Retailer – Real Basket Value in Retailing

Extreme couponing is not only one of these weird shows on TLC, it’s also more and more a way of living for many households. Since January is generally one of the months where households spend less and are looking to save money in opposition to the bloody months of November and December, I thought it was a timely moment to write a post related to this topic. This post takes a mom blogger approach blended with some of my old-style economist thinking to decorticate the “Real Basket Value” equation and suggests that some extreme couponing behaviors may increase the “Real Basket Value” instead of decreasing it. This post is written purely from a customer perspective rather than from a retailer perspective. So let’s get it started by presenting the “Real Basket Value” equation related to a specific transaction at a retailer:

Basket Price + Direct Costs + Externalities = Real Basket Value

Basket Value - It's Not Only What's in the Basket When Shopping at a Retailer
Real Basket Value - It's Not Only What's in the Basket When Shopping at a Retailer

Basket Price

Let’s first start with the easiest part of the equation, the Basket Price. The Basket Price is defined as the nominal price of all items included in the basket you will buy at a retailer. This is the price you happily or unhappily see on your bill.

Direct Costs

Direct costs may be restricted to distance costs, which can be defined as the additional costs related to the act of moving from point A (Generally your home or your workplace) to point B (the retailer where you will buy your items). These distance costs may include the amount for gas you will spend to make the distance and the depreciation cost of your car related to this particular ride. In some cases you may fix these costs at 0, while in other cases, they may be not as negligible.


Externalities are forgotten by many households since they may look frivolous, but the reality is that they may, and sometimes should, have an impact on the “Real Basket Value” equation and
on the final decision of: (1) where to shop/buy, (2) what to buy and (3) in how much quantities? An externality is defined as a cost or benefit that is not transmitted through direct prices.

Most importantly, externalities include time costs. As Benjamin Franklin stated, “time is money”, since time is a scarcity that can be associated to a particular opportunity cost. Some components of “Time costs” are a function of distance costs while some others are not. For instance, the time spent in traffic to reach a retailer is a function of the distance cost while the time spent searching for THE discount is not.

Furthermore, many other costs and benefits could/should also be taken into account. These include: (1) the benefits associated to the loyalty programs points you are gaining in buying what you are buying, (2) the stockpiling costs, (3) the costs or benefits associated to how much life expectancy (including medical costs) you are gaining or losing buying high or low quality food, and (4) the costs or benefits associated to your joy of buying (and most importantly thereafter consuming) a certain type of product that is offered at a particular retailer.

More About the “Real Basket Value” Equation

To fully take advantage of this humble equation, you can do a quick benchmark between two or more retailers or run the equation again by manipulating components of this equation. Thereafter, using heuristics (habits or shortcuts) may be the optimal way to reduce the “real basket value” by cutting useless overthinking.


Happy new year to everyone, enjoy the year 2012 shopping efficiently and don’t spend too much time finding THE “right” coupon since “time is money”.



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…And the 2010 Nobel Prize in Economics Goes to Diamond, Mortensen, and Pissarides

As an alumnus in economics (BSc, U. de Montréal, 2005), I must admit that I always try to keep myself updated with the Nobel Prize winners in economics. Switching from economics to marketing, was a hard but inevitable decision for me at the time, since the research I am currently conducting is related to economics, especially macroeconometrics, but it is not considered as part of economics, more precisely as part of marketing and strategy.

Thus, on this Canada’s Thanksgiving day, at 11AM this morning (5PM, Stockholm time, Sweden), I am happy to share the information that the Swedish Royal Academy of Sciences awarded the 2010 Nobel Prize in economics to Peter A. Diamond (Massachusetts Institute of Technology; USA), Dale T. Mortensen (Northwestern University; USA), and Christopher A. Pissarides (London School of Economics; Cyprus, UK) three researchers for their contributions in the analysis of markets with search frictions. Instead of repeating word by word what both of the recipients have to say, here are some links to some Nobel Prize winners information.

Professor Bertil Holmlund (left), Permanent secretary of the Royal Academy of Sciences Staffan Normark (center) and Professor Per Krusell announce the 2010 Nobel Prize in Economic Sciences on Monday October 11th in Stockholm, Sweden.
Professor Bertil Holmlund (left), Permanent secretary of the Royal Academy of Sciences Staffan Normark (center) and Professor Per Krusell announce the 2010 Nobel Prize in Economic Sciences on Monday October 11th in Stockholm, Sweden.

Diamond, Mortensen, and Pissarides 2010 Nobel Prize in Economics speed read
Diamond, Mortensen, and Pissarides 2010 Nobel Prize in Economics Prize Announcement
Diamond, Mortensen, and Pissarides 2010 Nobel Prize in Economics Press release

Here is also a list of past Nobel Prize winners in Economics from 1969 to 2009, with University of attachment when the prize was awarded, country of attachment (origins, work, etc…), and Curriculum Vitae in parentheses:

1969 – Ragnar Frisch (University of Oslo; Norway; CV), for having developed and applied dynamic models for the analysis of economic processes, and Jan Tinbergen (Netherlands School of Economics; Netherlands; CV).

1970 – Paul, A, Samuelson (Massachusetts Institute of Technology; USA; CV), for efforts to raise the level of scientific analysis in economic theory.

1971 – Simon Kuznets (Harvard University; USA, Ukraine; CV), for developing concept of using a country’s gross national product to determine its economic growth.

1972 – Kenneth J. Arrow (Harvard University; USA; CV) and Sir John R. Hicks (Oxford; UK; CV), for theories that help to assess business risk and government economic and welfare policies.

1973 – Wassily Leontief (Harvard University; USA, Russia; CV), for devising the input-output technique to determine how different sectors of an economic, social and institutional phenomena.

1974 – Gunnar Myrdal (Stockholm University; Sweden; CV) and Friedrich A. von Hayek (University of Salzburg; UK, Austria, Germany; CV), for pioneering analysis of the interdependence of economic, social and institutional phenomena.

1975 – Leonid V. Kantorovich (Academy of Sciences at Moscow; Russia; CV) and Tjalling C. Koopmans (Yale University; USA, Netherlands; CV), for work on the theory of optimum allocation of resources.

1976 – Milton Friedman (University of Chicago; USA; CV), for work in consumption analysis and monetary history and theory, and for demonstration of complexity of stabilization policy.

1977 – Bertil Ohlin (Stockholm University; Sweden; CV) and James E. Meade (University of Cambridge; UK; CV), for contributions to theory of international trade and international capital movements.

1978 – Herbert A. Simon (Carnegie Mellon University; USA; CV), for research into the decision-making process within economic organizations.

1979 – Sir Arthur Lewis (Princeton University; UK, Saint-Lucia; CV) and Theodore Schultz (University of Chicago; USA; CV), for work on economic problems of developing nations.

1980 – Lawrence R. Klein (University of Pennsylvania; USA; CV), for developing models for forecasting economic trends and shaping policies to deal with them.

1981 – James Tobin (Yale University; USA; CV), for analyses of financial markets and their influence on spending and saving by families and businesses.

1982 – George J. Stigler (University of Chicago; USA; CV), for work on government regulation in the economy and the functioning of industry

1983 – Gérard Debreu (University of California, Berkeley; USA, France; CV), in recognition of his work on the basic economic problem of how prices operate to balance what producers supply with what buyers want.

1984 – Sir Richard Stone (University of Cambridge; UK; CV), for his work to develop the systems widely used to measure the performance of national economics.

1985 – Franco Modigliani (Massachusetts Institute of Technology; USA, Italy; CV), for his pioneering work in analyzing the behavior of household savers and the functioning of financial markets.

1986 – James M. Buchanan (Center for Study of Public Choice, Fairfax, VA; USA; CV), for his development of new methods for analyzing economic and political decision-making.

1987 – Robert M. Solow (Massachusetts Institute of Technology; USA; CV), for seminal contributions to the theory of economic growth.

1988 – Maurice Allais (École Nationale Supérieure des Mines de Paris; France; CV), for his pioneering development of theories to better understand market behavior and the efficient use of resources.

1989 – Trygve Haavelmo (University of Oslo; Norway; CV), for his pioneering work in methods for testing economic theories.

1990 – Harry M. Markowitz (City University of New York, NY; USA; CV), William F. Sharpe (Stanford University; USA; CV), and Merton H. Miller (University of Chicago; USA; CV), whose work provided new tools for weighing the risks and rewards of different investments and for valuing corporate stocks and bonds.

1991 – Ronald Coase (University of Chicago; USA, UK; CV), for his pioneering work in how property rights and the cost of doing business affect the economy.

1992 – Gary S. Becker (University of Chicago; USA; CV), for “having extended the domain of economic theory to aspects of human behavior which had previously been dealt with-if at all-by other social science disciplines”.

1993 – Robert W. Fogel (University of Chicago; USA; CV) and Douglass C. North (Washington University; USA; CV), for their work in economic history.

1994 – John F. Nash (Princeton University; USA; CV), John C. Harsanyi (University of California, Berkeley; USA, Hungary; CV), and Reinhard Selten (Rheinische Friedrich-Wilhelms-Universität, Bonn; Germany; CV), for their pioneering work in game theory.

1995 – Robert E. Lucas, Jr. (University of Chicago; USA; CV), for having and the greatest influence on macroeconomic research since 1970.

1996 – James A. Mirrlees (University of Cambridge; UK; CV) and William Vickrey (Columbia University; USA, Canada; CV), for their fundamental contributions to the economic theory of incentives.

1997 – Robert C. Merton (Harvard University; USA; CV) and Myron S. Scholes (Long Term Capital Management, Greenwich, CT; USA, Canada; CV), for developing a formula that determines the value to stock options and other derivatives.

1998 – Amartya Sen (Trinity College, Cambridge; India, UK; CV), for his contributions to welfare economics.

1999 – Robert A, Mundell (Columbia University; Canada, USA; CV), for his work on monetary dynamics and optimum currency areas.

2000 – James J. Heckman (University of Chicago; USA; CV) and Daniel L. McFadden (University of California, Berkeley; USA; CV), for developing methods used in statistical analysis of individual and household behavior.

2001 – George A. Akerlof (University of California, Berkeley; USA; CV), A. Michael Spence (Stanford University; USA; CV), and Joseph E. Stiglitz (Columbia University; USA; CV), for market analyses with asymmetric information.

2002 – Daniel Kahneman (Princeton University; USA, Israel; CV), for having integrated insights from psychological research into economic science; Vernon L. Smith (George Mason University; USA; CV), for having established laboratory experiments as a tool in empirical economic analysis.

2003 – Robert F. Engle III (New York University; USA; CV) and Clive W.J. Granger (University of California, San Diego; UK, USA; CV) for developing the statistical tools for stock prices.

2004 – Finn. E. Kydland (Carnegie Mellon University & University of Santa Barbara; Norway, USA; CV) and Edward C. Prescott (Arizona State University & Federal Reserve Bank of Minneapolis; USA; CV) for their contribution in macroeconomics.

2005 – Robert Aumann (University of Jerusalem; Israel, Germany; CV) and Thomas Schelling (University of Maryland; USA; CV) for their contribution to Game Theory.

2006 – Edmund S. Phelps (Columbia University; USA; CV), for his analysis of intertemporal tradeoffs in macroeconomic policy”.

2007 – Leonid Hurwicz (University of Minnesota; USA, Poland, Russia; CV), Eric S. Maskin (Princeton University; USA; CV), and Roger B. Myerson (University of Chicago; USA; CV) for having laid the foundations of mechanism design theory.

2008 – Paul Krugman (Princeton University; USA; CV), for his work on international trade and the benefits trade brings to local communities.

2009 – Elinor Ostrom (Indiana University & Arizona State University; USA; CV) for her work on economic governance, particularly in managing Commons, and Oliver E. Williamson (University of California, Berkeley; USA; CV) for his work on the economics and economic boundaries of firms and companies

And here a prediction list of winners for this year from the Harvard University Economics Department website, thanks to well-known Professor Greg Mankiw’s blog for this link:

1 – Robert Barro (Harvard University) – 10.3%
2 – Martin Weitzman (Harvard University) – 5.5%
3 – Paul Romer (Stanford University) – 4.9%
4 – Jean Tirole *Université de Toulouse) – 4.9%
5 – Peter A. Diamond (Massachusetts Institute of Technology) – 4.2%
6 – Robert Shiller (Yale University) – 4.2%
7 – Alberto Alesina (Harvard University) – 3.6%
8 – Lars Peter Hansen (University of Chicago) – 3.6%
9 – Paul Milgrom (Stanford University) – 3.6%
10 – Richard Thaler (University of Chicago)- 3.6%

As you can from this list, Peter A. Diamond ranked 5th on this list was one of the winners, all the other ones non-winners will still be top contenders next year unless they die.


Anyway, for those who didn’t really know about these researchers, it is simply a good moment to read more about who they are, for the other ones, maybe it’s a good opportunity to humanize these authors by watching their Nobel Prize speech.

Have a nice one,


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I Will Buy it in Any Color as Long as it’s Orange

The omnipresence of the orange color floating all around me due to the presence of the Netherlands in the 2010 World Cup final reminds me my days spent in Amsterdam last month (June) at the beginning of the tournament. But commercially what it reminds me, is an analogy to the famous sentence by Henry Ford: “You can buy it in any color as long as it’s black”, when referring to the Model T in 1908. Thus, when thinking about the presence of the Netherlands in the 2010 World Cup final, a team that most soccer (football) fans would refer to as the “Oranje”, I can analogously propose the following sentence: “I will buy it in any color as long as it’s orange”. Simply think all the objects left from these dark and cold Halloween-related days that one company can finally get rid of (sell) on these extremely hot summer days. Moreover, what a good occasion to sell a box of 12 orange popsicles at a higher price than a mixed-color one? The “orange” is the air, it’s time to sell! But for those who might want to know more, why are the “Oranje” named that way? And what the orange color is broadly associated to?

That's me in Amsterdam, half-awake and really happy to have an orange doughnut for breakfast
That's me in Amsterdam, half-awake and really happy to have an orange doughnut for breakfast

The origin of the Orange jersey for Netherlands

I always remember, when I was about 9 years old, my time spent learning to associate flags with their related countries. When arriving at the Netherlands flag, I used to give “France” as the answer due to the fact that both flags incorporate the same three colors. So why are the “Oranje” all in orange and not in red, white and blue? First of all, orange is the historic national color of the Netherlands, originating from the coat of arms of the Dutch founding father William of Orange-Nassau. Furthermore, the top red band of the current flag was originally orange, but the orange dye was light-sensitive and used to fade to red, so it was later officially changed to red.

A flag comparison between Netherlands and France
A flag comparison between Netherlands and France

The “pop” psychology of the orange color

So what about the power of the orange color? Overall, the color is associated with fun, warmth and energy, and can stimulate activity, appetite and encourage socialization. For more on the topic, I would suggest the second book written on the topic by the color expert Leatrice Eiseman entitled “Color – Messages & Meanings: A PANTONE Color Resource”.


So what do you think? Do you have orange antiques to sell or are you jealous of my orange doughnut?


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Is Clotaire Rapaille Feeding or Failing Marketing?

Last week, brands’ psychoanalyst (sometimes referred as cultural anthropologist) Clotaire Rapaille was fired by the Quebec City mayor Regis Labeaume from his role as a brand management (image) consultant for the city because mainly of curriculum vitae falsifications. The news arrived more than a month after being hired to a $300,000 3-month contract to propose a branding plan for Quebec City. By trying to push too far his own marketing, Clotaire Rapaille completely violated the fundamental principles of personal branding and lost a portion of his credibility. When reading all these stories about Rapaille, one question came off the top of my head: Is Clotaire Rapaille feeding or failing marketing?

Clotaire Rapaille
Clotaire Rapaille

Why is Clotaire Rapaille feeding marketing?

By qualifying himself as an anthropologist, Clotaire Rapaille first reminds me cultural anthropologist Grant McCracken who to my limited knowledge in this field, was one of the first high-end anthropologist marketing consultant to sign lucrative consulting contracts with multinationals (Coca-Cola Company, Diageo, IBM, IKEA, Chrysler, Kraft, and Kimberly Clark). Perhaps the hiring of Clotaire Rapaille is the sign pointing the beginning of an era of lucrative consulting contracts for marketers’ anthropologists. On the academic side, this hiring could reinforce the appeal of cultural anthropology in marketing at the undergraduate and MBA-level, a field led by the York University crew (Russell W. Belk, Eileen Fischer, Robert Kozinets & Detlev Zwick) and growing in importance in the Montreal area (Zeynep Arsel and Annamma Joy at Concordia University and Jonathan Deschênes, Jean-Sébastien Marcoux, Marie-Agnès Parmentier, Yannik St-James at HEC Montréal) and especially at HEC Montréal.

Why is Clotaire Rapaille failing marketing?

By being fired from his consulting contract with Quebec City, Clotaire Rapaille makes marketing sounds like magic in the eyes of the populace, which is completely false. Surely, marketing is not a hard science at the same level as pure mathematics. However, marketers are not magicians or should not claim to be, let magic to mindfreak like Criss Angel. The discipline takes its roots in psychology, anthropology, statistics, economics and computer science, which creates a sexy melting pot. The “science” of marketing is based on empirical generalizations, strong conceptual frameworks and learning-by-doing case studies that lead to best practices.

Magician Criss Angel
Magician Criss Angel


Briefly, one sure thing is that Clotaire Rapaille is a good example of a personal branding failure. However, the Clotaire Rapaille personal branding failure has had negative and positive spillover effects for all those working in the field of marketing in the province of Quebec and perhaps even in North America. What do you think? Any other comments?

Jean-Francois Belisle

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The Art of Being Perceived as an Innovative Mind in Marketing

In many organizations you will find employees that are perceived as “innovative minds”. They are generally the ones who come with the brilliant ideas and trendy cool concepts that no one else in the organization have thought about. The first time you met these employees, you generally wonder how they do to be so innovative. However, when you become more acquainted with these individuals and you learn how they have become innovative, sometimes you realize that you can be perceived as an innovative mind too. So, what makes these employees so innovative? Personally I would limit my thinking to three simple hierarchically-related mantras. So here they are:

1. Get out of your comfort zone;
2. Explore what is done elsewhere in the world;
3. Adapt already existing so-called “new concepts” to your targeted audience.

The art of being perceived as innovative in Marketing
The art of being perceived as innovative in Marketing

1. Get out of your comfort zone

So let’s start with the first mantra: “Get out of your comfort zone”. This may seems obvious to many, but getting out of your comfort zone takes a huge amount of courage and discipline. Most well-known businessmen or artists had to use this quality at least once to meet their (career) objectives. This doesn’t mean being completely irrational, this means to take calculated risks that could generate strong outcomes. Imagine you are a media planner and an employee of yours proposed a media campaign targeted to youth that uses “old salty clichés” from the hip hop world. You think this concept can reach your targeted audience but you barely hate hip-hop music and you’re around 40 years old. What about buying some tickets for the next hip hop concert in your area? Find the “ethnographer” in you, just get out of your comfort zone!

2. Explore what is done elsewhere in the world

When you’re travelling a lot, you realize that some new campaigns on your national television are simply insignificant copies of successful campaigns that are launched elsewhere in the world. Imagine how much innovative ideas you can have if you have recently seen some of these campaigns when traveling or via the Internet. Personally, my lucky “13” cities list to find some cool concepts would include from West to East the following cities:

1. San Francisco
2. New York
3. Rio de Janeiro
4. Amsterdam
5. Stockholm
6. Paris
7. Johannesburg
8. Tel Aviv
9. Mumbai
10. Singapore
11. Melbourne
12. Beijing
13. Tokyo

3. Adapt already existing so-called “new concepts” to your targeted audience

Imagine you get out of your comfort zone, you pick the best “new concepts” from around the world and you adapt them to your targeted audience. What will your colleague think you are? Quite innovative, no? To be perceived as an innovative mind, the important is not to be the first to launch a concept in the world. What is most important is to be the first to launch that concept to your targeted population. Complete your mix with qualities such as (1) intelligence, (2) strong observational skills and (3) well-developed communication skills, and you got the perfect package. A good example of this is the popular lipdub by UQÀM students launched on YouTube during summer 2009. What did the UQÀM students do. Well, in summary they:

(1) Took the same concept HEC Montréal students have done months before,
(2) Choose one of the most popular song of the summer (Black Eyed Peas song) instead of an old Bryan Adams song,
(3) They communicate their creation to local Medias.

Was the concept really innovative? No way. Was it perceived as innovative? For sure. Final outcome: Around 4.5 million YouTube views and coverage at least all across North America. My verdict: Brilliant.


Briefly, remember that you don’t need to be the first one that has a real new concept in mind to be perceived as innovative, you only need to know where to find the information that no one else in your organization knows and adapt it to your targeted audience. What do you think about these three points?

Jean-Francois Belisle

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RESPECT: Please Alert Me Before Wasting My Time on Your Website

Every time you navigate on a website, you have an objective, even when you think you don’t have one. In this Web 3.0 era (the information comes to you before you need to search for it), based on your navigation, simple algorithms can easily identify you as being either in a searching mode or in a buying mode. Furthermore, based on other algorithms related to the order and the type of pages you are visiting, you can also be identified as being either looking for a more hedonic experience or a more utilitarian one. However, whatever your navigation mode is, the experience you are looking for, the amount of time you plan to spend on a specific website for accomplishing your task, and whether you are a freshly retired baby boomer or a freshly hired highly-stressed Wall Street analyst, one sure thing is that when you navigate, you want to be respected, to be treated well as an important user and consumer/future consumer. This last sentence may remind you of a seven-letter word wonderfully spelled by American Diva singer Aretha Franklin in her famous song entitled “Respect”.

Aretha Franklin - The Very Best of Aretha Franklin
Aretha Franklin - The Very Best of Aretha Franklin

Respect is a fundamental aspect of savoir-vivre in human relationships and in any shopping experience, so why should it not be important in an online shopping context? Thus, it is important to take into account that even though the user interacts with the website, every company should not forget that the user interacts with a website that has been created by other human beings. Why should the internal policies of a retail store include a code of conduct toward consumers/potential consumers, whilst there isn’t any such “code” in an online retail store for most companies? In this post, I propose four avoidable cases that illustrate how the lack of respect towards the customers in an electronic setting can be harmful in the long-run.

Frustrated user shouting at his computer
Frustrated user shouting at his computer

1. Incompatible Pizza Hut application

I remember this summer an interesting post (in French) by my friend Yasha Sekhavat regarding a new Pizza Hut iPhone application. The description of the application really captivated his attention and when he tried to use it, he discovered that the application could only be used in the United States. What would have been the cost of putting a simple one-line long warning on the page of the application mentioning that the application (API) was not available in Canada? How much time would it have saved to many users? How would it have reduced negative word-of-mouth (NWOM) in Canada, and overseas?

2. Problems with shipping overseas at

A quite similar case occurs when you take 10 minutes of your time searching and selecting on the Amazon website two or three super-techno-trendy-geeky products that you previously heard off via a super-techno-trendy-geeky website. Once you’ve found them, you just press the checkout button and lucky as you are, you find out that these items can’t be shipped in Canada. Once again, how much would it have cost to mention that these items could not be shipped in Canada or overseas?

3. A call-back facility as the last step of a registration process on the Videotron website

This summer I was looking to add a new Videotron service to my already existing bundle. I found on the Videotron website a 5-step process that would take care of my case without me having to take the phone. I was quite happy with this 5-step process until I reached Step 5 which involved an unwanted call-back facility. I finally left no information on the call-back facility and took the phone after having lost 10 minutes filling the first four steps of the online procedure. What a waste of time! How much would it have cost the company to tell me at Step 1 that the last step would involve a call-back facility?

4. Outdated Information on the Best Buy website

I used to like to shop on the Best Buy website or to have a look to see if one item was available at the Best Buy retail store near my apartment before making the trip. However, recently, it happened that not once, but three times, the website gave me wrong information. What is more frustrating than thinking that 6 copies of my favourite video game are still available and finding, once I’m physically in the retail store that these 6 copies are actually part of the next shipping trip arriving in two days? Giving wrong/outdated information is never a good way to show respect to the consumer.


In conclusion, if you want me to respect your company/brand, please alert me before wasting my time. Sometimes, adding a short highlighted sentence on the product page can save lots of efforts to consumers/potential consumers and avoid the spreading of NWOM. So what do you think of these examples? Do you have other examples where a company lacked respect towards you on the Internet?

Jean-Francois Belisle

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Fighting for the Web Supremacy: How Will Google Wave Suffer From Switching Costs and Lock-in Against Facebook?

Facebook and Google are probably the two hottest companies that come to anyone’s mind when chit-chatting about the Internet. Thus, according to Quantcast statistics, Google is the website that is the most visited by Americans while Facebook comes fourth. However, when it comes to social networking (SNs) websites, anyone will tell you that Facebook is the best one by far with 87.7 million unique users in the United States as of July 2009, up 14% compared to the previous month.

Furthermore, some may think that the recent acquisition of Friendfeed by Facebook for $50 millions (for more details see comments on Mashable) coupled with the beta launch of Facebook Lite sooner this week would be enough to solidify Facebook’s position as the leader in SNs. Most experts would say “yes, but for how long”? For many, the launch this Wednesday of iGoogle social gadgets, and the eventual launch of Google Caffeine and Google Wave are only the beginning of a longer battle between these two companies. Talking of Google Wave, many experts think that it would be the social network of the future, the most advanced in terms of success. But having the best product in terms of features, in this case the best social network, is not a guarantee for success. Concepts such as: (1) first-mover advantage, (2) switching costs, and (3) lock-in effects, are all important to take in consideration. This is why in this post, I will expose the current situation and then discuss the impact of these three interrelated concepts on Google Wave race against Facebook in their battle for web supremacy.

Google Wave
1. The Situation

The Internet is build out of technological infrastructure. Thus, the most important question to answer is: What is needed to dominate the Internet? What will it take to bring all the masses together in a single social network? In other words, what will be the social network of the future? According to my actual experience, the social network of the future will include the following features:
1. The space for a complete profile
2. The space for showing complete affiliations
3. The possibility to search for timely information (microblogging)
4. The possibility to search across the web for websites and useful detailed information
5. The possibility to follow non-followers and vice-versa
6. Private instant messaging features
7. Public messaging
8. Public video sharing
9. The possibility to send an e-mail to anyone
10. The possibility to group most popular posts in specific categories
11. The possibility to follow bloggers via feeds
12. The possibility of implementing social gaming features
13. The possibility to import friends from other social sites

But how will Google Wave perform against Facebook on these features? An overview of the answers to this question is presented on the table below.

# Features Google Wave Facebook
1 The space for a complete profile X X
2 The space for showing complete affiliations X X
3 The possibility to search for timely information (microblogging) X X
4 The possibility to search across the web for websites and useful detailed information X
5 The possibility to follow non-followers and vice-versa ?
6 Complete private instant messaging features X
7 Public messaging X X
8 Public video sharing X X
9 The possibility to send an e-mail to anyone X X
10 The possibility to group most popular posts in specific categories X
11 The possibility to follow bloggers via feeds X
12 The possibility of implementing social gaming features X X
13 The possibility to import friends from other social sites ? X

According to this short analysis, it seems like Google Wave outperforms Facebook for most features, the most important ones being: (1) search across the web, (2) complete private instant messaging (It is still impossible to send a document via Facebook private chat), (3) social bookmarking features and (4) usage of feeds. However, even though Google Wave seems ahead in terms of overall features, it is way behind in terms of unique users, since it hasn’t been launched yet. So, will users join Google Wave because it has more advanced features? Not necessarily.

2. First Mover Advantage

Google was founded in 1996, while Facebook was founded in January 2004 and went public in September 2006, which gives Google a first mover advantage in terms of Internet presence. However, as Facebook is a social network since it was launched, it has a first mover advantage against Google Wave. One important fact to mention is that after going public, it took Facebook 32 months (since May 2009), to dethrone MySpace as the number one Social Network in the United States. Thus, Google Wave is facing the same situation against Facebook. Some guesses?

3. Three Types of Costs in a Social Network

Before analyzing how much time could it take Google Wave to reach a number of users similar to Facebook, one of the most important concepts to consider is the types of costs associated with a social network, which can be divided into three categories:

Learning costs: how much time have you spent to learn how the social network works?
Searching costs: how much time have you spent to find your friends?
Social costs: how much time have you spent to socialize with others?

4. Switching Costs and Lock-in

The main problem that Google Wave faces is that Facebook users like to exchange information on this social network, they have invested their time in learning how it works (learning costs), they have invested their time in searching their friends (searching costs), and they have had plenty of fun socializing with others (social costs). Why should they switch to Google Wave? Why should they switch to Google Wave even if they know its better? What is the benefit of switching away from Facebook or simply investing time in Google Wave? Are they locked-in? The answer to this question is crucial and still hard to predict. Would that inspire a research paper written by Google Chief Economist Hal Varian who is also Professor of economics at the University of California at Berkeley, and who has published papers on switching costs and lock-in?

Conclusion & Discussion

To conclude, it is no surprise that according to my analysis, Facebook is ahead in this race for the Internet supremacy against Google Wave even though the latter has the best technology. However, one sure thing is that the race is not over and the next fall will be interesting in terms of social innovations (i.e. Google Wave) and potential acquisitions. Who do you think is going to win the race? Any other thoughts? Any bids?

Jean-Francois Belisle

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Don’t Make Users Think about Online Service Quality until the Task is Over

Every time I embark on an airplane, the waiting time in the airport proves to be valuable time spent exploring new venues and starting cogitating about nothing and everything, mostly things that could be related to consumption and society. I recently traveled to Norway for the Macromarketing Society Annual Conference, using KLM as my airline company, to present a paper about the measurement of service quality on governmental websites.

My experience in Norway was excellent and so was the flight service offered by KLM. However, I didn’t really notice that the flight service was that good until I started to think about it while waiting outside the airport for the bus that would take me to my hotel. The reason why I didn’t notice that the service was good during the flight is that I didn’t have time to think about it, since I was occupied: (1) watching movies, (2) learning a few words in mandarin, (3) eating little bites or (4) drinking free cheap wine.

How to get individuals occupied when waiting

In this era of customer empowerment, this phenomenon of not thinking about the quality of the service you are receiving at the actual moment could be generalized by saying that if you are thinking about the quality of the service while you are suppose to accomplish your task (whichever it might be), chances are high that it is because you are not satisfied. Thus, one important point is that company don’t want you to have time to think about the service quality. And this is related to the fact that individuals tend to think about the obstacles during their tasks rather than the things that facilitate them. In this way, why would you lose your time thinking about good service? In the same sense, who would call his mobile phone provider to say that he is happy with the service? The answer is nobody, unless you are feeling lonely and/or thinking that the customer service agent has a pretty sexy voice.

KLM in-flight entertainment screen and remote control

But what is the link with e-marketing? one may ask. The interesting thing about this phenomenon is that it can be applied to multiple settings: (1) shopping environments (including grocery stores), (2) restaurants, (3) entertainment events, and most importantly, (4) websites. Thus, when using verbal protocols in usability testing, if users are not saying a word about the service quality of the website, don’t panic, this is a good sign. Following that hint, this is why Key Performance Indices (KPIs) such as the “time spent on the website” and “the total number of page views” have been so many times criticized by both practioners and academicians.

So next time you fly (with KLM or not…) or simply navigate on a website, I hope you won’t have time to think about the quality of the website.

Jean-Francois Belisle

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The BIXI – What Rocks and What Sucks?

The BIXI (Bicycle taxi) – the new public bike system in Montreal – was officially launched this month, but still only a few Montrealers have tried this new service. Last Sunday afternoon, I went to the Old Port without any specific intentions and ended up trying one of these futuristic-looking bikes proudly sponsored by Rio Tinto Alcan. Overall, the experience was a positive one, even though the beginning was as rocambolesque as a Dream Theater song.

A closer look at the BIXI in Montreal
A closer look at the BIXI in Montreal

So what really happened? I was walking on De la Commune in the East direction and candidly stopped at one of these beautiful BIXI stations, corner De la Commune and Alexandra Quay. After putting my finger on the tactile screen of the BIXI station machine – which is similar to an ATM system – I rapidly scrolled the 50-electronic page instructions, then put my credit card in, and received a super 5-digit receipt from the machine. I typed this lucky number on the bike dock of one of the 10 BIXI available, but it didn’t work, tried another one, but it didn’t work either, and, in desperation, started screaming at the BIXI, but it didn’t change anything. Finally, I went back to the tactile screen but the system didn’t allow me to take another number, so I grunted like Clint Eastwood in his last effort entitled Gran Torino. Anyway, 5 minutes later, I tried one ultimate time and it appeared to be the good one. This time my 5-digit number worked and I was up for a free 30-minute ride (after having paid the 24-hour membership fee of $5.00) with my new friend that honestly looked like an E.T. gift. The entire ride was interesting and I felt like a rebel teenager with a new bike, I rode the BIXI across the Old Port with relative ease and enjoyed the windy, cold weather. Anyhow, during that afternoon, I learned what rocks (pros) and what sucks (cons) about the BIXI. So here is a summary:

Rocks (Pros)
• Easy-to-rent service;
• Lots of BIXI stations;
• Small distance between BIXI stations;
• Great quality bike.

Sucks (Cons)
• Sometimes there is no empty spots to drop the BIXI at the BIXI station;
• Sometimes there is no BIXI available at the BIXI Station;
• The membership fees details are not highly accessible;
• It is not crystal clear that your credit card will be temporarily credited $250 (+ taxes), a fee that will thereafter be debited;
• I had difficulties to adjust the seat (frankly, I wasn’t able to adjust it).

So now that you are aware of the pros and cons of the BIXI, as well as the kind of things I enjoy on Sunday afternoons, next time you are walking in Montreal near a BIXI station, don’t be shy to try the BIXI, enjoy the moment, have fun and as Lou Reed would have said, “take a [ride] on the wild side”!

Jean-Francois Belisle

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