I just completed my major research project for my MBA through Waikato Uni (I graduate in October 2011).

The full title is: “How New Zealand’s Cafe’s, Restaurant’s & Bar’s can best use the internet to attract new customers and encourage existing customers to return”

I poured 160 hours of my life into this project over a 4 week period and produced a report that is 115 pages long with 24,441 words.

Read The First Three Sections

You can download and read the first three sections including:

1. Table of Contents
2. Executive Summary
3. Introduction

Download the first three sections of “How New Zealand’s Cafe’s, Restaurant’s & Bar’s can best use the internet to attract new customers and encourage existing customers to return” (70Kb .pdf)

The Executive Summary for the report “How New Zealand’s Cafe’s, Restaurant’s & Bar’s can best use the internet”:

Café’s, Restaurant’s and Bar’s that learn how to use the internet to attract new customers and to remind existing customers to return, will have an advantage over owners who don’t.

7 Cafe/Restaurant/Bar owners in Tauranga were interviewed about their use/non-use of 11 different methods of online marketing which were: Business Websites, Business Facebook Pages, Email Newsletters, Online Review Websites, Online “Daily Deal” Coupon/Voucher Websites, Online Business Directories, Applications for Smart Phones, Pay-Per-Click Internet Advertising, Twitter, LinkedIn and Business Blogging.

Each method was described, the pros and cons were discussed, owners shared their perceptions and techniques, and a “how to get started” guide was provided.

One major benefit of online marketing is that you can use just about any method for free (or for next to nothing), and that, if it is set up properly, it can keep generating results infinitum with little or no maintenance. Compare that to an advertisement in yesterday’s newspaper or in last week’s Television commercial break.

However, business owners need to be convinced that each method will generate measurable results before they are willing to allocate time/resources/money to those methods.

To determine what those results may be, 105 consumers were surveyed about their use of the internet in relation to Cafe’s, Restaurant’s and Bar’s.

Firstly, they were asked about how they used the internet to find new places to visit. The 3 most common methods consumers used were Google search, “Daily Deal” websites, and Facebook.

Many respondents wanted to make it clear they did not use the internet at all to find new places to visit. However, many others are active users and several voiced frustration over not being able to find the information online, that they needed to make an informed choice.

If a growing number of consumers are using the internet looking for a new place to consider going to, are owners ensuring that their brand appears in the search results for a chance to be considered?  Owners that invest time/effort/money into this area will undoubtedly have an advantage over those that do not.

Secondly, the consumers were surveyed about the kind of information they expect to find online about a Cafe/Restaurant/Bar they are considering visiting. The importance of 18 factors was measured.

61% of respondents indicated that they were more likely to visit a place if they can find the answers to their questions online.

It is proposed that these questions and answers could form the basis of a Frequently-Asked-Questions page on a business website, and/or on a tab on a Facebook business page.

Finally, consumers were asked about how they interact with their favourite brands online.

Many respondents indicated that they would become fans of the Facebook business pages of their favourites if they could find them, and that they do subscribe to Email Newsletters.

We are living in a time when the effectiveness of traditional types of media is decreasing, the fragmentation of the media channels is increasing, and consumers are paying less and less attention. In times like this, business owners who get permission from customers to speak directly to them will have an advantage.

One third of respondents said they talk about their experiences online via social networking sites (such as Facebook) and a similar proportion take the time to write good/bad reviews online.

A growing proportion of consumers are engaging in discussions about their experiences, both positive and negative, on online platforms.

Owners that make efforts to monitor this feedback may be able to prevent damage to their brand that can result from negative criticism posted online.

Overall, it is clear that Café’s, Restaurant’s and Bar’s that make efforts to put some or all of these tools and techniques to use for their own businesses, will gain significant advantage over owners who don’t in terms of attracting new customers and maintaining relationships with existing customers.

What Should I Do With The Research Now?

My next challenge is to determine how to monetise this research. Options I’m considering:

• Could I turn it into an e-book or “how-to” guide for restaurant/cafe/bar owners and sell it to owners throughout New Zealand?
• Might the Restaurant Association of New Zealand be interested in the results? Might they hire me to present a seminar series?
• Could I start a mini-website dedicated to online marketing for restaurant’s/cafe’s/bar’s?

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1. In New Zealand Is Facebook Just For Kids? No. I thought it would be interesting to combine age group...

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I thought it would be interesting to combine age group data from Facebook with age group data from Statistics New Zealand to see what proportion of each age group is using Facebook.

In particular, I was interested in answers to questions like:

• Is Facebook mainly for teenagers?
• Are people over 50 using Facebook?
• Are people over 65 using Facebook?

What questions would you like answered?

Let’s take a look at the data:

*Source: SocialBakers.com

**Source: Stats.Govt.nz

^How is it possible that more than 100% of that age group use Facebook? I don’t know.

What do you think? Do these results surprise you?

Write your comments below

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My notes on “Fascinate: Your 7 Triggers to Persuasion and Captivation” by Sally Hogshead

Fascination Scale

• Avoidance
  • You’ll take steps to avoid TV commercials
• Disinterest
  • You might leave the room during a commercial break to grab a bite
• Neutrality
  • You don’t really care if you watch the commercial or not. You’re not going to take steps to avoid it, or to watch it
• Mild Affinity
  • If a commercial happens to pique your curiosity, you’ll watch. Otherwise, eh, whatever
• Interest
  • Commercials entertain, at least the good ones
• Engagement
  • You actively enjoy commercials. During Super Bowl, you pay more attention to the commercials than the game
• Immersion
  • You go out of your way to watch commercials, even going online to search them out
• Preoccupation
• Obsession
• Compulsion

Trends Driving the Need for Fascination

• An overload of distracting choices
• The rise of the ADD world
• Earning attention, not paying attention
• The ability to shut out messages
• Shift from the information age to the fascination age
• The Fascination Economy

Golden Hallmarks of a Fascinating Message:

• Provokes strong and immediate emotional reactions
  • Polarising – love or hate
  • Eg Botox
• Creates advocates
  • Passionate, dedicated fans
  • Eg Religions, Nascar, The Da Vinci Code
• Becomes “cultural shorthand” for a specific set of actions or values
  • A reference point for how people define themselves and their world
  • Eg tattoo’s, Louis Vuitton, Virgin
• Incites conversation
  • Top of mind. Earns more attention than it pays for
  • Eg Twilight series, Grey’s anatomy, Richard Simmons
• Forces competitors to realign around it
  • Establishes new standards and criteria. Irreplaceable for audience. Cannot be exactly replaces or duplicated by inspires look-alikes, me-too’s, imitators.
  • Eg Microsoft, then Apple, then Microsoft. Wal-Mart
• Triggers social revolutions
  • Disrupts the status quo of accepted beliefs. Forces us to think differently about ourselves and our world
  • Eg Bono, Mini Cooper, Yoga, Prozac, YouTube

The Seven Triggers

Lust

If you trigger lust, you will draw others closer. They will crave your message, wanting more and more until satiated.

• Lust creates craving for sensory pleasure
• Stop thinking, start feeling
• Make the ordinary more emotional
• Use all five senses
• Tease and flirt
  • As a motivator, desire is more powerful than fulfillment (eg Monkeys like the sight of a luscious grape, enjoy the moment just before eating, but are a bit bored when eating it). Eg2 burlesque shows are rarely performed in the harsh morning light
  • Journal of Consumer Research says sex sells: A woman in a bikini increases man’s sexual stimulation and increase the likelihood of indulgent decision making. As the brain opens to possibilities, the wallet opens as well

Mystique

Trigger mystique, and you’ll encourage others to learn more about your message. They’ll be intrigued, and seek information

• Mystique lures with unanswered questions
  • Eg celebrity deaths
• Spark curiosity
• Withhold information
  • Information is the opposite of mystique
• Build mythology
  • Tell stories, don’t recite facts
  • Eg Coca Cola secret recipe
• Limit access

Alarm

With alarm, you compel others to behave more urgently. They’ll take action in order to avoid negative consequences.

• Alarm threatens with negative consequences
• Define consequences
• Create deadlines
• Increase perceived danger
• Focus not on the crisis most likely, but on the one most feared
• Use distress to steer positive action
  • Eg “The Tap project” charges for glasses of water, that money goes to Unicef to provide a child clean drinking water for 40 days

Prestige

A message with prestige will elevate you about others, inspiring covetousness or envy.

• Prestige earns respect through symbols of achievement
• Develop emblems
• Set a new standard
• Limit availability
• Earn it

Power

If you effectively trigger power, you will control others. They will defer to you and your message.

• Power commands and controls
• Dominate
• Control the environment
• Reward and punish

Vice

By triggering vice, your message will tempt others to deviate from their usual code of conduct. They’ll act outside of standard habits or norms.

• Vice tempts with “forbidden fruit” causing us to rebel against norms
• Create taboos
  • Eg reality stars fight for the notorious villain role – Simon Cowell
• Lead others astray
• Define absolutes
  • Eg “don’t look in the box”, “don’t do drugs”
• Give a wink
• How to encourage someone to want do break your rules:
  • Enforce rigid black and white rules. Exaggerate consequences (eg “if you kiss a boy, you’ll get pregnant)
  • Give a firm “no” without reasonable reasn why
  • Fail to establish trust (no familiar people or context)
  • Trigger mystique by telling them what not to do, without telling them why
• How boring brands can trigger vice
  • Electronic company: Include a secret “road to deafness” setting on your headphones
  • Car company: buy a private autobahn for people who buy a new car

Trust

With trust, your message will comfort others, relax them, and bind them more closely to you.

• Trust comforts us with certainty and reliability
  • Are your favourite brands the highest quality or just the most familiar?
• Become familiar
• Repeat and retell
  • You can dabble in other triggers, but you must establish trust with consistency
  • Hitler: “The greater the lie, the greater the chance that it will be believed” if it is simple and you keep saying it
• Be authentic
• Accelerate trust
  • By tapping into values
  • Bring back old marketing devices

Your Potential Fascination Badges

• Purpose: Your reason for being; your function as a brand
• Core beliefs: The code of values and principles that guides you; what you stand for.
• Heritage: Your reputation and history; the “backstory” of how you came to be.
• Products: The goods, services or information you produce.
• Benefits: The promises of reward for purchasing the product, both tangible and abstract, overt and implied.
• Actions: How you conduct yourself.
• Culture: All characteristics of your identity, including personality, executional style, and mind-set.

Steps to Find the Edge of Your Bell Curve

1. List your badges (both existing and potential)
2. Evaluate against the hallmarks of a fascinating brand
3. Plot on a bell curve
4. Push badges outward on the curve by infusing them with more of your primary trigger
5. Push badges outward on the curve by infusing them with a new trigger
6. Build your message around these badges

More Notes

Fascinating Faces

We are all find faces fascinating and we all consciously/subconsciously attempt to interpret facial expressions. Cutting edge software analysed Mona Lisa’s smile. The results: 83% happy, 9% disgusted, 6% fearful, 2% angry

The Fascination Economy

• Goods-based economy >> Service-based economy >> Information economy >> Knowledge economy >> Experience economy >> Fascination economy
• Fascinating company’s/brands:
  • Charge a premium
  • Command more influence in the marketplace
  • Build more loyal relationships over time

People Want to Connect with…

• Not brands. With each other.
• Fascinating companies create more opportunities for people to connect with each other through the brand (eg Harley-Davidson)
• For marketers, it’s not about marketing a message – it’s about getting the market to create messages about you.

An idea is worth…

• An idea is only as valuable as its ability to solve a problem
• Ideas don’t live in a vacuum. They only become precious only once they successfully answer a specific need; otherwise they’re just scribbles

Red-tape will kill your fascinating plan

• Avoid committee mentality. The most fascinating ideas are often fragile because they can easily be “dumbed down”
• What policies and protocol block fascination by forcing a “red tape” mentality, or an over-thought, over-controlled approval process?
• Are you so concerned with neutrality that your communication is diluted down to gray mush?
• Are you so focused on keeping a low profile, playing it safe, that you’re kill fascination opportunities before they’ve had a chance to hatch?
• Fascination requires putting yourself out there for remarkable ideas, accomplishments and innovations

Brand Example

• Cirque de Soleil: Mystique (tightly held secrets) + Prestige (high-end execution) + Power (extraordinary training and skill) + Lust (playful style, elaborate costumes, makeup, artistry) leaves the audience craving more at the end of the show

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You may have heard that money-back guarantees are a good idea but you are not sure if they are right for your business?

Perhaps you are holding back because you are worried it’s going to cost you money handing out dozens of refunds, right?

Offering any kind of money back guarantee is better than offering none at all because the main two things that customers care about is:

1. Price
2. Risk

And a money back guarantee helps with both.

A money back guarantee reduces risk for the customer because:

• It signals that you are confident about the quality of your product
• It reduces their nervousness about making a bad purchasing decision
• It goes beyond the normal offer of replacing the item if something goes wrong, because they can get their money back

A money back guarantee reduces the price for the customer because:

• There is a cost for returning something for a refund: time. Knowing that you are able to get cash back for your trouble is better compensation than a replacement
• Customers perception is: Price + money-back-guarantee = Free Trial. Free is a customers favourite price

These are all “up-front” factors that persuade a customer to buy in the first place. Which is great.

In fact, let’s just slap a number on it and say that offering a money back guarantee will generate 20% more sales for you.

But the real magic happens in the “tail-end”, a long time after the sale.

Let’s say you purchased the Ginsu 2000 never-needs-sharpening-can-cut-through-a-can knife with a 30 year money back guarantee.

And it’s year number 29 and you decide it’s crap. Do you ask for your money back? Hell no. For 4 reasons:

1. You forgot about the 30 year money back guarantee anyway
2. You can’t be bothered
3. You feel you got your moneys worth any way
4. You don’t want to impose or be a nuisance
5. You’ve had it so long it feels like yours, you feel like the owner. This reduces the obligation of the people you bought it from

Yes, it’s an extreme example but you get the idea. Let’s look at another:

Let’s say you purchased an ebook about Search Engine Optimisation for $19 with a 3 month money back guarantee.

It’s the 2nd month, and you only just got around to reading it and you decide it’s crap. Do you ask for your money back? Hell no. For 3 reasons:

1. You forgot about the 3 month money back guarantee anyway
2. You can’t be bothered
3. You don’t want to impose or be a nuisance
4. It’s in your possession and so you feel like the owner. This reduces the obligation of the author

Let’s just slap a number on it and say that you get 5% of customers that actually do go ahead and ask for their money back.

So to summarise, you are getting 20% more sales to get out 5% refunds… Ummm, that’s really good isn’t it?

Yes. Yes it is.

4 Ways to Make A Great Money Back Guarantee:

1. Make the expiry really really long. The longer it is the more chance of the customer forgetting about it, or feeling like they are imposing by asking for their money back
2. If a customer asks for their money back, provide it the same day. Don’t drag your feet and make them wait. You will impress them with your customer service, and this experience may trigger Word-of-Mouth so you might get new sales from people they talk too!
3. Tell them up-front how to get one eg “To get your money back, just call us on 0800 xyz xyz and you’ll have your money back within 24 hours”. You could just provide an email form for them to request their money-back, but in this case, I advise putting up a small barrier for them and getting them to talk directly to you
4. Arrange their refund over the phone, and when it’s finished and approved, at the last minute ask them why they asked for one. Their feedback might be valuable. Don’t ask this question upfront because it will make them feel more uncomfortable than they already are

What about services?

Money back guarantees can also work for services but you’ll have to go overboard with your offer Eg “If you are not happy with our car washing service we’ll redo it for free + give your money back”

What do you think about money back guarantees now?

What do you have to add to this? Will you give it a try for your business? What’s the most outrageous money-back guarantee you’ve ever seen?

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Occasionally, just for fun, I spend a few minutes browsing www.ExpiredDomains.co.nz.

Expired Domains lists all .nz domain names which have expired and are in the .nz registry’s official 90 day pending release period.

But what I find most interesting about this list is that at first glance, many of them look like really good names!

Every single time I look at this list of Expired Domains, I have these same three reactions:

Reaction #1:

“oooo, I can’t believe that xyz.co.nz is available! And it’s only $24.50! What a freakin bargain, I’ll set up a website and make millions! I simply can’t lose!”

Reaction #2:

I do a double-take.

“wait a second… they are on this list of expired domains because someone, like me, thought they had potential.  But that person failed to make any money from it at all, and let it expire rather than waste another $24.50 on it to renew it… hmmmm”

**Warning Bells!!**

“calm down Sheldon, calm down, I don’t have to whip out my credit card right now and buy it before someone else gets a chance…”

Reaction #3:

“Oh, in all that excitement I forgot that it doesn’t matter what your domain name is. What is most important is your content!”

What do you think?

The next time you are tempted by an expired domain, pause, and remember that you are picking fruit from a graveyard of failed ideas.

Add your comments below:

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The next time you are writing an advertisement, or an article, or updating your website, choose your audience along the following grid of “usage” vs “loyalty”.

Choose just one and ask yourself “how can I modify my message to speak just to them?”.

Usage vs Loyalty: Where Are The Opportunities For Your Business?

Let’s look at each sector in more detail:

1. High/Med/Low User + High Loyalty To You = Your Best Customers

• This is where you are making all your profit.
• What else can you do today to keep them fiercely loyal? 2 ideas:
  • Keep adding value, keep improving
  • and keep putting your prices up (the best way to maintain or grow your profitability and signal to them that you are working hard to improve the value of your products and services)
• Don’t waste your money communicating to this bunch with mass-media. Surely you have their email addresses or phone numbers? But more important than a cheesy Christmas card every year is to keep delivering the top quality products and services they have come to expect. Keep up the good work. Nice job.
• High Volume:
  • If we all had lots of high volume / high loyalty customers we’d all be rich! But unfortunately they are hard to get, hard to keep and there are few of them.  So don’t retire yet
  • It’s a double edged sword: Does having just a few major contracts make your business secure and stable, or does it make you weak and vulnerable?
• Med/Low Volume:
  • Don’t neglect the little guy. They might never turn into high volume, but they are your bread and butter today. But you already knew that I’m sure.

2. High User + Low Loyalty To You = Your Competitors Best Customers

• Do you think you can win the most loyal customers of your competitors? You’re dreaming! They’re out of your reach
• Can you turn a Holden fan into a Ford fan? No, you can’t. So give up and pick a fight you can win
• But, be ready – wait for the competition to make a huge screw-up and be there with a smile on your face welcoming them home
• This group is completely blind to your advertisements. They have made their choice of supplier for this category/industry/niche. Life is easy and peaceful for them. Let them be at peace.

3. High User + No Loyalty = Attractive But Deadly

• This group is super attractive, because there are so many of them
• Your boss will put enormous pressure on you to do whatever it takes to make this group buy from you this week. Most of the time the only tactic that will work is a super special price (maybe at break-even point!)
• Sure, you might make the sale this week, but next week you’re playing the same game again and next time they’ll choose a different supplier
• These guys suck up your advertising budget and contribute little to your profitability
• They don’t care about the brand you’ve worked so hard to build. They don’t see distinction or differentiation between your brand and your competitors. “Who is cheaper this week? That’s the one for me!”

4. Non-Users + No Loyalty = Untapped Markets

• This group has never made a purchase
• They have the same problems and issues that all the other customers are facing, but not know that a solution exists!
• For example, one of the most popular websites in NZ is called 1-day.co.nz with half a million visits a day, but it seems that 80% of the people I tell about it, have never heard of it! Could the same be true for your business? What are they reading/watching/listening to that you don’t normally advertise in?
• The only bummer with speaking to the members of this new market is that you are breaking the ice for your whole industry and they may not choose you!

5. Med/Low Users + Low Loyalty To You = Your Competitors Bread and Butter

• This is where your growth can come from
• It’s about maintaining your high quality, providing remarkable service (even if only occasionally) and trying to activate Word-of-Mouth
• What can you do to turn your customers into ambassadors for your brand?

Need Help?

Need help analysing the opportunities for your business?

I’d loooove to help!  Call (07) 575 8799 or email sheldon@marketingfirst.co.nz.

Cheers,
Sheldon.

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If you’ve looking into buying mailing lists you’ll know that those lists are all about demographics.

Typical demographic are:

• Age
• Gender
• Address
• Job Title
• Income
• Education

Do you like being put in these boxes and having assumptions made about you regarding your buying preferences?

No?

Neither do I.

Let’s pretend for a moment that you and I are exactly the same on the 6 attributes listed above. (33 years old, men, live in Tauranga New Zealand, work in Marketing, earn $200k/year, have a Bachelor Degree, a Post Grad Cert, and will both finish our MBA in May 2011).

Does that mean we are likely to choose the same toothpaste? Same car? Same restaurants? Same insurance policy?

Hell no!

Because there are more choices in the market place you and I are more different than each other than ever before.

For this reason, demographics are out.

Behaviour is in.

This year it’s about segmenting based on the action that people take.

As an example let’s use a web hosting company.  For all the people that sign up for your free trial you can put these people in your “only-want-free-trial” segment.

For all those who upgrade to your basic paid plan because your welcome email was particularly persuasive, you can call this segment the “responded-to-upsell-in-welcome-email-within-a-week” segment.

Do you see how demographics mean nothing in this context? But you can definately make sound business decisions when you have action-segments like the 2 examples I’ve just provided.

Decisions like “what changes can we make to our offer to convert more people from group #1 to group #2?”

This post was inspired by “For Your Eyes Only – the three levels of customer behavior based data“

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When I need a businesses phone number I go to Google Maps, and search for the business name there. 95% of the time the business appears with their phone number.

What method do you use?

Hardcopy white pages? Google Search? Google Maps? Finda.co.nz? Yellow.co.nz?

Add your method to the comments below.

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My notes on “How We Decide” by Jonah Lehrer:

Which of the following 2 sentences of praise encourages kids to challenge themselves?

1. “You must be smart at this” (intelligence)
2. “You must have worked really hard” (effort)

The research revealed that the kids praised for their intelligence chose a puzzle of equal difficulty. Of the kids praised for their effort 90% chose a more difficult puzzle.  When praising intelligence, the kids hear “look smart, don’t risk making mistakes”. The fear of failure actually inhibits learning.

Why are slot machines addictive? Dopamine.

Dopamine is the reward your brain delivers to the pleasure receptors in your brain when you make a correct decision.  Over time it trains your brain, and creates shortcuts. The purpose of dopamine neurons is to predict future events.  Unpredictable events deliver 3 to 4 times the dopamine.

Most of the time, the brain will eventually get over its astonishment. It’ll figure out which events predict the reward, and the dopamine neurons will stop releasing so much of the neurotransmitter.  But the slot machines keep surprising your brain.  That’s why the volume for the payouts are turned up so you hear them all in the room.

Loss aversion

“Loses loom larger than gains”.  In Deal or No Deal, unless you are calculating probability, you feel the pain of loss after losing a case with a big amount of cash, and become less likely to settle for the banks offer because it feels like you are losing the difference, and continue to gamble on getting the next biggest reward.

Credit Cards dull the feeling of loss aversion because it doesn’t feel like you are parting with your money, you are just swiping a piece of plastic. That’s why you get a shock when you see your bill. Budget advisors chop up the credit cards first, and insist everything is paid for with cash.

Framing

You are given $50 and asked to decide between 2 options.

• Option 1 is all-or-nothing gamble. There is a 40% chance that you will keep the $50, and 60% chance of losing the lot.
• Option 2 is a sure thing, you get to keep $20.

Which option do you choose?

Most people choose the real thing.

Let’s play again, this time option 1 is unchanged, you have 40% chance of keeping the entire $50. But this time the sure thing is a loss of $30.

Which do you choose this time?

The 2 gambles are identical!

But the descriptions strongly affect how people play. When framed as a gain of $20, 42% chose it.

When framed as a loss of $30, 62% chose to roll the dice.

The Lesson: Think. It helps control emotional reactions.

Thinking too much

From the Consumer Reports test of 45 jams, 5 were chosen for a study on students. Statistically the ranking was very similar.  Our brains are able to automatically pick out the products that provide us with the most pleasure.

In the second experiment, a second group of students were asked to explain why they had made the choices they did. They filled in questionnaires after each tasting.

This process destroyed their results.

There was no relationship between their results and those of the pros.

Thinking too much caused them to focus on all the variables that don’t actually matter.

Our rational brains search for reasons to prefer one option over another.

When choosing between a house in the suburbs with an extra bedroom but a 40 minute commute, and a house with a 10 minute commute, the more you spend deliberating, the more important that extra space becomes.

“They’ll imagine all sorts of scenarios that turns the extra bedroom into a necessity, whereas the lengthy commute seems less and less significant”.

Mistake.

When a person travels more than one hour in each direction, he or she has to make 40% more money in order to be satisfied with life.

When buying an energy drink on special, participants in another study solved 30% fewer puzzles than those who paid full price. They expected the cheaper goods to be less effective.

This is why brand-name aspirin works better than generic aspirin.

We can only store 5-9 pieces of information in our brains at once.

Half of the participants in another study  were asked to memorise a 7 digit number and then asked to choose between cake and fruit. 50% chose the cake.  Half the participants were asked to memorise a 2 digit number. 37% chose the cake.

The anchoring effect is commonly used on used cars.  A high price is stated on the windshield, and you and the salesman chip away at that price.  You think you’re getting a bargain, and that you’re doing well to haggle, but in reality the car is worth a fraction of the anchoring price.

One group of participants in another study only had all the information at their fingertips for chosing shares.  The second group had only the share price to go on. The second group performed two times better.

This is counter-intuitive. When making decisions, people always assume more information is better.

How to make important decisions

1. Have a good hard look at the options.
2. Take a break and distract yourself for a while, and after that, make the decision.

This way you are using your conscious mind to acquire all the information you need for making a decision. But don’t try to analyse the information with your conscious mind.  Take a long break, while your unconscious mind digests it.

Whatever your intuition then tells you is almost certainly going to be the best choice.

Why do flight simulators work so well for training pilots?

It allows pilos to internalise their new knowledge.

Instead of memorising lessons, the pilot is training their emotional brain, preparing the parts of the cortex that will actually make the decision when up in the air.

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My Notes on “Ready, Fire, Aim” by Michael Masterson:

When Launching A New Business, What Should Consume Your Time?

• In launching new businesses, many entrepreneurs do the opposite of spending 80% of their time of their time on selling.
• They spend most of their time, attention, energy and capital on things such as setting up an office, designing logos, printing business cards, filing forms, writing contracts, and refining the product.
• They have the impression that they are doing things in a logical order – getting everything just right before they open their doors.
• In fact, they are wasting valuable resources on secondary and tertiary endeavours.
• It is enough to have the product and customer service just okay at the outset. Perfecting them can be done a little later, after you have gotten feedback from your customers.
• Sell as soon as you can – if possible before you have spent a lot of time and money making it perfect.

The Story of the New York Realtor

• A New York realtor spent $10,000 on a website to sell surplus office space.
• Listings were free for the first year and would then cost $59.95.
• No one took advantage of the free offer.
• He hadn’t tested his assumption – that he could attract lots of free postings and then convert them into paid advertisers.

The Story of the Car Repairman’s Neon Lights

• A car repairman thought he could sell neon lights for underneath cars.
• He started with $1,000, $350 of which built 2 crude prototypes – one for his car, one for his friend.
• Then he spent all of his spare time and remaining $650 selling.
• He worked from home. He spent his time travelling to custom auto shops and Auto-events trying to make sales.
• After talking to potential buyers he made adjustments to his product, his pricing, and the way he presented it.
• For months he earnt nothing, reinvesting cash into sales.
• At year one he started fixing up a shop, bought tools and inventory.
• 12 years later he had generated $23 million in sales.

Priorities when starting a business:

• Get the product ready enough to sell it, but don’t worry about perfecting it
• Sell it
• Then, if it sells, make it better

Front-End, Back-End Strategy

• Consider offering your product at below the market rate to build a list that you can sell more stuff to – “the backend”.
• The purpose of the front-end sale is to acquire a new customer. The purpose of the back-end sale is to produce a profit.
• Test the market by offering your existing customers evaluation versions for free

Speed of Execution is Key

• Accelerate failure
• Ready, fire, aim
• 2 reasons why most good business & product ideas never get off the ground:
  1. A desire for perfection
  2. Little chores

What is your Unique Selling Proposition?

• Find something about your product that is different from, or better than the competition.
• Eg FedEx – Overnight delivery. 7-up – the uncola.
• Look at all the other similar products on the market and try to identify gaps by recognising “unfilled customer needs” such as:
  • Faster service
  • Better prices
  • Superior quality
  • Convenience
  • Personal service
  • A better guarantee

Unique Selling Proposition – “USP”

The Story of the Brewery’s USP

• Schlitz beer, emphasised the painstaking brewing and bottling processes – which all beer makers go through, but no one had told the customers.
• They generated distinction and prominence – a USP.  The common claim of “pure” took on a very different and tangible meaning for their brand.

3 Aspects of a Solid USP:

1. The appearance of uniqueness
2. Usefulness. Better to select a useful feature that isn’t entirely original and make it seem unique , rather than a feature that is unique but is useless
3. Conceptual simplicity. Nothing sells well that is difficult to explain.

Fill in the blanks for your business:

The only ______ that _________

• Eg The only chain of retail stores for women that gives 10% of its proceeds to breast cancer research.
• Eg The only natural health website that is created by a panel of international experts

How to sell the USP:

• The Big Idea. This is the headline for your ads
• The Big Promise. How you will improve your customers life
• Specific Claims. What could the customer potentially achieve?
• Proof of those claims. Testimonials

Mentoring and Being Mentored

• Never be afraid to ask questions. Even obvious questions
• Have multiple mentors
• Ask for ideas from up, down and sideways
• Show your appreciation with notes, gifts
• Make your own decisions and take responsibility for them

Your Products: Brand-new or Old? Copy or Innovate?

• Consumers aren’t looking for brand-new products. They are looking for clever new adaptation of products they already know and love.
• When it comes to new, the human brain can take only a little bit of it. 80% of the old and 20% of the new is a good ratio.
• When you create me-too products, you are imitating something that is already being sold. You are following the market.  You must anticipate the market, not follow it.  To do that, create products that are not entirely new, just a little bit better than the hottest thing out there.
• You are after the tipping-point effect which is the one extra droplet of water that is added to many more that have been dropped before.
• Imitation doesn’t work, because it is always too little too late. Instead, notice what products are working and then create products with features that are somehow more advanced.  Its about evolution, not revolution.

3 Fundamentals:

1. The secret to breaking into new markets or reviving a flagging business is to create tipping-point products
2. The secret to creating tipping-point products is to find hot products in rising markets and come up with some way to make them new and different
3. You need tipping-point products for your front end, but you can make lots of money on the back end with ordinary products, so long as you make the effort to sell them to your existing customers

Need Product Ideas? Use the Magic Product Cube

• Generate 3 dimensions for each category: Price, Product Type and USP. Giving you 27 product variations.
  • Price: inexpensive, moderate, expensive
  • Product type: golf clubs, golf balls, golf clothing
  • USP: 3 golf pros for endorsements

The Story of the Candy Company Trying to Cut Costs

• A candy company wanted to save money so they cut out 1 of the 38 ingredients (which was costing $8.6 million a year.
• In tests, customers couldn’t tell the difference.
• They repeated this process several times.
• Sales started tumbling.
• They found an old bag of lollies, they tasted great! The new lollies tasted crap.
• They had been comparing each version to the previous version so they couldn’t tell the difference.
• They should have bee comparing to the benchmark.
• This is a warning about increasing profits by decreasing costs.

Lessons About Customers

• Customers don’t care about you or your business. They care about themselves.
• Why do customers buy? To feel good about themselves and/or to solve a problem
• Customer complaints and objections are the key to better selling

Take Advantage of the Buying Frenzy

• By selling more to a person that is buying at that moment
• Don’t let them cool off
• Send a thank you note and a bounce-back promotion
• Who would you rather sell a carry-on bag too? A person with 15 at home, or a person without 1?  The answer is the guy with 15.
• 3 factors that stimulate buying frenzy’s:
• Having the feeling that I have more money than I need
• Being exposed to psychologically effective selling signals
• The good feeling I get from buying

What Is Easier To Sell – Commodity Items or Discretionary Items?

• When selling commodities you are meeting a need. But customers won’t be loyal to you. They will always try to pay as little as they have to
• When selling discretionary items (especially luxury items) it is easier to convince your customer that your particular products are unique, and that by purchasing them he can get the psychological benefits the items offer
• When buying discretionary items, your customers will never be satisfied with a single purchase. In fact, the more they buy, the more they will want to buy, because their purchases are stimulated by desires, not needs. Desires can only be satisfied temporarily.
• Stimulate desires such as acceptance, recognition, admiration, love

The Story of How to Become a Movie Maker the Ready-Fire-Aim Way

• Marc Singer was fascinated with the story of an underground city of homeless people in New York. He found them, and even lived with them.
• Someone suggested he make a movie.
• He had always wanted to be a movie maker, so it took action.
• He did it on the cheap and “Dark Days” won several awards at 2000 the Sundance Film Festival.
• And his career is flourishing.

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