BANFF – One of the funkiest sessions at Banff was titled "Consumers and Choice: What Works And What Doesn't". In the context of the federal government’s Throne Speech promise to unbundle cable packages, and the CRTC's current "Let's Talk TV" process, it was neatly provocative.
The speaker was Dilip Soman, professor of marketing and Corus Chair in Communications Strategy at the Rotman School of Management, University of Toronto.
It turns out that, across a range of reputable research on several continents, people aren't very good at predicting their future behaviour or making rational choices.
Take the drink Snapple. Fifteen years ago there were about 6 Snapple options to choose from, like Original and Diet. Today there are 66 Snapple beverage choices yet, paradoxically, the selection of the basic original Snapple has spiked. Turns out we humans don't want too much choice. It confuses us.
Economic theory gets very complicated in its modelling of humans as rational beings maximizing our consumer utility, but Soman hasn't met anybody to actually fill that conceptual bill. Real people do odd things, like take escalators to health clubs when stairs are available.
In this digital age we are overloaded with decisions involving choice to the tune of up to 8,000 of these cerebral calls per day.
More proof? Take a look at Seattle's Best Coffee. Nearly three-quarters of their sales come from the middle rank Goldilocks medium coffee cup and that remains the case regardless of how much coffee the medium cup holds; be it 10, 12 or 14 ounces. The consumer simply infers that "medium" is a sound choice and zero computing utility is involved.
Closer to home we have Petro-Canada offering 94 rating octane, when to the best of anyone's knowledge not only do no cars require 94 octane but the only vehicle that does is a Bombardier jet. But the 94 offering has nudged the more expensive 91 octane into a middle option at the gas pump – and 91 purchases are soaring.
Moreover, according to Soman's research, give people a different starting point altogether and they will make different decisions.
Maybe it was even Tom Sawyer, and his hoodwinking of Spike to pay him to paint the fence, that was the first proof. It made no sense, but eventually not only had Spike paid Tom a quid to paint, but a neighbourhood of boys had made that irrational choice as well.
Humans, said the professor, are just not good at establishing value and rarely know what we truly want. We can provide conflicting answers to surveys based simply on the words, context and/or manner in which the questions are posed.
We are simplicity-seeking creatures apparently.
- If confronted with 200 items on a Chinese restaurant menu, over time, 95% of the owners revenue will come from five chosen dishes.
- In a supermarket experiment involving the sale of jams, a counter with 36 jam options got 66% of the customers stopping. A similar counter with only six choices drew 55 %. But the counter with only six had 30% of the clients making a purchase and the 36 counter made only 3%.
What does that tell the professor? People think they want choice, but they often don't know how to handle it.
In Sweden, during the 1990s, the government was told that citizens wanted more choice beyond the status quo public option for investing their social security funds. Dutifully, the government provided the populace with over 100 solid fund choices; with the result that the politicians got hammered for too much offered choice.
The outcome was that the vast majority remained with the original government social fund.
Indeed, research seems to trend that people consume fewer items if they have too much choice. Moreover, if there's any uncertainty about the outcome of a choice, folks have an overall negative experience making that decision.
Okay, so what does this mean for television in Canada?
Well, it provokes some key questions before we toss the bundling baby out with the political bath water. Are we certain that unbundling BDU offerings to viewers is consumer driven or politically motivated?
Bundles of products and services, according to Soman's empirical research, promotes more consumer sampling and flexibility – people try more things. Whereas products sold as stand-alones have a propensity to result in unsatisfying experiences, since people harbour over-invested expectations for the single item.
What is also plausible, based on this research, is that in a 50,000 channel digital universe, a few (or maybe even one) bad solo pick could drive many to switch to OTT completely.
And who stands to win in the unbundled TV universe? If the Chinese restaurant experiment holds true, just five or six mega winners along with dozens of losers, all of which would end up curtailing and concentrating TV choice.
So CRTC friends, is the research for unbundling valid and bullet-proof? Is there truly a consumer uprising demanding this change? What will the impacts be on independent TV providers, on important niche players like APTN, on accessibility, on public broadcasting and the public interest?
And I'm not being an apologist or shill for our BDU friends here.
Fresh in our memory still is the recollection that Canadian BDUs lobbied for pick and pay once upon a time. But their definition really meant pick by them, not by consumers. They also lobbied against fee-for-carriage, asking subscribers to look at their monthly cable bills.
Guess what, we did look and we were shocked at what we were paying. So there are self-inflicted wounds here, deservedly so and now both pick and pay and fee-for-carriage are very much back on the table with the TV Review.
My predictions?
1. Absolute unbundling will not happen. It's too cataclysmic (including for jobs) and the CRTC process isn't likely to be 100% complete before the next federal election.
2. Fee-for-carriage will now happen.
3. Sooner than we think, there will be just three big Canadian media players.
So, your not-for-profits like the National Screen Institute and the Broadcast Accessibility Fund, keep your tangible benefits pencils sharpened!
Bill Roberts was in Banff this week covering the 2014 Banff World Media Festival for Cartt.ca.
