Humbug: The Truth & Other Lies

The New York Times: When P.T. Barnum, the great 19th-century impresario of public entertainment (and co-founder of the Barnum & Bailey Circus) popularized that word — ‘humbug’ — he was talking exactly about things like Sea-Monkeys. Most assume … that the word is synonymous with total nonsense and absolute fraud.”

“But that overgeneralization misses Barnum’s sly nuance. ‘Humbug’ is not a lie, the great promoter used to say: ‘No humbug is great without truth at bottom.’ It’s unfair to say that Barnum peddled pure fantasy. Great humbug simply took off from a small truth and used that to show people what they wanted to see. In his own way, P.T. Barnum was the greatest cognitive scientist of the 19th century. He understood that when you pit humbug against harsh cold reality, reality doesn’t stand a chance.”

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Late & Great: Giorgio’s Fred Hayman

The New York Times: The late Fred Hayman “was the banquet and catering manager at the Beverly Hilton in 1961 when he invested several thousand dollars to become the silent partner in Giorgio, a struggling women’s clothing store off Rodeo Drive … The location was nothing special.”

“They saw the street, in their dreams, as a rival to Bond Street in London or Fifth Avenue in New York. Mr. Hayman showcased top designers new to the West Coast … He created a sunny, eye-catching exterior with awnings in bright yellow and white and a clubby interior with a pool table and an oak bar, with free drinks, so men could relax while their wives or girlfriends shopped.”

“Drawing on his hotel experience, he lavished the attentions of a concierge on his customers. He sent handwritten thank-you notes, set up a valet parking service and delivered packages to his best customers in a 1952 Rolls-Royce. By the mid-1970s the A-list clients were pouring in … spending tens of thousands of dollars in one go. Some patrons arrived with an extra limousine to haul away their purchases.”

“It was incredible how the money just flowed in,” Mr. Hayman told The New York Times in 1991. “You really didn’t have to sell. You’d just stand there and the customer would say, ‘I’ll have that and that and that and that.’” Fred Hayman was 90.

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Smoke & Mirrors: Online ‘Bargains’ Can Be Illusory

The New York Times: “Boomerang Commerce, a retail analytics firm, compared the list prices of dozens of pet items on Amazon and the specialist pet site Chewy.com. In only a handful of cases did the retailers even agree on what the list price was. So a 22-pound bag of Blue Buffalo Basics Limited Ingredient Grain-Free Duck and Potato dog food had a list price of $131 on Amazon and $84 on Chewy. Yet the retail price at both sites was the same: $49.49.”

“Some e-commerce experts said nothing needed to be done about illusory discounts, because the merchants needed them so much. The process ‘can seem dishonest to consumers, but let’s consider the retailer’s side,’ said Daniel Green of CamelCamelCamel.com … ‘If they weren’t using the list price as the benchmark, what would they use?’ … A few retailers defended themselves in off-the-record conversations by saying there are no victims here. That view got support from a Massachusetts judge in February, who dismissed a case alleging the use of fictitious prices by Kohl’s.”

The judge said: “’The fact that plaintiff may have been manipulated into purchasing the items because she believed she was getting a bargain does not necessarily mean she suffered economic harm.’ For others, however, e-commerce is not living up to its promise of being transparent and pro-consumer.”

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Nickels & Dimes Keep Airfares Low

“Air travelers love to gripe about fees: $25 to check a bag; $34 for early boarding; $129 for a few more inches of legroom,” writes Rafi Mohammed in The Wall Street Journal. “The challenge for this kind of model is managing perceptions … Customers may feel nickeled and dimed, but the a la carte model gives them the option to save money. Theoretically airlines could bake the cost of amenities into the base fare and then offer ‘discounts’ for giving them up. But that isn’t intuitive: Take $9.95 off if you don’t use in-flight Wi-Fi?”

“American Airlines recently charged $22 for ‘preferred’ seating in the front of the cabin—but with no added legroom. Internet access on some flights costs $40. Is this gouging? No, travelers who pay for these extras are subsidizing low fares for the rest.”

“In 2014 airlines generated $38 billion in ancillary revenue, according to a study by IdeaWorks. That money keeps base fares low. And airline profits are far from outrageous. The average net margin for all scheduled U.S. carriers was 4.4% in 2014. Even in the first three quarters of 2015, after oil prices had plummeted, the average net margin was only 14%.”

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Airlines & Flyers View Prices Differently

The Wall Street Journal: “American, Delta and United have new pricing rules that could easily raise the cost of many trips. Think of it as making a six-pack of soda twice as expensive as buying six cans individually.” For example: “For a May 4 trip from Chicago to Des Moines, Iowa, with a May 5 return flight from Kansas City, Mo., back to Chicago, American offers a fare of $522. But if you buy those flights individually, you’d spend $107 to get to Des Moines, then $65 to fly from Kansas City to Chicago, or a total of $172.”

“Airlines look at pricing through a different lens from their customers. Instead of adding up the fare from each flight on a trip, airlines look at each starting point-to-destination trip as its own market. Airlines want the ability to set pricing for a Kansas City-Honolulu trip as a unique product, not simply the sum of flights from Kansas City to Los Angeles and Los Angeles to Honolulu.”

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Fashionably Moo: The Rise of the Microdairy

“Add milk to the long list of traditional foods that are being rediscovered by young entrepreneurs and reintroduced in small-batch — and often high-priced — form,” reports The New York Times. “As historically low milk prices leave many mom-and-pop farmers struggling, some are choosing to ride the wave of the nation’s new food awareness … bottling their own milk (and ice cream and yogurt) and selling it directly to customers. And they are heralding the various ways it may be different from conventional milk — whether unhomogenized, organic, from grass-fed cows or locally produced.”

“Now many restaurant menus cite the provenance of their dairy products in the same way they boast of grass-fed rib-eyes and hydroponic tomatoes. And consumers are willing to spend more for boutique milk at farmers’ markets and upscale grocers … Manhattan Milk, a small distributor in New York City, evokes the days of the milkman, delivering glass bottles of grass-fed, organic milk from dairies in the region to doorsteps as far away as Greenwich, Conn … Customers of 1871 Dairy, in Wisconsin, “want more than the word organic slapped on a label; they want the satisfaction of knowing the milk was made close to home, in small batches rather than industrial vats.”

“Customers want to learn the story behind the food to see if it’s the values they hold,” says Joe Miller, the marketing director at Trickling Springs Creamery, a small dairy in Chambersburg, Pa. “The more you open the door for them to see behind the scenes, the more comfortable they feel with your product.”

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Philz Coffee: The Value is in The Experience

A San Francisco coffee house called Philz plans to challenge Starbucks with a different kind of experience, Forbes reports. “At Philz you won’t find the fancy brewing equipment of an artisanal coffeehouse. Beans are ground to order and then splashed with 205-degree water in pour-over funnel brewers. The coffee is good, but it is not cheap–a small coffee costs almost twice as much as Starbucks’ equivalent. Philz proponents say the value lies as much in the experience, or in what (founder Phil Jaber and his son Jacob) call ‘Grandma’s House,’ as it does in the coffee.”

“Unlike the corporate uniformity of Starbucks or the manicured hipster haunts like Blue Bottle, Philz has an informal charm that can be found in the mismatched couches at its original location and in the cup-by-cup approach of its baristas, who load drinks with heavy cream and brown sugar to each customer’s preference. ‘Taste it and make sure it’s perfect,’ a barista says before handing over a beverage. Details like that foster ‘an emotional connection’ for customers, says Jacob, 29, the CEO. ‘We think of ourselves as more in the people business than the coffee business.'”

“This year Philz plans to open at least two locations in Washington, D.C., the first true test of whether the company’s service-oriented approach can succeed outside California. Ultimately Jacob has visions of expanding into New York and Boston, with 1,000 stores nationwide, and “disrupting” the coffee industry … So far the company has interviewed more than 300 people, and Jacob has hired 30 … All will go through the company’s Apple-influenced Philz University training program, where they’ll be taught not to ask for customer names the way Starbucks does when taking orders. Doing so, Jacob says, is impersonal, because it suggests you’ve never met, and there’s a chance you’ll get it wrong.”

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Virgin-Alaska: Passion vs. Performance

The New York Times: The Alaska Airlines takeover of Virgin America may test whether passion or performance is paramount when it comes to creating customer loyalty. “Although Alaska has been a perennial leader in best-airline rankings, its allure comes more from its reliability than mood lighting or funny safety videos. Like Virgin America, it inspires loyalty among customers, if not the same passion.”

However, travel industry analyst Henry Harteveldt thinks Virgin America “failed to capitalize on its San Francisco hub or to build on its early innovations … The airline compensated for its financial losses by cutting flights in recent years, even as it added routes to Hawaii and elsewhere. While passengers may love the ambience of a Virgin flight, they love the ability to get where they are going more.”

“The combination of hip and practical could give the new company a competitive advantage, Mr. Harteveldt said. The smartest thing Alaska could do … would be to combine the characteristics that have made each airline popular.”

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How Gillette Delivers a Close Shave

The Wall Street Journal: Gillette employs an “elite squad of shave testers” who “assess 45 attributes of the shaving experience, rating some more obvious ones like tugging and redness, to more obscure ones like ‘blade feel’ and noise … The input helps Gillette’s scientists hone the razors it sells to three-quarters of a billion men world-wide, helping optimize coatings on blades and lubrication strips on cartridges.”

“Gillette, a Procter & Gamble Co. division, created the current panel by winnowing a pool of some 200 applicants. A visual screening eliminates guys with slow-growing beards or swirls in their stubble. To make the cut, candidates must pass sensory tests that gauge vision, touch and ability to detect subtle differences. One test involves inserting a hand in a box with three sanding blocks and identifying which is different.”

“There is usually no shaving cream. Bar soap is preferred, as it helps isolate the performance of the razors … After a pre-wash, they hold the soap beneath a stream of water set between 95 and 105 degrees. After 10 seconds, they roll the bar 10 times between both palms. Then they gently rub their hands together in 10 circles forming a lather, applied in a sweeping swirl … A timer gives them a 10-minute pause to assess their work. They repeat the process on the other half of their faces using the second razor.”

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