Archive for September 10th, 2008

Oil: Those 68 million acres of "idle leases" …

September 10, 2008

The issue

Some in Congress have recently argued that oil companies are not doing enough to develop the 68 million acres of leases they already have. 

Oil companies respond that the the current leases represent a very small part of the total Federal land bank, that there is or has been substantial activity on virtually all of the leased acreage, and that a small percentage of the leased acres have economical commercial quantities of oil or natural gas.

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Exploration status

In  recent letter to Congress on this specific  issue, one large oil company claimed that it had actively explored over 95 percent of their existing federal oil and natural gas leases.

Most the explored leases did not contain economically viable oil and natural gas resources. 

Based on known geological characteristics, the company anticipates a higher success rate and commercial viability from the off-shore acreage that is currently “off limits”. 

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The economics

Oil and gas companies have a very strong financial incentive to develop their leases and ramp-up production as quickly as possible.

To obtain federal leases, oil companies bid on tracts that are made available. Winning bidders make significant payments to the federal government to acquire the leases and then pay annual rentals to “maintain” them. 

Millions of dollars in exploration costs are incurred in the hope of finding commercial quantities of oil and natural gas.

The Dept of the Interior indicates that success rates are approximately 10% for new on-shore areas, 20% in deepwater offshore areas, and 33% in shallow water offshore areas.

If the companies do discover and produce commercial quantities of oil and gas, they must pay royalties and other tax payments on production.  Currently, revenues from federal oil & natural gas leases provide the second largest revenue stream for the Federal government — second only to IRS receipts.

In addition, under current federal law, an energy company with an oil and natural gas lease must “use it or lose it.”  If energy is not produced within the lease term (generally ten years), the lease reverts back to the federal government and the company forfeits all the money it has invested in it (which, for large tracts, can be hundreds of millions of dollars).

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Posted in Government & Politics, Oil & Energy | Leave a Comment »

Ethics: Moral Reminders & the “Cash Effect”

September 10, 2008


Excerpted from: Predictably Irrational,  Dan Ariely, HarperCollins Books, 2008

 

“There are two types of dishonesty.  One is the type of dishonesty that evokes the image of her crooks knocking off a gas station.

 

Then there’s a second type of dishonesty.  This is a kind committed by people who generally consider themselves honest — the men and women who have borrowed a pen from a conference site, take an extra set of soda from the soft drink dispenser, exaggerated the cost of their television on their property loss report, or falsely reported a meal with and Enid is a business expense.

 

In multiple experiments, when students were given leeway to cheat, they did — but only a little.  [Apparently there is some upper limit to what students consider to be an acceptable level of cheating.]  Even in situations where the students had virtually no chance of getting caught, they did cheat, but they didn’t become wildly dishonest.

When students are given a moral reminder before taking an exam — say, being asked to sign an honor pledge — cheating was practically eliminated altogether — even if the school didn’t really have an honor code.” 

 

The principal: if we are reminded of morality at the moment we are tempted, and we’re much more likely to be honest.  So, oaths and rules must be recalled at, or just before, the moment of temptation.

 

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“Hard cash tends to make people more honest.  Many people feel comfortable taking a pen from work, but few would reach into the petty cash drawer and grab a couple dollars.” 

The principal: The further a person is removed from cash money, the more yielding they are to temptation.  Think: expense reports, insurance claims, credit card expenditures.

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More proof … the power of "free"

September 10, 2008

Excerpted from Warrillow & Co., “Nothing good in life is free? 65% of small business owners disagree”

In 2002,  small business owners were significantly more interested in discounts for new products, with rewards and free trials competing for distant second and third positions. In a growing economy, like that of 2002, the free trial wasn’t worth the effort for most small business owners. Trial campaigns in strong economic conditions generate reasonable uptake, but generally result in poor conversion to the fee product or service and a lower quality customer over the lifetime of the account.

A 2008 survey … yielded the exact opposite set of preferences from small business owners:

Free trials are now preferred by far over discounts, with rewards dropping to the last position. In the current economy, … free offers are much more broadly applicable and appealing to the average business owner.

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Three recommendations to most effectively utilize free trial offers:

  1. Prove your superior service: Free trials get you in the door … high quality service remains the key factor in customers. Sell your company as a whole, in addition to … specific products.
  2. Provide an in-trial assessment: All too often, engagement with the customer during the trial period focuses exclusively on upgrading to a fee product. Create proactive and customized usage analysis … prior to the end of the trial that gives a reasonably unbiased assessment of the product fit for the customer … and recommendations for getting more out of the remaining trial time.
  3. Don’t abandon targeting: Creating a free version doesn’t automatically make your product or service more applicable to business owners outside your target market. Steer clear of blanket offers and focus your efforts on the customers for whom your products have the best fit.

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Full article:
http://www.warrillow.com/weeklyNews.aspx

Thanks to Straz (FOK) for the head’s-up

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Brand Power- Cole vs. Pepsi

September 10, 2008

Excerpted from “Innovation & Branding”, by Morgan Johnson, SCI Innovation Conference, May 2005

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TakeAway Point:

In blind taste tests, Pepsi usually edges out Coke. But, when folks know which brand they’re tasting, Coke wins convincingly.

Logical inference: it’s the power of the brand.

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image 

Source:
http://www.soci.org.uk/SCI/groups/bsg/2005/reports/pdf/MorganJohnson.pdf

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Posted in Mktg - Brands, Uncategorized | Leave a Comment »