Rock Your Relationships and Increase Sales with Words

Upon beginning in business, we are told, “You have to follow this system, or you will not be successful.”

The larger picture certainly needs to be understood in order to successfully move forward from your starting point. But, it is when we are able to craft that process into almost an art form that recognition and reward come our way.

Your mindset affects how you approach business, and it is your choice of words that reflect this. Your words are your marketing tools that will negate or build sales. Once you recognize how you are uniquely able to help others, it becomes easier to express as your dialogue continues to also get into the mindset of those you wish to help.

Let’s examine some of the traditional words used in business based upon following the same process as everyone else versus changing vocabulary to produce a new and improved outcome:

Exchange “Prospects” for “Potential Friends”

This term is used to describe those to whom you wish to sell. The term and idea of it become so ingrained in the minds of salespeople that when they do meet prospective clients, their demeanor does not change. What I’m referring to is the lack of a willingness to understand their prospect, why they were invited in for an appointment, and apparent lack of caring for what is being shared. Their entire focus is on the person from whom they are about to make money. The prospect can see dollar signs floating out of the salesperson’s eyes causing trust to dwindle along with sales.

Now, suppose you are mentally prepared to meet your new potential friend. Do you believe you will be more inclined to listen to what that person has to say by having an interactive conversation? The friendly interaction serves to build your integrity and the relationship between you. Trust builds and so do sales.

Exchange “Pitch” for “Discover”

Many businesspeople say they are about to pitch a client. This implies telling all the benefits of one’s products and services. It sounds hard-core and does not imply a care in the world about improving the status of their prospective friend’s business.

By discovering all that your potential friend hopes to resolve from the past and achieve in the future, you will come to a far greater understanding of what the needs, wants and deep down desires are and how to best address these.

Exchange “Scripts” for Conversation

To be clear, no two people have the same genetic makeup. Should you agree, you will admit no two people think exactly alike. Scripts are not nearly as successful as is being yourself with your own vocabulary and delivering honest thought behind what you say.

Exchange “Everyone” and “Competition” for the Unique You

Why would you follow the same as everyone else yet worry about competition? Coming to terms with differentiating yourself from the pack brings recognition, there is no competition. People buy you. Your personal brand becomes your unique art form for delivering services.

Embracing these word exchanges will serve to build trust, client relationships, and encourage larger sales and referrals that define the Smooth Sale!

Republished by permission. Original here.

Relationships Photo via Shutterstock

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Is 100% Customer Satisfaction Achievable? For This Company, Yes

Simplicity Sofas is a beloved company and their customer service philosophy is very simple:

• They do whatever it takes to surprise and delight customers.
• They make the furniture purchasing experience informative and enjoyable.
• They deliver more than customers expect.

Simplicity Sofas is a furniture manufacturer in High Point, NC. and an eCommerce retailer specializing in furniture for small spaces. After more than six years in business and $4 million in sales, the company has never received a negative review on their website - not one.

Jeff Franks has ensured their philosophy transforms into actions that deliver a unified customer experience, which in turn earns the customer’s story along with word-of-mouth advertising. It’s the norm for customers to tell friends, family and co-workers about Simplicity Sofas and to recruit them to buy the furniture.  Below are Jeff’s tips for achieving beloved company status.

Speed is Critical

Customers expect a 24 hour response time. They are delighted when they hear from you within 6 hours and amazed by a 1 hour response. The faster you respond to your customers, the easier it becomes to close a sale or solve a problem. Failure to return a call or email is inexcusable.

Communicate in a Timely Manner

If you don’t have an immediate answer, quickly inform the customer that you are working on their inquiry and will get back to them soon. Then do what you say.

Solve Problems

When responding to a customer complaint always begin by assuring the customer that you will fix their problem. This immediately removes the adversarial relationship that can lead to messy and expensive confrontations.

Always Offer Choices

This is particularly important in problem situations.  If you offer your customer three or more possible solutions, they will feel included in the eventual resolution. Also, you will be surprised at how often the solution selected is not as expensive or burdonsome as the one you thought they would demand.

Avoid Refering to Policy

Never answer a question by telling a customer something is “company policy.” All responses must make logical sense to both you and the customer. As well, if you can’t reasonably explain the company policy, either you need more information or the company policy needs to be changed.

Go Above and Beyond Expectations

The object of problem resolution is not to “satisfy” the customer but to “amaze” them by going above and beyond their expectations.

Turn Lemons Into Lemonade

Mistakes and problems always result in opportunities to create long-term loyal customers by exceeding expectations.

Attempt to Transform Them

Transforming an “angry” customer into an enthusiastic advocate is always worth the cost.

Offer Compensation

The resentment felt by an inconvenienced or frustrated customer can be transformed into gratitude and long-term loyalty by a small compensation offer - especially when the customer realizes that the circumstances were beyond your control.

Develop a Caring Team

Unhappy employees cannot create delighted customers.

Happy Customers Photo via Shutterstock

Digg Founder Protested for Bringing Jobs to San Francisco. Seriously.

Protesters showed up outside Digg Founder and Google Ventures partner Kevin Rose’s house in San Francisco over the weekend. Their beef?

Rose’s investments in tech startups are bringing too many high-paying jobs to the community. Seriously!

A flyer distributed to Rose’s neighbors by protesters stated:

“With each new tech corporation comes a wave of fresh techies, who on average earn four times more than an average service worker…Nearly all of them are just like Kevin Rose and we are tired of this miserable and untenable situation.”

The flyer further explained that protesters are among the service workers who deliver food, serve coffee, babysit and do janitorial and housekeeping work for the tech workers Rose’s investments have helped fund.

But workers are apparently concerned that the presence of higher earners has driven up local rents. This has forced service workers further and further out of the community only to have to commute back for lower paying jobs.

Rose, for his part, seemed to take the protest in stride. In a stream of Tweets he acknowledged that the protesters raised valid concerns:

But commenters on Rose’s Instagram account pointed out the irony that the presence of more tech workers in the community inevitably led to more service jobs for service workers.

There was also some irony in protesters’ demand that Google donate $3 billion for the creation of anti-capitalist housing in the community. On East Bay, a collectively operated website sympathetic to their aims, protesters explained:

“In these communities, whether in San Francisco or in the woods, no one will ever have to pay rent and housing will be free. With this three billion from Google, we will solve the housing crisis in the Bay Area and prove to the world that an anarchist world is not only possible but in fact irrepressible.”

Images: IndyBay.org, Instagram

10 Tips and Tricks to Boost Your Google Search Efficiency

The internet is a vast ocean of information, and Google is one of the most beloved search engines to help you navigate the waters. However, we’ve all experienced the pitfalls of searching - the frustration of getting inaccurate results and the time wasted as we try and try again to find the information we’re looking for. Why does a simple search become so difficult sometimes?

The fact is that internet searching can be easier if you use the right techniques. These Google search guidelines can help you quickly find the information you’re looking for without all the stress. There are a number of tricks you can use, and today we’re highlighting 10 of our favorites.

1.  Add search terms a few at a time. One of the first things Google mentions in its Tips & Tricks page is that the search engine will be kinder to you if you start simple. Start out with a search where you choose just 2 or 3 of the most related words. You can gradually add to this search if you don’t find what you’re looking for.

2.  Use Search Tabs. Google search is divided up into various categories, including: Videos, Images, News, Books, Maps, Shopping, Flights and Apps. The default setting is “Web” which includes everything - so if you’re looking for something specific, search within the specific tab instead.

3.  Use Quotes for Better Accuracy.  If you want to search a specific phrase, make it easier for Google to realize this - just group the words inside quotation marks and Google will search that exact phrase - and in that exact order. Only websites that have these specific words, in order, will appear in searches.

4.  Narrow or expand your search with AND & OR. Using the word AND between words (or phrases, using the quote technique above) can narrow your search because you’ll only get web page results that include BOTH words or phrases. On the other hand, you can expand your search using the word OR between words or phrases. This will give you search results that have either of the words/phrases.

5.  Get similar terms with the ‘~’ sign.  If you put a ~ sign right before a word, you are telling Google to search not only for that word, but also similar terms. This is a good idea when a word has a number of synonyms and you want these related words included in search results.

6.  Search specific sites by using a colon. If you are looking specifically for search results that come from one site in particular, you can tell Google to do this by typing out your search terms, and then site:name.com. For example the search - social media marketing site:smallbiztechnology.com - will return only results from Small Biz Technology that have those words in them.

7.  Take advantage of location based searches. If you have allowed Google to know your location, there is no need to include any extra location-based search terms if you want local information. For example, a search of ‘coffee shops’ will already assume your location and provide local results. If you are searching for information outside of your area, just type your search terms followed by the zip code (or city/state).

8.  Exclude words by using a hyphen.  If you are searching for a word with an ambiguous meaning, you can use a hyphen to exclude results that relate to a definition you aren’t looking for. For example, if you are looking for Mustang, but don’t want results relating to the car, Ford Mustang, you would type ‘Mustang -cars’ into the search bar and all results that have the word car in it would be eliminated.

9. Find sites similar to other sites. If you are looking for a website similar to one of your favorites or that will offer items similar to one that you’ve found, you can do a quick ‘related’ search to find them quickly. For example, lets say you want to find sites similar to Best Buy. Type related:bestbuy.com into the search and sites similar to Best Buy, but not the Best Buy site, will appear in your search.

10.   Search your web history. If you grant permission, Google will keep track of your web history - and then this history is searchable to you later on. Think, for example, of a time when you read a good article and then couldn’t seem to find it later on. If you had saved your search history you could have searched it and found it quickly.

Google is continually updating its search features to make online searches easier and to deliver the exact information you are after. Try these techniques to better communicate what you are searching, and you’ll see a huge boost in your search efficiency.

Despite Challenges, Women Business Owners Are Feeling Upbeat

Women entrepreneurs faced a lot of challenges this year, but in spite of their concerns over the economy, health insurance and marketing matters, they’re overwhelmingly optimistic about their own companies’ prospects for the coming year.  At least that’s what the 2014 State of Women-Owned Businesses Report states.

The report was commissioned by the National Association of Women Business Owners (NAWBO) and Web.com (Disclosure: Web.com is a client of my company). Below is some of what the annual survey of more than 600 women business owners found. How does your attitude measure up?

First, the good news: A whopping 89 percent of women business owners are optimistic about their businesses’ prospects for 2014. What’s more, 92 percent are bullish on women entrepreneurs in general, predicting that more women will start their own businesses this year.

Now, the bad news: What’s keeping women business owners up at night? The economy leads the list, cited as a worry by 90 percent of respondents. Eighty percent are worried about business taxes, 71 percent about the cost and accessibility of health insurance, 61 percent about access to capital, and 51 percent about fuel and energy costs. All of these worries were cited by a larger percentage of entrepreneurs than in the prior survey in 2013.

The survey also asked about issues closer to home. When asked to list their concerns about their own business in the next six months, 90 percent say they are worried about gaining new customers, while 81 percent are concerned about retaining current customers.

How Are Women Business Owners Tackling These Challenges?

The majority are focusing on improving and investing in customer service (69 percent) and marketing (62 percent), while about half (48 percent) are enhancing their products or services. Just 26 percent plan to hire new employees.

Online marketing is a big focus this year, with more women entrepreneurs investing in mobile marketing, social media marketing and website/online marketing. But the focus on online marketing also points up a major weakness that could keep women business owners from success. Although 85 percent of respondents say social media is important for building customer relationships, just 67 percent actually use social media to market their companies and connect with customers.

That means nearly one-third are missing out on a major marketing tool. Social media is not only a significant source of potential new business, it’s also a way to create customer loyalty, provide customer service, tap into what your customers want and much, much more.

Even among women business owners who are using social media marketing, most aren’t doing all they can.

What Are Women Business Owners Doing Wrong?

They Lack Confidence to Get Started

Only 54 percent of women business owners say they’re confident in their ability to build a social media presence for their business.

If you don’t feel like you can handle social media yourself, enlist someone to do it for you or at least get you started. An employee who’s familiar with social media can help you or, if you don’t have someone you can trust, an organization like SCORE or the SBDC (Disclosure: Both are clients of my company) can help you learn the ropes and show you tools you can use to streamline the process.

They’re Not Posting Enough

Only one-fourth of women business owners post on social media at least once a day, while 23 percent admit they rarely post at all. The only thing worse than not being on social media at all is being on it, but not using it.

What do you think when you see a business Facebook page that hasn’t been updated for months or a Twitter account that’s never tweeted? I think those companies have gone out of business or can’t handle the amount of business they do haveâ€"and potential customers probably feel the same.

Business Woman Photo via Shutterstock

More in: Women Entrepreneurs

Researchers demo iOS banking app hack

April 04, 2014

Mobile banking transactions may be on the rise, but banks may face an uphill struggle to keep them secure from cyber-criminals.

Researchers from Arxan, an application security company which specialises in reverse engineering, recently demonstrated how hackers can use ‘method swizzling' and a rogue application to compromise a user's online banking and, consequently, steal and transfer money out of the account.

In a live demonstration to SCMagazineUK.com, Winston Bond, sales engineer and security solutions architect at Arxan, showed how a rogue application - downloaded from an unofficial app store like Cydia or even Apple's own App Store - can be used in conjunction with ‘method' swizzling to compromise a jailbroken iOS device, and the mobile banking application running on it.

[Bond did admit that if the app were to pass Apple's App Store review process, it would not remain available to download for long].

In this case, the applications used for the hack were test versions created entirely to show off how hackers could connect to bank servers. The rogue application was, in this case, for showing the co-ordinates from the iPad's accelerometer, but both Bond - and Arxan director of EMEA sales Mark Noctor - concurred that hackers could well look to create a more popular app, such as a clone of the popular Flappy Birds game, in order to simultaneously pilfer money from thousands of bank accounts.

“You could be on three million devices before you know it,” said Noctor, when speaking about how a bogus popular game application could be used to compromise an iOS banking app.

On the attack itself, Bond said that method swizzling is ‘very easy' from the attackers perspective. Method swizzling is a feature of Apple's Objective C runtime programming language, which is often used by iOS developers to exchange one method for another, making it useful for usage logging, performance, or even adding or augmenting features. 

In addition, method swizzling is often used in the jailbroken community for user interface (UI) tweaks, and changing gesture controls. Fortunately, this kind of attack is only viable if the device has been jailbroken.

Quizzed by SCMagazineUK.com on whether this reduces the threat that this kind of remote reverse engineering attack could be used on popular mobile banking apps, Bond said: “Yes, a relatively small number of people have jailbroken [their devices] but it's not insignificant.”

The company's demonstration came after it released its 'State of Security in the App Economy' report, which revealed that 78 percent of the leading 100 iOS and Android apps have been hacked.

Both Bond and Noctor are mindful that attackers are grouping into organised gangs, and increasingly attacking applications that can make money. As a result, some banks appear to be very wary of the threats facing online banking.

“Some banks are paranoid, and it's to that extent that they find us,” said Noctor, who added that forward-thinking banks are starting to embrace two-factor authentication. Arxan's technology is able to detect compromised applications and jailbroken devices, allowing access to be shut off or for transactions to be limited, and the company says it is working with numerous mid to large-sized banks in Europe.

Trustwave senior security consultant Neale Hindocha, who showed how touchlogging can be an issue on iOS and Android devices at RSA 2014, told SCMagazineUK.com that while method swizzling is often used for good by app developers, security researchers and jailbreakers - it can also be used by hackers seeking to perform man-in-the-middle (MiTM) attacks.

"What developers need to do is to force attacks onto their app. They need to assume that it's working in a hostile environment," said Hindocha. Caleb Barlow, director of application, data and mobile security at IBM, further urged developers to scan app source code for vulnerabilities, ensure apps can identify mobile malware and harden them to ensure transaction integrity.

"Mobile applications are relatively easy to attack and rogue variants of legitimate applications are rapidly becoming the problem on mobile," said Barlow.

Arxan's demonstration came just days after the British Bankers Association reported that mobile banking transactions had doubled, to 5.7 million mobile transactions a day, in the space of a year.

Jason Hill, lead security researcher at Websense, told SCMagazineUK.com that the increase in popularity of cashless payments is likely to be matched by bad buys with bad intentions.

“Cashless payment methods and the reliance on mobile technologies is only likely to increase in the future,” he said.

“Given this, users need to increase their personal security awareness to ensure that they utilise all of the security controls that are available to them. Financial institutions are also likely to continue to evaluate suitable authentication and security mechanisms which, hopefully driven by consumer demand for enhanced security, will lead to suitable measures being deployed across the board.”

GCHQ to accredit cyber security degrees, appoint new director

April 07, 2014

GCHQ is teaming up with UK universities to offer accredited cyber security masters degrees, and is also reportedly on the verge of appointing a new director.

It was revealed over the weekend that the UK government electronic surveillance agency has sent out briefing notes to universities which offer MSc courses in cyber security, asking them to apply for certification by 20th June.

Should they accept, students who have completed and passed these courses would be able to say that they have “successfully completed a GCHQ-certified degree."

The government-backed body, which is still facing heat from Edward Snowden's ongoing allegations, reveals in the 39-page document that the certification would be valid for five years, after which it would need to be renewed.

It's not clear why the group is embarking on this scheme, although a look at the briefing document suggests that there is some disillusionment from within the government at the quality of courses being offered.

The briefing note says that the number of cyber security-related courses (there are around 90 currently, according to SC data) makes it difficult to “assess the quality of the degrees on offer”, and reveals that degrees certified by the GCHQ would offer a “general, broad foundation in cyber security” including detailed knowledge on things like malicious code and common attacks.

GCHQ came up with the criteria by working with Professor Fred Piper, the founding director of The Information Security Group at Royal Holloway, University of London - the first to offer cyber-security Master's degree in the UK 24 years ago.

Royal Holloway and Oxford were the two universities to trial the project, with the first group of students on doctoral training in cyber security starting in October 2013. They are due to complete their PhDs in 2017.

GCHQ has also confirmed that it intends to send its own employees on these courses.

“Whilst we will be offering opportunities for GCHQ staff to up-skill through Master's courses that are successfully certified, we also believe they will have much wider applicability across the public and private sector and encourage other organisations to look for the certification as a mark of quality,” they said.

“Our main aim here is to increase the future pool of cyber-security professionals that are available to both the public and private sector.”

In response to the news, Eerke Boiten, director of the Cyber Security Research Centre at the University of Kent, told SCMagazineUK.com that he welcomed the move - but expressed concern at the number of courses that will meet the required standard.

“Given our university offers several MSc programmes in Security, of course this is a development that is likely to affect us,” he said via email.

“It was already known that GCHQ is keen to support study at postgraduate (rather than undergraduate) level in this topic, and that is the correct choice given the depth and breadth of knowledge required. The novelty of this particular move is that it is willing to broaden this support, from a small number of institutes that it has direct involvement with, to a wider range of universities offering the right content and quality.

“Having an accreditation kitemark available, however, will not by itself be an incentive for people to embark on an MSc in Cyber security, and so won't address the skills gap. I think it is also extremely likely that there will remain good MSc courses in the UK that will not receive the GCHQ accreditation: the GCHQ curriculum is very densely packed, and somewhat focused towards their definition of cyber-security. Universities may choose to take a somewhat different focus, or decide that it is more appropriate to cover a smaller number of topics to a much greater depth.”

Alan Woodward, professor at the University of Surrey, added that the move was ‘really encouraging', and believes that the GCHQ is a "natural reference" for controlling the quality of cyber security courses in the UK. His university wasn't involved in the pilot - which involved Oxford and Royal Holloway - but hinted it could well bid to get involved.

In related news, it appears as though the electronic surveillance body is also someway closer to appointing a new director.

Citing ‘senior Whitehall' figures, The Financial Times reports that a decision on the new leader is expected within a fortnight.

The choice is currently believed to be between Charles Farr - director of security and counter terrorism at the Home Office, Robert Hannigan - director-general of defence and intelligence - and a third intelligence officer who ‘cannot be named for security reasons'.

Sir Iain Lobban, the current GCHQ director, is to step down later this year having worked for the organisation since 1983.

LinkedIn Gets Rid of Products and Services Tab on Company Pages

LinkedIn says it is phasing out the Products and Services Tab on Company Pages.

If your business has a Company Page, the tab will be history as of April 14, 2014. For now you can edit your existing tab but can no longer add new products to it.

In a post on its official Company Pages blog the LinkedIn Company Pages team says it frequently evaluates features so the site can focus on the most valuable among them. Apparently, this one didn’t make the cut. The team goes on to say:

“We do this to ensure that we’re creating a platform where companies can deliver timely, engaging content to our members. Sometimes, this means we need to remove a feature to focus on areas of the product that most benefit both companies and our members.”

But if you loved and used the products and services tab for your business, there’s no need to panic. LinkedIn says two alternatives are already popular with users. Those alternatives include your regular LinkedIn updates or another feature made specifically for this purpose: Showcase pages.

Company pages will remain a place to post real-time updates and share content from your business. This includes new images and videos that play right in one of your followers’ news feeds on LinkedIn. When a user interacts with content you’ve posted on your Company page, it gets shared with their contacts and further spreads the word about your business.

LinkedIn Showcase pages were introduced late last year. Showcase pages allow businesses to create a feed specific to a product, service or brand name. Take Hewlett-Packard’s pages centering on the company’s software, financial services or HP Lab, for example. The pages are used to generate a following for a specific part of your business, keeping it separate from other news and updates.

LinkedIn Photo via Shutterstock

More in: LinkedIn

Small Business Owners: Learn to Discriminate!

Price discriminate, that is.

Many small business owners fail to appreciate the value of this economic concept. That’s a shame because all small business owners can use price discrimination to boost revenues.

“Price discrimination” is an economic term that describes a strategy of making different buyers pay different amounts for the same good or service.

Let’s start with why you want to price discriminate. All of your customers have a reservation price - the maximum amount they are willing to pay for your product or service. You want your customers to pay their reservation price. Sell to them for anything less and you are giving up revenue.

You can’t charge all your customers the same amount because they don’t have the same reservation price. People who really want your product would be willing pay more than those who are mostly disinterested. So if you don’t charge the eager customers a premium, you’ve lost revenues. And if you don’t give the largely disinterested ones a discount, they won’t buy. In short, you will bring in more revenue if you charge eager customers a premium and offer reluctant customers a discount than if everyone pays the same amount.

Unfortunately, your customers don’t walk around with their reservation prices tattooed on their foreheads. So the price discrimination process is more complicated than just looking at your customers.

Economists generally describe the price discrimination process by reference to degrees: First, second, and third. First degree price discrimination refers to tactics that identify the maximum price that each customer is willing to pay. Consider the purchase of a used car. Rather than charging you a “sticker price,” the dealer is going to negotiate with you to figure out what you are willing to spend.

First degree price discrimination is tough to pull off because you need to negotiate with each and every customer to figure out his or her reservation price. But it still happens.

Perhaps the best first degree price discriminator I ever met was a rug shop owner a Turkish bazaar. Over several hours and numerous cups of apple tea, he asked me and my wife seemingly innocuous questions that helped him figure out our reservation price for a handmade Turkish rug. Once he had figured that out, he “miraculously” discovered that the rug we loved was available for our reservation price.

Second degree price discrimination refers to tactics that get customers to meet certain conditions to get a lower price. For example, volume discounts, premium packages, loyalty card programs, and early booking discounts are all examples of second degree price discrimination.

Consider the example of airline fares. Airlines sell tickets booked well in advance more cheaply than walk-up fares. They know that vacation travelers won’t pay as much as business travelers on expense account. Because vacation travelers will book further ahead, the air carriers can price discriminate by setting advance ticket prices at the maximum price vacation travelers will pay, while keeping walk-up fares at the maximum price that business travelers will pay.

Third degree price discrimination refers to tactics that lower prices for groups of people who wouldn’t otherwise buy because their reservation price is below the product’s list price. Consider movie theaters that offer senior citizens a discount. Because seniors tend to have less income than younger adults, the theaters can attract the seniors at the price they are willing to pay without having to lower the price that they charge other adults.

Basic economics offers small business owners a lot of lessons to increase revenues, lower cost, and boost profits. One of those is to learn to (price) discriminate.

Small Business Owners: Learn to Discriminate!

Price discriminate, that is.

Many small business owners fail to appreciate the value of this economic concept. That’s a shame because all small business owners can use price discrimination to boost revenues.

“Price discrimination” is an economic term that describes a strategy of making different buyers pay different amounts for the same good or service.

Let’s start with why you want to price discriminate. All of your customers have a reservation price - the maximum amount they are willing to pay for your product or service. You want your customers to pay their reservation price. Sell to them for anything less and you are giving up revenue.

You can’t charge all your customers the same amount because they don’t have the same reservation price. People who really want your product would be willing pay more than those who are mostly disinterested. So if you don’t charge the eager customers a premium, you’ve lost revenues. And if you don’t give the largely disinterested ones a discount, they won’t buy. In short, you will bring in more revenue if you charge eager customers a premium and offer reluctant customers a discount than if everyone pays the same amount.

Unfortunately, your customers don’t walk around with their reservation prices tattooed on their foreheads. So the price discrimination process is more complicated than just looking at your customers.

Economists generally describe the price discrimination process by reference to degrees: First, second, and third. First degree price discrimination refers to tactics that identify the maximum price that each customer is willing to pay. Consider the purchase of a used car. Rather than charging you a “sticker price,” the dealer is going to negotiate with you to figure out what you are willing to spend.

First degree price discrimination is tough to pull off because you need to negotiate with each and every customer to figure out his or her reservation price. But it still happens.

Perhaps the best first degree price discriminator I ever met was a rug shop owner a Turkish bazaar. Over several hours and numerous cups of apple tea, he asked me and my wife seemingly innocuous questions that helped him figure out our reservation price for a handmade Turkish rug. Once he had figured that out, he “miraculously” discovered that the rug we loved was available for our reservation price.

Second degree price discrimination refers to tactics that get customers to meet certain conditions to get a lower price. For example, volume discounts, premium packages, loyalty card programs, and early booking discounts are all examples of second degree price discrimination.

Consider the example of airline fares. Airlines sell tickets booked well in advance more cheaply than walk-up fares. They know that vacation travelers won’t pay as much as business travelers on expense account. Because vacation travelers will book further ahead, the air carriers can price discriminate by setting advance ticket prices at the maximum price vacation travelers will pay, while keeping walk-up fares at the maximum price that business travelers will pay.

Third degree price discrimination refers to tactics that lower prices for groups of people who wouldn’t otherwise buy because their reservation price is below the product’s list price. Consider movie theaters that offer senior citizens a discount. Because seniors tend to have less income than younger adults, the theaters can attract the seniors at the price they are willing to pay without having to lower the price that they charge other adults.

Basic economics offers small business owners a lot of lessons to increase revenues, lower cost, and boost profits. One of those is to learn to (price) discriminate.

Satanic Latte Art? How Should a Business Respond?

When a Louisiana teacher visited her local Starbucks, she didn’t expect that her coffee drinks would deliver a satanic message. But when she looked down at the two drinks, she allegedly saw just that. One of them depicted a star that appeared to be Lucifer’s pentagram and the other included a 666 made with caramel drizzle.

Megan K. Pinion posted a photo to the coffee chain’s Facebook page with the following comments:

“I just purchased two coffees at your Mall of Louisiana location. This is how my coffee was served to me. I unfortunately can’t give you the young man’s name who served it because I was so appalled that I could not bring myself to look at him. The star is almost okay because it is in your Starbucks logo, the 666, however, was quite offensive. I am in no way judging his beliefs or dis-meriting his beautiful artwork, I am however judging [the barista's] lack of professionalism and respect for others.”

In addition to her post on Facebook, Pinion also filed a formal complaint with Starbucks. The company has since apologized to Pinion, a public school teacher who is of Catholic faith. But it hasn’t commented on whether or not the employee responsible for the artwork would be disciplined.

Tom Kuhn, a Starbucks spokesman, told The Huffington Post:

“We’re taking the complaint seriously and have sincerely apologized for her experience. . .This obviously is not the type of experience we want to provide any of our customers, and is not representative of the customer service our partners provide to millions of customers every day.”

What should the appropriate response of the business be in this situation? Starbucks apologized. Should they have done more?

A sincere apology is nice, but isn’t always good enough when a customer receives poor service or is offended by an employee.  In this case, Pinion likely wasn’t the only one offended. Countless other Starbucks customers saw the post on Facebook and likely came to their own conclusions about the incident and how the company should have reacted.

Firing or otherwise disciplining the employee responsible for the artwork would be one option. But Starbucks said it is their policy to not publicly discuss such actions, and Pinion wasn’t able to provide the company with the employee’s name.

Another option would be to compensate Pinion in some way for the unsatisfactory service she received. The company has issued gift cards in the past to apologize for service issues at franchise locations.

Image: Facebook