Fryer's Blog in the Mountains

Citibank Increase Credit Card Rates by 50%, Citigroup loses 27 cents per share last quarter

Found out today Citibank increased their Master Card rate to 29.99% from 19.99%.  That's prime plus 26.74%.

So, they are making 800% return on money they lend you.   But if you "opt out" (read cancel) your card, you can continue paying off at the 19.99% rate.

We give Citi $45B in taxpayer TARP money and they return the favor by burning us.   

And Citigroup wonders why they lost 27 cents a share.   Maybe people aren't as clueless as Vikram thinks.

Doing a Presentation: Dealing with the Hecklers

It's been a long time since I've done a presentation to a general audience.   But last week I did one at the University of New Mexico about doing a startup on the cheap.   50% of the people in attendance came from outside the University.  It was a lot of fun. 

From past experience I knew there would be a ringer in the crowd who would ask me deep questions to see if I knew my stuff.  Sure enough, there was one, and I answered all of his questions.   So far, so good.

Then I kept getting questions from someone who kept challenging me on corporate entity types.  For investors, you always do a "C" corporation.  Period.  They insisted that an LLC was a better format.  I strongly disagreed because we were talking about venture type businesses, not lifestyle.  After about the third time an angel investor in the audience stood up and said they would never invest in an LLC and explained why.  Finally that ended that discussion.

Never ran into that before, but it was good that the audience was engaged enough to back up the key points.  

Afterward I decided to check up on the heckler's company.   They did "Internet marketing" and "Search Engine Optimization".   So just for grins, I put in those key words in Google and added "Albuquerque".   Guess which company did not show up in the search results?  And I looked back three pages.  

So here are my definitions.  A heckler just makes noise but has no substance.  A ringer has substance and just wants to make sure you do too.  So if you run into a heckler, ask them to see you after the presentation.  If that doesn't work, walk up to them and ask them to leave.   You owe that much to the people who want to learn something.

Brick and Mortar Retailers Crumbling Under Their Own Weight

Many believed that traditional retailers who operated from physical storefronts would go the way of the dodo bird when online alternatives like Amazon appeared.  Years have passed, and many of these retailers continue to survive—some, however, despite their own business acumen, or lack thereof.

Recently I was given a CD as a present, one purchased from HMV and one that I very much wanted.  To make a long story very short, the CD I wanted comes in four different flavors with the same CD title, and only one version contains all 13 tracks that I wanted, an Import, not the one I was given.

I called the local HMV to determine the CD’s availability.  Before I could determine their stock, I had to educate the store personnel on what I had learned about the different versions.  They asked how I knew about this, and I responded that I simply went to Amazon for the information.  The HMV system lists the various CDs, but it doesn’t identify the tracks on each CD, I was told.  I actually called two HMV stores, and both had people pull the CD from their floor to read what songs were on the CD.  Not having stock of the Import, they informed me that I would have to special order the CD.  The price was substantially more than Amazon’s, and HMV could not identify when I might receive the CD.

Suddenly it dawned on me, why am I dealing with HMV?  They don’t have inventory, which would allow immediate gratification, buying it now and listening to it almost immediately, they don’t offer the information that I can learn what I might need, and they have higher prices.  So I conveyed this to the HMV employee, and was dumbstruck by his response, “Perhaps, sir, then you should buy your CDs from Amazon.”  Subsequently I wrote HMV Customer Service about this, including their employee’s recommendation to take my business to Amazon, and now two weeks later, I have yet to hear from them.

In retailing there are primarily three business strategies:  lowest price; greatest selection, or; outstanding customer service.  I am trying to determine which strategy HMV has deployed, as I see them failing on all three fronts.  The shame is that HMV had an opportunity to forge a hybrid retail approach, leveraging the best of online world with the best of the brick and mortar world.  Others have done this successfully, but it may be too late for HMV, and while the world passes them by, they may be relegated to a slow demise.

Ryck Marciniak (Guest Blogger)

A Winning Business Model?

You're starting a new company.  You decide to focus on maximizing profitability for each customer.   You do this by charging as much as you can while delivering as little as possible to each customer.

30-40% of your revenue is dedicated to overhead to ensure that no customer gets more service than you are contractually obligated to give.   You charge 15% more than competitive solutions for your largest customers.   For your mid-sized customers, you raise their prices 8-15% if they use your services (to maintain those profits).  

For your smallest customers you focus only on the top percentage which will barely use your service while charging as much as you can.  If they do start using your service, you immediately drop them as a customer.    Some of them go bankrupt, but that's o.k.

How well do you think this new company will do?  

Alternatives to Salesforce.com

I used salesforce.com in my last company and liked it a lot.   Lots of community activity for help and some very nice features.   So of course when we needed a CRM for a new company I talked to them.   The version you want is about $50 / month per user ($600 per year).   With a sales force of 70 people, I gulped.  And don't forget, no matter what you have, you have to spend a lot of quality time setting it up and training.  Otherwise it's nothing more than a glorified contact manager.

I also remember using Sugarcrm in the past, so installed the free system on my hosted server.   It was pretty ill behaved during installation (especially figuring out chmod access rights) but I got it installed.   Took me a couple of days and some php tinkering.  But a pretty sophisticated system when done.  Problem was, when you run it, it's kind of a pig and pretty slow response time.

Then I found a derivative of sugarcrm called vTiger.   Took me literally 5 minutes to install on a hosting site including setting up a MySql server instance.   And it's fast.  However you do lose even a little more functionality in some areas, but really nice modules for thunderbird, outlook, word and even a webform which automatically populates leads.  

To save time and performance, do a web search of "web hosting sugarcrm" and you will find companies which will run (and even setup) your entire system for $70 a year, for all your users.   And if then can run sugarcrm they can run vTiger. 

But like I said, the big thing is setting up your system.  No matter what your CRM, you have many business decisions to make.  More on that later.

Sprint and Customer Retention

My two year contract was up and Sprint sent me a few reminders and "incentives" to renew.   So I did a lot of research on plans, phones and competitors and was really perplexed.   I like my small flip Katana because it fits in my Levis change pocket and (living in the West) also had analogue.  

What to do?

All the offers expired soon so I called customer service.   And they spent forty minutes with me going over the different plans.  Turns out we both agreed the current plan was pretty good for what I needed.  So she offered to shave 18% off my monthly plan, give me a credit to use if I ever wanted to upgrade my phone and one month credit.

I signed.

And this is smart.   I'm happy and this is so much better and cheaper than trying to acquire a new customer.   Know your customer acquisition costs, and you'll find it pays to keep your current customers happy.

The Two Things You Need to Start a Company: Trust & Execution

Let's face it, there are plenty of great ideas out there for new products and services.   And most of them will never see the light of day (or maybe on a late night infomercial). 

There is plenty of good advice about the mechanics of marketing a new product and starting a company.   But in my experience, once you've answered the questions:
- So What?
- Who Cares?
- What's the "aha"
And you've figured out how to get to market, you first of all need to be trustworthy.
Any business requires money, be it from a banker, friends, angels or a VC.   They need to believe in you and what you are doing.   Without that, you will have no capital.

This is also important to building customer and partner relations.   People like to do business with people they like to do business.

Secondly you have to be able to execute.   Brainstorming, business plans and wonderful architectures are just find and dandy, but you need to make them reality.  Market windows are just that.  Windows of opportunity.  And they change.  Quickly.

Tom Asacker says "Execution is the new strategy".

So if you don't have a high trust quotient or have execution problems, guess who your first employee / partner should be?

Be Noticed

This morning I talked to two people I know at two different companies.   Both deal with technical customers, one in computers, the other in manufacturing.   And they both have different approaches to reach their customers.

The software company has been very effective in intention marketing.   Their website and message is quite clear "This is what we do".   So when a potential customer says "I need this, now", bam, they come up on the first search page.   Focused, no b.s. and a very high conversion rate.

The manufacturing research company is very effective in relationship marketing.   Periodically, they carefully go through the list of people they have worked with and know, and just call to touch base.  That's it.   And they have been doing well.

So between now and the end of the year:
1) Make sure you can be found
2) Reach out and call

It's just that simple. 

Patents and Intellectual Property

While I'm not an attorney I've been involved in numerous IP deals sitting on both sides of the table.   One of the biggest misconceptions about patents is many people believe having one is an iron clad wall which will protect them from competition.  It just doesn't work that way.   I believe that patents are most useful as a negotiating tool used for licensing deals.

The first hurdle in patents is the extent of the claims.  Many people try to get them to cover everything they could ever think of doing.  The problem with this approach is it's darn hard to prove those claims (e.g.  prior art).  Instead it's best to keep them tight and well defined to your core business.   That way it's much easier to prove and show infringement.   

Other companies like to use them as a club to beat down any perceived competition especially after the fact.   They like to "stretch" the meaning and intimidate others into sending them money.  If you are on the receiving end of this behavior it's best to stand up to them.   Most of the time they will back down before going into full scale litigation because they know they can't win.  But this is a great opportunity to get them to the table and figure out why they are exhibiting this behavior.   Sometimes something good will come of this, but at least you can make them back down.

Years ago we were using a non-Intel chip in a new computer.  We knew there was some bad blood between Intel and the chip maker about a potential infringement of one small portion of the chip.  So our engineers made sure that portion of the chip was never used.  We went to market.  Sure enough our attorneys came back to us saying Intel was going to start litigation and we should settle.   I stated we had done nothing wrong and if they wanted to litigate that would be just fine, we could pay our expenses from the marketing budget: the publicity would be worth it.   The issue died quietly.

So by all means, file those patents, but realize their best use is to promote licensing deals.   But if you are being treated unfairly, get the best legal representation you can afford and stop that behavior as quickly as possible.  You don't want to get the reputation of being an easy target.  And that's in the best interest of your customers and investors.

Trade Show Tips

It's off to a trade show this weekend and here's a collection of thoughts as you prepare for your trade shows:

1) Vertical specific and regional shows return the best bang for your buck.   Unless you have a gazillion dollar marketing budget avoid the big general purpose shows.  Why?   Because when you are focused on your shows your odds of having interested attendees go way up.

2) Bring lots of business cards.   Make sure that someone looking at your card knows what your company does.  And have it blank on the back side for those hastily scribbled notes.

3) If you're introducing new products bring in the entire field sales team.   Not only do you energize the team, they can start talking about the new products to potential customers right away.  And they'll have questions.  And you're there to answer them.  When they go home, they'll hit the ground running.

4) Simplify your booth.   On your banners be explicit in what you do.  Lose the cute slogans.   Make sure other banners can be used as a selling tool.  Instead of handing out glossy brochures (which get tossed in the trash), point to a banner and walk a customer through your product.

5) Embrace the Brownian motion.  Don't over schedule your time.  Walk around, see what other vendors are offering, talk to random strangers.   Otherwise, why did you come if not to learn and connect?

6) The 48 hour rule.   If you made a commitment at the show, make sure you follow through within 48 hours after the show.   Interest decays rapidly with a very short half life.  And you need to demonstrate commitment to build relationships.  And this is an easy place to start.

And finally:
7) Just because you have a show list of all attendees does not give you the right to spam their email inboxes.   And if you do call someone who was at the show and you did not meet, make sure there is a single point of contact.   Nothing makes a company look more foolish than three different people communicating with the same potential customer.    With the CRM systems available out there for free, there is simply no excuse.