The Science of Vegas

Just like retail stores, the layout of a casino is nothing short of meticulous, designed for attracting customers to spend as much as possible and linger for hours, days, an entire week. Yet owners of retail stores may be able to use the same logic employed by these executives.

A recent article in d/visible discusses the evolution of the modern day casino. They quote Bill Friedman, an expert casino design consultant, as he writes:

Build a space that guides people easily around a large property to strategic spending points while inspiring a sense of curiosity. “First you want them to be curious, using curves walls and plants to obscure full view of the casino,” according to Friedman. “And once they’re where you want’ em, you want them to feel comfortable. So in the future, we can expect the hotel-casino to become a stylized reinvention of retail, entertainment, and classic casino style. Don’t get rid of the smoky male rooms with chandeliers yet, but get ready for more airy, entertaining retail-like venues with a more feminine touch to lead the market.

Theme parks, malls and other recreational consumer centers already use the concept of easily guiding people to spending points. How can you apply the same idea to your business?

How Apple Got Ahead

Even in its early years, Apple Inc avoided the corporate culture of revered firms like IBM and GE. Yet, this deviation allowed the Cupertino, CA-based company to show unparalleled progress compared to competitors and cause both executives and academics to reconsider formal guidelines in management (see yesterday’s post about Motorola).

Wired Magazine’s feature story for the month examines “Jobs & Co” and the CEO’s behavior in the company. They also list how Apple breaks business conventions and succeeds.

How Apple Defies 5 Core Business Principles:

1. Don’t communicate with the press: Never leak product news until release
2. Don’t play nice: Use hardball tactics to get ahead
3. Forget about customers: Design products that YOU would want to use, not your customers
4. Motivate employees through fear: Threaten them, withhold praise, and bring them to tears
5. Lock customers into your product: People are willing to trade freedom for a great device.

These tactics completely clash with a post I made last week where Knowledge@Wharton showed how companies could increase profits by playing fair.

Motorola: Knowing When to Take a New Direction

Yesterday, Motorola announced they would split the company, leaving the struggling and unprofitable phone division to take a new course. According to an article in the International Herald Tribune:

The activist investor Carl Icahn, who has pressured Motorola to make such a move, said in a letter to its board that the announcement was “clearly a step in the right direction.” But he questioned Motorola’s commitment to moving quickly to solve its problems.

Gregory Brown, Motorola’s chief executive, conceded that the main problem facing the company was its inability to come up with new products to replace the highly successful Razr, which was once a must-have phone but has faded from the scene.

Motorola’s actions may cause executives to ask themselves when they should take struggling enterprises into new directions. Analysts cite the competition in the market, especially with Apple’s iPhone, as well as the need for a new chief executive to take control.

As with any business, consecutive months of declining sales or slow growth almost always require a change; knowing exactly what steps to take is another concern altogether.

Increasing Revenues in Movie Theaters

Cinemas, with the majority of their revenues coming from concession sales and pre-showing advertising, are investigating simple ways to increase their revenues. New York-based marketing firm Brand Experience Lab is working with cinemas across the United States and United Kingdom to introduce “AudienceGames.”

Immediately before movie showings, advertisers will encourage audience members to cooperate by playing interactive games. Motion-sensing cameras positioned in the front of the theater track members’ movements.

Volvo tested this technology and measured the audience’s response in this YouTube video. During a showing, moviegoers competed simultaneously with other theaters. Collectively, the audience had the task of driving a virtual car through an obstacle course on the cinema’s screen.

How To: Write a Pitch Letter

Bnet posted an article on how to persuade coworkers by drafting the perfect pitch letter. In addition to focusing on what to say, consider how to express your idea.

A few suggestions from the article:

• The introduction should establish a problem or void that your suggestion will solve
• Make the purpose clear and concise
• Avoid stating personal or political opinions that do not belong in business
• Validate your point by using research or surveys, and make sure the source is both relevant and available
• At the end of the letter, the person should simply only have to give his or her approval to begin the process
• In case the person does not agree, offer to set up a meeting

Recreating Starbucks

Starbucks may need a sip of its own espresso. In the past year and a half, the company’s stock tumbled from almost touching 40 to falling short of 20. Chairman Howard Schultz may have accidentally caused shareholders to lose confidence in the company when his memo, criticizing the company’s “brand dilution” and “cookie-cutter” type store layouts, leaked onto the web. So what can this industry leader do to maintain its market share and growth?

Remember the Experience
Starbucks launched the idea of a “third-place,” saying people occasionally want to escape stress at home and work. Their coffee shops attempt to fill the void with flavorful aroma and an understated soundtrack. Starbucks’ alternations within their stores should remind customers of this experience that they used to enjoy.

Get Back to Basics
After experiencing tremendous success in coffee, Starbucks moved into manufacturing consumer products from espresso machines to coffee mugs and water bottles. They also released a line of alcoholic beverages, as well as distributing music albums and feature films. Perhaps this loss of focus, with an incredibly fast rate of expansion, contributed to the company’s dilution.

Yet even with the trouble Starbucks and its shareholders have seen during the past year, very few people have lost hope in Schultz’ guiding philosophy. He may be the Steve Jobs of designer drinks. Regardless of his strategy, the actions Starbucks makes from this point forward will live in textbooks as a case study for years.

How To: Get the Most Out of Your Ad Agency

Watching TV shows like Thirty Something or Mad Men gives a glimpse into the lives of advertisers and their agencies. Building a strong relationship between the client and the agency is crucial for the success of the brand and prevents clients from looking elsewhere when the economy begins to shake or sales begin to slip.

In an article for BusinessWeek:

It’s far better to make the marriage work. And just like real marriage, it’s less important to find the right partner than it is to be the right partner.”

Focus on forming a strong relationship between the client/agency. Doing so will provide more security in the future when the future does not look as prosperous.

The State of Corporate Philanthropy

MCKINSEY QUARTERLY — Corporate philanthropy can be an effective tool for companies that are trying to meet consumers’ rising expectations of the role businesses should play in society, say respondents to a McKinsey global survey. The survey also suggests, however, that companies aren’t using that tool as well as they could. Executives doubt that their philanthropy programs fully meet their social goals or stakeholders’ expectations for them. Read article.

Unconventional Decisions Pay Off

KNOWLEDGE @ WHARTON — Doug Lattner says his first rule of business leadership is “know yourself.” The CEO of fast-growing Deloitte Consulting applied that lesson to his own firm when he assumed the reins of the New York-based unit in 2003.

At the time, Deloitte Consulting, which offered expertise in such areas as strategy, technology and human resources, was serving more than 42 types of client groups. Lattner and his team grew the overall business even as they slashed that number by more than half, serving just 19 segments. “I said, ‘We’re not going to be all things to all people,’” Lattner stated during a recent Wharton Leadership Lecture. “We’re not going to out-Accenture Accenture, we’re not going to out-IBM IBM, and we’re not going to out-McKinsey McKinsey. We’re going to be very good at what we do.” Read article.

In the Game of Business, Playing Fair Can Lead to Greater Profits

KNOWLEDGE @ WHARTON — Tune into “The Apprentice,” and you get an all-too-common view of business. Every week, all of the wannabe moguls try to impress Donald Trump by preening, cajoling and conniving. In this world, toughness is the measure of every CEO, and the boss glories in firing people and squeezing every penny out of suppliers.

Yet according to John Zhang and Jagmohan Raju, both Wharton marketing professors, and Tony Haitao Cui, a University of Minnesota marketing and logistics professor, many people aren’t purely mercenary in their business dealings. They care about fairness — and they should, the researchers say, because doing so can maximize their profits. Read article.

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