Marshmallow Test and Insurance Marketing

I spent the last week reading up “The Marshmallow Test by Walter Mischel”. And while the book is a fascinating summary of key findings (and some of its applications) from Walters more than three decades of research, I found some of it is relevant for how we look at Insurance Marketing and Sales.

What is the Marshmallow Test

Walter’s team designed a test for pre-schoolers where the kids were asked to pick their favourite treats from Oreos, marshmallows etc. One of the treats was placed in a tray in front of the kid on a table. The table had a bell, which the kid could ring to bring back the researcher. There was another tray which had two of the same treats, on the same table. The kid was told, that the researcher needs to step out. If the kid wants to bring back the researcher she can just ring the bell, but then he/she gets just one treat. On the other hand, if the kid waits for the researcher to return on her own, she could have two treats.

As one would expect, there were all sorts of experiences that were witnessed in this experiment – from kids who waited easily, to those who found it very painful, to even those who ate the cream from all three Oreos and kept it back as if they had not been touched at all :-).

Walters team ran these tests and tried to understand how the human mind manages self-control, Takes decisions which can postpone instant gratification. What techniques work and which ones fail, consistently. And in all of these interesting findings, I found these as most relevant for Insurance Marketing.

Me Vs Them, Now Vs Future – HOT & COOL Minds

In multiple versions of the tests it was discovered that when asked, whats the logical thing to do for someone who is given the option of 1 treat now vs 2 in the near future. Every kid said that any smart one would wait. And interestingly when the same kids were asked, what would you do – most of them responded by saying “I would take the one treat”. Walter believes that this is due to what he calls the HOT and COOL brain system getting activated. When its a hypothetical situation that involves someone else, the cool mind takes over – it is good at coming up with rational and logical answers and hence every one knows that we should wait. But when the situation involves us and in the present, the hot mind takes over. This is where it becomes tough to manage the temptation.

The book talks about another experiment conducted by Hershfield, where in participants (in their mid twenties) were asked to create a digital avatar of themselves. For one set of participants, they were shown their regular avatar and asked how much would they invest in retirement planning. And the other group was shown their own aged avatar (aged mid-sixties) and asked the same question. Surprise surprise, those who saw their future self said they would save 30% more than those who saw their normal self.

marshmallow test insurance marketing
Source: HBR (link below)

Read about this interesting study on how we make better retirement planning decisions here on HBR.

This tells me few things (& I would love to hear what you read into the findings)

  1. Insurance purchase decisions are very similar to the Marshmallow test conditions. You forego immediate spends for deferred benefits.
  2. Walter discovered that the specific tactics that were adopted by each kid who waited (for the better rewards) fell into a generic category – Cool the now, heat the future. Which means, reduce the temptations of the immediate future and build temptations around the choice of waiting. Sounds logical, and there are good insights for Insurance sales and especially renewals. Buying on monthly installments is easier as the psychological barrier is 12 times higher than when buying an annual policy. Auto-renewal (Standing Instructions or Auto Debit) is better for persistency, as the consumer is not subjected to the same choices every year.
  3. Personalization – Creating Insurance ads that showcase a happy retired life may not trigger purchase decisions, because the consumer may or may see himself in the lead actor of the TV ad. If he doesn’t, chances are he understands the theory of why insurance is needed, but when presented by a choice to buy, he would forego. And this infact has been the experience of most life insurance products. We have only moved a step in this direction with calculators and personalized models for generating scenarios. But they are far from effective in building a true connect with the future self of the user. Calculators and models talk to the cool mind, what we need are ways to get the buyer involved actively in the future self. And decide now in favor of the future self or future selves of his/her dependents.
  4. I see a bright future for digital in Insurance marketing – we have been going at it in the wrong way. Cheaper term plans is not the only opportunity here. Disintermediation and cost-saves is just one slice. The Insurance agent was selling successfully not only coz of the trust & proximity he has with customers. Maybe he can narrate stories from closer home, talk to the customer by giving vivid examples and building scenarios where the customer can easily imagine himself and his family.

Like all interesting studies on behavioral economics and psychology, I feel Marshmallow Test is a great set of hypotheses to bring into the marketing themes and design of campaigns.

Lessons from “David & Goliath” by Malcolm Gladwell

“David and Goliath – Underdogs, Misfits and the art of battling giants” is the new book from Malcolm Gladwell which is based on the premise that maybe we have all been looking at the David and Goliath story completely wrong.

david-goliath-malcolm-gladwellGladwell starts by discussing specific details from the Biblical story to build the case that David the shepherd boy should have been the favorite in that battle. We all got it wrong because we were fixated on the giant that Goliath was, because we believed that it would be a close quarter battled where size, strength (of warrior, their sword and armor) would matter. But it wasn’t to be.

He dips back into the classical economic theory to talk about the marginal utility curve being an Inverted U curve. And if we believe that its an inverted U curve, then there comes a point beyond which the marginal returns decrease. Or in other words, the same things that were an advantage at one point may become an advantage on the other extreme of the spectrum.

As always, Malcolm backs his hypotheses with solidly researched stories.

  • One of the interesting stories is that of an Indian software engineer (who had never played basketball before) coaching his daughter’s team to national finals. How this outsider looked at his team – a bunch of self proclaimed nerdy girls, and how he looked at the traditional way of playing basketball. His gameplan – play the full court press – was something that was so unexpected that they just surprised their opponents all the way upto the finals where their opponents did the same to them.
  • The whole debate about class-size vs quality of education is again something where there is no clear answer and the reason is that the impact of an increase(or decrease) in class size depends upon which part of the curve the class currently is. It seems that if the class size is too small – there is no momentum in discussions and the intensity of possible interactions might be overwhelming for the kids. On the other hand, if the class size is too big the number of potential interactions may become too high to manage. Hence it seems the ideal class size is between 18-24. This is a great analysis for all those anxious parents who have been using the teacher:student ratio as a way of convincing themselves that they are giving their kids the best education possible. Apparently there is a simple rule in Israel – as soon as the class size crosses 39, they start another class.
  • Another interesting debate that is brought up is whether its a good idea to be a big fish in a small pond or a small fish in a big pond. And Malcolm does this on a very sensitive topic. Should you always choose to go into the top most college that you have an offer from. I am sure, you know what he is hinting at. And apart from some well curated data on college choices and subsequent career success, he also brings forth the choice that the emerging bunch of impressionists made in Paris. The economic principle discussed here is Relative deprivation – comparing with peers and then deciding how we want to feel.
  • Capitalization Learning Vs Compensatory learning: There is a detailed discussion on the lives of some very successful people who were dyslexic and how they managed to “compensate” for this apparent disadvantage. It seems that people who can build on compensatory learning (which is actually a very had and difficult approach) develop their own set of tools to thrive in their chosen fields. E.g. the trial lawyer who couldn’t read properly but had compensated this by listening and remembering things.

Watch the Video from Talks at Google here:

The key lesson that I took away from this book is that start-ups in garages would continue to dethrone big companies because beyond a certain point, their size, capital, processes, existing customers – start becoming their biggest disadvantage.

And when going head-to-head with a Goliath, don’t play by their rules. Make your own rules, where their disadvantage can be exploited.

What the dog saw – Malcolm Gladwell

what-the-dog-saw-Malcolm-GladwellWhen my cuz mentioned about this Gladwell book, my first reaction was why the funny title. It seems the title is inspired from Gladwell’s efforts to get inside the other party’s head. He talks about the ‘Dog Whisperer’ the guy with the magical effect on unruly dogs, and wonders how it would be to decode the magic by understanding what the dog saw in the ‘Dog Whisperer’.

The book is actually a collection of stories Malcolm wrote when he was a staff writer at The New Yorker. Each one is backed by powerful research and has powerful stories that make for a very interesting case-study.

Some of the interesting lessons I found in this amazing book:

  • While pitching remember who is the star. When a celebrity endorses a product, the star in that commercial or pitch is the celebrity. The Pitchman who made a million dollars in an hour selling a kitchen appliance on TV, made sure that the product was the star. Always.
  • Study who is using your product and how. Kids do not control what they get to eat. Hence they cherish Ketchup with most meals, because it helps them control some bit of what they eat. Heinz noted how kids reached out to Ketchup bottle more often than adults . One of their senior team was out studying consumer behavior and noted how the kid was told not to handle the bottle on her own. Heinz noted this and ensured that their bottle became the kid-friendly EZ Squirt bottle.
  • We have a strange way of processing probability. In a chapter around Nassim Taleb and his counter-intuitive trading strategy, Gladwell talks about a small social experiment done. A set of individuals were given two options – A: Get $100 or B: Throw a coin & if you win get $200. Most opted for option A. When the experiment was reversed, surprising results came in. Now people were told that they could choose from C: Pay $100 or throw a coin and pay $200. Most people now wanted to test their luck and take a chance at losing their money.
  • To sell pain killers, you need to understand the person in pain and not just the pain. A classic example given talks about how a company found that its pill was being used both by people suffering from head-aches and stomach-aches. It took an advertising firm to discover that the consumer was in completely different mindsets. A person suffering from stomach-ache tends to blame himself for overeating etc and hence considers himself to be the culprit. A head-ache patient on the other hand is more in the victim mindset. Even if the same tablet can help both, you need to understand what to say to them in each scenario.
  • Puzzles vs Mysteries. Malcolm talks about how we currently live in a more open world where there is an explosion of data and information. In most instances these days, it is not a challenge to get more information, but to figure out patterns and make sense of the maze of data. The former is referred to as a puzzle and the latter scenario as a Mystery. While this was written way back in 2007, I think Gladwell was talking about Big Data as we know it today.
  • Bell Curves are misleading. While I agree 100% with the abusive nature of Bell Curves in the corporate set-up, Malcom brings up a more relevant aspect of it in policy making. It seems that most social challenges have few outliers who take up most of the cost of the program e.g. few polluting cars if removed can bring down the pollution significantly. Hence the approach should not be to manage all cars and check them, but find the polluting ones (in a smart way) and addressing them. I think the key point he makes is that with a bell curve we assume that each car is contributing in some way to the problem, where as the problem is limited to just a small subset of population on the extreme end of the graph. So no point making a policy for the whole distribution.

Its a great read with stories on the how the Birth-Control Pill evolved, how fight against Breast Cancer is a study in human evolution. You can buy it on Flipkart here

Leadership Lessons from Making of India – Book by Ranbir Vohra

making of India - Ranbir VohraIt was quite some time back that I read the book – Making of India – by Ranbir Vohra.  This was December 2006 and I had a habit of taking notes from any book that I read. Sometimes even movies. So what you read below are my interpretations of the historical narration of India’s journey of acquiring its national identity.

Good Leadership involves Policy Making. More effective than individual action.

For Political leadership, this has obvious relevance, but I would feel safe betting that this is true in a business context too. Imagine the kind of ripple-effects that the CEO can create, by clearly articulating effective rules and policies. This would include not only the core values that the organization wants to pursue but also how to conduct itself in the marketplace. How is performance measure, how are incentives decided, how do you gradually build the culture and the DNA of the organization. All of these could be better achieved by effective policy making esp in the context of a big organization.

Learn to trust your team and delegate effectively.

Delegation is a pretty obvious trait one would expect in a leader. Motivation to delegate might differ. Some leaders might be inspired to create free time to think, like Jeff Weiner(CEO Linkedin) does  whereas others might do it out of sheer laziness (which by the way is again a good virtue of a leader, if found alongside intelligence).

Sometimes you need to lead a team of people you don’t trust or consider incompetent.

Sometimes, with the bigger goal in sight, you might be forced to choose a path where you end up leading a team of people you don’t really trust. Or whom you consider grossly incompetent. And inspite of your drastic opinion if the party(or organization or team) enjoys the support of the people (or the market in case of an organization), it wouldn’t be wise to remove them as the first step once you assume charge of the new office. Create an able leadership that is recognised by making the machinery work and slowly remove them in a phased manner. While this might sound scheming to many, I saw this as a way to keep the bigger interests of the party at the center.

To get your way through a tough negotiation- Create a diversion

Sometimes when you are stuck in a tough negotiation situation, a serious distraction might help. Create a new clause and pretend that this is what matters most to you. But be careful to choose something that the other party would find almost impossible to concede. Now with this new clause coming in, the other party (hopefully) focuses energies there and might go easy on the original bone-of-contention.

Need for Symbols. How do you inspire people?

Gandhiji’s Dandi march is a great example of how you build support. Find something that many can relate to or find an activity that many can participate in. Symbols can similarly act as a strong rallying point for your team/supporters. Symbol doesn’t necessarily have to be a prop or a logo or an image. It could be a simple tradition – like wearing Khadi . Create traditions that can start to mean a lot to people involved over a period of time. And you might end up creating a legacy that generations can relate to.

Also it is important to stay connected with your organization. Stay connected by talking to them regularly. Start by clearly articulating a dream, a vision, a reason to exist (for you, for your professional self, for the party or for the organization). And then keep re-iterating this vision. Make them believe in it as much as you do.

The Code Book by Simon Singh

the-code-book-simon-singhThe Code Book – is a short history of mankind’s journey to be able to transmit messages secretly. Its a very well researched compilation of what were the pre-cursors to the modern technology field that we call as encryptology.

I found some of the examples really interesting:

  • Amongst the first ways to send coded messages via a messenger through non-friendly territory was the means of writing the message on the messenger’s scalp. The king would choose a messenger,shave the guys head, write a message with a special ink and wait for the hair to grow back again. The messenger would then pass through the enemy territory and even if searched, no one would probably guess that the message is on the scalp. The messenger would again get shaved at the other king’s court so that the recipient king could read the message. Very intuitive but I guess once the word spread, most travellers would have been shaved as part of their search
  • The Roman period saw a very advanced cryptology technique – simple to code and very tough to decode. The Romans would have a special septre on which a narrow strip would be rolled and the message would be written. When the strip is unwound and read vertically, its completely gibberish. The only way to read this was to roll the strip back again on a cylinder of the same diameter. This was taken a step further and the woodden staff used was not a simple cylinder but a tapering one, which added to the complexity of someone trying to break the code using brute force.

Simon Singh highlights that the history of genuine code-breaking has been based on a simple premise – find patterns in the code and break the problem into smaller parts.

On the other hand, to make a good code, one should

  • Avoid putting a condition as it reduces the number of possibilities
  • Aspire for a multi-stage cipher where the subsequent stages lose the path from the previous ones

Could “Gods” be aliens

Chariots of the GodsI had heard a lot about Chariots of the Gods and finally managed to read it, inspite of the bad print. The whole book is based on one premise – Is there a possibility that the beings we refer to as gods and who have been talked about in various mythologies, be in fact aliens – superior intelligence-beings from other parts of our universe.

While this may sound slightly outrageous and maybe even funny on the first instance, believe you me, the book builds a very compelling case. If you are the curious kinds, you would love it and I can bet, a lot of chapters would trigger searches on Google :-).

I found some of the facts in Chariots of the Gods – very interesting:

  • Most mythologies seem to have a common thread that the “Gods” descended from the sky. Many even say they had flying chariots  or had wings.
  • Some civilizations managed to make sudden progress or achievements that were not in sync with the skills or the developed knowledge of the days.E.g.
    • The Egyptian pyramids (esp that of Cheops) have been built with such accuracy on its slopes, that even modern day architects might have a tough time competing with. Apparently the side slopes are 100 times better than what the naked eye can notice.
    • How the Pyramids were built has been a mystery and the most promising theory has been that the blocks were rolled on logs of wood and heaved by an army of slaves. Erich puts this theory to test by asking as to where the wood came from. How could the narrow-fertile part of the Nile delta feed this huge army?
    • A heiroglyphic tablet found in another pyramid has this interesting set of diagrams, one of which is like the modern day helicopter.helicopter shown in Egyptian Pyramid Tablet
    • Mayans had an awesome calendar that was not only super accurate but was used to design their pyramids with the twin headed serpents – the ones they suddenly abandoned.
    • Same with the Eastern Island structures. Its impossible that the folks of that era could have lifted the single blocks which form the hats (its apparently from a different quarry as the remaining body)
  • Most mythologies have stories about a hero-of-a-man undertaking a journey to meet the gods and in quite a few cases coming back with really sophisticated weapons.(remember how Arjuna journeyed and got special powers before the big battle. He apparently met Indra, flew with him in his chariot etc etc).
  • Apparently there are pyramids in Bosnia also (not mentioned in his book) which are subject to an ongoing debate whether they were man-made or just re-shaped at the periphery by man. Then theres the Pyramid of the Sun in Mexico, again an archeological feat.
  • There are diagrams and carvings from civilizations of the past, that clearly show what looks like a space-suit or a rocket-traveller.
  • And many more ……

Fully recommended if you think there is such a remote possibility that what or who we refer to as Gods, could have been visitors from outer space.

The Winning Way by Harsha and Anita Bhogle – Summary

winning wayI have tried to be a keen sportsman and strongly believe that one can learn a lot by playing sports. It teaches you how to lose, how to come back and fight. One learns that sometimes you play to win and what it takes to build a real team.

Reading Harsha & Anita Bhogle’s the Winning Way was a great experience as it resonated very well with my own experiences. But more than that I was thoroughly impressed how the Bhogle’s had managed to articulate the lessons so well in this book. They say that the book is the result of 100s of seminars they have done and its easy to see how we the book readers are getting the truly and magnificiently distilled content.

The Winning Way is fully recommended and with so many references to cricket I am sure Indian managers would relate to every word. (Flipkart link)

Winning Teams – Lesson 1 of The Winning Way

  • Have a Band of boys kind of attitude- relaxed n happy
  • Show a willingness to pass the ball. Be the one who builds the goal rather than scores it
  • Live in the present, and plan for future
  • Back-up underperformers
  • Have a Can-Do approach
  • Are attentive to 1% things – the mundane things that need to be done right. Think about the single runs scored/saved
  • Have a Common shared vision – idea of a shared journey
  • Healthy Focus on competition
  • Have a Non-negotiable work-ethic
  • New people and new ideas to prevent staleness
  • Nurturing and culling talent at right times
  • Hunger, passion and energy

Symptoms of losing teams Lesson 2 of The Winning Way

  • Beauracratic – delayed decisions
  • Egos, internal competition, groupism
  • Getting credit more important than getting the job done
  • Lack of focus
  • Too many or too few processes
  • No new people or ideas. Same few people perform
  • Weighed down by past failure
  • Not enough back-up plans
  • Blaming others or environment for failure

A good leader – Lesson 3 of The Winning Way

  • Has vision and communicates to inspire
  • Manages team climate & makes the team addup to more than sum of parts
  • Is trusted and respected
  • Approachable and understands the individuals, empowers the team
  • Courageous in decision making, always interest of team first
  • Accepts responsibility and gives credit
  • Serves as team glue

It also has specific sections on Managing Success, Understanding the importance of Goals and how to be/build team players. Something that we all could learn from the likes of Tendulkar, Ganguly, the Aussies and who better to tell us their story than Harsha Bhogle.