Thinking of an MBA? 7 Things To Keep In Mind

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Over the last 2.5 years, I pursued an MBA from the Kellogg School of Management at Northwestern University.

While the experience is still fresh in my mind, I wanted to share some thoughts with the wider world – in no particular order.

If an MBA is the last thing on your mind, I hope that this helps you understand MBA programs better. And if you are a potential MBA candidate, I hope that this helps you with the “Should I get an MBA?” question.

1. The MBA Investment and Payoff

If you think that an MBA is strictly about investment and payoff, or in finance terms, about the “NPV”, then going to a school that is well known in a certain field or area and doesn’t cost a lot – regardless of exactly where the school is ranked by The Economist, US News and World Report, BusinessWeek, Financial Times et al – is probably what you should do.

But I don’t know of many people that chose Program A instead of Program B because of the NPV decision though…and I wouldn’t recommend using cost alone to make your decisions.

2. Brand and The Alumni Network

In addition to what you learn in the program, MBAs generally give you two things that are valuable: Brand and the (Alumni) Network.

The benefits from both of those are unfortunately not quantifiable, at least in the short-term…even in the long-run, quantifying these is difficult, at best. What they both do is open doors that are otherwise difficult to pry open easily. Having said that, it is 100% incumbent on you, your skills and your abilities to get to the next stage once the door is open…and brand doesn’t help from that point forward. Same thing with the Alumni network.

Therefore, get the best brand you can.

3. Full-Time or Part-Time MBA?

The MBA “experience” includes or should include highly interesting and intellectually stimulating lectures and speaker sessions, the ability to participate in case competitions, workshops, exchange programs and the camaraderie that comes from living on-campus with hundreds of others and being immersed in the MBA.

These, in my opinion, are some of the reasons why the full-time MBA is better than the part-time MBA. But if family and work commitments mean that a part-time MBA is the only option, that is still a very good decision (speaking from experience, and for myself).

Note though that at some schools, such as Kellogg, almost all full-time MBA activities are open to the part-time students. So those that live in Chicago or close to Evanston can attend or take part in these activities as much as their schedules permit. Obviously, for out-of-towners, it is difficult to do so.

4. Academic Rigor and The MBA “Experience”

Academic rigor (the quality of the professors, the teaching style, your fellow students and their backgrounds and abilities, how challenged you feel and how much you potentially learn) and the MBA “experience” are two other things you experience, to varying degrees, based on where you go.

Again, their value is not easily quantifiable – but they are highly valued by some. For others, it is 100% about the brand and these two aspects of an MBA are farthest from their minds.

Hopefully you know yourself well enough that you are clear on what you value most. Make your decision based on that. If this is not clear, I strongly urge you to gain this clarity before you proceed further.

5. What Is Your MBA School Signaling About You?

One thing that the Top 5, 10, 15 or 20 programs do – is select candidates for drive, as much as they do, for ability. So while the GMAT score is important, the essays and the interview are very important and give the admissions staff (somewhat subjective) insights into how well you will do both during the program and after the program.

As someone (on Wall Street?) that hired Harvard MBAs once said about Harvard, they stand in awe of the admissions officers for their ability to select people with the drive (and ability) to succeed post-MBA.

In other words, Brand.

6. Confidence

For many, a huge intangible payoff from a good MBA program comes in the form of confidence at the end of the MBA program – which in turn stems from a combination of academic rigor, the professors, classroom discussions, peers and the brand.

That confidence, depending on where you go, has the potential to greatly influence and shape one’s career, for decades to come. MBA applicants considering schools would do well to think about what they are willing to pay for that.

7. Succeeding With and Without An MBA

Having said all of that, remember that there are countless examples of people without MBAs or with MBAs from non Top 5/10/20 schools that have succeeded and continue to succeed everywhere in the world, in amazing ways.

So having an MBA (regardless of the school that you go to) doesn’t mean that you will be a knockout success. And not having an MBA doesn’t mean you won’t. Like with anything in life, it may be good to keep things in perspective.

And…that’s a wrap.

Agree? Disagree? Be sure to use the comments section below to let me know.

Can I Request A Favor?

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So you read my blog regularly. Or just once a week. Or perhaps this is the first time you stumbled on it. Sometimes you click on links in my friendly morning email. Other times you can’t wait to delete it.

Regardless of which category you fall into and how fanatically you read every word on this blog, can I ask you for a favor?

Can you tell me what you think of this blog? If you are seeing this in an email, you can just reply to it. Or you can email me at mkompella at gmail dot com.

1. Do you like the (new) layout? Check it out at www.BminusC.com

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Thank you

Mohan

Super Bowl Ads = Stock Market Bump For Brands?

Stock Quotes

 [Above: BlackBerry, widely maligned for its SuperBowl ad, rose 15% on the first Monday after the event; Stock performance for Tide/Procter&Gamble, Best Buy and Axe/Unilever (widely judged as having some of the best ads) also shown]

People watch the Super Bowl for the ads. Some also watch it for the game.

So it is perhaps natural to wonder if brands associated with the best ads see a bump in their stock prices, just based on that much interest in their products just 12 hours or so before trading begins Monday morning.

Other minds, as usual, have wondered about this long before I did…and so we have this, as part of an article on MarketWatch:

From 1996 to 2011, Super Bowl advertisers outperformed Standard & Poor’s 500-stock index by more than one percentage point on average in the two-week period from the Monday before the Super Bowl through the Friday after the game, according to research by Rama Yelkur, a marketing professor for the University of Wisconsin-Eau Claire who studies Super Bowl ads. Furthermore, she says, companies that continued to promote their ads throughout the year tended to outperform the market longer, especially those in food and beverage categories. 

[Note that the excerpt says nothing about brands with good ads. It talks instead about any company that advertises during the Super Bowl.]

Naturally, correlation does not mean causation and it would be quite incorrect to conclude that spending $4m on a 30 second spot would be enough to lift a company’s sagging fortunes.

If that were true, everyone from Hostess Twinkies to Panasonic would have been all over the Super Bowl and the entire event would have been a 12-hour commercial interrupted by the game here and there.

In fact, au contraire, it could be that a company deciding to advertise during the Super Bowl sends a signal (3rd paragraph) that a company is heavily invested in its brand and is likely (or hopefully) using the ad as part of a broader marketing strategy. Wall Street then rewards this alleged focus by lifting the company’s stock.

The CEO of venerable Saatchi and Saatchi thinks that a company’s Super Bowl ad sends a signal also, but of a different kind – and references something called a “earned media” dividend (the first time I heard this phrase…I guess one could more colloquially call this “free publicity”):

“You get so much more earned media than you would than any other media buy,” said Durk Barnhill, whose agency produced a Super Bowl commercial for Procter & Gamble’s Tide detergent. “I pay nearly $4 million to put my ad on the Super Bowl and the next day millions of people watch it on YouTube — that’s earned media. I didn’t pay for it to be watched.”…

“Public companies and other advertisers get to associate their products with a sport that represents Americana — the fabric of the country, he said. “Because everybody watches, there could be some kind of message on Wall Street that a company is doing great. It’s also important culturally for a company. It’s exciting for employees and it’s exciting for the ad agency.”

Since the Tide ad was widely judged to be one of the best ones this time around, I guess P&G may be expected to, in good faith, outperform the S&P 500 for some time then?

What do you think? Have you followed such an investment strategy and if so, has it worked?

PS: This post must not, under any circumstances, be deemed to be stock buying advice…always invest wisely and never because you read something on this blog.

Advertising Strategy and Grading Super Bowl Ads

Tide-SB-13

 [Above, snapshot from Tide's Channel on YouTube]

Every year, in February, some of the leading American and Global brands spend millions of dollars for 30 seconds of your time. They want to amuse you. They want to make an impression. And they hope that you will become a customer of theirs.

This year, it was no different, with everyone from Subway (sandwiches) to Tide (detergent) to Dodge (with its Ram truck) spending anywhere from $3.7m to $4m+ this past weekend for a chance to sell you on whatever they are peddling. 

Obviously, some of the ads worked and some did not. 

They “worked” because they were funny, memorable or otherwise caused a reaction in the minds of viewers that may last a long time. But from the viewpoint of those throwing money at CBS, what defines a successful ad?

For this, I turn to my alma mater, who posits that a “successful” ad must do 6 things (link to the “ADPLAN Framework” if you want to look at this more closely, along with examples)

  • Attention – We all know what this means…some web hosting companies, with their outrageous ads, know how to get this, for sure – but fail on the other criteria below
  • Distinction – Two snack companies have a great ad, each…but can consumers later recall which one was which? 
  • Positioning – Its not enough for consumers to recall the ads …but they must end up preferring one over the other
  • Linkage – The ad is great, funny and distinct…but it doesn’t do enough to link it to the brand. So 3 weeks or 2 months later, customers can’t link the ad to the brand or product. Result? $4m down the drain.
  • Amplification – Our reactions to things we see are not limited to or by, that moment in time. Tomorrow, 3 weeks or 2 months later, we tend to mull over things some more and form more opinions and thoughts. So ads must make sure this post-ad “amplification” results in positive impressions.
  • Net Equity – How successful (or unsuccessful) an ad is, in terms of reinforcing or building upon a brand’s “equity”? 

Still here?

Great…now, on to this past weekend’s Super Bowl and the Kellogg team’s (headed by Clinical Professor of Marketing, Tim Calkins) assessment of the ads, in video form (4.5 minute segment).

Or if you prefer reading, you can read what the Kellogg Super Bowl Advertising Review thought of some of the more high profile brands and their ads, here. A quick sampling of the type of analysis that can be found at that link:

Tide (Grade – A)

Tide topped the list this year with a very engaging spot about a Joe Montana stain. Going into the game, we weren’t sure the spot would do well since the branding is late; Tide shows up just at the end of the commercial. But the ad had tremendous breakthrough. In addition, since the ad focused on a stain people quickly connected it to Tide, the clear category leader. This sort of ad wouldn’t work for a smaller brand but for Tide it is a huge win.

BlackBerry (Grade – D)

BlackBerry received the lowest score from the Kellogg panel this year. This is unfortunate because BlackBerry really needed a strong performance to reverse the brand’s negative trends.

There were two big problems in the BlackBerry spot. First, branding was weak; it wasn’t clear who was advertising. Second, there wasn’t a benefit; the spot talked a lot about what the product didn’t do but little about what the device could do. Why should we use a BlackBerry? We wish they had given us a reason.

And a PDF list of each ad’s grades can be found here

Finally, the video:

Now, on to more Super Bowl “business” news and analysis!

Frozen Yogurt, Coffee or Cupcakes? None of the above. What you are really buying is the ambience and the buzz…

Zinga-yogurt

Near where I live, about a year and a half ago, a vacant store next to a grocery store in a strip mall displayed an “opening soon” board and workers were swarming all over it. A few weeks later, Zinga! Frozen Yogurt opened to some fanfare. 

Fast forward to the summer of 2012.

Most evenings the place was packed. Happy families, kids, couples and singles could be seen streaming in and out of the store, lounging in their outdoor seating area and in essence, radiating happiness and summery joy. I had never seen that much traffic going into the strip mall parking lot before (not unless there was a coming snow storm and the masses were out to get every loaf of bread and every available bottle of milk).

So how is the fro-yo, the reason all of these people are ostensibly going there?

Pretty good…though not exceptional. Good ingredients, innovative flavors, good service and non-confusing options (their 3 step ordering process is outlined below).

Zinga-Concept

But does that explains its popularity and self-advertised “one of the fastest growing franchises” status? No.

The answer, I believe, is that Zinga is very good at selling the experience and the ambience, $3 to $5 at a time…and combining those things with good, tasty food to creating the mythical “3rd place”, much as Starbucks did with coffee. 

This is not a radical new way consumers have been sold to, though.

For the longest time, bars and clubs and have marked up alcoholic drinks 800% to 1000% to 2000% and sold them to the young and the restless that come to see and be seen and experience the bar or club’s ambience. Until fifteen or so years ago, people that wanted to drink coffee or eat some yogurt or ice-cream either went to a fast-food restaurant for its utilitarian look and rock-bottom prices or went to a nice restaurant for the sit-down service and hopefully some ambience, or grabbed something at Kroger and headed home to eat and imbibe in front of the TV. 

But starting with Starbucks, that changed. 

Starbucks was very good at figuring out that good ingredients, with some exotic flavors and good service – when combined with a welcoming ambience and the “3rd place” set-up, with Free Wi-Fi (limited to 30m now?) and comfy seating would allow it to charge $3, $4 or $5 ($7 this past holiday season for a one-of-a-kind coffee whose name I now forget) for a cup of coffee. And it replicated this model across the world. 

Zinga is doing the same with vibrant wall colors, OK seating and buzz on Facebook. The result? Consumers (mostly kids with families in tow) go to a “cool” place. They buy something exotic (a “pacific coast tart” base to hold “valencia orange” frozen yogurt). They take it all in (are these metaphors dating me badly?). Perhaps run into friends or be seen. They walk out after spending $3 to $5 or even more on a cone or cup. And I guess talk about it later on FB or at school the next day.  

Nothing wrong with that of course…but its a very interesting demographic trend that is as true in Ashburn, VA as it is in parts of Sao Paulo or Bangalore – as long as the demographics are yuppie-ish in nature. So one level this is a tad aspirational because people are spending $5 for something that only costs $1 or less to really put together (but then again you could say that for any restaurant meal). On another level, this taps into the human need to socialize and hang out with others. As long as they can afford it…but perhaps also if they can’t afford it every day, and view it as an affordable luxury. And on yet another level, it taps into yuppie-ish parents’ proclivity to spend a lot of money on what they kids want. 

So this movement started with coffee yesterday (and will continue for a long time into the foreseeable future…don’t see Starbucks or its competitors going anywhere). We are seeing frozen yogurt today. There is also a growing “gourmet cupcake” movement ($2.75 and higher for a single cupcake) in some places.

I wonder what else will be used to sell more buzz and ambience tomorrow…

Target’s Price Matching – Clever Strategy Or Desperation?

Website-Target.com

Target’s recently announced price matching policy says that it will match select online retailers’ prices if the customer can prove that one of its online competitors is selling something at a lower cost than Target sells it for – either in its stores or online at Target.com. Interestingly if Target.com prices something lower than a store, the store will match its own online price.

A thought provoking article on HBR argues that Target is making a mistake by price matching on items in both its stores and at Target.com. The author compares to this to “self serve” vs “full serve” gas pricing and says that “in store” shopping, by virtue of offering a higher quality of shopping experience, should price items higher and that if at all price matching must be offered then only Target.com should match prices, not the regular brick-and-mortar stores:

Target should instead match prices of online rivals with a comparable “apples to apples” service: order from Target.com. If a customer sees a lower online price, Target will match only if ordered from Target.com. Some variations that take advantage of a retailer’s physical store presence can also be offered: discounted two-day shipping (pick-up) at a store, for instance. Brick-and-mortar retailers shouldn’t offer the best of both worlds by providing in-store shopping benefits at online prices. It encourages a consumer behavior that is destructive to brick and mortar stores in the long run.

But I see a couple of issues with this.

1) Assuming that Target.com matches online retailers’ pricing and brick-and-mortar Target stores price things higher, someone that orders from Target.com instead of, say, Amazon, will want to have the same or better

– Ordering experience
– Shipping experience (what will Target charge for shipping compared to Amazon?)
– Delivery and
– Return experience (the return process is the only one here where Target has an inherent advantage…but I am not sure its a huge factor in customers’  purchasing decisions).

Can they get the Amazon.com experience at Target.com?

2) Taxes – For big-ticket items, sales taxes are still a big deal. Agreed…online retailers’ advantage here is being gradually eroded because of sane tax laws, but this will take a few more years to be changed across the US. Until then, I can’t see someone wanting to give up $100 or $200 and buying from Target.com even if Target.com and Amazon.com have the same prices.

In an ideal world, I would agree with the “full serve vs self-serve” gas pricing analogy…but I think that the price matching strategy is a tacit admission, on Target’s part, that price is the only way it HOPES to retain consumers – especially that segment of shoppers (5%? 10%? 15%?) that might represent a few billion dollars in otherwise lost revenue. And even with them, it must be hoping that the taxes consumers have to pay on the price-matched items are not high enough to sway consumers’ decisions.

Another related thing I have often wondered about is from the standpoint of those that make or manufacture those items that are most “show roomed”.

Today, they probably don’t care…but tomorrow, if bricks-and-mortar sellers stop selling their goods because they just can’t compete with online retailers, doesn’t that enormously increase the “supplier power” – they supply the means of distribution to consumers – of online retailers? How should these manufacturers and makers of goods respond to this trend, in their own long-term interest?

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