How Netflix Creates ‘Taste Communities’

Wired: “The Defenders provides Netflix with a unique case study. Instead of merely allowing it to find out if someone who likes, say, House of Cards also will like Daredevil (yes, BTW), it tells them which of the people who landed on Daredevil because of House of Cards will make the jump to The Defenders.”

“Wildly different programs lead people to The Defenders’ standalone shows. The top lead-in show for Luke Cage? Narcos. But for Iron Fist, it’s a Dave Chappelle special. Someone who watches Jones probably will watch Cage, but beyond that the groups of people—Netflix calls them ‘taste communities’—gravitating toward those shows enjoy very different programming.”

“Every Netflix user belongs to three or four taste communities. It’s easy to say that this influences what appears in your recommendations, but it’s not quite that simple. Membership in those communities does more than dictate the top 10 comedies appearing in a row of your queue, it determines whether comedies appear there at all … Each time you open Netflix it exposes you to 40 or 50 titles. Netflix considers it a win if you choose one of them.”

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Pizza Al Taglio Doesn’t Cut Corners

The Wall Street Journal: “A number of New York pizza makers are now offering the classic treat with different geometry: Their ‘pies’ aren’t pie-shaped. Instead, they are based on a rectangular-shaped style, known as pizza al taglio, that is popular in Rome. Further distinguishing this version: Slices are often served at room temperature. And when it comes to cutting the pizza, forget about the traditional wheel-style cutter. This is a pizza best divided with a scissors.”

“To some extent, the interest in pizza al taglio speaks to the appetite New Yorkers have for a broadening array of pizza styles, circular or rectangular-shaped. The city has seen restaurants offering everything including Detroit-style pizza and the classic Chicago deep-dish version. And that is not to mention the Sicilian pie, another rectangular style, that has been a mainstay at New York pizzerias for decades.”

“Moreover, other Roman styles are also finding their way to the city. Pinsa Lab, which opened earlier this year in Brooklyn, specializes in an crispy circular style, known as pinsa, that is said to date back to ancient times … But pizza al taglio has special appeal for a host of reasons, say fans. Some like the fanciful toppings that are often used: At Fornino, for example, the pizza al taglio comes in versions with everything from heirloom tomatoes and goat cheese to radicchio and figs.”

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Novo Oh-No: ‘New & Improved’ Doesn’t Sell

The Wall Street Journal: “Danish drug giant Novo Nordisk is living through a corporate nightmare that any CEO might recognize from business school. After the company concentrated on making essentially one product better and better—and charging more and more—customers have suddenly stopped paying for all that improvement. The established versions are, well, good enough.”

“Doctors, health-plan managers and insurers all have balked at paying for Novo Nordisk’s newest version of its insulin. Clinical trials show it works as promised in controlling diabetes and delivers significant side benefits compared with its predecessors. But for many customers, all that isn’t enough to warrant paying more—because the older drugs on the market already work pretty well, too.”

“Common, deadly ailments, such as asthma, high cholesterol and heart disease, were the focus of the pharmaceutical industry during a golden age of drug launches in the 1990s. Now, building on those advances has proven costlier and more complex, and usually results in smaller gains. Incrementally improved medicines are harder to sell at the prices needed to cover their development costs.”

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Applebees: What Is (not) Hip

Quartz: “It turns out, Applebee’s perhaps isn’t cut out to be a sophisticated, modern bar with a menu that sports chicken-wonton tacos and Sriracha lime sauce shrimp. Since the beginning of the year, the company’s stock price has plummeted by nearly 50%. It’s currently sitting at its lowest point in more than five years.”

“In a recent conversation with investors, Applebee’s executives were blunt about what went wrong. They called out the brand’s overt attempt at attracting a younger, affluent crowd as a strategic misstep that wound up alienating boomers and Gen-X consumers. Even worse, the rebrand never succeeded in luring younger diners.”

“By contrast, Texas Roadhouse made a conscious decision to avoid a rebrand and found success. It stuck to its straightforward menu, designed for those who enjoy the routine of sticking to the same dishes.”

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Brands Go Local To Beat Amazon

The Wall Street Journal: “As Amazon.com Inc.tightens its grip on retail sales, a growing number of brands are pushing back by championing local retailers. Some manufacturers are enforcing minimum advertised prices to make it harder for online sellers to undercut local merchants, while others give local stores first dibs on new products or funnel customers from their own websites to local outlets.” For example: “Luxottica Group SpA last year launched a minimum advertised pricing program that restricts the price at which its Ray-Ban and Oakley sunglasses can be advertised … The average discount on Ray-Ban sunglasses on Amazon has shrunk to about 3% as of this month from 37% in April 2016, according to Luxottica.”

“Free stroller tuneups are one way UPPAbaby, a Hingham, Mass.-based maker of baby strollers and car seats, draws customers back to local retailers carrying its products after they buy one of its strollers, which cost up to $900 … Running gear maker Brooks is testing a new app that uses an iPad connected to a treadmill to help local retailers determine which Brooks shoe best suits a runner’s biomechanics … Orb has a program designed to encourage local retailers to try out new products without worrying they might be saddled with excess inventory. At the end of each quarter, local stores can donate slow-selling items to a favorite charity. Orb then replaces the donated goods with new items selected by the retailer at no extra charge.”

“Arc’teryx salespeople use e-commerce sales data to help merchants determine which styles of clothing, shoes and backpacks are best sellers in their local market … If Simms Fishing Products had its way, the company’s waders and other fishing gear would never show up on Amazon’s website. The Bozeman, Mont., company doesn’t sell directly to Amazon, and its dealer policy specifically prohibits sales on third-party platforms … Simms employees visit local independent retailers and use computer-assisted design software to create customized Simms shops within each store.”

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Meal-Kit Meltdown: DIY Meals Are Cooked

The Wall Street Journal: “The promise of meal kits was to finally make cooking easy enough that Americans would actually do it. Proponents hoped that a cooking revival also could ease the nation’s obesity crisis—a way to reclaim control of what we eat from the big food manufacturers and restaurant chains … the amount of cooking required has apparently been too much, even for the farm-to-table crowd. (So much chopping!) Industry analysts believe that meal-kit purveyors are having trouble retaining customers.”

“The companies are only now starting to acknowledge the truth about the American home cook. Blue Apron recently introduced recipes that are faster to prepare. Amazon and other more recent entrants such as FreshRealm, Gobble and Terra’s Kitchen are going further, dialing back the prep work to almost zero.”

“Americans talk a good game about the importance of home cooking and family meals, but we still want convenience above all. To succeed, meal kits won’t just have to be easier than starting from scratch; they will have to be as easy as takeout.”

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Retrocycles: How Indian Throttles Harley

The New York Times: Harley-Davidson “now faces perhaps its most trying challenge in decades. Polaris, an established American company with manufacturing know-how and a revered motorcycle brand in Indian, is quickly making big strides … Indian’s sales grew 17 percent in the second quarter of this year, while Harley’s sales shrank nearly 7 percent. Overall sales for large-displacement bikes, the kind that Harley specializes in, shrank 9 percent in the second quarter of this year.”

“The rebirth started well, with attractive bikes earning positive reviews from enthusiast publications … All Indian motorcycles are built in Spirit Lake, Iowa. While its bikes like the Scout and the just-released Scout Bobber are aimed at younger buyers, most models revel in heritage, with styling and names that hark back to the company’s prewar glory days. They represent, as Karl Brauer of Kelley Blue Book, an auto research firm, put it, ‘a cool theme married to a modern chassis’ and particularly appeal to buyers with a ‘what have you done for me lately’ outlook on brand loyalty.”

“Inevitably, Indian’s retro approach makes the brand a head-to-head competitor for Harley-Davidson, offering bikes in the touring, cruiser and midsize classes as well as the popular bagger category, or bikes carrying saddlebags but not the full windscreen and gear of a long-distance touring machine … To be sure, there is little chance that Indian will run Harley-Davidson out of business anytime soon. Harley’s sales last year, some 260,000 motorcycles worldwide, generated revenue of $6 billion.”

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Cult of Queue: The Thrill of The Wait

The New York Times: “Theolus Jackson slouched against the stanchion separating him from the entrance of Supreme, the streetwear emporium on Lafayette Street in SoHo. He had registered on the company’s website to pick up a ticket assuring him a spot near the head of a line that by 10 a.m. that day spooled around the corner toward Broadway.” He comments: “Most of the time I have my music, so I’m not bothered. I come every week — I like the vibe — and I just chill.”

Jeff Carvalho of Highsnobiety explains: “These kids don’t come to go into the store. They want to be in the line. The line is the new community. When 200 to 300 kids are lining up outside of a store, it’s because they want to be part of something.”

“Today, the queue is partly a resellers’ market: energetic young entrepreneurs snapping up wares in multiples, then flipping them at soaring markups on eBay or selling them for pocket change to finance their own buys … For many others, though, the wait itself is sufficient reward.” Noah Callahan-Bever, the editor of Complex, observes: “The death of the shopping center has created this void in kids’ lives. It’s being filled in part by this society of kids, some known to each other only from the internet, all of them into this niche product that acts as a social identifier. For them, standing in line for a T-shirt or baseball cap is a way of telling the world that you know about something that not everyone is hip to.”

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The Killer Instinct: How Men Shop

The Washington Post: A new survey by Men’s Health magazine “found that 84 percent of men are now the primary grocery shoppers in their households, marking a 19 percent increase from a decade ago … It is worth noting that Men’s Health surveyed only men. Other surveys of both men and women have concluded that women continue to do slightly more of the country’s food-buying: NPD Group, for example, estimates that men are the primary grocery shoppers in 41 percent of U.S. households, while market research firm VideoMining puts that figure at about 49 percent of shoppers.”

“In any case, there is mounting evidence that more men are shopping for groceries than in previous generations. The reasons for those shifts are twofold, experts say. Gender roles are shifting, which means men are taking on more household responsibilities. And Americans are increasingly putting off marriage … And it doesn’t hurt that ‘there’s a younger generation of man who’s actively interested in food,’ said Paco Underhill, chief executive of Envirosell.”

“But there are still pronounced differences in how men and women approach grocery shopping … Case in point: Women are most likely to buy 12-packs of beer, while men typically buy six-packs, according to Underhill.” He comments: “Men tend to be hunters: They want to kill something quickly, drag it out and feel successful. Women, though, they’re thinking ahead and planning accordingly.”

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$1,400 iPhone & The Veblen Effect

Christopher Mims: “The launch of a pricey new iPhone has big implications for Apple’s financials, and it also bodes well for Apple’s continued dominance in mobile phones. Here are five reasons for Apple to go big, price-wise:” 1 Halo Effect: “An ultraexpensive edition of the iPhone makes sense as a shot in the arm for the whole brand … 2 Crazy New Tech: A big reason companies have halo products is that they give them a way to test new technologies.” 3 Supply & Demand: “If Apple’s high-end iPhone is aimed at a new segment—people willing to pay more than $1,000 for a phone—Apple can charge whatever it likes to balance supply and demand for the device, rather than worrying about whether increasing the price will hurt its overall market share.”

4 Average Selling Price: “With a phone priced upward of $1,400, Apple would have the opportunity to move the single most important metric on its balance sheet: the average selling price of a new iPhone.” 5 The Veblen Effect: “The final reason a pricey iPhone makes sense is that, paradoxically, the more expensive Apple makes the device, the more people will lust after it. Conspicuous consumption was first described in ‘The Theory of the Leisure Class’ by the economist and sociologist Thorstein Veblen, who singled out products that, contrary to logic, sold better when their prices went up.”

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