Monthly Archives: January 2013

At Rate My Teachers, the kids give the grades

The best teacher I ever had was a man named Bruce MacLean. I still remember his high school lectures on history, his hilarious stories about partying in Europe, the controversy about him hanging a Soviet flag in his classroom near the tail end of the Cold War. Bruce had long hair, acted like a wild hipster, buried us in homework — and actually prepared us for college.

I bring Bruce up because I used him to test, a crowdsourced site in which today’s students rank their teachers. My son had pointed it out when complaining about a tough educator, and we checked out comment after comment that backed up his point of view. It’s the Yelp of education.

So I punched in Bruce MacLean and sure enough, the score was on point. 5 stars for clarity, hinting at his smoking intelligence and tales. 4 stars for helpfulness, indicating huge amounts of homework. And 3 stars for fairness — he’s still a tough cookie on grades.

RateMyTeachers is growing rapidly, with traffic tripling in the past year to 800,000 unique visitors per month. What’s interesting is that, unlike Yelp or other business review sites, where the rankings could be gamed by many anonymous voters associated with the organization, at RateMyTeachers the reviewers are hundreds of children vs. one human being. I suspect it’s tougher for teachers, if they were inclined, to try to boost their own rankings, because they are outnumbered … so the site is remarkably accurate. My son ran down the list of his teachers’ reviews and said, “Yep. Oh yeah. Definitely right!” For my former teacher Bruce, the student quotes were: “Toughest teacher I ever had!” “My favorite teacher EVER!”

A year ago, I ran into Bruce at a bar while visiting my hometown in Vermont. He’s on the verge of retirement and plans to travel the world with his wife. His hair is shorter and salty, and he still mesmerizes, cutting through debate with a sharp laugh. Clear, mostly helpful, and more tough than fair. It’s amazing that even when kids collectively gather wisdom, the grades are spot on.

The curious case of consumer time with print

Oh, print, you have a problem.

When Henry Blodget presented the current state of media, he noted that ad spending by media channel is out of sync with how consumers really spend time in each format. Everyone understands that mobile ad spending is trailing consumers’ love affair with smartphones and tablets (because marketers are still figuring mobile out), but … what about print?

Print ad spend and consumer attention are wildly out of sync. In 2011, only 7% of U.S. consumer media time was spent in magazines and newspapers, yet 25% of U.S. ad spend flowed through paper. Newspapers have already faced an advertising correction — ad spend adjusted for inflation is down about 70% from the all-time high in 2001 — but that shift was driven primarily by Craigslist and Google sucking classified advertising revenue out of the back of newspapers. Newspaper and magazine display ads are still over-represented in ad spending vs. audience attention.

One reason for this misalignment is print ads often outperform TV, radio, digital and mobile in terms of response rates and cost per response; better return justifies a higher ad rate. This may seem counterintuitive, but we recently explained in a Digiday column that response rates for TV and radio hover around 0.05% to 0.13%, about that of banner ads, simply because so many ads are pushed to consumers each month. The typical U.S. consumer is hit with about 6,600 TV spots or 750 radio commercials every four weeks — how many do you respond to?

Print ads, by comparison, last longer, stick around the house, and can be revisited. Declines in ad spending in print channels aren’t driven, so far, by declining response rates but instead by slipping circulations.

The real problem for print is what will happen if response rates start to slump as well. Mobile could drive that; advertisers are starting to figure out the handset and tablet game with geo-fencing, app advertising, native ads, and Facebook (which can finally provide real mobile audience targeting based on all that information you’ve volunteered in your FB profile).

If mobile finally wakes up, the market may reset with ad spending aligned with consumer time. Not that this really matters for advertisers; the demarcation between digital tablets and paper print is starting to look silly, and eventually “screens,” “audio” and “reads” may be how we define media plans. But for publishers who live by the value of paper, fair warning: consumer attention is slipping away.

(Blodget’s presentation is worth bookmarking, find it here.)

Stop & Shop’s mesmerizing 1% gasoline giveaway

Stop & Shop, the northeastern U.S. grocery chain, has created a fascinating loyalty program tied to gasoline. If you use a loyalty card to buy groceries, you can later swipe that card at participating gas stations for supposedly big savings. Here’s the pitch:

“Save 10 cents per gallon for every 100 Gas Rewards points.
Earn 1 point for every $1 you spend with your Stop & Shop card.”

I love this (and, confession, I use this), because nothing feels better than pulling up at a gas station, flashing my Stop & Shop card, and seeing the price per gallon fall. But one day, I did the math … and realized all of this effort was saving me only 1%. In aggregate, I calculate Stop & Shop only gives away 0.25% of all its grocery revenue to fund this program.

What gives? This tactic is called “price obscurity,” a version of price framing in which the true value of a bundled product and its price is obscured by making it complex. This Stop & Shop program feels like a huge savings, when really it’s tiny.

Here’s the math. Look closely at the promotion, and you’ll notice the discount is broken into two lines:

Save 10 cents per gallon for 100 points …
… earn 1 point for every $1 you spend (on groceries).

Hm. Humans aren’t good at mentally calculating currency exchanges, and a double exchange is even trickier. It’s no mistake that the marketers broke this promotion into two lines that are hard to connect. So let’s move the equation into one line. We’ll also need to revise the second line to $100 in spending, so it will match up with the first. Finally, we’ll reverse the order, starting with your grocery purchase so it makes more sense:

Spend $100 on groceries = 100 points = 10 cents off per gallon. 

That’s better. But wait. What is $1 in grocery spending worth then? If we factor it all down by 1/100…

Spend $1 on groceries = 1 point = 0.1 cent off per gallon.

Hm. That’s not quite as sexy. For every buck spent, I save 1/1000 of a buck on gasoline? Stop & Shop is giving me 0.1 cents off per gallon? Well, to be fair, the average car fill up might be 10 gallons, so that means my 0.1 cent off per gallon would save me 1 full cent after 10 gallons. That is, our final math:

Spend $1 on groceries = 1 point = 0.1 cent off per gallon * 10 gallons average = 1 cent saved!

A dollar spent is a penny saved. That’s OK, about in line with every other rewards program out there (see: credit card cash back offers). But a penny is not a huge savings, and it sure isn’t as sexy as the promotions offering 10 cents, 20 cents, or 30 cents off per gallon … or more!

This brilliant promotion is giving Stop & Shop major buzz all for 1% savings. The grocery store likely benefits as well from slippage, the half of customers who won’t care about participating and then the portion of the remainder who likely stop by a participating Shell or Stop & Shop gas station only every other fill-up … meaning its true cost for this promotion could be 0.25% or less of all grocery revenue. Points also expire in 30 days. You get the idea.

So, 1% total potential return on grocery spending, for the fraction of customers who remember. That’s chump change … but I confess, it still feels great. I’ve swung by and “saved” 30 cents off per gallon in a recent fill-up. Tied, obviously, to $300 in recent grocery spending for my 1/1000 return per gallon price savings, which at 10 gallons saved me 3 bucks, or 1% back from my groceries … er. Logic be damned. Stop & Shop, you made me feel good with your clever math, and odds are I’ll keep driving back.

Fishing for the wrong customers

Stories about other brands are often told in marketing meetings, usually with admiration and perhaps with embellishment, and three of my favorite potentially apocryphal tales involve Pepperidge Farm Goldfish, the Ford Edsel, and the Honda Element. They go like this:

  • Pepperidge Farm once marketed its Goldfish crackers as a bar snack, but noticed later that moms were buying the crackers in spades for their children. So Pepperidge Farm refocused the Goldfish brand on kids, even adding a smiley face.
  • Ford launched the Edsel after much market research found the “best” designs for each auto component desired by consumers. However, when adding the favorite tail fin to the favorite hubcab, Ford ended up with a really ugly car, the Edsel launch bombed, and Ford went into rapid redesign mode.
  • Decades later, Honda followed suit with an auto success, but also made a mistake. It originally marketed the boxy Honda Element to early 20somethings, with a wink-wink campaign talking about fully reclining seats and images of the tiny SUV parked on beaches by the ocean. But sales took off among dads in their 30s and early 40s who found the small SUV perfect for hauling kids.
None of these stories may be true (although I keep hearing them); a little online investigation found that Pepperidge Farm has been selling Goldfish crackers since 1962, when founder Margaret Rudkin found the recipe on a trip to Switzerland, which doesn’t sound like the start of a bar marketing campaign. Still, the concept that marketers often miss their demo target by a mile and have to quickly adjust products or messaging is one we can all relate to.
The lesson is we marketers are often likely to get our first campaigns right. The only question is, how fast can we react when we discover we’re wrong?

In group decisions, beware the risk of propinquity

A riff on group dynamics that could save your next meeting.

Decisions are difficult in business because hierarchies and org structures, however well thought out, culminate in small groups trying to reach consensus on difficult issues. If you’re in a meeting, the outcome is important — you wouldn’t be there if the decision did not entail some risk or some reward. Funny thing is, the strongest influencer in a meeting is usually not the most senior manager. Often, an unexpected player steers the decision to a biased, wrong-headed conclusion. This is the danger of “propinquity.”

Propinquity means “nearness in relationship,” and was outlined by management consultant David Hillson in a 2009 paper “How Groups Make Risky Decisions.” Hillson suggested that if the risk of an issue being debated by a decision group is very close to one individual, that person will become a vocal force as influential as a top officer.

Don’t make it blue!

To see how propinquity works, imagine a group of managers convening to decide which color to paint a new office. Participants include:

- Sally, a senior manager who formerly led a paint department
- Frank, a mid-level manager with expertise in interior color design
- Tom, a junior manager … who as a child was frequently locked in a small blue room for “time outs”

As the color committee begins to discuss choices, Tom proclaims, “Blue is a horrible choice, it’s too babyish. We can’t include it.” The other participants, swayed by Tom’s strong opinion, agree. Blue is off the table.

What happened? Tom — unbeknownst to others, and perhaps unknown to him — had high propinquity to the color choice. His passion swayed the group, beyond the opinion of the other members who had more expertise.

Hillson suggests this type of group-member bias is important to recognize, because studies show that participants in decisions with high propinquity skyrocket in influence — rivaling or surpassing that of individuals with high power. This results sub-optimally in the group decision really being made by one person, who of course does not have access to all the data for the most rational execution.

It’s a bad choice, but I saved my bonus

Color choices are a silly example, but propinquity often arises in important business decisions. Imagine holding a team meeting deciding to:

- Develop a new service that could drive new revenue … but that might reduce the bonus for one manager who works in a competing department.
- Launch a communications campaign that could generate positive PR … but that conflicts with the power of an internal manager.
- Merge with a new organization that could triple annual profits … but undercut the power of the current team leaders.

It’s not hard to envision someone in each scenario above making strong points to nix the best decision for the organization.

Business history is littered with examples of decisions missed based on individual, or business unit, fears. IBM could have owned Microsoft’s early operating system, but dismissed it because its fortunes were tied to mainframe computers. Microsoft could have launched cloud-based apps before Google, but doing so might have cannibalized its PC software division. Kodak could have led the digital camera market, but doing so would have threatened its old film business. Clayton M. Christensen defined this macro-business illogic in his book “The Innovator’s Dilemma,” in which radical innovation can lead to enormous future profits … but is often blocked if seen as threatening to existing business groups. Entire businesses can make suboptimal decisions if they have too much propinquity, or nearness, to the risk.

In simple terms, propinquity inflates perceived risk

Boil it down and if a decision has a potential outcome that affects us personally, we often over-emphasize the risk … and end up not making any decision at all. Propinquity creates a type of “risk inflation,” where the peril may not be large to the overall organization, but challenges our current reward structure.

The solution is to self-regulate, to step beyond the shell of our personal rewards or fears to really evaluate how the decision may benefit or harm the organization as a whole. A good test is to ask two simple questions: If we do ______, where will our organization be one year from now? Is that a better place? And if it is, then leave your propinquity by the door.

Image by Matt Jariado