Scott Berkun linked to a piece which has snippets of an interview with Chef Anthony Bourdain.

Don’t know who Anthony Bourdain is? I’ve seen a few of his shows on the Travel Channel, and the wikipedia entry on him seems to be pretty adequate. Here are relevant snippets:

Bourdain was born in New York City and it was as a youth on holiday in France with his family that his love of food was kindled. He was on an oyster fisherman’s boat and tried his first oyster; ever since, he has traveled the world in search of food, good and bad, and has shared his results with the public.

Bourdain is an unrepentant smoker and drinker, and a former user of cocaine, heroin, and LSD.

Bourdain is also noted for his not-so- put downs of celebrity chefs like Emeril Lagasse and Rachael Ray (who is the butt of many jokes on No Reservations). Bourdain has recognized the irony of his transformation into a celebrity chef and has, to some extent, begun to qualify his insults. He has been consistently outspoken in his praise for chefs he admires, particularly Thomas Keller, Gordon Ramsay, Eric Ripert, Fergus Henderson, and Mario Batali.[6]

Here’s a straight shooter kind of guy. There’s quite a few interesting thoughts in the HBS piece, but here’s my favorite one:

Management by Fire a Conversation with Chef Anthony Bourdain – ‘Kitchen Confidential’ Chef’s Taste for Chaos – HBS Working Knowledge

Q: What makes customers loyal?

A: Well, obviously, quality and consistency. People feel betrayed if they come for a favorite dish and you’ve suddenly changed it. And they don’t want to be treated like idiots, like you tell them you’re giving them porcini and you substitute something else and hope they won’t notice. If every once in a while you have to pull a fast one for the common good, it is of course essential that you get away with it. When customers become regulars, even in fine restaurants, they’re looking for that familiarity, a crack in the veneer where they’re treated a bit differently, less formally.

A not-so-obvious thing often overlooked is that customers need to trust your intentions and your concept’s integrity—the sense that you know your product—and that it is the product you should be selling. So you’re not all over the place, serving pasta and French food and Mexican food and trying to be everything to everybody. A lot of places open up with a menu that’s floundering, because the owners are thinking, “What do people want?” Instead, they should be thinking something like, “We’re going to open a restaurant with a Gascony theme, and we’re going to concentrate on that area of France because this is what we love and do well.”

This applies in software and services as well. To serve your customer well, you must do something – and do it well. And then build on top of it. And repeat. Solidifying your reputation and your customer base at every step of the way. If you start off trying to do everything for everyone – you won’t succeed.

It seems fairly intuitive and common sense – but it’s surprisingly easy to mess up.

I saw this blurb on Consumerist the other day: 

Desperation: Vonage’s $3.99 Retention Plan – Consumerist

Vonage offers a $3.99 per month retention plan to customers who might jump ship to providers with more certain futures. The plan is meant to shore-up Vonage’s customer churn rate, especially as the internet telephony company struggles to stay alive amidst a patent dispute with Verizon. Vonage’s churn rate last quarter was 2.4%, high enough to spook investors or anyone considering a potential acquisition.

Pure subscription businesses are hard. It’s why cell phone companies in America have profit margins that are lower than… say… Walmart… despite the monthly fees and additional fees and fees and fees and fees. For example, Sprint has a net profit margin of 1.51%, whereas Walmart is over twice as much at 3.6%.

Why is this?

First, there’s SAC: Subscriber Acquisition Cost. This is the average cost in signing up a new customer. Signing up a new customer can get expensive – sometimes you need to pay sales people nice commissions to incent them to bring customers to you. For example, think of the guys at those cell phone islands at the mall and how they’ll practically throw a lasso over you to rope yourself in. Sometimes you need to subsidize hardware for the customer so that they can actually use the service you’re offering a subscription to. And then there’s plain old ads – on TV etc.

SAC hurts. For example, TiVO has a SAC of $191 and Vonage has a SAC of $436. That means the minute you sign up as a customer for one of these services, they’re already starting with a deficit on you. Youch!

But wait, you say - when you buy a fridge, they have marketing costs too. Well sure – but all of that is baked into the cost of the fridge. So is the commission. When you buy the fridge (generally) everyone in the supply chain instantly makes a profit off of it.

SAC’s best friend is churn – which is simply how many people cancel your their subscriptions. Churn is bad considering how much was spent acquiring that customer in the first place. There are things you can do to mitigate churn: you could have 1-2 year contracts – but then people might be reluctant to sign them. You could give away stuff to entice people to stay on – but then that hurts your profitability. As can be seen in the example above, Vonage is offering super low rates to try to entice people from leaving. A penny is better than 0 pennies!

There’s also COGS, cost of goods sold. Obviously, running the service isn’t free. If you’re a cell phone company, you have to hire people to answer support calls, upgrade the network, expand the network, etc. Similar with Vonage – you have to rent office space, pay salaries, benefits, do R&D, this and that.

So far most of these are negative things – but here comes the hero: ARPU. Average Revenue Per User. Hurray revenue! Finally!

The big question is: will the Average Revenue Per User be greater than the Cost of Goods Sold, be able to recover the Subscriber Acquisition Cost, and be able safe from Churn?

Let’s look at Tivo. A new customer buys a TiVO and becomes a subscriber. Great, we’re at -$191. TiVo’s 1 year plan is $16.95 a month (reduced from $19.95 a month). Cool, so if you’re a subscriber for 12 months – you’ll fork over $203.40. Ok, now we’re at $12.40.

$12.40. For the year. And that doesn’t even include operations cost – you know, the salaries of the people running the service – so it’s probably less than that. Ouch.

Subscriptions businesses are hard.

I was looking at a few weather reports today and I noticed this:

http://weather.msn.com/local.aspx?wealocations=wc:USWA0367

98 degrees in Redmond? That seems pretty unusual.

I think it’s time for a new vacuum cleaner. I bought my current one when it was on sale at Costco back in 2000 – so my current one is over 7 years old. Of course, age isn’t everything, but the fact that not much seems to get picked up in the bagless part of it, and the fact that a lot of dust is on the surface of the unit is indicative that something might not be right. I’m not in a particular hurry to buy one – especially given the upcoming events and changes to my personal life.

That said, I did a quick search on the web, and while everyone raves about the Dyson – there are also a lot of reports about them breaking, being extremely heavy, and being… well… over hyped. They’re also pretty pricey.

Here’s what consumer reports said on the other hand:

MSN Shopping: Consumer Reports – Vacuums

Top-rated by Consumer Reports

Consumer Reports has detailed Ratings of more than 35 vacuum cleaners, including upright and canister models.

The Consumer Reports top-rated upright vacuum cleaners are:

• Kenmore (Sears) Progressive with Direct Drive 35922
• Hoover WindTunnel 2 U8311-900
• Kenmore (Sears) Progressive with Direct Drive 36932

I sure wish there were some standard metric to compare vacuums against. All I want is something that doesn’t use a belt, doesn’t require filters, and ensure that the air that comes out of it is pretty clean. The current place I live in has carpets – so carpet performance is a must.

Would I be a social pariah for wanting a Kenmore?

And speaking of which, I love the pricing scheme here: 36932 and 369333 are practically identical. The difference is that the 2 has a 30ft cord, but the 35ft cord. But right now, the 2 is $349 and the 3 is $279 (usually $349). I wish everyone would have a simpler product line ala Apple.

Update: Someone pointed out that my next place might have hardwood floors (or Pergo) since that’s the rage right now. If that’s so, this might be moot!

The Internet is full of bad experiences and bad reviews, so I try to make an effort to post about companies that have a great buying experience. And I set the bar pretty darn high.

Recently, I was pretty impressed with PaperAndMore.com. I needed some special paper, and I needed it delivered ASAP. Thus, when I ordered it, I paid for UPS 2 Day shipping – $21.93.

The next day, I got this message from them:

Hello,
Thank you for your order with us. We ship from the Bay Area, which can arrive the same time or faster than 2 Day. We will change it to Ground for $3.99 to save money on shipping for you.

Holy cow! They just saved me $17.94 instead of pocketing it.

(BTW, did you know that for a lot of stores/ebay auctions, the profit is in the shipping and handling charge? Now you know.)

In summary: Although I haven’t received the product yet, so far I would definitely buy from PaperAndMore.com again.

My 2 year old Toshiba M200 keeps waking up by itself. This was bad for a few reasons:

1. It would wake up while in my bag – my bag got so hot, I’m surprised that it didn’t spontaneously combust or that all of my pens didn’t explode.
2. It would wake up on the airplane – I think it was on during take off the other day.
3. It wouldn’t go back to sleep by itself – so when I wanted to use it, the battery would be dead.

Eventually I found it was because when the lid was latched, there was some play and as a result, the “lid closed” detector would think the lid was open. It appears that I’ve opened and closed the lid so often, that the area the switch rubs into has degraded a bit as well, allowing more play as well.

The solution? I simply added a big stack of small pieces of electrical tape:

Not high tech, not pretty, but it works. FWIW, notice that already there’s a groove in the tape from the button. I guess I should’ve included a layer of metal amongst the electrical tape. I’ll save that for v2!

I sure wish all laptop vendors would use magnets ala the PowerBook.

Yeah yeah, iPhone this iPhone that – but the real kicker and the real crowd drawer that I noticed today was on my way to the office:

Yep. The 7-11 on Pear Ave near Microsoft is now a Kwik-E-Mart. There were a lot of people just camped out in the parking lot.