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If you want to reward your customers, reward them!

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I went shopping at RITE-AID today and saw one of my favorite products advertised as: “Buy 2, get $2 off your next purchase.” I grabbed two bottles and made my way to the register … where the clerk informed me that I could only get the deal if I had their frequent buyer card. To join the program, however, I had to give them personally identifiable information. I declined both the membership and the purchase.

There’s no reason a frequent buyer program needs to have my personally identifiable information. As long as all my purchases get charged to card #4234, they can print the offer coupons for card #4234 based on the purchase history of #4234. There is never any need to get my personally identifiable information unless they plan to sell it or cross-index it against other databases to find out more about me.

This seems like RITE-AID wanting to reward me as a frequent customer by giving me future deals that will encourage me to shop there more. In that, we’re aligned. I want to let them do that. But I’m not interested in giving them personally identifiable information that they can sell or use in ways other than encouraging me to shop there more.

If you want to reward your customers, find ways to reward them that does not infringe on them. Most people, if they like you as a merchant or service provider, will be happy to accept and respond to incentives. If you want fanatically loyal customers who rave about you, make it possible for people to have a great experience without stepping beyond the bounds where they stop being comfortable with the relationship. Otherwise, you end up with people like me blogging about your intrusion into their lives, instead of praising you for giving you such a great deal.

Be present: Put down your #@*($& phone!

I’ve noticed that more and more, people walk around with their phones glued to their ear or to their hands. They stand in the middle of hallways with the phone pressed against their ear, as if their life depended on it. They block stairways, staring entranced into their smartphone as it delivers some absolutely vital nugget of information or entertainment, without which their life would come to an abrupt and bloody end.

Not.

In a few short years, the cell phone has become the ultimate “Somewhere Else is Better Than Here” device. The problem with that is that you’re actually living here and now. Important things are happening here and now. When you’re in public, or around other people, get off your cell phone. Put it on vibrate. Even better, turn the darned thing off. Pay attention to what’s happening around you.

Friends of mine who are parents can’t do that. They literally can’t turn the phone off. They have all the symptoms of an anxiety attack at the thought of their kids being unable to reach them for more than three to five minutes. Really? You’re that worried about your kid? Why? Is he or she really so incapable of coping that you can’t turn your phone off? How will they survive when you die someday? It could be today. You could be chattering so intently on your cell phone that you step off the curb in front of an SUV going 90 miles per hour in an attempt to make it to a gas station before they run out of gas.

If you’re really worried about your kids, make sure they’re in a good school, surrounded by peers who will encourage and support them. If your local public schools suck, cancel your cell phone contract and use the money you save to put them in private school. Keep them away from swimming pools—kids mostly die in swimming pools, and their cell phones won’t work under water, so the cell phone won’t save them, anyway.

In short, come back. People are trying to walk by you as you stand transfixed playing Angry Birds in the middle of the hallway. The friends you came with are just two feet away (staring into their smartphones, too). Bring them back. You have a life. You have a world. And you’re missing it!

Success Starts When You Stop Using Your Own Product

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Have you checked out your competitors recently? I was just reading a review that says the new Blackberry smartphone is by far the best, speediest, most elegant Blackberry ever. But the reviewer would not recommend anyone buy it. Why? Because it’s still missing a lot of the key functionality that other smartphones have. The hardware is leading edge, but they haven’t truly made the device do anything better.

What I want to know is what kind of smartphone the co-CEOs of RIM use? Do they use Blackberrys? I can’t imagine a worse choice. They should be using iPhone and Android devices for 95% of their calls and computing. We’ll let them use Blackberrys, but only on Sunday. And they’re not allowed to have their IT people set them up; they need to do that themselves. Then they’ll start to understand fundamentally what it’s like to use these devices, and why Blackberry is increasingly falling behind.

I’ve been in Blackberry’s marketing research list for years. I want so badly to tell them why my next phone will be an iPhone, and exactly how and why their platform falls short. But they never ask that. They ask too-specific questions about their guesses as to why I might prefer an iPhone. And their guesses are wrong, because they’re so steeped in their own product.

If you’re in a competitive market, you owe it to yourself to adopt your competitor’s product. Don’t just use it for an hour or a couple of days; really integrate it into your life. Understand its strengths and its shortcomings. Do this a couple of times a year. Only then will you have a hope of being able to take the next step and leapfrog what they’re doing with your own next product. Otherwise, you’re playing guessing games. You might get lucky once or twice, but at the end of the day, you can’t create a vision of a next generation product when you don’t even know what this generation holds.

Use An Editor!

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If you want to produce extremely high-quality work, it may be wise to find someone to help. It’s hard to be objective about our own work. Almost by definition, we believe if we did it, it must be good. But yet, sometimes an objective eye can help us take our good work to the realm of greatness. The objective eyes I’m talking about belong to editors.

Editors ROCK! When I’m writing a Get-it-Done Guy episode, my natural sense of humor comes out. My natural sense of humor was developed doing comedy improvisation with college audiences. “Decorum” is not high on the list of words you would use to describe my first draft material.

Fortunately, there’s a very dedicated editor at Macmillan publishing who reads my drafts. She sends them back with paragraphs circled in red pen. In the margin, she writes notes like, “If you say that, the FBI will open a file on you, start wire-tapping your phones, and put you under 24-hour surveillance. Again.” While most people would enjoy free protection services, I find it cramps my style when I go out clubbing. So I rewrite the paragraphs she highlights, this time using Goldilocks and the Three Bears as the central metaphor of my piece. My editors approve, and another Get-it-Done Guy episode is born.

Editors come in many varieties. Some editors can make sure your humor is appropriate. They can make sure your text flows, that you don’t repeat yourself, and that your points build on one another. Copy-editors handle editing the details. They double-check your spelling, your grammar, and your punctuation. I was a copyeditor for the school newspaper when I was a student at Harvard Business School; I need to give my marketing staff a special therapy budget, so they can deal with me.

If you have to write reports, pamphlets, or anything where quality matters, get yourself an editor. It doesn’t have to be a professional, a colleague who writes well may be all that’s required. If you’re worried about letting your coworkers see your work before it’s polished, find a friend who has the write skill set, but works at another company. You can be an outside helper for each other, without worrying about work-in-progress-quality work getting out to the people in your company.

If you’ve never worked with an editor, give it a shot. You’ll discover that having an extra pair of eyes double-check your work can often produce something better than either of you could have written on your own.

Know the Lifetime Value of Your Customers

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When that lone customer arrives at your restaurant on a busy night, it’s tempting to make him or her wait, in favor of the party of 12 that’s sure to rack up a huge bill. But it just might not be wise.

When you’re deciding how to structure your business, who to give service to, and when to go the extra mile for a customer, don’t just consider the transaction you’re in the middle of dealing with. Consider the total lifetime of interaction with your customer. The “lifetime value” of a customer is how much you expect that customer to spend over the course of their association with you. That lifetime value is what you want to take into account when deciding how far out of your way to go. I’ve recently had a few run-ins with companies that have taken a short view, much to their detriment.

I eat lunch 5 times a week at the same deli. They discontinued my favorite kind of hot pepper, leaving no condiments that I enjoyed. I asked them to please bring them back, and they refused. I offered to buy my own jar for them to use. They refused. And I stopped eating there. Five days a week, times 50 weeks a year, times $7 per lunch is $1,750 of income a year they were happy to forgo to avoid dealing with the hassle of keeping a jar of peppers around. My new deli is part of a franchise. They are only supposed to serve their approved condiments. I spoke to the owner and he happily kept a special jar of peppers just for me. In the 3 years I’ve been eating there, they’ve made $5,000 and my previous deli has gone out of business.

My friend passes through Reno every year on the way back from the Burning Man festival. He stayed in Harrah’s because they gave him a free upgrade if they had rooms available. He then spent the money he saved in the Harrah’s restaurant and spent even more in the casino. They stopped giving free upgrades, and he changed hotels. It would cost them nothing to give him the upgrade, and instead, they’ve lost year-after-year of restaurant and casino business. Let’s not even consider how much Harrah’s would make on all the referral business my friend would bring. Smooth move, Harrah’s.

To return to the original example, while it may make sense on any given night to forgo seating one person in favor of the party of 12, if that one person dines at your restaurant three times a week, in the course of a year, they’ll outspend the entire party of 12. As unintuitive as it may seem, treating the solo customer well may be a better business decision than handling the occasional bachelorette party. And believe me—the cleanup’s a lot easier, too.

When you make decisions about your customers, do you consider their requests as separate events, or do you consider the lifetime value of each customer before deciding how much to commit to their happiness?

Creative deal structure–could it solve the housing crisis?

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One of the most essential negotiating skills is the ability to divide up the risk, reward, blame, and credit properly among the parties in a negotiation. One of the reasons many people are so outraged at the financial collapse brought about by the real estate bubble is that they (correctly) notice that the risk, rewards, blame, and credit were largely divided up in ways that people found unfair.

Many of the proposed solutions also leave a bad taste in people’s mouths. There is the sense that any solution should divide up both the pain and the responsibility for getting real estate back on its feet.

I recently met a remarkable woman, Kelle Sparta, of http://www.spartasuccess.com, who has been a real estate expert for years. She wrote an open letter to President Obama in which she laid out a plan for solving the housing crisis that, indeed, divides up the risks and rewards among all the players who made bad decisions in the first place.

Here is a copy of her letter. It isn’t a quick and easy read. Understanding her solution takes some concentration. It’s well worth it, however. Not only as a specific proposal to solve the housing crisis, but more importantly for our purposes, as an example of how deftly she has structured the solution so everyone involved—the banks, the homeowners, and the government—shares some of the costs and participates in the rewards.

Enjoy!
– Stever

Dear President Obama,

I recently received an email as part of a mailing to the leadership in the real estate industry asking us to consider how to solve the problems of the current housing crisis.

How To Solve The Current Housing Crisis

I spent several weeks chewing on the thought. What would I say to you if you were to ask me how to solve this current crisis? I had mixed feelings on it. What it came down to for me is this: it’s not about saving the banks from bad investments, and it’s not about digging borrowers out of holes that they got themselves into. As a benevolent parent, the governments’ job is to stave off the catastrophic results the housing downturn is having on the economy as a whole and bring it down to just enough pain that we don’t do something this stupid again. At the same time, the government has to remember that not everyone is in the same situation and you have to be responsible to those who were not caught up in this buying frenzy as well. So, with that in mind, here is my thought.

Buy The Land Under The Houses

In most markets, we have fee simple land ownership that conveys with the house. On every street card, there is a value placed on the land and one on the building. If we’re going to bail people out and make things more affordable, then let’s do it by reducing the principle owed on the property without asking the bank to take a hard hit and without the owners losing their houses. The deal works like this:

  • The banks would have to forgive all late fees and rewrite the loans at no cost (after all, they are getting the benefit of not having to foreclose on a bad loan). They also have to agree to continue to collect the taxes on the land from the homeowner and pay them with the taxes on the home.

  • The government issues bonds to investors to raise the capital and then buys the land at current appraised market value.

  • The homeowner gets a deeded option to repurchase the land at a later date at the original price paid by the government or current market value – whichever is greater.

  • The money paid by the government would go to the bank to pay down the principal balance of the loan, allowing the bank to convert an impaired asset into a performing asset which boosts the bank’s asset rate and lessens reserve requirements, strengthening its balance sheet. This makes the bank more stable, reduces the stress on government resources, and ultimately increases the availability of funds for consumer loans.

  • The homeowners would then get a new loan issued by the bank for the lower principal amount and have to pay a reasonable monthly lease (1% per year) on the land. The homeowner would also still be responsible for paying the taxes on both the land and the home.

  • The bonds issued by the government for the purchase of the land would be backed by the land with dividends provided by the lease payments.

Here’s how it would work in an example case: Harry Homeowner has a house that he is behind on his payments on. He is in danger of foreclosure. The bank has charged him hundreds of dollars in late fees and there is no way he’s going to get on top of things again. What he needs is a fresh start.

Harry’s loan is for $300,000, but the property is only valued at $225,000 in the current market and he can’t sell it. The government offers to buy the land under Harry’s house. The land is valued at $85,000. Harry sells the land to the government and pays down his loan to the bank, leaving a balance of $215,000. The bank agrees to forgive the late fees and rewrite the note. It issues a new loan to Harry on the house only in the amount of $215,000 at a lower interest rate taking Harry’s principle and interest payment from his previous payment of $1871.61 at 6.375% down to a new payment amount of $1073.46 at 4.375%. Harry pays an additional $70.84 per month (1% per year of the purchase price of the land) in addition to his mortgage to cover the lease costs on the land. This makes Harry’s total monthly payment (not including taxes and insurance) $1143.51, saving him $728.81 per month. This savings allows Harry to keep his home and the bank to avoid foreclosure.

Ten years pass and Harry wants to sell his home. He puts the house on the market and finds a buyer who agrees to pay $350,000. Harry then exercises his option to repurchase the land from the government. Current appraised value for the land is $110,000. Harry’s attorney does a simultaneous closing on the property, with Harry purchasing the land back from the government for $110,000 and conveying the house and the land to the new owner for $350,000. The bank gets its loan of $215,000 paid off, the government gets the $110,000 and Harry Homeowner gets the balance of $25,000 (less closing costs).

The Results

Win: The bank didn’t foreclose and got the full amount of its loan repaid.

Win: Harry didn’t lose his house to foreclosure, saved his credit and came out the other end with a little money in his pocket.

Win: As an investment for the taxpayers and bond holders, the $85,000 has matured into $110,000, for a $25,000 increase. In addition, the government has also received interest in the form of lease payments on the land in the amount of 1% or $850 per year. Over ten years, this totals an additional return of $8500 for a total profit of $33,500, an ROI of 3.38% per year which is a better return than the 10 year Treasury Bond rate which was 2.77 as of close of business Friday last week. (Obviously, this is a little more complicated than this, but you get the idea.)

What Happens If Harry Homeowner Still Forecloses? In many areas, affordable housing is a big issue. It’s all local towns and municipalities can do to get developers to include affordable units in their developments. Those towns could change their local regulations to state that the affordable housing unit doesn’t have to be in the development itself – it can be provided in the same town but in a different location within that town. This would make developers tremendously motivated to buy any of the properties served under this plan that go to foreclosure since they would cost the homeowner up to a third less than the local area prices. Even if the builder had to take a loss on the purchase and resale of the home to get the monthly payments into the “affordable” level, it will likely be less than the gain of an extra new unit selling for full price. It’s a good trade.

The Sparta Plan Has Several Benefits

  • It will reduce the principle of the loans for the current homeowners allowing them a payment level they can afford to sustain.

  • Banks only have to eat the cost of refinancing the loans at a lower interest rate and forgiving the late fees, not the cost of foreclosing and reselling.

  • The payments from the land purchases to the banks would allow them to convert impaired assets into performing assets. This boosts the banks’ asset rates and lessens their reserve requirements, strengthening their balance sheets. This makes the banks more stable, reduces the stress on government resources, and ultimately increases the availability of funds for consumer loans. Freeing up additional funds for new loans and opening up credit lines for new spending would be a boon for the economy overall.

  • Property values won’t suffer as a result of the plan since any subsequent purchase of the property would be made including the land when the current seller exercises his/her option to purchase the land back prior to conveying it with the property.

  • It’s a purchase backed by real estate, which means it’s not going to contribute to the deflation of the dollar.

  • It provides a stable investment for older investors who need some way to hedge their bets in this uncertain economy.

  • For the purchases that don’t get paid for by bonds, the tax payers will see a return on their investment as the economy recovers and property values improve. At the very least, we are guaranteed to get our money back with the land lease payments as interest. At the best, the appreciation and the land lease costs will provide a tidy profit for the use of taxpayer monies.

  • It’s not a free ride for anyone. The banks lose out on the refinance and late fees as well as taking only a slightly more than break-even interest rate. The homeowners lose out on the appreciation of their land and have to pay conveyance taxes and closing costs on the land multiple times. In short – those who made bad decisions get a chance to pay for those bad decisions without being destroyed by them.

So, that’s the crux of the idea, Mr. President. It seems to me that it would work. I’d welcome the opportunity to discuss it with you. I also have some ideas on how to make it easier to be self-employed if you’re interested.

Sincerely,

Kelle Sparta
Author of The Consultative Real Estate Agent 
National Speaker, Trainer and Coach for the Real Estate Industry

Marketing vs. Sales vs. Copywriting vs. Design

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I’ve recently noticed that many entrepreneurs hire a “marketing person” and then end up with someone who doesn’t do what they expect. Sometimes it’s because they didn’t realize what “marketing” means. Other times, it’s because the person they hired didn’t know what marketing means. Here is a quick guide to understanding the difference between professions that are distinct, separate fields, but get confused, because the titles are so often misused:

Marketer. A marketer decides what market a product will be sold to, how the product will be described to make it stand out from its competitors (called “positioning”), and how it will be priced. A market is a broad set of people who might want to buy the product that can be reached by the company. “Every adult over the age of 25” is not a market, because there’s no way to reach every adult over the age of 25. “Single women between 18 and 35” is a better market because there are magazines, TV shows, web sites, and other venues where members of that group hang out. Those places—often called “channels”—are how a company can reach that market.

A marketer also chooses the message to send to a market. Whether to say “We’re the lowest cost pony rental service in town” or “We have the only purple pony east of the Mississippi” is a marketing decision. The first message will appeal to members of the market who care about price. The second message will appeal to customers who care about … purple.

Salesperson. Marketers deal with defining the product. Once the market is identified, the salespeople actually go out and convince people to buy. The marketer decides, “We’re selling private jet memberships to corporate CEOs.” The salesperson drives out to the country club, finds a CEO, and says, “Would you like to buy a private jet membership?”

Note: the “junk mail” and “spam” professions are often called “direct marketing.” Those professions are rarely marketing; what they are is sales-at-a-distance. Very few people I’ve met who do direct marketing spend much time defining their market and competitive strategy. They spend their time selling.

Copywriter. A copywriter writes the text that will appear on a web site or in an advertisement. Text must accurately represent what makes a product unique and appealing to its target market. Knowing takes a marketing perspective. If it’s ad copy, it must also persuade. That’s a sales perspective. The text must also be clear and well-written. That’s a writing skill. You’ll do best with a copy writer who has good writing skill, and the perspective appropriate to the piece being written. A website “about us” page may require a marketing perspective, while a product sales landing page might require a sales perspective. Don’t assume the same person can write both kinds of copy. Also, don’t assume that a good salesperson or marketer can write good copy. They’re separate skills.

Designer. A designer makes things look good, and creates a certain feel using visual design. The designer will choose your website layout, your fonts, and so on. Designers need to know enough about your site to create the mood you want. That mood, however, is usually decided by the marketers, and it should send the right signals to the target market. Marketing would decide “We want a cartoony, happy feeling because we believe that will appeal to single women between 18 and 35” or they would decide “We want a professional, elegant feel to appeal to single women between 18 and 35.” The graphic designer would then create a look, feel, illustrations, etc. to make that impression.

These are different skills, and they often require different people to get them right. But when you get the right marketing, powerful salespeople, killer copy, and a great design, you’ll build a much stronger, more powerful business than you would otherwise.

How do you deal with fundamental overload?

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When you’ve made real commitments that add up to 100%+ of the time/mental energy you have available, how do you deal with it? I’m in that situation at the moment and find myself debating whether to concentrate on one thing, get it done (while other things fall by the wayside and/or miss deadlines, causing a backlog to pile up), or continue making small progress on many fronts, but not finishing anything.

Or perhaps there are other ways? What are your thoughts?

Make It Easy To Communicate

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If you’re a businessperson, relationships and partnerships are a key part of getting things done. Communication is one of the most important components of successful working relationships. Yet all the communication technology we’ve invented has actually made it harder to communicate. We have so many options, we don’t know how to connect.

A friend and I decided to schedule a meeting recently. He has three phone numbers, four IM accounts, three email addresses, a Skype account, a Facebook, and a Google Plus account. It took an entire conversation using two forms of email to decide which medium to use for our real conversation next week. Too much choice is making it harder and harder to reach each other. This is not progress.

If you want to spend your time forging relationships and getting work done with other people, choose a single email address, a single phone number, and a single IM account, and give those out as your contact information. Of those ways of contact, decide which one you prefer and let people know. You can even put it on your business card: “Email preferred” or “Please text me” or “Voice is best.” That way, when people need to reach you, they know exactly where and how to do it. It also means you know where to go to process your inbox, rather than having to check a dozen different places.

How The Rich Are Different (Hint: Not Much)

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I’ve found the older I get, the more I hear people talk about how some rich or famous person is so smart, generous, insightful, good at business, etc. Only these days, I actually know some of the people being placed on pedestals. I offer you this report as a public service, since I made this mistake for many years, often to my own detriment.

We get confused. We think that if someone’s rich, it means all kinds of other things about the person. We’re probably biologically hardwired to think this way. in our societies, money connotes status, and humans (being primates) seem to believe that status corresponds with all kinds of other qualities.

Let’s be clear:

  • Rich people aren’t necessarily smarter than you (though some are).
  • Rich people aren’t necessarily any better at business than you (no one ever writes an autobiography called “I was born to the right parents and was in the right place at the right time,” but they should. Nor do any tomes get written about the supremely competent who just happened to have bad luck)
  • Rich people aren’t necessarily any more moral than you (no matter what Ayn Rand writes in her fiction books)
  • Rich people aren’t necessarily any more generous, any greedier, or any more insightful as to what the world’s problems are or how to solve them.

The next time you go looking at a rich person and proclaiming how smart they are, how insightful they are, or how much good they’re doing for humanity, stop and double-check yourself. Go find some poor people who are also smart, insightful, or doing good for humanity. Then give a long, hard look and decide whether the rich person actually has all those qualities, or whether you’re confusing bank balance with human attributes.

(*) For the psychologically-inclined among you, this is called the “fundamental attribution error.” We tend to underestimate the role environment plays in outcomes, and overattribute outcomes to personal qualities.