It’s turning out to be a year of new launches, making the market place more interesting and competitive. Palm launched its glitzy mobile phone “Pre” making Apple really shaky and nervous, with Apple wanting to sue it for copying the iPhone touchscreen. Microsoft has launched, rather relaunched its internet search engine with a new name Bing – planning to take Google headlong in the battle of the “searches”. Yes, this time – innovation seems to be the key to survival. But will plain innovation be enough to make a product survive?
THREE STORIES TO ILLUSTRATE
100 students at MIT’s Sloan School of Management were shown an advertisement of the magazine – The Economist. It was a subscription ad, urging readers to pick the type of subscription they wanted to buy or renew. Three offers were on display:- 1st Offer: Internet subscription for $59 2nd Offer: Print subscription for $125 3rd Offer: Print and Internet subscription for $125
Out of the 100 students, 16 students opted for the first offer, zero students for the second, and 84 students went for the third offer. Now no one in their right minds would even remotely think of going for the second offer when at the same price, you got a bigger and better bargain when you selected the third offer.
So the researcher Dan Ariely decided to do away with the 2nd offer (after all no one went for it in the first round); this time again, 100 students were asked to fill up the subscription form. The results spoke a different story; 68 students chose the first offer of $59 for Internet only, while only 32 chose the $125 subscription, which offered the combination of print and Internet. While it appeared to be the most lucrative option the first time, what was it that made it look so lackluster the second time?
It was a basement-run operation when it started. Today it’s grown into a huge business with branches spread all over the world. The company is Amway Corporation. The company has used a technique whose power is indisputable. It calls this BUG. Before you draw up any conclusions, the BUG in nothing but a collection of Amway products – the furniture polish, detergent, shampoo, deodorizers etc. all put together in a specially designed tray. Each salesman is trained and instructed that he has to necessarily leave this BUG in the prospects house for 24-72 hours, without charging her anything or putting her under any obligation to buy. She was just expected to try the product. When the salesperson returned to collect the free samples (BUGs), most of the customers bought at least one product. The BUG, true to its name, was working like magic. What was it that suddenly made the same products so good, that all sales shot up so fast?
An owner of a jewellery store found that she was unable to sell a collection of turquoise jewellery. She tried as hard as she could, but nothing worked. As a last resort, during the peak tourist season, she asked her saleswoman to put a note on the turquoise jewellery section announcing “Everything at ½ (half) price”. As expected, everything was sold within a few days. However, the shocking part was that the saleswoman had not heard her correctly and instead of putting everything at “½” she had put them at “2x” i.e. double the price. Why did it all sell? Read More....
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