Travel Tech Essentialist #106: Remarkable & Focused
One of the pillars of the Stripe company culture is to be both micro-pessimist and macro-optimist: “Internally, we’re always thinking about what’s broken, which problems could lie around the corner, and where the unaddressed risks lie. But an important aspect of Stripe culture is macro optimism. We believe that Stripe will be far better in the future than it is today.”
That's an accurate description of today's newsletter. Some food for thought for both your left and right brains. I hope that it resonates with you and that you come out hopeful about what you can do to impact your future but also with a sense of urgency and focus for what’s immediately ahead.
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1. Worthy of remark
Seth Godin says that if you want word of mouth, you must create something remarkable. And that means to do something worthy of remark, worthy of talking about. This doesn't necessarily mean spending tons of money. Take El Arroyo, for example. It would seem quite a challenge for a Tex-Mex restaurant in Texas to be remarkable, but it has gained worldwide fame because of its signs.
If you have other examples of cheap but effective ways to be remarkable, please share them.
2. Heart > Wallet
There’s some number of copies that you could sell just by having an audience and a good marketing plan and sheer force of will and putting a lot of effort in. Maybe it’s 25,000, maybe it’s a hundred thousand, I don’t know. At some point, there’s some number where you can’t get beyond that, even if you have a large audience just by the marketing energy. It has to be word of mouth. And I think certainly once you’re in the millions or tens of millions of copies, the only way a book grows that much is people recommend it. — James Clear
The quote comes from a recent podcast conversation between James Clear, author of Atomic Habits, and Tim Ferris. James says that marketing is not enough to sell millions of books. You need word of mouth, and you need customers that love your product and actively recommend it to others. Read the transcript or listen to the podcast.
Of course, this also applies to the travel sector. It reminded me of the post I shared a couple of weeks ago from Mario Gavira. In analyzing the loyalty strategies of the global OTA giants, Mario said it came between heart vs. wallet. The past decade, he wrote, was primarily ruled by the overlords in online customer acquisition, but he expects this decade to be shaped by those who build a genuine loyal customer base in travel.
3. Get cognitive biases to work for you
A cognitive bias is a systematic thought process, often a result of our brain's attempt to simplify information processing. Cognitive biases help us find mental shortcuts to assist in daily life. Read these nine examples of how companies tap into our cognitive biases. Here are four of them:
Bias Towards Certainty. Uber's map didn't reduce waiting time, but it did make waiting less frustrating. The uncertainty of waiting bothers us more than the duration.
The Anchoring Bias. Rolls Royce's favorite exhibition spot is yacht and aircraft shows. “If you’ve been looking at jets all morning, a £300,000 car is an impulse buy. It's like putting sweets next to the counter” — Rory Sutherland
The Sunk Cost Fallacy. A Peloton bike costs $2000. The subscription costs $39/mo. So, either, you're locked in, or you admit to your spouse you've thrown away $2000.
The Left Digit Bias. Lyft cutting the price of a journey by $0.01 (from $15 to $14.99) had the same increase in consumer demand as cutting it by $0.99 (from $15.99 to $15).
4. Optimal airplane boarding using agent-based modeling
Agent-based modeling (ABM) is an algorithmic method of creating multiple independent entities (“agents”) that react to stimuli according to predefined conditions. This allows imagining humans not as an amorphous mass, but as a collection of individuals who respond in predictable ways to what’s happening around them.
ABM can be used to find the optimal airplane boarding strategy If we reimagine the passengers as agents, we can model normal behaviors such as putting luggage into the overhead compartment or getting up to let another passenger into their seat. ABM suggests that the best way to board passengers is to have boarding groups alternate based on the row number and on which side of the plane they’re on.
Read + The Decision Lab and watch a highly entertaining and creative video that illustrates the optimal boarding method.
5. Price-product personalization at scale in airlines
We’ve been trained by the likes of Amazon, Netflix and Starbucks to expect products and services tailored to our needs. A recently published paper offers different approaches that airlines can use for price-product personalization in scenarios where the purchaser is well-identified and when there is little known about the visitor except the context of the shopping session. Airline personalization at scale is enabled by combining the power of rich customer data, experiential learning, and revenue management. Read + Journal of Revenue and Pricing Management
6. Pricing & Jobs to be Done
Matt Lerner (ex PayPal, 500 Startups VC) shares his perspective on establishing and optimizing pricing using the Jobs to Be Done framework. More than simply buying a product, consumers “hire” them to do “jobs” (solve a problem). Success depends on understanding the actual “jobs” customers need products for. Matt reminds us that people’s jobs to be done are often social and emotional as opposed to functional: “They’re trying to impress other people, they’re worried about what people will think of them, and that’s the value that their customers are paying.”. To understand a user’s goals and why they choose a product in the first place, a list of features won’t work. Use the Ketchup trick to get to the bottom of a user’s need.
7. Careful with venture debt
Venture Debt is less risky when startups can fundraise with relative ease. This 2021 tweet by David Sacks is a reminder that venture debt must be paid back. Without new rounds and investors, banks will come to collect before the startup runs out of money.
8. Ruthless efficiency
SaaS companies and tech markets in general have swung from 2021’s record-setting funding activity at sky-high valuations to a sharp market correction in 2022. Growth at all costs has been replaced by a return to SaaS fundamentals: revenue durability, growth efficiency, and healthy unit economics. Operating with ruthless efficiency is now a requirement. In Efficiency as the Primary Operating Principle, Michael Robinson (partner at Craft Ventures, one of the premier SaaS VCs) shares specific and actionable advice on how to cut churn, reevaluate the ideal customer profile, keep CAC payback in check, watch Burn Multiple, and hold the team to a critical and excellent standard.
9. 2023: the year of customer success and gross churn
Efficiently retaining customers becomes a more urgent priority for SaaS startups during economic headwinds. The leaky bucket analogy implies a one-to-one relationship between churned customers and the amount of lost ARR, but the reality is that one dollar of churn does not equal one dollar of lost revenue. The impact of churn is much greater than the year’s churned revenue. This post goes into some detail on how churn’s impact is generally underestimated, and it suggests that a snowball is a more precise representation of churn than a leaky bucket. Read + OnlyCFO.
Andrew Bosworth, the 10th engineer hired at Facebook and current CTO of Meta, wrote a blog post last week about the need to focus and avoid distractions.
Similarly, last October, Brad Gerstner (founder of Altimeter Capital) sent an open letter to Mark Zuckerberg titled Time to Get Fit which demanded that Meta streamline and focus its path forward: "Like many other companies in a zero rate world — Meta has drifted into the land of excess — too many people, too many ideas, too little urgency. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows." The letter asked Meta to reconsider its announced metaverse investments of $10–15bn per year which may take 10 years to yield results: "An estimated $100bn+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.”
This leads me to something I heard Chamath Palihapitiya say in the last episode of the All In Podcast. Meta's stock price is moving inversely proportionally to the number of times that Metaverse has been mentioned in Meta's quarterly earnings calls. Meta is now reducing the number of “metaverse” mentions and favoring a new word: "efficiency."
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As usually, amazing newsletter! I really enjoy how you combine hospitality with other business areas plus you add your own insights.