The I-Hate-Marketing Approach to Marketing
In our latest podcast episode, the owners talk about the limits of marketing as well as its ability to transform a business by creating alignment.
Here are today’s highlights:
There’s still more evidence that you can’t rely on your AI chatbot for accuracy.
Has all of the talk we’ve heard about retail crime really been a cover for poor management?
Still struggling to staff up? Older workers are looking to return to the workforce.
A family-owned auto-shop chain is now one of New England’s largest employee-owned businesses.
THE 21 HATS PODCAST
The I-Hate-Marketing Approach to Marketing: This week, Shawn Busse tells Jay Goltz and Mel Gravely why he doesn’t want his firm, Kinesis, to be known as a marketing agency. Part of it is his sense that people just don’t trust marketers. But Shawn also believes that what Kinesis offers its clients is much more than just marketing. Hearing that prompts Mel to take us through his recent decision to spend a lot of money rebranding his construction business, which he says created alignment throughout the business and would have been worth twice what he paid. (Don’t tell his marketing consultant!)
Plus: Mel explains how he manages to generate new business without employing salespeople. Jay asks if it’s still possible in this tight labor market to enforce attendance policies. And, for the first time in the almost four-year history of this podcast, Jay goes extremely quiet for an extended period. What exactly was that about?
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I’ll be speaking this week at a brand new conference aimed at business owners: “In looking at the landscape of business events, the team at Permanent Equity saw a lack of options addressing what it means to own and run a small business. That’s something the Columbia private equity firm aims to change, managing director Emily Holdman said. Permanent Equity will host the inaugural Main Street Summit, billed as a ‘festival’ for owners of small and medium businesses, Wednesday and Thursday in downtown Columbia. It will feature speakers, workshops, food, drinks and music. Passes start at $625. Organizers for the event anticipate between 800 and 1,000 participants.”
“The event’s main purpose is to connect entrepreneurs and provide them with opportunities to learn from each other. Holdman said business owners can often feel isolated in their struggles. ‘It turns out, there are a lot of people who share the same challenges,’ Holdman said. ‘And so bringing people together to talk about some of those things, and try to learn through shared experience, is what the ultimate objective is.’” READ MORE
New research indicates that AI chatbots get a lot of things wrong. Of course, the research comes from an AI chatbot: “A new start-up called Vectara, founded by former Google employees, is trying to figure out how often chatbots veer from the truth. The company’s research estimates that even in situations designed to prevent it from happening, chatbots invent information at least 3 percent of the time — and as high as 27 percent. Experts call this chatbot behavior ‘hallucination.’ It may not be a problem for people tinkering with chatbots on their personal computers, but it is a serious issue for anyone using this technology with court documents, medical information or sensitive business data.”
“Their research also showed that hallucination rates vary widely among the leading A.I. companies. OpenAI’s technologies had the lowest rate, around 3 percent. Systems from Meta, which owns Facebook and Instagram, hovered around 5 percent. The Claude 2 system offered by Anthropic, an OpenAI rival also based in San Francisco, topped 8 percent. A Google system, Palm chat, had the highest rate at 27 percent.”
“To determine how often the chatbots hallucinated when summarizing news articles, Vectara’s researchers used another large language model to check the accuracy of each summary. That was the only way of efficiently checking such a huge number of summaries. But James Zou, a Stanford computer science professor, said this method came with a caveat. The language model doing the checking can also make mistakes. ‘The hallucination detector could be fooled — or hallucinate itself,’ he said. READ MORE
WeWork has filed for bankruptcy, a blow to its landlords: “WeWork, the real estate company that offered start-ups and individuals sleek quarters to pursue their entrepreneurial dreams, filed for bankruptcy protection in the United States on Monday after years of struggling to find its footing. The company filed for Chapter 11 bankruptcy protection in New Jersey, as part of what it described as a ‘comprehensive reorganization’ of its business. The company said creditors holding 92 percent of its secured debt had agreed on a restructuring plan that would include reducing its portfolio of office leases.”
“Many landlords have accepted lower rents from WeWork in recent years, and some are struggling to make payments on the debt tied to their buildings. Since the pandemic, fewer employees have been going into the office, causing one of the worst crunches in commercial real estate in decades.”
“WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey, and opened its first location in Lower Manhattan in 2011. It focused on leasing, rather than buying, office space and parceling it out to customers that included freelancers, small businesses, and larger corporations.”
“WeWork’s stock has fallen more than 98 percent since the start of the year, and the company was valued at less than $45 million as of Friday. At its peak, in January 2019, the company was worth around $47 billion.” READ MORE
Is retail crime really the problem we’ve been led to believe? “Major chains including Walmart, Walgreens, and Target have blamed rising crime for their decisions to close retail locations, with Target most recently shuttering nine stores across five cities. But retailers’ claims are likely exaggerated, analysts at investment bank William Blair wrote in a recent research note. Yes, crime has risen relative to pre-pandemic levels — but that’s not the only thing happening, they wrote.”
“During the pandemic, product ‘shrink’—the industry term for losses for any reason, including external and employee theft, product damage, or paperwork errors—dropped rapidly as fewer people shopped in-person and stores reduced hours and product selection. While theft has certainly risen since then, part of the recent increase in ‘shrink’ is merely a return to pre-pandemic levels, William Blair noted.”
“Shrink, as a portion of sales, was 1.6 percent last year—the same as in 2019 and 2020, and up from 1.4 percent in 2021, according to the National Retail Federation. This year, William Blair estimated that shrink will make up a slightly higher portion, about 2 percent. That will mark a peak, the bank predicted, noting that there are ‘early signs of stability shrink levels already in 2023.’”
“Target is one such example, William Blair wrote. The Minneapolis-based chain has been vocal in its complaints about theft, most recently with plans to close nine stores in New York, Portland, Seattle, and the San Francisco Bay area. William Blair suggested another possibility: Target could simply be closing unprofitable locations and conveniently blaming crime rather than bad business decisions.” READ MORE
Amazon is giving up on its brick-and-mortar apparel stores: “The Seattle-based retail giant launched its Amazon Style concept in early 2022, opening locations in Los Angeles and Columbus, Ohio. The stores were the latest brick-and-mortar efforts from the company, introduced just before Amazon shut down its 4-star and book stores. Both Amazon Style locations will close on Nov. 9 and the company will work with affected employees to find new roles within Amazon, spokesperson Kristen Kish said in an emailed statement.”
“Though Amazon Style was a brick-and-mortar concept, the stores themselves were imbued with tech throughout, giving shoppers personalized, real-time recommendations using machine learning. The company was also linked to plans for a space in downtown Seattle's former Macy's building to test retail store robots similar to those used in its warehouses.”
“Amazon is hardly giving up on physical retail, however. Kish said the company will continue investing in its Amazon Fresh and Whole Foods Market stores, as well as third-party partnerships for technologies like Just Walk Out, Amazon's cashierless payment service.” READ MORE
A family-owned auto-shop chain is now one of New England’s largest employee-owned businesses: “Bob Sullivan Jr. and Paul Sullivan received many inquiries during the past two years about acquiring their family’s tire-and-repair shop empire, amid an industry consolidation. They turned each one down. Instead, the Sullivan brothers decided to sell to an unsuspecting group of buyers: their 1,460 employees. On Friday, they told their workers that the Norwell-based Sullivan Tire chain had been sold this week to a newly formed Employee Stock Ownership Plan. All employees who stay until the end of the year will become members, which gives them rights to a share of the company. They’ll fully vest after six years, and they can redeem their vested shares when they retire, at age 65 or later. The deal includes Sullivan Tire’s real estate: The company owns more than 40 of its 117 locations across New England.”
“The company financed the deal using a loan from M&T Bank to buy out most of the equity held by members of the Sullivan family. The sellers also loaned the company some money to cover the gap, through warrants to be paid back over time.”
“[CEO Joe] Zaccheo will answer to the same board of directors, a group that currently includes himself, Bob and Paul Sullivan, and one outside director. The Sullivans promoted Zaccheo to be CEO last year as part of their succession plan. Finding a way to buy out the family members was the next step in that plan.”
“‘The benefit of the ESOP is the current management team stands intact,’ Zaccheo said. ‘It’s business as usual.’” READ MORE
Older employees are coming back into the workforce: “Data from payroll and benefits platform Gusto found that in September, 6.7 percent of workers hired on the company's platform were age 55 or older — compared to 5.4 percent in September 2019. Gusto Economist Luke Pardue said older employees flooded out of the workforce during the pandemic for health reasons or because of sharp job cuts and attempted to retire as the economic rebound boosted the value of their savings and their ability to stay out of work. Those times have changed. ‘As inflation persists, and many older workers deplete their savings faster than expected, this Gusto data shows signs that many of them are looking for work again,’ Pardue said. ‘Rather than come back to the same jobs as before, however, older workers are returning to work in industries and roles that allow them the flexibility they’ve come to appreciate while still earning a paycheck.’”
“That’s why the increase in older workers was concentrated in community services professions, such as health care, education and nonprofit work — where 24.5 percent of workers hired in September were 55 or older, according to the Gusto data, compared to 21.8 percent in September 2019.”
“In professional-services jobs, the share of workers 55-plus hired in September fell to 20.1 percent from 24.7 percent in September 2019. Older workers also made up a higher share of part-time workers, rising from 67.9 percent in September 2019 to 73.9 percent in September 2023, according to Gusto.”
“‘For those looking to hang on to their older employees for longer, higher pay, flexible hours, and good health care topped the list of benefits they would stick around for,’ the report said. READ MORE
Hillel Stavis, founder of Harvard Square’s iconic WordsWorth Books: “He took careful note of Barnes & Noble’s decision to open what was then Boston’s largest bookstore, in Downtown Crossing, at about the same time that he launched his store. In a daring approach, he decided to sell all new books for less than the cover price: 15 percent off hardcovers, a 10-percent markdown on paperbacks. Naysayers abounded among independent bookstores. In Globe interviews, Mr. Stavis recalled hearing that Harvard Square booksellers initially had a betting pool for how long it would take him to go out of business. It’s a safe bet that none of them guessed 28 years: WordsWorth closed in 2004, squeezed by rising rent costs and online competition from Amazon. For years, Mr. Stavis prospered and estimated at one point that WordsWorth had $10 million in annual revenue and 110 employees.”
“Scouting Greater Boston locations and calculating foot traffic, he settled on Harvard Square, where he opened WordsWorth Books on Brattle Street in 1976. Even though the neighborhood already had bookshops, he saw it was full of readers walking with books in hand. ‘There’s no sense in opening a store where everyone buys a hamburger at McDonald’s and then goes home to watch TV,’ he said.”
“In the 1980s, Mr. Stavis and a colleague, Glen Legere, created a computer system to replace the by-hand method of tracking inventory, through which employees tallied sales on 3-by-5 index cards. They called their digital system WordStock and marketed it to other bookstores.”
“‘People fantasize about owning a bookstore, but what happens is that you get so busy with minutiae, you don’t have time to read,’ he said. ‘If there’s a retirement home for booksellers, what you’d see is a lot of old booksellers sitting in rocking chairs, and what would they be doing? They’d be reading all the books they never had time to read when they owned a bookstore.’” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Can You Fire Employees Who Won’t Return to the Office? This week, Gene Marks warns business owners that the National Labor Relations Board has taken an action that could make it harder to fire employees who won’t come back to the office. But is that really the case? Gene’s also concerned about a new rule proposed by the Equal Employment Opportunity Commission that makes it even more important that business owners review their policies and training regarding harassment of employees. And then Gene reviews the case of an employee who filed some relatively minor misrepresentations in an expense report and then lied about it. Should the employee be fired?
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Thanks for reading, everyone. — Loren