27 June 2007

Faith in Human Relations

I've taken quite an interest in general economics lately. Like most people not in the field, I always thought that economics have everything to do with a country's financial health, and little else. But after reading the excellent books Freakonomics and The Undercover Economist, it has really opened my eyes to the way this world works. I'm by no means an excellent one yet, but I've been more observant about phenomena around me and I'll catalog them under the 'economics' label. Actual economist might read such posts and say "Bah! That's NOT economics!", so I appeal to them to speak out.

To start things off, have you guys heard the radio advertisement that goes something like, "Mum, it's time to buy a Hyundai Atos! Auntie Sim, you should get the gutsy Hyundai Getz! Uncle Lim, it's the Matrix for you and your family! Now, remember to write my name on the entry form so I can stand a chance to win a new Hyundai Azera!" (The contest details can still be found on their website)

Does that make sense to you? Imagine for a moment I'm Uncle Lim, saying the following to the guy on the radio:

Why would I get myself into half a decade of debt just so someone else can stand a chance to win a RM230,000 car? And it's not guaranteed you'll get the car, mind you. What's my incentive for putting your name in? Are you going to share half the car with me?

I think Hyundai's marketing department designed this contest wrong. They can't use a scheme like those grocery products where the more you buy the better your chances of winning, because vehicles are not something that people buy in bulk. Among my first degree friends, probably only 1 or 2 is looking for a new vehicle. And of course, there's the absence of any incentives to put your name in and not mine.

2 things I learned from reading those books are:
- People respond to incentives (positive OR negative)
- People are inherently selfish (most of the time but there are divergent theories)

Do you have any other opinion on why this scheme would work or wouldn't?

1 comment:

William said...

I guess that the contest is just to tip the scale for people who are undecided between two manufacturers. Not create more demand, steal your competitor's potential customers.