Always New Mistakes

July 13, 2009

Anchoring an idea or product

Filed under: Business — Tags: , , , , — Alex Barrera @ 6:00 pm

I’m currently reading Crossing the Chasm (Geoffrey A. Moore). A friend recommended it to me when I told him I was struggling with the idea of selling services from my startup, Inkzee, to the enterprise. It’s an old book, (1991, revisited in 1999, old in terms of the tech scene), but the ideas and tips are surprisingly valid nowadays.

crossing_the_chasmOne of the key ideas for a successful “chasm crossing“, or selling an idea to the mainstream markets is to create a reference market to which your product/service can be compared on the heads of your clients. This principle is fairly easy to follow, but quite complex in nature. It taps into the way our brain works and it’s not the first time I’ve stepped onto it. Some months ago I finished reading another book, Predictably Irrational by Dan Ariely. It’s not an awesome book, but holds some very interesting insights into how humans react to different situations. One of the examples was about getting the correct pricing, or what the author calls the anchor price.

m_chasm_sf

Both ideas are rooted on the same principle. On the first case, the author suggests that when selling something innovative, that has no competition, the way to go is to create that competition. How do you create that competition? Easy, you introduce 2 new concepts, the alternative market and the alternative product. You need to position your product close to a well know market by the customer. For example, if you’re selling an online word editor, you could make yourself close to the market of desktop word processors, aka Microsoft Word, that will be your alternative market. It’s a market known by the customer, where they buy from and most importantly, they have an allocated budget to buy from it. By positioning next to that market, the client can make comparisons between your product and what they’re already using. In other words, you create an anchor they can use to compare you against. You set yourself into a preexisting category in the customers head. The problem is that you need to differentiate your product from that preexisting market. The way to do this is by referencing your alternative product, that is, a product or service that is similar to yours, and is market leader but in a different market niche. In this example, you could name something like Salesforce.com. So you end up with a punch line like, “our online word processor is like the salesforce word processor”. So, in conclusion, the idea is to create an anchor point and a differentiating value proposition.

Now, in Predictably Irrational they idea was very similar. Instead of focusing on a product sales proposition, tpredictably-irrationalhe domain was the pricing of a product. The example the author gave was the pricing of a subscription. An offer goes as follows, an annual subscription to The Economist (online access) costs $59. An annual subscription to The Economist (print) costs $125. Finally, an annual subscription (print and online access) costs $125. Which one would you choose? Chances are that the last one. Why is it like that? Truth is, that humans can’t value things without any reference. We always draw conclusions from comparisons. Our mind works under a cause/effect paradigm, that is, if the paper edition (lets symbolize the concept paper edition with the A symbol) costs $125 (B is the price), and online + paper (C) costs $125 (B as it’s the same price symbol as before) and online + paper (C) is better than only paper (A) then (here comes the effect) option C (paper + internet edition for $125) is the best one.

  1. A -> B
  2. C -> B
  3. C > A

As we see from the simple logic equations from above, without [3] we can’t choose between the first 2 options. We need something to compare against. In the prices example, we are creating an anchor price, $125, something we know the value of, the printed edition of a magazine (our alternative market). We then offer a new product, innovative, something we aren’t familiar with, the online access to a publication. By virtue of putting it next to the magazine realm (in this case by virtue of the same price) we create a connection between both propositions. The problem is that we need a 3rd cornerstone to allow humans to see the difference, to be able to choose. In this example we are using a quantitative approach to choose, 2 things are better than 1, specially if that 1 thing is part of the other offer.

Irrational

In the product example we use the product alternative to create a point of reference to which we compare the product to. In the former case the equation [3] isn’t as clear and powerful as in the subscription example, but plays the same role, a way to quantify and compare your product. For example, Microsoft Word (A) is part of the desktop publishing tools market (B), our product (C) is on a similar market (B). Salesforce.com (C’) is doing great and it’s similar than our product but in a different market niche (D). There fore, our product must be as good as Salesforce but in the market of desktop publishing.

  1. A -> B
  2. C -> B
  3. C’ ~= C (similar products)
  4. C’ best in D
  5. C > A

As you see, the train of thought is slightly more complex, but ends up with a similar conclusion. Granted that it’s not as straightforward as the pricing example and you need to probe both [3] and [4] to get the client to buy into your proposition, but it’s much easier to do that, than to try and sell it blindly.

Ahh, the beauties of neuromarketing ;)

June 18, 2008

Next generation search engines

Filed under: Technology — Tags: , , , , , , , , , , , , , — Alex Barrera @ 2:31 pm

I was reading Scoble’s post about Windows Live Search and I realized what the future of search is going to look like (or so I think). I realized that the users don’t know how to express in a written way what they are looking for. Most of the times, you type a couple of keywords that should, theoretically, yield some results from which you can identify the one you are looking for. Human powered search engines like Mahalo have the same problems. They rely in human beings building pages with the most relevant information about a topic, but if you are looking for something not that common you’ll run into problems. Last but not least, semantic search engines like Powerset are closer to the goal, but there is still a big hurdle in the user’s way. How do you phrase, as a user, the information you are looking for? You need to type a phrase, but it’s not that obvious what that phrase should be, making it hard and slow to search things.

Now, the big problem again is writing down what are you looking for in a way the search engine understands it. How about another approach? How about a search engine that reads your mind so that it knows what you are really looking for? Most readers must have had a good laugh with the former statement but I have to say that mind reading devices are a big reality with their own field of expertise called Brain – Machine Interfaces (BMI). Several gaming companies are already using these devices to allow their players to control virtual avatars with their minds.

And how do these devices work? Generally speaking, it’s a helmet that reads neuron impulses in several areas of your brain. In the gaming example, they read the brain areas dedicated to movement, mapping neuron firing patterns to an specific movement in the game. This technology is still giving its first steps in the commercial arena, but I’m pretty sureĀ  we’ll see more and more devices working with it.

Now, is it a big stretch to say that we can use similar devices to read our search intentions? It is indeed, it’s something that is still out of reach. Not because of technology but because of a lack of Neuroscientific data that can be use to pinpoint which brain areas we use when searching online. But it’s just a matter of time (I’m talking about 5 to 10 years here).

Big problems with this type of search, you not only need a web index, but a neuron firing pattern index and an engine to understand them and translate that into a web search query. Another big issue is brain privacy. Your neuron firing patterns would need to be transmitted through the Internet and stored somewhere. That’s a source of major privacy concerns that should be address before using a search engine like this.

Nevertheless, and with all the problems than might arise with an idea like this, I truly think we’ll someday see something like this and I have to say it will be awesome. I don’t know if any company is currently investing in developing a mind controlled search engine, but it would be a great project for a big company like Google, IBM or Microsoft.

Do you like the nextgen search engine? What problems do you see with it? Would you use something like that?

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