The $40 Million Cautionary Tale | Raising Money

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The Dangers of Raising Too Much Money

With $41M in funding and a killer team, you have the perfect ingredients for a successful company on the way to fame and fortune in no time… well, maybe not.

That’s what Color was all about.

Touted as a company of savvy businessmen and innovators, who brought their expertise to the table, they promised to bring the picture-taking experience to a totally new level.

Everyone loves capturing even the minutest moments of their lives. And with Color, taking pictures with your camera doesn’t stop there.

Riding on the wave of this new mobile age, the Color team envisioned a company that would change the way people shared their precious moments with others. Yes, Color hoped to reinvent your mobile social networking experience. The idea is to bring people closer together by developing apps that promise a totally new visual experience.

The app, which debuted via iPhone a year ago, is best described as a “public photo and video-sharing app for groups.”

With co-founder Bill Nguyen, you have a company that is highly advanced in terms of technology.  D.J. Patil, LinkedIn’s former chief scientist, heads the product department.  Another co-founder, Peter Pham was formerly from Photobucket, BillShrink and Trinity Ventures.

Sequoia Capital contributed $25 million as initial investment, $9 million came from Bain capital, while Silicon Valley Bank put in $7 million.  So that brought the total to $41 million in seed money.

But with that kind of funding, a lot of pressure rose from both the start-up and the investor community.  With Color being able to afford more pricey developers than other companies, they were a premium destination for top talent.  The stakes are simply got higher.  And the risks are got bigger.

It’s worth taking noting that a lot of start-ups literally have to start from the ground up, with some not even managing to take off.  With no big names and very limited, or no funding at all.

For Color, having those big names and funding — to the tune of $41 million, almost assured them of massive success.

Yet, success is never guaranteed.

To be able to succeed, Color needed to capture the imagination of millions of users.  And after that, figure out a way to monetize the app. There’s a huge potential for highly-targeted, location-based advertising.

And it failed there miserably.  Customers just didn’t want to ride the wave.

After a few months, Color was re-launched, this time enabling users to integrate it with Facebook and now has video sharing features.  After struggling to build an audience, they collaborated with Verizon so that the app is pre-installed on the telco’s 4G LTE enabled Android phones.

This enabled Color to increase their active users from 50,000 monthly in May of last year to more than 400,000 in September of the same year.  However, that was no match to Instagram’s more than 7 million daily active mobile users.

And in September, Nguyen announced that he was leaving the company.

Color blasted into the scene with a Technicolor Dreamcoat, but ended up wearing a cloak of mourning.


Update: Rumor has it Apple is snatching up Color’s IP for $7 Million.

Update (Nov. 20, 2012): Color, the Startup from Hell, Is Going Down in Flames 


Increase Tips | Gamification Example

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Increase Tips

Tip Jar

People are more likely to give money when they don’t feel obliged to do so. But rather, are doing it just for fun. In this photo, they were able to engage customers to give tips by asking a harmless question. Would you rather ride a dragon or a phoenix? People will often give their opinion when compelled to do so.

It gets confusing at times, whether or not you should leave a tip for a waiter or barista – and the next logical question is: how much is the appropriate amount?

Let’s face it, for those in the hospitality industry — like servers, drivers and guides, more often than not, they are not paid enough to make ends meet.  And that little tip to show that you appreciated the service can go a long way.

The average tipping rate for server is 20%, for bartender it’s at 15%, for buffet it’s 10%, for take-out it’s at 5%, while the fast food crew usually gets none.

However, it is surprising to note that as a nation, Americans give tips amounting to over $16 billion dollars a year.

1 in every 8 customer would tip less than 10%, while 1 in 20 would give more than 20%.  But the most common one is a tip of about 15%.  So, on the average, American give tips of about 17.5%.

A lot of advice has been given in order to entice the customer to give higher tips.  Like a simple gesture as touching a customer’s shoulder during a meal or showing that you’re intently listening to what the he is saying when you take their orders.  Being at the customer’s beck and call is more likely to give a waiter a fairer chance at getting a higher tip as well.

But what if we infuse some humor, or maybe a little bit of a fun to encourage those customers to shell out some more?

Leaving out games or puzzles, even mind games and other activities – anything that will make a customer linger longer than usual in your shop with their coffee, is one sure-fire way to keep your customer engaged, and thus, wouldn’t mind leaving some token of appreciation in the form of a tip, especially since they had fun. If you can tie those games to tipping, even better!

Developing customer loyalty programs that enables the customer to reach different ranks whenever a number of purchases is made, and enabling them to get rewards or freebies will most likely keep them coming back for more.

Let’s take the case of Starbucks, one of the most successful companies when it comes to fostering customer loyalty.

Starbucks Loyalty card proves to be a hit for all its customers. Enrolment is free.  Customers can load any amount on the gift card and start collecting stars for every purchase that they make through the card.

The more stars they get, the bigger the rewards are.  Aside from that, since you use the card to make your purchase, it makes a customer feel that he’s not really shelling out money.

And lest we forget, every Christmas season, many coffee lovers get the Starbucks Christmas Traditions Promo card.  This can be availed without any purchase.  And this is where the fun part starts.

They need to accumulate a certain number of stickers by buying Starbucks beverages.  And the reward: a Limited Edition Starbucks planner that you can actually get for free.

Come to think of it, if we do the math, the cost of one planner can prove to be cheaper than having to consume all those coffee just to get all the required number of stamps.

But year in and year out, customers continue to do this Starbucks Christmas tradition just for the sake of having a planner that they can brag about. Gamification in its simplest form.

What is Gamification?

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What Is Gamification?

Gamification is a strategy integrated to increase customer or user engagement. This is done by using “game elements, and game dynamics” in “non-game contexts.”

It’s awakening a person’s interest to do something for a certain gain —  whether explicit or implicit.

The idea is to create or do something that will catch the customers’ attention and encourage them to do things in exchange for some rewards. stipulates that gamification has become “a buzz word since 2010″ and the more popular sites like Nike Plus, Zombies Run, Salesforce Rypple and Samsung Nation have successfully leveraged gamification in effecting customer behavior change.  That is, turning their customer from mere onlookers, or even “passersby”, to more engaged fans.

The “playful environment” allows the players or the customers engaging in the activity to be themselves, it’s like being a child all over — in a different setting though.  But being given the space and freedom to do as they please make the experience a truly rich one.

This makes them feel that they are in total control and are not dictated upon.  Thus, the human need to feel empowered is satisfied.  As well as the need to gain recognition or get rewarded from an activity that they have done. defines gamification as “incorporating game elements and mechanics into non-gaming websites and software.”

The objective of gamification is to make nongame applications “more fun and engaging” and to influence the behavior of the participant.  The operative word there is “fun.”

To illustrate, Nike Plus has a Running app.  It is a chip embedded in Nike shoes used to measure the running activity of people.  The user can choose where to run and when or for how long.  All the Running app does is record the activity.  It is this relationship between the user and the “gamifer” that matters.

Although We Play mentioned that gamification became popular in 2010, it originated in 2004 when Nick Pelling coined the term gamification for Conundra Ltd, his consultancy business.  Nick Pelling’s business was involved in helping “manufacturers evolve their electronic devices into entertainment platforms.”

Conundra, according to their website will “help design, build and run industry partner programs around new collaborational business models.  They can also source, adapt, or co-develop games and entertainments.”

September 2010 served as the benchmark for the use of gamification by marketers and website product managers to engage customers and influence desirable behavior with respect to website to usage.

Examples of how gamification boosted the number of users abound.

DevHub is one site which enjoyed the benefits of gamification.  Their users’ numbers leaped from a measly 10% to an exciting 80 % after they infused gamification into their website.

RedCritter Tracker uses badges, rewards, leaderboards and ribbons into project management.

Stack Overflow, a Q & A website for programmers also uses gamification. Users are influenced and encouraged to act in a certain way like sharing links to questions and answers in Facebook and Twitter.

Australian broadcast and Yahoo! introduced Fango mobile app in Nov 2011.This allows TV viewers to actively engage in shows with the help of social networking sites, and help enliven viewer discussions.

Gamification may have been a boon to business and to those who utilized it, but it also has its share of opponents.  One of which is Ian Bogost.  He thinks it is merely a means to manipulate the unaware.

However, despite that, gamification has been successfully integrated in business and is used in the following areas:

Employee training programs
Health and Wellness
Online and in-person shopping
Primary education
Financial websites
Extreme sport activities
Loyalty or rewards programs
Social Networks
Call Center environments
Market Research

This reminds us of the old rule.  When it comes to advertising or marketing, what makes consumers decide to buy or engage are their brains.  But an appeal to the emotion is what catches their attention first, and make them give those products or services that second look.

Gamification is indeed a very good example of the rewards system theory. And for marketers and other online advertisers, understanding how they can fully utilize gamification intelligently will help in creating that influence that can potentially have long-term business and economic impact.

Piano Stairs | Gamification Examples

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Sure, gamification is used in games and online. But what if gamification could be used to help make ordinary tasks not only doable, but exciting? What if you could ‘gamify’ life? Well, Volkswagen has a brilliant organization dedicated to doing just that. It’s called The Fun Factory. Over the next few weeks we’ll be looking at several of The Fun Factory’s gamification examples. Today, we’re examining Piano Stairs.

The goal is simple: increase the amount of people who choose stairs over the escalators. In order to accomplish this, a behavioral change is required. (For more information on changing behavior with gamification, click here)

What would motivate a massive crowd to take the stairs instead of the ‘effort free’ escalator alternative? Adding game mechanics to the stairs. By turning the stairs into piano keys, TFF utilized three key game mechanics:

1.)  Social- With multiple people taking the stairs at one, it’s a shared experience. Each individual is participating in a group activity. Every trip up the stairs will sound different depending on who is stepping on what key… I mean step.

2.) Curiosity- Although we’re creatures of habit, curiosity is a powerful driver. It’s why we touch the stove top and landed on the moon. It’s human nature.

3.) Feedback Loop- Every single step results in audio feedback from the stairs. This keeps the participants actively engaged.

The results: 66% increase in stair traffic vs escalator traffic

This execution is a great gamification example of turing an ordinary task into a viral, engaging experience. What everyday task can you gamify? Please submit your ideas and comments below.

Frequent Flyer Programs | The Poster Child for Gamificaiton

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Gamification Airline Miles

Everyone wants value for their hard-earned money. From buying groceries, cars, food or a house, people go for stuff that will stretch their dollar. Now more than ever, most consumers are now wiser in handling their money. As a response, businesses have come up with unique ideas to attract and retain customers.

From loyalty programs to cash back rewards programs, and other activities like awarding and redeeming points for cash or gift items, companies have tried everything to entice customers to part with their money.

The airline industry is a perfect example with their frequent flier programs.

Frequent flier programs reward loyal customers by allowing them to earn “miles” or points. These miles are accumulated over time and may be exchanged for free airline tickets. This benefits the frequent fliers such as those who regularly travel on business and/or pleasure. Earning and redeeming miles though, are subject to the terms and conditions of the specific airline.

Over the years, the concept of miles has evolved. In the past, earning miles was just associated with the travel, specifically the airline industry. Now, other lines of business embrace the idea. You can earn miles if you stay in a hotel, rent a car, shop, buy groceries, gadgets, credit card use and other transactions not related to travel. This gives benefits both for the customer and the business owners. The customers get rewarded for being loyal to a specific company while the commercial entities are able to entice customers to get their products and/or services as well as keep them.

The great thing about it is that it encourages customers to spend more in the hope that they’ll be able to earn points to get rewards. Which is not really a bad thing after all. And the thrill of getting something for “free” adds motivation.

So how does it work? You would need to sign up for an account for a frequent flier program with your airline of choice. There are several ways to do so — online enrolment, a telephone call to their office, or via filling out a paper form and sending by it mail. Prior to signing up, carefully weigh the advantages and disadvantages of the frequent flier program that you are considering. This is important to maximize earning of miles.

Overall, frequent flier programs can be a great way to travel for free or at least with minimal cost. The key is understanding how your program works and being flexible to fully maximize its features.

There are statistics showing that the number of miles awarded since 1981 has swelled to 2714.1, from 4.1 in 1981.

And the thing is that frequent-flyer programs continue to grow tremendously.

In 2005, who would have thought that 14 trillion frequent-flyer miles would be accumulated by people worldwide. And if we do the math, that’s roughly about US$700 billion in customer spending. So, you can just imagine now just how huge it can possibly be.

Maybe it is really our basic instinct as human beings to compete. And things start to get even sweeter when we are made aware of the potential rewards that we can get.

Foursquare | The Dangers of Gamification

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Is Foursquare Moving Away from Gamification?… Finally!

About 10 years before 2009, Dennis Crowley was bored while working at Jupiter Research. Suddenly, thoughts of a mobile social network emerged.

He said that during the dotcom crash, Dodgeball, which is the predecessor of Foursquare “started as a way to locate the hang out of their laid off friends.” Dodgeball was bought by Google in 2005 who basically shelved it.

In 2009, Crowley joined forces with Naveen Selvadurai. Selvadurai is the co-founder of Foursquare. The duo then worked at bringing the abandoned service back to life.

Foursquare was launched in March 11, 2009.

Foursquare is an improvement on Dodgeball. It serves as a locator for the participants. The rules are pretty simple. The users announce their location with friends by checking in. They can either use a smartphone app or send a text message. When users check in at certain locations, they receive corresponding points. Gamification is great for user adoption but is incredibly dangers for a long-term strategy, as users eventually get tired of games and stop “playing.” If you’re trying to build a long-term social network, it’s ok to include gaming elements but Foursquare was designed like a game from the ground up. Even the name “Foursquare” is a game. As to be expected, the traffic followed the predictions for short-tem growth…

Foursquare Gamification Comscore

The graph is showing that the number of users is not increasing. in fact it has reached a plateau since Aug of 2012.

Dennis Crowley also “revealed that users were not checking in with Foursquare, so they are searching for solutions to improve engagement.”

In line with this, there is a new highly enhanced Foursquare that accommodated user feedback for better service. The new Foursquare highlighted the “venue and activity recommendations”.

The smarter Foursquare app has the following improvements to expand beyond gamificaiton:

1) There are now fewer tabs, when the old one had 5, now there are 3

2) The Explore tab recommends places, food, shops, clubs based on your dwelling place

3) The venues can be seen on Google Maps

4) Userful information are now accessible to users about “the venue, feedback from users and publications, available deals”

5) Call to action button is placed at the top of the screen. This makes it easy for users to access check-ins using the thumb

6) Mayorship and other gamification features that used to define Foursquare are relocated to the bottom of the screen

7) The profile has categories which are designed similar to Pinterest with boards. Categories “include friends, stats, photos, tips, badges and lists.”

These improvements are met with the following:

New York’s PRWEB as of October 22, 2012 depicts that Foursquare challenges Yelp.

Chris Thompson on October 31, 2012 wrote about Foursquare becoming a search engine. This time it is so much easier to accomplish by learning to leverage on the services offered by Foursquare.

Foursquare has accomplished a lot with the innovation they adapted. How the people and businesses ride the tide of this tiger novelty is something worth watching.


The Charisma Myth: Book Review

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Charisma, as defined by Wikipedia, is that attractiveness or charm that can inspire anybody, in an almost divine or supernatural way. It’s like seeing a person walk into a crowded room, and then everything would seem to stand still. And you become totally aware of the power that that person seems to hold.

Political, religious and business leaders have that kind of power. While us, mere mortals, just stand in awe.

In this book by Olivia Fix Cabane, The Charisma Myth: How Anyone Can Master the Art and Science of Personal Magnetism, she has illustrated how science and technology have torn charisma apart and shows us that it isn’t really magic. But rather a skill that can be learned.

Imagine if you can make people like you more, trust you more, and want to hang on to every word that you say – that would be like living a charmed life where everything becomes so easy. Your projects, business and personal life become successes that you never even imagined possible.

Charisma is very important in business. Whether it’s about a new venture or project, or career move to advance – this book will enable you to achieve your goals. And the actionable steps listed there can definitely give you that unfair, competitive advantage.

Understanding that charisma is not some power but rather a set of behavior that can be learned, and that can be almost turned on and off — can turn your life around from a series of conventional happenings to something more exciting.

This book was able to define the three main elements of charisma – presence, power and warmth. And dissect how each one has an effect on the others.

From the way you shake hands with people, how you interact and engage in conversations, you’re actually sending signals that make them very much aware whether or not you really care. Or even whether or not you’re really there, both physically and mentally.

The way you carry yourself also sends a very strong message of the kind of power that you hold. But lest we forget, a power that’s not mixed with warmth might just as well be taken as conceitedness.

This book takes us farther into the non-verbal behavior we display that seriously impacts how others see us.

If there’s one book that you should have, this has got to be it.

This book teaches you to stand up a little straighter. This book makes you look at things clearer. And this book compels you to summon the necessary courage you need to become a success – in anything that you do, no matter how small or big it may be.

Remember, charisma is a skill. It’s not something innate or something one is really born with. So the more you understand it for what it really is, the more you see it in a totally different perspective.

Cabane has succeeded in coming up with a book that you won’t really get tired of reading, most specially if you’re a person who seriously wants take your business endeavors to a whole new level.


Crush It Review (Gary Vaynerchuk)

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To some up Crush It in one word: culture. Gary Vaynerchuk’s first business book was an easy read and a great reminder for entrepreneurs to chase passion, not profits. Gary’s unique writing style is a ‘write as you would talk’ method which is interesting and at times, a bit distracting. It does however, follow his ‘be authentic’ mantra.

There are a few actionable items within the book (mostly revolving around social media) so if you need a short course in building a business culture through social media, it might be worth looking into Crush It! Likeable Social Media is also a great alternative.

Vaynerchuk can be self-serving at times, but it’s not overwhelming. Many of his personal stories tie back in nicely with the overall theme of the book. Having said that, it does jump the line between autobiography, marketing and entrepreneurship quite often and not in a eloquent way. It almost feels like several blog posts smashed together with no real hierarchy.

The other major gap lies within the data. I understand that ROI (return on investment) is difficult to measure in social media, but some of the concepts are difficult to swallow with hypotheticals.

On the plus side, Gary doesn’t sugarcoat the lifestyle of an entrepreneur by claiming “Get Rich Quick” or other such nonsense. For years I’ve been hearing, “why do you work so much” or “come relax and watch some tv.” To many entrepreneurs like myself, work is fun. It’s not boring, it’s not a chore. It’s what I choose to do when I wake up. It’s what drives me out of bed. It’s what inspires me. I’ve never heard an author understand that as well as Gary Vaynerchuk did. For that, I applaud him.

So without spoiling anything, here are a few highlights of the book:

Book Highlights

• Motivational stories inspired from personal experiences

• Why passion is important and how to find it

• How to build a personal brand online (and offline)

• How your actions effect the culture of your business and employees

Overall, Crush It is more of a battery than a business book. Gary’s high energy keeps things entertaining and might inspire you to get up off your butt and get things done. If you’re looking for a more ‘marketing focused’ book, see my Top 10 Best Marketing Books.

If I had to pick one, Gary’s The Thank You Economy is my favorite of the two. It feels a bit more structured and has a clearer purpose. Either book is worth reading, especially if you need a little pick-me-up.

Save over 30% on Crush it!

Top 10 Best Marketing Books

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Here are my top 10 favorite marketing books. (in no particular order)

1.) Insanely Simple(Ken Segall)

Description: In Insanely Simple, you’ll gain insights into the mind of Steve Jobs, and listen in on the receiving end of his midnight phone calls. You’ll understand how his obsession with Simplicity helped Apple perform better and faster, sometimes saving millions in the process.

Pros: Fascinating “Outsiders” look at Apple’s business practices

Cons: A little repetitive with a lot of filler content

2.) Spent(Geoffrey Miller)

Description: Exposing the hidden reasons for why we buy what we do, Spent applies evolutionary psychology to the sensual wonderland of marketing and perceived status that is American consumer culture. Geoffrey Miller starts with the theory that we purchase things to advertise ourselves to others, and then examines other factors that dictate what we spend money on. Miller analyzes an array of product choices and deciphers what our decisions say about ourselves, giving us access to a new way of understanding-and improving-our behaviors to become happier consumers.

Pros: The evolutionary look at marketing is game-changing

Cons: The book is longer than it needs to be… easily worth it

3.) The Tipping Point(Malcolm Gladwell)

Description: The tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire. Just as a single sick person can start an epidemic of the flu, so too can a small but precisely targeted push cause a fashion trend, the popularity of a new product, or a drop in the crime rate. Malcolm Gladwell explores and brilliantly illuminates the tipping point phenomenon, is already changing the way people throughout the world think about selling products and disseminating ideas.

Pros: Fun read backed by case studies and data

Cons: None. Read this book.

4.) Reality Check(Guy Kawasaki)

Description: Reality Check is Kawasaki’s all-in-one guide for starting and operating great organizations-ones that stand the test of time and ignore any passing fads in business theory. This indispensable volume collects, updates, and expands the best entries from his popular blog and features his inimitable take on everything from effective e-mailing to sucking up to preventing “bozo explosions.”

Pros: Guy is engaging and articulate. Startup AND marketing advice

Cons: It leaves you want more… in an empty way

5.) Delivering Happiness(Tony Hsieh)

Description: In his first comic book, Zappos CEO Tony Hsieh shares the different lessons he has learned in business and life, from starting a worm farm to running a pizza business; through LinkExchange (acquired by Microsoft for $265 million), Zappos (acquired by Amazon for over $1 billion in stock), and more.

Pros: Advice from a real entrepreneur. Nice mix of biography and business advice

Cons: Great information on satisfying customers, but little on acquiring them

6.) Content Rules(Ann Handley)

Description: Blogs, YouTube, Facebook, Twitter, Google+, and other platforms are giving everyone a “voice,” including organizations and their customers. So how do you create the stories, videos, and blog posts that cultivate fans, arouse passion for your products or services, and ignite your business? Content Rules equips you for online success as a one-stop source on the art and science of developing content that people care about. This coverage is interwoven with case studies of companies successfully spreading their ideas online—and using them to establish credibility and build a loyal customer base.

Pros: Practical and actionable advice to get started

Cons: Needs more information on customer acquisition

7.) Made to Stick(Chip Heath)

Description: Made to Stick is a book that will transform the way you communicate ideas. It’s a fast-paced tour of success stories (and failures)–the Nobel Prize-winning scientist who drank a glass of bacteria to prove a point about stomach ulcers; the charities who make use of “the Mother Teresa Effect”; the elementary-school teacher whose simulation actually prevented racial prejudice. Provocative, eye-opening, and often surprisingly funny, Made to Stick shows us the vital principles of winning ideas–and tells us how we can apply these rules to making our own messages stick.

Pros: Entertaining with great case studies

Cons: A little longer than it needs to be

8.) Blink(Malcolm Gladwell)

Description: Blink is a book about how we think without thinking, about choices that seem to be made in an instant-in the blink of an eye-that actually aren’t as simple as they seem. Why are some people brilliant decision makers, while others are consistently inept? Why do some people follow their instincts and win, while others end up stumbling into error? How do our brains really work-in the office, in the classroom, in the kitchen, and in the bedroom? And why are the best decisions often those that are impossible to explain to others?

Pros: Wildly entertaining with great stories and fascinating data

Cons: None. Another Gladwell gem :)

9.) Enchantment(Guy Kawasaki)

Description: Enchantment, as defined by bestselling business guru Guy Kawasaki, is not about manipulating people. It transforms situations and relationships. It converts hostility into civility and civility into affinity. It changes the skeptics and cynics into the believers and the undecided into the loyal. Enchantment can happen during a retail transaction, a high-level corporate negotiation, or a Facebook update. And when done right, it’s more powerful than traditional persuasion, influence, or marketing techniques.

Pros: Covers a wide range of startup and marketing ideas

Cons: A bit repetitive

10.) Brain Rules(John Medina)

Description: See how the brain works while using it in the process of reading this book! Most of us have no idea what’s really going on inside our heads. Yet brain scientists have uncovered details every business leader, parent, and teacher should know – like that physical activity boosts your brain power.

Pros: Biological and psychological look at marketing. Fascinating.

Cons: Less marketing related and it can get a bit academic

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