z on life

California Golden Cookies is an amazing gyro place and bakery on Kearny St. in downtown SF and is a frequent lunch spot of mine. The food is amazing, prices are reasonable, service is given with a smile, but far and away the best part is that you sometimes get a free cookie that is amazingly tasty. The interesting facet is that you never know when you’re going to get a free cookie. I have gone about 20 times now and gotten, I’d roughly estimate, 10 free cookies. The problem is I can’t seem to figure out what variables the guy uses to determine if you get one or not. I have thought about everything and watched carefully, but to no avail, I cannot figure it out. This prompted me to think about the pyschology of giving out free stuff.

Consider three cases in which I am going to buy a gyro and may or may not get a free cookie.

1. Every other time I get lunch there, the guy gives me a free cookie.
2. Every time I go there, I get to flip a coin and if I call it right I get a cookie.
3. It is seemingly random whether he gives me a cookie or not, but so far it has worked out to roughly 1 out of 2 times I go I get a free cookie.

Notice that the expected value for all three of these is that, per lunch session at the restaurant, I expect to earn half a free cookie. So does this mean that the affect on the consumer is actually equal for all three stratgies? I say no, and here’s why.

In the first case, you have a game of perfect information and you know exactly what you’re getting. The problem with this approach is that, while people generally get excited about free stuff, you are reducing the experience down to its raw economics. The customers know exactly how much they are saving per lunch visit. Plus or minus a little added excitement, they know that if the cookie is $1.75, they are really just being given 87.5 cents back each time. This feels like a coupon. Coupons work, but it comes down to economics.

Pros

• After an odd number of visits, people will be thinking about coming back to get the next one free.
• For the store owner, this is predictable and easy to work into his financial models of sales and profitability per customer.
• If people get a cookie every other time free, they’ll probably get used to eating them and actually buy one every time they don’t get a free one.

Cons

• Some people will see it purely as a coupon and the free cookie will not have any intangible or emotional value.

In the second case, you have a game of chance where you expected value tells you you’ll earn 87.5 cents back each time, but really it is either 0 or $1.75. Some customers would probably prefer the fun and allure of this more so than just having a ‘coupon’ as in case 1, but some would also probably not like it. Some people prefer to save every penny, some prefer to buy lottery tickets. This might be a fun idea to try, and may cause the restaurant to turn into a really fun environment as the tension builds for each coin-flip and there will be excitement after wins.

Pros

• This will really be fun to some percentage of people (risk-takers).
• The coin-flips will create excitement and hooplah.

Cons

• For small sample sizes, the number of free cookies needed to be given out is highly variable so there could be inconsistencies in profit day-to-day caused by this.
• Risk-averse people would probably just prefer the coupon style.

In the third case, you as the consumer really have no idea what is going on. All you know is that sometimes you are excited about your bonus, and other times, not. The key here is that you can’t prove the restaurant owner has a systematic method for giving out the free cookies, and thus you must (or at least it is human nature to) conclude that he is actually giving you one out of kindness. When you make the decision to go to the restaurant, you will not only consider the empirical chance that you’ll get a free cookie, but also the emotional aspect of ‘wow that guy is nice, we should go back there’.

Pros

• You get the human factor of emotion and personal connection involved.
• If the owner is being secretly systematic, he can tweak the algorithm to his daily needs (ie: if there’s only a few cookies left and still many more potentially paying cookie customers to come in later, he can simply not give any more out free that day).
• Because there is no set expectation of something free, you can never be disappointed on non-free days (ie: it is easy to be mad at someone for not keeping their word, but really hard to be mad at someone for not being overly nice).

Cons

• In the case of the customer who is the utmost consistency seeker, they may react negatively to this mysterious process (highly unlikely though).

It is so interesting to see how these three economically equivalent schemes are so psychologically different and complex. Of the cases, I think case 1 is the most popular (think those little things restaurants stamp when you come in, and every 10th free or something). Case 2 is the most fun and would be interesting (I have never seen it done). But I think very strongly of case 3 above and beyond the first two.

There is something about selling the ‘hope’ of a free cookie and genuine kindness that is awesome and resonates very well with me. Of course, in case 3, the guy could really be deeply manipulative and have this complex algorithm for which he is maximizing my expenditures in his restaurant. And if that is true, kudos to him, he should be an econ PhD (or maybe he is). But, in my book, he is innocent until proven guilty and until I or anyone else can prove that he has a system, I have to believe he is genuinely just a nice guy and that means a lot. It keeps me coming back.

The moral of the story is that if you are slick about it, you can connect with your customers on a personal level in a way that doesn’t cost you anything extra. Good feelings and good relationships are huge in business, and even matter down to the level of this small restaurant. If you take a little time to think about the psychology of such techniques, you can get something for nothing, and that’s always a good thing.

Think of it this way. Consider that each of those cookies probably costs the guy, let’s say, 30 cents to make. He’s given me about 10 free. He’s lost $3 to such a business practice but just got me to blog about it. If even one reader buys one more gyro at his restaurant, he’s made that back in raw profit. Interestingly, he’s created economics that make sense for him (not even including the probably 30 people I have told about his place in conversation), but I as the customer never even thought about the economics. All I thought about was how nice the guy was.

PS: I did not get a free cookie yesterday, but I’m still happy.

Great thought experiment: how would you sell water*? This is much like one of the stereotypical Microsoft interview questions of “how would you sell ice to an eskimo?” and is a cool exercise to go through just for fun.

Here’s how I would do it. Put the water in an interesting bottle. This bottle has 5 different openings from which to drink. Maybe one on the top, one on the bottom, and three on the sides at different angles. At this point, ergonomists, environmentalists, and production managers alike are probably freaking out at how user-unfriendly, plastic-heavy, and expensive this product would be, but just bare with me.

Now, let’s include a marketing spin on the consumption of the water. Not only is this a ‘premium’, ‘hot’, and ‘blinged out’ product, but we will push the idea that the opening you drink out of ’says something about you’. For instance, those who drink from the top are traditional, those who drink from the bottom are rebellious, and those who drink from each of the side openings are wild, cool, and bad-ass respectively.

What’s the goal of this? It’s to get people to self-identify with one of the methods. If you can successfully pull it off, you’ll have created an interesting dynamic between the product users where they argue over the best way to drink. Soon you’ll have trash-talk dialogues going about how “top-drinkers are un-cool” or “left-side-drinkers are the $&!^”. This is exactly what you want. Not only do you have to put thought into which way you drink as an image statement, the choice of buying another brand of water will become a huge social detriment. If you buy a different brand, you lose the ability to express yourself. You become a generic person. Yuck! Who wants to be generic? No one does. And that’s the beauty of it.

Take this a step further. Let’s get 50-cent to have the water in his video. Maybe he can even throw in a line like “The realest playaz drink from the right. Damn this water is tight.” Next thing you know, hardcore 50 followers everywhere are buying up bottles like crazy, eager to show off their loyalty and get some street cred. Things only get better when Kanye raps about “I only drink from the top, cause it gets me goin and I just can’t stop”. Kanye fans rush to grab some bottles and drink from the top to show how he’s the man and Fifty is uncool. Now you’re golden**. Everyone who chimes into the debate further boosts the sales numbers. The more controversy you can raise, the stronger the dedication will be, the more water will move off of the shelves.

Now in all reality, pulling something like this off is far-fetched. There’s a number of serious problems with this strategy above and beyond the less-than-serious issue that Fifty was an equity holder in Vitamin Water and thus has a conflict of interest. Joking aside, we see similar things in the consumer world every day. It’s like wearing the Yankees hat with a perfectly flat brim and the sticker still on. Surely it’s not more comfortable, and it’s not as if the sticker has utility value. It’s really an image thing. How about paying 5 times more for something because it has Gucci tags? At the end of the day it just makes the wearer ‘feel’ good. How about shooting out T-shirts into the crowd at a baseball game? You don’t pay for an expensive ticket to catch t-shirts, you pay to watch baseball, but fans love the t-shirt toss and often remember it more than the game nonetheless. How many people wear Tag Heuer because Tiger Woods does? How many people bought a LiveStrong bracelet, not for charity, but because it was the ‘cool’ thing to do?

The learning lesson here is that you shouldn’t always just think about the actual product you’re working with as the thing you’re selling. You could be better of selling an image, a feeling, a status symbol, supplementary activities, or personal meaning. If you can surround the most boring of products, ie: water, with a really super-cool context and get people riled up about it, then almost any other product should give you way more leeway. Instead of getting caught up on the idea of creating the perfect product, settle for an okay one. Instead think about all the little things you can do to get people feeling excited to use your product, either directly or indirectly. Sometimes its the subtle mini-emotions evoked by products that make the difference, not the shear utilitarian value. The more you can get people to use your product because of what it means or how it makes them feel and not because of what it is, the better. If you get to this point, you’ve created personal value for the user, and you have created an arbitrage. Personal value is free to you as the product creator, but worth lots to the customer. And when you’ve made some, it’s like you have a license to print money because what makes you money costs you none.

So, how would you sell a teenage girl MySpace? Would you talk about social networking features and news updates and friend lists? No, of course not. This is like selling water “because it hydrates you”. The magic isn’t in the utility, it’s in the soft experience. The sell for MySpace is in the ‘wow’ moment when she is done customizing her profile with glitter, blinking text, a custom sunrise background, 4 YouTube embeds, 3 celebrity photos, a blog post, a music player bumping, and an ‘about me’ where she answers 100 personal questions. The sell is when she takes a step back and says, “yes, that’s me, and I love it!”. Again, it’s not about utility. It’s about what it means.

How would you sell water? How do you plan to sell your web 2.0 idea to users? If it’s just great features or great technology, you’re probably still leaving something on the table.

* - Credit for this great hypothetical goes to Andrew Chen.

** - If you’re not familiar, Kanye and Fifty have had a bitter on-going rap battle for a long time and fans of each side usually take vary strong stances and are never hesitant to show support.

In consumer web, how can you avoid the constant urges to build for yourself? One great way is to run through the thought experiment of building a product for someone as little like you as possible. Invade the unknown territory that is urban America, the economically challenged family, a youth age group, the opposite gender, or better yet, all of these at once.

So how would this go if I were doing it? I would describe myself as the following:

• 20 year old white male
• Socio-economically upper-middle class suburban upbringing
• Well-educated at the masters level from a top university
• Technology enthusiast, sports fan, avid reader
• Facebook versus MySpace? — Facebook

Knowing that, then, who would it be fun to build for?

• An urban demographic with low socio-economic standing
• Teenage girls who hate school
• Someone who thinks MySpace and YouTube are the entire Internet
• Anyone who didn’t go to college

Let’s say your building for any or all of these characteristics. How do you do it?

To approach this very hard problem, you need to be systematic. If you can’t immerse yourself in the culture, then you should at least talk to some people who are in it day-to-day. Listen to them talk about daily life. If you abstract away the unimportant details, it is likely that you are very much alike in the raw elements of life that provide happiness. The key is to find the analogies between your experience and their reality so you can come to terms with why they like the things they do. Pull out these analogies, understand the core elements of life that provide happiness, and surround them with a context that is agreeable to whoever you’re building for.

So let’s say I am building for an urban teen girl who has no plans to go to college, works at a fast food restaurant, and is a huge MySpace party girl. First of all, if you think most of America is far, far different than this, you’re way off base. To be mass market, this is precisely who you need to build for. So the question is, what should be built for this huge and actually very average audience? To start, consider what they might like: YouTube, party pictures, stating their BFFs, rap music, glitter text, flashy MySpace layouts, hot celebrity photos, scandalous personal photos, flirting online, phone wallpapers, pimped-out text with misspellings, music videos, Apple Bottom jeans, and so much more.

So right now you might be tempted to make a mash-up to ‘best’ hit this demographic, something like an embeddable photo slideshow player with background rap music sequences for MySpace that features a glittered border and pimped out subtitles that let’s users post shout-outs to each other. This is exactly how to get a horrible and contrived product that will fail miserably. Instead, try to understand what these ‘things they like’ are really telling you about the psychology that drives them.

YouTube and the music videos (and a lack of things like news articles) tell you that they like visual media way more than text-based media and will want a product that provides instant gratification in a rich way with little effort. The Apple Bottom jeans, and rap music are things that indicate a need to self-identify with a unique culture and specific icons, symbols, brands, and activities. The phone wallpaper, pimped text, flashy layouts, and glitter text represent self-expression and the ability to show uniqueness, creativity, and present themselves in an eye-catching way so they’re differentiated to those around them. The party photos are displays of social proof of popularity. The flirting and scandalous personal photos are all mechanisms of reaching out to sexuality and demonstrating personal value and power in a social way. Hot celebrity pictures are icons of future aspiration. Finally, prominently displaying BFFs shows a need for attention and the reciprocation of affection and relationship.

When you boil these things down you get the raw elements: entertainment, identity, expression, uniqueness, popularity, sexuality, power, aspiration, attention, affection, and relations. If there’s anyone out there who doesn’t want or need these things, I would be surprised. So, what we’ve shown is this demographic that at first seemed very mysterious is actually quite predictable in its desires when you break things down. So, getting back to product, the key is to think subtly about the ways each of these raw human levers are pulled in their lives. They certainly are not pulled in the same way for me as they are for the demographic we’ve been discussing. In fact, something I like might not resound at all with them, and vice versa. The devil is in the details. It’s not that the emotions themselves are different for different people, but the contexts around them certainly are.

Translating context can be as easy as changing ‘flirt’ to ‘holla at’, Zegna suits to Air Jordans, or the PGA to the NBA. It can be as hard, however, as having to completely rethink a communication medium because a certain demographic uses text messaging instead of email. Compare the demographic you’re building for to the one you’re most used to. What if the new demographic is less likely to care about friends’ recommendations of products? What if the social circles of the demographic are based on 100 looser relationships instead of 5 very close friendships? What if the demographic works on average 3 more hours in the day and has less time to spend on the computer? What if their interactions with others online are more direct and they won’t hesitate to send a bulletin to 300 people? What if they are more likely to give someone a virtual gift? Questions like these are the questions that need to be asked. They are extremely subtle. The raw emotions stay constant across demographics, but these minute details of context and process do not. They can shatter the success of a site that relies on an axiom of life that does not hold for the target audience.

So, if you understand the subtleties of the context, you can likely build a great product bottom up. Start with some strong emotional drivers, wrap them in appropriate context that fits the demographic, and tie them together with some core functionality that makes a user happy. I know this is easier said than done, but if you really understand you’re users and are good at evoking core emotion with products, you should have no problem. You just need to frame your attack to hit the right targets and use the right weapons.

So what is the actual product? I will leave that up to your creativity! The point of this wasn’t product. It was process. I get off easy this time :).