Pricing Rumors & Profiting From Mistakes

How do you charge for sports coverage in an age of information overload? Well ESPN.com seems to have a good idea--charge people the most for the information they are least able to verify the veracity and value of. 'Rumor Central' doubles-down on the brand message of 'insider,' and avoids calculations of relative value vs. CNNSI or Yahoo sports. Alternative tactics here might have highlighted A-list writers or other quality based enhancements but as in other competitive industries it can be very hard to achieve the 30-40% better product required to reshape customer perceptions of value. Instead charging for rumors of variable value (hey maybe they can really tell you about the big trade before it hits and suddenly 'your the man' at the water cooler) attacks the foundation of customer cost/benefit analysis.

Its not purely charging for a mistake of course, humans are a curious lot. What is important is putting the customer in a poor position to make a value judgment and appearing to deliver 'breakthrough' value.

Another glaring example of how business engineer mistakes into customer behavior is Tide's laundry scoop. The product is sold on a cost/load basis in major stores with clear "120 Loads" stamped six times on each box. The customer makes a comparison to other brands on this basis and if they are loyal to Tide they pay a 10-30% premium/load for the Brand. This is classic Trout marketing leadership and well done! Rumor has it Tide is a 2-4B$ a year business for P&G.

But once they get home the brand loyal customer is presented with a subtle sequence of riddles. 1: Do they notice the numbers on the side of the scoop? If they don't they could be using up to three loads worth per scoop. 2: If they do notice the lines how high should they fill the scoop to get '120' loads? Is a scoop up to '1' or is that just for partial loads. Remember nobody wants to have dirty clothes.....

It turns out that despite having articles about everything on Tide.com, nowhere on the box or the website is the question answered--quantity of Tide powder per load is simply never mentioned anywhere. I estimate Tide increases their revenue by as much as 20% with this subtle trap.

This is my new blog about business and technology strategy. I decided to create it as an organized, hopefully thoughtfully assembled, venue for the things I think about for work and curiosity.

As a corporate strategy worker I'm well versed in the blessing and the curse of the terminology. In good economic times, when new mid-tier executives are minted like fresh dimes, it is fashionable to attach the word to any title 'Director: product management & strategy,' 'VP: PR messaging and strategy.' In the corporate push and shove playground 'strategic' is just a nice way of saying "I make decisions that count," and like most overstatements, it isn't really so. A February 2005 McKinsey Quarterly study indicates industry selection/participation was the primary, 88%, explanation for the best performing companies in the 1993-2003 business cycle. Clearly, few newly minted managers have any hope of making many truly strategic decisions after they choose the industry they wish to work in. Perhaps this managerial posturing exemplifies agency cost? Should companies ban strategy?

No matter what strategy ultimately is attentively attempting it prepares one for decision making. So doubt and corporate baggage aside here are some of the topics I'd like to cover in the next few weeks.

• HP's strategy?
• India
• Applicators, applicators, applicators!
  
• Scenario Planning: play time or pay time?
  
• Software and Services'
• 'ESPN Insider' and the inefficient pricing of rumors
• What is strategy, role, definitions and problems.
  
• 'Latent value' and Google's rise
• Is 'web 2.0' disruptive
• On-Star and emerging 'connected' services
• Customer loyalty Guru's and the Myth of the naive customer
  

In the mean time I'll also post any interesting reading I find as well.

Finally a cross disciplinary quote

"Value of a profession . A profession makes us thoughtless: therein lies its greatest blessing. For it is a bulwark, behind which we are allowed to withdraw when qualms and worries of a general kind attack us."--F. Nietzsche, "Human, All Too Human"

Even in our knowledge economy many still feel this way and enjoy the pleasure of traveling the path the company has set out. How to know when to choose the pain of learning over the protection of repetition?