Book Review:  “Freakonomics” - click here

Expert Insight: Make your employees your “brand family” - click here

Expert Insight: How much money should you spend on marketing? - click here

Events -  TEC Events and My TEC Groups - click here

Book Review

"Freakonomics: A Rogue Economist Explores the Hidden Side of Everything"

• Introduction
• Catching the Cheaters
• Economics or Morality?
• Key Lessons

Introduction

Have you ever wondered:

Ø       What do sumo wrestlers and teachers have in common?

Ø       How is the Ku Klux Klan like a group of real estate agents?

Ø       Why do drug dealers still live with their mothers?

At first glance, these questions might seem trivial, even frivolous.

Not to Steven Levitt and International Leaders Conference keynote speaker Stephen Dubner. To the authors of "Freakonomics: A Rogue Economist Explores the Hidden Side of Everything," these questions serve as a gateway to fascinating insights into human behavior.

In addition, the answers to these questions support two important principles uncovered in Levitt’s off-the-beaten-path economic research. One, that more often than not, "conventional wisdom" proves to be highly unconventional and not supported by the data. Two, that given enough hard data to work with, certain macro-economic principles can shed new light on what really motivates human behavior at the individual level.

Not exactly what you would expect from a Harvard-trained economist and a seasoned New York Times reporter.

Catching the Cheaters

So, what do sumo wrestlers and teachers have in common?

According to the authors, both groups -- like most human beings -- share a propensity to cheat when the stakes are high.

Using conventional economic tools to analyze the data, Levitt and Dubner determined that sumo wrestlers often engage in quid-pro-quo type deals that enable them to pad their won-lost records and retain higher rankings, which translate into significantly higher earnings and lifestyle perks. In fact, by analyzing the numbers, the authors were able to determine which sumo wrestlers were mostly likely to throw a match and at what point during a tournament.

Using the same methods, the authors also discovered that some public school teachers actually changed their students’ answers on standardized tests in order to earn cash incentives and/or boost their own performance ratings.

However, the real insight, say the authors, is not that sumo wrestlers and teachers break the rules in order to enhance their personal gain. It’s that given a sufficient pool of data and by asking the right questions, it’s actually possible to determine which people are cheating within a particular system.

More important, by understanding the incentives that guide human behavior, we can begin to get at the real underlying causes of many social phenomena. Which leads to an unconventional conclusion -- that economics can actually be used to understand individual human behavior in a very meaningful way.

Economics or Morality?

The fact that sumo wrestlers rig some of their matches may hold little interest to those outside of Japan. Catching teachers who cheat carries a bit more social significance.

However, as Levitt and Dubner aptly demonstrate, economics can also shed light on some of society’s more pressing issues, such as:

•      What factors really determine whether a child will do well in school?

•      Do parents really matter?

•      What caused the sudden and dramatic drop in crime during the 1990s?

Using regression analysis and other economic tools, the authors come up with some interesting, plausible and sometimes controversial answers to these important questions.

For example, they attribute the unprecedented drop in crime during the 1990s not to improved policing techniques, more prisons or an aging population (as so many "experts were wont to do), but to a single event that took place 20 years earlier -- the landmark decision by the Supreme Court that legalized abortion across the United States.

Casting aside questions of morality or political correctness, the authors suggest that the change in abortion laws had a remarkable, though unintended, long-term consequence. Women who previously were forced to give birth to children in social and economic environments that tend to breed criminal behavior could now choose not to have those children in the first place. As a result, an entire generation of criminals was not born, and two decades later society experienced a sharp decline in crime of all types.

Controversial? Yes. Politically incorrect? Perhaps. But based on their hard evidence, the authors make a strong case.

Despite their findings, Levitt and Dubner in no way endorse abortion as a crime-fighting tool. In fact, they purposefully avoid taking a public stand one way or another regarding the morality of abortion.

Their point in this situation? When it comes to cause and effect, conventional wisdom often misses the mark by a wide margin. But when applied in a judicious manner, economics can help to remove the social blinders and get at the real causes of human behavior.

Key Lessons

Questions of morality aside, Levitt and Dubner have written a book that is as unsettling as it is fun to read.

From learning how experts use their informational advantage to serve their own agendas to finding out which "truisms" about parenting simply aren’t true, "Freakonomics" will change the way you look at human behavior.

In the end, the authors make several important points:

•            Incentives are the cornerstone of modern life. Understanding them is the key to solving almost every riddle.

•            Conventional wisdom is often wrong.

•            Dramatic effects often have distant, even subtle causes.

•            Knowing what to measure and how to measure it makes a complicated world much less  so.

Levitt and Dubner hope these lessons will encourage us to start thinking more sensibly about how people actually behave in the real world. All it requires, they say, is a novel way of looking, discerning and measuring. And, of course, eschewing "conventional wisdom" for a closer look at what is really happening with human behavior.

The authors also hope that after reading their book we might all become a bit more skeptical of conventional wisdom. That we might dig a little deeper into how things aren’t quite what they seem. That we might even seek out new data and carefully sift through it, in the process balancing our intellects and intuitions in order to arrive at "glimmering new ideas."

In a world where most authors insist that we embrace their narrow points of view while eschewing all others, a book that encourages readers to question their assumptions and cast a wary eye upon conventional wisdom comes across as a breath of fresh air.

"Freakonomics" co-author Stephen Dubner is speaking at the International Leaders Conference, set for Oct 26-28 at the Washington Grand Hyatt in Washington, D.C.

Created for MyTEC. Copyright 2005, TEC Worldwide, Inc. All rights reserved.

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EXPERT INSIGHT

How to Make Employees Your "Brand Family"
By TEC speaker Karen Post

• Introduction
• The best brand ambassadors
• Internal branding goals
• Touching the troops

Introduction

Many organizations spend a lot of resources and boatloads of time on building their brand. They hire consultants, map out an intense external communications program, print their logo on everything in sight, and then watch their brand end up as a blurry, bland and boring blob of nothing special.

How does this happen?

One of the biggest reasons is that organizations forget their employees or put them at the bottom of the communication priority list. On the contrary—employees are absolutely critical to building a strong, sustainable brand.

You’ve got a good story, a compelling visual look and feel, and a category distinguisher. Now bring your employees into the action. Their buy-in can be a deal maker or deal breaker. It’s up to you.

The best brand ambassadors

Employees can bring a higher volume to your brand voice and be walking/talking billboards and devoted advocates for your cause.

Studies show that organizations that brand internally experience less turnover, attract the brightest talent and foster healthier, more productive environments.

Breathing brand within an organization has two distinct dimensions of power:

1.       As brand ambassadors, employees are the cheerleaders, the big brother or sister who watches out for the brand and serves as the human front line to the market.

2.       Your brand is the magnet that draws out superstar recruits, empowers loyalty from the current staff and adds to the overall corporate brand.

Both disciplines require commitment, resource and innovation. Both are worthy initiatives.

Internal branding goals

Your company’s size may dictate how these efforts are managed and implemented. Larger organizations sometimes shift internal branding responsibilities from marketing to the HR department. In any case, the activities need to transform thinking about branding from a pure marketing function to an organizational principle. And in all situations, leadership needs to be an advocate of brand initiatives and take an active role-model position.

Your internal branding goals may include:

•          Strengthen your brand’s visual identification. When you establish internal branding communication standards, the brand will move to the marketplace in a more consistent, cohesive fashion.

•            Launch new business units. As organizations grow, new business units need to launch from within. Without that internal buy-in, the external branding process is tougher.

•         Serving as a catalyst for change. Layoffs, management changes, mergers and acquisitions all shake up employees. The brand can serve as a security blanket through the toughest situations.

•   Be the center point for your brand essence or corporate strategy. The big brand is the glue that holds all the pieces together and keeps everyone on the same page and focused on the company’s mission.

•             Connect employees to each other as a "brand family." As humans, we all have tribal instincts. We like to hang together with like-minded souls. Internal branding efforts can unite a tight team even in tough market conditions. It gives them something to hold on to for security and a connection to shared values.

•            Achieve "employer of choice" status. Employees and recruits tend to gravitate to brands they understand, ones with clear identities whose values they share. Recruiting top candidates and retaining skilled talent are the results of solid internal branding. Strong brands can reduce staffing turnover.

•             Instill brand values in key processes. As employees grasp the brand essence, they are more likely to infuse the same attributes into their work product and processes.

•              Deliver brand promises through employees. Employees are your primary source of customer contact. As they engage the brand promise, they will naturally channel it to the customers through all service and touch points.

•       Add momentum to selling channels. Strong brands ease the selling process. If your organization has any kind of size of sales team, the more they know about and believe in the brand, the easier it is for them to do their job.

Touching the troops

From these goals, you need to decide if you create two separate initiatives or breathe brand in one unified effort. This will depend on how closely aligned the corporate brand is with the individual marketed brands and the degree of your employee needs. In a perfect world, they would be very aligned, but as companies grow, sometimes their diversification makes this more difficult. Whatever track you take, you now must tactically touch your troops with the appropriate brands.

Here are some tips:

•             Decorate your lobby in brand style on a special day or every day. Use giant brand characters, murals, neon signs.

•            Create newspaper funnies with the brand. Feature brand leaders, brand warriors and brands busted. From fax cover sheets to memo pads and annual reports, all should prominently showcase the brand and represent the voice.

•           Tell your brand story to all employees. Explain how the brand was born and where it’s headed. Test employees on brand knowledge and reward them, too. If you can, give brand products and service to employees.

•        Unveil the new brand at brand parties and celebrations. Other noteworthy occasions include christening of a brand, changes in a brand, achievement of brand milestones.

•         Put the brand on relevant promotional items.

Internal branding and enhanced employee communications can certainly be an expense. So how will you know when and if they’re working? From my experience, there are several observational indicators, ranging from employee turnover and increased employee satisfaction to increased productivity and overall customer relations and loyalty.

TEC speaker Karen Post is an author and branding consultant based in Tampa, Fla.

Created for MyTEC. Copyright 2005, TEC Worldwide, Inc. All rights reserved.

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EXPERT INSIGHT

How Much Should You Spend on Marketing?
By TEC speaker Mitch Goozé

"How much money should I spend on marketing?"

Here is my answer: It depends on what you mean by "marketing." Since most people who ask that question are referring to the promotion side of marketing, let’s focus there.

The promotion side of marketing generally includes activities designed to create awareness and/or move customers further along the buying cycle—until a salesperson can take over. These activities include advertising, public relations, trade shows, brochures and collateral materials, premiums and give-aways, and some portion of your Web site costs.

One answer to the question is that you can afford to spend up to the net present value of a new customer’s lifetime profit contribution. Or, put another way: A new customer has some value to your business. What is that value? Realistically, it’s the sum of the profits that the customer generates over the time they do business with you, discounted to its present value today.

The new customer’s profit value

Several obvious problems crop up. First, how much does the "typical" new customer buy from you? What is the marginal profit contribution of that added customer? Clearly the contribution to profit from a new customer (or an existing customer buying more) is greater, since all other fixed costs are already being incurred regardless of their purchase.

How long are they likely to be your customer? One year, five years, longer? The longer they’re your customer, the more valuable they are to you. What is the ongoing cost of retaining the customer? How does that affect their continued profit contribution?

What is the present value of that profit stream? If you can calculate the profit stream, then the present value is just a simple calculation to be performed by a computer.

So it’s obvious that to determine "how much can I spend on marketing?" requires that you understand the customer’s profit value. That demands more knowledge of a customer than many companies have.

Does that excuse you from not knowing? I don’t think so.

But if you do know, can you afford to spend that total amount on marketing? As my father once taught me, "can’t afford" doesn’t necessarily imply a lack of money, but a lack of desire to spend it on a particular item. Just because you can afford to spend that much money on marketing promotion, doesn’t mean you should.

Effective and efficient

If you’ve found a marketing message that can create valuable new customers, you’ve found an effective marketing message. Now you must work to make it more efficient. Effectiveness is doing the right thing; efficiency is doing things right.

First do the right thing, then do things right.

If you don’t work to make your effective marketing messages more efficient, you can still spend too much money on effective marketing and suffer a competitive disadvantage. While this is better than spending too much money on an ineffective marketing message, it’s still a problem.

The bottom line: The marketing-to-sales process is a manufacturing process that produces valuable customers on purpose. Like any manufacturing process, to increase output (profitable sales), you must focus first on the manufacturing bottlenecks.

So before you rearrange the budget and realign your entire bottom line to account for an expanded marketing budget, think of what you want to accomplish—and if you have the resources to follow through. Increasing marketing promotion to generate more leads that you don’t follow up on is a waste of money, no matter how you look at it.

TEC speaker Mitch Goozé is president of the Customer Manufacturing Group, based in Santa Clara, Calif.

Created for MyTEC. Copyright 2005, TEC Worldwide, Inc. All rights reserved.

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