At C-Level

Circuit City Flailing

 For those that might have missed the press release, Circuit City just announced the centerpiece of its holiday season marketing: One Price Promise.  Basically, the company is guaranteeing the same price on Circuit City products sold online, in the store or on the phone.  Not exactly the makings of a legendary Black Friday.

It's not surprising that the company's marketing efforts are less than stellar.  The company is bleeding$250M in cash (ttm), and at least one analyst has predicted a Chapter 11 filing in 2009, the unfortunate result of a long string of questionable management decisions.

CEO Phillip Schoonover resigned in September after a nasty and protracted war with shareholder and Hollywood Video founder Mark Wattles.  Earlier in the year the company resisted acquisition interest from Blockbuster, which would have been a good idea at almost any price.  And then there were the ill-advised acquisitions in 2004 of digital music purveyor MusicNow (undisclosed amount) and Canadian retail InterTAN ($250M).  And all the while the real estate was crying for capital, with the aging stores getting outflanked by nicer, newer and better-positioned Best Buys in almost every market.

But for me, I knew the end was near 18 months ago when the company axed 3500 of its higher-priced (experience-based) sales associates and replaced them with minimum wage (acne-based) part-timers.  I was dumbfounded when I heard this.  How could the company abandon its customer focus, even in the worst of times?   I decided to visit my local store to assess the damage.  Sure enough, no one had a clue about the product.  If I'm not going to get decent service, why not just buy at Wal-Mart or Costco, which are both a lot cheaper?  And I guess that's what folks have done, because third-quarter revenue was down almost ten percent. And of course, the company is in no financial condition to weather a recession, or to find capital to fix what's broken.

So skip the One Price Promise Christmas special and wait for the going-out-of-business deals in 2009.  Just don't expect great service.

The Sleaze Temptation

It’s easy to be sleazy. Just put aside your business ethics for a moment, forget about treating customers well and go for it. Offer a big rebate, then make the redemption requirements sufficiently challenging to drive down the redemption rates. (There are actually formulas for this.) Or sell a product at a killer price, but then slip in an over-inflated S&H fee to recover your margin. Or, as I just experienced, lure new customers with a Free Trial offer, get their credit card on file, then make it virtually impossible for them to cancel.

I wanted to send a birthday ecard and ran across a charming one from American Greetings that said it was “Free.” I expected a catch, and sure enough, I had to sign up for a trial. I know the drill, so I went ahead and signed up, expecting to cancel later unless I was pleasantly surprised by their offerings. I immediately emailed Customer Service and asked about the length of my trial period. Three days later, no reply.

Now suspicious, I went to the website and looked for information about how to cancel. But it was nowhere to be seen. After working through about six links I finally came to an account page which had a paragraph at the bottom with a telephone number to call if you want to cancel. Wow!  I called, got a CSR and expressed my disappointment.  I think she’d heard it all before.  I received no apologies. No sympathy. Just “Thank You.”

The company had surely made a conscious decision that making cancellations more difficult would increase revenue. The strategy is called:  “Easy in. Hard out.”  In the long-term, this is bad business. I used to feel generally positive about the American Greetings brand name—after all, their cards have always been kind of fun. Now I am the worst kind of negative. That will catch up to you.

 But more important, doing business this way is sleazy.  It’s not just a bad way to make money, it’s a bad way to live. The world is too small and life is too short.