Strategy Speaks: a Peppers and Rogers Blog

Customer Strategist Bruce Sweigert: Airline FFPs Are Springboards for Engagement

2010-03-10T05:07:00Z

I've been following some of the debates in the airline industry about the new ways to engender loyalty: social media as the new loyalty vehicle versus costly frequent flyer program (FFP) miles. While social media has already become an essential ingredient to airline's customer programs, the FFP will continue to be a foundation for one-to-one customer engagement.

]]> The reason is simple: Social media is more like a democracy. You engage, but on a mass level with customers. While it's important to engage on multiple levels, not every customer can be a VIP. This may sound like a nice idea, but in practice if companies answered every complaint with an unconditional refund and treated everyone with their most lavish services they would be out of business very quickly.

One-to-one marketing is a different concept. It's essential to recognize many customer types, but we need to treat different customers differently. It's like being a regular customer at a diner where you have been going for years. The owner knows your name and you don't have to order because he knows exactly what you want; he makes sure the eggs are not too runny, and puts it on the house tab. In this example, our restaurateur would treat a new walk-in customer differently; he might try to upsell the basic morning breakfast to the deluxe special. And cash payment only.

It should be same with airlines. Instead, airlines often don't track purchases beyond the last transaction; every sale is a distinct and discrete event. One of the big problems airlines face is how to make sense of the millions of daily transactions around their brand. While many are important, there is a lot of irrelevant noise out there and it's very hard to link these voices to real individual customers, or future customers, who matter to you.

Airline IT systems further support this transactional focus, because they were built around the Passenger Name Record (PNR) transaction, which is unique to every trip. Loyalty programs are the perfect platform to build these discrete transactions around the customer profile. Without a unique customer ID, it's difficult to build a picture of your customers' histories and a profile of their demographics.

Yet, in most airlines that have loyalty programs, less than half of their customers are loyalty members, including some of the highest-value elite customers. The reasons vary: Customers may not expect to travel on your airline again, they may not understand the value of the program, or they simply don't want to bother with the effort. Whatever the reason, you are losing opportunities for engagement with new customers (including those of your competitors) because you are only focusing on those customers who are already converted.

There are many ways to encourage your customers to sign up. It can be as simple as a small gift or service priority such as an extra free checked bag, or even the convenience of remembering their identity and payment details on your website for their next booking. Customers are willing to sign up as long as there is a reason for them to do so, and if you make it easy. Why not use the information you have through ticketing to auto-enroll customers at the website or check-in desk without requiring them to complete a form? All they would need to do is simply click an opt-in box.

Loyalty programs don't even have to give free miles. They can present offers for benefits like an upgrade on the next transaction. In fact, we don't even need to call them loyalty programs. For a low-cost airline, how about creating a "customer key" that unlocks these special benefits for customers?

Here is the real power of your program. Now that you have a customer ID, why not encourage customers to use it in social media applications to help you learn about their profile and next trip? Millions of social media users are happy to share their personal information in games such as Farmville on Facebook; would they not also be willing to link their customer ID to their Facebook, LinkedIn, and Twitter profiles with the knowledge that they might get a targeted promotion for their honeymoon or next vacation? The popularity of sites such as Tripit.com, Foursquare, and Gowalla prove that people are very willing to exchange their personal travel information widely with others for utility, or to simply share their whereabouts with friends.

So let's stop thinking just about offering miles to loyal customers. Your loyalty program is a platform for engagement. Miles are not the end-game, but just one tool in your toolbox.

Bruce Sweigert is Director of the Travel & Transport sector for Peppers & Rogers Group. Contact him at bsweigert@1to1.com

Trust - A Political Role as Well as a Business Role

2010-03-08T17:10:18Z

The New York Times' website has a number of interesting blog discussions going on at any one time, but over the weekend Dick Cavett and David Brooks posted a back-and-forth discussion on the erosion of trust in our society - speaking about what Brooks suggested might be a lack of "social trust" that could account for people's lack of support for any positive solution to our country's current problems (like overspending).

Cavett referred to Martha's and my book Rules to Break & Laws to Follow, pointing out that Chapter 7 was all about trust, and doing a very serviceable job of linking this problem to the political issues involved. He even surmised that our advice to Toyota, at this time of stress, would be "to do more to re-woo disaffected customers than just customary apologies and reform -- to do something 'extra' and original. Something like five years of free maintenance, a paid vacation, school tuition? Maybe fun-designed safety helmets?"

]]> In fact, that is indeed what we would advise a company in Toyota's situation - to create a policy or offer to customers that recommits the brand to unrivaled quality, no matter what. Our advice to Toyota would be to do something analogous to JetBlue's "Customer Bill of Rights," a promise they adopted to reassure customers in the wake of the disastrous Valentines Day 2007 ice storm and service interruption (Chapter 9 of the book). Comcast - a company afflicted with its own set of nagging service problems - has recently adopted exactly this kind of policy, creating a seven-point Comcast Customer Guarantee and advertising it heavily with television commercials.

With respect to recovering trust in our social and political discussions, however we would circle back first to the two different requirements for earning someone else's trust: intent and competence. First, the person whose trust you want has to believe you intend them no harm - that is, that you intend to act in their interest, not just your own. In social or political terms, this might mean that you and the other party both have the same objective (to better society) - although you may differ in the means to achieve it. But second, the person has to believe you are actually competent to act in an effective way - that you have the ability, in other words, to carry out this intent.

In political discussions, confusing intent and competence is the surest way to radicalize a debate over policy, because questioning someone's political intent is like casting doubt on their moral worth. Conservatives who charge Obama with being a socialist, for example, or liberals who charge that Bush actually lied about WMD - these are extreme views that tend to cast the actors on the opposite side of a political discussion as evil. In fact, however, at least in this country and most other civilized democracies, we all have very similar desires to better ourselves and our societies. We differ, mostly, in our assessment of which policies will show the most competence at achieving these objectives. For example, in economic terms liberals often think a social safety net will be more effective at meeting the goal of improving our society, while conservatives often think self-reliance will be more effective. These are questions of which policy is most competent to carry out our common intent; they don't require anyone to assert that one objective is good and the other is evil. When we question the actual intent of our political opponents, we are ourselves contributing to the erosion of trust we all sense.

Readers who want to make their own contribution to an improved level of trust in our political debate could do this: In a political discussion, rather than seeking out people they already agree with and then enjoying this self-affirming conversation about a common point of view, they should seek out someone they don't agree with, politically, and try to understand what it would really be like to be that person - to see the world the way that person sees it, and to think the way that person thinks.

The most trustworthy businesses are those that can actually take their customer's perspective. And trust will only be restored to our political system when discussions involve serious efforts to understand other citizens' legitimate views - views that are every bit as morally justified as yours or mine are.

Customer Strategist Mujdat Ayoguz: Telecoms Need to Rethink Their Approach to Attracting Customers

2010-03-03T17:34:56Z

There is a major shift in the value proposition for telecom operators today because voice revenue, which has been the core revenue source of telecom operators, is on the decline. There are many signs in the market that shows voice is on its way to becoming "just another application" on data network like messaging or gaming. For example, 8 percent of international voice traffic is now carried by Skype.

The main obstacle that stands before the widespread adoption of voice as "just another application" is the cost of mobile access network which is rapidly changing with the evolving mobile access and backhaul networks. In five to six years, mobile broadband will be readily available everywhere and that is going to change the game totally for the telcos. Simply put, operators will have to find different ways of making money.

]]> Recent studies show that the revenue mix will shift towards growing revenues in non-traditional businesses. Setting their strategy in this direction, telcos will first and foremost need to answer the very basic question of "what line of business are we in?"

This question is not being faced by an industry for the first time. As Theodore Levitt eloquently put it in his famous paper Marketing Myopia, published in The Harvard Business Review, "The railroads did not stop growing because the needs of passenger and freight transportation declined. That grew. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was because they were railroad-oriented; they were product-oriented not customer-oriented."

There's a similar shift in telecom. Telecommunications companies have to rethink their positioning. Are they in the communication business, the entertainment business, the killing time business?

Wireless provider Verizon in the U.S. has decided that it is in the communication business. Last week the company inked a deal with Skype that will allow Skype users to access a 3G Skype app on Verizon's wireless data network and smart phones. Essentially this moves even voice calls to the data network, which at a glance looks like a cannibalization of voice users. But look deeper in the overall customer experience and it's actually the opposite.

Skype CEO Josh Silverman told CNN's Richard Quest last week that results from a similar partnership with mobile operator 3 in the UK show that many customers switched to 3 specifically because of Skype, and once there, generated 20 percent more profit than customers who don't use Skype. According to Silverman, this is because Skype customers "communicate a lot" with Skype calling and chat, but also with a high volume of voice calls and text messages. "They are very valuable customers for 3. They were acquired cheaply and have very low churn."

As technology improves and customer demand for untethered communication grows, telecoms need to explore unconventional options based on the customer experience. It's the beginning of a new chapter for the telecom industry, if they are willing to write it.

About the author: Mujdat Ayoguz is a director at Peppers & Rogers Group. Contact him at mujdat.ayoguz@1to1.com

Comparing Customer Experience and Return on Customer

2010-02-11T13:34:17Z

There is a lot of discussion lately about "return on customer experience," an idea we think should be almost directly aligned with our Return on Customer concept. Buzz-Talk's blog has an excellent summary of many of the more recent findings in this field. Unfortunately, the "proof points" that get the most attention in Buzz-Talk's and other discussions of customer experience management have to do with comparisons of the overall economic and financial performances of CXP leaders and CXP laggards.
]]> Now it's certainly welcome news that financial success at a company does seem to be at least roughly correlated with a better customer experience delivered by the company. However, it hardly helps a marketing executive during a debate with other executives at the firm about how much investment his or her own company should make, in which kinds of experience-improving services. Even though it's become fairly easy to "prove" that good customer experience management has some kind of positive impact on a company's results, the simple fact is that all these indicators are inherently non-financial metrics. Using these kinds of indicators, you still can't actually quantify the financial benefit of, say, investing an extra $25 million in contact center training at a firm, or spending $50 million to install software and re-engineer a company's system, in order to do a better job of treating different customers differently.

And, if your marketing exec says, well if we want a good customer experience then we should just do these kinds of things, then our question is: What if the cost is $100 million? Or $500 million? See the problem? At some point a balance must be struck, but where? Simply saying that CXP leaders tend to have better financial results than CXP laggards doesn't solve the hard problem of resource allocation. To solve this problem you need a metric for the benefits of customer-experience-management that can be converted to dollars and cents.

That's the benefit of the "Return on Customer" metric, a precisely quantifiable measure of the efficiency with which a company's customers are creating value. Our previous post on Strategy Speaks has a concise and useful description of how this metric works.

Has the Time Come for "Return on Customer" At Last?

2010-02-09T21:30:58Z

There is an interesting and well-informed article discussing Martha Rogers' and my Return on Customer metric in the most recent issue of the UK's Marketing Week magazine. David Reed, who covers the "data strategy" beat for the magazine, writes that while the data side of marketing has benefited greatly from a renewed attention to the financial metrics of success, particularly ROI, this might be a short-term blessing for the discipline. What he means is that ROI metrics typically look at campaign or product profitability figures, but have little to say about the long-term value created (or often destroyed) by marketing efforts. On the other hand, he says, the ROC metric does capture long-term value, because it incorporates changes in customer lifetime value (LTV). [Note, please that Martha and I have trademarked the terms "Return on Customer" and "ROC." We grant permission to people to apply these terms to their own analytics efforts when we deem the terms are used correctly.]
]]> Although Martha and I first wrote about Return on Customer in late 2003, our book by that name didn't appear until 2005. We argued that whenever a customer has an experience with a brand he creates current-period, short-term value, by buying the product or costing money to serve, but he also creates long-term value, because the experience itself makes him more or less likely to do business with the brand in the future. We also suggested the simplest way to measure such future value would be to compare the customer's lifetime value both before and after the experience. If he has a good experience, then his LTV will increase, and vice versa, and the amount by which LTV changes represents the long-term component of the value created by the experience. Although there was no shortage of analysis devoted to forecasting customer LTV, until our book came out the marketing community paid little or no attention to trying to understand or forecast changes in customer LTV. But these changes in LTV, by capturing the long-term impact of short-term events, will do the best job of eliminating the short-term bias of more traditional ROI and pay-back analyses of marketing efforts.

In addition to its inability to capture long-term value creation (or destruction), return-on-investment analysis doesn't speak to the other big problem confronted by marketing, which has to do with the fact that customers are a finite productive resource. Customers aren't unlimited in number, so a business must create whatever value it can from the customers and prospects available to it. If you have a good marketing program to invest in, and the ROI is appropriate, you can virtually always secure the capital to invest, because there is a robust secondary market for capital. However, there's no such secondary market for customers. No bank can lend you a few customers for you to employ to create some value, repaying them later with interest.

Reed writes that he remembers a presentation I gave in London a few months ago, in which I posed a question to the seminar attendees. Suppose, I said, you had to choose from two different marketing initiatives. Initiative A costs you £5 per customer, and yields a benefit of £10 per customer, for a net profit of £5, or a 100% ROI. Initiative B costs you £10 per customer, and yields a benefit of £16, or a net profit of £6 per customer, giving you an ROI of just 60%. Which initiative do you choose? Of course, Initiative A is by far the superior financial investment, because for every pound invested you get a pound of profit, instead of just 60 pence. So, whether your budget is £1000 or £10,000,000, you get more benefit from A, right? Well, yes - unless you just have one customer. If you only have a single customer, of course, then Initiative B is better, because the £6 you would earn from B is more than the £5 you would earn from A. But now the question is, would your answer be different if you "only" had a thousand customers? Or a million? Of course not.

This is the basic logic of Return on Customer. The ROC metric assumes that (1) customers create all value for a business, (2) this value is created not just in the short-term but also in the long-term, and (3) the number of customers is finite. ROC measures the efficiency with which a set of customers creates value. ROI, on the other hand, measures the efficiency with which a quantity of capital creates value. The simplest mathematical explanation of Return on Customer is by direct analogy with return on investment: Suppose you buy a stock for $100, you receive a dividend of $5 on this stock, and by the end of the year the stock has gone up in value to $110. In that case, your ROI would be 15%. Similarly, if you acquire a customer who has a $100 LTV, you make $5 in profit from this customer, and by the end of the year the customer's LTV has increased to $110, then your ROC would be 15%.

We predict that ROC will become more and more important to businesses as they continue to wrestle with the kinds of customer-specific marketing problems thrown up by today's assortment of interactive media and technologies.

ROC measures customer-specific efficiency, as opposed to dollar-specific efficiency. It is a way to "optimize" your business around an individual customer, a task that is becoming increasingly central to any company's success. Let's say you're designing a Web site. You want the communications and offers on your Web site to make the best possible impression on the customer who is visiting the site right now, based on what you know about the customer. And of course you will change what the Web site shows to the next customer, and the next, and the next, based on what you know about each different customer, in order to tailor the most appropriate communication and offer for each. In effect, you are optimizing your business around each customer, individually. And you will do the same thing at the contact center; you will want to do the same thing at the point of purchase, and for the sales force, and for your email marketing, and for all other one-to-one channels. In each such situation, your task is not to decide the best communication to go the same way to everyone, but the best communication for each individual customer, at this time. You are optimizing by customer.

Optimizing by customer is, increasingly, the central task of marketing, as the whole discipline continues to be transformed by interactive technologies. And Return on Customer is a metric designed for measuring the value created whenever a business optimizes by customer.

The Perils of Treating Different Customers Differently

2010-02-02T02:48:07Z

As I write this, I am recovering in my hotel room from an early-morning run several times up and down each of the four different staircases in this hotel, in a foreign city (not going to tell you what city, but it's way far away from the US - virtually opposite side of the world). Something I noticed about this modern hotel is that the number of steps between floors varies with each stairwell! While the floors are all level and have no ups or downs in the hallways, the stairwells themselves each have the same number of steps between each of the principal hotel room floors but that number is 21 steps for one of the stairwells, and 22, 23, or 24 steps for the other three (go figure). I don't know the explanation for this, and truth is I'm not even very interested in it, but when you have to run up and down stairwells in a hotel because it's too early for the fitness center to be open, then you have to occupy your mind somehow.
]]> Nevertheless, this got me thinking about today's consulting assignment. Our firm is meeting later this morning with a large mobile phone carrier regarding their customer retention efforts. If you know anything about this subject, you know that customer retention can be thought of as both proactive and reactive. Proactive efforts are those service improvements, process enhancements, and quality initiatives that encourage loyalty by removing many of the causes of defection. Proactive retention measures could also include a loyalty program of some kind, along with customized service treatments and the like.

Reactive retention efforts, on the other hand, are those policies and practices aimed at intercepting customer defections - either by convincing people not to leave when they contact the firm to disconnect, or by using analytics to detect the kinds of behaviors that normally precede defection, and then actively intervening with a customer contact or offer.

It is the reactive retention efforts that I came to wonder about as I was pondering the irregularities in my hotel's stairwells. The thing is, a good proactive effort is one that arms the customer service agent with a number of different types of offers and communications to deploy for different types of customer situations. And sometimes the only real difference between one situation and the next is the intensity of a customer's desire to leave, and therefore the "price" required to retain. What this means is that - theoretically at least - different customers could communicate with each other about the kinds of "win back" offers they each received, and the result would not be economically helpful to the carrier. On the other hand, not making the "best offer" to a customer at any point in time is clearly flirting with untrustworthy behavior.

What we usually advise clients is that they have to have some objective reason they can cite for making any customer-specific offer - a reason that would allow any other customer who met those particular conditions to receive that offer, also. But this advice only really applies to the kinds of initial offers that are made to a customer in a reactive retention situation. What happens, however, when a customer improves his offer simply through negotiation? When a business customer does this, a contract typically will have a confidentiality clause, so the seller can protect overall pricing with other customers. But this obviously would be difficult to apply to consumer customers, even if you wanted to.

Reason I'm posting this is to see if anyone out there has a view on how to handle this issue. What are the best practices, what are the worst cases, what are the issues? Anyone?

Customer Strategist Yücel Ersöz: 4 Low-Hanging Fruit to Pick to Boost Sales in 2010

2010-01-14T19:30:38Z

As organizations set new priorities for 2010, they must understand how continuing market changes will impact future business in order to keep their momentum going. Enterprises must find ways to balance achieving profitability by containing costs in the short term with delivering on customer needs and extracting the greatest value from a customer in the long term. This will help them weather the crisis without destroying their fundamental value, which is the value of their customer base.
]]> There are four areas companies can easily address to overcome these challenges and help steer themselves toward long-term sustainability. They include:

1. Prepare to serve well-informed customers. You can no longer lure a customer into buying your product by simply comparing it with the competition's offering. In many cases your customers have already researched the product online and discussed it on social media sites. Customers are looking to make better-informed decisions, and since the recession began, they are spending their money more wisely. Successful sales teams must be armed with tailored customer information and be ready to respond to questions on the fly.

2. Integrate sales and customer retention. High levels of penetration in some sectors, like mobile phones, mean that there are few consumers who are not already using your products or a competitor's. You can't afford to lose the customers you have gained. Concentrate on the total customer equity in your desired markets. This means selling products and retaining customers should no longer be separate items on a CEO's agenda.

3. Focus on the short term--in a different way. Many sales organizations live in the moment, focused on closing sales and moving on to the next prospect. In addition, the pressures of meeting the next quarter's numbers push sales teams to sell some customers a product they know isn't suited for them. Companies that can create a trust-based relationship by implementing a customer-focused set of principles, and arming sales reps with accordingly will continue to build value over the long term.

4. Strive to boost sales effectiveness. Sales effectiveness is not just about selling more with fewer people on the payroll. It is also about managing customers across the customer lifecycle with the goal of building loyalty while focusing on cross-sell and up-sell opportunities that arise during interactions to boost the bottom line. Sales effectiveness is especially important to the firms facing increased competition and declining revenue. It can be achieved if every interaction with the customer is seen by staff to obtain one more precious piece of information about the customer. As the picture gets clearer with each piece of new information, salesforce automation tools will guide the team to hit the targets.

Acting on these four pervasive issues will have far-reaching effects. By taking a customer-centric approach and being well skilled in sales planning, sales teams will not only prepare for 2010, but also for the future.

About the author: Yücel Ersöz is a partner at Peppers & Rogers Group. Contact him at yucel.ersoz@1to1.com

What should newspapers be doing?

2010-01-04T16:48:08Z

Anyone have any ideas for this newspaper publisher? He runs a state-wide newspaper for a religious denomination, and every two weeks they mail about 16,000 32-page newspapers out to subscribers. Paid advertising makes up about 10% to 15% of these pages. They have a modest e-zine as well, and they have all their news on their Web site, too. Every state has a similar church-denomination newspaper, and he has teamed up with the editors in two other states, with whom he shares news tips and stories. There is no central newspaper organization for the whole country, however. A typical story in his newspaper might be one that covers a controversial resignation or organizational dispute occurring in one of the state or national religious organizations, or maybe a report on missionary work, and so forth. But this newspaper editor's question to me was, what more should he be doing, given the dramatic new technologies available?
]]> I told him that social media like Facebook and Twitter might be perfect vehicles for a church-based newspaper, because members of a church are natural connectors; most of them want to reach out to others, share stories, make suggestions, and do good things. So I suggested he arrange a one-hour tutorial for himself with someone familiar with these services, and that he should begin thinking about how to start conversations, generate feedback, and create more active communities of common interest among his readers, as opposed to simply putting out news.

But what else should he do? Anyone have any good ideas? Know any similar situations?

Self-Service vs. Crowd-Service

2009-12-16T15:18:00Z

When customers can go online and help themselves, we've always thought of this as the best kind of service there is: self-service. But social media tools have made it possible for businesses to provide an even better type of customer service: crowd-service. Companies such as SAP, Lenovo, Verizon, iRobot, and Pitney-Bowes are now using social media tools to enable some of their customers to help other customers. CustomerThink's Bob Thompson coined the term "crowd-service," a particularly descriptive and appealing label, analogous to "crowd sourcing." (You can download Thompson's white paper "Crowdservice," sponsored by RightNow, at our Web site 1to1.com.)
]]> Earlier this year the New York Times published a nice description of how Verizon is using crowd-service to handle its own issues (although they don't use the term "crowd-service"). And about a year before this article appeared, a different reporter published a story in the same paper about highly engaged retired employees volunteering to help their former employers, using HP as an example. My feeling is that we are only just now scratching the surface of enlisting customers, employees, and others to voluntarily help the brands and companies they support personally.

If you want to learn more about this trend, I came across a terrific recorded webinar of Forrester's Dr. Natalie Petouhoff on the subject, well worth paying attention to and taking notes on. I did, anyway. One of the interesting things about crowd-service is that it follows the same kind of power law distribution of influence as other networks. Petouhoff points out that, usually, about 90% of customers just read and absorb the information, while only about 10% contribute information. But at the top of this pyramid, just 1% of customers, the "super users," drive the vast majority of help provided by a crowd-service platform.

One last thought: It's quite possible that the increasing interconnectedness of people, using social media tools for conversing and collaborating, will transform human society in a very constructive way. There is a charitable, giving motive behind the efforts of unpaid customers helping other customers, and I predict it will spread like any other meme, making human beings - over time - more generous and trustable, as a species. The more people encounter and render this kind of service online, the faster this meme will spread. Good on us!

Perils of Consensus: Climate-gate, WMDs, and Asset Bubbles

2009-12-07T14:23:00Z

Computer servers at the Climate Research Unit, based in the UK's University of East Anglia, were recently hacked. Internal email messages reveal that the scientists who were entrusted by the UN to provide the most objective view of the climate problem were actually engaged in over-hyping the dangers posed by global warming, suppressing research findings which might either cast doubt on the issue or reduce the sense of urgency, trying to discredit dissenting scientists, and even rigging the peer-review process itself, to reduce the influence of some of the more problematic research studies and scientific papers.
]]> As politicians and statesmen soon head off to Copenhagen to renew their governments' political commitments to reduce carbon emissions, we should all remember there are two separate hypotheses driving the movement: first, that the world's climate is warming, and second, that this warming is at least partly caused by man's activities - specifically, by the injection of millions of tons of carbon into the atmosphere each year, largely through the burning of fossil fuels. These two hypotheses together form the foundation for the theory of man-caused, or anthropogenic, global warming ("AGW"). Both these hypotheses are probably true, but the extent to which they are is not really known. Our world was in a warming period before the Industrial Age began, for instance, and a lot of the recently observed increases in temperatures might just be natural. On the other hand, with a system as complex and feedback-driven as the world's climate, big changes might come suddenly, in a kind of phase transition, with little actual advance warning or observable trend. As a species, we should want all our best scientific brains investigating this danger to better understand it, without fear of reprisal.

These days, nearly every media report on global warming specifies that the science behind it is "universally accepted" and "beyond dispute," but this is not true. The theory of AGW is not like the theory of relativity, or even the theory of evolution, both of which are well understood, and have been observed, demonstrated and confirmed again and again, in thousands of experiments and research studies. The climate is an extraordinarily difficult system to understand, even with sophisticated computer models. Systemic "experiments" that prove or disprove various elements of the AGW theory are nearly impossible to conduct. Just 30 years ago, in fact, the greatest scientific fear about our climate was that the world was cooling and might soon experience a new ice age. The Earth has warmed and cooled significantly in the past, way before man's use of fossil fuels, but calculating the magnitude and effects of these past climate changes by analyzing tree rings or taking core samples from ice sheets is not foolproof, nor do we really understand what causes many of these cycles.

However, if AGW really is true, then only drastic, costly governmental intervention will ensure that carbon emissions can be reduced enough to have any real impact, and many critics point out that even the most draconian government measures proposed to date are simply unlikely to succeed, despite their disastrously high costs. The funds required to reduce carbon emissions could be used, alternatively, to completely eradicate malaria, or wipe out AIDS, or both. There may be technological solutions that don't have as high a cost (carbon absorption sinks, nanotechnology, genetically engineered carbon-eating organisms, and so forth). Moreover, the actual consequences of a warmer world are not universally bad. Fewer people die from heat than die from cold every year. A warmer climate mostly means milder winters, rather than hotter summers. Agriculture will become more difficult in some regions but is likely to be much more productive in many more regions. And the apocalyptic idea that global warming will cause sea levels to rise by as much as 40 feet (see Al Gore's An Inconvenient Truth) was always nonsensical; even the most vocal AGW boosters are now careful to distance themselves from such scare-mongering.

In short, there is still a great deal more we need to learn about AGW, and if the consequences are as imminent and damaging as many reports say, then we need to learn about it all the more quickly. It is therefore a gross disservice to humanity for scientists on either side of the AGW investigation to try to rig the debate.

This "climate-gate" scandal has ignited a firestorm of I-told-you-so protest from the conservative media, including Wall Street Journal editorial writers and Fox News. Some scientists brand this criticism of the AGW movement from the right side of the political spectrum as non-scientific, and they are right, because most of the criticism is based on politics and economics, not science. But if AGW necessitates severe government intervention, then we really can't entirely separate the science from the politics. These more conservative media voices have no special claim to scientific expertise, but they do tend to give greater weight to the serious costs and reduced personal liberties likely to result from most of the solutions proposed by the AGW crowd. What we need from scientists is the most objective, balanced evaluation of the problem that we can plausibly obtain, and it turns out that this is not what the Climate Research Unit was giving us. It was building a stronger case than would be justified, based on what turns out to be a false consensus.

Still, it's not hard to empathize with the climate scientists involved. After all, if you have a strongly held belief that man's activities are threatening the world's climate, and that if something isn't done soon then we will all suffer severe consequences - well, obviously you will do what you can to make sure this doesn't happen. And you'll want to make the argument as strong as you can make it, in order to mobilize action. But these scientists have no more political expertise or authority than the Wall Street Journal has scientific authority.

When I read media statements that man-made global warming is "beyond dispute" I cringe. It reminds me of other great examples of global consensus, including even the most recent financial crisis, driven by the universal conviction that housing prices would continue to rise, no matter what. Or consider the run-up to the invasion of Iraq, when it was agreed by virtually all the Western World's intelligence services that Saddam Hussein was in fact harboring weapons of mass destruction. This was not a lie being told to the public by intelligence agencies, any more than global warming is a lie being perpetrated on the UN by scientists. There was a sincere, rational belief, based on a lot of evidence, that Iraq had WMDs. No one had actually put their hands on one of these WMDs, but none of the intelligence services doubted that Iraq actually had them or would soon have them - not the French, not the British, not the Germans, not even the Russians. And in view of the consequences involved, the political officials who felt most strongly about the issue bent over backwards to make their case as persuasively as possible in front of the world public. Who could forget Colin Powell's detailed and damning address to the UN?

Those of you who follow my blog posts know that I, personally, am a big skeptic when it comes to AGW, as are many reputable scientists, but this is not what I'm writing about here. I think the climate scientists whose emails were stolen do have a point. There is good evidence that the world's climate is heating up, and that man is at least partly responsible. However, there is also a lot more room for doubt than most people appreciate - certainly more than most reporters apparently understand.

Life is complex, and issues like global warming are difficult to analyze, so we need to be tolerant of dissenting opinions. Dissent, when properly handled, makes our decisions more intelligent. We won't get smarter, as a species, if we don't tolerate - indeed welcome - a variety of points of view. And, in the same way that the East Anglia scientists should welcome dissenting views on their own theories, the anti-AGW crowd also needs to calm down a bit and realize that just because private emails reveal that climate scientists "fight the hard fight," it doesn't necessarily mean that the science behind AGW isn't legitimate. Colin Powell presented a highly persuasive case for WMD that, it turned out, were never found in Iraq. But that doesn't mean he wasn't sincere in his belief, and motivated by an urge to do the right thing.

The Balmoral Flunks a Customer Service IQ Test

2009-11-22T06:20:10Z

In my previous post, I posed a question with respect to how to handle a customer service problem at a great hotel - the Balmoral, in Edinburgh, Scotland. What should the night manager do, if anything, on the day after the fire alarm roused guests from their rooms after midnight? The several folks who commented on this posting all suggested appropriate measures. The correct solution would be to offer a small gift or rebate - something nominal, nothing very expensive - and to do this in as personal a manner as possible.
]]> The Balmoral's management, however, has obviously never taken customer service as seriously as the readers of this blog. The morning after the fire alarm went off, I found a typed note of apology slipped under my door. It was unsigned, headed simply "Dear Guest," and it consisted of an apology for the inconvenience, followed by an explanation that the hotel takes all fire alarm activations seriously in the name of guest safety. While it sounds reasonable to slip an apology note under guest doors, I found it to be almost insulting. Why?

First, there was no attempt at all to personalize. I mean not even the faintest attempt. In fact, the last sentence of the note wished "those guests departing today" a safe onward journey, and "those guests staying this evening" a pleasant stay at the Balmoral. Come on, you idiots, your own registration records will show which rooms belong to guests who are checking out and which rooms belong to guests who are staying.

Second, while this was an apology, there was no acceptance of responsibility whatsoever. No hint that the fire alarm system might in fact be faulty, and that this was being looked into. No suggestion that the hotel would even try to prevent this kind of highly disruptive false alarm in the future. We all knew it was a false alarm. Some one or something was responsible, but apparently the hotel has no interest in finding the source. (As a matter of fact, the following afternoon, the fire alarm went off AGAIN, but only very briefly, while I was in the building - so obviously there is some kind of problem that needs fixing.)

Third, there was no benefit or gift offered to the inconvenienced guests. I don't think every apology for every customer service problem actually requires some kind of compensation, but in this case compensation would clearly have made a big difference, and what's interesting is that all of the commenters on my previous post suggested some kind of gift, perhaps some type of complimentary spa service. The cost of a compensatory gift doesn't have to be very large - in fact, it could be in the form of a coupon for some future service, so it wouldn't really cost anything at all, but be revenue-generative. But a gift indicates sincerity, and it denotes that the company is taking its customers' feelings seriously. And that's most likely why it was omitted from the Balmoral night manager's note of apology.

As my daughter is a student at Edinburgh University, my wife and I travel to the city once or twice a year. We'll be staying at a different hotel next time.

Test Your Customer Service IQ: What's the Right Decision?

2009-11-21T14:00:00Z

This is a quiz, designed to test your sensitivity to important customer service issues.

In the 15 years since Martha and I published our first book we have both become increasingly discriminating customers, much less tolerant of incompetent or uncaring service, and more willing to provide feedback, even when it isn't requested of us. Our careers now involve a great deal of business travel, often international, and so of course some of the services we know a great deal about include hotel service, car service, and air travel.

]]> As I write this, I am at a classy hotel in Edinburgh, Scotland: the Balmoral, which is part of the "Rocco Forte Collection" of fine hotels. Last night, however, shortly after midnight, the fire alarm at this hotel went off, and all the guests had to evacuate their rooms. Sleepy-eyed, and clad in bathrobe and slippers, I traipsed down four flights of stairs to the lobby, to mingle with other bathrobe-clad guests recently awakened, along with an assortment of people in tuxedos and formal gowns, rousted out of the hotel's ballroom, while the fire alarm continued putting out an excruciatingly loud and annoying screech.

After about 20 minutes, fire department personnel arrived on the scene and a few minutes later the alarm was turned off and we all returned to our rooms.
So, after an inconvenient event like this, what should the manager of a fine hotel do? What would YOU have done, if you had been the Balmoral's night manager on this occasion? I have my own opinion, but before I tell you what the Balmoral did, and what I would have done, I'd love to hear anyone else's ideas...

AYFKM? Why the Droid is Just Not Ready for the World Stage

2009-11-13T12:58:15Z

It's no secret that mobile phone service in the US isn't as ubiquitous, US phones aren't as stylish, and the whole mobile system just doesn't work as well as in Europe, Asia, and most of the rest of the world (with the possible exception of Africa). Even our proudest mobile phone technologies often don't live up to the most basic standards of service expected in the ROW.

Case in point: The Droid. Now here's a beautiful phone just launched by one of the country's most accomplished technology companies, Motorola, using Google's innovative software, and sold for use on the largest US mobile network, Verizon Wireless. But guess what? The Droid won't work on non-US networks! Or, in the sophisticated technical jargon of Verizon Wireless, the Droid is not a "world phone." Which begs a point: What planet does Verizon Wireless inhabit, anyway?
]]> More than five years ago, when I lived in the UK, if I had gone shopping for a new mobile phone at any store, for use on any network, I would have had a hard time finding a phone that did NOT have "triband" capability, meaning that it would work on virtually any phone system in the world, including the antiquated US CDMA One and CDMA2000 systems.

But here in the US, half a decade later, we still tout our proudest mobile phone accomplishments to ourselves alone. How utterly parochial and narrow-minded. Hey, we're Americans. We don't need no stinkin' world.

A Tale of Two Corporate Cultures

2009-10-30T09:42:36Z

A recent issue of the Wall Street Journal has a wonderful article comparing to two different corporate cultures being nurtured by two different Internet companies - Facebook and Zappos. Facebook's CEO Mark Zuckerberg says his company is nurturing a culture designed to attract entrepreneurs, even though he knows that many of these creative people will leave the firm later. Zappos' CEO Tony Hsieh says his firm wants a culture of committed, engaged employees - people who buy into Zappos' mission and plan to stay.
]]> Facebook's vision of itself is that of a technology company, while Zappos thinks of itself more in terms of ultra-good customer service.

Success for either firm, of course, could mean entirely different things. But there are a lot of recent books and studies on the impact of corporate culture on an organization's success, and one thing they all agree on is that when a firm's employees share a strongly held set of values and beliefs, long-term success is more likely. You don't have to read any further than Built to Last, or Firms of Endearment, to get this very clear message. So it's refreshing to see two such interesting and newsworthy firms thinking so clearly about their corporate cultures.

While Facebook is undoubtedly a highly successful technology firm, and clearly dwarfs Zappos in size and scope at this point in time, my own bet is that Zappos is more likely to be around in some form or other fifty years from now.

CONTRARIAN IDEA: Let's Legalize Insider Trading

2009-10-20T18:42:17Z

Billionaire fund manager Raj Rajaratnam and a bevy of other highly placed Wall Streeters have just been arrested on charges of profiting from inside information in their trades of securities over several years. Under financial regulations, insider trading is prohibited because it gives an unfair advantage to people who have information not available to public investors. In the days of paper-based financial reports and a news cycle that was measured in hours, if not days, this might have made sense. But today, news travels at Twitter speed, and the wisdom of the online crowd might itself be a much better policing mechanism than a thousand pages of difficult-to-read legal jargon.
]]> At every public company, board members and top executives are automatically classified as "insiders," and are not allowed to buy or sell shares within a few weeks of major financial reports being filed. In addition, when they do trade in their own company's shares, they have to file a special form with the SEC within a day or two of each trade. Presumably, this prevents insiders from unfairly profiting personally from information they come into in their fiduciary roles.

While this sounds very logical, there are all sorts of difficulties in policing this, in practice. For instance, a senior executive at a publicly held company has to be very careful what he or she says in public, in order not to allow any hint of "inside" financial information to get out in advance of the scheduled financial reports. These restrictions create a substantial incentive for firms to provide official projections of future earnings or revenues in their SEC filings, in order to try to get as much information into the market as possible. But this just adds to Wall Street's short-term earnings fixation, pushing many firms into destructive behavior, because these official "expectations" figures can only be disseminated on specific occasions in specific, heavily documented formats.

Technology could easily do the same job of protecting the public from insider trading, while at the same time making all markets more efficient by disseminating inside information to the public. All we need to do is require real-time, on-line reporting of the identities and transactions of all identified insiders. This would disseminate information about company performance much more efficiently to the market, and it would ensure no insider would be able to profit very much, because any substantial profit opportunity would be identified quickly and arbitraged away by a host of other investors following the real-time reports of insider trades.

Regulatory enforcement would only be required to ensure that everyone who really is an insider properly registers all their securities trading transactions or accounts - probably including spouses and close associates. Twitter would take care of the rest, stock prices would be more efficient, and "gaming the system" in order to outperform or underperform Wall Street expectations would be useless, because public expectations would have already caught up to the non-public reality.