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1) At the salad bar, you don’t have to reach far for the broccoli, but you do have to for the shredded cheese. The chicken can be back there too because you’re likely to reach for it anyway.

2) For every food offered at the salad bar, you have to use tongs instead of spoons to move it to your plate. (Except, perhaps, for the asparagus if it’s not sliced.)

3) When you’re ordering off a posted menu, the fried chicken and fries are buried in the middle of the list while the oven-roasted turkey is at the top and wilted greens are at the bottom.

From two new papers in the Journal of Decision Making (pdfs for 1) and 2) are here, and 3) is here).

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Speaking to a group of Northwestern University marketing students, Yum! Brands Chief Public Affairs Officer Jonathan Blum shared the story of recent Taco Bell promotion flop that shows the difficulty the chain has had turning social media into a viable business model. Said Blum: “We haven’t even been able to give away the food, never mind figure out how to sell it online.”

Over the course of a year, the number of friends on Taco Bell’s Facebook page rocketed from 500,000 to 6 million fans. Sounds great. Then, in the middle of an ongoing unflattering lawsuit about the quality of its beef, Taco Bell decided to offer those 6 million fans a free taco — no strings attached. They didn’t need to buy anything. They were already Facebook fans, which means they had already paid the very minor costs of “liking” Taco Bell. It was an offer from a company that Blum says wanted to tell its fans, hey, come and get a free taco.

Two hundred thousand people did. Almost 97 percent on passed on free grub they supposedly “liked.”

Cases like that explain why the bulk of Taco Bell’s marketing budget goes to television (and some radio) ads. Social media remains a small part of the budget because the company hasn’t figured out how, in Blum’s words, to use it to “make the cash register ring.”

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Note: The following post is a revised and expanded version of an earlier one on the paycheck cycle.

On the eve of each new month, a consumer ritual unfolds at Walmarts around the country.

At around 11 p.m. “customers start to come in and shop,” Walmart’s CEO of U.S. Business Bill Simon told a conference of investors last year (pdf of transcript here). Shoppers fill their carts with staples. Baby formula, milk, bread, and eggs. They browse until midnight when their government electronic benefits cards activate. Walmart’s dead-of-night sales zoom well above its daily average over the month.

Retailers have long known about this phenomenon, commonly called the “paycheck cycle,” in which cash-strapped consumers make big purchases when they get paid and are forced to cut back to the bone later in the cycle until the next paycheck arrives. In this tough economy, said Simon, the paycheck cycle is “extreme.” It can affect Americans at all income levels, but at the end of the month, that extremity is most crushing to the poor and the working class.

Continue reading here.

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1) Decision making when you’re in poverty is hard because every decision is critical. Taxes mental resources and self-control.

2) At Buenos Aires restaurants, diners who want salt now have to ask their waiters. Hat tip: Ramiro Lynch.

3) Apple made the shuffle function in the iPod “less random to make it feel more random,” according to Steve Jobs. Hat tip: John Kenny.

4) 100-calorie packs do reduce caloric intake among the heaviest.

5) The Optimism Bias – Time’s cover story.

6) Self-control for Max OS X.

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When the price of gas goes up, people switch from premium to regular. They don’t switch from Tropicana to private label orange juice. That’s the very narrow takeaway from Justine Hastings and Jesse Shapiro’s paper on how gas price changes affect other consumer purchases.

The larger takeaway is that consumers use various mental accounts to keep track of different purchases. When the price in one mental account increases, consumers don’t ease the pain of that loss by shifting purchases across a variety of other budgets. Instead they make more dramatic changes in their purchasing choices in the category with the price increase – hence, they switch gas grades. They end up acting as if they are poorer than they really are. That’s where the orange juice comes in.

Does this behavior go beyond the pump? Because some customers held retailer loyalty cards with the grocery store, Hastings and Shapiro were able to track other purchases. They looked at sales of half-gallon cartons of orange juice. They found that while customers were drastically scaling back from premium to regular gasoline, this behavior did not spill over into drastically different orange juice purchases. Gasoline prices affect orange juice purchases in the same way that changes in income do.

A pdf of paper is here. A link to summary of research is here.

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Well, it’s still open for starters.

For every ten customers, Panera says six leave the amount suggested for each food item, two leave more, and two leave less, reports the Associated Press by way of the Washington Post. The most paid for one meal? $500.

Overall, the pay-what-you-want-cafe performs at about 80 percent of a similar retail store, which is enough to generate $3,000-$4,000 a month in “profits” that end up going to a job-training program for at-risk youths.

Only a few take advantage of the system — “lunch on Uncle Ron” as (Panera founder and Chairman Ronald Shaich) calls it. He still fumes over watching three college kids pay $3 for $40 worth of food. Generally, peer pressure prevents that sort of behavior, he said.

“It’s like parking in a handicapped spot,” Shaich said.



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Two Häagen-Dazs chocolate ice creams. Original chocolate and “Five” milk chocolate, named appropriately for being made from five ingredients.

The ingredients in Five are
1) Skim Milk
2) Cream
3) Sugar
4) Egg Yolks
5) Cocoa Processed with Alkali.

The ingredients in the original are
1) Cream
2) Skim Milk
3) Sugar
4) Egg Yolks
5) Cocoa Processed with Alkali.

The same five ingredients subtly rearranged. Ta-da…A whole new product created by altering the salience of a product feature from the overall brand to the actual ingredients. Five has been a very successful product. One interpretation of its success is the public’s new appreciation for simplicity. The product is supposedly inspired by Michael Pollan’s rule to not eat foods with more than five ingredients.

Simplicity may be more appreciated today, but the behavioral mechanism making this product work well is salience. Häagen-Dazs activated that appreciation by changing the salience.

Häagen-Dazs advertises Five as an “All-natural ice cream crafted with only five ingredients for incredibly pure, balanced flavor… and surprisingly less fat!” It does have less fat (and fewer calories), but not because it is made from five ingredients. It has less fat because it uses more skim milk and less cream than the original. To make that easy to see, you’d want to change the salience to something silly like Skim Milk Chocolate ice cream. But who wants to eat that?

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The Economist points out another last mile problem in fighting global poverty and argues for more nudges.

What is needed are little interventions: adding iodine to salt here, doling out vitamin A supplements there. Even relatively small doses work. Yet they also raise one of the great puzzles of development. These are, by some measures, the best investments you could make. When the Copenhagen Business School asked some Nobel-winning economists the best way to spend money to help the world, nutritional projects topped the poll. Vitamin A supplements cost just a dollar or two. Their benefits—preservation from fatal diseases, higher lifetime earnings—so massively outweigh the tiny costs that poor people ought to snap them up. Yet they don’t. Orwell put his finger on why. The poor want something tasty. They may not believe nutritional experts who promote special diets (rich Westerners have been known not to stick to diets, too). Or food itself may not be their priority. As Orwell said, “There is always some cheaply pleasant thing to tempt you.”

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Getting kids to eat smart isn’t as easy as making healthy, tasty food. At Holy Trinity High School in Chicago, chef Paul Boundas uses psychology too to help change habits. Incidentally, he has a background in clinical psychology in addition to culinary training. The Chicago Tribune reports on his success in making healthy food under the $2.74 per meal lunch budget.

His approach involves easing students gradually into healthier foods, making healthy meals tasty and attractive, hiring a passionate and skilled workforce, adapting his menus to market availability and responding to customer feedback.

“He doesn’t tell us what we have to eat,” said Holy Trinity senior and vegetarian Valerie Balthazar. “He asks us what we like and then he makes it healthier. My favorite dish is the stir-fried vegetables on top of brown rice. It feels like we are eating food from a restaurant.”

When Boundas ushers in healthy menu items, he avoids broadcasting it too loudly. When he switched to whole-grain pasta, for instance, he didn’t put up a sign about it until a month later.

So when a student came through the line and said he didn’t like whole-grain pasta, the cook was able to respond: “You’ve been eating it and liking it for four weeks.”

…”At first we did just a smidgen” of whole-wheat flour, (the pastry chef) said, “and now I am doing half and half. It’s easiest with things like oatmeal raisin cookies, apple crisp and now pancakes. But you can’t just switch them to granola overnight. In fact, I called something granola once, and they wouldn’t eat it, so now we say breakfast bar or power bar.”


Assorted links

1) Honey, they shrunk our consumer products.

2) Mitigating the “regret premium” – in general, people aren’t willing to exchange lottery tickets even with a bonus.

3) Follow up on Kirkland House post. Trayless cafeterias result in 25 percent less food waste, according to a study of 25 campuses by food services provider Aramark. Hat tip: Scott Talan.

4) Should you peel a banana like a monkey? Nudge blog reader Matthew Hook says yes.

5) Behavioral economists advising on yet-to-be-released personal finance software. Stay tuned.

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