Archive for the ‘CRM’ Category

It’s easy to imagine how a company moves to variable pricing. They follow the money. They test into it. They realize that the buying behavior of shoppers varies from day to day and hour to hour. Their analytics tells them that someone using Safari has higher average purchases than someone using Firefox. They know that visitors that come to their website after visiting certain websites are more or less price sensitive than if they come from other referring sites. And sometimes, they’ve even learned that it pays to increase prices based on repeat visits. In other words, on some sites, the best price you’ll ever get is the first one they show you. Shop around, come back, and you’ll pay more. (Sort of like a car salesman, who knows that if you come back, he’s got you, and he doesn’t have to lower his price to make the sale.)

Then a marketing manager or someone in the sales department makes the case that they can improve profits by harnessing all of this data into a variable pricing strategy. It’s hard to argue with the data.

So the company invests in a pricing engine or builds its own pricing algorithms and institutes variable pricing. And guess what? Profits go up. Sales go up because shoppers are getting deals created with their buying habits in mind. After all, it is an accepted rule of Internet marketing (and direct marketing before it) that the more relevant and personalized the offer, the better the response. And milking every extra dollar out of a sale (or, in some cases, many extra dollars) increases profits.

A slam dunk, right?

Anybody who remembers the relevance of that phrase knows where I’m going with this.

Pricing may seem like a commodity, but in fact, it is part of brand identity. As is the relationship a buyer has with a brand. And just to be clear, a retailer is a brand, too. Sure, Target sells brands, but it is also a brand. People shop at Target as opposed to Wal-Mart for many of the same reasons that they choose Land’s End over Old Navy.

If you found out that the person next to you in line paid less for the same sweater at Land’s End than you did, how satisfied with Land’s End would you be?

Some shoppers will be so upset they’ll never come back. And others will find out how to get the lower price, and then make sure they do that from now on.

Let’s call the first shopper a Brand Shopper. And the second a Price Shopper.

Price Shoppers are smart. They find coupon sites. They find discount codes. They follow blogs and Twitter feeds that promise to find and deliver the best prices. Some of them use bots or apps to notify them of the best prices on specific retailers and shopping aggregators.

And in many cases, price shoppers know that brand distinction isn’t as important as it used to be. As Seth Godin famously said, most products these days are “good enough.” In other words, the upcharge for a top brand isn’t always worth it, and price shoppers often know that.

If you are courting price shoppers, then you’re always in a pricing war where the shoppers are as well-armed as you are… sometimes better. And the competition can almost always undercut you… unless you’re the rock bottom price, in which case, you’re not varying your prices anyway. You’re Wal-Mart.

With variable pricing, price shoppers learn when to buy, and when not to buy. The profits you initially expected from this major segment wither away.

Now let’s look at Brand Shoppers, the core of your business. Your house list, so to speak. They love you. They swear by you. They only wear/drive/eat you. But it turns out, brand is about more than just quality, or value. Brand is emotional. Brand lets people willingly buy inferior products out of love, or a sense of belonging, or even habit. In other words, brand is like a relationship, the human kind.

And nobody likes to feel cheated on, or duped, or lied to, or made a fool of. When they do, they dump you like a bag of bread that’s gone moldy.

So what happens to your brand loyalists when they find out that you’re playing fast and loose with pricing and they get no benefit for being a loyal customer? Even worse, what happens when they find out that you’ll give a better discount to someone who’s never bought from you before, rather than they, who sing your praises, evangelize your brand to all who will listen, and buy whatever new product you throw at them?

So yeah, variable pricing looks great from inside the bubble. But can someone please explain to me the value of a brand in a world where we’re made to feel like chumps if we don’t outsource our shopping decisions to mindless shopping bots that always find us the best prices, regardless of source, regardless of emotion, regardless of loyalty?

Like I said. Slam dunk.

I was at SMX East Tuesday and attended a session on Facebook advertising. The experts on the panel were talking about how, in order to actually get useful results out of advertising on the world’s largest social network, they had to change their Facebook creative as often as 4-5 times a day to combat blindness, fatigue and annoyance.

Swapping out ads every few hours? Optimizing banner campaigns and paid search and websites on the fly? Managing brand reputations that can change in hours thanks to a viral video or a negative blog post?

When did advertising get so hard?

It used to be, you ran a TV spot on Must See TV and the whole world knew about your product.

It used to be, you rented a great mailing list, sent out a juicy catalog half the size of a phonebook, and watched the orders come rolling in over the phone or in the mail.

It used to be, you did your keyword research, put up a bunch of paid search ads in Google AdWords, and watched people come to your site and buy things.

It’s not like it used to be.

Advertising has gotten really tough. And it’s gotten tough because our target audiences stopped being targets and started being participants.

Now, you have to listen to them – but if you do, you can learn what you need to succeed.

Now you have to engage them – and when you do, they’ll reward you with the real version of the brand loyalty you thought you had before.

Now, you have to treat your customers like a Facebook Friend, a Twitter Follower, an engaged stakeholder – and if you don’t, they’ll find a company who does, but only after they tell everyone how shabbily you treated them. (5 years ago, if you said this to a client, they would have called you crazy and shown you the door.)

The bad news is that there are more channels, more touchpoints, and more tools than ever before, and they’re labor intensive, difficult to quantify, and constantly changing. (Just keeping up with the changes to Google is a full time job!)

The good news is that there are more channels, more touchpoints, and more tools than ever before at our disposal to change the way we relate to our customers.

So can someone please explain to me why, rather than change their methods to get the most advantage out of these newly engaged and empowered customers, so many advertisers are just trying to find a way to make the new mediums work like the old ones?

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Good CRM = A Red Swingline Stapler

We’ve been building an e-commerce website for a client and my art director Otto sent me the following sample invoice. It’s one of the automatic forms that’s part of the Network Solutions e-commerce solution we’re using — the only thing Otto did was add my client’s logo and address (which we’ve now removed to protect the innocent).

Take a look at it — see anything interesting? (You can click on the image to enlarge it!)

Right about now you’re either laughing hysterically, humming, “Damn, it feels good to be a gangsta” or wondering what’s going on. For those of you in the latter category, the specifics of the invoice relate to a prop from the movie Office Space, much of which takes place in a cubicle farm computer company called Initech. The names in the form are all characters from the movie.

Now Network Solutions didn’t need to fill in the sample invoice with anything funny. They could have used a “widget” instead of a red Swingline stapler. They could have used John Doe or Pat Stephenson instead of Peter Gibbons and Samir Nagheenanajar. But they chose to use elements from an iconic, classic movie virtually guaranteed to bring a smile to the face of almost any programmer, designer, entrepreneur or wage slave of a certain age.

And by doing that, they not only made Otto’s day, they made mine, and then I showed it to my creative director and another art director, both of whom loved it. I showed my wife, who cracked up. Now I’m blogging about it. And still smiling.

That’s good customer relationship management. And good word of mouth. And it didn’t take much more effort than the plain vanilla boilerplate version would have.

All it took was a little empathy, a little creativity, and an understanding that even the boring parts of our jobs don’t need to be soul crushers unless we let them.

So can someone please explain to me why red Swingline staplers are the exception rather than the rule?

And while you’re doing that, I’m off to find a baseball bat. I’ve got a date with a fax machine.

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“Just the facts, M’am.”

Pepsi, who has advertised in every Super Bowl for 23 years, is shifting its entire Super Bowl budget into social media via its charitable crowdsourcing community called The Pepsi Refresh Project.

According to a UMass Dartmouth Study released this month, 80% of the Inc 500 use social networking as a marketing tool. And 89% of them say it was successful, “using hits, comments, leads or sales as primary indicators of success.”

The Mobile Internet Report by Morgan Stanley, released in December, says,

“Regarding the pace of change, we believe more users will likely connect to the Internet via mobile devices than desktop PCs within five years.”

Okay, that wasn’t a fact. That was a prediction. But it’s a conviction backed up by a 424 page research report.

But this is: as of today, the Red Cross had raised $22 million for Haiti relief thru text donations alone. And I don’t know about you, but I first found out about the effort on Twitter.

I could keep listing facts that prove the value of social media, but I’m lazy. Instead, I’m going to post this great video, Socialnomics, by Erik Qualman, that I found on Josef Katz’s Marketing Maestro blog that addresses the ROI of social media.

Pepsi. Ford. Gary Vinochuk. Zappos. Lenovo. Burger King. Blend Tec. Dell. Intuit. Volkswagen. Barak Obama. The Red Cross.

They all get it.

Can someone please explain to me why there are still people who don’t?

I wasn’t going to blog about this.

Unlike most of my posts, which have at their core a desire to make things better by understanding how they happen, I have no hope that this situation will improve.

But after weeks of incredible personal frustration, it was the mounting complaints by my friends and co-workers that convinced me that this situation truly needs an explanation. Somebody somewhere made this decision, and I desperately want to know what they were thinking.

I’m talking about the recent change southern Connecticut made to their phone numbers.  Beginning on November 14th, customers in the 203 area code became required to use the area code, 203, before all calls within the 203, whether local or long distance.

Now I know what I said makes no sense, so let me explain for those of you who don’t live here.

203 has always been a pretty conflicted area code with serious identity issues. Sometimes it’s local, sometimes it’s long distance. And there’s really no way to know which is which, because it’s not just based on where the recipient is located. In fact, sometimes it’s both at the same time. I have clients who have business phones and cell phones, all within the 203 area code, but the cell phones are sometimes local while the business phones are long distance.

Have any of you ever encountered an area code like this?

There must be others, although I always thought all the calls within an area code would be local calls. In my experience, living at various times in suburban New York, suburban New Jersey, San Diego, CA and Manhattan, I have never encountered an area code that could be both local and long distance within the area code, and especially within such a small geographic area. (I could understand, for instance, if all of Montana shared an area code that included local and long distance. But Fairfield County, CT? You’ve got to be kidding.)

I’ve lived in Connecticut for 5 years now, and worked here for 10, so I’ve made my uneasy peace with the split personality of the 203.  Besides, the “locals” seemed to take it in stride, chalking up my frustration to my lack of geographic awareness. After all, how could I not know that Weston is a long distance 203 but Wilton is not, and Shelton is long distance from my office, but not from my home 15 miles away.

But this most recent change has the natives up in arms, so that must mean it’s really bad, even by Connecticut standards.

You see, now every call needs to have a 203 put in front of it, but not every call gets a 1 before the 203. And that’s what’s causing the problem.

The reason for the area code change is pretty clear: to accommodate the growing need for more phone numbers, Connecticut is adding a new area code, 475, to the 203 area. You can read the public announcement by the State of Connecticut’s Department of Public Utility Control here.

And the need to use 1 or not to use 1 is also pretty clear: local calls are still local calls. A prefix of 1 denotes long distance. And it matters because there are cost differences between local and long distance, of course. At least on antiquated land line systems.

So, technically, the change is pretty minor, right? In the past, within 203, you dialed 1-203 for long distance, and nothing for local. Now, you dial 1-203 for long distance, and 203 for local.

It should be a pretty simple change to adapt to. And yet it’s got people slamming phones and cursing throughout the day at the those endless, annoying messages:  “We’re sorry. You must dial a 1 and the area code before making this call.” or the dreaded “Hey, Moron, this call cannot be completed as dialed. Do not include a 1 for local calls. What are you, from New York?”

Talk about a frustrating and inescapable customer experience.

Speed dials on office phones have to be reprogrammed. So do faxes. Employee home phone number lists have to be updated, as do personnel records.

One of my coworkers has a 203 based cell phone. He says he has to reprogram the numbers in his phone to include a 1 or not, and it’s not based on where he lives, but where he activated his phone, in addition to where the number is located. (My cell started as a 917 out of NYC, so 203 has always been long distance and automatically gets a 1, so I’m ahead of the game on that one.)

You’d think I’d be enjoying this. All those people who were unmoved by my phone frustrations are now plagued with their own.

And yet I get absolutely no joy whatsoever from their angst.

Because I’m way too busy being frustrated on my own. That simple change now means that every call is 203, but only some get a 1.  I’ve got a 50/50 shot at being right, but for whatever reason, I’m guessing wrong way more than 50% of the time.

As I see it, the problem isn’t really about the change. The problem has been there all along, thanks to the schizophrenic nature of the 203 area code.  There must be a reason. Is it based on square miles of coverage? Is it based on greedy municipalities and usage taxes? Is it a 19th century legacy of a long forgotten battle between local phone systems that combined in some satanic mega-merger?

In other words, can someone out there please explain to me why the 203 area code is just so messed up?

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So I’ve got the place all to myself the other day and I’m watching The Dirty Dozen on AMC.

It’s bad enough that they’ve edited the hell out of this classic and see fit to interrupt me every few minutes with commercials, turning a 150-minute testosterone thrill ride into a slogging, 210-minute endurance test.

But I’ve got a DVR, so I’ve given the movie a head start and I’m racing through the endless commercial interruptions, jumping from scene to violent scene. I mean, it’s The Dirty Dozen:  Lee Marvin, Charlie Bronson, Jim Brown, John Cassavetes, Telly Savalas and company killing Nazis…it doesn’t get tougher than this.

Then we get to one of the few scenes where there’s no action at all, and Lee Marvin’s got me riveted to the screen with just a hard look, a bottle of scotch, and his gravelly voice, when suddenly, in the lower left corner of the screen there’s this hot chick in sexy lingerie standing in a doorway exhorting me to watch Mad Men — and she’s totally blocking Lee Marvin’s face!

Did the sexy chick make me want to watch Mad Men? Not one bit — quite the opposite, in fact. Nor did that slick Don Draper guy in the 1960’s suit that stood in the same left corner later on, blocking a scene where a real mad man was actually killing something. Nor the next time the sexy chick came back…nor the time after that, nor the…you get the picture. (Where’s Maggot when you need him? Hey, it’s an inside joke — if you don’t get it, watch the movie.)

What’s AMC’s plan? Do they think that somehow, somebody who has avoided tuning in to watch Mad Men for the last 3 seasons will be swayed suddenly by the sexy chick in the lower left corner? Or that somebody who is already watching Mad Men will suddenly go, “Oh my god, that’s right, I nearly forgot that I love Mad Men and I must make a note to watch it the next time it’s on. That Don Draper is so tough.”

Now I’m pretty sure there’s no intelligence behind the timing of the tune-in ads. They didn’t plan to obscure Lee Marvin with the sexy chick, it just worked out that way because nobody who cared was paying attention.

And that’s my point. AMC is supposed to be a channel about movies for people who love movies. In their own words, “Story Matters Here. Dedicated to American movie fans featuring popular movies and original productions. Long Live Cool.”

Does anybody else remember when AMC walked the walk they still talk? They were all about great old movies… and they played them without commercials. Sure, sometimes they edited them for content, but I could overlook that — what’s a few deleted expletives between friends?

But as bad as that got, at least they weren’t obscuring critical content with their own tune-in ads for their original TV shows. (TV Shows? Don’t they understand that if I want a good cable TV show, I’ll watch HBO or Showtime?)

It all comes down to respect. AMC doesn’t respect me. (At least not the way TCM does!) To AMC, I’m just an eyeball to be advertised to, whenever they want, as much as they possibly can, regardless of what I’m watching, in whatever inappropriate manner they think will work this week.

Can someone please explain to me why — in this day and age when dozens of commercial-free movie networks are just a click away, when I can download movies from Netflix instantly, or watch them On Demand — AMC still thinks any self-respecting movie fan will swallow their disrespect?

Maybe that kind of thinking used to work in the fictional 1960’s in which Mad Men is set, but it doesn’t fly now. And if Lee Marvin were alive today, he’d kick Don Draper’s ass for dissing The Dirty Dozen. Long live cool.

I just received my membership renewal notice from Costco, and I was astounded by their blatant failure to apply one of the most basic rules of direct marketing:  give me a reason to buy!

There were at least 3 offers to upgrade my Gold Star (or Basic) Membership to an Executive Membership for an additional $50. The most prominent of these offers was a Yes! box on the reply “portion” (their lackluster word, not one my agency would ever use) of the renewal notice.

Since Gold Star Membership only costs $50, I was intrigued to know what extras I would get for double the price.

I looked on the front of the notice. Nothing. They spent a whole panel encouraging me to sign up for exclusive online offers and shop online, but not a single word about why I should upgrade my membership — at the exact moment in our relationship when I was about to take action to renew my membership!

I looked on the back of the notice, where they directed me to find instructions for upgrading to an Executive Membership. Sure enough, there were instructions… but no list of features and benefits or any kind of explanation of Executive Membership.

I looked at the inserts. There was one for Ameriprise Auto Insurance. Nothing there about Executive Membership.

There was an insert for the TrueEarnings Card from Costco and American Express Card. And miracle of miracles, it mentioned that with the TrueEarnings Card, you can earn 1% in addition to the 2% rewards “you’re already earning” with your Costco Executive Membership. But nothing else.

Just for fun, I went to the Costco website and looked up Executive Membership. Here’s what I found:

Executive Membership is our highest level of membership. Executive Members enjoy an annual 2% Reward on most Costco purchases, as well as additional values on member services, such as lower prices on check printing, auto loans and identity protection; larger Costco Cash card amounts for mortgage, real estate and home equity transactions; an account bonus for money market and online investing accounts; free roadside assistance for vehicles covered through the auto insurance program; and extra travel benefits.

That’s not a bad offer: Cash rewards, better benefits, extra features. At 2% cash back, I can even figure out my annual purchases and see that if I spend over $2,500 a year, the upgrade more than pays for itself. And that’s not even including the value of extras and account bonuses.

It’s a good story, one that might have convinced me to upgrade my membership, if it were anywhere at all on the Renewal Notice.

Direct mail isn’t rocket science. There’s a set of time-tested basic rules, a wider set of tested-into best practices, and some basic mindsets. A good direct marketing agency (like mine, Tanen Directed Advertising) knows how to apply these time after time to generate predictable, successful results.

But it doesn’t take a direct mail expert to know that if you want to upsell someone to a product or service that costs twice as much, you’ve got to give them a reason why.

Did they just forget? Were they trying to drive me to the website or the phone to get more info because they’ve tested into it and learned that they actually upgrade more memberships that way? Or did their lettershop screw up and fail to insert the buckslip extolling the features and benefits of upgrading to Executive Membership?

Since this blog is based on the premise that if we knew the reasons behind some seemingly incomprehensible choices those choices would make more sense, can someone please explain to me why Costco thought they could get me to fork over an extra $50 without telling me why? (And Costco, if there isn’t a good reason, give me a call. My agency can really improve your membership renewal mailings.)

“Guaranteed. Period.” (R)

Land’s End built their direct response business — and helped the industry grow — with their “Money Back, No Questions Asked” guarantee. They engendered trust in an inherently risky proposition, that of buying products you couldn’t pick up and touch. And perhaps, because they needed to live up to that guarantee, they also pursued a higher level of quality.

Compare Land’s End to the insurance industry.

Hard on the heals of Sully’s heroic Hudson landing of US Airways Flight #1549 comes the insurer AIG’s decision not to pay insurance claims for the passengers. They claim the pilots did everything right, there was no equipment failure, and the geese were an “unusual incident.”  Apparently, if there’s no negligence, there’s no liability.

It’s like the insurance companies not paying some homeowners after Katrina because the insurers claimed that the damage wasn’t from the flood, it was from wind-driven storm surge. To a normal person, four feet of water in your house is a flood.

Even worse, there is recision, the practice of canceling the insurance policies of sick policyholders, frequently to avoid having to honor them, and often on technicalities unrelated to their illness.

According to this article in the LA Times, Blue Cross actually praised and promoted employees who saved them millions. One employee alone was praised for “dropping thousands of policyholders and avoiding nearly $10 million worth of medical care.”

How have we allowed a system to thrive where reality is trumped by legal fiction, or more accurately, legal stamina?  These insurance companies outwit, outlast and overwhelm us in the courts. Every day that they avoid paying out makes money for them at our expense.

Could you imagine another industry operating this way?

Imagine if Land’s End had acted this way? “Guaranteed. Until it’s not.” Who would have ever sent them a check? How long do you think they’d have lasted?

Land’s End became a powerful, popular and trusted brand because it lived up to its brand promises:  its quality, its customer service, and its guaranty.

How can the insurance industry ever hope to be loved and trusted by consumers when it continues to weasel its way out of its promises.

More importantly, can someone please explain to me how long we’re going to go on enabling these companies who are addicted to gambling with our money and then using legal obfuscation to avoid the consequences when they lose?

News outlets make news. But to make money, they wrap that news in advertising.

Anybody else see a disconnect?

As we all know, advertising revenues are down as advertisers shift their dollars to more attractive media channels. And not every newspaper, least of all the NY Times, will be saved by the influx in erotic advertising that is resulting from Craig’s List’s ban described in this article on Adotas.

So I have a suggestion. Newspapers should climb out onto the leading edge of the micro-payments industry in this country and charge us for the news we so desperately need the same way they used to pay their reporters:  by the word.

I wonder what would happen if the NY Times wrote an open letter to all its readers in all formats (print, online, Facebook, Twitter, etc.) explaining that the old advertising model no longer supports the costs of news gathering, and asking us to opt-in to a micro-payments structure that has users pay for content by the word or article.

After all, we pay for our music by the song or album at iTunes and Amazon. Users pay for their apps, too, at the iPhone store.

Maybe our news will cost us 100th of a penny per word — I don’t pretend to know — but there’s a number that would be worth paying to get accurate, valuable journalism, fed into our brains by whatever method we choose.

Faced with the alternative — disappearing like The Rocky Mountain News, turning into an online blog like The Tucson Citizen, or going Chapter 11 like the Chicago Tribune — would the stakeholders of the Times keep the “Old Gray Lady” afloat?

Advertisers could play along too. They could buy prepaid content credits that they would give to their target consumers  — as premiums, promotions, free-downloads, usage credits, rewards points, membership discounts or rewards. When a reader used credits, if they were sponsored, they would see their sponsor’s message.

From a reader’s perspective, it would look like this: Whenever I logged onto the Times website (or followed a Twitter link (A Twink?) etc.) I’d get a screen with that day’s advertisers’ offers. I’d pick a sponsor, they’d pay, I’d get my news, and they’d get my eyeballs. Maybe by the article, maybe by the day, maybe by bandwidth, whatever. (Hey, if Bank of America brought me my NY Times content for free, I’d gladly sit through their pre-rolls.)

These prepaid blocks would represent reliable chunks of income that could be sold through a digital auction model or on an upfront basis, or a combination of both (digital auction for the any inventory left over after the up front sales). A major advertiser could work out a promotion with Amazon that every large format Kindle would come with a sponsored year-long subscription to the Times.

Forwards to a friend could represent extra eyeballs for the advertiser, or extra charges, depending on the media buy.

It is frequently said that people don’t value what they get for free. While that may not always be true, it is true that the Internet has changed people’s cost/value perceptions as it pertains to news.

I am a news junkie. I stopped reading printed newspapers long ago, mostly because they’re outdated the minute they’re printed. And I’m ingesting more of my news online or on my phone rather than be continuously disappointed by cable and network news (which I am watching less frequently). Online, I can get better news faster. And much of that news comes from the NY Times. But I usually only notice the publisher after I’ve read the article, if at all. I frequently don’t even notice whose article it is I’m reading on Google News. Or Digg. Or a tweet.

So, in my desperate search for news, would I be willing to pay for that NY Times article? I would if, like E-ZPass, it was effortless to do. Would I sometimes choose an article from the competition if it were cheaper? Depends on the organization. (After all, I have always had the option to buy a Post or Daily News rather than a Times, and yet rarely did so.) More importantly, would I sit through ads for the sponsored version if it were free? I would.

Format-wise, news gathering and dissemination is wonderfully adaptable to large-format Kindles, Twitter, Facebook, SMS, and more.

But what will happen to the dead trees, and all the personnel associated with their destruction, rebirth, and delivery as newsprint?

Since we’re attempting to reinsert value into the equation, let’s look at it in those terms. Would people find enough value in the printed version to pay more for it? Might the printed version of the Times became such a status symbol that some people would happily pay more to make a conspicuously consumptive statement?

Where is the tipping point? Could the Times sustain a print edition at $10 per copy? Remember, under this model they’re already paying for news-gathering and editing with micro-payments. The printed version just needs to carry its own weight. And if it can’t, then I’m sorry for all those workers along the non-value chain, but it’s time for retraining.

So what do you think? Am I crazy, or could this work? And if so, can someone please explain to me why the NY Times isn’t already doing it?

Hi there, everybody. My name is Jeffrey Lee Simons, and I don’t have an iPhone. You see, my fingers are the wrong temperature or something and touch screens only work for me about 20% of the time. You’ve probably seen me at an ATM, stabbing my useless digits at the screen and cursing a blue streak until I remember to use the keypads.

(What uber-phone do I use? LG Voyager… it’s got a touch screen, but flip it open and you’ve got a full keypad.)

So I’ve missed out on the whole iPhone App feeding frenzy. Although I’m not sure exactly what I’ve been missing. After all, the average iPhone app only gets used about 19.9 times in its lifetime according to this article on marketingcharts.com.  “The study also found that 46% of users play their games/apps five times or more, while 10.2% play 25 times or more.”

I just read a detailed discussion about the economics of iPhone game apps in Gamasutra, the gaming business enewsletter, written by iPhone-appmaker Ian Bogost.  Game apps are among the most popular of all iPhone apps. (12 of the top 25 apps in Feb 2009 were games according to a recent Comscore report.)

Bogost tells a woeful tale of plunging sales (down 8% in April alone) and a race to the bottom for both pricing ($0.99 seems to be the target)and quality. The average net profit on an iPhone app is $1771, and for a game app that figure is closer to $900. That’s average. The difference between the hits and the not-hits is so wide that the median may be much lower, though Bogost admits this is hard to determine.

$900 or less. (Apple doesn’t even distribute royalties until you hit $250 in each region, so for many game developers, there’s no profit at all.)

Now while I haven’t ever produced an Apple iPhone Game App, I have produced a variety of games in my life, from advergames that took a minimum amount of time to historical simulations that took a tremendous amount of time. But at no time would I have looked at $900 or less profit as a sustainable business model.

Hoping and praying to be the breakout game among the multitudes is fun, to be sure, but makes for a harsh, ridiculously competitive and ultimately indefensible business strategy. (Although it sounds a bit like blogging. Or publishing. Or the music industry. Or…)

But the most insightful aspect of Bogost’s article concerned perceived value and customer satisfaction. People who are willing to shrug off a bad cup of $0.99 coffee hold a $0.99 game app to much higher standards. One is clearly disposable, and for $0.99 who really cares enough to complain. The other is not, and is far more likely to garner complaints (especially now that Apple lets people “comment after deleting” an app).

All this really comes down to value.

How much value can an app developer deliver for $999 or less? How much value does a customer deserve for $0.99 these days? Does using a product 19 times make it disposable or not? After all, you probably use a razor blade that many times before throwing it away.

And the answers, it seems, comes from where they always do. The customer. If a customer feels a product isn’t worth the money, they buy the lower priced versions. More people buy Toyotas than Rolls Royces, although to be sure, there is a market for both.

It looks like, in Apple-land, $0.99 is the acceptable price for everything from games to songs. Regardless of their cost to produce, you’re expected to make it up in volume.

But can someone please explain to me how consumers can ever expect to get value out of a system that refuses to return value to the producers?