3 business lessons from poking your tongue

Sticking my tongue out was all part of the plan.  It felt a bit uncomfortable, a bit rude, but it's once again driven home for me the importance to businesses of understanding behavioural economics.

I am fortunate enough to work with an employer who provides a range of health services, and this month was a Chinese Medicine 'Tongue and Pulse' check.  For those who haven't experienced this form of health assessment, effectively the tongue's colour, shape and texture can provide clues about the larger biological system.  It involves you poking your tongue out at the practitioner who then prescribes a course of holistic treatment.

Now not only can the Tongue poking experience, or more correctly, the opportunity provided by my employer to poke my tongue, illustrate some of the behavioural principles at play, but so too the promotion of a free Internet conference that passed my desk.  So here are three lessons about behavioural economics to apply to your business.

1. Free isn't without cost...to your customer
The 15 minute appointment was provided free to employees, and even right there, in my building. Further, it was being coordinated through a credible organisation so I had nothing to lose except 15 minutes, and the gain was a new experience that I could choose whether or not to pursue.  If you are trying to get a customer to try something new, it should go without saying that the gain should exceed any "loss", or perceived cost.  However in our excitement to wear the financial cost of delivering the "free" service to customers, we sometimes overlook the cost of free to them.  This can include time, money, status, power....anything that is important to that person.  Free + convenient + credible in this case encouraged me to make the booking. 

On the flip side of 'free', a brochure for The Internet Show was doing the rounds at work, touting 70 free educational seminars.  In this context, 'free' actually worked to denigrate the perceived quality of the conference and people flicked the brochure on to others without being stimulated to attend.  Fundamentally, the effort and time required to attend was greater than the chance of absorbing free content.

What could The Internet Show have done? Perhaps limited free tickets to the first, say 26 to register, thereby stimulating activity by tapping into our aversion to loss.  If I think something will be taken away or forfeited, it makes it harder to give up.  Otherwise, they could have provided something other than the content for free. For example, by promoting that the conference fee of $xyz would be waived for anyone who signed up by 9am or visited two exhibition booths would at least have distanced the connotations of 'free' from the perception of content quality.

2. Safety in numbers
We are a pack species, a herd, and typically like to go where others are (in a general sense, I'm not talking about a romantic beach getaway here).  When the Tongue message was circulated, it became a talking point. Are you going? Maybe. You?  We were seeking some reassurance that others thought the experience worthwhile.  In the booking system, it was encouraging to see that appointments had already gone.  If others think this is ok, I will too.  If you are setting up a booking system or trying to stimulate courage to try something new, let it be known how many have tried your service, and even book out appointments if that helps to create a sense of confidence.

The Internet Show on the other hand, had negative herding going on. The poor first impression aka thin slice with its emphasis on "free" and junky looking material, worked against this conference.  Can you turn a herd around?  Not easily would be the answer. But this is where marketing is central to identify early adopters, secure their advocacy and spread the word.  The speakers are the best place to start - getting them to use their networks and personal credibility to draw the crowd.  For your business, substitute speakers with product managers and the lesson is to get your product managers to shape the herd by lifting the profile of their products through media, speaking gigs, blogs. In a socially networked society, why not use it to shape product herds by using professional credibility?

3. Choice overload
By the conclusion of my Tongue assessment, my interest in Chinese Medicine was definitely piqued enough to seek out a local practitioner. To the search phase! I tried a range of directories and search engines, but have not yet landed on a practitioner I feel comfortable contacting. Why? The choice is overwhelming. Near work or home? Acupuncture or herbal specialist? Private health insurance or not? This directory service or that?  Choice overload is well documented, and can result too often in decision paralysis - it just gets too hard.  What would have helped? A list of practitioners provided by my initial Tongue assessor to streamline my choices.

The Internet Show fell into the choice overload trap as well. 70 seminars to select from across three content streams and two days.  I was exhausted going from one agenda to the other, and so will end up attending none. 

Keep it simple should be your mantra. Fewer choices mean better conversion.  Now, it doesn't necessarily mean paring back your product range, but it may mean communicating your range in a different way. Check out http://www.boutiques.com/ if you want to see how an online retailer has helped reduce choice by personalising the catalogue according to your tastes. 

So three illustrations of behavioural economics; free, herding and choice overload from something as simple as poking your tongue.  How have you reacted to free stuff in the past, and do you agree that we are herders?  I look forward to hearing.

Picture from http://www.infovisual.info/03/photo/tongue.html

Why slamming the brakes can be a great product strategy

At the off-leash park and my dog was being jostled either side by a couple of rouge, running hounds. So she did something interesting. She stopped. Instead of continuing running with them, being corralled by the hecklers, she stopped, stood tall, and let them go past. Then she changed course and reasserted herself.

Hollywood car chases. The hero is driving at speed when villains pull up on either side and try to jam his car. So what does he do? Slams the brakes, letting the villains career to their doom.

Intel. The story is told in Sway: The Irresistible Pull of Irrational Behaviour of how Intel slammed the brakes on micro processing because they were in an unwinnable war with cheaper manufacturers.

Independent schools. In a war for fees, some schools are slamming the brakes on single sex educational programs and moving co-ed.

Harvey Norman's boss Gerry Harvey copped a lot of flack recently for complaining about competing with cheaper off-shore retailers. Guess what Gerry, slam the brakes because you won't win on price.

So here's the lesson. If you find yourself being jammed either side by competitors in a price war, a technology war or a product war, slam on the brakes. Let them hurtle to their doom whilst you change course, reassert your Brand and, of course, remain top dog.

Image source: http://cinemeccanica.wordpress.com/2011/01/30/there-are-bad-cops-and-there-are-good-cops-and-then-theres-bullitt/

Check me out! The perplexing preference for self-service

Something has shifted in supermarket shopping. Visiting the local Woolworths last week I noticed that the queue for the self-service line was longer than the Express lane. In other words, more people were willing to scan, pay and pack their items than wanted to have a shop assistant help them.  Wow.  Sure this is part of the deal at cheap-end Aldi, but Coles and Woolies now too?

This was in the same week I attended David Chaulk's Australia Scan presentation which showed very clearly that self-service check outs were finding favour with the Australian public. 

Why?

Can it be as easy as convenience?  That we believe it is faster to handle the goods ourselves than wait?  Well, maybe this stacked up when low adoption of self-serve meant it was truly faster than going through the service lanes. But if this is no longer the case, what other than convenience is driving our behaviour?

My theory? Two factors. The first, isolation.  It's the interaction we are keen to avoid because we are becoming more isolationist (is that a word?) in our real-world dealings.  Yes we're twittering and social networking, but we'd rather deal with a beeping machine in the supermarket than a human.

The second. Fear of inactivity. We'd prefer to do something - like scanning and packing our items, than stand idly in a line waiting for service. I mean imagine, a whole 2 minutes...just waiting.  The horror! No, in this modern age we need to do do do and it freaks us out to stop.  What a different experience it would be if the queue was designed to entertain us rather than bore us.  Disney makes queuing part of their magical experience, but supermarkets choose not to use this time to delight us.

What I find interesting for marketers is that we keep reading and hearing about the importance of Customer Service. And yet, our shopping behaviour suggests that a less personal type of customer service is what we want.  We prefer seem to prefer technology (except of course in ads where we want to see check-out chicks and chaps and smiling bank managers). And just like the introduction of ATMs, initial public concerns about how the technology would replace jobs has now been forgotten.

So kudos to the supermarkets for risking this change. They've gambled that less personal service is the way to go, and they are being proved right.  For me, this suggests three things;
1. like the supermarkets, you can force people to trial technology by making the other options unpalatable (in behavioural terms, by 'nudging' them to your preferred channel)
2. people will adapt to technology despite initial resistance if there is sufficient personal benefit, and
3. Customer Service does not always mean personal service

So what does that mean for your business and the way you think about Customer Service? 

Image from http://aca.ninemsn.com.au/article.aspx?id=1065793

Why I hate Coco Chanel

...or more correctly, why I hate the quote attributed to fashion designer Coco Chanel, “Before you leave for the day…take one thing off…”.  Why do I hate it? Because a number of times I have paused before leaving the house and wondered, what should I take-off?  Which makes me second guess the decisions I have already taken.  It messes with me!

See I come from the school of thought where you get it right the first time.  Dress as you intend to be seen. Write how you want to be read. Develop your product as it should be.  Fiddle at the beginning not at the end.

So for me the lesson from Coco Chanel (who by the way had quite a bit of success with product) is this: Before you launch your product, get it right. Don't include anything that is so meaningless that it can be taken off before it goes out the door. Think streamline. Think clarity. Think Philppe Starck. Think Apple. Think Flip Video. Just think.


Postscript:
To right the karma ledger here are some great quotes from Coco Chanel

• "How many cares one loses when one decides not to be something but to be someone. -Coco Chanel."  —Coco Chanel on Being
• "There is no time for cut-and-dried monotony. There is time for work. And time for love. That leaves no other time!"  —Coco Chanel on Business
• "There are people who have money and people who are rich."  —Coco Chanel on Money
• "In order to be irreplaceable one must always be different."  —Coco Chanel on Uniqueness

Easter Eggxample of Behavioural Economics

Easter Eggs.  If you're ever chatting with someone who isn't familiar with Behavioural Economics or doesn't see the opportunities in understanding the power of irrationality, Egg them.  Let me explain.

We love Easter Eggs. In Australia we consume an average of twenty Easter Eggs for every man, woman and child, and that means it's big business for our chocolate manufacturers.  But in economic decision making terms, our love of Easter Eggs is irrational.  Here's why.

Imagine you visited two different supermarkets.

• The first offered you 100 grams of Cadbury chocolate for $2.98.
• The second likewise offered you 100 grams of Cadbury chocolate, but for $2.15.

You'd opt for the second, right?  After all, it's the same product but you save almost 40%.

Now imagine you are within one of the supermarkets and they have two offers;

• The first is the same offer you took above, 100 grams of Cadbury chocolate for $2.15.
• The second offer is an Easter Egg. 100 grams of Cadbury for $2.98.

Now which do you choose?

Block chocolate vs Easter Egg

Traditional economics, based on rational arguments of supply and demand would have us taking the $2.15 offer every time.  But guess what? We are not always rational.  The fact that the chocolate is shaped like an egg, wrapped in foil, available at a certain time of year and can be given as a gift means that the majority of us will buy the $2.98 Easter Egg and pay a 40% premium.

And Behavioural Economics can help us explain why. 

Relativity

We make judgments about one thing relative to another.  In the examples above, 100g of chocolate that was the same could be judge of the basis of price.  However, when one chocolate was shaped like an egg, the grounds of relativity became different.  Have you ever wondered why Easter Eggs are not in the confectionery aisle?  Because relativity is being confined to the "Easter Egg"  category rather than the chocolate category. (And for anyone who may argue that it would be logistically difficult to have the Eggs in the chocolate aisle I will posit that if Eggs were shown to sell better in the aisle, that 'logistical difficulty' argument would evaporate. It's purely about moving higher margin chocolate, and that is best done when the customer can't easily compare $2.98 to $2.15.)

Social Influence
We are greatly influenced by others around us.  Indeed, that we even have such things as Easter Eggs is a social construct.  To give your child a block of chocolate is just not the same as an Egg.  As consumers we justify the economic irrationality by deferring to such emotional reasons as the magic of an Easter Egg hunt, smiles on faces etc.  And as marketers, that's what we aim to amplify so that our Brands have a reason to be purchased outside purely rational reasons.

And this is a key thing about explaining Behavioural Economics.  All those reasons for paying more can be cited by the consumer as entirely rational because we are great at justifying our decisions. But rationalised isn't the same as economically rational.  Why is this important?  When you next pitch a product or campaign for development, remember it's not just about the 100 grams of chocolate. It's the shiny foil, the social construct, the timing, the gifting, the emotion that your customer will be processing when they are in your aisle.  Get excited because if you can help your consumer rationalise their purchase, the economic rationalisation becomes moot.

And this is the massive opportunity Behavioural Economics presents to marketers, product managers and retailers.  Yours is the opportunity to turn the magic of irrationality into margin for your business.  So tell me, what's your Egg? 

Prices quoted from Woolworths, Moorabbin 8 April 2011

If NAB killed the asterisk what's it doing in their logo?



NAB billboard South Yarra station

"We killed the asterisk"


I love this ad for NAB, but not for the intended reason.  Forgive my shaky photographic skills, but the sign reads "We killed the asterisk" and is part of their campaign to differentiate themselves from the other big banks.

 

I'll get to their campaign in a minute, but not before I get an observation out of my system.



That's right, the NAB logo contains as asterisk!

But to be serious, let's look at what they are trying to tap into here*.

  * small print, exceptions, qualifiers

Turns out customers are annoyed when what they believe is the stated offer is subject to all manner of qualification.  In layman's language you feel like you've been jibbed, snowed, or mislead if the big claim is really not what it purports to be.  So NAB are differentiating themselves through inferring that they can be believed - the deal is the deal, no exceptions - whereas their competitors cannot.

But we're in marketing and know that there are always qualifiers*.  Whether you use * or ^ or 1, somewhere in your product or marketing information you will have to include substantiations or clarifications, terms or conditions. 


* sweeping statement not backed by any empirical data

 In a previous post, T&Cs Necessary? Yes; Evil? No I wrote that when you present Terms and Conditions to a customer, you are jolting them from state of unconscious processing to Executive brain function, and once the Executive mind starts to question, it questions everything.  'Do I really need this?' 'Is this how I should best spend my money?'  'How will I justify this to my boss?'  'I should probably see what the competition has to offer.'

Given Terms and Conditions are an important, and often mandatory part of the transaction and serve to ensure that both seller and buyer are clear on the terms of exchange, how can you minimise the disruptive impact of the "asterisk" moment on your sales momentum?  Three ways;

• Integration - Have the customer understand and agree to concepts within the Ts and Cs throughout the sales process so they don't come as a surprise in the transaction stage.  Meaning? Why not use Ts and Cs as part of the feature set you are using to sell your product. For instance,  "Our Customers receive a monthly offers catalogue from us so that they get first dibs on priority deals" might be less of a shock than "By signing this contract you agree to receive promotional offers". 
• Language - Modify the language so that your legal messages are not inconsistent with your brand.  Why not a statement that helps them understand the impacts of their behaviour such as "We know you'll want to wear these earphones all the time, but promise you won't drop them in the toilet or sink or wear them in the shower because you'll be warran-teed off when we can't replace them" rather than a dull warranty statement?
• Congruence - Customers are looking for congruence between the proposition and the terms of sale.   Inconsistency will see them paralysed with confusion and leave you in a situation of hope for the sale rather than assurance. How does this play out?  A relationship based on trust will be undone by onerous and explicit Ts & Cs.  A relationship based on customer service will be undone by ill written and unintelligible Ts & Cs.  A product which promises happiness and simplicity will be undone by Ts and Cs that are dull and complicated. A bank that is claiming it killed the asterisks better not have any exceptions to the deal.

So to NAB and their marketing team, nice try*.  But to win my business I'd prefer you to relate to me rather than pretend that conditions do not apply.

* not really

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!