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October 28, 2013

Product testing - Interesting examples

Many a times companies would like to know how their products would work out in real life situation. In such cases they would indulge in product testing. Product testing can be done in the field or in a experimental setting or in-house.

Gillette has a very interesting way of testing its products. All the male volunteers of Gillette are required to come to the office or the factory without a shave. Once they come to the factory they are required to go to a special room and take a shave. There are marketers observing the employees from behind the mirrors. The way the employees shave, the time taken, the process of shaving, the application of cream and after shave lotion, the number of strokes in the shaving process, and whether they shave only in one direction or many directions all give very interesting insights in product development. 

Similarly there are lots of youngsters who combine business with pleasure by walking up an down a corridor while listening to music or reading textbooks on their Kindle. What are they testing? They are testing the wear and tear of carpets. Each student has to walk for a specified time and specified distance. This way the durability of carpets can be tested. The luckier lot get to sleep – Literally. They are testing the durability of the mattresses or of the bed itself.

Freebie marketing - where free is not really free.

 Freebie marketing, also known as the razor and blades business model, is a model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good such as supplies (inkjet printers and ink cartridges, mobile phones and service contracts) or game consoles (accessories and software). It is distinct from Loss leader Marketing and Free sample marketing, which do not depend on complementarity of products or services.

The usual story is about Gillette is that he realized that a disposable razor blade would not only be convenient, but also generate a continuous revenue stream. To foster that stream, he sold razors at an artificially low price to create the market for the blades.

But in fact Gillette razors were expensive when they were first introduced, and the price only went down after his patents expired: it was his competitors who invented the razors-and-blades model.

Freebie marketing has been used in business models for many years. The Gillette company still uses this approach, often sending disposable safety razors in the mail to young men near their 18th birthday, packaging them as giveaways at public events that Gillette has sponsored.

Comcast often gives away DVRs to its subscribing customers. However, the cost of giving away each free DVR is offset by a $19.95 installation fee as well as a $13.95 monthly subscription fee to use the machine. Based on an average assumed cost of $250 per DVR box to Comcast, after 18 months the loss would balance out and begin to generate a profit.

Computer printer manufacturers have gone through extensive efforts to make sure that their printers are incompatible with lower cost after-market ink cartridges and refilled cartridges. This is because the printers are often sold at or below cost to generate sales of proprietary cartridges which will generate profits for the company over the life of the equipment.

In fact, in certain cases, the cost of replacing disposable ink or toner may even approach the cost of buying new equipment with included cartridges, although included cartridges are often 'starter' cartridges that are only partially filled. Methods of vendor lock-in include designing the cartridges in a way that makes it possible to patent certain parts or aspects,

Atari had a similar problem in the 1980s with Atari 2600 games. Atari was initially the only developer and publisher of games for the 2600; it sold the 2600 itself at cost and relied on the games for profit. When several programmers left to found Activision and began publishing cheaper games of comparable quality, Atari was left without a source of profit. Atari added measures to ensure games were from licensed producers only for its later-produced 5200 and 7800 consoles.

In recent times, video game consoles have often been sold at a loss while software and accessory sales are highly profitable to the console manufacturer. For this reason, console manufacturers aggressively protect their profit margin against piracy by pursuing legal action against carriers of modchips and jailbreaks.

Many marketers make extensive use of the freebie marketing business model, as many products are promoted as having a "free" trial, that entice consumers to sample the product and pay only for shipping and handling. Advertisers of heavily-promoted products such as weight reducing Products targeting dieters hope the consumer will continue paying for continuous shipments of the product at inflated prices, and this business model has been met with much success.

Websites specializing in sampling and discounts have proven to be very popular with economy-minded consumers, who visit sites which utilize freebies as link bait.

Tying is a variation of freebie marketing that is often illegal when the products are not naturally related (for example, requiring a bookstore to stock up on an unpopular title before allowing them to purchase a bestseller). Tying is also known in some markets as 'Third Line Forcing.

Some kinds of tying, especially by contract have historically been regarded as anti-competitive practices. The basic idea is that consumers are harmed by being forced to buy an undesired good (the tied good) to purchase a good they actually want (the tying good), and so would prefer that the goods be sold separately.

Another common example is how cable and satellite TV providers contract with content producers. The production company pays to produce 25 channels and forces the cable provider to pay for 10 low-audience channels to get a popular channel. Since cable providers lose customers without the popular channel, they are forced to purchase many other channels even if they have a very small viewing audience.

Dogfooding - A great way of Internal Product testing

 Dogfooding is a term used where a company uses its own product to demonstrate the quality and capabilities of the product. In other words the company is practicing what it preaches!

Dogfooding can be a way for a company to demonstrate confidence in its own products. The idea is that if the company expects customers to buy its products, it should also be willing to use those products. Hence dogfooding can act as a kind of testimonial advertising.

One perceived advantage beyond marketing is that dogfooding allows employees to test their company's products in real-life scenarios and gives management a sense of how the product will be used, all before launch to consumers.

In software development, the practice of dogfooding with build branches, private (or buddy) builds, and private testing can allow several validation passes before the code is integrated with the normal daily builds.

In the 1970s television advertisements for Alpo dog Food, Lorne Greene pointed out that he fed Alpo to his own dogs. Another possible origin is the president of Kal Kan Pet Food, who was said to eat a can of his dog food at shareholders' meetings.

In 1988, Microsoft manager Paul Maritz sent Brain Valentine test manager for Microsoft LAN Manager an email titled "Eating our own Dogfood", challenging him to increase internal usage of the company's product. From there, the usage of the term spread through the company.
The development of Windows NT at Microsoft involved over 200 developers in small teams, focused on dogfooding, using a daily build, initially text only, then with graphics, and finally with networking. It was initially crash prone, but the immediate feedback of code breaking the build, the loss of pride, and the knowledge of impeding the work of others were all powerful incentives in making it better.

October 09, 2013

Two movies for Management students - Baby Boom and Pentagon Wars

 It was one of the movies that I had always admired. It was shown in Doordarshan in the late eighties. The plot was remarkable and it got etched in my mind. Alas long time delay meant that I forgot the title. But the story line was fresh in the mind. Google search helped in zeroing on to the movie title - Baby boom. I will definitely watch it again and would make my MBA students watch it too. Useful for classes of Entrepreneurship, leadership, fight against adversity, women empowerment, risk management and even about work life balance.  I would recommend Baby Boom to lift you out of that terrible depression that might strike at any point of time. It will put a smile on your face and yes in your heart too!

Baby boom (1987): J.C. Wiatt (Diane Keaton)  is a driven career woman (nicknamed the "Tiger Lady") whose fast-paced life leaves her with no time for romance or relaxation, though she derives pleasure from her frantic schedule and demanding job. She works as a management consultant and lives with an investment banker, whose job and life are likewise hectic. Her life is thrown into turmoil when she inherits a toddler, Elizabeth (twins Kristina and Michelle Kennedy), from a deceased cousin.

Caring for the child soon occupies much of her time and her business career begins to suffer, culminating in the loss of her boyfriend and job. Wiatt tries to give Elizabeth up for adoption but finds that she has grown too attached to the child, forcing a reevaluation of her priorities. She moves into a house in the country. Purchasing the home without first having seen it in person or having it inspected she finds it is riddled with problems (failing plumbing and heating, lack of water, bad roof).

Suffering a nervous breakdown and on the brink of financial collapse, she sees an opportunity to sell baby food applesauce she had concocted for Elizabeth from fresh ingredients. Amid the clamor for her new products she develops a relationship with local veterinarian Jeff Cooper At first annoyed by him, she is opposed to Jeff's overtures and is focused now on as fast as possible to return to New York. Finding a buyer for the house proves almost impossible.

After a rough start she succeeds in selling "Country Baby", her gourmet baby food, and soon business is booming. Finally, her old boss and his client take notice. They offer to buy her company for millions, take her product nationwide, and give her back her career and high-prestige life. On the brink of accepting, she decides that she can grow her enterprise on her own without having to sacrifice her personal life. She returns to Vermont and the arms of her new lover and adopted daughter.

Another movie, I thoroughly enjoyed watching on Doordarshan was Pentagon wars. It is a great movie about product development and about governmental bureaucracy. Made for great viewing. Lots of information delivered in a very satirical fashion

Pentagon wars (1998):  The story itself the crazy process whereby a simple request for an improved armored personnel carrier for the US army resulted in the ridiculous initial design for the Bradley transport is one that should be well-known. It is the ultimate cautionary tale about a bureaucracy gone out of control. It is amazing to see the light-handed skill with which the story is told. It is funny when it should be, yet interest you sufficiently to get you really mad at what is going on and the cover up operation.