Personal Preference Bias

I’ve read and heard a fair amount from critics of JC Penney’s disastrous everyday-low-price strategy. But, much of it is too simple.

Critics speak of JC Penney’s customers as if they are all the same. I’ve read things like maybe they liked sales prices or JCP has to attract a new customer base to replace the old one.

While JCP sales were down considerably, they were still doing 75% of the volume they did the previous year. That is a huge decline for a retailer, but the sales didn’t go to zero and that says something. Three-fourths of customers didn’t mind the change.

In my experience with consumers and retailing, it is not uncommon for about 25% of sales volumes to come from promotions and coupon offers such as the sales JCP use to run. A fair part of that percentage are folks in whatever product category that are bargain hunters. Another chunk are from folks who are not typical bargain hunters — they may shop on value — but they may just come across a deal too good to pass up. I was recently perusing Kohl’s and saw a griddle for half the price I’ve seen elsewhere. I’m not a typical bargain hunter, but I popped on it.

There’s no reason JCP can’t satisfy value shoppers and bargain hunters alike. Other retailers have figured out how.

Even low-price leaders Walmart has “Rolbacks” in the aisle. Target has a dollar section near the front. Old Navy has clearance racks hidden in the back. Banana Republic has its mall based-locations, carrying higher priced, in-season fashion. But, they too have limited clearance sale space in the back. They also have separate Factory Stores where you don’t get the latest, but you get good stuff at sales prices.

Management at these companies recognize that not everybody is the same and they try to find ways to satisfy varying consumer preferences in creative ways that don’t detract from the experience of others. That’s typical retailing.

In my opinion, that’s the key insight that escapes JCP CEO Ron Johnson — everyone is different.

Johnson was in charge of retailing at Apple. Certainly, many folks rave about the Apple store experience. But most of these ravers have very similar preferences when it comes to electronics — they love Apple!

So, Johnson didn’t have very tall task in delivering a retail experience that satisfied a relatively narrow consumer segment. He made a store for Apple devotees.

Ask yourself this. Does Apple need a store? Not really. Apple products would sell with or without their stores.

Johnson is remaking JCP to satisfy a segment of consumer that is smaller and more narrow — a group that he likely sees himself in — than the group that JCP was satisfying before he arrived, which is not usually a successful strategy.

I call this personal preference bias. Successful managers usually find ways to overcome their own personal preferences and give more weight to the varying preferences of their customers.

It’s an easy mistake to make. Ron Johnson probably thinks he learned from his former boss, Steve Jobs, that designing things to meet your personal preference is good. And, there might be something to that when you are trying to innovate from ground zero.

I’m skeptical of the red meat study

We’ve all heard ‘meat and potatoes’ dishes referred to as a ‘heart attack on a plate.’  What we may not have suspected was that it was actually the potatoes that might do the damage, not the meat.

But, I’m sure that’ll be a hard sell after the recent Harvard red meat study.  It’s been getting much press lately. Most press reports say something like: “Eating a lot of red meat will kill you. Guys from Harvard say so.”

The first day that this came out, I asked an associate to identify potential problems with the study. We have to pick apart similar studies all the time for our jobs. I thought this would be good practice. He did a great job.

And so did CNN for including his primary concern in their online article about the study. Something I haven’t seen other media outlets do yet.

Unfortunately you have to make it to the last two paragraphs of the CNN article to read it. Here it is:

Studies like Pan’s are inherently iffy due to red meat’s unhealthy reputation, which makes red-meat consumption difficult to tease apart from a person’s overall lifestyle, Lindeberg says. “Red meat has been perceived as a villain for many years, and people who avoid red meat take all sorts of precautionary measures for their future health,” he says. “It is not possible to statistically adjust for all of these measures.”

Sure enough, Pan and his colleagues found that the men and women in the study who ate the most red meat also tended to be heavier, less physically active, and more likely to smoke and drink alcohol than their peers. However, the researchers did take those and other factors into account in their analysis.

In other words, the researchers may have really found that overall unhealthy people die prematurely. Wow.

For those who would like to know more about the flaws in the diet and health research, I recommend reading Gary Taubes. He has done a fabulous job in his book Good Calories, Bad Calories at casting credible doubts on past health studies like this one, which form the foundation of the of diet and health ‘conventional wisdom’ that has helped drive increases in obesity and Type II diabetes.

Taubes’ book is big. If you don’t have that kind of time, download and listen this Econtalk podcast that had Taubes as the guest (also available on iTunes). The podcast is an 1 hour and 22 minutes. Listen to it while you workout. I do.

Not only does Taubes cast doubts on these studies, he demonstrates that some of these studies never actually proved the hypotheses (that are now conventional wisdom) like “fat is bad for you”.  When the researchers with these hypotheses didn’t prove them, they’d just say, “well, this study didn’t show it, but we’re certain that it’s just a matter of time that other studies will.”

Over time, it was the domineering personalities of these researchers and political connections that eventually thrust their unproven hypotheses into the realm of conventional wisdom.

The nanny government of the 60s and 70s felt they needed to give guidance on healthy eating (hmmm), so they took the conventional wisdom from these researchers (it’s easy to sell BS to the public when you can say things like “research suggests”, even when it doesn’t) and created the food pyramid, which has helped wreck our health and medical system.

For making it to the final paragraphs of this post, I’ll reward you with the hypothesis Taubes’ has to explain our declining health: sugar & flour. Especially refined sugar, starches and flour. Taubes thinks these boost insulin levels, which tells the body to store fat.

When you see an overweight person, don’t think about how much they eat. Rather think about how much sugar and starch they eat. Don’t believe Taubes? Cut back on your sugar (candy, cookies, mochas), flour (bread, pasta) and starch (fries, chips) for a few days, eat a little more fat, protein, fruits and veggies and watch the scale.

Genius

I know I’m way behind the times, but I recently outsourced my music listening selections to an open source solution, Apple’s Genius. I never could quite find the time to build playlists and shuffle was getting to haphazard.

So far, so good.  It’s been mixing music I don’t listen to much or at all that happens to have found its way onto my iPod with the stuff I listen to more often and I like.

That’s yet another way Apple adds value to its product at no monetary cost for its users.   And, yet another way an open-source solution makes our lives incrementally better.

Now, I think it would be nice if iTunes suggested podcasts in similar fashion.  “Those who like this podcast also like these…”  Perhaps it does already and I just haven’t figured it out.