The Entrepreneur and the Academic

The Entrepreneur and the AcademicWalking around Melbourne city one afternoon I decided to have some chips for lunch and ended up in a trendy chippery in Elizabeth Street, munching away on some deep fried potatoes and mayo. The man serving me was the owner, an entrepreneur experienced in the fast food business. Brad, spoke openly and explained how he tries to make a buck in the hyper-competitive world of fast food.

Brad celebrated big successes in this market in the past but emphasised that he had only completed high school and had no formal business qualifications whatsoever.

Some time ago, Brad attended a post graduate management lecture at a local university. First Brad thought that the lecturer was talking gobbledygook, but after a while recognised that the theories presented in this talk match what he does intuitively to run his business.

The entrepreneur is the hero of contemporary capitalism

I told Brad that I occasionally teach marketing at La Trobe University.  Management scientist study entrepreneurs like Brad to figure out how they do business and present this back to colleagues and students as generalised theories, formulas and diagrams. One of the aims of business studies is to unlock the intuitive knowledge of entrepreneurs such as Brad so that other, less talented and more risk averse budding entrepreneurs, can replicate their success.

The Entrepreneur in Society

The entrepreneur is the hero of contemporary capitalism and has been idealised and studied in great detail by scholars around the world, each looking for the holy grail of entrepreneurship. Researchers study entrepreneurs like etymologists study insects. They dissect them, analyse them, observe their behaviour to extract the essence of what it is that makes them successful.

Entrepreneurial biographies are, however, always incomplete and sanitised versions of reality. The spirit of entrepreneurship is a mythical concept in business studies that can only be known through experiencing what it is to be in business, not by studying it

Further reading:

Using Queuing as a Marketing Tool: Waiting increases desire

Using Queuing as a Marketing Tool: Waiting increases desireThe release of a new iPhone model or other Apple gadget always seems to be accompanied by long queues of people. Even though customers can pre-order their desired devices, stocks always seem to run low quickly, and there are always lines of people in front of the iconic Apple stores come release date. Just like fast food companies have limited time offers on themed burgers, Apple simulates scarcity to stimulate demand.

In the epic battle between Samsung and Apple queueing of customers is used to create the perception of increased value. Samsung has recently taken a line out of Apple’s book and established a store close to the flagship Apple store in Sydney, selling $2 phones. Eager punters for this great deal were quickly queueing in front of the Samsung store.1

According to Robert Cialdini, scarcity is one of the Six Weapons of Influence, a powerful way to influence consumer attitudes.2

The use of scarcity to generate demand has recently been validated by Jeffrey Parker and Donald Lehmann at Columbia University.3 Parker and Lehmann found that retailers can shift demand to a more profitable brand by keeping it less fully stocked.

Scarcity has a mostly positive effect on consumer preferences when they believe that it is created by market forces. Scarcity is not a positive influence when produced by accidental causes, such as failed delivery. The power balance is, however, always in favour of the marketer as they control the flow of information.

  1. Ben Grubb, Samsung ambushes Apple’s iPhone 4S launch in Sydney, Sydney Morning Herald, 12 October 2011. 

  2. Cialdini, R. (2007). Influence science and practice. Gardners Books Ltd. 

  3. Parker, J. R., & Lehmann, D. R. (2011). When Shelf-Based Scarcity Impacts Consumer Preferences. Journal of Retailing, 87(2), 142-155. 

The Marketing Mix as a Metaphor

The Marketing Mix as a MetaphorManagement is a complex activity. To be able to deal with the inherent complexity of business most management advice is littered with simplifications—formulas, diagrams, matrices and other mnemonics help managers to create order in the chaos of everyday business life.

Marketing students at all levels of academia are indoctrinated with the concept of the marketing mix as the 4P-mnemonic: product, price, place and promotion, initially proposed by Jerome McCarthy.1 Other scholars have built on McCarthy’s insanely popular scheme, most famously Bernard Booms and Mary Jo Bitner proposed three additional concepts to account for the precise nature of services, i.e. people, process and physical evidence.2

The simplicity of this approach fuelled its popularity, and the 4Ps have become synonymous with the Marketing Mix. Most practitioners and scholars do, however, seem to forget that this system is merely a metaphor, a simplified checklist to aid marketers.3

There are serious issues with this simplified approach. Most importantly this seven pronged attack of the market seems to ignore the relationship between the organisation and the consumer, and that marketing is based on an exchange of value. The 7P system defines business from the organisation’s perspective and is as such severely limited in informing an enlightened marketing approach. More interesting ways to look at marketing focus on value and relationships and view the world from the customer’s perspective and are based on understanding the customer.

  1. Jerome McCarthy (1960) Basic Marketing: a Managerial Approach. Homewood: Richard D. Irwin. 

  2. Booms, B.H., Bitner, M.J. (1981 ) Marketing strategies and organization structures for service firms, in Donnelly, J.H., George, W.R. (Eds), Marketing of Services, Conference Proceedings: American Marketing Association, Chicago, IL, pp.47-51 . 

  3. Philip J. Kitchen ed. (2008) Marketing Metaphors and Metamorphosis. Palgrave MacMillan. 

Nobody sells widgets anymore – on the importance of services

No-one sells widgets any moreMost people have heard of widgets, hypothetical thingamajigs manufactured and sold to hypothetical customers of hypothetical businesses. They are often used in exam questions in business courses such as accounting, economics and even more often in marketing classes. However, the study of marketing has evolved from discussion of selling mere widgets.

It could be argued that marketing is not only about selling manufactured things, like widgets, but rather providing a service to customers. In their 2004 paper, Stephen Vargo and Robert Lusch describe this concept nicely when they say:1

“…times have changed. The focus is shifting away from tangibles and towards intangibles, such as skills, information, and knowledge, and towards interactivity and connectivity and ongoing relationships.”

So what does this migration away from manufactured objects and towards services mean for the business manager?

Managing the Myths

If you’re looking to understand why everything you offer is a service, it’s important to consider four aspects of what you’re marketing. Again, borrowing somewhat from Stephen and Robert:2

be mindful of your customers’ perception of your service

  1. Even tangible objects that you sell have an element of service to them. A more obvious example is a smart phone (a physical object) with a subscription to phone and internet services. It is important to examine everything you have on offer and try to understand the service it provides and how it can better meet your customer needs.
  2. Customer’s perceptions play a large part in how they evaluate what you have on offer. This is because service levels can vary a great deal more than the physical dimensions of quality-controlled, manufactured widgets. As a business manager, you need to be mindful of your customers’ perception of your service and make the most out of the opportunity to customise your service to match individual customers’ needs.
  3. You don’t necessarily need to be there for the customer to provide a service. There are countless opportunities to add and enhance the service component of what you’re offering customers. One of the best examples of this is making information about the support that you provide to customers pre- and post-purchase available on online.
  4. Services, like objects, can fail, they can become less fashionable, they can be replicated. It is essential that you continuously improve and innovate your services. It is vital that you ensure you understand the needs of your customers and look at new and more effective ways to meet their needs.

No one just makes widgets anymore; if there is a physical object to be offered at all, it is entwined with a service of one kind or another. A lucid manager understands how to make the best advantage of the service aspect of what they offer to customers and understands that a widget is merely a tangible and small part of the service being offered.

  1. Vargo, S.L. and Lusch, R.F. (2004) The Four Service Marketing Myths: Remnants of a Goods-Based, Manufacturing Model. Journal of Service Research(6)4: 324–335. doi: 10.1177/1094670503262946

  2. Vargo, S.L. and Lusch, R.F.(2004) Evolving to a new dominant logic for marketing. Journal of Marketing 68: 1–17. doi: 10.1509/jmkg. 

“Waiter, there is a fly in my soup”—When Customer Service Goes Wrong

dreamstime_xs_5655515Customers are always right is one of the adages often proclaimed in marketing.1 Lucid managers object against this presumed absolute truth because bowing to every whim of customers would make it very hard to achieve organisational goals, i.e. to provide a return to shareholders or help as many people as possible in the case of social marketing.

Customers are always right

Some might hold that the customer is always right about their perception, but that is a far too simple view of this problem. To find out what this statement means, it needs to be unpacked and analysed. There are three aspects to this: customers, the qualifier always and the idea of being right.

For this statement to make sense, the term “customers” should be demarcated, or in marketing jargon, segmented. Market segmentation is, however, an artificial construct used to simplify soup.” groups of people. Understanding customers does, however, go beyond quantified constructs and focuses on customers as individuals. Furthermore, demographic variables are poor predictors of behaviour as they rely on descriptive, rather than causal factors.2 Customers are individuals that can only be understood within a specific context. This implies that the statement should be “the customer is always right”, narrowing it down to individuals, rather than all or some customers.

Second part of the statement, “always right”, infers a universality. Whatever the customer says, truth is on their side. However, truth is a tricky concept, specially when combined with a universal statement. Absolute universal truth is mostly proclaimed by religions and not in marketing. The “always right” component should be understood as an ethical marker. The term always implies that an organisation should do whatever a customer wants because they are presumed to be always right. However, an organisation serves customers, but can never become the slave of customers as it will undermine economic sustainability. This can be corrected by narrowing the statement down to: “The customer is sometimes right”. But this is not enlightening and practically tautological.

The way out of this conundrum is to find out what a customer can be right or wrong about. The easy way out is to say that the customer is always right about their perception, but that is too much of a simplification as two planes of reality are at work in customer service:

  • Fact: “Waiter, there is a fly in my soup.”
  • Feeling: “I am angry because there is a fly in my soup”

Customers can certainly be wrong about facts because they are by their very nature verifiable. A waiter can confirm whether there is a fly in the soup or whether it is an oddly shaped croûton. Perception is not reality, and where possible, every claim customers should be verified.

The customer is always right about their own state of mind

The second type of statement is much harder to verify because it is, in the words of Bernard Williams, incorrigible.3 A proposition p is incorrigible when it satisfies this description: “if I believe that p, then p“. These statements can neither be verified nor denied, and they assume that the customer is sincere, and they thus have to be true. Customers are logically always right about when it comes to incorrigible propositions about how they feel about the level of service. The incorrigibility is problematic because of the implied sincerity. Some customers might exaggerate their feelings to obtain preferential treatment. Some psychologists would argue, however, that nobody can truly be sincere about their internal state of mind because of subconscious drives.4 Although customers might not always know or able to express their state of mind, incorrigible statements are absolute truths to those who utter them.

The original statement can be corrected by saying that “the customer is always right about their state of mind”. The customer is always right about how they feel about the level of service and the marketer has to accept these statements as absolute truths.

  1. Coined by Harry Gordon Selfridge, Sr. (1864–1947), retail magnate and founder of the British department store Selfridges. 

  2. Russell J. Haley (1968) Benefit segmentation: a decision-oriented research tool. Journal of Marketing, pp. 30–35. 

  3. Bernard Williams, Descartes: The project of pure enquiry, (London: Penguin Books, 1978). 

  4. See also our work on personality tests

Don’t want to be *that* guy—five steps of complaints management

Don't want to be *that* guy—five steps of complaints managementI know that you would rather shuffle self- consciously near the service counter and try to pretend you have nothing to do with that guy.

That guy is standing there outlining, somewhat passionately, just how disappointed he is that, as a customer, his expectations have not been met. It’s almost a reflex that most of us don’t want to be part of the conflict in any way. Many would just take their business elsewhere; it’s bad enough to be near that guy, imagine being him!

Some companies might, somewhat rudely, label that guy a complainer. Complaining, however, is merely a description of what he is doing. He should be viewed by the business as Santa Claus bringing the gift of opportunity.

Rather than walk away, quietly taking his money with him, he is providing critical marketing intelligence and providing a golden opportunity to turn some very negative word-of-mouth publicity into a clear positive message.

if you’ve misinterpreted their concerns, empathise!

We all have stories of companies who have done a bad job of “Service Recovery”. I recently became that guy when a local company failed to do what they promised to do for a member of my family. After sending a written complaint, the manager of the company called and asked to meet with me and what I experienced was service recovery done the right way.

Complaints Management

The way that this manager handled the meeting provides an excellent template of how to deal with a customer’s complaint in a way that, in most cases, will lead to customer satisfaction and excellent word-of-mouth endorsement. The five steps that he used were:

1. Thank the customer for making the complaint

It’s likely that the customer will feel awkward. It is easy to say, “Thank you for telling us about this problem, most people would have, just left but you’ve given us the chance to fix this problem, not only for you, but for other customers.” Being thanked for making a complaint is often surprising for the customer but helps them feel more open to discuss the problem.

2. Outline your understanding of the problem

While simple, this lets the customer know that you have heard their complaint and allows them to correct you if you’ve misinterpreted their concerns; empathise! Show them that you understand the impact on the customer.

3. Take personal responsibility for fixing the problem

This is a tough one to do. While you might not feel that you personally are at fault, the customer will often need someone to be accountable for fixing the problem. A simple approach is to say, “I could have made sure that my staff were aware that this approach may caused you and I didn’t do that well enough on this?occasion?- I take personal responsibility for fixing this problem”

4. Negotiating an agreed approach to fixing the problem

In most cases this could be simple. A refund, a next free visit, an apology. It is also vital that you outline how to ensure that the problem does not happen again. During this step, it is essential that you gain an acceptance from the customer that the solution is agreed upon and that it will resolve their concerns.

5. Do what you promised to do to fix the problem!

Whether you actually deliver on your promise to fix the problem or not the customer will?tell others. By delivering on the promise, you get to choose positive word-of-mouth endorsement and much higher levels of customer satisfaction. I’ll leave it to your imagination what stories will be told if you don’t deliver.

Customer service engineering may still be, in the larger part, more art than science. It is important to bear in mind that “individual results may vary” but taking the?five steps to customer service recovery very much increases the odds that you’ll turn that?guy into one of your company’s best resources.

Customer complaints are a gift: Collect as many as you can

Customer complaints are a gift: Collect as many as you canOne Monday morning Jeff came to work, preparing for a new week on the phone and helping customers. His day way rudely interrupted when his manager summoned him and scolded Jeff about a customer complaint that had come to his attention. Jeff went back to his workstation, angry and disenchanted: “bloody customers!”

The ultimate aim of any organisation is to create gains for shareholders by providing value to customers. To be able to achieve this purpose it is imperative that a business understands customers. It is impossible always to keep every single customer satisfied, and complaints are an inevitable outcome of trying to help people.

The customer is always right about their own perception of the value they receive

On the bright side, complaints are a source of information that is not always fully appreciated by managers. The customer is always right about their perception of the value they receive and a complaint provides a great insight into how customers perceive what you do. In many organisations, the number of complaints is seen as a negative indicator. When a customer lodges a formal expression of dissatisfaction, managers run around in blind panic and try to found out who is to blame for this negative experience.

McDonald’s seemed to have grasped this concept of complaints and created this beautiful pieces of advertising. They are not the only fast food company performing a mea culpa on television.

Also pizza purveyor Dominoes recently admitted having changed its recipe after customer feedback. Patrick Doyle, president of Dominoes, summarised their journey succinctly: “You can either use negative comments to get you down, or you can use them to excite and energise you”.

The moral of this story is to embrace customer complaints. A lucid manager leaves emotions out of the equation and rationally analyses every complaint and seeks ways to improve the organisation without finger pointing and enabling your staff to help their customers.

Retail Theatre

Retailers around the world are scratching their heads how to seduce customers to come back into their shops. Financial woes and competition from online stores have seen a decline in retail turnover. In Australia, some shopkeepers even criticised their customers because they prefer to purchase their goods online. Online retailers indeed have a price advantage over local retailers, but the real cause of why people prefer to shop online lies, however, deeper than price alone.

Since my undergraduate days, I enjoy smoking the occasional cigar. Retailing tobacco has its complexities, given the health implications of excessive smoking. The marketing principles governing their sales are, however, the same.

Retail theatre - Visiting Wum Otten's cigar shop in Maastricht

Visiting Wum Otten’s cigar shop in Maastricht

My favourite cigar shop is located in my former hometown of Maastricht in the Netherlands and is owner by cigar aficionado Wum Otten. At my first visit to his shop, I was fascinated by the thousands of boxes and smoking paraphernalia lining the walls. I asked Wum for my then favourite brand, but he quickly persuaded me to try something different. He shuffled around the boxes and produced a single cigar for me to try. Ever since that first visit I have faithfully bought almost all my cigars from his shop, until I moved to Australia.

Being thousands of kilometres away from my favourite cigar store, I am faced with the boring tobacco shops in Australia. Alas, I purchase my cigars online as the places available to me have no knowledge of the product and do not provide a compelling experience. The shops are dull – only partially caused by strict anti-smoking legislation – and staff are unmotivated. Buying cigars is no longer an enjoyable experience, so I prefer the utility of online shopping.

A modern development in marketing discourse is the idea of providing an experience. Retail has been compared with a theatrical experience.1 Retail theatre relies on correspondences between shopping and the stage: the backdrop and props formed by retail displays and merchandise with salespeople as actors, customers as spectators and the shop floor is the stage. A salient difference between a shop and a theatre is that there is no fourth wall, no imaginary sheet of glass between the actors and the spectators and no proscenium. The customers are not just passive spectators but are active and integral components of the play.

Therein also lies the most important difference between online retailing and brick-and-mortar shops. Online retailing engages the eyes and maybe the ears, but physical retailing provides a full sensory and social experience. Online stores have no smell; you can not touch the goods. There are also no people, which is negative but is often considered a positive.

Well designed physical shops with motivated staff provide a holistic experience that can only be beaten by online retailers on price and many case studies in marketing show that price is only one factor in purchase decisions. Recent research indicates that a positive mood, influenced by motivated retail staff and a rich environment, have a positive impact on shopping behaviour.2 All the more reason for retail managers to look at their shop as a theatre and positively influence the customer experience.

  1. See for example Kim Harris, Richard Harris and Steve Baron (2001) Customer participation in retail service: Lessons from Brecht International Journal of Retail & Distribution Management (29)8/9: 359-370. 

  2. Paul M. Herr, Christine M. Page, Bruce E. Pfeiffer and Derick F. Davis (2012) Affective Influences on Evaluative Processing, Journal of Consumer Research (Published online 13 June 2011). 

The Magic of Marketing

marketing magicWhat do marketing and conjuring have in common? Some might say that both fields of human endeavour use deception to reach their objectives. Marketers promise a world in which consumers can be beautiful and live the life of the rich and famous. Magicians deceive by presenting a world in which spectators are asked to believe that the laws of nature can be suspended.

Marketers and magicians have, however, more in common than the creation of impossible worlds of universal beauty and magic. There are in fact four areas where magic shows and marketing overlap.1

Special techniques

Firstly, to be able to create the illusion of perfect or enchanted worlds, both marketers and conjurers need to use special techniques, hidden from consumers and spectators. Magicians spend many hours developing manual dexterity to create the illusion of magic. Marketers use special techniques to, for example, create the illusion that food looks fresh, even after ours in the spotlight of a photo studio.

Perception psychology

The use of perception psychology is the second correspondence. Most stage illusions are, just like advertisements, based on the fact that our mind makes inferences based on perceptual clues. We are led to believe that beautiful girls can be cut in half and restored just like we are led to believe that using the right deodorant will make you more attractive.

Attention management

Penultimate, both marketers and magicians, use attention management. These are psychological tools to ensure that consumers remember advertisements or that spectators only looks at the narrative aspects of the performance. In conjuring, this is mostly called misdirection, which is the technique to ensure viewers do not perceive the mechanical workings of a trick. In marketing, this is important because in a hyper-competitive world attracting attention from consumers is tough.


Finally, presentation and entertainment are important in both conjuring and marketing. Both are forms of theatre. A well-designed shop, website, supermarket and so on are similar to a stage. The most successful brands in the world understand and excel at this. The most important aspect of a magic performance or a marketing exchange is that the consumer has a positive experience.

The use of deception in marketing

Theatrical magic is based on deception, using the four principles outlined above. Using deception in marketing is considered unethical while using deception in a magic show is accepted. There exists a social contract between the magician and the audience that deception will be used to entertain them. But also in marketing, there is an implicit understanding by consumers that communication paints a positive picture and does not provide the whole truth. Just like a magician does not reveal the secrets, neither does a marketer point out the negative aspects of their offering.

  1. Thanks to Australian magician Simon Coronel whose show Manipulations provided me with this insight. 

Service With a Smile: The Importance of Mirror Neurones

Service With a Smile: The Importance of Mirror NeuronesService with a smile is the most famous mantra in customer service. This common-sense wisdom has also been confirmed scientifically many times. Genuinely smiling service staff has been linked to increased customer satisfaction and repurchase intentions.1

Responding positively to smiles is part of our mind’s software. When we see somebody smiles, so-called mirror neurones are activated. These neurones form part of the same pathway as the neurones that we use when we smile ourselves. This is the scientific explanation of why smiles are so contagious and why being around happy people makes us feel happy as well.

Many managers are aware of common sense and scientific evidence that smiling staff will increase their chances of achieving business objectives. However, some managers do not fully understand the theory and coerce their employees to smile. They publish written reminders about the importance of smiling. These managers pretend that they are in a theatre and segregate the ‘front stage’ from the ‘backstage’ and ask staff to behalf as if they are actors in play. These management approaches are not very effective and create a lot of emotional labour. There is, however, a very easy and cost-effective way to make sure your staff treat their customers very well.

The most effective and cheapest way to make your staff smile is by smiling at them and provide a fun workplace where people feel free to joke with each other.2 No need for expensive customer service seminars and propaganda, just being nice to your staff is the best investment a manager can make.

  1. Sandra Gountas, Michael T. Ewing, John I. Gountas (2007), Testing airline passengers’ responses to flight attendants’ expressive displays: The effects of positive affect. Journal of Business Research (60) 81–83. 

  2. Managers with a STAR in their personality inventory will find it easier to behave this way.