Ascription is an Anathema to any Enthusiasm

I think I’ve found the most evil journal in the university library. The Journal of Consumer Research is marketing’s DARPA, the place where new weapons in are developed for sales and marketing. There are plenty of self help airplane books for salesmen, like Sales Closing for Dummies, or Sig Ziglar’s Secrets of Closing the Sale. What you get over in the Journal of Consumer Research is guys in white coats throwing around psychology jargon like mad scientists. For example: “Disruption should impede closure and motivate consumers high in NFCC to seek clarifying information that facilitates the ablity to reach closure quickly.”

The article that drew me in was on a little trick of the trade known as DTR, or Disrupt and Reframe. This gimmick works by first confusing the buyer and then re framing it to be less confusing. For example:

“The price of these note cards is 300 pennies.” This disruption was followed by the reframing: “That’s $3. It’s a bargain.” .. compliance rates ranged from 65% to 90% … compared to only 25% to 50% …”

While I love the use of the word “compliance” the take away is that 2-3 times more junk get’s sold if you bewilder your customers.

That mnemonic above NFCC refers to a trait known as need for cognitive closure. People with very high or very low NFCC are a bit rash. Folks with very high NFCC will rush to pin an explanation to a mystery; and then cling tightly to it going forward. Folks with very low NFCC leave everything open to further assessment.

It is but one of a slew of traits that psychologists have tests to measure, IQ probably being the most famous. The traits give rise to metrics, and the metrics can then be used to forecast patterns of behavior. It’s usually less accurate than predicting the weather with a barometer, but certainly more accurate than throwing dice. Puzzling out new metrics like this is one of the ways the field of psychology moves forward. It’s good if the metrics are independent much the way wind and temperature are better than wind and wind-chill. So it is standard practice to see if metric A is correlated with metric B. For example NFCC is not highly correlated with intelligence.

The psychologist, not a marketing guy, that invented NFCC has two other metrics that I found thought provoking. He points out that when solving a problem you can assess your options or you can get down to work. Presumably for a high stakes problem you’d be well advised do lots of both, but he suspects that people don’t. So he sought out a metric that would score people’s tendency to assess; and a second metric that would score their tendency to act.

One of the reasons that DTR works is that it exhausts the buyer’s willingness to assess the purchases, and that helps to move him into the acting phase.

To me the interesting thing about all this is that is suggests that many other persuasion techniques might be better framed into these terms. For example the usual explanation for why vendors like prices like $1.97 is that innumerate buyers think ‘Ah, a dollar” rather than “Ah, two dollars,” discussed here (pdf). I, now, think that’s wrong. The functional purpose of that pricing technique is to inflict a DTR attack on the buyer.

Income inequality effects firms and individuals. Rising inequality moves hand and hand with increasing skew in the distribution of firm size. For firms this goes by various cliched names, consolidation for example. When it becomes extreme then we talk of anti-trust. In this framing talk of what’s good for small business is analogous to talk about what’s good for the poor and in those terms the ideas of consumer protection are mimic’d by regulations, like anti-trust, that temper the power of the large firms over the small ones.

The payment’s industry is a good exemplar for all these dynamics. Follow the money, and all that. There is a lot of high stakes antitrust litigation (2.1 Billion example) in the payments industry. Personally I think these cases should get more press coverage.  Visa has filed to go public (10 Billion).  These exchange networks are big money; e.g. UPS, or AT&T wireless (10.6 Billion) As an aside I find this is interesting from an industrial standards point of view. It makes me wonder if the folks that run the Universal Product Code hub could go public too?

The risk section in Visa’s S1 makes for interesting reading. It’s a guided tour of the business model. I love S1 since they are a rare attempt to speak clearly about the business. A good example: “Our management team is new and does not have a history of working together.” Where else would you get to see that? Or that they have a complex partnership with Visa Europe full of technical stress; and options for significant financial events they don’t control.
Regarding the introduction above it says that both banking and retailing are becoming more consolidated. It’s nice to have diffuse and weak neighbors in the supply chain; it’s a pain to have powerful neighbors since they tend to be difficult to negotiate with.

Consumer protection, i.e. government regulation targeted to protect consumers, hardly shows up in their list of concerns. Government regulation does. Privacy regulation is the closest the come to a consumer protection worry; and that appears to be less of a worry than dealing with the thicket of regulations thrown up after 9/11.

Its telling that they frame their concerns about credit card fraud entirely in terms of it’s effect upon the brand.
I love to anthropomorphize and these dozen pages are a great window into what keeps a payment network up at night.

If I tally up all the retail businesses with in a mile of my house one category stands out. Retail banking offices are an invasive weed on the local landscape; a persistent weed. Presumably rational business men over the last year have built quite a few new branch offices in my town. Demand for banking services certainly hasn’t increased. Our economy and demographics is very stable and looks likely to stay that way. The reasons for this blight must lie elsewhere.
But where? Here’s my guess. There is tremendous pressure on firms to grow, and to take risks to enable that growth. The rules of the game are, oddly, structured so that on average these bets don’t work out very well. For the investor this is a statistical curiosity, a lot of risky bets plus some diversification creates higher return. For the firm’s employees and neighbors it’s an offputting realization.

In the days when banking was closely regulated business banks expanded by building new branches, and enticing customers to open accounts. The classic enticement was a toaster.

When society discarded the regulations against bank consolidation the route to growth was acquisition. Growing companies by acquisition is risky; it creates a slew of coordination problems to be solved. If your lucky you get some economies of scale. Modern IT has made banking pretty efficient. Bank acquisition was one way that IT efficiency spread through the system. So I’ll buy that there was some cost and efficiency drivers for the rollup of banking over the last few years.

I gather that’s pretty much played it’s self out. The banks that were available to be acquired have become a scarce commodity. No doubt this has created demand for more. Some of the new branches are tiny banks building additional branches, and I think they are dressing up for acquisition.
Banks are now returning to their traditional growth strategy; i.e. opening new branches. I doubt there are powerful technological drivers for this; but there are regulatory ones. Citibank, which recently announced plans to build numerous new offices around the Boston area, can do that because of regulatory change and when you combine it with the scarcity of banks available for acquisition it’s their cheapest route to growth.

Apparently all the largest banks are playing this game, which goes by the name de novo branching (note that link is 2003). What’s a bit disturbing is the realization that mot of these giants are not yet on the ground in my town; so it seems not unlikely we are going to get a lot more banks real soon now. Their investors demand that they grow; they don’t care that my town is way over banked;

This chart show various possible solutions to a problem.  If you can create energy in one location how do you store it?  For example you might charge up a battery or spin up a fly wheel.

The upper right corner is suggestive of how dense and hot fuels are, i.e. oil and it’s friends.  But it’s hard to make an entire energy cycle out of them.

This post doesn’t really have point.  Just something I’ve been thinking about.  Triggered, to a degree, by discovering that natural gas is cheaper than pellets for your pellet stove and the associated  fact that people heat with corn in parts of the midwest.

I lifted that out of this presentation (pdf).

Nor-easters are called that since the wind comes out of the north east.  Noel is beautiful example.   This storm dropped two feet of rain on some islands in the Caribbean.  Today at the vegetable market people were peeved.  They order on Wednesday morning; at which point we were forecast to have reasonably nice weather today.   The forecast had it a bit more to the right.  Slightly stronger, slightly to the left, it would have been worse.  .