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How Marketing Promotion Affects Product Performance

2010 December 22

Is brand marketing dying? Are we entering a golden age of “pull marketing.”

Many people think that while promotion can be effective in getting people to try a brand, once a purchase is made it is only the intrinsic qualities of the product that matter.  Therefore as technology enables consumers, broadcasting brand messages is increasingly a waste of time and money.

Recent research, however, debunks this notion.  Marketing actions like brand promotions and discounting can actually affect how consumers experience products.  Moreover, follow-up fMRI studies show that this is a verifiable physiological process that we can see working inside our brains.

The Placebo Effect in Marketing

A series of studies at Stanford University aimed to see if the placebo effect long familiar in medical circles also held for marketing actions.  In other words, they sought to find out if what consumers were told about a product would influence its effectiveness.

In the first set of studies, they gave an energy drink to people before their workout. The researchers told one group that they got the product at the regular price and told a second group that it was purchased at a heavily discounted rate.  The first group reported great workouts while the group that thought the product was discounted got less satisfaction.

In follow-up studies, done by the same research team, participants were given a drink designed to aid concentration and then given puzzles to solve.  Again, they tested the effect of price promotions, but they also added some marketing literature to the study.  They found while price promotions decreased performance, brand promotion increased it.

Shortcuts and Cues

How can this be?  We are used to thinking that product performance is intrinsic and has nothing to do with price or advertising, but it does.  Our preferences are not as independent as we think they are.

In an earlier post on advertising’s effects on the brain, I explained how advertising links into how our brains evolved to promote survival.  We aren’t programed to think about whether we should run from a lion, those of us that took the time to do that died out long before they were able to pass genes onto us.

We depend on shortcuts and cues to guide us because it’s fast and efficient.  Advertising, in effect, plays the same role as a faint rustle in the grass did in prehistoric times.  It prompts us to expect a certain experience (which will hopefully be more pleasant than escaping from a lion).

Pricing and Enjoyment

The powerful effect of price cues was observed during another study at Stanford, which used fMRI to monitor subjects’ brain activity while they drank wines they were told had different prices (in actuality they were the same wine).

While there was no difference in the sensory parts of the brain (i.e. the wine had the same effect), the decision making part of the brain differed with price (i.e. they liked pricier wines more).

In truth, we often decide whether to enjoy something or not before we  even try it.

The Anchoring Effect

Jonah Lehrer, in his book How We Decide, gives two examples of how we use shortcuts and cues to “anchor” or decisions.

In the first example, Dan Ariely set up an experiment at MIT where students were asked to bid on bottles of wine, but first had to write down the last two numbers of their social security number.  Sure enough, those with higher numbers were willing to pay more money.  Even that small amount of prompting was enough to have a measurable effect.

In a previous exercise, Nobel prizewinner Daniel Kahneman asked subjects to guess what percentage of African countries are in the United Nations.  Before they guessed, they were shown a spinning roulette wheel.  Those who saw higher results on the roulette wheel gave higher answers.

While we like to think we make up our own minds, we are usually swayed by previous information, even if it is irrelevant.  Effective marketing takes advantage of this tendency and can affect not only our purchases, but how we experience the product itself!

All those goofy ads, it seems, aren’t so foolish after all.

Push vs Pull Marketing

As the semantic web brings us closer to a frictionless marketplace, many believe that the days of broadcasting and “push marketing” are over.  Rather, they submit that marketers should focus exclusively on “pull marketing”, which relies on value promotions and inbound marketing rather than branding.

I have always suspected this to be wrong.  Marketers spend the bulk of their budgets on broadcasting brand messages because it works.  It is unreasonable to believe that profit driven companies would commit billions of dollars a year on a hunch.  Moreover, in my own experience, TV and other mass media have been highly effective.

Now the latest neurological research tells us why.  Branding campaigns can not only increase sales, but consumer enjoyment and therefore loyalty as well.  Furthermore, discounting, it seems, can actually hurt sales in the long run by decreasing satisfaction and perceived product performance.

For me it’s comforting to know that in an increasingly digitized, social media-ized marketing landscape, we still have human brains, irrational as they may be.

- Greg

14 Responses leave one →
  1. December 22, 2010

    Are you familiar with this Greg?

    http://www.innovatorsdigest.com/2008/09/brand-ate-to-in.html

    It may be effective but is it right?

    We can both agree the fashion industry has done alot to make us believe that our sense of self is derived from clothing. In advertising you see it all the time, yet my concern is when we lose sight of importance of value.

    For example, ten years ago in Greece branding was not as evident as it is today, yet i feel alot of the economic crisis is due to branding and driving expectations through finding value in self through brands.

    We have emotional jobs we all want to meet, and one of them is to belong to feel a sense of self somehow and brands try to capitalize on this.

    What do you think?
    Spiro Spiliadis´s last blog post ..spirospiliadis- Reiterate Communication as interaction in synergy with uncertainty http-bitly-g3z1DK

    [Reply]

    Greg Reply:

    Spiro,

    I hadn’t seen the article, but I had heard of the study (I think it was in Dan Ariely’s Predictably Rational).

    You raise an interesting point. I personally believe that brands are useful, at least in as much as they help perform a self regulatory function. If a company invests in a brand, it has something to lose.

    As for brands contributing to conspicuous consumption, I’m a bit skeptical. We had crazes long before brands (probably the most famous was the Dutch Tulip Mania in the 17th century).

    Brands have certainly become more global, which makes them seem less natural, but I’m fairly certain that people are perfectly capable of doing stupid things with money without brands. Status seeking is pre-historic.

    Have a great holiday and thanks for your support over the past year.

    - Greg

    [Reply]

    Spiro Spiliadis Reply:

    Thank you for being so insightful with your posts,

    I agree with your first paragraph, but what i see between the push vs pull function, and perhaps i noticed it today in your post is that you can have both if derived from a place of “value”

    For example, you seem to have a keen sense of pull and push, as well as a know how to derive value for both a company and a consumer. Which is important because from my observations following Graham and Wim and their insights on service dominant logic and value co-creation combined with your insights into marketing and advertising does show that we are now coming into balance of both.

    Happy Holidays!
    Spiro Spiliadis´s last blog post ..spirospiliadis- Reiterate Communication as interaction in synergy with uncertainty http-bitly-g3z1DK

    [Reply]

    Greg Reply:

    Spiro,

    I think you hit the nail on the head. The problem comes when people see brand marketing as a con or as ending when at purchase. Further, there is also a myth that people are some kind of super rational beings that are sometimes blown a bit off course by brands.

    I don’t think either notion is helpful. You have to have consistency throughout the brand experience and that includes broadcasting promotional messages as well as consumer centric approaches.

    - Greg

  2. December 24, 2010

    You’ve been writing a fair bit about the continued success of mass media & traditional agencies and I’m wondering a couple things related to this in terms of push / pull:

    1. Is digital, specifically the web, have limits in what in can achieve for marketers because the way we interact with it, the expectations we have as it being interactive, mostly free, and a place where we are in the driver’s seat whereas we have an inherently different mindset and user experience with other media, such as television? Or, put another way, does pull marketing have serious limitations in the online world that have been overlooked?

    2. Does the user experience and expectations when online explain some of the strength of traditional media which has been argued is in decline but which you’ve argued is ‘going strong’?

    [Reply]

    Greg Reply:

    James,

    Thanks for the excellent questions. Here are my thoughts.

    1. I think the Web is limited in the sense that everything is limited. Pull marketing is important and the increasing capabilities of owned and earned media are clearly making an impact on how we need to do things. However, there will always be a need for marketers to get their message out quickly and cheaply to potential customers.

    There limitations of inbound marketing (i.e. owned and earned) are speed and reach. When you look at big success stories, you find that they have social media reach in the millions, which is impressive. However, when you take into account that those cases are rare, they take a long time to build and you can reach many multiples more in a week of TV (and do it consistently), it becomes clear why marketers continue to use paid media.

    That doesn’t mean that owned and earned media aren’t worthwhile, just that they shouldn’t be seen as a panacea.

    2. First of all, I don’t think anybody who is aware of the facts could honestly argue that traditional media is in any kind of serious decline (except, of course for Newspapers). TV is at record highs. It’s possible that magazines are declining, but if so only slightly and the web potential for magazines far exceeds the threat. Rather, I think that during the crises, some people extrapolated temporary conditions. Yes, media was down in 2008 and 2009, but what wasn’t?

    More to your question, I think there are some user experience issues, but convergence will solve them. The more important factor is that we like to be entertained passively, especially as we get older and our responsibilities increase. We like to sit in front of the TV because it’s relaxing and, as long as we lead stressful, tiring lives, there’s a need for that.

    Thanks again for your questions and have a happy New Year!

    - Greg

    [Reply]

    James Hvezda Reply:

    Thanks for the reply Greg. I couldn’t agree more – “The more important factor is that we like to be entertained passively”. Might add that being “passive” allows us to more easily “suspend disbelief” and enter the world of the show, so to speak.

    Looking forward to reading your posts (and seeing if convergence is the solution) in the New Year – Happy Holidays!

    [Reply]

    Greg Reply:

    You too. Thanks for reading:-)

    - Greg

  3. January 24, 2011

    Wonderful discussions on a wonderful post!

    We might also want to give some thought here to the importance of mass culture, which often determines the value we attach to products. It is here that the irrational mind wants to create differentiation, and one way to do so is to assert one’s purchasing power. The fashion industry is a prime example of this, as are wines and luxury brands and more. Can these be discounted, without them losing out on their long-term value? And it is value creation that keeps sales – and economies (even those of scale) – healthy.

    Mass media can never be given the short shrift. Even if we could target potential buyers more efficiently through personal contact programs, wouldn’t we need to address the admiration of the non-buyer as well? It is they, after all, who make the buyer take his irrational decision?

    Best,

    Shiv
    shiv vasisht´s last blog post ..3 Target Audience&gtTarget Person&gtWho- exactly- Mr Freud

    [Reply]

    Greg Reply:

    Shiv,

    You make an excellent point. I would, however, suggest that price (as in the wine study example) often is used as a surrogate for mass opinion.

    Anyway, great point!

    - Greg

    [Reply]

    shiv vasisht Reply:

    Greg,

    Price is used to indicate (and differentiate from) the masses, if I read you correctly?

    Besides price, I’m sure there would be other factors that could be used to explore the ‘placebo-effect’ in a brand or category – exclusivity (limited editions), heritage (ingredient from land of origin/designed by/hand-crafted/etc.)…

    I’m sure we could think of many more, but it seems to take us back to the very basics of brand management in the pre-digital era!

    But it might be interesting to see what categories can benefit from discounted products. Institutional sales is one that comes to mind – and wherever we make purchases that do not affect our sense of individuality.

    Your thoughts?

    Shiv
    shiv vasisht´s last blog post ..3 Target Audience&gtTarget Person&gtWho- exactly- Mr Freud

    [Reply]

    Greg Reply:

    Shiv,

    I think that you’re absolutely right. However, price does play an important signaling function as well (e.g. “Well, if people pay that much, there must be something to it”).

    So, while I don’t think that categories play much of a part (most categories are well segmented), pricing is clearly an important part of overall communication (in addition to general marketing) strategy.

    - Greg

  4. January 24, 2011

    Yes, that is interesting too – who will pay how much for what (perceptions included), with the “it must be worth it” line of thought.

    And this can change from culture to culture, even depending on usage, or the level of development (cars mean little where public transport is available)!

    And doesn’t this pan out in terms of cost to market as well? Like Suzuki’s response to the Tata Nano, that stricter laws in other countries meant that such a vehicle would not be viable as a global offering!

    Whence, again, the need for intangible values. As the ad said – You always come back to the basics!

    Shiv
    shiv vasisht´s last blog post ..3 Target Audience&gtTarget Person&gtWho- exactly- Mr Freud

    [Reply]

    Greg Reply:

    yes, we do:-))

    Thanks a lot for your input Shiv!

    - Greg

    [Reply]

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