A Hard and Soft Side of Marketing

Daniel Harrison has put together some of his thoughts on organizational behavior here, and it is a great reminder to me that this subject cuts through many aspects of professional and personal life. Daniel’s listing brought me over to Dr. Andrew McAfee’s (a Harvard Business School professor) post here, which starts off citing some reasons (by Dr. John Gourville) why consumers should not be thought of as  "… highly rational evaluators of the old vs. the new products, lining up pros and cons of each in mental tables and then selecting the winner …". The post goes to mention three explanations (each of which either stem from or highly relate to prospect theory):

  • We make relative evaluations, not absolute ones.  When I’m at a poker table deciding whether to call a bet, I don’t think of what my total net worth will be if I win the hand vs. if I lose it.  Instead, I think in relative terms —  whether I’ll be ‘up’ or ‘down.’

  • Our reference point is the status quo.  My poker table comparisons are made with respect to where I am at that point in time.  "If I win this hand I’ll be up $40; if I lose it I’ll be down $10 compared to my current bankroll."  It’s only at the end of the night that my horizon broadens enough to see if I’m up or down for the whole game.

  • We are loss averse.  A $50 loss looms larger than a $50 gain.  Loss aversion is virtually universal across people and contexts, and is not much affected by how much wealth one already has.  Ample research has demonstrated that people find that a prospective loss of $x is about two to three times as painful as a prospective gain of $x is pleasurable. 

What is interesting to reflect on is that it is not always very easy for marketing organizations to explore the points above in a quantitative way. Figuring out where people’s reference points are (e.g., on a market segment basis) often requires primary research that may be expensive (e.g., millions of dollars). Hence, organizations may (primarily or initially) resort to secondary research methods that may tend to be biased toward assuming that consumers are rational evaluators.

Some ways to bootstrap the marketing research process may be to use focus groups, interview distributors (e.g., of competitors), and/or conduct mystery shopping efforts. What bootstrap methods have others used and found to be effective? How does it complement secondary research?

MBA Good News and Bad News

Good (old) news: MBA students defend having ethics programs in business school. Bad (old) news: MBAs don’t value ethics during job selection. Bad (new) news: MBA students are more likely to cheat than those in other disciplines.

Mixed news: Business schools are targeting younger, less experienced candidates.

Good news: Business schools adapting their programs to address the lifestyle needs of females.

Good news update (9/21/06): Management guru David Maister shares his perspectives and increases the dialogue on improving the relevancy of business schools.

At What Point Should Consultants Make Recommendations to Clients?

I run into a lot of folks who use the term "management consulting" a lot more loosely than I would use the term. I often run into people who say things like:

"You should just go in there and start telling them what to do – go and consult."

"Go and give them your advice."

"I can do consulting. I can give them my expert advice."

"So you tell them how to start wireless businesses?"

Although I’ve not described the context for these statements fully, these types of statements make me cringe. Why? Because people who say these things often presume that consultants start dispensing advice without understanding and gathering an inventory of a client’s situation.

In some circumstances, maybe the consultant can jump right in to start making recommendations. For example, if a client is simply missing some basic fundamentals, e.g., sales or operational reports, written contracts, one can dispense some "advice" from the start. But I tend to caution giving advice so early in a consulting relationship. I tend to prefer to share perspectives as well as the factors or things I would need to investigate to either confirm or alter my initial read of the situation. This communicates to the client that I am not in the business of dispensing shallow advice. It also sets the frame for the consulting methodology that I am going to use to solve the problem at hand.

Now provided that a consultant is going to use a structured methodology for solving a client problem, at what point does the consultant make recommendations to the client? My timing preference is based on the fact that clients ultimately have to live with proposed solutions. As such, I prefer the recommendation process to be more iterative. For example, on one project I may have to first gather competitive marketing information about mobile operators and benchmark my client against those competitors. The next step may be for me to outline the options that the client has to pursue to close the gaps (say increase efficiency of distribution points versus increase number and type of distribution points) along with the tradeoffs. As the final step, the client and I jointly work to decide the best path. By involving the client in the recommendations process, the client takes more ownership of the solution, and hence, the solution will tend to stick better.

There is second school of thought on how to time recommendations to clients. Rather than the process being iterative, the thinking is that if the client is a large Fortune 100/Tier 1 ranking/etc. client that the consulting style should be more iterative. For smaller clients, e.g., middle-market/Tier 2 ranking/etc. companies, the thinking is that a consultant should take a stronger up-front stance on making recommendations and skipping a lot of the client facilitation and decision-making process.

I can see some benefits to the strong up-front approach as opposed to the iterative process:

  • consultant takes more control by initiative
  • smaller companies do not have as many resources as larger companies and need consultants to service as "interim managers" and not just as facilitators
  • consultant may leave a stronger impression with the client by being strong up-front

As a consultant, what method do you use? If you are a client, what method do you prefer?