A perfect example of customer loyalty | WordPress outage
A key driver of customer loyalty is customer service, especially in the handling of crises and problems. But there are other aspects.
WordPress for those that are not familiar, is a blogging platform. This blog is running on WordPress. Yesterday, late afternoon, WordPress was down for 110 minutes. On the face of it this would be a crisis. For example when gmail goes down, even for 2 minutes, everyone panics, predicts the end cloud computing, reflects on how this proves you cannot trust Google etc. etc.
When wordpress goes down, here is the result.
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Jean-Luc Crucifix
February 19th, 2010 at 12:03 amThanks for this very quick update! We appreciate it!
Olivia Tejeda
February 19th, 2010 at 12:04 amHonestly, I was horrified when I heard WordPress was down, but you did a great job of keeping us informed and getting back to business. Thanks so much for that!
Avraham
February 19th, 2010 at 12:04 amThanks for all your hard work!
jamesb101
February 19th, 2010 at 12:05 amThanks for the info…..
I love you guys…..You’re doing a great Job….
After I did a level 2 diagnostic check (A la Star Trek ) I knew it was the system and I just left things alone…
Keep up the good work!Ruslan Trad
February 19th, 2010 at 12:06 amWe understand!:)
We love you, thank you, we understand?? There are 203 comments and they are 100% in the same vein. There is not one comment suggesting they will leave WP, or even anything remotely negative.
On twitter these were the initial reactions.
And this was wordpress response at the time – note Matt Mullenweg is the CEO.
I have seen similar occurrences when something has gone wrong at WP and the result is always the same.
A few things stand out about wordpress.
- They are both personal and personable. Users feel they are dealing with people. First names are always used.
- Matt the CEO is personally engaged and it shows.
- There are frequent enhancements to the service that are promoted on my dashboard, and discussed on their blog and forum. They are always communicating to their users.
- Users care about WordPress, appreciate the service, and feel engaged with it. so when it breaks they feel part of the problem, as opposed to Google users who have no idea who is on the other side of the wall at gmail. There is no personality in the case of Google.
Relevance to Bankwatch:
In my little case study of one, me, WordPress and gmail are my two most commonly used apps. They are both technically sound, equally reliable and invaluable to me. Yet I have more perceived confidence in wordpress than gmail, this despite the fact that logically I know that gmail has never missed a beat since inception in 2004, and I have complete confidence my mail will always be there, despite occasional hiccups.
I believe one difference must lie in personality, and knowing who I am dealing with. I always have more confidence in the bank where I know the people than in a monolithic organisation such as a typical discount brokerage firm where there is little human contact. Incidentally I also recognize the distinction between the immediacy of the tools which will also influence how users interpret downtime.
The challenge then, relative to the organisational personality aspect is to create that human contact and create it in a way that is genuine, and that will scale, without having to maintain a 1,000 unit branch network for example. The traditionalists always say that bank branches drive loyalty and new accounts. Is it the physical locations or is it the personality that located in those locations? How do we scale personality and personal contact. Before everyone jumps on it this is more than a twitter solution. My impression of twitter is that it is actually becoming highly impersonal with RT being the predominant twitter activity.
No, the challenge for banks and other organizations to develop a genuine and trusted personality online will be multi faceted yet essential in order to succeed and produce economic scale.
The debt glut and risk to banks
The survivability of banks generally is todays topic. The Greek situation has one possible outcome of contagion across numerous aspects with potential for another economic crisis, despite the cries from many that the crisis is over.
This week Brad de Long took issue with Niall Fergusons recent piece (A Greek crisis is coming to America) wherein Niall highlighted the international country debt crisis was not just Greece, Portugal and Spain, but included the US. He is one of many US commentators who are becoming increasingly shrill against Niall and others even raising his personal life style as a means to discredit him. The issue is one to be determined by facts not shrillness.
Fact 1:
FDIC problem banks are an increasing problem. In May 2008, I noted the existence of the FDIC Problem Bank list. At that time there were 90 banks representing $ 26 Bn in assets at risk.
Today there are 552 banks, representing $ 346 Bn.
Fact 2:
Government debt is a problem. The Greek situation is one that has no good outcome. John Mauldin summarises the situation in his weekly newsletter.
The recent credit crisis was over a few trillion in bad, mostly US, mortgage debts, with most of that at US banks. Greek debt is $350 billion, with about $270 billion of that spread among just three European countries and their banks. Make no mistake, a Greek default is another potential credit crisis in the making. As noted above, it is not just the write-down of Greek debt; it is the mark-to-market of other sovereign debt.
That would bankrupt the bulk of the European banking system, which is why it is unlikely to be allowed to happen.
He goes on to note that there might be ways to reduce valuations of debt at a slower pace to allow absorption into the banks’ balance sheets, but that partly assumes the Greek situation remains alone. What of the US debt, which despite de Longs protestation to the contrary is at 100% of GDP by 2012, and eerily similar to the Club Med countries position. The contrary argument says it matters less because the debt is denominated in US Dollars. However if money has to be printed to repay the interest, I see no relevance to the currency denomination. Directly or indirectly it always comes back to exchange rates, interest rates, and repayment, and those are factors that impact the general population directly through inflation/ deflation, unemployment, and affordability.
Debt and repayment of that debt remains one of the single largest global risks and those that try to paint a picture that the US is immune are wrong.
Earlier this week Moody’s reported a downgrade to Bank of America and CitiBank with the peculiar note that the potential availability of government bailout of those institutions is reduced. The implication of that statement is that government bailout is factored into the rating of US banks. This is insanity. the risk of a bank to fail should not be mitigated by inferred support from Government. Financial risk is financial risk and can only be reduced by explicit guarantees. Clearly the rating agencies have learned nothing since 2008.
Banks will continue to be distracted from customer based activities by threats to their financial survival.
UPDATE:
Europe cannot afford to rescue Greece | ft.com
Participation in Emu brings huge advantages. The benefits of joining a stable economic area are greatest for countries that were unable to deliver such conditions before. Thanks to the euro, Greece has enjoyed long-term interest rates at a record low. But instead of delivering on its commitment at the time of entry to reduce public debt levels, the country has wasted potential savings in a spending frenzy. The crisis with which it is now confronted is not the result of an “external shock” such as an earthquake, but the result of bad policies pursued over many years. Bailing out Greece would reward such behaviour and create moral hazard of a dimension hardly seen before
IBM and BBA look at banks; restoring loyalty and trust
The British banking system has changed beyond all recognition. It was not a difficult prediction that I concluded last year, but it has come to be sooner than even I thought.
RESTORING LOYALTY, TRUST AND INDUSTRY PROFITABILITY | IBM / BBA
Hand-in-hand with this increase in consolidation and government ownership, we have also seen a major new entrant arrive – Banco Santander now has over 1,300 branches through its acquisition of Abbey National, Alliance & Leicester and Bradford & Bingley – and non-banking groups flexing their muscles in the banking space. Tesco Bank has now exited from its joint venture with RBS and announced its intentions to offer a mortgage and current account. Virgin Money is one of 53 new applicants for banking licences in the UK, while the mobile operator O2 has launched a pre-paid card ‘powered by NatWest’. There is also renewed discussion about the role of the Post Office in supplying banking services.
The prediction was that we would see two types of institutions form:
This will effectively split the financial community into two distinct sets:
- financial utilities – significant operating restrictions in light of implicit and explicit government guarantees underpinning the business
- risk takers – not clearly defined as yet – will be dependent on regulation applicability
Lloyds and RBS are the former. Virgin and Santander are examples of the latter.
One thing I did predict and has not occurred yet in any meaningful way despite public outcry is the enforcement of government requirements on bank actions that come with their new found ownership responsibilities. This surprises me, and I suppose is due to discomfort with being in an ownership role, but it will come in time.
Anyhow the paper looks at customer perceptions and impact of regulation.
I looks at at what customers will pay for ….
and how to create value from customer information.
Their conclusion:
Conclusions
Now, more than ever before, there is the potential for significant change in the retail banking landscape. In our view, the winners will be those who:
- Focus their cost reduction efforts intelligently on the areas we have identified: continuous improvement techniques, empowered workforces, and the right technology and data foundations for their operations
- Build targeted customer propositions to gain significant wallet share, using ‘fine grain’ pricing techniques
- Meet regulatory requirements effectively
- Exploit the potential of smarter banking models that are instrumented, intelligent and interconnected.
To help enable these smarter banking models to work requires the fuel of high quality, accurate data, plus an
ability to look across the different product and geographical silos that still operate in many banks. When banks have the data to serve customers better, they also have the basic building blocks required to meet regulatory (and board) reporting requirements.To win will require significant investment and management effort by both the established UK players – challenging at a time when they have to meet enhanced capital requirements and sort out mergers and divestments – and the challengers.
Banks prepared to make bold plays on this agenda, with clear strategic intent, will force the competition to respond. The competitive dynamic will lead to a smarter banking industry that we can all be proud of and which customers will trust.
Global risks that affect everything for years to come
McKinsey provided a list here of the latest risk assessments done by three groups. I had the WEF one already, so its was interesting to review and compare the three.
- World Economic Forum Global Risks 2010 (In collaboration with PricewaterhouseCoopers Global Thought Leadership group)
- Economist Intelligence Unit’s latest global business risk assessment
- Eurasia Group, Top Risks and Red Herrings for 2010
Relevance to Bankwatch:
This is a sobering list (see below for complete table of contents of all three. The news today is full of:
- Greece, Portugal and Spain country risk problems
- government debt, particularly US, UK and Japan
- consumer debt – all western countries, with special mention to Canada, UK and US
- possibility (likelihood) that we are in the midst of a commodity price bubble
- post crisis statistical recovery associated with a continued consumer recession (approximate quote from Larry Summers at Davos)
- total failure of confidence and trust in banks and their management (Dimon, Lewis, RBS etc)
- US government deficit at unprecedented levels
- potential for catastrophic economic collapse in China (asset bubble, unsustainable government spending
- polarisation of banks into zombie /utility banks and risk takers
- deflation resulting from developed countries and their population deleveraging
The list could go on, and we all see these things through our own lens. These are the things we know about. If we look down the list below, and pick some outlier events such as
- US/ China trade war,
- Muslimisation of Turkey and alliance with Syria and Iran,
- a real global pandemic
Even one such event would have dramatic impacts on confidence, currencies, interest rates and therefore inflation/ prices. Banks and there customers are not immune whether in UK, US, or Switzerland. The results of the risk outcomes will have effects on us all.
I keep going back to Homer-Dixons The Upside of Down. That book set the tone for the 21st Century for me, and provides a backdrop for financial planning, and therefore bank planning for its customers. The view of the last 20 years to buy stock and wait is no longer an adequate plan. Not a good time to be laboured with expensive infrastructure, or to be increasing that infrastructure.
Lots to think about.
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Here is a summary of the coverage of each report.
World Economic Forum – Global Risk Report 2010
Economic Risks
- food price volatility
- oil price spikes
- major fall in US $
- sowing Chinese economy (< 6%)
- fiscal crises
- asset price collapse
- retrenchment from globalisation (developed)
- retrenchment from globalisation (emerging)
- burden of regulation
- underinvestment in infrastructure
Geopolitical Risks
- international terrorism
- nuclear proliferation
- Iran
- North Korea
- Afghanistan instability
- transnational crime and corruption
- Israel- Palestine
- Iraq
- global governance gaps
Environmental Risks
- extreme weather
- drought and desertification
- water scarcity
- NatCat cyclone
- NatCat earthquake
- NatCat inland flooding
- NatCat coastal flooding
- air pollution
- biodiversity loss
Societal Risks
- pandemic
- infectious diseases
- chronic diseases
- liability regimes
- migration
Technological Risks
- Critical information infrastructure (cli) breakdown
- nanoparticle toxicity
- data fraud/ loss
Economist Intelligence Unit
Growth without jobs
The global economy is set to endure a "jobless" recovery, but governments are ill-equipped to deal with the economic and political consequences of entrenched high unemployment.
Austerity and unrest
Moves by many countries to introduce fiscal austerity measures in 2010-11 could spark social unrest, particularly in eastern Europe but also in the developed world.
Shaky foundations
We have fractionally raised our forecast for global economic growth in 2010, but we remain concerned that unsustainable factors are driving much of the recovery.
Preventing the next crisis?
The process of reforming global financial regulation is well under way, but policymakers are reluctant to demand measures that could undermine the economic recovery.
Key issues for 2010
The world economy is improving, but the fading of short-term factors that have supported recovery thus far will feature among the key issues to watch for in 2010.
COP-out
The UN climate-change summit in Copenhagen has ended in failure. It has produced a heavily diluted agreement that omits concrete targets and lacks unanimous support.
A global carbon market?
Carbon trading is at the centre of proposals to limit greenhouse-gas emissions. But for trading to achieve useful scale, a global benchmark for carbon prices is needed.
Bubble fears
Rising global risk appetite and the spillover of liquidity from the developed world are creating conditions for asset-price bubbles in emerging markets.
Eurasia Group
1 – US-China relations
2 – Iran
3 – European fiscal divergence
4 – US financial regulation
5 – Japan
6 – Climate change
7 – Brazil
8 – India-Pakistan (no, not Afghanistan)
9 – Eastern Europe, elections & unemployment
10 – Turkey
CIBC release first Canadian bank iphone app
It was October 2009 when I posted ‘who will be the last bank without an iphone app’.
For Canada I should have said who will be first, and its been a long time coming but it is CIBC. After an initial delay in December, it is released today. No bill payment yet, but it does have EMT (Canadian p2p payments between participating banks).
Kudos to CIBC.
Nicolas Sarkozy opening plenary | Davos WEF Annual meeting 2010
I finally got around to watching the full Sarkozy opening to WEF. It is both controversial and interesting. He continues the theme that ‘anglo saxon’ financial models are the problem and makes some good points that are hard to disregard. For example, he notes that it was too easy to earn large amounts of money based on ‘today’ with no regard for future implications, and with little effort.
Worth watching. There are more ways to see the world that the North American way.
Beware of Greeks bearing Gifts
Beware od Danaos bearing gifts.
((Laocoön warned his fellow Trojans against the wooden horse presented to the city by the Greeks. In the Aeneid, Virgil gives Laocoön the famous line Equo ne credite, Teucri / Quidquid id est, timeo Danaos et dona ferentes)
With that famous line, the worry of surreptitious infiltration is captured, as we now know as the Wooden Horse of Troy.
When people accept a condition in the midst of a complicated negotiation with no apparent conditions beware.
When I read this headline “Bankers in favour of paying global fee” my immediate reaction, as an ex banker was. what!!!
Banking as it is designed anywhere in the world is based on a highly levered model supported by central governments. The problem in the world as we work out of the crisis is leverage. Banks are central to the problem. Yet as head of a bank your targets are designed to maintain return on equity so any interference in the model is bad.
Regulation is bound to reduce leverage in some way so the opportunity to have a fee imposed to all banks equally is manna from heaven. The equilibrium remains.
Two views of Canadian economy – the external view is flawed
Consider these headlines about Canada, both published this week.
First the world view of Canada, reaffirmed at Davos.
What Toronto can teach New York and London | ft.com
That’s where Canada comes in. It is a real-world, real-time example of a banking system in a medium-sized, advanced capitalist economy that worked. Understanding why the Canadian system survived could be a key to making the rest of the west equally robust.
Next a Canadian view, that says Canada is a bubble waiting to burst, that is not widely shared other than by yours truly.
Awash in a sea of Debt | Macleans Feb 8th, 2010 (partially published on Roseth)
It seems we have learned nothing from the American debt crisis; and here in Ontario, we have forgotten the housing collapse of the early 1980’s, when house prices dropped as much as 40 % and did not recover their old values until after the turn of the century. Speculation was rife; people kept moving up, sometimes changing homes every one or two years; speculators were “flipping” homes, and ordinary people were buying forward several months and expecting their old home to appreciate before putting it up for sale. It worked for a while, but then the market turned, and some people who had committed to a new home and waiting to sell their own at higher prices had to sell much lower and ending up with a new house but a much larger mortgage. Some seniors, selling their old, large home and hoping to move into a new, smaller home, mortgage free, ended up with a smaller home with a large mortgage. Quit claims were rampant.
Now, here we go again
For the rest of the world what is happening in Canada is that home prices rose through the recession, and continue to rise. Extraordinarily low interest rates are incenting people to borrow against equity or purchase a more expensive home than they might otherwise. The reset point for Canada will be when interest rates begin to rise.
Analysts from Bank of Canada conducted an analysis of Canadian debt from a historical perspective to 2005 recently.
In a nutshell Canadian debt was significant amongst certain groups as early as 2005. More recently Bank of Canada conducted a sensitivity analysis that noted risk associated with defaults if Canadian interest rates rise to the 4 – 5% range, and that would precipitate significant defaults and loss of capital at Canadian Banks.
The most telling statement in the Macleans piece is this is that ‘you never see a crisis coming’. As recently as 2009 Scotiabank published a piece entitled “Canada’s Mortgage Market is not like the US”. I believe they are wrong. Time for some economists to read “This Time is Different – Eight Centuries of Financial Folly”. As you can imagine the conclusion of the book, is that it is never different.
