Archive for September 2008
my comment on seth godin’s post “breakage”: be careful with your customers
Seth Godin‘s blog doesn’t seem to allow comments, so here we are.
I really like the theme of his most recent post, “Breakage“: you have to be careful with your customers. You might go years upping prices bit by bit, then all of a sudden lose half your customers before you know it. Massive swings like that can happen whether making just a slight change to your pricing, or what you offer, or your tactics. Here’s the last bit of the post: (although you should just read it–it’s short.)
When you hit the breaking point with one person, it might be 1,000 or 100,000 people who do the same thing at the same time. And you don’t get a second chance. They’re gone.
It’s not just money. It’s service. Or trust. Or spam.
You can stretch a rubber band for a long time. But then it breaks.
I heartily agree. But he neglected to discuss what that company should be doing differently: it’s something so many businesses should be doing, and _especially_ businesses with a big customer base, since it’s so easy in the internet age. Test.
Test new products internally, then with a limited set of your customers, before offering them to everyone. Test advertising messaging, test landing pages, test changes to your checkout process if you’re in e-commerce. And if you need to make pricing changes, absolutely test those changes before rolling them out to every customer. Testing is the clear victor over focus groups, surveys, or any other method of gauging customer preferences without them actually making the decision in question. If you ask them how a change in pricing would affect their decision, you won’t get the right answer. If you serve 5% of your customers a different price, you’ll quickly know if it’s a good or terrible idea.
Maybe Seth’s insurance company, in fact, was merely testing pricing changes, and he happened to be in the 5% of their customers randomly selected to get the highest price increases, year after year. If so, then Seth’s departure has just given them some very valuable information they can now apply to their pricing model for their customer base as a whole. My gut tells me Seth’s right, though, and they’re just raising prices for everyone by the same amount, year after year. If so, then as he suggests, they may have made an unexpectedly costly mistake.
p.s.: There are plenty of businesses where testing prices often doesn’t make a lot of sense, for a number of possible reasons. At basecamp, for example, simple and consistent pricing is part of what makes them who they are. I wouldn’t favor pricing experimentation for them. For amazon, definitely yes. For a new startup still looking to hit its product/market fit: don’t worry about testing tiny changes–iterate on your whole product.
what i liked at techcrunch50: fitbit, grockit, goodguide, and peter thiel
I didn’t watch every presentation. I probably saw 10 in person and streamed another dozen or so from home. I also didn’t pay to attend the conference. I volunteered for free admission, which meant showing up for a couple hours on Sunday to chat with the organizers beforehand, then showing up early Monday morning to help get people to their destinations. A couple of those people I guided I didn’t mind getting up early to meet: James Currier (I’ve written about him before) and Michael Arrington. During that 10-second conversation with Mr. Arrington, I felt almost as if I was speaking to the most influential blogger about technology startup companies of our day, if you can even grasp what that means. =)
Since I was given the gift of free techcrunch, I thought the least I could do was give back just a bit with my opinions of companies I learned of that you actually might care to know about.
Each link goes straight to their tc50 presentation video, which is a pretty painless way to learn more, if you’re interested.
Fitbit. These guys were one of 5 runners up, as were my next two highlights. They’ve basically got a device about the size of a usb flash drive that you clip on your clothes and wear all day, every day, if you feel like it. Using some sensors (accelorometer-type, not gps-type yet), it measures your movements and records your level of activity throughout the day and night. It automagially uploads the data through a wireless base station in your home to their servers. Anytime you want, you get on their website and see how many calories you’ve been burning, what your activity level has been like, what your sleep patterns have been like, in as much or as little detail as you like in very pretty charts. There’s a tremendous amount more it’s capable of, in fact–watch the video if that sounds cool. It’s a one-time $99 purchase. [sorry, realized they don’t have a video available. their website is fitbit.com]
Grockit. I’m not quite sold on using it myself yet, but they’ve made an incredible step forward in collaborative learning online. Study for the GMAT with your friends, or with any number of people you’ll meet on the site.
Goodguide. This is something I’ve been waiting for for a while now. And these guys have seriously nailed it, it appears so far. It’s an online guide and repository for health, environmental, and social impacts of consumer goods. Their first focus is “personal care and household chemical” products, and already I’ve used it to decide I need to switch from Coppertone’s Sport Lotion to its Sport Gel sunscreen. You’d be surprised at the tremendous difference between the two in terms of health risks.
Michael Arrington chats with Peter Thiel. Great thoughts from Peter Thiel of paypal, facebook, slide, founders fund, and many more on technology trends, bubbles, and how much vc-backed startup ceos should get paid, based on analyzing the performance of past startups (his opinion, to break the suspense: 100k-150k).
Bonus: Tonchidot. Not a company I would recommend investing in if you’re an investor reading this, but a video demonstration definitely worth watching, just to see what someone has been able to do with an iphone. They overlay data from the internet on live video of the real world through your iphone. You’ll have to watch it.
using a speculative market to decide our laws? (“futarchy”)
I just learned of this idea today, and it caught my attention. The post I’m referring to: http://hanson.gmu.edu/futarchy.html
The two sentence version:
In futarchy, democracy would continue to say what we want, but betting markets would now say how to get it. That is, elected representatives would formally define and manage an after-the-fact measurement of national welfare, while market speculators would say which policies they expect to raise national welfare. The basic rule of government would be:
When a betting market clearly estimates that a proposed policy would increase expected national welfare, that proposal becomes law.
I haven’t yet digested this much, but I wanted to see what other people’s initial reaction was to the idea. Is it something we should be discussing more? Obviously it’s not realistically going to happen anytime soon, but with what we’ve learned about markets even in the past decade, what do you think?
Blake Borgeson, in blog form 