Most memorable 2018 Super Bowl ads

Super Bowl ads are the most expensive in the world. This year average cost was 5 millions USD for 30 seconds. Check out the best ads from this edition:

Vodafone's first mobile phone ad from 1986

Strategic Mistakes

"The two worst strategic mistakes to make are acting prematurely and letting an opportunity slip.

To avoid this, the warrior treats each situation as if it were unique and never resorts to formulae, recipes or other people's opinions."

- Paulo Coelho

Top10 Consumer Tech Products - Google Searches in 2017

Check the TOP10 consumer tech products with more Google searches globally last year:

1. iPhone 8

2. iPhone X

3. Nintendo SWITCH

4. Samsung Galaxy S8

5. Xbox ONE X

6. NOKIA 3310

7. Razer Phone

8. OPPO F5

9. OnePlus 5

10. NOKIA 6

Source: Google

Top 10 Google searches of 2017

2017 is over...

Time to check the worldwide trends from the top 10 google searches of last year:






1. HURRICANE IRMA

2. IPHONE 8

3. IPHONE X

4. MATT LAUER

5. MEGHAN MARKLE

6. 13 REASONS WHY

7. TOM PETTY

8. FIDGET SPINNER

9. CHESTER BENNINGTON

10. INDIA NATIONAL CRICKET TEAM


Source: Google

Oprah's Powerful Speech at the Golden Globes 2018 - Word Cloud

Check Oprah´s full speech at the Golden Globes 2018 in a word cloud and which words stand out.

How Airlines Price Flight Tickets

Check this video that shows the logic behing the Airlines pricing strategy.

First iPhone Advertisement / Commercial

Time flies… It was in 2007 that Apple started the broadcast of this commercial.

This advertisement campaign was called Hello and it was the beginning of a market revolution.

Do you still remember this ad? 

The Smallest Countries in the World

Following the previous article about the largest countries in the world, I am sure that now you are curious to know more about the smallest countries in the world.

Most of you probably knew about Vatican City and Monaco but the rest of the list isn´t that easy, at least for those that never visit or don´t live in those countries.

Check below the top 10 smallest countries in the world (land area).

Rank	Country	Area sq.km
1	Vatican City	0.44
2	Monaco	2.02
3	Nauru	21
4	Tuvalu	26
5	San Marino	61
6	Liechtenstein	160
7	Marshall Islands	181
8	Saint Kitts and Nevis	261
9	Maldives	298
10	Malta	316

The Largest Countries in the World

Did you ever wonder what are the largest countries in the world (land area)?

I believe that most of you will be able to name up to 6 and not always in the correct order.

Anyway, check below if your guess correct from the list of the Top 10 largest countries in the world:

Rank	Country	Area sq.km
1	Russia	17,098,242
2	Canada	9,984,670
3	United States	9,826,675
4	China	9,596,960
5	Brazil	8,514,877
6	Australia	7,741,220
7	India	3,287,263
8	Argentina	2,780,400
9	Kazakhstan	2,724,900
10	Algeria	2,381,741

First Coca-Cola Advertising on TV (1950)

Check out the first television ad created for The Coca-Cola Company on Thanksgiving Day, 1950.

2018 Predictions

Let's see if you agree with these predictions for 2018:

. The mobile phone cameras quality will improve so much that it will jeopardize the industries of digital and action cameras.

. The online business market share will keep growing aggressively across most industries.

. 5G is coming and it will take the internet streaming experience to another level.

. Telco companies around the world will invest more and more in tv and music content providers companies (music, sports, movies, shows...) and in some markets mergers will occur.

. Chinese companies will be the biggest international investors, buying big slices of well renowned companies.

. Bitcoin value trend will follow Ws curves where which recovery curve tend to be smaller than the previous one.

. The transportation industry revolution will still surprise us, since the electric battery design which is leading the way will be beaten by alternative and more efficient technologies.

. We will keep talking about going to Mars... but for now it is still just talk.

Top 25 most visited cities in the world in 2017

The tourism industry is booming and before you choose your next destination, check out the Top 25 most visited cities in the world in 2016 and expected figures for 2017 (November projections):





1. Hong Kong: 26.55 million in 2016;
25.7 million expected in 2017 (-3.2% growth).

2. Bangkok: 21.25 million in 2016;
23.27 expected in 2017 (9.5% growth).

3. London: 19.19 million in 2016;
19.8 expected in 2017 (3.4% growth).

4. Singapore: 16.6 million in 2016;
17.6 million expected in 2017 (3.4% growth).

5. Macau: 15.39 million in 2016;
16.3 million expected in 2017 (5.9% growth).

6. Dubai: 14.9 million in 2016;
16 million expected in 2017 (7.7% growth).

7. Paris: 14.39 million in 2016;
14.26 million expected in 2017 (-0.9% growth).

8. New York City: 12.65 million in 2016;
13.1 million expected in 2017 (3.6% growth).

9. Shenzhen, China: 12.57 million in 2016;
12.96 million expected in 2017 (3.1% growth).

10. Kuala Lumpur: 12.29 million in 2016;
12.8 million expected in 2017 (4.5% growth).

11. Phuket, Thailand: 10.6 million in 2016;
12 million expected in 2017 (14% growth).

12. Rome: 9.4 million in 2016;
9.6 million expected in 2017 (1.8% growth).

13. Tokyo: 9.27 million in 2016;
9.7 million expected in 2017 (4.8% growth).

14. Taipei: 9.2 million in 2016;
9.3 million expected in 2017 (1% growth).

15. Istanbul: 9.17 million in 2016;
8.6 million expected in 2016 (-5.8% growth).

16. Seoul: 9 million in 2016;
7.66 million expected in 2017 (-14.9% growth).

17. Guangzhou, China: 8.6 million in 2016;
9 million expected in 2017 (5.3% growth).

18. Prague: 8.18 million in 2016;
8.5 million expected in 2017 (4.5% growth).

19. Mecca, Saudi Arabia: 7.96 million in 2016;
8.7 million expected in 2017 (9.8% growth).

20. Miami, Florida: 7.8 million in 2016;
8 million in 2017 (3.1% growth).

21. Delhi, India: 7.4 million in 2016;
10.26 million expected in 2017 (37.7% growth).

22. Mumbai, India: 7.19 million in 2016;
8.9 million expected in 2017 (23.5% growth).

23. Barcelona, Spain: 7.04 million in 2016;
7.6 million expected in 2017 (8.3% growth).

24. Pattaya, Thailand: 7.02 million in 2016;
7.3 million expected in 2017 (4.2% growth).

25. Shanghai: 6.9 million in 2016;
7.2 million expected in 2017 (4.3% growth).

Source: CNN & Euromonitor International's

Top 10 Movies of 2017 - Gross Revenue

Are you wondering which movies made more money in 2017?

Find below the highest gross revenue movies of this year:

Title/ USD (mil)

1. Beauty and the Beast - $1,263.5
2. The Fate of the Furious - $1,235.8
3. Despicable Me 3 - $1,033.5
4. Star Wars: The Last Jedi - $934.3
5. Spider-Man: Homecoming - $880.2
6. Wolf Warrior 2 - $870.3
7. Guardians of the Galaxy Vol. 2 - $863.7
8. Thor: Ragnarok - $847.0
9. Wonder Woman - $821.8
10. Pirates of the Caribbean: Dead Men Tell No Tales - $794.9

Source: boxofficemojo.com (Dec 30th of 2017)

The Value of BTL/CVM Pricing

BTL (Below-the-line), or CVM (Customer Value Management), or Segmented Pricing are all buzzwords that almost all business people heard about, but…

What is the real value of CVM/BTL Pricing for the business?

I will demonstrate it through a simplified example, so keep in mind that there are many different ways of applying it and this is just an example of a Business to Consumer model which also has above-the-line/open market offers.

So, let’s consider in this example an online retail store.

In this model the ATL (Above-the-line) price is the one presented to all unidentified customers that are surfing the webpages of the online retail store looking for great deals.

The ATL price tend to be aligned with the Demand and Supply curves intersection (Price vs. Quantity), since it is the market equilibrium point.

 Note – Usually the cost per unit sold tend to decrease with incremental quantity, but for the sake of simplicity of this model example, that cost will be stable.

Although the online business is extracting relevant profit with the ATL proposition, as you can see in the graphic above, the company is not maximizing their overall profit and revenue potential.

How to improve business efficiency and extract more revenue and profit from the market?

The business efficiency can be improved through Customer Value Management (CVM), where it can be developed Segmentation Analysis, Targeted Marketing and also Targeted Pricing, communicating tailored offers to those customers through Below-the-line channels, where only selected customers will be exposed to personalized discounted offers.

The company through CVM efficiency improvement will now have multiple supply curves to address different segments that were not willing to pay the ATL price.

So, BTL discounted offers managed through Targeted Marketing, Targeted Pricing and Targeted Communication will generate incremental revenue and incremental profit, since the customers engaged with the online store will increase, generating more sales.

In this example of the online store, how it can be implemented?

• The first step will be always through data analysis; in this example the online store may explore different data sources. Examples: The customer's accounts details in the store, their previous purchase records, or the website cookies that track the pages that the customer visited without buying the items, and others.
• From the data analysis previously described, the online store may now identify different customer segments and deliver to them personalized product/price proposals with the support of revenue/margin optimization models.
• And finally, the tailored offer must be communicated to the customer through a BTL channel (example: newsletter) so it may be promoted individually as an exclusive promotion only valid for that customer.

Following this approach, the online store can now explore new segments that before were out of reach from the ATL proposition, since although they had interest in the product, they were not willing to pay the ATL price and as shown in the graph below, the company will be able to increase their revenue and profit.

The Risk and Challenge…

… It is critical to avoid impacting customers that were willing to pay the ATL price with the BTL discounted prices.

If the segmentation analysis and/or execution are not properly executed, there is a high risk of cannibalization of the ATL revenue by the BTL discounted propositions, therefore leading to revenue erosion, instead of revenue growth as intended.

Keep in mind that proper Customer Value Management through BTL Segmentation and BTL Pricing require a lot of resources, but also don´t forget that the revenue and profit growth opportunities through BTL are also huge.

Note that Customer Value Management (CVM) is not only about BTL discounted offers and this case is just a basic example of how CVM can bring incremental value to a company.

Do you know how much your customers are willing to pay?

Your business success is directly linked to the ability of offering a price that your customers are willing to pay.

As mentioned and detailed in my previous article "What Impacts Pricing", the 3 key pricing drivers are:

• Willingness to pay
• Competition
• Cost Structure

We are now zooming on how to measure the willingness to pay of your targeted audience.

There are many different methodologies to address that research question, but I will be focusing on my preferred technique: Van Westendorp's Price Sensitivity Meter

Why I recommended it?

1. It is easy to execute.
2. The results are clear on interpretation.
3. It follows a quantitative approach; therefore if you apply a representative sample of your targeted segments in your results, you may extrapolate the results for all your targeted segments.

Also, you need to keep in mind that this research method applies open-ended questions combining the valuation at the same time of price and quality.

How to implement this research technique?

1st Step – Identify the target segments of your product/service.

2nd Step – Calculate how many potential customers are in these targeted segments.

3rd Step – From your customers universe, evaluate how many customers you need to contact in your representative sample to be able to get meaningful findings. Therefore it is recommend to contact a sample that conveys a confidence interval of 95% with a margin of error of less than 5%.

4th Step – Conduct the survey (can be in-person, by telephone, or online) with 4 open ended questions (the wording of the questions can be adjusted)

• At what price would you think that the product is too expensive to consider? ("Too Expensive" results)
• At what price would you think that the product is so inexpensive that you would question the quality and not consider it? ("Too Cheap" results)
• At what price would you think the product is becoming expensive, but you still might consider it? ("Not a Bargain" results)
• At what price would you think the product is a bargain, therefore a great buy for the money? ("Bargain" results)

From these questions you may cross the data that you collected with a cumulative perspective (Count of Customers % vs. Price Points) and create a graph similar as this:

The distance between the 2 mentioned below intersection points will give you the range of "Accepted Prices" for your product/service, from a willingness to pay perspective.

• "Not a Bargain" & "Too Cheap" lines
• "Bargain" & "Too Expensive" lines

Some researchers claim that the optimal price is on the intersection of the "Too Cheap" & "Too Expensive" lines, but I challenge that view because as already mentioned the "willingness to pay" isn't the only key driver on pricing to assess the optimal price.

You may argue that Brand strategy and Brand reputation should also be included in these pricing research assessments... and you are right!

Brand value contribution is already incorporated in this research indirectly, as long as your survey questions also mention your brand, if so, customers will incorporate your perceived brand quality and reputation when assessing the product/service price and quality value.

Conclusions:

1. This Pricing research technique will enable you to understand the acceptable price ranges for your product/service from the customer willingness to pay perspective.
2. You will only find the optimal price point (within the ranges) for your product/service after also incorporating in your assessment the other mentioned pricing drivers (Cost Structure and Competition).

As mentioned on the " What Impacts Pricing" article, the willingness to pay is really important, but it is just one of the 3 key pricing drivers.

Therefore the final price setting decision cannot rely only on the Van Westendorp's model analysis. It must also consider the profitability assessment based on your cost structure and the expected competition reactions to your pricing move.

What Impacts Pricing?

When a business manager is setting a price, he or she must understand first, all internal and external variables that may impact that decision.

So, what impacts pricing?

Price setting is impacted by 3 main drivers and the relative importance between them may be different from location to location, industry to industry and/or company to company:

1st Driver - Willingness to Pay
From Economics perspective, this critical pricing driver is boosted from the "Demand" side of the equation.

As you may expect, it has sub-layers as well:

• Customer perception

You always need to keep in mind that in the market field, perception is reality.

As already explained in the article “Brand Strategy vs. Pricing Strategy”, you can in fact have the best product in the market but that is useless if customers´s don´t perceive that quality.

• Brand Value

On top of the rational value of the product or service that you are offering, you may also have an emotional value from your brand that enables differentiation, allows to charge a premium price and also generates customer loyalty.

An example of brand value materialized in additional pricing value occurs when you have two shirts, with the same design, with the same material, from the same factory and you are able to sell that shirt with a higher price if it is branded with a recognizable and appreciated brand.

• Nature of the Product/Service

From the customer point of view there are some key questions that will allow you to understand the nature of your product/service.

Is your product/service unique or exclusive? Do you have a patent?

If you are alone in the market you probably will be able to explore higher margins, at least until competitors arrive and only if there isn´t any regulatory control.

What is the overall customer demand for your product/service category?

It’s common sense that demand is the number one key element that will affect your success. Usually the focus is on the present demand, however with forecasted technology development, "demand" can be observed also as "potential demand".

Example: When mobile phone touchscreens were launched, there wasn’t any current demand; it was a new product category that was developed under the assumptions of potential demand migrating from the mainstream keypad mobile phones.

Is it easy to find in the market any substitute for your product/services?

Even if you are the only provider in your product/service category, if customers can satisfy their needs with other offers even if not exactly the same, those substitutes will affect your pricing as well.

Example: During the Napolean wars, tea became a substitute product of coffee in England and English colonies, which changed consumption behaviors in those places until today.

Is your product/service easy to compare with others?

Even if your product/service is unique and if there isn’t any substitute offer in the market, you still must evaluate what are the relevant pricing references around, because customers will always try to evaluate if your price reasonable.

Example: Some companies are trying to launch space trips offers. When the first company launches that service, customers are already expecting a mark-up on top of the premium airline fees, therefore although is not the same service, there is already a baseline as a reference from the customer perspective.

What is the importance of your product/service category in the customer monthly budget?

Your competition is not only from your industry. You are also competing with your customer overall wallet share, so you must understand how important is your product/service category for your customers.

What is the benefit acquired when your product/service is purchased?

It’s the easiest answer for you, because probably you already have it written in your product/service slogan.

Is it possible to split the product/service price in installments?

Depending of the product/service nature, or price value, you must evaluate if you can sell your product/service in smaller installments and even communicate your price in installments instead of the total price. That is very common in automotive industry.

What is the investment already made by the customer before buying your product/service?

In this case investment is not only about money. It can be time, it can be travel distance or emotional involvement. Just keep in mind that, the greater is the previous investment of the customer the more hooked is your customer to your product/service, so you may have a chance to charge him a premium price.

Is it possible for the customer to stock your product?

In some industries this question is critical, especially when temporary price discount promotions are considered.

When the product is perishable, the customer cannot stock it for a long time therefore a temporary discount will not impact significantly your future sales. However if your customers can stockpile your product and if there is a huge temporary price discount, it is expected that many of your customers will anticipate their purchases, and although it looks a promotion success in the short term, your future sales will suffer a huge hit.

What is the nature of the demand of your product/service related with customer income?

It is very important that you know your product/service nature, to avoid making pricing mistakes in the future.

Therefore if the customer income increases how that impacts your product/service demand?

1. If the demand decreases, you are dealing with an inferior good type of product/service.
2. If the demand increases but at a lower level than the income variation, you are dealing with a normal good type of product/service.
3. If the demand increases more that the income variation, you are dealing with a luxury good type.

Let me clarify that if you are dealing with an inferior good is not negative per se. There are many “inferior goods” that are very successful in the market and they tend to shine even more in economic downturn cycles.

2nd Driver - Competition
Your positioning in the market is relative to your competitors positioning.

An usual mistake that marketeers make is that they think they can define alone their product or brand positioning in the market.

That is a huge mistake because your Brand/Offer positioning is made solely by your customers and also considering your competitors Brands/Offers, therefore what marketeers can do is define and implement a strategy to aim an intended positioning, but that positioning is never 100% under control of the business manager.

Before you define your pricing strategy it’s imperative that you make a comparative analysis with your current and potential competitors, regarding:

• Prices
• Perceived Quality
• Market Share

Keep in mind that you must expect a reaction from your competitors when you make a market move.

3rd Driver - Cost Structure
This driver influences the supply curve in the market and is the backbone of your strategy because it is through this assessment that you will understand your pricing limits.

Regardless of the willingness to pay of your customers or your competitors positioning, to survive, you must have a sustainable cost structure to be competitive in the market.

Understanding and controlling your costs defines your competitiveness level in the market, your margins and in the end your profit so that is why it is so important in pricing.

So, the first step to understand your cost structure is to split your costs in 3 different types:

. Variable costs – This type of cost is directly linked with your production or selling operation and it is applicable per unit produced and/or sold. Therefore you only have these costs if you are active in your business (producing or selling), so if you would froze your business activity, those costs would stop immediately.

On the long run in competitive markets, all prices tend to meet the variable cost per unit.

So, with that premise when you launch a new product line without incremental fixed costs, the Variable Cost Method is applied to evaluate that price setting.

. Fixed Costs – Those are different from the previousones because they don’t depend directly on your activity, which means that you still have them even if you stop producing or selling your product/service for some time.

Example: Even if you don’t produce or sell anything, you still have to pay your office rent. That is an example of a fixed cost.

When launching a new business or a new offer portfolio that requires an incremental CAPEX budget (Capital Expense), the Total Cost Method (variable costs + fixed costs) is more suitable to evaluate the price setting.

. Opportunity Costs – These costs are extremely important and harder to manage since most of them are driven by assumptions and by future forecasts. Long story short, it is the expected outcome of the best alternative of your intended action.

Usually the Opportunity Cost Method is applied by companies already set in the market when they are evaluating a change on their products (offer replacement or price adjustment) without incremental fixed or variable costs.

Sometimes this method is also applied on top of one of the previous two described (variable or total cost methods).



CONCLUSION
Price setting is a complex business activity with many variables to consider within the 3 key drivers:

1. Willingness to Pay
2. Competition
3. Cost Structure

The main objective of this article is to show that Pricing should not be driven by gut feeling and you would be surprised with the number of companies that drive their pricing strategy solely based on gut feeling instead of these drivers.

John F. Kennedy Inspirational Speech in 1961

One of the best speeches of all time from John F. Kennedy (1961):

"There is no strife, no prejudice, no national conflict in outer space as yet.

Its hazards are hostile to us all.

Its conquest deserves the best of all mankind, and its opportunity for peaceful cooperation many never come again.

But why, some say, the moon? Why choose this as our goal? And they may well ask why climb the highest mountain? Why, 35 years ago, fly the Atlantic? Why does Rice play Texas?

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too."

How to do it...

Everyone can introduce a new offer in the market, but not everyone knows how to do it well.

Each industry has different nuances that must be incorporated, therefore the approach that I will describe next is flexible. Consider it only as a guideline and always incorporate the specifics from your market or industry when you start this process.

Always follow these 5 steps if you want to launch a new concept or offer.

1st Step - Research, Research and Research some more

Even if you feel that you had a brilliant idea, before yelling "Eureka" as Arquimedes once did, you must run an extensive research on top of it.

You will have to:

• Collect internal and external data.
• Apply qualitative techniques (e.g. focus groups) and quantitative techniques (e.g. representative surveys) to identify and test the hypothesis.

Make sure that by the end of your research, you are able to answer at least the following 7 questions:

1. What are the relevant segments in the market, their profile, size and value potential?
2. What are the current offers in the market that are addressing the demand for your future product or service?
3. What is each segment current perception of the service they are getting from their current providers, regarding availability, affordability and quality?
4. What are the relevant features or advantages that would persuade those customers to shift their demand and adopt other provider?
5. How much your potential customers are willing to pay?
6. What is the current channel distribution structure in the market, the key players and their influence, commissions and other costs related?
7. What are all the expected costs (Cost of Sales, Operational Expenditure and Capital Expenditure) required to launch and maintain your new offer?

If you are already an established business and you are just looking to add another line of business to your portfolio, you also need to get the answers for the following 3 questions:

1. How is your brand currently perceived in the market?
2. Is your current brand positioning compatible with your new concept? Or, do you need to create a new specific brand for this new offer, so you don´t jeopardize your other businesses if the targeted segments are incompatible?
3. What are the opportunities within your company universe (other services/products) that can be used as an added value on top of your new offer or if those already engaged customers can be leveraged on a cross-sell strategy to your new service/product?

2nd Step – Strategize... before you attack you must always have a solid game plan

Your strategy must always include the following:

• Clear target segments and their expected value.
• All offer specs, including all required features, packaging, prices and desired brand positioning.
• Distribution plan, that must be coherent with your targeted segments profile by investing more on the relevant distribution channels (e.g. digital vs. physical channels mix).
• Communication plan, which must also be coherent with your targeted segments profile by pushing more ads and promotional activities on the channels that have more reach on the targeted segments.
• Financial assessment, before you finalize your strategy you must challenge it by running a profitability assessment, estimating all the expected costs and revenues in the near future (at least 3 years ahead) and estimate when you expect to achieve your break-even point.

3rd Step – Test it for real… with potential real customers.

At this stage, usually a qualitative approach is applied by having a focus group up to 8 people with the same profile of your targeted segments and by collecting their feedback.

Note that since it is a qualitative research technique and with a small sample, the findings won´t be representative of your targeted segment, so be careful and don´t extrapolate your interpretation from this research.

On the other hand, this qualitative technique is extremely valuable because allows you to get a very insightful perspective from some of your potential customers and once you hear an interesting comment from them, you can always follow-up with more questions and extract many valuable tips that can make your product/service better for customers with the same profile.

This real test will probably allow you to make the final adjustments before launch and these tweaks can make a huge difference on your success.

4th Step – Ladies and Gentlemen, start your engines... it is time to launch

After you have everything in place, it is time to execute your game plan.

This is a very sensitive stage, because usually the first experience is the one that lasts therefore make sure that your launch is flawless.

Keep a close eye on execution and monitor the results so you can act immediately in case something or someone is not following the plan.

5th Step – Your success is also your enemy… beware!

If you develop and launch a successful concept, be sure… you will trigger a reaction from your competitors.

Following your success, your competitors will react by adjusting their strategy or their offer, or in case you don´t have any competitors yet because you created a new market from a groundbreaking concept, someone will try to follow and copy you soon.

It is extremely important that you keep an eye on your competitor’s reaction and adjust your strategy if required.

The best are always trying to predict the competitor’s next move and they stay 2 steps ahead of them.

The best are always trying to predict the competitor’s next move and they stay 2 steps ahead of them.

Liar, Liar… “Average” Liar

The “Average” or “Arithmetic Mean” is one of the most common statistical formulas applied in business performance analysis.

Almost everyone knows how to calculate it… it is just the sum of a list of values divided by the number of occurrences.

However, for some business questions the “Average” can deliver deceiving answers and lead to wrong decisions.

Example: A company has 2 branches and they are facing some customer satisfaction issues because of the queue time that their customers endure.

After a customer survey where almost all mentioned that they accept to wait up to 5 minutes, but if they had to wait in queue for more than 5 minutes, they would be extremely unsatisfied. So, the company decided to evaluate their branches and deliver regular incentives to the best performer.

Branch A had 10 customers and the queue time of each one was:

4 min, 3 min, 5 min, 4 min, 4 min, 20 min, 7 min, 4 min, 4 min and 5 min.

Average queue time = 6 min



Branch B had also 10 customers and queue time of each one was:

1 min, 7 min, 6 min, 4 min, 7 min, 2 min, 8 min, 1 min, 7 min and 7 min.

Average queue time = 5 min

So, the Branch B had the best performance… or maybe not.

Remember that the customer survey told us that if the customers had to wait more than 5 minutes they would be extremely unsatisfied.

From the count of impacted customers perspective:

Branch A: 80% of customers satisfied vs. 20% of customers extremely unsatisfied.

Branch B: 40% of customers satisfied vs. 60% of customers extremely unsatisfied.

So, the Branch A was able to deliver the expected service level to 80% of the customers and the Branch B only delivered it to 40%, therefore impacting negatively much more customers than Branch A.

This is a just a simplified example that shows how the “Average” can “lie” when measuring business performance and that is even more risky in business scenarios where outliers can occur as this one.

The “Average” is very useful in business analysis, but be careful when interpreting it, because it also can “lie” to you.

Always keep in mind that sometimes there are other formulas to measure that are more suitable to answer your business question.

Pricing Wars – Rational Explanation of an Irrational Behavior

Pricing wars are frequent in almost all industries and if you ask business directors about it, 99% of them agree that it hurts their business and they only did it because their competitor started it.

So, if Pricing Wars are a race to the bottom, why are those so frequent?

To understand that behavior in the market, the best approach is looking at “the prisoner's dilemma” from game theory that shows why two completely "rational" individuals might not cooperate, even if it appears that it is in their best interest to do so.

(This model was originally developed by Merrill Flood and Melvin Dresher in 1950)

Below you will find an example of the model adjusted to a Pricing War between two companies:

To understand this dynamic you need to keep in mind that business managers from different companies cannot speak with each other about their pricing policies (mandatory by law in many countries), therefore they are unable to meet or speak to align their pricing strategies.

This lack of communication between companies, which is imposed by most governments to promote competition, triggers a huge fear within the companies.

Business Managers feel fear? Why? 

Because, if the other company drops their prices suddenly and your company doesn´t, there is a huge risk of losing market share, therefore losing revenues to the competitor. On the other hand, your competitor feels the same fear towards your company.

So, if the companies are unable to communicate, both feel a huge risk in case the other company strikes first and that builds a great pressure on managers.

This fear automatically drives pricing aggressiveness and that pressure tends to bring prices down on both sides and by keeping almost the same market share in the end, both companies’ loose revenues after a Pricing War.

So, since both companies probably will end much worse than before, Pricing Wars are irrational, although there is a rational explanation for it.

Unexpected Strategy – “I want buses”

World War II was a humanitarian disaster, but although it was a sad episode in history, there were lessons learned at Strategy level.

World War II showed that speed, agility and mobility are far more efficient then strength, trenches and strongholds strategies that dominated World War I.

After German blitzkrieg in France which led to a desperate evacuation of the Allied forces in Dunkirk, it became clear that England invasion by Germany was imminent.

One of the most notable English generals, Bernard Montgomery, was appointed by the Prime Minister to prepare England defenses of the imminent invasion in 1940.

Winston Churchill was surprised by his General demands.

Instead of requesting the construction of heavily protected bunkers and strongholds, “Monty” requested buses, many buses.

Why?

“Monty” immediately understood and adapted to the new dominating strategy of the war that he witnessed in France a few months earlier.

Strongholds can be avoided by the opponent and when the generals perceive the move of their opponents their stronghold was already surrounded and sieged without access to supplies which leads them to surrender.

For that reason, the British general requested buses, many buses, because he wanted to be 100% mobile, agile and fast by delivering to his main force the ability to move around the country with buses to face the opponent wherever they landed, or in the coast or inland through German paratroopers.

From the General perspective, the coastal defenses should be light and with the only purpose of get some extra time until the main force could move towards the opponent and deliver a decisive blow.

Later in WWII, these speed, agile and mobile strategies were mastered and applied with great efficiency by the U.S. General George S. Patton that it is still today the most famous United States General and Strategist.

Military Strategy overlaps with Business Strategy and we can see today that companies that are more agile and faster to adapt to the market by changing their ways of working and engaging with their customers, tend to be more successful and last longer than companies that stick to their old ways just because it worked in the past. 

Sales Incentives Can Backfire

Sales Incentives and Commissions are common in many industries as a tool to improve sales performance internally or through Indirect Channels as Telesales or Retail Agents.

Usually, companies design their commissions’ models around a percentage (%) of the billed revenue because automatically rewards performance growth (5% of 10,000 is always more than 5% of 7,000).

So… where is the flaw of the revenue approach?

Most of the companies´ have more than one product on their portfolio, since they are aiming to extract the maximum value from each customer by upselling, so to better understand the issue, please check below.

Consider an Insurance Company that has two Life Insurance products in their portfolio, the Insurance Basic which has a price of $500 a year and another called Insurance Premium that costs $1000. 

In this example the sales strategy is pushed through one telesales partner, by rewarding the partner with 5% of the first year bill of the acquired customer, which means that the Insurance company will be paying $25 for each customer that buys Insurance Basic and $50 for each customer that buys Insurance Premium.

So, at a first glance it looks like there is an automatic incentive to the Telesales partner to push Insurance Premium first, since the partner will make double the commission per each sale on the Premium product.

Well… that is the flaw. Most of the commissions’ schemes don´t incorporate a key variable which is time. 

The sales pitch effort that can be measured by the average time per sale of each insurance product.

The insurance company must also understand his telesales partner perspective, since the time spent and effectiveness per each phone call is critical to the telesales partner business model.

If in this example the Insurance Premium product takes 4x more time to sell than the Insurance Basic product, the telesales partner will be only focused on the cheapest product (Basic) regardless of the briefing provided by the Insurance company, because per each Insurance Premium product sold ($50 commission) the partner expects to sell 4 Insurance Basic products, therefore he can extract more value in the same time ($25 x 4= $100 commission) by pushing solely the Basic product and...

... this brings a huge opportunity cost to the Insurance Company since they will have many customers that would have bought the Premium product, but instead were only exposed to the cheapest one.

To address this revenue model flaw there are basically 2 solutions:

• Develop a commission scheme that also incorporates the sales pitch time/effort per product/segment, so you may get the expected focus from the telesales partner.
• Or hire 2 different partners and each one will be solely focused in one of the segments/products.

Smart Pricing – The Next Generation

Smart Pricing is a Pricing Strategy that can be implemented in many different industries and combines the following:

• Profitability - Design an offer/promotion/service/product which is profitable. 
• Relevancy - Identify the customer’s profile that may consider the offer relevant. 
• Segmentation – Push the proposition only to the customer’s segment that the offer will be relevant and profitable.
• Timing – Identify the trigger event that has associated a higher probability of the offer adoption and push/promote the offer at that moment.

“Smart Pricing" sounds only as another marketing buzzword… not true.

So, it is easier to visualize the Smart Pricing concept through an example:

"Imagine a coffee shop that through a loyalty card tracks the orders of their customers.

From that, the coffee shop knows that a specific regular customer always order one medium size coffee and never orders any food.

Additionally, in this example there are the assumptions that the difference between a medium and a large coffee is only $1 and the coffee margin is high, and without a sale cannibalization, a discount of 75% on the coffee upgrade it still be profitable.

So, next time that specific customer checks in with the loyalty card, the shop assistant would be notified in the machine that the customer is eligible for a special promotion that day – he can upgrade is coffee to large only for 25 cents, instead of paying the normal price of $1.

If the customer doesn´t adopt the promotion, the shop probably still gets the usual medium size coffee sale… but if the customer bites it, there is a short term positive revenue and margin impact and from the product seeding there is a relevant probability of behavior change on the customer, if he starts ordering in the future a large coffee instead of a medium, even without a discount."

The Smart Pricing drivers on this example were:

• Profitability – The discount on the coffee upgrade is still profitable.
• Relevancy – The targeted customer already orders regularly a coffee, so the promotion is on top of what the customer is looking for. 
• Segmentation – Only customers that regularly order a medium coffee would be eligible and would be presented with this promotion.
• Timing – By proposing this deal when the customer is already buying one coffee in the shop increases the probability of the customer taking up the promotion, instead of sending him this promotion through a newsletter by email.

The Smart Pricing strategy is an effective way to increase revenues, profits and also customer satisfaction, engagement and loyalty.

Brand Strategy vs. Pricing Strategy

In the marketplace, perception is reality.

You can have in fact the best product in the market but that is useless if the customers’ don´t perceive that, or even worse, if the customers perceive another product as better than yours when in fact that is not true.

You must keep in mind that Pricing is not only a tool to generate revenues or margin. Pricing is also the key statement about the quality of your product.

Remember that no one believes that the cheapest product in the store is the best one, therefore Pricing is also a powerful brand positioning tool. 

To be successful, when you design the price of your product you need to consider the costs, the required margins, competition prices and also the current customer perception of your brand.

Why the current customer perception of your brand is so important when you design your Pricing Strategy?

The answer is… Trust. 

If there is lack of consistency between your prices and your brand image perception, customers will have trust issues with you, because your overall messages are conflicting.

Example: If you already positioned your brand in the market as a low cost service provider and you launch a new service in the market with a premium price, your new service and in the long term also your all business may be in jeopardy because you are losing consistency and customers don´t trust conflicting messages and customers tend to avoid brands that they don’t trust.

So, the key conclusions are:

Pricing is not only about margins… Pricing is also a powerful brand positioning tool.

• Your Pricing Strategy must be aligned with your Brand Positioning Strategy
• If not, you will trigger trust issues in your customers that in the long term may jeopardize all your business.

Trust vs. E-commerce - The end of a myth?

There is still a big gap between the number of Internet users and online shoppers and although trust is considered by many as a key factor in e-commerce, the knowledge about it was little.

This was a quantitative research with a deductive approach in which statistical procedures were applied to validate the hypotheses of the theoretical frame of reference, and the research questions of this study were:


(i) What is the socio-demographic profile of university students’ online shoppers?
. Men have greater intention to buy online and recommend it to others than women.
. Working students have higher intention to purchase on the Internet than individuals who only study, but regarding their intent to recommend it to others the difference is not statistically significant.
. Older students have more intention to buy online and recommend it to others.
. Experienced online buyers have more intention to buy online and recommend it to others than individuals with less experience in online shopping.


(ii) What is the impact of trust and social influence in the intention to buy online?
. It was observed that the adjusted model regarding "Intention to Buy Online" in result of the weight of “Trust” and "Social Influence" explains only 1% of the variability of the "Intention to Buy Online", and although the "Social Influence" has more weight compared to “Trust", the relationships of these variables with the "Intention to Buy Online" are not statistically significant.


(iii) What is the impact of trust and social influence in the intention to buy online in individuals who never bought online before?
. It was observed that this model adjusted to the "Intention to Buy Online" regarding the weight of “Trust” and "Social Influence" explains only 4% of the variability of the "Intention to Buy Online" of those individuals, and despite that the "Social Influence" also has more weight than “Trust", the relationships of these variables with the "Intention to Buy Online "are also not statistically significant.


Conclusion:
This study confirmed the theoretical framework regarding the socio-demographic profile of online shoppers, namely that the profile is not homogeneous, even having differences between age groups as suggested by Reibstein (2002), with men having higher intention to buy online than women, as indicated by Greenfield Online in 1999 (quoted by Chih-Chung & Chang, 2005) and that the previous experience of Internet shopping of the individual is an important factor to consider, as stated by Perea y Monsuwe, Dellaert & de Ruyter (2004).

Regarding the central question of my research - "What is the Impact of Trust in the Intention to Buy Online?" - Turns out to be surprisingly that has been observed that Trust impact is in fact low, even in individuals who never bought online before.

However, some caution is required in interpreting these results, to avoid the mistake of generalization or abusive interpretation. Firstly, even considering that the sample was intentional, it is necessary to remember that the findings of this study apply only to the universe of students of ISEG (Technical University of Lisbon).

We also found that the impact of Social Influence in the "Intention to Buy Online" is very low too, although it was noted that this impact was greater than the Trust impact. So, it is important to remember that if consumers choose not to consult recommendations, consumers will rely on their knowledge or previous experience on the service to make their buying decision (Senecal, Kalczynski & Nantel, 2005).



Note: This is a summary of my Master Thesis. If you wish to read the complete study or the details of the mentioned bibliographic references, please follow the link below:

Antunes, A. (2011). Impacto da Confiança na Intenção de Compra Online. (Master Dissertation). Technical University of Lisbon Repository, Portugal.
https://www.repository.utl.pt/bitstream/10400.5/4459/1/DM-ANLGA-2011.pdf