Free services, can companies still make money?

Can you offer your primary products/services at no cost to your clients and still make a profit? It seems like a highly improbable and quite likely a mission impossible. Agree? But if it’s achievable, it will be win-win for both the company and its customers.

In Germany, any individual and/or organization can own/run public toilets. The German government requires that there should be one public toilet every 500 metres in downtown and other high-density areas; one every 1,000 metres on all other roads. The toilet/people ratio of an entire city should be between 1: 500 people and 1:1,000 people depending on the size and population density of each city.

Can you make money running public toilets? It’s indeed a challenging project. First of all, toilets are scattered across a city; that alone increases the construction, operational and maintenance costs. In addition, although using a toilet is a basic need for everybody, most of the public toilets are free. Even if it’s a chargeable service, you can’t charge much for it. How then can you make money with this kind of a venture?

In 1990, it seemed impossible for most of the competitors to make this viable, however, Wall AG, a German company specializing in street furniture won the contract that they would build and maintain the required number of toilets in Berlin at their own costs and provide this service at no cost to the public. In return, the Berlin government would only charge minimal annual management fees. Let’s see how Wall AG made this venture possible and actually created a highly successful and profitable outcome.

1. Innovative usage of space - outdoor advertising and indoor wall decoration/advertising. Because the toilets were present in downtown shopping areas, train stations and airports, the advertising revenue was an opportunity. In fact, Wall AG has received tens of millions (euros) in 5 major cities alone, including Berlin, Frankfurt and Munich.
2. Strategic partnership and complimentary services offered added value to customers - Wall AG installed public phone booths in every toilet. They earned a portion of the profits from telecommunication companies. The company also worked with American Express, retailers and restaurants in the shopping malls providing discount coupons to customers using their American Express card in the toilets.
3. Increase brand awareness through high-end toilets - besides the free toilets, Wall AG also built some luxurious paid toilets that offer services including diaper changing, shoe cleaning, and massages .etc. Customers could listen to music and read books/magazines from its large content library. This not only satisfied the special needs, but also increased its brand awareness as a quality and trustworthy service provider.
4. Cost management through high technology - Wall AG created its own cleaning services. It sent patrol cars and maintenance staff to check all toilets 3 times a day. In Berlin, they have 20 cars and offer 7/24 hour patrols to ensure they can fix problems in time at every location. They also installed an automatic cleaning system in every toilet that cost less than deploying staff.

Is this the end of the story? No. Wall AG entered into the U.S. market by building toilets for disabled people in New York. In the late 1990s, they had built over 1,000 simplified men’s toilets for free in other European cities such as Paris, London and Rome and received substantial advertising revenues. In addition, they also hired top designers from Italy and Japan to create innovative toilet products and sold it globally. In 2009, Wall AG was purchased by JCDecaux Group, the world top outdoor advertising company.

Are you overwhelmed marketing in a digital world?

Many of us have been to a hairdresser’s shop, but the experience may not be pleasant. The process started with the first step of washing your hair. The assistant recommended several shampoos, names you had never heard of. If you did not choose one, they would pick the most expensive one. When the hairdresser started to cut your hair, he/she would try as hard as possible to sell all kinds of expensive hair dye and maintenance products, as well as membership cards. What’s worse, it took so long because of the persistent marketing and up-selling.  

The competition in the hairdressing market is fierce and many of them are struggling with marketing in a digital world. QB House is a famous hairdresser’s chain that offers 10-minute cut only service. It was founded in 1996 in Japan with over 550 shops and now it has opened chain shops in Singapore, Hong Kong and Taiwan .etc with more than 125 visitors on a monthly basis on average. It only charges $10.46 for a 10-minute cut. QB House has already achieved over 4 billion yen in revenue (approximately $42 million Canadian) in the first few years. What makes it so popular and profitable?

1. Innovative water free service - QB house uses a special vacuum cleaner to clean the small hairs left on the customer’s neck and clothes.
2. Simplicity - there is a standard cubicle for each hairdresser with essential tools such as scissors, combs and mirrors .etc. in order to save the space. Customers use an automatic ticket machine to make a payment and obtain a number card to wait for the service. It costs less than to hire a cashier.
3. Convenience - there are signal lights in front of the shop and in the waiting area from where customers can check whether the service is available and how long they have to wait. For example, the green light means the service is available right away. The yellow light means you need to wait for 5-10 minutes and the red light means the waiting period is more than 15 minutes.
4. High tech - There is a sensor under each chair that can automatically send the customer’s information to the backend system that enables the headquarters to calculate real time customer flow information and make strategic decisions accordingly.

You may wonder why the founder of the QB house had so many innovative ideas. The answer is that it’s based on his own uncomfortable experience and customer feedback/surveys. In a digital world, marketers are overwhelmed figuring out how to engage customers with numerous new technologies and channels. It’s time to take a step back to Marketing 101 and focus on customer needs and behaviour. Do you really know who you are trying to reach? Do you understand the processes they take to make decisions? Can you quantify the returns on your marketing investment? And can you use the data and web analytics to do segmentation and targeting for your Customer Relationship Management (CRM) strategy?

Tips for overcoming procrastination

For some time now I have been wanting to write an article about procrastination. Procrastination is the behaviour that we know we should do something, but we intentionally delay the start date. Meanwhile, we feel guilty and stressed about the pending task. For example, many people have downloaded an eBook, but keep postponing to start reading it. What's worse, we can’t find time to read it because we get tied up doing many other maybe less important but easier things. This task has sat on the “to do” list forever.

How can we deal with procrastination? if you search Google, you will find numerous books, articles and methodologies on this topic. The Pomodoro Technique is one of the famous philosophies that assists users to complete a task faster with maximum focus. The idea is that you work consecutively for 25 minutes, which is called a pomodo, named after the Italian word for tomato. Each time you finish a pomodo, you mark an X. Each time you have the impulse to procrastinate, you can switch gears to work on another task each for a 25-minute chunk of time. This technique may work for some people, but the key to utilize this technique lies in the motivation to get people to start to do a task in the first place.

Procrastination is harmful in that we may concentrate only on one thing, however, since we continue to procrastinate, we end up doing a lot of non-essential stuff. As an example, before writing an essay, a student might get engrossed in a video game, feels hungry after the game, has something to eat and then feels sleepy and falls asleep. All designed to avoid starting the essay which will take some concerted effort.

The following tips may work for those who have difficulty getting started on an important task:

1. If the task involves creative thinking, start to think about it in advance and make sure you divide the whole task into different sections. This way it breaks down and makes it easier to begin. For example, instead of thinking the every aspect when you design a web page. You can focus on the page title at one time and the layout at the other time. To some extent, it allows the whole task become more structured and therefore you need less creativity for each piece.

2. Set a deadline and involve a third party to check the result. This creates a sense of urgency. Also, once you have to report the progress to others, in general, you are more committed to the task itself. This technique has widely been used by those who wants to lose weight. They set a deadline, let’s say, lose 10 pounds in three months. They then share the goal with their family members who will keep an eye on their diet, join a gym or hire a personal trainer.

3. Invite other people to help you complete the task if possible. Divide the task into small parts. Each person is in charge of a portion. Teamwork can increase the efficiency if we use it properly. One of my friends wants to refurbish her basement. This topic has been mentioned every time when I met her for almost 6 months now. I suggested her why not you invite your husband and kids, each person takes responsibility for whatever he/she is interested. It’s early April now, her basement transformed into a lovely entertainment room.

Key takeaways from the 4th Envision Career Discovery Conference

I attended the 4th Envision Career Discovery conference organized by Enlight at Toronto City Hall to support my friend Gwen Wang who was one of the organizers recently.

Some of the topics we discussed at the conference are worth mentioning:

Communication skills

Many new graduates or young professionals, especially those whose first language is not English asked me how to improve communication skills at work. Communication skills, in my opinion, not only means that we have to use the appropriate grammar when we speak or write, more importantly, it is the skill to be able to express ourselves and/or explain our opinions in a clear and concise manner that other people can understand. Ultimately, communication skills are critical to extend our influence horizontally (colleagues), vertically upward (your bosses), and vertically downwards (those who work for you). To this end, I recommend a book titled Influence without Authority by Allan R. Cohen and David L. Bradford that offers practical, common-sense advice to the new world of work.

Networking

Jeremy Choi, Managing Partner, Pixelcarve Inc. provided an interesting concept regarding networking - the 5:50 rule: get to know someone like the way you would want to know them for the next 50 years instead of the next 5 minutes. Utilize tools, like Google Contacts to manage all your contacts and record not only the phone number, email address, but also their hobbies, their family and anything that relates to the person. In this way, it is easier to follow up with your contact especially during special occasions like birthday, work anniversary and the first time we met .etc.  After all, people do business with people who care about them.

Work and life balance

The question of work and life balance is often asked whenever I attended this kind of conference. The answers that Beth and Michele provided are meaningful:

Beth A. Shaw, Managing Director, Equity Capital Markets & Operations at Desjardins Securities Inc.

"Different people have different definition about work and life balance. The tolerance level also varies. For example, to work 12 hours consecutively is fine for me, but it may be considered to be too much for other people."

This leads to another question: when you first choose your career, choose something that really interests you. If you find a work that naturally motivates you, you may never have to think about work and life balance.

Michele Goddard, Senior Vice-President and Managing Director, Client Strategy and Execution, BMO

"There is no specific boundary regarding work and life. We have to prioritize. For example, if you need to work on an ad-hoc report that will be due in a week, it is necessary to spend extra hours to make sure you can deliver it on time with quality. However, if you are suffering from the flu, you'd better spend more time on the bed in order to be effective for future assignments and life experiences."

ROI still remains a hurdle for social media success

I had an opportunity to attend Technology Marketing & Sales Think Tank round table discussion organized by ITAC and SMA recently. Marketing professionals from the high technology industry had an open discussion about our challenges and experiences in social media.

Almost all attendees expressed the point that we all use social media tools to some extent in our marketing efforts.  Most of us utilize social media for the purpose of brand awareness. However, we have a different strategic focus for each social media channel. Facebook, for example, is used as a main channel to employ the human side of an organization in order to engage with internal employees, vendors, existing/prospective customers as well as attracting potential talented people to join the company. No matter whether we are in B2B, B2C market or both, in the end,  we deal with people. People like to do business with people they like, period.

Most companies spend a considerable amount of time and resources to keep the social media platform updated with event pictures, customer quotes and featured employee stories, .etc. However, very few can prove to Senior Management the impact on ROI of social media. Currently, most marketers use vanity metrics such as total views, likes, shares and comment to evaluate the performance of social media platforms. These metrics, however, mean nothing from an actual financial perspective. We are struggling to prove that social media have a direct impact and/or influence the generation of  sales and revenue. To some extent, we can use what Dan Ariely  said about big data to describe social media: big data is like teenage intimacy – everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it.

Besides the obstacle of social media measurement, most of us expect that social media will become even more crucial to the fundamental business model in the next few years. In the digital world, marketers are facing challenges in keeping pace with industry leaders in terms of breaking new ground and with the latest social media trends. Here are some suggestions that may help you keep abreast of the trend:

• Set a realistic expectation of social media performance to the Senior Management team. To maintain social media channel activities and to measure their performance is time consuming. It also takes time to demonstrate its impact on business.
• Develop a clear goal for each of your social media platform. It doesn't make much sense to post the exact same messages on each channel. Understand what your followers and target audience wants.
• Use social media platforms as listening tools to monitor the industry trend and competitive activities. By following key influencers for a specific industry and engaging with industry groups will help companies to build their thought leadership in the chosen field, both at the corporate level and at the personal level.
• Encourage as many stakeholders as possible to actively engage with your social media actions. There are many software solutions available in the market, Gaggleamp is one of the tools to empower your employees, vendors and customers to share your social media messages automatically.
• Integrate traditional marketing activities with social media campaigns to generate a better outcome. For example, to develop pre-event, during event and post event social media strategies and have a follow up plan. Make sure you figure out what’s the next step?

Alibaba’s fake product issue – Economics of counterfeit product review

Alibaba’s real product product ratio only accounted for 37.25% of all the products sold through its platform, according to a recent survey of the State Administration for Industry and Commerce of the People’s Republic of China.  Alibaba immediately announced that the survey samples were questionable. The State Administration only took 51 samples from 1 billion products. The State Administration responded to the critique by Alibaba with a white paper which listed Alibaba’s five challenge questions on January 28, 2015. They also required that Alibaba’s executive team behave properly and to reign in their arrogant attitudes. However, the State Administration claimed that the white paper released could not be considered as a legal document two days later to the public. It seemed that the saga was over, but it actually caused Alibaba’s stock price to fall significantly.

A well-known scholar Mr. Larry Hsien Ping Lang undertook a comprehensive analysis of the history of world fake/reverse engineered products. Many advanced economies have experienced a fake products being sold in a  period in their history. Let’s start with the U.S., the U.S. experienced the period of fake products during 1840 to 1910. It had much more serious implications in those days. For example, the author of A Tale of Two Cities, CharlesDickens visited the U.S. in 1842. He found out that fake copies of numerous European masterpieces were all over the place, including his own books.  He was so angry that he wrote a book titled American Notes to reprimand those who had participated in the phenomenon. However, the American book publishers had copied the book and were responsible for selling them widely throughout the  U.S.

A further surprise, Germany (later a high tech/innovative mecca also experienced fake product period from 1871 to 1900. The reason was because right after Germany was united in 1871, it did not have the  fundamental infrastructure to develop its economy. Therefore, Germany came up with a very simple idea that to copy products from the most advanced economy at the time, namely the United Kingdom. In 1887, the State of Britain passed an Act that any product imported from Germany must add a logo “made in Germany”, which identified fake products. 

Also, Japan experienced fake product a period during 1945 to 1960. In this period, made in Japan was equivalent to fake or reverse engineered products. In China, fake products have appeared in the market since 1990s. Nobody can predict how long it will take China to rectify this situation. Perhaps they can learn from how other countries prohibited fake products to everyone’s benefit. 

The methods to counteract this practice can be categorized into the following three areas:

1. To increase product quality. How did Germany achieve the goal? In 1890, the German government announced a policy to compete via product quality. Many German manufacturers, especially small and medium ones started research and development departments. This resulted in the future strong foundation of the German economy. In 1907, German products could compete with U.S. products.  The Japanese government also had a policy of saving Japan through quality. On the one hand, it imported advanced technologies from across the world. On the other hand, the Japanese government supplemented companies that did research through taxation and direct investment. For example, Mitsubishi Heavy Industries Ltd. was able to produce machine tools in 1960 that were considered the most advanced technology at the time. 
2. To increase the capability of industry workers. Germany utilized the apprentice system. When people reached 16 years old, they would become an apprentice for two years and needed to study industrial theory in school for another two years. Germany required that all workers must pass the 4-year apprentice training for 450 industries. Japan created the permanent employment. Japan relies on organizations to train employees on the job. It takes time to train workers to master the process and become really good at it. 
3. To prevent fake products with strict regulations. In Japan, the government uses societal pressure. Any company would definitely go bankrupt if they sold any counterfeit consumer goods. Germany controls the fake products through regulations. I have to say that Germans follow rules in a far superior fashion compared to the rest of the world. If a company breaks the law, they will face a substantial fine and a possibility of jail sentences. Similarly, the U.S. created a law between 1984 and 1994, any company who sold fake products would face a $2 million fine and a 10-year jail services. If they broke the law again, they would face $5 million fine and a 20-year jail services.

The U.S., Germany and Japan ended the fake product phenomena through the above mentioned three-step strategies and became top industrialized countries in the world. Hopefully, the Chinese government will learn from the lessons/experiences of those nations and create a Chinese model to end reverse engineering as soon as possible.

How do you evaluate talent

I had an opportunity recently to attend a session host by Compugen Inc., a leading IT Service provider in Canada. put on by Jamie Scarborough, Founding Partner, Sales Talent Agency. The guest speaker was Jamie Scarborough, Founding Partner, Sales Talent Agency. In the session, we all agreed that people are and will always be the real and most important asset for any organization that seeks sustainable growth.

Jamie shared how his company evaluates talent which can be categorized from two perspectives: Talent and Experience. He summarized the concept of three letters – DNA when evaluating people from a talent perspective. 

1. Drive – Goal-oriented and resilient.
2. Nature – emotional intelligence. How well candidates can fit into the existing environment.
3. Acumen – business acumen. i.e. whether a sales candidate can make a profitable sale. Rather than sell a product directly. Candidates can sell a valued solution to customers from which they will earn a higher gross margin. This is the so-called “solution selling”. 

From an experience perspective, Jamie utilized the acronym “PRO” to select the right people.

1. Performance history – whether the candidates had a proven track record in the past.
2. Relevancy – Whether the candidates have similar work experience.
3. Opportunity – opportunity management.

As for opportunity management, Jamie gave a 3-year talent benchmark that an employee should stay with a company for at least three consecutive years. In the first year, an employee needs to adapt to the new environment, learn the corporate culture and build positive relationships with colleagues. In the second year, they become familiar with the company processes and start to make a profit. In general, people make reasonably good profits in the third year. If an employee leaves a company within 3 years, the company is at a loss, given the training and resources that allocated to the employee.

On the other hand, how a company can attract talented people? In my opinion, a company should create an open environment and offer the following:

• Executive support.
• Allow mistakes – trial and experiment to identify the optimal methods for a chosen project.
• Buy-in/positive reinforcement from key stakeholders.