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Monthly Archives: March, 2012

Target Knows your Pregnant–How data mining and the Analysis of Keystone Habits Grow Your Sales

Target statistician Andrew Pole may know that a family member is pregnant before you do.  A summary of the process that Pole used was published last month in Forbes.  http://www.forbes.com/sites/kashmirhill/2012/02/16/how-target-figured-out-a-teen-girl-was-pregnant-before-her-father-did/ .  Here is a brief recap of the article written by Kashmir Hill in Forbes

“An angry man went into a Target outside of Minneapolis, demanding to talk to a manager:

English: Photograph of abdomen of a pregnant woman

“My daughter got this in the mail!” he said. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?”

The manager didn’t have any idea what the man was talking about. He looked at the mailer. Sure enough, it was addressed to the man’s daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologized and then called a few days later to apologize again.

(Nice customer service, Target.)

On the phone, though, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.” (From Kashmir Hill’s article on Forbes 2/16/12)

How did Andrew Pole know this customer was pregnant?  He was able to identify shifts in purchases by women from scented to un-scented lotion at the beginning of the 2nd trimester.  Pole was able to track and establish that in the first 20 weeks, pregnant women loaded up on supplements like calcium, magnesium and zinc. Many shoppers purchase soap and cotton balls, but when someone suddenly starts buying lots of scent-free soap and extra-big bags of cotton balls, in addition to hand sanitizer and wash cloths, it signals they could be getting close to their delivery date. (Charles Duhigg–New York Times 2/16/12)

As you can see from the example, customers started becoming uncomfortable with Target sending baby product coupons to expectant mothers.  Not only was the element of surprise undesirable but the notion of the invasion of privacy was expressed by several customers.  With all of the analyses and work that Target put in, they weren’t going to give up.  To mitigate a concern for privacy Target began mailing the baby product coupons with advertisements that they know pregnant women wouldn’t buy such as wine glasses and lawnmowers.  Now when the expectant mother gets the coupon booklet, she doesn’t feel singled out, as she thinks that everyone on the block is receiving this mailing.   However what the consumer doesn’t know is that Target is still sending these coupons exclusively to pregnant women.

Essentially on a behavioral science level, Target has recognized and understood the importance of a Keystone Habit.  “If you can change a keystone habit, you unlock all these other patterns in someone’s life or in an organization, According to Charles Duhigg in his new book “The Power of Habit: Why We Do What We Do in Life and Business, “One of the characteristics of a keystone habit is that it creates a culture. That’s why it seems to have such a profound influence on other patterns in our lives,” including how, what and where we consume.    In life as Duhigg points out there are only a few of these trans-formative moments where people will actually change their buying habits, hence the profound and compelling strategy Target is using.

The data mining done by Andrew Pole is phenomenal in several ways that we can incorporate in building an analytic system that will be scale-able as your business grows.

1.  Track and profile your customers as much as possible.  Using a tool to analyze purchases will help you assemble data that could help predict future customer behavior

2.  Once a customer profile is established make sure you cater to the buying habits in a non-invasive way.  Customers don’t like the feeling of being spied on but they like the opportunity to save money in return for loyalty

3.  Understand a keystone buying habit.  Know when these habits are going to change and strategically position your venture to benefit from the paradigm shift in customer behavior.

Until next time keep working on analyzing habit loops, check you mail for a “targeted” sales circular and ALWAYS PAY FOR PURCHASE WITH UNMARKED BILLS.

Until next time, be good and cultivate your community of friends

<a href=”http://f4b508ueqelndn0-cgp0qqko-u.hop.clickbank.net/?tid=BLOG&#8221; target=”_top”>Click Here!</a>

 

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The Curious Case of the Etch a Sketch–An Exercise in History, Context and Truthful Assumptions

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My Etch a Sketch broke this morning.  I got so excited when I saw that a Mitt Romney aide was using it to frame his political views, now I am despondent and wondering where to turn.  Thankfully the good folks and the readers of “Good, Evil and the Things I do” are here to assist me.  When my Etch a Sketch was working, I was able to come up with numerous business ideas everyday.  As a passionate entrepreneur I know these ideas would work and I invested heavily in every idea I drew.  As each idea failed to pay off my cash reserves dwindled and now I must take up a carreer as a strategic marketing consultant.  My new employer will benefit from my unique skill set especially the lessons I learned from Etch a Sketch.  Here is what I learned:

History and Context are critical to making truthful assumptions toward sound business decisions.  Since I was starting fresh every time with my Etch a Sketch I didn’t realize the importance of the aforementioned elements.  Lets look at why this is important and build out a business model.

A.  History–what motivates you?  What is your world view and passion?  What experiences can you draw on to become an expert in your field

B.  Context–Evaluate the current state of affairs and find the opportunity for your innovation.

C.  Inputs–What materials, labor, equipment and other resources do I need to start my venture.

D.  Activities–How do I uniquely add value.  I have an idea, take my materials and through a “proprietary” process create value for customers and stakeholders.

E.  Outputs–What is the finished product I deliver?  When I was using my Etch a Sketch, I kept erasing my ideas and never produced anything meaningful.

F.  Outcomes–How do I want the world to change?  This is a core value of Social Entrepreneurship.  If I create a unique program to educate children, what values do I want to instill?  Through my

intervention, how will I impact and change people’s lives?

G.  Impact–Does my outcome have a measurable metric that shows how I qualitatively and quantitatively made a difference.

Finally the biggest danger with erasing my Etch a Sketch and always changing my views is that it ignored the assumptions I need to make to ensure that my Output, Outcomes and Impact are viable.  By using a prototype and testing my idea to reach a proof of concept, I can show that my assumption is true and therefore my innovation will be successful and make a difference.  However what do you do in a case where you “build it and they don’t come”?   First of all don’t build it.  Before you allocate your resources to a project that may or may not be viable, ask people if they will come to the ballpark.  If your survey and information gathering indicates they will come, go buy some land and build it.

I would be re-miss without giving a link to the Etch a Sketch clip:

http://www.youtube.com/watch?v=5DmtPA02SNk

Thank-you to http://townhall.com/tipsheet/ and Greg Hengler for the YouTube clip.

Go out my dear friends and build a sound infrastructure for your venture, but please make sure your assumptions are sound, you seek the truth and material evidence supports your cause.

Until next time, be good and cultivate your community of friends

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Toenail Fungus, Groupon and Lessons in Excess Capacity

I want to begin this blog on a deeply personal note.  YES I suffer from Toenail Fungus.  As I try to keep you the reader informed it is necessary to unveil my bias and show the different motivations that go into considerations for a blog post.  So how do these three seemingly odd bed fellows converge into a teachable moment?  Let’s take a quick look at the economic principles and structures in play.

 

For those of you not familiar with the dreaded Toenail Fungus (consider your phalanges blessed), you acquire the fungus usually in locker rooms or communal showers.  However, painted toe nails, unclean socks or hosiery and shoes that create sweaty foot conditions can create an inviting environment.  The fungus is a chronic condition that is not painful and usually goes untreated.  Oral medication can be taken but the risk of serious side effects including death is present.  Most people who have the fungus just live with it.

 

But now thanks to Daily Deal sites like Groupon, we can say good-bye to the Fungus.  As indicated by this link: http://www.groupon.com/deals/north-shore-foot-and-ankle obviously there are a lot of  fungus suffers who want relief.

 

Finally Podiatrists and clinics that provide the laser Toenail Fungus removal have to make a large capital investment to acquire the suitable equipment to make sure your toes are fungus free.   Now its time to put these elements to work and establish some basic assumptions that are valid in light of the current economic climate.

 

1.  There are a lot of people who have the Toenail Fungus that choose to forgo or were treated ineffectively with oral medication.  Therefore you already have a pool of patients (1.26 billion dollars per year are spent on topical treatment as well) who want a safe medical solution to their problem.

 

2.  Groupon reaches a large audience and delivers coupons reducing the cost of goods and services.  Nothing Groupon does is proprietary however they are the current market leader as they deliver thousands of offers everyday to people all around the globe via e-mail, apps and similar mobile communication.  Groupon’s innovation has come in the delivery system of discounts and coupons.

3.  Podiatrists and medical clinics that offer the Toenail Fungus treatment have spent considerable investment capital in the equipment and need to recoup this money to mitigate cash flow.  In addition if the providers have excess capacity, they are getting value out of their machine, albeit at a reduced rate.  The biggest challenge with reducing the price for treatment is denigrating the integrity of the price.  However with the competition robust, the price for the treatment has drastically come down as the providers recoup their capital. (this was mentioned to me by my podiatrist during my last visit as he tried to sell me on the procedure).

So what can we actually learn from these assumptions:

1.  If you are an entrepreneur and a service provider with excess capacity, consider Groupon as a way to monetize your otherwise “un-booked” time.

2.  If you are afflicted with Toenail Fungus, there is a reason to be excited as you watch treatment options drop in price and increase in effectiveness.

3.  Finally the hardest question is how to mitigate cash flow after investing in capital-intensive equipment for your business?  The answer as shown by this Groupon deal  is to make sure you maximize your revenue from your assets even at a discounted rate.  However be careful about the potential effects this could have on the future integrity of the price for your service.

 

Until next time study depreciation and monetize your efforts to the best of your ability.

Until next time, be good and cultivate your community of friends.

Walgreen’s, Nerf Darts and Using Creativity to Create Customer Goodwill

How can an 11 year old wanting to buy Nerf Darts teach us how to maintain both personal and business relationships?  I have one word for you:  Walgreen’s.  Is it just me or does it seem that when you go to buy the $.39 toothpicks advertised in the weekly sales flier, the item is either sold out, scans at the wrong price or that particular location never has and never will carry toothpicks.  As I went into Walgreen’s today I did not intend to buy Nerf Darts although my son did mention that he would like some extra ammo for an upcoming birthday party.  As I went down the toy aisle I saw a closeout on the exact replacement darts he uses.  Along with my other purchases, I brought them up to the register.  Two out of the 5 items scanned incorrectly and my total came to $54.  Upon closer examination I was incorrectly overcharged nearly $25.  When I questioned the manager for the correct price, her answer was, I can refund your money but I can’t sell you these items at the marked, posted price–company policy (Whatever the price scans at is what Walgreen’s will sell at).  This is a classic case of a self-defeating policy.  While a computer managed system of SKUs (Stock Keeping Units) certainly can be efficient, it does no good if a manager does not have the authority to over-ride and use her own judgement.  I left the store and will contact the manager tomorrow.

As usual I started to frame my experience and question what I could learn.  In a poll conducted by IBM among 1500 CEO’s from 66 countries and 33 industries more than 60% responded that the singular element of CREATIVITY will help companies navigate successfully through the increasingly complex global economy.  (here is a link to the poll http://www-03.ibm.com/press/us/en/pressrelease/31670.wss )  The situation described above happens in business even at the best companies.  However the Walgreen’s manager did not use creativity to respond to an error and take advantage of an opportunity to make me a loyal customer.  The Walgreen’s manager had a chance to offer me some type of goodwill but dismissed the opportunity using company policy as a damaging crutch.  While there may be many codes of company policy that are valid, make sure that the freedom to be creative is a part of your business culture.

Go out there and be creative, the worst that can happen is a mistake.  I love learning from mistakes.  At this point my mistakes are too many to count but I will get up tomorrow, learn and try to do better.

Stay tuned loyal readers, tomorrow I will be reporting on Toe Nail Fungus, Excess Capacity and Lessons in Depreciation!

Until next time, be good and cultivate your community of friends.

 

 

The Illinois Lottery and Really Bad Math Skills–Why the Luck of the Irish Won’t Improve your Odds of Winning

As my daughter becomes more involved with Irish dancing, I have become more acutely aware of Irish culture and heritage.  The annual Illinois lottery‘s St. Patrick’s day raffle apparently is wildly popular.  Today when I attempted to buy a $20 ticket for a chance to become a millionaire, the clerk at my local 7-11 kindly told me that all tickets were sold out.  Now some things are shocking and some simply don’t make sense.  Sold out lottery tickets ring in my head as a huge entrepreneurial opportunity.  What is really at play here?  First in raw numbers the chances of winning a large lottery jackpot are similar to being eaten by a tiger and a shark on the same day (NY Times “Economix Putting your odds in lottery context” 10/19/09).   Since I don’t plan on swimming with sharks and napping with tigers at the same time, I may have to look at an alternative revenue stream.  Surely I am not the first consider why people buy lottery tickets but I would suggest people play the lottery for four reasons:

1.  Operant Conditioning using variable reinforcement (termed by June Foyle of Suny NY Clinton).  In terms we can understand this means fun caused by the possibility of an unpredictable reward, similar to why we like to watch contested sports.  When something is unscripted and our team has a chance to win and we are captivated.  Similarly when an individual has a chance to win a cash prize (termed variable reinforcement), even though the odds are high everyone has a dream to pursue.

2.  The Availability Heuristic is the concept in which you hear constantly about a winner.  Our mind begins to frequently recall success stories often repeating the same instance.  This is why the state lotteries run the drawings on TV and make sure the winners do an ample amount of publicity work.  As we continually hear about lottery winners,  our mind relies less and less on probability and more on the wonderful anecdotes of the lottery winners.  In real terms we equate the probability of winning with how often we hear about lottery winners.

3.  The Slot Machine Fallacy is the assumption that as a gambler we are “due”.  Our run of unsuccessful  winning tickets is about to end any day as the numbers are going to turn our way.  Again probability is temporarily suspended and we know that winning is imminent.  We will be rewarded as our time to win has come.

4.  Selective Memory plays along closely with the Availability Heuristic.  Hence we choose to remember only the instances in which we win rather then the actual facts surrounding the circumstances.   These observations fascinate me as en Entrepreneur because I see the challange as re-creating these elements in a business model.  How can a I create a contest that gets people excited to play?  What do I do make sure only the positive outcomes of my business are well represented across all media platforms.  How do I communicate to customers that if they buy my product or service they will be rewarded?  Finally how do I use the power of customer selective memory in marketing my business so I will satisfy consumers based on a high level of emotion?

Lets part today borrowing a concept from Game Theory.  If I called you on the phone and told you that had just won a million dollars your audible scream measured by a decibel level would be quite high.  However if I called you and reported that you had just won two million dollars would your scream be twice the decibel level as when you were notified that you had won exactly half the sum of money in the previous phone call?  As a teaser I will discuss the economic concept of the utility of money in an upcoming post.  Stay tuned loyal readers.

Until next time, be good and cultivate your community of friends.

Doing God’s Work, Moral Bankruptcy and the Blues Brothers

Does it take the Blues Brothers for us to learn about faith, God and choosing to do the right thing?  In light of Goldman Sachs and Bank of America, I am sending my kids to the movies for a religious experience.  At least Jake and Elwood were convinced they were on “a mission from God” to reunite their band and keep the orphanage they grew up in from bankruptcy.  In fact, you don’t have to rely on my judgement of their intentions.  In observance of the 30th anniversary of the movies release in June 2010, the Vatican’s official newspaper L’Osservatore Romano has dubbed The Blues Brothers a “Catholic classic”.  In contrast Lloyd Blankfein, the CEO of the 143 year old investment bank Goldman Sachs stated in a November 2009 interview with The Times of London that he’s just a banker “doing God’s work”.  I guess in this case, toxic credit default swaps, government bailouts, excessive bonuses and acting with intent against the best interest of his customers are the work of a deeply humble religious man.  To put it bluntly then Greg’s Smith deftly penned op-ed fair-well was the work of an atheist or agnostic.  Another words Mr. Smith began doubting the holiness with which Mr. Blankfien served the creator.  This blight of the pen cost Goldman Sachs shareholders 2.2 billion dollars on paper and will make me think twice about how my business ethics and behaviors intersect with my religious beliefs.

Until next time, be good and cultivate your community of friends.

I am just a banker “doing God’s work”  Lloyd Blankfein CEO Goldman Sachs November 2009

 

Amateurs Built the Ark, Professionals Built the Titanic. Why the Ability to Adapt and Learn Trumps Credentials.

The title reflecting how the Ark and Titanic were built is a famous quote with an anonymous origin.  In an economy where if you want a job you have to create it and the market will dictate the value of your product or service, it is time that we build the “Ark”.  An entrepreneur’s ability to prototype, assess and accept failure will go a long way in determining who will rise and who will fall.

 

A prototype is one of the most effective ways to gauge the viability of your venture.  By creating an original, functional, small scale model of your product or service, you are able to let potential customers see it, test it, taste it, use it and smell it.  This process will point out potential problems in the product’s design, giving entrepreneurs an opportunity to fix the problem before a large-scale launch.  The feedback you receive from your prototype often leads to design improvements, and new features you may have never realized on your own.

Here are some prototype assessment questions suggested by “Corporate Venturing: Creating New Businesses Within the Firm” by Block and MacMillan, 1985.

1. Completion of product testing:  Is there are real market opportunity? Will customers buy the product? How should the product or service be marketed or distributed?  Are your early assumptions about the opportunity still correct?  What level of sales can be achieved?

2.  Completion and financing of the prototype and venture:  How long does it take to produce the prototype?  What is the cost?  What is the time frame in which the prototype can be produced?

3.  Production start-up:  Are operations working as expected and if not how can you improve them?

To complete your assessment don’t forget about continuing to scan the marketplace for competition and potential collaborators.

 

Finally lets put failure in perspective.  Personally I have experienced at least 15 different business failures.  Yet I still get up in the morning ready to try again.  The failure of a venture does not have to reflect on you as a person.  Successful entrepreneurs use failure as stepping stones to success.  As detailed in the November 1995 issue of Entrepreneur Magazine, NBA great Michael Jordan frames his athletic failures to breed success.  Jordan states ” I’ve missed more than 9,000 shots in career.  I lost almost 300 games.  Twenty-six times, I’ve been trusted to take the game-winning shot and missed.  I’ve failed over and over and over again in my life and that is why I succeed”.  I think we can all agree that after 6 NBA Championships and a hall of fame career, most people would classify Michael Jordan’s basketball efforts as a success.

In echoing a great quote from Eleanor Roosevelt who said:

“You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face. You must do the thing which you think you cannot do”

So dear friends I implore you to protoype, get your feet wet, dump cold water on your head and take an honest look in the mirror.  This will lead us to best practices and the promised land.

 

Until next time, be good and cultivate your community of friends.

 

 

Giordano’s and the Moral Hazard of Bankruptcy

As I talked about in an earlier post on the Moral Hazards of Bankruptcy,  here are two relevant links to articles about how the ownership of the Chicago based pizza chain of Giordano’s has been accused of looting the company of cash and assets before its impending bankruptcy.

http://articles.chicagotribune.com/2012-01-17/business/ct-biz-0118-giordano–20120117_1_eva-apostolou-philip-martino-giordano

http://articles.chicagotribune.com/2012-03-06/business/ct-biz-0307-giordanos–20120306_1_eva-apostolou-philip-martino-giordano-s-enterprises

Shareholder Value and Making the World a Better Place–an Argument for the Social Business Model

Is their room for global corporations to make the world a better place and actually have a double bottom line?  I would like to suggest an answer but ultimately this is an idea that marketplace will have to validate.  Lets back up for a minute and dive deeper into the question.

If we operate under the assumption that the singular outcome for a global corporation such as Amazon is to deliver value to the shareholders, is their room for a double bottom line?  That is, can Amazon deliver value to its share holders while at the same time contributing to a social cause or alleviate an injustice.  I strongly believe that this is possible, however the message has to start at the top.  If we look at a company like Amazon, its CEO Jeff Bezos would have to go on record and state that his intended outcome in addition to shareholder value is a designated social cause.  Moving forward Amazon’s shareholders would be able to decide if the monetarily immeasurable value of the intended social cause is important and  brings with it an intangible benefit.  Amazon shareholders would have to be willing to hold the stock knowing that the goal of a double bottom line may have measurable costs.

With all this said I think that Global Corporations have to at least consider what they can gain by supporting socially appropriate causes.  More importantly as consumers we must demand that corporations we interact with not only produce profits but they improve people’s lives.  So for all of the aspiring entrepreneurs out there  your job is to create change for society while maintaining your fiduciary responsibility to achieve profitability. 

Please let me know your thoughts about this.  Can we expect corporations to act for the common good when it comes to social causes?  Only the market will tell us.  In the meantime please take one small step toward making the world a better place before we meet again. 

Until next time, be good and cultivate your community of friends.

Excellent Video on Entrepreneurship

Great Video on the meaning of Entreprenuership.  If you need a little inspiration to keep going, sometimes a good video helps.  This was made by the good people at Entrepreneur Week.

Driven By Ambition

 

What is an entrepreneur to you?

How can you get started in entrepreneurship?

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