Saturday, March 26, 2011

Marketing lessons at 60kms/hr

Here's your brief: You are to create a sign that will be posted in public that needs to do one thing - change behaviour.  You can determine the shape of the sign, but it is to include 3 colours maximum, 1x graphic and up to three letters or numbers.  Now, remember your audience will be very distracted as they come across your sign, will be in a life threatening situation, and have milliseconds to process your message. Up to the challenge?  Oh, and I forgot to say what the behaviour was you need to change...

The humble speed sign is something we come across everyday, change our behaviour as a result (accelerate or decelerate) and yet the signs don't even register a blip on our conscious thinking. And this strikes me as a good illustration of marketing and design principles.

So what are the lessons of the speed sign?

1. Consistently distinguishable
Speed signs consistently comprise a white background, red circle with black numbers.  It is the same across Australia so that the consumer has no ambiguity to process when confronted with the sign.  Furthermore, there is no mistaking a speed sign for another road message because the 'branding' is strong and differentiated from other road signs.  So what advertising does this remind you of?

Apple iPod poster

2. Clarity and certainty
Both in the design elements and the behaviour expected, speed signs are unambiguous in what they convey.  The consumer is forced to respond to the designated speed without further consideration. On the road, it's important that the mind be directed because distraction can be deadly.  "Hmm did they really mean 60?   Honey, what do you think it meant?"  No, it's clear that 60 is 60. 40 is 40. 100 is 100.  So what can we apply from this?  If you are trying to get people to do something - buy your product for example - be clear!  "Where the Bloody Hell Are you?"  Ummm, sorry....what's that?  Or more recently, Microsoft's "To the cloud" ads?

Tourism Australia's maligned "Where the Bloody Hell are You?" campaign

3. Targeted audience
Speed signs are targeted at drivers and only when driving.  Speed signs do not try to appeal to everyone - "hey look at me dog-walker - you can only do 60 kms/hour here!", and they do not try to haunt me as I sleep "hey, remember me, that 80 km/hr sign you saw on Nepean Highway? Wasn't I the best sign ever?!". And they do not appear in irrelevant locations, say, like in a park. In other words, speed signs are targeted to their audience.  No matter that it probably doesn't cost that much for that extra sign to be placed in the Botanic Gardens, the audience is not right and it's proper to say no.  Imagine if they sign was placed in a stupid spot - the harm to the credibility and clarity of the message it would do? Why then as marketers do we fall into the intoxicating promise of 'extra reach' by a placement of our product or ad somewhere that is not right for our objectives?  Think it doesn't happen?  Tune into the inevitable Christmas sale ads on Boxing Day to see what I mean.

4. Moment of truth
The sign only works - for the large part - because it is one element of a bigger context - road rules, policing, education, reinforcement (penalty rather than reward in this case). But whilst the road sign by itself may not be able to change behaviour as a single media with a singular tone and message, it is the ultimate point of behavioural impact - the moment of truth.  The lesson here?  The speed sign is placed where it is because that's when behaviour is required to change.  Think of it like Coke's points of interruption in a convenience store where signage cues you to buy a Coke as you step into the store, head to the fridge and slap your money down on the counter.  In order for those points of interruption to sway the consumer's behaviour, the rest of Coca-Cola's marketing and product chain have to work to establish the purchase context.

So the humble speed sign belies it's marketing expertise - it's ability to change behaviour at 60 kms/hour through differentiation, clarity, audience targeting and precision placement. Sounds like an effective marketing campaign to me!

Monday, March 21, 2011

Channel 9 gambles $1m on Behavioural Economics

What do Eddie McGuire and Behavioural Economics have in common? If you tune into Channel 9 on Monday nights you'll see Million Dollar Drop which flips the traditional game show on its head.  Instead of contestants working their way towards prize money, they have to answer questions to retain the pot.

Host McGuire was quoted in the Daily Telegraph as saying "This one is the easiest show of the lot"...and on paper, it seems that way.  Eight questions and the money is yours! 

But this is where Behavioural Economics comes in.  The concept of loss aversion.  Pretty simply, we are hard wired to avert loss because it is psychologically painful.  Therefore to risk a loss of say, $50, I'd need the motivation of a potential gain of say $150. For contestants on Million Dollar Drop, they are going to be confronted with a significant amount of psychological stress resulting from the perceived "loss" of money for an incorrect answer as it physically drains away from the stack in front of them.  The pain of this loss will be much greater than they ever would have faced in a game like Who Wants to be a Millionaire, where they gained money along the way. 

'Crazy people', I hear you say. Why on earth would they feel pressure when they don't even 'own' the money in the first place? 'Let me go on and I'll show them how it's done!' That's the armchair hero talking and using a rational argument ie we act perfectly rationally at all times and make decisions on the basis of logic and data. In other words, that being asked a question for $1 million is the same as a question for $1. But as Dan Ariely points out in both Predictably Irrational and Upside of Irrationality, we are not always rational and we are very prone to real and perceived emotional, intellectual and psychological forces.  That's why we drive across the suburb to queue for 4 cents off a litre of petrol.  That's why we can justify a new $200 handbag but baulk at buying our favourite loaf of bread if its not on sale.  That's why we tune in to see people on game shows for the emotional and often painful rollercoaster ride.

So what can we take from Channel 9's new symposium on Behavioural Economics?
  • Offset the risk where possible - Can you make your sale risk-free for your customer?  Money back guarantees and product warranties have been successful strategies for a very long time for a very good reason.  If you can't offset the risk, then...
  • Gain must exceed risk of loss - If you are running a consumer promotion, what are you asking your customers to lose for the chance to gain?  How much money must they spend or energy expend to participate?  If the payoff is not much greater than the loss then they will not participate.
  • Scale the pressure - Acknowledge that your customer will be going through various levels of psychological pressure throughout the sales process.  Look for signs of tension and help them through using any strategies at your disposal.  Imagine a car sale - the further away from my budget I get with the model you try to up sell (loss), the more I'll be seeking reassurance about features and options you can 'throw in' (gain).   The harder you push me for a long-term contract (loss), the more I'll need comforting about the benefits to me (gain). 
So will you be tuning into Million Dollar Drop to see people chance becoming instant millionaires? If so, pace yourself because Eddie McGuire has hosted 728 episodes of shows with million dollar prize money and signed the winners' cheque only twice.  And now with the added intensity of loss aversion, I think the bank managers at Channel 9 can rest easy.

Tuesday, March 15, 2011

Buying a vote for 20 cents

What can you buy for $0.20 vs $10?  A vote at the local bushwalking club.

Two scenarios are outlined below, both with the objective of securing a $10 increase in the annual club membership, from $40 to $50.  The story illustrates how the positioning of a price increase can impact much more than whether it goes through or not.

Scenario 1
"Welcome to our monthly meeting, I am Jane Smith, your club president. As you know, you are one of over 500 members, 200 of whom are here tonight to discuss and vote on the plan to adjust annual membership fees by $10.  As you also know, what brings us together is our love of the outdoors and bushwalking, so I am really looking forward to sharing our plans on how we can do even better than last year.  Our plans mean that we can support up to five different walk locations every single week rather than the current three, we can continue to provide our monthly newsletter via your choice of post and email, but most importantly, we are all protected through accredited safety training and our insurance policy. It also means we can at last buy 2 satellite phones to use on our most remote walks. And to make this the best year yet, all it will take is one of these (holds up a 20 cent coin) per week. But let's go through the detail so you know why it's 20 cents and not say 10 or 50 cents, and then I can open the floor to questions."

Scenario 2
"Welcome everybody.  Now tonight as you know we need to vote on the proposed increase in membership fees.  These were outlined in the newsletter. We've got the figures in a spreadsheet up on the screen behind me (gestures to excel file that is a bit too small to read from the back of the room). It's $10 for individuals, from $40 to $50.  Does anyone want to say anything before we vote?"  (Member takes the microphone and asks what the financial health of the club was and whether a sizable sum should be used to offset the fee increase rather than sit untouched. President hands over to Treasurer and it quickly resolves into a discussion on the detail of how much a newsletter costs to print, including paper, printing and post. 30 minutes later the President calls for a vote. I meanwhile had plenty of time to work out that $10 on $40 is 25% increase which was much steeper in relative terms than the $10 on top of the $60 family membership).

What are the key differences between how the fee increase - the price rise - was positioned? 

The first scenario used the principles of behavioural economics and change management to motivate the affirmative vote. Let's step through the principles;
  • Shrink the change - $0.20 a week seems a lot less burdensome than having to pay $10. The mere mention of $10 conjured in my mind all the things I could spend it on, so by visually holding up a 20 cent piece the president was bumping an abstract image from my mind with a tangible representation. I couldn't even remember the last time I had used a 20 cent coin, so of course 20 cents a week wouldn't be a problem.
  • Adaptation - don't assume your customers are consciously aware of the benefits they already receive, so the president in scenario 1 was right to remind me of our common love of bushwalking and all the services the club provided.  The Adaptation principle tells us that people get used to good things and can forget the value they extract along the way. The joy of a pay rise quickly fades as it becomes the usual.  And Adaptation also helps us get over the pain of a price change. Remember the last interest rate rise?  I certainly remember the media hype but I can't remember what it has meant to my mortgage because I have adapted. So Adaptation also tells us that the club was right in both scenarios to charge the amount as a once-off rather than by instalment.  We get used to prices rises as long as we are not reminded of them (aka the 'quick like a band-aid' rule).
  • Executive Mind - a fee increase engages the executive mind which looks for logic and value - it's provoking the Rider when the Elephant has been happily trotting along*. Don't engage this type of processing with a price rise unless you couple it with the value argument, otherwise the Rider will yank the reins and march that elephant right out of your shop. However, the big trick here is to not just base it on logic.  Like me, I'm sure you have seen many logical arguments fail because they did not appeal to the Elephant as well as the Rider.  In scenario 1 the president not only illustrated the scale of change (Rider) but why we needed to contemplate this.  Safety, shared love of bushwalking, the number of members which illustrates the thriving nature of the club all got our Elephants stampeding for the affirmative vote.  In scenario 2, instead of reminding us of why we were members in the first place, it was inferred we were an insurance risk and communication burden that had to be covered.   The unhappy Elephant was thinking 'Yes, I logically get why you need to put up fees but I really resent it. Why am I part of this club again?'
  • Clarity - Detail is great as long as its accurate and meaningful, but clarity is much more important.  In scenario 1, the president was clear in the amount of increase ($10) and what this meant (equivalent of $0.20 per week). She also cleverly introduced it as an anchor (20 cents rather than 10c or 50c) so we inferred that it was not too little or too much. In scenario 2, the $10 was clear but not in terms of why - what was the context around the amount, and what was it paying for? 
I mentioned in the introduction that the positioning of a price rise can impact much more than whether it is implemented.  If you haven't already guessed, Scenario 2 was the situation I and my fellow club members endured.  Did the fee increase go through? Yes.  We voted for the $10 increase and the committee can say that it was a successful outcome.  I think many of us voted just to get it over with and we had justified to ourselves that $10 wasn't worth another 30 minutes of awkward discussion.  Instead of the fee change being viewed as a positive sign of growth for the club, we have come away with a nagging sense of incredulity, and that's a shame for a club with such hard working volunteer committee members. 

So when you are contemplating a price rise in your line of business, remember it's the customer churn resulting from your decision, the lost advocacy for your product, the Elephants that may have voted one way in the room but now walked out of it that you need to worry about.  We all know that prices rise - that's the easy part - it's how you get people to vote for it that is your job.

* For an explanation of Riders and Elephants, please refer to previous posts such as

Sunday, March 6, 2011

Why the old guy in speedos probably has a point

Swimming laps at the local pool the other day and the old guy in the lane next to me offered some unsolicited advice.  "Your kick, too inefficient.  You are using too much energy.  You need to go like this..." at which point he mimicked shallow, light movements with his hands.

My reaction?

I dismissed him as an old dude who couldn't swim very well. He was labouring up the lane with a lopsided breaststroke kick.  What would he know?

Hmm.  Hang on a minute.  I did have a sense that my kick wasn't good, that it wasn't adding enough value for what it took to produce.  Whoops!  By discounting this man, I was falling into the same trap that as product and marketing managers we can sometimes find ourselves.  

You know the one...ignoring what your consumers have to offer?  Shrugging them off because they don't have credibility in your eyes?  Afterall, we're the ones actually doing it!  I mean, it's my kick/product/campaign so I should know best of all!  Right?

You see, it can be easy to become arrogant in our product management.  We are dealing with it everyday, and know our product inside and out.  But that guy in the next lane, the one who isn't a great swimmer himself, can see a flaw in what I am doing. He sees inefficiency where I cannot.  His perspective is clear, it is objective, and it is different.

So where does that leave us?  Of course it's our choice what we do with the opinions and perspectives of our market. Some opinions are baseless and a distraction. But at least spend the next lap thinking about that opinion and your reaction to it.  Maybe it's the just the kick you need to go to the next level. 

Tuesday, March 1, 2011

Tim Minchin vs business: 5 lessons from comic genius

"This is about me, not you!" So proclaimed Tim Minchin, a London-based Australian "rock star" comedian to his audience at the Palais in St Kilda on 25 Feb 2011 (Tim Minchin vs MSO).   Here are some business-life lessons that I have drawn from his stage craft.

1. Be distinctive
Tim has spoken openly about how and why he conjured up his stage persona as the "comic rockstar".  Central to his carving out a unique position and winning an audience was the addition of a Baby Grand Piano, cleverly signaling to potential bookers and audiences that "gee, this guy must be good" because (a) he can afford a Baby Grand and (b) he can be bothered having it transported and set up every time. As Tim has said, it would have been easy for him to play the same tunes on a keyboard...but easy wasn't different.

So you, in your business, what's your Baby Grand?  How do you signal to potential employers and colleagues that you are such a talent that you deserve a Baby Grand on stage?  We are all unique, but let us be distinctive!

2. Risk a reaction
Tim takes an audience right to the edge - and beyond for some - in order to get the 'payoff'. He tackles latent racism, religion, baby shaking, hypocrisy - stuff that is confronting and uncomfortable. He forces his audience to see and hear, but also to think, to feel, to reevaluate.  In business we often play for no reaction - we seek to dull people into submission, to have decisions ticked off as a "no brainer".  As a result maybe things don't change with the urgency and passion they should?  What if we actually tackled business from the perspective of seeking a goose bumps, heart pumping reaction?  Positive provocation is surely a key reason for us being employed...isn't it?

3. This is about me, not you!
Tim exclaims to his audience that the show is about him not them. In so doing, he of course takes the whole audience with him as he shares the gift of his comedic genius. In business, we spend a lot of time saying we are acting 'for the business'.  But why not be like Tim? Why not proclaim that this is about me, and then take the audience/your business on the exhilarating ride of what you - and only you - have to offer?

4. Be illuminating
Tim's performance is intelligent and insightful.  Using juxtaposition beautifully, Tim points to hypocrisy, to contradiction and forces us to question ourselves.  In business, we can often get weighed down by data and convention when we should really be expending energy and brain power on seeing patterns, connections or differences that no one has seen before.  Feel like giving it a try? Why not watch the Academy Award winning movie 'The King's Speech' (or any other movie) with your business problem in mind.  Use the plot and characters in that movie to unpick your issue - you'll be surprised how changing your perspective will illuminate the issue like never before.
5. Be fallible
The night I saw Tim perform he fluffed a couple of lines.  Whilst he will probably sweat on this, as an audience member it made me appreciate his talent even more.  Why? He was human.  It's the difference between a live performance and a recording - the risk of it going wrong, and the courage in light of this.  In business we are often so concerned about making a mistake that we stick to the script, and as a result we sacrifice our human-ness.

Photo uploaded on by Marniott on 23rd December 2010. Taken at Tim Minchin and his Orchestra, MEN Arena, Manchester