Boulder Small Business Fighting Effects of Recession

The Rocky Mountain news featured Colorado small businesses in the front line of recession battle. There are two businesses and their approach particularly stood out. They are, Wheatridge based Vibrant Solar and Boulder based, Boulder Ice Cream. Vibrant stands out for its marketing strategy and Boulder Ice Cream for its operational efficiency.

In times of recession it is all the more important to invest in marketing and develop customers and that is exactly what Vibrant Solar is doing:

"When things are tight, you need to work harder to find customers," said Mark Simmons, Vibrant Solar's vice president of sales and marketing. "This is the time to increase marketing costs, not decrease them."

The company has virtually doubled its marketing budget. It is mailing postcards with personalized messages to potential customers, asking them to contact the company online.

Operational efficiency is no something to achieve just for the recessionary times. It is about keeping the costs down and continuously driving them downwards to keep more of the revenue the business brings in. Boulder Ice Cream has been focused on keeping their fixed costs, costs that are incurred regardless of the sales volume, down. This helps them to manage the low sales volume without making further cuts:

Boulder Ice Cream was careful to not increase its overhead along with its sales. The company doesn't provide health or retirement benefits and uses contract workers to ramp up production during peak selling season, allowing the company to hold steady with six full-time production workers.

What do you think?
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What is your Willingness to Pay?

I recently wrote about a new pricing scheme, "Pay all you can afford" adopted by a Boulder Spa, Sensorielle. The underlying premise is customers will disclose (willingly) how much they are willing to pay for a service. In the case of Sensorielle spa, they will disclose it after they have had a chance to consume the service. Getting everyone to pay their maximum willingness to pay is every marketer's dream. The hard part is, a rational customer has no incentive to disclose their willingness to pay and would want to pay as low as possible. For a longer discussion on this topic see this article I wrote awhile back.

While the consumer behavior could be acting to maximize their benefit when making a product purchase with no possibility of repeat interaction and with comparatively less human touch, their behavior is bound to be different in a high touch (no pun) service exchange environment like in a Spa. In a spa after a hour or so of interaction with the service provider people will feel less inclined to capture all the value for themselves. When the services they received is effective and useful the customers are also bound to use them again in the future. Paying a token amount for the service makes no sense as they know they may not receive the same value from the service provider in the future.

The main question, will such pricing schemes bring back customers who decided to cut down on spa expenses due to economic downturn? I will talk more on this in future posts.

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Social Networking Within The Organization

Broomfield Colorado based engineering firm MWH is profiled in The Wall Street Journal on its use of Social networking to map out the relationship between employees.

To boost productivity at engineering firm MWH, executive Victor Gulas asks employees which colleagues they talk to, and whom they turn to for help. Then he draws a "map" of the connections, which reveals dark patches around employees who work closely with others and lighter areas where there's little interaction.

Mr. Gulas says the map shows communication gaps, information bottlenecks and underutilized employees. "It's making the invisible visible," he says.

I wonder if the density of connections alone indicate the state of the social map and the informal network with the organization. The questions I have with these social maps are

1. Do these maps indicate direction of information flow?
2. Is the information flow even in both direction?
   
3. Are the links graded based on frequencies of interactions?

Boulder Layoffs Near 30% in the past six months

In our continuing discussion of the recently concluded poll on Boulder Employment, close to 40% reported a change in their status in the past six months. The margin of error is 9%. Even then this is a high number. If we look closely at the reason for the status change

30% of the Boulder professionals reported being laid off in the past six months

This explains to an extent the high number of people , 25%, reporting unemployed. The breakdown of 30% shows that 19% laid off and still looking, 8% found a job already and 3% became self employed.

Another nagging data point is 7% reporting they expect their business to do layoffs in the next six months.

Pricing Experiment by a Boulder Spa Sensorielle

One of the Boulder Net member, Jewl Petteway owns and operates Sensorielle spa in Boulder. As Jewl describes it,

We have been around for 4 years. We are a natural/organic holistic, wellbeing spa... Our treatments are based in nature. Our spa was built with non-toxic paints, and sustainable materials whenever possible.

What is interesting this time and differentiates this spa from others is their introduction of new pricing. Starting February 1st of 2009 Sensorielle is starting a daring pricing experiment they call, Pay-all-you-can pricing. In the recently conducted Boulder Employment Poll, around 25% reported as being unemployed. As the economic conditions deteriorates people starting to cut back on their spending. Even the de facto necessities like cable and Internet are getting cut, so it is no wonder that people will be cutting back on personal grooming and other spa expenses.

In the recent New York Times article it was stated that more of the tasks that are typically outsourced like coloring your hair and walking your dog are coming back home. While the upshot is people saving money on these tasks, every such service people do it themselves it takes away contribution to economic output.

All of these consumers could praise themselves for their newfound frugality in the midst of an economic downturn. But every step they take toward self-reliance — each shrub they prune themselves, each cupcake they bake from scratch — hurts the people and small businesses that have long provided these services professionally.

Sensorielle's Jewl says she realized that people will cut back on spa and related expenses. So she is trying to entice customers to come back by asking them to pay for the service what they value and what they can instead of the posted prices.
Let us help you feel great by offering our loving sanctuary to you.

We[Sensorielle] offer you professional, quality therapists and estheticians at a price you can afford. We offer a healing sanctuary where you can relax, get stress-relief, upliftment, beauty, happiness, and feel a great sense of overall well being. We ask in return that you pay what you truly can for our services.

It is a tricky pricing scheme but it is better than lowering prices to attract customers, because from what I see and read Sensorielle is a premium service and hence it should be offered at a premium price. Any price reduction now will not only signal inferior quality but also will make it very difficult to return to normal prices when the economy turns around.

We understand that a rational person, as defined by Microeconomics, will pay nothing more than the absolute minimum they have to. But as the field of behavioral economics show, people are not rational, they are Predictably Irrational. If the pricing and promotions brings about customers to the Spa, I bet that most will still pay closer to the list price.

What do you think? What will you pay when you visit their spa?

When 50% in Boulder say they are looking for new job

In the recently conducted poll of Boulder professionals, more than 50% were reported to be searching for new jobs and 25% reported unemployed. For one thing it indicates that even those with a job are not sitting safely and believe a change is needed. This makes the job search more difficult for those who are unemployed. Not only do they have to compete among themselves but also with those who are trying to switch jobs. Macroeconomics says that those who are already employed stand a better chance of getting jobs because of many reasons including the networking opportunities. This competition is not different from any other time but what makes it difficult is the high numbers of both groups.
What is your take?

How do handle requests from LinkedIn members with 0 connections?

I see a new class of LinkedIn members who send requests to join the Boulder Net group. Their profile say, their location is Greater Denver area. Most time their profile is empty but other times has few parts filled out. One thing that stand out however is their number of connections. It is 0.
I wonder if some create a different profile with different location.

In any case I do not see a fit for those in the group. I think I have been meticulous in looking at new member requests but if you see any 0 connection members let me know.

High Unemployment Rate Among Boulder LinkedIn Members

I recently posted the complete results and preliminary analysis of the poll results. One data that stood out is the 25% of the people reporting as unemployed. The US Bureau of Labor Statistics numbers are far below this for Boulder MCA, a about 4.6%. So why one in four in LinkedIn reported unemployed?

There are two possible reasons

1. People more actively use LinkedIn when they are searching for jobs, especially in between jobs.
2. Since respondents self selected the poll is over represented by unemployed

So we cannot say that LinkedIn members who work and live and Boulder area have a higher unemployment rate than the rest of the population.

Boulder Metro Employment Status Poll Results

Please use full screen mode to view the details.

Lower Unemployment Rate Than The Rest of the Country

The United States Bureau of Labor Statistics (BLS) reported the November 2008 unemployment numbers for US cities. The overall number stands at 6.2%, but the number for Boulder is significantly lower at 4.8%