Lessons from the pudding guy

True story : In 1999, David Phillips was grocery shopping when he noticed that Healthy Choice Foods was offering frequent-flyer miles to customers who bought its products. A 25-cent pudding would bring 100 miles. Phillips bought 12,150 servings of pudding for $3,140 and then enlisted the Salvation Army to help him peel off the UPC codes, in exchange for donating the pudding.

He mailed his submission to Healthy Choice, and they honoured the terms of the promotion and awarded him 1.25 million frequent-flyer miles, enough for 31 return trips from California to Europe. Phillips also got Advantage Gold status for life with American Airlines, which brings a special reservations number, priority boarding, upgrades, and bonus miles and he got an $815 tax writeoff for donating the pudding!

He is currently earning new miles five times faster than he can spend them, so essentially he has free air travel for life for the net cost of $2,325.

Morals of the story :

1. Always do a full commercial review of any agreement / contract / business decision - check your modelling and assumptions.
2. Make sure that your selling price on a product is greater than the cost to make / buy it.
3. Honour your contractual commitments to increase the value of the trust in your brand.
4. Donate to charity!

Luckily, there are no losers in this story. Phillips bought all his future air travel for $2,325. The airlines sold the miles to Healthy Choice foods so it was a standard arms length transaction and Healthy Choice foods got more publicity from Phillips’ pudding plan than they could ever have hoped to achieve through the promotion alone.

Originally saw this on www.futilitycloset.com

How will the television content get to us tomorrow?

In the previous post I outlined my reasons for thinking that the current television content distribution model is rapidly becoming obsolete.

Networks and studios should adapt to meet the changing market needs.

Here are two examples of how this could work :

1. Studio’s sell direct to the public via the internet. This model may not stop the piracy which is plaguing the industry because the gap between free and cheap is still a big one. The networks are bypassed entirely because they currently add little to no value to the user. The studio’s benefit because they know exactly what the viewer wants and waste very little money producing shows that no-one watches.

2. The other model which may have sustainability is for the networks to add value by becoming content aggregators. They continue to buy from studios and sell to viewers either on a “pay-per-view” arrangement or on an advertising subsidised basis, but more likely in a combination of the two.

The networks get to know their viewers through proper investment in customer relationship management. They use this information to supply advertisers the opportunity to air targeted marketing content to the viewer.

Content is still accessed via the internet, meaning you can watch what you want when want to and the interruption of advertising is limited to products you actually may have an interest in.

Advertisers only pay networks for the advertising sold, minimizing the shotgun approach they currently adopt.

If these ideas sound far-fetched, think again. iTunes is already selling music under this model, you can already pull down movies using your Foxtel remote and there is a new music site call Guvera which is looking to test a similar approach with music sales.

The studios don't want to do this, they may even fight it - but sooner or later something is going to give.

The way television content is distributed won’t last much longer

That’s a pretty bold prediction, but stick with me on this – you may just agree with me. Let’s look at the old TV content value chain :

Studios produce TV shows. TV networks buy this content from studios. Networks air their content and generate revenue through a mix of subscriptions and advertising. The viewer watches the show when it is aired by the network.

This makes a great deal of sense in a situation where the only way to distribute media to a viewer is via broadcast (other than hard copies of course). It also makes sense in a situation where the viewer is disconnected from other viewers and could not collectively purchase the media content. Enter the network acting as the intermediary.

But now with high speed internet facilitating direct distribution and a hyper-connected viewing public as well as viewers who are increasingly protective about the precious resource of spare time – viewer wants and needs are changing :

1. They don’t want to pay for things they don’t want to watch
2. They want to watch what they want to watch when they want to watch it
3. They don’t want to wait for their local network to buy the content and then air it, they want it as soon as it is available
4. If they are getting content for free, they don’t want to be interrupted by marketing for things they don’t want
5. They don’t want to have to leave the house and go search through DVD’s at a store and select one to watch.

The current model does not meet the new demands of the TV viewer. Something is going to have to change soon…

In my next post, I have some ideas where this may be heading.

Should we benchmark schools on the 3 R's?

The Australian government has launched the MySchool website. This allows anyone who is interested to investigate a school’s vital statistics (number of students, number of staff and some other key metrics). It also compares the school’s NAPLAN results against similar schools and all schools. (NAPLAN tests cover the fundamental skills of reading, writing, spelling, numeracy and grammar). This initiative has been received with mixed reaction.

My thoughts are mixed. I think the tool is extremely useful but it is the application that makes me nervous. In financial effectiveness, the mantra is “What is measured is what is managed” and as a school, producing adults who are capable of all the skills tested by NAPLAN must surely be high, if not number one on the agenda.

Having this focus on the results allows a school to determine their comparative success in achieving this objective. They can also seek out the schools that are outperforming them and collaborate to raise the scores. Everyone wins.

My concern is, what about numbers 2 through 10 on the school agenda. Where are the metrics that measure creativity, innovation, passion, discipline, creation of future leaders and so on. If you have a moment, you must watch Sir Ken Robinson’s TED Talk on how school’s could be killing creativity.

A targeted focus on “reading, ‘riting and ‘rithmetic” could see Australian schools losing that spark that creates musicians, dancers, leaders, inventors, paradigm breakers, game-changers....

Perhaps, to give a more well-rounded picture of the success of a school, the benchmarking should also include what past students of each school have gone on to achieve once leaving school - that would interest me as a parent and give me a sense of career accomplishment as a teacher.

Links

MySchool website

Sir Ken Robinson's TED Talk

The myth of self-regulation

The concept of self regulation is a simple one. An industry polices itself to make sure that they comply to an agreed code of conduct. There is just a tiny problem to this plan – it’s rubbish. It reminds me of a line from the Pirates of the Caribbean when Barbossa was explaining the Pirate's Code : " The code is more what you'd call "guidelines" than actual rules."

Chances are, it would probably be in the best (short term) financial interests of the company to act against its own industry code and, because there is self-regulation, there is no need for management to weigh up the cost of contravening the code with the benefit to be obtained from ignoring it.

There is no leverage to ensure that the individual company adheres to its own code.

This was evident in the case of Hungry Jack’s in Australia contravening the industry code regarding marketing of children’s meals with too high a fat content. They weren’t supposed to, but they did it anyway.

They weighed up their commitment to self-regulation against another contractual obligation and the contractual obligation won. Why? If they didn’t, they would lose money. Unfortunately, impact to the bottom line is often the only language most corporates understand.

But consumers have the ability to influence customer behaviour. Unless we change the way we interact with companies, they will continue to heed the call for more shiny things that cost less as opposed to the call for sustainable business practices.

This is the kind of industry self-regulation that will work. If companies don’t behave in a responsible manner, stop buying from them. Immediately.

The leverage of money, spending it and withholding it, is an incredibly powerful leverage. As consumers we need to start using it.

Interesting reading and viewing :

Hannah’s rules : Rise of the ethical consumer

Building values into business

It's (still) good to be good

Change is inevitable

It has been such a long time since the last post but I have been busy. A new baby in the house makes every day living quite a challenge and what was the norm never will be again. I am also involved in the transformation/creation of the finance function in a very large Australian company.

These two events have one very distinct commonality – change. Most people fear change, it represents the unknown. But change is inevitable, it is going to keep happening and eventually – it’s going to happen to you.

Being caught in change is a bit like swimming in a river (pardon the very extended metaphor). You have some options :

1. Resist the change or swim against the stream. Chances are you may be able to stay exactly where you are, but you are just as likely to tire and be swept away.
2. Let change happen or go with the flow. You won’t get tired but at the same time you will have little control over where the change takes you.
3. Influence the change or ride the wave. By being involved in influencing the change process you immediately herald your intention to be a leader in your organisation (or perhaps even industry). You also get the opportunity to shape the change in your organisation and how it impacts your business, you personally and your tribe (read up on Seth Godin if tribes at work is a foreign concept to you.)

Personally, I am all for option 3. If you swim with the current you tend to swim a lot faster than if you swim against or do nothing at all.

Maybe this comes from a smug sense that my opinion is worth adding to the change discussion, but I strongly believe that if you feel strongly enough about something, that regularly equates to an opinion that should be considered.

Bottom line : get off the sidelines and get in the game.