Charging for a Free Lunch

No one likes to pay for something that used to be free. And no company likes to tell its customers they have to start paying for a service they got for nothing. Nevertheless, it happens all the time and, in many cases, it causes hard feeling and ill-will between customer and company.


The folks at Pandora, the online streaming music service that allows you to create your own radio “channels,” faced the same problem. Due to royalty issues with its providers, Pandora had to begin charging for some of their content. As a devotee of the service, I was leery about what was coming. After all, Jott used to be free, and after they hooked me, they cut off the free service.


Here’s an excerpt from the email I got from Tim Westergren, the founder of Pandora.

First, I want to let you know that we’ve reached a resolution to the calamitous Internet radio royalty ruling of 2007. After more than two precarious years, we are finally on safe ground with a long-term agreement for survivable royalty rates – thanks to the extraordinary efforts of our listeners who voiced an absolute avalanche of support for us on Capitol Hill. We are deeply thankful.

While we did the best we could to lower the rates, we are going to have to make an adjustment that will affect about 10% of our users who are our heaviest listeners. Specifically, we are going to begin limiting listening to 40 hours per month on the web. Because we have to pay royalty fees per song and per listener, it makes very heavy listeners hard to support on advertising alone. Most listeners will never hit this cap, but it seems that you might.

Ok, so far so good, although I was expecting the big “but” that was going to nail me with big fees. This is what came next:

We hate the idea of capping anyone's usage, so we've
been working to devise an alternative for listeners like you. We've come up with two solutions and we hope that one of them will work for you:

Your first option is to continue listening just as you have been and, if and when you reach the 40 hour limit in a given month, to pay just $0.99 for unlimited listening for the rest of that month. This isn't a subscription. You can pay by credit card and your card will be charged for just that one month. You'll be able to keep listening as much as you'd like for the remainder of the month. We hope this is
relatively painless and affordable - the same price as a single song download.

Your second option is to upgrade to our premium version called Pandora One. Pandora One costs $36 per year. In addition to unlimited monthly listening and no advertising, Pandora One offers very high quality 192 Kbps streams, an
elegant desktop application that eliminates the need for a browser, personalized skins for the Pandora player, and a number of other features: http://www.pandora.com/pandora_one.

Tim goes on to add that a third option is to stop listening once you get to the 40 hour cap for that month. He closed the email by saying they’ve created a counter that will let you see where you are to date toward your 40 hour cap and by thanking me once again for using the Pandora service.


What’s the catch? There is none. Pandora has had to change their business model and did so in a way that almost makes you feel good about paying a small fee to continue being a customer. What did they do right and what can marketers learn from this? I see three things:

1. Lay out the issue clearly – Tim spoke of the royalty settlement and its impact on his business. No fluff, just straightforward talk.


2. Give the customer options – I now have three choices (four if you count stopping listening altogether). One of these three will surely work for me.


3. Give the customer time to react – I got Tim’s email in early July. His changes won’t be effective until August, giving me plenty of time to consider my options (not that this is a life-changing decision, but I do like my Bob Seeger and James Brown channels).

Product management’s role is to set pricing strategy. Part of that strategy includes how / when you change price. Pandora’s decision on how they increased their price says a lot about their brand and the type of company they want to be.


P.S. I responded to Tim’s email and got a prompt (less than 24 hour) response from Jasmyn, a “listener advocate” thanking me for my comments and my support of Pandora. Well done!

Making a Difference

Back from a mid-summer’s blogging break…..

One of the reasons I love what I do is that I get to work with passionate visionaries. And sometimes, these visionaries have an idea that could change the world, or at least a piece of it. I’m currently helping a start up that is trying to change the world for all the right reasons. InvoTek, a firm based in the small northwestern Arkansas town of Alma, makes assistive technology devices that help people with high spinal cord injuries use a computer. Their flagship product, AccuPoint, uses sophisticated laser technology to enable quadriplegics to operate a computer using head movements. This technology has changed the world of a small group of users who can now download pictures of their grand kids, send emails to friends, and organize a reunion of Navy buddies. For more on InvoTek, see the Fort Smith, AR City Wire article.

Here is a for-profit company with a non-profit’s vision. It shows in their products, their commitment to their customers, and even in their tag line: Compassion Driven Innovations. They understand that a solid business strategy starts with changing someone’s world.

It’s like a mentor once asked me, “Do you want to make a dollar, or do you want to make a difference?”

The More Things Change, The More They Change

For those of you who are a bit overwhelmed by the rate of change we’re experiencing, here’s more reason to overwhelmed. Did You Know? is a short video based on a concept by Karl Fisch that lists some enlightening facts about our exponentially changing world. For example:

• 25% of India’s population with the highest IQ’s is greater than the population of the entire US. That means India has more honor students than the US has students.



• Information doubles every 2 years. That means that for a student pursuing a technical degree, what they learn will be outdated by their junior year.



• It took radio 38 years to gain 50 million users. It took television 13 years to do the same. It took the internet 4 years, iPod 3 years, and Facebook 2 years to reach the 50 million mark.

Now, I’ll assume Mr. Fisch has his facts straight. I guess I could go to http://www.snopes.com/ and check to see if it’s an urban legend. But the point is we’re in a world that is changing at a breakneck pace. The amount of information (correct and incorrect) is exploding. The way we get that information (print, online, social networks, and so forth) changes daily. The winners in this race will be those who can best distill the information into “This is what it means” and then “This is what we should do about it.”

For marketers, this translates into helping our companies or our clients articulate why we can solve a problem better than the other guy. It’s not about features and functions or speeds and feeds, it’s about results. And it’s about doing if faster than the competition.

By the way, in the time it took to read this post, 198 babies were born in India. We’d better get busy!

Radar O'Reilly and Client Relations

I recently had the chance to speak to a group of communicators at one of the nation’s largest energy companies. Their leader was trying to get the group to add value to their internal clients instead of just taking and executing orders for press releases, newsletters, and the like.

The guy that came to my mind as a model for a client-focused, action-oriented employee was Radar O’Reilly, the Army clerk on the long running MASH television show. Radar was always one step ahead of Col. Blake, Hawkeye, Trapper, and the rest. He could anticipate what others wanted and, more importantly, what they needed before they could articulate it. I used this acrostic to prove my point:

Resourceful – Radar knew everyone. He knew the supply officer in Tokyo, the motor pool guy in Seoul and the secretary to the commanding general in the Pentagon. Consequently, he could get things done no one else could. How’s your network? Are you spending time growing the people you interact with? And by interacting, I mean giving them a bit of knowledge or a pat on the back or some other “gift” to form a bond with them.

Attuned – Radar listened aggressively and was sensitive enough to know the others’ motivations. What excited them? What scared them? What turned them on? Do you know what motivates your customers? What are their key metrics? How are they evaluated and compensated? Knowing what’s important to them, personally as well as professionally, puts you in a great position to solve their problems and speak to them in terms that mean something to them.

Deliberate – Radar always had everything ready for Col. Blake to sign. All of the Army forms in quadruplicate. All Blake had to do was scribble his name to a requisition or a promotion authorization. Are you disciplined enough to handle all the details for your client and make it easy for them to say “yes” or to sign the contract? Early in my career I worked for an executive that drilled into me the concept of “completed staff work.” That meant, I had done all of the research, presented all the alternatives, had the recommendation and everything the exec needed to make his decision. When we take the concept of completed staff work to our clients, it shows them we’re not only prepared but we understand their business enough to prepare them to make the right decision.

Active – Radar took the initiative to go to his “customers” and make something happen. He set the agenda for most of his interactions with Blake, Hawkeye, Trapper and the others. Do we set the agenda for our clients or do we wait for orders? I worked for the Chairman of the Board at one of the country’s largest energy companies and would ask to see him on occasion. After walking past his attack-trained secretaries, you entered the hardwood floor office, with the Persian rug and massive mahogany desk. It was pretty intimidating. At the end of the desk, facing you was a 3x5 note card that said, “What Do You Recommend?” You knew that if you came to him with an issue, you better have 2-3 alternatives, a recommendation, and your rationale for that recommendation. But he appreciated people who identified a problem and then offered a solution. What if we made it a habit to ask our clients, “What if…?” or “How about trying….?”

Relentless – Finally, Radar didn’t take “no” for an answer. He was results focused and wouldn’t stop until he completed his mission. When we focus on results instead of activity, we’ll do what it takes for our clients. We’ll break down whatever barrier stands in our way. And we’ll earn our client’s respect (and hopefully lots of additional business).

So, next time you think about building close client relations, think RADAR. He was more than the company clerk on MASH. He was the model for making you indispensable to your clients.

Desmond Tutu

Last Sunday, the University of North Carolina had Archbishop Emeritus of Cape Town, South Africa, Desmond Tutu as their commencement speaker. He was everything that most commencement speakers are not -- funny, encouraging, challenging, reverent, and irreverent.

This Nobel Prize winning champion of the anti-apartheid movement presented a message of hope mixed with urgency that transcends our current economic slowdown and the dismal job prospects most of these graduate face.

You would expect preachers to be effective communicators. After all, that’s a big part of their job. But Tutu’s address is a template all of us can use in our professional and personal lives as we attempt to get our ideas to others:

• Connect with your audience – it took Tutu all of 30 seconds to bond with the thousands in the stadium. Once he had us, he never let go. We were captivated and a bit disappointed when he had to end his speech.
• Humor is the universal language – Tutu’s jokes, stories, and often self-deprecating humor dissolved any age and cultural barriers that might have existed between him and the twenty-somethings in the caps and gowns or, as he called them, those “blue-clad creatures.” At one point he laughed so hard at his own joke, he almost lost his train of thought.
• Finish strong – I won’t spoil the ending, but his last words to us were more than memorable…they were haunting. As we communicate, we need to leave our audience with an indelible mark that won’t easily wash away.

As the father of one of those “blue clad creatures” I left the ceremony uplifted by Tutu’s optimism and passion and re-energized to be a better steward of what God has entrusted me.

And, by the way, guess who UNC’s cross-town rival, Duke University, had as their commencement speaker that same morning? Oprah. UNC wins again….

Reading, Writing, and Red Sauce?

A Pocatello, Idaho teacher is trying to do his part to fill his school's budget gap by offering advertising on exams. On a recent history exam, at the bottom of each page in 1" red letters was: MOLTO'S PIZZA 14" 1 TOPPING JUST $5. The principal wasn't thrilled, but Jeb Harrison convinced him that it helped to illuminate topics such as the Great Depression.

Molto provided 10,000 sheets of paper, valued at $315 for Harrison's five classes, with their ad on each page. I would suspect the $315 was more than offset by the PR storm the school had to handle.

I won't get into the merits (or demerits) of advertising and branding in schools. But you have to hand it to Molto Caldoro Pizzeria. They:

1. Understand their target market (teenagers)


2. Understand the importance of being first in a new channel (at the bottom of exams)


3. Understand the value and receptiveness of cash strapped intermediaries (school districts facing budget cuts)

As an instructor at a local university, and as a parent of a high school student, I don't want ads on the bottom of tests. But we marketers should all take a lesson from Molto and look for innovative ways to engage our customers.

March Madness 2009

For those of us who follow basketball, this is THE time of year, especially if our team is in the NCAA tournament (a special shout out to the Mississippi State Bulldogs). We will be glued to whatever media we can to get our fix of scores and analysis.

Every year at this time, the HR consulting firm of Challenger Gray puts out their estimate of the amount of lost productivity due to employees watching the basketball games during work. Last year the estimate was $1.2B for 2007 (a number widely ridiculed by Slate and others...see my post last year).

A funny thing happened this year, though. CG decided not to put out their estimate, citing the economy: “In light of the fact that employers and employees have more important things to worry about, we feel that any attempt to estimate the impact of March Madness
on productivity would be counterproductive and inappropriate," John Challenger said in a statement.

So, what about it? Are you still going to watch the games online while at work? How much time will you spend? I'll probably spend an hour or two per business day (more if MSU gets past round 2). Let me hear from you. And don't worry...I won't tell your boss!!