The Price of Everything

Dogfooding is the practice of using your own products.  The term comes from marketing slang - “will the dog eat the dog food?” - shorthand for the idea that the product may be amazing, but ultimately, it only matters if the consumer likes it.

Dogfooding was made famous at Microsoft, but has spread well beyond Redmond, Washington.  Lots of companies dogfood their products now.  Some choose more palatable imagery.  For example, Siebel Systems calls it “sipping your own champagne”.

Whatever you call it, the thought is right.  Otherwise, the annoying nuisances in the product never completely go away.   Read more »

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Sting still pulls in $2,000/day in royalties for Every Breath You Take. 

Pretty cool, but nothing like singing about central bankers.  From Columbia Business School, economics with an eighth note pulse.  Schoolhouse Rock, eat your heart out.

Bankers: Pop this one in before your next ALCO meeting.  All that jaw-jaw about forward rates, consumer demand drying up, and asset-sensitivity goes down a little smoother with a catchy tune.

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BTN reports a new service for bank customers: placing shredders in the branch.

What’s the connection?

Banks sell trust and security.  Customers want to buy peace of mind - and one of their deepest financial fears is identity theft.

Leave aside the profit implications of offering this product for fee.  The service deepens the relationship with your customer exactly along your key branding as a bank. 

Shredding is similar to placing a coin counter in your lobby.  Take care of your customers’ financial headaches and they will stay loyal. 

Of course, only offer services that enhance your key value proposition - no lottery tickets, hedge funds, or payday loans, please.

Bankers: You can lower your optimal rates by changing rate sensitivities.  Deepen your bonds with the customer and use your retail presence to your advantage.

Update: Shredding is spreading to banks across the country.  From American Banker ($) (hat tip: John McCaffery):

National Penn Bank has had such good attendance at its shredding days that it is considering handing out coupons for special bank offers at next year’s events, said Linda C. Hill, director of retail marketing for the subsidiary of the $5.2 billion-asset National Penn Bancshares Inc. in Boyertown, Pa.

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Yes, it turns out our China trade deficits are partly due to those darned bankers.  America’s financial system may be working a little too efficiently. 

My econ classes taught money flows from developed economies to build up evolving countries.  The Brits and Dutch invested lots of money in the Colonies because that’s where the returns were.  Investment (factories, tools, etc.) is more effective in places that don’t already have a lot of money. Read more »

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From the NYT, Diner Beware: Turisti Pay More in Roman Restaurants

It might be an extra 30 cents for an espresso, or a $5 tithe tacked onto a bottle of wine. It may even mean the substitution of lower grade ingredients. But the practice of charging tourists more does exist and is committed daily, even hourly. If executed properly, the turista will be none the wiser.

“You think you are being taken care of,” said Christian Boyle, a Londoner who has spent some months in Rome. Soon after arriving, she and some friends displayed fatal naïveté, when they were not sure what to order at a restaurant just off the Piazza del Popolo. “We couldn’t decide,’’ she said, “so the waiter said he would bring us some things to try.’’

“One thing kept arriving after another,” she said. Things were fine until “he charged us full price for all these little dishes that we thought we were just trying.”

People hate getting cheated.  Evolutionary psychologist Leda Cosmides built pretty cool experiments to demonstrate how good we are at finding cheaters.  Turns out, the human brain specifically evolved the ability to detect cheaters.

Which brings us to price gouging.

Read more »

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The Wrong Way:

I vividly remember my first experience in the corporate world after college.  I was hired by an enormous engineering firm to program some small subsystems for a multimillion dollar simulation of a power plant in Canada.

I was pretty excited.  I had a cool job for a respected company where I could learn a lot.  Plus, they paid me an adult salary. 

After my first day at my new desk with a multicolor employee manual, corporate vision statement, and new stapler, I was still raring to go.  But the next day, I was assigned to investigate the “library”, a small office filled with various piles of disorganized correspondence about the project.

I spent weeks in that room.  My eyes wore grooves in the paperwork as I read and reread - trying to make sense of the project and my part in it.  I bulled my way through it and eventually, the project engineer let me out of the room.

I organized the mess so no one else would needlessly suffer.  I created a thermodynamic heat balance so our 30-engineer team could work effectively together.  Then, I created a paper-based version  of the distributed control system (the video game the operators control the power plant with) so everyone could see who was working on what - and where the holes were.

I hated being the new guy.  Turns out, the experience stuck with me.  Read more »

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Zopa is a shot across the bow of traditional banking, much like Commerce Bank.  The effects will take years to play out, but the best banks will take the opportunity to hone their competitive edge right now.

Zopa is a classic blue ocean strategy.  It will likely create brand new customers in areas like personal loans rather than pull them from banks.  But zopa may also hit banks in their sweet spot of low-cost deposits.

Banks should not compete directly against zopa on price.  Banks have a different cost structure - and a different product.  But they should think about lessons from zopa - as well as areas where traditional banks can excel. Read more »

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We saw in part one that peer-to-peer banking has a lot going for it.  But there are some strong negatives too. Read more »

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A few months ago, a venture capitalist asked my opinion about Zopa.com - a new financial startup. I told them I thought they were not much of a threat to banks. The VC went on to fund the company, which goes to show how little I know. Read more »

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“Wiki”. Even the word is silly.

Say wiki out loud among responsible adults and get the same look you’d expect if you brought up your Dungeons & Dragons fairy character with strength = 10. Over Scotch at the Algonquin.

Last time, I quickly covered by bringing up wikipedia (amazing encyclopedia built with a wiki). My companions were relieved that I was not speaking complete gibberish. We hurriedly changed topics before they risked hearing about my comic book collection.

But wikis really are that important to banks, software companies - virtually any organization that has access to computers. While wikipedia is amazing, it has very little to do with the true power of a wiki in a company. Read more »

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