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Blockbuster

Sometimes I think about how I would improve companies I see around me. I dream up advertising campaigns, I figure out how to improve user experience on their web sites, and sometimes I consider possible alternative revenue streams that leverage existing assets. Yes, I am already aware of the fact I think too much and over-analyze things.

If I don’t talk to anyone about these ideas or post them online, it seems as if the thoughts have gone to waste. Generally, the ideas are specific to one company and do me little or no good keeping secret. The purpose of writing about the ideas would not be to get through to the target company, but to share with others my thought process and possibly provide inspiration for others who may have similar opportunities.

I received a coupon in the mail from Blockbuster a while back, and it got me thinking. The coupon was part of a promotion they were running for an upcoming motion picture award event (Oscar, Emmy, or Academy). It was pretty obvious they blasted this bulk mailer out to just about everyone. This type of bulk mailing seems to be a shotgun approach to get people into the stores. Aren’t there more efficient ways of doing it? I go to Blockbuster a couple of times per year, and that coupon didn’t seem to be enough to inspire me enough to increase my patronage.

There are, however, people who rent movies regularly and thus would be more likely to participate in a promotion like that. Realizing this difference in behavior between me and a movie aficionado, I thought about different ways of increasing activity in each group. The mailer I received was likely to be more effective on the active movie aficionado group than on the group I fit in.

The key to grouping people by behavior is right down my alley. You’re dealing with abundant data (millions of customers’ rental habits) and identifying trends. I would imagine a rental behavior graph would look something like this:

Graph: Hypothetical Rental Behavior

Expressed in that graph is a common philosophy recently promoted as the “long tail.” I am going to blindly speculate that out of 50 million households renting from Blockbuster, less than 1 million rent an average of two movies per week (100+ movie rentals per year). A larger segment is likely to rent an average of two movies per month (25 movie rentals per year). The largest segment, or the long tail, probably rents zero to ten movies per year.

In a mailer targeted on the upper two percentile (the 100+ crowd), if it results in one additional movie rental, it will increase sales with 2% of your customer base by 1%. Now, if you target the sixty to eighty percent of customers who rent less than ten movies per year and focus on increasing their rentals by one per year, you will increase sales with 60-80% of your customer base by an average of 50%.

One additional rental per customer in the lower sixty percentile is much more valuable than one additional rental per customer in the upper two percentile. It may take a more significant discount to get those less active customers to go out of their way to rent from Blockbuster, but there are two very important factors at play.

First, the most obvious, if you discount something enough to eliminate 90% of the profit and sell it to 30 million people (lower sixty percentile), you are still making more money than you would if you reduce 10% of the profit and sell it to 1 million people (upper two percentile). Second, if you double someone’s yearly activity, you are taking a step toward forming a habit (like weekly or monthly “movie night”).

Beyond targeting segments of people with bulk mailers, Blockbuster should be able to react to behavior changes. There is no reason why they shouldn’t notice and react when a customer who rents movies every month misses a month. Why not drop them a coupon in the mail to make sure they haven’t forgotten about you?

There are tools and people available these days for any company to perform intensely detailed behavioral analytics on their customers. Reacting to a specific customer’s behavior is traditionally some a small, agile business owner would do. Today, large corporations have the ability to be agile on a per-customer basis. They will need to perfect the art before their competitors do.

And again, I already know I think too much!

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Collective Creativity

Technology changes the way we do things. The fact that it does is not an astounding revelation. However, it is always fascinating to see how it does.

When we think about “creativity” from a classical perspective, we might picture a person creating a piece of artwork, whether it is a painting, a piece of music, a novel, etc. In the past, creative collaboration occurred on a very small scale, if at all. Today, the creativity landscape is shifting, thanks to the tools we have at our disposal with modern technology. One of the key ways technology has changed the world is communication. This opens the door for a type of collaboration that was not possible before.

How does this impact our view of “creativity”?

Unlike the past, where a creative, highly-skilled individual — or a small group of highly-skilled individuals — would develop a work of art, we can now develop tools that allow millions of people to contribute to a single project.

One example of this is Drawball.com. Drawball, which launched in late 2005, allows anyone to pick up a virtual airbrush and paint graffiti on one giant digital wall. While the majority of users contribute little more than a mess of scribbles, there is a “hall of fame” area that showcases some of the best drawings spotted on the wall.

Another example, though on a much smaller scale, is BrainFuel.tv‘s Caption Contest Fridays (with spin-off site Caption Fridays). Every week, there is a new photo that begs the question “What’s going on here?” and visitors are encouraged to make up a caption to explain what is going on in the photo. It is great to go through the comments at the end of the day to see what the blog’s readers had written.

This concept is fascinating and motivated me to start small, for-fun projects like Crappy Graphs (where visitors can draw their own ‘crappy graphs’) and TwitLibs (where visitors choose words or phrases to fill in the blanks in my sentences). I am constantly surprised by how great (or how terrible) the visitor submissions are.

Crappy Graphs started out as a blog where I drew and posted my own graphs. After releasing the user submission tool that allows users to draw graphs in my design/template, the best visitor-submitted graphs found their own way out onto the internet and now draw in more traffic than the main blog itself. That means collectively, Crappy Graphs’ visitors are funny than the original Crappy Grapher, me.

It is clear to me that none of us are as creative as all of us.

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That Internal Project..

In the web development industry, most companies build applications for their clients but deep down inside want to build the “next big application” for themselves. The client work pays the bills now and the internal project will rake in millions — when or if the team can get around to building it.

I hear about these ideas all the time and doing so usually reminds me of an episode of Ze Frank’s “the show” entitled “Brain Crack“:

“I run out of ideas every day. Each day I live in mortal fear that I’ve used up the last idea that will ever come to me. If you don’t want to run out of ideas the best thing to do is not to execute them. You can tell yourself that you don’t have the time or resources to do them right. Then they stay around in your head like brain crack. No matter how bad things get, at least you have those good ideas that you will get to later.

Some people get addicted to that brain crack. And the longer they wait, the more they convince themselves of how perfectly that idea should be executed. And they imagine it on a beautiful platter with glitter and rose petals. And everyone’s clapping for them. But the bummer is most ideas kind of suck when you do them. And no matter how much you plan you still have to do something for the first time. And you are almost guaranteed the first time you do something it will blow. But somebody who does something bad three times still has three times the experience of that other person who is still dreaming of all the applause. When I get an idea, even a bad one, I try to get it out into the world as fast as possible, because I certainly don’t want to be addicted to brain crack.”

It is very common for the exciting, innovative idea to be put on the back burner repeatedly. We all do it. Somehow, you have to be able to say no to the money you could be making with client work today and spend time on your internal project which will pay off in the future.

Nothing is free. Time is money.

Spending time on your internal project will cost real money. Therefore, this expenditure must be viewed as an investment. Any work you turn down to make room in your schedule for development of the project would be considered the cost of this investment.

Do not abandon the process.

Another common pitfall when trying to build an internal project is management. People often think that you can build it on the side — poke at it for a few minutes here and there between other things. If the project is relatively simple, this may be possible. Generally not.

Once people free themselves of clients and work on their internal projects, they generally neglect to use a standard development process. Without a client breathing down their necks, developers often want to forget about deadlines, schedules, meetings, reviews, and setting up milestones.

A development team is a machine that thrives on structure. Making schedules, determining features, and having meetings are pivotal for a smooth development cycle. The normal structure needs to be maintained for internal projects. In order to be productive, you must treat yourself like you would a client because you are your own client. Schedule reviews. Set deadlines and milestones. Allocate time in your schedule as if it was paid client work.

Do not procrastinate. There is no time like the present.

Many people do the client work now and plan for the internal project later.

When? Later.

The part of Ze Frank’s “Brain Crack” video that most people should be able to relate to is the part where he says “You can tell yourself that you don’t have the time or resources to do them right.” Generally, this is just an excuse to procrastinate. You can make the time. You probably have the resources to at least get started. If you do not have the resources, you should be working on that right now.

You can do it. You are just uncomfortable with the sacrifices you will have to make to get your idea off the ground. The only way you can get it off the ground is by making those sacrifices and investing the time.