot, and Walmart. Online commerce. B2C, B2B and B2G. Neighborhoods monitored hundreds or thousands of miles away by wonky marketers and data scientists using predictive analytics dashboards.

Friedman’s and Jensen’s ideas have permeated into a “river of self-love that is America’s management-ideology complex,” as Stewart describes it. Every day, putrid bubbles of pomposity rise up from the sediment: United Airlines drags a paying passenger from one of its planes, initially defending its action. Wells Fargo systemically exploits its customers and employees so its president and senior managers can receive multi-million dollar bonuses tied to stock price. Theranos coerces its employees into silence to conceal the dangerous technology flaws in its widely-installed blood assay equipment. This is Mr. Friedman’s “single-minded focus on profit” at work. If he were alive today, Friedman would object to my characterization. “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud,” he wrote. It took society nearly fifty years to fully recognize that Friedman’s view had great potential for harm. Today, many people simply ignore every word he wrote after profits. No doubt, some believe his sentence ends with that word.

In the 1990’s, the privately-held company I worked for was acquired by a firm traded on the NASDAQ, and a massive cultural shift overtook the sales organization almost immediately. Some salespeople who regularly provided great support for their customers became pariahs for not making goal. They were flushed, to use the indelicate vernacular of the profession, meaning they were fired. “Everything’s changed,” we were regularly reminded at our monthly sales pep talks. “Investment analysts are looking closely at our revenue performance, and it’s imperative that we hit our number every quarter.” Did our buyout and concomitant obsession with satisfying the analysts’ revenue expectations increase customer satisfaction? Did it motivate the company to invest more in customer support? Did it improve morale? It’s a fallacy to believe that on-target revenue production means employees and customers are happy, or that “top revenue producers” have delighted customers.

Should we replace maximizing shareholder value as management’s objective? If so, what goes in its place? The core issue is allegiance. “Harvard Business School Professors Joseph Bower and Lynn Paine propose that the primary allegiance of managers and their boards should be to the health of the corporation, not the maximization of shareholder value [emphasis, mine]. The rationale for this includes the arguments that managers can be held legally accountable while shareholders ‘have no legal duty to protect or serve the companies whose shares they own,’” writes James Heskett. And it’s immaterial whether investors have morals or personal integrity. Under maximize shareholder value, governance is not automatically granted a role in how companies are managed. In fact, governance can threaten shareholder value. In business, there’s no such thing as an immutable truthEven the notion of shareholders as owners of a company has been called into question.

The widespread practice of prioritizing shareholder value maximization seems odd, given the ambiguity over their role and rights in the development and implementation of corporate strategies and tactics. This becomes especially problematic when ensuring high returns to shareholders exacts heavy costs on others who are similarly vital for creating value.  For example, decisions that benefit shareholders, such as increasing short-term profitability through downsizing, can be catastrophic not only for customers and employees, but for the communities and the ecosystems of enterprises that depend on them to thrive. To make financial ratios more attractive, companies often reduce or eliminate essential long-term investments in research and development. In some cases, a company’s most valuable assets can be sold or leveraged to provide investors with immediate, substantial financial returns, while jeopardizing a company’s overall vitality. Few could argue that outcomes for customers, employees, and suppliers are fairly protected under this system.

If maximize shareholder value is so bad, why have so many companies embraced the idea? First, companies need investment capital to launch, grow, and fund new development. Those who put their money at risk deserve to be rewarded – and should be. Second, according to Heskett, “One reason the theory has predominated is that it is simple and straightforward. Shareholder value is easy to measure. Agency theory [the idea that a company’s managers and directors are responsible for carrying out the wishes of an organization’s owners and shareholders] simplifies the mission for managers; they need only serve one primary master [emphasis, mine].”

The problem is, converting to another corporate edict – one that is ostensibly healthier, more egalitarian, and more long-term focused – is complicated, as this passage from NCR Corporation’s annual report, excerpted from an article, Two points of view: The Point of Shareholder Wealth Maximization, illustrates:

“. . . board of directors no longer believe that shareholders is [sic] the only constituent to whom they are responsible”. (Wang, Jia and Dewhirst, H. Dudley, 1992). Explicitly, shareholder value maximization is not the only goal of the company, a company can’t do well without caring the interests of customers, suppliers, employees, or government environment . . . Stakeholders are constituencies who play an important role in the fortunes of the company. Their primary mission is to create value for stakeholders.”

That can work when the activities involved in value creation for all stakeholders are harmonious and aligned. But they are not. A point that Michael Jensen picks on:

“Stakeholder theory effectively leaves managers and directors unaccountable for their stewardship of the firm’s resources . . . plays into the hands of managers by allowing them to pursue their own interest at the expense of the firm’s financial claimants and society at large. It allows managers and directors to devote the firm’s resources to their own favorite causes – the environment, arts, cities, medical research – without being held accountable.”

I think his worry that managers will pursue disparate goals like aiding environmental causes or solving world hunger is overblown. Isn’t that the role of leadership – to keep everyone in the organization on the same page, so to speak? Here, Jensen backpedals, and provides a tiny concession:

“But . . . No company can create great value for its shareholders without stable growth of revenue, which comes from the relationship with customers, suppliers, bankers or government and so on.”

I agree with this last point. But I also recognize that with diminishing consumer trust, growing wealth inequality, and information power skewing back to corporations, Jensen and I are looking at business through the same rose-colored glasses.

Society cannot assume that by focusing on fulfilling the interests of shareholders we will produce consistently benign outcomes for others. We need something better than maximizing shareholder value as a managerial marching order. I’m just not sure exactly what it should be.