CEO’s Blog

Even with the economy tanking, we are still kicking butt here at Bodybuilding.com. Revenue has never been better. Here’s a little story I wrote to illustrate why I think this is…

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The 3 Little Company-Building Pigs

Once upon a time there were three little pigs that decided to each build a company.

The First Pig

The first pig wanted to do it the easy way. He built a company that was focused on the short term. He wanted to "get rich quick". He didn’t care about his customers or focus on the customer experience. He outsourced most of the functions of his business (customer service, IT, fulfillment, etc.) to other companies so he didn’t have to deal with it. He lied to his customers and used marketing gimmicks to get as much money from his hapless customers as possible. He didn’t care about his employees or the culture of the company he was building. He treated them like crap and thought they were easily replaceable. He didn’t focus on keeping his costs low and doing things efficiently, and wasted a lot of money on things that weren’t important to the customers.

Then suddenly the Big Bad-Economy Wolf came into town and saw the company that the first pig built. As he huffed and puffed, he stole money from the overall economic market and from the overall population, stalled overall economic growth, and seized up the credit markets so that businesses have trouble getting financing for new initiatives and to buy inventory. He easily blew the first pig’s company down. It didn’t have any legs to stand on and had no way to combat the wolf, and had to file for bankruptcy.

The Second Pig

The second pig was similar to the first pig, but he spent some time thinking about building a medium term company. He implemented some of the basics of customer “service” (the bare minimum) to at least keep the customers “satisifed”. He tried to be nice to his employees so they at least wouldn’t quit too quickly, but didn’t really care too much about them as people. He spent a lot of money on marketing (SuperBowl TV ads, radio ads, search engine ads, etc.) in order to convince enough people to purchase from him. He didn’t really spend money innovating or creating customer value, but the big marketing budget helped him to grow.

The Big Bad-Economy Wolf came upon this second company and huffed and puffed. It took a little longer and was a little tougher for the wolf, but eventually the company couldn’t deal with the bad economy anymore and came tumbling down and the pig shut down the business for good.

The Third Pig

The third pig was different. He wanted to build a company that would last for a hundred years. First, he built a world class team of people that were smarter than him, and he did everything he could to show them how important they were and to make them happy. Together, they focused 100% on building customer loyalty by creating innovative products and features that the customers valued a lot. They focused on the customer experience so that they would get free word of mouth marketing. They focused on limiting their marketing budget and spending the money on building value for the customer. They kept their costs low by being productive, efficient, and not spending money on things that don’t matter to the customer. They were lean and mean. They worked hard and built a solid company that both the employees and customers loved.

The Big Bad-Economy Wolf came around just like he did with the other businesses. He used the same tactics that decimated the other two companies, but no matter how hard he tried, he could not blow down the company. Frustrated, he moved on (as bad economies always do), and during the next wave of prosperity, the third pig’s company came out even stronger and with less competitors than before.

Can you guess which little pig Bodybuilding.com is trying to be?

Check it out!

http://webcast.bodybuilding.com/fitshow/other/2008octobernewsletter.pdf

From Jennifer Nicole Lee’s latest Bodybuilding.com article:

"All of us most know that there are many benefits to weight training. We know that exercise can help fight heart disease, but can it help fight depression?

Studies have found exercise to have both physiological and psychological benefits. A Harvard study once found that ten weeks of strength training reduced clinical depression symptoms more successfully than counseling. This is particularly important for women since they are more than twice as likely to experience depression and only one out of three actually seek care."

Read the full article here!

My mother had breast cancer that was caught in time and she was cured, but I always worry that it will come back. This new study was very interesting to me. Just another reason to maintain a healthy weight, exercise, and eat right!

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It’s common knowledge that keeping fit and maintaining an optimal weight are great ways to achieve overall health. But for breast-cancer survivors, the stakes are much higher.

Research indicates that excess weight can lead to increased levels of the hormone estrogen — and estrogen has been tied to the development of breast cancer in women.

Dr. Duc Vuong, a weight-loss surgeon in Houston, spells out the issue plainly.

“Overweight women have larger breasts,” he says. "These women have more exposure to estrogen, which we think increases their risk of several different cancers, including breast and uterine cancer.”

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http://www.msnbc.msn.com/id/27013681

"We understand life backwards, but live it forwards." - Soren Aabye Kierkegaard (Danish philosopher and theologian, 1813-1855)

"We don’t like uncertainty. We have a need to understand and make sense of events. We refuse to accept the unknown. We therefore seek explanations for why things happen." - Seeking Wisdom, page 91.

We see this all the time in the media. Experts can always look back at events and tell us why they think they happened and how it should have been obvious that the event was coming. The current financial meltdown is one example. Everybody’s an expert.

The problem is that we don’t take into account chaos and randomness. There are a lot of books out there about human irrationality right now, so I won’t go into too much detail. Check out Fooled By Randomness by Nassim Taleb.

Here at Bodybuilding.com, we were victims of this error in one of our leadership meetings.

Each Wednesday we meet to check out the latest customer loyalty numbers (net promoter scores, etc.), customer feedback, customer success stories, and much more. We do this to make sure we all know how our customers are feeling, what problems they are having and what they want. It’s the most important thing we do!

One week we pulled up our latest customer loyalty rating and noticed that it dropped. Ugh! So we immediately started asking ourselves why it happened. We came up with all sorts of answers.

“It’s that change we made to one of our customer service processes! I knew it!”

“We ran out of samples last week in the warehouse again!”

“The holiday messed up the shipping times since FedEx didn’t deliver on Monday, and customers are mistakenly blaming us for the delay!”

We thought we had it all figured out. How smart we are!

Then we noticed something funny. We were looking at the wrong chart. We were not looking at the customer loyalty SCORE, but the number of customers that rated us this week. The number of customers that rated us went down (it fluctuates all the time) and we thought we were looking at a chart showing that our customers were not as happy with us this week.

Then we looked at the correct chart. Customer ratings actually WENT UP this week!

I immediately laughed. We fell victim to one of the mental errors that I’m always reading about. We thought everything made sense.

Does this happen to you?

Internet Retailer magazine did an interview with me for an article that just came out about e-commerce and the economy. Check it out!

http://www.internetretailer.com/dailyNews.asp?id=28038

Not sure if this is good or bad for the industry… haha… I guess it depends on if you are a McCain or Obama fan, but this was interesting:

"Campaign reps for Sen. John McCain obtained an herbal supplement touted to enhance memory and keep energy levels up for the candidate before his joust with Sen. Barack Obama, a source tells us. Four-time Super Bowl champ Bill Romanowski, whose company Nutrition53 produces the capsule Neuro1, said: “I won’t confirm or deny that Sen. McCain is using our product, but it’s phenomenal for any person with stress and an overwhelming travel schedule.”

http://www.nydailynews.com/gossip/2008/10/01/2008-10-01_celebrity_side_dish.html?print=1&page=all%0D

I’m constantly fighting the media and the marketing machines that are trying to brainwash my child, telling them that junk food is "fun!" and healthy food is "gross". We all know about Ronald McDonald and cartoon characters like Shrek promoting Twinkies (with green filling! cool!). In my house, I try not to let them see too much of this marketing, and I also tell them the other side of the story. "No, we don’t want to go to McDonald’s! It will make you sick! It will make you run slower. You won’t be able to jump as high. SuperMan would never go there! Sicky sick!"

So far I feel like I’ve done a good job. My 4-year old son, Raiden, never asks to go to McDonald’s or other fast food places, and when we see one, he points and says, "Gross daddy… look! McDonald’s! Sick!". It makes a father proud. Haha.

Well, you can imagine how SHOCKED I was when my son told me about his routine trip to his doctor for a vaccine. Because Raiden didn’t cry and was such a "big boy" during his shot, his doctor gave him a prize. Guess what it was?

A gift certificate to McDonald’s for a free bag of french fries.

I’m not even joking. When I heard about it, I just about passed out.

Think about the message that this doctor is giving out (and think about how smart McDonald’s is to give this doctor these free gift certificates). Basically, his doctor (a person that knows about health and a person you can trust) just told him that eating french fries at McDonald’s is okay. It’s a good thing to do. It’s something that is worthy of being a prize to cherish and work hard for. Nevermind that french fries are full of heart-disease causing saturated fat and that dangerous childhood obesity is on the rise. He might as well have given my son a pack of cigarettes too.

Oh, and by the way… what does your doctor look like naked? Like many "health professionals", my son’s doctor is obese.

I’m a huge fan of economics and psychology, and recently I saw something that mixed the two together.

As you have probably heard, many airlines are now charging you if you check ANY bags. I was on United a few days ago and had to pay $15 to check my one bag. I can see how this puts a bad taste in your mouth as a customer. Getting nickel and dimed isn’t a good feeling.

Obviously, the airlines put this in place to try to make some extra money, especially as fuel prices are skyrocketing. (Not that they were making money before, but that’s another story… don’t even get me started.)  Right now the airline executives are probably patting themselves on the back for implementing a new way to increase revenue.

Here’s the interesting part.

Whenever you change the economics of a situation, there are always secondary consequences. For example, one college was having a problem with rats. So they came up with a "brilliant" idea. They would ask the college students to kill any rats they found, and bring them in and get a $1 reward. That way every college student is helping! Well, a few months later they had a LOT of rats turned in by students, but the rat problem was actually getting worse.

They found that college students were actually breeding more rats so they could get paid more money! Woops. There are hundreds of stories like this.

Back to the airlines. What do you think will happen when you start charging for checked bags? Well, people are going to check less bags. They still need to bring their stuff with them, and customers are not stupid. They know you can bring one bag on the plane with you and put it in the overhead bin or under your seat.

So now a much higher percentage of people are bringing bags with them on the plane, even though the amount of space in the overhead bins has not increased.

As I was getting on the plane last week, I noticed that it was taking FOREVER for everybody to load. People could not find spots for their luggage. It was full even though only half the people were on the plane. People were moving bags around, shoving bags in tiny spots, moving up and down the aisle looking for a spot, and the finally asking the flight attendant for help. I even took a picture with my phone:

The pilot actually came on the loud speaker and announced that we needed to "hurry" and get loaded because we were now already 15 minutes late for takeoff.

Being behind schedule costs the airlines a lot of money. Airlines need their planes to be in the air as much as possible, rather than sitting on the ground where they are not performing any service to customers.

Also, I wonder what the costs are to customer loyalty and satisfaction? How many customers are now upset about the extra fees, slow loading and irritation when trying to find a place to put their bag, and late arrivals?

It is my opinion that airline executives will see the positive side of their new fees (higher revenue per passenger), but will be scratching their heads when they lose even more money. They can’t see these unintended consequences on their financial reports. But they are there.

Southwest doesn’t charge any extra fees for your first two bags. They are promoting that everywhere ("You’ve entered a no-hidden-fee zone!"), which is smart. Southwest is one of the only airlines that "gets it". It’s all about the customer! You would think the other airline executives would catch on one of these days….

We all know that we should set goals in our life for fitness, family, career, and everything else that is important to us. But did you know that HOW you set goals could be the biggest thing that determines whether you actually reach them?

For example, a study by Hayes et all, 1985 showed that people that set goals and announced them PUBLICLY actually performed 17% better on a test than the other two groups which consisted of people that didn’t set goals and people that privately set goals. Yes, if you set a goal but you do not tell anybody, you are just as likely to fail as somebody that DOESN’T even set a goal at all!

That’s a big reason why we created BodySpace. It’s the perfect place to publicly set your goals and commit to them. Your online and offline friends and family can also see your progress and cheer you on.

Here are other tips for effective goal setting from my the book I am reading titled Behavior Modification: What It Is And How To Do It:

1. Specific goals are more effective than vague goals.

2. Goals with respect to learning of specific skills (4-foot putts in golf) should include mastery criteria (making six putts in a row).

3. Goals should identify the circumstances under which desirable behavior should occur.

4. Realistic, challenging goals are more effective than "Do Your Best" goals

5. Public goals are more effective than private goals.

6. Goal setting is more effective if deadlines are included.

7. Goal setting plus feedback (charting your progress) is more effective than goal setting alone.

8. Goal setting is most effective when individuals are committed to the goals (don’t set goals for somebody else without their participation).

Create smart goals, write them down, create an action plan for reaching your goal, announce your goals to the world on BodySpace, track your progress, and just watch the magic that happens!