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How Williams Sonoma Inadvertently Sold More Bread Machines

Paying attention to what your customers and clients see can be a very effective way to increase your influence and, subsequently, your business.

Steve Martin, co-author of Yes! 50 Secrets from the Science of Persuasion, tells the story:

A few years ago a well-known US kitchen retailer released its latest bread-making machine. Like any company bringing a new and improved product to market, it was excited about the extra sales revenues the product might deliver. And, like most companies, it was a little nervous about whether it had done everything to get its product launch right.

It needn’t have worried. Within a few weeks, sales had almost doubled. Surprisingly, though, it wasn’t the new product that generated the huge sales growth but an older model.

Yet there was no doubt about the role that its brand new product had played in persuading customers to buy its older and cheaper version.

Persuasion researchers suggest that when people consider a particular set of choices, they often favour alternatives that are ‘compromise choices’. That is, choices that compromise between what is needed at a minimum and what they could possibly spend at a maximum.

A key factor that often drives compromise choices is price. In the case of the bread-making machine, when customers saw the newer, more expensive product, the original, cheaper product immediately seemed a wiser, more economical and attractive choice in comparison.

Paying attention to what your customers and clients see first can be a very effective way to increase your influence and, subsequently, your business. It is useful to remember that high- end and high-priced products provide two crucial benefits. Firstly, they often serve to meet the needs of customers who are attracted to high-price offerings. A second, and perhaps less recognised benefit is that the next-highest options are often seen as more attractively priced.

Bars and hotels often present wine lists in the order of their cheapest (most often the house wine) first. But doing so might mean that customers may never consider some of the more expensive and potentially more profitable wines towards the end of the list. The ‘compromise’ approach suggests that reversing the order and placing more expensive wines at the top of the list would immediately make the next most expensive wines a more attractive choice — potentially increasing sales.

Original source: http://www.babusinesslife.com/Tools/Persuasion/How-compromise-choices-can-make-you-money.html

Persuading Intellectuals

This is interesting: I always thought thinkers were less likely to be swayed by persuasion techniques than others. However, it appears ‘thinkers’ are just persuaded differently: they like adverts that make intelligent arguments. Another thing that came out of the research, and this has been consistently found, is that people believe others will be swayed far more than they are themselves. Combine these two things and you can start to see how ‘thinkers’ end up doing stupid things.

This research could have a huge impact on the ads you’re shown. If you’re a thinker you might get technical specs listed out. If you’re a doer you might get shiny pictures showing other people using the product. The point is that advertisers can (and likely will) customize ads that you see.

Karen Douglas and colleagues at Kent University have bucked this trend with a paper which they say shows people have an intuitive understanding of how a person’s thinking style affects their vulnerability to persuasion, known formally as ‘the elaboration likelihood model’. This is the idea, supported by research findings, that people who have a greater inclination for thinking things through tend to be less swayed by adverts that use superficial tricks like beautiful models and slick graphics, but are more persuaded by adverts that make an intelligent argument. The jargon for the character trait in question is ‘need for cognition’.

…Our findings suggest that people do have some kind of awareness of how persuasion works and can use their knowledge to attempt to persuade people. It’s just the beginning really – while people seem to have an intuitive understanding of how thinking style relates to persuadibility, it could plausibly extend to other aspects of persuasion and persuasive techniques such as social norms and the foot-in-the-door technique.’

Read more

Throw Less At The Problem

There is a lot of wisdom in this brief excerpt from Jason Fried and David Hansson’s book Rework.

Jason and David are the founders of 37signals.

Watch chef Gordon Ramsay’s Kitchen Nightmares and you’ll see a pattern. The menus at failing restaurants offer too many dishes. The owners think making every dish under the sun will broaden the appeal of the restaurant. Instead it makes for a crappy food (and creates inventory headaches).

That’s why Ramsay’s first step is nearly always to trim the menu, usually from thirty-plus dishes to around ten. Think about that. Improving the current menu doesn’t come first. Trimming it down comes first. Then he polishes what’s left.

When things aren’t working, the natural inclination is to throw more at the problem. More people, time, and money. All that ends up doing is making the problem bigger. The right way to go is the opposite direction: Cut back.

So do less. Your project won’t suffer nearly as much as you fear. In fact, there’s a good chance it’ll end up even better. You’ll be forced to make tough calls and sort out what truly matters.

If you start pushing back deadlines and increasing your budget, you’ll never stop.

You won’t regret reading Rework. Plus it will make you seem cool at work.

The long chains of reasonings …

The long chains of reasonings, simple and easy, by which geometricians are wont to achieve their most complex proofs, had led me to suppose that all things, the knowledge of which man may achieve, are strung together in the same way, and that there is nothing so distant as ultimately to be beyond our mental grasp, or so hidden that we cannot uncover it, provided only we avoid accepting falsehoods as true, and always preserve in our thoughts the discipline essential for the deduction of one truth from another.

René Descartes, Le Discours de la méthode pt 2 (1637)(S.H. transl.)

Hiring and the Mismatch Problem

“We want to cling to these incredibly outdated and simplistic measures of ability.”
Malcolm Gladwell

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Hiring is difficult and we tend to fall back on antiquated tools that give us a number (something, anything) to help us evaluate potential employees. This creates what Malcolm Gladwell calls “mismatch problems” — when the criteria for evaluating job candidates is out of step with the reality of the job demands.

Of course, we never think our criteria is out of step.

The mismatch problem shows itself all over the sports world. Although the study below was released in 2008, Gladwell has long illustrated the point that sports combines (events professional sports leagues hold for scouts to evaluate potential draftees based on a battery of ‘tests’) don’t work.

Gladwell’s results echo what Michael Lewis talks about in Moneyball: Combines are a poor predictor of determining ultimate success. Mismatch problems transcend the sports world.

Teachers are another example. While we tend to evaluate teachers based on high test scores, the number of degrees and other credentials, that makes little difference in how well people actually teach.

Some companies, like Google, are trying to attack this problem. Google tried to find correlations between ‘great’ existing employees. When they find correlations, say like most people who score 9/10 on performance reviews, own a dog, they try to work that into their hiring. By constantly evaluating the actual results of their hiring, rethinking how they hire, and removing questions and evaluations that show no bearing on actual performance they are taking steps to try to eliminate the mismatch problem.

Google also knows hiring lacks certainty; they are just trying to continuously improve and refine the process. Interestingly, very few workforces are so evidence-based. Rather the argument becomes hiring works because it has always ‘worked’…

So why do mismatch problems exist?

Because we desire certainty. We want to impose certainty on something that is not, by nature, certain. The increase in complexity doesn’t help either.

“The craving for that physics-style precision does nothing but get you in terrible trouble.”

See the video here.

Interested in learning more? Check out measurements that mislead.

Malcolm Gladwell is the New York Times bestselling author of Blink:The Power of Thinking Without ThinkingThe Tipping Point: How Little Things Can Make a Big DifferenceOutliers:The Story of Success, and What the Dog Saw: And Other Adventures.

Taleb: The Fooled by Randomness Effect and the Internet Diet?

In this brief article Nassim Taleb (of Black Swan fame) touches on information, complexity, the randomness effect, over-confidence, and signal and noise.

THE DEGRADATION OF PREDICTABILITY — AND KNOWLEDGE

I used to think that the problem of information is that it turns homo sapiens into fools — we gain disproportionately in confidence, particularly in domains where information is wrapped in a high degree of noise (say, epidemiology, genetics, economics, etc.). So we end up thinking that we know more than we do, which, in economic life, causes foolish risk taking. When I started trading, I went on a news diet and I saw things with more clarity. I also saw how people built too many theories based on sterile news, the fooled by randomness effect. But things are a lot worse. Now I think that, in addition, the supply and spread of information turns the world into Extremistan (a world I describe as one in which random variables are dominated by extremes, with Black Swans playing a large role in them). The Internet, by spreading information, causes an increase in interdependence, the exacerbation of fads (bestsellers like Harry Potter and runs on the banks become planetary). Such world is more “complex”, more moody, much less predictable.

So consider the explosive situation: more information (particularly thanks to the Internet) causes more confidence and illusions of knowledge while degrading predictability.

Look at this current economic crisis that started in 2008: there are about a million persons on the planet who identify themselves in the field of economics. Yet just a handful realized the possibility and depth of what could have taken place and protected themselves from the consequences. At no time in the history of mankind have we lived under so much ignorance (easily measured in terms of forecast errors) coupled with so much intellectual hubris. At no point have we had central bankers missing elementary risk metrics, like debt levels, that even the Babylonians understood well.

I recently talked to a scholar of rare wisdom and erudition, Jon Elster, who upon exploring themes from social science, integrates insights from all authors in the corpus of the past 2500 years, from Cicero and Seneca, to Montaigne and Proust. He showed me how Seneca had a very sophisticated understanding of loss aversion. I felt guilty for the time I spent on the Internet. Upon getting home I found in my mail a volume of posthumous essays by bishop Pierre-Daniel Huet called Huetiana, put together by his admirers c. 1722. It is so saddening to realize that, being born close to four centuries after Huet, and having done most of my reading with material written after his death, I am not much more advanced in wisdom than he was — moderns at the upper end are no wiser than their equivalent among the ancients; if anything, much less refined.

So I am now on an Internet diet, in order to understand the world a bit better — and make another bet on horrendous mistakes by economic policy makers. I am not entirely deprived of the Internet; this is just a severe diet, with strict rationing. True, technologies are the greatest things in the world, but they have way too monstrous side effects — and ones rarely seen ahead of time. And since spending time in the silence of my library, with little informational pollution, I can feel harmony with my genes; I feel I am growing again.

Related: Noise Vs. Signal

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