I suggested in my post Marketing Schizophrenia and the Persuasion Paradigm that much of the debate about consumer decision-making, behaviour and marketing is stuck down an intellectual dead-end. To escape this dead-end we have take a deep breath and prepare to do battle with a fog of conceptual confusion.
(Bear with me in this post and please forgive its length. I’m trying to think out loud about stuff that’s incredibly slippery, where one wrong move takes you right back to where you started.)
OK, so here goes. The context of this whole debate is the insane speculations of traditional economics – particularly its notion of ‘rationality’ which, for a hundred years or so, has pretty much defined what a ‘good’ decision looks like and how it is made.
In short: according to these theories a ‘good’ decision is one that ‘maximises the utility’ of the individual making the decision. This brings with it three huge assumptions.
1) A good (i.e. ‘rational’) decision is only rational if it is pathologically selfish. ‘My sole concern is to maximise my utility. If the only way to maximise my utility is at another person’s expense, that’s not my problem.’ In other words, this theory of ‘rationality’ is uncompromisingly atomistic and, ultimately, it is an exploitative philosophy.
2) This utility maximisation has been carefully calculated according to purely ‘rational’ considerations – weighing hard facts about what will and what will not maximise my utility unsullied by non-rational considerations such as ‘emotions’.
3) This process of calculation is perfect. It assumes that I have access to all the information I need to make this calculation and that the costs of gathering and using it are zero.
This theory of ‘rationality’, along with its associated assumptions colours and distorts all our debates about consumer decision-making, consumer behaviour, marketing and so on – mainly by the ways it defines ‘irrationality’:
• It is ‘irrational’ not to be pathologically selfish (to factor other people’s needs or desires into our decision-making).
• It is ‘irrational’ to let emotions colour what a ‘good’ decision looks like.
• It is ‘irrational’ to make decision without having complete access to perfect information, because without this, the calculation is likely to be wrong.
All we have to do is look at this list to know that, by definition and a priori, the theory of rational decision-making has declared all real human beings’ decision-making to be ‘irrational’. We may know in our heart of hearts that this is nonsense, but explaining exactly why it is nonsense is quite difficult. As a result, we find ourselves debating the nuances and foibles of human decision-making as if it were true. It’s as if the biology profession decided that all living creatures should be pink flying elephants, and then went about comparing all the real creatures they studied against this ‘gold standard’ of what their ideal features should be. Are they pink? They should be! Do they have six foot long probisci? They should have! Do they weight two tonnes and still fly? They should do!
For consumer decision-making this disease of pink elephantitis tells us – straight away – that virtually all consumer decisions are ‘irrational’ because they are a) coloured by emotions and b)not perfect (because they are not based on perfect information).
Now. Please note the power of that word ‘irrational’. First and clearly, somebody who is ‘irrational’ is stupid. Second, anybody who is rational – wanting to maximize his own utility – will take advantage of the stupidities of stupid people.
Marketing corporations are supposed to be rational entities making rational decisions. Therefore, if they want to behave rationally, they need to understand the stupidities of consumer irrationality and to exploit these stupidities as much as possible. This way, marketers can get consumers to do what they want them to do – buy more stuff, pay higher prices, be ‘loyal’ to the brand, become the brand’s ambassadors, etc. This is what ‘effective’ marketing is about.
This is not the whole of marketing of course. Remember, in my marketing schizophrenia post I emphasised the two opposite stances of marketing: Stance 1) identify and meet customer needs and Stance 2) change consumer attitudes and behaviours in our favour. Stance 1 isn’t perfect by any means, but right now it’s Stance 2 we are wrestling with: the professors’ argument that because consumer decision-making processes are mostly unconscious and irrational a) consumers will always be prey to marketers’ persuasive powers and b) there is no merit or value in trying to build services that help consumers make better decisions.
So, is consumer decision-making really that ‘irrational’?
Well, over the last few decades, there’s been an awful lot of new research in areas such as behavioural economics, evolutionary psychology, ‘neuroeconomics’ and the like – and here’s my take on what we seem to have discovered so far.
Round One to the Professors
The first to thing to say is Yes, it’s true: most human mental activity and decision-making is indeed unconscious. This is a byproduct of our evolutionary past. Brains and nervous systems did not develop for the purposes of thinking ‘rationally’. They developed to help organisms survive, so they are geared to the survival imperatives of sensing and fleeing danger (or fighting), and of sensing and approaching opportunities, for food and sex for example.
The way these instincts work is not via some sort of artificial intelligence if-then computer programme. We are wetware, not hardware and software. Our decisions are mediated by a chemical soup of hormones, neurotransmitters and the like, which we mostly feel as emotions: fear, a desire for safety and security, desire for food etc.
What this means is that every decision we make rests on, and is mediated by, these survival-oriented and unconsciously generated emotions and instincts. So, unconsciously, our mind is always sending us ‘flee’ or ‘approach’ signals which make us feel uncomfortable or comfortable with certain situations and decisions. We know these almost primeval prompters are important because people with brain damage to the parts of the brain that process them find it almost impossible to make even the most basic of everyday decisions.
So, the first point goes to the professors. Yes, most ‘consumer’ (i.e. human decision-making) is indeed underwritten by strong, influential unconscious processes. However, this is not the same as saying that the resulting decisions are ‘irrational’ and that people’s decisions are therefore stupid. Far from it, most of these decisions are actually very sensible. These instinctive processes and responses evolved because they help us survive.
Round Two to the Professors!
By the way, there are probably many layers of such instinctual decisions at work at any one time, some of which may not be directly to physical safety or security. For example, we humans are social creatures and are acutely aware of our relative position in the pecking order among our peers. Just as our unconscious emotions scream ‘don’t do it!’ when we sense risk or danger, and ‘do it!’ when we sense an opportunity for food or sex, they also scream ‘do it!’ if it looks like a particular action might improve our status.
Marketers realised this was the case a long time ago. They realised that if they can wrap an aura of status around the product they are trying to sell, many people will buy it not because of its particular features or functions, but because of the social signals it sends. Such decisions may be ‘irrational’. They don’t fit the pink elephant mindset. But from the point of view of a social animal trying to prosper within a competitive pecking order, it makes some sense. We human beings are influenced by many such ‘irrational’ but ‘understandable’ instincts, and marketers have become adept to appealing them.
So yes, it is true that when a market researcher asks a man why he spent twice as money as he really needed buying a penis-extension status-symbol of a motor car rather than a more functional one that does the job of transport just as efficiently, he might start talking about the engineering and the miles per gallon. He might invent all manner of ‘rational’ justifications for his decision. But we know that deep down underneath, his decision was driven by status seeking, not engineering and that these are just post-rationalisations.
So round two also goes to the professors.
Round Three to the Professors!!
Here, we need to make a second, knock-on observation: our minds are ‘always on’. Our senses are always scanning our environment – sight, sound, touch, smell, and so on – to make sure we are not running into danger; to find opportunities for food, procreation and so on. The vast majority of our brain time is taken up with this under-the-radar environmental scanning, and the vast majority of these scanning and other processes are unconscious. This is important when we come to consider one of the effects of advertising. Because our minds are ‘always on’, we cannot help but become aware of advertising messages even if we are not paying them conscious attention, and once we have become aware we cannot decide to become unaware; awareness is not a reversible decision.
If we put this together with our first point about instinctive decision-making and its connections to primeval concerns of safety, security etc we arrive at an important conclusion. By definition, we feel safer and more secure with things that are familiar to us – that we have become used to and know are not a threat. Thus, simply by making us aware of and familiar with brands, advertising and marketing creates preferences for these brands – compared to products and services which are not familiar to us. Given the choice between the familiar and the unfamiliar, most of us choose the familiar. This is one of the reasons why advertising ‘works’; why it is often effective in influencing consumer decisions whether they aware of the process or not.
So, the third round also goes to the professors – though only within certain limits. Awareness advertising can be very powerful … when the brand that’s being advertised is competing with brands we are not familiar with. But once we are equally familiar with two brands, the influencing power of brand awareness evaporates. More awareness will not prompt us to choose one over the other; mere awareness does not determine the outcome of consideration.
For this reason, even in a buyer-centric, VRM-enabled future we can expect there to be lots of awareness advertising. Yet in the scheme of things – as Professor Andrew Ehrenberg and others have shown through mountains of empirical evidence – in the end awareness advertising is only a ‘weak’ force. Yes, it has an effect, but only at the margins.
Round Four to the Professors!!!
The third point to consider is the way human brains ‘think’. Our minds are incredibly good at seeing patterns and analogies, and not very good at thinking logically, calculating probabilities, and so on. We do not think like computers. Thinking in terms of patterns and analogies makes very good evolutionary sense. If a new situation has features similar to a previous situation which presented us with dangers or opportunities, it’s a pretty good rule of thumb to assume this new situation is also presenting us with similar dangers or opportunities. That way, we are not starting from scratch every time we come across a situation, needing to amass information and evidence, sift its relevance, weigh its pros and cons, etc. Life is too short for that. By the time we’ve gone through the laborious process of ‘rational’ decision-making, there’s a good chance we might be somebody else’s lunch.
But there is a drawback to this rule-based, pattern-based way of thinking: sometimes we don’t read the patterns right. Sometimes we make mistakes. As a result, we make ‘irrational’ decisions on two counts. First, the reason for making our decision in the first place was not a thorough evaluation of all the relevant facts but a simple judgement ‘this looks like a good idea because it’s similar to that other decision which seemed like a good idea’. Second, sometimes we mistake the pattern and make decisions that are not in our best interests.
Once we start looking at consumer decision-making rules of thumb, we can find dozens of them – and each one can be ‘exploited’ by wily marketers who, once they understand the pattern or the signals we are looking for, deliberately create the pattern in order to mislead. Take just one example. Consumers have learned, often by painful experience, that ‘you get what you pay for’. So many consumers adopt the heuristic ‘expensive = good quality’ and ‘cheap = shoddy’.
Having identified this heuristic at work, it’s relatively easy for marketers to exploit this: ramp up the price, and make it look like it’s really good quality say, by wrapping it in fancy packaging when in reality the product inside is no better than its cheaper peers’. Consumers acting on the heuristic ‘expensive = good quality’ then buy this product believing it to be better quality, when it is not.
So: round four also goes to the professors. Sometimes marketers induce consumers into making ‘stupid’ decisions by taking advantage of unconscious or barely conscious mental processes, including belief systems, that are far from ‘rational’ as defined by the pink elephant economists.
A dead end for buyer-centric services?
So far, it’s not looking good for my argument, is it? Could it be that the professors are right after all? That the idea of building buyer-centric services that help people make better decisions is destined to fall on stony ground?
Well, I don’t think so, because I think we are only half way through the story. Let’s pursue it a little further.
So far, we have talked only about unconscious and barely conscious (i.e. heuristic driven rather than consciously, deliberate, ‘rational’ decision-making processes). But the fact is, we humans do ‘stop to think’ every now and then – and we do so for good reason.
Some time in our long evolutionary history, we started developing ‘what if’ mental models. Having noticed a particular pattern instead of risking life and limb by immediately taking course of Action A, we learned how to carry out ‘what if’ trial runs in our heads. ‘If I leap in that direction, I might lose balance and fall over that cliff’. In this way, we began to build mental models of the reality around us, and to make conscious decisions between alternative courses of action.
These conscious, deliberate decision-making processes didn’t get rid of the primeval emotions driving our behaviour. They were just a layer on top, thereby creating two interesting scenarios. The first scenario is where our basic instincts scream at us ‘do it!’ or ‘don’t do it!’ and we go ahead and make our decision on this basis. Does this obviate the value of conscious deliberation? Not at all. Having made a decision as to what to do we may then we refer to our ‘what if?’ mental modelling capacities to work out the best way of doing it. In such a case, the decision might still be driven by unconscious emotional or survival motives, and we simply deploy ‘rational’ conscious, deliberate decision-making processes in pursuit of these goals.
The second scenario is that our basic instincts scream at us ‘do it!’, or ‘don’t do it!’, and our ‘what if?’ mental modelling capacity then kicks in and tells us to reconsider: “actually, thinking about it, I’m not sure that’s the best thing to do”. So, instead of punching someone in the face after they have been rude to us, we keep our anger in check, avoid going to prison and make it up with them later.
Many marketers, when trying to big up their powers of persuasion, ignore the effects of this human ability to ‘stop to think’. For example, there are now huge amounts of research that show advertising can have all sorts of subliminal emotional effects: for example, the smiling pretty woman signalling ‘come to me!’ induces male consumers to buy more and pay more even when the product is as asexual as a loan. Such signals work, because they are addressing those unconscious instincts of ‘flee!’ or ‘approach!’.
However, what marketers don’t add when they big up these findings, is that as soon as the same consumer ‘stops to think’ a) about the relative merits of this offer as opposed to that, or b) how the way the offer is being presented might be manipulative, the persuasive effect of the imagery evaporates. Marketing activities like these ‘work’ so long as consumers continue operating on autopilot. They stop working when they stop to think.
There are two issues worth considering here. First, time and learning. It’s now a common observation among marketers that consumers are becoming ever more ‘savvy’ and ‘sophisticated’ and therefore less prone to be influenced by marketers’ blandishments. Once we stop to think about this, we can see why. Even if most human decisions are first and foremost underpinned by emotional needs and signals relating to safety, security, status, opportunities for reward and so on, we have also evolved this ability to stop to think and to learn from our experience. This is one of the reasons why marketers’ ability to play with our unconscious desires, to get us to what they want us to do, is more limited than they sometimes pretend.
Reciprocity and the theory of mind
But we haven’t finished yet because, to make sense of the world, ‘what if?’ mental models also have to take account of what other people are thinking, believing, intending, planning to do etc. To have a robust, realistic mental model of the world out there we also have to develop a ‘theory of mind’ which tells us about the other party’s motives.
This is important, because another one of the basic emotional instincts we acquired along the way is that of reciprocity. Reciprocity has two sides:
• ‘you scratch my back and I’ll scratch yours’. In other words, if you demonstrate yourself to be honest and fair with me, then generally speaking I will be honest and fair with you.
• ‘an eye for an eye; a tooth for a tooth’ – the revenge instinct. If you betray my trust and threaten me, then I will punish you for your transgression.
Now, once we enter this territory of ‘theory of mind’ things begin to get very complicated. For example, having a reputation for being trustworthy can be very beneficial because people will be much more willing to do business with you. This is what lies behind marketers’ talk of brands being about trust and promises, and the importance of keeping these promises.
On the other hand, if you have a reputation for being trustworthy but can somehow get away with cheating (by for example, pretending that it’s better quality simply because it’s more expensive), then you can reap the benefits of the good reputation without its related costs. This can be a much more profitable course of action.
However, over many years of complex social life, human beings have learned to keep a look out for such cheats. In fact, some psychologists posit the existence of powerful ‘cheater modules’ in human minds. We are, it seems, instinctively very good at scanning the actions, signals and motives of other parties to see whether they are likely cheats or not.
What’s more, human societies have also developed sophisticated ways of punishing cheats, for example, via the weapon of gossip, by which the cheating party’s reputation is destroyed, the party gets isolated and shunned, and so on. In the modern era we have given these age-old instincts fancy new names such as ‘word of mouth communication’ and ‘peer-to-peer communities’ etc. But they are as old as the hills.
Here, we hit the real dilemma for marketing’s persuasion paradigm.
1) By looking at the ways human minds work – e.g. the power of instinctive emotionally driven decisions that are shaped by patterns and analogies and ‘irrational’ rules of thumb, plus physiologically unavoidable facts such as ‘always on’ awareness – it is possible for marketers to find many ways of influencing consumer decisions. Their success at doing this seems to demonstrate that ‘the consumer’ is indeed ‘irrational’ and ‘open to influence’. There is strong, indeed irrefutable evidence that, to some degree or other, marketing’s persuasion paradigm ‘works’.
2) However, the self-same in-built characteristics of the same human minds also explain why the scope of such ‘powers of persuasion’ are actually rather limited. Sometimes, they only ‘work’ up to a certain limit and then stop working. Sometimes, they evaporate in the face of second thoughts. Often, the consumer is presented not just with one influence working in one direction but many influences working in many different directions, so that their net effect is that they cancel out. For example, the heuristic ‘expensive = good quality’ may be countered by gossip saying ‘that brand is a rip-off’.
3) Once we bring ‘theory of mind’ into the equation we discover that marketing is working always at two levels at the same time, not just one. Even as marketers succeed in influencing or persuading consumers to do one thing, they are at the same time sending powerful signals as to their motives and intentions. If and when these motives and intentions are not deemed trustworthy, they trigger ‘revenge’ responses. Even as marketing’s persuasion paradigm appears to work by influencing consumer decisions it is, at the same time, undermining trust and building resistance.
That’s why nowadays, nobody trusts marketing or marketers. Which means that, in everything they do, marketers find themselves trapped in an uphill struggle of rising costs and reducing ‘effectiveness’.
The opportunity for buyer-centric services
So where does this leave buyer-centric services whose job is to help individual make and implement better decisions?
The first thing to note is that ‘better decisions’ are not the same as ‘rational’ decisions, as defined by the pink elephantists. If we take it for granted that most human decisions are emotionally driven, and that the ‘bottom line’ for most human decisions includes an emotional element – Was it fun? Do I feel safer as a result? Has it improved my status? Does it make me feel good about myself? – then a truly buyer-centric service will help people make decisions that achieve these emotional results. Buyer-centricity is about being human. It’s not about trying to become a pink elephant.
The second thing to note is that, under their persuasion paradigm, marketers often try to induce consumers into making worse decisions. The value of buyer-centric services is that they help individuals ‘see through’ and overcome the ploys. They can do this in many ways: by helping us to see and develop different patterns and different analogies and adopt different decision-making rules of thumb, helping us to ‘stop and think’; mobilising the power of gossip to punish cheats, etc. They may even use the same biasing instincts that prompt us to make bad decisions (i.e. decisions we later regret) to help us make better decisions. This is theme of the fascinating book Nudge by Richard Thaler and Cass Sunstein.
So my net conclusion is that:
1) despite the fact that rounds one to four of the argument seemed to go to the professors, there is room for new types of service that help individuals make (and implement) better decisions;
2) approaches to marketing that seek to take advantage of the supposed ‘irrationality’ of ‘the consumer’ are both toxic and addictive. They are addictive because they ‘work’ to a some degree. Once they have started working then, in the quest for even better results, marketers are sucked into taking bigger and bigger doses. But the net effect of these bigger doses is usually counterproductive: they build consumer resistance to marketing (thereby leading to increased cost and complexity) while undermining trust.
3) From the consumer’s point of view, there is potential value in services that help them make better decisions, despite their supposed ‘irrationality’.
Now, this doesn’t mean that there is a viable business model in services that help consumers make better decisions. (I believe there is a viable business model. In fact, I believe it’s going to become the biggest industry in the world.) But that’s a separate argument.
It also begs the question, ‘what’s in this for marketers?’ I believe there’s a huge amount of value in better consumer decision-making for marketers. It’s about helping markets flow and work better, rather than clogging them up with unnecessary friction. But that, too, is a separate argument.
Also, it doesn’t answer the professors’ other objection – the one that says consumers don’t know what they want until marketers tell them. That too, is far more complicated than it looks, and I’ll return to that in due course.
But right now, if you’ve kept with me this long, Thank You! This is only a first stab at a big and complex debate. So please add your thoughts, because the sooner we work our way through this intellectual maze, the better.
7 April 2009
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Advertising, Buyer centric services, Marketing, The Persuasion Paradigm