Dan Marino Vs. Drew Brees – the Relative Data Still Favor Marino’s Record

(The original version first appeared in “One Twenty-Two”)

When measuring business performance, comparisons to the competition provide the ultimate test of success. If a business grows 25% but it market grows 40%, then the business is a relative laggard losing market share, and likely profits, to the competition.

I recently became intrigued by a football example of this dictate after some commentators insisted on diminishing the new record for passing yards in a season set by Drew Brees. I took a comprehensive look at the data to decide for myself how to rate Drew Brees amongst the passing greats of days past. Here is what I found…

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First of all, congratulations to Drew Brees for breaking Dan Marino’s NFL record for passing yards in a season. With one game left to play this season, Brees surpassed Marino by throwing a late touchdown to running back Darren Sproles that only had meaning because of the record. I have read and heard some gripes about how Marino’s record was broken. The most interesting complaint is that Brees’s record deserves a footnote because NFL rule changes have made it much easier for quarterbacks to throw and for receivers to catch.

There are many ways to attempt to correct for such a mismatch in context. Normalizing statistics relative to the quarterbacks playing under the same rules is probably the most direct method to account for differences. Indeed, at the end of the Saints record-breaking game against the Atlanta Falcons, I thought I heard ESPN commentator Mike Tirico reassure everyone that Drew Brees still outshines Dan Marino when comparing each QB to the average quarterback in their respective record-breaking seasons. However, when I checked the statistics, Marino actually still stands above Brees. In fact, he stands above all the record-breaking quarterbacks of the “Super Bowl era” (in passing yards).

In the chart below, I use player statistics from NFL.com to compare the record-holders in passing yards to that of the average quarterback of that same season. I calculate this increase using all quarterbacks and additionally a list of quarterbacks filtered by a threshold for a minimum number of passing attempts. The threshold removes most QBs who had almost no chance of setting the record because of a lack of opportunities (whether because of injury, demotion, or even a run-dominated offensive game plan). See the areas in green and yellow. I explain the rest of the table next.

Comparison of record-breaking QBs for total passing yards in a season

Source: data from NFL.com statistics and list of record-holders from ESPN.

Not only does this chart show that Dan Marino was much further above the average quarterback in the same record-breaking season than any other record-holder, but it also shows that Dan Fouts truly ushered in the new era of the profligate passer. When he broke is own record in 1980 with a near 20% increase in passing yards, the average QB’s passing yards only increased by around 3%! (Note that this average performance has definitely spiked higher these days.)

With such a rapid and sudden increase in production (NOT productivity), I find it VERY surprising that Marino broke Fouts’s record in just four years. Note that in 1978, the NFL went to a 16-game schedule from a 14-game schedule. Joe Namath’s passing yards per attempt are almost exactly the same as Fouts and Brees. Here again, Marino stands above the other record-holders with 9 yards per passing attempt.

The graphs below show a definite difference in the pool of QBs from 1984 to 2011. In 1984, there were only two QBs who were anywhere close to Marino with over 4000 years. This season, there are SIX QBs in this category trailing Brees. Moreover, the performance of the remaining QBs is very even across the categories of passing yards. In 1984, the remaining distribution was quite lumpy with a large cluster of under-performers.

1984 Distribution of Passing Yards per QB

2011 Distribution of Passing Yards per QB

Source of data: NFL.com statistics for 1984 and 2011
*QBs must have at least 14 passing attempts per game. 2011 covers the first 15 games of the season played by each team.

(For you fantasy football players, the differences shown above mean that it is easier to wait until later draft rounds to pick up a QB than in Marino’s day if you cannot score a top-tier QB!)

I do not interpret any of these results as fodder for diminishing Brees’s accomplishment. There are many things that support a QB’s stats including a strong offensive line, extremely skilled wide receivers, and even playing in a division (or conference) fielding
relatively poor secondaries. It is very hard, indeed near pointless, to account for all the factors that explain how a record gets broken. It is also much less fun to read about records that contain a paragraph full of caveats and footnotes.

Commentators like Jason Cole of Yahoo!Sports have griped that Brees broke the record in an unclassy way. At a point in the game when teams focus on running out the clock with conservative running plays, the Saints focused on getting Brees to break the record by passing the ball. I do not blame coach Sean Payton or Brees for doing this. Getting the record on Monday Night football in front of an excited home crowd is a very electric and exciting way to get it done. It is a fantastic combination for us fans of the game. Besides, as linebacker Sean Weatherspoon was quoted in Coles’s article (Weatherspoon was supposed to cover Sproles), the Falcons still have to play defense no matter the score:

“No man, it’s our job to stop them…I can’t say I’m upset by them running up the score or anything like that when I had a chance to make a play.”

Congrats to Brees. Marino, you are of course still a giant amongst QBs.

I cannot wait to see the Falcons try to exact revenge on Brees and the Saints. Bruised egos and exultant victors make the competition even more intense.

Be careful out there! (And Go Raiders!)

Full explanation of the statistics categories:

• Total passing yards: sum of passing yards of ALL QBs who passed for at least 14 times per game.
• Total QBs: sum of all quarterbacks who registered on the NFL stats list for at least 14 times per game.
• Average passing yards per QB: total passing yards divided by total QBs.
• Average passing attempts: total passing attempts per included QB for the given season.
• Standard deviation passing attempts: measure of the width of the distribution of passing yards per QB. The larger the standard the deviation, the larger the disparity in performance from the average number of passing attempts.
• Threshold for minimum passing attempts: Standard deviation passing attempts subtracted from the average passing attempts. This provides an approximate measure used to filter out QBs who had insufficient attempts per game to be considered a “peer” of the top QB.
• Stats filtered for QBs above the minimum threshold for passing attempts: the statistics in this group are the same as above but only include those QBs whose passing attempts exceeded the calculated minimum threshold. The listed percentages indicate how many passing yards and QBs still remain in the pool after filtering.
• New Yards Passing Record-Holder: Name of the QB with the record for passing yards as of the given year.
• New Yards Passing Record: the record for passing yards as of the given year.
• Passing Attempts to get New Record: the passing attempts of the record holder.
• Rank in passing attempts: where the record holder ranks relative to other QBs in passing attempts.
• Passing Yards per Attempt for Record-Holder: total passing yards divided by passing attempts for the record-holding QB.
• Increase in passing yards over average of ALL QBs: the record-holder’s percentage increase over the average passing yards for all QBs with at least 14 passes per game.
• Increase in passing yards over FILTERED average: the record-holder’s percentage increase over the average passing yards for QBs who exceeded the threshold calculated above.
• Standard deviations above FILTERED avg: Total passing yards divided by the filtered standard deviation calculated above (note this is calculated only for comparison purposes. There are more accurate ways of accounting for these distributions, especially given the passing yard statistics are not normally distributed).

Video Links
QB Brees to RB Sproles, 9-yd, pass, TD
Saints’ sentimental moment – Payton and Brees speak to team in the locker room
Brees breaks Marino’s record (NFL Total Access coverage)

On August 18, Hewlett Packard (HPQ) announced its earnings and dropped the following bombshell:

“HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward. “

My first thought was that I should check to see whether I can get one of those TouchPads, first released just a little over a month ago to the market, at a bargain basement discount. My father is an avid browser of the web but struggles with using a keyboard or clicking a mouse. At the right price, a tablet offers him a preferable computing alternative. I was far from alone. HP dropped the price of the TouchPad Tablet with 16GB Memory to $99.99 and the TouchPad Tablet with 32GB Memory to $149.99. Best Buy online sold out quickly and remains sold out today:

TouchPads sold out at Best Buy Online

Source: BestBuy.com

Lines immediately formed outside of Best Buy stores in San Francisco, CA that still had TouchPads in stock. I just called a local Best Buy to inquire about availability of the TouchPad. The recorded message began with an introduction stating that the store had sold out of TouchPads and had no plans to sell any more of them. Even retailers in the United Kingdom quickly sold out of HP TouchPads.

Clearly, consumers think these products are a steal compared to the $500 or so they would otherwise pay for competing products like Apple’s iPad, Samsung Galaxy, or RIM’s Playbook. These consumers are not concerned that they are buying a product with an operating system that has reached the end of its life and may not be supported for long. Moreover, commentary on the product indicates the TouchPad is an inferior product. From CNET (before an update to account for the product cancellation):

“The TouchPad would have made a great competitor for the original iPad, but its design, features, and speed put it behind today’s crop of tablet heavyweights.”

So what pricing lesson does this event teach us? eWeek.com addresses this question on page 2 of its article “RIM Reaffirms PlayBook Commitment After TouchPad Fire Sale.” Firstly, tablets cost $300-500 to build, so HP’s firesale is priced to clear out product – great for consumers, bad for business. The rush to buy at firesale prices affirms consumer expectations that such deals will not be seen again anytime soon. The iPad has sold about 30 million units to-date, so it does not appear Apple (AAPL) has a pricing problem relative to the competition. Competitors could consider undercutting Apple prices to gain some market share, but one analyst thinks it would take a 30% discount to compete with iPad on price. At a $350 price point, such a competitor is most likely going to lose money.

I see the opportunity in multiple layers:

1. Somewhere below $300 is a price where consumers are willing to trade features for price. A “stripped down” tablet, perhaps focused on a few common tasks like email and web browsing could be a big hit with a lower tier of the market. This product could also be made slightly smaller, slightly slower, etc…
2. Additional sales could come from selling a cheap product that offers additional products and services to enhance the value of the software and provide recurring revenue streams. eWeek.com mentions something similar regarding Amazon.com’s pending tablet offering. Also see “What HP’s TouchPad fire sale tells iPad rivals.”
3. Similar to the last point, a low-cost tablet bundled with wireless services, television programming, Netflix (NFLX) subscriptions, etc… could be a huge hit.

In other words, Apple is likely to remain the feature-function leader for quite some time. HP demonstrated that when cheap enough, a large number of consumers are willing to settle for less. The competitor that matches production costs with a low-priced, “budget” offering could have the best chance to compete.

The additional challenge in this marketplace is the proliferation of hardware at many different form factors converging with the increasing ability to pack more features into less. This dynamic blurs distinctions across devices – for example, my suggestions above could end up looking like a cell phone on steroids, a mini-tablet not much different than a netbook with a larger screen, etc.. – and keeps marketers and product managers on their toes trying to manage product cannibalization as well as all the many cross-competitive pressures.

My wife recently relayed to me an odd story told to her by a car rental agent. This agent told my wife about a woman who for months has rented the same Escalade over and over, renewing her rental agreement for a few weeks at a time. Escalades are considered premium/luxury rentals, so the bill has mounted quite rapidly. At this point, she could have easily taken all that money she spent and bought herself a new, albeit modest, car.

The question is why is she “wasting” so much money?

Given my past training in economics, I could not accept that this woman (let’s call her “Elaine”) is behaving irrationally – I searched the deepest corners of economic logic to explain Elaine’s behavior. One saving grace is that she has not spent so much that she could have purchased an Escalade outright. This condition allows me to create two key assumptions (every economic theory needs convenient, simplifying assumptions):

1. Elaine’s, uh, business cannot be conducted without an Escalade. The style, the comfort, etc… is an absolute necessity to demonstrate to her customers that she is one of them, rich and powerful and ready to deal.
2. Elaine’s business is very uncertain. She lives from deal to deal. She works hard to close every deal, but she cannot afford to count her chickens more than a few weeks out. (Maybe she sells real estate to high-end clientele?!?)

These rationalizations mean that Elaine cannot risk committing to a $60,000+ purchase or even a less expensive lease, but each deal earns her enough to generate the $500-1000/week it costs to rent the Escalade she requires for her business. When she closes another substantial deal, she happily skips to the rental car agency to ask for another extension.

So is there a point at which Elaine is better off purchasing the Escalade? Not at all. As long as she is never “sure enough” about a $60,000+ income stream, she is better off buying what she can afford and still conduct her business. (Not to mention few banks, if any, especially these days, would even consider loaning money to Elaine for buying the car or for funding the business given the looming uncertainties!) At some point, she may save enough money to buy the Escalade outright, but it is also possible she has other expenses that prevent her from saving enough Escalade-money.

In other words, Elaine may be doing what so many people do NOT do – buying what she can afford now and not burdening herself with debt she can only aspire to afford.

This parable reminds me of something Nassim Taleb – the famous author of “The Black Swan: The Impact of the Highly Improbable” – said about confidence and debt:

“…overconfidence translates 1-1 into accumulation of debt…I know I’m going to make an 8% return, and if I underestimate my error rate I will know with certainty I’m going to make an 8% return, so if I borrow at 5% I can leverage up the wazoo. (“Taleb on Black Swans, Fragility, and Mistakes“, interview with Russ Roberts on EconTalk, May 3, 2010).

Go Elaine! And happy deal-making!

A Cadillac Escalade

AirTran Airways provides multi-tiered pricing for advance reservation of seating in its coach class. AirTran differentiates its pricing by positioning vertically in the plane, but not horizontally. That is, for some reason, AirTran charges the same price for a middle seat in the same row as an aisle and middle seat. AirTran does not charge passengers when the airline assigns the seating.

Exit row seats are the most expensive at $20 per reservation. Exit row seating provides extra leg room. Zone 1 seats are located toward the front of the coach section and offer priority boarding privileges. The first rows in this section cost $15 while the remaining rows in Zone 1 cost $13. All remaining coach seats cost $6 to reserve in advance.

Most travelers consider the middle seat of plane the equivalent of hell in the sky. However, on AirTran middle seats actually get reserved BEFORE the supply of aisle and window seats run dry! I would expect such behavior only if middle seats actually cost (a lot?) less to reserve than aisle and window seats AND passengers are charged even when the airline assigns the seat.

The graphic below shows a sample grid for selecting a seat on an AirTran flight. The text bubble provides basic information about any seat of interest. Note that numerous middle seats are reserved even though windows and aisle seats are available on either side. That is, these seats are most likely reserved by solo travelers who are free to choose any seat in coach. (It is possible that AirTran has blocked these seats, but I am at a loss to provide a rational explanation for such a policy).

Grid for reserving a seat on a typical AirTran flight

Source: AirTran
(Click for a larger view)

I have not been able to figure out why a solo passenger would pay $6 to reserve a middle seat when it is flanked by available aisle and window seats for the same price. However, I do know that under such conditions a person who prefers aisle and window seats to middle seats should consider saving money and taking his/her chances with the random assignment process.

For example, in the case above, there are only five middle seats available outside of Zone 1 and the exit row. There are 23 aisle and window seats available (the text bubble covers a few of them). Thus, assuming a purely random process and assuming that AirTran sells no more tickets, a passenger has an 82% chance of getting the (presumed) higher quality seating for free. Otherwise, a passenger could pay $6 to avoid the 18% chance of getting the dreaded middle seat. The “expected value” of this choice is a mere $1.08, well below the $6 the airline charges. (Conceptually, if you are unlucky enough to draw the middle seat, you could pay $6 to switch to an aisle or window). Personally, I am willing to take my chances with the random assignment with these odds and costs!

Only passengers who are trying to keep a party seated together should be willing to pay a non-zero price for the middle seat. If there are enough people who think like I do, AirTran will increase revenues in the above situation by reducing the price of the seats in relative over-supply, in this case, the window and aisle seats. Otherwise, most passengers reviewing their options will choose to wait what for a seat assignment at the time of boarding.

Having said all that, my choice might change for a red-eye flight or after flying four times in a row in a middle seat!

{Spoiler alert! This post reveals the story of a previously aired episode of “Undercover Boss“}

After watching this year’s Superbowl, I left the television remain turned on and discovered a CBS show called “Undercover Boss.” On this show, top executives disguise themselves as lower level employees to review company operations from the perspective of the average employee. The executives are essentially conducting field studies and collecting data to get the real “dirt” on their respective companies.

The particular episode I watched featured Waste Management (WM):

“Larry O’Donnell, President and C.O.O. of Waste Management, works alongside his employees, cleaning porta-potties, sorting waste, collecting garbage from a landfill and even being fired for the first time in his life.” (aired February 7, 2010)

O’Donnell visits five locations. He discovers not only is he incapable of doing most of the jobs his employee do on a routine basis, but also some of his efforts to increase efficiency are having the exact opposite impact and lowering employee morale. His path of discovery demonstrates the power of collecting data firsthand, the limitations of creating corporate strategy in the abstract or using numbers bereft of direct experience, and the importance of directly monitoring results from the bottom to the top. Granted, these observations occur in front of a camera, so employees have incentives to put on their best show. However I was convinced that most of the workers used this opportunity to expose the difficulties they face on the job.

I briefly summarize O’Donnell’s experiences by site and follow with some lessons learned:

Recycling Site
The conveyor belt transporting trash through the facility moves extremely fast. As a “trainee”, O’Donnell makes numerous mistakes and is exhausted by the time he retires to his hotel. He is dismayed to learn that employees are docked two minutes for every one minute they report late after lunch. The site manager maintains vigilant watch over the entire facility using a battery of security cameras installed in his office. The strict enforcement and tight surveillance are an on-going source of grief amongst employees.

First Landfill
O’Donnell is tasked with picking up litter blowing across a hill adjacent to the landfill. O’Donnell must fill at least two bags of trash every ten minutes, but, once again, he is not up to the task. His performance is so poor that the supervisor fires him from the job. It is interesting to note that the supervisor does not oblige O’Donnell’s request for guidance on technique because it is “…not rocket science. It’s a very easy job.” It turns out that this supervisor is disabled and ignores his pain to report to work every day. Thus, he has little sympathy for able-bodied employees who cannot perform. O’Donnell is impressed with the supervisor’s will, attitude, and stamina, but he fails to note the opportunity to improve knowledge transfer, even for such a simple task.

Second Landfill
O’Donnell is assigned to assist the office administrator who is doing the work of several employees as office manager, accounts payable/receivable, payroll, executive assistant, and scale operator. Cost-cutting has reduced the workforce, and the site manager has pressed his administrator to wear multiple hats with no promotion or increase in salary. O’Donnell becomes particularly sympathetic upon learning that the administrator is about to lose her house.

Carnival Site
O’Donnell trains to clean outdoor toilets. He encounters a worker who displays a lot of enthusiasm for his work. This employee cheerily teaches O’Donnell the tricks to clean the toilets as efficiently as possible. O’Donnell comes well short of the required cleaning rate of 15 toilets per hour, but his trainer still notes the potential to develop into a good worker.

Trash Collection Route
O’Donnell rides with a trash collector to learn how to load and unload garbage cans into the truck. He is horrified to learn that she must urinate in a can because she does not have time to stop and use a bathroom. His own productivity requirements are producing these time pressures. Constant surveillance from roaming and calling supervisors keeps the trash collector on edge. An example occurs in real time as she points out a white pickup truck that has followed her on her route. She also gets annoyed by a status check from a supervisor who wonders what is taking her so long; it so happens that O’Donnell’s “training” is slowing things down.

Some of the trash collector’s customers come out to show their appreciation and to talk, but O’Donnell notes that his productivity requirements prevent the trash collector from fully engaging with her customers. This limitation is significant given trash collectors are “the face of the company.”

Lessons
This experience with data collection in the field taught O’Donnell that productivity and cost-saving measures can place extreme pressures on employees. Only the most “optimistic” of employees can thrive under such circumstances. Management must balance the drive for efficiency and productivity with employee empowerment. O’Donnell could not have learned this as effectively from verbal or written communications from his direct reports.

Of course, O’Donnell also learned firsthand the level of difficulty associated with the work of his employees. This fresh understanding and heightened appreciation should better inform future company initiatives.

Changes and Results
The trailer at the end of the show indicated that morale and productivity improved at the recycling plant after O’Donnell changed the onerous lunch policy. It was not clear whether surveillance practices were also adjusted.

The landfill administrator was given a promotion, a raise, and two new assistants. O’Donnell created a task force to think of ways to improve the working environment for trash collectors. He also channeled the positive energy of the toilet cleaner into a program on employee motivation. The determined landfill cleaner was given time off to better manage his disability and to help others with similar worklife issues. The show did not provide a status report on the impact of these initiatives.

Interestingly enough, O’Donnell did not mention his experiences during Waste Management’s latest earnings report on February 16. Even more surprising, analysts did not ask any related questions. Hopefully after another quarter or two, we will learn a little more about the quantified impact of O’Donnell’s changes.

In conclusion, here are some key quotes from O’Donnell about Waste Management’s operations from the transcript of the earnings call (from Seeking Alpha).

“Our residential collection line of business provides a very solid foundation because it’s very stable, but it carries the lowest margins of all our collection lines of business. The landfill business carries some of our highest margins, but it is very difficult to flex down costs, especially labor, as this line of business is less labor intensive than our collection line of business.”

“We will continue to work hard at aggressively flexing and eliminating costs. So for the full year 2010 we expect margins to continue to improve, and as many of you are aware, one of our key financial components to our annual incentive plan is expansion of our income operations margin as a percent of revenue.”

“If we don’t expand that margin in 2010 as compared to 2009, we will not receive an incentive payout for that portion of the bonus plan, so you can be assured that everyone will be working hard to find ways to control our costs and improve our margins.”

I intended to write a detailed examination of Amazon’s pricing problem with e-books. However after doing just a little research, I found there are plenty of people who have already provided excellent opinions and recommendations. So, instead of providing my classic unsolicited advice, I am posting links to the two most insightful pieces I found in addition to a general news story if you just want an overview on current events.

General news
ChannelWeb: “Amazon Gives In To Publisher’s Demands For Higher E-Book Prices”
BusinessWeek: “Amazon’s E-Book Price Reversal: A Mixed Blessing” – considers the impact of pricing on demand for e-readers and e-books.

Opinion
The Big Money (Marion Maneker): “Amazon’s Self-Defeating War on Publishers”
Tobias Buckell: “Why my books are no longer for sale via Amazon”

Maneker recognizes that sales of e-books will inevitably dominate sales of physical books and recommends the following:

“There is…a compromise that might benefit all parties. Amazon has been pushing the Kindle to heavy users of frontlist books. But the agency terms offer an opportunity for backlist books that gives everybody a win. With the agency model, a backlist book becomes a goldmine for publishers, authors, Amazon and Apple. Priced at $9.99, the publisher receives pretty much the same amount of money under agency terms as it would have for the wholesale book. Still protecting their preferred terms for electronic books, the publishers could maintain their 20-25% of net receipts formula for author royalties because the author would be getting more money ($1.75 vs. $1.05 in paperback royalties on a $13.95 physical paperback). Leaving the publisher with $5.25 in margin, more than they’d get from the physical paperback. When you include the savings in paper, printing and binding, freight and warehousing, the margin jumps even more.

This detente would flood the book market with titles that have stood the test of time where demand remains strong–a good incentive for Kindle and iPad buyers–while protecting the physical book distribution business. It would also buy publishers some time to divest the distribution assets that will inevitably erode as e-book selling takes off.”

Buckell write an extremely long piece, but it is worth the read given it comes from a concerned author. He laments that Amazon is attempting to abuse its market power to fix prices and thwart publishers’ ability to implement dynamic pricing. Buckell also describes process of making books in extraordinary detail. He explains his interest in writing this piece in personal terms:

“I’m not trying to exhort anyone to do anything, but to explain the situation I’m in, and to educate. I’m seeing a lot of people state things with certainty (points I try to knock down above) who have no involvement in the trade.

A lot of readers are going to take this out on authors, and I wanted to basically show my homework to explain things that people may not be aware of. People toss out prices of what eBooks ‘should be’ who’ve never even stopped to understand how the math of something like this works. They demand things they’d never demand of a jacket salesman, just because they think economics and supply and demand and volume don’t apply to eBooks. They do.

Seriously. I’ve thought about these things a lot. Mostly because I have a novel series that has not been renewed, and I keep running the numbers to see if I could write it as an eBook, and when I run these numbers, I come up looking at making a few thousand dollars for half a year’s worth of work based on how eBook sell now. Yes, there are a few J.A. Konrath’s selling well on Amazon, but as I’ve linked, other authors aren’t automagically selling thousands of eBooks there. Most who follow these footsteps sell hundreds. Not everyone becomes JK Rowling.”

The last point reminds me of Nassim Taleb’s “The Roots of Unfairness: the Black Swan in Arts and Literature“. Taleb notes that artists and writers work in a field where a few successful people take the majority of the rewards in the industry. He attributes this situation to largely unrecognized random events (luck!) that are highly improbably but have large impact (“Black Swans”). Moreover, he observes:

“The occurrence of the Winner-Take-All effect in any form of intellectual production has been accelerating along with the speed of reproduction and communications.”

So, ironically, e-books will continue the democratization of publishing and reading (through convenience, easy access, and low costs), but the percentage of winners may narrow further even while providing those winners more wealth than ever.

Dan Siroker, former Director of Analytics for the Obama Presidential Campaign, was a keynote speaker at SoCon10. SoCon is an annual conference run by the Center for Sustainable Journalism at Kennesaw State University in the Atlanta, GA area. This year’s theme was “Proven Social Media, Social Network Tactics to Enrich Your Business, Nonprofit and Yourself.”

Siroker described how his team used the power of data analysis to raise an extra $44M or so for the Obama presidential campaign. Here are his five keys to success in getting actionable and profitable results using data analysis:

1. Define quantifiable success metrics. For Siroker, these were donations and votes.
2. Question assumptions.
3. Divide and conquer (segmentation of data).
4. Take advantage of circumstances – be prepared to leverage unplanned events.
5. Always be optimizing – continual improvement.

Siroker’s results speak for themselves!

The UC Berkeley Center for Executive Education is offering a 4-day pricing program called “Pricing for Profitability in the Information Age“, April 27-30, 2010 and November 15-18, 2010.

Here is the intro and program description provided by the program’s website:

“Companies leave millions, sometimes billions, of dollars on the table every year through sub-optimal pricing practices. The current abundance of customer data, in the context of increased global competition and the instant information sharing made possible by the internet, requires companies to not only set the right prices, but to continually monitor and refine pricing.

The four-day Pricing program at the UC Berkeley Center for Executive Education equips managers with proven techniques for assessing, formulating, and monitoring pricing strategies. Participants will learn several powerful principles of pricing, and will explore innovative approaches that take full advantage of the rapid changes brought about by the information age. The tools developed in this course will enable participants to fully integrate the 3Cs of pricing (Customers, Competitors, and Costs) into the best price for your products.

At the end of the program, participants will be awarded a certificate of completion by the UC Berkeley Center for Executive Education.”

Tom Davenport discusses his new book “Analytics at Work: Smarter Decisions Better Results” in Information Week. Davenport and his co-author, Jeanne Harris, wrote this follow-up to:

1. Provide a guide for creating and promoting analytical capabilities without making analytics a core business strategy.
2. Emphasize the importance of data governance.
3. Introduce a formal framework called the DELTA model: Data, Enterprise, Leadership, Targets, and Analysts.

Here is the intro to the article:

“The business best seller Competing on Analytics made the case that there are big rewards for organizations that embrace data-driven decision-making. Offering a preview of his soon-to-be-released follow-up, Analytics at Work: Smarter Decisions Better Results, co-author Thomas H. Davenport , professor of information technology and management at Babson College, recaps the book’s five-stage “DELTA” model for assessing and improving analytical decision-making.”

I maintain a relatively regular lunch rotation that features essentially the same main item at each eating establishment. Today, I was delivered a shock to my comfortable culinary routine: I was told that I could not substitute a brownie for the muffin that comes with the chicken salad sandwich box meal at, what I will call, “Establishment X.” (Note that the woman at the cash register was not the same woman I have seen for all these many months to-date. I can only assume that THIS time, I got the manager/owner!)

As I did my best to conceal my complete and utter shock and dismay, I casually observed that the brownie is the same price as the muffin ($1.99 vs $2.00). I was summarily informed that “the ingredients are different. They just use different ingredients. And the muffin is really good.” My overt protest shut down at that point, but my inner pricing analyst began gnashing away on the logic of this tragic situation.

Eating establishments typically use bundling to entice consumers to buy additional food that they otherwise would not have purchased separately, either because of price or (temporary) appetite constraints “at the moment or at the margin.” This technique is profitable when the complementary product has a high enough margin such that the effective discount applied to the extra food item still results in a positive overall margin.

In the case of the brownie vs. the muffin, I can only assume that the cost of the ingredients of the brownie are higher than those of the muffin (assuming no difference in labor and spoilage costs, etc..). If so, then all my earlier substitutions have caused Establishment X to lose some untold amount of profit (likely very small).

It was not in my interest to provide unsolicited pricing advice in this case since I am the consumer. However, if Establishment X hired Ahan Analytics, LLC for pricing consultations, I would likely recommend increasing the price of the brownie. Let’s assume a 25 cent increase still leaves the muffins with higher margins. This price increase would serve multiple purposes which should lead to higher overall profits:

1. Drive consumers who are indifferent between muffins and brownies to buy the more profitable muffins.
2. Extract more money out of consumers who strongly prefer the brownie and are willing to pay accordingly. I am biased on this point because I believe the brownie is at least ten times better than the muffin, and the slightly higher price would not discourage my purchase of the brownie by itself.
3. Eliminate confusion about the relative value of the brownies vs. the muffins in the sandwich meal.
4. Provide an opportunity to offer a brownie option for the sandwich meal at a slightly higher price.

Given I have plenty of other eating options in my lunch routine, I will not likely miss the chicken salad sandwich meal. I will just have to find solace in the “satisfaction” that on future visits, I will be purchasing the brownie at some discount to its, let’s say, “true price.”