NBC's "The Apprentice": QVC

A full post-mortem of last night's episode of "The Apprentice" will have to await the extended boardroom episode on Saturday.

The project was to choose an item to sell on QVC, write the script, set the price, and produce a live 12 minute segment. Whichever team generated more revenue would win. Oh, and since the teams were unbalanced -- 8 on Mosaic to 6 on Apex -- Trump moved Pamela back to Apex and made her the project manager. The thinking was that she might straighten Apex out, but I had a feeling it would be like pouring gasoline on a fire.

Both teams ended up going with higher prices rather than lower ones, and in the end, Mosaic won by $10 (on total revenues over $17,000). Mosaic's reward was to go play tennis with John McEnroe and Anna Kournakova at the U.S. Open Stadium. The funniest part was seeing Raj unsuccessfully hit on Kournakova, resulting in her dare to him: she would go out for coffee with him if he could return one serve of hers out of five tries, but if not, he had to submit to the dare. Not surprisingly, Raj failed, and he had to run around the stadium seats in his boxers.

I'm not surprised that he totally flailed and didn't even come close to returning a serve; in fact, he only got his racket on one. Kournakova never won a tennis tournament, but she did managed to rank in the top 10 on occasion, and Raj looked like he'd never played tennis seriously. I played on my college tennis team -- but it was Caltech, so it's not as if I'm a really strong player -- and I took lessons from a former pro, a guy who I think never got ranked even in the 200s when he was playing. One time, we played points where he was serving, and by luck/chance, I managed to scramble and got to love-40 (3 points for me, 0 for him; 4 points to win the game). He then broke out his "A" serve -- four serves either right down the line or at the opposite corner. I had no chance.

Anyway, Trump fired Pamela (over Maria, who claimed to be terrific on camera but was terrible; and Stacy, who was competent but annoying), though it wasn't entirely clear to me if it was because Pamela set the price -- which Trump and Carolyn thought was too high -- or because she misidentified who should be assigned to what tasks. Personally, I think the magic eraser was probably priced too high ($27), but given the ultimate results, I don't think the price was the culprit. True, had it been priced at $19.99 as many teammembers wanted, they would have sold more. But they would have had to have sold 200 more erasers, which may or may not have happened. At the $27 price, had they sold just one more magic eraser, they would have won.

On a side note, it's nice to see that Trump does not surround himself with yes-men (or yes-women). While Carolyn approved of firing Pamela, George had stood up for her in the discussion before the final boardroom, and after Trump fired her, George continued to defend Pamela. Oh, and did anyone else think it was funny when Trump said, "I think it was the right decision." Well, I should hope that you think it was the right decision; otherwise, why did you make it?!?

Finally, why is "The Apprentice" superior to "Survivor"? Because in "Survivor," the gamesmanship dominates over success in the challenges. That may make "Survivor" harder to play than "The Apprentice," but it makes it less interesting to watch. Ho hum, each tribe is dominated by the older players, with the younger ones getting picked off one by one. Apart from seeing your tribe win immunity, there's nothing you can do if you're not in the dominant alliance. Brady tried hard to crack the elderly male alliance, but despite his hard work, his athleticism, his good nature, he was voted off. That just doesn't happen on "The Apprentice."

UPDATE (10/11): Predictably, I watched the QVC channel tonight for "The Apprentice" segment. First, QVC was selling the first season on DVD. Then they repeated the "It Works" sale (the cleaning block that Apex sold), except that QVC priced it at $17.62! In 4 minutes, they sold $48,000 worth of product -- and that's with Pamela hawking (as opposed to the more polished Jennifer)! While it's hard to compare this to the performance on the show (as a primetime slot is probably more desirable than mid-afternoon), this definitely supports the contention of those who thought it was priced too high.

Comments

[Kevin Jon Heller]

Such sloppy fact-checking... :) Kournikova has won numerous doubles titles, including two grand-slam victories in the Australian Open (with Martina Hingis). In fact, Hingis and Kournikova were the #1 ranked doubles team in the world in early 2000.

[Andrew O'Brien]

I think Trump got it exactly right last night, and here's why I think that.

The men sold 252 grills @ $71.25/ea for total revenue of $17,955.00.

The women sold 659 sets of sponges @ $27.23/ea for total revenue of $17,944.57. So the women lost by $10.43.

Trump fired Pamela because she was responsible for setting the pricing on the women's team's product, and he thought the price she set was too high. Trump obviously believed that the women would have sold many more sponges at a lower price. But how reasonable an assumption is that? Let's crunch some numbers!

Either Trump or Caroline (or both, my memory is a little fuzzy) cited $19.99 as the price they thought would have been optimal. In order to match the men's revenue at a $19.99 price point, the women would have had to sell 898 sets of sponges. That's 36% more sets of sponges than they managed to sell. The $19.99 Trump-suggested price is 26.6% lower than the actual $27.23 Pamela price. So Trump is arguing that a 26.6% price cut would have resulted in more than a 36% increase in volume, or, to put on my economist's hat for a moment, Trump is arguing that the price elasticity of demand for sponges is 1.35 or greater.

Is that a reasonable assumption? This website,

http://www.mackinac.org/print.asp?ID=1247

provides some estimated real-world price elasticities. The sponges from last night are not on there, so one has to decide which of the goods they do list is most similar to the sponges. Would QVC buyers consider these sponges as an easily-substituted commodity which wouldn't be worth splurging on if they got expensive (like restaurant meals or fresh tomatoes)? Or are the sponges more like a household necessity that's so cheap that even if the price doubles it doesn't matter (like toothpicks or salt)? I think it's pretty obvious that these sponges are more like fresh tomatoes and restaurant meals, whose price elasticities are far greater than the 1.35 I calculated as the breakeven elasticity. So a small price cut would have resulted in a sales boost that would have more than compensated for that cut.

[B. C.]

Well, I disagree with the assessment above, but I'm no economist so I won't challenge it. What I will challenge is whether or not Trump fired the right woman.

First of all, Pamela was thrown on to a team that (a) she knows little about and (b) has failed consistently. She took an authoritarian approach, thinking it would help to dissolve the personal issues that divide the team. Naturally, she wasn't received well by the other girls. But she was effective, as the team actually pulled together and looked pretty good in the end, finishing in a virtual tie. (Wouldn't it have been more interesting to calculate net profits?)

But a loss is a loss. Pamela had effectively delegated and clearly had trouble with Stacy throughout. She immediately balked on the price, refusing to give her opinion without qualifying it. Then she predictably waited for the troop to back her up. So Pamela took over and made the decision, which seems rational if she was accurate in comparing it with similar products on the market. Then, in her legal duties, Stacy seemed a little worked up about relabeling the other cleaning supplies. Was she planning litigation with 409 and Fantastik? Her job was just to get them on the air, not take them to court. Her response, "if you don't want to do the legal work, then don't ask a lawyer to do it." Well, Stacy, you didn't complain when it was assigned to you. And Pamela was right; we're not here to bill hours, honey, we just need to know what we can have on camera and what we can't.

Trump's assessment? Pamela didn't take the time to figure out her team's strengths, she just asked them what they were good at. Wasn't this a two-day project, Mr. Trump? Didn't you just put her on a team that he is completely unfamiliar with? Was she supposed to hold auditions? It seems reasonable that one would assess strengths by asking a group of grown professional women what they feel they are good at, especially when pressed for time. I'd like to hear his alternative. But what else does Trump have for us? Pamela is too opinionated and decisive. Trump wants to suggest these are bad qualities in a leader? Does he have a mirror around? (Apparently not, or he'd do something about that hair.) Ridiculous. Someone has to form an opinion and make decisions or nothing gets done. Pamela did that; Stacy didn't.

I don't even like Pamela and I don't think she did all that great, so I feel bad defending her. But Trump is consistently making the wrong decisions, and the show is starting to get lame. If I wanted to see people play Jenga to see who gets voted off, I think Mark Cuban has a reality show for me to watch.

[Craig]

Maybe they should have _raised_ the price! I didn't see the show, but if they had raised the price only 50 cents (still under $28), and lost no more than 9 sales, they would have won.

[apprentice fan]

Following your assumption, Professor, I think Pamela deserved to get fired for one reason: Sandy! :o)
Apex lost its mission last week because of Sandy's decorating. By tasking Sandy for such a position again, Pamela proved the Donald's point that the team leader lacked the ability to place individuals in positions best suited for their talents.

For future episodes, I predict that the successful Apex team leader will be that person who puts Sandy in charge of purchasing one additional item of whatever it is the group is peddling...jk :o)

[Sarah]

W74--
I read your analyses of the apprentice, and I really do not get it. What is it that keeps/holds your interest? It is like a soap opera for the business community? That's what it sounds like.

Maybe I need to put a tungsten filter in my personal reading lamp....

[FN84]

The moral of the story is clear: Anyone who makes it to The Apprentice should not set any prices until calling Andrew O'Brien! Good lord, I have not seen so clear an explanation of an economic principle since Hazlitt's Econ. in One Lesson.

[Tung Yin]

Andrew O'Brien: Wow, I'm basically persuaded on the general pricing point. I'm not sure that price elasticities remain constant, but the $19.99-$27 range seems like it would fall within the 1.35 ratio.

Sarah: I don't think I can articulate what it is I like about "The Apprentice," but I'll try. I like seeing the projects that the teams have to compete on, and seeing how they perform. I also like seeing the boardroom, where the contestants have to defend themselves from Trump's criticisms. Finally, I like hearing Trump say, "You're fired."