Tuesday, September 03, 2019

MBA in a Nutshell #4 - Marketing : Dimensions of Buyer Perception

Dimensions of buyer perception is a very practical framework that forces an executive to think really hard about his product offering.

This is a very useful checklist for marketers to ask themselves whether their products tick all the boxes and where areas of improvement can be made.

Let's look at the primary dimensions of my own product offering, the ERM Masterclass :

a) Perceived Risk - How can this product harm me ?

It is impossible to avoid self-harm in DIY investing. The trick is to manage the harm when it does occur.

Being one of the few instructors who address leverage as an investment strategy, my students are not too far from having their investments explode in their face. My solution is to do everything empirically and give them the means to calculate the odds of avoiding a margin call.

If you use numbers to make a decision, even if harm occurs, you might be able to limit it to a reasonable level.

b) Relative Advantage - How does this product compare with others ?

It is the statistical and empirical approach that differentiates my offering from the others who seem to want to craft a beautiful narrative for every stock they buy.

While I do not compete on relative performance of my student's portfolios, I compete on how transparent my results are. I also put a substantial amount of trainer fees into the portfolios built by my students making me the only trainer in the whole industry to voluntarily hurt myself if my students pick the wrong stocks attending my program.

( Right now, my XIRR for all my student portfolios stand at around 13.68% unleveraged. In practice I employ a multiplier of two to put more skin in the game and I have been benefiting from leverage thus far. )

There are also secondary dimensions that I have to come to terms with :

a) Observability and Immediacy - Can the product's benefits be seen and how soon can they see it ?

As dividends require at least one quarter to appear in your bank account, expect results only after a few months. Sometime if the student is lucky (or unlucky), Trump does something funny and the student gets to see how defensive their portfolios are in practice.

One out of six batches of my students are currently sitting on losses after a brutal August 2019, but given how they fared compared to the rest of the market,they might be the lucky ones amongst my students because you always learn more from your failures than successes. ( Loss aversion bias )

b) Complexity - Is the product difficult to understand and use ?

When I started out, feedback was that the course was too difficult for beginners who feel lost. I have since rectified this with pre-course readings and online videos so that beginners will be able to hit the ground running.

I now have a steady record of getting absolute rookies into getting regular dividends every quarter.

c) Compatibility -  Is the product usage congruent with my belief system ?

I am not an expert on get rich quick schemes, so I generally attract very down to earth folks who are willing to put in the hard work of managing their money towards early retirement. The word cloud of my student professions reflect a strong following among engineers, teachers and accountants.

My students are not the kind of folks who sign up for a program so that they can "shake leg" in pyjamas in Bali.

d) Trialability - Can the product be used without a commitment from the customer?

A preview workshop is the best way to use the product without a commitment. We had to tweak our money-back guarantee to eliminate abuse several times.

I guess it is quite hard to get better than this.

e) Divisibility - Can the product be purchased in smaller quantities?

I'm surprised this is an issue in my business. Some customers want to pay less and only attend the leverage component of my course and I spent a large amount of time fending off such requests. I think any framework for financial leverage much be combined with an investment methodology as the alternative would be to court disaster.

So these guys can keep their money, they are going to need it one day.

f) Availability - What about after sales service ?

This is why building a community of student alumni is so important for modern trainers. I have about 200+ members in my FB group who get updates on all future courses along with stock lists. I do not charge subscription fees because the members double up as support for incoming students.

Maybe in the far future, some kind of advanced investing course can be marketed to these students. But I just want to build a different kind of financial community than the free social media groups out there right now.

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