All posts filed under “Rent-seeking

Freudian slip in BBC iTunes story

Apple has repeatedly made clear that it is in this business to make money, and would most likely not continue to operate iTS if it were no longer possible to do so profitably, said Mr Cue. The National Music Publishers' Association has asked for the royalty rake increase and has said it believes everyone will benefit because the digital music market is growing. I think we established a case for an increase in the royalties, said David Israelite, president of the NMPA. Apple may want to sell songs cheaply to sell iPods. We don't make a penny on the sale of an iPod

From this BBC story, as of 6.43 pm.

P.S. I love the way it’s claimed “everyone will benefit” from the royalty rise. As a consumer, I can’t wait to be paying more! Perhaps a price increase will help limit the consumption of this precious rivalrous good… oh, wait…

P.P.S. Not the first time a BBC story about Apple’s had truer-than-they-perhaps-meant phrasing.

How to fit a normal bulb in a BC3 fitting and save £10 per bulb

BC3 and 2-pin bayonet fitting compared
Standard 2-pin bayonet cap (left) and 3-pin bayonet cap BC3 (right) fittings compared

Summary for mystified international readers: In the UK new houses/flats must, by law, have a number of light fittings which will ‘not accept incandescent filament bulbs’ (a ‘green’ idea). This has led to the development of a proprietary, arbitrary format of compact fluorescent bulb, the BC3, which costs a lot more than standard compact fluorescents, is difficult to obtain, and about which the public generally doesn’t know much (yet). If you’re so minded, it’s not hard to modify the fitting and save money.

A lot of visitors have found this blog recently via searching for information on the MEM BC3 3-pin bayonet compact fluorescent bulbs, where to get them, and why they’re so expensive. The main posts here discussing them, with background to what it’s all about, are A bright idea? and some more thoughts – and it’s readers’ comments which are the really interesting part of both posts.

There are so many stories of frustration there, of people trying to ‘do their bit’ for the environment, trying to fit better CFLs in their homes, and finding that instead of instead of the subsidised or even free standard 2-pin bayonet CFLs available all over the place in a variety of improved designs, styles and quality, they’re locked in to having to pay 10 or 15 times as much for a BC3 bulb, and order online, simply because the manufacturer has a monopoly, and does not seem to supply the bulbs to normal DIY or hardware stores.

Frankly, the system is appalling, an example of exactly how not to design for sustainable behaviour. It’s a great ‘format lock-in’ case study for my research, but a pretty pathetic attempt to ‘design out’ the ‘risk’ of the public retro-fitting incandescent bulbs in new homes. This is the heavy-handed side of the legislation-ecodesign nexus, and it’s clearly not the way forward. Trust the UK to have pushed ahead with it without any thought of user experience.
Read More

A lengthy debate

Norwich City Council is introducing a system of parking permit charges determined by the length of the vehicle:

The move away from flat-fee permits will penalise drivers who own vehicles more than 4.45 metres (14½ft) in length, such as the Vauxhall Vectra.

Brian Morrey, vice-chairman of the Norwich Highways Agency Committee, a joint initiative between the city council and Norfolk County Council, said: “We want to encourage more people to drive smaller cars. It is far more environmentally friendly and would also generate more parking space on the roads.”

(Quote from the Times; image from the Daily Mail)

From the Daily Mail - the parking permit charge bands for some common cars

Media reactions have largely been negative, with the measure being seen as a stealth tax, penalising larger families with larger vehicles, and so on; even the Green Party’s Siân Berry (London mayoral candidate and anti-4 × 4 activist) criticised the measure on the BBC News this morning for not being linked to the cars’ CO2 emissions.

Nevertheless, from a ‘design with intent’ point of view, this is an interesting strategy. The Council is clearly addressing the problem which it perceives – too many large cars in a city with “narrow, mediaeval” streets, rather than the ‘wider’ problem of CO2, and it’s addressing it directly, by making it less desirable to own a larger vehicle in Norwich if you’re going to park it on the street. Whether that’s ethical, sensible, or anything else is another matter: there are always unexpected consequences, and if, for example, more people decided to lay tarmac over their front gardens to avoid having to pay to park on the road outside, the impact of the permit costs might be felt long after the price had been forgotten (much like the window tax). While legal/economic/policy mechanisms for changing user behaviour, such as fines and permits, are perhaps outside the usual purview of ‘design with intent’, the idea here is still relevant: it’s a rather rare example of a direct response to a problem, and it – potentially – has that ‘trimtab‘ characteristic that is so fascinating about certain solutions.

An obvious physical-psychological mechanism analogous to the permit pricing structure might be to construct city car parks and parking spaces so that there were only a few spaces long/wide enough to take larger vehicles (making this very obvious), thus adding a little extra inconvenience every time a driver of a larger vehicle wants to park. Over time, that thin end of the inconvenience wedge might have an effect, even if it simply means that when the owner comes to replace the car, he or she thinks “Driving a big car’s so inconvenient nowadays; I’ll get something smaller.” On a large scale, those small decisions can have a significant impact. Has this been done anywhere?

Biting Apple

BBC News headline, 28 September 2007

Interesting to see the BBC’s summary of the current iPhone update story: “Apple issues an update which damages iPhones that have been hacked by users”. I’m not sure that’s quite how Apple’s PR people would have put it, but it’s interesting to see that whoever writes those little summaries for the BBC website found it easiest to sum up the story in this way. This is being portrayed as Apple deliberately, strategically damaging the phones, rather than an update unintentionally causing problems with unlocked or modified phones.

Regardless of what the specific issue is here, and whether unmodified iPhones have also lost functionality because of some problem with the update, can’t we just strip out all this nonsense? How many people who wanted an iPhone also wanted to be locked in to AT&T or whatever the local carrier will be in each market? Anyone? Who wants to be locked in to anything? What a waste of technical effort, sweat and customer goodwill: it’s utterly pathetic.

This is exactly what Fred Reichheld‘s ‘Bad profits’ idea calls out so neatly:

Whenever a customer feels misled, mistreated, ignored, or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value.

If bad profits are earned at the expense of customers, good profits are earned with customers’ enthusiastic cooperation. A company earns good profits when it so delights its customers that they willingly come back for more–and not only that, they tell their friends and colleagues to do business with the company.

What is the question that can tell good profits from bad? Simplicity itself: How likely is it that you would recommend this company to a friend or colleague?

If your iPhone’s just turned into the most stylish paperweight in the office, are you likely to recommend it to a colleague?

More to the point, if Apple had moved – in the first place – into offering telecom services to go with the hardware, with high levels of user experience and a transparent pricing system, how many iPhone users and Mac evangelists wouldn’t have at least considered changing?

On the level

Patent image of Tilt sensor
A tilt-detector from this 1984 US patent, with intended application on a packing box.

The liquid detection stickers in mobile phones, which allow manufacturers and retailers to ascertain if a phone has got wet, and thus reject warranty claims (whether judiciously/appropriately or not), seem to be concerning a lot of people worldwide. Around a quarter of this site’s visitors are searching for information on this subject, and the comments on last October’s post on the subject contain a wealth of useful experience and advice.

This current thread on uk.legal.moderated goes into more depth on the issue, and how the burden of proof works in this case (at least in the UK). While informed opinion seems to be that the stickers will only change colour when actual liquid is present within the phone, rather than mere moisture or damp, this may well include condensation forming within the casing, as well as the more obvious dropping-of-phone-into-puddle and so on. The main point of contention seems to be that the sticker may change colour (perhaps gradually) and the phone continue working perfectly, but when an unrelated problem occurs and the phone is taken in for repairs under warranty, the presence of the ‘voided’ sticker may be used as a universal warranty get-out even if the actual problem is something different.

Tilt detection
Along these lines, one of the posts tells of a similarly interesting design tactic – tilt-detectors on larger hardware:

30 years in the IT industry and associated customer service tells me they are trying it on and most people buy it. In the olden days, hardware used to come with a similar red dot system indicating the kit had been tilted more than 45 degrees and the manufacturers claimed the kit could not be installed and had to be written off.

Of course, 99.9% of the time the kit was fine, but they had a get-out from a warranty claim or so they thought. When the buyers tried to claim on their insurance or against the transport companies insurers the loss adjusters got involved and invariably the kit was installed and worked fine for years rather than the insurers paying out.

In some cases, of course, tilt-detectors were (are still?) necessary in this role. A piece of equipment with multiple vertically cantilevered PCBs laden with heavy components – relays, for example – might well be damaged if the PCBs were tilted away from the vertical. Certainly some devices with small moving coil components would seem as though they may be damaged by being turned upside down, for example. (Do the ultra-fine damper wires on an aperture-grille CRT monitor such as a Trinitron need to be kept in a particular orientation when handling the monitor?)

This patent, published in 1984, from which the above images were extracted, describes an especially clever ‘interlock’ system using two liquid-based detectors arranged so that if the device/package is tilted and then tilted back again, the second detector will then be triggered:

…it is desirable that the tilt detectors not be resettable. In particular, it must be possible to combine a package with at least a pair of the tilt detectors such that attempting to reset one would cause the other to be tilted beyond its pre-determined maximum angle so that the total combination would always afford an indication that the tilt beyond that allowed had been effected.

This is something of a poka-yoke – but as with the phone liquid-detection stickers, it’s being used to detect undesirable customer/handler behaviour rather than actually to prevent it happening. Other than making a package too heavy to tilt, I am not sure exactly how we might design something which actually prevents the tilting problem, aside from rectifying the design problem which makes tilting a problem in the first place (even filling the airspace in the case with non-conductive, low-density foam might help here).

But there’s certainly a way the tilt-detector could be improved to help and inform the handler rather than simply ‘condemn’ the device. For example, it could let out an audible alarm if the package or device is tilted, say, 20 degrees, to allow the handler to rectify his or her mistake before reaching the damaging 45 degrees, whilst still permanently changing colour if 45 degrees is reached. In the long run, it would probably help educated users about how to handle the device rather than just ‘punishing’ them for an infraction. I’m sure that mercury-switch (or whatever the current non-toxic equivalent is) alarms have been used in this way (e.g. on a vending machine), but how often are they used to help the user rather than alert security?

The patent description goes on to mention using tamper-evident methods of attaching the detectors to the device or packaging – this is another interesting area, which I am sure we will cover at some point on the blog.

In default, defiance

‘Choice of default’ is a theme which has come up a few times on the blog: in general, many people accept the options/settings presented to them, and do not question or attempt to alter them. The possibilities for controlling or shaping users’ behaviour in this way are, clearly, enormous; two interesting examples have recently been brought to my attention (thanks to Chris Weightman and Patrick Kalaher):

Send to FedEx Kinko's button in Adobe Reader

Recent versions of Adobe’s PDF creation and viewing software, Acrobat Professional and Adobe Reader (screenshot above) have ‘featured’ a button on the toolbar (and a link in the File menu) entitled “Send to FedEx Kinko’s” which upload the document to FedEx Kinko’s online printing service. As Gavin Clarke reports in The Register, this choice of default (the result of a tie-in between Adobe and FedEx) has irritated other printing companies and trade bodies sufficiently for Adobe to agree to remove the element from the software:

Adobe Systems has scrapped the “send to FedEx Kinkos” print button in iAdobe Reader and Acrobat Professional, in the face of overwhelming opposition from America’s printing companies.

Adobe said today it would release an update to its software in 10 weeks that will remove the ability to send PDFs to FedEx Kinkos for printing at the touch of a button.

No doubt the idea of linking to a service that’s often the only choice presented to consumers in the track towns of Silicon Valley made eminent sense to Adobe, itself based in San Jose, California. But the company quickly incurred the wrath of printers outside the Valley for including a button to their biggest competitor, in software used widely by the design and print industry.

I wonder how many users of Acrobat/Reader actually used the service? Did its inclusion change any users’ printing habits (i.e. they stopped using their current printer and used Kinko’s instead)? And was this due to pure convenience/laziness? Presumably Kinko’s could identify which of their customers originated from clicking the button – were they charged exactly the same as any other customer, or was this an opportunity for price discrimination?

As some of the comments – both on the Register story and on Adobe’s John Loiacono’s bloghave noted, the idea of a built-in facility to send documents to an external printing service is not bad in itself, but allowing the user to configure this, or allowing printing companies to offer their own one-click buttons to users, would be much more desirable from a user’s point of view.

In a sense, ‘choice of default’ could be the other side of process friction as a design strategy. By making some options deliberately easier – much easier – than the alternatives (which might actually be more beneficial to the user), the other options appear harder in comparison, which is effectively the same as making some options or methods harder in the first place. The new-PCs-pre-installed-with-Windows example is probably the most obvious modern instance of choice of default having a major effect on consumer behaviour, as an anonymous commenter noted here last year:

Ultimately, though, you can sum up the free-software tug-of-war political control this way: it’s easiest to get a Windows computer and use it as such. Next easiest to get a MacOS one and use it as such. Commercial interests and anti-free software political agenda. Next easiest is a Linux computer, where the large barrier of having to install and configure an operating system yourself must be leapt. Also, it’s likely you don’t actually save any money upfront, because you probably end up buying a Windows box and wiping it to install Linux. Microsoft exacts their tax even if you won’t use the copy of Windows you’re supposedly paying them for.

Starbucks Mug; photo by Veryfotos
Photo by veryfotos.

Sometimes ‘choice of default’ can mean actually hiding the options which it’s undesirable for customers to choose:

Here’s a little secret that Starbucks doesn’t want you to know: They will serve you a better, stronger cappuccino if you want one, and they will charge you less for it. Ask for it in any Starbucks and the barista will comply without batting an eye. The puzzle is to work out why. The drink in question is the elusive “short cappuccino”–at 8 ounces, a third smaller than the smallest size on the official menu, the “tall,” and dwarfed by what Starbucks calls the “customer-preferred” size, the “Venti,” which weighs in at 20 ounces and more than 200 calories before you add the sugar.

The short cappuccino has the same amount of espresso as the 12-ounce tall, meaning a bolder coffee taste, and also a better one. The World Barista Championship rules, for example, define a traditional cappuccino as a “five- to six-ounce beverage.” This is also the size of cappuccino served by many continental cafés. Within reason, the shorter the cappuccino, the better.

This secret cappuccino is cheaper, too–at my local Starbucks, $2.35 instead of $2.65. But why does this cheaper, better drink–along with its sisters, the short latte and the short coffee–languish unadvertised? The official line from Starbucks is that there is no room on the menu board, although this doesn’t explain why the short cappuccino is also unmentioned on the comprehensive Starbucks Web site, nor why the baristas will serve you in a whisper rather than the usual practice of singing your order to the heavens.

The rest of this Slate article* from 2006, by Tim Harford, advances the idea that this kind of tactic is designed specifically to allow price discrimination:

This is the Starbucks way of sidestepping a painful dilemma over how high to set prices. Price too low and the margins disappear; too high and the customers do. Any business that is able to charge one price to price-sensitive customers and a higher price to the rest will avoid some of that awkward trade-off… Offer the cheaper product but make sure that it is available only to those customers who face the uncertainty and embarrassment of having to request it specifically.

Initially, one might think it a bit odd that the lower-priced item has survived at all as an option, given that it can only be a very small percentage of customers who are ‘in the know’ about it. But unlike a shop or company carrying a ‘secret product line’, which requires storage and so on, the short cappuccino can be made without needing any different ingredients, so it presumably makes sense to contnue offering it.

Thinking about other similarly hidden options (especially ‘delete’ options when buying equipment) reveals how common this sort of practice has become. I’m forever unticking (extra-cost) options for insurance or faster delivery when ordering products online; even when in-store, the practice of staff presenting extended warranties and insurance as if they’re the default choice on new products is extremely widespread.

Perhaps a post would be in order rounding up ways to save money (or get a better product) by requesting hidden options, or requesting the deletion of unnecessary options – please feel free to leave any tips or examples in the comments. Remember, all progress depends on the unreasonable man (or woman).

*There is another tactic raised in the article, pertinent to our recent look at casino carpets, which I will get around to examining further in due course.