Fairly irrational – Why Fair-trade products should do well in India?

Why should people who otherwise bargain for every penny, pay more for something knowing fully well they are overpaying? While classical economics likes to believe people are rational and hence selfish, interestingly most people don’t live by the laws of economics, or as Mullainathan & Thaler (Read the research paper here) puts it “economics is anti-behavioral”. They indulge in chocolates, spend time watching trashy movies, and fortunately enough, are concerned about people around them, often willing to sacrifice their own interests to help others.

The fundamental premise of the fair-trade movement (Hear Harriet Lamb speak at the LSE) is this humaneness in human behavior. A higher price that a consumer pays for fair-trade coffee, tea, sugar or any other product is in exchange for a promise by the producer to pay a higher, fair price to its workers and farmers. And one of the drivers of this trend will be the increasing polarization in incomes and quality of living in India. “In the face” poverty in large cities like Mumbai makes many people feel guilty about being rich – travelling in chauffeured cars amidst poor children begging for the next meal – and works as triggers for altruistic behavior.

Today, in some countries fair-trade products have become huge. In UK alone, £500m worth of goods bearing the Fairtrade mark are sold annually, including tea, coffee, bananas, cotton, flowers and even footballs, transforming the lives of millions of farmers, workers and families.The Fairtrade Foundation, has been a pioneer in this movement. In India, beginnings have been made by NGOs like Fair Trade Forum, among other institutions. But it is when larger organized retailers and speciality retailers like Fabindia starts promoting these products through their networks, this could snowball into a much larger movement.

Let’s celebrate irrationality again!

Fast food is dead. Long live fast food chains!

AdAge just recently talked about how calorie data posted on the menus of New York chain restaurants are changing the way New Yorkers eat. While of course, the postings are not hurting business, restaurants are selling more lower-calorie alternatives and hitting customers just above the belt.

From AdAge

Read the entire article here

Bob Goldin, from Chicago-based Technomic, which conducted the study says, “It appears from what consumers are saying, that they are ordering differently, not that they wouldn’t go.”

What is interesting about this entire exercise is that consumer habits have been changed by merely posting information on foods. Consumers always had a fair idea of the bad calories they were consuming at these joints, but the moment this actual information became available, they realized what the real damage is.

Some 86% of the participants said they were surprised by the calorie information, and 82% said they were changing their consumption habits because of it, by choosing lower-calorie alternatives.

No big advertising campaign, no mudslinging, no “eat healthy” marketing initiatives. Just one big board with all calorie counts. That was what did them in. Simple, huh? In trying to understand why this actually worked is the more fun part.

No matter which public topic you discuss or which personal aspect you worry about – you need reasons for your opinion and argumentation. Moreover, this ability of reasoning is responsible for how you make decisions and choose among alternatives. Taking a leaf from understanding neurobiology of human behaviour, we can attribute this change of behaviour to availability – Things that are more easily remembered are judged to be more prevalent. This acts as a shortcut for our reasoning and we tend to select the first solution that becomes conscious.

It was just simple availability of the information that influenced peoples’ reasons according to their own opinion without them even realising it. When no chains displayed their calorie counts, every one of them was an equal-opportunity offender. It didn’t really matter what you ate there, because all food was subconsciously seen as bad. The minute you know what you’re eating on the basis of this availability heuristic, it impacts what you order.

No wonder, 60% of the respondents said calorie disclosure affected where they ate, and 62% of New Yorkers sought restaurants with healthier options.

Chew on this a little, will you?

Design a better, irrational world

Dan Ariely, a professor of behavioral economics at Duke University and author of Predictably Irrational, presents examples of cognitive illusions that help illustrate why humans make predictably irrational decisions.

This video is a talk he gave at the Entertainment Gathering in December 2008.

It’s worth thinking about a few key points he makes in his talk.

While we have a feeling that we are in control of all decisions we make, we find it tough to accept the fact that we are merely in just an illusion of making the actual decisions. This is illustrated well with cases of organ donation percentages across countries and the Economist subscription example.

Another interesting point he brings up:

When we build the physical world, we understand our limitations and build around it. But when it comes to the mental world where we design and plan for things like healthcare, stock markets and retirement, we forget the idea that that they too are limited in nature.

If we understood our cognitive limitations the same way we understand our physical limitations, and stare at them at the same way, we can design a better world keeping them in mind.

While the irrational decision making has bigger implications on how we design policies and regulations, it would be worth thinking about how we can use these very principles in marketing. So far, all the knowledge we have come across, including how our friend sells waterproof watches to how saree salesmen operate (ask us and we’ll let you in on the secret), most of the selling strategy is intuitive in nature. Combine this study of irrational behaviour with marketing wisdom, and there are many more opportunities that immediately open up in targeting consumers and starting a dialogue with them.

What irrational behaviour observations have you come across lately?

from [swissmiss] via [FORA.tv]

Prisoners of precedence

“We’ve always done it that way”. Precedence is a decision killer, we don’t take decisions many times, we just follow the past. more true of marketing. We just rely on many precedents, we priced it that way in the past, we used this media last time around, we used that channel last year! One precedent sets off another.

Came across this amazing email story, some could see the butterfly effect, for me there it is about precedence.

The US standard railroad gauge (distance between the rails) is 4 feet,8.5 inches because that’s the way they built railroads in England, and English expatriates built the US Railroads.

The English built that way because the first rail lines were built by the same people who built the pre-railroad tramways, and that’s the gauge they used.

“They” built it that way because the people who built the tramways used the same jigs and tools that they used for building wagons, which used that wheel spacing.

And if they tried to use any other spacing, the wagon wheels would break on some of the old, long distance roads in England, because that’s the spacing of the wheel ruts.

So who built those old rutted roads?

Imperial Rome built the first long distance roads in Europe (and England) for their legions. The roads have been used ever since.

And the ruts in the roads?

Roman war chariots formed the initial ruts, which everyone else had to match for fear of destroying their wagon wheels. Since the chariots were made for Imperial Rome, they were all alike in the matter of wheel spacing. The United States standard railroad gauge of 4 feet, 8.5 inches is derived from the original specifications for an Imperial Roman war chariot.

It gets better

There are two big solid booster rockets or SRBs attached to the sides of the main fuel tank when you see a space shuttle sitting on its launch pad. The SRBs are made by Thiokol at their factory in Utah.

The engineers who designed the SRBs would have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site.

The railroad line from the factory happens to run through a tunnel in the mountains. The SRBs had to fit through that tunnel. The tunnel is slightly wider than the railroad track, and the railroad track, as you now know, is about as wide as two horses’ behinds.

Apparently, a major Space Shuttle design feature of what is arguably the world’s most advanced transportation system was determined over two thousand years ago by the width of a horse’s ass.

The fact is it could have been broken at various stages, earlier the better, but it was never. Probably because no one questioned it!
So, the next time you are writing the brief for a 30 second spot, stop for a while and think, question , why a 30 seconder? why a TV spot? why mass media?

It could well be because someone, someday, in some country thought of it to be the right way for one brand! It’s never too late to break a precedence, sooner the better!

Question it, you could be the next Barry Marshall, who proved that 90% of all ulcers are caused by Helicobacter Pylori bacteria.

Make time to stand and stare

Go, stand outside your local kirana store during peak hours and see how people are buying. Everyone’s in a hurry, they come prepared, pick up their stuff, pay for it, and leave. And even when it’s not crowded, people come prepared, pick up their stuff, pay for it, and leave. In such a transactional environment, where is the opportunity to have a meaningful dialogue with the shopper?

Moreover, under the guise of “providing consumers with a more personalised and fulfiling shopping experience,” initiatives such as HUL’s Supervalue stores are only a means of incentivizing the retailers to stock and sell more of their products. Bigger display margins means more substitution of planned purchases with incentivized brands. As a part of local sales promotion budgets, these do nothing to connect with the shopper.

In a bid to have an integrated strategy, we are only seeing more clutter. Salespeople come by the store, stick up posters with adapted communication and leave, only to have other salespeople stick up posters from competing companies over it.

Let’s face it, cracking the kirana store is a challenging task. What can be done to increase interaction at the kirana store?

Just the other day, we came across an interesting poster for Dev D (releasing Feb 6, by the way). Of all the conventional movie posters in the movie hall, this was the one that caught our attention and made us take it in.

Double Take

Interesting visual illusion, huh?

Wonder why marketers are not yet experimenting with design like this… If brands use interventions like this and create time for dialogue, it will only lead to a little more connection.

And once your consumers get time to stand and stare, combine that with persuasive communication. This will ensure you are on your way to creating interventions at the kirana store that can increase conversions.