December 13 is the Survivor finale and a chance to highlight the different ideas of the blog.
Sampling. These people are not “representative samples“. Survivor hosts a casting call for people with good stories. Like Bob Iger’s big lesson, entertainment isn’t about reporting so much as stories.
Incentives. Like the many games of Jeopardy, Survivor has layers of games. When there are layers of games it’s difficult to judge actions. Is someone trying to win the game or claim later fame?
Business models. Thanks to MTV in 1981 and then Real World in 1992, one entertainment business model is to create value by editing rather than crafting (unlike Seinfeld). Put regular people with backstories (hence sampling) in interesting situations and things will happen. Edit a month of island living to a few dozen hours and viola.
Customer acquisition costs. Sequels – it’s season 43 for Survivor! – have lower CACs. Consumers don’t need to be educated.
Good business strategy is homeotelic, single actions work toward multiple goals. Aldi has a good strategy. Dominos has a good strategy. Trinny of London has a good strategy.
Good strategy balances what’s made, how it’s delivered, and how it’s communicated: product, placement, promotion. Aldi uses private labels to control the product, small footprint stores to sell from, and focused promotion. Those fit.
What does a business do well and what do customers want well done? Organizations answer these questions and the best organizations do so in a homeotelic way. This is an example from my local pickleball store:
For today and the next two days only (ends Wednesday 9/7)…we are offering a special Labor Day 20% off sale on Bags & Apparel and 10% off all paddles (and receive a FREE Paddle Cover with your paddle purchase).
Go to our website by CLICKING HERE.
For Bags and Apparel, use discount code LaborDay20 at checkout
For Paddles, use discount code LaborDay10 at checkout and receive a FREE paddle cover too.
NOTE: You can only use one discount code at a time, so if you are buying bags/apparel and a paddle you will need to place two (2) separate orders.
If you know what you want and want to go directly to the page, here’s the quick (direct) links:
Bags > CLICK HERE
Apparel > CLICK HERE
Paddles > CLICK HERE
Any questions, email
The good: Scarcity drives urgency and attracts attention. For the I’ve been thinking about this group, this email drove sales. The free paddle cover is good too.
The bad: (1) Discounts are heterotelic: more sales less brand value. All value is perceived value and premium products – like these paddles – shouldn’t be discounted. Price is a proxy for value. Here it is lowered. Freebies, gifts, ‘two-for-the-price-of-one’ maintain the core product value and have other benefits – see below.
(2) Why buy? Here customer language shines. Buy a bag and we will send three balls because you’ll have the room. Or, when you miss-hit at the end of the day your paddle is too heavy. Or, summer is winding down, get a long-sleeve shirt while they last. There’s nothing in this copy other than CLICK HERE TO TRANSACT NOW. As outsiders we don’t know the customer’s language, but a business owner should.
(3) Hats, shirts, and towels retail for thirty dollars. These lightweight packable items are perfect for shipping, have good margins, and are an easier part of profitability. But they are also a form of CAC. Reducing profitability per item raises the revenue, a homeotelic approach. People pay to be walking billboards. These items are great thank you gifts, with the purchase of a premium paddle. Gifts also seed new product lines and delight consumers.
The confusing: CLICK HERE. Multiple discount codes.
Labor Day Sales (like this) raise revenue but reduce brand value. Labor Day Sales are superficial and reactionary. Labor Day Sales are heterotelic, not homeotelic. Labor Day Sales should follow, not precede, Alchemy.
Here’s an excellent example, received around the same time.
Ridge speaks the customer’s language visually: my wallet is too fat. Why buy? Does it carry my cards and cash? Oh, it does. It’s the best way ever. Not ‘best’ via test, but ‘best’ is expert language, like someone judged wallets and this is indeed the best. Don’t CLICK HERE like a child, instead shop our wares like an adult. There’s no sale, but there are premium products (good, better, best) and because value is relative, ‘good’ appears discounted to ‘better’ and ‘best’.
Outsider commentary is a challenge. It’s another perspective, unaffected by sunk costs, and angled away from the status quo. However it’s also ignorant of successes, goals, and pesky problems like ‘oops we made too much’. Broadly sales are bad unless they are baked into a business’s strategy (like Domino’s Pizza).
Homeotelic, introduced here, applies everywhere. If someone learns to cook at home they save money, eat healthier, and gain skills. If someone joins a gym they meet new people and get healthier.
Homeotelic responses are the most important type of action. Introduced here, someone who wanted to lose weight and save money would learn to cook for themselves. Cooking (homeotelic) satisfies both goals.
Harry’s and Dollar Shave Club used homeotelic approaches. Their first goal was cheaper razors and their second goal was easier razors. Online subscriptions achieved both goals.
Competitors like Gillette were forced into heterotelic responses. They couldn’t move towards easier because of their existing retail goals.
Makeup company Trinny London’s CMO Shira Feuer spoke with Rory Sutherland about how she manages the brand in a homeotelic way. Here are three ways.
Trinny London uses real people not models as their models. This is a good bit of differentiation. We’re like you the ads state.
The branding is like the models: nice but not fancy. The copy isn’t polished and the images aren’t photoshopped.
The company uses gifts, not discounts to extend value. Gifts are CAC Trojan horses.
If the Trinny London brand goal is nice and friendly, then not-models, simple copy, and free gifts all work toward that.
Feuer also worked at Burberry and tried to bring that aesthetic to the makeup world. But it was too polished. What works at Burberry does not work at Trinny London. Feuer also consulted with companies and remembers being told you should never pay full price for a Domino’s Pizza because the discounting is built into the pricing model. What works at Domino’s Pizza does not work at Trinny London.
The Domino’s Pizza turnaround was built around changing the culture, improving but not perfecting the pizza, allowing social media, and building their data prowess. That’s a great homeotelic plan – for DP.
Huge relative to what? Mills Snell smartly asks just that. “Like AirBnb, a two sided marketplace opens up monetization. Before someone puts their house on AirBnb they aren’t making any money. I think to the psychic it’s something similar. Their customer acquisition is people driving by and word of mouth. Maybe they’re willing to lose 75% of the revenue because they’re turning on so much potential revenue that they did have access to otherwise.”
Marketplaces are great businesses to own especially when they compete with non-consumption.
Every business approaches the CAC crossing. One way to pay the crossing tax is to advertise. Another is the marketplace take rate.
But there’s also the elusive word of mouth bypass, which like actual unicorns is quite rare.
I tried, and failed, to get a photo of this issue.
For Christmas my youngest daughter got an iPhone. It was BOGO when you add a line, so I got a new iPhone too. For simplicity sake I ordered us Apple cases with the phones. And my case sucks. The silicon marigold iPhone 13 case is the worst I’ve ever owned.
Apple products are good. The computer I’m typing this on is an Apple product. If it’s read on a phone odds are one-in-three it’s an iPhone. Apple is one of the most valuable companies in the world – and has been for many years. What’s going on?
Well first, value is relative. If something is bad, it’s bad relative to what? My previous Smartish and Speck ($12 & $8 respectively) cases were more durable and provided prolonged protection on earlier inferior designed products. I think Apple cases are bad becausethey lack competition.
Apple, like Aldi, competes in a special way. Both are A+ companies and both compete outside the store. The goal is to get people inside, and if customers come in, they’ve got them. So Apple doesn’t convince me to buy the silicon marigold case rather than the leather case. No, Apple just wants me to buy Apple.
Aldi cereal is a visual example of this model, the boxes are bland (here in B&W) because they don’t have to grab the customer’s attention in the store. Contrast this with Walmart or Amazon where the competition is both inside and outside.
Smartish or Speck compete in the bedlam of Amazon. These cases have to throw sharp elbows in the arena of good, fast, and cheap. I found the Smartish case via a Wirecutter review, so it has to stand out as well. Ditto for Speck.
That said, I don’t know if the Apple case should even be good. Apple’s advantage is packaged hardware and software, not being best in class on accessories. Apple doesn’t sell a great phone case, instead the JTBD is ease and brand.
Many actions are taken because they are easy. What did you last eat for lunch? How did you drive to where you are? What browser tabs are open? And ease is context-dependent. What is easy for one person may not be easy for another.
Ease is a tool. Make it easier and people will do more of it.
The ‘buy now pay later’ company Afterpay succeeded for many reasons, one was a focus on ease.
Easy for the consumers. Pay one-fourth now, then one-fourth every two weeks. That’s easy. There’s no consideration of credit card balances or APR.
The terms also make it easy for the consumer to legitimize. If the offer was too good to be true consumers would sniff it out and balk at the purchase.
Easy for the merchants. Say you own a store. You hear about Afterpay. Wait! They charge, 4% of the transaction!?!?! Your store can’t afford that.
So how did Afterpay make it easy?
Merchants don’t have to handle the transaction costs (~1-2% anyway) or the chargebacks. They don’t have to worry about bounced checks or building out their own software. Afterpay increases total order size and serves as a marketplace. The deal was so good it was irresponsible not to be a customer.
Easy for regulators. Every business exists within a system of rules. One of the largest agents in the system is the government. Relative to credit card companies, Afterpay has a consumer-friendly profile and consumers love it.
BONUS: Easy for Afterpay. Yep. Afterpay made it easy on themselves too. Co-Founder Nick Molnar told people his ideal customer was someone buying a purple polka dot dress. This customer was fixed on the fashion and unlikely to miss a payment.
Fashion customers also skew younger, are more open to options, and want creative financing. While Amazon is convenience shopping, Afterpay became experience shopping.
Afterpay found an opportunity by reshuffling the costs of doing business. Merchants do pay more per transaction but have more and higher transactions. Effectively Afterpay took money from the marketing and rent buckets and moved it to (their!) processing bucket.
Within Afterpay, it is CAC reshuffling. If Afterpay is more lenient in approving customers, they have more loss. But they get more customers. Longtime users use Afterpay 29 times each year! While the fraud and loss figures increase the other forms of CAC do not.
My eleven-year-old daughter requested “Pirate Booty” after having it at school. Those bright buccaneers put the JTBD right on the box. Parents buy these “lunch bags” to pack for their children. You’re not buying a snack. You’re buying being the parent who packs their kid’s lunch.
Pirate Booty also commandeered a clever CAC. They earn “bulk pricing” from the school pay and “retail pricing” when eleven-year-old daughters return home. If this is negative CAC, it joins Freight Waves, who use content subscriptions to sell data and American Pickers who also use content to sell t-shirts.
Health is a good proxy, like with finance and fitness, for understanding systems because it involves personal choice, design, social factors, marketing, culture, and so on.
Part of the reasons diets, like the diet formerly known as Weight Watchers, work is design. One design is zero point foods, like bananas. Zero points isn’t zero calories but it is zero thought. The primal diets do the same thing. Carbs bad, meat good. Fasting also succeeds due to good design. Vegetarian too. The best diets combine easy rules and identity.
Here’s the pitch: the birthday cake diet or BCD.
The first product would be a book. Or, better, a self-help book! It would outline all the advantages of better eating, all the research of behavioral scientists, and all the philosophy around intentionality and purpose. Tolle meets Tversky to defeat Tollhouse. The pitch is: the only junk food you would ever eat would be birthday cakes.
People could just decide to only eat birthday cakes. But then again there’s a fasting app that’s essentially just a timer — and it’s a great idea! The BCD frames inaction (not eating) as action (waiting for a birthday cake). Annie Duke I know would approve.
‘Okay’ you’re thinking, ‘it’s not just birthday cake that’s bad for you.’ True. So after the first book about the why, comes the second book with the how. Taking a page from WW, the second book used slices of cake as the metric. One cookie? One slice of cake. Chips? One slice. A granola bar? Half a slice. Pizza? Half a slice. Bananas? Free! It’s not as clean as the points system, but framing things as a slice of cake definitely will change some consumption patterns.
The books will kickstart the funding needed for recurring revenue. Birthday cake as a service anyone? BCAAS! The BCD wouldn’t even need to create products. This business white labels ones from the big bakers or leverages the identity and design ease to create Keto ones or whatever. Plus birthdays are regular events. The Total Addressable Market is everyone every year.
The BCD is super social media friendly. Like cheat day posts on Instagram, the BCD sells the experience of blowing out the birthday. You haven’t had cake all year, how about one that’s five feet across? The BCD is shareable. Imagine the local, regional, and national news. This is so influencer friendly. Is a low CAC tastier than birthday cake? We will find out.
So email me to sign up and join the next great eating revolution: the birthday cake diet.
This posts are too much fun. Somehow this is the second Birthday themed post, here is the birthday bet. In college a friend framed regular beer as having a ham sandwich and light beer as not. I still think of that when I see a can of Budweiser.
One way to change the CAC is to change the communication. When an organization communicates well it clearly frames the exchange which helps people ‘get it’.
It happens in politics. It happens in emergencies. It happens in sports and in investing too. When asked why he didn’t bring part of his business to a new venture, Bill Miller replied, “We are only interested in having clients that understand you’re going to get volatility. We try to monetize the volatility.“
The simplest form of this is the dating advice: be yourself.
Who is the message for and how would they like to hear it? At Duolingo the how is short.
“Any page on Duolingo has the minimum amount of text, the minimum amount of instructions and an intuitive simple interface. That’s in contrast to how language is traditionally learned, which is in a textbook, which usually begins with a conjugation table. What works better is to let the user jump into the exercise, get some hints, answer questions, and then we unlock new concepts.” – Cem Kansu, The Science of Change, October 2021
In sports the idea was unlocked with images (like heat maps). In investing the idea was unlocked with shareholder letters. It’s the same thing over and over – it’s just finding a fit. Kansu said they’ve run hundreds of experiments, on probably every part of their service. Part of those are how to find a good way to communicate well.
My own version of this is the sixty-two ideas drip. Like this post, it’s a short daily email about an idea. Communicating well is one. It’s five bucks.
Me, a box of cereal from Aldi, and our kitten. When I bought this cereal the checkout process was 40% faster than rival stores. Plus the cost savings! Sure I had to collect my cart – with the quarter deposit in hand – and also return the cart, but often I meet someone half way and we do the Aldi parking lot exchange of quarter for cart and some goodwill good-to-see-yas.
This Aldi aesthetic is intentional. The cart, the product, the extra long barcodes for the extra fast cashiers are all tactics that support a strategy. I’d heard tactics are not strategy but it’s through the Aldi aisles and Marc Lipsitch’s interviews that the idea becomes as clear and legible as that bar code.
One of the lessons from Covid is how much conditions matter. We’ve learned that individual treatments are dependent on disease stage. We’ve also learned that societal actions are dependent on infection stage. The travel ban, Lipsitch said in May 2020, “was a tactic not a strategy, it was an attempt to show we were doing something rather than a piece of a strategy to make us safe from this virus.”
Strategy is important because our resources are limited. Sure, I’d love to invest in the cryptocurrency of the moment as a lottery ticket but there’s no extra dollars in our investing budget to allocate to a different strategy.
“In the beginning of the intense phase, New York City was working very very hard to do contact tracing at a time when they knew they had lots of cases and didn’t know about most of them. That’s exactly the setting where contact tracing can’t work. No matter how hard you fight the 10% you know about, you’re not doing anything about the rest.” – Marc Lipsitch, May 2020
When tactics fit together like puzzle pieces it creates a beautiful strategic picture. Aldi’s boxes are optimized for speed rather than customer acquisition. Classic cereals use bright colors and cartoons to scream pick me! The cereal aisle is the competition. It’s Cap’n Crunch vs Cinnamon Toast Crunch. Aldi’s products are private labels, so the competition is between big box stores not boxes in stores. The Aldi CAC is speedy checkouts, self-service, and quality goods.
There’s a certain amount of what economists call ‘transaction utility’ at Aldi too, we like finding deals. Also, Lipsitch is such a balanced voice on Covid or any field with some uncertainty in the future.