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The New Psychology of Marketing

2011 December 7
psychology2

Clearly, psychology and marketing are deeply related. What we buy is a function of how we think and what we think is a product of the way our minds work.
 
Yet, what doesn’t seem to be clear is that our scientific understanding of how people think and how they make decisions has changed drastically over the last decade or so.  Unfortunately, marketing practice has not kept pace.
 
While it was once believed that people could be expected to behave rationally, the truth has been found to be far different.  In both neurological studies and behavior experiments people have been shown to act, to borrow a phrase, in ways that are predictably irrational. It’s time we start applying what science already knows.

Rational Benefits

For a long time, it was taken on faith that people made decisions that based on their utility.  As Jeremy Bentham wrote over two hundred years ago:

Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do.

The concept is simple enough, maximize pleasure while reducing pain.  Get the best value for money.  Do, in other words, what will benefit you most.  The principle has been widely accepted in domains ranging from legislation to the efficient market hypothesis in economics.

In marketing, the idea manifested itself in the belief that “rational benefits” are essential to good selling.  However, as this video shows, there is something wrong with that idea.

Clearly, there is something more to marketing than rational benefits.  Yet, not all of us have the intuitive instincts of Steve Jobs.  If we’re to make any progress, we need new principles to guide us.

Share of Synapse

As I have written before, neuroscientists have discovered that our emotions have a lot more to do with how we make decisions than was previously thought.  Antonio Damasio found that clinical patients who lost the ability to emote also had difficulty making choices. They knew the facts, but couldn’t weigh them.

Even more interesting is the work of Joseph Ledoux, who found that emotions promote learning through releasing chemicals that build connections in our brains, called synapses. Furthermore, once we establish those connections, they regularly bypass the rational part of our brain, like when we jump out of the way of a moving car and only later realize what happened.

So when we talk about brand associations (i.e. archetypes, cultural memes and brand experiences), we are really referring to synapses that have been established in consumers brains.  Strong brands have built up strong synapses that relate to a variety of positive things, while weak brands have weak synapses that conjure up little.

In order to build market share, we first need to build share of synapse.

A Tale of Two Systems

Daniel Kahneman, who pioneered the field of behavioral economics, has come to similar conclusions in his work.  In his book, Thinking Fast and Slow, he describes two systems that lead us to action.

The first, is automatic and highly emotional.  It relies on rules of thumb, called heuristics, that it enables it to act quickly.  It is, in other words, fast and frugal.  The second is highly rational and weighs facts, makes difficult calculations and takes more time and effort.  We only engage our second system when the first one falls short.

Our reliance on system 1 leads to some interesting quirks in our behavior.  For instance,, research shows that consumers who receive a discount enjoy a product less than those who are exposed to brand marketing.  We will pay more to avoid a risk than to have a chance to gain an identical amount.  We give more weight to information we see first and so on.

For a more complete list of cognitive biases that effect buying habits, see this excellent article.

Irrationally Digital

When the consumer Internet first emerged, many thought it would make purchase decisions more rational.  Shopping in a more information rich environment would allow consumers to research purchases and compare products effectively.  To some extent, that’s been true.

However, e-commerce has also flattened the path to purchase, making it easier to buy on a whim.  That favors the fast and frugal system 1 over the slow and lazy system 2. Consumers, in actuality, are more likely to rely on brand associations built up before they intended to make a purchase than on information provided at the point of sale.

In other words, brands will become more powerful in the digital age, not less.  Purchases will be more emotive and less rational.  To compete, marketers will have to become experts on not only HTML5 and the mobile web, but also on the archetypal software of the human mind.

- Greg

17 Responses leave one →
  1. December 7, 2011

    Very nice post. I agree on all counts and would contribute by sharing that having an awareness of the liquid networks that pass through your stream of consciousness is what shapes the ability for brands to make impressions like grooves in the mind. I like how you take experience and deconstruct it by identifying key distinctions between physiological functions of the brain and psychological functions of the mind. The unity of consciousness between these two harmonious functions is what I call the innovation platform. It’s where ideas come from, get cultivated, and transform into something meaningful. I would also suggest that having an awareness of the portal between the conscious and unconscious will lead to what Professor Mihaly calls Flow. Thanks for the insights.

    ~Nikos

    [Reply]

    Greg Reply:

    Interesting ideas Nicos. I like the idea of flow. For anybody not familiar with the concept, you can read the book:

    http://www.amazon.com/Flow-Psychology-Experience-Mihaly-Csikszentmihalyi/dp/0061339202/ref=sr_1_1?ie=UTF8&qid=1323285313&sr=8-1

    – Greg

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  2. December 7, 2011

    Interesting post, Greg. Have you seen Think Insights by Google?
    http://www.thinkwithgoogle.com/insights/featured/zero-moment-of-truth/
    Interesting stat regarding influence from “The Zero Moment of Truth”:
    “We found that the average shopper used 10.4 sources of information in 2011, up from 5.3 sources in 2010.”

    And imagine the influence of reading people’s minds. :) “The Human Brain: Advances in Neuroscience Can Read Your Mind.”
    http://blogbrevity.posterous.com/the-human-brain-advances-in-neuroscience-read
    Thanks!
    Angela Dunn´s last blog post ..On "The Good Habit of Being Creative" #ideachat Dec. 10th

    [Reply]

    Greg Reply:

    Thanks Angela,

    I had not seen the Google study, but we do ongoing studies (called Touchpoints) that do a similar thing. I think the conclusion made sense, but aren’t really anything new. The “3 step model” they presented is very basic (models usually have 5-7 steps) and the “4th step” is very similar to “consideration” that marketers have been aware of for a long time.

    In any case, marketers need to develop a model that’s suitable for their category and brand, so it’s tough to talk about generalized models.

    The mind reading stuff is really cool! It’s amazing how active it is as a field of research. Michio Kaku covers it nicely in his new book: http://www.amazon.com/Physics-Future-Science-Shape-Destiny/dp/0385530803

    – Greg

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  3. December 8, 2011

    Neuroscience seems so vast and so little understood. I appreciate the books of Jonah Lehrer, Daniel Kahneman, Malcolm Gladwell and others in summarizing the research and helping us to understand.

    I hope that some researchers and communicators focus on understanding how we can avoid being manipulated into decisions that are ultimately bad for us and the world.

    Your point about brand associations being more important in a time of fast e-commerce seems very plausible.

    [Reply]

    Greg Reply:

    Thanks for your thoughts Graeme.

    – Greg

    [Reply]

  4. Mark permalink
    December 11, 2011

    I agree with your analysis that marketing has not kept pace with how people think, process information, and uptake knowledge. Today I believe with easy access to the web and social networks most decisions are made on knowledge and understanding which is learning. If we consider Malcolm Knowles and his model for adult learning andragogy http://www.infed.org/lifelonglearning/b-andra.htm we see that adults will only learn if they are seeking solutions to problems and that their experiences directly influence the uptake of knowledge.

    Many products and services can be viewed as solutions to problems. Most marketers do not look at the problems adults are seeking to solve and identify solutions within the brand. I consider this approach problem-centric marketing as opposed to brand centric marketing. What are the problems your customer, client, patient etc wants to solve within the domain of your brand or service? This approach requires a needs assessment to understand the problems but offers a powerful long-term relationship with the user.

    [Reply]

    Greg Reply:

    Interesting ideas. Thanks Mark!

    Have a great week.

    – Greg

    [Reply]

  5. December 11, 2011

    Why? When you say “brands will become more powerful in the digital age, not less. Purchases will be more emotive and less rational.” Why? Just because of an additional platform? Tempting to think so. But no evidence to show so.
    Remember more noise doesn’t equal more value. Or engagement. Or response. Or power.

    [Reply]

    Greg Reply:

    Sorry if that wasn’t clear. The reason why brands are becoming more powerful is that digital technology is enabling more impulsive purchasing, which favors Kahneman’s system 1 over system system 2.

    Thanks for your question.

    – Greg

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  6. Greg Millard permalink
    December 14, 2011

    Great reading Greg, thanks. Within the 3rd para of ‘Tale of two systems’, the line that reads ‘ consumers who recieve a discount enjoy a product less than those exposed to brand marketing’. Can you explain that please?

    Thanks,
    Greg M>

    [Reply]

    Greg Reply:

    That’s based on numerous studies. Follow the link.

    Greg

    [Reply]

  7. December 18, 2011

    This was a good read. You might want to read Martin Lindstorm’s book ‘Buyology’ which talks about neuromarketing really well.

    [Reply]

    Greg Reply:

    It’s on my list. Thanks for reminding me.

    – Greg

    [Reply]

  8. November 11, 2012

    Intelligent comments as well as your mind probing topics, Greg. But what about the video? Was the point that you can market all you want but that people aren’t rational and so did not buy the MS I-Pod? or Zuni, for that matter. I think that it was a stretch to market music things to Windows geeks who all had geeky gizmos to listen to music IF THEY DO/DID listen to much music verses games and other geeky distractions. It seems fairly obvious in hindsight that because the Apple fan boy audience of yore did not know about technology or the Internet (and still don’t) and they are a small but devoted group of Mac Zombies = musicians and artists who do listen to more music…and buy computer boxes b/c they have a pretty colored shell that they would flock to the I-pod and begin the craze, which is what you need for herd behavior, right?

    [Reply]

    Greg Reply:

    The point of the video was to contrast rational and emotional approaches to presenting products.

    Thanks for you comment.

    – Greg

    [Reply]

  9. November 12, 2012

    Thanks, Greg. I see. So emotional marketing has something to do with design? Because that’s all I thought Mac did better over MS. Well, simplicity too, but that’s part of design.
    We are making the same sort of product because you have to for the average consumer. My right brain cried for a month when first learning Micro edit and calc. We even have a tongue in cheek saying about equipment in the radio biz; that it has to be idiot-proof.
    btw, Sorry to make you read that previous drivel for I also get the award for most confused comment. I thought the vid was real on some level even though I know that MS never marketed the I-Pod..the power of a well produced video. The music really sold the idea of over working the box design. My left brain liked that box!

    [Reply]

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