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14 April 2008 @ 10:24 pm
Wherein I Blather About Money  
Applebees discontinued their Chimi-Cheesecake... a wonderful concoction of cheesecake, apples, pastry and caramel that I believe was one of their most popular desserts.

This happened around the same time that all the hooplah about Livejournal started causing so much noise.  I think the conjunction of those two things is what got me to thinking.  Given that I'm not an economics expert, you should probably take the following with a grain of salt.

So what exactly is wrong with making money?

Well, nothing, as long as making money isn't your primary goal.

You may think that I don't realize I'm spitting in the face of years of business curricula when I say this.  I know perfectly well that the idea that there can be anything wrong with making money, of and for itself, is everything from fantastically old-fashioned to ludicrously revolutionary.  I also happen to be a capitalist of the old school.  I'm good with Laissez-faire.  But I'm also in favor of good sense, and I'm most definitely in favor of people being as happy as possible.  And sound business practice, more and more, is defined strictly as the making of more money... and it doesn't contribute to either of these goals.

So Applebees gets rid of my favorite dessert.  Why would a chain of shops stop selling a popular item?  Because this isn't just a 'bees thing.  Herbal Essences discontinued all of their old flavors but one when they switched to a new product design.  Clinique changes my favorite makeup scheme on a regular basis.  "New and Improved" shows up on the supermarket shelf day after day, with little respite.  Why not just stick to what works?

Simple.  Because these massive conglomerate corporations are not in the business of satisfying customers.  They are in the business of making money.  Customer satisfaction is only important inasmuch as it contributes to the making of money.  I know I'm stating the obvious, but it needs to be stated in order for the rest to follow.

Say, like Applebees, you have a portion of your customer base who comes to the store precisely because you have one very awesome item on your menu.  However, the item in question is a (somewhat) expensive, large-sized dessert -- this is something one would only order as an occasional indulgence, and something often shared between two people.  Okay.  Forget what your customers want.  How can you make more money selling desserts, especially in a diet-conscious culture such as ours?

You can try a new dessert product line, such as the new Dessert Shooters that have taken over their dessert menu of late.  These are small, cute, relatively inexpensive, and they offer the taste of a large dessert with a smaller portion of calories.  Now you're faced with a problem:  getting your customer base to switch their preferences.  Because if you can switch a customer's favorite dessert from a large one to one of the new small items, they will order the new small dessert more frequently.  It doesn't feel like such an indulgence.  And it's not really big enough to share.  Two Dessert Shooters cost less than one Chimi-Cheesecake, incidentally, and although I'm sure they contain less actual associated food cost, this means that you'll order your one-person dessert more often and still give Applebees more money in the long run.

How do you force your customers to switch?  Simple.  Take the old favorite off the menu.  They come to your shop, anticipating a dessert, and suddenly are left with only the options you provide:  they can leave unsatisfied, or take a chance on one of your new products.  Many customers will make the switch.  Not all of them, but enough to make the new line worth it, and in the meantime, you may coax non-dessert-ordering customers into ordering the new line as well.  Why not just focus on the ones who normally don't order dessert?  Because they can't get roped into replacing something they aren't missing.

Make no mistake:  if there weren't an expectation of making money from it, the Dessert Shooters would not have been created.  There was an initial outlay on new menus and table cards for them.  That's an investment, and they are expecting a return on it.

Now here's the question:  what is their top priority in this entire process?

To make more money.  To stay "competitive" (with other companies whose only goal is to make money).  Market margin.  Profit margin.  A lot of big fancy terms that in the end, amount to imaginary points on an imaginary scoreboard.  It's not that the Chimi wasn't making them any money.  It was.  It's just that the current amount of money you are making is never enough... if making money is the only reason you're in business.

Applebees has lost me as a customer because I went there expressly for the Chimi.  If they lose enough customers over this, they'll bring it back.  But it won't be in order to make us happy.  It will be because enough customers are unhappy enough that it's going to affect the profit margin.  Serving customers has nothing to do with it... customer satisfaction is just a measure of what a company can get away with.  Now, what a smart business advisor would recommend is to bring the Chimi back on a limited availability basis... and advertise the heck out of it when they do, so that it becomes a "rare" item and hence more desirable.  That nets you your new Shooters income and brings back the Chimi customers en masse.  (And the money came a'rollin' in...)

You'll find companies doing this all the time.  They get rid of product lines that have loyal buyers, just as long as it's not the prime money maker line, and replace them to force their customers to try something new, and preferably something that is either more expensive or that comes with more expensive accessories.  And it works, so it perpetuates.

That is what is wrong with making money.  Because the only gains are made in terms of money, and the only virtue measured is measured in terms of money.

There's a phrase in Robin McKinley's Sunshine talking about how nobody gets into the small restaurant business wanting to make money... they do it because they have a compulsive need to feed people.  The question unasked in that statement is this:  where would you rather eat, somewhere where they're primarily in the business of feeding you, or somewhere where they're primarily in the business of attracting enough of you and your neighborhood in order to make the maximum profit margin?  Diversified:  who would you expect a better performance from, an employee who shows up to make a paycheck, or an employee who takes a pride in their work that has nothing to do with the money they make?

I find it amusing that massive corporate entities write reams of manifestos and company credos to the effect of begging their employees to work for the sake of the product, while the board of directors continues to make decisions about said employees for the sake of the stock.

There is an image of corporate executives as fat white old men rubbing their hands together with glee as they discover new and fascinating ways to put the screw to the working man... I don't think any of us reach the age of maturity without realizing that's not what's going on here.  The problem is not that there is some evil group of power entrepreneurs at the top of the heap who like seeing people unhappy.  The problem is that money makes a rotten point system, and to a certain extent, board ownership of companies makes a lousy leadership model.

When you have a single person or family in charge of a company, you run the risk of all sorts of ridiculous eccentricities in business model and operation.  But you also gain the possibility that individual (or family) has started and intends to run the business with more than just money in mind.  And it may not be about the product sold, either.  Maybe the owner gets truly excited about the company itself, about its employees and plants and grounds.  Maybe the owner gets excited about a reputation that the company has for producing a product of outstanding quality.  Maybe the owner just likes being in business for him/herself... don't discount that; "for the joy of it" is one of the best and purest reasons there is to do something.  Any one of these things will create a more positive outcome for the customers and the employees than a purely profit-based approach.

But when you have a board of stockholders, what inevitably happens is that you have as many as several dozen primary objectives (held by as many or more stock-holding individuals), and, like as not, the only top-five objective held in common among them is the objective of making as much money as possible.  It becomes, by default, the primary goal of the company, and everything else gets demoted.  It's just like I said about Livejournal before:  there is a big difference between seeing if you can connect people and make some money off of it, and seeing how much money you can make off the fact that people want to be connected.  If money is your primary objective, then providing the service won't be.

That's exactly the point where automotive dealerships start applying formulas to recalls based on the cost of lawsuits.  It's the point where your favorite line of hair gel gets cut and you end up spending $30 on different products trying to find something else that works nearly the same way.  It's the point where companies like Circuit City make risky moves like firing the top earners in their sales base in order to preserve income (as it turned out, they lost their most experienced salespersons and a lot of their stock value as a result... oops, guess they didn't quite get away with that one, but who here really expects no other company to try the same thing?).  It's the point where highly-technical phone-based support lines started getting outsourced to countries where the first language of the employees is not the same as the first language of the vast majority of the customers.  What will our customers let us get away with in the service of money?

There's nothing wrong with making money.  It's just circular.  When you set out to make money, your reward is the opportunity to make more money.  You exist in order to exist.  If you're not making money for something or at least in addition to something, you really don't have a reason to exist at all.  Money is not a reason.  It's not even real.  But most companies are evaluated precisely on that imaginary scale.  By that standard, most companies don't actually exist anymore.  Are you a restaurant?  No, I make money.  Can money be eaten?  No, but it can be used to make more money.

Why on earth SHOULD Applebees continue my dessert if it can make more money discontinuing it?  It is in effect a bad company if it does not continue to frantically search out new ways of making more money.  By the only honor system that counts in collaboratively owned corporations, it's struggling very hard to do the right thing.

But from my standpoint, it sucks.  I know exactly what my money is for:  it's there so I can buy Chimi-Cheesecake from time to time.  Why?  Because that makes me happy.  And when I'm happy, I treat other people better, and I do better at my own work, and I enjoy my life more.  Incidentally, when I do well at my job, that makes me happy, too, because I have associated parts of my identity with the quality of my work.  And that also makes my bosses happy (most of the time).  Which means they and I can both go home a little earlier, but with more money, so we can all buy gym memberships and trampolines and trips to Florida, and contribute to the charities of our choice, and recycle because people who feel like they have a lot of stuff often want to contribute something back, etc. etc. etc.  Money isn't points to me, it's a tool to make my life better, easier, more worthwhile to myself and to the people around me.

If all I lived for was to make money, I wouldn't be much of a human being.

And a company that lives for nothing but the making of money isn't much of a company, either.  You can say it creates lots of jobs and contributes to the economy, but a thriving economy isn't worth a whole lot if we sacrifice quality of life, which is the only reason we want a thriving economy in the first place.  And a lot of jobs working for a cut-throat, empty corporate entity aren't worth very much, either.  You find a lot of turnover at such companies.  It doesn't provide stability, or benefits, or any of the other things that would turn its employees into power-producers in their local economies and neighborhoods... that would encourage them to feel secure enough to purchase equity and have children and create stable communities.  What good is such a company?

That's the heart of the problem, really.

There's nothing wrong with making money.  There's just not anything good about it.

Money, power, efficiency, water, fire, air.  These are forces, not objects.  An arrow is only as good as where it's aimed.
 
 
 
In Need of a Pan Galactic Gargle Blaster...kanga2roos on April 15th, 2008 02:52 am (UTC)
A very interesting point, however, it is very likely that Applebee's is not making money at all. Every business that I can think of (except maybe gas companies...) are hurting for business. Benjo works for a restaurant and I know that their guest counts are down. I work for a department store and sales are way down over the past couple of years. So, for the dessert it comes down to more like the company trying desperately to break even.
Octanetoqueville on April 15th, 2008 05:58 am (UTC)
Alot of the restaurants around Atl are really hurting right now. The high end ones especially.
In Need of a Pan Galactic Gargle Blaster...kanga2roos on April 15th, 2008 07:03 pm (UTC)
Business in general is bad everywhere. It's bad enough that the company I work for during our last "use your card" sale gave discounts on many expensive items they haven't done that with for about a year and a half. Regular price stuff, which is where we make all our money! That tells me that it's gotten to the point that they are willing to take a 20% hit just to get sales up.
Harfafnorharfafnor on April 15th, 2008 03:13 am (UTC)
Such an elequent rant. I applaude. This, after going to Wendy's today. What you ask has that to do with the price of tea? Let me expound. A while back they changed the Taco Salad, made it into a Midwestern Salad, not as good in my opinion. Then, not to long ago they introduce onion rings. Them were some good onion rings and I enjoyed them to their fullest. Gone. So, in comes this fish sandwich. The other day I went in to get one, they were sold out. Didn't have any. Today I went with fish sandwich on the brain, to what end? They no longer carry the fish sandwich. Gone. I was ranting my whole drive back to work. Why? This can't even be about making money because, they sold out of the darn thing. Now, they won't sell any. So, I feel your pain. And sometimes, I too get fed up with these places that get rid of something and never return.
In Need of a Pan Galactic Gargle Blaster...kanga2roos on April 15th, 2008 07:04 pm (UTC)
I was very upset when Wendy's took away their Frescata sandwiches. :/
Harfafnorharfafnor on April 15th, 2008 10:24 pm (UTC)
I think I'm an idiot. I didn't even notice those were gone. :-(
Petermaverick_weirdo on April 15th, 2008 03:28 am (UTC)
I'm not saying you are wrong...
but there is more to the picture.

We belong to an inflationary economy (i.e. prices go up)
Business need to make more than they did last year in order to stay ahead of inflation. (This is known as either continual growth or unsustainable growth depending on who you ask).

{some time in the past} Applebees comes out with their Chimi-Cheesecake dessert, some people like it, they tell their friends, more people like it, popularity grows. Their numbers of customers increase.

Then they reach "Saturation" eventually any product will plateau. Everybody either loves it or doesn't, and there are pratically no "undecided" people. The number of new customers trying it equalls the number of customers lost due to natural attrition.

From here they can only make the same amount of money as last year (which due to inflation is less). So while hit is hugely popular, it is unlikely to get More popular

So they start offering some new dessert, some people like it, they tell their friends, and the cycle begins again
J.D.: Techarasirsul on April 15th, 2008 04:11 am (UTC)
Change is good in the restaurant business. People want something new or different-- or at least something they couldn't get last week. It's why there's always something plastered to the windows of the local Taco Bell showing you what they have this quarter that they didn't have last quarter. It's why McD's brings back the McRib once every couple years instead of leaving it on the darned menu, which one'd think would make sense if it was such a good idea the first forty-two times. It's why there's always an insert in the menu at any of those brass-and-wood places with some sort of limited-time specials on it.

You leave the core intact for the regulars, and then you shuffle around everything else to bring in people who don't show up all that often. Of course, this works better in situations where you're not shuffling up with the regulars want, like Chimi-Cheesecakes; it's very well possible this move will backfire on them. :) I don't get the idea of 'dessert shots' or other miniscule desserts; if I'm gonna have me some cheesecake dammit I WANT to blow my diet to hell. What's the point of moderation in decadence?

I do disagree on one point: there is something good about making money. I think that Bill Hewlett and Dave Packard had it right back when they were still running HP. The idea as I parsed it boiled down to "It doesn't matter how many wonderful things you do for how many people, if you don't turn a profit you only get to do them once". Profit has to be a core goal of a successful company, but it shouldn't be the core goal. And making money at what you do is good because it means you get to keep doing the other good stuff.

Радаdigitalemur on April 15th, 2008 09:14 am (UTC)
Wow. This post and the comments so far have been the best economic commentary I've heard in a while, and I'm one of those geeks who listens to Marketplace for peppy economic commentary pretty regularly. And it just made me happy that it was built around the Chimi-Cheesecake. I wonder if they're serving more desserts if a table of people of people who cannot agree on 1 or 2 large desserts to share then buy dessert shots? And is the profit margin higher on those little desserts because they cost more per ounce of materials than the big ones? I dunno, but now I want to do dessert market research, dammit.