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December 28, 2005

Marketing Primer - How Toothbrushes Make Better Generals

Marketing is about making choices within the typical four C's affecting most business decisions - Company, Customer, Competitor, Collaborator. Things work out best when your choices align well.

Take Harley Davidson, the company. Harley has to make choices about what it's going to do with its brand. It has to decide things like who it will go after: latte drinkers or hard-core bikers. If latte drinkers, perhaps the right thing would be to show shiny new hogs with riders in the latest fashions. If hard-core bikers, then you probably want to do exactly the opposite. But, if you can get away with marketing to them differently, and not having the others find out (or find out strategically), then even disparate goals can work. Think airline pricing - vacation vs. business fares.

The other thing to figure out, from the company side, is what can we be? There are umpti-odd books on core competencies, competitive advantage, and so on that look to explore what you can do as a company versus what you cannot do. The thought being that most any company can do anything, but what can a company do well or best? So much so that it can do it better than others. Go some place where others cannot go. If you have patent protection, you've got some competitive advantage if people want your product. Without intellectual or regulatory advantage, sometimes it's just how well you're able to do something relative to others.

This speaks to the competition and the concept of a value proposition. Value is determined in the customer's mind. Price to Earnings ratio is an example. People think Google earns a P/E of around $94 (as of today), while Yahoo earns a P/E of $38. People buy Google shares at a higher price than Yahoo, not because the earnings are more than Yahoo's, but because they feel that Google's earnings are worth more than Yahoo's. They feel the stock, maybe, will climb higher, that earnings will rise faster, among other attributions.

Starting with the customer's idea of value, and business's need to recoup investment and expense, you can start to chart the relativity of value to cost.

Take a toothbrush. If it costs $2.50 and people pay $2.50, then that's the toothbrush's value. What's the value if no one buys it at $2.50? Less than $2.50. Again, value is in the customer's mind. What if I price the same toothbrush at $1.00 and no one buys it? What if I offer it for free? If no one wants it, then it has no value! Likewise, if I price the same toothbrush at $10 and someone buys it, then the value to that person is $10. Key thing for marketers to understand is how many people will buy something, in what circumstances, for how much.

If most customers value our toothbrush at $2.50 and a competitor offers a toothbrush at $2.00, what will happen? That all depends! What is the value of the competitor's toothbrush? That is, is the competitor's toothbrush one of those that's worth $10 in the customer's mind or one that's worth $0. You cannot tell just because they priced it at $2.00! If it's worth $10 to the customer, and your toothbrush is worth $2.50 to customers, then the competitor's toothbrushes will sell out before you sell even one. Likewise, if the competitor's toothbrush is worth $0 in the consumer's mind, then yours will sell out before they even sell one.

Now, these are extreme examples between very different brushes, but in the real world toothbrush competition, the stakes are higher and the similarities between values in brushes dominate the competitive landscape. It also becomes harder for the customer to determine which brush has a higher value.

Let's look at some attributes of the physical toothbrushes:
- bristle variation
- angle of the brush
- compactness of the bristles
- hard, medium, soft
- grip
- color
- head geometry
- and so on

Different customers going to the supermarket to buy a toothbrush may value these physical attributes differently. Your competitor might make a diamond shaped, compact bristle, angled brush, with serrated bristles that will appeal to 10% of the buying public. But, if your research showed that oval shaped toothbrush heads sell better than diamond, then you can make the same toothbrush as the competitor, but with more valued head geometry; therefore, a more valuable toothbrush in the customer's mind.

However, the physical attributes of a toothbrush are NOT the only attributes customers buy. Consider the following:

- Performance attributes (how long a brush will last; how "effective it is")
- Packaging
- Where on the shelf it is at the supermarket (collaborator)
- and so on.

This makes the toothbrush competition even more complicated. If you have a $2.50 valued toothbrush and the competition has a $2.00 valued toothbrush, but your brush is on the bottom shelf almost buried next to the shaving cream, and the $2.00 brush is at eye level, within easy reach, and has big arrows point to it, that $0.50 of effort the customer might make to reach your brush might not seem worth it.

However again, the process is not even that simply complicated. Factor in the following:

- Brand name (Colgate, Crest, Oral-B, and so on)
- Advertising (collaboration with supermarket)
- Word of mouth
- Dentist recommendation

If Crest goes on a rampage and advertises how other toothbrushes are more fit for canine than human toothbrushing and does it convincingly, and shows that only their new brush is really fit for humans, then, as long as everyone remembers the ad when going into the stores, and remembers it's Crest, not Colgate, that made this claim, then they can expect that you'll buy their brush over the others. Of course, they won't do this and even if they did, it would be remarkable to have people believe it en masse.

Go to your supermarket and check out the toothbrush racks. You'll see a variety of toothbrushes. Most brushes belong to the major brands. Most of the smaller brands are at the bottom or top of the shelf, far away from most strolling customers. Now, how would you pick? Is your current brush working for you, but needs a replacement? Want to ditch the standard brush and go for an electric model?

Your own thoughts about how to pick a toothbrush are cloudy enough. Toothbrush manufacturers and competitors have to think through all your value issues, juxtaposed with all the various value markers mentioned above and more for how to compete for your business. Why? Because they have to CHOOSE how they are going to compete. (I'm surprised we haven't yet seen the Sleep Number toothbrush yet, or the build your own toothbrush, but imagine they're coming... at least now that I've mentioned them)

In the Way of Go there's an entire chapter on focus versus diversification labeled Expand Focus. I've heard time and again from people saying, "I'm going to market this to everyone!" That's usually always a bad move. People value things differently. And, there often are discrenible segments of people that value things the same way. Gain a beachhead with a segment that you can really attack with your product's best value proposition first, if the numbers pencil. Cross the chasm and get into the rest of world from there.

So, how does this relate to you?

If you're a Go player, then you have to make choices between moyo or territory; influence or territory; many positions or one position; leaving aji or not. Goal: to obtain more territory ("board value") than the opponent.

If you're a politician, then you have to make choices between a clean campaign or a dirty one; anti-choice or anti-life; gun control or not; death penalty or not. Goal: to raise your value above the competitor's in the most constituents' minds.

If you're a general, then you make choices between troop levels, positioning, timing, air land or sea, time of day, among myriad others. Goal: obtain the objective at the lowest or no cost.

Brushing up on Marketing or the Way of Go should help.

Posted by wayofgo at 04:44 AM | Comments (0) | TrackBack

December 23, 2005

The President’s Decision Analysis 101 aka FISA Savvy Terrorists

I’m the first to admit that I had no idea about FISA – the Fone Invading Spy Act, the law that says you need a secret judge to get authorization for your wiretap, even if the authorization is after the fact. I operated under the assumptions of modern culture that my government would spy on me whenever it wanted to (c.f., “Enemy of the State,” “The Net,” “Above the Law,” “Sneakers”). Can’t tell you how many conversations I had on my cell or at home where someone would say, “It’s between you, me, and whoever’s listening.” Glad to hear that there are laws to prevent this from happening; don’t know if that will make me any more cautious on the phone. Not that I’m doing anything!

What I did not realize, however, is that terrorists know the laws better than I do. I suppose that’s part of the terrorist training curriculum. I can imagine the syllabus entry: “FISA’s Too Slow! Relax! You Can Make Calls Inside the US to Foreign Countries Without Getting Wiretapped.” (I suppose it doesn’t have to be part of the training program… maybe if you grow up in a terrorist friendly village, you learn it by osmosis (Hard to tap osmosis… Hmmm)). Now why, you say, do I now know that this must be part of every terrorist’s internal mindset? I came to this realization when President George W Bush got really mad because someone disclosed the secret wiretaps.

Before I actually read through the paper on this breaking story, I heard about these secret wiretaps on my local news radio and just shrugged it off. “Secret wiretaps, humph!” I said to myself, “Major movie studios have been telling me about them for years.” But the President knew, as all those terrorists knew, that secret wiretaps were illegal. Therefore, because of the lengthy, onerous procedures of FISA, terrorists could operate willy-nilly. I mean if terrorists weren’t FISA-savvy, why would the President be mad?

Let’s say that they weren’t FISA-savvy. If some of the card carrying members of ______ (your least favorite terrorist organization here) thought the Bush/Cheney government would eavesdrop on their conversations, they would have not relied so heavily on transmitting their secrets over the phone lines, would they? They would have figured out how to carry out operations by phone or other means so that they wouldn’t be caught if wiretapped. If this were the state of the terrorist thinking, then secret wiretapping would reveal little to no info. Terrorists must have been confident in the law-abiding President and FISA, in order to conduct such operations by phone, and we know this because Bush is so angry at the disclosure of this now not-so-secret wiretap program and his telling us of how this is helping terrorists (Might also be possible that potential illegalities are exposed, but that’s another topic).

It must be the case, since Bush is angry and believes that this was not illegal, that terrorists knew about FISA, knew that America wouldn’t break laws to try to prevent another attack, and that they would phone each other with reckless abandon, knowing the law on wiretaps, or at least slowness of FISA, was on their side. They had to believe this or they wouldn’t be using their phones to conduct terrorist business.

Bush, therefore, tricked the terrorists for the last few years. He convinced the terrorists that the USA was a law-abiding country (let’s ignore prisoner treatment for now) and was therefore going to not interfere with even the questionable-public’s phone conversations. There must have been some weighty conversations going on given how the terrorists must have believed in FISA.

Potential Terrorist Phone Conversation
Ted (terrorist #1): “Bill, I have this secret plan to blow up something. Can you help me get $1,000,000 in C4?”
Bill (terrorist #2): “Ted, aren’t you worried that the US Government is listening to our call?”
Ted: “No dude, remember our training on FISA?”
Bill: “Oh yeah, it’s so lengthy and onerous to hear our calls; we can speak freely about our plans.”
Ted: “Right on. Now about our evil plot and the C4…”

To have some yahoo inside blow the entire secret wiretapping gambit is a travesty.

I mean look at just some of the quixotic odds that Bush had to ignore in order to make this secret wire-tapping a success. Below are the probabilities that:

- terrorists believed we were law abiding – 1,000,000,000 : 1
- terrorists, so believing, would give up good information over the phone, instead of speaking covertly or otherwise – 50 : 1
- our intelligence apparatus would be able to sift through the millions of phone conversations (including those of PETA and other anti-war camps) and find the various needles in the haystack that would thwart a terrorist attack – 10,000 : 1
- if we found the right needle from the right haystack that it would lead to the right action to prevent a terrorist attack – 500 : 1
- if the secret wiretaps were disclosed, it could bring a criminal case / probe – 1 : 100
- a case / probe would lead to impeachment – 3 : 1
- lessening of trust from Congress – 1 : 1,000
- lessening of trust of American people – 1 : 3
- making lawmakers less effective – 1 : 1,000,000

Even without baking in the jeopardy to the President, the odds of preventing a terrorist attack as stated above are about 250 quadrillion to 1. 250,000,000,000,000,000 : 1. Pretty low odds.

But, we also need to assume how the President looks at his decision analysis. There is a rationale to all of this. Here is what I imagine the President’s calculus must look like to justify such measures:

- a stem cell – nearly infinite worth
- a human embryo – infinite worth
- one American – infinite worth
- reinvoking 9/11 = priceless

When you look at it multiplying 250 quadrillion to 1 odds against priceless and infinity values, (namely, anything that supports saving those stem cells, embryos, non-captured Americans, and 9/11 memories) most any action is justified.

The problem lies with whatever alternatives there were (not just for this, but for Iraq, ANWR, etc.). Given the infinite values will always justify anything, you can still act more cost effectively if other measures improve on the 250 quadrillion to 1 odds you’ve set off with the secret phone taps. But, since we’re not the President, we can’t know what he knows until far after the fact, even if then.

So, relax about this whole FISA thing. At the end of the day, the President’s career, criminal record, and the Constitution may be in jeopardy, but for any chance of stopping terrorists, especially as the President must believe, savvy ones, we’ll always do the right thing as long as there’s some chance we’ll be right given infinite values for the above; however infinitesimal.

Posted by wayofgo at 01:09 PM | Comments (0)