We Tried That Brand Thing. It Didn't Work
In the latest 21 Hats Podcast episode, the owners debate what it means to have a brand and what it takes to build one.
Here are today’s highlights:
How many subscription plans can one household bear?
Amazon promised to turn its Delivery Service Partners into business owners.
Lots of new services aim to help employees with mental health issues.
A startup thinks it may one day be able to deliver New York pizza to San Francisco in 45 minutes.
THE 21 HATS PODCAST
We Tried That Brand Thing. It Didn't Work: This week, Shawn Busse, Paul Downs, and Jay Goltz talk about the tendency of many businesses to obsess about their logo, their website, and the need to drive more leads. To which Shawn suggests concentrating first on customer experience. And Jay agrees: “It's better business,” he says, “to make your customers happier than to keep trying to find new customers.” But Paul has his doubts: “You can have your internal house in order, as I do,” he says. “And you can have a great website, as I do. But it's not driving new business to us at the moment.” Plus: Shawn, Paul, and Jay react to recently publicized strategies to address the labor shortage, such as giving out raises more than once a year and encouraging new employees to take a vacation before they start work.
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We may be heading toward a shakeout for subscription plans: “The downside of the model’s popularity is that it has generated tons of bad subscriptions. ‘A lot of boards and executives are now saying, Let’s get some subscription revenue, without thinking about why that would be good for the customer,’ said [Robbie Kellman Baxter, author of two books on subscription businesses]. ‘Paying a nominal fee for access to large content libraries, bulk discounts, gyms, or car shares can be a good deal, as long as you actually use the service, but the math can get a little trickier when a business is asking customers to pay for regular deliveries of a product: Some things go bad quickly or have especially thin margins, and a person’s need for a monthly box of raw meat or new types of hard liquor probably varies more than their desire to listen to music.”
“Also, try as I might, I can think of no plausible long-term use case for something like Fabletics, which sends people monthly boxes of new workout clothes.”
“Many of the most popular subscription services began their lives as start-ups, which meant that investors flooded them with cash in hopes that they would acquire as many customers as possible, as quickly as possible.”
“Even in 2016, when meal-kit subscriptions were the new cool thing, the companies selling them lost as many as 90 percent of their customers within six months, once the steep discounts had expired.” READ MORE
Amazon’s Delivery Service Partners thought they were getting a shot at the American Dream: “On a Veterans Affairs job board, between advertisements for public loan forgiveness and a Red Cross blood drive, is an attractive small-business opportunity for returning soldiers. Want to finally be the boss of your own future? Amazon will offer you the chance to start your own delivery company, no experience required. This advertisement attracted the attention of one veteran when he was getting medical care at the VA following multiple military tours. He thought the idea of becoming his own boss sounded like an appealing opportunity. The materials touted that he could make more than $75,000 and perhaps as much as $300,000 every year. The application required that you have $10,000 in startup capital, but the ad he saw also said that the fee might be waived for veterans.”
“He was all in. He applied and was almost immediately accepted to start his own limited liability corporation. Just like that, he was an Amazon Delivery Service Partner.”
“‘I feel like something needs to be done about this. It’s a sham,’ the veteran said. ‘What they’ve done is taken two years away from my life, causing me to miss out on job opportunities and things I could have been doing.’”
“For some financially successful DSP owners, the difference in profit and revenue makes them wonder if the effort is worth the reward. ‘I grossed $3 million from Amazon,’ another DSP owner told Protocol. ‘And somehow, after I pay for everything, I end up making less than $90,000.’” READ MORE
THE RUSSIAN INVASION
Some American consumer brands are choosing to stick it out in Russia: “As Western corporate titans flee their Russian connections — citing moral and economic imperatives — others, especially in food service and natural-resource-based industries, say they are stuck. McDonald’s, Starbucks, Papa John’s and Yum Brands — the conglomerate behind KFC and Pizza Hut — have all stayed mum on their plans for business in Russia after its invasion of Ukraine, as they come under growing pressure on social media and from large investors to quit Russia.”
“McDonald’s owns the vast majority of its more than 900 locations in Russia and Ukraine, though it sold off 15 percent of them to franchisees after Russia’s 2014 annexation of Crimea.”
“But other food brands don’t have as much control over their Russian operations. Most Starbucks, Papa John’s, KFC and Pizza Hut locations in Russia are owned by franchisees, limiting the corporations’ abilities to curtail their operations.” READ MORE
A new report suggests the labor market isn’t as tight as it should be: “The report, released Monday by the Treasury Department, contends that employers often face little competition for their workers, allowing them to pay substantially less than they would otherwise. ‘There is a recognition that the idea of a competitive labor market is a fiction,’ said Ben Harris, assistant Treasury secretary in the office of economic policy, which prepared the report. ‘This is a sea change in economics.’”
“Drawing from recent economic research, the report concludes that lack of competition in the job market costs workers, on average, 15 to 25 percent of what they might otherwise make.”
“There are non-compete agreements that bar workers from moving to a competitor, and nondisclosure agreements that keep them from sharing information about wages and working conditions — critical information for workers to understand their options. Some companies make no-poaching deals.”
“The outsourcing of work to contractors — think of the janitors, cafeteria workers and security guards employed by enormous specialist companies, not by the companies they clean, feed and protect — reduces the options for low-wage workers, the report argues.” READ MORE
THE COVID ECONOMY
In Philadelphia, convention and hotel business is recovering but still down 50 percent from 2019: “This year, the Philadelphia Convention and Visitors Bureau has 19 ‘city-wide’ events on the books — gatherings that generate 2,000 or more hotel room stays on its peak night — matching the number of city-wides held in 2019 before the pandemic. The marquee events include the NCAA Division I men’s basketball east regional in late March at the Wells Fargo Center, which is expected to fill more than 8,000 hotel rooms. The return of the Army-Navy football game this winter, projected to attract 50,000 visitors, will ‘really help our December and help us finish the year out strong,’ said Ed Grose, executive director of the Greater Philadelphia Hotel Association.”
“Still, the 498,000 hotel nights from all 152 events booked by PHLCVB will be down about 50 percent from one million room nights in 2019.”
“In Philadelphia alone, employment in leisure and hospitality fell from 72,500 workers in March 2020 down to 29,200 by the next month, according to federal data. As of December, employee numbers in the sector were up to 54,300.” READ MORE
Employees prefer phone calls to Zoom calls: “Phone calls are reigning supreme at businesses: Fifty-three percent of U.S. workers who use phones on the job say that phone usage increased in the past year, according to the data. Video calls also increased, but by 46 percent. So why might voice calls be gaining in popularity? You aren't chained to your desk, according to Hiya's president, Kush Parikh. ‘You could have a call internally while walking around the block or getting a cup of coffee—you have a lot more mobility that's tied to voice-only versus video.’”
“Twenty-eight percent of U.S. respondents said a phone call is their go-to choice to correspond with their co-workers, as opposed to just 7 percent who chose a video call.” READ MORE
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LOCATION, LOCATION, LOCATION
Actually, Silicon Valley is still Silicon Valley: “For all the hullabaloo that San Francisco is over — long live ‘Zoom towns’ and the rise of remote work — the reality is much more mixed, according to a new report from Brookings Institution. Brookings found that, despite anecdotal evidence to the contrary, regional tech hubs like San Francisco, Seattle and New York actually expanded their share of tech jobs during the pandemic. ‘Anybody who thinks that the big tech hubs are sad and closing down is wrong,’ said Mark Muro, a senior fellow and policy director at Brookings Metro.”
“People are overemphasizing the remote-work boom, according to Muro. In his opinion, the shift to smaller cities in the South and Midwest is more likely driven by the industry’s desire to source more diverse talent.”
“Some of the cities with the biggest rise in employment growth compared to pre-pandemic include Atlanta and Birmingham, both known for their technical talent and proximity to HBCUs and other respected public universities, as well as a high quality of life and decent weather.” READ MORE
A slew of companies are attempting to help employees cope with mental health issues: “Dozens of companies have jumped in, aiming to help struggling employees find the care they need. Investment in such startups more than doubled last year to $5.5 billion, according to researcher CB Insights, and 10 of those companies have valuations topping $1 billion. The newcomers offer services ranging from mindfulness training and sleep apps to comprehensive programs that match workers with caregivers.”
“Timely, affordable care from licensed therapists was hard to find before the pandemic, and it’s even tougher now, with demand soaring and clinicians dropping out of insurance networks because of stingy reimbursements or administrative headaches.”
“‘If you are serious about addressing mental health, I don’t know how you stay with an EAP,’ Brunson says.”
“Auditing firm EY, which last year hired Lyra, now offers employees and family members 25 free counseling sessions annually, up from five before.”
“‘Finally we have innovation occurring in the mental health field,’ says Mike Thompson, chief executive officer of the National Alliance of Healthcare Purchaser Coalitions, which represents 12,000 employers. ‘This had been a sleepy place.’” READ MORE
A California company is looking at disrupting express delivery by sending packages into space, as in outer space: “Inversion is betting that as it becomes cheaper to fly to space, government agencies and companies will want to not only send things to orbit but also bring items back to Earth. Inversion aims to develop a four-foot-diameter capsule carrying a payload equivalent to the size of a few carry-on suitcases by 2025. Once in orbit, the capsule could, the company hopes, navigate itself to a private commercial space station or stay in orbit with solar panels until summoned back to earth. Come time to return, the capsule could drop out of orbit and re-enter the atmosphere.”
“If Inversion is successful, it’s possible to imagine hundreds or thousands of containers floating around space for up to five years — like some (really) distant storage lockers.”
“The company’s founders imagine the capsules could store artificial organs that are delivered to an operating room within a few hours or serve as mobile field hospitals floating in orbit that would be dispatched to remote areas of the planet.”
“And one day, a shortcut through space could allow for unimaginably fast deliveries — like delivering a New York pizza to San Francisco in 45 minutes.” READ MORE
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren