Monthly Archives: January 2010

An interesting application of genetic algorithms

I recently watched an interesting BBC documentary called “The secret life of chaos”. It did a good job of explaining how interesting patterns could arise from very simple rules and how these could be further shaped by evolution to create the sort of complexity we see in the living world. It is well worth watching in full.

I have been interested in genetic algorithms for some time and use a genetic algorithm to optimise seating plans in my own PerfectTablePlan software. So I was particularly interested in a segment towards the end, where they showed how naturalmotion.com have used bio-mechanical modelling and genetic algorithms to create virtual humans that can respond realistically to various (unpleasant) physical stimuli, e.g. being shot, being hit or falling off things. The details are sketchy in the TV program, but it appears that they have evolved genetic algorithms that mimic aspects of the human nervous system. For example a human will instinctively put their hands out to cushion a fall or put a hand to an area that has been hit. They then combine this nervous system modelling with physics and a realistic a bio-mechanical modelling of the human anatomy. The results are impressive. You can see them about 2 minutes into the video below.

They claim they can use these models to generate realistic movements for synthetic characters in real time. Their Euphoria software is already being used in computer games, such as Grand Theft Auto IV.

More videos by naturalmotion.com

Haiti disaster relief

David Trump of the ASP is offering free software licences to people who contribute to Haiti disaster relief. This seems like a great idea to me, so I am copying it for PerfectTablePlan. I am going to try it for 24 hours and see how it goes. I am blogging about it here in case other software vendors are inspired to try it.

How to build an igloo

We have had loads of snow here in the UK. Loads by UK standards anyway (I don’t think a Scandinavian would be very impressed). So I decided to take full advantage of the flexibility my job allows and build an igloo. It was my second attempt and it turned out much better than rather wonky one I did a few days ago. This post is a quick overview of the modest amount I have learnt about igloo building, in case you are inspired to build your own.

how to build an igloo

First of all, building materials. The snow needs to be the sort you can squash together to make a snowball. If it is too powdery to stick together, forget it – you won’t be able to make a worthwhile igloo. Try again tomorrow.

Next you need to mark a circular base for your igloo. If you don’t then it is hard to get a decent overall shape. Two twigs and a bit a string is all you need to draw a circular outline. Don’t be too ambitous though, it takes a surpising amount of snow to build an igloo and the amount goes up fast as you increase the diameter. 1.5 to 2 metres diameter is plenty for a first attempt.

Then you need to have a bucket-shaped receptacles in a range of sizes. I used a household bucket as the largest, 2 different sizes of flower pot and a child’s bucket as the smallest. Start with the largest receptacle. Use it as a mould to create ‘snow bricks’. Pack the snow into the mould tightly to make strong bricks. Lay a circle of these bricks as close together as possible, leaving a gap for the door. Then place the next layer of  bricks on top, interleaving them like standard brickwork. Pack the gaps between the bricks with loose snow like mortar in brickwork.

Every few layers you need to swap to a smaller mould. Each layer needs to curve inward a bit more than the previous one to form the dome. It is quite surprising how easy it is to build an arch out of snow. It is stronger and stickier than you might think.

It took 3 adults a couple of hours to complete the igloo. I don’t think the Inuit will be offering us a job anytime soon, but it was very satisfying. Considerably more satisfying than the several hours I spent this morning failing to work out how to get rid of a maximise icon in Mac OS X.

A YouTube video of a similar approach using stacking boxes

Should you offer a money back guarantee?

money back guaranteeA few weeks ago I was going to buy a digitizer tablet for my PC. Then I noticed in the vendor’s terms and conditions that they wouldn’t accept a return once I had opened the packaging. But I couldn’t know if the tablet works until I open the packaging. Duh. I didn’t buy it. Similarly I look for a sensible money-back guarantee whenever I buy software. I don’t remember ever invoking such a guarantee for software, but it is nice to know that I could if I wanted to. Also, I see the lack of such a guarantee as a warning signal that the vendor isn’t confident about the quality of their product.

I offer a 14-day money back guarantee on my own Perfect Table Plan software. The only provisos are:

  • They have to tell me what they didn’t like about my software. This is very useful feedback for me.
  • They have to email me that they have uninstalled the software and won’t use it again. I have no way of checking this, but I want them to be clear in their own mind that they are a liar and a cheat if they carry on using it (if you have read Ariely’s excellent ‘Predictably irrational’ you will know that many people are prepared to be a little dishonest, but few will lie and cheat outright).
  • They have to return the CD, if they purchased one.
  • The guarantee is only valid for 14 days.

But I am fairly relaxed about about all of these. If it is clear that someone thinks they haven’t got their money’s worth out of my software, I will pretty much always give them their money back.

Note that is isn’t a ‘no questions asked’ money back guarantee. I haven’t been quite brave enough to try that yet and really want feedback on why they didn’t like my software. Also the 14 day guarantee is shorter than most. The reason is that a lot of people buy my software for a single use (e.g. their wedding reception) and I don’t want to make it too easy for them to use the software and claim a refund after they have finished with it. However I have heard vendors say that their refund rate actually dropped when they extended the length of their money back guarantee (due to increased procrastination, perhaps). I may test switching to a ‘no questions asked’ and/or longer guarantee period at some point.

The advantages of a money back guarantee to the vendor are:

  • More sales. If they customer is confident they can get their money back they are more likely to buy. I don’t have any numbers to back this up, as I have always had a money back guarantee. But I know I am considerably more likely to buy if there is a money back guarantee. Aren’t you?
  • Less chargebacks. If a customer buys with a credit card they can get their money back anyway. They just have to ring their credit card company and do a chargeback. Your payment processor will then take the payment back and, to add insult to injury, slap a chargeback fee on top. Too many chargebacks and they might even close your account. Better to refund and avoid the chargeback fee.
  • Less bad vibes. No matter how great your software is, some people aren’t going to like it. Maybe your software isn’t a good fit for what they want to do. Maybe they are just having a bad day. Better to give them their money back than to have them bad mouth your product on every forum they can find.
  • Less bad customers. Some customers (thankfully very few, in my experience) cost more in time and mental energy than their licence fee is worth. It is better for you to cheerfully refund them and focus your efforts on more financially and psychologically rewarding customers.
  • Staying legal. You may be legally obliged to give a refund in some circumstances.
  • Good karma. If you aren’t happy, I really don’t want your money.

Generally it costs you nothing to refund a software purchase, apart from a few seconds of your time (depending on your payment processor, some may not refund the processing fee). The only disadvantage of a money back guarantee is that it makes it easier for a customer to cheat you. A lot of vendors worry about this, but in my experience (and of others I have spoken to) this isn’t much of an issue in reality. My refund rate has been consistently around 0.5% (I am not including cases where I refunded because people bought the wrong type of licence, bought 2 licences instead of one etc.). I would be very surprised if dropping my prominent money back guarantee didn’t also drop my sales by a lot more than 0.5%. So, even if all the refunds are fraudulent (which I very much doubt) I am confident that the refund policy increases my profits overall. Sufficiently confident that I don’t intend to run an A/B test any time soon.

Interestingly, my refund rate is 10 times lower amongst customers who have purchased a CD. This could be because these customers are less price sensitive and so don’t see the refund as worth their precious time. Or it could be because of the extra hassle of having to send the CD back (I know a wily B2B vendor who includes a CD with every purchase for exactly this reason). Probably it is a combination of both.

Some vendors think that they don’t need a refund policy if they have a free trial. I don’t agree. When I buy software I want a free trial AND a money back guarantee in case I only discover a problem after purchasing. Also I know (from a survey) that some 25% of my customers don’t even try the free trial of my software before they buy. I expect I would lose a lot of these sales without a money back guarantee.

I think the case for a money back guarantee is even stronger for B2B software. Customers buying B2B software typically aren’t spending their own money, so they are probably less likely to ask for a refund. Especially as this would mean admitting to their boss and peers that they made a mistake buying your software in the first place. Certainly I have a lower refund rate to businesses than to consumers.

From a business point of view, I think the only case where you can justify a no refund policy is when you have a high cost of sale, e.g. enterprise software that requires a lot of configuration. In that case you could include a non-refundable set-up fee that covers your costs, but still have a money back guarantee on the remainder of the purchase.

No doubt refund rates vary according to product type, price range, customer demographics, geographic market and a range of other factors. But , reading forums and talking to other vendors, the typical refund rate seems to be in the range 0.1% to 1%. If your rate is much above 1%, perhaps there is a problem with your product you need to address? If your rate is much less than 0.1%, perhaps you aren’t marketing your product aggressively enough?

In the early days I found it hard not to see refund requests as an insult to my product. But now it really doesn’t bother me and I cheerfully make the refund. I just add the key to a ‘blacklist’ in the software so it won’t work in any future releases.  I don’t attempt to disable it in the current release. I don’t see implementing a ‘phone home’ strategy to make this work as being a profitable use of my time.

In summary, by not giving a money back guarantee you might avoid a small number of customers cheating you. But I think you are very likely to be losing a lot more in chargebacks, missed sales, ill will and missed feedback than you save in fraudulent refunds. Try it. You can always revert back in the unlikely event that your refunds go up significantly more than your sales. And if you have a money back guarantee you should shout about it on your website. Having a money back guarantee and not advertising it prominently seems like the worst of all worlds to me.

Interview for Shareware Radio

Mike Dulin has just uploaded an MP3 of an interview we did at SIC 2009 for Sharewareradio.com. In the 15 minutes we discuss marketing, how I got started with PerfectTablePlan, ads, the wedding industry, newsletters, the ASP, this blog and more. There are some problems with the recording levels, but hopefully that doesn’t detract too much.