(1) Compensation: Usually money, but anything someone is given to do a job.
If we want to attract the best employees, we need to increase compensation.
(2) Big bucks: Bucks means dollars, so we often talk about “big bucks” to mean a lot of money.
I don’t get paid big bucks, but I love my job.
(3) Objectively: The opposite of subjectively–it means to think about something without emotions or personal opinions
I can’t think about this deal objectively because I’m so angry with her.
1. Why should executive compensation be put at risk?
a. It’s only fair for executives to be able to lose their money.
b. So that executives can lose something and are therefore motivated to work well.
c. If executives can lose their money, they’ll think about the long-term more.
2. What’s one way compensation could encourage long-term thinking?
a. It could be lost if the executive does a bad job
b. It could be linked with low pay at the company
c. It could increase for each good year
3. What’s one way to make executive pay fair?
a. It could be linked with low pay at the company
b. Executives could get paid well only if the company does well
c. It could be linked with long-term thinking
By Jeremy Schaar
Today on the blog, we’ll look at an article on CEO pay. You’ll learn some interesting ideas about how to determine CEO pay. You’ll also learn some useful vocabulary.
In this post at Strategy+Business, James O’Toole discusses CEO pay. He begins by noting that SEC (Securities and Exchange Commission) regulators are going to force companies to become more transparent about CEO pay. But he would prefer if company boards would just do a better job with executive compensation. To that end he suggests three principles.
1. “Put executive money at risk”
To be “at risk” means that something can be lost. He gives a nice example of going to a casino. If you’re playing with your money, then you’re cautious. But if the casino gives you money, then you don’t care. You can only win, you can’t lose. With stock options, he feels executives have nothing to lose, they can only win. He encourages companies to give actual stock instead of stock options.
2. “Compensation needs to encourage long-term thinking.”
To encourage something is to push someone to something. He thinks that bonuses are good motivators, but that they should increase with each year of performance in order to encourage long-term thinking (e.g. 10% for one good year, 20% for two good years, etc.)
3. “The third principle is fairness. I suspect there would be less public outcry about executive compensation if those big bucks were seen as objectively earned.”
“Public outcry” is when a lot of people complain about something. He doesn’t know what fair pay is, but it does seem unfair for a CEO to make $25 million when a secretary makes $25,000. But that’s not his real point. He thinks the big problem is when executives get a lot of money after the company does really bad. Fair means that if the company does well, so does the executive. If the company does bad, the executives don’t get millions of dollars.
And, by the way, if you have trouble understanding the blogs or LinkedIn groups, send me a message. We teach lots of students Business English and I’m sure we could help you too!
(1) Gaming console: The thing you use to play video games
The most popular gaming consoles are made by Nintendo, Sony, and Microsoft.
(2) To brag: To tell something good about yourself (or someone else)
I try not to brag about my salary, but I brag about my kids’ accomplishments all the time.
(3) Fabulous: It means “very good”, but is often used with fashion. Click here to see “fabulous”.
That’s a fabulous bag. Where did you buy it?
1. What is the paucity strategy?
a. A way to make something expensive
b. Increasing price until few items are sold
c. Making your product rare
2. How does Nintendo negotiate well with WalMart?
a. By limiting supply
b. Through long meetings and hard work
c. By supplying as much as WalMart wants
3. Why do people brag about buying a Nintendo console?
a. It’s hard to get one
b. It’s an amazing product
c. All their friends have one
By Jeremy Schaar
Last week we looked at the elements of luxury branding. They were performance, pedigree, paucity, persona, public figures, placement, PR, and pricing.
Most brands, however, aren’t luxury brands. But the elements are useful for many brands. This week, and in the coming weeks, we’ll look at how the different elements of luxury branding can be used.
Nintendo isn’t a luxury brand, but they release a new gaming console every five years or so. At those times, they use one of the elements of luxury branding: paucity.
Again, paucity means rare. And Nintendo has used paucity to great success.
When I was a kid, Nintendo released the Super Nintendo. We all wanted one, but not everyone could find one. No one understood why. Couldn’t they just make more? The same has been true for other consoles. The picture above is of a guy who was very excited that he got to buy a Wii. He looks like he won something! That’s some pretty great marketing when someone gives you money and looks like he won.
Nintendo argues that they don’t know how many consoles to make and that production is hard. Don’t believe it. They sell millions of consoles, but they could sell more. They make their products rare on purpose.
They do it for the same reason that luxury handbag brands make their bags rare. When the product is rare, they can control price and create buzz.
Think about a company like Walmart. Normally, they control the price. Selling something in WalMart is so important for companies, that they must accept whatever WalMart demands. But not Nintendo. WalMart will charge whatever price Nintendo says because Nintendo’s product is rare. If WalMart doesn’t accept the price, Nintendo will just send the truck to another store. It won’t affect their sales at all.
Second, paucity creates buzz. Newspapers write about people trying to find a Nintendo Wii. People who do buy one get excited and and brag to their friends. In future years, this buzz continues to generate sales.
The strategy only works, of course, if the product is really good. A handbag should be fabulous and the Nintendo Wii should be a lot of fun to play.
Nintendo has used this strategy for almost 30 years. So, the next time Nintendo makes a new gaming console, don’t believe them when they say they don’t know how many to make and that it’s hard to produce as many as they want. They know exactly what they’re doing. It’s a very successful marketing strategy.
(1) Bargaining Power: This is your strength when negotiating.
The fewer competitors you have, the greater your bargaining power will be.
(2) To pay a premium: To pay extra for something.
For a special service, like fast shipping, we often pay a premium.
(3) Competitive challenges: The things that make it hard to do well
Competitive challenges change from year to year, often because of technological innovations.
1. What does it mean for Microsoft to sell software independent of hardware?
a. The software price higher
b. Microsoft doesn’t sell hardware, just software
c. Microsoft bundles hardware and software together
2. Why does it matter that hardware isn’t a commodity anymore?
a. People won’t buy Windows if the hardware is bad
b. Windows needs to develop hardware that works well
c. Microsoft’s previous strategy was to guarantee good hardware
3. Why does it matter that Android is free?
a. It increases competition for Windows
b. Companies have no reason to partner with Microsoft
c. It will affect the price of Windows negatively
By Jeremy Schaar
Microsoft is still making lots and lots of money. So why does everyone talk about them like they’re a dying company? It’s because we can all see how they could fail. Last week, I discussed what made Microsoft so successful. This week, you’ll learn the two things that caused Microsoft to change its strategy. You’ll also learn what their new strategy is and you’ll learn some great strategy vocabulary.
That looks like a nice tablet, but why would Microsoft make it? Their strategy was to sell software independent of hardware. Microsoft let Dell and other companies sell hardware. They sold software because the hardware was a commodity, but everyone needed the same software because of network effects. (See last week’s lesson.)
Two things changed. First, hardware stopped being a commodity. The features on your phone and tablet matter now. So, if Microsoft wants to continue to sell Windows, it needs to come with awesome hardware.
But why not just partner with a hardware producer like Samsung? They might not have the bargaining power they did before, but they could still sell a great operating system. The second thing that changed is that Google gives away Android for free. So why would anyone buy Windows?
The only possible solution is to be like Apple. They need to sell both the hardware and the operating system together. If they have the best combination, then people will pay a premium for it. This is why Microsoft had to buy Nokia.
So Microsoft’s new strategy is to be like Apple. I’ll discuss the consequences of that decision and the competitive challenges Microsoft will face in the future next time.
(1) One time event: Something that doesn’t happen many times
This extension is a one time event. We can’t do it again.
(2) To get discouraged: To think things will be bad
I got discouraged after he sent back the report again. I’m not sure he’ll ever be satisfied.
(3) Process: A series of events that lead to a result
This writing process is taking much longer than I had planned. There is so much to do.
1. When can we use along the way to mean while?
a. When it’s about a process
b. For a one time event
c. To describe the events of a trip
2. How can we use along the way?
a. To discuss something that happens during a process
b. To be direct and formal about two events
c. To be casual about two events
3. When can we use to touch base?
a. To get or give a friendly update
b. When something is late
c. To give an extension on a project
By Jeremy Schaar
This week on the blog I’ll introduce two more useful phrases. You’ll learn what they mean and read a few examples of how you might use them.
1. Along the way
We use along the way to introduce something that happened during a process. Sometimes it’s similar to while, but not always. Compare these two examples.
While I was in New York, I met several clients.
While I was preparing to begin construction, I learned about some interesting new options for finance.
In the first example, you might just say When I was in New York… It talks about a one time event. But in the second example, when isn’t best. We should say while because we’re talking about a process.
In a situation where we’re talking about a process, we can use along the way. Here are some examples:
I know you’re new here. You’ll need to do a lot of research before making your recommendations for the building project. Along the way, you’ll need to study about the new program as well. You’ll be busy.
It means that the person should focus on research, but at the same time study the new program.
Don’t get discouraged along the way!
This means that the process will be hard, but you shouldn’t lose confidence.
2. I just wanted to touch base
Use this phrase when you want to contact someone to see how things are going or report on your own work. It’s polite and casual at the same time. Here are some examples.
I just wanted to touch base and update you on my progress. Things are going good and…
I just wanted to touch base and see how you’re doing with the new client. Could you update me…
(1) Paucity: Rare, hard to get
Paucity can occur because something is expensive to produce, the raw materials are rare, or just because a company decides to not make a lot.
(2) Pedigree: The history of something, usually it’s used in a positive way
I haven’t worked with that firm before, but they have excellent pedigree. I’m sure we can trust them.
(3) To reinforce: To make stronger
Each part of a brand should reinforce the other parts. For example, the performance should make the persona stronger.
1. Why is it important to study luxury marketing?
a. All brands should try to become luxury brands
b. It’s key for making more money
c. Some ideas can be used for any brand
2. How do luxury brands use public figures and PR to help their brands?
a. They reinforce the other parts of the brand
b. They allow them to charge high prices
c. They make it hard to learn about the brand
3. How should luxury brands be placed?
a. In an exclusive environment
b. In a luxurious environment
c. A and B
By Jeremy Schaar
What brands do you think of when you think of luxury? Brands like Gucci, Versace, and Rolex probably come to mind. These brands have done an excellent job marketing their products. They represent luxury and they’re able to charge very high prices as a result. But why? What makes them special? What are the secrets to luxury marketing?
Today on the blog, we’ll review the eight Ps of luxury marketing. You’ll learn some great vocabulary. And, even if you don’t have a luxury product, you’ll learn some ideas that you can use to market your brand. In the coming weeks, we’ll look at companies that use luxury brand strategies well (even if they don’t have a luxury brand).
Performance. Pedigree. Paucity. Persona. Public Figures. Placement. PR. Pricing.
According to Rohit Arora, these are the eight Ps of luxury marketing. I’ll review his ideas in simple English. After you finish this lesson, I suggest you read his whole paper.
Performance: This means that experience with the product should be great. If it’s a watch, it should be a great watch. If it’s a car, it should be a pleasure to drive.
Pedigree: Pedigree means good history. Chanel and Gucci don’t just make great products now, they have a long history of being amazing.
Paucity: Paucity means rare. Products can be rare for different reasons. Some are just hard to get–like diamonds. Others, like a custom car, are hard to create. Others, like an Hermes tie, are just produced in small numbers on purpose.
Persona: It’s the personality of the brand. The brand should create an emotional connection. Often advertisements make it seem that the brand lives in an amazing world full of sex and adventure.
Public Figures: Actors, actresses, musicians, sports stars, and so on. They’re people we admire, so we trust them when they speak about performance. They also reinforce the pedigree, paucity, and persona of the brand.
Placement: Placement isn’t just an element of luxury marketing. It’s one of the four basic Ps of marketing. The brand should be placed in a luxurious or hard to reach environment. The magazines and events where a brand is featured are also part of placement.
PR: Good public relations for a luxury brand will give the brand buzz that reinforces the other Ps.
Pricing: And here’s the big one. Luxury brands are expensive. The price makes us trust the performance and makes the brand rare–if only because most can’t afford to buy it.