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Consumerology® Blog
May 05, 2010
The Greatest Thing?
Those of you following me on Twitter probably know that I have been baking bread lately. It's kind of magical what flour, yeast, salt, water and time can produce. And I am not tooting my own horn, but the bread is pretty darned good.
But I have noticed something. My two sons - who for whatever reason eat a lot of toast - use store-bought bread instead. The reason? It comes already sliced. This saves them a few seconds and leaves fewer crumbs to clean up... even though that bread isn't as tasty as the freshly baked stuff. 
It follows, then, that (at least my kids) are willing to eat something less delicious if it's easier and fast. This means I should ban sliced bread, but always have prepared veggies and sliced fruit on hand. There should always be a picture of water in the fridge, and the beer should be at room temperature.
Mom was right again.
May 03, 2010
Why Do We Buy Pants?
Good old (well, new) khakis are hitting the streets for more than $500, and Eric Wilson of the New York Times wants to know why. After all, economic times are a bit dicey, so it would seem hard to justify five Cs on pants.
But not so fast. These aren't just regular old pants. They're special. Wilson explains just what goes into high-end khakis:
Yet, from the designers’ perspective, there is value to be found in pants that are thoughtfully designed with high-quality materials and labor...
A man was hovering over an 80-year-old contraption called a jump iron, hot enough to mold fabrics into shapes they will be unlikely to forget. Another man basted panels of suit fabric to springy canvas, which makes the garment more flexible. In a machine-made jacket, the canvas would be fused or glued into a suit.
Mr. Sternberg’s khakis are tailored like dress pants, and the details are largely sewn by hand, including buttonholes and split waistbands, which can be altered easily. The fabric, which costs $24 a yard, plus $3 a yard to import, is a cotton gabardine fine enough to withstand basting stitches. About two yards, counting for boo-boos and such, is used to make a pair of pants, so the fabric cost is $54.
Add labor, and the cost to produce a pair of these pants rises to $110. The desinger, Scott Sternberg, marks that up by 2X to get to his wholesale price. Retailers then generally apply a 2.5X markup, which grosses up to $550. The math works, but the logic seems sketchy. (Note to self: get in the markup business.)
But hold your horses, Mr. Not So Fast. Wilson quotes a brand guru with an opposing view:
The cost of creating those things has nothing to do with the price,” said David A. Aaker, the vice chairman of Prophet, a brand consulting firm. “It is all about who else is wearing them, who designed them and who is selling them.
Setting aside the question of whether a consulting company that calls itself "Prophet" has gotten too big for its corporate khakis, Aaker makes an important point: when we buy things and wear them, other people see. And when other people see, strange things can happen.
Just what are we buying when we buy pants? Part of it is the pants (are the pants?) themselves, and certainly part is the quality of the pants. But if that was the only consideration, we'd probably expect a little "give" in the mark up.
In the case of these whacky khakis - or the Coach purse, the Armani suit, the Jimmy Choo shoes, that little blue box from Tiffany - part of what we're buying is the clear indication that we are the kind of people who can afford to spend too much. Some of what we're buying is the price tag itself, and the bragging rights that come along with it.
These costly signals - for better or worse - are part of the social soup in which we find ourselves. Where we fit relative to others matters... sometimes a lot more than we'd like to admit. Frugal was good while it lasted, eh?
Apr 30, 2010
Who Really Won the Big Powerball Lottery?
By now, most of us have seen the toothless smile of Mr. Chris Shaw, the young feller from Missouri who found himself the sole winner of the 10th largest multi-state lottery jackpot to date in the US. His take: $258 million. His plans: pay his bills, take the kids to Disney World, and see a dentist about getting some front teeth.
This is the sort of story that engenders some sort of reaction from nearly everyone. Some are heartened. Here's an average Joe, barely getting by from paycheck to paycheck, whose life is changed instantly and who - if he's careful - will never have to worry about money again.
Yes, the evidence suggests that these sorts of windfalls can really spoil things. But if he sticks with the priorities he's already articulated (take care of your family, your obligations, and yourself), he has as good a shot as anyone at making this work.
But other folks see a darker side to this story. News reports tell us that Mr. Shaw was down to less than $30 in his bank account, that he owed a friend $1,000 on a truck he'd bought, and that he was pressed to pay his utility bills. If that's the case, then why on earth would he hazard a precious $5 on a nearly sure loss?
Critics claim that lotteries take advantage of those who can't manage the math. Multiplication isn't all that fun, and it's downright painful when the probabilities get tissue paper thin. For every Mr. Shaw, the reasoning goes, there are millions of other people who also can't afford to play the lottery. He won, but all the other poor folks are now just that much poorer. Right?
Well, not so fast. It's true that nearly everyone who played lost their money; the chance of winning the grand prize is one in 195 million. And it's also true that that's who paid for Mr. Shaw's big win (and then some). But the data aren't so compelling when it comes to the claim that lotteries take advantage of people that can't do math.
But perhaps the most straightforward answer is that Mr. Shaw - along with Ms. Smith, Dr. Jones and millions of other people - are not playing the lottery to win. Instead, they're buying the right to imagine winning.
And imagining is a lovely thing. We watch a tennis match and imagine ourselves right there on the court. We look at travel offers and can almost feel the sand between our toes. And many of us pay a lot more than $5 every time we sit down in a darkened room with sticky floors and gnaw on a tub of overpriced popcorn... all for the privilege of being transported - if only for a little while - to a different time and place.
Millions of folks (including lots of folks who can do the math) routinely plop down their money for the chance to dream of something different. For Mr. Shaw, that dream came true. Let's hope he can enjoy it.
Apr 26, 2010
Of Paychecks and Pecking Orders
In a recent NY Times column, Robert Frank schools us on social transitivity, noting that you can't be better than other people at something unless they're worse. His core argument is that mediocre performers are overpaid so that outstanding performers won't feel average.
He argues that this is a type of tax and that it's progressive. He goes on to argue that because we put up with this sort of thing in the (relatively) free market, we shouldn't fuss over progressive taxation.
I am not the kind of guy who easily equates personal excellence to a tax on mediocrity. And the linchpin of his argument is that social transivity is "progressive"... which is not at all obvious to me.
But Frank does make a point with which I agree: people care about an awful lot more than money.
One answer is that these employees may care, often subconsciously, about things besides pay. The most productive workers in a group, for example, often appear to value their status, perhaps because they enjoy greater self-esteem and respect than the least productive workers.
Just another reminder that financial incentives, although important, are not the sole driver of better behavior in health care.
Apr 20, 2010
Human Behavior - An Active Ingredient for Driving Better Health and Value
Some very exciting news today. For the first time ever, Express Scripts has quantified the hidden healthcare costs of very common behaviors related to prescription drugs. We estimate that procrastination, forgetfulness, and other everyday behavioral "hiccups" are costing the United States $163 billion dollars a year. This is both good news and real money: if we each optimized our pharmacy-related behaviors, we could together save enough over the next five years to offset the projected cost of the recently passed national healthcare legislation. And we'd improve health outcomes in the process.
The Express Scripts 2009 Drug Trend Report, released today, documents how the application of the behavioral sciences can positively impact health outcomes and lower costs. It also illustrates how common behaviors – such as change resistance, inattention, and how we take our medications – contribute to the waste, or savings opportunities, we are missing each year. Express Scripts is the first company to apply behavioral science to address healthcare challenges that individuals, policymakers and employers have faced for years.
The good news is that these potential savings in the pharmacy benefit are tied to one of the few factors in healthcare we can readily influence: human behavior, an active ingredient for driving better health and value. We have the tools that can make all the difference, and the behavioral sciences are supplementing those with new approaches that preserve individual member choice.
Genuine, meaningful, and positive change are ours if we want them. Lowering cost and improving health outcomes – goals that all Americans share – depends on behaviors we can all change, today. Healthcare reform starts right in our own homes.
Change begins here.
