The Starling's Algorithm
A framework for deciding when to exit a customer, market, or product by comparing marginal value of continued engagement against opportunity cost of alternatives.
A framework for deciding when to exit a customer, market, or product by comparing marginal value of continued engagement against opportunity cost of alternatives. Based on the marginal value theorem demonstrated by starlings leaving berry bushes.
When to Use The Starling's Algorithm
Use when evaluating whether to continue investing in existing customers, markets, or products versus pursuing new opportunities. Critical for portfolio optimization and avoiding the trap of staying at depleted patches.
How to Apply
Calculate Marginal Value
Marginal value = (Next deal revenue × Margin × Retention probability) - (Sales cost + Delivery cost)
Outputs
- Dollar value of next interaction with current entity
Calculate Opportunity Cost
Opportunity cost = Expected profit from best alternative (new customer, different market, etc.)
Outputs
- Dollar value of next-best alternative
Make Leave/Stay Decision
Leave when: Marginal value < Opportunity cost. Stay when: Marginal value ≥ Opportunity cost.
Outputs
- Binary exit/continue decision