Posts filed under ‘Microeconomy’
Private equity and the subprime crisis (bad news that could be good after all)
The subprime crisis has arrived. Yes, many anticipated so. That’s what happens when economy depends on expectations. They take some time to change and, when they change, they do it abruptly. Like those subprime mortgages that have transformed from “hot products” to “hot potatoes”.
Overall is not a matter of solvency but liquidity. I agree, tell that to those that will not be able to afford the mortgages, maybe up to 500.000 people in the US. But investors do not worry much about them. Investors just get scared and they stop pouring endless capital… until they start to do the same somewhere else.
Because companies still report record earnings and the price of gold has been rising non-stop. That means that the machine is still working.
But let’s not be too complacent. A wider crisis can still arise. If gold is “hot”, ABS are cooler than ever. ABS are asset-backed securities, financial products made up of mortgages and things alike that are covered by a real asset, such as your home. These are a way for banks to get cheap financing and externalise risks, because the default risk is transmitted by the ABS, while it wouldn’t be with debt, for instance.
If banks get increasingly difficult to finance, they will transmit this additional cost to companies and consumers. And that’s an entry point to generate a widespread crisis. Central banks should add additional liquidity to the system by lowering rates, but that seems unlikely given their current policies.
But, what about private equity? Now it will be more difficult for them to get cheap capital to finance, that’s for sure. But that doesn’t mean they have no future. On the contrary, they are now more needed than ever, because they are the ones to provide that leaning, that additional shakedown that companies needed in times of more expensive credit.
Remember, there’s much more to private equity than leveraged buy-outs, they have an important role in the markets, and that means they have an important role to play in this new situation.
PD: I read this morning in “The Economist” that the US were thinking of “relief measures” for the crisis. Then I changed to a Spanish newspaper and read about the Popular Party (centre-right and opposition and presumed liberal) to propose the right not to pay mortgages during a year for the unemployed. Alarmed by both news I couldn’t help the thought: regulation must ensure that the system is not abused but, let the market regulate itself. Although some regulations will be painful, it’s the most effective way we’ve come to know.
Blaming Heathrow (and splicing it up)
It’s increasingly easier for alienated bare-footed queuing passengers to blame Heathrow (BAA) for the illnesses of the deficient British airport system. Even easier to blame there is the Spanish owner: Ferrovial. But a systemic look at the problem reveals that the responsibility is wide spread, and it may not be that easy.
The airport sector has been traditionally underinvested. A very important stakeholder, the surrounding communities, has been reluctant to give way to hostile-perceived enlargements. Justifiably worried about the environment, may that be atmosphere or noise, or simply about the territorial impact in hindered neighbouring villages, new infrastructures take so many years to be constructed that capacity always lags demand. The results: outdated infrastructures that are working over-capacity, and need to be maintained, overhauled or simply redesigned while in operation, leaving a poor image to travellers passing by.
More capacity is coming: brand-new T5 will open in March 2008
But what does it take to open a new terminal? There’s a lot of regulation in that too. Regulation that can be changing at any moment, as the new security requirements. BAA is required to enforce the law, a law that has changed to tougher requirements that imply additional costs.
But, that’s another point, tariffs are regulated. Airports are not free to choose what they charge the customer. In the case of the British Airports it was decided at some point that they wouldn’t compete with each other. Instead they were to be bound by decree tariffs. So the passengers would spill from one another filling all them up.
It has certainly happened. But the model needs a lot of overhauling too. Competing airports would make additional capacity out of thin air, and improve the customer service. Airports would feel the need to adapt to their customers: both airlines and travellers, and would need to align costs and prices. Do I really need to praise market economies here?
In my opinion, that’s what the Spanish owner Ferrovial is looking forward to. They had to incur in huge debt to buy BAA at a higher price than expected. And right now they are bound both by harsh requirements and fixed tariffs. In a free market they’d be competing against other airports bearing a much lower debt. And they’d have the first say on which airports to sell. If I was them, I’d pressure for that using public opinion, a very important stakeholder in this sector.
And when social brokers, namely the media, align with public opinion pressuring for change, the government complies.
Where corporate social responsibility ends and consumer responsibility begins
My fellow student Andrew wrote about CSR, corporate social responsibility, and made me think.
Wikipedia defines CSR as a concept that organizations, especially (but not only) corporations, have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations. This obligation is seen to extend beyond their statutory obligation to comply with legislation.
That responds to an increased sensibility of society towards sustainable development, as well as social issues. There are many investors that claim that they take CSR into account before deciding which investment to choose. Forgive my scepticism but I’m not sure if that’s only another way to make an exotic fund.
CSR is voguish at the moment. Many write about it, less practice it and even less perceive the consequences of it.
Anyway, although CSR is increasingly required and demanded to companies, you can’t expect CSR to make them act against their own nature.
Let me elaborate on that. Companies look for profit. That’s their goal and that’s the way it should be if they are to grow or even survive. You can say that they must diverge part of their profit into the society that bought their products in the first place. But, when the nature of the social or environmental problem is related to excessive consumption, I’d even say conspicuous consumption quoting Thorsten Veblen, you can’t expect the companies to help.
It’s true some companies have changed their products to more healthy ones, but, they are not promoting less consumption, reducing their promotion, increasing their price. In fact doing that would be irrelevant because they’d simply be substituted by competitors and market, and consumption, would stay the same.
Many social and environmental issues don’t have their origin -or solution- in the offer, it’s demand: our part.
We customers are on demand’s side. The parents have much more to say about their offsprings’ obesity than the companies have to say. The same about throwing water away or wasting energy. It’s our duty to be responsible consumers, not their obligation to teach us how to consume. And it’s so easy not to be responsible…
And they help us not to be. Let’s be realistic. At the same time, companies also have learned to transform their PR message to profit from our worries. They tell us they -and their products- are greener, lighter, healthier so that we can forget those issues and keep buying. They give us the alibi we need to divert our attention from the environmental issues, health issues, weight issues… whatever. We are already doing something, right? We are helping with our responsible shopping.
It’s the system. Economists can’t account for what they cannot measure. And you can’t measure happiness, or excess of weight, you measure the quantity of candy bars sold. In the same way we do not take into account the contamination we are producing with our low-cost flight. (although we still have the concept of externalities that, as a concept, has many things in common with the concept of CSR).
But, even if the plane left without us, it would still produce (almost) the same amount of CO2, right? Why bother?
Just some thoughts to share
Blackstone going public… not so well (at least something is coming back to markets)
My readers (thank you for being there) already know that Blackstone is a private equity firm that I like and I’ve been following lately (See China and Blackstone: bad news for capital markets, good news for private equity).
I’ve always visualised private equity firms as a way to avoid the market’s constraints, and the firm’s constraints also, to be able to make longer term moves in order to ensure efficiency and the emergence of sunk benefits inside the firm (See Defensive strategies from private equity).
The funny thing is to see how a private equity firm just decides to go public. In any case, makes a lot of sense to me. At least the market recovers part of what has been taken off it. ($4.13 billion are a nice prodigal son to welcome home)
And Blackstone decided to do just that and went public last Friday.
Graph source Yahoo Finance
This graph is from IPO-day. If you read the news, it was a success, as the PR guys and gals are saying: biggest US IPO in the last four years, executives going mega-rich and all that stuff.
And I concur that it was a success. But not a wild success: a mild one.
In the picture, the trade for Friday: the share ended up at $35.06, far higher than the initial price of $31, a 13% more… of course it went up, it was already over-subscribed. But, take a second look, it didn’t go that far up. The Fortress Investment Group went 33% up in its IPO last February, and it wasn’t as sexy or hyped as Blackstone.
Things are changing. As I have also written before, cheap money is going scarce. (see Rates keep raising: is this the end of cheap money?) And maybe we’ve reached the peak. Bond’s yields are going up too.
Let’s take a peek at the market:
Graph source Yahoo Finance
The graph is the Dow Jones Industrial Average Index over the last year. The two curves below are the Relative Strength (RSI) and the Money Flow (MFI).
The RSI measures the internal strength, the momentum, and it’s indicative when the security reaches a high and the signal fails to reach one. It’s not as low as it was in March’s crisis, but it’s in the second lowest for the last year.
The MFI also measures momentum but takes into account volume as well as price. In this case it has shown repeatedly how the market was loosing strength, thus slowing the slope, so there is a divergence there. In any case it would be worrying if this signal went below 20%, which has not happened.
But my point is that things are not as bright as they were before. And probably things will be harder from now on. If these guys were discounting new highs, they could have waited for a better moment. But they decided to go in now. There must be a reason for that. Behind the curve probably we will find a bumpier road, not the accustomed highway they’ve enjoyed until now.
And, just another thought, another interpretation from a different perspective: is it sustainable that private equity firms enjoy a 15% tax rate while public companies are at 35%? Doesn’t seem quite fair. There’s a hard debate on this and proposed changes on legislation on the way… is Blackstone equity already discounting the conclusion of the debate? (or at least the uncertainty)
Last food for thought today: KKR has also announced it will go public. (yummy, yummy)
Airline movements in Europe: British Airways and Iberia on hold (and a remote highway too)
It’s funny that the Wall Street Journal published this week an article about the consolidation of the European airline industry. I’ve written about Iberia and it’s many contenders in two previous posts: Airlines corporate hunt: British Airways and TPG finally join forces to buy Iberia and Iberia and its brides… where’s the value?
What has happened this time about Iberia? In fact very little.
I don’t know what the WSJ article said because I’m not a subscriber. But this wave of consolidation that they talk about has come to a stall in Spain. Why?
BA and Iberia: having second thoughts?
One of my assumptions was that, where there is a flagship airline, there are also political interests. No need to prove me wrong. Politics have a lot to do with that. And it’s Iberia who has been stalling the situation.
Because Iberia’s dominant position in Spain, specially in Madrid, has a lot to do with political connections. They have been granted the best slots and the lion’s share of Madrid brand new terminal: T4.
Madrid’s brand new Terminal 4, granted to Iberia and OneWorld
The Spanish government has already required that Iberia needs to be Spanish to keep enjoying the privileges it already enjoys (exclusive routes, slot assignement, top location at Spain’s first airport).
In time this privileges will cease to exist, specially when European regulations in open skies come to be in effect. But I don’t know any single country that doesn’t -or didn’t- protect its flagship airline.
The government’s point: we’ll still protect the status quo, but only for a Spanish company. And Texas Pacific Group or British Airways are not exactly Spanish. But, how do you know if Iberia is Spanish right now? How can you know who, in fact, owns free floating shares?
Anyway, these are advantadges that no company should have, regardless of its nationality. They are just imperfections of the market that the consumer ends up, as always, paying. But that’s how it is, and that’s how I like to tell 
State Highway 121, Texas, U.S.
More noise from Texas
And right now another Spanish company, the infrastructure operator CINTRA is fighting for a highway concession in Texas: State Highway 121. The company already exploits two highways in the US: Chicago Skyway and Indiana Toll Road, and is already constructing a third one in Texas: SH 130. The concession was granted to CINTRA, but it has been recently revised. The Texas Transport Commision still has the final word but taking back a concession already granted to a Spanish company wouldn’t help politically Texas Pacific Group interests in Iberia.
Which strategy now?
Just let the time pass. Iberia has not given any of the contenders its data, and it is for a very good reason. The longer it takes, the better. Why? Spain will hold a general election in nine months. Maybe the government will change but, in any case, the government will be less pressured and open to negotiations.
Defensive strategies from private equity (spin-yourself-off)
Those of you who read me know my ideas about private equity and how it has become an increasingly efficient way to invest the “big bucks”. I wrote about this in China and Blackstone: bad news for capital markets, good news for private equity.
I have to confess I like the concept of private equity. Although private equity firms probably wouldn’t considering hiring me, I’d hire them to increase efficiency. Their whole business is about efficiency gains: buy some under-performing firm, use your credibility to increase debt to pay the buy-out, make it perform again. If the gains are similar to the costs, the company is yours… *for free*.
Of course I’m exagerating. That’s a simplification, but, for comparing purposes, what happens if you compare their strategy to the diversification strategies undertaken by big companies? We have extra resources, we are not really interested in giving them away to our investors, or owners, so we are going to buy some business out of our core knowledge and know-how to have less risk and at the same time less yields.
Why should anyone do that? Well, managers would say there are synergies to be gained, but, as you know, sometimes those synergies never make it out of the power-point file.
The real reason to do that is that the managers need to keep busy, and need content to present in their next shareholders meeting, probably speaking about another business they don’t know anything about. (Fortunately, neither the shareholders)
Are they paid to do this? Are they suitable to do this? Hell, no!
Not so long ago, they were pretty relaxed and calm because nobody would object anything to that strategy. Even shareholders didn’t see that it was easy to reduce their risk just diversifying investments in different companies instead of diversifying core businesses.
If the investor can diversify by himself, companies shouldn’t try ventures alien to their business.
Then, why were the big companies so unperturbed just doing that? Because they were huge. Or at least too big for hostile takeovers.
And then came KKR with RJR Nabisco (See article about KKR here), and Cerberus with Chrysler (See article about Cerberus here), starting a series that could end with ABN Amro or who knows what. Being huge is not safe anymore.
A new signal emerges from markets. It’s the end of diversification. It’s time to concentrate on your core business. For public companies there’s only one protection strategy for private equity. And it’s no longer to be huge, now you need to be efficient instead.
Barbam propinqui radere, heus, cum videris, praebe lavandos barbulae prudens pilos
(in latin, if you neighbour is being shaven, do get your beard ready)
*Efficiency will save you from private equity*
Got an interesting non core business? Let it go. Otherwise private equity will come for you, and spin it off you.
Inside the non-efficient companies lie a lot of unused resources that justify the gains private equity need as an excuse to assault them. If only those companies could use those same resources for protection…
But that would mean being efficient again. That would mean ruthless reestructuring. That would mean hard and painful decisions. That would mean having to face change, sometimes radical change. That would mean challenging established authority. In short that would mean working more and better.
One last problem about leaning and trimming yourself: why do it yourself when private equity can do it more efficiently than you? (And market seeks efficiency, somehow)
Cerberus Capital Management: another style for private equity
A few days ago I wrote about KKR and the three men behind that acronym. Now it’s the time for another company that lies in the private equity niche too, but, as you will see, plays its cards quite differently. In this article I’ll focus on the difference between them.
the original Greek Cerberus, a dog with three heads that guards the world of the dead and won’t let you in
Cerberus Capital Management was news just three weeks ago, when they announced they’d buy Daimler’s 80.1% stake in Chrysler for $7,400 million. Three months before the company had announced the laying off of 13,000 employees, after the red tape exceeded $1,500 million for 2006.
Not very good times for Daimler and Crysler. That was the end of a transatlantic marriage that lasted since 1998 and cost $36,000 million.
As you know, good times for private equity, bad times for inefficiencies and for corporate social responsibility: more laying offs ahead. More trouble in the Motor City: Detroit. And of course unions abhorring of letting private equity in, unions such as the United Automotive Workers and their leader: Ron Gettlefingers, warning about the dangers.
worried about the takeover? when this man speaks, Motor City listens
But something strange happened. Ron Gettlefingers, after some months sending the leave-Chrysler-alone message decided to back up the take over. Why? Who convinced him and how?
this is the man from Cerberus that convinced Gettlefingers: John W. Snow
What did Snow promise? Three things: to keep the same management team (I’m not sure that is a good idea after $36 billion having gone down the drain), to keep his three brands (well, without further analysis, looks sensible to think about consolidating the strongest only), and no further lay-offs and contract negotiations to be held this summer with the unions (which doesn’t mean that they’ll succeed either).
Will they be able to deliver? who knows.But that’s not the point.
They have credibility or, at least, they have a very different style. Cerberus managers are not perceived as elitist billionaires -and that’s a difference with KKR. Cerberus founder Steve Feinberg was son for a steel’s salesman, graduated in politics in Princeton while playing a lot of tennis. It has been said of him: “While other hedge-fund managers are collecting fine French wines and flying around in private planes, he drives a Ford truck and drinks Budweiser.” (Follow this link to a Businessweek article for the source)
most appreciated piece of art in Cerberus headquarters
It is said that the most valuable piece of art that is stored in Cerberus headquarters is a poster by the Fugees. Feinberg himself drives a pickup and wants no personal publicity. Half of their staff are ex-managers, a big number when compared to other companies that heavily relay on consultancies.
remember the one on the left? from US vice-president to Cerberus vice-president
Dan Quayle is also in Cerberu’s team as vicepresident. Not famous for his literacy or his perfect spelling, but close to the people. The same style that has made George W. president twice.
So, which are the main differences between the way of doing business of KKR and Cerberus?
- Cerberus are perceived as peacemakers, not as hard negotiators. Got nervous union leaders? they just hop on a plane and talk face to face plain conversations, making trust, opening bridges. As Buzz Hargrove, president of the Canadian Auto Workers (CAW) said on Feinman, “He gave us all letters that said there will be no job losses. He was very genuine, not some highfalutin billionaire. It was real talk.”
- And a financial difference: they don’t use leveraged buy-outs. That way the cost of borrowing money keeps lower. And, guess what, they talk to creditors too, giving them a lot of information and letting them participate. That makes trust too, and the more the trust, the less the borrowing costs also.
- Not worried about quick returns either. Let things take their time.
So, money is not everything, is it?
Bubbles I: Tulipmania, XVIIth century
I do not need to tell you what bubbles are: irrational exuberance leads to an inflation of prices, usually some kind of stock, expectations lead to greater expectations, until there comes a moment where people believe at the same time that assets are too high -much above value- but that they’ll keep skyrocketing. This contradictory belief leads to stubborn reality and, once you come to terms with it, prices crash, leading to a backslash in the percepti0n of price and value of speculative investments.
So it’s a matter of scarcity and demand. Scarcity leads to demand, and demand leads to scarcity, until craze comes.
Today I wanted to review one of the first paradigmatic cases of a bubble. Much is said today if this description is an ex-post judgement and it really wasn’t a bubble, but in any case, tulipmania is still a synonym for bubble.
lesson learned: don’t bet all your future into one flower
It all began in 1593 when the first tulips arrived to the Netherlands. They were new, scarce, pricey and everybody wanted one. And it had a maturity period: you bought the bulb and in time you’d have the flower, just like some investment. So people began buying more and more and prices soared.
In fact tulips’ bulbs had been introduced for medicinal uses, but beautiful tulips quickly became a distinctive and exclusive mark of beautiful gardens. And from that they became a mark on the social ladder: you had to have tulips in your garden if you wanted to be someone in the Dutch society.
One thing led to another. Bulbs were traded more and more. Prices multiplied: more than twenty-fold monthly increases. And, as it always happens, everybody wanted to invest: people became on debt to get rich and longtime accrued savings were transformed into bulbs.
object of greed and social desire
Of course value was not on the bulb itself, because the bulb wouldn’t produce anything. Value was speculative, and that meant that, to really earn something, you needed to find another buyer. With rising prices, the buyer’s base shrinked until it was too small. Maybe they thought that a bunch of wealthy foreigners would come and buy them all, but foreigners never came.
Instead there was a moment when people started worrying because selling them was getting more difficult: periods got longer, psychologically longer than whatever short term is.
And there was that contradictory thought that comes with all bubbles: this is too expensive but it will get even more expensive. Expectations of further risings and expectations of depreciation mixed. Until the first expectation overcomes the second: this is too expensive.
And bulb investors panicked. Specially when many realised they had traded lifelong savings for beautiful-when-flourished nonproductive bulbs. Wouldn’t you?
Too late as usual, even the Dutch state tried to intervene, proposing to cover contracts at 10% value. Of course that caused an immediate 90% drop-off. But the value punctured that 10% soil again and again and the bubble finally bursted. It happened in 1637. The bubble had lasted less than one year, some had won a lot of money, but the subsequent depression affected both winners and losers.
Did investors learn from this? I leave the question unanswered. For next post: Isaac Newton’s investments…
Kohlberg, Kravis & Roberts, the three men behind private equity’s star KKR
As you probably know, private equity firms are hot. And as they get more and more funds (remember how the Chinese government decided to invest in Blackstone) they become even more desirable.
KKR used to be the Holy Grail of private equity. KKR stands for Kohlberg, Kravis & Roberts and was founded in 1976 by Jerome Kohlberg, Henry Kravis and George Roberts. KKR specialised in leveraged buyouts and starred with the buy of RJR Nabisco in 1988 for $31.4 billion. There’s a must-read book about this buyout: Barbarians at the gate, by Bryan Burrough and John Helyar. And a movie too.
Blackstone has broken that record this year- yes 2007- and gone from princess to queen, but that’s a story for another day.
You could say that they used junk bonds to buy underperforming companies, reworked their balance sheets, and sold them for profit, maybe as a whole, maybe not.
But who where those entrepreneurs that decided to create KKR? Where are they now?
The first, Jerome Kohlberg, was born in 1926. Unsurprisingly, he was working with Roberts and Kravis in Bear Stearns, worldwide investment banking and securities trading and brokerage firm. He left KKR in 1987 –that is one year before the Nabisco takeover- but he didn’t retire until 1994 when he created the Kohlberg Foundation. His wife has a restaurant, the Flying Pig, in Mount Kisco, NY. His fortune is approximately $1.2 billion.
Henry Kravis was born in 1944. Economist and Columbia MBA, in KKR he was the key to developing the LBO, leveraged buyout, concept, acquiring corporations they thought were under their potential, putting 10% of the price and financing the rest through junk bonds. (At that moment the concept of junk bond was still undefined, they were just high-yield bonds). The concept included selling whatever assets that could be valuable and leaning the company to a maximum before selling again with huge profits. He directed the Nabisco takeover after Kohlberg’s parting, creating the legend for KKR. He also participated in buying huge brands like HCA Inc., Texaco, Gillette, Playtex, Beatrice, Safeway, Borden and Samsonite. He is a prominent Republican and a strong supporter of G. W. Bush. (What a coincidence: Nabisco also began donating great amounts to the Republicans after the takeover) His fortune is approximately $1.5 billion.
George Roberts was born in 1945. Cousin of Henry Kravis, Law Graduate. Mentored too by Jerome Kohlberg in Bear Sterns, he cofounded KKR, participated in the Nabisco takeover –he is one of the main characters of Barbarians at the gate- until he exited in 1987. He’s been active ever since, participating in the Toys’r'us takeover by $6.6 billion with Bain Capital this year and SunGard Data Systems for $10.6 billion with Blackstone. His fortune is approximately $2.5 billion.
Well, he is the richest of all three so maybe he has something to tell. This text is from his acceptance speech at the 1998 Man of the Year’s award from the Culver Military Academy:
“I’m often asked by people, especially younger people, what do you have to do to be successful. And I assume they’re asking not what you have to do to make money, but what do you have to do to be a successful individual. Coming out here, I jotted down several examples that I’d like to share with you.
“You’ve got to work hard at whatever you do. So if you’re going to work hard and put everything you have into what you’re doing, you better find a job and a career that you love to do, because if you don’t you have no chance.
“Set your goals. Set goals that are unrealistic in some cases. Be prepared to be disappointed. One of the goals I set for myself when I came to Culver was to get into Yale. I got turned down. One of the goals I set for myself when I graduated from CMC was to get into either Stanford Law School or Stanford Business School. I got turned down. Set your goals high; reach, that way you improve our muscle tone. Don’t be afraid to fail. Our society won’t penalize you if you fail honorably, and by that I mean with integrity and honesty. Everyone who has done anything in life has failed at something. And there will be nobody in this room who is any different.
“Keep a sense of humor, that’s probably the most important thing. Be prepared to laugh at yourself a little bit, your mistakes. And when things really get tight and tense and everything else, laugh a little bit.
“Keep a perspective of what’s really important. For me, that’s been my health, the health of my family, and those intangible things that don’t involve material objects.
“Raise a family, because that’s the only way you’re going to learn to love somebody or some group more than yourself.
“Rely on yourself with both your brain and your heart. Don’t blame others for the mistakes that happen. Learn from them yourself and go on.
“And lastly, help others that are less strong and less fortunate than yourself, because you will get back many, many, many fold what you have done for yourself.”
Usable but not emphatic, some ways to irritate your online customers
Don’t web designers surf the web? There are so many things that annoy users that I hardly believe so. And it’s not a matter of small businesses. Many big ones also do fail.
It’s not usability. With usability we define the on-line concept of being able to interact with a website with ease. But there’s more than that. There’s a business process going on, and you need to treat customers right. You need some empathy. Can you spot the difference?
I’m interested in the business perspective. Let’s see a few ideas from situations I’ve experienced myself:
- The ones you read everywhere:
- Easy and quick. That’s where business and usability go hand by hand. No comments.
- User feedback, listen to the user, bla bla bla. We all agree on that.
- The ones that really matter to me:
- Don’t make me register before buying! Can’t you do that seamlessly with the billing process but without cutting the business flow? I have changed my mind more than once because of that.
- And if I make any mistake. Don’t erase all my data! I’m going to hate you for that.
- Don’t forget that a buyer hates ambiguity. Do offer a final bill of materials, with the specifications and reference of every product bought. It’s long and ugly? It’s useful too.
- I won’t accept hidden costs! I’ll back out if you add me some extra cost at the final step. That’s cheating the customer!
- Give me an easy contact email and/or number. What should I do if I have a doubt? I don’t trust sites that don’t offer that, or try to hide it. Moving it to a secondary place will surely lower your quantity of calls, and the associated costs, but it will annoy many users too!
- Tell me where I am in the buying process, and where I can go without a steady compromise.
- Let me know if I can change some parameters later. That will let me not to worry about them.
- Let me have a lifelong record of past purchases. Will that mean some extra records at your database? That will mean also that the user will have a stable reference, and a personalised service. That I won’t have to print anything or save any page to my overcrowded desktop (and probably loose it).
Aren’t they obvious? Well, they aren’t. And there’s still something more that I hate.
the value of personalisation comes from exclusivity
People do want to be exclusive. Who could recognise himself as unoriginal or just conventional? No one. So, don’t tell me about “other users that bought this also bought”! At least for a moment I want to feel I am the only one…
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