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The Apprentice 2 QVC Challenge: The Right Way to Measure Success?by David Bloomberg -- 10/13/2004
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In the fifth episode of The Apprentice 2, we saw the two teams battle to sell their products on QVC. In the end, as we know, the men won by little more than ten dollars.
But was this really a legitimate way to measure success? Or should it have been done differently?
Certainly, this type of challenge is more objective than the type where they have to create something and have it judged by “experts.” Despite the fact that the two teams were very close, and despite Pamela’s assertions that they “tied,” the winner was actually quite clear.
However, that doesn’t mean they did it right.
The winner was determined by figuring out how much each team grossed in sales. But real business doesn’t work that way. In business, you only really care about net. If you gross a ton of money but it's all eaten up in expenses, you go out of business. But if you net a smaller amount of money, most of which is profit, you succeed.
Let me give you a real-life example. While I was in high school, I worked at a lot of flea markets and fairs. We sold leather belts (my grandfather at one time owned a factory) and eventually went into t-shirts as well (rock shirts and other screen-printed shirts). What mattered to us was not how much we grossed, but how much we netted. We could have sold a lot of items at rock-bottom prices – and had a loss at the end of the day. Or we could have sold fewer and made a profit and had something on the dinner table that night. (OK, so it wasn't quite THAT bad, but you know what I mean.) We had to factor in the cost of the merchandise, the cost of the space, etc. Just because some guy wanted to buy ten shirts for $3 a piece didn't mean it was a good idea. Sure, we would have grossed $30, but probably netted about $3.
Looking at the items chosen by Apex and Mosaic, it seems to me that the It Works! sponges had a pretty large profit margin relative to their price. If they didn’t, we wouldn’t have heard so much about how they could cut the price much lower. Indeed, several team members, Carolyn, and even QVC said the price was too high! And when Pamela returned to QVC on Monday to sell It Works! again, QVC priced them at $17.62 as compared to the $27.23 charged by Mosaic!
We have little idea as to the profit margin on the grill chosen by the men, but as a bigger-ticket item, odds are good that its profit margin was decent as well. Still, percentage-wise it was probably nowhere near the sponges – when Apex returned to QVC on Monday, the grill was selling for $69.24, only two dollars less than the men’s original price.
The women sold three times as many items as the men. Even if the profit margin on the grill was twice that of the sponges at their inflated price, the women still would have actually earned more. And considering that QVC was selling It Works! for $17.62 compared to Apex’s $27.23, that means we know that at least $6600 was pure profit (since the women sold 659 units) before we even factor in the profit that QVC would normally make. Compare this to the men, we only know they made $506 in pure profit before whatever QVC would normally make. That’s a hell of a hill for the men to climb. Just to make it even with the profit we already know the women had, they needed to make almost $24 a piece! And that doesn’t even include whatever QVC would normally make.
So if this had been a competition for profit, as opposed to simply gross intake, it seems fairly clear that Apex would have won.
Yes, I know that The Apprentice does not really take true-to-life business challenges any more than Survivor does (when was the last time a person stranded on an island had to walk along a balance beam around his fellow castaways?), but that is the premise under which they work – as seen when George correctly blasted Pamela for claiming they “tied” because they lost only by a little. Also, The Apprentice promises a real job in the business world rather than a simple cash prize, as does Survivor. But in a case where they were being measured on the amount of money they got for selling items, it seems to me that they should have taken profit, rather than net, into account.
Yes, there are good arguments against it. As Betsy Wasser pointed out in her recap of the Yahoo extras, QVC probably doesn’t want people to know just how much they mark up their products! However, I think a way could have been found to avoid that, such as giving them set costs for material, labor, and the like, or by giving both teams products that had the same base cost rather than items with such widely different price points.
Another argument against it is that it’s good to give the contestants a wide variety of challenges. They knew going in that this one was based on gross, not net, and so should have planned accordingly. True, but if they are going to have a business task that mimics sales, why not just go all the way to measuring profit?
It also could be pointed out that we have come to learn that the tasks are mostly irrelevant anyway. It's how you handle yourself during the task that is more important. Pamela showed this in a variety of ways (as discussed in Why Pamela Lost).
There really is no right or wrong answer – the task is what it is. Yes, we could say that most toys are not designed overnight. Most ice cream flavors are not created and sold in a single day. But those did not seem to truly come from the world of business. This task was supposed to mimic business decisions – choosing an item to sell, pricing it accordingly, creating a sales pitch, and getting out there and doing it. If it was going to mimic business decisions, I feel it should have gone all the way and been judged by the way real business decisions are judged: Profit.
David Bloomberg is the Editor of RealityNewsOnline and can be reached at RNO@pobox.com.
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