Understand price discrimination and take advantage of it!

It has been ages since I've written in my blog! I haven't lacked inspiration nor ideas, but I haven't respected two rules for materializing them:

• When inspired, you just go and start writing! don't postpone it until "you have the complete text ready in your mind"!
• Shut off all sources of diversion while writing! (facebook for example ;p )

In this article I am sharing with you some techniques in order to save money in your online shopping.

First, I will start with some theory. Price Discrimination is a marketing concept of pricing same goods differently in order to maximize the value of sales and profits. The concept is explained in the following supply&demand graphs (Wikipedia) :

In the top diagram, a single price strategy is applied to all customers. The total revenue generated by this strategy is represented by area PAQO.

In the bottom diagram, a price discrimination strategy is applied to customers by dividing them into two segments:

• D1 segment: it's the low elasticity segment, non sensitive to price.
• D2 segment: it's the high elasticity segment, very sensitive to price.

According to the strategy of price discrimination, a higher price is charged to D1 segment, and a lower price is charges to D2 segment. By doing so, the total revenue generated is the sum of the two areas: P1BQ1O and ECQ2Q1. The sum of these areas will always be greater than the area without discrimination. In this way, we maximize the value of sales and profits!

To set up price discrimination, we must know how to recognize the category of a customer (which segment) in order to apply the appropriate pricing scheme.
Many e-commerce websites have implemented intelligence modules to classify customers by analyzing their behavior on the website. When you understand the logic of these modules, you can adapt your behavior in order to be classified in the D2 segment and have better prices!

The typical behavior of D2 segment is hesitation before undertaking a transaction. For example, you create a profile on the e-commerce website, then add a product to your basket, and continue with the buying process until the payment phase, and then cancel everything!! Normally, if some intelligence is implemented on the website, you will later have a personal promotion, coupon or even a call from the company!

Another typical characteristic of D2 segment, is its low fidelity to his current provider. This provider continuously verify the willingness of their customer to leave to another provider. When the provider identify this intent, he proposes some promotions to the customer in order to retain him. For example, many Mobile Operators (in highly competitive markets like France) implement on their websites an alert that is triggered whenever a customer goes to the line cancellation section to read the contractual conditions.

Now go and make the most of these techniques !

Free Mobile: Simplicity laws applied to business

Today in France, everyone was waiting for the launch of the new low cost french mobile operator Free Mobile. Free was up to its promise of proposing unlimited mobile plans at half of the practiced prices. Two plans are proposed: 

• Unlimited plan for 20 euros / month: Unlimited calls in France, and to 40 international destinations, unlimited sms/mms, unlimited wifi, and 3G data
• Social plan for 2 euros / month: 60 min of voice communications and 60 SMS

I watched the morning launch presentation by the CEO Xavier Niel, and I would like to talk about two points on the positioning of Free Mobile.

The first point is about simplicity. In a previous post I wrote about the laws of simplicity (Reduce, Organize, Time..). For me, these laws applied by Free to their new mobile offer makes it a really beautiful piece of art.

1. The Reduce rule: reduce number of offers to only two, reduce offer complexity, reduce price, reduce control: no engagements, no usage restrictions, reduce services, reduce options, reduce contract clauses..
   - The image of the offer can't be clearer and simpler in the mind of the consumer, no need for catalogs, no need to think to choose the right offer.
   - The resulting chain value/cost structure of this simple offer should be also simple: simple sale process, no need for sales advisers, simple after sales services, simple information system, simple advertisements.. all of which are factors for lowering the costs of the offer! take for example their after sales services, they don't need to learn about sophisticated offers, so this service can be externalized easily, and if not, more client issues can be treated more rapidly thus needing less personnel.
2. The Organize rule: The offer is organized in a new innovative way: the mobile subscription and the financing of the mobile phone are separated. This way for example you pay 20 euros per month for your communications plan and 15 euros per month to pay your iPhone "loan". This way of organizing the offer gives the consumer the freedom of financing the mobile phone he wants in the way he wants. As a whole, the organisation of the offer is very simple. Speaking of iPhone, Apple has adopted the same simplicity in their offer: Only one phone, the iPhone!
3. The Time rule: The consumer needs less time to understand the offer, to choose his plan and to get the offer (online). We consumers, we love our time, and prefer not spending it on comparing offers, reading catalogs, talking with sales advisers..
   The time savings are also valid in all of the value chain processes of Free Mobile.

As a conclusion of this point, Free Mobile has made very quickly a simple and strong representation in the mobile brands evoked set.

The second point is about the aggressiveness of the offer presentation in the launch. This was for me the very negative point of the positioning of Free Mobile. In his presentation, the CEO was very aggressive and disrespectful toward other brands of mobile providers. For example he kept telling the audience that the current mobile operators were stealing money from consumers, he criticized the complexity of their offers, their prices and practices. He may be right, but I don't think that he should be doing that, but rather focus on the innovation and the advantages of his offer. As a consumer, I don't like the seller whose only arguments are the defaults of his rivals.

The launch of Free Mobile on the french mobile market will certainly disrupt it, which is a good thing. I am looking forward to see how free will deploy and develop their offer, market, and their mobile network, and also how rivals will respond.

Cloud Computing in 1996

Since the sad death of Steve Jobs, a lot of articles were written about him and about famous figures that revolutionized the computing industry like Bill gates and others. These figures are described as men with a vision, a power to see or modify the future. Among them, I was mostly amazed by one of them: Larry Ellison the co-founder and  CEO of Oracle. I was watching a 96's documentary "The triumph of the nerds", which talks about the rise of personal computers, where he was interviewed and asked about the future of PCs. Larry Ellison believed that the PC will be replaced with a cheap device he calls an information appliance which will access information and computing simply by connecting to giant computers via the Internet. Figure well that the Internet was just beginning to boom those days. The CEO of Oracle says: 

"I hate the PC with a passion. Me going down to the store and buying Windows 95, I've got to get into my car drive down to a store buy a cardboard box full of bits you know encoded on a piece of plastic CDROM and you bring it home and read a manual install this thing - you must be kidding you know, put the stuff on the net - it's bits, don't put bits in cardboard, cardboard in trucks, trucks to stores, me go to the store, you know, pick the stuff out, it's insane. OK I love the Internet - I want information you know it flows across the wire."

Did you guess what he was speaking about? Cloud Computing, yes, in the 1996s!

Thanks to the vision of this man, Oracle is now a major player in the cloud computing industry with an offering covering SaaS products and PaaS/IaaS enabling technologies. He is also a major shareholder in several SaaS providers, like Salesforce.com and NetSuite.

This is what I call a vision! although its as simple as applying traditional economic laws to computing. According to Wikipedia, Its seems that the underlying concept of cloud computing has be thought of by a computer scientist called John McCarthy in the sixties when he opined that computation may someday be organized as a public utility.For example, it is cheaper for a company to pay for the services of a mail service provider than building its own army of mail men to deliver its mails! it is the simple phenomenon of pooling resources and specializing businesses.

Confessions of an Economic Hit Man

The story of John Perkins is an easy to stumble upon story in the conspiracy theory based literature. I learned about him in the second documentary of the famous series Zeitgeist. John Perkins wrote a book about his story, his life: Confessions of an Economic Hit Man. In this book, he explains how the United States of America used economy and finance to extend its empire across the globe. I thought that it is a point of view worth telling, especially that I always considered that 90% of the world's events are often driven by hidden financial logic.

Corporatocracy is a word Perkins invented to describe the implicit coalition of the banks, corporations and governments. The interests of these three institutions have converged in the current capitalist economical system. A lot of big names in this coalition have in their CVs entries from the three different institutions: for example the current president of the World Bank, Robert Zoellick was a former Deputy Secretary of State of the USA and a member in the board of the energy corporation Enron.
This Corporatocracy is the new imperialist empire of nowadays. The Americans have discovered after their wars in Asia in the fifties that they had to change their imperialist strategies. They adopted a new creative strategy to dominate countries with resources: Corporatocracy instead of armies. This strategy has three different steps according to the resistance of the targeted country.
The first step is accomplished by the Economic Hit Men (EHM) like John Perkins. The objective is convincing the leaders of the country with resources to take huge loans from the World Bank to finance some development projects. These projects are contracted to american corporations (construction, energy, communication, consulting..) so the money is vehicled back to the USA. EHMs are men with expensive suits, who work often for private consultancy companies for camouflage, and try to convince third world leaders with a lot of means. One of the tasks John Perkins has typically done was writing exaggerated economical forecasts on the effect of loans and development projects on the growth of the targeted country's GDP. He even invented with the collaboration of an MIT mathematician an economical model for forecasting that is easy to cheat. Other ways for convincing include corruption, threats, sex.. Typically the leader will be promised to be rich with his family, and protected also by the USA. When the leader yields, his country with rich resources makes huge loans from the World Bank. Loans that can never be payed back with interests. This way the World Bank blackmails this country afterwards, and forces it to open its borders to american corporations, sell its oil for low prices, accept american military bases on its land, give its vote for the USA in the UN...
If the EHMs fail their mission, the Jackals step in. This is the second step. The Jackals are professional killers, specialized in eliminating leaders by assassinations or other methods. In Ecuador, Jaime Roldos elaborated a policy that helped its people with the oil money, and it was surely not international oil companies friendly. He was killed in an "mysterious" plane crash. In Panama, Omar Torrijos wanted to enforce the fair pact that was signed with Carter about the canal. He was similarly killed in a plane crash. The savoir-faire of the Jackals includes organizing riots and coup d'etat such as with Mossadegh in Iran and Chavez in Venezuela.
In the third step, the traditional army approach is finally used. This is when the EHMs and the Jackals fail. In the case of Irak, Saddam Husein has a strong character, he had money and power and wasn't corruptible by the EHMs, and the Jackals couldn't get him because he has collaborated a lot with CIA and knew all of their tricks. Irak was invaded after that the Corporatocracy has invested billions of dollars in media to convince the public opinion of the invasion. They got what they wanted. The oil, the military bases, and all the development projects contracted to the american corporations.

A documentary has been made based on this book, you can find it on youtube:

As I saw on the internet, this book was a bestseller, rose a lot of criticism on some factual things, and was described as another conspiracy theory book. Personally, I found the book interesting and quite passionate. Nevertheless, I think the essential information is not enough to make a book of it, but the way the author has put it in a narration style makes it  worth reading, even if some information is being repeated constantly. I also think the the confessions of Perkins have come a little bit late, after he has played the game for many years. Something inside of me felt while reading the book that the author wanted by this book just another success in his life rather than an authentic confession. I felt also that the author is a bit egocentric as if the stories are more about him than about explaining the Corporatocracy game. This makes me wonder about the correctness of the facts in the book. 

In all cases it is an interesting book and a point of view worth exploring. It is also a point of start to further readings on the big political events of the last century.

Achraf

Scrum & Outsourcing

Agile development is a fashion nowadays. Anyone one who wants to shine in a professional discussion adds SCRUM keyword between his words. For making things short, Scrum is a very dynamic and flexible way of  work organization in order to conduct a project. In scrum we privilege persons and interaction over processes, working products over heavy documentation, client collaboration and trust over negotiation and contracts, and finally flexibility over planning.

In big companies, sometimes there is a need to reinforce scrum teams with external persons, which is known as technical assistance (outsourcing). This is a very risky strategy if it is not well managed and understood.

As said before, scrum is highly dependent on interaction among team members, and on their spirit of initiative and proposition. If the external members aren't motivated enough, scrum can be a nightmare for the project. Many reasons are possible of this lack of motivation: The external member intervene for a short period of time, he doesn't have a good vision of the project, the scrum master hides a lot of information considered important to his company... The problem with scrum is that documentation isn't present in abundance. It means that scopes and rules of work aren't well defined and in case of problems it is not easy to contractually repair the damage. When trust is not well present, hell of mutual accusations threatens the success of the project.

Scrum's name is inspired by Rugby. It is a team game. If you aren't sure about the external people you want to integrate in your team better not use them and work harder in the smaller team, or otherwise work in the standard V-model process.

Achraf