Hey, where did my blog go?

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Well, I finally made the move. I just finished importing all my blog entries over to my web site. Unless my new site blows up or something, I won't be posting any more entries here at Blogger. To go straight to my new blog page, click here.

Study Questions Impact of DVD Sales on Video Rentals

This appeared in Supermarket News this morning. It's not exactly earth-shattering news, but it got my attention.

Findings from a new study from Lyra Research here question the widely held assumption that the increase of DVD sales has negatively impacted video rental activity, said the research company. "Flicks for Hire: A Video-Rental Survey" shows that people who own more DVDs also rent more DVDs. The report is based on a survey of video renters conducted in June and July. "We can construct obvious logical theories why consumers who own more DVDs would also rent more videos," said Steve Hoffenberg, principal analyst for the DTV View report series and Lyra Research's director of electronic media research. "For example, the more people like to watch videos, the more likely they are to both own and rent them. But such theories don't jibe with a commonly espoused assumption in the video rental industry that the dramatic growth in consumer purchases of prerecorded DVDs is the chief cause of this year's slump in video rentals. Our findings call into question whether DVD buying is indeed the primary factor reducing video rentals, and they suggest a more complex relationship between rentals and purchases."

I find it illogical that DVD sales are putting the damper on rentals. When you buy a DVD, you pay 3 to 5 times the cost of renting one. Presumably, this is because you like it enough that you plan on watching it over and over. This makes sense for children's videos and movies that you absolutely love, but that's been the case for years. We bought plenty of VHS tapes long before we owned a DVD player. Why would the advent of DVD's have a significantly greater impact on the propensity to buy versus rent a video?

Yes, there are those special features that appear on many DVD's and the picture quality is great, but it's still a movie. It still costs a lot more to buy it than it does to rent it, and face it, how many run-of-the-mill Hollywood products do you really want to see three times or more?

In our house, DVD purchases are virtually always in addition to our rental activity, not a substitute. The only exception is when we see something in the theater that we really love. In those cases, we'll often buy the DVD just to have it. Because of the quality and features. We might be slightly more motivated to buy the DVD today than we were the VHS version a few years, but that should be a benefit for the industry.

If the rental industry is broken, then why has NetFlix been so successful? And why is Wal-Mart getting in on the same business? Something doesn't add up.

The sinking value of the Wal-Mart experience

I stumbled across this commentary while reading one of my regular Wal-Mart-related feeds. I'm not disputing Stephen Crockett's points or debating his motivation for taking a stand against Wal-Mart. That's his business, and his reasons are well stated, whether I agree with them or not.

What caught my eye is the startling contradiction, if I may call it that, that emerges from his statements. On the one hand, he says:

I limited my [Wal-Mart] purchases somewhat as a result [of Wal-Mart's anti-union attitudes] but still bought some things because of convenience... I also limited my purchases there because Wal-Mart hurts many local businesses when it moves into a community.

Interestingly, these comments follow this admission:

I bought 20 pairs of the same type of shoe from Wal-Mart over the past six or seven years. Men are creatures of habit.

Two things really jump out at me. First, it sounds like Mr. Crockett shopped at Wal-Mart more often than he thinks he did. At the very least, it's safe to say that Wal-Mart was the first place he shopped for shoes. Second, people are indeed creatures of habit.

In these statements you find the fundamental building blocks of Wal-Mart's dominance: convenience and habit. That's why they have grown and why they continue to grow. As Wal-Mart opens more stores, they become even more convenient, and consumers become even more habitual in their shopping patterns.

I shop at Wal-Mart. I admit it. Sometimes I like what I find there. Sometimes I don't. I also shop at Lowe's, Target, Home Depot and other big box retailers. We all do. Why? Because this is what is available and convenient. These retailers have connected their operating models to American lifestyles and culture. The connection is so strong that even Mr. Crockett was willing, for a time, to disregard his strongly-held beliefs in order to buy shoes at Wal-Mart.

Mr. Crockett didn't stop shopping at Wal-Mart because of his ideology. It was because he was treated poorly as a customer. Poor customer service caused him to reevaluate everything he believes about shopping at Wal-Mart, not the least of which is Wal-Mart's abandonment of Sam Walton's "Buy American" purchasing ethic.

My point is this: Wal-Mart and other big box retailers will remain dominant until other retailers come along that can connect with customers even better than they do. Governments can try to stop the big boxes. Unions can organize to fight them. Individuals can start boycotts. Sure, Wal-Mart itself might hasten the process if they keep letting down customers like Mr. Crockett. But ultimately, only that quiet majority of consumers, those creatures of habit and convenience, will create substantive change.

And you know what? No one knows this better than Wal-Mart.

A Product is only as Good as the Company that Sells It

My primary transportation is a 2002 Volkswagen Jetta station wagon. Driving it is a drug. The performance is just amazing. Unfortunately, the quality is typical VW. Little stuff breaks all the time. I've had no major nightmares, and most of the problems have been covered by warranty. Nevertheless, there is indeed a trade-off between VW's performance and quality. (My experiences with the dealer's service department have echoed this, but that's another story.)

An article in the Cleveland Plain Dealer this morning tells the same story about the VW Passat wagon. Here's a company that makes cars that are simply amazing to drive and are priced affordably. But there's a catch. The company has a track record for being finicky about how they treat their customers.

Volkswagen has always had a reputation for occasional quality problems, but I don't think that's what hurts them the most. The only thing keeping me from considering another VW is the matter of whether or not I can trust VW to stand behind the product. Is the sublime performance worth the risk that I might get stuck paying for the product's shortcomings?

A remarkable product can be killed if a company gains a reputation for not standing behind it. People are willing to take some risk on quality if they know they are protected on the down side. Once doubt exists, the product's performance becomes nearly irrelevant. The review in the article would have been glowing, and I would have immediately put the Passat wagon on my short list of cars to consider next time. Unfortunately, all it did was confirm my doubts. Hopefully, VW will turn the corner. I hate the thought of giving up this wonderful driving experience.

Blogger's Spell Checker

Here's something interesting. The following words are not found and show as misspellings when you run Blogger's spell check on a post.

• blog
• blogger
• blogging
• blogged
• blogosphere

The first recommended alternative for blog is "flog."

Trivial, yet amusing.

Public and Experts Split Over E-voting Security

I blogged on this topic a couple weeks ago. It seems now that the experts are far less trusting of electronic voting than the general public. That's a real surprise to me. I would have expected the techno crowd to be more in favor of it than anyone.

Nevertheless, after reading my proposal from the other day and weighing it against these "expert" opinions, I'm refining my idea.

Let's skip the whole electronic thing for a while. (Presumably, it really will work someday. Apparently, now is not the time.) Instead, let's just implement the second part of my plan. We can call it the Voting Accountability for Morons (VAM) plan or something.

The gist: All voters are responsible for auditing their own ballots before they leave the polls. (This is completely optional. You only do this if you are concerned your punch card won't be read properly -- or if you're a freaky activist of some sort.)

How it works: You scan your punch card in a reader identical to what they will use to count the votes. You receive a printout showing how your card was read (i.e., how you voted). You then have the opportunity to report any discrepancies and make corrections on the spot. Otherwise, what you turn in is what stays in the system. Period.

It's not perfect, but it's got to be better than just putting up a sign that says "Please remove all hanging chad." Does anyone really believe that the folks in Palm Beach County are going to remember what a hanging chad is four years later?

Companies Find They Can't Buy Love With Bargains

Great article in the New York Times about customer satisfaction. I wasn't even familiar with the American Customer Satisfaction Index. It's a neat idea, and despite not knowing how the index is calculated, the contrasting scores reinforce my belief that the products retailers choose to carry often differ from what consumers really want.

The problem? Too many companies confuse selling clever gadgets at good prices with delighting customers. When so many products get cheaper every year, offering customers a great bargain will not necessarily win their loyalty. Someone else is bound to offer a better bargain, and besides, most customers have come to expect good deals. "Price has an effect on whether you buy or not," Dr. Fornell says. "It has less of an impact on whether you're satisfied or not."

Mass retailers perpetuate this problem. In fact, they may be the root cause.

It's virtually impossible to be a successful buyer for a major retailer today and be primarily focused on figuring out what customers want to buy and then carrying it. That's only the beginning, a prerequisite perhaps. The buyer's most important jobs are to:

• Consistently increase return on inventory investment year after year
• Grow top line sales every year

Bonuses are earned and lost on these criteria. Getting vendors to provide annual price reductions (typically referred to as "driving the business" or "adding value") is now the norm. Therefore, product improvements have become mere margin enhancements. "New and improved" usually means that the product had to be changed in order to keep its shelf space -- regardless of whether or not customers were happy with it the way it was.

A buyer's worst enemy is the product that customers buy year in and year out -- unchanged. It's very difficult to grow margins regularly on a product that stays the same. The vendor only has so much to give. Heinz ketchup is the perfect example. It's no wonder that they have the highest customer satisfaction score. They haven't messed with the product, and it continues to keep customers happy! Duh!

Vermont Teddy Bear is a small company whose impressive turnaround shows the power of creating a connection with customers rather than competing on price.

This connection is the relationship between the customer and the product. Retailers either enhance this connection or they hinder it. Price is only one of many elements that define the relationship with the consumer.

Yes, the retailer is also its own brand, but I doubt that has anything to do with the Heinz story. Maybe it did at one time, but those days are long gone. The retailer as a brand is a separate issue.

Why does Amazon produce such satisfied customers? Low prices and wide selection play a part. But plenty of retailers, on the Internet and at the mall, offer good deals and scads of merchandise. The real secret, says Bill Price, a former vice president of global customer service at Amazon, is the site's evolving menu of features and services that make it more friendly, more reliable and easier to use - little touches that personalize the site for each buyer.

Amazon gets it. They understand that price is an element. Free shipping is an element. But so are personalized service, excellent communication, product reviews, wish lists, and so on. Customers trust Amazon.com. They trust Amazon because the company is reliable, remarkable and consistent.

There is always someone with a lower price than Amazon, and some customers will always navigate toward the lowest-cost provider. Most will stick with Amazon, though, because trust doesn't cost much more.

Retailers need to focus more on building trust and carrying what customers want to buy. These efforts will grow markets and, frequently, market share. Healthy ROI and top line sales will follow.

Companies Ignore Customer Email

So much for good customer service. Articles like this one in Internet Retailer pop up once in a while. Although this story pursues the differences in response rates to emails written in English vs. Spanish, the abysmal response rates are just amazing:

Barely half of the world’s best-known brands answer e-mail from consumers...

In the first query, a request for product information got only a 42.7% response rate when submitted in English, and a 46.9% response rate when submitted in Spanish.

The second query, a complaint, got a greater response when submitted in English – 49.4% versus 35.8% for messages sent in Spanish.

The third message, a compliment about the site, got almost equal response rates in Spanish and English – 35.4% and 35.6%, respectively.

The fourth message, a question on where to buy the company’s products, got the highest response rate of any of the four messages when sent in English—50%—but only a 33.3% response when submitted in Spanish.

The top 100 brands included in the survey were drawn from an Interbrand and Business Week study published in 2003 and included global companies such as Colgate, Heineken, Kellogg’s, L’Oreal, Toyota and others.

How can companies possibly think that this is acceptable? Is it the fact that email is easy to put off compared to a phone call or a face-to-face encounter? Is it because upper management still doesn't "get it" when it comes to the technology?

An email contact from a customer is just as important as any other moment of truth. Ignoring it is the same as hanging up on a caller or slamming the door in a customer's face.

Surviving the Slog of Trade Shows

The New York Times has an amusing filler piece today about working at trade shows. The picture is hysterical -- boy can I relate! Some of the quotes are great:

"It just sucks the life force out of you, and you don't even know
why."

"I started keeping a journal because it keeps me busy when the booth is slow and it helps me channel my anxiety," said Kelly Sopp, who will exhibit at half a dozen children's apparel and gift shows this year to promote her Wry Baby clothing line. Typical of her journal notes: "Everybody hates my product."

For exhibitors, commentary overheard from the aisles can require thick skin - and a check on the urge to respond. "One woman walked by and she just rolled her eyes and said, 'Now who would put that on her child?' " Ms. Sopp recalled. "I wanted to yell back, '20,000 people so far,' but you just can't do that.''