Monday, May 07, 2012

Can you hear me now?

A couple of weeks back, in my home province, a piece of legislation managed to make headlines despite not being stupid. The proposed new law is a set of rules designed to protect consumers from the marketing and billing practices of wireless service providers. It brought back a flood of memories for me. If I were to make a list of the most ethically challenging product categories I’d ever worked in, this one would certainly be on it somewhere. Though perhaps not for the reasons you think. From my experience, the industry wasn’t full of cheats and liars; it was just full of lousy stewards of the marketplace. If the wireless marketers of that era were running every consumer marketplace, we would by now be scrounging for nuts and berries and wearing raccoon pelts. It was an interesting laboratory for how what seems to be good business can turn out to be bad capitalism.

Nothing says failed marketplace like the law stepping in. If you’ve screwed up so badly that you can make politicians look like heroes, you may not have found your calling. Yet, in the words of the heretic John Bradford, “there, but for the grace of God…” There are cautions in this tale, temptations to which any marketer might succumb in a spasm of MBA cleverness. Fear them. They seem awesome in the moment, but are very likely to wind you up the same way Bradford did: burned at the stake.

Asymmetry. This is what happens when, by statute or by chicanery or even by marketing brilliance, an industry becomes so concentrated that consumer choice, in practical terms, disappears. Banks are like this. Airlines are like this. Cable companies are like this. A lot of the product categories people most hate doing business with are characterized by asymmetrical power relationships between the marketer and the consumer. When it happens, marketers don’t generally intend to become evil, but they do take consumers for granted, investing a lot more time in operational efficiency, government relations and other back room stuff. People feel neglected, as if they know your business will be fine whether they like you or not. They seethe. And by seething, they soak your customer service infrastructure as much as they can. And then, one day, a choice comes along, and they flock to it. Just to teach you a lesson. No, even if a category is asymmetrical by nature, a smart brand pretends otherwise and acts as if its life depended on an empowered consumer. RIM is reaping this whirlwind before our eyes. Apple might want to give it a think now, while love is still in the air.

Displaced value. One of the major features of the new law I mentioned earlier is a significant reduction in the cost of getting out of a contract with your wireless provider. But here’s the thing: Those contracts are the only reason your carrier could afford to sell you that snazzy new smart phone for $99; the other $300 it cost to build it is baked into those 36 months of payments you signed on for. Under the new rules, your phone could be a liability for the carrier. If you were the CEO, would you let it ride? Probably not. You’d increase your rates, or you’d charge more for the phones. That will make people mad, because they’d never understood in the first place what that phone was really worth. Angry consumers destabilize businesses and, eventually, cost money. Imagine if the industry had marketed itself by putting its pricing where its costs were: We’d buy phones less often, and we’d be paying less for our airtime. Earth and bank account would both be sustainably happier. Something to think about the next time you’re railing at the price of razor blades. In the long run, we're all better off if we know what things are really worth.

Taxing the gormless. There is, believe it or not, a business out there that will look at your wireless bills and figure out which plan you should really be on to pay the least. You pay them by diverting the first few months of your savings to them. This shouldn’t even be possible, right? I mean, there is no way that providing wireless services is so complicated and so user-specific that it needs so many ‘plans’ or that it should be possible to so expensively pick the wrong one. Yet we do. Some people shop like predators, and they get to pay less. That means that we, the gormless, must end up paying too much for long distance or wireless services or plane tickets or mortgages and chequing accounts, or we put premium in our gas tanks without knowing for sure if our particular car needs it. We – and I’m the worst for this – end up being taxed for being too trusting. This doesn’t end well. Nothing, and I mean nothing, makes a consumer more wildly angry than being made to feel stupid. Someday, Mr. Bank/Airline/Wireless/Gas Station Chain, someone will come along and stand up for we, the gormless, and all you’ll be left with are the mercenaries who learned how to game your system. There is, you’ll learn, no profit in them.

Maybe I spend too much time around farmers, but I’ve come to believe that stewardship is how we should run marketplaces. If a marketer focuses on extracting value without regard to the consequences, he’s just strip mining. Eventually, all he’s got left is an ugly hole where the money used to be. But if we treat the marketplace with some respect, it will keep happily producing for a thousand years. Here in this new, low-growth world, I can’t imagine why we wouldn’t want that. We corporations, we shareholders, we consumers. I can’t imagine.