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The Value of a Customer’s Mobile Number
As cookie’s fade, online retailers are offering 10 percent to 15 percent discounts on first orders in exchange for an email and mobile phone number.
Here are today’s highlights:
Shopify is raising its prices as much as 33 percent.
Diners are paying as much as $50,000 a year to join a private restaurant club.
Here’s a crazy idea: Maybe businesses should have a customer-service phone number.
Could the AI gold rush save San Francisco?
With cookies on their way out, online retailers are finding new tricks to increase sales: “Experts that spoke to Insider said many of the business strategies deployed by retailers tap into shoppers' fear of missing out, or FOMO, on the latest and most popular products. Offering incentives for adding more items to online carts like free shipping is another example of the psychological tricks a retailer can play. Nike and Lululemon are two companies leading the pack on using FOMO to sell products, according to Manini Madia, adjunct professor at Columbia Business School and expert in consumer shopper behavior. Lululemon's app will explicitly let customers know how many items are left in their size. Meanwhile, Nike uses its SNKRs app to gather information about customers and keeps them checking the app frequently through notifications.”
“It's become more common for retailers to offer 10 percent to 15 percent discounts on customers' first orders in exchange for an email and mobile phone number. By opting into emails and text messages, customers open the door to be contacted about everything from seasonal sales a company is offering to a reminder about items left in their carts.”
“‘Having a cell phone number is probably the single most valuable source of communication with a customer right now,’ Madia said. Emails can be filtered or avoided altogether, but a consumer is much more likely to click on a text.”
“Startups like Klaviyo and Twilio, which offer technology for brands to create personalized customer engagement platforms, are used by DTC companies like Who Gives A Crap and Solo Stove to create deeper relationships with customers.” READ MORE
Confident that merchants aren’t going anywhere, Shopify is raising prices by as much as 33 percent: “As of April 23, the prices on Shopify's monthly subscription are increasing from $29 to $39 for a basic plan, from $79 to $105 for a standard plan, and from $299 to $399 for an advanced plan, representing increases of about 33 percent for each category. Prices are going up about 12 percent for annual plans. Shopify has been running a promotion that gave merchants a 50 percent discount on their first year on the platform since May. That promotion has been replaced with a 25 percent discount.”
“This is Shopify's first meaningful change to its pricing structure in 12 years. Though there was some backlash to the announcement online, the general consensus among analysts and other Shopify observers was that most merchants would not end up leaving the platform for competitors.”
“The main reason is that they see Shopify as continuing to offer a unique value for its target audience.” READ MORE
Restaurants are trying a new high-end business model: “You are not allowed into Chapel Bar. A firm but polite hostess will tell you, smiling, that you may not have a table this evening at the members-only bar located in Manhattan’s Flatiron district. ... Private bars and restaurants like Chapel Bar, for which members pay up to $2,500 in yearly dues and fees, are on the rise across the country. They purport to offer members a more elevated, luxurious hospitality experience. They also afford guests something infinitely more valuable if not intangible: the feeling of exclusivity. At a cost, of course.”
“Members-only restaurants like ZZ’s (rumored to cost members $50,000 per year) in Miami, or The Britely (which costs $2,900 annually) in Los Angeles, offer patrons bespoke, high-end dining experiences, often at a steep price, and usually after interviews and referrals.”
“When I polled the table of fashionably clad 30-somethings, all of whom had perfectly white teeth, they swore that the reservation scarcity that’s plagued many restaurants around New York City was at the core of the allure of Zero Bond and other private restaurants.” READ MORE
Wage increases slowed in the fourth quarter: “Employers spent 1 percent more on wages and benefits last quarter versus the prior three months, a slowdown from a 1.2 percent increase in the third quarter, the Labor Department said Tuesday. Compensation gains slowed in the second half of 2022, after touching the highest readings since the series began in 2001. Fed officials have indicated they are watching the figures closely for signs that wage inflation might have peaked. The report won’t change their likely quarter-point rate rise on Wednesday, a step down from their half-point increase in December.”
“Tuesday’s report showed wage and benefit growth ran at an annualized rate of 4 percent in the fourth quarter, well below the 5.8 percent rate recorded early in 2022.”
“Compensation growth is an important factor in the inflation puzzle because it represents a cost employers factor in when setting prices and reflects workers’ ability to pay for more expensive goods and services.” READ MORE
Maryland is considering encouraging a four-day work week: “Earlier this month, Maryland lawmakers introduced a bill that will ‘promote, incentivize, and support the experimentation and study of the use of a 4-day workweek,’ according to the proposed bill. Under the Four-Day Workweek Act of 2023, employers would cut their employees' weekly work hours from 40 hours to 32 hours without reducing their pay or benefits. In return, employers would receive a tax credit. The Maryland Department of Labor would give out up to $750,000 in tax credits every year. The bill would apply to public and private employers with at least 30 employees from all industries. Employers that choose to participate in the program would do so for up to two years until it ends in 2028.”
“The arrangement is beginning to become more common: One hundred companies in the United Kingdom have committed to issuing permanent four-day work weeks for employees without cutting pay, The Guardian reported.”
“Companies outside of the UK that have experimented with a shorter work week also said that they have seen their profits and productivity jump as a result. Kickstarter, Unilever, Shopify, and even Shake Shack have experimented with 32-hour work weeks.”
“Maryland isn't the only government entity looking to cut work hours. California and national law makers have introduced similar bills to shorten the work week, though they have stalled and failed, respectively.” READ MORE
LIVE FROM CHICAGO
Join us for the very first 21 Hats Live event: This intimate, three-day gathering is limited to 20 business owners/CEOs. It starts with dinner on Wednesday, May 17, and runs through lunch on Friday, May 19. It will feature lots of opportunities to engage with other owners on similar journeys. We’ll have two deep-dive peer group sessions, for which you’ll help choose the topics. Bring your own challenges! You’ll also get to hang with 21 Hats Podcast regulars including Paul Downs, Jay Goltz, Liz Picarazzi, Sarah Segal, and Dana White. And you’ll participate in the taping of a podcast episode.
Plus: Tour Jay Goltz’s retail operation. Take an architectural cruise on the Chicago River. And make connections that will last a lifetime.
When: May 17-19.
Fee: $2,750. (All meals, activities included. Travel, hotel not included.)
Sign up: Reply to this email with any questions or to reserve your spot.
You’d think businesses might want to talk to their customers: “Plenty of companies make it impossible or at the very least very difficult for consumers to call. Frontier Airlines announced in November it was axing phone-based customer service. You can get through to Amazon if you absolutely have to, but you’ve got to go through multiple steps to find a little button to get them to call you. In the age of the internet, and with companies constantly looking to cut costs, businesses big and small are cutting off the option for consumers to get on the phone and talk to an actual human being to resolve their problems. It’s not great for anyone involved.”
“When I was reporting for this story, three of the companies I contacted to ask about the specific experiences of individual customers responded asking for those customers’ information so they could try to get their problems fixed. Having a journalist as a go-between to unlock your Facebook account is not exactly a replicable tactic.”
“The answer to why companies make it hard or impossible for people to call them is simple: It saves them money. It’s more expensive to hire a person in a call center — assuming they can find people who want to work there — than it is to engineer some chatbot that offers up canned answers on a website. The result is sort of a sliding scale of cost-saving terribleness.”
“In taking away customers’ ability to reach out to an actual person, companies are largely seeing dollar signs. Cutting a call center obviously helps the bottom line. But they may be missing other, less obvious costs as well. Talking to customers about their products and services may lead businesses to discover deficiencies they might not otherwise notice.”
“Not giving customers an option to speak to a person directly can also erode trust and lead those customers to go elsewhere, if they can.” READ MORE
Gene Marks isn’t happy that Republicans put fraudster George Santos on the Small Business Committee (even if he’s stepped aside at least for the moment): “I’ve covered, watched and written about this committee for years and here’s what I’ve learned: It is by no means the most powerful group in Congress, but it’s by far one of the most bipartisan collection of political representatives Washington has seen in recent memory. The committee for the past two years was chaired by Rep. Nydia Velazquez, a Democrat from New York whose left-of-center positions on many issues I oppose and is now chaired by Rep. Roger Williams, a Republican from Texas whose right-of-center positions on many issues I also oppose (but tend to agree with more). But you know what? They get along pretty well. Why? Because its members are not only avid supporters of small business, but most have extensive small-business backgrounds.”
“It counts among its priorities the oversight of the Small Business Administration, improving private lending and easing the regulatory burdens for small businesses to do business with the federal government.”
“And, with control now being in the GOP’s hands, it will be stepping up its opposition to any of the Biden administration’s rules and regulations that may potentially harm the country’s 30 million small businesses that employ half of our workers and contribute half of the nation’s GDP.”
“This is a diss. It’s a slap in the face. It’s a massive show of disrespect to the nation’s small businesses. So, thanks, GOP. Now we know where small businesses really stand on your priority list.” READ MORE
The AI gold rush has founders headed back to San Francisco: “After the pandemic effectively shut down the city for more than two years, sentiment is shifting away from proclamations of a once great city's demise and toward the good old times, when it was the destination for people trying to reshape the world's technological vision. Across the city, founders are planting their flags, with dreams of riding the wave of a new technology that's been said to be a step change akin to the iPhone: generative artificial intelligence. Amber Yang, an early-stage investor at Bloomberg Beta, recently tweeted that startups in that field were flocking to San Francisco's Hayes Valley neighborhood, which founders have renamed ‘Cerebral Valley.’ ”
“Twenty-two percent of generative-AI companies are based in the greater San Francisco Bay Area, and 55 percent of capital invested in the space is landing there, said James Currier, a partner at the early-stage investment firm NFX, citing an analysis of a database the firm is compiling.”
“Other smaller hotspots for generative AI include the New York City metropolitan area and Israel.”
“Nicholas Locascio, is working on Booth AI, which targets e-commerce with a tool that generates professional product shots without the user having to pay for an expensive photo shoot. Customers of the tech upload an image of a product — say, a coffee mug — and then Booth AI can place it in a lifestyle scene that makes it look appealing on e-commerce pages.” READ MORE
THE 21 HATS PODCAST
This week, Shawn Busse, Paul Downs, and Jay Goltz go right to the bottom line. Shawn points out how easy it is for businesses to fool themselves into thinking they’re more profitable than they really are. Paul talks about how margins can vary from year to year, especially if an owner decides to invest in improving the business—as Paul’s doing right now. Jay says he’s long sought a 10-percent profit margin but so far, he hasn’t managed to get there. Plus: Shawn explains how he solved his accounts receivable problem. And have you looked at the 401(k) accounts of your employees lately? If not, there’s a good chance you’re going to find that they’re not saving a whole lot. Is that just the employee’s problem, or is it also the owner’s problem?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren