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Tuesday, September 11, 2012

Olympics Economics


Since the London Olympics rolled to a close in early August, there have been several articles on the subject of the medals table. Some ask if we shouldn’t account for the resources at a country’s disposal and express the rankings in terms of GDP per medal or population per medal.  Others debate the wisdom of assigning a 3-2-1 scoring system for gold-silver-bronze medals (because a gold medal has far higher worth in many people’s minds). And that leads to a question of whether the ranking should simply be based on gold medals, not the total

But all of these conversations sound silly if a country has won just a handful of medals1. Let’s look at India.  How does one explain why a nation with over 1.2 billion people, an economy that’s grown at a rate of 6 to 10% each year over the last decade, an ability to successfully launch satellites and harness nuclear power (just to stick with the serious stuff and not add things like Bollywood blockbusters and cricket stars to this list) should win just six medals and not a single gold in the 2012 Olympics?  There is an answer to this, and it is painfully simple: past performance is a key predictor of future success.  However, if the goal is to break the cycle of low medal winnings, one has to find another variable to counter the effect of “past performance”.  Statistical models that predict the medals table highlight the importance of the “host nation effect”. It's a catch-all factor that captures the inexplicable forces that propel a host country to excel beyond what its economics, population or medal haul in past Olympics can reasonably predict2, 3.

So here’s my proposal to the Sports Ministry of India: make a bid to host the 2028 Olympics. Given the epic power cut a few weeks ago and the slowdown in GDP growth this year, doubts are being voiced about India’s infrastructure, its economic engine and the political will to enact major reforms needed to sustain the country’s development.  A bid to host the Olympics might look frivolous in this light, but it may be just the kind of accelerated effort to focus a nation to carry out important infrastructure projects. It might be a ‘head fake’4 that leads to the sort of positive side effects that don't manifest themselves when an already developed nation hosts the Games. Who knows, it may speed up water clean-up efforts, to help with swimming and rowing events. Better schools that provide well-rounded curricula that include sports and thus enhance children's physical well being. It would offer private enterprises a chance to invest in efforts that may not lead to immediate profits but may well generate goodwill and a payback in the long run. The 16 years leading up to the Games would give ample time to groom and inspire the next generation of world-class athletes. 

It is time for the Sports Ministry of India to get their creative juices flowing. Perhaps the Olympic village shouldn’t be in one large, choking city like Delhi or Mumbai, but be set up in a small cluster of newly built cities. After all, according to a McKinsey study on the infrastructure needs of the country, India needs to build a city the size of Chicago every year for the next 15 years. 

If comparisons motivate, let me point out the track record of BRICS nations: China hosted the 2008 Olympics, Brazil will do so in 2016, South Africa did a fabulous job with the 2010 Soccer World Cup and Russia is no stranger to large scale events.  In addition, India successfully hosted the 2010 Commonwealth games with 71 participating nations (and incidentally came second in the medals tally). It might be a good idea to test out the host nation effect in India.  Let the games begin! 

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Notes & References:
1.      They may sound sillier if you care a whit about Olympic medals to begin with. But I’m going to assume that most people and nations care, especially the emerging ones such as China, India and Brazil (for one example, the Economist reports on China’s complaints about its showing at the London Olympics, even though – or because – it was a close second to the US). 
2.     Robust statistical models have been developed to predict the number of medals a nation would win in a future Olympics taking into account certain obvious factors such as a county’s population and GDP per capita as well as less apparent ones such as climate and political structures. Other variables include past performance, “Soviet Bloc” country status and host nation status.  For more details, read “Who Wins the Olympic Games: Economic Resources and Medal Totals”, by Andrew B. Bernard and Meghan R. Busse.       
3.     Britain won one gold in the 1996 Olympics in Atlanta. As a host in 2012, it won 29 gold medals. For one example of the inexplicable forces that a host nation enjoys, think about how Andy Murray beat Roger Federer in straight sets to win the Olympic gold exactly a month after losing a grand slam to the same player at the same location.  If you’d prefer to ponder more guaranteed ways to win as a host, experts say that in sports like cycling and canoeing, knowledge of local conditions may matter. 
4.     In his last lecture at Carnegie Mellon University, late professor Randy Pausch used ‘head fake’ in the sense of ‘indirect learning’.  He said: “We send our kids out to play football or soccer or swimming or whatever it is, and it's the first example of what I'm going to call a head fake, or indirect learning. We actually don't want our kids to learn football. … we send our kids out to learn much more important things. Teamwork, sportsmanship, perseverance, et cetera, et cetera.

Thursday, July 19, 2012

Instant Gratification is Passé. Welcome to the Age of Multiple Instant Gratifications


The Mobile Movement, a study by Google/IPSOS, reported the following finding in April 2011:  43% of adult smartphone users would give up beer for an entire month if they would otherwise have to give up their internet-enabled smartphone1. Maybe those respondents weren’t living through a hot summer day, but no matter the day, one could argue that a beer and a smartphone are not perfect substitutes.  So what’s being evaluated in this tradeoff? I suppose it’s the aggregate value or pleasure that a person expects to derive from using a smartphone for a month compared to the aggregate pleasure of drinking beer over the same time period.

To begin with, the instant gratification that the 43% get from checking email, listening to music, playing games, shopping and updating their Facebook status probably outweighs the pleasure of a beer.  Further, people generally use their smartphones far more often than they drink beer: 76% use their smartphone to get online two or more times a day2. In contrast, drinking in moderation is defined as having 1 to 2 drinks per day, assuming one doesn’t drink everyday3.  Even if each beer packed more joy than each smartphone usage occasion, the smartphone would win out on a cumulative basis. 

Finally, consider another statistic on alcohol consumption:  a July 2011 Gallup poll4 found that less than one-in-four adults consider beer as their preferred drink.  So maybe the 43% who’d rather have their smartphone than beer don’t even care about beer in the first place. I can picture them immersed in their unwired gadgets, with a glass of merlot or bourbon in hand and a big smile on their face.  They are not satisfied with instant gratification.  For them, this is the age of multiple instant gratifications!

Next time you have a happy hour, do invite everyone, even the folks who prefer smartphones to beer.  They’re all bound to be quite social.

Sources:
1. Google/IPSOS OTX MediaCT Study from April 2011. 
 http://www.thinkwithgoogle.com/insights/library/studies/the-mobile-movement/
4. The Gallup poll I refer to reported that beer was the top choice of alcoholic drink for 36% among the 64% of US adults who drink alcohol. This translates to about 23% of adults overall.

Saturday, May 12, 2012

Customer experiences as a series of 'aperture moments'

Media executive David Verklin frequently talked about an 'aperture moment' in marketing - the idea of having the right product for the right audience at the right moment. His favorite example (certainly the most cited) is that of an umbrella seller at a subway entrance on a rainy evening. I will add to it the example of a QR-coded poster for the New York Yankees-branded fragrance on a train that takes sport fans to the baseball stadium.  In the digital world, it is the deal-clinching coupon that pops up when you're about to leave a website after searching for a product.

The idea of intercepting the right audience with the right product at the right time and place for the right price is simply Marketing 101 and about addressing the 4 P's.  Just that it is hard to execute on a consistent basis.  In today's omnichannel retail world (a term coined by Darrell Rigby and expanded upon in an HBR article), where consumers can shop anytime and across any channel that meets their need of the moment, it is critical to offer customers and prospects an experience that makes the sale irresistible. Otherwise she is going to click away in a microsecond. 

Armed with 'Big Data' and predictive analytics to mine such data, companies are increasingly in the best place they have ever been to intercept customers at the aperture moment in the online and offline worlds. General guidelines on best times to reach different audience groups based on their moods across a day add another layer of sophistication to companies' targeting efforts.  In the not-so-distant future, neuroscience may make it possible to guess a specific customer's mental state right before making an offer to her! If a company wants to generate a band of loyal customers - powerful advocates - it should consider building its customer experience as a series of brilliantly executed marketing aperture moments.

What are your favorite examples of brilliant executions that took advantage of a marketing aperture moment?

Thursday, April 26, 2012

No Car, No Care!

Driving along the Pacific Coast Highway or the Merritt Parkway in the past, I've felt an invigorating sense of freedom.  If my license were to come up for renewal today, the memory and imagery of those trips alone would propel me to the DMV.  It seems not everyone in America shares my romanticized notion of what driving is about. According to the Federal Highway Administration, from 2000 to 2010, the percentage of 14 to 34-year-olds without licenses rose from 21% to 26%.  Maybe they plan to get their licenses later, or prefer to enjoy the scenery from the backseat.  

Even those who drive are doing less of it.  The average American in 2011 was driving 6 percent fewer miles per year than in 2004, a trend that appears to be led by young people. Certainly, most of the time, driving is about running errands, going from place A to place B, about filling gas (painful at $4/gallon). It's about maintenance and oil changes.  Depending on your age and where you live, it can mean high parking charges, insurance premiums and debt repayment. 

If future generations start favoring city-living and rely more and more on public transport, carpooling, biking and walking, it can only be a good thing for the planet.  People will save themselves money and the hassles of car ownership. When they do feel that occasional itch, a hybrid convertible from zipcar should do the trick.  I'm told there's one right now at Big Sur, waiting for a driver.  Just remember to bring your license.

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Sources: 
http://www.uspirg.org/reports/usp/transportation-and-new-generation
http://www.adweek.com/sa-article/young-people-are-driving-less-139569

Wednesday, April 25, 2012

Clever Headlines Are Worth As Much As The News

Who doesn't like a story well told? Newspapers, especially the serious ones like WSJ, FT or NYT, seem to play with words all the time, but occasionally they come up with a zinger. A memorable one for me was FT's "Shock Gen" title to describe the rogue trading scandal at Societe Generale.  A serious event told with a cheekiness makes for juicier reading.

In the last week, no one could resist the opportunity presented by the Euro zone's politics. "Holland, Not Hollande, Is Europe's Latest Worry" chirped one newspaper.  And in the world of sport, Metta World Peace provided an occasion for some creative writing. 

What is your favorite clever headline or slogan?