Google Desecrates Microsoft, Sort of…

Posted on 23 September 2009 | 5 responses

Anyone that has spent any time at all doing web based development knows the pains caused by Microsoft Internet Explorer, specifically Internet Explorer 6 (IE6).  We live in a world today where the pace of technology is unbelievable.  It is estimated that Twitter.com had nearly 25 million world wide unique visitors in August 2009, not bad for a company formed in 2006.  Facebook has over 300 million active users, and it was developed in the spring of 2004.  That is a lot of web traffic, in fact Facebook estimates 6 billion minutes of traffic to their website alone per day.  And per Google Analytics, my websites get about 15-18% of their daily traffic via IE6, I’ve read and suspect this number to be a little low with the actual closer to 20-25% market share – as my user base doesn’t seem to be corporate based.

In my former life as a VP of software development for a development/consulting company, we estimated that we had to carry 25%-30% extra developers, because of IE6.  That means out of every 1o developers we had, 25%-30% of those man hours went into “dealing with” IE6.  We had a number of screens that we replicated in our applications, one screen utilized by IE6 and the other version utilized by the rest of the browsers.  Granted, the company was 100% focused on large enterprise customers as the user base, which has been slow to adopt IE7 and IE8 as their corporate browser of choice.

For those not familiar with software development, the vast majority of developers develop software using the Firefox browser.  The browser has a number of developer tools (mainly 3rd party add-ons) that substantially increase the productivity of the developer.  And by now you’ve probably deduced that not all browsers are equal. IE6 has a lot of known bugs that were just never fixed by Microsoft and it just wasn’t built to utilize many of today’s technology like off-line capability, CSS/Layouts, and a good JavaScript engine.  So, over time, developers hacked their way around IE6 (and to some degree IE7 & IE8) as it couldn’t be ignored even though it should have been put to bed.

Did you know?

IE6 was released in August 2001, here are a few major events that have taken place since then:

  • 9/11 happened two weeks after the release of IE6
  • Terminator 2: Judgement Day was the top grossing movie of the year
  • Life House – Hanging by a Moment was the top song of 2001
  • Enron scandal starts to unfold
  • 13 months later Firefox 0.1 released (most importantly they are now at version 3.5.3)
  • I’m 8 years older than I used to be

Introducing a smack down, corporate America style.  Google has release a beta version of Google Chrome Frame, an application that has to be installed on the computer.  But what it does, via a single meta-tag in the code, is serve up the application inside of IE6, IE7, or IE8 utilizing Google’s Chrome engine.  So in essence, Google has made Microsoft’s browsers work.

I gave it a quick test drive and it seems to work quite well, granted it wasn’t thorough testing.  The image below is an image of my Wyoming Road Trip site in native IE6 with all of the IE6 “hacks” removed.  What you can’t tell is that I’m attempting to mouse over the CSS driven menu bar.

Native IE6 Mouse Over CSS Driven Menu Bar

Native IE6 Mouse Over CSS Driven Menu Bar

You may have to click on the images to see them full size to see the quality differences.  Notice the quality of the images in native IE6, the blue “shading” or whatever it is above the menu bar, and the twitter image without legs.

Now lets look at the same image also in IE6, running Google’s Chrome Frame.

IE6 Using Google Chrome Frame

IE6 Using Google Chrome Frame

Notice a few things, the first is that the IE logo on the top left corner of the screen is replaced by Chrome’s logo – very nice touch.  Also notice how much more crisp the images look, no more blue “shading” above the menu bar, the menu bar actually works when you mouse over it, and the twitter bird has legs!

I can’t even begin to express how cool this is, and the impact it COULD have.  I fear however, that it will not have the impact that one would hope for.  The only reason that IE6 has even 1% market share let alone the 20+% it does have, is once again, because many enterprises have not moved to IE7 or IE8 for various reasons.  They usually state security and training issues, I call BS on both of those excuses.  But the problem is that there are still a lot of enterprise users that don’t have access on their desktop or laptop to install software – hell if they could they would be running IE8, Chrome, or Firefox in the first place.  So while Google has successfully slapped Microsoft in the face, will the adoption of this frame really make a substantial difference, or just be another distraction for developers to worry about?  I hope the former, what do you think?

The Incentive Behind Pricing

Posted on 17 September 2009 | 5 responses

I recently wrote an article about pricing, markups, and margins and thought I could go a little further in depth on the importance of the topic – in a little less technical fashion.  I can’t count the number of times as a child growing up I came up with an idea for a product.  Growing up through a number of Wyoming winters I hated the fact that you had to scrape ice off your windshield and that your windshield wipers got frozen to the windshield, it just didn’t seem like that hard of a problem to fix.

I assumed that if my product could sell it for X and I could build it for Y, and X > Y, then I had it made.  At the time I didn’t give the first thought to distribution and sales, I guess I figured that would take care of itself.  It was also prior to public availability to the internet which changes the discussion, but for now we will live in the brick and mortar world.

Let’s say that you are an entreprenuer and you have developed a “better mousetrap” that you want to sell on the shelf of hardware stores across the nation.  You are able to manufacture and produce the product, but you don’t have the ability to get it in stores across the country.  So, you take your product to a wholesaler and ask them to distribute (or carry) your product.  Sounds like a great idea, what price are you going to sell it at?

Now let me ask a couple questions:

  1. Presuming the wholesaler agrees to carry the product why would she be more inclined to sell your better mouse trap over the standard trap?
  2. When she does sell it to the retailer (hardware stores) what is to get the store manager to place your product on the top shelf near the front of the store as opposed to the dusty bottom shelf in the back of the store?
Incentive

Incentive

The answer to these questions is INCENTIVE, and in the retail world incentive is a close relative to margin.  What’s In It For Me…

The liquor industry is probably one of the more prominent industries, or the one that drives the expressions around pricing.  You’ve heard of “Top Shelf Liquor” and “Well Liquor”.  One product sits behind the bar on the top shelf in a shiny bottle for the world to see and purchase, the other product sits underneath the bar hidden away.  Similarly in the liquor store, look at the brands that sit on the top shelf versus the bottom shelf.  Additionaly look that the store displays that you see when you walk in enticing you to purchase, are they ever for the bottom shelf product?  The price, and in most cases the distributor/retailer margin vary substantially for the two different products (just because it’s a higher price doesn’t necesserily mean its a higher margin but most likely).  I’ll avoid a thorough discussion on product placement other than to say that one of the underlying themes is to place your higher margin and higher volume items in the front of the store near the cash register – as almost everyone walks by that area.

So, back to your mousetrap.  You now understand that you want your mousetrap near the front of the store on the top shelf, and you would like your wholesaler from time to time promoting your product with store displays, right?  Hopefully you answered yes, thus you must price your product accordingly so that there is incentive (margin) for your wholesaler and retailers.  Now that isn’t always easy, as there is probably a sweet spot that the product must retail at to maximize revenue, additionaly you must consider where your competition is priced at.  In Pricing, Markups, Margins and Mass Confusion I talk about how to work backwards from retail price to get to retail markup, wholesale markup, to eventually your markup.  Go in and talk to some retailers and find out what their average margin is for your competitors product and likewise do the same with the wholesaler.  It then becomes a business decisions to see if you can give them a little larger slice of the pie (and how much of a slice does it take to make a difference) to help move your product.

Pricing, Markup, Margins and Mass Confusion

Posted on 17 September 2009 | 7 responses

I was recently talking to some local business owners about what it would take to put a product on their shelf, a product that I’ve developed and would like to take to market.  After talking to a couple businesses, working in the exact same industry, it became apparent to me that when I asked what their typical retail margins were for a product such as mine, we weren’t always speaking the same language.  I was given a few answers that were close to being in-line, and then I got a couple fliers.  So I dug deeper to determine how they calculated their “margin”, and found that “markup” and “margin” were being used interchangeably.

Why does it matter, well product pricing is a very important aspect of entrepreneurship and running a business, and probably a subject that a lot of people don’t fully understand?

That said, the concepts are actually quite simple.

  • Markup is based on the cost one purchases a product for
  • Margin is based on the sales price one sells the product for

The following equations are used in the examples below:

Margin (%) = (The price you sell at – The cost you buy at) / The price you sell at

The price you sell at = The cost you buy at / (100% – Margin (%))

Markup = (The price you sell at – The cost you buy at)

Markup (%) = (The price you sell at – The cost you buy at) / The cost you buy at

Markup = The cost you buy at * Markup (%)

The price you sell at = The cost you buy at + Markup

The price you sell at = (The cost you buy at * Markup (%)) + The cost you buy at

It is probably easiest to use two examples to show the concept.

Example 1.

The first is the case where you develop a new widget and want to sell it at all of the local hardware stores in the country.  Let’s assume that you are able to manufacture the item, and you will sell the widgets to a wholesaler, whom will take care of distributing your product to all the retailers across the country.

Your Pricing

Your cost to manufacture and package your widget is $10/unit.  You want this to make you rich over night, so you decide that you will sell the product to your wholesaler for $19/unit.  You have marked-up the product $9, which will cover your operating expenses and provide for a nice profit.

Your Cost = $10

Your Markup = $9

Price You Get = Wholesale Cost = Your Cost + Your Markup = $10 + $9 = $19

Markups and Margins

Markups and Margins

We can now calculate what your percentage markup and margin are:

Markup (%) = Your Markup / Your Cost = $9 / $10 = 90%

Margin (%) = Your Markup / Price You Get = $9 / $ 19 = 47.4%

We are already starting to see a markedly different set of values for terms that are sometimes used interchangeably.  If I were to ask you what your margin is and you replied 90%, that would be drastically different than the actual 47.4%.

Wholesale Pricing

Let’s continue, when you work out a deal with your distributor they tell you that they require a 25% margin to move your product.

Wholesale Cost = $19

Wholesale Margin (%) = 25%

Price Wholesale Gets = Retail Cost = Wholesale Cost / (100% – Wholesale Margin (%)) = $19 / (100% – 25%) = $25.33

From this we can now calculate the actual and percentage markup.

Wholesale Markup = Price Wholesale Gets – Wholesale Cost = $25.33 – $ 19 = $6.33

Wholesale Markup (%) = Wholesale Markup / Wholesale Cost = $6.33 / $19 = 33.3%

Retail Pricing

And finally the wholesaler is able to sell the product to the retailer.  In this industry we’ll assume that it is standard that products of this type are marked-up 50%.

Retail Cost = $25.33

Retail Markup (%) = 50%

Retail Markup = Retail Cost * Retail Markup (%) = $25.33 * 50% = $12.67

Retail Price = Retail Cost + Retail Markup = $25.33 + $12.67 = $38

So we can now determine the Retail Margin.

Retail Margin (%) = Retail Markup / Retail Price = $12.67 / $38 = 33.3%

In summary, the product that you developed for $10, after your markup, wholesale markup and retail markup is now selling at hardware stores for $38.

Example 2.

Now, lets work backwards.  You have developed your new widget and you know that your competitions product retails for $23 in hardware stores.  You know yours is slightly better, but will not be able to sell for $38.  You are pretty sure that your product will sell for $27.

Squeezing Margins

Squeezing Margins

We’ll assume that (the same as in example 1):

Retail Margin (%) = 33.3%

Wholesale Margin (%) = 25%

Retail Pricing

So, if the suggested retail price of the item is $27, then:

Retail Markup = Retail Price * Retail Margin (%) = $27 * 33.3% = $9

Retail Cost = Wholesale Price = Retail Price – Retail Markup = $27 – $9 = $18

Wholesale Pricing

Now to determine the wholesale markup and cost:

Wholesale Price = $18

Wholesale Markup = Wholesale Price * Wholesale Margin (%) = $18 * 25% = $4.50

Wholesale Cost = Your Price = Wholesale Price – Wholesale markup = $18 – $4.50 = 13.50

Your Pricing

In this scenario, it costs you $10 to produce your widget and you are only able to sell it to wholesale for $13.50.

Your Margin (%) = Your Markup / Your Price = $3.50 / $13.50 = 25.9%

This is substantially less than the 47.4% margin that you received in the first example, but you can see how it allows you to make a business decision.  If the product must sell for $27, it costs you $10 to produce, then you have to decide if a 25.9% margin per widget is acceptable to pursue the opportunity, remember that the 25.9% must cover your operating expenses, marketing, with something left over in the form of profit.

How can the iPhone STILL not have MMS?

Posted on 4 September 2009 | 3 responses

Pop quiz, when AT&T was first founded what did the letters A, T, T stand for?  No matter what the answer is, it’s time to get out of the age of dots and dashes and into the age of data.

It is perplexing to me how Apple could allow the most advanced phone in the world – dating back for a couple years now – to still not have a feature as common as MMS.  Much like the Google Voice Issue that AT&T has perpetuated we sit today with an iPhone that can not send media via text messages.  MMS is not exactly a new technology, first used in 2002.  I see a few enterprising individuals have built morse code applications for the iPhone – that should be right down AT&T’s sweet spot?  Here’s an entreprenuerial idea.  An iPhone Application that takes an image, renders it into ASCII art, so that it can be text messaged on the iPhone.  I presume AT&T can handle this?

                              |\
                              | |
                              | |
                              | |
                              | |
                ))))))))      | |
              ((((    \       | |
               \\\.=<#-<#     | |
                \C     7      | |
  ,              \    -)      | |
  \\__         __.) (.__      | |
   \\\\ _    /'         `\    | |
    \_ '/   /  ,       .  \   | |
      \ \  /  /| '   ' |\  \  | |
       \ \/  / |       | \  \ | |
        \  /'  |       |  `\ \| |
         `'    |       |    \ | |
               |   .   |     \| |
               >-------<      | |\
              [~~~~~~~~~]     | | )
              [    L    ]     | \/
              [    |    ]     | |
              [____|____]     | |
               | /   \ |      | |
               ()     ()      | |
               ||     ||      | |-._
               ||     ||      | |_  `.
          jgs  )(     )(      | | `-. `.
              /==\   /==\     | |    `.;
             ooooO} {Ooooo    | |      `
             ~^^^~   ~^^^~    |/ ascii art

Should I not expect more from the American Telephone & Telegraph Company – my monthly bill would make me think so?

Remedy Alas?

The end of summer is approaching quickly and as sure as fall will bring color to the leaves, will AT&T finally be ready to flip their switch, thus turning basic functionality on to the iPhone in the US?  Hopefully Apple will release in conjunction OS 3.1, leaving me only Google Voice and Total Cost of Ownership to complain about?

In the meantime, I’m going to start researching this ascii art converter idea…

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