January 24, 2021

31 - 26

My Packers were trailing 31-23 late in the 4th quarter to Tom Brady and the Tampa Bay Buccaneer. In spite of playing poorly, the team rallied, forcing Mr. Brady to throw three (3) second-half interceptions. Three! In a half! But here they were, with first and goal. Then second and goal. Then third and goal. And finally, it was fourth and goal. At the nine yard line.

The Packers just blew three scoring chances.

If the Packers went for it, several things would have to happen in succession for the Packers to win.

They'd have to convert fourth and goal ... maybe a 1 in 5 chance. Then they'd have to convert the two point conversion, a 50/50 proposition. Then they'd have to stop Tom Brady from scoring in the final two minutes with a full compliment of time outs. Good luck there! And if that happened, they'd have a 50/50 chance of winning in overtime. If they didn't get a touchdown on fourth and goal, they'd have to stop Tom Brady on three downs, use timeouts, then get the ball back and go all the way down the field and score and get a two point conversion just to get to overtime where they'd have a 50/50 chance of winning.

In other words, the math wasn't great if they went for it on fourth down.

So Green Bay kicked a field goal. Down 31-26, they needed to hold Tampa Bay, use their timeouts, get the ball back, and then they had to score a touchdown ... but the difference was if they scored a touchdown they'd win the game ... no overtime.

In other words, there were two lousy choices, each unlikely to succeed.

Green Bay kicked the field goal, and trailed 31-26.

They weren't able to stop Tom Brady and the Bucs. Final score, 31-26.

That's where football Twitter lost their ever-loving mind.

"Worst call ever". "Why did they do something so stupid??".

The advanced analytics folks "did the math" and suggested that Green Bay had a 27% chance of winning by kicking the field goal, and a 25% chance of winning by going for it. Both choices were bad. But one choice followed conventional wisdom (go for it), and the other choice marginally improved the odds of winning but looked like a bad choice (kick the field goal).

This situation happens in business all the time. You are faced with a choice ... conventional wisdom, or something new and somewhat unproven?

It's safe to follow conventional wisdom ... nobody is going to criticize you for making a decision that everybody else would make. Even if your odds of generating profit are lower, you're still doing what everybody else would do. Everybody is happy with your decision.

But did you make the right decision?

Let me give you an example. What month is it easiest for most of you to acquire new customers? It's December (or very late November), isn't it? For some of you it is November. If you are a gardening brand, it might be in April. So conventional wisdom tells you to acquire a new customer "when the fish are biting". Nobody is going to criticize you for spending money on Cyber Monday.

Now, the data shows something different. When I run my simulations, I easily see that the best time to acquire a customer is 1-3 months prior to your peak season. If you acquire a customer in October, for instance, the customer is hyper-responsive in November/December during your peak season. This means you "Develop" more customers who will pay you back the next year. You earn more future profit by "Developing" customers, and that profit offsets the money you lose acquiring the customer in a non-peak window.

So what do you do? Do you follow conventional wisdom and stuff more money into Christmas, or do you do something that is unpopular but generates more profit for your company over time? 

I know what I'd do.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Elements of Customer Development You Control

I talk a bit about this in the booklet ( click here to purchase ). For an average client, your merchandise assortment is responsible for +/-...