Later edit - December 2018
This article attracted a lot of interest so I thought I’d update it with news on how this battle between BAT and Phillip Morris played out.
Short story: BAT removed focus from iFuse and launched GLO, a device similar to IQOS. GLO uses apparently normal cigarettes which you heat up. The implication seems obvious: while I anticipated that iFuse would prove better commercially, I was wrong. IQOS won a significant market share (don’t have figures on this because they are definitely not public, but I see more and more people using IQOS) despite the presence of behavioral triggers that at first glance would prompt you to smoke less. Now, why is that?
I forgot the power of familiarity. IQOS has one big thing going for it - it uses cigarettes, not liquid, thus making for a familiar smoking experience. And familiarity heuristic is one of the most powerful frames of behaviour I know. That doesn’t mean that decision points are not valid in designing a behavioral experience, but, familiarity is, in hindsight, more powerful.
One last note: BAT still decided against decision points - as opposed to IQOS which needs a 3-min recharging after a smoke, the GLO device keeps running for several smokes in a row.
A couple of weeks ago, I was approached at Romanian Design Week by a sleek young lady promoter (cigarette brands always have the most beautiful and the smartest promoters) suggesting we try the newly launched glo iFuse - a hybrid type of cigarette, that releases nicotine without burning and eliminating that nasty smoke.
My boyfriend, in hope of quitting eventually, bought one.
The second story comes from a few days ago - while at a top management event, I was approached by promoters from Philip Morris with their iQOS type of hybrid cigarette.
Now, as a former smoker and student of human psychology, I couldn’t help but notice how perverse and pervasive the behavioral economics principles that underlie all our innate and unconscious behavior are used for the worst. Ironically, BAT is doing a much better job than Philip Morris. I wonder if it’s by design (and immoral considerations) or by mistake…
But first a cool story first about decisions points.
Eating on small plates
In 2008, two professors - Dilip Soma (my professor at Rotman School of Management, University of Toronto) and Amar Cheema, did a very insightful study - later published in a paper called - Decision Points, A Theory Emerges - in a cinema around “partitioning”. Suppose you go to the cinema and you order a large bucket of popcorn and you happen to eat it all during the movie. In a second group (the control one), consumers were given the equivalent of the large popcorn bag, but this time the popcorn was split into 4 bags under the fake pretense of being out of large bags. What happened, is that those people that received the popcorn in 4 bags, consumed way less than those who received the popcorn in one go.
The catch is that we are prone to mindless eating, mindless spending, mindless everything. We take a deliberate decision to start an action (System 2 thinking / the planner) but then fall on auto-pilot and never stop to take the deliberate decision to actually cease eating popcorn. It’s much easier to pop your hand in your bag to take another bite, but much harder to actually tear open another popcorn bag.
Which reminds me about the very honest brand tagline: Pringles - Once you pop, you can’t stop!
On the other hand, taking the decision to stop an action, requires active attention, focus and cognitive effort.
By splitting the popcorn into 4 bags, the researchers have effectively created a decision point that comes with a cost of considered attention. The individual in order to eat more - had to tear open the bag. This simple act of tearing the bag, focused his mind on Should I eat more? I’m going to dinner later..so perhaps I’ve had enough...and plus they are full of trans-fats..and my doctor said I should eat more healthy…
This behavior happens in numerous studies with cash, with the amount we eat (an excellent behavioral researcher is Brian Wansink who actually wrote the book on mindless eating) with the amount of savings we do and any activity that can be put on autopilot. Brian is the one that proved that what determined the amount of food people consumed was depended on the size of the plates they used. By actually dining on small plates, diners would have to get up, walk to the food table, and get a second serving.
In short, any intervention that is designed to get an individual to ‘pause and think’ about the consumption they are currently engaged in is called a decision point. This can be a sealed bag, a timely reminder, a transaction cost etc.
So what does this have to do with hybrid cigarettes? Plenty, actually! To structure the conversation let’s look at main building blocks of these products: product, price and consumer experience.
Price - happy now, pain tomorrow
The price for glo iFuse is 90 lei for the starter kit (includes 1 device and 2 capsules with liquid nicotine). According to company representatives, this 90 lei-device is going to last about 1 year under normal smoking conditions (no idea what these are).
After this starter kit purchase you have to buy capsules which come in 2/pack - at 30 lei a pack. The manufacturer says 1 capsule last approximately as 30 cigarettes. A cigarette pack is around 15 lei, so a quick math reveals that by switching to glo iFuse you save over 50% of the money spent on cigarettes. Bingo!
This, coupled with the hidden desire to quit subtly primed by the product design (it looks like an e-cig, right?) makes the BAT new product almost irresistible.
The iQOS device is sold at a hefty price of 400 lei while the 20 pack of HeatSticks is sold at 17 lei, slightly above the normal Marlboro pack.
On this single aspect, I’d say the BAT iFuse is clearly a winner. While we get no indication how much the iQOS device is going to last, even if it lasts a lifetime, it doesn’t really matter. Why?
Because of a little cognitive bias we all have called the Theory of Hyperbolic Discounting. At the heart of this theory (also proven by neuroscience experiments) is the fact that now always beats the future. A $50 prize today is valued more than $100 in two weeks and therefore chosen by many more people. In other words, people always value more the gain that comes sooner rather than later, even if the later gain is clearly better on all accounts than the more immediate gain.
Not to deviate too much from the subject, this theory captures that human tendency to disregard the future, over the present benefits leading to often to very detrimental effects on the long-term - saving for retirement anyone?. The explanation in evolutionary terms, is that our brains developed this coping strategy because statistically, ages ago, not too many people survived today to catch that promising, better future.
Back to our story, the gain is obviously paying less. Not only is the iFuse device considerably cheaper than the iQOS device, the price of capsules, as mentioned, is also 50% cheaper than normal cigarettes while the Marlboro HeatSticks is pricier than normal Marlboros.
Product - building on the comparison frame
Glo iFuse is a hybrid e-cig/cigarette system where the liquid nicotine is heated and the vapour is drawn through tobacco leaves to add flavor.
On the other hand, iQOS is a device using traditional tobacco mini-cigarettes, that get heated to produce a flavored smoke. These mini-cigarettes are marketed as Marlboro HeatSticks - to capitalise on the brand’s still powerful equity.
Both products promise no nasty smoke, therefore being allowed to be smoked indoors, though no company openly assumes this claim (presumably while the anti-smoking indoor law is still debated).
So, all in all - iQOS is more like a cigarette while the iFuse is more like an e-cig. Here, the effects depend on the consumer's frame of mind and objectives: if he's hoping to quit, he'd go for the iFuse like my boyfriend did since e-cigs are already marketed as a step closer to quitting. If he's not hoping to give up smoking, he'd much rather enjoy the more real feeling and haptic effects of iQOS.
Now...show me a smoker who doesn't want to quit and I'll go and place my money on BAT stock any day.
Experience - the devil is in the (psychological) details
But the real deal - the master stroke of behavioral economics applied in a company’s self serving interest (and coincidentally against the health of its consumers) comes in the consumption act of these hybrid cigarettes. Here, the theory of decision points - those small inflexions that force you to take note and think, come into play for one product and not for the other.
The iQOS is used by inserting the HeatStick into the device and vaped for about 6 minutes. After that, the HeatStick gets consumed, you take it out and throw it away in an ashtray. Then you have to wait for about 3 minutes for the device to recharge. After about 20 HeatSticks you have to put the device into the charger for a full charge.
With the iFuse you put the capsule inside and start vaping. A capsule last about 1 pack and a half of normal cigarettes and only has to be replaced after it’s consumed. And here comes the tricky part. While vaping, you have no clue when to stop. No sign that you smoked the equivalent tobacco of one cigarette. Nothing to throw out and contemplate sadly in an ashtray.
iFuse shrewdly removes all the obvious decision points in the act of smoking:
It has no burning tip that lets you in on the smoking progress
It has not butt that you need to throw out like in normal cigarettes
It does not require any refill of tobacco or energy between smokes
There is no pack with remaining doses - there are just two capsules/per pack, thus it jumbles your implicit comparison system. Effectively, your mind cannot compare just by sight (System 1, fast, unconscious calculation) 20 cigarettes with 2 capsules. You’d need to think things through to make this calculation - and, since we know smoking is mostly a mindless act, this computation never happens.
You just keep going, keep smoking until the capsule is empty. So while you might have smoked around 20 cigarettes a day, spaced out at 2 per waking hour let’s say, with iFuse you can easily smoke the equivalent of 30 cigarettes in just 6h of continuous vaping. And BAT is happy to cash in not 15 lei/day but actually about 24 lei/day (1 capsule and ⅔) on the back of your mindless smoking.
And brilliant at the same time!
Because the Philip Morris iQOS has the exact reverse of these 4 attributes, effectively making you stop and consider how much you smoke:
It makes you vape on the tail end of the HeatStick, thereby creating the natural experience with a cig
You have to take the stick out and throw away each and every time you want a smoke
You need to wait 3 min between cigarettes for the device to recharge
You see inside the 20-pack how many HeatSticks you have left, thus alerting you that you’ve gone over your daily quota.
The iFuse is the clear winner here. You could say the BAT new product is more like an e-cig, but to its advantage, it has the anti-power of human psychology. Sad news for us, smokers and smokers’ companions, but very very good news for shareholders.
To sum up
BAT's iFuse comes out on top on all marketing levels over Philip Morris iQOS, yet it's a mischievous trick on human psychology - a move this particular industry always thrived upon. It wins because:
understands how people deal with prices and pain, now and in the future
the product plays perfectly to the biases and previous preconceptions that users have
effectively removes any decision points in the smoking act that could alert you to stop or curb your smoking.
PS. I left out the distribution side - yet there's an interesting aspect here as well: while BAT has gone the usual distribution to retail route, Philip Morris is - testing perhaps? - the e-commerce route with their www.iqos.ro platform where users can only buy the product if they are recommended.
Cannot help but wonder? With all these restrictions around, is the tobacco industry dumping its distribution strategy from distributors in favour of direct B2C channels?
Edit: Also glo iFuse has an e-commerce website http://www.exploreglo.com/ifuse/ - but this time with no recommendations or limitations on selling products, except probably a legal age verification step (I assume, I didn't check).
The opinions in this article are mine alone and are based on direct experience with the products and publicly available information at the date of writing.