Focus On: Deborah Small

A Day to Give, not Spend

Posted on November 27, 2012

Consider it the antidote to Black Friday, Small Business Saturday and Cyber Monday.  A national coalition of organizations and individuals wants to brand today – the first Tuesday after Thanksgiving – as #GivingTuesday, an opportunity for people to give, not spend, as they enter into the holiday season.

According to the #GivingTuesday website, “more than 2,000 partners have come from all 50 states of the United States, and are either registered charities [a 501(c)3] with a specific #GivingTuesday initiative, or they are for-profit businesses, schools, religious or community groups who have committed to spearhead a project that will benefit at least one 501(c)3.”

The initiative’s sizeable list of participants ranges from The United Nations Foundation, The American Red Cross and Microsoft to The Economist, Groupon and Mashable, to name a few. The list also includes animal shelters, Big Brothers Big Sisters organizations, performing arts centers, city mayors and New York’s 92nd Street Y – a major catalyst behind the movement.

One wonders, however, how successful this initiative will be, given shoppers’ stretched budgets, their continuing focus on finding the best deals and the fact that many other charitable groups use this time of year to ask for donations.

Wharton marketing and psychology professor Deborah Small applauds the concept. “In general, #GivingTuesday is a good idea,” she says. “Although personal budgets may be constrained due to holiday shopping, charitable giving does go up at the end of the year. This could be due to associations between the holiday season and charitable giving, which I believe is what #GivingTuesday is trying to capitalize on, but it could also be due to tax incentives. People want to get in their donations by the end of the year to get the deductions.”

In terms of the recession, “charitable giving has gone down in absolute terms, but not relative to GDP,” Small adds. “In other words, people are spending less on charity just as they spend less on most discretionary purchases because they have less. However, they are not becoming stingier – i.e, giving a smaller proportion. This could be because social needs are more pervasive when the economy is weak so people feel a greater desire and responsibility to help others.”

According to Katherina Rosqueta, executive director of Penn’s Center for High Impact Philanthropy, the period between Thanksgiving and New Year’s has “historically been one of most active times of the year for philanthropic giving. So in some ways, #GivingTuesday is not really creating a new tradition; it’s highlighting a tradition that has long existed.”

What’s interesting, she says, is that people’s generosity remains alive and well, despite the recession. She points to the fact that donor advised funds – those specifically set aside for charitable giving – continue to increase in assets. Also, perhaps because of the recession, people want to make sure that their giving “actually makes a difference….  If you don’t have as much to give, you want to be smart about where [you donate]. This ability to have more confidence that what you are giving really matters is more in the forefront because of the recession.”  

Several studies have shown that, for individual donors in particular, “the information they value the most — and that is still not as available as they would like — is information around the effectiveness of their gift,” Rosqueta notes, adding that #GivingTuesday “provides an opportunity for people to make the case around what are some of the smartest philanthropic [opportunities] available to donors. Because of this initiative, maybe people will think, ‘Okay, today might be a good time for me to make a gift.”

The only downside to #GivingTuesday, Rosqueta suggests, would be if “it gets too noisy, so that donors no longer trust the information they receive. If voices like ours — which focus on bringing money to organizations and models that have evidence of impact — get drowned out by marketing, and people then tune out, that would be unfortunate. But the more that organizations are encouraging giving and actually providing solutions for people to consider, the more successful this can be.”

Wharton marketing professor Stephen Hoch is somewhat less hopeful. “I think this event is going to be buried by all the worthless media attention on Black Friday and Cyber Monday and so will receive little traction with the media, which is important in getting any attention from the public,” he states. “Moreover, I think that the entire Black Friday pseudo-sale is losing steam; it is so over the top at this point. It won’t be going away, but it will become more passé, since retailers can only open so early and there can only be so many door buster offers. My own view is that smart shoppers would be better off not shopping this past weekend and waiting for the inevitable markdowns if they really are interested in bargains.”

All non-profits struggle with fundraising, Hoch says, “but it is worse since the recession because once people start cutting back on their giving, it is not that easy to get them back into the giving groove.” At the same time, he adds, “I see no downside to trying this for either the organizers or the partners.”

 

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Do Something Nice for Yourself — Without Feeling Selfish

Posted on September 28, 2012

Anyone who has ever sat through a commencement address, read a self-help book or sought input from a friend when making a tough decision has probably heard this seemingly straightforward piece of advice: “Do what makes you happy.”

But the connection between doing what’s best for you and being content with that decision is more tenuous than most of us might think. According to Wharton marketing professor Deborah Small and PhD student Jonathan Berman, the conflict inherent in making a decision — and guilt about choosing oneself over the chance to help others — often makes looking out for your own self-interest seem downright miserable.

“Context is critical — people make very different choices based on the background. When the context is right, self-interest can feel quite pleasurable,” Small says, noting that people make numerous choices every day without thinking of them in moral terms. “But when self-interest is directly pitted against the needs of others, it makes self-interest feel selfish.”

Some people are psychologically hard-wired to think everything they do is selfish, Berman points out, while “others are oriented to think that nothing they do in their own self-interest is selfish.” Berman and Small decided to see what happened when the choice was taken out of people’s hands. In a recent paper, “Self-Interest without Selfishness: The Hedonic Benefit of Imposed Self-Interest,” which is forthcoming in the journal Psychological Science, they show that people who had a self-interested outcome imposed on them were able to enjoy it without the burden of feeling “selfish” — and were happier on average than those who got to make the choice on their own.

In the first of three experiments, 216 people were told that they were either going to be given $3 to spend on themselves, or would donate that money to UNICEF. Some participants got to choose between the two options; the others had no choice — they were forced forced to either keep the money or give it to charity.

After the first study, participants were asked was asked to rate on a scale of one to seven how much enjoyment they got from the experience. The happiest group of people by a significant margin were those who were simply told they could keep the money, rather than being told to donate it to charity or to decide between the two options. (Credit: Deborah Small and Jonathan Berman)

Afterward, the entire group was asked to rate on a scale of one to seven how much enjoyment they got from the experience. The happiest group of people by a significant margin, the researchers found, were those who were simply told they could keep the money.

“The idea is to make it feel less and less like a choice,” Berman says. “The less something feels like a choice, the less tension people feel and the better they feel as a result.”

In the next experiment, 132 people were asked either to choose between accepting one of two gift cards, to pick one of two charities to give a $5 donation to or to decide whether to take a gift card or give the equivalent amount to charity. Once again, those who were only presented with gift cards(self-interested options) proved to be the happiest with the outcome.

Finally, Berman and Small conducted a third experiment designed to study whether people’s perceived level of control over a decision impacted their level of happiness with that choice. They recruited 252 people through Amazon Mechanical Turk and told the group that each would receive a monetary bonus in exchange for their work or would be asked to donate the same amount to UNICEF.

Participants were asked to give their preference between the two options and then told that either they would get to make the choice, or the computer would make it for them. (Unbeknownst to the group, however, the computer “picked” whatever option the participant said he or she wanted.) Once again, the group was asked how happy they were — and once again, those who got to keep the money were happier when they believed the decision was imposed on them.

According to Small and Berman, the research shows the danger inherent in giving people too many choices, and how giving moral undertones to a particular decision could put at risk the happiness that consumers associate with a particular store or product.

As an example, Berman points to programs in which supermarkets give customers a choice at checkout of whether to keep a refund for bringing their own reusable grocery bags, or to give that money to charity instead. “Companies tend to think about the people who would want that option, not about the people who don’t want to take it,” he notes. “Maybe if they just gave everyone the money as a refund, everyone would feel better off.”

“Or they could impose the choice to donate to charity,” Small adds. “Lots of companies do. For example, they say that for every dollar you spend, a portion of that is given to charity. Cause marketing is very effective if it is done well. Consumers like the idea of doing good. But the potential downside is that putting the customer in the position of deciding whether or not to do good might make him or her feel less satisfied.”

However, Berman notes, that feeling selfish isn’t necessarily a bad thing. “In some sense, the feeling of selfishness is a good thing for morality because people who don’t want to feel selfish end up doing good deeds,” Berman says. “Maybe there is a trade-off between your own happiness and doing good deeds, but it’s also doing good for the world.”

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Taxes for Thee, but Not for Me

Posted on March 14, 2012

The news about sales taxes for online retailers, such as Amazon, has usually been about how states were struggling, largely unsuccessfully, to pull that e-business into the sales tax net. But in a new twist, Amazon is holding out a carrot to New Jersey: If the state foregoes, at least temporarily, the right to collect sales taxes on residents, Amazon will create 1,500 jobs by building distribution centers in the state.

Meanwhile, other states, such as Arizona, are pushing to eliminate an ineffective and unenforced law requiring the state’s residents to report and pay sales taxes on their online purchases.

Under a 1992 Supreme Court ruling, online retailers do not have to collect state sales taxes unless they have a physical presence in a state. So, with Amazon considering opening distribution facilities in New Jersey, it would trigger the requirement to collect sales taxes on online sales to residents. Amazon is working to cut a work-around deal to delay any tax collection until next summer in return for creating those 1,500 jobs and investing $130 million.

While consumers love the idea of lower priced goods, bricks-and-mortar retailers, naturally, object to any special treatment for their online competitors. The 4% to 9% in foregone sales taxes can give the online retailers a significant price advantage when they also offer free shipping. The ranks of the bricks-and-mortar retailers are often joined by state and city officials across the U.S., who are still hurting from lower sales tax receipts because of the poor economy and other factors. Last year, sales tax collections, which have been near historic lows, increased by only 1.2%, despite a 4.7% rise in consumer spending. Those local officials often have close ties to the local merchants, who already pay property and income taxes to the states, and thus the two groups should make natural allies against exemptions for online sellers.

Yet, the general anti-tax sentiment sweeping much of the country appears to trump all of that for now, to the advantage of the online retailers. In Arizona, for instance, state legislators are pushing to do away with a state law requiring consumers to pay state sales taxes on all annual online purchases when they file their state income tax returns. As it is, practically everyone ignores the law.

The anti-tax sentiment also appears to overwhelm the fact that the tax advantages allowed for online retailers means bricks-and-mortar retailers are less likely to expand or hire more workers. Some will even be put out of business.

“Of course Amazon destroys more small business sales jobs than the number of warehouse and shipping jobs it creates,” says Wharton’s Eric Clemons, a professor of operations and information management.  “That’s what economies of scale and operational efficiencies do.” The real question is whether or not online businesses should be exempt from sales taxes at all, he adds.

According to Clemons, “We really need to decide: (1) that online giants like Amazon need to be subject to sales tax regardless of where they are headquartered and regardless of where they have commercial facilities; or, (2) sales tax needs to be eliminated. It’s not a decision about whether sales taxes are still necessary revenue sources, but rather whether they are still feasible revenue sources. Anything that systematically places small local businesses at a competitive disadvantage is probably no longer part of a rational fiscal policy.”

Wharton management professor Stephen J. Kobrin points out two conceptually separate issues: “First, N.J. Is using tax relief to attract an investment and presumably the jobs that come with it.  That is standard practice among states and municipalities, although this is quite different as it is not an income tax abatement on a specific facility located in the state.  Furthermore, incentives whether they take the form of tax relief or infrastructure (new roads or facilities), usually provide a competitive advantage to the firm that receives them.”

At the same time, this case is very different.  “There is a fundamental principle in play here:  Whether on-line retailers should be subject to sales tax in a given state, whether or not they have physical facilities in that state,” Kobrin says. “I believe that the clear answer is ‘yes.’  There is absolutely no reason that they should pay sales tax and not doing so provides an unfair competitive advantage.  So, Amazon is not merely seeking an incentive to locate in N.J., but basically is arguing that their sales should not be taxed as a matter of principle. In this case, I suspect the fact that they are building a distribution center is a convenient fig leaf which allows N.J. To back away from taxing Amazon without appearing to give on the underlying principle.”

 

 

 

 

 

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Can Hoover Give Soap Operas Another Life to Live?

Posted on April 21, 2011

Back in the days of radio, daytime dramas were called soap operas because of the household goods promoted on the shows. Procter & Gamble, Pillsbury and General Foods were happy to feature their products alongside the daily travails of Helen Trent, Ma Perkins and the Bauers of The Guiding Light because they knew that legions of housewives were listening.

Fast forward 70 years and we live in an era with more women working, a seemingly endless buffet of television choices and far fewer soap operas. In 1940, serialized daytime dramas made up 90% of all commercially-sponsored daytime broadcast hours, according to the Museum of Broadcast Communications. Today, American soap operas number at six and are dwindling following last week’s announcement that ABC will end All My Children in September and One Life to Live in January in favor of airing cheaper-to-produce lifestyle programs.

There are plenty of people out there who grew up watching All My Children and One Life to Live, and plenty of now-adult young girls (and boys) who spent their allowance money on contraband copies of Soap Opera Digest and skipped college classes to watch Luke and Laura get married on General Hospital. But most would be the first to admit that they don’t watch much anymore. They grew up, and life got more complicated. Maybe they kicked the habit when O.J. Simpson’s murder trial preempted the soaps in 1994 and 1995. The Chicago Tribune reported that soap operas routinely attracted more than five million viewers per episode in 1996; today, only The Young and the Restless draws that kind of audience.

Despite those smaller numbers, there was still a sizable impact earlier this week when Hoover marketing vice president Brian Kirkendall — whose mother and wife are diehard All My Children and One Life to Live fans — announced in a Facebook note that the vacuum company would pull its advertising from ABC in protest starting tomorrow. And the company didn’t stop there — Hoover also set up a dedicated e-mail address where fans could make their case for a change of heart by ABC and promised to send those letters to the television network.

Will it work? Probably not, at least not on its own (see this K@W story for more on the effectiveness of boycotts). But Hoover won the hearts of millions of soap fans who are targeting everyone from advertisers to Oprah (and her fledgling cable channel) in an effort to save their shows. “It’s all about brand awareness, particularly with their target customers, who are women,” notes Wharton marketing professor Deborah Small. “Think about it — the company is supporting this cause and it’s something [fans] care deeply about, something that is personally very important to them…. That’s going to have some positive effect.”

So far, Kirkendall’s original Facebook post has drawn more than 700 “likes” and hundreds more messages thanking Hoover for taking a stand and pledging loyalty in return. Carolyn Hinsey, a columnist for Soap Opera Digest, even wrote a blog post asking fans to declare tomorrow “Buy a Hoover Day.” (For anyone considering actually doing so, Consumer Reports is highlighting its annual product rankings for vacuums.)

 

And Hoover may not be taking as much of a hit from this move as some might think. Advertising Age‘s Brian Steinberg notes that the vacuum company’s overall ad spending on ABC is relatively small, around $353,000 in 2010. He also argues that pulling the advertising dollars that support the programs is not the most effective way to keep them on air.

What would keep soap operas on TV? In a blog post for Fast Company, Sam Ford, co-author of the book, The Survival of Soap Opera, says advertisers, networks and producers have created a self-fulfilling prophecy for the genre by declaring it dead and irrelevant, rather than collaborating to create a long-term plan for its viability. Financial Times media editor Andrew Edgecliffe-Johnson likens soap operas to other orphan brands abandoned by the consumer products companies that once depended on serialized dramas to make them household names. “In television terms, this means that shows that no longer pay their way on broadcast networks could profitably anchor a cable channel’s daytime line-up, with its dual revenue streams of advertising and cable system fees,” Edgecliffe-Johnson writes. “The Discovery-backed Oprah Winfrey Network, after a sluggish start, could be an ideal home for another daytime TV exile.”

In reality, this is a problem that all content creators, from television networks to newspapers, are struggling with: How do you keep old media viable in the eyes of consumers — and earn enough money to pay for it — in a new media world? That’s one soap opera that is not in danger of cancellation anytime soon.

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Why ‘Friday’ Just Won’t Go Away

Posted on March 24, 2011

It seems like everyone is laughing at Rebecca Black. But her universally mocked viral music video has become a business success story — and that’s no joke.

The 13-year-old has garnered millions of YouTube hits, thousands of  iTunes downloads and become a constant Twitter trending topic thanks to “Friday,” a song almost universally considered to be pretty awful. Her single even hit number 72 on Billboard’s Hot 100 chart, sandwiched between the kids from Glee and country star Kenny Chesney.

What makes this song so bad it’s good? Is it the prodigious use of AutoTune? Or Black’s intense lyrical debate about whether to sit in the front or back seat of her friend’s car? What about the equally confounding video — why is she waiting for the school bus if her friends are giving her a ride?

“Friday” has all the classic attributes of an “earworm” — also known as a song that gets stuck in your head, according to James Kellaris, a marketing professor at the University of Cincinnati who studies the influence of music on consumers. The lyrics are relatively simple, there’s a lot of repetition and “some odd incongruities, features that violate listeners’ expectations.

“There is also something social going on here that has relatively little to do with the music itself,” Kellaris continues. “When a crowd of onlookers stops to watch something, others will stop to see what is going on. If the crowd increases, it exudes sort of a gravitational pull. This seems to be happening on YouTube, with millions of viewers checking out what all the fuss is about.”

Even if that attention is focused on how bad the song is, the broad level of public awareness is what’s really important here. Recent research co-authored by Wharton marketing professor Jonah Berger found that negative publicity can actually make a positive impact on sales by giving previously unknown products a share of the spotlight. In investigating how book sales were affected by poor reviews, Berger and his co-authors discovered that, as time passes, customers “may not remember that something is negative. You may read a negative review today, and then a couple of weeks go by, and you might remember that you heard something about the book, but not remember exactly what you heard.” In those cases, the poor review becomes “free advertising,” boosting awareness with few repercussions.

So far, the “Friday” video has more than 42 million views on YouTube. About 63,000 listeners took advantage of the site’s “like button” to give it the digital thumbs-up. But a comparatively whopping 543,461 clicked the “dislike” button.

An erroneous Internet report sparked rumors that Black was making hundreds of thousands of dollars from YouTube views and sales of her song. She’s not doing quite that well — Billboard’s Glenn Peoples did the math and estimates that she’s making closer to $25,000 per week from track sales. But that’s not bad for a single most people claim (at least publicly) to hate. (Black told Jay Leno that she’s donating the proceeds from the music video to earthquake/tsunami relief efforts in Japan and to her school.)

“Consumers may purchase ['Friday'] precisely because the song is bad,” says Wharton marketing professor Deborah Small.  ”A bad performance can be funny, and people experience schadenfreude, or pleasure from the pain … of others. This particular video … appeals to teenagers, who can relate to the characters in the video.”

They can also relate to Black. “Although [teens] may aspire to be rock stars, they can envision themselves at [Black's] level of stardom,” Small notes. “This is similar to the [reasons for] the success of much of reality TV.”

It remains to be seen if Black capitalizes on her 15 minutes of fame to become the next Justin Bieber — or if she’s destined to languish in one-hit wonder territory. But she might take note of a cautionary tale from a recent Knowledge@Wharton story about the rise and fall of fads, which warns of the challenges in keeping consumer eyes from wandering. Hot streaks, according to Wharton operations and information management professor Marshall Fisher, “are like an airplane. If it stops operating at a certain speed, it falls like a stone.”

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