Sunday, May 31, 2009

Target Price Tags Lead to Shopper Confusion

While browsing through the food aisles at the SuperTarget in St. Louis Park, I observed two separate incidents of shoppers not understanding Target's price tags. Since I didn't observe that many total incidents of shoppers interacting with the price tags, this seems like an abnormally high error rate.

In the first instance, two women were chit-chatting while casually picking up food. As they passed by the barbecue sauce section, one of them remarked to the other that Sweet Baby Ray's (a brand of barbecue sauce that's fairly popular in Minnesota and Wisconsin) was on sale. As a fan of Sweet Baby Ray's myself, the comment piqued my interest (I'm always looking to stock up on something I like when it's on sale) so I looked over to the rack to inspect the price. To my dismay, Sweet Baby Ray's was in fact not on sale. But, the item directly above it (some sort of marinade) was on sale, and the large 'on-sale' ticket was hung directly above the various bottles of Sweet Baby Ray's. As far as I can tell, the shoppers mistakenly associated the 'on-sale' ticket with the Sweet Baby Ray's and used it to justify its purchase, which one admitted to the other was an "impulse purchase."

In the second instance, two teenage boys were shopping with a limited budget (this sounds like some made-up persona, but it's true!) and I passed them in the snacks aisle. One of them saw a bag of Munchies and mentioned to his friend that he loved Munchies and that they sooo good. But he ended up not buying the product because, as he explained to his friend, "Seven dollars is too much for Munchies." Not a fan of Munchies myself but nonetheless an occasional purchase of bagged chips, I thought to myself that seven dollars IS too much for Munchies...something must be wrong. So, I checked the price (since the item was not on sale, the price tag was a standard tag like the one pictured above) and found that the price for the object adjacent to the Munchies (some sort of package of several "lunch size" packs of chips) was $6.99 (i.e. "seven dollars"). However, the Munchies, whose price tag was a bit to the left of the bag and therefore easy-to-miss, were $3.99, a far more reasonable price (I think it was a super-size bag). So in this case, the shoppers' confusion led to a lost sale for Target.

In both cases, the shoppers were confused about which price tag applied to which item, which to me calls into question the effectiveness of the price tags' designs. I'm guessing they were not designed for maximum usability, as they are similar to the tags one would find at any big-box store and are probably merely the default style that the tag manufacturer provides. But, this being Target, I'm surprised that the company hasn't unleashed its army of designers on this problem, something that could be costing the company lost sales and, if solved, could possibly result in greater revenue and most-likely in greater brand equity.

One idea I had was to, at least on the larger 'on-sale' tickets, put a picture of the sale item on the tag. Manufacturers already spend a lot of effort on distinguishing their packaging from their competitors, so why not leverage that effort and simply show a picture of the item next to the price? If this isn't possible, then perhaps the price tag could at least feature an easy-to-read, non-technical, non-abbreviated description of the product. "Munchies, $3.99" would probably be sufficient.

Images from here and here.

Tuesday, May 26, 2009

An Idea for Reducing Energy Usage and Subsidies

I had a thought while driving home after softball today and listening to an NPR report about the complex issues involved in developing a multilateral coordinated response to the problem of climate change, something that will be addressed head-on at climate change talks in December of 2009 in Copenhagen.

Here's my idea. Once Google PowerMeter and/or similar services becomes ubiquitous, each homeowner's energy use could be compared to all the other homeowners in the same city or county. Utilities would include a homeowner's energy usage percentile rank (lower is better) on each month's bill (or paperless statement, if the homeowner so chooses) so they could see how/whether their changes in behavior are affecting their rating and private companies (such as DIY KYOTO) could provide devices that deliver feedback on energy usage in real time.

So, nothing too revolutionary with the above paragraph (see pages 195-196 of Nudge). But to really incentivize people to strive for the best ranking possible, what if receipt of the home ownership subsidy (more commonly known as the mortgage interest tax deduction) were subject to a homeowner attaining a ranking below the median homeowner. That is, as long as a homeowner's energy usage is in the lower 50th percentile of their peers (across a given municipality), they receive the full subsidy (just like they already do today). But homeowners with energy usage in the upper 50th percentile receive no subsidy.

The program could be phased in over time, so that in Year 1 no subsidies are withheld from homeowners but those who are in the upper 50% would be notified that next year, they will not receive the full subsidy. In each subsequent year, the subsidy offered to energy-intensive households would decrease (e.g. 75% in Year 2, 50% in Year 3, etc.) such that eventually only homeowners with energy usage in the lower 50th percentile would receive the full home ownership subsidy. And maybe over time the 50th percentile threshold could change or become multiple thresholds, so that homeowners not near the 50th percentile mark will still have an incentive to save energy (after all, if you're already in the 90th percentile, it may be unrealistic to think that you'll ever be below the 50th percentile, so you might just give up). The gist of the idea is to tie receipt of the home ownership subsidy to some level of energy conservation.

Not only does this chip away at the market-distorting home ownership subsidy, it also offers a progressive (as opposed to regressive) nudge to homeowners, since wealthier homeowners are more likely to use more energy. As discussed in the book Nudge, often people (Humans, not Econs, in the terminology of authors Richard Thaler and Cass Sunstein) will respond more readily to incentives with high salience than those with low salience, even if the value of the behavior changed by the incentive isn't directly proportional to the value of the incentive. The threat of losing a generous subsidy for not reducing energy usage may in fact be a more salient incentive than a utility bill that is $10 higher in a given month.

One final point: it's important to reframe the concept of the home mortgage interest deduction as a home ownership subsidy, since (1) that's what it is and (2) a tax "deduction" sounds like something to which you're entitled but a "subsidy" sounds like something that has been granted onto you and is subject to removal.

Friday, May 22, 2009

Einstein Expanded on Newton, but Newton is Still Relevant

A great exchange from the two bloggers at Defective Equilibrium, the New Zealand version of Marginal Revolution:

Udayan Mukherjee:
This doesn't mean we have to argue that markets are always and everywhere a non-starter. It is merely an acknowledgment that the model proferred by neo-classical economics is not the final draft of economic explanation, but that it is akin to the Newtonian Physics awaiting its Einsteinian upheaval. For me this is tremendously exciting, as it opens up the study of economics and allows its foundations to be put under the experimental zoom lens. If people are predictably irrational, then it is something we need to be aware of as empirical scientists and integrate into our models of market behaviour.

Tom Mathews:
Uday used a useful analogy of Newtonian vs. Eisteinian physics. Newtonian physics gave us a good approximation of how the world worked for hundreds of years - but as Einstein showed, it turned out to be fundamentally misconceived. Einstein's insights gave us a deeper, more accurate understanding of how things actually work.

But have we since abandoned Newtonian physics? Of course not. In the vast majority of observable situations (that is, except for research physicists) Newton's laws still appear to hold. Engineers need not worry that people moving around in their buildings will increase in mass as they move and thus crash through the floor, for example.

While earning a master's degree in mechanical engineering, I don't think I ever learned about Einstein's theories beyond the cursory mention that Newton's stuff is really just an approximation for how things really work, but it's so accurate for most real world applications that it's all we're going to teach you. Ten years from now, perhaps this is how neoclassical economics will be thought of.

Image from here.

Sunday, May 3, 2009


There's something incredibly inspirational about seeing Danny MacAskill attempt something extremely difficult and then finally master it. That's what happens in the first 1:30 of this video. The rest is just awesome.

Via Kottke, who aptly describes the above feat as "parkour on a bicycle." Although I think the actual term is "bike trials."

Saturday, May 2, 2009

Are stoplights really necessary?

Via Tom Vanderbilt, the London borough of Ealing is about to conduct an experiment in which they observe whether traffic flows better at some intersections without stoplights:
Ealing found evidence to support its theory when the lights failed one day at a busy junction and traffic flowed better than before. Councillors have approved a report which recommended that they “experimentally remove signals since experience of signal failure showed that junction worked well.”

I observed a similar phenomenon sometime around March of 2009 at an intersection near where I work.  For about a week, the intersection shown below, which is usually regulated by stoplights (including a left turn arrow), was regulated solely with stop signs as a 4-way stop. My personal observation was that traffic flowed no worse than usual, and if anything may have been better. Ultimately, I think the best solution for the intersection shown below is multi-lane roundabout.

View Intersection where stoplight was out of service in a larger map

Fostering Increased User Participation in Healthcare

IDEO's Tim Brown thinks that "participation is key to the next big wave of innovation in business and society." In a post specifically about healthcare, he envisions EMRs (Electronic Medical Records) and HSAs (Health Savings Accounts) as two ways to enable greater participation in healthcare.

Fundamental to this collaboration is the creation of platforms that encourage participation. By this I don’t mean goading people into eating healthier food or taking more exercise. These may be beneficial outcomes of other more systemic innovations, but they are not, on their own, going to create the major shifts that we need.

Two platforms that are already under discussion and, in my opinion, offer huge potential for improved collaboration and participation, are e-medical records and health savings accounts (HSAs). With the risk of sounding like a health-care reform lobbyist, here is why I think they are important, but also why I think current ideas about these platforms run the risk of limiting their impact.

The Obama administration has already embraced EMRs, but HSAs have typically been championed by libertarians and conservatives. I agree with Tim Brown that HSAs help people become more engaged with their healthcare decisions, but I'm skeptical that HSAs will gain much traction in the foreseeable future.

Image from here.

Friday, May 1, 2009

Dynamic Haptic Displays: The Next Big Thing?

Dynamic haptic displays like the one shown above (from Chris Harrison) seem to really be gathering momentum and I wouldn't be surprised if they become the next big thing in interaction design. The feedback channels of sight and sounds are already maxed out, but the sense of touch is currently underutilized (we can do better than just a vibrating phone). Another cool dynamic haptic display technology comes from Artificial Muscle:

Corporate Nationality As a Branding Tool

Matt Yglesias on corporate nationality:

Beyond CEOs, Nestle has 15 directors. Of them one is Indian, one is Swiss/American, seven are Swiss, and the rest are from other European countries. But there’s nothing especially “European”—and certainly nothing Swiss—about the company’s actual operations. They earn a lot of money in Europe, but the majority of their revenue is from outside of Europe, and there’s production all over the world. It’s also totally normal for large multinational firms to be disproportionately owned by shareholders located in their “home country” and home continent.

Corporate nationality, in other words, doesn’t matter. But it seems as if it actually does. And for somewhat mysterious reasons.

One reason I can think of is that corporate nationality can and is used as a branding tool. There's probably some serious brand equity in Nestle being thought of as a Swiss company because Switzerland is know for its luxury brands and chocolate. And American companies practically flaunt their American-ness (at least here in America).

Image from here.

Customer Experience In Healthcare

Jay Parkinson:

I’ve started collecting photos I take of medical clinics vs. veterinary clinics in the same neighborhoods. If anyone has some good examples, send them my way…but here’s the first. Just goes to show that when people pay their own hard earned money for healthcare, providers start competing on price and quality and appearance…essentially, the consumer experience.