Professor Dilip Soman believes society is erring by failing to consider “last-mile problems”.
If you think about what people actually do in organizations from day to day, the bulk of their efforts are spent on what I call "first-mile problems." These include the efforts devoted to thinking through the competitive landscape; developing strategies to address it; designing processes of innovation; and coming up with new products and services.
Very little attention is paid to the "last mile" – the part where a consumer actually gets to your website, walks into your store, or talks to your sales representative – and subsequently makes a decision to switch to your product (or not).
If you take some time to think about the last mile and listen to stories from consumers who have had a bad experience there, you will quickly realize that it is not "big things" that make a difference here: it is the small things that matter. Things like the manner in which a decision is presented; the ambience of the room; or the disposition of the agent with whom the consumer interacts. These are all key determinants of our decisions to buy a product, open an account or consume a service.
As a society in general, I would argue that we have not spent nearly enough time thinking about last-mile problems, and in my mind, this is a big mistake.
Depending on which survey you read, new product success rates are typically in the region of 1 to 25 per cent. In other words, more than 75 per cent of new products fail. There is a simple behavioural reason that might explain the bulk of this high rate of failure: while the product or service was being developed, the developers didn't think at all about the last mile. That is, they failed to recognize that proactive effort would be required by consumers to adopt and use the new product.
Here's a public sector example. In Canada, the government introduced a new welfare initiative called the Canada Learning Bond (CLB) – a wonderful program that provides eligible low-income families with $500 to use on their children's education. While there are obviously some parameters around what the money can be spent on, this is essentially "free money" for these families.
An economist would say, "Wow, free money; who wouldn't take advantage of this program?" And yet, in the first year the bond was introduced, take-up rates were as low as 16 per cent. The reason had nothing to do with the quality of the program: it was a classic last-mile problem. In order to benefit from the program, eligible families needed a bank account. But the reality was that many families simply didn't have the time to go out and open a bank account. They were parents juggling multiple jobs, and they had children to look after. The inability to physically get to a bank proved to be the primary reason why this program failed.
Following are three principles of human decision-making that can be applied to the last-mile phase of just about any product or service situation.
Defaults are tremendously powerful. Human beings are supremely lazy, both physically and cognitively, and as a result, we stick to defaults. Unless a default option is something we are particularly averse to, we will stick with it. Defaults also work because they tend to signal some sort of a "social norm": If the default is that "everybody is donating organs," we think that we, too, should donate ours; likewise, if the default is that "nobody is donating organs," we are likely to take that as a suggestion.
We obey the Laws of Motion. The second principle is explained by Sir Isaac Newton's Laws of Motion: A body at rest will continue to be at rest, unless it is given some sort of an external push; and a body in motion will continue to move unless some external force slows it down. Human decision-making is very much like that. People will continue to do whatever it is they are doing, unless they are mentally or physically "nudged" to do something different.
Inter-temporal choice. The third principle that explains human decision-making is "inter-temporal choice," which looks at the fact that most choices require a decision maker to trade off costs and benefits at different points in time. Everybody intends to eat healthy food, exercise regularly and save money for the future; but given the up-front "costs" of making these things happen, there is usually a gap between our intentions and our actions.
As a result of these three principles, the solution to last-mile problems isn't so much about creating awareness about a product or service as it is about facilitating action.
Dilip Soman is the Corus professor of communication strategy, aprofessor of Marketing and Director of the India Innovation Institute at the University of Toronto. He is the author of The Last Mile: Creating Social and Economic Value from Behavioural Insights (Rotman-UTP Publishing, 2015) from which this article is excerpted. The article, in the fall, 2016, issue of Rotman Management, www.rotmanmanagement.ca, is reprinted with permission.