Free Medium Coffee and Warm Fuzzies

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What did the new Dunkin Donuts store owner do right? The sign says it all…”Free Medium Coffee”.

Do you think he drove traffic to his new store? Lots. I had to look twice at the second line; “No Purchase Necessary."

That’s different.

Free just feels different.

New businesses offer discounts, coupons and rebates all the time. They imply, “We’ll give you a good deal if you come check us out.” Free, on the other hand, says, “We’re willing to invest in a relationship with you and know we’ll need to earn your business.”

Now flip it. How obliged do you feel after hunting for the coupon, clipping it out, sorting it by category and then remembering to use it before it expires? You feel like they owe you the coffee, don’t you? At best coupons and other promotions offer a balanced exchange; at worst, buyers feel distrust about the process. How much pain have you felt due to coupon or rebate issues? One study suggested that 50% of all rebates never get turned in.

Now let’s look since the savvy store manager erected the sign:

Day #1 – On your first visit, you look around as you approach the counter with caution. Suspicious of a catch, you place your order, “I saw your sign and I’d like a free medium coffee.” When the person on the other side of the counter smiles and promptly pours your Dunkin Decaf, you wonder if the other shoe will drop. When you realize there’s no string attached, they just went from stranger to friend.

Day #2 – You know you’re getting a donut with the coffee. Why? Because you feel a strange sense of gratitude for a second cup of free coffee. I bet you never felt a sense of appreciation after using coupons? (By the way, after day #1, you told at least three friends about the free medium coffee because you like to give away free stuff too, even if it’s someone else’s).

Day #3 – “Dunkin Decaf, cream, no sugar Mr. Slatin?” says the lady in a pink and orange uniform. “Thanks for remembering Janice, let me also get a half dozen glazed and a half dozen with sprinkles, an egg, bacon and cheese croissant and a box of munchkins.”

What just happened?

The seller created value by giving you something without expecting anything in return. Did he have a previous relationship with you? No. But now he does. He changed the feeling you had about his product or service from neutral to positive. Warm fuzzies. Why are warm fuzzies important? Well despite popular belief – all decisions are based on emotion and justified by logic. Dunkin Donuts went through your mouth to get to your heart.

What’s your “free medium coffee”?

Trusting and Trustworthiness: The Chicken or the Egg?

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Most talk you hear about trust uses that one word—“trust.”  But on closer reading, the talk turns out to be about one of two very different things: either about trusting, or about trustworthiness.

They are not the same.

Trusting is about the one doing the trusting.  Being trusted is about the one who would be trusted, or trustworthiness.

•    When you read about the poor charities who got ripped off by Bernie Madoff, that’s about trust-as-trusting.
•    When you read about how Bernie Madoff pulled off the con, that’s about trust-as-trustworthiness.
•    Surveys that talk about declining trust are usually about a decline in trust-as-trusting.
•    When we read stories about how there are more securities violations, we’re reading about a decline in trustworthiness.

Which is the chicken, and which is the egg—trusting, or trustworthiness? Which causes the other?  Which should drive policy?

Years ago I consulted to a convenience store chain with a serious store manager turnover problem (150% per year).  They wanted us to profile a successful store manager so they could hire to that spec. 

Sounded like a good plan.

Until we found out that each store manager was routinely given a lie detector test every month to see if they were stealing. 

Let’s say you’re a store manager.   After 6 months of being hooked up to a polygraph and asked if you were a thief, you might figure “hmm, someone must be getting away with something—I wonder how he’s doing it?”  So you start experimenting.

And in a few months, you’ve a turnover statistic.

So which was the chicken, and which the egg?  Trusting, or trustworthiness?

The company management thought the trustworthiness came first, that they were being victimized by untrustworthy employees.  They wanted to find trustworthy people, so they could trust.

In this case, it turned out to be the opposite problem.  Management’s mistrust lowered the trustworthiness of the store manager.  People live up (or down) to our expectations of them.

Sometimes it’s the other way. There are real Madoffs out there, and you’d be a chump not too protect yourself against them.

But here’s the thing.  Think of trust as a risk mitigation strategy. Unlike fight or flight—the usual risk mitigation strategies—trust actually alters the risk in question.

If you take a risk and trust someone—or take a risk to show that you are trustworthy—you can influence the other’s behavior.  People tend to respond in like manner to well intended gestures. 

Madoff is not the norm.  To subject every store manager (or any other job) to the kind of scrutiny that would prevent a Madoff can be a very expensive proposition.  (See Sarbanes-Oxley; airport security).  We need to think very carefully about the right responses to unusual events.  
 

The Curious Case of Curiosity in Selling

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What’s the top, number one, single greatest factor affecting success in sales?

There are often multiple answers to questions like that, because all the prime candidates overlap similar territory. You might argue for a can-do attitude, or customer focus, or a committed team.

Let me make the case for curiosity.

Imagine being in a constant state of heightened curiosity when you are with, doing work for, and thinking about your customers. What would that look like?

The answers fall into two broad categories, I think:

1. If you were curious on your customer’s behalf, you would:

• Notice an awful lot of things about their people, products and customers
• Formulate many hypotheses
• Ask a lot of questions to pursue those hypotheses
• Want to know lots of things on general principle: preferences, history, culture, practices
• Be other-focused

2. And while you were being curious, you would spend less time on:

• Worrying about how to get the sale
• Worrying about how to speed a decision, or close, or qualify a lead
• Trying to portray yourself in ways you assume will influence the customer

Now here’s the punch line. Most approaches to selling tell you to ask a lot of questions—basically like the first category.

But they also tell you to worry about that second category. In fact, they say the sole purpose of all questions is to get the sale. Most sales approaches say you absolutely should worry about getting the sale, speeding a decision, qualifying, etc. Which kills curiosity.

Curiosity says, to hell with that. Curiosity says, the purpose of questions is to find out what could be: what could be better, what the right thing is, what the customer should do.

The paradox, of course, is that curiosity-driven selling just plain works better. It works better because the questions are grounded in the customer’s world, not the sales person’s needs.

The linear, process-driven, metrics-based approach to selling that has become so prevalent has many virtues, but one gigantic, glaring defect: By trying to maximize the sale, it has devalued the customer—thereby reducing sales effectiveness (insert ironic music here).

Curiosity may have killed some cat once upon a time; but it serves salespeople well. Curiosity isn’t a sales tactic. Done right, sales are a natural byproduct of being curious.  There’s something very simple and right about that.

Thanks to All Who Commented in 2008

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I want to extend a huge thank you to all readers of this blog. I’d thank you all by name, but of course most of us read most blogs without leaving a trace.

Some of you, however, also contribute your own comments, either by email to me or directly on the blogpost. I want to particularly thank this last group by name, and with a "gratis" link. Thank you very, very much for helping make this blog successful.

A

Ken Allan, Scott Allen, Trip Allen, Lisa Anderson, Ann, Anonymous, Anthony, Antuan,

B

Roger Baillargeon, Dawn Rivers Baker, The Baldchemist, Barb, Chris Barr, Narconon Vista Bay, Michael Benidt, Bizurk, BobG, Ralph Bonzo, James A. Boyd, Brad Trnavsky – Sales Blogger, Eric Brown, Nancy Brown-Johnston, Mark Bryan, Ron Buck, Buffy,

C

CB, Rosalind Sedacca, CCT, Amy Campbell, Steve Campbell, Michelle Malay Carter, Pierre Cerulus, The Chaplain, Clarke Ching, Marie Christine, Jon Clayton, Cliffside, Confirmed, Consensio, Stuart Cross, Jeff Cullen,

D

Martin Dalgleish, Dave, Leadership Development, R. David Donoghue, Don, Drew458, Duncan, Norman Dutt,

E

Eddie, Erika, JHS, Esq., Euphrosyne,

F

Roger W. Farnsworth, Fat_Peter, Mark Federman, Fee Only Financial Advisor, Flawedplan, Colleen Francis, Jann Freed, Patricia Fripp, Bret Frohlich,

G

Barbara Garabedian, George, Justin George, Merv Giles, Woody Gilk, Michelle Golden, Gabriel Goldenberg, Gab Goldenberg, Goleez, Peter Guinta, Bizzie Guye,

H

Jeff Hardin, Ford Harding, Andrea Harris, Hazel, Paul Hebert, Chris Herbert, Scot Herrick, Thomas Hines, Tom Hines, Stewart Hirsch, Michael Holt, Homejobsite, Hops, Andrea Howe, Dan Hull, Arne Huse, Shama Hyder,

I

Carl Isenburg,

J

Don J, Manish Jain, Geoffrey James, James, Harold Jarche, Jill, Jim, Joaquin, Jonathan, Justin,

K

Izi K., Mad Kane, Kelly, Lion Kimbro, Brad Kolar, Jill Konrath,

L

Lance Jepsen Author Of Internet Marketing, Lark, Jeremy Lattimore, Leetah, Tammy Lenski, Mbakisi Vusumuzi Lesetedi, Diane Levin, Suzanne Lowe, Ria Ludy,

M

Bruce MacIlroy, Matt, Phil McGee, Philip J. McGee, Jen. Writer MembershipMillionaire.com, Alan S. Michaels, Awesome Mom, Mr. Money, Jim Monk, Nils Montan, Morris, Ella Moss, Mukundan, John Mulholland, Mythago,

N

Nate,

O

Orji,

P

Param, Pat, Brian Phipps,

R

Evan Raffel, Rebecca Morgan, CSP, CMC, Rebekah E. Donaldson (Red), Renata, Matt Rhodes, Barry Ritholtz, Beth Robinson, Martha Rogers, Maureen Rogers, Rick Rottman,

S

Brooks C. Sackett, Thomas Sander, Sheryl Sisk Schelin, Sean, Kurt Seifried, Jeri Sessler, Sham @ Enhance Life, Clayton Shold, Skip Shuda, Mark Slatin, Comcast Sleeping, Code Sleuth, Carol Stanley, Dave Stein, Stephanie,

T

TC, Tbone, Rick Telberg, Tom "Bald Dog" Varjan, Totalpardo, Tracey, Dick Troll, Jebra Turner,

V

Peter Vajda, Vikas, Erik Volkers,

W

Derek Wall, David Watkins, Derril Watts, Ian Welsh, Wenchypoo, Will, Tim Wright, Sims Wyeth,

Y

Chris Young,

Z

Evan Zall, Zike, Zowoco

A Better New Year’s Resolution

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I wrote a good blog post at this time two years ago, and haven’t improved on it yet. Here it is again.

Happy New Year.
——————————————-
My unscientific sampling says many people make New Years resolutions, but few follow through. Net result—unhappiness.
 
It doesn’t have to be that way.
 
You could, of course, just try harder, stiffen your resolve, etc. But you’ve been there, tried that.
 
You could also ditch the whole idea and just stop making resolutions. Avoid goal-failure by eliminating goal-setting. Effective, but at the cost of giving up on aspirations.
 
I heard another idea: replace the New Year’s Resolution List with a New Year’s Gratitude List. Here’s why it makes sense.
 
First, most resolutions are about self-improvement—this year I resolve to: quit smoking, lose weight, cut the gossip, drink less, exercise more, and so on.
All those resolutions are rooted in a dissatisfaction with the current state of affairs—or with oneself.
 
In other words: resolutions often have a component of dissatisfaction with self. For many, it isn’t just dissatisfaction—it’s self-hatred. And the stronger the loathing of self, the stronger the resolutions—and the more they hurt when they go unfulfilled. It can be a very vicious circle.
 
Second, happy people do better. This has some verification in science, and it’s a common point of view in religion and psychology—and in common sense.
eople who are slightly optimistic do better in life. People who are happy are more attractive to other people. In a very real sense, you empower what you fear—and attract what you put out.
 
Ergo, replace resolutions with gratitude. The best way to improve oneself is paradoxical—start by begin grateful for what you already have. That turns your aspirations from negative (fixing a bad situation) to positive (making a fine situation even better).
 
Gratitude forces our attention outwards, to others—a common recommendation of almost all spiritual programs.
 
Finally, gratitude calms us. We worry less. We don’t obsess. We attract others by our calm, which makes our lives connected and meaningful. And before long, we tend to smoke less, drink less, exercise more, gossip less, and so on. Which of course is what we thought we wanted in the first place.
 
But the real truth is—it wasn’t the resolutions we wanted in the first place. It was the peace that comes with gratitude. We mistook cause for effect.
 
Go for an attitude of gratitude. The rest are positive side-effects.

Smoking Guns in the Rear View Mirror: Madoff and the SEC

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Experienced bloggers tell me to lead with the headline, as in newspaper stories.

So here it is: read this link. It’s the document sent to the SEC in 2005 accusing Bernie Madoff of running a gigantic Ponzi scheme.

More specifically, it’s the Wall Street Journal’s copy of the letter, separately identified as coming from Harry Markopolos, the Deep Throat of the Madoff scandal. But that’s not the point.

The point is this: take 2 minutes to click on the link and give it a quick look.

Come on, you can afford 2 minutes, this is history we’re talking about. It’s only a 17-page .pdf file, and you don’t have to read all of it.

There, that wasn’t so bad, was it?

Now—what did you think? OK, let me help you out.

It wasn’t all that hard to read, was it? Some jargon, but largely around technical terms whose connotation was clear in context. Markopolos outlined it pretty well, right? You got the sense that something was most definitely fishy, and that this guy sounded like he pretty much knew what he was talking about—right? When he says "Madoff Securities is the world’s largest Ponzi scheme," did you get the sense he was telling the SEC that Madoff was running a Ponzi scheme? Yeah, me too.

Now—if you were a staff member at the SEC and received this letter—what would you do?

My own gut-level instinct—based on nothing more than having worked 6 months for the feds 30 years ago, knowing a whole 2 SEC employees, and having lived on this planet for a few years—is that at least a couple hundred human beings at the SEC are more than capable of of understanding it at least as well as you or I. And I’m sure several got the chance.

Which begs the obvious question: why, oh why, did nothing happen?

There are several really obvious answers, which I won’t belabor. Just now. (Though venality and incompetence generally head the list of usual suspects).

Now, at the risk of losing the bloggers, let’s get past the headline. When something in retrospect is shockingly obvious, it should at least raise the possibility that it might not have been so obvious looking forward. Consider the law of gravity, for example. Or Obama’s election. Not to mention this smoking gun of a document.

What kinds of things get in the way of clear forward perception? High on the list, I think, are beliefs. Not the opacity of data; not a lack of IQ; not a conspiracy of coincidence. Beliefs.

Beliefs: preconceptions, ideologies, inclinations, habits, norms, assumptions, conjectures, presumptions, presuppositions, expectations. A word for "stuff" in the mind that the neurobiologists haven’t yet "explained," but which laymen nonetheless manage to understand quite well.

Business doesn’t believe in beliefs these days. It believes in behavior, results, measurement—these it considers incontrovertible proof.

I have two suggestions. First, go see the movie “Doubt.” It raises questions about the effects of moral certitude.

Second, go back and read that Markopolos’ document again. It does exactly the same thing.

Why did the SEC look so pole-axed? Place your bets. Venality? Incompetence? Or blindness due to moral certitude? What’s your bet?

And by the way, who owns the movie rights?

On the Road – To Trust

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Sometimes, little things add up to big trust.  I had to travel recently for a client, and I asked Joel, my travel agent, to provide me with flight and price information, which he promptly did.  However, when I learned that I could book my flight with my client’s travel agent for a lower price due to their airline contracts, I decided to book with them. 

Shortly later, plans changed.  Another client asked me to visit in a different city the following day, which required another leg to my journey before returning home.  I called Joel again because I needed to change my itinerary. 

Even though I had not booked the initial flight with his agency, Joel greeted my travel issue as if it was his own.  Though he could not make changes to another agent’s booking, he advised me how to deal with the change, without charge and without being miffed that I’d booked elsewhere after he’d gathered information for me.  He was focused on me, the client, and on our long-term relationship.  He checked his ego at the door.  

The result for Joel – I booked the next leg with him, of course.  And, I would recommend his services to anyone who asks.

Is it Personal? Or Is it Business?

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In The Godfather, Michael Corleone famously says to Sonny, “It’s not personal, it’s strictly business.”

What about trust? Is it possible to separate them? Can you be trustworthy in your personal life, but not in business? Does one imply the other? And what do we think of someone we trust personally who is turns out to be untrustworthy in business?

Cue Bernie Madoff again. (No, we’re not done with him yet; Madoff is a rich vein of material).

Eric Wiener in the LA Times:

the reason so many Wall Street players couldn’t believe their ears was they couldn’t accept that Bernie Madoff, of all people, would have pulled something like this. "Not Bernie!" was a typical refrain.

And, from the New York Times:

Indeed, in the world of Jewish New York, where Mr. Madoff, 70, was raised and found success, he is largely still considered as a macher: a big-hearted big shot for whom philanthropy and family always intertwined with — and were equally as important as — finance.

It seems increasingly clear that Madoff was greatly aided in this by dozens of willing accomplices—aka banks, funds of funds, hedge funds, “feeder” funds. People who took their own percentage for assuring “due diligence” so that the fraud that took place could never take place. People who claim to be anguished "customers," but who willingly sold the snake oil downstream.

And always, they too are characterized by those who knew them as people of integrity, people you could trust. And, I suspect, they believe it of themselves.

Now, there is a code by which you lie to one group and are trusted by another. It is the code you can hear recited in Huckleberry Finn by the Shepherdsons and the Grangerfords. The Hatfields and McCoys. The Montagues and the Jets, the Capulets and the Sharks. Or as it’s taught in competitive strategy and too many sales programs: the Sellers and the Customers.

I continue to be astonished that the largest Madoff “victim,” Fairfield Greenwich Group, who made hundreds of millions from Madoff, is considering suing PricewaterhouseCoopers—its own auditor. Reportedly because, channeling Willie Sutton, that’s where the money is.

How does Fairfield’s Walter Noel explain that to the partner at PwC’s Stamford office in charge of Fairfield’s audit?

Hint, Mr. Noel: you can buy The Godfather here and start rehearsing the line. "It’s not personal, it’s business. It’s not personal, it’s business." Click your heels three times while you say it. And tell him ‘trust me.’ That way it’ll sound personal, even when of course it’s not.

 

Anatomy of a Con Artist: How Madoff Played the Trust Equation

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The Trust Equation  describes the components of trustworthiness.  The equation is:

T = (Credibility + Reliability + Intimacy) / Self-orientation

Of course, any such recipe worth its salt will also serve as a template for reverse engineering—a “how-to” manual for a con man.  Measuring Bernie Madoff by the trust equation shows just what an effective job he did at mimicking genuine trust. 

So let’s do the numbers:

Credibility: Chairman of the Board of Nasdaq, for starters.  Not to mention a Who’s Who client roster.  But an especially nice touch: not just any old lamb could buy in—you had to be approved by the wolf.  Exclusivity adds cache and credibility. 9 out of 10.  Better than Alan Greenspan (hey, he used to be hot).

Reliability: Arguably Madoff’s greatest contribution to the con: don’t go for the jackpot, the Big Win.  Become known for steadily hitting .335 in a league of .285 hitters.  Always just over the average means always just under the radar.  Another 9 out of 10.

Intimacy: courtesy of spoonfeedin, he was described as a gentleman, gregarious, generous, personable, charming, and so forth.  Like a mass murderer, he appears to have been ‘the last person’ one would have suspected.  Give him an 8 out of 10.

Self-orientation: who would suspect the motives of a philanthropist, a giver to religious causes, a man generous with his own (we thought) money?  Not me, not you, that’s who.  An apparent low score (low self-orientation is good, you see); maybe a 2. 

That’s a Trust Quotient score of (9+9+8)/2, or a spectacular 13 out of a possible 15.  (If you don’t think that’s spectacular, try it yourself: take your own Trust Quotient.

There is no such thing as trust without risk; Madoff was an awfully talented con man.

But he couldn’t have done it without his pigeons. 

–A great many people may have suspected him, but felt glad to be in on the “fix.”  No sympathy for them. 

–I am astonished to hear that Fairfield Partners may sue PricewaterhouseCoopers—not Madoff’s accounting firm, but their own accountancy.  Zero sympathy for that Madoffian level of chutzpah. 

–Then there’s all the relatively innocent folks out there who thought they’d found something almost too good to be true.  They learned the distance between “almost” and “definitely” is dangerously thin.
 

Where Caveat Emptor Still Stalks the Land

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I am not generally the dullest knife in the drawer, but when it comes to the subprime, I-mean-credit, I-mean-whatever financial crisis, I often feel like one. I know a few facts, but can’t put them together in a satisfactory way.

Fortunately, for my ego, I’m not alone. Few people seem to understand it all.

One that comes closest is the recent article The End of Wall Street’s Boom by Michael Lewis, author of, among other books, 1990’s Liar’s Poker. I heartily recommend this for anyone wanting to better understand what went on at the heart of the storm.

If you believe there is something hopelessly twisted at the heart of the financial sector of the global economy, you’ll find some support here. The most telling story Lewis relates, I think, is that of a dinner that Steve Eisman had with a fund manager:

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

[Eisman] had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

In other words—‘no problem, I’ve unloaded the toxic waste onto my customers. I’m doing fine, thanks for asking.’

Let’s be clear. If your grocer sold you toxic milk for your child, would they say ‘no problem, I unloaded it onto my customer?’ How about your local pharmacist? Your auto dealer? Heck, if your local drug dealer sold you bad weed, wouldn’t he at least be embarrassed?

Those other industries at least have the good taste to be ashamed. In this sector–well, not so much.

There is a belief afoot in Finance Land, put well in the Financial Times by George Soros last January in Worst Financial Crisis in 60 Years Marks End of an Era :

Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest.

As Soros points out, it’s simply not true. The current crisis was caused by markets, and (sort of, so far) mitigated by governments. I learned in business school the notion that competition leads to equilibrium is a bad economist’s dream: the real point of competition is to bash the other guy’s head in. Du-uh. The only reason it doesn’t reach end game more often is regulation—agencies, anti-trust laws, etc. which say “tilt” and “restart.”

I’ve met all too many people educated in our “best” schools who have come to believe that selling toxic waste to customers is a legitimate part of a noble, even moral, endeavor called ‘capitalism,’ founded by Adam Smith, tweaked by Ayn Rand, and quasi-guaranteed in the Constitution. The customers? Caveat emptor. It’s good for them. Culls the weak from the herd.

No, it’s not. It is simply selling toxic waste to customers, and it is despicable under any code of behavior within 10 miles of the word “ethical.” It is not even good capitalism.  Poisoning a customer is like selling your mother to pay the rent, or stealing the life preservers from your children on a sinking boat.

Congratulating yourself for doing it is simply beyond the pale.

How many banks and hedge funds who sold Bernie Madoff’s funds to their clients will offer to make good? To simply refund the commissions? Or—a novel thought—just apologize? There’s your caveat emptor at work, still stalking the land.