May 16, 2022 | Customers, Governance
When a rule is made by some institution, seemingly in the best interests of the community, most citizens accept the rule and do their best to adhere.
This applies from the rules introduced by local councils to moderate litter, to the larger tax and commercial governance rules applies by federal governments.
Some rules are just ‘semi-rules’. The intent is to substitute for common sense, rather than attracting enforcement in the breaking of them.
Problem is that once you have a rule which dictates behaviour, any behaviour that is not explicitly outlawed becomes OK. That has led to armies of lawyers and accountants using unintentional loopholes in tax laws to slide through.
The wider impact is that the community ceases to consider what is ‘right and wrong’, substituting the question ‘is it legal: Yes/No’. If one of the accountants can make it seem legal, no matter how morally corrupt it may be, we now have the licence to go ahead anyway.
This is stupid, it has led to the erosion of the ‘moral compass,’ the sense of right and wrong that we used to impose on ourselves.
In addition, these rules become so complex that only experts can understand them, and mistaken misunderstanding is not seen as a defence.
Just consider for a moment our taxation regime.
Hugely complex, a great big pile of band-aids that applies only to those without the resources to exploit the gaps.
Even at the ‘semi-rules’ level this applies.
Last week coming up to some roadworks in my street, I slowed to accommodate the obvious cement truck coming out of a side street. There was a bloke with a sign that said ‘slow’ which I took to mean slow but careful, assuming the truck driver would respond accordingly. He apparently did not see the sign, slammed on his brakes, as I did as it became obvious that if I followed the clear instruction, I would not come out of it well. In addition, I copped a mouthful of extremely fruity language from the driver. Understandable, but in the circumstances, unwarranted.
Had the whole thing been left to common sense with no dozy sign carrier removing the need for common sense to apply, none of this would have happened.
In most situations where people are in a position to make a decision, let them. There will be errors, and mis-steps which will lead to learning, and attendant improvement. Providing a framework for decision making empowers people to do the right thing, offering a sense of responsibility and accountability they will not have in a highly regulated environment.
Substituting common sense, courtesy, and respect for others with formalised rules applied by institutions is part of what has led us to this state of perpetual anxiety and selfishness.
May 6, 2022 | Customers, Governance
The Financial service industry is the last bastion of the defence of the 20th century business model where the seller had control over the vital product information.
In those old days, you went to your bank branch where the manager knew you, your kids, your financial position, and was someone to be trusted.
When did that change?
Now you cannot get to see anyone in a bank who either knows your situation, cares, or can make any sort of decision.
This personal relationship has proven time and again to be one of the most important in the lives of most people.
After the Royal Commission into ‘Misconduct in the banking, Superannuation and Financial Services Industry’ which reported in February 2019, most thought that the shenanigans of banks would be cleaned up.
Not as such, as Monty Python would say.
Banks are not required by regulation to take steps that are in the best interests of their clients.
This means that they can, and do, sell you products when they know absolutely that there is a better deal, or one that better fits your circumstances readily available elsewhere.
By contrast, when you deal with a broker, they have a legally enforceable fiduciary duty to ensure they are always acting in their clients best interests. This means they are prohibited by law from behaving the way banks routinely behave.
If there was ever a good reason to go to a broker to find finance rather than directly to a bank, this is it!
You know that a good broker has found the best deal possible, having scoured the landscape for the best deals, because they will be prosecuted when it is found they have not.
Pity the banks cannot follow the same rules, although if they did, and they still had their clients best interests at heart, there would be no need for a broker.
The information, or at least the understanding of the information is skewed away from the consumer of financial services.
Finance is one of the last markets where it is difficult for the average consumer to do a realistic assessment of their best option. In every market I can think of, except financial services, the net has democratised information. No longer do the sellers of a product have all the information needed to make informed decisions, and dole it out as it suits them, to best serve their own ends. The web changed all that, forever.
The regulations applying to financial services have become so complex, the options so wide, and the nuances of options so difficult to understand, that most still need a specialist to navigate the potholes.
Many of the broker groups are owned or at least controlled by banks. Where is the responsibility for doing the best deal possible for the client lie in that situation?
Not with the bank controlled ‘pretendy’ brokers.
No, the best deal is to find an independent broker you trust, one who takes the time to understand your situation, then allocates the time and resources to scour the landscape for the best deal possible for you.
Not the best deal easily available, but the best possible.
It seems the obvious scepticism of Royal Commissioner Hayne, obvious to all when refusing to shake the Treasurers hand when formally handing the Commission report to the government in February 2019 has been confirmed.
May 2, 2022 | Communication, Customers
The BATNA (Best Alternative to a Negotiated Agreement) has become an essential tool in the negotiation toolbox, yet many leave it in the box.
It is, in effect, your ‘walk-away’ point.
However, before you walk away, there are always alternatives that can be considered. Identifying these alternatives that make the ‘pie bigger’ is often a challenge only overcome after considerable work, but having done this preparation before entering the negotiation starts will always be useful.
Understanding your own BATNA is essential, but it is just as important to understand as best you can, the BATNA of the other party, or parties.
What do they value that you can deliver?
What are their ‘non-negotiables?
Will the decision maker be at the table?
How can you make the pie bigger for them at little cost to you?
There is a myriad of questions you can ask yourself that will give you a better feel for your relative position, simply by thinking about them, and assembling some information that may otherwise have been overlooked.
In a negotiation, we tend to automatically set ourselves for some sort of compromise. We assume that the net effect of the balance of wins and losses for both parties in the compromise will be the most satisfactory outcome for all.
Often it is not.
Prospect theory, first articulated by Daniel Kahneman points out that the pain we feel for a loss is much greater than the joy we feel for a gain. If we are given $50, we just say thanks, and are happy. If we are given $100, then $50 is immediately taken back, we feel pain. The outcome of both is the same, we are $50 ahead, but the balance of pain and joy is completely different.
This applies in a negotiation when trying to balance gains and losses for an acceptable outcome. At a rational level we can reach an agreement on the net outcome, but at an emotional level, a compromise generally does not allow for the impact of prospect theory on the perception of an individual of the net value delivered.
It will pay you to consider deeply how the impact of this disparity between gains and losses will be felt.
Negotiation is all about the recognition, articulation, and exchange of value.
The challenge is we all see value differently. Being able to recognise the value as the other parties in a negotiation see it will deliver hugely valuable insights to be leveraged.
In other words, understand the psychological BATNA of the other party as well as you can.
Header cartoon credit. Scott Adams and Dogbert perfect negotiation tactics.
Mar 16, 2022 | Customers, Marketing
We are confronted every day with hundreds, thousands of messages, all competing for our attention. The volume has ramped up exponentially since the net delivered access to anyone with a connection.
The vast majority are tactical thought bubbles, cat photos and brain farts by people vying for attention, but then not knowing what to do with it when they are the winners of the lucky dip.
‘Yesterday’, access was not so available, you needed lots of money, which ensured there was a barrier to entry not hurdled by the figurative cat photo.
The generation of revenue, the process that encompasses both ‘Marketing’ and ‘Sales’ is a continuum. Sales comes in right at the end, at the point of, or near to the transaction. Marketing is the longer-term stuff that provides the opportunity to open and lead the process culminating in a transaction.
Think of it like a race.
Are you running a sprint next month, or a marathon?
If it is the sprint, training can be short sharp explosive sessions. You focus on the detail, short sharp sprints, and many of them.
By contrast, if it is the marathon, training for a sprint will not get you far. You need to have longer sessions, building slowly to the marathon distance.
Building a relationship that leads to making a sale is a marathon, not a sprint.
Most of the marketing I see is designed as if the race was a sprint. Usually this is the wrong training, as in most instances beyond small value commodity items, you need to get set for the marathon.
As a result, you have all this crappy tactical sales stuff thrown at you daily, which is rarely of any interest, so you turn off. Turning off just encourages the tactical digital set to chuck more crap at you in the hope that something sticks.
When you have to churn out new messages daily, weekly, it removes the opportunity for creativity, the building of the relationships that may lead to something meaningful at the end.
Most so called ‘marketers’ brought up on a diet of digital are unfamiliar, and as a result do not deeply understand this more strategic approach. They set out to sprint in a marathon, and end up coming in at the tail, assuming they actually finish.
Header photo: Marathon startline 1904 Olympics
Jan 13, 2022 | Customers, Marketing, Strategy
Google has been a revelation, all the answers you need at your fingertips, or so it would seem.
What is the consequence of this instant question gratification?
Do we ask better questions, or just more superficial ones?
Does the volume of questions we ask, to which there are instant answers, substitute for the value of the fewer but deeper questions we used to ask?
My clients and those in my networks hear me rambling on about what I regard as the key to success. That single characteristic I have seen in all successful people I have known, and watched from a distance. Yes, they are all smart, and yes, they are all motivated to success, but underlaying those two factors is a third characteristic:
Curiosity.
I have never seen someone who is smart, and successful, who is not also curious. I have also seen many who have both of those characteristics, but are not successful. Generally, they strike me as not being also curious.
I use Google and Wikipedia every day to answer questions that emerge as I service clients and write this blog, but neither offers the catalyst to a post. That catalyst is curiosity, sated by the deep but selective ‘backgrounding’ I do of books, podcasts, blogs, journals, and absorbing informed commentary.
They are where the catalysts are hidden, uncovered by curiosity.
Social media, Google and Wikipedia specifically have sated our curiosity at a superficial level. No longer do we have to search for answers to questions, they are dished out for us, making life easy, but reflecting the superficiality of the answers to the superficial questions we ask.
Are our lives better because of this ability to get immediate answers to questions?
Undoubtedly yes, but are the questions as useful, offering the deep insights found as we used to dig around for answers, often finding that the initial question was inadequate, superficial, or simply the wrong question.
I like books, my car is a mobile library from which I can consume from a menu of offers in the idle moments between the busy times out of my home office. The one I pick at any time is most likely the one that relates to a question on my mind at that time, or that throws light on a topic of current interest.
Thanks Google and Wikipedia, you have made my life easier, both because I can find the answers to superficial questions, and because most of my competitors stop there, at the superficial.
You need books to go deep.
Dec 13, 2021 | Customers, retail
A dictionary will define price as something like: “The amount of money for which something is sold’
Pretty obvious.
However, price can mean many different things to different people in different contexts.
Years ago, I ran a food manufacturing business that sold product through multiple distribution channels. Supermarkets, route trade, distributors, food service, direct via our own vans, and export.
The pricing architecture had a common starting point, the ‘List price’ after which everything changed depending on a wide range of factors such as: the relative power of the channel, volumes, payment terms, negotiated promotional and incentive programs, supply and demand at any specific time, geography, variable freight charges, seasonal factors, clearance prices, rebates, and others.
Exactly the same products, subject to a whole range of variations, both formulaic and negotiated.
In that complexity, how do you define what the ‘right’ price is?
At one point we made the attempt to calculate the actual price based on the net cash flow from the products and customers. In the days before flexible digital tools, this was a brain buster, and consumed too much time and effort to deliver a return, but was a good idea at the time.
Added to the complexity which discourages most from developing the understanding necessary to optimise whatever the net price ends up being, is the impact of unintended consequences and the channel conflict that is almost inevitable.
For example, the small retailers we serviced saw their competitors as the supermarkets and were very noisy indeed when they could buy a case of product at Woolies cheaper than they could buy it direct or via a distributor. They did not care about the nuances of our pricing architecture, or the fact that they might buy a case, and a supermarket buy multiple truckloads. Their concern was serving their customers by not having them go to Woolies for cheaper prices, while remaining profitable.
As a young bloke doing the backpack thing around Europe, I stayed at one point for a few weeks on a small Greek island. On the occasions a cruise ship came in, the retailers of all types simply substituted one price list and price display for another, somewhat more expensive. The locals knew not to buy that day. Amazon takes that flexible pricing strategy to the limit with its use of your browsing and purchase history to automatically set the price their algorithms indicate gives them the best combination of the purchase being made at the maximum margin.
So, what is the right price?
Whatever you and the buyer who completes a transaction determine it to be, in those circumstances, on that particular day.
