Source : wired.com
Houzz, an online hub for home-remodeling fanatics, just unveiled a curious new feature. It’s called the “Real Cost Finder,” and the idea is to help homeowners estimate the total cost of big remodeling jobs and, in the process, keep a lid on their expenses.
There’s no question Real Cost Finder is cool. In a demo, Houzz co-founder Alon Cohen showed me how the tool adjusts its estimates based on where you live and shows how likely you are to need a professional to complete the makeover, whether it’s a kitchen remodel, a bathroom improvement, or a deck install, based on how many other people in your area hired outside help for the same task.
The estimates are based on a survey of more than 100,000 of Houzz’s 14 million monthly users — the largest interior design pricing survey ever completed, according to Cohen.
But slickness aside, why would Houzz want to help people tackle the notorious problem of spiraling remodeling costs? This is a site, after all, that makes its money selling advertisements for home decor and by connecting homeowners to contractors. When people lose sight of the bottom line and start spending irrational amounts of money on pricey materials and over-elaborate layouts, that should begood for Houzz, not bad.
“We have confidence in the good karma that’s generated from doing things like this that don’t have a direct monetization aspect,” said Cohen, adding that users have been asking for help solving this very problem. “The thing that’s worked for us from the get-go is: ‘There’s a problem. We go solve it.’ And the money is going to follow. We’re not too concerned about that.”
That’s a wise philosophy, but there’s deeper smartness to tools like the Real Cost Finder: They help mitigate a fundamental paradox of online shopping communities, which is that the more you know, the dumber your decisions tend to become, at least from a purely economic perspective.
For example, the fashion industry has known for decades that showing people lots of pretty pictures of clothes might make them more selective in what they buy, but at the same time — and more importantly — it also makes them spend more money and buy more stuff. Hence the flood of fashion magazine advertising each September as new lines are rolled out, and hence the success of the online community Polyvore, which doubled its revenue last year and has been profitable for two years running thanks to the affiliate fees generated when 20 million monthly users click to buy the outfits assembled by Polyvore users.
Becoming a shopping obsessive in a community like Houzz or Polyvore can be a real pleasure, but sometimes a guilty one. Trying to make perfect shopping choices can actually make you unhappy, as psychologist Barry Schwartz has shown. And from a financial standpoint, pickiness isn’t the same as frugality: The more you know, the more you spend.
“Ultimately, people will most likely end up spending more money in total as the ‘temptations’ so readily reveal themselves,” says Lars Perner, an assistant professor of clinical marketing at USC. “This would be consistent with economic theory of the downward sloping demand curve — as things become less expensive (in this case because the lowest cost seller is now more readily identifiable) a larger quantity of items will be demanded.
“I also would emphasize that I think there is a lot to the idea that these online displays tend to raise ‘competition’ among consumers to have more. Although this is not good personal finance strategy, some people may rationalize that if others have a particular item, they, too ‘deserve’ to have it.”
The true — and truly interesting — nature of the Houzz Real Cost Finder, then, is that not only does it alleviate the age-old pain of wringing a cost estimate from a professional, but it also helps counteract one of the big downsides of Houzz itself and its peers: that they encourage lots of spending. Polyvore, it turns out, has evolved similar countermeasures, like its paper bag fashion contest and a product price filter.
The nature of online shopping also offers another self corrective: It is psychologically easier to abandon a Houzz or Polyvore shopping spree than to abandon one involving a human contractor or salesperson. “Even if an online system sends follow-up messages, there is less of a feeling of guilt,” says Perner.
So while online shopping is constantly offering clever new ways to allow for very costly, very fast purchases — $5,500 headphones in the click of a mouse! — it may yet devise ways to save us from ourselves.