Thursday, April 28, 2011

Why slamming the brakes can be a great product strategy

At the off-leash park and my dog was being jostled either side by a couple of rouge, running hounds. So she did something interesting. She stopped. Instead of continuing running with them, being corralled by the hecklers, she stopped, stood tall, and let them go past. Then she changed course and reasserted herself.

Hollywood car chases. The hero is driving at speed when villains pull up on either side and try to jam his car. So what does he do? Slams the brakes, letting the villains career to their doom.

Intel. The story is told in Sway: The Irresistible Pull of Irrational Behaviour of how Intel slammed the brakes on micro processing because they were in an unwinnable war with cheaper manufacturers.

Independent schools. In a war for fees, some schools are slamming the brakes on single sex educational programs and moving co-ed.

Harvey Norman's boss Gerry Harvey copped a lot of flack recently for complaining about competing with cheaper off-shore retailers. Guess what Gerry, slam the brakes because you won't win on price.

So here's the lesson. If you find yourself being jammed either side by competitors in a price war, a technology war or a product war, slam on the brakes. Let them hurtle to their doom whilst you change course, reassert your Brand and, of course, remain top dog.

Image source:

Tuesday, April 19, 2011

Check me out! The perplexing preference for self-service

Something has shifted in supermarket shopping. Visiting the local Woolworths last week I noticed that the queue for the self-service line was longer than the Express lane. In other words, more people were willing to scan, pay and pack their items than wanted to have a shop assistant help them.  Wow.  Sure this is part of the deal at cheap-end Aldi, but Coles and Woolies now too?

This was in the same week I attended David Chaulk's Australia Scan presentation which showed very clearly that self-service check outs were finding favour with the Australian public. 


Can it be as easy as convenience?  That we believe it is faster to handle the goods ourselves than wait?  Well, maybe this stacked up when low adoption of self-serve meant it was truly faster than going through the service lanes. But if this is no longer the case, what other than convenience is driving our behaviour?

My theory? Two factors. The first, isolation.  It's the interaction we are keen to avoid because we are becoming more isolationist (is that a word?) in our real-world dealings.  Yes we're twittering and social networking, but we'd rather deal with a beeping machine in the supermarket than a human.

The second. Fear of inactivity. We'd prefer to do something - like scanning and packing our items, than stand idly in a line waiting for service. I mean imagine, a whole 2 minutes...just waiting.  The horror! No, in this modern age we need to do do do and it freaks us out to stop.  What a different experience it would be if the queue was designed to entertain us rather than bore us.  Disney makes queuing part of their magical experience, but supermarkets choose not to use this time to delight us.

What I find interesting for marketers is that we keep reading and hearing about the importance of Customer Service. And yet, our shopping behaviour suggests that a less personal type of customer service is what we want.  We prefer seem to prefer technology (except of course in ads where we want to see check-out chicks and chaps and smiling bank managers). And just like the introduction of ATMs, initial public concerns about how the technology would replace jobs has now been forgotten.

So kudos to the supermarkets for risking this change. They've gambled that less personal service is the way to go, and they are being proved right.  For me, this suggests three things;
1. like the supermarkets, you can force people to trial technology by making the other options unpalatable (in behavioural terms, by 'nudging' them to your preferred channel)
2. people will adapt to technology despite initial resistance if there is sufficient personal benefit, and
3. Customer Service does not always mean personal service

So what does that mean for your business and the way you think about Customer Service? 

Image from

Friday, April 15, 2011

Why I hate Coco Chanel

...or more correctly, why I hate the quote attributed to fashion designer Coco Chanel, “Before you leave for the day…take one thing off…”.  Why do I hate it? Because a number of times I have paused before leaving the house and wondered, what should I take-off?  Which makes me second guess the decisions I have already taken.  It messes with me!

See I come from the school of thought where you get it right the first time.  Dress as you intend to be seen. Write how you want to be read. Develop your product as it should be.  Fiddle at the beginning not at the end.

So for me the lesson from Coco Chanel (who by the way had quite a bit of success with product) is this: Before you launch your product, get it right. Don't include anything that is so meaningless that it can be taken off before it goes out the door. Think streamline. Think clarity. Think Philppe Starck. Think Apple. Think Flip Video. Just think.

To right the karma ledger here are some great quotes from Coco Chanel
  • "How many cares one loses when one decides not to be something but to be someone. -Coco Chanel."  —Coco Chanel on Being
  • "There is no time for cut-and-dried monotony. There is time for work. And time for love. That leaves no other time!"  —Coco Chanel on Business
  • "There are people who have money and people who are rich."  —Coco Chanel on Money
  • "In order to be irreplaceable one must always be different."  —Coco Chanel on Uniqueness

Tuesday, April 12, 2011

Easter Eggxample of Behavioural Economics

Easter Eggs.  If you're ever chatting with someone who isn't familiar with Behavioural Economics or doesn't see the opportunities in understanding the power of irrationality, Egg them.  Let me explain.

We love Easter Eggs. In Australia we consume an average of twenty Easter Eggs for every man, woman and child, and that means it's big business for our chocolate manufacturers.  But in economic decision making terms, our love of Easter Eggs is irrational.  Here's why.

Imagine you visited two different supermarkets.
  • The first offered you 100 grams of Cadbury chocolate for $2.98.
  • The second likewise offered you 100 grams of Cadbury chocolate, but for $2.15.
You'd opt for the second, right?  After all, it's the same product but you save almost 40%.

Now imagine you are within one of the supermarkets and they have two offers;
  • The first is the same offer you took above, 100 grams of Cadbury chocolate for $2.15.
  • The second offer is an Easter Egg. 100 grams of Cadbury for $2.98.
Now which do you choose?

Block chocolate vs Easter Egg
Traditional economics, based on rational arguments of supply and demand would have us taking the $2.15 offer every time.  But guess what? We are not always rational.  The fact that the chocolate is shaped like an egg, wrapped in foil, available at a certain time of year and can be given as a gift means that the majority of us will buy the $2.98 Easter Egg and pay a 40% premium.

And Behavioural Economics can help us explain why. 

We make judgments about one thing relative to another.  In the examples above, 100g of chocolate that was the same could be judge of the basis of price.  However, when one chocolate was shaped like an egg, the grounds of relativity became different.  Have you ever wondered why Easter Eggs are not in the confectionery aisle?  Because relativity is being confined to the "Easter Egg"  category rather than the chocolate category. (And for anyone who may argue that it would be logistically difficult to have the Eggs in the chocolate aisle I will posit that if Eggs were shown to sell better in the aisle, that 'logistical difficulty' argument would evaporate. It's purely about moving higher margin chocolate, and that is best done when the customer can't easily compare $2.98 to $2.15.)

Social Influence
We are greatly influenced by others around us.  Indeed, that we even have such things as Easter Eggs is a social construct.  To give your child a block of chocolate is just not the same as an Egg.  As consumers we justify the economic irrationality by deferring to such emotional reasons as the magic of an Easter Egg hunt, smiles on faces etc.  And as marketers, that's what we aim to amplify so that our Brands have a reason to be purchased outside purely rational reasons.

And this is a key thing about explaining Behavioural Economics.  All those reasons for paying more can be cited by the consumer as entirely rational because we are great at justifying our decisions. But rationalised isn't the same as economically rational.  Why is this important?  When you next pitch a product or campaign for development, remember it's not just about the 100 grams of chocolate. It's the shiny foil, the social construct, the timing, the gifting, the emotion that your customer will be processing when they are in your aisle.  Get excited because if you can help your consumer rationalise their purchase, the economic rationalisation becomes moot.

And this is the massive opportunity Behavioural Economics presents to marketers, product managers and retailers.  Yours is the opportunity to turn the magic of irrationality into margin for your business.  So tell me, what's your Egg? 

Prices quoted from Woolworths, Moorabbin 8 April 2011

Wednesday, April 6, 2011

If NAB killed the asterisk what's it doing in their logo?

NAB billboard South Yarra station

"We killed the asterisk"

I love this ad for NAB, but not for the intended reason.  Forgive my shaky photographic skills, but the sign reads "We killed the asterisk" and is part of their campaign to differentiate themselves from the other big banks.

I'll get to their campaign in a minute, but not before I get an observation out of my system.

That's right, the NAB logo contains as asterisk!
But to be serious, let's look at what they are trying to tap into here*.
  * small print, exceptions, qualifiers

Turns out customers are annoyed when what they believe is the stated offer is subject to all manner of qualification.  In layman's language you feel like you've been jibbed, snowed, or mislead if the big claim is really not what it purports to be.  So NAB are differentiating themselves through inferring that they can be believed - the deal is the deal, no exceptions - whereas their competitors cannot.

But we're in marketing and know that there are always qualifiers*.  Whether you use * or ^ or 1, somewhere in your product or marketing information you will have to include substantiations or clarifications, terms or conditions. 

* sweeping statement not backed by any empirical data

 In a previous post, T&Cs Necessary? Yes; Evil? No I wrote that when you present Terms and Conditions to a customer, you are jolting them from state of unconscious processing to Executive brain function, and once the Executive mind starts to question, it questions everything.  'Do I really need this?' 'Is this how I should best spend my money?'  'How will I justify this to my boss?'  'I should probably see what the competition has to offer.'

Given Terms and Conditions are an important, and often mandatory part of the transaction and serve to ensure that both seller and buyer are clear on the terms of exchange, how can you minimise the disruptive impact of the "asterisk" moment on your sales momentum?  Three ways;
  • Integration - Have the customer understand and agree to concepts within the Ts and Cs throughout the sales process so they don't come as a surprise in the transaction stage.  Meaning? Why not use Ts and Cs as part of the feature set you are using to sell your product. For instance,  "Our Customers receive a monthly offers catalogue from us so that they get first dibs on priority deals" might be less of a shock than "By signing this contract you agree to receive promotional offers". 
  • Language - Modify the language so that your legal messages are not inconsistent with your brand.  Why not a statement that helps them understand the impacts of their behaviour such as "We know you'll want to wear these earphones all the time, but promise you won't drop them in the toilet or sink or wear them in the shower because you'll be warran-teed off when we can't replace them" rather than a dull warranty statement?
  • Congruence - Customers are looking for congruence between the proposition and the terms of sale.   Inconsistency will see them paralysed with confusion and leave you in a situation of hope for the sale rather than assurance. How does this play out?  A relationship based on trust will be undone by onerous and explicit Ts & Cs.  A relationship based on customer service will be undone by ill written and unintelligible Ts & Cs.  A product which promises happiness and simplicity will be undone by Ts and Cs that are dull and complicated. A bank that is claiming it killed the asterisks better not have any exceptions to the deal.
So to NAB and their marketing team, nice try*.  But to win my business I'd prefer you to relate to me rather than pretend that conditions do not apply.
* not really