It's Rishi

Recently I flew to the east coast via JetBlue. Although I took the red-eye, it was still a pleasant experience. Time flew by (no pun intended) as I spent half the flight watching the WSOP and then proceeded to nap for a bit while listening to XM radio via my noise-cancelling headphones. On my return flight, I took a US Airways flight that I found for about 20% cheaper than other alternatives. Worst decision ever. The plane was old, the seats narrow and worn, legroom sucked, no in flight entertainment…horrible. I just couldn’t believe how much more pleasant a flying experience JetBlue offered. I thought to myself: “Man, if JetBlue offered internet, I think I really would pay even 50% more to fly JetBlue”.

Fast forward to today and I see a headline saying that JetBlue is testing Wi-Fi internet. I was super excited..until I read the article. It turns out that JetBlue is in fact testing out the feature however it is super, super crippled. It’s the equivalent of having an early 1990’s AOL client as your gateway to the internet. Because, it seems, RIMM and Yahoo! are sponsoring the feature, passenger internet use is limited to Yahoo Mail, Yahoo Messenger, and BlackBerry messaging. How incredibly dumb. Moreover, according to the article, while JetBlue has plans to expand this service to their entire fleet, they don’t have plans to expand the capabilities of the service.

Meanwhile, Virgin America has equipped their entire fleet with Wi-Fi and are planning to add Internet service within a year. If I recall correctly, they will be charging passengers a very nominal fee for access and possibly a slightly higher fee for additional bandwidth. Sounds perfect to me.

As the rest of the domestic airline industry seems to be supremely focused on profitability over service, JetBlue and Virgin American clearly are bucking the trend. It’s not a stretch to say that they are reminding their customers that flying can be a joyful experience – as it was decades ago. I’ve talked to several friends and we all agree that we’re willing to spend more for a better experience. Internet is the true killer app for in flight entertainment. I hope JetBlue realizes this and rethinks their internet strategy. Otherwise they’ll be eating Virgin’s dust.

This afternoon, Yahoo! sent me a friendly reminder that my Yahoo Music Unlimited annual subscription is up for renewal in a month. I had signed up for Yahoo Music right when it came out a couple years ago and I must admit it’s been an awesome companion for me. Having access to well over a million songs across all kinds of genres has introduced me to a lot of new artists that I hadn’t been famliar with and also given me the chance to listen to the full albums of artists I already was a fan of. The downside is that the Yahoo Music application is pretty slow and clunky. Also, while the star-rating recommendation system does an OK job at pushing me music that might fit my taste, it would be nice to have more help, such as having some better social features or more editorial content.

After reading reviews about other music subscription services that have launched over the past couple of years, I thought I’d do some quick research before renewing. A couple of my friends have Rhapsody and say really great things about the service. Also, in this CNET review from a couple weeks ago, they named Rhapsody their Editor’s Choice amongst competing services. One of the best features of Rhapsody is the team of music editors which write commentary on the various artists and genres. Rhapsody does cost a little bit more but the difference is only a few dollars a month. I became really tempted to make the switch – if for no other reason than to have a change of scenery.

Then it hit me. I have now rated over 2k songs, artists, and albums on Yahoo Music. Those ratings represents thousands of hours of music listening for me and represent a deep description of my music taste. When browsing music it helps me sort out music that I have and have not listened to. Furthermore, in a sense I’m sort of proud of my ratings. I’ve put in a lot of time creating those ratings and since my music taste is a big part of my identity, hence my music ratings are a big party of my identity. I don’t want to lose those ratings. As is typical of big portal sites, there’s no way to export my music rating data. In all fairness though, import/export is not supported by any of the services and since they presumably use different music databases, it’s not even clear if an import/export could reliably be done.

The bottom line is that I don’t want to lose my ratings so the switching cost for me is impossibly high (I’d have to manually transfer my ratings one-by-one).
It turns out that there is actually a very good reminder here for consumer services. The deeper a customer can personalize the service, the higher the switching cost is.

Anyway, in conclusion, for the time being I’m Yahoo Music’s bitch. I’ll be renewing for another year…

Have you ever been browsing around Yahoo! Shopping or Shopping.com clicking on various products. You see a product you like, read about it, click around to some of the merchants that sell it, click on another product, read about it, …. Well, whether you realize it or not, each one of those clicks from the shopping comparison site to the merchant’s web site costs money for that merchant. Brian Smith over at ComparisonEngines.com put together a nice table listing the minimum rates each of four popular shopping comparison sites charge merchants for various product categories.

CPC Price Floors on the Shopping Comparison Engines

A few months back when I was shopping for a plasma TV, I spent a long time browsing through various models on Yahoo! Shopping and clicking through to various merchants. There’s a good chance I earned Yahoo! Shopping well over $20. Unfortunately for Y!’s merchant advertisers, I ended up buying the TV through an alternate source. Sorry Y! merchants!!

What surprised me was ink and toner cartridges also tops the list with a minimum of $1/click. I wonder if the high CPC is because of a high gross profit margin in this category (how much profit does a merchant make on a $30 ink cartridge… $1, $5, $10??) and/or high conversion rates amongst users in this category (x?/100 users who click actually follow through with a purchase?) I’ve got a contact who manages SEM at an online office tech retailer so hopefully I can get an answer for this question in a few days.

Labor costs money. The price of a product always factors in the labor costs associated with designing and manufacturing that product. The price of a service includes the labor costs associated with delivering that service. The higher the labor cost, the higher the price of the product or service. That’s pretty much a universal truth.

As markets become saturated and differentiation becomes increasingly difficult, companies are forced to compete on price. The cost of raw materials used to produce a product can only be controlled so much. Thus, companies concentrate on reducing the amount of manual labor required to produce their products. The trend towards automation has become so dominant that “handmade” products are now rare and often prohibitively expensive.

Well, what about services? Better service generally involves either more labor or higher-skilled labor (or both). Because the cost of labor has only been increasing over time, service is becoming increasingly expensive. Once again, businesses are forced to compete on price and, as a result, services are either reduced or eliminated altogether. The key thing to remember is that businesses are able to reduce the service they offer only because consumers are willing to sacrifice service for reduced cost. Given the option to pump their own gas or pay a bit extra, most people chose to pump their own gas so full-service gasoline pumps are all but extinct.

Let’s say you need to buy a new oven for your kitchen. You could go to the local mom & pop appliance store and receive a personalized shopping experience OR you could goto your local electronics mega-retailer like BestBuy, get minimal service but save a few bucks. Most people opt for BestBuy. Of course, the ultimate form of sacrificing service for price is on the Web. Web merchants can generally offer rock-bottom pricing because no physical presence means no inventory cost and no labor costs. Continuing the trend of preferring self-service and lower prices, consumers are increasingly hopping on the Web to shop.

When you pay for a service, you are paying someone to do something that you either lack the necessary skill or knowledge to do or simply don’t want to do. With the advent of the Internet, the barrier to acquire knowledge and skill has been shattered. Accordingly, the demand for services is diminishing. Why pay a plumber to fix my faucet when I can follow one of many DIY guides on the Web? Why pay a few hundred bucks to an auto broker to buy a car for me when I can now find model information, reviews, dealer invoices and submit quote requests to several dealers for free on the Web?

I think it’s time to analyze what the terms ’self-service’ and ‘full-service’ really mean. Self-service means that your request will only be fulfilled with further input of your time and energy. Full-service means that you make a request and it is fulfilled without any further input of time or energy by you. Nowhere in the definition of full-service does it say that your request is to be fulfilled by a human. Traditionally, people think that if you’re going on the Web to do something, it’s self-service. After all, it takes your time and energy. However, because there is often not much in the way of price differentiation between Web-based companies, these companies are forced to provide a higher level of service. Since employing humans to provide this service would kill their business models, technology is used to deliver higher levels of service.

One example is search engines. The search engine is technology’s replacement for the human librarian. Imagine that you’re planning a vacation to Australia. You could walk into your local library, tell the librarian “Hi, I’m planning a trip to Australia. Can you help me find some information on that”, and for a few minutes you’ll have your own personal research assistant. Unfortunately, having a personal research assistant at our disposal full-time is too expensive. Search engines like Google attempt to do the same thing. Instead of randomly poking around on the Web trying to find Australia travel information, we can use these technology-based services to help us locate the information we seek.

Dontbuyjunk was created to, in a sense, be a full-service shopping experience. You state what you want e.g. “I want a digital camera with good battery life and low-light shooting” and the system told you what to buy and where to buy it. To accomplish that, we developed a technology called TotalRank which essentially replaces a knowledgable salesman that you might find at a store.

Everyone likes good service. We all want the best experience with the least effort. Traditionally, good service meant extra cost and as a result good service is hard to find. But through technology, companies are once again able to differentiate themselves by offering better service. Long-term, I think we’ll see the return of full-service experiences. The difference will be that instead of people providing service, technology will. The result will be great service with minimal additional cost. Finally, consumers will get to have their cake and eat it too.

After thinking for a while, I came up with the following list of those fundamental things that every human wants:

• attention
• importance
• companionship
• entertainment
• sex
• knowledge
• time
• relaxation
• success (at any challenge/goal)
• earn/save significant (relative to the individual) amounts of money
• and even though it’s sort of implied: power to get any of the aforementioned items

Is that a comprehensive list? Can anyone think of anything that’s missing? Any items that are there that you think don’t belong? Lemme know!

Alexa is an Amazon company, that among other services, provides traffic details and rankings for web sites. Everyone references Alexa’s traffic rankings. I use it regularly to get a glimpse into how much traffic (and the traffic growth) of a particular startup. Likewise, many tech journalists/bloggers/pundits use Alexa rankings to analyze how much traffic one site is getting versus another and if the site is growing or decreasing in popularity. I’ve also read on many SEO discussion boards that prospective advertisers will look at your Alexa ranking to determine how much your ad space is worth. I’ve also spoken with investors who include an Alexa traffic check in their initial look at a startup. So, clearly, if you run a web-based company, that Alexa ranking is an important number. It will likely have a direct influence on your business.

There has been much debate over how accurate Alexa’s rankings are. To understand how accurate (or inaccurate) Alexa’s data is, you need to understand how their system collects traffic data. It’s really quite simple. Alexa offers a toolbar for IE that offers up a Google search box, Alexa site info, popup blocking, and page highlighting among other features. More importantly, it records every single URL the browser visits and sends that information to Alexa. The important thing to understand here is that Alexa’s traffic data is based solely on the traffic of users who run IE and have the Alexa toolbar. For some more specifics about how and what Alexa calculates, go here.

Up until this point, you might be thinking…hmmm this Alexa sounds pretty reasonable! Rishi, why do you call it a “myth”?

Alexa states that they compute “traffic rankings by analyzing the Web usage of millions of Alexa Toolbar users.” Millions huh? Seriously, have you ever seen anyone that runs the Alexa toolbar. I sure haven’t. Google or Yahoo toolbar, sure. But never Alexa. My hunch is that it’s more like hundreds of thousands, not millions, of users. Possibly millions have downloaded it and had it installed at some point, but not all are currently running it. Check out this post from a couple years back on SEOChat. The author concludes that “that the Alexa sample size was 180,000.” Since Alexa does not post any demographic data, all of this is 100% speculation. However, the point is that the toolbar’s user base represents a very, very small percent of the Web-browsing population. And what kind of people do you think have the Alexa toolbar installed? I’m thinking it’s more Joe InternetProfessional and less Joe Teenager and even less Joe Noob. Evidence of this is that MySpace is currently ranked #5 and Google is #2. According to every other data point I’ve seen, MySpace pageviews far exceed Google. My guess is that your typical MySpace user is a lot less likely to be running the Alexa toolbar than the typical Google user. If efforts were taken to make this userbase statistically random (like a Gallup does) then the traffic data would be a lot more reliable. But as it stands today, one could not expect the pool to be random and thus the traffic data just isn’t that reliable.

Another huge problem with Alexa rankings is that it easy to manipulate. The traffic rank of ItsRishi.com is a patheticaly low 3,741,850. According to Alexa, my reach per million users for the past 3 months has been 0.1. That means that 1 in every 10 million Web users visit my site on a daily basis. Is that accurate? Who knows. Even Alexa states that traffic data beyond the top 100k is not statistically significant. Fair enough. As an experiment, I will be improving my traffic rank over the next few weeks. How? It’s simple. I installed the toolbar on my IE browser and from now on will use IE whenever I am working on ItsRishi.com. What this means is that I’ll probably end up with a few hits on average per day. If I don’t see enough of an improvement in a couple weeks, I’ll recruit some IP addresses – oops, I mean friends – to also install Alexa toolbar on IE and use it while visiting ItsRishi.com. My hope is to crack the top 100k. I’ve read many stories from webmasters who have done this very same practice with great success.

While I will be doing this for ItsRishi.com purely to satisfy my curiosity, you can bet that many companies are using such techniques to magnify their Alexa rank. The higher your rank – especially if your rank is rapidly climbing – the more people are interested in your company. That’s just a fact. Whenever I hear about a startup for the first time, I usually do a quick check of their Alexa rank to get an idea of their popularity. If the rank looks promising, I assume the site is hot and I take a deeper look. As I’ve explained, this assumption is faulty, but there really is no better (public) way of determining a site’s popularity. So while the Alexa number may not be accurate, it is a number. It’s not really much different than when Forrester publishes a report saying that an industry is X billion dollars. When you want a number, any number is better than no number. I guess the lesson here is to be careful of how much meaning you try to extract from the Alexa data.

If you’re trying to compare two companies in the same industry, the best suggestion is to find a metric that’s more pertinent to that industry. For example, an owner of a online retailer comments: “There is one competitor in particular that I watch..He is a member of Bizrate, so I can count the number of customers that take his survery each month, and compare it to the number that take our survey.” In his space, the number of Bizrate survey submissions is a much more accurate metric for him because its a nice apples-apples comparison since you can assume that at his store and his competitor’s store, the % of customers who complete the survey is about the same.

You can follow my Alexa progress here.

Ever since I discovered Robert Farago’s automotive news and editorial site, The Truth About Cars, I’ve been an avid reader. Farago’s editorials combine his deep knowledge of the auto industry with sharp, frank analysis. Furthermore, even though he writes many articles criticizing the Big 3, especially GM, he isn’t just Detroit-bashing like many journalists do. For every criticism he makes, he usually puts forth his own alternative ideas.

Whether you follow the auto industry or not, you may have noticed that Ford has ditched “Built for the Road Ahead” for a new marketing campaign called “Bold Moves”. The first glimpse that the general public got of this new campaign was a new 60 second commercial featuring Kelly Clarkson which aired during American Idol a couple weeks ago. (watch the commercial on YouTube) They also caused a stir in TV land by announcing that they will be making a reality TV show where contestants will be involved in design projects.

In a recent editorial, Ford: Bold Moves Sink Ships, Farago focuses on the discrepancy between Ford’s new marketing message and their vehicle lineup. The marketing message is encouraging the consumer to be bold and fresh by buying a Ford but all of the company’s new cars (except for the Mustang and now-extinct GT supercar) are conservative and generic. As is taught in Marketing 101, the best way to make a marketing campaign succeed is build a great product. Great products market (and sell) themselves. Ultimately, the market itself will be the major influence for how your product is positioned.

Favorite line in the editorial:

In fact, Ford’s Bold Move message borders on self-parody: be bold and buy a vehicle from a car company struggling for survival.

Brilliant! Come on Ford, this is do-or-die time for the company. With dwindling sales, a non-existant passenger car lineup, and only a couple brightspots in the pipeline, the company truly does need to take intelligent, drastic steps to emerge victorious. You can’t sell the consumer just with bold marketing. You sell the consumer with bold products that meet their needs and fit their wallets.

Last month I wrote a mini-essay titled “It’s cool…but I wouldn’t pay for it” in which I briefly discussed a phenomenon that is becoming more and more common. A company launches a good service but has trouble finding users who will actually open up their wallet and pay for that service. This has led most recent web-based companies to either offer their service free of charge – relying exclusively on ad revenue for cash flow – or give away the basic service free and try to upsell premium services.

After making that post, I started to think about what does make consumers open up their wallets. What are their motivations? I want to answer the simple question: Why do people buy stuff?

After a lot of thought, I came to the hypothesis that each purchase is motivated by the following 2 factors:

Functional – Many products we buy fulfill a tangible function. In other words, they have a measurable utility to us. Each function of a product has varying utility to each consumer depending on his or her needs. For example, a BMW M5 has a top speed of 205MPH. For the average buyer that function is offers little utility. But for a German driver who needs fast transportation on the Autobahn, the utility might be very high. Similarly, the fact that a buffet is all-you-can-eat may have high utility to a football player but little utility to someone dieting. On the other hand, a bottle of water has universal and similar level of utility to most consumers.

Emotional – There are a few primary emotional states that all humans strive for (whether they admit it or not): happiness, security, attractiveness, belongingness, and, above all, a feeling of importance. The interesting thing about emotional-based purchases is that they have no bound. Humans always want more. A man who owns a Casio wants a Seiko. A man who owns a Seiko wants a Rolex. Similarly, people are generally interested in spending money to achieve higher levels of the aforementioned emotions.

this leads us to…

Rishi’s laws of Consumer Behavior

If your product appeals primarily to the consumer’s functional needs: That consumer will likely open their wallets to you, but will probably do so unwantingly. Nobody particularly enjoys buying milk, toilet paper, or store-brand cola, but they do so because it fulfills their needs.

If your product appeals primarily to the consumer’s emotional needs: That consumer will likely want to open their wallets to you, but will probably not do so. People want Porsche 911’s, Rolex watches but few buy them, even if they could technically afford it. Now, if you intend your product to be a niche-market, luxury item then there’s no problem.

If your product appeals both to that consumer’s functional side and emotional side: The consumer will likely open their wallets to you, and feel happy about doing so. Ideally, you want your product to fit into this last category: appealing both to the functional and emotional side. This is not so much a product design exercise but a marketing exercise. The art of branding is all about how to make a product sell for more than it would if it was perceived as just a commodity (only functional). It’s the reason why Ralph Lauren (declare to the world that you’re successful with the Polo logo) can charge $60 for an ordinary polo shirt or why Coca-Cola (make every moment a memory by drinking a Coke) can charge more than store-brand cola. But, to accomplish this, it’s also important to remember that you must also fulfill a clear functional need for your consumer. A great (if obvious) example of a product which accomplishes both is the iPod. There are several competing hard-drive based MP3 players which are very competitive. Apple is able to not only dominate the market, but do so selling it’s products at a significant price premium. Through a combination of product design, packaging, and marketing, Apple has consistently made each iPod hip and luxurious. They made the MP3 player be more than a functional purchase, they made it an emotional purchase.

Few companies in the computer industry have been able to appeal to the emotional motivations of consumers. Specifically, I can’t think of a single software company that has. Possibly video game software, but one could also argue that it’s also functional: video games provide the function of entertainment. What about on the web? Are there any websites that you pay for that appeal to your emotional side? This is something I’ll be thinking about for the next few days…

VW launched a great marketing campaign for the new 5th generation GTI which recently launched here in the US. Over the past 2-3 generations, the GTI has lost much of what made early generation GTI’s so popular. Sluggish and heavy where the original GTI’s were agile and light. Well, VW has definitely come back swinging with the latest generation GTI and the marketing campaign they’ve gone with definitely reflects this. The markething theme is “Make friends with your Fast”. What’s your “Fast” you ask?

Check out some of these great commercials for the GTI featuring Fast:
Cop
Streamlined
Wind

If you’re still not convinced that this is a great marketing campaign, take a look at how much these official VW Fast packages (only 600 were made for promotional purposes) are selling for:
$300+ Fast packages on eBay

UPDATE: VW Project Fast documentary (I think this is the DVD that comes with the promotional package)

I was having lunch with a friend of mine a couple days ago and while we were eating, I was ranting to him about how if you search for “Rishi Khaitan” on Google, itsrishi.com is not the first result. Before I knew it I started explaining to him how Google ranks results, SEO, etc. About a minute into it, he interrupted me and was like “I guess I never really thought about how Google does it’s thing. I love Google ’cause it just works.” I thought about what he said some more. It hit me that I’ve become accustomed to talking endlessly about how things work with my geeky friends that sometimes I’ve lost focus on what’s really important. Users universally want one thing. They want things to “just work”.

Sure, Google has a simple interface and is very fast, but what makes it so ubiquitous is the fact that it doesn’t require any specialized knowledge of its user in order to work well and reliably. You type in some search words, click Search, you get good results. That’s it. Everytime. When things “just work” you feel in control. When you drive, it’s the same thing. Gas pedal go. Brake pedal stop. Everytime. There’s a sense of satisfaction and control that people have when driving. Could you imagine if even 5% of the time, the brake pedal did something else? We’d have a lot less people driving that’s for sure. But this isn’t just an issue of reliability. Complexity of operation is just as important. Just about everyone today owns at least one camera. You press the button, it takes a picture. You don’t have to know jack about what’s going on. It just works. What if auto-focusing was never invented? If you had to manually focus every shot, there would be a whole lot less cameras sold. Things that “just work” make us feel confident and in control which in turn makes us feel comfortable and joyful.

There will always be successful products which offer lots of functionality because their primary market demands it, such as SLR cameras which are intended for photography hobbyists and professionals. Such products are complex and most people won’t be happy with it. But that’s fine. Most people will choose more accessible, mainstream options.

The lesson here is, if you’re aiming to make your product a household name, you gotta make sure it “just works”. I know this doesn’t sound like rocket science, but I seem to come across countless products which promise to be the next “big thing” yet violate this basic principle.