Tuesday, December 06, 2011

What did you lust for when you were tired or turned-on?

Honestly tell me, have you ever wanted to have sex when you are really tired, have a headache and beat-down? or did you just wanted to lay-dead and sleep? How about aspiring for Rancheros Enchilada (or your favorite dish) when you had fever and tummy pain? If you answered this with "Are you freaking, out of your mind?", you are part of a large group of the sane population.

Now, also tell me. Did you care for how remarkably awesome your bed should be for you to lay-dead and sleep over? Or even cared about whether Katrina Kaif promoted the Crocin you popped in? If your answer is a “No” again, you are rest assured that you confirm with a large group out there.
The point is? Even when your product is remarkably sexy, curvaceous and the most lustful creation that you may have created, if your target segment is tired and beat-down (or in pain), then you fail selling sex. It does not matter if you drop your going-rate (price), engage in longer foreplay (dedicated pre-sales and program structure elements), stay back longer (more for less) etc... Instead, focus on selling them a simple sleep aid or a quick massage if they are tired (deal fatigue or some similar syndrome?) or honestly leave them alone for some time if you are not addressing the pain. Again, If you do not have passionate early adopters (and/or, you are not addressing a consumer pain), then do not bother on further expenses on cosmetics, bikinis and fad-diets.

What about when your consumer segment is extremely turned on? (The other extreme lets say. Like when they are pumped on testosterone or probably drunk), do they go choosing between a hot blonde versus a brunette bomb? Intuition and trends says, “No”, they do not. They will probably settle down with who ever is the most convenient to access (as anything may do in that state). Even here, overtly sexing up your product in the name of competition may not help. Focusing on just “being available” when needed does the job.

The problem arises when the consumer is in neither of the states and they are sober. This is when they have enough time to haggle on the price, services, duration, special-attention, shape, size, texture, whatever (the value conscious state). This is where you better be “remarkable” or you shall be soon off the streets. Being remarkable need not have to play on the deadly sins theme at all (no, you do not have to be a hooker). Just choosing the core business values and doing it well is good enough.

Being remarkable requires your ability to make an impression in a way that the consumer will speak about you in their casual conversations. Something like, “That girl is one of the kindest soul I have come across. I find it cute in a way” or “He is so chivalrous and decent, a breathe of fresh air”. These casual conversations dictates that they remember you for your core-values, as against "Oh, she has the hottest assets you know". Having and maintaing hot assets is far more difficult than being kind, and is not sustainable in the long run. If you are note worthy during a casual conversation on your business values, you have made the right consumer impressions for a long-term organic growth.

Do you know what state your market segment is in? Have you figured out your core principles?

Monday, December 05, 2011

What is the best hyperlocal strategy for India?

Came across the question here on Pluggd.in forum.

If I take the question at face value, then it is at a very high level. It is almost like asking "What is the best means of transport on land (in India)?" The devil is actually in the details of what we perceive of this question. What do you mean by "best" (quality, cost, value, speed)? What do you mean by "transport" (for people, live stock, fragile goods, general goods)? What will be the volume, frequency of travel? Will it be in a desert? Metaled Road? By-lanes? Across highways? Rough off-road terrain? (Point being made)

Similarly, In this question we have the following variables: 'best', 'strategy', 'hyperlocal' and 'India' which has wide ranging and extremely swinging perceptions. Best for who? (vendor, manufacturer, service provider, consumer...)? What is a threshold to say something is strategic versus operational (from a near term cash-flow perspective? or a long term organic growth perspective?) What is hyperlocal? Which India? (The 4 broad demographics in a tier-1 city? The multitude of BoP class which can only be classified on economics, but gets hairy when we apply cultural context? Aspirants from tier-2, tier-3?...)

Let's specifically say for hyperlocal, the challenge with any discussion around hyperlocal quickly surmounts to what each of us perceive as hyperlocal (and also based on what categories already has or has-not worked in some distant markets). Some agree that it is around a physical boundary (narrow geography) while others vehemently deny a concept of geography involved at all (the theory of nearness to an idea/concept  which does not encompass geography is also accepted as hyperlocal).

As an example, let me assume that the flavor of discussion I would like to ‘barely attempt’ to provide my opinion, contains the following key constituents: Narrow-geography based on your immediate current location, Relevance, Individual targeting, Retail and Tier-1 city as a domain (even this is at a very high level).

Then IMO, (at a very aggregate level) India and BRIC style developing nations will be the most equitable places where hyperlocal will thrive in the mid to long term forecasts.

Why? because the heterogeneity of the markets and the amount of fragmentation and decentralization in these nations are high (intuitively, that is, compared to homogeneous, big-box EDLP markets). As a hygiene-argument from a market-category perspective, demand analysis in such markets is way costlier if it has to be done by each SMB on their own. Currently even large well funded (offline retail) conglomerates in India suffer majorly from demand metrics which can significantly improve top-lines when applied well. (This assuming hyperlocal enables significant improvements on demand-chain solutions, which it resoundingly does).

A large part of Indian-metro population is cost conscious markets (specifically around dailies, staples, consumer durables and household services) as I understand it (Note that not all FMCG falls in this group, or beauty and restaurant services is avoided intentionally as that has its own segmented behavior). (Again, what is good for Mrs Khanna is not good for Mr. Iyer).

If you look at the market from the (stated) consumer perspective for the specifically stated categories, then IMO, we can ascertain that finding value (cause one is cost conscious) for what we pay in such heterogeneous markets is extremely painful. and hence, where there is pain (latent or otherwise) there ought to be innovative solutions which shall be reasonably profitable for all players involved.

There are many execution specific questions that pops-up when you generalize such arguments. What is the pain threshold? Will the consumer generally live with the pain in a latent mode until a hyperlocal-solution is offered? or have they already moved on with other alternatives with maximum utility (group-deals are already hyperlocal)? What is the segment size and the number of segments that can be herded with a single platform enabling dynamic customization for similar market segments at minimal cost for the solution-provider? Can it go to the level of relevance and individual targeting over a period of time? Can you apply consumer language for all of the questions and simplify the ‘value find’ use-cases efficiently in near-term? The nature of solution in itself is a huge debate. Add to that the number of edge-devices, maturity of the masses to soak up mobility solutions (or other such profile), technology, market-led innovations etc.. and we can keep this debate on for a long time in vaccum. Justifying an opinion to such interesting debates on a single-post on a blog is really hard without getting excited on every aspect of the problem-space. (Maybe further blogs)

Meanwhile, think through the following hyperlocal use-cases and apply your own perspectives:

  • Collective collaboration at the community marketplace where vendors offer service-packs (electricians, painters, plumbers...).
  • Community economics encouraging sustainable & experiential lifestyle involving gaming, community sharing (used items, car pool).
  • Social engagements involving flash mobs, activism, common goal (as against common interest), social donors.
  • Enhancing supply-side (sourcing) dynamics with stock and asset moments along with logistics, in-bounding, relevant auto-indents.
  • Empowering producers (farmers) at the geo-fenced level with info enablers such as price flux, input source, weather, infra...
  • Enabling 'catchment level' sales structures and program support elements empowering feet-on-street, reducing fiction costs.
  • Community news, for the community, by the community enabling personalized channels and preferences.
  • Transport details involving nearness, cost, mode, quality of experience (crowded) and alternatives.
  • Near-store engagements enabling experience that are relevant for the moment-of-maximum exposure limiting the lead times to zero.

In essence #hyperlocal is an ability to focus on a market of 1 (or few) engaging with relevant info based on personalization in real-time, near-to where you are currently located. Its a nascent problem-space. There are no such thing as best strategies except to intrincically know your markets and to iterate. There are no experts who can predict the outcome of any of the myriad hyperlocal use-cases for India or anywhere globally either. We should therfore be cautious not to throw baby out along with the bath-water.

Thursday, October 13, 2011

Are we 'Life' Challenged?

meaning of lifeRegardless of our supreme abilities as mammals, living life seems to be a challenge for most of us. We complicate and procrastinate things like we shall live forever, in the end only to die like we have never lived. Why is it so difficult to lessen the luggage? adding more and more of inanimate desires which slows us down, chokes us and strips us all of true joy.

Jealousy, greed, awry, hatred, lust; these have never seemed to have rejuvenated anything ever, yet we internalize them. Vicious these parasites are, for once they hang on to us, they do deplete life before we know it.

Unconditional love, it seems, has become a poet’s semantic. Hopeless romantics are despised. To slow down to watch the sunset is abstained. Boundless laughter is thought to be frivolous. New-perspectives are sedated and made to fall back in line of the old. Different is feared. To start-up is considered dreadful. Are we programming ourselfs to gravitate towards getting stuck in a surreal state of gloom?

Wondrous encounters with the elements, sunshine on our face, a dip in the serene lake, wholesome fresh fruits, playful and indeterminate conversations with the kids, being impregnate with curiosity, to get up and run; free and wild. Just the sound of these words are so full of life. In order to “one-fine-day” achieve such ecstasy, we seem to abandon the very same, “today”.

Life’s compromises are just that. Compromising on life.


Thursday, October 06, 2011

Heavens Will be More Perfect.

I feel naked. Naked to the fact that death as a milestone does apply to Gods as well. I do not know if it is true, that death is a destination, for, in my culture and religion, I have been fostered to believe that death is just the beginning. The beginning of the new, the beginning of the momentum that you may have set in due course of your life.

I do not have the privilege to claim that I know or understand Steve Jobs. But I have the colossal honor to have lived in his times and to be impacted with sheer excellence of his legacy. The legacy for me is not the products that he marshalled, nor the business that he built, nor the empire that he reigned on.

The legacy, for me, is something more astute to the fact that being a fearless heretic of an idea, an idea that strongly resounds with the “why” of existence more than any other ruminations, is the most potent wisdom that empowers paradigm shifting creations.

A man who was given birth only to get adopted, who dropped out of college at 17 post self interrogation of the value for such expensive education paid through the savings of working class parents, to have slept on the floor of friend's dorm and to have been fed by the deposits of coke bottles when there was no money for food, who walked 7 miles once a week for one good meal. For such a man to be in romance with aesthetics of life is something astonishing, but not unimaginable.

What is unimaginable is the passion with which such aesthetics was pursued, unsettling to anything sub-optimal, relentless in the pursuit of the pristine, fearless in his advocacy of what should-be than what was assumed necessary, never bowing down to anything mediocre. Feared, respected, revered, worshipped. For someone who even death, it seems, asked permission 6 years back.

Uncompromising and resolute towards perfection. A perfect life, a perfect death and a symmetrically perfect legacy. iSalute.

Wednesday, September 28, 2011

What are you waiting for?

So, said the reporter, "Excuse me... What's your opinion on the meat shortage?" to a nearby standing clique which had an American, a Russian, a Chinese and an Israeli. Now, the ability to perceive the reporter's question was preceded with the idioms and metaphors of the culture and economic context of the individuals who were from their respective countries, as usual.

- "What's a Shortage?" queried the American. In the land of excess this was an alien word.

- "What's meat?" quizzed the Russian, for, he had not heard of any for a long time.

- "What's an Opinion?" wondered the Chinese. As much as what had been the rule of the land.

- "What's an Excuse?" inquired the Israeli. That's something they were never used to !

Now, there was an Indian passing by who happened to overhear the Reporters interrogation. *The Indian understood the question perfectly well*. 

The point is? Well we Indians as startups and Innovators happens to be in the context & economy that allows us to be blessed to understand all the connotations of that question. Yet, we must hope that it would be a blessing, the day we stop understanding "excuses". This shall probably be the day we accelerate the process of Innovation.

Whats your execuse to not start-up? or to not push the boundaries? or to not stop whining about lack of eco-system? or...

(Attribution: this context is a adaptaion of Mike Leigh's Jewish play "Two Thousand Years")

Monday, September 26, 2011

Mobile Apps Developer? Ad Monetization? Really?

There are so many mobile app developers nowadays. It is getting hard to keep track of what exactly each of us do. Whenever you veer into the Business and Revenue model discussions with some of them (us), you get to hear awesome things about Angry Birds! The pitch is to follow the Angry Birds revenue model. What is that you might wonder? Oh the Ad Monetization based Revenue models you are pitched.

But have you explored what App you would like to develop? What is the consumer and target groups you are going after? The utilities you enable for the target group? About other revenue opportunities? As soon as these questions flow, it sometimes look like I catapulted a Black-Bird that explodes on contact at them, and the conversations flow like, Oh, we 'thought' about it, we have tried it 'once'! those are pretty 'hard' things to do!

Thought about it? Tried it Once? Hard to do? I am gasping for fresh air at this moment.

You know, there is absolutely nothing wrong in aspiring on a good Ad monetization revenue model (even if you are not benchmarking Angry Birds here). I know several great Ad monetization businesses which are doing decent top-lines (some of them are good friends and well respected). So, before you break it down, its important to know what other Business Models exists.

At the very high level, the following are some broad brush strokes mobile app business models :

  • Enable mobile channel play for existing web channels which are non-ads based (Deals, Events, News).
  • Enable mobile channel play for Business LOBs creating new media asset (Leads, Branding, Merchandising).
  • Own a focused, curated content (created through your app), and charge for the access to assets (POI, Metrics, API).
  • Enablement of mobile mediation layers controlling access to existing enterprise services. (Enterprise Mobility).
  • Mobile device management and control platforms. (Enterprise Device Management).
  • Develop apps for other business as a service. (Software Services).
  • Develop compelling utility/game apps which users are willing to pay (Pay per download).
  • Develop compelling utility/game which are free (Ad monetization).

The Revenue models can be categorized as follows:

Not charging the consumer but charging a Business: (Free for consumer)

  • Charge for Action (Number of leads filled, Deals closed, Events booked, Close loop).
  • Charge for Impression, Click Through Rates (Brand content disseminated, Click on assortments).
  • Charge for Service to develop (Fixed Cost, Time & Material, Hybrid).
  • Charge the Developer or Enterprise for Usage (Charge for API calls, charge for throttled use of mediation layers).
  • Earn through Promotions (Ad monetization). (This is diff from 'charging' for Impression where you control the sourcing)

Directly charge a consumer:

  • Charge for Commodity (One time download fee)
  • Subscription Charge for Access (Subscription for monthly news, Stock tickers, Domain content)
  • The above can have a variant of free for limited features, different monthly fee for different capabilities.

Since we started on Angry Birds Ad monetization as benchmark (for a specific Business/Revenue model combinantion), you should know some high-level metrics of Angry Birds (as I write) if you are aspiring to be one. Angry Birds have in excess of 350 Million downloads (across all platforms) and has 200 Million minutes of play time everyday (that's equal to 380 years of game time every day). Also, it is not just one game anymore. It is more a game platform with series of games for every season (Halloween, Christmas),  along with extension packs and Themes for movies (Rio) and Ports (Magic for Nokia). Angry Birds is rumored to have taken in excess of 50+ release attempts before it struck the exact game psychology with its adopters. They also have a paid version, where 12+ Million copies have been purchased on iOS.

Then, Of-course, you were kidding when you mentioned Angry Birds. Yeah, I know that. in that case, lets focus on the people who are making a decent living off Ad-Monetization, shall we. Lets take an analogy here, there are so many bloggers who are making a decent living off their blogs cause they are experts in what they write and have a focused audience. So when you say you would like to start a blog to earn money, be very focused on the audience. Even for mobile apps, audience and utility matters. Who are your audience? demography (age profile..)? psychography (likes, tastes...)? What app are you developing (Game, Lifestyle, Info, Travel, Shopping)? What is the experience you are targeting (Lean-Back, Lean-Forward) etc.. Once you have figured this, you need to worry about:

  • Hardware, Software, Device (and experience) fragmentation.
  • Compelling UX, Addictive Visuals, Theatrical Experience.
  • Content Refresh Rates (or game levels).
  • Challenges and Puzzles for the right psyche and device profile.
  • Context Awareness (Location Based, Event based...)
  • Seasonal, Theme or Memorabilia (Christmas, Disney, Harry Potter)

Next, you have to worry about the metrics of the mediation layer. In other words who shall give me ads? what shall I earn? when do i get paid etc.. Some of the Ad and usage metrics that you have to be aware of are as follows:

  • Dwell Time: The average time spent by the user daily.
  • Frequency: The number of times the consumer uses the app.
  • Time lags: The time between frequent visits (this can taper down).
  • Shelf Life (Half-life): The time that a app can keep a consumer excited, once a half-life is reached, the usage tappers down.
  • Impressions: Number of times a ad is served.
  • CPM: Cost per Mille of the ad impression.
  • Clicks: Number of people clicking on a served impression.
  • CTR: Click through rates, number of clicks by the number of impressions served.
  • Global Fill Rates: This is a percentage metric representing the inventory of ads that is served.
  • Funnel Fill Ratio: Number of new users, acquired users, median users, half-lifed users that are in your funnel.
  • Viral Coefficient: This is a fancy ratio, but in general this means, how many of your current users referenced new users.
  • Relevancy Metric: Is it in native language? Is it specific to a locale? is it specific to a demography? psychography?

Notice that you earn less money by serving impressions and more for covering clicks (clicks are considered as actions and are equivalent to leads) So, how do you increase your impressions and clicks? This is exactly where the rubber meets the road friends. If you do not know your audience profile, or track the usage metrics of your app, then, you are in complete doldrums here. You need to have a good analytical dashboard in the backend or rely on the one that your ad mediator provide (like InMobi or AdMobs).

Assuming you have a compelling App which has a addictive user Interface you 'still' need to ponder on:

  • Is this a lean-back app driving dwell times but is not so much focused about frequency?
  • Is it a lean-forward app relying much on recency and frequency?
  • Do you uderstand the events that produce the time lags?
  • How about your Relevance strategy? What are your ad promotion strategy based on such relevancy?
  • Do you serve text ads versus graphics?
  • What about the Global Fill Rates? Are the house ads (free ads) eating up your ad inventory?
  • Who controls the fill rates (you or the mediator)?
  • What is the seasonal cost of such inventory (Oh, these rates fluctuates beyond anyone’s understanding).

Just while you start interacting and getting a handle of some of the above, your half-life hits and usage tapers down, now you start worrying about Funnel fills, refresh rates & median CTRs for retention (through new versions, new levels, extension packs). What about virality? marketing budget to go after prime adopters? Yeah, I can go on, but by now you get the point right. If you are throwing more than one app out there to spread the bets on the portfolio, then you have to do all of the above for every app if you need a decent top-line. But then again, you can blindly just throw apps out there not worrying of anything and hope to make some revenues as well (Good luck if you are one of them).

Just in case if you think you are in the Ad monetization business because it is 'Easy'. Think through again. Talk to established players and understand their metrics. Get a good product mentor on board. Most importantly be ready for a wild experience. Oh do not forget to have fun in the process. Cheers :)

Thursday, September 22, 2011

Social Graph: The Philosophy of Existence.

The first post of this social-graph series explained the scheme of things and the second post looked at the broad types of activities one can perform over the graph and the experiences that are possible using edge devices.

In this post, I ponder (philosophically) on the nature and the context of the social graph from the perspective of why it matters or why people participate.

Its been found that even bacteria-infecting viruses (called phages) do communicate through chemical markers (viral gene expressions based on genomes and proteins) in the host system to make collective decisions to either remain in a latent state or to attack the host. The point is? Well, the point is that life, it seems, is inherently and implicitly social, both by nature and context (voluntarily and involuntarily).

In-fact, i have a amateur-theory that all organisms are hardwired by nature to engage with other organisms in order to get fitter in the cycle of evolution. The fitness is based on the 'access' and evolution of 'shared' knowledge (of a particular gene state in a host, or the economic output of a country, or any other esoteric inter-galactic protocol).

Given that humans are organisms blessed with superior interaction skills, our incentives are primarily driven by engaging with each other, often emphatically, based on many different 'intents of life'. The intents of life can be shaped up from a functional context as understood from previous posts or also based on 'tastes' and 'interests'. Note that I am generalizing all intentions that forms different context and still call them as social-graphs . In many places, people have coined many other terms such as interest-graph or taste-graphs and have provided interesting connotations for these topologies (I will provide my opinions on this in future posts). For me, simply put, if Individuals are socially networking, then its a social-graph. The rest of it is a signalling discussion around the context. IMO, the intents only bind the domain of discourse of the graph establishing a context.

To illustrate, If I am interested in bird watching, I would love to engage with fellow bird watchers to exchange notes, discuss, and learn about this domain. Now, will I choose to search for others sharing similar interest over my friends network (Facebook, Twitter etc..), or will I form a separate group, or will I move to a separate social-graph for bird watchers is again a discussion of semantics. Lets for a moment assume that there is a bird-watchers fan-page or a group as part of a established social network (say Facebook) and call it a platform.

Every time people engage with each other over a topic of interest over a domain (on a platform), they refine the knowledge-base within that domain and take it to the next level (evolution). Note that in the process of engagement, I may also want to date, hang-out and party with people who are like minded. The pleasure modules in the brain is incentivized in this 'interest seeking' behavior to feel good about engaging with other humans on the topic of interest that are close to our heart(?). In effect, when we say we engage socially, we involve the faculties of both Cognition (understand, learn) and Psyche (perceive, emote) to derive conclusions of such engagements. it is almost a driver of life, that we voluntarily or in-voluntarily participate in social-graphs then.

Given the connectedness of the digital world, it became quickly obvious that establishing context specific platforms over the Internet (the digital nervous system) to enable such interactions is a natural hit. As hypothesized, it becomes natural for us humans to gravitate towards such platforms which enables access to others so as to share our life's intent enriching our experiences.

The nature of such engagements happens over different styles of communication as follows:

  • Synchronous or Asynchronous (relevant based on the flow of info and immediacy) 
  • Closed or Open ended (status versus questions)
  • Private or Public (Inside a closed virtual room or on a wall)
  • Unicasted or Broadcasted (one-to-one or group messages)
  • Organized or Un-organized (hashed, tagged, categorized)
  • Structured or Loose (Text heavy or template based)
  • Animated or Bland (Exchange of Narratives, Theatricals and Videos)
  • Location specific or Global (My locality, state, country...)
  • Discovery versus Recovery (Find something new versus fetch something I know)

Again, it has to be noted that the styles of engagements are chosen primarily based on the combinatorics of dimensions that we have understood in the past posts such as the functional domains, the edge-device profiles, the device experiences (upright, lean-back, lean-forward) and also on the intent of accessing or sharing information and the conclusions that are sought for such engagements. So, again, not all engagement styles are suitable for a given combination of device-profile, device-experience, environments and engagement intents. (much to ponder and innovate here BTW)

Now, then, it starts getting interesting to study and analyze the usage profiles and behavior of humans (to access and share info) through such bounded context of different social-graphs. The intents that are captured, the knowledge disseminated, diffused, built or contained in such graphs becomes extremely important to push the bounds of human evolution a bit further. Of-course such knowledge gets extremely enticing to all practitioners from the functional domain, be it marketers, sellers, buyers, recruiters or also to linguists, sociologists, politicians, economists, logicians, biologists etc...

We can conclude that Social graphs do matter and it is natutral for people to participate. And, what about the evolution? The reach and relevance, unprecedented. The potential and imagination, unbounded.

Wednesday, September 21, 2011

Social Graph : Access, Activities, Environment & Experiences

In continuation to the previous post : The Scheme of things which may have set the base to understand the usage of terms such as Identity, Relation, Context, Functional Domains, Functions, State, Reputation and Edge Devices, I intend to work towards the functions of the Access points (Edge devices), Nature of Activities and Environment of use of the social-graph in this post.

Edge Devices
To quickly summarize, edge devices are the access points or tools that are used to communicate with the digital world, be it world wide web or the social graphs. Broadly there are 3 types of edge devices today being PCs/Laptops, Tablets and Mobile. Each device has advantages and disadvantages around form factor, resolution, input functions (keyboard), nearness (always with me?), bandwidth, processing capacity, memory etc.

Nature of Activities
Lets now broadly categorize the 'nature' of activities that a user performs over a social graph, as follows:

  1. Heavy text content creation/updates (Initiation as well as operational)
  2. Media content updates
  3. Passive Information Consumption
  4. Active Information Consumption
  5. Interaction

Heavy text content creation: During the initiation (or the first time use of the graph) there may be Identity creation, profile updates and other such social-graph-context specific info that needs to be updated. Depending on the context of the graph, these activities may include extraction and load process (Ex:Bill-of-material) into the graph as well. Also on a ongoing basis, you may change, update, add several stateful information that is relevant to the context.

Media content updates: These can be updates of Audio, Video, Pics or other relevant media specific to context.

Passive info consumption: User may visit the social graph site based on events like a notification (friend posted something on the wall) to only consume that portion of information. Or, the user may in general check the news-feed to be in-touch with activities and statues of others through a quick browse.

Active info consumption: User actively searches for a specific profile in the hope of hire (Linkedin), or a product search to find the seller (eBay) etc. There is a active and intense engagement of user to retrieve info either in the form of discovery (looking for something) or recovery (recall what i know already exists). This requires users attention to perform the activity with satisfaction.

Interaction: Interaction may involve, chatting, tagging, commenting, likes, purchase, filling lead forms, quotations etc... (diff function across diff domains of social graph)

The most important aspect of the access points are its environment.

- PCs/laptops are typically fixed point devices used from home or work. They are fully loaded across all capabilities including larger screen, ergonomic keyboard, powerful CPU, memory, fat-pipe (bandwidth) etc. Users typically sit-upright with full attention to perform a task when working with PC. There is limited distraction and ambient noise when user works on a PC. Lets call this the sit-upright posture. Lets say the combination of the device capability and the posture is called as a experience. Typically the consumer can perform all activities (#1-#5) with absolute ease during this experience.

- Next, Tablets are mobility devices meant to be carried around and used in environments such as conference, work, shop-floor, home, events etc. The device capabilities are typically built around info consumption with a focus towards, touch inputs, relative mid sized screens (compared to PCs) and a good processing power for gaming. Now these devices are built to be used in a relaxed manner, leaning-back on a sofa, reading a digital book, playing angry birds, taking quick short notes etc. Lets call this the lean-back posture. IMO the functions that are mostly apt for a lean-back experience is media-content-updates, passive info consumption, and some amount of active info consumption, and interactions. Not all functions of active info consumption may provide maximum utility for a lean-back experience. Also heavy text inputs or extraction-load processes are a complete no.

- Finally, Mobile phones are extreme mobility devices which have the smallest form factor, limited screen size, not so powerful processor etc. The most important aspect of this device is its always-on, always-with-me profile. Also the environments in which they are used are far wider in range than the above two device profiles. Lets hypothesize that a user who has a PC + Phone, would mostly switch to PC when in home or work. (I will keep the discussion on users who never have a PC but only a phone, separate from this post). This eliminates home/work as the major usage time of phone as a access point to engage with social graphs sites. Given this assumption, phones, almost overlap with all environments that of Tablets.

Mobiles are also majorly used in shopping areas, airports, cafes. Typically due to the limited form factor of the mobile, and the amount of ambient noise, distraction, grab-of-attention etc that happens to engage the user away from the phone, the utility of the phone is primarily built to be able to be operated with minimal attention span of the user and maybe single handedly. User typically leans-foward, quickly consumes info and gets engaged back in his environment. So lets call this the Lean-forward experience.

Lets extend the context of the mobile phone profiles a bit. There are feature phones (Not so powerful, limited capability devices) and there are smart phones (A mini Tablet lets say). So the utility of each of this differs based on input capabilities as well as info consumption (based on processing power). Assuming that mobiles are used in a highly distracting environments (unless in a cafe), the nature of activities that you may perform on a mobile gets further limited to a quick status update (about where you are, what you are doing) or passive info consumption. Also only some amount of media content updates and interaction can be performed. Performing Active info seek, or heavy operational text inputs are almost bad experience from the utility-value-grid perspective here.

So the users usage behavior on accessing specific functions of the social-graph is completely dependent on the profile capabilities of the Edge-device, Environment, and the Posture (Upright, Lean-Back, Lean-forward). In effect, all these dimensions combined, drives the experience of the user which limits the maximum utility of a social-graph function for a specific combination of these dimensions.

We can conclude that the way we experience the social graph significantly differs based on the combinatorics as explained.

Here-in lies a premise to focus on either incremental-innovation to build on top of the permissible utilities of a specific experience (mobile-lean-forward) or work towards disruptive innovation on making the pain-points go away (speech-to-text for heavy input processing). That said, it is difficult to change the environment of use or the limited attention a user gets for an experience such as mobile-lean-forward.

Will leave you for now on the thoughts of how applications and domain specific social-graphs can evolve particularly around a mobile-lean-forward experience, as majority of the graph utilities are yet to emerge in this segment...

Social Graph : The Scheme of Things

I was off-late wondering on the nature of social graphs in general and what maybe the functions and context of use of these graphs. Social graphs being the root of many business and scientific discussions, requires a common scheme of things that are used in well defined way in the conversations to broadly make sense.

I am breaking down my thoughts into series of posts to manage the size.

In this series, I thought I can take a first-cut of my understanding and opinions on what this scheme can be (in a common business like language) and represent a preamble to my future posts based on social graphs.

Probably the following distinct scheme of things are obvious at a higher level during social graph discussions.

  1. Individuals who participate in a social graph. (Identity)
  2. Relationships between the individuals. (Relation)
  3. The Domain and its functions. (Context)
  4. The standing of an Individual within a social graph based on the values, behavior and outcomes of his activities. (State, Reputation)
  5. The tools that are used to communicate. (Edge Device)

Lets get the academic definitions out of the way

Social: refers to the interaction of organisms with other organisms and to their collective co-existence, irrespective of whether they are aware of it or not, and irrespective of whether the interaction is voluntary or involuntary

Social Graph: A graph that is constructed by connecting the organisms to each other forming relationships and 'How' they are related.

Defining each of these schemes further

Identity: Each individual will have to establish a unique ID to distinguish herself across other within a graph. This can be email, TwitterID, FacebookID etc..

Relation: The nature or type of relationship you hold in real life, such as, employee, employer, friend, spouse, buyer, seller etc..

Context (Functional Domain): A social graph can be formed between humans relative to many functional domains. Which means, it does not necessarily have to be between a type of relationship such as friends (friendship being a functional domain). You can construct a social graph of organized sellers in a market place relatively connecting with each other to create the sell side dynamics like price control, logistics, bill-of-material, turns ratio, availability etc. You can also have a social graph between organized buyers in a market place connecting with each other enabling the buy side dynamics. Then another graph having participants from a work hierarchy (linkedin), another between a seller & a (adhoc) buyer in a market place (eBay et al). It can be between structured sellers (Amazon, eCom...), it can be for a specific community of aggregators (who are not producers or consumers) such as co-op societies. You get the idea of functional domain specific social-graphs by now.

Functions: Note that the relationship drawn between two people connected in a social graph has certain functions that are enabled to make sense within the context of that domain. In Facebook for example, you chat between friends, you are more casual in your status, you poke friends, upload family photos and comment on them etc... But when you get to Linkedin, you are more focused on getting connected to people from your industry, hiring, marketing, selling, defining job responsibilities accurately, enable recommendations etc. These are the functions you perform over the domain specific graph to engage meaningfully.

State: You seamlessly cut across all the functional domains of different social-graph that you belong to. You as a individual know your personal state and verify your state against activities across different graphs. You also update your residual state which is very specific to the functional domain of the graph. For sake of brevity, each graph carries only enough context and state to play within the domain boundaries of the graph. To illustrate, you may update Facebook that you just became a father (and your demographic profile in FB). You may update your new promotion and brief job responsibilities on Linkedin. As a Individual, you are aware of both these states, but as LinkedIn or FB the graph only knows what it needs to know.

Reputation: Based on your state, activities and interactions in the social graph, you manage to hold a reputation as an Individual within the functional domain. In Facebook maybe you are known to be overtly quite, but extremely chatty when it comes to Twitter. You may be a super connector when it comes to LinkedIn, a top commentator when it comes to Disqus. Reputations are based on likes, rating (and other esoteric parameters such as relationship weights based on frequency, recency, reputation of people you have connected to etc... PeerIndex and Klout are examples to manage such reputation). Also graphs themselves internally manage reputation based on internal algorithms which may be used to show you news-feeds of friends who you interact the most etc.

Edge Devices: There are many types of devices that can be used to access social networks today. PCs, Tablets and Mobiles being the broad category. Each device has advantages and disadvantages around form factor, resolution, input functions (keyboard), nearness (always with me?), bandwidth, processing capacity, memory etc. Assuming there is connectivity for the device to access the graph, the functions of the graph that you would access is based on the context of the graph and the capability of the device to allow a reasonable experience for the consumer to engage with the graph.

Given this scheme of things, it probably becomes meaningful to have reasonable discussion about a social graph in any functional domain without getting overtly confused on the terms used. In the next post I will talk more on the edge devices and its functions which sets the base to understand the pivots of utilities when the edge device capability amplifies or hinders a social graph function.

Tuesday, June 28, 2011

Indian VCs are Dumb. Really?

Indian VCs are dumb f**ks. They do not have the balls or the brains to invest in Indian startups which can become the next Google, Facebook or Twitter !! If I can get a rupee for every time I hear these sentiments I will be reasonably rich soon.

The argument goes that VCs and Angels in US have invested in such start-ups even while revenue models have not been obvious. Fair. VCs in US invested in anything that had a 'dot' in a dot-com during the boom as well!!! What happened to all those companies?? This does not showcase that American VCs have bigger balls or better brains. It only tells that the supply and demand (of surplus funds) in that part of the economy (for that period of time) is different. India is NOT America or Israel or Bangladesh or Taiwan or China or...

Economy across countries differ. Heck, Economy in the same country across timelines differ!! Its not the same USA that it is now when it was 6years back. Reflect on the spectacular failures the so called awesome investors in USA has caused through prescient acquisition of sub-prime mortgages inflating the markets. The world economy nearly crashed.

Money is only a very small part of the equation of why a Google or a Facebook is what it is. If money and smart entrepreneurs alone can have spectacular home runs, then the world will be a different place. How about luck? Does that play a part? We hear about these start-ups only because they are successful. What about all of the ones which got funded in US by the US investors (which had super awesome teams) and failed? Should we really have such retro-rational arguments on successful businesses which is across a geography and from a different time?

What if Google had messed it up? Huh? Would you blame the VC then or the Entrepreneur?

IMO The most important aspect for any start-up to 'survive' is finding traction with early adopters in the right markets. And subsequently for a start-up to 'succeed' they need to cross the chasm to find early majority.

Finding early adopters and early majority is NOT a function of getting funded. A market has many constraints ranging from economics, culture, social-influences, demographics, psychographics, clusters, niches, segments, categories, attribute ownership etc. The Diffusion of innovation and business is completely different for every possible combination of the above dynamics. The rate of acceptance or adoption of a 'utility' differ significantly for these combinations across industry verticals.

Among the stated dynamics, culture and social-influences play a priority. Tangential to this debate let us ask the hard questions first. Why do Indians throw garbage on the roadside? Why do we spit on the walls? Why do we pee outside on the wall of the public toilets? Why do we kill baby girls? (I know you may be nodding your head in disbelief how these questions slipped by in this article!!) Well I will say that you just missed the clue train then.

How many of you have used a really good hyper-local news and deal app that a good friend of mine has built? How many of you have participated in making it viral? How about a great crowd-sourced testing platform from India that another good friend has built? How about a really cool platform for secondary markets for used-items? How about a book and content publishing platform? You would know the names only if you are early adopters. And hell NO, early adopters are NOT marketed to. There is no marketing budgets for early adopters (Not even in your beloved USofA. There were no marketing budgets for the big three sexy companies you quote in the debates as well).

I do not have anything against US VCs nor am I in bed with the Indian VCs. I feel all VCs are opportunists. They are all the same. They have to make money for their LPs. Yes some are smart others are not. The point is, it is not specific to any geography or time or color of the skin or the size of their you know what.

Indian start-ups fail or succeed because of Indians. Period. (I am an Indian entrepreneur in India building a India specific platform for Indian markets).

I know most of you will not like this post and you will have intelligent arguments supporting your claim. I also know that if you get funded when you do not understand market economics, then, not only will you NOT give us a winning sixer, but you will also mess the case for the other deserving ones. Think through that, Arighty? Peace...

Saturday, June 25, 2011

Principles of Failure

Of course you have a great idea. Sure you are a visionary. No question you have battled hard to be where you are. So was Van Gogh or Nikola Tesla.

Did you get rejected by your Customer? Market or your Investor? Hmmm, they must be dumb then, no? Customers are not able to identify the latent problem that is lurking? How lame. Markets do not understand the utility you provide? How immature. Investors do not comprehend the scale you shall bring? How myopic. Sounds familiar? (Note the saracasm, please)

You may strongly believe all of the above as true !! That is besides the point for this post.

Rejections are inevitable. I am not an expert, but Economics (Macro or Micro) is the study of scarcity (due to existence of scarcity) isn't it?

Very broadly stated:
- Customers cannot buy from everyone.
- Markets cannot always accommodate everything having a utility (due to alternatives and irrationality that is pervasive)
- Investors cannot invest in every great idea.

Also, markets and economies are not equal across geographies (and even across time) so basing your rationality across markets or across time may not help.

Some of the good leaders I have studied or have had pleasure to work with, have one strong trait in common: They demonstrate tremendous maturity in handling rejections.

As an entrepreneur, nothing is more handy a tool than managing failures and rejections. This helps in conserving entrepreneurial-energy and dip back into the pool of irrational exuberance or optimism as some call.

Neither Van Gogh nor Tesla gave up in the face of failures to the end (They were in love with what they did). Yes its unfortunate that they are posthumously famous. Its (grossly) unfortunate 5 billion of the worlds population (across geographies, not that it matters) could not identify with them in their time.

Aside, principally though, your ability to resolve forward in the face of rejections has a higher probability of positive impact on your eco-system, than your human instinct to share experiences by considering your markets, customers or investors as lame (even if they happen to be lame) and giving up. [If your failures have had a impact or a burn-out due to which you cannot move forward, then that's a different matter which is valid.]

Also, consider the fact that maybe, (just a little maybe) that the markets, customers and investors are probably not that lame. Then, isn't it important to avoid the rut of ignorance (arrogance?) not seeing holes in your own proposition?

Does handling rejections teach you to sharpen your tool better? What is your opinion?

Wednesday, June 22, 2011

What is your Story?

First, check this video out :

You had no clue what he was singing right? (Unless of course you are a Korean or understand the language). Did the song still move you? I bet it did.

If you had just jumped right into the song sans the story, would it have moved you enough? captured the same interest? Maybe... But the song within the context of the story is a sure shot winner.

Lesson? A good story which people can 'emote' with, almost always sets a strong context for any performance. Be it a talent show, brand, product or a start-up. It does not have to be a sad story. It does not have to be a powerful story either. What a story does is establish trust right from the word go. Empathy is the shortest route to trust.

Isn't 'Trust' the most important faculty when you social-proof? It seems to be the strongest bond that carries people, product, brand and companies through rough weather.

Stories about people who built the product, the journey, country of origin, culture, happy moments shared, rough moments endured, individual or group struggles and victories are all seemingly the levers that can be very humbly sprinkled into the context. Being honest and sincere about it will surely set the tone, intonation, cadence and the 'pitch' right.

It helps to be inclusive. Involve your customers into the story. Make them part of your story, their struggles, their victories, their pains and joys told from the perspective of your brand.

This is what the Experience Economy should be all about. Isn't it?

What's your opinion?

Friday, June 03, 2011

Value Erosion - Prisoner's Dilemma & Defections

My previous blog did evoke some interesting conversations on pros-cons on the Group Buying models. Mostly the argument for Pro group buying almost always veered towards group buying being a great model for service which has high-fixed cost and excess capacity. The examples almost always ended with Travel (Airline) and Hotel Industry and extrapolating that to SMBs!

To recap: High-Fixed cost services which has excess capacity (after recovering its fixed cost) tends to gain from every $ they earn for the same session (Airplane, Yoga Studio etc..) as the cost of acquisition is not significant there after. The Key here is "post fixed cost recovery" and "same session". This is a very Rational Viewpoint. The flipside is, behavioral economics, human beings and market dynamics are not Rational!

Lets take a Yoga Studio as in one of the examples. If the fixed costs were $2000 (lets say) per month (Lets call this a monthly session) and you have enough students who have already covered your cost. Now every additional student (assuming you have excess capacity) you add to the same session should be profitable for the Yoga instructor correct? Rationally Correct.

The challenge with this debate is exactly what the "all customer defects" scenario as per the Prisoner's dilemma presents. When the initial paying customers gets a wind of what you do to fill the remaining capacity of the Studio, they start defecting to wait for that Deal... and this catches on (is catching on). Airline and similar (Hotel) industry is only very few industry which can afford to operate in this model as people are 'pressed' to fly and cannot always wait for a deal. For everything else (which is not pressing), they will wait for a deal. This is already happening in the SMB markets in volumes as we speak. Regular paying customers are defecting to wait for deals. Also, they would now not mind to switch loyalty off the Merchants if someone else gives a deal.

We must exercise caution while extrapolating such models to SMBs right off. Unlike airline industry, the 'long tail' of similar merchants (Yoga, Cafe, Saloon...) is relatively much voluminous in a given city than a consolidated few flight schedules between two cities across airline players. which means, there will mostly always be a deal for me to defect.

When most customer's defect, then, the prisoner's dilemma feeds on itself to erode value out of the system. Talk to the SMBs to feel their pain and validate this.

A key metric on the current deal-seekers for Merchants now includes in excess of 50% (median) and as high as 90% in some formats of "existing" customers biting the deal! Did you add additional footfalls then? or are you defecting your current paying customers?

When most of them defect, the SMB will now be fully dependent on the likes of Groupon for filling seats to recover their high-fixed cost. Great if you are Groupon, Living Social, Google Offers..., Epic win if you are a Consumer, Sucks if you are a SMB. You know what SMBs will do if this happens right? (and what will be left of the business model.)

Bottom-line: The current avatar of group buying is just not a proven model yet and needs to focus on a whole lot of market dynamics to assure a equilibrium before we can claim that it works.

Thursday, June 02, 2011

Group Value, Where Art Thou?

There are exciting theories and debates on group buying, thanks to the promised land prescribed by Groupon who made Group buying the current rock-star of the fledgling US markets (post, recent down-turns that is). (Is it adding to inflation or aiding? Hmmm, tangentially different debate.) With today's S-1 filing, the heat (usually which allows a hot air balloon to raise) seems to be turned on. Don't get me wrong. Hot air balloons are the greatest invention which allowed mankind to fly. Just that its not a preferred mode of transport since the Heidenburg disaster. So is Group buying a proven model yet?

Quick recap: Retailers usually break down their sales life cycle largely into Acquisition, Retention and Servicing. The budgets for ATL (Above the line), deep-discounts and loss-leader line of products typically falls in the Acquisition cycles. The loyalty and BTL (Below the line) promotions fall into the Retention bucket. Upgrades and up-sell falls into the Servicing bucket. Smart Retailers do not aggregate a single promotional budget to track their consumer micro-segments. Instead, they spend their research and sampling $$ on new customers, marketing $$ on Silver profiles, retention $$ on Gold profiles and the Service $$ on Platinum profiles. Not all these budgets are equal. Most important of all, The ROI of each of these spends are significantly different for each micro-segment. Also, retailers trade-up during boom cycles and trade-down during bust-cycles (So the budget varies).

Where does group-buying fall into? Clearly the Acquisition bucket (which is NOT a capex spend but a marketing cost). The Acquisition is the big funnel that marketers fill in order to convert the footfalls towards the Retention bucket. One must make sure that they fill quality leads which aids in healthy conversion helping them move the leads to the Retention bucket. What are quality leads? Are consistent deal-seekers quality leads? Are Bargain hunters quality leads? Is the cumulative conversion index per consumption-segment positive? These are some of the questions which a optimized, organized retailer such as GAP, Walmart etc. asks. Are these measures different for a SMB retailer? I would argue that they are even more applicable for a SMB...

When does one deep-discount? typically, when you have end-of-line sale, surplus capacity whose account has gone into sunken cost, poor-utilization rates (Ex: Hotel Rooms), Expiring shelf-life, to clear product line whose GMROII is not positive, Projected increase in policy costs (Taxation changes on holding inventory), or adding large sampling to acquire new customer base for virgin markets or virgin products. (I may have missed few others for sake of brevity). Most of the above is a provisional measure for retailers who are operating in a larger scale of economy. What are the premise for SMBs then? In my umpteen conversations with the SMBs, deep-discounting occurs primarily to add leads to their funnel in the hope that the consumer shall experience the "Unique product offering, Service and Ambiance" which is a differentiation for the SMB to exist. Now this sounds like a virgin offering. So it clearly is for "Sampling" then for the SMBs.

Now, the Cost of Consumer Acquisition (CCA) should be paying off on the long run through two different measures that adds up.
1) NPV or the Net Present Value of the Consumer.
2) LTV or the Life Time Value of the Consumer.

The NPV for virgin footfalls does not exist. Which leaves the LTV. This materializes only after the conversion. Remember that the CCA of 'N' who are added to the funnel is used in determining the 'M' conversions and their LTV. Meaning the CCA cost of adding 100 virgin footfalls must be offset by the LTV of the 5 who gets converted (5% as a example).

The CCA and LTV are very segment specific (Beauty & Massage parlours, Small Eateries & Restaurants, Boutique Hotels, Convenience Stores etc..). The conversions are also segment specific. Not only are they segment specific, the country of operation, the consumer behavioral context, culture and current economy makes a huge difference in any of these measures.

As an example: A country like USA where people leave a tip in the Restaurant on the original price of the meal-offer (Not on the group-discounted price) makes a significantly large difference in the operating cost for the Vendor as against in India where people usually do not like to leave tips or have a standard 5 Rupee coin for whatever the ware maybe.

Also the LTV is a layered value derived based on effective frequency of visit. Meaning, How many of them visited 1 time, 2 times etc... and the relative spend thereafter. Also, there is a break even frequency at the same cost before a positive value can be derived (Here is a simplified calculator)

Not all SMBs are also geared to service a peak footfall that occurs during this group-buying frenzy, which results in diluted service/offering. This hampers the conversions badly. Most of the SMBs are not seeing a conversion above 3% (median) of the footfall. I have been following rants about SMBs saying that they shall never go back for Group-buying again . I have also heard rave reviews about some Up-sale (NOT conversion) during such frenzy, especially in the Beauty Segment (people walk in for 500 RS worth of ware but spend 10K), These guys love the group-buying models... besides, there has been theories that deal-seeking bargain-hunters are never loyal (There are stats to prove this)... All of this has to play out towards a equilibrium in the long run.

The point is: Group-buying in its current avatar (Independent of what ever the top-line suggests for Groupon) is not YET a proven model for SMBs. It cannot address the economy of scale challenges of the big retailers either. So where does it fit as a positive operational model? I am not saying that this will fail. Its just that there is a lot more nuance and context specific treatment that is required to make this a classic. I am sure the markets will figure it out eventually...

For now, how many of you are standing in the line for the Groupon IPO? Make sure you do not sell your house as of yet to invest :)

Monday, May 23, 2011

Where lies the rhetoric?

Its amazing how many debates exist out there on what should be the 'right' reasons to start a business. There are so many theories around making-meaning, start-to-scale, greed-is-good, fast-company etc... The proportions of these principles contradicting each other is high. Equal number of empirical evidence exists to hold each of these theory on its own. The empirical evidence is mostly either in the form of demonstrated success stories and strong learning post-success or some are retro-rationale (as some call it). Are there enough based on the principles of failure in this culture and economic context? Are there enough which are from here (India) and not pre-canned?

There seems to be camps which discourage entrepreneurs-in-the-making (EIM) to first find the 'right' reason. If the reasons does not match the eye-of-the-beholder, they are quick to dismiss the EIM as a wannabe. There is also a term 'wannapreneur' for such dismissals. This seems to be applicable to the ideas as well, which gets discouraged cause the beholder has a strong opinion against it. Woah!!!

Funnily enough, these dismissals does not come from the Investment community. Most of the investors I have come across or heard of have mostly NEVER dismissed an entrepreneur based on the stated right or wrong reasons of the EIM. Generally, the Indian investment community (I have no interactions with others) is really a mature lot in understanding that there is no point being predictive and judgmental about the reasons. Also the investors confess that they have no way to even tell, as a matter of fact, if a given idea is a great scalable idea which will have huge returns or not. They have invested in ideas they think are awesome and failed (Ok, there are many reasons to fail. I agree), and have passed great ideas, where they did not have enough gut-feel (yes, that feeling in their stomach, not the brain) but later found that it was a big hit (Yes, there are equally many reasons to succeed).

Shouldn't people start business based on whatever reasons, principles, theories they believe-in is right? If the reasons are 'strong enough' to make a difference then it shall find the early-adopters, and if it is 'right enough', they will cross the chasm.

If the markets are the best course of correction, then, shouldn't we encourage every one who is willing to crossover, to do so, independent of their reasons? Shouldn't the eco-system have a healthy amount of failure for everyone to figure out the cost of failure (or a new path to succeed) for whatever the reasons may be?

I am of the belief that India lacks by huge margins (yet) in the number of startups per year (given the per-capita measure). Also, it is way-early to define reasons/principles of success which are context, economy and culture specific, as there are very few successful startups or number of exits (yet). The only way to increase this is to initially increase the size of funnel before applying any "qualifications" to the funnel. The qualifiers are not known yet. Even if (hypothetically) known, its not reason enough to stop the inflow of entrepreneur-energy-capital.

Entrepreneurial-Energy is a scarce resource. Kindly, encourage them to start...

Sunday, May 22, 2011

What's the price?

I assisted a friend to purchase an assembled computer recently. There were 2 equally good vendors who offered the goods. One of the vendors was close to where we live while the other was about 30mins away. We approached the vendor nearby (In J P Nagar) and bargained on the price (common while purchasing assembled goods). The vendor nearby quoted INR 27,300/- for the same configuration while the other vendor was willing to go down to INR 27,150/. My friend settled to place an order with the vendor nearby as the price differential was only 0.5%.

Next we went to the nearby bookstore to browse some books. Friend decided to (after my rave reviews) pick the "The Black Swan" priced at INR 495/-. When we approached the desk, the gentleman behind the desk advised that a paper back version of the book discounted at 30%, is available in another store near Indiranagar (which is 40mins drive). We drove to Indiranagar to purchase the book.

Reflecting upon the events, the mental math made for NOT travelling an additional 30mins to save 0.5% off a purchase price, was offset (on the same day) by the mental math of saving a 30% off another product for which friend decided to drive 40mins.

In absolute terms, the savings in either case was INR 150/-. We clearly choose one versus the other.

Basic observation using this as an analogy for product pricing
(Eliminating the details around same-product versus like-to-like price comparisons)
Having a list-price of your product set to a ideal-ask price and then providing a relative discount to the list price has an edge compared to having a lower-list price and not offering discounts (while the absolute sale price being the same).

Behavioral Economics supports these observations and conclusions.

Worth pondering ?