It all started in 1964 with a guy who called himself Captain Crunch after the
cereal he got an invaluable toy boatswain’s whistle from. As a US Air Force airman based in Alaska, John Draper
discovered that the whistle emitted its sound at the same pitch used by
AT&T exchange systems for dialling and by using it correctly he could get
himself and his comrades free long-distance calls. Years later he and other
counterculture followers created a “Blue box” that could generate enough multi-frequency
tones to allow them access to the AT&T system. They called it “phone feaking”. But the idea caught on and
was later dubbed “hacking” or “cracking” – gaining unauthorized access to
systems using a variety of methods to various ends. Passwords have been around for millennia in security
contexts for the obvious reasons, so when computer networks were created it was
a no-brainer that passwords would have to be used along with logins. But, little by little, various methods have been used by
hackers to break them. One of the originals was invented by Captain Crunch and
his merry band. “Social engineering” was basically calling up a company
pretending to be the proper user and using enough of that person’s details to
convince the firm that you are them and thereby gain access to their account
and/or reset the password etc. It’s one of the techniques still used today by hackers and
detailed in Mat Honan’s excellent article
on the weakness of the password system in the January issue of Wired UK. Long story short, passwords are vulnerable because they
have to be easy enough for us to remember and the reset systems need to allow
us to do that without too many hurdles. But their ease is their greatest
vulnerability. So how do ensure that you don’t end up having all your
accounts cracked by hackers, as happened to him? Here are the key password take-aways
from his article: DON’T
Reuse
passwords for several accounts
Use
a dictionary word, or at least use more than one in a
phrase
Use
standard number substitutions – i.e. 1 for l - cracking
tools have these built in
Use
a short password – they’re quickly crackable
DO
Enable
two-factor authentication when it’s offered–
this allows the system to send you a text to confirm it’s really you if you log
in from a non-usual location.
Give
bogus answers to the standard security questions–
it’s like a secondary password as many of the answers to standard questions
will be accessible online – you may have chatted about your first school/pet
etc on Facebook and parental details are on public record.
Use
a unique, secure email address for password recovery – If
a hacker knowswhich account your password reset goes to, that’s a line of
attack for them. So set up a special email account you don’t use for regular communications and ensure you don’t create a
username linked to your name.
Scrub
your online presence – Sites like 123 people allow you to remove your info
from databases.
If, like me, you have all sorts of accounts all over
the place, Mat’s article will have been a real eye-opener and the tips vital for ensuring you
survive any future Password Apocalypse.
To a
keen photographer it was temptation incarnate, an ocean of exciting products
printed on both sides of a very large sheet of paper in very small print. Reissued
with updated listings regularly, the Jessops product list was a must-have for
anyone who loved their photography in the 1970s and ‘80s. And visits to their
stores was akin to stepping into Ali Baba’s cave — lined with objects of tech lust and often some
far-off wish for a pools win to make their purchase possible. Ever
since Jessops opened in Edinburgh I have been a regular customer with them
and, given its place in my photographic life, I was deeply
saddened to read of its fall into administration yesterday. So what
when wrong? Looking over the coverage, here are the main factors and lessons
for SMEs:
Its core market had been eroded
from both ends of the price range – high megapixel smartphones being chosen
instead of lower-end digital cameras while top-spec cameras were being bought online
from specialists with better ranges based on reviews. Lessons: 1) If a new trend or
technology is threatening your market, you need to be in it, not fight it like King
Canute or you’ll only be washed away by Schumpterian forces of “creative
destruction”. Jessops should have offered at least a range of the best
cameraphones, but didn’t; 2) You need to find a way to price-match or get close
to the price leaders on at least the key products, like John Lewis does. Linking with other independents (through groups like Euronics &
Nisa) to gain buying muscle to match the big boys’ prices is one way for smaller retailers.
Its core marketplace was down
overall – you can’t
do much about the overall market but you could fight better for a share of what’s
still there (see below).
It hadn’t made the “profits it planned” – it maybe needed to look
harder at costs, store locations and alternative ways to do its back-end
services (e.g. sharing distribution services with other High St chains). But
were its targets too high? Given the debt for equity swap with HSBC in 2009,
were they pushing for an unrealistic turnaround timetable? We don’t know, but
word on that may emerge.
Timing of rent payments– this hits all High St
retailers equally unless they own their premises. Cashflow is always hard at this
time of year for retailers and combined with the importance of Christmas for so
many and fiercer price competition, it will have been one of the tipping point
factors that forced it into administration.
It lost the confidence of its
suppliers – this
is a clear strategy fail. You have to retain credibility and the relationship. This
will have been one of the reasons why Canon didn’t go forward with a rumoured cash
injection (to help maintain their own High St sales). If Jessops marketing had
been better, this, and sales, might have been better.
It was a victim of 'showrooming'— In economics a distinction is made between ‘experience
goods’ (things you have to try to know their quality) and ‘search goods’ (things
which are identical commodities for which you’ll typically simply seek the
lowest price as you know the product will be the same e.g. branded goods).
In the early days of e-tailing it was thought that experience goods couldn’t be
sold online, but once ‘showrooming’ (where customers sample a product in-store
and then buy it online) emerged, it meant experience goods were being tried on the
High St but bought online like search goods. So unless a shop can afford to
price-match, or at least get close in price, like John Lewis, they will often lose
the sale.
A survey showed 24% of all UK shoppers
‘showroomed’ in the lead-up to last Christmas (39% for 18-39s, 18%
for over-40s). You might worry that if that carries on the only winners will be
the big chains with ‘clicks & mortar’ offers including collect-in-store,
online-only retailers and the postal and courier services, but don’t panic yet as
showroomers only represent 10% of overall shoppers and only 40% of showroomers bought
items from a competitor after trying in-store.
The lesson could be, if appropriate in your market, to focus more marketing
spend on older non-showroomers via appropriate channels and, if possible, use in-store wi-fi to track what showroomers are searching for and
offer them a time-limited ‘have it now’ discount voucher on the in-store price if
they check-in to secure the sale. There are lots of occasions when you need
something TODAY, so ensure you maximise the stock of key items that are urgent
purchases.
Also, once the last date for online delivery for dates such as Christmas is
past, you can target your marketing messages on the ability to get it NOW
in-store in time for the big day.
So how else can local and independent High St retailers
fight back?
Make
good use of PR and social media – they work just as well
for you as the big boys. Yes, they have dedicated teams of experts, but with the
key knowledge, the help of people like me, some creativity and some dedicated
time you can make it work for you too. It’s all about content and that’s a
level playing field where your David can beat the chain Goliath, especially if
you can offer the product today.
Reassess
your basic business model, including locationto ensure you’re doing
everything you can to make the most of your offer & USPs.
Make
sure you’re communicating your USPs regularly—
I was amazed to find a local computer supplies shop in Forfar is cheaper for my
printer ink than anywhere in Dundee, but I haven’t seen them advertising it
anywhere. Shout about your strengths!
Look
into linking up with other local independents to help each other – like the retailers in chain-averse Totnes. Their solidarity is said to be one
of the factors behind their success.
There are, sadly, no panaceas for all High St retailers, but if you undertsand your business well you can maximise your chance of not being the latest victim of its tranforming character.
Given my long and happy relationship with it, I hope PWC can find some way of saving Jessops.
In my last blog post I looked at
the recent Instagram Terms of Service debacle as a case study of how getting
the balance wrong between satisfying your shareholders versus your other key stakeholders
can lead to major reputational damage and, ultimately, lost shareholder value. At the end I introduced the term Reputational Elasticity of
Demand (RED). Anyone who’s studied economics will be familiar with the concept of
price elasticity of demand
— the idea that demand for some products decreases as their price rises
(referred to as being elastic, with a price elasticity of demand score above 1),
while for others demand is less affected, if at all (referred to as being
inelastic, with a price elasticity of demand below 1). It’s easily seen that usually non-essential goods (like
expensive cameras or world cruises) have a higher elasticity than basic needs,
such as food. Although I would add the caveat that elite luxury goods appear to
be fairly inelastic as the kind of people who buy Bentleys and Impressionist
paintings are less bothered by price increases than most buyers as their wealth
stays constant enough to allow more consistent consumption of such things. Applying this notion of demand being influenced by a
factor, it’s also easily seen that a company’s reputation can have an influence
on its sales. You only have to look at past examples of major PR failures to
see how a reputational hit can influence revenue, profitability and sometimes
the whole existence of the company. Think Ratners, Arthur Andersen and The News of the World. More recently, we’ve seen Starbucks change its UK Corporation Tax policy after an
outcry over its perfectly legal but unpopular use of international transfer
charges to minimize its UK tax bill and comedian Jimmy Carr pulling out of a controversial tax avoidance scheme,
again because of the public reaction when his involvement was revealed. They clearly feel their services are reputationally elastic
(Starbucks may have seen its sales fall), but other companies clearly think
theirs are reputationally inelastic. Amazon and Google were also named as UK tax
dodgers by the same parliamentary committee that named and shamed Starbucks,
but they didn’t respond in the same way. In fact, the reaction of Google chairman
Eric Schmidt was to say he was “very proud” of their
tax avoidance scheme — “It’s called capitalism.” He’s clearly been taking PR
lessons from Michael O’Leary of Ryanair! So why can one company’s demand be more resilient to dents
in its reputation than those of another? The simple answer is each will have
their own Reputational Elasticity of Demand (RED). So how do you measure yours and allow it to inform your
future decision-making? First you have to understand the factors which influence
how elastic your RED is and how they can be measured. I would suggest the following factors and metrics can be used
in calculating your brand’s RED:
Market share —
the higher yours is, the more inelastic it’s likely to be if the barriers to switching are also high and/or your industry has
low competitiveness e.g. Google in search.
The importance of reputation in your industry— high in art auctions, universities and used car sales, lower
in petrol or gas sales where the product is closer to being an identical
commodity. Measured by quantitative market research.
The importance of ethical behaviour to your key
customers (an idealism score) — measured by qualitative market
research.
Likelihood of your key customers to act on
core ethical values — measured by qualitative market
research.
Your brand’s rhetoric on the importance of
ethics to your company— everyone hates a
hypocrite more than an honest stonewall capitalist e.g. Starbucks and Apple
versus Ryanair, banks, oil firms, arms companies. Measured by an ethical rhetoric
score.
The expectation of ethical behaviour in your
industry — more so in charities, but less so in the arms industry.
Measured by quantitative market research.
Barriers to switching from your brand to a
rival, including transaction costs (hassle) to do so — i.e.
coffee lovers in cities can easily use another outlet, but someone in a village
with only one bank will find it harder to switch. Similarly, Facebook enjoys a
high barrier in terms of the time and effort it would take a user to move all
their friends and content to another social network.
Depending on your industry, there may be more, but this is
a basic list to start with. So once you have your RED figure, is it elastic or
inelastic? That can be worked out by measuring the RED of a number of companies
like Starbucks and Google which clearly enjoy elastic or inelastic RED figures
and finding which you are closest to. With enough comparisons you should be
able to find the figure which represents the point of transition from reputational
elasticity to inelasticity. Once done, you would need to monitor your RED score
regularly as the factors which make it up will vary over time. So how can you use it to inform your management
decision-making? You could use an equation to do scenario analysis to weigh
up the effect of the future options being considered on sales, but to do so
would be make the same fundamental reputational error that Ford in America made
in the 1970s with the Pinto — where
management calculated the cost-benefit of recalling and fixing the fault on the
car which caused fires in accidents over versus the cost of potential lawsuits.
It would be a PR own goal if found out, more likely in the increasingly
transparent online and socially networked world we live in. Whatever you do, you need to take into account two factors:
How personal the proposed unpopular conduct
is to customers — e.g. Instagram seemed to be
threatening to sell users own pictures, while Starbucks was not paying the Government,
not us directly, and Apple’s use of Chinese workers with comparatively bad pay
& work conditions to make its products seems more distant.
How unpopular the proposed conduct is with
your customers— measured by qualitative market
research.
So what’s the solution? I’d say that you need to set out
your ethical stall in line with your RED, communicate it clearly via your
marketing communications to manage the expectations of your current and future
customers and then act accordingly. If you’re going to be a hard-nosed capitalist, say so. For
example, no-one any longer acts surprised when Ryanair takes a tough legal-contractual
line over an unpopular policy because they have a long and well-publicised history of being
that way. So, for various reasons including the price sensitivity of their
customers, their RED is clearly inelastic. Conversely, don’t project ethical whitewash and then act
otherwise, especially if your RED is highly elastic. Brands like Apple and Co-operative Bank
have seen the reputational damage of failing to live up to their ethical rhetoric. Ultimately, using your RED to influence your brand
management is about using your judgement, informed by the knowledge of your brand’s RED elasticity, to make the
business decisions which will help maintain a high reputation and in the medium
and long-term maximise
the returns and value to your shareholders.
This morning’s news
that actor and comedian Alan Davies is among 10,000 Twitter users facing legal
action over the false Lord McAlpine allegations is the latest, but biggest,
example of why you have to think before you tweet…and retweet. One of the problems of Twitter is that users very quickly
forget that they’re not only sharing their comments, and, crucially, those of
anyone they retweet, with their pals but also everyone else on Twitter. So you’re
pretty much publishing it to millions of people. Just like the conventional
mainstream media. The difference is they have long understood the
consequences of getting their facts wrong. Apart from specialist lawyers,
no-one knows the laws of libel better than journalists. It’s a key part of
their training because the power to publish to millions (or even just thousands)
of readers is something that has to be treated carefully. So they understand that saying you simply repeated
something someone else said isn’t a defence in law — you’re responsible for
publishing it again. Aside from the Reynolds defence, you
have to be able to prove anything you publish, or face the consequences. So the old advice that you shouldn’t tweet anything that
you wouldn’t say to the person’s face is reinforced by this latest example of
what happens if it turns out to be untrue. Think not naming the person will protect you? Not so. Look
at Newsnight. They didn’t name Lord McAlpine, but they said enough for him to
be identified by enough people for his name to start circulating. Again, the concept of what’s known as ‘jigsaw
identification’ is already well-understood by the conventional media. They
already have to watch for it with cases with child victims or accused under 18
as well as rape victims — ensuring that individually and collectively they don’t
give out enough details for the person to be identified by someone who might
know them. Similarly, if you keep it too obscure you could be sued by
several people who could argue people might mistakenly think it was them — 10
policemen successfully sued a paper in England because it ran a story about ‘a
policeman’ from a particular station. Once upon a time to be a publisher you needed a printing
press and all sorts of other expensive gubbins and so realised that you had a
lot on the line if you got your facts wrong in print. Twitter may be free and easy, but the consequences of
saying or repeating something you personally have no proof for are just the
same. So think before you tweet or retweet.
The second part of Michael Robinson’s BBC Radio 4 documentary
series Fixing
Broken Banking features the Cumberland
Building Society and the German local bank Handelsbanken, which has branches in
the UK. Robinson’s persuasive thesis is that these comparatively small,
locally-based banks have thrived while the big boys have floundered because
they’ve stuck to the old-fashioned model of local, relationship-based banking.
And when you listen to the programme you can hear why. Here are some of the reasons why:
They
embrace proper relationship marketing by only accepting
savings from and offering products to local people, only selling their products
directly, not being driven by selling the most profitable products, quarterly targets
or bonuses and by being “embedded with community”, in the words of the
Cumberland’s chief executive. They demonstrated that after the floods in
Cockermouth, when they were the only financial institution to contribute to the
post-event flood defence fund.
Their reward has been bad debt and repossession stats far lower than their
rivals, partly because they know their customers better than simply from the
data analysis tools used by the big banks.
A key part of that is delegating
decision-making to the level with the greatest knowledge of the customer, so managers aren’t just implementing top-down policies or sending
data to head office decision-makers. This makes sense as the person meeting the
customer will usually have far more relevant information than HQ e.g. local
reputation of a business, NVCs from a customer talking about their financial
situation.
They
“stick to the knitting” (in the phrase coined by Peters
& Waterman in their classic In Search Of
Excellence) by keeping their core business in the local banking they know
(no leap off into backfiring risky sub-prime mortgages in search of continued high
growth), being 98% funded from local savings (in the case of the Cumberland),
staying at the scale they understand.
They
take managing their reputation seriously—
by sticking to a low-risk strategy and walking their talk every day with their
policies…which leads to stability and sustainable organic growth, which are, in
mutually reinforcing.
Relationship marketing isn’t new or sexy, but its truths
and benefits have never been more valuable in the uncertain times we all face.