Models that Measure Customer Demand

I ran with my friends a small juice cafe in university. Unlike many Pakistani businesses which think about customer demand and all of it after spending millions, we searched for ways to determine, in fact, accurately measure consumer demand, elasticity of demand (i.e., effect of price change on customer demand of our products), quantity consumers would like to consume, product choice, prices, etc. We did that by giving samples to our faculty who we were not our customers actually (sounds funny isn't it!). Our customers were (poor) BSc/BA students only, for whom cost is a major factor, for they come to this university (confirmed from university surveys).

So we used widely used survey thing, without carrying out any reliability and confidence test. What our survey proved was that people on campus are addicted to cheap (& nasty) food. Not many care about the quality which has caused yours truly food poisoning for couple of time. And, that not many would love to pay more than Rs. 50 as regular customers. Because juices were different and each juice had 4-6 fruit or fruit juice(s) as inputs, it justified high prices of Rs. 70-80 per 450 ml glass. I visited Dunkin Donuts in Lahore, and they sell smoothie at Rs. 150. What can you do about ingratitude ! :P (Nah, I'm joking.)

The survey prediction came true. Sales fell as we moved forward. We ran out of friends. Repeatedly, our customers told us, often instructing us, to cut down prices. Unfortunately, we couldn't continue with low prices due to excessive end-semester workload, and had to close the beloved cafe. It has disappointed many, and if i get permission next semester, I'd definitely do it, primarily for my own self, I'm sick of low quality items sold. This experience is shared by many, hence I believe I can create value. Again, I need to research again, and that's were Marketing Models of Consumer Demand, a research paper Chicago & Stanford professor kicks in. It does just the thing.

Here's the abstract of the paper, and you can download its pdf from here.

Marketing researchers have used models of consumer demand to forecast future sales; to describe and test theories of consumer behavior; and to measure the response to marketing interventions. The basic framework typically starts from microfoundations of expected utility theory to obtain a statistical system that describes consumers’ choices over available options, and to thus characterize product demand. The basic model has been augmented significantly to account for quantity choice decisions; to accommodate purchases of several products on a single purchase occasion (multiple discreteness and multi-category purchases); and to allow for asymmetric switching between brands across different price tiers. These extensions have enabled researchers to bring the analysis to bear on several related marketing phenomena of interest.

This paper has three main objectives. The first objective is to articulate the main goals of demand analysis - forecasting, measurement and testing - and to highlight the desiderata associated with these goals. Our second objective is describe the main building blocks of individual-level demand models. We discuss approaches built on direct and indirect utility specifications of demand systems, and review extensions that have appeared in the marketing literature. The third objective is to explore interesting emerging directions in demand analysis including considering demand-side dynamics; combining purchase data with primary information; and using semiparametric and nonparametric approaches. We hope researchers new to this literature will take away a broader perspective on these models and see potential for new directions in future research."

Pradeep K. Chintagunta
University of Chicago

Harikesh Nair
Stanford University - Graduate School of Business

Intellectual Dishonesty

Assignments which are data-holic, by that i mean which require number crunching on an independent institution, in which we've not worked as students, can be challenging. In Pakistan, although ERP systems are rampant in use, small organizations may not be eccentric about recording data, and even those which do, are not often willing to share. Apart from all this, i've this tendency these days to make up data. Its worst thing to do.

First, because you're not fooling anyone but yourself. Over years, the habit may persist, and in real world wrong information mean loss of competitive advantage and loss. Second, its certainly a short-cut of which we as nation are fond of. Third, lack of rigor won't do any good to personal development, as Iqbal once remarked that philosophy not written with hardship and khoon-e-jigar (blood of liver, literal meaning :D) would always remain imperfect and wide off mark.

Why eSystems often fail: Change Management

Our professor talks about failure of implementation of technology to solve real-world business (including private/public sectors). It happens due to the gap between computer scientists/engineers and people who run processes/businesses/institutions. Yet another failure of such mass-level system: "Minister [of education] admits failure of e-system (for roll# slips)" (Dawn, Wed 9 March, p. 13).

Education ministry was supposed to give all roll # slips electronically; 17,000 roll # slips given manually. Maybe because they didn't do the ground work; without involving someone who understands every aspect of the business and understands what would be the benefits of the technology to the business.

People get over-excited by benefits of technology, but often fail to understand change management issues, both technical and behavioral. For instance, i worked on the pre-feasibility of online tuition center. Where you can lecture 40 students in a classroom, you can now teach thousands online through Skype for free. You can now have a computerized adaptive testing system in which computer adapts to the ability of students and give simpler questions to a struggling students, or more difficult to an expert one - helping each master at their own pace. We can create earning opportunity for so many talented teachers through 1-to-1, 1-to-many online tuition, textbook solutions, homework help - btw, this is not novel, its being done via & Problem with these sites is that they don't offer local language education and require credit card payment. Fortunately students in Pakistan can now pay their bills via easyPaisa.

But there are many technical & behavioral challenges to it. 1st technical issue which can wipe out this business model on day 1 - load-shedding! 2nd, internet connections may not be very fast & reliable.

When you come to behavioral issues - these are really subtle. Some go to academies just for friends, some due of fear of teachers who force them, some may not adopt eTuition just because its not done in physical world, some would only go to an academy because their parents want them to. All of these have their own solution, fortunately! For instance, by creating a game-like, socially competitive learning environment - learning experience online can be very addictive when you can compete with students in quiz, practice session. Ever saw those badges on It serves the purpose.

Work of Tableegh: How ignorant i've been

At the tender age of 16, my heart became hard and shut to the light of Tableegh movement. Since then i've never went out of home with them to "strive (your utmost) in the Cause of Allah", let alone strive in the way of Allah with my property, assets and life... I have been repellent to their simple message which can make one a true Muslim - belief in the kalimah and following the way of Prophet, and spreading his message to millions of people who are in need of the light of Islam... This so far nascent awakening has come from this talk given by a former devoted Christian who came to Islam after a long journey of searching for Allah.

Anything that can go wrong, will

And today it did again with bursts of cunning, demotivating laughter, but more with comedy. In our MIS course, we're required to make a story board - an artificial model or replica of our business model or project. Its great, because instead to boring people with story of imaginary things, systems and business processes - just show them its prototype of model ! It makes every clear, eliminates need for boring PowerPoint presentations.

1st mess. I worked on my business idea's - - consistently, although less, for more than a month. And, thanks for being not reading long and tedious manuals of Micrsoft's Publisher software, it didn't work on another computer. Actually, when you make a thing as a web file, you've to set it as 'global' or something, for the html to work on other computers... Instructor informed us about it; means he was sympathetic, i hope =)

2nd mess. i'm becoming more and more convinced that i'm a victim of Small and Medium scale memory loss problem... How could i forget to bring the Key Performance Indicators report ! However, just before the talk i realized what i've done with the group, i managed to download a month old version, which had no entries of data ! Even instructor did not seem about it... It also generated bursts of laughter... Bit embarrassing though :P Who cares though... The real thing is doing the thing in real world...

Point of working in groups

Professors tell us that in real world team players are demanded. Working alone and in a team is hugely different for psychological and social reasons. The fact that you can face criticisms on your thoughts can be disturbing especially if the members are not glued together already. The point really is to get us debate about grey areas, and come to agreement using some objective criteria.

Working in teams suppose in a business should be have clear "rules of engagement". What i mean is that although we're not enemies, but since we're often excited about the venture, we forget to deal with each other like strangers. Hence, when i and my 3 friends launched a small venture of juice cafe in our school, we made it very clear what our values were, although there used to disagreements, because not everything could be foreseen, especially when making critical decisions about business, like pricing, budget spending, etc. i want to emphasize on corporate structures of even a small firm. What happens in over family business is that things are not worked out, nobody decides how time would one person work, and what would be his job description. That can leave space for lots of commissions and conflicts for future...

US, Pak, Muslims, Slavery, History

Time for us to assert. Perhaps last year, I saw a short video clip of Israeli F-16s approaching to attack Iraq’s nuclear reactors. I don’t appreciate nukes, but certainly respect Iraq’s right to have it. My heart rends still now when I imagine those lethal birds flying so fearlessly over Muslim lands killing its masses, and now plundering its resources in the name of democracy.

This thought has to be linked with the history of contemporary Muslims, which we often tend to ignore. Muslims do not blame others for their short-coming. Not far ago, when Muslims were still free from the fetters of slavery, they became very arrogant. Shaykh Hamza Yusuf mentions those filthy letters sent by Muslim rulers to Westerners, degrading them as humans, not just non-Muslims. They showed arrogance. Allah does not like this. The situation is reversed. It’s the medicine for us – this slavery on whole Muslim world.

Nonetheless, with recent killing of Osama – I am indifferent to him – and the consequent in-camera briefing to parliament of Pakistan by top echelon of Army, especially its top intelligence agency’s chief, Gen. Shuja Pasha’s confessions, its all clear that even Army is fed up of US and admits of how wrong the relationships are. I do not have any hopes from this corporate army – but I’ve this children dream that one day our F-16s won’t fear facing deadly F-22 Raptors, and manageable F-18 Hornets and won’t pretend to be absent from the show. I just wish…

Allah doesn't create anything useless: Algae Tech

Fossil fuels, as per technologists, will end in near future. What do we do? Search for sustainable alternative field. You must be familiar with this phrase. Although the problem of environment can be discussed separately, but we hear engineers leading the movement, perhaps without philosophical insights from Islam. Just thinking that by reversing our "bad engineering" into good can transform the situation, notes Dr. Hossein Nasr, is a naive idea. Thinking that by turning to alternative energies can help us out without changing industrialist, consumer mind-set might the biggest mistake we make.

Nonetheless - this isn't topic of the post, but i couldn't help not making a comment - i've an afterthought to share. Look at this picture of Algae below.You must have seen this on walls and on ground. I noticed it from childhood and could never appreciate its worth. i thought, what a useless is that! It sort of irritated me. But, that's where lines are drawn between ignorant and knowledgeable.

This semester, while trying to pursue a technology business idea, i stumbled across an unknown PhD level research going on in my own university in the field of bio-tech. Ms. Someone (i forgot her name) is PhD candidate in the field of bio-tech, who also teaches at my university. She is working on Alage. She has set-up a pilot project, after successful tesing of Alagae's capability of producing bio-diesel - as a direct competitor of fossil fuels, to commercialize the Algae fuel and its by-products.

Although she says it'll take a decade, but the by-products are so overwhelming in quality and importance that it'll come in market.

New Website of ESEF Launched

Its the third website design for ESEF, Elementary Society to Excel in Future, Pakistan. This is run by high school toppers, established back in 2008. Right now, the founders and executive members are largely studying in engineering, medical and business schools. Their activity has been focused helping juniors climb the ladder of getting into university. They're working on intellectual grounds to construct exemplary learning institutions of future to reconstruct Islamic identity in muslims.

I was talking about its new website:

Its more visual and graphic this time, and more pleasant to look it. This is where we interact with juniors and help them out, and debate about perennial and temporary issues of Muslims. Hope it will reach out to as many juniors...

A Blasphemious Statement by Tea Ad

My blood is furious and restless after what i heard in an ad about tea and family women. Ad of Tea Max (by Haleeb) proclaims: "Even Khan's wife couldn't add taste to his tea..." Now you can presume that all the world of taste was in darkness and misery until our dear Tea Max Knight came to rescue Khan Sahib from the negativities of tasteless tea.

By now you'd have pin-pointed the blasphemy, better than Pak Army pinpointing firing choppers near its war academy. Its the women of home that add taste to anything! I heard Shaykh Hamza complain about the hasteness with which professional cooks cook meals and tea in hotels, comparing it with the sweetness and taste added to food and tea by her wife!

The statement in that ad is anti-social, wide off mark and a typical lie perpetrated by mindless advertisers who detach themselves from factual truths.

Halal search engine

Telegraph wrote a technology news back in September 2009 about a search engine for Muslims, I used it once and liked it. It filters those websites having explicit content which is not allowed for a Muslim to see. In fact i believe this search engine is useful for whole humanity. Everyone in a society is a victim of pornography - from children to married husbands. When i think of my own kids, i fear about having free access to internet, cause school children are introduced to these things in an early tender age of 10, or may be below.

The article explains how it works, but the problem is that i tried to open it, and i cannot... Nonetheless, i'll try it later in some other browser. Back in 2009 it Muslim founders hoped that this will become homepage of every Muslim. i remember getting smses about this. i was excited. i read some posts online by modernized muslims "condemning" this blasphemy of having halal search engine - another case study of inferiority complexes we've developed or to put in other words, completely blind intellects. The search engine may need lots of improvements - they're in contact with Islamic scholars to decide about what to show, what not to, but that's the case with all businesses. Whenever Google launches some product, they launch beta version. I remember Marissa, one of its elite employees, recalling having received around 500 feedback comments the very next day they launched one of their products!

Helping students get into top universities

My father has given this task to create an academy in my home city for intermediate/high school students preparing for undergrad med and engineering and other schools. i'm thinking of creating an opprotunity for those students who're in those schools teach remotely through Skype or something during evening. Many students want to devote time freely for this... Nonetheless, i've to talk to them and see if its feasible for them... Couple with this computerized tests which students can practice online, for this i'll have to see technology penetration... A place where students can collaborate real time, and take lectures at home...

Why i didn't & don't like Mondays

:D this research has something cool to say. i receive a daily stat from Harvard Business blog. Following is its copy:

Stress Hormone is Higher on Monday Mornings

"Levels of the stress hormone cortisol, which has been linked to increased blood pressure and weakened immune responses, are higher in white-collar workers' saliva on Monday mornings than on Sunday mornings, says a study led by Jason Devereux of University College London. Cortisol levels in 77 people employed in health care, government, technology, and consulting averaged 16.80 nanomoles per liter on Sunday mornings, but 22.52 nanomoles per liter on Monday mornings. The higher levels of secretion may be in anticipation of a stressful day at work, the researchers say."

Source: An exploratory study to assess the impact of work demands and the anticipation of work on awakening via saliva cortisol

My Entrepreneurial Venture: Long way to go

We've planted a seed of a start-up. We wish it goes a long way. i wanna talk about elements of success and appreciate how "smarter our parents" - in fact smartest!

Its all about perseverance some say. Our professor talked about Pakistani businesses. He said that they are not doing any thing brilliant - making fans, constructing houses, etc. Yet making a fortune. They do things consistently over a number of years. Now a days we've this trend where people do one thing, then leave it and move on. When you meet them after 20-30 years, they're still saying, "Ah, i'm going to do something great soon." It never happens, because perseverance is not a part of such entrepreneurs.

As i reflect on our juice cafe. i've been exposed to things related to this business - customer perceptions about food brands, having just-in-time production system, food hygiene & other bio-tech problems, accounting systems for such a business, etc. I've opportunities to grow. I'd better grow in this sector than haphazardly starting another. i can diversify and move to other food and drink items; its essence remains the same. What i can leverage over the number of years by having a staying power, i'm more likely to do innovations and remain more competitive than a start-up.

But that does not mean i cannot or should not start other businesses if i can. The example that i'd give also explains how smarts our parents are, who're doing businesses or remained part of markets over decades. My father today discussed with me the idea of exporting straws produced as by-products from crops such as wheat. He made an accurate calculation of investment and found that one can make 200% profit by collecting this waste which many people here burn (hence increasing its price), making its batches and storing to wait for the time of export. He is mashaAllah already into many diverse markets. One of my friend's father also has done so many things which are herculean. He made that point.

Faith is dynamic

i's coming to after namaz from an adjacent block and found my friend - an MS computer science student at FAST - was coming out of mosque. i stopped and joined him on his way to his home. He talked about his transformation into a pious person. "I never imagined going to mosque for prayers few years back! It wasn't just possible to imagine. Now, here i'm." SubhanAllah! "But sometimes it happens," he continued, "that you cannot concentrate in namaz. You're indulged in studies and during prayer, you're reminded of going back to work. We've to strike a balance between both worlds - this world & deeds of the next. You see, Hazrat Umar (r.a.) said that faith doesn't remain constant and fixed. It has its own highs and lows. Sometimes you're up, sometimes down. May this struggle never end. There's a prayer in Qur'an, probably in Surah Al-e-Imran, in which we pray God not to take back guidance once it has entered our hearts. I make this prayer everytime i say my prayers. May this noor never be taken back from us..." Aameen...

I said to him, "So this means we shouldn't get despair and hopeless." Exactly! That's the whole point," he replied. This was a lesson that came at the right for me. I forgot of this! I started to despair that my condition cannot change and be as same as it was couple of years back... Hope has been revived in my heart of transformation and consistency in eemaan... InshaAllah

Trade Ethics

I with my college friends have started a small business in university to learn ground truths. I saw the application of Islamic ethics of trade, and why evil is the opposite. Whatever code of ethics has been made by Islam, it is to benefit humans, both as entrepreneurs and consumers. For instance, telling the people right information was not being encouraged by some of us who are running the firm. They're reluctant and fear short-term losses. But, that's only hiding our own shortcomings. What if consumers come to know about the fact that strawberries are not being added to the drink, but some powder form of it! They'll spread bad word about it. But above all, the best way to implement these codes may not be policing firms but inner consciousness in humans.
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