• LeBron Gets Life

    Nike likes to hire celebrity endorsers to represent its hallowed brand, and there are currently scores of them on the payroll. But lots of companies hire endorsers, so what makes Nike so special? Aside from the sheer number of paid athletes which is unmatched by any other company, what sets Nike apart is its propensity to offer extended deals to those athletes it deems worthy of such a long-term relationship. On the heels of a 10-year, $300 million dollar agreement with NBA start Kevin Durant that Nike inked last summer, the apparel maker has announced a lifetime deal with LeBron James, possibly the best basketball player of all time. Terms were not disclosed, but insiders say that the deal could be worth more than $500 million when all is said and done.

    That's a big deal. But not only is it risky to offer long-term brand representation contracts with human beings, who tend to be rather fallible and make mistakes, a "lifetime" deal is an especially risky proposition. PR troubles with Kobe Bryant, Tiger Woods, and even Jared the Demented Subway Pitchman illustrate just a few a examples of how such agreements could actually harm brands. So it begs the question of how closely a brand should align itself with an endorser. A lifetime deal, it would seem, represents one extreme. Nike, for its part, does have a large stable of endorsers representing myriad sports across a global platform, so it doesn't have to rely on any one endorser to represent the brand and can engage in sport-specific target marketing. So if Tiger Woods eventually loses his appeal, as he most certainly did almost overnight, Nike has much flexibility. Smart. But this sort of marketing is expensive.

    So why the lifetime deal? Simply put, $500 million is really not that much of a marketing expense to enable a global company to secure the services of an athlete who has mass appeal, has performed at the highest level in his sport, and so far has stayed out of trouble. Even if the relationship only lasts ten years like the Durant deal, it will likely be well worth the money considering the widespread appeal of Mr. James. Plus, they are selling lots of shoes. And if Nike doesn't sign him, competitors like Under Armour and Adidas might. So despite the huge amount of money involved, this move just makes good marketing sense for a company with well-funded competitors knocking at the door.

  • Gillette Fights Shave Club

    Tired of losing market share to online upstart and frequent television advertiser Dollar Shave Club, Gillette has finally decided to try its luck in court. As such, this Proctor and Gamble business unit has asked a U.S. District Court to stop its rival from selling razors that it says infringe on one of the company's hundreds of patents. At issue are two coatings that strengthen the edge of the blade and protect it from wear, a patent that was issued back in 2004.

    By law, a U.S. non-drug patent essentially gives the inventor a 20-year monopoly on selling an invention as well as protection from imitators. Gillette says that it routinely tests competitive products and during such testing it has noticed that Dollar Shave Club's products have changed over time and now too closely resemble those of Gillette. The 120-year old brand has successfully beefed up online efforts over the past several months, but competing on price against online pure plays has been challenging to say the least. And without some form of product differentiation, such as a patent-based competitive advantage, it will be difficult for Gillette to compete effectively in the rapidly growing online space.

    The matter will be settled in court with the most likely scenario being either a judgment for Dollar Shave Club or punitive measures against the company such as a fine. It is very unlikely that the company will have to cease and desist. As such, Gillette must continue to innovate rather than resting on its patent laurels. Imitators are everywhere, and it's tough to protect what is already available on the market, patent or no. Dollar Shave Club and other players in the Razor Wars aren't going away and Gillette, after enjoying decades of industry domination, must face this new competitive reality.

  • Fenders and Genders

    A new study from iseecars.com, a Massachusetts-based automotive research company, has revealed that, at least when it comes to used cars, men have wildly more expensive tastes than do women. Over 54 million used car sales (as well as 500,000 plus online inquiries) were analyzed over a three-year period to determine whether or not there were statistically significant gender preferences. And were there ever!

    It turns out that the top 10 models preferred by gentlemen amounted to an average of just under $50,000 while the models women chose averaged under $15,000. You read that correctly, and it remains to be seen whether or not this study is flawed in any way, but if not it certainly sheds some light on consumer behavior as it pertains to gender. What accounts for the huge disparity? Men prefer sports cars and trucks, models that tend to be on the high end of the used auto pricing spectrum, while women tend to make more practical choices. Further, half of the models selected by women were Korean brands such as Kia. Men liked the Nissan GT, BMW, and of course Porsche. Obviously, this sort of data is crucial for any marketer in this vast multi-billion dollar industry. If men and women buy for different reasons, and it appears that they in fact do, savvy marketers need to know what these motivations are so that the marketing mix can be tailored accordingly.

  • The New Black Friday

    Well, so much for Black Friday, and good riddance. It' is still an important shopping day, to be sure, but recent evidence points to its waning importance as an end-all-be-all, make or break day for retailers. It looks like the game of "holiday creep", wherein the Black Friday deals have become spread out over an increasingly longer period of time, combined with the rise of e-commerce, has finally diluted the much-heralded (and maligned) Day After Thanksgiving. But fear not, shopper! There is a new "big day" for shopping both in terms of dollar volume as well as total store visits, two key indicators in the world of shopping metrics. So when is it? The day before Christmas? Cyber Monday? Nope. It's the day after Christmas. Why?

    One might answer that gift returns are a big reason for the post-holiday flurry of activity, but one would be mistaken as these account for only 5% of consumer reasons for venturing out, according to recent data from American Express. Indeed the vast majority of consumers (38%) cite personal/family buying (not gifting), followed by the use of gift cards at 25%. Interestingly enough, a full 21% said that they shop on the day after Christmas to buy reduced-price gifts for 2016. Tradition was offered as the primary reason for an additional 13% of post holiday shoppers. In total, two-thirds of consumers said that they would shop on that day versus only 45% for Black Friday. For marketers, this information is invaluable as using old templates for making marketing decisions doesn't take into account that market conditions might have changed. In this case, not only has behavior shifted, but it some of the attitudes in the study are rather revealing and could be of great help to advertisers when crafting their post-holiday messaging. The power of information knows no bounds.

  • Beating Up A Burrito Brand

    In a previous post, I postulated that Chipotle marketers have two choices, apologize profusely, take affirmative action and carry on; or make dramatic changes to the brand. We have just seen the beginning of the former strategy (most recently perfected by notorious oil-spiller, BP) in the form of full page ads placed in all of the major newspapers wherein appears the CEO's written letter of apology and plan of action. Since the apology/sction approach will require multiple impressions for it to have a chance of being effective, we should probably look for a multi-media strategy across multiple platforms over an extended period of time. But will Chipotle, until now a brand that has experienced nothing but success over the past two decades, be willing to make such a humiliating commitment?

    Image result for chipotle problems

    The stock is down 25% or more, sales have slowed considerably, and the company has announced that they have already altered some supply chain policies in response to the crisis. Perhaps most interesting after all of this is the admission a few days ago that it will finally have to embrace "industrial" food. That's right. Marketers have to admit that the company cannot adequately control for safety when it uses a huge, unconnected bunch of "local" farmers. Why could  this be a potential marketing problem for Chipotle? Simply because using fresh, locally-grown ingredients that have been untouched by the sullied hands of "big agriculture" has been a huge point of differentiation for the successful fast-casual chain. Take a look at the company's "scarecrow video" online, which has thus far garnered 15 million views, and you will see what I mean. So making changes to the supply chain surely contradict that message.

    Image result for chipotle problems

    Here is another, perhaps even larger problem. The company has also admitted that the local produce they do currently buy, really represents a small portion of the over 60 ingredients that Chipotle purchases for use in its restaurants. In fact, closer scrutiny reveals that the company has been relying on industrial production to meet the needs of its multi-billion dollar operation for years. Surely only the most naive of consumers would believe that such a behemoth could actually rely on local producers for the lion's share of it's locations. Right? In light of this obvious alleged deception in marketing communcations and the long-term implications for a brand that appears to have essentially been "green washing" it's marketing message for years, it looks like the 10% or so of ingredients that have come from local producers have also been confounding the organization's efforts to discover the sources of contamination. Perhaps the problem is with sanitation standards in the restaurants themselves and not supply chain vendors, but that is sheer speculation. Nevertheless, if this is true, this is a brand that might be in deep trouble. The bottom line is that this company sells burritos. That's about it. It's core product offering isn't anything that anyone else couldn't do or isn't currently doing, so the strength of the company really lies in the brand equity it has built over two decades. And in light of both food safety issues as well as some highly questionable marketing tactics, it's hard to imagine that this brand will have much equity left over when it's all said and done. But brands have survived much worse, and of course much depends on what happens over the next few months. In the meantime, Chipotle has some major brand damage for marketers to control.

  • Dynamic Pricing Becoming Norm

    The pricing of services has always been a bit of a crap shoot. Generally, marketers will employ some form of a "cost plus" strategy at least initially, but prices must be adjusted based on competitive and consumer factors as well. Over the past several years, a new pricing strategy has emerged, enabled by the proliferation of effective algorithms that can move prices in real time based on demand. This form of variable pricing is known as "dynamic" pricing, and as consumers, we have all become accustomed to these constantly changing prices when shopping for stocks, hotels and airfare and online services of all stripes. More recently, the practice has crept into the spectator sports industry, since fans have always been used to having to pay much more for a last minute ticket that's in high demand. Even toll roads aren't immune, as Colorado has just launched a lane that will cost between $3 and $30 depending on the volume of traffic, which represents high demand for limited space on the road at a particular time. So is this sort of strategy appropriate for a service such as a zoo?

    If you ask the marketing people at the Indianapolis Zoo, they will tell you "yes". In fact, it seems that any service (an intangible, heterogeneous, and highly perishable type of product) could benefit from employing a form of dynamic ticket pricing, if it is in fact feasible. And as long as demand can be estimated and actual demand can be measured, variable pricing is feasible for a service provider. The pricing strategy obviously lends itself to online commerce and its inherent metrics, but with mobile technology in play in the form of all kinds of useful apps, brick-and-mortar businesses (like the Indianapolis Zoo) are now able to join in the fun. Want to pay less for a ticket? Go to the zoo during off-peak hours. Too busy? Then you will have to pay for the privilege of using the facility when it is in high demand. Such pricing is good for consumers because they have more choices, and the whole practice should help to alleviate crowding at the zoo in the same way that Colorado officials hope the dynamically-priced toll lane on the I-70 corridor will help to alleviate traffic. This useful pricing strategy is likely to be employed just about everywhere in the near future, so the era of fixed pricing based on demand that has been projected in advance might soon be over, replaced by prices that reflect real-time demand. Now that's progress!. 

  • Organics Could Use A Little Panic

    The organic products industry has experienced double-digit growth rates for almost 50 years, with products not only proliferating in scale but also in scope. It wasn't long ago that a health-conscious consumer had to visit a small-format health food store to get what amounted to a very small selection of packaged foods among a bevvy of bulk items and nutritional supplements. That was when the market was a niche. Then, Whole Foods Markets among many others, changed the game when they brought these products to a more mainstream audience, and as manufacturers grew in size, they were better able to meet increased demand in grocery, big box, and other mainstream retail channels. Today, organic products are represented in just about every grocery category, and along with the increased volumes, price points have come down considerably from prices in previous years. So with consumers clamoring for more and supply barely able to keep up with demand, what could possibly go wrong?

    For marketers, there is a threat around every corner, and in this case, it lies in consumer attitudes. One major problem is that, despite decades of consumer education, 90% of consumers don't know the difference between a "natural" ingredient and  "certified organic" ingredient. The differences are many, and if consumers don't know any better, they are likely to purchase the natural product, which is usually sold at cheaper price points that are organic products, undefined by regulators, and is a category that is vastly larger than organic. And organic agriculture is very expensive. Another threat lies in the rapidly-spreading trend of consumers desiring locally-grown products, and unfortunately for the organic crowd, where it is grown is not a consideration in the USDA national Organic Program rules. A third issue involves the current obsession with all things "non-GMO". Despite the fact that there is exactly zero scientific evidence after hundreds of studies have been conducted that there are any health issues associated with the human consumption of genetically-modified foods (such as the Ruby Red Grapefruit and just about all of the corn that you eat), consumers these days are still freaked out about the prospect of eating something that has been modified by dudes in white coats rather than grown by hippies in Widespread Panic shirts. But the problem here for organic marketers is that the "non-GMO" labeling movement is catching on, and consumers still fail to realize that certified organic products are, by definition, free of genetically-modified ingredients.

    Clearly marketers of organic products have had it pretty easy for a very, very long time. They will undoubtedly have to stir themselves from the lulling effects of marketing success and step up their efforts in the face of these emerging consumer trends. Simply put, simply being "organic" as it is understood by the vast majority of consumers might not be enough of a product differentiator to compete in the business environment of the not-so-distant future.

  • Sports Business Attitudes Revealing

    Every year, the leading trade publication in the sports industry develops, fields, and publishes a study assessing the attitudes of professionals working in the sport industry. SportsBusiness JOURNAL, like most business-to-business resources, offers insights and data on industries and marketers relevant to its professional reader base. As such it is a valuable tool for marketers making decisions for sport products of all kinds. Here are some of the more interesting findings in the latest survey published last week:

    *More than 80% of female respondents think that the sports industry is behind the rest of the business world when it comes to gender inequality. In light of the recent, highly-publicized domestic violence cases across multiple leagues, this isn't surprising, and sport marketers must do more to change this perception.

    *The majority of readers support having a major professional sports team in Las Vegas, but do not support having a team in Europe. Nevertheless one will be there shortly and the other probably be coming before the decade is through. The NFL will most likely have a team in London.

    *The "model pro franchise" is the San Antonio Spurs and Mark Cuban rates as one of the most popular owners readers would like to work for. That is simply fascinating.

    *Nearly all voters say they have a pay-TV subscription although they may be using mobile devices to access it, and 40% admitted to "borrowing" a friend's password to access content that they did not pay for. Imagine what the real number is!

    *The most family friendly game experience is minor league baseball, which might help explain how a sport that hasn't grown much in many years still manages to field well over 100 professional teams in the U.S.

    Remember that the respondents are all sport business professionals, and not regular Joe's, so the findings are even more interesting. The study, in its 11th year, has all kinds of good stuff in it but you must have a code to access it, and you can't borrow mine.

  • College Football Overkill

    It has finally happened. Just when you thought that there were too many NCAA college football bowl games being played every year, the recently-released game menu exposed that there are a record 40 bowls this year, including three teams with losing records. Forty bowl games! That's 80 teams out of 127 eligible for a whopping 63% representation, up from less than 50% ten years ago, which was still too many! The proliferation of games over the years has been slow but sure. and with the advent of the long-awaited four-team playoff system, it seemed that many of these relatively meaningless games would not survive the transition. Although title sponsors are not easy to come by, the games are played nonetheless. Why?

    The answer lies in the growing importance of TV revenue to the sport product, which actually passed gate receipts in total revenue contribution for major spectator sports in the U.S. this year. So if people are watching it at home, it doesn't matter how many people show up for the Scrubbing Bubbles Toilet Boil played at 9am on a Tuesday and broadcast live from Reno, Nevada. And if you need a scapegoat, you can pretty much blame ESPN for this madness since it's family of networks not only will broadcast 37 of the 40 games, but the media giant also owns and operates 13 of the games, a form of vertical integration in the spectator sports supply chain. So, as long as there are enough eyeballs watching the action, there will be ample schools, advertisers, sponsors and other partners willing to finance the production of the San Diego County CU Poinsettia Bowl and the Popeye's Bahamas Bowl. Let's see what the ratings look like this year.

  • McComeback!

    The jury is most certainly still out, but thus far it looks like McDonald's may be turning things around. After flat growth over the last several years, a condition that also plagues much of the fast food industry overall, the company test marketed an all-day breakfast concept in select locations around the country. The test was well-received, and the venerable burger giant decided to go whole hog so two months ago, it rolled out the concept on a national basis. The result so far?

    McDonald's really needed some good news, and market researcher NPD Group was able to oblige with a report that provides evidence that Mickey D''s is attracting both lapsed and new customers with its all-day breakfast menu. In all, 1/3 of customers who purchased a breakfast item outside of "traditional breakfast hours" hadn't been to a McDonald's in the month before the launch. Now that's progress. Of course, the company will have to do much more in the future to fend off the likes of Smashburger, Five Guys and other rapidly-growing market share-pilfering "better burger" players, but this is certainly a good start for Ronald and his beleaguered marketing department.

  • Chipotle Brand Taking Hit

    By now, consumers are used to the occasional announcement that someone or several someones became ill after eating at a particular restaurant. Most of us expect this sort of thing to happen in the world of high volume food service, and we simply hope it doesn't happen to us.  Sometimes, however, the incident does serious long-term damage to the reputation of the brand as was the case with Jack-In-The-Box several decades ago. Although the chain ultimately recovered, many people still associate the brand with a deadly e-coli outbreak that happened so many years ago.  So what about Chipotle, an extraordinarily valuable company known for high quality, fresh ingredients? How will the barrage of e-coli and norovirus outbreaks across nine states affect the burrito-maker's brand?

    When you position your brand on the freshness of its product ingredients and something like this happens, it can have an even worse effect than if this sort of thing happened to McDonald's, a brand not known for healthy ingredients. And when a brand promise is not kept, whether intentionally or otherwise, many consumers will hold a grudge. The fact that these outbreaks have unfolded over several weeks (replete with the commensurate negative media coverage) also doesn't help matters, since each announcement simply reinforces the perception that Chipotle's products make people sick. Indeed the CEO has apologized and insists that the offending ingredients are now out of the supply chain. In addition, the company has engaged in a complete overhaul of its food handling practices, but again, the brand promise was really that these practices have been good all along. And it doesn't help that, most recently, a location in Boston was closed when students fell ill, and the company said this norovirus-related incident was unrelated to the previous outbreaks, which were e-coli caused. Come again? This would suggest that the problem is systemic and not at all isolated.

    Sales have plummeted since the incident and the stock is also taking a big hit. But it's still worth $575 a share, and that's pretty darn special. Chipotle might have to embark on a re-branding campaign a la Domino's after its employee food-tampering incident that went viral several years ago or it can choose an apology approach a la BP after its infamous gulf oil spill. BP is still apologizing and Domino's continues to remake its brand. It's a long, expensive process, but Domino's had nowhere to go but up. Chipotle, for it's part, should probably follow these examples and do some major marketing to repair its image and rebuild the trust it has lost. Can these clever burrito marketers do what's necessary? Will their efforts be adequate? Will people just forget? Time will tell.

  • Big Beer Merger Good For Consumers?

    Anheuser-Busch InBev NV CEO, Carlos Brito, sure thinks so. He even went so far as to say that the proposed $110 billion merger of AB and SAB Miller will actually increase competition. That would be a neat trick, but if the merger does open new markets for the combined company, as Mr. Brito predicts, perhaps the big beer behemoth will spend fewer resources in the U.S. market. American consumers are enamored of high alcohol-content, high quality craft brews, after all, and it is this small batch, artisanal beer that shows the most promise for growth in the domestic beer category. Big batch beers have experienced flat growth for years now. Will the FTC buy this argument or will the merger idea be left to ferment?

    The previous KnowNow! post mentioned that U.S. regulators are in a rather cranky, non-giving mood when it comes to possibly enabling the formation of oligopolies by allowing huge companies to acquire one another in their efforts to satisfy shareholder demands for ROI. It's hard to blame these regulators. But Mr. Brito is smart. He plans to spin off the highly-coveted, Colorado-based MillerCoors brewery (probably selling its' half of the company to Molson Coors, which owns the other half.) This, Brito thinks, will appease regulators. Nevertheless, the combined entity would represent about half of all beer profits worldwide, and with alcohol being so heavily regulated, obtaining distribution in this industry is a very difficult task. Small companies are at a huge disadvantage when it comes to getting market share in the form of tap handles and store shelf space. Are prices expected to rise as a result? Will competition be adversely affected? If not, it will be tough to justify blocking the deal. First there will be a subcommittee hearing, and then a recommendation will be made. This will be very interesting to watch.

  • Managing Merger Mania

    Companies merge, or rather one company acquires another, all of the time resulting in what shareholders hope is a sort of "synergy" that will provide a better return on investment than the companies would otherwise provide on their own. The trouble with mergers is that the vast majority of them fail to meet these shareholder expectations, and in light of this fact, it is indeed remarkable that they occur at all. Another problem with mergers is that they often result in one company having far too much influence in the industry, and less competition usually means bad news for consumers in the form of higher prices and lower product quality. This is why regulators raise eyebrows at some mergers while others escape their notice. In the U.S., the Federal Trade Commission has been charged with protecting consumers from the negative side effects of free trade, so this is the agency that gets involved when a merger might have negative side effects for consumers. A quick look at the airline industry (where only  four carriers currently dominate) shows airlines charging higher than normal prices despite low fuel costs, as well as lower-than-ever customer satisfaction ratings. Many analysts feel that some of the recent airline mergers should never have happened at all, and the evidence currently substantiates that assertion.

    As such, the FTC has been under pressure to be a bit more free with its objections, and has recently filed suit in two high profile merger cases. The first involved General Electric and its plans to sell its appliance business to Sweden-based Electrolux. After 15 months and much FTC push back, GE recently walked away from the deal that regulators have said would reduce competition and raise prices. The latest was a long-awaited suit filed by the FTC to block Staples' plans to acquire Office Depot, a transaction that would essentially leave Staples with 70% of the market for key products in that industry.  Will the court allow it to happen? Probably not, as this is exactly the sort of thing that the government wanted to avoid when Congress passed the Federal Trade Commission Act during the early days of World War One. Earlier this year, Bumble Bee and Chicken Of The Sea called off a proposed merger due to anticipated regulatory concerns. The same happened with Time Warner/Comcast as well as Sysco/U.S. Foods, deals that would have created uber-dominant industry players overnight. The combined companies would certainly agree to sell of several hundred stores to a competitor if the court asked them to do so as a condition of the deal (which is a fairly common occurrence), but the current zeitgeist with regard to M&A activity involves more regulatory scrutiny than it has in the past.. Free market capitalists must take note of these new conditions and find other ways to maximize shareholder value. I would recommend simply becoming more adept at planning and implementing the marketing mix rather than relying mergers to provide return for shareholders, but that may be too much to ask of many of these aging brands. The bottom line is that the consumer comes first, so both the regulatory and judicial branches of our government must do what they can to protect her. Merger mania will nevertheless continue until companies tire of losing legal battles or the regulatory environment becomes more merger-friendly. The latter scenario won't happen any time soon.

  • Fed's Food Guidelines Sketchy To Some

    The eighth iteration of the U.S. government's Dietary Guidelines is expected to be released by the end of the year, and the only thing certain is that there will be changes. There always are. And some of them have been quite dramatic over the past 40 years. Why is this a problem?

    Consumers can lose confidence in scientific advice when it changes too often (in this case every five years), and despite the fact that most educated people do expect science to shed new light on what we currently think we know, skeptics of the evolving Dietary Guidelines can be forgiven for being skeptical. There was the announcement earlier in the year that eggs and certain types of fats are no longer considered a problem except for those with very high cholesterol levels. In fact, there is evidence that the suggested restrictions on fats led food manufacturers to increase sugar levels in products and that the huge decline in milk consumption due to the guidelines contributed to our habit of over consuming sugary beverages. If true, that's worth contemplating. And a recent study found that many Americans might actually be consuming too little salt rather than too much. Another study found that evidence supporting either a benefit or harm of the recommended sodium levels in the current guidelines "was inconsistent and insufficient". Ouch. These are also the same guidelines that, decades ago, suggested that Americans reduce meat consumption, a practice that arguably led to over consumption of starches like pasta and thus contributed to the obesity problem. Now meat is cool again, except for the over-processed kind, which apparently isn't very good for the body.

    It's hard to keep up. So, it does bear asking whether or not the science behind the guidelines is less real science (which involves double-blind clinical trials among other controls) and more consensus opinion, which is not science at all. The original guidelines were dubbed "a nutritional experiment with the American public as subjects"  by one famous nutritional expert back in 1980. So how has that experiment gone? Are we any healthier now than we were then? Alas, we will have wait a few more weeks to see what new dietary suggestions the experts in Washington have in store for us. And consumers have certainly have good reason to question that advice.

  • Swatch This

    The fact that the smartwatch product category has failed to gain traction with all but the "innovators" and all but the earliest of  "early adopters" (if we use the Diffusion of Innovation model as a framework), has not deterred industry icon, Swatch, from entering what is becoming a highly competitive industry.

    Even Apple has had trouble getting any traction thus far, as consumers are wary of buying yet another device to meet their technological needs, but worldwide smartwatch sales are expected by one industry research group to increase from 7 million units last year to 650 million units by 2020. This seems a bit far-fetched, but the world is a big place, and much of this volume is expected to come at the expense of standard wristwatches. Wearable technology is here to stay, and a highly functional and aesthetically-pleasing watch might become a very desirable device in the not-so-distant future. Imagining a watch that does almost everything a smartphone does is not an unrealistic proposition. For its part, Swatch has signed an agreement with VISA to provide a cashless payment system to rival that of Apple and a growing list of others. This is the kind of thing that might catch on. Stay tuned.

  • Slot Replaces Swipe

    Europe has been doing it for almost a decade, but it has taken about that long for retailers and banks in the United States to agree on how to roll out the important new point-of-sale credit card technology. Why is it important? The technology is supposed to reduce the amount of fraud and data breaches (and we've seen a lot of these lately) and thus save the banks that operate the credit cards many millions of dollars. But retailers have been reticent to make the change due to the high cost involved in the transition, and banks have been unwilling to foot the whole bill despite the losses. Nevertheless, the transition is now happening, and these new chip-enabled cards will soon be everywhere. Swiping will become a consumer behavior from Christmas past.

    How Credit Card Chips Could Actually Increase Fraud

    The only sticking point now is that clerks and consumers will have to change the way they pay, and consumers are often slow to adopt new behaviors, especially when these changes are forced upon them. But as Yoda once said, "Change they must." The new way to pay involves "dipping" the chip-enabled cards instead of 'swiping" them, and the most important part is that the card is left in the machine until the transaction has been completed. At Target, if you perform this task incorrectly, a buzzing noise identifies you as an offender. One bonus with regard to the new technology is that the card holder should never have to leave the card with anyone, so the way that we pay at restaurants will probably change dramatically as well. Pay-at-the-table devices, as a result, should become even more commonplace, and wait-staff increasingly less so. Will consumers be better protected as a result of this change? Banks? Retailers? It all remains to be seen, but the experiment as been in full swing overseas for a number of years now with positive results. Farewell to the swipe!