01.20.06

Group Work

Posted in MBA at 2:26 pm by Jason

I know I know the MBA is supposed to be all about working in teams and the power of the group dynamic…

I think this will be the most valuable lesson that I take away from my time at Anderson because I am still finding it very hard to work effectively in my teams. It is so hectic day to day that it is just easier to divide and concur on most of the work; “you take this I’ll take that and we’ll assemble it just before submission.”

While this is usually the easy thing to do I think it is also the most unfortunate. It is not often that one gets the opportunity to develop their teamwork and leadership skills in a protected environment and I think I am learning that true value can come when effort is put into developing synergy. When the team is able to come together and create a force greater than the sum of it’s individual members…

I will keep my focus on this goal and try to resist my urge to just “Do it myself”… It won’t be easy though :)

01.16.06

Web Attention Deficit Disorder

Posted in Marketing at 3:41 pm by Jason

Users on the web have VERY short attention spans… This is not a knew idea, but recently Seth points to a study that claims we don’t get the 3 seconds we once thought that we did; we get 50 milliseconds :)

While this number may sound unbelievable, one should recall the last time they used a search engine to find what they wanted. Presented with sometimes millions of results for your search, you set to work finding the best site. This is usually performed quite fast… I know that when I am sifting through the top results I am usually making snap judgments on the site’s quality, presentation, and focus. If it doesn’t look like it scores highly on those three things, in an instant, I am clicking the back button.

This is why it is paramount to present a well designed site; one that is well laid out and provides a natural eye path for the user to read down the page quickly and find what he is looking for. Equally important to your sites success, is knowing WHY a user is on the page he is on :) Users land on your site for different reasons (I know this is obvious). As a site designer it is important to architect the site in such a way that you serve the needs of those different users. Some want information on the product, some are researching for later purchase, and others are just looking for the quickest (and safest) way to buy. Each one of these people wants to see something slightly different, and if you don’t show it to them QUICKLY the potential customer may be lost forever…

01.14.06

Make up Days…

Posted in MBA at 4:09 pm by Jason

When did these get invented? When I was in undergrad at UCLA we never had to go to school on some alternate day to make up for days that were taken off due to national holidays. For some reason it seems to have become common place at Anderson. We just had to go to school on Friday to ‘make up’ for the fact that we’re getting MLK off. Last quarter it was even worse. We got 1 day off for thanksgiving, but had to go to school 2 more days to make up for it. That just doesn’t make sense to me :)

New product adoption Part 1: Is there still a chasm?

Posted in Marketing at 3:47 pm by Jason

In Seth’s recent posts he explains the new product adoption lifecycle and explores how much traditional marketing has power over it. Some commenter’s seem to think that Seth is trying to contend the adoption cycle all together. I whole heartedly disagree…

You can’t market away the cycle. Even in his example when he removes price altogether there is still the power of ‘inertia’. And while it can be debated that new marketing tools could play a greater role than current mass marketing tools in speeding the cycle there is NO way to eliminate the process altogether. There will ALWAYS be a cost of switching. There will always be a few people who adopt early, middle, and late. All we can do is ‘squish’ the bell curve. And this is where the new, cheaper, tools of marketing come in. They reduce the barriers of information exchange and allow for trust network based diffusion, which WILL speed product adoption.

If price were to be re-included into this exercise it would only prove to make it more unlikely for the bell curve to disappear. It can be argued, as Rogers did, that this bell curve is like a queue where every person in the market is ordered by reservation price. There are people who MUST have the product now and if you engage in penetration pricing you will only be giving away consumer surplus to those who would have bought at the higher price. To argue that marketing could raise everyone’s reservation price to the point of the innovators is a little absurd, but perhaps there is an equilibrium price where we balance reservation price with profits, but that’s for a later economics discussion…

So, no, Seth is clearly not disputing the adoption cycle or the existence of Moore’s Chasm. In fact, if you read the punch line in part three he is challenging marketers to rethink their role. We need to realize that throwing money at the problem is not the solution. To answer his earlier question, marketers are not peddlers of lies they are the shepherds of the masses. They help to guide those who will benefit from an idea or product to the realization of that benefit. Couple this with the idea of Rogers’ consumer categories and it says we need to send the message in a different way for each class of consumer and potentially even change the product itself to meet changing needs as we cross each chasm to the next category.

New product adoption part 2: A little Bass with your Squid Soup?

Posted in Marketing at 3:46 pm by Jason

Frank Bass borrowed a model from immunology to describe how new products diffuse into a market. This model is very elegant, both simple and powerful. Using only three variables (coefficient of innovation, coefficient of imitation, and market size) it is able to fairly accurately model diffusion. It does this by recognizing that there are a few people in the market who act on their own and make decisions independently of others (the innovators) and a few people who are influenced by the installed base of adopters (the imitators), this is called an installed base effect. Bellow is the Bass equation in all its glory.

S(t) = [p + q(Y(t-1)/m)] * [m – Y(t-1)]

Where S(t) is the number of new adopters in time period t and Y(t-1) is the total number of adopters from the prior period. Essentially the first bracketed part of the equation is the probability of getting a sale, either through innovation or imitation. The second bracketed part is the remaining untapped market. Thus, if we multiply the probability of adoption by the number of people remaining we get the number of adopters for the current period.

Immediately one should ask, “Where do we get m, p, and q from?” Well, there are various methods for finding these numbers. First we can use analogy. By using p/q values from similar products we are able to infer a likely value for this new product. Second we can use historical data. Perhaps we have sales data from another, comparable, geographic region or early sales data from the product in question. Finding m is a little bit more of an art even than finding p and q. We want to try to start with the most inclusive market and systematically reduce it until we have found a best guess. For example, we could use the number of households in the US for the color TV market… Then we can perform sensitivity analyses on these data to see how affected our estimate is by error in our estimates of the values we arrived at for p, q, and m.

Once we have our values we can plug then into the bass model and estimate the diffusion process. One point to note is the point of inflection. This point represents maximum demand for the new product and is an important figure for production sizing. It also represents the point at which demand will begin decreasing.

A short example for Seth’s Squid Soup: I’m going to somewhat arbitrarily take our market size to be one million (I know it’s a big buffet). I will then take a slightly conservative value of p = 0.003 (Average value of p for all products studied is 0.03) and a slightly less conservative value for q = 0.7 (average value of q is 0.4). My reasoning for selecting these values is as follows: I have to imagine that squid soup will have a bit of a bad reputation from the get go (i.e. a lot of negative inertia) which is represented by the low value of p. However, assuming the soup actually does taste at least somewhat good, after those few innovators display their pleasure in eating squid soup it will have a strong influence on the remaining untapped market. (I chose to rely on taste for this example because this product suffers from observability issues. Meaning that Squid Soup is supposed to be healthy, and that is its benefit, but that feature is VERY hard for the untapped market to observe definitively, whereas people can readily observe and hear people’s enjoyment of the taste.)

S(t) is new adoptions for that year (We’re also simplifying the example by assuming that you only eat squid soup once, though the model can be modified to take into account repeat sales). Y(t) is total adoption up to that period. And “Trip” is what I am using for time period, i.e. trip to the buffet line.

NOTE: All sales figures are in thousands.

Bass Diffusion GraphBass Diffusion Table

From the graph we can see this product starts very slowly but then once it reaches a “critical mass” of adopters the installed base effect takes over and growth is very rapid. Then we reach the inflection point (at trip11) where we have maximum demand for Squid Soup at 174,300 adopters. After the point of inflection demand begins to wane as the untapped market shrinks…

New product adoption part 3: Mind your P’s and Q’s.

Posted in Marketing at 3:45 pm by Jason

In the previous post we discussed a model for forecasting new product diffusion in a market. We discussed ways of finding values for its three inputs m, p, and q. Finally, we worked through an example using Seth’s Squid Soup. Now I would like to discuss the impact of price and advertising on this model (Because we’re marketers :) ).

In its most simple form, the Bass model does not account for effects of price or advertising, but clearly this has to affect product diffusion. There is a more general form of the Bass model that allows one to scale based on parameters one thinks must impact diffusion, such as price or advertising.

S(t) = [p + q(Y(t-1)/m)] * [m – Y(t-1)] * Z(t)

Z(t) = 1 + α [% change in variable]

Where α is the elasticity of the measured variable, and %change is the percentage increase or decrease in the variable from the prior period. For price this is simply the percentage change in the price. However, it is a little bit more ambiguous for advertising, but dollar spend can be used…

In this equation, Z(t) is affecting both q and p, but it is also possible to scale one variable or the other as well. For example, p(t) = p(0) + α*Price(t). This alpha is not the elasticity, but some other scaling variable.

As an example let’s return to Squid Soup. We will leave price at 0 and only look at the effect of advertising. Initially advertising should be informational to persuade the innovators to adopt. Then as we move across the adoption cycle we should adjust the mix to be more persuasive to affect the imitators. For this example I will simplify, and just say “we’re advertising”…

I’ll set α at 0.8 and I will initially spend $1 on a sign that say’s “Squid soup is great for your health! It increases vitality by 15% and reduces cholesterol by 50%”. Then I will grow the ad budget by 100% each period for the first 5 periods (buying all the signs my budget will allow for $1) and continue at that spend for the remaining periods.

Z(t) will then be: 1 + 2(1) = 3 (for the first 5 periods) Giving us the following diffusion forecast:

NOTE: All sales figures are in thousands.

Bass Diffusion GraphBass Diffusion Table

As you can see from the table, we have moved the inflection point forward three periods and accelerated adoption overall. Notice the effect of ceasing our advertising budget growth in period six.

Anyway… enough fun with Bass and Squid.

01.09.06

The sleep number bed

Posted in Marketing at 12:06 am by Jason

I have owned a Sleep Number Bed, by Select Comfort, for about five years now. I love the bed…

Recently my wife and I decided it was time to make more room for our cats and get a king size bed. Naturally, I wanted another sleep number. Though we actually did our comparison shopping, even considering a regular mattress (Damn those things are HEAVY), we still returned to the sleep number bed as the right bed for the quality, cost, and comfort. So, being the avid researchers that we are we hit the internet for all the new model information. We compared all the features and prices of the different model sleep number beds and were trying to decide between the 3000, the 4000, and the 5000. It wasn’t all that easy to see what you got for the additional money in the 4000 and 5000.

Here’s where the marketing aspect enters :)

They do an excellent job in delivering their message on-line as well as in their TV spots. Their phone customer service and sales are quite pleasant and seem knowledgeable. Where the system breaks down TERRIBLY is where I think it is most important, their in-store sales. Their in-store sales staff (at least in the 3 stores I went to) totally misses the mark in delivering the marketing message of select comfort. It’s almost as if select comfort is relying solely on the presence of the bed to deliver sales.

“Here, lye back and be sold…”

Because if that doesn’t sell the bed they certainly aren’t going to get any help from the staff. Perhaps I am just a really educated consumer, but every time I ask a question I am met with a look of total ignorance. Even questions that I ask merely to keep some kind of conversation going (and that I already know the answer to, because it’s in their brochure). I find this to be a glaring hole in their marketing system.

After repeatedly being disappointed whenever I went into a store I finally bought mine over the phone. Why? Because for some reason there was a discount on the phone that wasn’t accessible on-line… I also found their phone sales staff to be more informed than I was (a breath of fresh air). Perhaps this was merely because they had the unfair advantage of a computer terminal with all the technical specs of the beds :) Either way, the in-store sales staff should, in the very least, have an intimate knowledge of the sales material they hand out to customers.

01.08.06

Here we go again

Posted in MBA at 8:56 pm by Jason

Tomorrow is the first day back after winter break… It is hard for me to get back into the swing after having so much time to devote 100% to my business. But, my bags are packed, the coffee timer is set and tomorrow the journey will begin again.

This quarter looks like it will have MUCH more group work than last. We have 3 core courses: Corporate Finance, Marketing II, and Operations Management. I elected to take a fourth class, even though it was not required. It is called ‘Entrepreneurship and Venture Initiation’ and after reading the syllabus I nearly dropped the class :) It will add considerably to my workload considering it has 8 group writing assignments (which is just about as many as the other 3 combined). So i am a little worried, but it also seems like it will be a very applicable class so i will stick it out.

More to come as it developes…

01.06.06

Why I went back to school…

Posted in MBA at 2:33 am by Jason

I run a small on-line marketing business, I am married, looking to have kids, have a LARGE mortgage, and two cats… Why on earth would I try to go back to school and get an MBA?

I’m not sure…

I mean if you have applied to any graduate program you are “supposed” to know why you’re going. They even make you write an essay, or seven, eloquently describing, in great detail, how sure you are about this decision :) Total bollix! I think the admins must know that the vast majority of people applying to most graduate programs have no idea what the end result will be (I guess unless it’s med or law). Anyway I digress… My point being that I have yet to talk to a single student at Anderson who really knows what they’re doing there.

OK… So we’ll take this in two parts. Why I applied and why I stay enrolled :)


Why I applied: After I gradated from UCLA the first time I almost applied to Anderson thinking it was the next step on my path to great wealth. Luckily, reality set in and I continued on to consulting for a major bank making more than I deserved. Fast forward 5 or so years and here I am pondering applying again. Only this time I have made a relatively decent living and am running a small business which I think could possibly benefit from a proper business education :) To be honest I sort of applied on a whim. In January 2005 my wife suggested I just take the GMAT and put together the best application that I could in the 1 month I had left before the third round deadlines. So I did…

I did quite well on the GMAT and got the score in just under the deadline :) I decided to apply to UCLA and , half heartedly, to USC (as a backup, mind you an expensive one). Why UCLA? Because it was ranked 14 at the time, #1 for entrepreneurship, but ,more importantly, because it was local. USC had just fallen to 27 and had more of an international flavor, so I was not too warm to shelling out the big cash they wanted for something that I didn’t really love. Luckily I got in to UCLA :)

So here I am going to Anderson… I tell them my reasons are to learn how to grow my business and to take advantage of the entrepreneurial environment they foster, but I’m still only vaguely believing that. My greatest hope was that it wouldn’t cost me what I had already built in the process of reaching for something greater.


Now I’ve finished my first quarter and am just about to dive head long into my second. So…


Why I Stay: Sometime during the first few weeks of the first quarter I found myself sitting in Econ listening to the economic reasoning behind getting an MBA sooner rather than later. The professor was trying to illustrate present value theory and the relative cost of sacrificing income at 28 vs income at 50 (ie there are many earning years after 28 rather than 50 and your salary at 28 that you’re sacrificing SHOULD be lower than that at 50)… Anyway :) This is true, I guess, regardless of your relative income at 28 compared to your fellow students AS LONG as your income actually increases as a result of this undertaking. Simple investment analysis :) The part that bothered me was his comment on how little we all made. Not so coincidently, my marketing professor also made a few comments to that effect. Well perhaps I am an atypical case or something, but I make a damn good living and this education has a VERY high opportunity cost for me right now…

So back to simple investment analysis :) Can I possibly make a profit? At first I thought OF COURSE! I thought there would be some magic awaiting me at Anderson. Well, perhaps there is, but I have yet to find it (at least I am still diligently looking). So I ask people I know who have MBAs if they thought it was worth it. They almost all say it was, but they also weren’t running a company before they signed on and they aren’t now either… I ask a professor or two and get something similar to what the MBA party line seems to be “It teaches you a way of thinking”. Hmm… What if I already have that way of thinking :)

Oh, i was supposed to say why I’m still here. I’m still here because I’m fighting the urge to quit too soon. One of the hardest things I think I have found to do is choosing between two ‘potentially good’ things. Your urge is to hold on to both opportunities until it is obvious which is best. The problem is that in doing so you usually lose them both.

That’s where I’m at now I will keep you posted…

01.05.06

Orientation in Review

Posted in MBA at 2:03 am by Jason

A review of this experience will have to suffice, I only started blogging last week.

UCLA has a 2 week orientation that is split between a two unit course entitled ‘Leadership Foundations’ and what most people would consider a true orientation (where you learn how grading works, where the library is…).

The orientation experience starts off with Leadership Foundations. This class was devised to help students start off on the right foot as they begin their MBA. We engaged in many group dynamic experiences from A Ropes Course to working with an improve troop. I’m sure the designers were well intentioned when they included these activities in the program. An MBA is most certainly made up of MANY group exercises and this was supposed to get us warmed up to that, I guess. I found it to be a little bit of a waste of time. Most of the participants were clearly doing their best to get out of their shells and participate. However, as the week wore on I kept wondering when the rose colored glasses would come off and reality would be restored :)

Well, though I kept waiting we really never did return to reality that week, or the next for that matter. We all kept on pretending to be nice and pretending we cared about all our fellow students. It really started to get to me :)

The class is culminated with a final deliverable… They call it a Leadership Map. It is a written ‘Map’ to help guide us on our journey to be better leaders. During the week we kept a journal of the things we learned about ourselves and special insights we gained. Then we merged all of this into what we thought was the best course to turning ourselves into better leaders. While I would like to be a pessimist and say this was total crap and a waste of time, I can’t. I actually found it to be a good exercise in self reflection and introspective thought. I’m not sure that I learned much about myself that I didn’t already know, but it certainly brought these things into sharp focus for a short time.

After our maps were turned in we went on to week 2 where we actually started learning about what life would be like as an Anderson student. We were introduced to the library, the career center and the grading curve :) . We were also told MANY times that the first quarter would be grueling (for more on that see my “First Quarter In Review” - in short I found the curve to be WAY too forgiving and the quarter to be not that demanding).

In my opinion these two weeks of constant 7am - 7pm days could have EASILY been compressed (removing some of the time wasters) into 1 week. In doing this, it would both allow those people with other demands on their time (me) to better serve those needs and allow those new to the area to get acclimated to the environment with the comfort of the new friends found during orientation.

All in all I would rate it a 4 out of 10 :) While I did learn a bit about my fellow students and I did get some time to think on my issues, I felt that it dragged on and left me feeling burnt out just as i was about to start the “Hardest” quarter of my MBA. Oh, and the rosy glasses came off sometime mid quarter :) Reality is pesky and always weasels its way back into full frame.

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