InterPlay

In the Telecom devices industry, a lot of times consumers think that manufacturers, in the race to gain market share come up with design options arbitrarily or even randomly. They think that these device manufacturers mix and match all available features hoping that one model might just make it big. I recently came across a news item: Huawei-branded handset lands in UK. Now someone could think that these Chinese have a weird mind. Who would, in their correct state of mind, want to use a low end service like a 2G handset bundled with a high end feature like a touchscreen. In my opinion, this is one of the most clever and creative moves I have seen in the industry for a while. Intentionally or unintentionally, when they sell this model to the low end customer, they automatically create something that Dan Ariely calls anchors. In his famous book Predictably Irrational, Dan talks about how our judgment of the world and the utility of our actions is assessed in relation to anchors or psychological benchmarks that we have created for ourselves. Touchscreens have always been considered a high end feature, only available to the likes 200+ pound, 3G+ smartphones. Low end customers have often drooled over but never experienced the feel of a touchscreen on their low end devices. By giving the low end prepaid customers a feel of the touchscreen, Huawei would be able to create an Anchor which would later act as a benchmark for the consumer to jump to a premium device. Without the existence of this anchor, the low end customer would have found it very difficult moving to the next ladder.

I call this idea clever and creative because it is not a huge technological leap but at the same time very effective. It is exactly like creating gold from a base metal rather than that from silver i.e. when we spend millions on RnD and come up with a high end technological solution to the problem when there exists in parallel a much simpler and hence cheaper solution to the problem. I agree with Sendhil Mullainathan what he says in this TedTalk that we can be more effective by focusing first on the human problem rather than prioritizing on the technology problem. In this problem, the touchscreen and the 2G handsets individually already existed in the market. It was only a matter of bringing them together.

The human problem for device manufacturers is that they cannot automatically get low end customers to start adopting highend (read expensive) handsets. Those consumers have never experienced a highend device and hence are not aware of, or developed a habit for the features of a premium device. One solution is advertising which can incite, cajole or seduce us into giving in. But there is only enough that a bikini clad Katrina Kaif add to a communication. Unless consumers start seeing real benefit or even perceived benefit they might enjoy the Katrina Kaif cat walk but will still not run to the nearest retail store to purchase the product. And with Katrina Kaif selling us a myriad of products from Soaps to shampoos, sooner or later we start to realize that we are not getting closer to looking like her.

The problem with traditional advertising is that it is becoming ever more difficult to elicit action from consumers just by showing them a 30 seconder. Rory Sutherland says in one of his talks at the IPA that for traditional products that solve age old problems, the traditional advertising model works and Katrina Kaif could well sell it on a poster for Slice Juice. But to communicate solutions for complex problems, for a multitude of new-age products like broadband internet, electricity consumption, cell phone adoption etc, we need to look for the solution in behavioral economics. Whether Huawei made use of behavioral economics or it was just a fluke, there is something interesting at work here.