TFS: Do your want to be inside or outside? The view is different.

Insiders are biased into thinking they have more control than they actually have, or probably should have. That's one of the reason it can be so valuable to have a consultant come look at your business. But the article below also shows the dangers of the outside view. It's cold out there, and the perspective may not be constructive.

"The way around the concern is simple." Only from the outside. Just replace the unprofitable customers with profitable ones. From the inside, you have to try and anticipate the repercussions and project probable outcomes. And prepare yourself for the "unknown unknowns." We can't know or control the future. All we can do is try and recognize what is valuable and hold onto it, letting go when we need to do so in order to survive. 

Sloan Management Review: Should you punish or reward current customers, 2013-Jul-23, by Jiwoong Shin and K. Sudhir

The common apprehension among managers that firing customers may lead to allocating fixed service costs among fewer customers (making them unprofitable) is misplaced. The way around the concern is simple. Simultaneously with firing bad customers, the company should go out and obtain new customers — customers who are on average more profitable than the ones who were fired.

Marketing is a Wicked Environment

According to Robin Hogarth, a 'wicked environment' is one where "feedback on decisions is infrequent, it can be distorted (e.g., biased by unexpected events), and [decision makers] cannot learn from the decisions they did not take." [Emphasis mine.] Hogarth wrote one of my favorite books, Educating Intuition, and is mentioned admiringly by Daniel Kahneman in Thinking, Fast and Slow.

I've been trying to get a client to tell me why she bought a product and how she's using it, but she is not interested in my concerns and will not reply. Of course, I haven't built enough relationship trust with her yet, but my maddening problem is that I only have 5 (five) customers. I cannot get any kind of reliable read on the market in these conditions!

When I was an account executive at Ogilvy working on the Compaq account, we ran a wonderful ad in the Wall Street Journal with the headline, "It's not just that 97% of all COMPAQ owners are satisfied. It's why." It was a full page ad illustrated with a pie chart where the 3% gap had been transformed into a smile. We called it "Smiling Pie."

That ad was the most successful we ever ran, according to the feedback system we had in place. Then a buddy of the Compaq CEO called him and said, "Hey, I saw you guys recruited PAC MAN as a company spokesperson. Heh, heh, heh." The CEO immediately killed the ad. I did NOT fight back, I just asked, "Did anyone TELL him that it has pulled more responses than any other advertisement we've ever run in the Wall St. Journal? Aren't we interested to see what those responses were??"

I was told that the ad's performance was irrelevant. Despite the fact that David Ogilvy said "We sell or else." Getting good results didn't matter. Obeying the CEO mattered. THAT's a wicked environment.

That incident at Ogilvy wasn't unusual. After 25 years in marketing, I could tell you six more stories. My point is that today, as I try to grow a business from a very small base of clients, I'm more aware than ever how difficult it is to find out if you're doing it right in marketing.

TFS: Better a simple calculation than an educated guess

Experts can become very, very good at reading the immediate situation and handling it well. But their intuition for handling long-range problems seldom has the opportunity to develop. However, their confidence is high. Daniel Kahneman says "They know they are skilled but they don't necessarily know the boundaries of their skill."

The halo effect (transferring unearned value), combined with our WYSIATI tendency (assuming 'what you see is all there is'), often leads us to make very bad marketing forecasts. Expecting to fail, and planning to learn from your failure, is a much better strategy. 

Kahneman recommends that we develop a checklist of reliable and non-overlapping traits that we expect to see in a venture, and apply that checklist ruthlessly before we decide whether on not we expect it to succeed. If we become experienced using the checklist we can give the traits a weight, but we need to make sure they vary independently. Using this method, your decision to launch a product would not be based on expectation of success, but based on whether or not the project represented a meaningful experiment--something you could learn from.

Loyalty is more than marketing

Loyalty marketing has become big business, but loyalty remains a basic human behavior. You can't design a good loyalty program for your customers unless you know how to act with loyalty.

FrogDog: The Benefits of Loyalty, 2013-Jun-20, by Leslie Farnsworth

Sticking with one person or company will get you

• better results,
• extra consideration for needs and modifications and specializations,
• perks and freebies, and
• top-notch customer service.

The overlooked art of the great reply

As a communication medium, email is trickier than most. We can appear evil by accident. We can expect to be ignored. Our message is often lost. Sending email (like sex) is something worth doing well. If we slam a message with no consideration for the human being at the other end, we'll get the contempt we deserve.

Replying to email is an overlooked skill. Isn't it great when someone goes out of their way to be nice? When they craft a gracious no? When they respond with enthusiasm when you expected silence? Be that person.

Pleasure & Pain: Email is People, 2013-Jun-3 by Whitney Hess

An email does not send itself. It is sent by another human being. Whether an individual person hit send, or whether they set up an automated service, it represents the same thing. It is one person making contact with another person. It is simply the chosen method of communication. In our vilification of the method, we have lost the message.

TFS: In choosing advisers, avoid certainty

In his chapter on the illusion of validity, Daniel Kahneman discredits all efforts to take the uncertainty out of the future. In fact, he finds the more confident an adviser becomes, the more likely they will miss the mark. This false confidence is often based on all the research and analysis the adviser has performed. Unfortunately you cannot work your way away from variance.

When times are uncertain, we look for the emotional protection of a leader who is full of certainty, but it's actually the opposite of what we should do. We should find a leader who acknowledges the unknowable. A well-prepared adviser can share his or her observations and help you find a good range of reasonable next steps for the immediate future. I've always appreciated Peter Bishop's analogy of being prepared like a good tennis player. Be healthy, be alert, and be prepared to handle the ball wherever it goes.