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Science of influencing consumer behavior
- 1. SCIENCE OF INFLUENCING CONSUMER BEHAVIOR @TejDesaiJan 12, 17
- 2. … requires as much an understanding of human psychology as much as that of media!
- 5. One quality that binds them together…
- 6. … is their need for simplicity!
- 8. ‘You’ll see I wear only gray or blue suits. I’m trying to pare down decisions. I don’t want to make decisions about what I’m eating or wearing. Because I have too many other decisions to make.’ The simple act of making decisions degrades one’s ability to make further decisions.
- 11. Do you know how many decisions do we make daily on an average?
- 14. “The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts… One shortcut is to become restless… the other is the ultimate energy saver: do nothing!” ~ John Tierney
- 15. Six jars of jam on display Twenty four jars of jam on display urce: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology Which sample would attract more people?
- 16. Six jars of jam on display Twenty four jars of jam on display 40% stop & taste 1-2 types of jams60% stop & taste 1-2 types of jams urce: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology Which sample would attract more people?
- 17. Which of those people would actually buy? Six jars of jam on display Twenty four jars of jam on display 40% stop & taste 1-2 types of jams BUT 31% of those who stop, purchase 60% stop & taste 1-2 types of jams BUT ONLY 3% of those who stop, purchase urce: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- 18. Which of those people would actually buy? Six jars of jam on display Twenty four jars of jam on display 40% stop & taste 1-2 types of jams BUT 31% of those who stop, purchase 60% stop & taste 1-2 types of jams BUT ONLY 3% of those who stop, purchase urce: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- 19. So how do marketers tackle this dilemma of consumers’ inability to make decisions?
- 20. THEN NOW iPhone 5: 16GB, 32GB, 64GB iPhone 7: 32GB, 128GB, 256GB • Price decoys - From AED 2199 - From AED 2599 - From AED 3099 • High reference price • Obscure the reference price so there’s no point of comparison
- 22. THE DECOY EFFECT The decoy effect is a phenomenon where consumers change preference for one of two items when a third is introduced.
- 23. THE DECOY EFFECT The decoy effect is a phenomenon where consumers change preference for one of two items when a third is introduced.
- 24. THE DECOY EFFECT The decoy effect is a phenomenon where consumers change preference for one of two items when a third is introduced.
- 25. CENTRE-STAGE EFFECT It is the belief that consumers will prefer the middle product when presented with a line of items.
- 26. FRAMING EFFECT The framing effect is an example of cognitive bias, in which people react to a particular choice in different ways depending on how it is presented; e.g. as a loss or as a gain. It is a way to describe or label a product in order to get customers to focus on the value instead of the price.
- 27. BANDWAGON EFFECT A psychological phenomenon whereby people do something primarily because other people are doing it, regardless of their own beliefs, which they may ignore or override
- 28. ANCHORING EFFECT Anchoring or focalism is a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions.
- 29. Source: Eric Johnson & Daniel Goldstein %ofdriversdonatingorgans Defaults and donation decisions
- 32. • Flowery language: "handcrafted, triple- basted, slow-cooked, golden-brown, hand-selected"—makes a dish seem more enticing • Price decoys - Surf and Turf …………… 45.00 - Salmon …………………....28.00 - Fish & Chips ……………. 16.00 • Covert currency / Pricing in letters known to increase spends by 30%
- 33. • Golden Triangle • Subconscious scheming (Top two items, last item – highest margin) • Limited choice • Nostalgia (Grandma’s Apple pie) • Layout: Most have uniform description length except the key items • Negative space: crammed vs open space for attention • Upsell items
- 34. The long pour: Have you ever seen a bartender pouring a drink and bring the bottle way far from the shaker/glass while they are pouring? This gives the illusion that they are dumping huge amounts of liquor into the drink, when in fact it's all based on the timing.
- 37. CONSUMER JOURNEY
- 38. Source: Little Springs Design
- 42. I GO TO MY REGULAR BANK AND THE OTHER BANK THAT REMEMBER FROM THE GREAT TVCS I EXPLAIN MY REQUIREMENTS TO THE BANK STAFF BOTH OFFER ME OPTIONS. I SEEK MY ACCOUNTANT FRIENDS’ OPINION I CHOOSE THE OPTION THAT WORKS BEST PERSONAL LOAN CONSUMER JOURNEY - 1995 I NEED A PERSONAL LOAN Source: Sujay Nanavati
- 43. PERSONAL LOAN CONSUMER JOURNEY - 1995 I NEED A PERSONAL LOAN SUPPLIER PROBLEM SOLUTION PRODUCT
- 44. PERSONAL LOAN CONSUMER JOURNEY - 2016 I NEED A PERSONAL LOAN I START WITH GOOGLING MY PROBLEM AND EXPLORE MY OPTIONS OF LOANS ONLINE, COMPARISON SITES ETC I READ REVIEWS, DESCRIPTIONS, SOCIAL INFORMATION, BY EXPERTS AND PEOPLE LIKE ME AND FROM THE BANK THAT I TRUST I CHOOSE THE LOAN THAT BEST FIT MY NEEDS AND FEELINGS BASED ON THAT INFORMATION THEN I CONTACT THE BANK THAT OFFERS THE LOAN
- 45. PERSONAL LOAN CONSUMER JOURNEY - 2016 I NEED A PERSONAL LOAN PROBLEM SOLUTION PRODUCT SUPPLIER
- 46. PERSONAL LOAN CONSUMER JOURNEY - 2016 I NEED A PERSONAL LOAN PROBLEM SOLUTION PRODUCT SUPPLIER
- 47. PERSONAL LOAN CONSUMER JOURNEY 2016 PROBLEM SOLUTION PRODUCT SUPPLIER 1995 SUPPLIER PROBLEM SOLUTION PRODUCT
- 48. PERSONAL LOAN CONSUMER JOURNEY 2016 PROBLEM SOLUTION PRODUCT SUPPLIER 1995 SUPPLIER PROBLEM SOLUTION PRODUCT It was critical to have great TVC to generate high awareness It is critical to be found in the research stage of the journey BRANDING & CONTENT ARE OF PARAMOUNT IMPORTANCE
- 49. … THUS IT IS VERY IMPORTANT TO BE PRESENT ACROSS THE DIGITAL CONSUMER JOURNEY
- 50. … AT THE SAME TIME, WHAT PEOPLE SAY ABOUT A BRAND IS MORE IMPORTANT THAN WHAT A BRAND SAYS ABOUT ITSELF… SOCIAL & CONTENT STRATEGIES ARE KEY!
- 51. When people want to find, do or buy something, they expect IMMEDIATE RESULTS. In these micro-moments, brands have an opportunity to meet consumers’ needs and shape their decision.
- 52. PRETAIL AND CROWD- SOURCING HAVE DISRUPTED INDUSTRIES BY ALTERING CONSUMER JOURNEYS
- 53. TESLA: Sold over 180,000 cars in a day netting over US$8 billion!
- 55. First crowd-funded album: Marillion's Anoraknophobia
- 56. XIAOMI: Ranks No. 4 in Smartphone Sales in less than 6 years
- 57. • Purpose: Bring the accouterments of finer living to the middle class • Direct access: ecommerce • Flash Sales: One day sales (control inventory) • High word of mouth + robust social media strategy • Competitive Pricing • Loyalty: 30million registered users • Long term strategy: Build an eco-system (Software apps, Cloud services, Consumer electronic products
- 58. “The next revolution will be psychological, not technological” - Rory Sutherland
- 59. SOURCES • Dan Ariely • Sheena Iyenger • Richard Thaler & Cass Sunstein • John Tierney • Charlie Sorrel • Ed Coburn • Quincy Smith • David Aaker • Rory Sutherland
Editor's Notes
- They have chosen to do so to reduce the number of daily decisions that they have to make, thus enabling them to get on with making all the rather more important decisions.
- “You need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.”
- The Judge Harry Pregerson Interchange – Southern LA On average, the normal person makes about 35,000 decisions every day, 226.7 of which are about food alone, according to researchers at Cornell University (Wansink and Sobal, 2007).
- Decision fatigue is what happens when your brain gets overwhelmed with making decisions and determines it’s too tired to make any more, causing your ability to choose between options to suffer. Interestingly, it’s a quantity and a quality issue. The size of a decision just dictates how quickly you get fatigued! Big complicated ones suck the energy out quickly, while lots of mundane tedious ones drip the energy out slowly like a leaky tap. But the result is the same. It doesn’t mean that you get physically tired, but your decision-making energy can be exhausted. What it means is that you’ve made so many decisions in a row that your ability to make good choices degrades over time, and it’s extremely likely that you’re now going to start making bad or rash ones without even realising it. So, decision fatigue is what happens when we’ve drained our mental resources and compromised our ability to do our best thinking and make the best choices.
- “We love the idea of choice, but making decisions” ~ Sheena Iyengar Source: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- “We love the idea of choice, but making decisions” ~ Sheena Iyengar Source: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- “We love the idea of choice, but making decisions” ~ Sheena Iyengar Source: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- “We love the idea of choice, but making decisions” ~ Sheena Iyengar Source: Sheena Iyenger and Mark Lepper 2000. – Journal of Personality and Social Psychology
- Humans rarely choose things in absolute terms. We don’t have an internal value meter that tells us how much things are worth. We focus on the relative advantage of one thing over another and estimate value accordingly. Most people don’t know what they want unless they see it in context. Decoys, in marketing, are products, services, or price points that a business doesn't really want you to take, but rather use as a reference to make another product look better.
- a Realtor who shows you a home that needs a new roof, right before taking you to a higher-priced house he really wants to sell. It's hard to tell if a $400,000 colonial is a good deal—but compared with a $380,000 home that needs work, it looks damn good. Decoys explain why Apple often sells each gadget in a pricing series, such as the new iPod Touch's $229, $299, and $399 price points for different storage capacities. You may gladly spend $229 to get a hot media player, thinking it's a deal vs. the highest-priced version … and not blink that you could instead buy an iPhone 4 at the lower price of $199 with more features. The $399 "decoy" has clouded your judgment. Apple wins the best of both worlds—stoking demand for products that look like bargains and for all the decoys it sells at much higher prices. Yes, some people will spend $399 for a music player with slightly better technology—and Apple makes even fatter margins.
- Decoy pricing works best when you have limited products or services and are trying to steer your customers towards the one with the higher price. The way you do this is by introducing an additional option, but with less value than the higher priced one and a cost that is almost the same. The idea is that your customers will see this new option compared to the one you hope they pick and say to themselves "for only x$ more I can have more value!" and then choose accordingly. In the above example you can see that Sports Illustrated offers three subscription options: a 1-year All Access package, a 6-month All Access Package, and a 1-year Digital Access package. Anyone that looks at the options can see that the Digital Access package is redundant since it’s already offered with both of the All Access options, but including it at the same price as the 1-year All Access package helps reinforce the value of the latter, thereby nudging customers towards choosing it. They should be thinking, "Hey, the All Access package includes both print and digital for the same price as just digital, sign me up!” Restaurant Menu – High priced items are there even if no one orders them … because usually they will end up ordering the 2nd most exp dish instead. > So be creating an exp dish, restarurateur lures customers into ordering 2nd most exp choice – which can be cleverly engineered to deliver higher profit margins.
- Multiple studies have shown this to be the case regardless of the number of items and even when the items are identical. To capitalize on this, companies often opt to put their most expensive product in the middle instead of listing them in the order of price. At nearly $200 more than their other options, GoPro placed their Hero 4 Black model in the center of their product page hoping to capitalize on this effect.
- In e-commerce, the most popular way to achieve this is by highlighting how much a customer will save to offset the difference in price between products. While users will obviously see the price first, Moz does a great example of framing the prices by clearly stating how much a customer can save by purchasing annually, thereby increasing the value. Framing also applies to discounts and studies have shown that when it comes to higher priced items, discounts are more effective when shown as a dollar amount versus a percentage.
- PhotoBucket example Ever heard the saying "if your friends were jumping off of a bridge, would you jump too?” That is the bandwagon effect in a nutshell, and if you said you'd jump, you just proved its effectiveness. The easiest was to achieve this effect is by telling customers what the most popular option is or by showing them how many other people have chosen a certain item or service.
- Anchoring occurs when a customer forms an opinion based on the first piece of information they receive. They then use this information as a point of reference throughout the purchase and compare other figures against it to determine value. For eg, if your friend bought a computer and told you it cost $2,000 but you go to the store and see a price of $1,500, you already perceive a deal even if your friend was incorrect and he really paid $1,500. To take advantage of this bias, sites can list their products highest to lowest in terms of price so that anything after the first item is perceived as a deal. In this eg, it's clear Time Warner is capitalizing on anchoring by listing their prices in descending order.
- It’s a cognitive illusion / decision making illusion. One of my favorite plots in social sciences. 2 types of countries: 1 set – gives a lot and another gives very little … Why?? Culture? Religion? If you see, countries we think are similar exhibit very different behavior. Sweden vs Denmark Germany vs Austria Netherlands vs Belgium Netherlands: Direct mail campaign to every HHLD in the country
- National Portrait Gallery in UK Borrowed learnings from Frank Lloyd Wright’s Guggenheim building New York
- 60% of Buying Online is based on ONLINE REVIEWS INFLUENCEING CONSUMER BUYING 25% OF TIME IS SPENT ON SOCIAL NETWORKS USAGE OF VIDEO CONTENT GOING UP
- So the primary job of a marketer is to “be there” and “be useful in these micro-moments” – when he is looking for answers, discovering new things, making a decision.
- They got to sell them even before they were manufactured
- Eighties rockeMarillion are widely considered to be the first band to harness the power of their following to finance their careers. When they couldn’t secure enough money from their label to tour the US in 1997, they set up a website and their fans came to the rescue, pledging $60,000. For their 12th album, Marillion went even further. Frontman Steve Hogarth emailed fans asking if they would be willing to buy the album before it had been recorded. In just a few days, he received 6,000 positive replies. Ultimately, 12,000 fans pre-ordered the album at £15 a go and Anoraknophobia was released in 2001, eight years before the most popular crowdfunding sites PledgeMusic and Kickstarter were founded.
- Less than 6 years old, Chinese brand Xiaomi ranks fourth in global smartphone sales, selling 60 million last year with a market cap of 45 billion dollars. Purpose Xiaomi has a higher purpose to bring the accouterments of finer living in the form of smartphones and other consumer electronics software and equipment to the middle class of emerging economies. This mission is communicated and represented by the charismatic co-founder and CEO, Lei Jun, the face of the brand in the style of Steve Jobs. Accessibility Xiaomi sells directly through its own online store and through large established online retail sites such as Tmall.com. They do have service centers to support the products, but as a result of this process they bypass the cost of retail storefronts that Samsung, Apple, and others must pay. And Xiaomi offers an exceptional e-commerce experience through a familiar and functional website design. This direct model helps make their products more accessible to the large middle class in China as well as in other markets outside urban centers. One of Xiaomi’s trademark strategies is to sell products only through “flash sales,” where a limited quantity of product is made available for only one day. One day this month, they sold more than two million phones in a 12-hour period during the Mi-Fan Festival. As a result, Xiaomi creates an appearance of scarcity, the aura of a special event, and a way to control inventory. Advertising Xiaomi spends little or no money on expensive paid media. Rather, they rely on word-of-mouth promotion among their fan base, earned media in the press due to their newsworthy product development and sales success, and social media efforts. They have a robust social media program that includes incentives for photo contests, a socially active employee base, and much more. In particular, they solicit and respond to customer suggestions online. Sometimes, a suggestion can be transferred to market facing product improvements in a few weeks. But suggestions are always treated with active respect and response. Pricing Xiaomi’s price is often 30-50% cheaper than its two larger competitors, Samsung and Apple. Further, although its flagship model does keep improving, it doubled down on the price by introducing an even lower-priced model, the Xiaomi Hongmi. The low price comes in part from the austere design (that over time has come closer to parity with the big brands and may even have some advantages such as a more appealing user interface), efficient manufacturing and a willingness to accept a low margin. The low cost is also based on inherent cost advantages of direct online distribution and the absence of media advertising. Loyalty Xiaomi has cultivated a rabid loyal customer base that populates an active blog, the BBS, which has some 30 million registered users – 90,000 of whom enjoy a special status and loyalty program. The site publishes over 600,000 new posts daily. There are a lot of self-expressive benefits residing in the Xiaomi brand. People are proud of being able to own and use modern, cool products and the fact that a Chinese company made it possible competing against the best in the world. To cement this relationship, Xiaomi hosts parties for selected members of the fan base every few weeks, giving brand advocates a chance to experience clubs that are out of their social and economic realm. Even those that do not make the list enjoy the experience vicariously online. Long-Term Strategy Xiaomi emulates Amazon more than Apple in terms of its long-term thinking around the hypothesis that Xiaomi smartphone customers might eventually buy other Xiaomi offerings including software apps, cloud services, and consumer electronics products such as Smart TVs, MiPads and smart home security equipment. And thus in the long run, the small margin on inexpensive smartphones is less important than the Xiaomi customer experience and brand power that results.