Archive for February 2010

Better E-Commerce Design using the Luhn Algorithm?

I finally put in my pre-order for SimpleScott’s Designing Obama book a few minutes ago. I wanted to buy it earlier but never overcame the inertia until I got a chance to have beers with Scott and then listen to him speak at the excellent Webstock conference in New Zealand last week (by the way, thanks to Khoi Vinh for asking me to step in for him as a speaker). Can I also just say that Webstock is the best designed conference I’ve ever seen?

Scott’s a great designer, obviously, but hearing about the care that’s going into just the production of the book is going to make this piece of art a must-have. I may even order two and keep one suspended in formaldehyde.

While ordering the book, one part of the process stuck out to me as something I’d never seen before, even having ordered probably a thousand items online in the past: when I typed in my credit card number, a green checkmark showed up immediately after the last digit was entered. My immediate suspicion was that they were counting digits and gave me a check to indicate I had typed in enough of them, but again, having never seen that before, my interest was piqued. I tried deleting the last digit and replacing it with a 1, then a 2, then a 3, and so on. Only when I typed the actual digit from the credit card did I get the green checkmark again.

Further investigation revealed that no server calls were being made, which means this was some sort client-side algorithm that verified credit card patterns. Iiiiiiiiiinteresting!. Even more investigation revealed that this was the work of something I’d never heard of: The Luhn Algorithm.

The Luhn Algorithm is a formula which can be run in javascript, PHP, and most other programming languages that uses some mathematical rules to determine if a credit card number is likely to be valid. Apparently, credit card companies issue numbers according to this algorithm, and if a number doesn’t fit it, it’s definitely not valid. Before you say to yourself “wow, that’s some neat, new technology I can use!”, note that the Luhn Algorithm has been around since 1954!

Although using this algorithm in your own projects is clearly not a necessity, I see a couple of potential advantages and a couple of potential disadvantages:

Advantages

  • Instant UI feedback is a great tool to help users correct errors
  • The checkmark is a nice bit of instant emotional validation to make sure users complete the process

Disadvantages

  • Is there a guarantee that every card will always follow this pattern? What happens if one or many stop following it?
  • Since it’s an unusual experience, does it add a bit of suspicion in some users? Would a less technical user assume their number was being broadcast across the internet more times than necessary?

I’m curious to see if this catches on as a trend.

It's Only a Matter of When

I’ve been trying to square my lack of enthusiasm about the iPad with the seemingly very positive analyses from those smarter than me.

After a few days, I think I finally reconciled it with a simple realization: the only reason I’m not enthusiastic about the iPad as a consumer is that it simply falls below my value curve at this point in time. Consider the graph below:

When the iPhone came out, I would have paid $1000 for it. I still would, to be honest. I wouldn’t exactly be happy about it, but I’d do it. It provides so much utility to me, it’s become such an indispensable part of my life, and it has no perfect substitutes, so its price elasticity to me is extremely low. Apple can charge pretty much whatever it wants and I will buy exactly one iPhone.

When the iPad was announced, however, the value curve was very different for me. It is currently a device I’d pay about $199 for. Not $499-$829. That is not to denigrate it at all. It just means its current value to me is below its current price. I don’t read eBooks, I have a laptop for my mobile computing needs, and I don’t have a place in my workflow for this device at this point in time.

The key is what happens over time, however.

The first effect is a pricing effect. As the price of both devices inevitably decreases, the value equation begins to change. A $10,000 iPad sells maybe 1000 units. A $1000 iPad sells maybe a million units. A $100 iPad sells 50 million units. And a $10 iPad sells about 500 million units.

So then, “liking” the iPad is really just a question of “what price would you pay for it?” For me, it’s about $199 right now. Electronic toy price, in other words. For others it may be a lot higher, and still others, lower.

The second effect is a utility effect. The utility of an iPhone is very high right now. It already plugs into existing cellular and wifi networks, it fits in your pocket, it replaces multiple devices, and it has few competitors. What happens when it’s not the only horse in the race though? We’re already starting to see stiff competition from Google with the Nexus One and Nokia undoubtedly wants to play this game too. It’s unclear whether any competitors will succeed making a better smartphone than Apple, but they will certainly create viable substitutes, thus reducing the unique utility of the device.

Look at what happens (possibly) with the iPad though. You can just sense by looking at it that it’s a bit “early”. There isn’t enough to do with it yet. The New York Times app looks nice and all, but it’s a far cry from a world of widely available, richly laid out e-publications (I personally question, however, if we even need this sort of world). You also can’t use the iPad for home automation stuff yet (although my buddy Danny will be working on it). You can’t beam Hulu from it to your TV. You can’t video conference with it. You can’t control it with voice commands. You can’t run it for a week on a single charge. These are all things I think we’ll see in the next several years, and thus it may become a more valuable device as time goes on.

When either the price is lowered to my value threshold, or my value threshold rises due to increased utility, that is when a purchase will be made. Perhaps even multiple purchases.

There is little doubt in my mind — upon finally thinking this through from a dispassionately microeconomic standpoint — that at least one of these two things will happen; and that is why Apple wins in the end, despite our best attempts to be curmudgeonly about it.