KnowNOW!

Global Economic Watch

Syndication

Recent Posts

Tags

View more

Other Useful Blogs

Archives

  • Seth Godin on Market Creation

    Sometimes creating markets for products can be a lot more difficult than creating products. Seth Godin says that "buying something for the first time" is a fairly recent phenomenon. Before the second half of the Twentieth century, we bought what our parents bought, who bought the products their parents bought. So the challenge for getting consumers to buy new things, even when those products could really truly make their lives better and healthier, remains quite high in parts of the world where people are still buying what their parents bought. Godin discussed this challenge at the Acumen Fund's 2011 Investor Gathering :

  • Lessons on How Not to Drown in the 'Data Deluge'

    The expansion of the mobile marketplace over the last decade has brought companies access to exponentially more data than they previously had on consumer behaviors and desires. Too much data, as it turns out. Collecting meaningful data has become a major challenge. The old tools simply may not work. In a new paper, George Day , Co-Director of the Mack Center for Technological Innovation and Professor of Marketing at the Wharton School , says there is a dangerous gap between the potential value of all the data and the capacity of companies to adequately analyze that data: The hypothesis that organizations are not keeping pace with market velocity and complexity is more difficult to test. Suggestive evidence comes from several sources. The first is the vast literature on information overload, which describes how an excess of information has resulted in the loss of the ability to make decisions, process information, and prioritize tasks (Eppler and Mengis 2004; Klingberg 2009; Meyer 1998). The second is the equally large literature on organizational adaptation in the face of environmental change (ranging from Miles and Snow [1978] to Hamel [2007]). Still, there is no longitudinal measure of the size of the gap. Some evidence comes from recent estimates that the amount of data available expanded at an exponential rate from 100 billion gigabytes in 2005 to 1000 billion gigabytes in 2010 (IDC 2007). This suggests an even greater rate of growth than Davenport and Harris’s (2007) claim that unique information per person is growing at 50% per year. In contrast, they estimate that information consumption per person is only growing at 2% a year. Taken together, a reasonable case can be made that the deluge of data has run up against the barrier of the limited ability of people and organizations to process it. The evidence sug- gests that the volume of inbound data and the proliferation of channels is going to continue for the foreseeable future. Absent any breakthroughs in human beings’ ability to process data, unless new tools and approaches are adopted, the gap will continue to grow. There are other reasons to suggest that the gap is growing and that new approaches are needed to begin closing it. During periods of technological disruption, most organiza- tions have trouble keeping pace. This is true of the effect of the Internet and cheap, ubiquitous communication technologies on the habits and behaviors of consumers and the creation of new business models for reaching these markets. The tendencies toward inertia and sclerotic decision making are fed by lag effects and organizational rigidities. Read the full paper here . And watch Day and colleague David Reibstein discuss the "data deluge" problem in this Knowledge@Wharton interview:

  • Dan Ariely on Netflix and Consumer Behavior

    With Netflix's announcement this week that the company is changing its pricing structure--essentially upping the cost for customers who wish to both have access to DVDs and streaming of content--it is worth looking back at Dan Ariely 's compelling Wired article on how companies successfully manipulate consumer behavior online. Ariely's short assessment of Netflix looks prescient: Netflix built a billion-dollar business on one simple principle: People hate late fees. With traditional video stores, customers always had to choose between racking up extra charges and returning an overdue movie without watching it. Besides eliminating the late fee, Netflix offered an exhaustive selection of films from which each user could assemble a personal “queue.” This seemed to create an intelligent system that matches users with the movies they want to see. What wasn’t to like? In practice, though, Netflix users ended up watching fewer DVDs than they might have expected. (This is fine with Netflix; it saves on postage and boosts profits.) Why? One reason is that Netflix was forcing us to choose based on what we thought we wanted to see in the future—and we’re bad at predicting our preferences. There’s a beautiful paper by Daniel Read and two coauthors showing the gap between what people want to do in principle and what they want to do right now. They asked subjects to choose several films from a list containing a mix of highbrow titles (e.g., Schindler’s List) and lowbrow titles (e.g., My Cousin Vinny). When asked which film they wanted to watch a few days later, most picked a highbrow one. But when asked which they wanted to watch right now, most went lowbrow. In principle, we want to be the kind of people who watch serious movies, maybe even French ones—just not tonight! And so our queue becomes aspirational, filled with titles that are more ambitious than the ones we really want to watch. Now that Netflix offers streaming, I’ve dropped the DVDs altogether. With streaming, we no longer get stuck with movies we only want to watch in theory. Instead, we feel like we’re paying for the right to watch any movie at any time—even if we don’t wind up watching many. Read How Online Companies Get You to Share More and Spend More here .

  • eMarketer: 'New Normal' in Consumer Behavior

    Lisa Phillips , Senior Analyst at eMarketer.com , writes that most American consumers are highly skeptical that recovery is here, or will start anytime soon. And she shares this chart on that sentiment: And that means, Phillips writes, that marketers are going to have to accept a "new normal": To cope, consumers are resetting their spending behaviors and focusing on value, according to NPD Group’s “Retail & Brand Landscape Report Series 2010” study. For example, they shop at more stores but realize they can leave without buying something. They have also widened their brand considerations, MediaPost reported. For 81% of the participants in Deloitte’s “American Pantry Survey,” however, their new-found use of coupons and loyalty programs is fun—and 93% said they still expected to spend cautiously even if the economy improved. Even as they expect to spend less, consumers are shopping more online. Some 55% of respondents to a PriceGrabber.com survey said they were spending more time shopping for and researching purchases on the internet this year, compared with 26% in 2009. Read The ‘New Normal’ in Consumer Shopping Behavior here .

  • 'Monkeynomics' and the Irrational Behavior of Consumers

    Laurie Santos is not an economist. She is a psychologist. She is also the director of the Comparative Cognition Laboratory at Yale, where she searches for a better understanding on human behavior--particularly our decision-making--by studying the behavior of a range of primates. So she may have a lot to offer economists (and marketers, and managers) on how consumers make decisions. In a recent talk at a TedGlobal conference, Santos discussed "monkeynomics," and showed that the irrationality of our decisions are not so uncommon:

  • Seth Godin: Hunters and Farmers

    Seth Godin believes there are hunters and there are farmers in every group of people--even if they aren't exactly hunters and farmers. And, he writes, we would all be well served to recognize that treating both groups the same is a mistake--especially in business: Marketers confuse the two groups. Are you selling a product that helps farmers... and hoping that hunters will buy it? How do you expect that people will discover your product, or believe that it will help them? The woman who reads each issue of Vogue, hurrying through the pages then clicking over to Zappos to overnight order the latest styles--she's hunting. Contrast this to the CTO who spends six months issuing RFPs to buy a PBX that was last updated three years ago... she's farming. Both groups are worthy, both groups are profitable. But each group is very different from the other, and I think we need to consider teaching, hiring and marketing to these groups in completely different ways. I'm not sure if there's a genetic component or if this is merely a convenient grouping of people's personas. All I know is that it often explains a lot about behavior (including mine). Read Hunters and Farmers here .

  • American Consumers: Resetting Behavior and Refocusing the Economy

    John Gerzema , Chief Insights Officer for the marketing firm Young and Rubicam , sees a major shift in the "post-crisis" behavior Americans. He says the American consumer is "de-leveraging," and he is bullish on what that means for the future of the US economy. The consumer is newly empowered, in Gerzema's view, and he outlines how this will bring about positive change in the economy in this Ted talk: