Saving a doomed product rollout

Imagine you’ve been asked to sell new software to existing clients. This happened to a friend of mine recently. The plan was to offer the software on a trial basis and then convince clients to pay $2000 a month ongoing. The plan was doomed.

Problem 1. No frame of reference

My friend’s clients had no frame of reference for the new product. They’d never seen it before and they didn’t know whether they needed it. They’d rightly be thinking “is $2000 expensive, cheap or about right?”

When we introduce a product or service it’s our job to provide a contextual anchor that makes the price look like great value. Steve Jobs did this when releasing the iPad by first telling the crowd that “pundits” speculated it would be sold for $999, before thrilling us all with his pronouncement that it was “only $499”!

When you omit an anchor you risk your client using the closest proxy, and once they’ve done that you have lost control of the sale. It’s hard to sell $2000 software when they are used to paying $49 for something they (mistakenly) think is similar.

Here’s the trick. Before you reveal the price be sure to insert into the conversation a frame of reference that is ideally related. In this case, my friend could say things like:

  • “A similar software can cost up to $3000 a month”
  • “I reckon this software will save about 20 hours a week, or around $40,000 a year”
  • “We have two versions of the software. One is $6000 a month, and this one is $2000”

When paying $2000 feels like a relief, you know you’ve anchored them effectively.

Problem 2. “Yes or No” rather than “This or That”

My friend was only planning to offer one choice of software to clients – the $2000 option. Unfortunately that frames the decision as a binary “Yes please” or “No thanks”, and because it’s much easier to stick with the status quo, “no” is more likely.

smarter play is to introduce at least two product options because it changes the decision from “whether I’ll buy” to “which one I’ll buy”. From “yes or no” to “this one or that”.

Note the difference in these questions, for example.

  • Do you want an orange? Yes/No.
  • Would you prefer an apple or an orange? An orange.

Asking clients (or colleagues) for a preference jumps the decision-making queue because it assumes they want a piece of fruit, the only question is which. While they can still say they want neither, it is more difficult for them because you’ve drawn them into considering the merits of having one or the other.

In my friend’s scenario, that means adding a more expensive version of the software to the rollout discussion with the intent of making the $2000 option look great. You may not ever sell the more expensive option, but it will help you sell the cheaper one.

Problem 3. Free pilot program

The third problem my friend was facing in this new software rollout was offering it as a free pilot program. Making something free lowers the stakes for the client and theoretically makes it easier for them to agree.

The problem though, is when no cost is involved there is no value either. No skin in the game. Your clients will be less likely to use the software because they’ve paid nothing for it. Then, when you invite them to upgrade and pay they will decline because they remember they didn’t use it!

Instead we need to sell the product as if there are dollars attached. If we need to we can then waive the fee for a few months as a special favour to them. Importantly, they need to feel they’ve bought it or they will never use or value it. 

Desire for choice varies by time of day

Imagine you are in the supermarket shopping for yogurt. How many different flavours do buy?  According to some new research your answer may very well depend on what time of day you make the decision.

The role of choice in our lives

The role of choice in our lives is a perplexing one. As consumers we want enough choice without it overwhelming us. As businesses, we want enough choice to attract customers without carrying too much inventory.

When it comes to choice, past research has found people seek:

  • More variety in a product category when consumption will take place at a future time (Diversification Bias by Read & Loewenstein 1995 PDF). If I have to choose three chocolate bars to eat over the next three weeks, for example, I will likely opt for a broader variety than if I was to choose one chocolate each week, in the moment.
  • More virtuous options for future rather than immediate consumption. The movie I select to watch next week, for example, will be more highbrow than the movie I choose to watch it tonight (Read, Loewenstein & Kalyanaraman 1999 PDF).
  • A larger choice-set when the decision is proximal. I will tend to prefer a restaurant with fourteen items on its menu than seven for dinner tonight, but won’t care if the booking is for dinner in 5 months time (Goodman & Malkoc 2012 PDF)

How desire for choice varies by time of day

In their forthcoming paper, researchers Gullo, Berger, Etkin and Bollinger (2018) dived into how the desire for choice varies over the course of a day. They were curious about whether a purchase decision could be different depending on whether it was made in the morning or afternoon.

Hypothesising that changes in circadian rhythms would impact levels of arousal, and therefore decision-making, the researchers analysed the supermarket shopping decisions of over one million American households over 25 months. Using a rewards card to track each household, the researchers found people sought more variety in the afternoon and evening compared with the morning.

In short, in the morning you may choose two flavours of yogurt, but later in the day you are likely to choose four.

Why? In the morning people are less typically aroused, and therefore seek less stimulation. Less stimulation in a retail sense means they seek less variety.

What this means for you

This research is an important illustration of how physiological arousal impacts decision-making. Some of the business implications noted by the research team include:

  • Consumers may be less inclined to try new products in the morning and voters may be more prone to vote for incumbents if they vote in the morning
  • Ads that appeal to variety seeking might be more effective in the afternoon or evening than in the morning
  • Ads could emphasise different benefits in the morning than evening. For example, a car company could talk about its range when advertising at night, but focus on a particular car or feature in the morning
  • Restaurants could downplay variety on their breakfast menus but highlight variety in their lunch and dinner menus.
  • Radio stations might want to play less varied music in the morning and more varied music in the evenings.

But…I’m not sure.

Broader context

What attracted me to this latest research was the connection between how we decide and how we feel. Not how we ‘feel’ emotionally, but how our body is making us feel – measured by markers like body temperature and circadian cycles.  Rationally, if our intellectual self was in charge like economists assume, I should make the same decision at 10am that would at 2pm, whether it’s Monday or Friday. But you and I know that’s not how things work, right?

In an oft-cited study by Danziger, Levav & Avnaim-Pesso (2011), mental fatigue has been shown to impact high-stakes courtroom decisions. When fresh, at the start of the day or after a break, judges granted parole 65% of the time. When depleted, at the end of a long day or session, odds dipped below 10%.

The broader take away from the judges-study is that when tired we tend to defer to the status quo (leave things as they are). We are more open to change when our brain is refreshed.

In the case of the yogurt, that would see us trialling more varieties when we are fresh (in the morning before we’ve had to make a lot of decisions) than tired (later in the day).

So how to square this with the latest variety-seeking research that says people want narrow their options in the morning, when their circadian rhythms signal they want less stimulation?

To me there’s a piece here about perception of effort that I haven’t yet seen explained. Here’s my thinking on how to pull the research together.

In the morning, when arousal is typically lower but we are less mentally depleted, people perceive choosing variety as more effortful. That doesn’t mean making a decision is more effortful, it means we naturally prefer to focus rather than broaden.

  • In my view that may not necessarily mean people are less likely to trial a new product, but you would be best not to offer them lots to choose from
  • Likewise, voters may opt for the incumbent rather than choosing from a large array, so your role would be to clarify rather than expand options
  • If you are dealing with a customer, that means having a more pointed, focussed decision-making discussion rather than one that is more abstract.

Later in the day, when arousal is higher but we may be more depleted, people perceive having to narrow their options as more effortful. That means they want a broader, options-oriented discussion. The risk, if you force them to narrow, is they will opt to leave things as they are rather than have to discard options they haven’t yet fully considered.

This article also appeared in Smartcompany.

How Apple, Aldi and McDonald’s address behavioural barriers

It’s one of the great ironies that behavioural economics has a behavioural economics problem. Specifically, choice paralysis. When push comes to shove and you have to do something to improve your business – create a marketing campaign, write an email, have a conversation, prepare a pitch – it can seem too overwhelming to know which behavioural principle to use, and how.

My advice? Keep it simple. 

Focus on the three barriers to people taking action:

  • Apathy: too lazy; they can’t be bothered (a.k.a. System One)
  • Paralysis: too overwhelmed; they are confused (a.k.a. Paradox of Choice) and
  • Anxiety: too scared; they are worried about proceeding (a.k.a. Loss Aversion).

But let’s bring it to life by looking at how some businesses have sought to address these barriers.

Getting customers to care: overcoming apathy

Most businesses have to address apathy because they need their customers to be bothered to act. A good way to go about this is to ensure the effort you are asking of them is much less than the payoff they receive.

#BanTheBag is an example of a campaign that makes it extremely easy for people to act. Launched by Clean Up Australia and TV program The Project, #BanTheBag is a petition to ban single-use, non-biodegradable plastic bags in NSW, Victoria and Western Australia.  In just a week the petition has generated over 100,000 signatures.

How? First they laid out the case for the ban, including clever use of the social norm that Tasmania, South Australia, Northern Territory, Australian Capital Territory, Queensland and lots of other countries already had. Then they personally identified the three decision-makers responsible (the state premiers), and put pressure on each not to be the last one standing. And importantly, the online petition was a doddle to sign, reducing effort by limiting the number of fields required.

Of course reducing effort is not the only way to address apathy. McDonald’s this month launched an unbranded campaign with actress and brand-fan Mindy Kaling. What made the campaign noteworthy was McDonald’s was not mentioned by name, nor its logo included. Instead the fast-food giant sought to trigger deeper brand associations and appeal to customer familiarity. In essence, McDonald’s was asking their audience whether they were clever enough to guess who Mindy was talking about. Of course they were. We all were. And who doesn’t like to feel smart?

Keeping it simple: avoiding decision paralysis

Art director Matilda Kahl made headlines when she adopted a uniform of the same black pants and white top every day. Grace Coddington, former Vogue-US creative director famously wears black every day. Barak Obama was widely cited as only wearing grey or black suits during his time as President, eliminating low-grade decisions and saving his energy for more important matters. There can be power in constraining choice.

In a business context, when Steve Jobs returned to Apple one of his first moves was to cut the number of products by about 70%. This, along with a new eye to innovation, saw a turnaround from $1 billion loss to $309 million profit in his first year. Jobs recognised that having too many undifferentiated options (there were 12 versions of the Macintosh computer) not only created overhead, it confused the customer.

But limiting the number of options is only one strategy to address paralysis. Another is to make use of defaults because people tend to stick with what has been selected. In Australia for example, the government is keen to increase public take-up of My Health Record, a centralised repository of personal health information. To maximise enrollment, the government is using an opt-out model where people are automatically subscribed unless they state otherwise.

For times when you can neither constrain choices or create a default, your best bet is to focus on how you structure and communicate options. European retailer TK Maxx has opened in Australia, promising “big brands, small prices”. With stock changing rapidly, stores are structured by department (e.g. womenswear, homewear) then category (e.g. dresses, manchester) and size so their shoppers don’t get overwhelmed.

Nothing to fear here: Reducing anxiety

Seizing on a gap in the market, in 2010 US jewellery designer Kendra Scott decided to “engineer the scary out of jewellery stores”.  Scott had identified that people felt too intimidated to visit most jewellery stores, particularly those who didn’t list their prices and had snooty staff. By creating a warm, fun, vibrant environment, Scott democratised jewellery and created a business worth more than $1 billion. What does this show us? Addressing customer anxiety is important.

In fact anxiety was proving to be stumbling block for US smart lock firm August. Having identified that missed deliveries was a pain point for customers, August knew they had the solution. Customers could unlock their door remotely via an App, letting the delivery person in without them having to be present. But how to overcome customer anxiety about having a stranger in their home? August decided to combine their smart lock with a camera, giving customers the confidence that the delivery person was able to be monitored and held accountable.

A final example of addressing anxiety comes by way of supermarket chain Aldi who have recently confirmed they are extending their inventory by 250 product lines. Why? To reduce customer concerns that their time would be wasted if they visited a store and could not find what they needed. Importantly, Aldi are avoiding the trap of fixing one behavioural barrier (anxiety) but creating another (paralysis) by maintaining a focus on breadth rather than depth, ensuring shoppers have a higher hit rate across categories while having limited choices within a category.

I hope that gives you a sense of how real businesses are addressing the three key behavioural barriers.

This article also appeared in Smartcompany.