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Monthly Archives: November 2012

We all have our favourite clothes brands. Caroline loves Jimmy Choos. Gudgeon favours retro jumpers bought from tramps. Me? I’m partial to threadless t-shirts. Here’s me on holiday wearing one of my favourite threadless t-shirt designs. It’s called “to scan a forest”. I think the design is an amazing piece of art.

threadless morrocco

to scan a forestOf course you may not like this design – but if you visit www.threadless.com, you’ll be able to look through literally hundreds of t-shirts that were all initially submitted to the site as designs (over a 1000 submitted each week), been voted on extensively (each design receives an average of 1,500 votes by the threadless online community), the most popular of which are then printed and sold as t-shirts (around 10 are chosen each week). There’s bound to be a few designs that catch your eye.

The process by which t-shirts are designed and chosen on threadless is best described as “crowdsourcing” (Howe, 2006), which is similar to outsourcing, except that the work is outsourced to an ‘undefined’ public rather than another business or organisation.

In this case, the ‘undefined public’ are the community of designers and design lovers that design, vote, and buy the designs, of which there are 1.8 million members.

Threadless’ business model could not exist without the Internet, which is the means by which the community communicates. In fact, the business actually started in the early days of the Internet, on an online forum of graphic designers, and the subsequent growth of the Internet has obviously contributed to the success of the business.

Fuchs, Prandelli & Schreier (2010) outlined the psychological consequences of this business model in a study that actually used t-shirts as the products to be evaluated.

They found that empowering customers to play a part in selecting t-shirts to be produced and sold results in stronger demand for the products, even when subjective and objective evaluations of the quality of the product are the same. They also find evidence that empowerment affects feelings of psychological ownership over the products they helped select, which may play a part in this increased demand.

The authors highlight that this irrational effect contradicts economic theory, which suggests if two products are of the same quality and value, demand for the product should not be increased. As psychologists however, we know that human beings don’t act in rational ways. The authors refer to this increased demand following empowerment in selecting the product as the “empowerment – product demand” effect.

Threadless have even found a way of bringing people who don’t initially vote on the designs into the production process. Every shirt is produced in limited quantities, and when they run out of stock, they only reprint when a certain amount of customers requests a reprint. In this way, even members of the community who weren’t involved in the initial design, critique, or voting process can are empowered. I can say from personal experience that it’s very satisfying when you get an email saying that a t-shirt you requested for a reprint has been reprinted!

Screen Shot 2012-11-30 at 18.45.56

Interestingly, the researchers also found that the “empowerment-product demand effect” diminishes if the consumers do not feel they have the competence to make good decisions in the product selection task. This highlights the need for companies to facilitate helpful online communities and giving users information to increase their expertise and knowledge, in order to maximise this ‘empowerment – product demand’ effect. Using threadless as as example, the “empowerment-product demand effect” might not be evoked in the type of person who needs to be told by someone else what looks good.

To summarise, crowdsourcing is a powerful tool, and empowering consumers by making them part of the selection process increases demand for the product, which means that the company can sell more products, and charge higher prices. This goes some way to explaining why threadless are so successful, and are able to compete with much larger clothing labels and retailers – the community plays a crucial role in creating and choosing which products get printed. Clearly crowdsourcing is an effective way for smaller businesses to compete with larger corporations, particularly in the digital age, and should be considered by any business hoping to increase demand for its products.

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Last week I blogged about Nespresso and their luxury machine + capsule + service experience. While I was researching the topic, I stumbled upon numerous articles complaining about the high cost of the coffee capsules. These capsules can be bought for around 30p each – which makes the average cup of home coffee around three times more expensive than buying filter coffee – but still far cheaper than the average high street coffee shop. It got me thinking about how we perceive value, both in terms of time and in terms of pricing.

30p per capsule – is that really too expensive?

Time > Money

One of the selling points behind Nespresso is the convenience and the time saved during the process. No cleaning out a filter, no boiling a kettle, even the mail order service reduces the amount of time spent at the supermarket.

Aaker, Rudd and Moligner (2011) examined the connection between time and happiness, and found five time-spending principles that increased happiness, including

1) spend time with the right people

2) spend time on the right activities

3) enjoy the experience without spending the time

4) expand your time

5) be aware that happiness changes over time

Of these five principles, 3 and 4 directly relate to the Nespresso experience, in that the machine saves time, giving you more, and gives you an excellent coffee experience without spending the time. Indeed many people genuinely report being very happy with their Nespresso machines, this indicates why.

Of course, that’s not to say that spending time (and money) at the coffee shop isn’t well spent. A coffee with friends is spending time with the right people, which this study, and a study by Dunn, Gilbert and Wilson (2011) would argue is time and money well spent.

The Effect of Pricing Points

The pricing of the machines themselves are also interesting. The three machines priced from £70 to £125.99 all do pretty much the same thing. For £159.95, you get the bonus feature of heated milk.  Why have Nespresso bothered releasing three different machines which all pretty much do the same thing?

The bottom end of the Nespresso range. But why does the £70 one look so tempting?

Shafir, Simonson and Tversky (1993) presented the case that when we seek choices under conflict we seek different options. If Nespresso only had one standard coffee machine before the heated milk upgrade, the consumer might seek choices else where from other coffee machine makers. By producing the alternative choices themselves, Nespresso is accounting for this psychological ‘option seeking behaviour (scroll to chapter 3 – ‘Choice under conflict: seeking options’ for an explanation of this behaviour).

This paper also showed that by adding more options (three is ideal) can make the cheapest product seem like a better choice. Dan Ariely suggests that this is because as humans we judge value relatively, so in the context of these Nespresso machines, having two machines costing £109.99 and £125.99 makes the £70.00 look like good value. Or, on the other hand, a buyer who worries that the £70 option might be cheap might think that a more expensive machine indicates good value, and given the small jump from £109.99 to £125.99, might be more likely to make the jump.

In conclusion, the coffee and the machines that Nespresso sells are undoubtedly quite expensive compared to other home drinking coffee options. However, Nespresso utilise psychological principles to maximise customer satisfaction and create favourable price perceptions, giving their customers the perception of value, whilst simultaneously and maximising sales and profits.

George Clooney. Who else?

Nespresso sell a range of specialist coffee machines that use capsules sold exclusively by the company via their mail order service or via the Nespresso boutiques located in London, Manchester and Birmingham. To be able to order the capsules online you need to sign up to become a member of the Nespresso Club, which is “dedicated to providing the ultimate coffee experience”.

Nespresso capsule range, which work out around 30p per capsule. Still cheaper than Costa!

Rather than targeting the crowded coffee shop market, Nespresso have positioned themselves as a luxury coffee company in home and office settings. Along with your first order they send you a little booklet that really flowers up the whole coffee experience, describing each aspect of the coffee making experience in amazing detail. They have profiles of all the ‘Nespresso Experts’, the individuals involved at all the different stages of the coffee making process, and everything in the booklet seems designed to mythologise and ritualise the coffee drinking process, arousing all the sensory characteristics of coffee.

They explain how to distinguish between the different aromas, notes, body and flavours, how the different roasts affect the intensity, and really encourage the user to take their appreciation of coffee to the next level (their regular magazine also features countless articles promoting the ‘art of coffee’).

A sample of the range of coffees available for your Nespresso machine. The descriptions apply just as easily to farts.

Let’s face it; on one level this is all very pretentious stuff. Charlie Brooker has derided the magazine Nespresso send out as “an aspirational lifestyle marketing exercise by desperate lunatics”, and indeed, many aspects of Nespresso’s marketing mythologise and ritualise the coffee drinking process to absurdity. Then again, wine and whiskey experts are equally pretentious, so why shouldn’t Nescafe jump on the bandwagon?

Criticisms aside, there’s actually a really powerful psychological aspect of turning consumers into knowledgeable experts. Nam, Wang and Lee (2012) investigated the different criteria on which expert and novice consumers make their choices when buying electronic goods, and I believe these differences can be generalised to other goods as well.

Novice consumers base their choices on differences in basic features that are easy to compare. So, in the case of coffee, a novice might make a choice between a cappuccino or an Americano, which taste very different, and differ strongly in bitterness. In contrast, experts base their choices on more specific, unique attributes of a product. Crucially however, the consumer need to first be made aware of and understand these unique attributes, and this can then change their buying behaviour.

For example, the authors of this study found that the novices reliance on easy to compare features, (known as alignable features) could be attenuated when they were motivated or provided with greater category knowledge. Essentially, increasing novice consumers’ knowledge led to consumers using unique, non-alignable attributes as their basis of judgements.

Nespresso exemplify this perfectly. By making their customers more aware of the subtleties and differences between different types of espresso, they are providing their customers with knowledge and motivation to become coffee experts, and in doing so, are potentially changing the way that their customers judge coffee, in alignment with Nespresso’s model of having a wide range of espresso coffees that differ in a number of subtle ways.

Clearly, the idea of informing and educating the consumer, turning them into experts is a powerful one, which has many implications for the way that companies design and market products.

Musicians and alcohol go hand in hand. A song by a musician can immortalise a drink and place it in the minds of their listeners forever. Here are some lyrics that will live inside my head forever:

“I’ll fake it through the day with some help from Johnnie Walker red…” (Elliott Smith)

“Rolling up a fatty, but the Tanqueray straight had me…” (Luniz)

and my personal favourite:

“Now you and me can drink some Hennessy/then we get it on

Mad women wantin to bone Sean Combs/sippin on Patron” (P. Diddy)

In an analysis of popular US music songs between 2005 and 2007, 20% of songs made explicit references to alcohol, and 25% of these songs mentioned a specific brand. The top three brands were Patron tequila, Grey Goose vodka, and Hennessy cognac, accounting for 65% of references overall. (Primack, Nuzzo, Rice & Sergent, 2011)

Songs featuring brands made strong aspirational connections between alcohol and themes such as wealth, sex, luxury objects, partying, drugs, and vehicles.

Effectively, these songs are mini adverts, giving the listener positive feelings, associations, while promoting specific brands of alcohol. As previous blogs have mentioned, for sexual imagery and celebrity tie-ins to be effective, the product have to be congruent with the message, and what could be more congruent than the partying musician enjoying his favourite luxury brand of alcohol?

One example of the effectiveness of brand promotion in songs is the 18.9% increase in sales seen by Courvoisier following Busta Rhymes release of “Pass the Courvoisier”, the song at the top of this blog.

This got me thinking that a great way for companies to build their brands and increase sales would be increased integration with musicians. Perhaps promoting specific brands within the music community would help capitalise on the positive associations that being referenced in mainstream songs can bring.

ImageOne example would be The JD Set  – the series of gigs Jack Daniel’s ran between 2002 and 2011 to promote and bring a serious of one-off, unique collaborations between artists. Tickets were always hard to come by, and you either needed to know the right people, or win a competition to get in, but it was always a great show.

Another incredibly effective example of a brand/musician collaboration is the partnership of entertainment kingpin/sometimes rapper P. Diddy and beverage titans Diageo, who in 2007 became 50/50 partners in the Ciroc brand of premium vodka.

ImagePrior to Diddy’s involvement, the brand’s USP was that it was one of the only vodkas on the market made from grapes. The problem with promoting the brand according to Jon Dobbin, a senior member of the brand’s agency was that: “That whole grape story just didn’t work, because nobody really cared.”

The results speak for themselves. Since the “Diddy merger” in 2007, up to 2010 the brand has grown 552%, and Ciroc has become the number 2 ultra premium vodka in the world. There’s no doubt that P. Diddy’s celebrity and promotional credentials have helped convert younger, affluent consumers with his celebrity contacts and aspirational messages, exemplified in adverts like this:

The brand has also branched out into flavoured vodkas, and if you made it this far, here’s a fun little Ciroc advert featuring Aziz Ansari and Diddy promoting the range (albeit still peppered with aspirational messages and positive associations throughout):