Wednesday, July 26, 2017

Overdoing Innovation


Lately, it seems to me that “continuous innovation” has become one of those rallying cries that people follow without thinking about what it really means of if it’s really needed.   The notion that customers are dissatisfied with your current product offering and that you need to constantly abandon old products and adopt new products just to be fashionable is simply not true of most industries.

Chances are, your current product lines are profitable and popular.   If this were not so, the firm would be in turmoil and would not have budget to innovate.  And chances are, the majority of your customers like your products just as they are, and will not be delighted by arbitrary changes.

As a concrete example, the customer who goes to a Macdonalds restaurant and orders a Big Mac is not going to be delighted to hear that they are no longer being sold – that the company has “innovated” and is now selling stromboli instead of hamburgers because, according to their marketing firm, that’s what customers want this week.   This would be a disastrous business decision.  The Big Mac sandwich has not changed much, if at all, for decades – and customers like it just the way it is, and will probably continue to do so.

That’s not to say the brand isn’t innovative.  It seems that every month they are offering some new item to try to keep pace with the changing tastes of the market  - but they do so without disrupting their primary menu items that most customers like and expect of them.   It’s also worth observing that their main menu is very slow to change because most of the innovative items have only a temporary popularity – those that have staying power become permanent offerings.  The Big Mac itself was a new and different idea in 1967 and has not evolved – nor has it needed to evolve.

But back to the main point, there is no value in continuous innovation  unless there is a need for innovation in the first place – when a product is no longer meeting the needs of its customers (or never really did in the first place) and there is widespread discontent with all product offerings, then there is a need to innovate to find a better solution – but for most goods and services, this should be unusual if they are currently viable in the marketplace.

Wednesday, July 19, 2017

The Value of a Leading Question

I read an interesting factoid from a “study” that was unfortunately not cited – so I can’t get further detail or verify that it is anything other than folklore – but it seems plausible.   Allegedly, researchers conducting a face-to-face study found that less than 30% of the people they confronted were willing to take the time to participate – but when the surveyor asked prospects, “Do you consider yourself to be a helpful person?” the participation rate jumped to over 70%.

Both of those numbers seem a bit high to me, but the premise is sound: it is based on the mechanisms of consistency and commitment.   Once a person states that they are “a helpful person” they feel compelled to back that statement by acting in a way that is helpful – in this case, to “help” the surveyor by taking the time to respond to the survey.   Psychologically, it feels important to maintain personal integrity by acting in a way that is consistent with one’s words (even though being a helpful person isn’t an obligation to help everyone at all times).

A more reliable and documented resource (Cialdini) reports similar results in a volunteer program: asking people if they would be willing to volunteer, then asking for a specific commitment to participate in a volunteer effort, resulted in a 700% increase in participation.  He also speaks of commitment as being a “sunk cost” that makes people continue to do something, even if it is not in their interest, to justify past events – to have answered a leading question creates a sense of investment on the part of the prospect.


Given the psychological underpinnings of this practice, I am cautious of its manipulative nature – to “hook” someone into doing something that is not in their interest is definitely unethical, but to commit someone to completing an action that is in their interest may be within the bounds – though I am cautious of whether this is merely justifying the behavior for the sake of achieving a one-sided outcome.

Wednesday, July 12, 2017

Sustaining a Luxury Brand

In the marketplace for luxuries, there are two kinds of customer: those who seek luxury for its own sake, and those who seek luxury as a means to bolster their social image.  My sense is that if a luxury brand is to be sustainable, it must embrace the first and shun the second.

For the hedonic customer, luxury is access to pleasure, and there is a strong and sustainable demand.   So long as the brand delivers the pleasure that was expected, its consumers can remain engaged (and re-engaged) and the only means of competition is to deliver a substitute product that legitimately provides greater pleasure.

For the status-seeking customer, luxury is a means to gain approval, and the demand for the brand is only sustainable so long as others approve of its consumption.    Because there is no evaluation of the qualities of the brand itself, only of the opinions of those the status-seeker wants to impress, there is nothing that the brand can do to the product itself to reinforce and retain the loyalty to the customer.

To compete with a luxury brand for the status-seeking market, one need only to sway public opinion: the product can be unchanged and objectively just as good as it ever was, and the competing product does not have to be any better – it only needs to be more fashionable.   This is easily accomplished by advertising and publicity efforts: get a person who has high social esteem to endorse the brand, directly or indirectly, and the flock of status-seekers will follow.

Fashion is innately perishable: when one group adopts a brand to distinguish itself from other, lesser, groups, its inferiors will seek to imitate it, which tarnishes the cachet of the brand in the eyes of the group that wished to differentiate itself.   Because those with whom they do not wish to associate are using the brand, they must abandon it to seek another brand to remain distinct.

In this sense, pursuing the status-seeking market will drive short-term revenue but will not sustain the brand.    If the quality of the product is not harmed, then the hedonic customers will remain after the status-seekers have moved on to the next brand – because it is the quality of the brand, not its public image, that results in their satisfaction.

But very often, the quality of the product is compromised to gain popularity, whether directly (the product is changed to suit the perceived “tastes” of a majority of its customers, who are now status seekers who have no taste at all) or indirectly (the product is compromised to lower its price so that it is affordable to a broader market).

This may be the reason that many of the luxury brands of the past have fallen from grace or disappeared entirely, while certain other luxury brands have stood the test of time: if it remains indifferent to the demands of the status-seekers, it may enjoy temporary popularity while retaining its core customers.   And it seems that few are able to do so.



Wednesday, July 5, 2017

Snakes, Marshmallows, Desire, and Ignorance

Many years ago in junior-high school, I participated in an experiment that would likely not be allowed in the present day – it would be denounced as cruelty to animals and psychological torture.   The experiment asked schoolchildren (myself included) to place their hand firmly against the side of a large jar containing a rattlesnake, and to keep it there even when the snake struck.

At first, no-one was able to do it at all.  In spite of the fact that there was no danger, everyone jerked their hand away.   The first person who succeeded, and everyone afterward who succeeded, was only able to do so by looking away – so that they did not see the snake strike at their hand.   If they were paying attention, they flinched.

This experiment came to mind while reviewing the results of the Stanford Marshmallow experiment, in which young children were presented with a treat (a marshmallow, as you might have guessed) and told that if they did not eat it (no licking or nibbling either) for fifteen minutes, they would be given a second one.   The purpose of the experiment was to test the ability to delay gratification – to forego a treat now for the sake of two treats (double the pleasure) if they could control their desire to have it right away.

What they found in this experiment was very similar to the snake-in-a-jar experiment that I had participated it: those who were successful in resisting the temptation of the treat refrained from looking at it – to turn their heads, cover their eyes, or use their hands to hide the marshmallow from their vision so that they could resist their natural urges.

And some year later, as I am studying the financial habits of adults, I see the same phenomenon.   People have less trouble saving for retirement when the money is deducted from their paycheck, so that they don’t ever see it.   And people saving for specific goals will often open an account with another bank and transfer money, throwing away the statements that come in the mail, so that they are not tempted to pilfer their own savings.

This contradicts the principle that accomplishing a goal, whether by momentary action or the effort of years, requires constant awareness and monitoring.   Sometimes, it is best not to pay attention – particularly when we know that our inclination is to act in a manner that would be contrary to our best interests if we were attentive.