A Few Books Every Marketer Must Read

This is my recommendation:

  1. Hard Facts, Dangerous Half-Truths And Total Nonsense: Profiting From Evidence-Based Management by Jeffrey Pfeffer and Robert I. Sutton
  2. Marketing Imagination, New, Expanded Edition by Theodore M. Levitt
  3. The Strategy and Tactics of Pricing: A Guide to Growing More Profitably by Thomas T. Nagle and John Hogan
  4. The Affluent Society by John Kenneth Galbraith (if you can’t read the whole book  at least read the chapters on Conventional Wisdom and Consumer sovereignty )
  5. Influence: The Psychology of Persuasion by Robert B. Cialdini
  6. Wrong: Adventures in the Margin of Error
  7. Spent by Geoffrey Miller
  8. The Rise and Fall of Great Powers (it is a great book on strategy)

Book Review: Price of Everything

The book is The Price of Everything: A Parable of Possibility and Prosperity by Russell Roberts. A very well written book with a storyline, set in Berkeley and Bay area. That alone gets stars from me. If you are exposed to economics or a practitioner you will be bored especially with the  parables trying to teach you. On the other hand, if you find it hard to explain to your friends and colleagues market economy, price discrimination and dynamic pricing this book will give you pithy stories to tell.

The book starts with what most people and media would call as price gouging. The scene is aftermath of a mild earthquake when there is a sudden spike in demand for flashlights, candles and baby formulas.  The story’s protagonist Ramon was shopping for flashlights. The local Home Depot was completely sold out but another retailer had supplies – at twice the regular price. Is this price gouging? How dare a retailer profit from an emergency and squeeze their customers when they most need the supplies?

This leads to a series of events, later on in the book the question is put back to the readers, “Would you rather shop at a store that charges the same price all the time and runs out of stock in emergencies or shop at a store that has differential pricing and does not run out of essentials when demand spikes?”

This I think is a great way of teaching (that is if you are a reader looking for learning from the book) – set up the problem, the context and also toss in  conventional wisdom (which not only not wisdom but down right wrong),  let the reader toy with the problem and enable them to form their version of solution before giving an alternative explanation.

The question that was not asked by the author is – If what Big Box did was price gouging, would it be okay if someone picked up all the flashlights from the Home Depot and sold them right outside Big Box for a price just below  twice the regular price Big Box was charging?

There is also the famous story of the pencil – how no one single person knows how to make a pencil.  The core principle is how price and price alone serves as all the information that is needed to orchestrate the complex and distributed ecosystem that has no central authority and no other channels of information. I liked the version described in the book Free to Choose: A Personal Statement by Milton Friedman and Rose Friedman.

Price is Everything does not ask or explain why some are willing to pay $4 per pencil when Target and Walmart sell a box of two dozen pencils for 25 cents. What is missing is that while price alone serves as the signal, it is not something decided purely by supply and demand equilibrium. A marketer has control over the price they charge and  improving customer willingness to pay.

The book also touches on several other economics topics like  game theoretic thinking and choosing a dominating strategy.

Overall I recommend this book, even if the concepts are  not new to you there is value in learning from Russell Roberts how to tell a good story and how to create teachable moments.

Book Review – Why Popcorn costs so much at movies

The book is Why Popcorn Costs So Much at the Movies: And Other Pricing Puzzles by Richard B. McKenzie.

I have mixed feelings about the book. The first thought I had was that the book reads like a blog and probably would have been a very good blog that draws lots and lots of comments. That said, the flip side is I think it needs tighter editing. The discussions in the chapter definitely need to have a better flow. The conclusions at the end of each chapter do not help.

I am impressed in general by the logic and analysis McKenzie applies to economic and pricing puzzles. But for most puzzles there seems to be equally plausible alternate explanation.

In the first few chapters he talks about the logic of buying vs renting houses. His discussion of the homeowner tax credit flows to the renters in the form of lower rent sounds plausible. Except the argument ignores the possibility that not all renters may have  credit history to buy house or not all of the rental properties are available in nice neighborhoods people would want to live in.

Regarding free WiFi in coffee shops, McKenzie argues that sell the value of coffee and give free WiFi since the marginal cost to provide this service is $0. Again I do not agree with this. What about the fairness argument, why should those who just drop in to grab coffee and run out should subsidize the WiFi used by a few who spend hours at the shop?

On of the puzzles is why prices end in 9, I cannot say I understand the reasoning. There was an article on the same topic in The Times some time back. I liked that article a whole lot more.

As I said before, the topics discussed in the book would have been great in a blog format.

Should Barnes & Noble Go After Kindle?

With Borders shutting down stores and facing declining profits, Barnes & Noble remains the only strong brick and mortar bookstore. While it faces strong competition from discounters like Amazon, WalMart and Costco, its new threat comes from the change in consumer preference from  paper books to eBooks. While there were other eBook formats and readers, the threat was not credible until Amazon entered the market with its own Kindle eBook reader.

The real threat is not from the device but from Amazon’s strategy to own the distribution through its Kindle store. Amazon is more than a bookseller, it is a Platform company (Mr. Jeff Bezos once described Amazon as the Ideas company). It has the wherewithal to develop a home grown distribution platform, build an ecosystem around it and quickly gain control of the ecosystem. But B&N does not have the technology and a strong R&D team.

Clearly B&N knows this weakness and sees the threat posed by Amazon’s Kindle store. It however can acquire the technology to fast-track its eBook strategy and it did exactly that. B&N is  set to answer Amazon with its own eBook store with its acquisition of FictionWise an eBook retailer.

Stated in the same report is that B&N is going to develop its own eBook reader, a competitor to Kindle if you will. This is not the right strategy for B&N. As I stated in my previous article the Kindle device is not the main focus of Amazon and it will gladly give that market to control the distribution value chain. B&N should not be distracted by the success of Kindle device. The war is about the control of distribution platform not handheld devices. It cannot dilute its scare resources by focusing on both the eBook distribution platform market and the devices market as this would only enable Amazon strengthen its platform leadership position.

Strategy is about making choices and allocating limited resources and not straddling. So forget going after Kindle device, it is a  red herring. B&N’s strategy should be to become another platform option for publishers and authors who would not want to see just one strong player in the eBook market.

Amazon Kindle – The Platform Wars

Back in July 2008 I wrote about Amazon’s Kindle Strategy. I said they are not in it to capture the devices market but rather win the distribution platform market.

It is driving the new format, reduce the value captured by publishers and position itself to be the distribution medium of choice. The goal is to capture the format market and control the value chain and not the devices market. Since no one else s making such devices amazon.com took this on itself.

There is news today from Amazon that signals the move in that direction. Amazon announced today that they will release a Kindle iPhone Application that lets iPhone and iPod Touch users read Kindle books on their devices instead of Kindle. This program is available for free, a right move that fits with the platform strategy to increase footprint. The Kindle App will be a bit with  iPhone users and it will reach top 10 among most downloaded.

Is this program targeted at its existing Kindle customers or new customers? While Amazon says it is adding convenience to Kindle owners allowing them to read books while they are away from their Kindle device, it is directly targeted at converting new users and increasing Kindle format footprint. For the very near term (within days) even if 1% of 10 million (approximate) iPhone/Touch users bought just 1 book at $9.99, that is  $1 million in new revenue. For the long term this translates into not only more revenue from repeat purchases and new customers but also delivers on Amazon’s goal to win he platform war.

Questions do arise on why Amazon introduced Kindle at all and why it did not go for iPhone application in the first place. I think Amazon’s strategy evolved since the introduction of Kindle. The biggest factor of Kindle device is the readability with its e-ink technology, there will always be a segment willing to buy this device for this factor alone. Techcrunch downloaded Kindle App for iPhone and reported they had same reading experience on iPhone as on Kindle. Amazon probably also wanted  to be negotiating with Apple from a position of strength having a powerful BATNA (Best Alternative To Negotiated Agreement).

Other Winners and losers? By giving the program away for free Amazon denied any revenue to Apple.  Authors and Publishers stand to gain more from increased book sales. Magazines and Newpapers  that received subscription revenue from Kindle subcribers stand to lose any additional revenue from new subscribers. This is because iPhone readers can access the content using the browser and with existing online subscription instead of paying a separate subscription fee for reading on Kindle. To some extent Sprint Nextel that has the contract with Amazon to deliver books on-demand to Kindle devices stands to lose.

Overall, Amazon will win because of its clear strategy and flaw less execution.

Randy Pausch and Randy Komisar – Trade Money For Time

This weekend I watched the time management lecture by Randy Pausch, (well known for his terminal condition and his book The Last Lecture). I also read a book by Randy Komisar, The Monk and The Riddle. The two Randys talked about exactly the same thing.

Their core concept is the same, simple and profound – worry about the scarcest and non-reprehensible resource. Time and not money. Both goad us to ask ourselves, ” if I only had a short time to live, would I want to do what I am doing now. Is what I am doing worth my time? What is the opportunity cost?

While Komisar is more holistic in his approach and asks ” if I am doing step-1 because it has to be done so I can get to do step-2, which I love and is really what I want to do for the rest of my life, why? Why not do what I really want to do now? Why wait? Why subscribe to ‘deferred life policy’?”

He talks about ‘drive’ which pushes you to do things you have to do while ‘passion’ pulls you towards things you would rather be doing.

While Komisar simply asked us to imagine our final days, Pausch literally had only few days to live and died recently.
Pausch gives tools and tactics to operationalize this, with specific and tionable and habit forming TODOs.

Together the two tell us to focus on our passion and how we go about achieving it.

Komisar’s book also gives brief insights into how startups and VCs work, how they think about valuation from their perspectives and some funny anecdotes on life in the valley.