Example 1: The Grocery Game

The Grocery Game is a service that informs their customers on how to combine coupons and promotions, at a variety of grocery stores, in order to get the best deal possible.  They distribute updates on a weekly basis to paying customers.  Here is a screen shot from an E-mail they recently sent me encouraging me to sign up.

Since when does $2 divided by 3 equal $0.55?  I would think their E-mail marketing would go through a more vigorous editorial review then their product.  If their marketing is inaccurate, how accurate is their service I would pay for? Or if this is a screen shot of the actual service, I now know that I would be paying for something that was not correct.  After seeing this, I could never trust the company.

Example 2: JBoss

I recently received an E-mail newsletter from a local consulting firm that my friend works for. They mentioned “JBoss” in the newsletter many times, so I thought I would do some research into what JBoss was.  I was browsing RedHat’s website and found this example comparing the cost savings JBoss provides compared to IBM WebSphere and Oracle SOA Suite.  I thought I would play around with the tool a bit. Check out these calculations:

I don’t see how 20% of  $212,800 is $212,800.  Am I missing something?

It appears as though they were going to add up the column and have a Total License Cost like they had in the first column.  But, in year two and three, they all add up to $0.

Both of these errors impact the savings calculation shown on the bottom of the tool.  If RedHat’s savings tool doesn’t work, why would I trust the service they are selling with my company’s data?

Many of my friends and colleagues know I am a huge proponent of Wal-Mart’s and their Every Day Low Prices.  I frequently have lively discussions about my love for Wal-Mart and their low prices.  In mid December, I came across an article that discussed Chicagoland’s grocery chains and their battle for shoppers.  The article got me thinking about how powerful Wal-Mart’s “Every Day Low Price” strategy is.  Two lessons can be learned from the Every Day Low Price strategy: consumers don’t shop where they are unhappy, and innovative companies are profitable.

Pricing Strategies

Grocery stores primarily use one of two different pricing strategies: High-Low, or Every Day Low Prices (EDLPs).

Stores with “high-low” pricing strategies price some products at low prices, while having other products at higher prices.   These stores use promotional sales to lure shoppers into the store in order to persuade them to buy other high priced high margin items by utilizing other marketing techniques.

The competing grocery pricing strategy is “Every Day Low Prices”, or what I like to call, EDLPs.  Wal-Mart popularized this strategy and uses it to this day.  Prices are set low, and stay low.  The only time a price changes is when supply or demand changes, or when the retailer forces the supplier to innovate.  Furthermore, if prices do change, they usually go down.  Remember Wal-Mart’s “falling prices” marketing campaign? EDLPs have helped Wal-Mart become the world’s largest retailer.

The Grocery Store Game

Lesson one: Consumers don’t like to shop where they feel unhappy.

I don’t know about other shoppers, but I don’t like to play games when I shop. I like to know I am getting a fair price for everything I buy.  If I wanted to play games with my money, I would gamble.

Every time I shop at stores like Jewel and Dominick’s, stores that use the “high-low” pricing model, I feel like I am loosing a game of pricing. With the “high-low” pricing model, prices don’t change because of supply or demand; they change to trick the customer.  I always leave the store feeling like I lost the game, which makes me very unhappy.

The “high-low” pricing model is about as close as it can get to a “bait and switch” technique without actually being it.  Actually, when an item is out of stock, it does become a “bait and switch” technique.  Does anyone actually go through the hassle of getting a rain check on a bag of peas?

Let’s look at the shopping game in the eyes of an offensive or defensive player.

Defensive shoppers, like my self, usually go to the store when they need something.  And when they buy a product, they are at the store’s pricing mercy.

As stated in the fore mentioned article, stores who use the “high-low” pricing strategy have higher total transaction values; on average, 13% higher.

My defensive shopping habits cause me much frustration when I see the price I am paying.  As a price conscious consumer, I tend to remember what prices are good, and what prices are bad.  To this day, I know when I shop at Wal-Mart I can buy a cake mix for roughly $0.87 , no matter which store I am at or what day of the year it is.  At Jewel or Dominick’s, that price can range from a rare $1.00, to the usual $3.00.  Prices of many items at Jewel or Dominick’s fluctuate to this extreme, and it really makes me unhappy.

On the other hand, shoppers that buy offensively at these “high-low” stores, only buying products when they are on sale, usually do pay a decent price.  But that comes at a cost, shopping offensively is not only inconvenient; it requires a tremendous amount of planning and researching.  As explained in the story She’s crazy for coupons by the Star Tribune:

If you want to learn to save as much as the pros, check out their websites or attend one of the classes. Before long you’ll be buying 10 or more Sunday papers a week just for the coupons, going online for additional coupons and tips, devoting an entire room to food storage, and slashing grocery costs by 75 percent.

The Star Tribune is not alone, local and national news segments frequently feature customers that play the game so well, they can save nearly 85%.

I have tried this offensive technique, but living in downtown Chicago without a car, it is very difficult.  I am lacking both storage and transportation capacity.  It would cost me tens of thousands of dollars to devote a whole room to this strategy; eliminating any possibility to save money.

Efficiency

Lesson two: Companies that innovate are profitable.

As Jim Hertel points out in Food fight: Grocery chains, discounters in battle for shoppers, operating “high-low” pricing strategies actually creates inefficiencies, which translates into higher inventory costs.   I could not agree more with Jim.  Stocking and tracking inventory for temporary specials is extremely expensive. I recently discussed this along with many other inefficient practices associated with “high-low” pricing strategies in my recent post The Costs of Promotional Sales.

Jim also discussed the high amount of variety at stores like Jewel and Dominick’s.  Jewel and Dominick’s defend their vast variety, almost twice that of discounters such as SuperTarget, as adding to their level of service.  Stating,

Price comparison between conventional retailers like Dominick’s and low-cost discounters like Wal-Mart, SuperTarget and Food 4 Less is fundamentally unfair.

They continued,

We have different business models, and our format, offerings and overall selection and pricing strategy are not the same.

The last time I went to Jewel, there was half an isle of Jelly, Jam, and Peanut Butter.  How many varieties does the consumer need? I see the benefit of different brands and flavors, but there are countless sizes and varieties of each! Imagine the cost associated with stocking and tracking five different sizes/containers of each brand and type of jelly! This practice is not service, it is gross inefficiency that brings higher prices across the board.

One store has this “few varieties” concept down so well, I believe it has lead to their prices being lower than Wal-Mart’s prices.  Yes you heard me right; there is a retailer with lower prices than Wal-Mart. Aldi, well known in Europe for decades, has been expanding the number of their United States locations rapidly in recent years.  Aldi sells one size and one brand of grape Jelly. They only stock two peanut butter types: creamy and chunky, with one size fits all containers. Prices at Aldi are unbelievably low.

I can go on and on about Aldi, but I will save that for another day.  I will say, however, their business model is not only admirable, it’s brilliant and innovative.

Innovation is not unique to Aldi.  In order for Wal-Mart to have Every Day Low Prices, prices that are consistently lower than the competition, they need to lower costs.  Lowering costs is a religion at Wal-Mart.  The company is constantly innovating their supply chain and retail operations.

The most profitable companies are the ones that innovate: Wal-Mart, Apple, Google.  These companies are companies that I, along with most of the business community, admire to a great extent.

Innovation is, if anything, my religion.  Innovation should be never-ending.

In order for Wal-Mart to continue their goal of having EDLPs, they require their suppliers innovate and increase productivity. Many people see Wal-Mart as the goliath who forces suppliers to reduce wholesale prices, which, on occasion, puts the supplier out of business.

One of the most predominant examples of a supplier that Wal-Mart ruined was Rubbermaid.  Rubbermaid insisted on raising prices due to higher material costs.  Wal-Mart stopped selling Rubbermaid’s products.  A different supplier, Sterilite, quickly took advantage of the situation by innovating and became a significant supplier to Wal-Mart.  If Sterilite was able to supply Wal-Mart profitably, Rubbermaid should have been able to do so as well.  It was Rubbermaid’s failure to innovate which led to their failure, not Wal-Mart’s strength.

In fact, as mentioned in Wal-Mart’s Influence Grows, published in USA Today, Wal-Mart accounted for 25% of the late 1990s’ productivity gains. In the article, McKinsey & Co also explained that profit gains in the late 90s were primarily due to Wal-Mart.

The costliest thing a company can do is “do it like is has always been done” and languish in gross inefficiencies.

The Power of Every Day Low Prices

Looking at national, public grocer chains, and their financial data**, it is easy to see how powerful EDLPs can be. Stores that use the EDLP pricing model tend to be more profitable than those that do not.  Both Target and Wal-Mart have a healthy 4% average Net Margin for the last four fiscal years.  Kmart also utilized the EDLP strategy, but they stand out from the crowd.  Kmart’s refusal to innovate was, in large part, the reason for their demise.  As mentioned before, innovation is essential to the EDLP strategy.  Without innovation, the strategy will fail.

Now, let’s look at the stores that use the High-Low pricing model. SUPERVALU lost $2.9 Billion last fiscal year, a -6% Net Margin.  Over the three prior years, SUPERVALU had a 1% average Net Margin. Safeway and Kroger did slightly better, both having an average of 2% Net Margin the last four fiscal years. None of these stores had a fiscal year better than that of an EDLP store.

Every Day Low Prices make customers happy.  People like to shop where they feel happy. Shoppers know prices are consistently low at stores with Every Day Low Prices. And because shoppers know prices will be consistently low, they will continue to shop at those stores.  It is literally a free marketing campaign. Furthermore, both efficiency and innovation are functions of Every Day Low Prices.  In order to keep prices low, retailers must constantly monitor and reduce costs.  Cost reduction is a never-ending process requiring companies to be lean and innovate every day.

**National Grocer Chains Fiscal Data.  In Millions of USD.

* Fiscal years are estimates; company fiscal years deviate slightly from normal Gregorian calendar years.
* Fiscal data gathered from Google Finance on February 23^rd 2010.

I proceed to sign up for a Minyanville account so that I could comment on the video.  Knowing their ads were out of control, I thought it would be best to read their privacy policy before I decided which E-mail address to divulge. I am glad I made that decision! Minyanville’s privacy policy is absolutely absurd! Check out these three segments:

Personal Information

We will not sell or rent your personal information.

We may share your personal information with third parties solely for the purpose of providing services to you.

As we develop our business, we may buy or sell assets or business offerings. Customer, email, and visitor information is generally one of the transferred business assets in these types of transactions.

Their privacy policy starts out stating they wont share your personal information what-so-ever.  Then it states they may share it.  Finally it says, they may actually end up selling it. Unbelievable.

In case they decide to change it at a later date, here is a PDF of their privacy policy.

Grocery retailers frequently use promotional sales to lure customers into stores.  Retailers hope customers will purchase higher margin products while they shop for the promoted items.  Chicago grocers Jewel-Osco, subsidiary of SUPERVALU, and Dominick’s, subsidiary of Safeway, both follow use this marketing strategy, changing promotions twice a week.  The promotional sales may increase customer traffic, but they may also lead to the demise of the store.  I suspect, retailers that use promotional sales, on every day products sold year round, increase the cost of doing business and decrease supply chain efficiency.

Used by many grocers, promotional sales are the activities, materials, devices, and techniques used in the advertising and marketing of products.  I separated their cost into two different categories; direct costs and indirect costs.  I see the money spent on the processes and material to implement the promotional sale as direct costs, and the money lost due of the effects of the promotional sales are considered indirect costs.  From my point of view, both of these costs are significantly high, high enough to possibly outweigh any benefit of the promotional sales.  If I were managing a retail grocery operation, these are the items I would consider when deciding whether or not to continue utilizing promotional sales.

Direct Costs

Promotional sales have many components, each having a cost associated with it. Planning, marketing, inventory builds, and store preparations all take time to complete and consume valuable company resources.

Planning

Planning a promotional sale must be time consuming and costly.  Stores need to decide what products to put on sale, when to put them on sale, and at which price to sell them during the sale.  They must also decide how they will market the promotion, design the promotion, and distribute the promotion. It takes time for the retailer to manage, and it takes time for suppliers to manage.  That being said, it is possible that retailers who promote frequently can manage this process relatively efficiently.  However, managing a promotional sales still requires resources; resources that do nothing other than manage and execute promotions. The planning process is only the beginning.

Marketing

Promotions need to be communicated to the public, using any number of methods, all of which cost money.  From my experience, grocers seem to prefer some form of print media, like news papers or local ad circulars. Designing, printing, and delivering these advertisements must add significantly to a retailers cost. Some grocers even compliment the print media with radio and TV commercials, all of which take additional resources to produce and distribute.

Inventory Builds

Before the promotional sale starts, retailers must increase inventory of the items being promoted. Vendors, transporters, distribution centers, and storefronts all need to take special measures to guarantee extra inventory is delivered, on time.  Not only on time, but just in time; fresh produce spoils quickly and it’s vital the delivery process be planned and executed without error.  Early or late delivery can lead to costly spoiled inventory. In addition to any spoiled inventory losses; inventory builds take significant amounts of working capital.

Store Preparations

At the start of the promotional sale, costly store preparations must occur.  I have witnessed employees rearranging store shelving to accommodate shifts in inventory in anticipation of an increase in demand for some products, and decrease in demand for others.  Price tags throughout the store need to be updated, reprinted, and reapplied.  Finally, if displays are being used, they must be built and placed.

Each activity and consumable is temporary.  As promotions end and new ones begin, I expect these four processes repeat endlessly, adding cost during each cycle.

Indirect Costs

Along with any direct costs mentioned above, I predict promotional sales also have indirect costs aswell. Indirect costs caused by poor forecast accuracy, inadequate supply chain communication, and large inventory swings.

Forecast Accuracy

As part the planning and execution phases, I suspect most vendors and retailers use Enterprise Resource Planning systems, or ERP systems, to manage the supply chain.  ERP systems use a multitude of variables, including, but not limited to forecasts, past orders, current orders, and current inventory levels, to track, plan, and manage inventory.  Recommendations to create purchase orders or manufacturing requirements are created on a regular basis. Recommendations may be edited manually and released by planners, or  they may be released automatically as purchase orders to suppliers.

Because forecasts are the foundation of ERP system demand calculations, I know the data must be clean and accurate for the systems to operate efficiently.  But, from my point of view, promotional sales cause forecast data to be dirty or inaccurate for two reasons: lack of predictability, and manual data entry.

I assume it is nearly impossible to precisely predict how inventory will move during and after a promotional sale.  The incredibly high quantity of variables makes it close to impossible to accurately forecast purchasing. Even the most nimble and elaborate forecasting software will likely have difficulty analyzing uneven sales data, not knowing what impact each dip or spike had, or if the dip or spike will happen again. During a promotion, inventory could be wiped out completely or may not be sold at all.  After the promotion, purchasing may likely decrease but it may, instead, increase.  The dip or spike in demand will last an unknown period of time.  I suspect competitors may possibly have a promotion on the same or competing products.  The promotion price may or may not impact purchasing.  Finally, it is also likely a naturally occurring or unpredicted event may also affect demand.

Even if all the variables are correct and accounted for, and the company has perfect knowledge of consumers’ thoughts and competitors’ marketing, forecasts may still be entered or edited incorrectly.  The manual data entry processes is far from six-sigma levels of accuracy and, from my experience in analyzing forecast data, will most likely have errors.  Incorrectly entered or edited data points could flow automatically from the retailer’s ERP system to the vendor’s ERP system without notice.  It is likely systems would be in place to detect erroneous data, but because the data nature of highly volatile forecasts, I would expect the detection systems would miss many errors.

Supply Chain Communications

The ramifications of incorrectly generated and/or entered forecasts could be huge and expensive.  Data often trickles down from retailers to distributors and from distributors to suppliers; Most likely traveling automatically by way of automatic releases of ERP generated purchase order recommendations.  An invalid forecast could be transfered from the retailer to distributor to vendor without anyone knowing its inaccuracy.

Correct, but changed forecasts, could also cause problems.  I expect promotion plans change all the time.  They may get canceled, dates may move, or anticipated purchasing may change.   Regardless of the change, corrections or non-standard changes could get lost, miss communicated, or miss translated when being sent from retailers to vendors.  In some cases, they may not be communicated at all.

The farther away in the supply chain a company is from the retailer, the more difficult planning and communication becomes.  At the front of the chain, retailers have direct knowledge of a promotion, and have the ability to add or edit the details in their ERP system.  As promotions are developed, retailers communicate information to suppliers.  But, as mentioned before, if a promotion changes, it may not be fully communicated to all suppliers.  To add to the confusion, suppliers have suppliers, and those suppliers also have suppliers.  The farther down the chain, the less promotion visibility is seen.

The entire chain is only as good as the weakest link.  If not handled quickly and efficiently, at all levels of the supply chain, one invalid or missed forecast entry, or forecast change, has the ability to trigger massive product spoilage.

Inventory Swings

From my experience at a manufacturing company, huge swings in inventory are nightmares for suppliers.  Inventory builds require increased production, which may require overtime pay and/or auxiliary temporary warehouse space; both impacting the supplier’s profitability.  On the other hand, purchasing reductions that occur after a promotion ends may lead to vast amounts of unused warehouse space, non-moving inventory, or unutilized resources or personnel.  These swings are not only problems for suppliers, they are disruptive to transporters as well.

Trucking is the predominant type of food transportation in the United States.  Trucking is a tough business; just like empty planes, empty or unused trucks are not profitable. To be profitable, trucking companies need to haul loads to and from sources and destinations.  And inventory swings spurred by promotion sales create irregular shipments and increase the possibility of empty trailers for flatbed trucks.  Fortunately, third party logistics companies have become a popular way to mitigate the cost of empty trucks, but I still don’t believe they are still not a perfect solution, nor do they provide free services.

The least tangible costs of inventory swings are their affect on data mining and forecast generation.  As previously discussed, forecast accuracy is crucial.  From my experience as a Supply Planner, large swings in inventory make it very difficult to produce an accurate forecast. Standard deviations for products that regularly go on sale are extremely high, and systematically generated forecasts can be incredibly inaccurate.

Any losses or costs incurred at any point in the supply chain will be passed on to the retailer by way of higher wholesale prices, regardless who is at fault.  The retailer will then pass that cost increase to the consumer via higher retail prices throughout the store, not necessarily on the product being promoted.   Keep in mind, all of these additional costs are being incurred to sell an item at a reduced price, likely a price below wholesale cost.

I believe retailers that use promotional sales as part of their marketing strategy are pregnant with cost saving opportunities.  It only requires retailers to realize how many costs are likely associated with their promotional sales in order for them to analyze their promotional sales strategy.  In a retail world ruled by everyday low prices, the analysis will hopefully come soon.  If not, retailers selling everyday products will likely fail because their promotional sales have a high probability of increasing their cost of doing business and decreasing their supply chain efficiency.

I recently rearranged furniture in my condo.  Doing so required me to use the wireless 802.11 G network on my iMac.  I was not too thrilled with the solution; media transfers to my Tivo were extremely slow, and the connection was not as reliable as the hardwired one I had become accustomed to.

I remembered that my condo had many phone jacks throughout, so I thought I would research how my builder wired my unit, and maybe change the phone jacks to Ethernet jacks. Worse case scenario, I could at least get one 100 Mb connection from my iMac on one wall, to my Tivo under the TV on the other wall.

Solution

Turns out, the builder did a remarkably robust job with the wiring!  He used Cat5 cabling and all connections went to the closet! What a blessing!

I replaced all the wall plates with new versions and terminate the cat5 cables with Ethernet keystones.  I then created a small little networking area in my laundry closet.  Luckily, the builder also wired the cable lines to the same location he put the phone wiring. I was able to tap into the cable line right where I terminated the Ethernet in the closet.

After some cable crimping and wall mounting I was set!  My cable modem and router were hidden in my laundry closet, with hard wired Gigabit capable Ethernet jacks throughout my condo.  Pretty slick! And all under $15.

Next Step: Gigabit 802.11 N router!

One of my client’s computers recently got infected by several viruses.  She attempted to solve the problem by installing Norton Antivirus 2010.  After the instillation, her computer would not allow her to logon, so she gave me a call.  After doing some research, being unable to solve the problem, which was likely caused by the instillation of Norton Antivirus, I called Norton to receive the “Free Support” that came with the software.   The phone support reminded me of my recent post on foreign call centers; Norton’s support was unbelievable and unacceptable.  Explaining my interactions with Norton’s support team will illustrate how Norton’s “low cost” foreign call centers destroy consumer trust, damage Norton’s brand, and ultimately reduced the company’s profitability.

Before I elaborate on Norton’s phone support, I want to point you to how I solved the problem.  You can see the solution on how to fix a logon logoff loop on a previous post of mine.

I would also like to give a brief history of Norton Antivirus. Historically, Norton Antivirus has received extremely poor reviews because of its intense PC resource consumption, and inability to be completely removed from a user’s computer system.  Recently, Norton has been making great strides in reducing the products resource requirements and marketing it as such.  It has been quite some time since I have personally used Symantec’s Norton software; before the following fiasco, I perceived the Norton and Symantec brands as mostly neutral.  Let’s see how Norton’s call center impacted my perception of Norton’s brand.

When I arrived at my client’s location, she was completely beside herself.  My client was about to go on vacation, and her POS (Point of Sale) system was out of commission.  I tried for about an hour to solve the problem on my own to no avail. The box the antivirus software came in mentioned that it came with “Free 24/7 chat, E-Mail, and phone support”, so I figured I would give that a shot.

When I called, I was first connected to a Norton call center in the Philippines.  Before getting to the actual support, I had to give the Norton agent some personal information so she could create a customer profile for me.  I usually find it quite easy to tell someone my name and phone number.  This was not the case with Norton; I was barely able to communicate with the Norton representative I was on the phone with.  I spent five minutes spelling my name and giving her my phone number.  I am not an exaggerating.  If it was difficult to give my phone number, I could only imagine the quality of support I was about to receive.

After describing the problem, and going through some basic trouble shooting steps, the representative said she was unable to solve the problem.  I asked for their second level of support, the support based in the United States. As she began her response, I came to realize they were attempting to up-sell me.

I was embarrassed for the Norton representative as she began her sales pitch; I could tell she was reading from a script.  She told me that the second tier of support was based in the United States and normally cost $170.  But since I was a “valued customer,” they would give me a $30 discount.  So much for the “Free” support claims on their packaging.  I agreed to pay the $140, as I knew this was the only way I could reach someone that understood English.  I also knew that could get a refund, or if not, dispute the charge with the credit card issuer.

Prior to connecting with the second level of support I was asked to go to “Norton.com/link” in my browser.  Early in the support call, I told the agent I was using a second computer that had access to the internet, and it was not the computer I needed the support on.  With that understood, I figured this page would be used for some purpose other than remotely controlling my computer.

I spent another five minutes communicating my E-Mail address.  I was laughing in my head the whole time.  I assumed Norton’s support would be poor, not painful.  Norton’s support was painful.

The Norton representative then spent more time then necessary explaining how I would be entering my credit card information into an automated phone system.  When she finally transferred me to the automated system, I looked at my phone, and realized I had spent 30 minutes talking to her; 10 minutes of which was communicating my name, phone number, and E-Mail address.   I entered the requested information into the automated system with relative ease and was transferred to tier two support.

I got to the second level of support after a brief time on hold.  As the conversation started, I noticed the second representative had a stronger accent than the initial agent I spoke with. I inquired about her location, and she said she was in India.  I distinctly remember being told I would be talking to the second level of support, in the United States.

As I was talking to the second female agent, I was asked to confirm the information in my customer profile.  It turns out my E-mail address was incorrect.  I guess the five minutes I spent giving it to the first agent was not enough.  I had to go through the process once more; add five more minutes to the phone call for simple data entry.

After verifying my information, I was asked to go to the “Norton.com/link” page I had open in my browser.  The Norton representative said she was going to remotely control my computer.  I expressed, again, this was not the computer with the problem.

We discussed the problem once again. She reviewed a few pages of her resources with me; all of which I had already tried with no success.  Once her resources were exhausted, she said she was unable to assist any further and that she would refund what I had paid for the support.

After the interactions with Norton, I did some more research on the internet.  And, as I mentioned in the beginning, I did finally fix the Windows XP Logon Logoff loop.  Not only is it likely Norton Antivirus caused the problem in the first place, their support provided zero assistance solving the problem.  What Norton did do, however, was impact their brand quite negatively.  Norton’s “low cost” foreign call centers damaged the trust I had in Norton, damaged Norton’s brand, and ultimately cost the company money.  Let me elaborate a bit on each of these claims

Trust

My trust in Norton’s brand has now been damaged.  Norton’s packaging says “Free Phone Support” and I did not get that.  Instead, Norton required I purchase their advanced support to get any relevant help.   If one portion of the packaging was untrue, were other parts untrue?  Is Norton Antivirus actually effective at preventing infections? It is hard to trust one claim on a package if a second claim is proven false.

Second, I was told I would reach American based technical support if I paid their advanced support fee.  When I was transferred to that second level of support, I reached someone in India.

Impact on Brand

Besides losing consumer’s trust, Norton also proved they can’t effectively communicate. Either Norton’s foreign call centers are staffed with employees that can’t understand English well, or the call centers are built using poor quality telephony equipment. Why would anyone do business with a company that can’t spell “Ed” or understand a 10 digit number?  Statistically, from my interactions with two of Norton’s employees, in two different countries, 100% of Norton’s employees can’t communicate.  I realize that that is quite a poor population size, but it is all I have to go by; it is the only point of contact I have with Norton.

The Numbers

A few months ago my interactions with RCN inspired me to write an essay on how low cost call centers are inherently expensive.  My experiences with Norton prove my theory once again.  I spent roughly an hour and a half on the phone with Norton Support.  The call accomplished no positive outcome.  However, many resources were used during the conversation.

• Norton authorized a $140 credit card purchase, which likely cost Norton $3.
• I talked to two different support agents, at $10 an hour, that cost Norton $15.
• Norton consumed 90 toll-free minutes.

The call, which cost Norton nearly $20 financially speaking, was not the only cost to Norton.  The damage to Norton’s brand, caused by the poor quality foreign support and false advertising, carries an even larger cost, although it’s tough to say exactly what that cost is.

Even with the sale of the software, it would be tough to conclude Norton made any profit.  Norton only received a fraction of the revenue generated from the purchase of the software, which retailed for $40.  And it is likely that the software will be returned.

Here is the kicker: The foreign call centers may actually impact Best Buy more than Norton.  Best Buy does not allow opened software to be returned; it is against their return policy. It is unfortunate for Best Buy that Norton’s packaging included false advertising.  The customer, my client, did not receive what she had paid for; free phone support.  Therefore, it is safe to assume any credit card disputes would end in favor of my client.

I believe a credit card charge-back, or “dispute”, would cost an estimated $25, regardless if the dispute ends in the retailers favor or not.  Furthermore, credit card charge-backs are an administrative nightmare for any company.

At minimum, if Best Buy accepted the return, Best Buy would incur the cost of processing the initial sale, the refund, and the cost of employing someone to process both transactions. Total minimum cost would be roughly $3.30.  However, if they won’t allow the product to be returned, Best Buy would incur a charge-back fee from the credit card processor, regardless if they were found accountable or not, which would add $25 plus any administrative labor cost.  The total cost would be well over $30 after all is said and done.  That is well above the margin from the initial sale.  Furthermore, if the dispute ended in the customer’s favor, Best Buy would be out the $40 as well; totaling $70.

Norton’s “low cost” call centers have impacted both Norton and Best Buy quite negatively.  Norton has lost consumer trust.  Norton has badly damaged its brand.  And both Norton and Best Buy have incurred, or will incur, significant financial losses.  When will multinational corporations begin to see the damage caused by poor quality and low cost call centers?  It astonishes me that this trend continues.  Even as I was writing this essay, a friend of mine was complaining about HP’s foreign support as he tried to get his printer installed.  Ironically, he recently consulted on a project to outsource a portion of a company’s workforce to the Philippines.

Here is a quick “1-minute” formatting improvement.

Original

Improved

The improved segment is easier to read; looking cleaner, better structured, and more professional.  I made five improvements, each of which made a dramatic difference.

• Move the date below the “Top Headlines” title -> cleaner look.
• Used an Un-ordered list instead of inline, text bullets -> cleaner look.
• Decreased quantity of words in each headline -> no wrapping text.
• Standardized text sizes -> all headlines match, cleaner look.
• Used Blagojevich’s real last name, not slang -> improved professionalism.

One of my clients caught a virus on her computer this last week.  In an attempt to correct the problem, she installed Norton Antivirus 2010 before doing a full system scan using the boot disk.  The first time she rebooted the computer, she got into a logon logoff loop; after entering her login information and submitting it, Windows XP would automatically logoff the account.  It was at this point she contacted me and I came to help her solve the problem.  [See the bottom of this post for the solution]

I was stumped rather quickly after many internet searches.  I could tell the solution would not be easy.  The logon logoff loop persisted in all versions of safe mode; I was unable to access a command prompt.  I ran the bootable Norton CD and cleaned any remaining viruses off the machine; that didn’t solve the problem. My attempts to rename or copy files from another working machine, using a Windows Repair Console, did not solve the problem either.

Before telling my client I could not fix the problem, I called Norton to see if they could help me. Norton’s support was unacceptable, they could not help me.  I documented Norton’s inadequate support in a separate post.

I brought the computer to Best Buy, where my client originally purchased the Norton product.  I talked with the Geek Squad agent for a while, and we came to the same conclusion, a Windows Reinstall was most likely necessary.  I told my client I could do this at a fraction of the cost Best Buy would charge.

I attempted one last time to save the instillation of Windows, and returned to the internet once more.  I quickly realized I had managed to miss one of the possible solutions; fixing the registry.  I originally did not try this because I was unable to access Regedit.  This time, however, I brought some blank CDs and a copy of Windows XP Professional SP2 so that I could create a BartPE disk.  Using that disk I was able to open the local machine’s software registry hive and solve the problem.  My client’s computer booted successfully, and everything was as good as it was pre virus infection.

I learned two lessons with this service call:

• Run a full system scan prior to an Antivirus instillation; the scan provided on the bootable CD.
  • The Bootable Norton CD will download new virus definitions automatically if the machine is connected to a LAN.
  • Installing Norton on an infected machine could possibly cause damage.
• Come to all clients with all the tools at your disposal.  Even the tools you don’t think you will need.

Conditions

A Windows XP Professional machine was infected with several viruses.  Norton Antivirus 2010 was installed prior to a full system scan.

Symptoms

After rebooting, the system enters a logon logoff (or login logoff) loop; unable to get to the desktop. Safe mode will not work.

Solution

1. Boot from BartPE disk (Download and creation instructions for BartPE)
2. Open Regedit
3. Select the HKEY_USERS hive
4. Click File and choose Load Hive
5. Open the SOFTWARE  registry hive, likely located in:
   C:\Windows\System32\Config\SOFTWARE (Note: No filename extension)
6. Give the Hive a name: MyLocalHive
7. Navigate to:
   HKEY_USERS\MyLocalHive\Microsoft\Windows NT\CurrentVersion\Winlogon
8. Validate the value for the Userinit string equals:
   C:\Windows\System32\Userinit.exe, (Note: comma should be there)
9. The preceding string and value may be missing and must be added
10. Close Regedit and reboot the machine

Solution Credit: MVPS.org

I had a problem with my Samsung LN-S4095DX cutting off the edges of the image and was able to fix it with a firmware update.

I have had this edge-cut-off problem ever since I bought my TV.  I really didn’t notice the problem when viewing my Tivo; most channels do not to put important visual information on the edges of the image.  However, I had a difficult time using my Mac or PC with the TV as a display because the menus were always getting cut off.  Both computers were sending out a 1920 x 1080 resolution image via an HDMI.  My TV supports 1080P.

I have searched through my TV’s menus and manual on many occasions; unable to find a solution that would enable “pixel per pixel” or “Just Scan” image display functionality.   I searched the internet on multiple occasions, also unable to find a solution.  A few days ago, in desperation, I called Samsung support.  I told them about my edge problems, and they claimed my TV is set correctly, and the image coming from my PC and Mac were either incompatible or not correct.  The Samsung support supervisor even claimed a 40″ 1080P TV has fewer pixels than a 50″ 1080P TV and told me I should lower my computers output resolution.

The geek inside me knew Samsung’s information was far from the truth.

I went back to the internet and searched for another hour.  I found something that instructed me to disable the “Overscan” feature on my Mac.  I tried that solution; the image on the TV reduced in size, and I was able to see all of the menus.  However, the image being displayed was at a much lower resolution then the TV should be able to handle, and there were now black bars on the sides of the image.  This solution was not acceptable.

Finally, I came across some postings referring to a new firmware update for my TV.  I found the update files on a server somewhere on the Internet, thanks to Google.  I downloaded the firmware (usb_MOS2AUS0_1026.exe), used my PC to extract the files and put it on a USB drive, and upgraded my TV’s firmware. See below for the exact process.

I turned my TV on, pushed the blue P.Size button on my remote, and YES! the “Just Scan” feature was now present!  The picture looked perfect!  Problem solved.  I have no idea why Samsung did not enable this in the first generation of firmware.  But it works now, and I am a happy camper!

Symptoms

A Samsung LN-S4095DX is stretching a 1080p/1080i imaged and cutting off the edges.  The image displayed on the TV is 92% of the original imaged; stretched.

Solution

1. Get file from here (sorry for the pop-up ads):

   http://www.mediafire.com/file/mzjgjvwzngy/usb_MOS2AUS0_1026.exe

2. Extract the files to a USB memory stick/jump drive.
3. Insert the USB memory stick/jump drive into the TV’s service port.
4. Turn on your TV
5. Go into AIR or Cable mode by pushing the source button.
6. Press: MUTE,  7,  8,  9, EXIT
7. Sit back and watch the hilarious status messages. TOUCH NOTHING
8. The TV will turn off by itself at the end.
9. Turn on your TV
10. JustScan will be available in the Picture menu, or by pressing the blue P.Size button.

A recent trip to Best Buy encouraged me to Tweet about a slow line and unhappy employee.  After my Tweet, a concerned Best Buy employee responded and asked me to elaborate on the problems I was having.  I decided to write him an e-mail.

Below is a copy of my e-mail and his response.

John,

As I mentioned, I thought it would be best to elaborate on my situation today.  Today’s situation is quite irritating on its own, however, there are other circumstances related to today that should concern your company more. I will bring those to your attention after I describe the day’s events and review some background information.

Today’s events
I came to the store to apply a gift card ($5) and RewardsZone certificate ($5) to a $140 purchase I had made a few weeks prior.  The transaction could be completed in two minutes, if done correctly.  When I got in line, there were three people in front of me.   While waiting, for somewhere near 30 minutes, I was able to watch the actions of many Best Buy employees quite closely.  Leah was the only person working customer service at the time I arrived.  She had an incredibly dreary and unhappy  look on her face for the entire 30 minutes.  I don’t think she smiled once the entire time I was in line.  She talked very quietly with little joy or excitement in her voice. While completing transactions, she had no sense of urgency and not once acknowledged the customers waiting in line.

Although Leah was the only Customer Service representative that was helping customers at the time, I saw many other Best Buy employees walking back and forth behind the counter.  None of the other employees came to help Leah or acknowledge the customers waiting in line.

Bored in line, I turned around several times and witnessed many concerning things.

1. A Best Buy employee in the digital imaging department was not helping any customers, and was standing, literally, right behind the customer service line.  He must have been aware of the slow moving line with several people in it.
2. Several Best Buy employees were standing and talking to one-another in the computer department.
3. One of the store managers, a tall man, was talking to another Best Buy employee at a nearby POS system.

Combined, there must have been at least six Best Buy employees, that I could see with my own eyes, whom were not helping any other customers.  And most, if not were aware, should have been aware of the situation.  Although it was hard to hear Leah speaking, I do not believe she ever spoke into her in-store communications device asking for assistance at customer service.  I did hear her, however, ask for a Digital Imaging employee to assister her.  The digital imaging employee I mentioned earlier came over to briefly discuss something with a customer and left.

It was at this point I formulated my Twitter message.  Before I could send the message, a second store manager came over and started to help me with my transaction.  By that time, there were four people behind me in line, and two other people that had come and left the line.  I was shocked that a store manager was helping me with my transaction. To his credit , he apologized for the wait.  however he did not offer anything for compensation when I agreed waiting in line for 30 minutes was concerning.

After the transaction, I was able to send my Twitter Message.  As I returned home, I was pleasantly surprised that one of the “twelpforce” agents called her, and many responded to my tweet.

Some background information
Nearly two months ago, I was aware the store was accepting applications for seasonal help.  I filled out an application online for a customer service representative or cashier position.  I was called in for an interview the same day I submitted the application.  I came in, a week later, for an interview with Elisa on September 7th.

I believe I was exactly what Best Buy was looking for.  I had worked for Best Buy for three years during high school and college; working during two different holiday seasons.  I was recently laid off from my previous full time job and was fully available. I would need nearly zero training, could start immediately, and to top it off, I am one of the most cheerful and upbeat people I know.  And to add to that; I am passionate about process efficiency and would have been very good at quickly helping customers.

During my interview, it was stated on many occasions that cheerfulness and happiness was important.  It was also stated that bending the rules on occasion was acceptable to make a customer happy, and encourage repeat business.

I was told I would receive a call back from Elisa once they made a decision.  I never did.  I called back twice to talk to Elisa the following two weeks, and left messages for her on both occasions.  When I visited the store to make the original purchase I mentioned earlier, I talked with Elisa and ask why I was not hired.  She said I had experience with customer service and not being a cashier;  they were hiring cashiers. Maybe she didn’t remember that I had mentioned I was both a customer service representative and cashier.

Why this should concern your company
I realize this email is getting quite long, so I will try to be brief.  It appears to me that Best Buy is trying to create happy customers.  I have perceived this through commercials your company is developing, the fact that I received multiple responses to my Twitter comment, and the information I was given during my interview.  But these all are merely one-way, or distant two-way communications.

As a customer, former employee, and non-hired seasonal employee of Best Buy, I have a significantly different perception of your company than most people.  My goal in writing you is to make you aware of both today’s situation, and the situation a few weeks ago when I was not hired.  Individually, both of these scenarios are of little consequence.  Combined, however, a different picture is painted.  It seems to me that Best Buy is spending incredibly amounts of money to improve their brand image by bettering their customer interactions.  However, Best Buy is failing when it comes to the actual face-to-face customer interaction.  Today, all of the good will built by Best Buy’s advertising and promotions was eliminated by one single transaction that took over 30 minutes to complete.

It astonishes me that your company is not only hiring people that do not compliment this new “happy company” image,  it is actively seeking not to hire them.

I could write a whole other two page email about an HP representative I interacted with a few months ago and my attempts to improve that situation.  I could also write up a lengthy critique of a list of computer “optimizations” your company sells which was given to me by your employee.  Furthermore, I could assess a poorly designed Windows 7 upgrade flyer I picked up today.  But, I will not.  It is at this point I believe the free advice has run out.  But your company need’s to get with the program.

We can discuss any of this over the phone if you would like.  My  phone number is listed below.

Regards,

Ed Hayes
Information Technology Integration Analyst

I got this from John in response:

Ed

That was actually me who had called the store because I was concerned about your experience when I saw your tweet.

I agree that the below items are concerning, and I need some time to figure out an approach to rectify the situation. It may be that store process dictates employee behavior, but it seems we could have done much better here. I’ll be getting this information to the store manager asap.

With regard to the hiring situation, I realize I’m hearing only one side of the story, but it seems a bit confusing at best. Stores are empowered to make their own decisions, so I’m afraid there’s not much I can do.

Thank you for taking the time to tell us where we can be better. Info like this will help us get better.

Thanks,
John <last name truncated>

It appears Best Buy is genuinely concerned about the situation I had.  I am hopeful that my letter will encouraged better hiring practices, or at minimum, better employee training.