Tag Archives: brand is a promise

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A Letter Regarding Financial Faith

Dear Financial Community:

The failure of Silicon Valley Bank is enormously troubling. Call it an isolated circumstance all you want, but it has further stressed our nation’s dialogue. An echo of other bank failures has followed SVB down the drain. Long lines of anxious customers waiting outside banks are never something we want to see. This was unnecessary. This was bad form.

As dependability in our institutions continues to fray, I worry increasingly about where we’re headed. As divided as we are in this nation, can we withstand a true crisis of faith in our banking system? What understandable assurances are in evidence that wider contagion is not possible, that limits can be maintained on the ramifications of remarkably poor judgment?

Where does resilience meet its match and cause us to lose faith in the basics of our grand experiment in economic expansion?

Our economy works on a number of elusive factors in concert with tangible reporting. One of those is faith. If we lose faith in our banking system, the notion of ongoing growth and innovation at scale seems to go out the window. The economic miracle we have created together freezes solid and then melts into the ordinary.

Ample credit fuels dreams. Intelligently borrowed capital brings to market hopeful new companies and bolsters the expansion of existing businesses. Financial institutions, mostly banks, have to lend money for ideas to become enterprises.

Lending money as its own business only works if there is leverage in lending. We understand the rules of engagement: a bank keeps some cash on reserve and lends more than it has at any given time. This works fine as long as there are no unaddressable runs on banks.

Should redemptions exceed liquidity, banks are forced to liquidate assets at any price to return cash to depositors. Trust in the banking system and the FDIC is required of depositors to prevent runs from melting down banks. Trust is a reflection of faith. Lose all faith, lose all trust, we all lose.

Here’s ground zero: If we lose faith that banks can get our money for us whenever we ask for it, deposits cease. If there are no deposits, there can be no lending. That’s the endgame you are teasing when you fail to do your job and cautiously manage risk. Kill deposits, kill lending — that’s a death spiral in the making.

Faith is increasingly becoming a conflicted proposition. Reckless financial engineers test us every decade. The savings and loan crisis. Long-Term Capital Management. Sub-prime mortgages. Washington Mutual. Collateralized debt obligations. Lehman Brothers. One day the combined impact of these attacks on faith may succeed in fully undermining the little faith we have left.

Then the thinning ice cracks for good.

Don’t tell me this time it’s about rising interest rates that weakened your balance sheet. You’re smarter than that. You know history. You knew interest rates had to rise. Nearly free money is never forever. You’ve been making loans as long as you’ve existed. You understand liquidity. You understand it so well that you spend millions lobbying against the very regulations you need to stay in business.

There are no excuses. You take bonuses for being clever. When you’re too clever, the damage has the potential to become systemic. When faith in the system evaporates, apologies are meaningless.

A brand is a promise. When a bank’s brand fails that promise, the entire concept of for-profit banking is soiled. We are only human. Serial violations of trust reveal fragile faults in what we’re repeatedly told is a robust system. We can only experience so many failures before trust is gone.

If we come to believe that U.S. Treasuries are the only safe place to park our money, what happens to commercial lending? If commercial lending retreats, how do the entrepreneurial efforts of the next hundred years replicate the last hundred years?

Do we really want to depend on government to keep righting the wrongs of irresponsible, conniving executives? Government’s role is to referee where self-regulation has proven farcical. Regulate, yes. Adjudicate, yes. Underwrite exponential losses, unsustainable.

If government must guarantee every deposit regardless of the amount in order to maintain faith in those deposits, how can bank executives ever be trusted to take risk seriously?

There’s a lot at stake, more than many of us may yet realize. We’re shell-shocked, but we’re supposed to maintain faith. Each day it’s harder. Each day we put our own historical investment paradigm at risk.

In simplest terms: Please stop putting our nation’s future at risk and punting your unnecessary failures to manufacture compensation you haven’t earned and don’t deserve.

Seek to restore our faith. You need deposits. We need loans. Keep our money safe to put it to work properly. We’ll pay our installments. That’s the contract. It’s a virtuous circle. We all have to abide by the rules, not wait to get caught if enough oversight is available.

Please make the rules work to all our advantage and believe in something more than your own benefit. Prosperity hangs in the balance. You’re toying with breaking everything. Let’s look to another hundred years of wise lending and liquidity to continue investing in positive outcomes we can’t even yet imagine.

Yours in faith,

A dissatisfied lifelong banking customer

_______________

Photo: Pixabay

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Trust Is Not Negotiable

I’ve been thinking a lot about trust.

I’ve been thinking a lot about truth.

I’m trying to wrap my head around what I thought for fiftysomething years were the basics: If we’re going to climb a mountain together, we have to agree on what mountain we’re climbing, where it is, are there airports nearby to get in and get out, has it been climbed before and under what circumstances—you know, the facts.

We won’t necessarily know the exact temperature at the top, the weather patterns tomorrow or the next day, the precise condition of the trail at every turn, those sorts of variables. There are always unknowns ahead of us that we’ll discover together, but if we can’t start on the same page, how can we possibly agree on plans to address the unknowns?

I find these days truly unsettling, not just because there is a debilitating health crisis before us, but because I don’t have enough trusted information to know what the crisis is and the ability to share in that belief set collegially with a vast majority of the population.

We are confused. We are bombarded with conflicting information. We are scared, anxious, and divided when we need to be informed, building consensus, and united.

How do we address monumental problems when we have little idea what we can believe?

In the age of the Internet, with the ability to share more factual information globally than in all of history, we are mired in noise.

How do we navigate a crisis and ask people to make personal sacrifices—not the least is the temporary surrendering of certain personal liberties—without a unified voice in leadership speaking with sound judgment and reverence for the impact of expert advice?

To me, the deepest impact of the Covid-19 pandemic beyond the tragic loss of human life remains the nagging head fakes that cause me to have no idea what to believe.

Contradictory information is not just a health concern. The unrestricted blending of fact and speculative opinion can undermine our entire economy. If truth blows in the wind, if we have no idea what basic financial information constitutes truth, how can we wisely invest? How can we guide careers? How can we effectively build plans for our future?

Trust and truth are not just about bidirectional knowledge transfer or multi-directional pollutants of critical exchange. Once we accept the notion that lies will be lies and are simply part of the fabric of sharing a planet, we effectively invite opportunism and exploitation as normal behavior. Today there would seem almost nothing that surprises us in lowering our expectations of those whose paths we may cross.

As quickly as the novel coronavirus was becoming a national emergency, some of our fellow citizens took it upon themselves to empty stores shelves of toilet paper, hoarding for themselves rather than caring about the needs of others.

As soon as hand sanitizer became scarce, many sellers of it started price gouging. Even though we have laws about profiteering in crisis, even though it is a purely inhuman act, they did it to extract obscene profits, to hell with the ongoing trust of their customers.

Earlier this month it was revealed that an international criminal operation was filing fraudulent unemployment claims in the United States. Congressionally directed funds meant to help people became the target of a scam. My own company saw one of the first fraudulent claims.

With so many people working from home, phishing and identity theft are on the rise. Credit card fraud is escalating. Fellow human beings see upside in the confusion brought on by the rapid adoption of technologies meant to connect us. Instead they would steal from us.

We are parroting unseemly behavior. We hear lies coming from our foremost leaders. Somehow that becomes permission to follow suit. Self-interest becomes justified and paramount. What we allow we let spread.

Why is all of this bothering me so much, beyond the underlying sickness it unmasks in our global community?

I am a brand builder. The basis of a brand is trust. A brand is a promise. Without trust in a brand, most products become random commodities. The balance of price, quality, and service is reduced to the lowest common denominator. Without brands, we don’t have customers, we have transactions. That is a pure downward spiral in economic viability.

I am also a business leader. When I say leader, I only can apply that descriptor in as much as people choose to follow me. Certainly I can impose hierarchy and insist on the power of authority. If you have ever managed creative people, you know how far that will get you.

If all trust is gone, then I have to assume trust in me is gone. If all truth is gone, I can’t expect anyone to believe anything I say is the truth. A complete lack of credibility in the chain of command is the fastest path to chaos in business I can imagine.

So yeah, it’s personal. If the societal fabric is unwound by manipulation and cynical agendas, my efficacy is also tainted. If you don’t trust my brand, you won’t be my customer. If no one trusts my direction, I can’t do my job and I will have no product to sell.

Is every detail in a company always able to be posted on the side of a cube wall? No, certainly not, there are all kinds of trade secrets and human sensitivities that merit protection. I am not particularly a fan of radical transparency. It sounds much better than it is and I have seldom met colleagues with the pure objectivity to pull it off.

Does it mean there is no way for us to walk down a path of honesty and clarity without a categorical imperative? If you don’t understand that there are shades of grey in decision-making that don’t cross the boundaries of trust, I’m not sure anything I’ve written here will be of value to you.

Integrity is a calling. It is a beckoning aspiration that molds and shapes behavior. Intention matters. Respect matters. Acknowledgment of consequence matters.

If you have shouldered the responsibility of executive leadership or brand stewardship, you know that once integrity is compromised, it is almost impossible to restore faith in a promise of any kind. We teach this to young children, why the smallest lie matters because it makes the next lie possible. Once you’ve lied or cheated and you’ve been caught, no one can ever be certain of your words again.

Am I giving up the fight against the absurd? Hardly. Am I done compromising around the notion of false equivalency? I’ve yet to compromise on values that are sacrosanct and I see no value dancing around an undisciplined contradiction that is empirically wrong.

We can’t let down our guard against emboldened con artists. The disease they spread will never have a cure.

Trust is not negotiable because truth is not negotiable. Talk yourself out of that and you have opted into the source of aimless unwinding.

Trust has to matter to you. Telling and hearing the truth has to matter to you. Commit yourself to demanding more of your own integrity, and one by one we might be able to rebuild our way out of unearned gains and stolen promises.

_______________

Image: Pixabay

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Is Facebook the Next AOL?

 

I used to like AOL. Back in the day we called it by its full name, America Online. Prior to the broad penetration of the Internet, it was how we connected with each other. It was the company we paid on a subscription basis for both access to digital connectivity and content. For the ownership of AOL, it was a very, very good business, so explosive that it frightened the old guard in media and was merged into an even bigger entity, AOL Time Warner. If you were born after that wildly failed merger, it is difficult to convey just how powerful and influential AOL had become. Truth be told, I still have an active AOL account and get teased about that by friends. I wound it so tightly into my life it is still hard to completely unwind despite its deterioration.

I also like Facebook. As an individual enamored with words, I find it an irresistible way to communicate with a circle of acquaintances on everything from politics and social causes to MLB, The Beatles, wine, and business opportunities. As an author of fiction, I find it an essential tool to communicate with readers, let them know a new book is coming, tie that book into news of the day, and connect all of that with the monthly postings on my blog. Another confession: I was one of the earliest adopters of Facebook over the age of 40, invited for business reasons to create an account back when it required a .edu email to become a member. Companies I’ve led have been active buyers of advertising on Facebook at every stage of its evolution. Yet even with all that passion, I have been an ardent critic of Facebook. It reminds me of AOL. I hope it won’t suffer the same fate.

Is it alarmist to think that Facebook could collapse at the level of AOL simply because of its latest data breaches? Yes, I think that would be overstating the calamity of its current situation, and if Facebook does implode, it will likely be a slow and painful process much like AOL with a long-tail legacy business lingering into the digital future. I am not predicting that will happen. I am suggesting that it could if Facebook does not radically rethink its business in real time and take immediate action to course correct.

I am not specifically reacting to the gross abuse of Facebook’s members by Cambridge Analytica, but if ever there was a wake-up call to Mark Zuckerberg this bell is tolling awfully loudly. The sound of that alarm is the crying out of customers reminding the leadership of Facebook that they are not users as the descriptor goes, but human beings who have chosen to enter into a relationship with a brand. As I have mentioned here many times before, a brand is not a logo, a brand is a promise. When that promise is violated, all bets are off for the future of the brand. I believe AOL broke its promises way too many times and then sadly faded away. Facebook is now breaking many of its promises, real or presumed, and if the leadership there doesn’t do something material about it soon, they are rolling the dice against fate.

Here are the three most obvious areas of overlap I see between Facebook and AOL, and how addressing them now aggressively might change the course of history for the social network that changed our lives in the last generation much as the online access ramp that carpet-bombed the nation changed it in the previous generation.

DUMP THE MVP

I am at odds with many of my colleagues on the topic of “minimum viable product,” but I have always vastly disliked the MVP acronym and concept. I know how much Silicon Valley treasures the notion of The Lean Startup, and I suppose if a fast path to cash generation is primarily a company’s goal, a crappy first-generation product bounced off a wave of early adopters who will offer critique could make business sense. Because I favor brand development over fast monetization, I have never bought into the whole idea of “moving fast and breaking things.”

How did Facebook get into this fix with inexplicable amounts of customer data being exploited? Top management didn’t take the time to fully think through the implications of their product decisions. Likewise, AOL was legendary for releasing updates that crashed our computers and often made it impossible to even log onto the system. MVP is a shortcut that disrespects customers. Build excellent products tested thoroughly before deployment, and customer trust will compound rather than be wagered.

LEAVE SOME MONEY ON THE TABLE

AOL came to love hammering our screens with advertisements. We got them at sign-on, with our email, with instant messaging, with our stock listings, with our sports scores. The ad insertions were ceaseless and endless. When it was the onramp to connectivity we were already paying a monthly fee for the privilege of being an advertising target, but this additional banquet of media cash was a renewable feast of dots and spots. With so many eyeballs and so little competition they also assaulted advertisers with ever-increasing campaign rates.

Today on Facebook it isn’t quite that aggressive, but it’s getting there. What’s worse, the advertising depends on crawling through our personal profiles to target ads with astonishing performance response. The media business is certainly a game of haves and have-nots, but company leaders have to keep their eyes on the prize. Does the company think its demise is inevitable and thus seek to exploit its visitors with endless badgering? Or can it modulate the experience to show us a reasonable number of ads that are relevant but not beyond our comfort levels of intrusion?

SUSTAIN AN AUTHENTIC MISSION

Here we return to the luster or disposability of a brand, to the ability to make a promise and deliver on it consistently in the face of day-to-day business realities and financial opportunism. AOL’s stated mission was “to build a global medium as central to people’s lives as the telephone or television… and even more valuable.” AOL actually didn’t do that—the internet itself obviated its driving purpose—but rather than build on the goodwill of its access brand and attempt to enhance the customer experience through creativity, the company sought to keep customers in a “walled garden” and intervene in easy access to the open internet. Customers soon enough revolted and left in droves.

Facebook’s initial mission was “to make the world more open and connected.” That mission more recently has been revised “to give people the power to build community and bring the world closer together.” Those are both lofty ideals. The question is whether Zuckerberg had the maturity to comprehend the implications of what path his company’s technology cut through the landscape as a result. Of course it seems like a great idea to be closer to our friends and meet new people along the way, but if that compromises our privacy and personal security, is it worth it? Who gets to decide that? I can’t navigate Facebook’s privacy tree and I work in the medium. If its brand offers us a lasting promise of sharing and collaboration, does it also offer any guarantees of protection? If not, then we arrive at the cynical conclusion: “If we aren’t paying for the product, we are the product.” If a company wants to build a brand for the long-term, that’s simply not a sustainable value proposition.

I would guess if AOL founder Steve Case had it to do over again things would have been different at his once pioneering enterprise. It was a younger audience that first championed AOL, but his demographics didn’t stay young as the massive brand quickly lost its cool factor. Facebook is already seeing a similar demographic shift as its relevance with younger customers is waning, ceding that excitement to newer brands. I wonder if Zuckerberg will someday have the same regrets as Case or if he will find a way to shift gears with thundering resonance and reinvent his company to achieve a greater destiny.

The answer isn’t in testifying before Congress, any more than it is about inescapable government regulation. The answer is in balancing business success against the real human needs of customers, about making a promise and keeping it, about building a brand that stands for something more than the dollars it attracts. Innovation is both challenging and valuable. Trust is much harder and worth so much more.

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You Call This a Loyalty Program?

Try this episode on for size and tell me how it makes you feel about the brand:

I recently logged into one of my hotel loyalty accounts where I had amassed several hundred thousand points. That is, I thought I did. All my points were gone. Apparently this chain has a policy that deletes all your points if you don’t stay at one of their properties for a year. Did they send me a courtesy email reminding me I needed to stay there toward the end of the twelve-month lapse? They did not.

I called customer service and they recited the policy back to me, willing to say farewell to a customer who had paid the freight to accumulate several hundred thousand points in its loyalty program, just not in the past 14 months.

Then I tweeted my complaint about the forfeited points publicly. A few hours later whoever runs the company’s Twitter account tweeted back publicly that the company was very sorry for the situation and dedicated to my satisfaction. The Twit-master asked that I send a private tweet to follow up, which I did. Then we moved the correspondence to email.

I was then told that the company had a one-time exception to the policy where points could be reinstated, but that had already been done for me approximately 13 years ago. Silly how I could have forgotten their grace. However, they said that in an attempt to reinstate my customer satisfaction, they would restore half my forfeited points now and the other half if I agreed to stay at their properties at least three times in the next six months. I wrote back that it sounded a bit ridiculous to be playing Let’s Make a Deal – Loyalty Edition with them, but I would agree because, well, why not?

To their credit, they did return half my points upon receipt of our “written agreement” in that email thread, and I have booked one stay with them. I just wonder, is this what they really set out to accomplish in developing their loyalty program? Is it a loyalty program at all, or just a rewards program that effectively gives me a rebate on what I spend provided I do it on their timetable?

If you give me a reward for my business, then take it away because I didn’t precisely follow your rules, then give it back conditionally with an expectation that somehow I have become pleased by our interaction, how has this helped me as a customer or you as a business? It’s a quid pro quo. I don’t think a quid pro quo has anything to do with loyalty.

When I think about loyalty, I think about preference. When I think about preference, I think about what brand comes first to mind when I need a particular item or service. I choose that brand for a host of reasons, for the totality of my experience with the brand.

I prefer to fly Alaska Airlines because they tend to treat me better as a human being, so I am loyal to them. I am also a member of their loyalty program, but that has very little to do with my loyalty. The way we interact all the time has to do with my loyalty. There is a consistency in my interaction with their airline personnel whether I am flying in coach or upgraded to first class, whether I bought a discount or full-fare ticket. That consistency is what creates loyalty.

I prefer to shop at REI for sporting gear because they are patient with me when I come to their stores not knowing nearly as much about hiking or biking shoes as they do, and when I leave it is with the right pair of shoes. I am also a member of their co-op because that is required to shop in the store, and I get a member rebate every year, but that is not why I am loyal. I am loyal because when I am on a trail or in spin class and my shoes are comfortable, I remember how great they were about helping me get the exact fit and charging me nothing more for their time.

I don’t prefer the hotel chain that gave me back half my points now with a contingent promise for half my points later. We have a transactional relationship based on price and location. I wouldn’t seek them out. I could, but they have given me no reason. Now when I think of them I think of my Let’s Make a Deal experience rather than any experience staying under their roof. That’s sad.

Maybe the problem is terminology. Maybe there is no such thing as a loyalty program. Maybe they are all just rewards programs masquerading as loyalty programs. That’s kind of a punt when you think about it. We could design a loyalty program that involved every point of customer interaction to ensure your satisfaction, but heck, that would be hard, why don’t you just take these points instead and we’ll play like we’re loyal to each other even when we know, wink-wink, we couldn’t care less about each other. It’s a bed and bathroom and points if you follow our rules, so come here at least every twelve months and someday maybe you can cash in those points for a standard room on the house. Maybe, if we have availability, certain restrictions apply.

I recently attended an e-commerce industry conference where at more than one session I heard the phrase, “There is no customer loyalty, consumers only care about price.” If this cynical statement is true, then I wonder why we have marketing departments at all. Don’t believe it. All customers are not automatons who solely focus on what’s cheapest.

Brands are not dead. A brand is a promise. Brands compete on price, quality, and service. If a company wants my loyalty it is there to be won, like Alaska Air and REI. If a company wants to make it about points and rules, that’s something else, and yes, in that scenario why should there be customer loyalty?

You get what you give. Since you’re selling and I’m buying you get to go first. You want my loyalty, show me yours. You want my loyalty, enter into a brand-customer relationship with me. You want to make it about points, if you piss me off I’ll dump you at the next possible off-ramp.

Loyalty is hard to win. It should be, because it’s valuable. That’s why the great brands think in terms of lifetime value rather than rules. If I have to publicly embarrass you with a tweet to get your attention, you don’t care about me a hoot, especially when you just had me on the phone. Think about that the next time a company penalizes you for breaking its loyalty rules. Those are stupid rules. You don’t need the points that badly, and if you don’t prefer the brand, you sure don’t need its crappy rewards program.

_____

Image: Stefan Hatos – Monty Hall Productions