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CARROTS AND STICKS

Manipulation vs. Inspiration

There’s barely a product or service on the market today that customers can’t buy from someone else for about the same price, about the same quality, about the same level of service and about the same features. If you truly have a first-mover’s advantage, it’s probably lost in a matter of months. If you offer something truly novel, someone else will soon come up with something similar and maybe even better.

But if you ask most businesses why their customers are their customers, most will tell you it’s because of superior quality, features, price or service. In other words, most companies have no clue why their customers are their customers. This is a fascinating realization. If companies don’t know why their customers are their customers, odds are good that they don’t know why their employees are their employees either.

If most companies don’t really know why their customers are their customers or why their employees are their employees, then how do they know how to attract more employees and encourage loyalty among those they already have? The reality is, most businesses today are making decisions based on a set of incomplete or, worse, completely flawed assumptions about what’s driving their business.

There are only two ways to influence human behavior: you can manipulate it or you can inspire it. When I mention manipulation, this is not necessarily pejorative; it’s a very common and fairly benign tactic. In fact, many of us have been doing it since we were young. “I’ll be your best friend” is the highly effective negotiating tactic employed by generations of children to obtain something they want from a peer. And as any child who has ever handed over candy hoping for a new best friend will tell you, it works.

From business to politics, manipulations run rampant in all forms of sales and marketing. Typical manipulations include: dropping the price; running a promotion; using fear, peer pressure or aspirational messages; and promising innovation to influence behavior—be it a purchase, a vote or support. When companies or organizations do not have a clear sense of why their customers are their customers, they tend to rely on a disproportionate number of manipulations to get what they need. And for good reason. Manipulations work.

Price

Many companies are reluctant to play the price game, but they do so because they know it is effective. So effective, in fact, that the temptation can sometimes be overwhelming. There are few professional services firms that, when faced with an opportunity to land a big piece of business, haven’t just dropped their price to make the deal happen. No matter how they rationalized it to themselves or their clients, price is a highly effective manipulation. Drop your prices low enough and people will buy from you. We see it at the end of a retail season when products are “priced to move.” Drop the price low enough and the shelves will very quickly clear to make room for the next season’s products.

Playing the price game, however, can come at tremendous cost and can create a significant dilemma for the company. For the seller, selling based on price is like heroin. The short-term gain is fantastic, but the more you do it, the harder it becomes to kick the habit. Once buyers get used to paying a lower-than-average price for a product or service, it is very hard to get them to pay more. And the sellers, facing overwhelming pressure to push prices lower and lower in order to compete, find their margins cut slimmer and slimmer. This only drives a need to sell more to compensate. And the quickest way to do that is price again. And so the downward spiral of price addiction sets in. In the drug world, these addicts are called junkies. In the business world, we call them commodities. Insurance. Home computers. Mobile phone service. Any number of packaged goods. The list of commodities created by the price game goes on and on. In nearly every circumstance, the companies that are forced to treat their products as commodities brought it upon themselves. I cannot debate that dropping the price is not a perfectly legitimate way of driving business; the challenge is staying profitable.

Wal-Mart seems to be an exception to the rule. They have built a phenomenally successful business playing the price game. But it also came at a high cost. Scale helped Wal-Mart avoid the inherent weaknesses of a price strategy, but the company’s obsession with price above all else has left it scandal-ridden and hurt its reputation. And every one of the company’s scandals was born from its attempts to keep costs down so it could afford to offer such low prices.

Price always costs something. The question is, how much are you willing to pay for the money you make?

Promotions

General Motors had a bold goal. To lead the American automotive industry in market share. In the 1950s there were four choices of car manufacturer in the United States: GM, Ford, Chrysler and AMC. Before foreign automakers entered the field, GM dominated. New competition, as one would expect, made that goal harder to maintain. I don’t need to provide any data to explain how much has changed in the auto industry in fifty years. But General Motors held fast through most of the last century and maintained its prized dominance.

Since 1990, however, Toyota’s share of the U.S. market has more than doubled. By 2007, Toyota’s share had climbed to 16.3 percent, from only 7.8 percent. During the same period, GM saw its U.S. market share drop dramatically from 35 percent in 1990 to 23.8 percent in 2007. And in early 2008, the unthinkable happened: U.S. consumers bought more foreign-made automobiles than ones made in America.

Since the 1990s, faced with this onslaught of competition from Japan, GM and the other U.S. automakers have scrambled to offer incentives aimed at helping them hold on to their dwindling share. Heavily promoted with advertising, GM, for one, has offered cash-back incentives of between $500 and $7,000 to customers who bought their cars and trucks. For a long time the promotions worked brilliantly. GM’s sales were on the rise again.

But in the long term the incentives only helped to dramatically erode GM’s profit margins and put them in a deep hole. In 2007, GM lost $729 per vehicle, in large part due to incentives. Realizing that the model was unsustainable, GM announced it would reduce the amount of the cash-back incentives it offered, and with that reduction, sales plummeted. No cash, no customers. The auto industry had effectively created cash-back junkies out of customers, building an expectation that there’s no such thing as full price.

Whether it is “two for one” or “free toy inside,” promotions are such common manipulations that we often forget that we’re being manipulated in the first place. Next time you’re in the market for a digital camera, for example, pay attention to how you make your decision. You’ll easily find two or three cameras with the specifications you need—size, number of megapixels, comparable price, good brand name. But perhaps one has a promotion—a free carrying case or free memory card. Given the relative parity of the features and benefits, that little something extra is sometimes all it takes to tip the scale. In the business-to-business world, promotions are called “value added.” But the principles are the same—give something away for free to reduce the risk so that someone will do business with you. And like price, promotions work.

The manipulative nature of promotions is so well established in retail that the industry even named one of the principles. They call it breakage. Breakage measures the percentage of customers who fail to take advantage of a promotion and end up paying full price for a product instead. This typically happens when buyers don’t bother performing the necessary steps to claim their rebates, a process purposely kept complicated or inconvenient to increase the likelihood of mistakes or inaction to keep that breakage number up.

Rebates typically require the customer to send in a copy of a receipt, cut out a bar code from the packaging and painstakingly fill out a rebate form with details about the product and how it was purchased. Sending in the wrong part of the box or leaving out a detail on the application can delay the rebate for weeks, months, or void it altogether. The rebate industry also has a name for the number of customers who just don’t bother to apply for the rebate, or who never cash the rebate check they receive. That’s called slippage.

For businesses, the short-term benefits of rebates and other manipulations are clear: a rebate lures customers to pay full price for a product that they may have considered buying only because of the prospect of a partial refund. But nearly 40 percent of those customers never get the lower price they thought they were paying. Call it a tax on the disorganized, but retailers rely on it.

Regulators have stepped up their scrutiny of the rebate industry, but with only limited success. The rebate process remains cumbersome and that means free money for the seller. Manipulation at its best. But at what cost?

Fear

If someone were to hold up a bank with a banana in his pocket, he would be charged with armed robbery. Clearly, no victim was in any danger of being shot, but it is the belief that the robber has a real gun that is considered by the law. And for good reason. Knowing full well that fear will motivate them to comply with his demands, the robber took steps to make his victims afraid. Fear, real or perceived, is arguably the most powerful manipulation of the lot.

“No one ever got fired for hiring IBM,” goes the old adage, describing a behavior completely borne out of fear. An employee in a procurement department, tasked with finding the best suppliers for a company, turns down a better product at a better price simply because it is from a smaller company or lesser-known brand. Fear, real or perceived, that his job would be on the line if something went wrong was enough to make him ignore the express purpose of his job, even do something that was not in the company’s best interest.

When fear is employed, facts are incidental. Deeply seated in our biological drive to survive, that emotion cannot be quickly wiped away with facts and figures. This is how terrorism works. It’s not the statistical probability that one could get hurt by a terrorist, but it’s the fear that it might happen that cripples a population.

A powerful manipulator, fear is often used with far less nefarious motivations. We use fear to raise our kids. We use fear to motivate people to obey a code of ethics. Fear is regularly used in public service ads, say to promote child safety or AIDS awareness, or the need to wear seat belts. Anyone who was watching television in the 1980s got a heavy dose of antidrug advertising, including one often-mimicked public service ad from a federal program to combat drug abuse among teenagers: “This is your brain,” the man’s voice said as he held up a pristine white egg. Then he cracked the egg into a frying pan of spattering hot oil. “This is your brain on drugs…. Any questions?” And another ad intended to scare the hell out of any brash teenager: “Cocaine doesn’t make you sexy . . . it makes you dead.”

Likewise, when politicians say that their opponent will raise taxes or cut spending on law enforcement, or the evening news alerts you that your health or security are at risk unless you tune in at eleven, both are attempting to seed fear among voters and viewers, respectively. Businesses also use fear to agitate the insecurity we all have in order to sell products. The idea is that if you don’t buy the product or service, something bad could happen to you.

“Every thirty-six seconds, someone dies of a heart attack,” states an ad for a local cardiac specialist. “Do you have radon? Your neighbor does!” reads the ad on the side of a truck for some company selling a home-pollution-inspection service. And, of course, the insurance industry would like to sell you term life insurance “before it’s too late.”

If anyone has ever sold you anything with a warning to fear the consequences if you don’t buy it, they are using a proverbial gun to your head to help you see the “value” of choosing them over their competitor. Or perhaps it’s just a banana. But it works.

Aspirations

“Quitting smoking is the easiest thing I’ve ever done,” said Mark Twain. “I’ve done it hundreds of times.”

If fear motivates us to move away from something horrible, aspirational messages tempt us toward something desirable. Marketers often talk about the importance of being aspirational, offering someone something they desire to achieve and the ability to get there more easily with a particular product or service. “Six steps to a happier life.” “Work those abs to your dream dress size!” “In six short weeks you can be rich.” All these messages manipulate. They tempt us with the things we want to have or to be the person we wish we were.

Though positive in nature, aspirational messages are most effective with those who lack discipline or have a nagging fear or insecurity that they don’t have the ability to achieve their dreams on their own (which, at various times for various reasons, is everyone). I always joke that you can get someone to buy a gym membership with an aspirational message, but to get them to go three days a week requires a bit of inspiration. Someone who lives a healthy lifestyle and is in a habit of exercising does not respond to “six easy steps to losing weight.” It’s those who don’t have the lifestyle that are most susceptible. It’s not news that a lot of people try diet after diet after diet in an attempt to get the body of their dreams. And no matter the regime they choose, each comes with the qualification that regular exercise and a balanced diet will help boost results. In other words, discipline. Gym memberships tend to rise about 12 percent every January, as people try to fulfill their New Year’s aspiration to live a healthier life. Yet only a fraction of those aspiring fitness buffs are still attending the gym by the end of the year. Aspirational messages can spur behavior, but for most, it won’t last.

Aspirational messages are not only effective in the consumer market, they also work quite well in business-to-business transactions. Managers of companies, big and small, all want to do well, so they make decisions, hire consultants and implement systems to help them achieve that desired outcome. But all too often, it is not the systems that fail but the ability to maintain them. I can speak from personal experience here. I’ve implemented a lot of systems or practices over the years to help me “achieve the success to which I aspire,” only to find myself back to my old habits two weeks later. I aspire for a system that will help me avoid implementing systems to meet all my aspirations. But I probably wouldn’t be able to follow it for very long.

This short-term response to long-term desires is alive and well in the corporate world also. A management consultant friend of mine was hired by a billion-dollar company to help it fulfill its goals and aspirations. The problem was, she explained, no matter the issue, the company’s managers were always drawn to the quicker, cheaper option over the better long-term solution. Just like the habitual dieter, “they never have the time or money to do it right the first time,” she said of her client, “but they always have the time and money to do it again.” Peer Pressure

“Four out of five dentists prefer Trident,” touts the chewing gum advertisement in an attempt to get you to try their product. “A double-blind study conducted at a top university concluded . . .” pushes a late-night infomercial. “If the product is good enough for professionals, it’s good enough for you,” the advertising eggs on. “With over a million satisfied customers and counting,” teases another ad. These are all forms of peer pressure. When marketers report that a majority of a population or a group of experts prefers their product over another, they are attempting to sway the buyer to believing that whatever they are selling is better. The peer pressure works because we believe that the majority or the experts might know more than we do. Peer pressure works not because the majority or the experts are always right, but because we fear that we may be wrong.

Celebrity endorsements are sometimes used to add peer pressure to the sales pitch. “If he uses it,” we’re supposed to think, “it must be good.” This makes sense when we hear Tiger Woods endorse Nike golf products or Titleist golf balls. (Woods’s deal with Nike is actually credited for putting the company on the map in the golf world.) But Tiger has also endorsed General Motors cars, management consulting services, credit cards, food and a Tag Heuer watch designed “especially for the golfer.” The watch, incidentally, can withstand a 5,000-g shock, a level of shock more likely experienced by the golf ball than the golfer. But Tiger endorsed it, so it must be good. Celebrity endorsements are also used to appeal to our aspirations and our desires to be like them. The most explicit example was Gatorade’s “I wanna be like Mike” campaign, which tempted youngsters to grow up and be just like Michael Jordan if they drink Gatorade. With many other examples of celebrity endorsements, however, it is harder to see the connection. Sam Waterston of Law & Order fame, for example, sells online trading from TD Ameritrade. But for his celebrity, it’s uncertain what an actor famed for convicting homicidal maniacs does for the brand. I guess he’s “trustworthy.” Impressionable youth are not the only ones subject to peer pressure. Most of us have probably had an experience of being pressured by a salesman. Have you ever had a sales rep try to sell you some “office solution” by telling you that 70 percent of your competitors are using their service, so why aren’t you? But what if 70 percent of your competitors are idiots? Or what if that 70 percent were given so much value added or offered such a low price that they couldn’t resist the opportunity? The practice is designed to do one thing and one thing only—to pressure you to buy. To make you feel you might be missing out on something or that everyone else knows but you. Better to go with the majority, right?

To quote my mother, “If your friends put their head in the oven, would you do that too?” Sadly, if Michael Jordan or Tiger Woods was paid to do just that, it might actually start a trend.

Novelty (a.k.a. Innovation)

“In a major innovation in design and engineering, [Motorola] has created a phone of firsts,” read a 2004 press release that announced the launch of the mobile phone manufacturer’s newest entry to the ultracompetitive mobile phone market. “The combination of metals, such as aircraft-grade aluminum, with new advances, such as an internal antenna and a chemically-etched keypad, led to the formation of a device that measures just 13.9mm thin.”

And it worked. Millions of people rushed to get one. Celebrities flashed their RAZRs on the red carpet. Even a prime minister or two was seen talking on one. Having sold over 50 million units, few could argue that the RAZR wasn’t a huge success. “By surpassing current mobile expectations, the RAZR represents Motorola’s history of delivering revolutionary innovations,” said former Motorola CEO Ed Zander of his new wunder-product, “while setting a new bar for future products coming out of the wireless industry.” This one product was a huge financial success for Motorola. This was truly an innovation of monumental proportions.

Or was it?

Less than four years later, Zander was forced out. The stock traded at 50 percent of its average value since the launch of the RAZR, and Motorola’s competitors had easily surpassed the RAZR’s features and functionalities with equally innovative new phones. Motorola was once again rendered just another mobile phone manufacturer fighting for its piece of the pie. Like so many before it, the company confused innovation with novelty.

Real innovation changes the course of industries or even society. The light bulb, the microwave oven, the fax machine, iTunes. These are true innovations that changed how we conduct business, altered how we live our lives, and, in the case of iTunes, challenged an industry to completely reevaluate its business model. Adding a camera to a mobile phone, for example, is not an innovation—a great feature, for sure, but not industry-altering. With this revised definition in mind, even Motorola’s own description of its new product becomes just a list of a few great features: a metal case, hidden antenna, flat keypad and a thin phone. Hardly “revolutionary innovation.” Motorola had successfully designed the latest shiny object for people to get excited about . . . at least until a new shiny object came out. And that’s the reason these features are more a novelty than an innovation. They are added in an attempt to differentiate, but not reinvent. It’s not a bad thing, but it can’t be counted on to add any long-term value. Novelty can drive sales—the RAZR proved it—but the impact does not last. If a company adds too many novel ideas too often, it can have a similar impact on the product or category as the price game. In an attempt to differentiate with more features, the products start to look and feel more like commodities. And, like price, the need to add yet another product to the line to compensate for the commoditization ends in a downward spiral.

In the 1970s, there were only two types of Colgate toothpaste. But as competition increased, Colgate’s sales started to slip. So the company introduced a new product that included a new feature, the addition of fluoride, perhaps. Then another. Then another. Whitening. Tartar control. Sparkles. Stripes. Each innovation certainly helped boost sales, for a while at least. And so the cycle continued. Guess how many different types of toothpaste Colgate has for you to choose from today? Thirty-two. Today there are thirty-two different types of Colgate toothpaste (excluding the four they make for kids). And given how each company responds to the “innovations” of the other, that means that Colgate’s competitors also sell a similar number of variants that offer about the same quality, about the same benefits, at about the same price. There are literally dozens and dozens of toothpastes to choose from, yet there is no data to show that Americans are brushing their teeth more now than they were in the 1970s. Thanks to all this “innovation,” it has become almost impossible to know which toothpaste is right for you. So much so that even Colgate offers a link on their Web site called “Need Help Deciding?” If Colgate needs to help us pick one of their products because there are too many variations, how are we supposed to decide when we go to the supermarket without their Web site to help us?

Once again, this is an example of the newest set of shiny objects designed to encourage a trial or a purchase. What companies cleverly disguise as “innovation” is in fact novelty. And it’s not only packaged goods that rely on novelty to lure customers; it’s a common practice in other industries, too. It works, but rarely if ever does the strategy cement any loyal relationships.

Apple’s iPhone has since replaced the Motorola RAZR as the popular must-have new mobile phone. Removing all the buttons and putting a touch screen is not what makes the iPhone innovative, however. Those are brilliant new features. But others can copy those things and it wouldn’t redefine the category. There is something else that Apple did that is vastly more significant.

Apple is not only leading how mobile phones are designed, but, in typical Apple fashion, also how the industry functions. In the mobile phone industry, it is the service provider, not the phone manufacturer, that determines all the features and benefits the phone can offer. T-Mobile, Verizon Wireless, Sprint, AT&T all dictate to Motorola, Nokia, Ericsson, LG and others what the phones will do. Then Apple showed up. They announced that they would tell the service provider what the phone would do, not the other way around. AT&T was the only one that agreed, thus earning the company the exclusive deal to offer the new technology. That’s the kind of shift that will impact the industry for many years and will extend far beyond a few years of stock boost for the shiny new product.

Novel, huh?

The Price You Pay for the Money You Make

I cannot dispute that manipulations work. Every one of them can indeed help influence behavior and every one of them can help a company become quite successful. But there are trade-offs. Not a single one of them breeds loyalty. Over the course of time, they cost more and more. The gains are only short-term. And they increase the level of stress for both the buyer and the seller. If you have exceptionally deep pockets or are looking to achieve only a short-term gain with no consideration for the long term, then these strategies and tactics are perfect.

Beyond the business world, manipulations are the norm in politics today as well. Just as manipulations can drive a sale but not create loyalty, so too can they help a candidate get elected, but they don’t create a foundation for leadership. Leadership requires people to stick with you through thick and thin. Leadership is the ability to rally people not for a single event, but for years. In business, leadership means that customers will continue to support your company even when you slip up. If manipulation is the only strategy, what happens the next time a purchase decision is required? What happens after the election is won?

There is a big difference between repeat business and loyalty. Repeat business is when people do business with you multiple times. Loyalty is when people are willing to turn down a better product or a better price to continue doing business with you. Loyal customers often don’t even bother to research the competition or entertain other options. Loyalty is not easily won. Repeat business, however, is. All it takes is more manipulations.

Manipulative techniques have become such a mainstay in American business today that it has become virtually impossible for some to kick the habit. Like any addiction, the drive is not to get sober, but to find the next fix faster and more frequently. And as good as the short-term highs may feel, they have a deleterious impact on the long-term health of an organization. Addicted to the short-term results, business today has largely become a series of quick fixes added on one after another after another. The short-term tactics have become so sophisticated that an entire economy has developed to service the manipulations, equipped with statistics and quasi-science. Direct marketing companies, for example, offer calculations about which words will get the best results on each piece of direct mail they send out.

Those that offer mail-in rebates know the incentive works and they know that the higher the rebate, the more effective it is. They also know the cost that goes along with those rebates. To make them profitable, manufacturers rely on the breakage and slippage numbers staying above a certain threshold. Just like our trusty drug addict, whose behavior is reinforced by how good the short-term high feels, the temptation to make the qualifications of the rebate more obscure or cumbersome so as to reduce the number of qualified applicants can be overwhelming for some.

Samsung, the electronics giant, mastered the art of the kind of fine print that makes rebates so profitable for companies. In the early 2000s, the company offered rebates up to $150 on a variety of electronic products, stipulating in the fine print that the rebate was limited to one per address—a requirement that would have sounded reasonable enough to anyone at the time. Yet in practice, it effectively disqualified all customers who lived in apartment buildings where more than one resident had applied for the same rebate. More than 4,000 Samsung customers lured by the cash back received notices denying them rebates on those grounds. The practice was brought to the attention of the New York attorney general, and in 2004 Samsung was ordered to pay $200,000 in rebate claims to apartment dwellers. This is an extreme case of a company that got caught. But the rebate game of cutting out UPC symbols, filling out forms and doing it all before the deadline is alive and well. How can a company claim to be customer-focused when they are so comfortable measuring the number of customers who will fail to realize any promise of savings?

Manipulations Lead to Transactions, Not Loyalty

“It’s simple,” explains the TV infomercial, “simply put your old gold jewelry in the prepaid, insured envelope and we’ll send you a check for the value of the gold in just two days.” Mygoldenvelope .com is one of the leaders in this industry, serving as a broker for gold to be sent to a refinery, melted down, and reintroduced into the commodity market.

When Douglas Feirstein and Michael Moran started the company, they wanted to be the best in the business. They wanted to transform an industry with the reputation of a back-alley pawn shop and give it a bit of a Tiffany’s sheen. They invested money in making the experience perfect. They worked to make the customer service experience ideal. They were both successful entrepreneurs and knew the value of building a brand and a strong customer experience. They’d spent a lot of money trying to get the balance right, and they made sure to explain their difference in direct response advertising on various local and national cable stations. “Better than the similar offers,” they’d say. And they were right. But the investment didn’t pay off as expected.

A few months later, Feirstein and Moran made a significant discovery: almost all of their customers did business with them only once. They had a transactional business yet they were trying to make it so much more than that. So they stopped trying to make their service “better than similar offers,” and instead settled with good. Given that most people were not going to become repeat customers, there weren’t going to be any head-to-head comparisons made to the other services. All they needed to do was drive a purchase decision and offer a pleasant enough experience that people would recommend it to a friend. Any more was unnecessary. Once the owners of mygoldenvelope.com realized they didn’t need to invest in the things that build loyalty if all they wanted to do was drive transactions, their business became vastly more efficient and more profitable.

For transactions that occur an average of once, carrots and sticks are the best way to elicit the desired behavior. When the police offer a reward they are not looking to nurture a relationship with the witness or tipster; it is just a single transaction. When you lose your kitten and offer a reward to get it back, you don’t need to have a lasting relationship with the person returning it; you just want your cat back.

Manipulations are a perfectly valid strategy for driving a transaction, or for any behavior that is only required once or on rare occasions. The rewards the police use are designed to incentivize witnesses to come forward to provide tips or evidence that may lead to an arrest. And, like any promotion, the manipulation will work if the incentive feels high enough to mitigate the risk.

In any circumstance in which a person or organization wants more than a single transaction, however, if there is a hope for a loyal, lasting relationship, manipulations do not help. Does a politician want your vote, for example, or does he or she want a lifetime of support and loyalty from you? (Judging by how elections are run these days, it seems all they want is to win elections. Ads discrediting opponents, a focus on single issues, and an uncomfortable reliance on fear or aspirational desires are all indicators. Those tactics win elections, but they do not seed loyalties among the voters.) The American car industry learned the hard way the high cost of relying on manipulations to build a business when loyalty was what they really needed to nurture. While manipulations may be a viable strategy when times are good and money is flush, a change in market conditions made them too expensive. When the oil crisis of 2008 hit, the auto industry’s promotions and incentives became untenable (the same thing happened in the 1970s). In this case, how long the manipulations could produce short-term gains was defined by the length of time the economy could sustain the strategy. This is a fundamentally weak platform upon which to build a business, an assumption of never-ending boom. Though loyal customers are less tempted by other offers and incentives, in good times the free flow of business makes it hard to recognize their value. It’s in the tough times that loyal customers matter most.

Manipulations work, but they cost money. Lots of money. When the money is not as available to fund those tactics, not having a loyal following really hurts. After September 11, there were customers who sent checks to Southwest Airlines to show their support. One note that accompanied a check for $1,000 read, “You’ve been so good to me over the years, in these hard times I wanted to say thank you by helping you out.” The checks that Southwest Airlines received were certainly not enough to make any significant impact on the company’s bottom line, but they were symbolic of the feeling customers had for the brand. They had a sense of partnership. The loyal behavior of those who didn’t send money is almost impossible to measure, but its impact has been invaluable over the long term, helping Southwest to maintain its position as the most profitable airline in history.

Knowing you have a loyal customer and employee base not only reduces costs, it provides massive peace of mind. Like loyal friends, you know your customers and employees will be there for you when you need them most. It is the feeling of “we’re in this together,” shared between customer and company, voter and candidate, boss and employee, that defines great leaders.

In contrast, relying on manipulations creates massive stress for buyer and seller alike. For the buyer, it has become increasingly difficult to know which product, service, brand or company is best. I joke about the proliferation of toothpaste varieties and the difficulty of choosing the right one. But toothpaste is just a metaphor. Nearly every decision we’re asked to make every single day is like choosing toothpaste. Deciding what law firm to hire, college to attend, car to buy, company to work for, candidate to elect—there are just too many choices. All the advertising, promotions and pressure employed to tempt us one way or another, each attempting to push harder than the other to court us for our money or our support, ultimately yields one consistent result: stress.

For the companies too, whose obligation it is to help us decide, their ability to do so has gotten more and more difficult. Every day, the competition is doing something new, something better. To constantly have to come up with a new promotion, a new guerrilla marketing tactic, a new feature to add, is hard work. Combined with the long-term effects of years of short-term decisions that have eroded profit margins, this raises stress levels inside organizations as well. When manipulations are the norm, no one wins.

It’s not an accident that doing business today, and being in the workforce today, is more stressful than it used to be. Peter Whybrow, in his book American Mania: When More Is Not Enough, argues that many of the ills that we suffer from today have very little to do with the bad food we’re eating or the partially hydrogenated oils in our diet. Rather, Whybrow says, it’s the way that corporate America has developed that has increased our stress to levels so high we’re literally making ourselves sick because of it. Americans are suffering ulcers, depression, high blood pressure, anxiety, and cancer at record levels. According to Whybrow, all those promises of more, more, more are actually overloading the reward circuits of our brain. The short-term gains that drive business in America today are actually destroying our health.

Just Because It Works Doesn’t Make It Right

The danger of manipulations is that they work. And because manipulations work, they have become the norm, practiced by the vast majority of companies and organizations, regardless of size or industry. That fact alone creates a systemic peer pressure. With perfect irony, we, the manipulators, have been manipulated by our own system. With every price drop, promotion, fear-based or aspirational message, and novelty we use to achieve our goals, we find our companies, our organizations and our systems getting weaker and weaker.

The economic crisis that began in 2008 is just another, albeit extreme, example of what can happen if a flawed assumption is allowed to carry on for too long. The collapse of the housing market and the subsequent collapse of the banking industry were due to decisions made inside the banks based on a series of manipulations. Employees were manipulated with bonuses that encouraged shortsighted decision-making. Open shaming of anyone who spoke out discouraged responsible dissent. A free flow of loans encouraged aspiring homebuyers to buy more than they could afford at all price levels. There was very little loyalty. It was all a series of transactional decisions—effective, but at a high cost. Few were working for the good of the whole. Why would they?—there was no reason given to do so. There was no cause or belief beyond instant gratification. Bankers weren’t the first to be swept up by their own success. American car manufacturers have conducted themselves the same way for decades—manipulation after manipulation, short-term decision built upon short-term decision. Buckling or even collapse is the only logical conclusion when manipulations are the main course of action.

The reality is, in today’s world, manipulations are the norm.

But there is an alternative.