Tag Archives: business models

Can Twitter Really Drive Investment Decisions?

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A group of hedge-fund managers are launching a multi-million dollar hedge fund next month, using Twitter as its market indicator to determine sentiment and to thereby make investment decisions.

This information came from a recent article on CNBC / Yahoo Finance which quoted Derwent Capital Markets – a London-based hedge fund – as saying it had successfully marketed the new venture, officially called the Derwent Absolute Return Fund, to high net-worth clients and had attracted over £25 million in investments.

The company is confident it can achieve returns of at least 15-20% per annum by analyzing information gathered from over 100 million tweets each day, which the firm brands as “The 4th Dimension.”

On the face of it, this may sound like a risky, or even crazy, venture – but is it?

Let’s face it, the concept of rational markets has been comprehensively debunked during the last few years of economic crisis, and the global growth in wealth came to a dramatic end largely through a change in general sentiment. We’ve also seen plenty of allegations – many apparently backed by evidence – of collusion between those in research and those in investment banking to pump stock prices of certain companies at various times. In fact, based on this and my own experience, it seems that relying on the “experts” to manage your investments is no greater guarantee of success than simply using a general market-tracking fund – and often provides worse returns.

Furthermore, most people agree that we won’t see real growth return this cycle until consumer confidence picks up. Isn’t that really just about general market sentiment?

So contrary to some of the views on this fund, I would argue that this is a smart bunch of people – what they’re doing is using current technology to gauge market sentiment and make investment decisions from there.  Instead of listening to a small group of people to try to understand what “the man in the street” is saying, they’re tapping into the collective feelings of millions.

I see this as the start of a whole new way of tapping into societal collective wisdom and sentiment. What do you think?

“The Lifetime Value of Customer” Concept

AA vintage sidecar (date unknown) at the Great...
Is the AA’s approach to customers old-fashioned?
Image via Wikipedia

Well, we survived October unscathed (although it remains to be seen if Ireland will drag the whole of Europe down) and am now pretty well settled in England so will be able to write more frequently again.

An issue that has really been highlighted during my move is that so many companies here seem to have little or no understanding of “The Lifetime Value of Customer” concept. And I’m not just talking about SMEs here – in fact, many of them understand it far better than the big ones.

Let me illustrate this – apart from Newsweek, that troubled publication that continues to make it far more attractive to take out a new subscription each year than renew (see “Is There Value in a Repeat Customer”), an excellent example of this is the AA (Automobile Association) here – an organisation that is clearly confused by policies and customers.

Having been a member of its sister organisation in South Africa for some 20 years I joined the AA in England as soon as I was no longer using hire cars, and had bought my own. It’s just a piece of mind thing for me as I’ve only had a very few occasions to need their help in all the years. Well, as luck would have it, a few weeks after joining I did need them, so put in a call.

I won’t go into the details here – suffice it to say that I needed to upgrade my membership for the call to be answered (hadn’t read the small print carefully enough) so did so. Imagine my shock to find that I was not only charged for a new, higher-level membership plus a penalty for not having had the right level when making the call, but was given no credit for my previous membership fees. In other words, I was considerably worse off than somebody who was not a member at all when calling.

Assuming that somebody had pushed the wrong button, I wrote to the AA and – after having to request a response for a second time – got a rather offhand letter referring to “company policy”: that wonderful phrase used by so many people to hide behind. The fact that the policy is stupid seems to have escaped them.

The fact is that the AA, for the sake of around £40 will lose my future membership fees of probably some £3000: an extremely poor decision. They just do not understand the concept of “Lifetime Value.”

Mind you, they’re not alone – I’ve seen numerous examples of some of the world’s biggest companies throwing away, potentially, millions of dollars/pounds in future sales through mistreating their customers in the technology channel.

And yet the concept is so simple: attend to your customers, have sensible policies, take the opportunity of turning an unhappy customer into an advocate for your business and you will thrive. Take a short-sighted view at single transaction level and risk all those future earnings you might otherwise have had – not exactly a guarantee of long-term success, is it?

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Not Really a Global Economy

My Pocket Contents
Image by William Hook via Flickr

The news continues to be full of stories around the Global Economy and how companies increasingly operate independent of national boundaries – so that one could be forgiven for believing that we really do live in a global economy.

However, as my current experience of relocating to a “First World” country – England – shows, where one would expect that things do operate in this way, the reality is very different and the Global Economy seems a long way off.

Certainly, some things work well – one can move money between bank accounts across multiple geographies easily (provided, of course, your accounts are all with one bank, otherwise it’s far more complicated). Mobile telephones also operate well across boundaries, although you pay handsomely for making and receiving calls when away from the country where your phone is registered – profiteering, perhaps?

However, the rather large holes in this Global Economy story (myth?)  have really been exposed when trying to establish myself with the basics here.

  • Renting a home – this is far from simple. You have to get credit reference agencies involved and they require enormous amounts of information. Simply giving them details of your bank/s and relationship managers isn’t enough: you have to do all the leg work yourself.
  • Insurance – amazingly, motor insurance companies apparently don’t give credit for a no-claims driving record in countries like Dubai (an extremely challenging environment as anyone who has driven there will attest), although they are happy to do so for comparatively tame driving countries like New Zealand, so no more no-claims bonus on motor insurance…
  • Telephones – it took me a week to establish that I COULD get Blackberry Services on a Pay As You Go basis (I was told by some mobile operators and some phone shops that this was impossible for the first week, but kept researching until I found it could be done).

In fact, for most general things (even using your new bank account’s debit card) the over-riding requirement is for a local Post Code (you’re asked for this the whole time), so if you’re still trying to set things up and don’t yet have a fixed abode, you end up having to borrow a post code and address from a willing friend or relative for even simple transactions.

Why is it, that with a 30+ year history of banking, credit, insurance, telephone, etc., etc., usage in countries like South Africa and Dubai (countries that have “First World” standards of traceability on such things) I have to start over? One would think this information would be available to the relevant companies and authorities in other countries, but it seems to be only the case for adverse information and anyone else is “guilty until they prove themselves innocent.”

So much for the Global Economy – or is it just a case of laziness and profiteering?

———-

P.S. This relocation process is, of course, the reason for my lack of blogs recently – I hope to be back to regular blogging in September.

Regular readers will notice the banner picture change to reflect my new home…

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The End of Cash?

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Image via CrunchBase

It’s interesting to see the number of recently introduced products coming to market which are designed to, in effect, remove the need for cash.

One that has garnered particular attention recently is, of course, Square. This comprises a small application that resides on your iPhone (or iPad, iPod Touch) or Android phone, together with a little reader that plugs straight into the audio input jack of the phone and turns it into a personal credit card payment machine that will allow the user to accept credit card payments from anyone for a small fee (typically 2.75% + 15c). With no costs for set-up, application or card reader this is sure to change the game for those tens of millions of small businesses, traders and professionals that have, until now, fallen outside the electronic payment net because they are too small for the card companies to serve cost-effectively.

But Square is not alone – Obopay allows anyone with a  mobile phone to set up an Obopay account and, for just 25-50c (plus 1.5% if you’re using a credit card to fund your account) send money – in other words, make a payment – to anyone else with a mobile phone, whether or not that person already has an Obopay account. Again, there are no setup costs.

And then there’s Intuit with its GoPayment service that also enables credit card payments from a mobile phone – this time with a Bluetooth reader – at a cost of 1.7% + 30c per transaction, although this service does have a monthly service cost of $12.95 attached to it (I wonder for how long, though, given the competition above).

Doubtless there are many others, too, either in stealth mode at present or on the drawing board.

What’s more, these systems allow you to build purchase histories by customers, offer loyalty programs and great levels of service more simply than the straightforward cash systems did – so even the smallest businesses can step up their marketing at little or no cost.

At present, all these products only work for you if you’re a US-resident/business, but it’s only a (hopefully short) matter of time before they go global and the way of transferring value changes forever from cash to electrons. No more looking for change, worrying about how the currency in a new country you’re visiting works, being concerned whether anybody’s watching as you withdraw a large amount of cash from an auto-teller…. And, of course, if you’re a small business, no more concerns about having the right change for those large notes that auto-tellers like to give, about the value sitting in your till, or being worried when taking your cash to deposit it.

It’s going to be interesting to see how society changes over the next generation as we move from cash altogether. Will the nationalistic bonds to a currency (and the resulting issues of payments from/to different countries and with travel) be removed, and could we find a common global currency?

And, of course, we’re seeing the continued drive for the mobile phone to be less a telephone and more a personal digital assistant in every way – clock, alarm, calendar, address book, diary, music player, radio, newspaper, camera, voice recorder and now, wallet. As an aside, it’s interesting to see how many of the Generation Ys don’t wear watches – their phones tell them the time. Has the watch industry got an answer to this, its potentially biggest threat?

We’re at a very interesting point in the 5000 year evolution of money as we know it. Will it disappear completely as a physical object in the next 20 years?

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Can Europe Survive? Life after Katla…

Katla
Image via Wikipedia

The recent chaos surrounding the eruption of the Eyjafjallajökull volcano in Iceland – with effects being felt globally in terms of significant financial losses, disruption to travellers, disruption to food supplies, and so on – needs to provoke some serious discussion as to what actions are needed to prevent even greater, and much longer-term, chaos in the event of a more significant eruption.

After all,  history has clearly shown that when Eyjafjallajökull erupts, it’s very much larger neighbour Katla is generally not far behind, and Katla is overdue for an eruption anyway.

While the size of eruptions can never be accurately forecast, the historical evidence shows that Katla’s eruption is likely to be at least ten times the size of the Eyjafjallajökull eruption – and quite possibly more. This could mean not only significant floods of fresh glacial-melt water into the sea (a volume equal to the combined flow of the Amazon, Mississippi, Nile and Yangtze rivers is estimated to have occurred following its 1755 eruption), but a column of ash rising 20km, or more, into the jet stream and being spread over a much greater part of the Northern Hemisphere.

History has already shown some of the worst effects from major volcanic eruptions in Iceland – that of Laki in 1783 resulted in famine across Western Europe, and as far south as Egypt, one of the longest and coldest winters on record in North America, and the death of tens of thousands of people from gas poisoning and famine. It was even linked to the start of the French Revolution, where the lack of food played a significant role.

Admittedly, these are somewhat extreme examples, but they show what is possible should Katla’s eruption be a big one – and almost all experts agree that with Katla, it’s not a question of “if” but of “when” it will erupt.

So, what are some of the possible effects of a big Katla eruption?

  • Air travel – the recent 6-day chaos would potentially be dwarfed by one that could last months. This would not only impact passengers, but freight, too. Tourism would certainly be impacted negatively, but so would food imports and general freight movement.
  • Agriculture – the impact of a prolonged cold spell would drastically affect crop production in Europe and, potentially, elsewhere in the Northern Hemisphere. For Europe, this would just add to the difficulties faced by the lack of air transport to bring in fresh produce from elsewhere.
  • Power – of course, a lengthy period of exceptionally cold weather would push up power consumption dramatically. Could Europe cope with a prolonged extra demand for power for heating?
  • Wealth – potentially a significant shift in the wealth of Europe as the combination of food shortages, collapsing tourism, freight reduction and prolonged cold takes its toll. Where would this wealth go, and who would benefit?

Disturbingly, though, little attention seems to being paid to this, in spite of the lessons we’ve learnt from Eyjafjallajökull. And if it’s not Katla, how long before another significant eruption – perhaps in Iceland, or perhaps elsewhere (Yellowstone?)…

European, and other, governments need to get together as a matter of urgency on this: the planning for overcoming the potential problems is not something that can be done overnight in a reactive manner. Rather, they need to start work today on ways to reduce the reliance on current modes of air transport (could the airship make a comeback?), to find additional reliable power sources, determine ways to source sufficient food, and so on.

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The obligations of Airlines to their Passengers

Europe
Image via Wikipedia

The current chaos following the six-day shutdown of almost all European airspace has thrown the issue of passengers’ rights firmly into the spotlight – particularly with the fact that so many airlines are refusing to take any responsibility for assisting stranded passengers.

With my son being among those stranded (he was stuck in England, trying to get home to Dubai) I have been active in understanding this in order to help him, and so post this in the hope that it will help others in a similar predicament due to the massive problems caused following the eruption of Eyjafjallajokull.

The governing regulation behind all this is one entitled Regulation (EC) No 261/2004 of the European Parliament and of the Council. The Regulation is available in full from various sources on the web, while this Wikipedia entry has a good summary, and this BBC post has one too.

The summary bottom line is:

  • All passengers stranded in Europe are entitled to their choice of: rerouting to another airport for onward flight to their destination (difficult for this in Europe at present); accommodation, refreshments/meals and communication services (basically 2 calls) while they are stranded (the most applicable option); or a refund of their ticket (not sure why they would want this as they generally want to get home).
    • This is regardless of the nationality of the airline on which the passenger is flying, as the European rules apply to the airlines while they are operating in Europe.
  • All passengers stranded outside Europe with tickets to a European destination on a European airline are entitled to the same choices detailed above.
    • The key points here are firstly that the carrier must be a European airline (if on a code-share flight, the ticket must have been issued by one of the European airlines on that code-share), and secondly that the destination must be a European one.
    • Unfortunately, if you are stranded outside Europe with a non-European airline, they are not obliged to provide this assistance.

Many airlines are claiming that as the volcanic eruption is an “Act of God” (or “Force Majeure”) they are absolved from any responsibility for such assistance and are turning passengers away. This is patently untrue as the regulation only makes provision in such circumstances for airlines to be excused from paying additional (cash) compensation that they are normally liable for in the event of delays. They are still required to accommodate, feed and provide communications for stranded passengers, regardless of the reason.

Other airlines, such as Qatar Airways (on which my son is booked – so much for the “5 Star Service” they like to advertise!), are saying that they are not required to provide any assistance as they are foreign-owned. Again, this is simply not true. Although they are not obliged to provide assistance for those passengers stranded outside Europe, they are absolutely obliged to do so for the passengers stranded in Europe.

Should your airline have refused you compensation at the time, you should retain all receipts for accommodation, food, etc., while you have been delayed and lodge a claim with the airline on your return home.

I hope this will help clear up the confusion surrounding this issue and enable people to claim appropriate assistance.

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Twitter – The “Next Big Thing” for Business

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Image via CrunchBase

With Twitter set to pass the magic 100 Million user mark later this month, or early May, and the company having been valued at around a Billion Dollars last year, it’s moved from the realms of novelty. So, should business sit up and take note; is it the “Next Big Thing” as a business tool?

Speaking with business leaders and marketers, one gets mixed responses – the enthusiastic advocates on the one hand, and those that hope it will fade away as it can potentially damage their company, they believe, on the other.

There’s no question that any public forum can be used by people to disparage, or worse, a company, but is that a reason to abstain from that forum, or should one take the opportunity to embrace it and counter any adverse remarks? After all, unhappy customers that are turned around tend to become the most loyal advocates…

Others look at Twitter and ask whether 140 characters is really enough for any sort of meaningful dialogue with customers and dismiss it on this basis. But in our information-overloaded world, is brevity not a blessing?

Properly used, there is no question in my mind that Twitter really can become a significant business tool:

  • Customer service – probably the first Twitter application area to be embraced, companies like Southwest Airlines, Staples and Zappos have found it invaluable to track unhappy customers, respond quickly and show a great service ethos.
  • Sales leads – of course, great customer service leads to sales, but many more companies, like Dell, Sony and Starbucks are using Twitter to promote products; in fact an article last month reported Sony measuring over £1 Million in sales directly attributable to its Vaio Twitter account.
  • Promotions – an extension of the sales leads application is using Twitter for promoting special offers to followers. As the integration of GPS technology with phones increases, these could even be location and time specific, making them highly targeted.
  • Product feedback – companies are often accused of making products that customers don’t need, or of not including “obvious” features. Twitter can give a window for listening to the needs and views of a very wide customer base.
  • Order tracking – an area I’ve yet to see, but one I think is an obvious one: imagine being able to Direct Tweet to a courier company and get an automated response as to where your special delivery is in the system…

In fact, the possibilities are endless – limited only by imagination. With Twitter, companies have access to an incredible mass direct marketing tool without the dangers of being considered spammers – people would simply unfollow those they consider annoying – and one which can provide real-time, real-person feedback on an incredibly wide range of issues.

Twitter, I firmly believe, is poised to be the “Next Big Thing” for business, and companies that ignore it do so at their peril.

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