• “If we could just add / amend these few boxes then the business model canvas would be even more brilliant and would be closer to the theory of everything as far as business is concerned.

Alexander has resisted all such temptations and quite rightly so in my opinion – the business model canvas isn’t meant to be the theory of everything, it is a really useful tool but it was never designed to describe EVERYTHING about a business.

So I was interested to see in Alexander’s recent session at Stanford University with Steve Blank that he introduced the first “plugin” to the canvas which allows and encourages closer examination of the offer / customer fit, customer pains and gains.  This certainly fits nicely with Steve Blank’s customer development approach and I’m delighted to see the melding of “Business Model Generation” with “The Customer Development Process” and I’m looking forward to an early read of Steve Blank’s new book “The Startup Owners Manual” which I understand incorporate the business model canvas as a key tool.

I was struck today by his section addressing information overload.

• Data isn’t information
• Information isn’t knowledge
• Knowledge isn’t insight

We are surrounded by vast oceans of data and businesses are carrying out market research incessantly.  We hardly need more data, but winning businesses do need more and deeper insights.  The fact is that we obstinate humans rarely comply and fit neatly into marketers “segments” any more.  We behave in different ways in different circumstances and depending upon our mode.  How does traditional marketing theory cope with the owner of a brand new top of the range BMW 4×4 shopping in Aldi or LIDL and wanting the absolute best deal on weekly grocery shopping.  Or those of us who will scour the internet for the best deal on flights and accommodation for the summer holiday whilst remaining with a poor value utility supplier?

One of the morals of these types of stories is that there is probably little insight to be gained from averaging lots of market research data.  It is more demanding but look at the outliers and the aberrants  and learn from them.  Business decisions based upon the averages of large market research studies have a potential danger to “satisfy everyone whilst delighting nobody” – is that where you want your business to be?  I expect not.

But in this month’s Harvard Business Review I was drawn to what I consider to be the most useful analogy that I’ve come across so far in relation to how we might think about an organisation’s engagement with social media.  It was offered up by George Eberstadt, the CEO of TurnTo Networks who made the comparison between hosting a party and teaching a class.

In both cases all of the participants are physically in the same room, but there are very different dynamics at play.  In the classroom setting the teacher (the organisation’s brand) dominates the conversation (if indeed it is a conversation at all as it might well be a lecture) and the flow of information is “hub and spoke” – from the teacher to the class and maybe with some flow back to the teacher.

Whereas in a party the guests (customers and potential customers) may have minimal or no direct contact with the host (the brand), preferring to spend most of their time interacting with other guests.  But all / most of the guests know and presumably like the host and so when the conversation touches upon the host it is very likely to be favorable and positive.  The host has no control over those myriad conversations but the guests at a party are at least as likely to go home with a warm feeling about the hosts as are the pupils in a classroom setting.

The learning point being that controlling the conversations isn’t a guarantee of those conversations being positive and people harbouring warm feelings about the brand.  Sometimes letting go and allowing people to express their own opinions, in private and to whom they want, can be even more beneficial.  The great news is that in the social media space brands can monitor much of what is being said about them, without needing to control it.  The eavesdropping tools are numerous and well developed.

What is going to work best for your organisation in terms of social media – lecturing your clients and prospects or inviting them to an ongoing party?

1. Get a mentor.  I don’t necessarily mean paying a professional mentor – it could be anyone who you respect and who you can talk to about your career and business matters throughout the year.  Someone who is probably sufficiently detached from your day to day work to be able to see the wood from the trees.  Someone who you can trust and have some “chemistry” with.  Someone who will at least occasionally challenge you and your ideas.
2. Ask more questions than you answer.  The rate of change in the business world is increasing all of the time.  Nobody knows all of the answers, not even you.  You will get to higher quality “answers” if you ask probing questions, of yourself and those around you.  OK if you are a time served manager in an industry that is static then maybe you do know the answers – but how many of us does that apply to?  Asking questions doesn’t need to lead to lack of decision making but if it is an important question then it probably deserves rather more than a “stock, shooting from the hip” answer.  Ask some quick probing questions.  as ever the Pareto principle applies.  Do at least the 20% of research that will get you to the 80% answer.

Happy New Year.

Surely we aren’t taken in by £9.99?

Well in his book “Priceless: The Myth of Fair Value (and How to Take Advantage of It)” William Poundstone analysed eight studies conducted between 1987 and 2004 which looked at the effects pricing with the “magic 9″ (ie £9.99, £19, £99 and so on) and he found that their use boosted sales by an average 24% compared to nearby almost identical prices (ie £9.99 versus £10.00). In a study conducted jointly by The University of Chicago and Massachusetts Institute of Technology (MIT) a mail order catalogue was sent out in three versions, identical in all respects apart from the pricing of a single item of women’s clothing. The catalogues were mailed to identical sample sized groups with no difference in any of the average group characteristics. The item was variously advertised at the “magic” $39 as well as $34 and $44. The result was significantly greater sales at the $39 price point compared to both the $34 and $44 price points. So we consumers aren’t as clever as we think – we prefer $39 over $40 and even over $44 (although of course those other prices were not displayed alongside the $39 item like some type of “decoy”.

What outsells “magic 9″?

Researchers have conducted experiments “split testing” price tags along the lines of the three versions below (which I have marked A, B & C).

So what were the results?

In A versus B:  A wins (because in B there is no indication of how much the item has been reduced (no initial reference price) even though B was offering the same item at a lower price than A

In C versus A and C versus B: C wins (the power of “magic 9″ and the initial reference price is available).

So lessons learned?

• The power of “magic 9″
• If reducing the price then let customers know the original price as a reference (all those sofa retailers have done their research!)