Posts Tagged ‘understanding investments’

The Ryan Air model has become a lauded case study for business schools around the world.  It´s low-cost structure, offering a bare-bone basic product which the customer can tailor with paid-for add-ons gives the consumer better choice in their desired service needs and cost level.

Ryan Air´s founder Michael Leary praises this new system by saying ”only by continuously challenging accepted conventions and questioning costs can we continue to lower costs and fares”.

The question is how far should they go?  At what point does offering the lowest-cost most basic product not become the priority but instead maintaining some of those accepted conventions which consumers have come to cherish?

Call a spade a spade

The price advertised for a low fare airline nowadays seldom equates to the price you will pay.  There are additional fees, many even obligatory, which must be calculated into the price to make them a true and far comparison against what you will spend.

Treat us like customers not money machines

Ryan Air specifically employees people (or so it seems) at the gate to check the size of carry-on bags.  Ryan Air´s bag size allowance is smaller than the majority (or accepted convention) for carry-on luggage although the planes appear the same size.  This allows more opportunity to prey on customers miscalculations, charging on-spot fines of 35€ for anyone with a slightly larger bag then there arbitrary size.   As a coach I coach businesses to focus on extra revenue sources but I have to ask is this more of a swindle or brilliant extra revenue sourcing?

4 hours before the flight or you pay

Traditionally (or perhaps conventionally) you may print out your boarding pass and check you have “passport, tickets, money” just before you leave for the airport.  If you try that with Ryan Air you may be fined 40€.  Why, because you are unable to print your boarding pass within 4 hours of flying and it costs 40€ for them to print it for you. Why four hours?  Fortunately a Spanish judge has ruled this illegal in Spain and that Ryan Air must print the boarding passes for free.  But is this another example of the airline going too far in its pursuit for profits at the expense of an honest passenger?

How far do you go to make a buck?

Ok, so we are a captive audience, I get it. But does this mean that airlines have the right to continuously sell to us?

A Ryan Air flight I was on recently had a crew member walk up and down the cabin twice holding packs and advertising “cigarettes, cigarettes for sale”.  Now I know I will be quickly reminded by some that they are smoke-less cigarettes; I agree however, they still include nicotine, still cannot be sold to minors so why are they being openly advertised.  Cigarette sponsorship has been banned in many sports because they are not allowed to advertise cigarettes due to the health risks of becoming addicted to nicotine. So why is an airline allowed to aggressively sell cigarettes on a captive audience including minors?  It just seems strange to me and goes against all the hard-fought legislation for getting nicotine and cigarettes out of the minds of children. Even with the “smokeless cigarettes help stop smoking” argument it still begs the question, “how far should an airline go just to make a buck?”.

Ryan Air is a great case-study for how we do business in the future but it could become another one for a different reason: how to lose customers.

My worry is that low-cost structure companies are taking the liberty to offer any addition (product feature) as a paid-for addition and sometimes ignoring the true needs of the consumer.

Therefore the balance may have swung. Well done for combating high-fares and creating a low-cost option opening up air travel to many who couldn´t previously afford it. However, let’s not get too ahead of ourselves and become too smug with the low-cost structure.  The needs and desires of the consumer must remain as the driving force behind business innovation.  Those needs are forever changing and businesses must remain dynamic and continuously adapt their offerings to fit them.  As a business you must keep a pulse on the customer through research and feedback.

Through more research, perhaps, Ryan Air may find that the customer need of being respected, valued, not swindled or felt like being a money machine is high up on our list of desires.  I personally look forward to that day and will try and avoid Ryan Air in the meantime.

You can profit a lot from reading people´s opinions as long as you know how to read them effectively.  Investment opinion articles and personal finance articles are very common nowadays.

However, opinions can be helpful or misleading so it is important to determine whether you agree or not with them by using these top 12 tips and some critical thinking.

1. Set Your Expectations

You will never find a no-risk guaranteed high-return investment written in an opinion article – so don´t look for one or believe it if someone tells you it is one.

2. Don´t Miss The Boat

Wait, isn´t it the other way around? If you read about it in the papers you have ALREADY missed the boat?  A tricky one this. If you are investing on that one piece of news (i.e. Google profits soar 50%) then you have already missed the boat (professional traders would have traded on that news earlier). However if the opinion talks more about long term initiatives or the future then you may not have missed the boat.  Remember, Rome wasn´t built in a day and you are looking for nuggets of news that gives insight into how things may be in the future.

3. Know Your Source

Always ask two questions: what have they got to gain from writing this article? and; why should they be considered an expert on the subject?   Weigh up the negatives and decide whether it is a reliable source.  Read marketing materials with caution.  Any post of the internet should be regarded suspiciously as you don´t know their expertise level.  Even newspaper articles should be read with some scepticism as they are written to sell papers so sometimes their opinions are exaggerated.

4. Understand What Is Being Said

If there are some words, concepts or acronyms you don´t understand then it is either a badly written piece or it is not meant for your readership. That being said the more you read the more you will understand so keep picking up investment opinion articles as the good ones will explain new concepts and ideas to you in a way you will understand.

5. Does It Make Sense?

Does their reasoning sound reasonable?  You may understand it, but now you need to take it one step further and decide whether their opinion makes sense. Try and follow their reasoning and decide whether you agree or.  Cut through any waffle and get to the reasoning and then ask yourself “does that sound realistic?”

6. Play Devil´s Advocate

Come up with reasons and an explanation for a counter-argument.  Which argument do you think is stronger, the article or the counter-argument?

7. Demand & Supply Rules

The most fundamental economic concept needs to be considered every time you read an investment opinion piece – simple as that.   What is the demand for such investment? Why might the demand increase in the future? Are we still going to need this in the future? Secondly, how much supply is there? What are its competitors?  What are it´s competitive advantages? Why might supply for this product or a substitute product increase/decrease in the future?

8. Take Out The Emotion

Yours, theirs, or anyone else´s you ask.  Emotions don´t help us make good investment decisions.  If it is an emotional subject then you have to recognise this and decide how this might add bias to people´s opinions.

9. Formulate Your Opinion

Try and take away from the article your opinion about the subject which you can support with reasons. Or, if you don´t have an opinion, try and formulate some questions you would like to answer in order to form an opinion.

10. Always Get A Second, Third, Fourth Opinion

Never decide outright on just one opinion. Look into the subject further.  Internet searches, additional newspaper articles, opinion of a trusted financially-savvy source.  Obtain additional opinions and reasoning following these top tips.

11. Discuss further

Discussion will enhance your understanding of the subject.  Many people like to discuss these topics, either in forums, internet groups, interested friends, family friends, financial coaches.  You can discuss a subject generally or specifically. Try and get the other person´s view before you give your own.  Gauge people´s responses but always “know the source”.

12. Awareness, plans, results – possible next steps

Increasing your awareness about investments and personal finance unlocks the door to possible new ideas and opportunities.  If you find something that looks interesting then look into ways you can gain more understanding or expertise.  A financial coach can help you simplify saving, investments and your personal finance options in order to help you develop a plan based on your personalised goals and objectives.   It is a way to grow your savings and understanding at the same time.

Happy reading!

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