The Entrepreneur and the Academic

Selling chipsWalk­ing around Mel­bourne city one after­noon I decided to have some chips for lunch and ended up in a trendy chip­pery in Eliza­beth Street, munch­ing away on some deep fried pota­toes and mayo. The man serving me was the owner, an entre­pren­eur exper­i­enced in the fast food busi­ness. He, lets call him Brad, spoke openly  and explained how he tries to make a buck in the hyper-competitive world of fast food.

Brad cel­eb­rated big suc­cesses in this mar­ket in the past but emphas­ised that he had only com­pleted high school and has no formal busi­ness qual­i­fic­a­tions whatsoever.

Some time ago, Brad atten­ded a post gradu­ate man­age­ment lec­ture at a local uni­ver­sity. First Brad thought that the lec­turer was talk­ing gobbledy­gook, but after a while recog­nised that the the­or­ies presen­ted in this lec­ture actu­ally match what he does intu­it­ively to run his business.

I told Brad that I occa­sion­ally teach mar­ket­ing at La Trobe uni­ver­sity. What man­age­ment sci­ent­ist do, I con­tin­ued, is to study entre­pren­eurs like Brad to fig­ure out how they do busi­ness and present this back to stu­dents in the­or­ies, for­mu­las and dia­grams. One of the aims of busi­ness stud­ies is to unlock the intu­it­ive know­ledge of entre­pren­eurs such as Brad so that other, less gif­ted and more risk averse bud­ding entre­pren­eurs, can rep­lic­ate their success.

The entre­pren­eur is the hero of con­tem­por­ary cap­it­al­ism and has been ideal­ised and stud­ied in great detail by schol­ars around the world, each look­ing for the holy grail of entre­pren­eur­ship. Research­ers study entre­pren­eurs like ety­mo­lo­gists study insects. They dis­sect them,  ana­lyse them, observe their beha­viour in order to extract the essence of what it is that makes them successful.

Entre­pren­eur­ial bio­graph­ies are, how­ever, always incom­plete and san­it­ised ver­sions of real­ity. The essence of entre­pren­eur­ship is a myth­ical concept in busi­ness stud­ies that can only be known through exper­i­en­cing what it is to be in busi­ness, not by study­ing it

Fur­ther reading:

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Toilet Paper and Consumerism

Valuable toilet paperWe all use it, we all need it and we all buy it every week: toi­let paper.1.

Buy­ing toi­let paper is one of those many decisions we make in the super­mar­ket every time we visit. The amount of energy we are will­ing to invest in a decision depends on the level of involve­ment we have with the product.2.

Research sug­gests that the type of toi­let paper we use is a mat­ter of low involve­ment.3. Low involve­ment products are hard to sell because, by defin­i­tion, con­sumers don’t pay much atten­tion to them. This is why mar­keters developed tech­niques to increase the level of involve­ment and in effect cre­ate a mar­ket where one pre­vi­ously did not exist. This prac­tice star­ted in the 1890s when the Scott Paper Com­pany became the first to offer toi­let paper on a roll and advert­ise it with a range of images show­ing luxury.

Product involve­ment demon­strates the import­ance of the mean­ing of the object to the ego struc­ture or the consumer’s inner self. The products we pur­chase are an exten­sion of our self, a means to con­struct an iden­tity.4. Toi­let paper man­u­fac­tur­ers have used this psy­cho­lo­gical con­struct to cap­ture the mar­ket. In super­mar­ket aisles we are bom­barded by a pleth­ora of types of toi­let paper to choose from. The bewil­der­ing array of choices ranges from one, two or even three ply, scen­ted, non-scented, hypo-allergenic, recycled, non-bleached, rain­forest cer­ti­fied and so on, and so on. There is a type of toi­let paper for every seg­ment in the mar­ket. It is only because we are sub­jec­ted to this wide range of choices that we are forced to make it.

involved con­sumers pay higher prices

The main reason toi­let paper man­u­fac­tur­ers spend so much money on devel­op­ing new types of toi­let paper and advert­ising their product is because they want us to care about toi­let paper. Not only by devel­op­ing a product vari­ant for every ima­gin­able pref­er­ence, but also by adding emo­tion to an oth­er­wise bor­ing product. Toi­let paper advert­ising fea­tures cute puppy dogs, baby’s and other images that trig­ger emo­tions. When con­sumers are involved they are hes­it­ant to choose lower price altern­at­ives and sup­pli­ers of toi­let paper use this by cre­at­ing a high level of involve­ment and char­ging higher prices than they oth­er­wise could.5.

This is no bet­ter illus­trated than by what I observed dur­ing a recent visit to a super­mar­ket in Kangaroo Flat in Aus­tralia. They sell rolls of spe­cially prin­ted Christ­mas toi­let paper for $4.49 each, almost ten times as much as nor­mal toi­let paper. Clean­ing your bot­tom with jolly mes­sages and images makes life just that much more worth living.

Christ­mas is a time when people are pre­pared to spend money on silly items and a roll of spe­cial toi­let paper can provide a lot of value because it becomes an instant con­ver­sa­tion starter, as evid­enced by this post.

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Notes
  1. This post is inspired by a dis­cus­sion between Ian Wat­son and prof. Rhett Walker on this topic. []
  2. Zaich­kowsky, J. L. (1985). Meas­ur­ing the involve­ment con­struct. Journal of Con­sumer Research, 12(3), 341–352. []
  3. Ratch­ford, B. T. (1987). New insights about the FCB grid. Journal of Advert­ising Research, 27(4), 24–38. []
  4. Belk, R. W. (1988). Pos­ses­sions and the exten­ded self. Journal of Con­sumer Research, 15(2), 139–168. []
  5. Cohen, M. (2000). Con­sumer involvement–driving up the cost. Con­sumer Policy Review, 10(4), 122–125. []

Using Queuing as a Marketing Tool

The release of a new iPhone model or other Apple gad­get always seems to be accom­pan­ied by long queues of people. Even though cus­tom­ers can pre-order their desired gad­gets, stocks always seem to run low quickly and there are always lines of people in front of the iconic Apple stores come release date. Just like fast food com­pan­ies have lim­ited time offers on themed bur­gers, Apple sim­u­lates scarcity to stim­u­late demand.

In the epic battle between Sam­sung and Apple queues of cus­tom­ers are used to cre­ate the per­cep­tion of increased value. Sam­sung has recently taken a line out of Apple’s book and estab­lished a store close to the flag­ship Apple store in Sydney, selling $2 phones. Eager punters for this great deal did of course quickly queued up in front of the Sam­sung store.1.

Accord­ing to Robert Cialdini, scarcity is one of the Six Weapons of Influ­ence, a power­ful way to influ­ence con­sumer atti­tudes.2.

The use of scarcity to gen­er­ate demand has recently been sci­en­tific­ally val­id­ated by Jef­frey Parker and Don­ald Lehmann at Columbia Uni­ver­sity.3. Parker and Lehmann found that retail­ers can shift demand to a more prof­it­able brand by keep­ing it less fully stocked.

Scarcity has a largely pos­it­ive effect on con­sumer pref­er­ences when they believe that it is cre­ated by mar­ket forces. Scarcity is not a pos­it­ive influ­ence when cre­ated by acci­dental causes, such as failed deliv­ery. The power bal­ance is, how­ever, always in favor of the mar­keter as they con­trol the flow of information.

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Notes
  1. Ben Grubb, Sam­sung ambushes Apple’s iPhone 4S launch in Sydney, Sydney Morn­ing Her­ald, 12 Octo­ber 2011. []
  2. Cialdini, R. (2007). Influ­ence sci­ence and prac­tice. Gard­ners Books Ltd. []
  3. Parker, J. R., & Lehmann, D. R. (2011). When Shelf-Based Scarcity Impacts Con­sumer Pref­er­ences. Journal of Retail­ing, 87(2), 142–155. []

The Manager and the Magician

Managers are magiciansEvery man­ager would love to have a wand and make things hap­pen magic­ally. Although this vis­ion is only a dream, man­agers do have a lot in com­mon with magi­cians. Both the man­ager and the magi­cian aim to cre­ate a world dif­fer­ent from the one we know. Both the man­ager and the magi­cian con­struct a new real­ity – the magi­cian using the stage and the man­ager using the work­place. Another sim­il­ar­ity is that many magi­cians carved out a mar­ket in the cor­por­ate sec­tor by provid­ing enter­tain­ment at Christ­mas parties and sim­ilar occa­sions. But the sim­il­ar­it­ies don’t stop here.

As an ama­teur magi­cian I col­lect aca­demic journal art­icles about con­jur­ing and found two inter­est­ing papers explor­ing the sim­il­ar­it­ies between man­age­ment and magic.

… a wand and make things hap­pen magically.

David Pol­litt described how the man­age­ment team of a large retailer was invited for a magic show as part of their pro­fes­sional devel­op­ment. Magi­cians fol­low rigid pro­ced­ures to cre­ate the illu­sion of magic and the man­age­ment team were encour­aged to do the same to achieve res­ults. Magi­cian Richard Pin­ner per­formed a Rus­sian Roul­ette inspired trick to illus­trate that in cus­tomer con­tact there is only one chance to get it right.1.

Professor’s of man­age­ment Joe Dob­son and Ter­ence Krell pub­lished a paper on how to use magic tricks to teach organ­isa­tional beha­viour.2. They use magic tricks in the classroom to show that with­hold­ing inform­a­tion, like a magi­cian with­holds the meth­ods from spec­tat­ors, can cre­ate a power dif­fer­ence. So called for­cing tech­niques com­monly used by magi­cians are an illus­tra­tion of the fact that our free will is more often than not bound and lim­ited by the con­text in which we operate.

Per­cep­tion is not reality

Although a magic wand is not a reli­able man­age­ment tool, these examples from aca­demic lit­er­at­ure show that pro­fes­sion­als can learn from magic as it provides valu­able les­sons in psy­cho­logy.3. Most import­antly the magician’s abil­ity to dis­tort real­ity is a reminder that our per­cep­tion is fra­gile and that we should always find out the facts, rather than rely­ing on per­cep­tion. The biggest dif­fer­ence between a man­ager and a magi­cian is that a magi­cian man­ages per­cep­tion to cre­ate the illu­sion of a new real­ity. Man­agers focus­ing on per­cep­tion in real­ity will find that they are cre­at­ing an illusion.

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Notes
  1. Pol­litt, David (2006). ‘Com­mu­nic­a­tion cam­paign con­jures up suc­cess for Homebase: Magi­cian theme makes for mem­or­able launch of guides’, Human Resource Man­age­ment Inter­na­tional Digest 14(5): 38–39. doi: 10.1108/09670730610678271. []
  2. Krell, Ter­ence C. and Dob­son, Joseph J. (1999) The use of magic in teach­ing organ­isa­tional beha­viour. Journal of Man­age­ment Edu­ca­tion 23: 44–52. doi: 10.1177/105256299902300105. []
  3. K. Fatehi-Sedeh (1980) A card game as a teach­ing aid. Journal of Man­age­ment Edu­ca­tion 5(3): 57–60. doi: 10.1177/105256298000500316. []

Marketing Metaphors

Marketing Mix and the 4P-MnemonicMan­age­ment is a com­plic­ated activ­ity, filled with sim­pli­fic­a­tions. For­mu­las, dia­grams, matrices and mne­mon­ics help the man­ager to cre­ate order in the chaos of every­day busi­ness life.

Mar­ket­ing stu­dents at all levels of aca­demia are indoc­trin­ated with the concept of the mar­ket­ing mix as the 4P-mnemonic: product, price, place and pro­mo­tion, ori­gin­ally pro­posed by Jerome McCarthy.1. Other schol­ars have built on McCarthy’s insanely pop­u­lar scheme, most fam­ously Bern­ard Booms and Mary Jo Bit­ner pro­posed three addi­tional con­cepts to account for the spe­cific nature of ser­vices, i.e. people, pro­cess and phys­ical evid­ence.2.

The sim­pli­city of this approach fueled its pop­ular­ity and the 4Ps have become syn­onym­ous with the Mar­ket­ing Mix. Most prac­ti­tion­ers and schol­ars do, how­ever, seem to for­get that this sys­tem is merely a meta­phor, a sim­pli­fied check­list to aid mar­keters.3.

There are ser­i­ous issues with this sim­pli­fied approach. Most import­antly this seven pronged attack of the mar­ket seems to ignore the rela­tion­ship between the organ­isa­tion and the con­sumer and that mar­ket­ing is based on an exchange of value. The 7P sys­tem defines busi­ness from the organisation’s per­spect­ive and is as such severely lim­ited in inform­ing an enlightened mar­ket­ing approach. More inter­est­ing ways to look at mar­ket­ing focus on value and rela­tion­ships and view the world from the customer’s per­spect­ive and are based on under­stand­ing the customer.

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Notes
  1. Jerome McCarthy (1960) Basic Mar­ket­ing: a Mana­gerial Approach. Home­wood: Richard D. Irwin. []
  2. Booms, B.H., Bit­ner, M.J. (1981 ) Mar­ket­ing strategies and organ­iz­a­tion struc­tures for ser­vice firms, in Don­nelly, J.H., George, W.R. (Eds), Mar­ket­ing of Ser­vices, Con­fer­ence Pro­ceed­ings: Amer­ican Mar­ket­ing Asso­ci­ation, Chicago, IL, pp.47–51 . []
  3. Philip J. Kit­chen ed. (2008) Mar­ket­ing Meta­phors and Meta­morph­osis. Pal­grave Mac­Mil­lan. []