Pizza!!! Pizza!!! Pizza!!!

Posted by cgast on June 5, 2019

What is the difference between an algorithm and an idea?

Once there was a pizzeria, and its owner wanted to sell more pizza. To increase sales, he decided to offer discount coupons.

Three teenagers were tasked with distributing the coupons around town. The coupons were assigned to the teenagers so that the cash register could track who brought in how many customers. Each of the three came up with a clever and successful strategy for where and how to distribute the coupons, as they were paid based on the redeemed coupons.

After a month, they settled the accounts: Two of the teenagers had achieved a reasonable quota by distributing their coupons in high-traffic areas. But the third teenager must have been a marketing genius: 100% of his coupons had been redeemed.

The owner of the pizzeria was jumping for joy. He had never invested his marketing budget so well. He asked the teenager what his secret was and where he had distributed the coupons. The teenager replied, “Here in the store. To the people in the waiting line.”

The moral of the story?

The third teenager achieved perfect targeting: Every contact converted. 100% success… and they even got paid for each successfully redeemed coupon.

For the pizzeria owner, it was the perfect scam: He had spent money to reach people who had already decided to buy a pizza - a complete waste of money.

Economists call this the “selection effect”: People see the ad, but they WANTED TO click, buy, or download ANYWAY. In contrast, there is the brother of the selection effect, the “advertising effect”: People see the ad and WANT TO click, buy, or download BECAUSE of it.

The two are difficult to distinguish and even more challenging to prove, but they nicely explain the difference between an algorithm and an idea:

An algorithm finds the waiting line, An idea brings people into the store.

(PS: For those who want to delve deeper: The pizza story comes from this very readable article: The bubble online advertising (2019) )