Why Consumers Don_t Buy – Manoj Thomas

Chakravarti, Amitav and Manoj Thomas (2015), Why Consumer (Don’t) Buy: The GO and STOP Signals, Palgrave Macmillan

Most businesses view their consumers as homo economicus. The authors’ insight is that they are not. They feel that decisions happen because of some kind of Go/No Go filter that we all have.

The stimuli of product attributes pass through these filters. Some products, such as cookies, struggle through the Go filter – as our morals remind us of the sinfulness associated with this product. The No Go filter works mostly on price. But the price filters are not so simple – you have both low and high filters. Most of the time the high filter works, as you think: Is it VFM at this price? But sometimes, especially for products consumed publicly – the low filter sets in – What quality can they deliver at this price?

Companies need to realize that the sales happen not just because of rational decisions taken by consumers. An interesting product category that saw success in the US is the 100 calorie cookie. By labeling itself as 100 calorie – the product got past the first virtue / sin filter. Once it got past that, it did not matter that it was sold at a 200% premium to the normally packaged cookie.

Another insight that the book offered was about how past successes can lead to a blinkered vision about our future. We see everything in terms of a world view that has led to part success. The book narrates the story of Ron Johnson, a sales whizkid who made Target successful by improving customer experience. He went on to repeat his success at Apple Store. When he joined JC Penny, he decided to work on the same idea – and reduce hassle by launching fewer discounts.

What had worked twice, proved to be third time unlucky for Johnson. When he set about simplifying discounts and changing pricing from xx.99 to rounded off pricing, the customers didn’t like it – and started leaving in droves. The story ends with Johnson getting fired. The insight? Context matters. To the JC Penny customer, the store was known for discounts. That was the only thing that got past customer filters.

And the other insight from the same story was the filter that Johnson operates with. The book talks of the hedgehog Vs Fox strategy. The hedgehog (porcupine) has a simple response to all dangerous situations. It just rolls up with the spikes sticking out. The fox does not have any fixed response, as it tries out various things – and remembers what works. The book says that Johnson was behaving like the proverbial porcupine. He had a single solution to all problems. The unfortunate part was that it had so far been working for him. Looking at this example, I realized that there is a part of the porcupine in all of us. We learn much more from success than we learn from failures.

So Kislay, to sum up – is it worth the 22 Euros? You will definitely recover the 1 Euro spent for for Chapters 1, 3 and 8!

Kislay’s original comment: Marketing guru should tell me a little of pricing strategy one day. The McMillan ebook is available for 22 euro  but per chapter is 31 euro per chapter.

Thoughts from Kerala, Dec 22

Visits to Kerala are always invigorating. It has to do something with the greenery and the hills. This time I spent more time with flowers. The diversity of flora is something that you only find in equatorial forests. Good rainfall, good sunlight almost all through the year. So the competition is only for the soil. Go below a nutmeg tree – and you could still find reasonable undergrowth.

Walking does something to discussion quality. Even in Pune I really enjoy my walks on the tekdi – mostly due to the company and the discussions that happen, thanks in large part to Alok and Prasanna. Did 30,000 steps over 3 days. What do 50 year olds talk about? What is interesting to note is that perspectives change with professions. I had always assumed that career peaks happen usually in the forties. But looks like the peak comes 10 years later in academia. Probably because a typical prof starts in the thirties – and so everything lags by a decade from then on. And yes, the typical US prof also retires 10 years later than his peers in the industry. Working into the seventies is the norm.

What strikes me is that there is a good amount of churn that is happening in the global education market. There are two trends – the move away from mainstream MBA programs. And the second is delivery is moving away from traditional campuses. Mainstream MBA programs still matter to students who are keen to do career switches. They appreciate the time spent on campus and the network building that happens there. More importantly, they look at a B school as a place where they can get a job in a new field – with a reasonable salary. But there are quite a few folks who are happy with their employment – and feel that some amount of continuing education might help them in their current jobs. So they are the ones who are investing in themselves. They are not ready to let go of their current job – as they are typically in self financing mode.

For colleges, they have set very low entry barriers to these programs. Admits are mostly based on profiles. And since most of these programs happen in asycnchronous modes or are delivered in satellite centers on weekends, there are no caps on numbers that can be taken in. Does set me thinking. If education is going to gravitate more towards distributed delivery, do test prep companies have an opportunity there? One way would be to work as facilitators for these collaboration spaces. The certification, some of the content and the online inputs can be provided by the university, whereas the venue, the handholding by a local mentor, alumni engagement – can be done by companies like us. And one more role that would be appreciated is in student enrolment – that has been our forte. What is important is the formation of groups of at least 10 students in a single location.

Cornell runs an executive education program with Queens, a Canadian university. The program is run through a model where students are put into conference rooms across cities – in groups of 5 to 12. Sessions are delivered live – but online. Students are beamed into the Cornell studio, even as the prof is beamed into the classroom. One of the big pluses of this design is peer learning. That cannot happen too well when you sit in your bedroom armchair attending sessions. I believe this Cornell-Queen template has a lot of promise – and could show the way how a lot of education programs could happen in future. The program is also more cost effective compared to the regular classroom MBA program. There are no boarding charges for students. They don’t have to quit jobs – so the income meter continues to run. For the university, there are no hostels that have to be arranged for. Possibly faculty time is also used more sparingly, as a university student would spend much more time in out of classroom interaction. Though personally, I would want that this aspect of a campus education should be replicated in the Queen-Cornell template.

Another model that is working out well is the asynchronous mode. Most of us do spend time in self education. Every year we pick up a few skills that we did not have earlier. We are rarely interested in getting a certificate for those skills – unless they come free of cost – aka a linkedin recommendation, Will we see the evolution of companies that score skills, like they have done for credit? In a sense, you already have companies like Hackerrank that do that. The data though is public only if an assessee wants to make it public. Will skill assessment become like a board exam or SAT at some time in future? I doubt it. First, there are a lot of skills I may experiment with in my life, but I would expect to fare badly on most. Careers are the outcomes of, like many other things in life, trial and error activities. Most of us want to present a picture before the world of our successes – very few want to talk about failures.

Like IIT Madras, the Cornell B school also has a data sciences program, albeit more with a business flavour. It also sells at a much lower ticket price than the regular MBA. And I suspect it makes a lot more moolah for the school – as faculty costs are incurred only during the lecture recording. Off course, there is a significant amount of spend in sprucing up the content. Am assuming that for tech courses, students tend to be more self driven. Also, placements are not really a problem in the tech world – as most of the times the demand for relevant tech skills is much more than supply. Tech programs also tend to be shorter – finishing off in a year rather than the two that the MBA takes.

The competition in tech programs will be higher. At one end you have company certification: Microsoft, SAP and Oracle have been at it for ages. On the other hand engineering schools, humanities schools will vie for the same tech student. So my guess is that you will have these programs coming in multiple flavours. Would a company like Bulls Eye have an opportunity here? I am not too much of a votary of the asynchronous at home program. So my guess is that there will be one flavour on offer which will work on the same model as the Queen-Cornell program. And in that case, we can be involved in the same way that we had talked about earlier.

One big discussion area during our morning walks was health. Very happy to note that Manoj’s dad – at 83 years of age, still does his diligent 10,000 steps a day. He does most of the walking on the house terrace. He does not like uneven surfaces too much – and rightly so. If he were younger, I would have suggested building a walking track through the lovely garden that they have in the backyard. Though Manoj tells me that the backyard is also home to a healthy snake population. Walking definitely has one advantage over cycling – it does lead to better conversations.

Manoj follows a strict diet regimen in Ithaca. Breakfast is muesli, lunch is soup and salad, and dinner is fish along with a few veggies. He has almost banished carbs from his diet, though he does consume some fats and oils. What I would recommend is adding a few more raw food – in terms of fruits. Manoj’s dad has at least 20 banana plants – with at least 3-4 fruiting at any time. Unfortunately, did not see them eating too many during my stay there. Manoj’s dad, I can understand, he is on insulin. But young Manoj, can definitely do with a few more fruits.

Manoj has been working off late on moral marketing. And we found a case study right at his home. Good companies are the ones that are customer centric. They are the ones who do what is right for the customer. But who decides ‘what is right’. Is it the customer? The company? Society? We did not really find an answer in the short time that we spent together. I am hoping that Manoj comes up with a book on his thoughts in this area soon. But coming back to the case study – it is about Manoj’s dad. He is diabetic and on insulin for many years. Till five years ago, insulin doses were quite inexpensive. Today, Manoj’s dad pays 15 K per month for his insulin. Just about the same that is paid to the full time house help, Shyamala. Pharma companies and diabetologists are hard at work brainwashing patients to pay through their noses for the paid vacations and perks that the medico-pharma axis is earning. Space for some innovation over here?

Talking of innovation, we chatted up about start-ups. Manoj has invested in a couple of companies. He talked of one of them – a company started by a PhD in food sciences from Cornell. He is working with chick-peas – that is touted as the next super-food. The company’s first product – was a dark chocolate with a chick pea kernel. Didn’t do too well – people like to keep their sins pure. The next product is a chickpea wafer, which is doing better. But scaling up in manufacturing is a challenge.

Mrinal, Manoj’s younger son, has done his BS in materials science. He has also managed a side by side major in Computer Science. He spent some time doing an internship at a petroleum company – and was disappointed with work there. He is currently in Madison, Wisconsin, where he works for a healthcare software company. Mrinal wants to do a start-up. Manoj recommended me a book – Super Founders, which tries to document traits of unicorn founders. There don’t seem to be too many in common. It would be a good idea for Mrinal to work in a few start-ups before he starts one on his own. The learning come much better in smaller companies than the larger ones.

Tushar, the elder son, was visiting Kerala along with Manoj. Spent a few hours with him. He works with a German retailer, LIDL. Tushar has done his bachelors in English literature at Cornell – and his Masters in German literature at the University of Heildelberg in Deutschland. His work at Lido is in the area of analytics. He was in WFH mode all over the world, in Germany, Portugal and Costa Rica. We chatted about WFH – and Tushar tells me that on the whole the younger generation is quite happy with it. Covid has helped in making it more acceptable to the oldies too. There are some tax issues for the multiple country work-from-homer that will need to be resolved, but that is only a matter of time.

Tushar is now headed back home to spend some time at Ithaca. The family is going for their Christmas vacation to Seville, Spain. What I liked about the distributed family is their weekly WhatsApp video call. Bini, btw, has enrolled at the Queens-Cornell MBA program. So Manoj, who is chair of the exec programs at the B School, is getting first hand feedback about how the program is working.