Great co-branding

Burton and Mountain Dew recently announced partnership to produce a clothing product made from recycled Mountain Dew bottles.

Why is this such a smart marketing? Because it connects the thrill-seeking psychographic profile and image of both brands customer base, while also recognizing the target youth market segment is now also environmentally-conscious.

Although a win-win for both brands, I think the Burton brand benefits most from this product effort.

Why I am short Walmart

As someone who feels strongly about a good retail experience and that retailers can offer a lot of value to consumers, I realized that I really can’t stand Walmart.  I find the business uninteresting and lacking in providing a value-add retail experience for consumers.

From an industry perspective, I worry and hate the idea that Walmart is putting other, perhaps smaller, retailers who add value by educating consumers and curating product inventory, out of business.  In my mind, the retailer serves a wonderful primary function of being a trusted solution provider.  This involves curating product inventory, educating the consumer on how to use products to derive desired solutions, and lastly, providing customer service when the product maybe doesn’t solve the problem.    Does Walmart do this?  Overall, I would argue, no.   Walmart’s business model and strategy is instead focused on everyday low prices and being a one-stop shop for almost everything.  Eye glasses, auto-repair, groceries, televisions, etc.   How can a retailer specialize in all these different product categories?  Answer: They can’t.  And service suffers as a result.  Essentially Walmart is the brick-and-mortar version of, but probably adds more value because they can at least recommend things you might be interested in buying.

customer service is terrible   Don’t blame Walmart employees for this either.  It isn’t their fault.  The Walmart business model doesn’t focus on the potential value that its employees could add to the consumer’s shopping experience.  Walmart doesn’t care that non of its employees are not experts in any product category, and they don’t care about employee turnover, as a result.   How can we expect this employees to be excited and informed about the products being sold in the store?

penny wise, dollar stupid    When people go to Walmart, they go there expecting to save money.  Instead, they end up buying more than they had originally planned and spending more money than they would have likely spent had they gone to a specialty retailer for the specific item that they needed originally.

no curation value-add    Walmart’s idea of curating its product inventory is looking at suppliers who can supply the large enough volume at low-enough prices.  Where does fit of product features and consumer preferences of different market segments get factored into store buying/merchandising decisions?    Am I finding anything unique in the Walmart store located in my hometown versus another Walmart store location?  Am I finding anything unique at all in the Walmart?  I would argue no.  The shopping experience is void of any taste and style…it is a colorless experience, from my point of view.   I prefer spending my money with retailers who are passionate about their products and business, and who help tell me what I should want.   Walmart presumes its customers already know what it wants, and it just provides it a low price.  Boring.

boring business model    Congratulations Walmart, you’ve become an expert at supply chain and economies of scale.   This business model existed and was well utilized in the 1900s.  How exciting it must be to be all about size and volume, and that’s it.


fundamentally flawed bank underwriting

A lot of friends, who weren’t bankers, have asked me to explain the whole financial crisis thing to them.  So far, I do not know of anyone who has made the explanatory point I share below; but I am sure someone has.  Regardless of whether someone has published this explanation, one thing about the financial crisis really has me confounded.

I just find it hard to believe that professional bankers with decades of banking experience didn’t realize they were helping “blow up the bubble” and push home prices higher with the generous liquidity they were providing to home buyers.  Lenders providing financing to consumers enabled consumers to then make  higher bids on real estate properties, and these generous bids then become the sales prices at which the property was sold, which is then fed back into the bankers financing decisions in the form of “comp” values, which bankers use to determine how much they can lend against the property, which is the collateral securing the loan.

So what’s the solution?   Shouldn’t real estate lending practices simply be a simple function of the borrower’s ability to pay the proposed mortgage; not on a forecasted sales price the property could be expected to sell for at some point in the future?   That is, bankers can simply look at the borrowers income and expenses and determine how much the borrower can afford in terms of monthly mortgage payments; and then back into how much the borrower can afford to borrow given the market interest rates and time duration of the loan.

Had lending practices been based on these exogenous means for affording real estate properties, I think it would have been very easy to see the “bubble” forming, because a “safe demand” (i.e. people’s ability to afford mortgage payments) for real estate properties could have been measured by measuring people’s income and wealth, minus the value of the real estate properties owned by people.

One day, we will look forward to commercial breaks!

As data collection methods grow, advertisers will be able to better predict what information/ads would be relevant to each of us individual consumers.   And as more relevant ads are served to the consumer/individual, higher click-through rates will result, and advertisers will be able to afford an advertising model that has fewer numbers of ads shown to the user.  For example, today, say–on-average–click-through rates on ads are 10%, then this means that an advertiser–on average–has to show the consumer 10 ads before one click-through is generated; but in the future, say click-through rates on ads improve to 50%, now only two ads need to be shown to the consumer before a click-through is generated.  So this would lead us to believe consumers will have to sit through fewer ads; but in all likelihood, advertisers will not be satisfied with the same number of click-throughs per pair of eyes.

That is, say today, 10 commercials are shown to a pair eyes for a given 30-minute television episode, and one click-through is generated per pair of eyes.    Then, I am saying, that advertisers, in the future, when click-through rates improve to 50%, each pair of consumer eyes will likely be shown more than two ads per 30-minute episode.   Advertisers, content creators, and distribution channels will do this because they will know they can.  They will know that we consumers are happy to sit through 4 ads because 4 ads is still a 60% reduction in ads; not to mention these ads are more relevant to the individual.  So what will happen is total number of click-throughs generated per pair of eyes per 30-minute episode will increase from 1 to 2; and advertisers, content creators, and distribution channels will all be making more money off the same 30-minute long piece of content.

In this future state of the world of media and ad consumption, both advertisers and consumers are happier.

Data is what’s needed.

As I understand the state of the art, the artificial intelligence algorithums needed to make the accurate predictions not only already exist, but are considered quite basic now.   What is missing is the data needed by these algorithms to make predictions!

One day, an individual consumer watching TV any day of the week will be like watching the Super Bowl, when we look forward to the commercials; but it will actually be better.   Right now, many people hate ads; but ads actually serve a very useful function of informing us about things we should know about.   The problem with the current advertising system today is that ads annoy us more often then they inform us.   In the future, ads will do a better job of informing us, and will hence be less annoying.


Zediva is an almost comical, no, just comical, business model that was created to serve consumer demand for streaming DVD content without the “window” delay put in place by movie studios who fear such a window delay is necessary to prevent cannibalization of DVD sales.   As I learned from the below NY Times video, Zediva is actually streaming playback from a huge room full of DVD players.  Hilarious… but also sad and pathetic that this is the reality.    Question is, “What should/could be done about this?”

Watch this video to see what I mean.

Why “TV” is on the way out

You know how commercials are played at louder volumes than the programming segments between which they are played.   I can’t help but think this is done on purpose as a means for trying to make the commercials more affective advertisements.  This is just one of the six major reasons I think internet-deployment of programming content will the business model of the future.   Frankly, why most all the players in the TV commercial industry are not sprinting towards an internet-deployment model, is beyond me.

Continue reading

Bad credit application methodology

Whenever I recognize where a part of world is such that we can’t access something when we most need that something, and–worse–that we have best access to that thing when we least need it, I am confused. This kind of situation seems wrong.

So this brings me to a small example of such a paradox: the credit credit card application process. I don’t understand why the consumer credit application process is not more sophisticated in the sense that credit card companies can issue credit cards soley to refinance (a.k.a transfer) a balance from another card, allowing the individual who most needs a lower interest rate to gain access to that lower rate. this I what I wanted to do with one of the banks that i do business with a couple of days ago. Unfortunately, for me and the bank that could have not only gained my business but taken it away a competitor, the customer service representative who was taking my application was unable to specify anywhere in my application that the application was not be submitted to increase my total credit, but rather that it was being used merely to replace an existing credit account. Thus, although the risk profile would have actually improved upon securing a less expensive (i.e. lower interest and financing fees) credit account, the bank denied my application, because it could only assume that I was applying for the credit card because my other two cards were maxed out.

To a degree, I understand why lenders have to charge higher interest rates to those borrowers with more risky profiles; but one could argue that this model actually causes that which it wishes to avoid: unpaid/uncollectible loans. Why? because the borrower ran out of cash before he was able to fix his situation either with more income or lower expenses. Had he a lower rate, he might have been able to make a couple more monthly payments; and these two months might have given him the time he needed to make adjustments to his life and expenses.

I worked in the high-yield lending business for 3.5 years, and I saw predatory lending at it’s worse, so I know that more often than not, the reason lenders charge higher interest and fees to certain borrowers is because they can; not because it is neccessarilly right. For example, I have seen lenders create a lending product that frequently took advantage of borrowers ignorance and literally was lending the borrowers money back to the borrower.

A bank needs to create a credit product that gives it the opportunity to refinance other credit card balances while keeping the risk profile of the borrower in check by requiring the borrower close the card account from which the balance was transferred, and maybe even prohibit that the borrower not open any new lines of credit until the borrowers financial situation markedly improves. I think this could be a win-win opportunity for both th lender, borrower, and society.