Brain Buster Great Marketing

The Paradox of Choice

Yesterday I saw two demonstrations of  Barry Schwartz’s Paradox of Choice in action. This is one of the most useful books about decision making that I have found, and is a must read for anyone in marketing.

Jeff Bussgang asked why everyone still uses 4 year vesting schedules at startups when, in the current economy, exits usually take longer. For those that don’t speak VC – employees at startups get shares of the company, usually granted in 25% chunks at the first four anniversary dates – to encourage them to stay four years and get all their shares. (Shameless plug – if you want to learn more about how to speak VC, check out the Marketing Over Coffee interview with Jeff that will be posted the first week in June)

It’s a good argument, but as you can see from the post it has generated many comments – and this goes right to the Paradox of Choice. The more alternatives someone faces when making a decision, the less likely they will make a decision.

This is most easily demonstrated at a store I go to during the summer in Northern Michigan. They sell different kinds of jam and jellies, and they have about a dozen of them out to taste test, and that’s a problem. If there were two out you would like one better than the other, and maybe buy it. An Economist can mathematically represent this, they use a unit called Utils (rhymes with noodles) to measure the benefit of making a purchase. Bob really likes Jelly A, buying it gives him +5 utils, he does not like Jelly B, buying it would not give him any utils. 5 utils beats the 4 util cost of giving up the $7 to buy it, so he does. His day is now 1 util up with his jelly, the store owner closed a sale, and there is much rejoicing.

Things get more complex when Jelly C is added to the table. Bob likes it, but not as much as Jelly A, he only thinks it’s about +3 utils. Here’s the problem – let’s also say that Bob will only buy one jelly because he knows that even one is really too much and it will sit in his fridge for a year and he will throw half of it out when it’s moldy.

With the third jelly on the table, now if Bob buys Jelly A he’s going to take a hit of -1 util for the regret of passing up Jelly C, which he also liked (but not enough to give up Jelly A). A buyer will be less satisfied with their purchase if they have to rule out alternatives. You can see where this goes, by the time the store owner puts Jelly K (the 11th jar of jelly) on the sample table, the psychological baggage of having to make a decision, including the negative impact of the foregone alternatives actually outweighs the pleasure of making a purchase.

So, changing a 4 year vesting schedule is an interesting idea, but is opens a world filled with alternatives. Unless any of these options are REALLY great (unintended VC pun), the odds are good that no decision will be made. This is the basis for all the stats you hear about having to be 10x better than a competitor to win customers away from them. If you only have one or two features that are better than the competition, odds are that’s not enough to get them to wade through all the work of making a decision (“switching costs” in Economese, which can be real dollars or just psychological labor).

At the other end of the spectrum, @cc_chapman generated some heat admitting that he’s never been to a Trader Joe’s. Many fans of the store cite the quality of the goods, the low cost, the selection. There’s one factor that’s consistently misunderestimated (yes, both): choice is often removed from the equation.  Schwartz gives the example in the book of 85 types of crackers at the local supermarket, again the weight of the decision making baggage. There are some items at Trader Joe’s that have only one option, from there the benefits pile up: smaller footprint for the store, more efficient use of space, more types of products, ability to cut the best deal by limiting suppliers.

And so, as my Friday begins I offer two pieces of unsolicited advice: read Paradox of Choice (and use that link so I get my affiliate kickback), and to C.C. (and everyone else), get the frozen Tuna Steak from Trader Joe’s, thaw it, throw a cast iron pan on to your grill on high to warm for 10 minutes, throw on half a stick of butter and blacken the steaks with a dry rub. Add your favorite beer and enjoy the long weekend.

Gaming Geek Stuff

All About the Gear

I’ve decided to get an iPad, a few people in the office have them and I’m impressed with both the screen and the Kindle App. I bought a Sony PSP so I could watch movies while traveling without booting up my laptop, it had a bigger screen than the iPod touch and could also run Skype.

The iPad screen is even better, and the fact that I can leave behind my Kindle, PSP and iPod when I travel makes it a good upgrade. To fund my gear addiction I’ve got the PSP lot up on eBay and I’ve also decided to unload my spare Logitech Presenter. I was looking into getting a new Microsoft Trackball, I’ve found it Logitech Presenterto be much better than a mouse, and learned that they have stopped making them. As a result, new ones are going for up to $400 on Amazon.

I remembered hearing that Logitech stopped making the presenter I use (a wireless controller to advance slides while you are presenting), so I checked the pricing on that. Same deal, it’s up over $200 (I bought my spare at a Circuit City that was going under for $35).

This presenter is considered the gold standard by many, it has a timer that vibrates when you get to 5 minutes and 1 minute remaining, it has a laser pointer, and it’s smaller than the new model. Apparently the new one also has the “blackout screen” button too close to the advance slide buttons.

Those are the latest tales from the gear bag, anything interesting on your side?

Daily Life The Marketeer

Do You Know Anyone Serving in Iraq or Afghanistan?

On Sunday I will be running the Run to Home Base, a 9 km road race that will finish at Home Plate in Fenway Park. As part of this race I raised $1,000 for a fund run by the Red Sox Foundation and Mass General Hospital to benefit soliders with traumatic brain injuries and/or post traumatic stress syndrome.

For a huge change of pace I am not hitting you up for money. Thanks to the listeners of Marketing Over Coffee (and my family – thanks John and Helen), I’ve hit the goal so that I don’t have to pay any more than the entry fee out of my own pocket. But as a valued reader of this blog, you can still help out, and help someone you know.

During the race volunteers will be making care packages for service men and women in Iraq and Afghanistan. They are saying they will have far more care packages than recipient names. They’ll probably all be sent regardless, but, if you know anyone serving there send me their information and they will be sent one of these care packages. It would be best if I get the info before Tuesday, you can email me at john at them$how dot c0m ($=s), or friend me up on twitter @johnjwall and DM me.

I’ll also have to post some pics of the official Marketing Over Coffee race shirt…

Daily Life

Friday Entertainment

This is pretty much what our home was like when my brother and I were teenagers. It’s at about a 3 Stooges level, so I found it quite amusing.


Brain Buster

Ruled by Price

Seth Godin had a post today about Becoming the Bus Company, a list of common behaviors that are exhibited by organizations well on the road to trading commodities as opposed to providing a remarkable service. It makes me wonder if all companies that fail to innovate are doomed to walk this path after their glory begins to fade?

It seems like a vicious cycle – as competition gets fierce, customers use online tools or purchasing departments to always get the lowest price. As a result the companies focus on trimming every penny and things start to suffer. In turn, morale slowly fades as everyone gets crushed under the bureaucracy.

Companies like Southwest and Virgin, built around a vision (reminding me that they have their “Why” in order), remain above the fray while everyone else teeters on the verge of bankruptcy.

My big question is: Does anyone have an example of someone that pulled it back from the edge? The only thing I can think of is Apple with the return of Jobs. Even more interesting – has it ever happened from the bottom up, or is this limited to dynamic leaders?

Daily Life Podcasting

Headphone Update – Getting Better Sound Out of the iPod

Long-time readers of this blog are well aware of my addiction to audio equipment (and in fact, my post talking about Bose vs. Shure vs. Sony still gets a ton of traffic).

For some reason it’s always the product marketing guys that get me into new audio equipment. This time Bruce was showing me his iPod set up. For less than $30 you can get a converter that plugs into your iPod port that will give you something closer to a true Line Out. Hardcore audio people that use big expensive headphones are often disappointed at their portable player’s ability to really drive the headphones. By using a line out there are two benefits – being able to use a better quality amplifier than the one in the iPod (a “cleaner” sound, usually more bass that is tight, clearer highs and you can go louder overall), and some believe that bypassing the internal amplifier reduces some noise and gives you better battery life. I cannot attest to those, but I can say that while testing Bruce’s rig the sound is better.

So, for less than $50 you get the line out dock (or LOD as they call it on the audiophile boards), and a portable amp that  is only slightly larger than the iPod Nano that had the round control on the front. It should be noted that makes a killer portable amp which can be a huge upgrade if you are running a PC laptop, but it is a lot larger than the FiiO and takes 4 batteries. I went for the cheaper, more portable amp.

I’ll post some pictures when the full geek gear shows up.

I also picked up some bluetooth headphones and a BT adapter so I can use it on any audio device, but the weather has been great so I probably won’t get around to those until the bad weather comes back and I’m in the gym.