The more I talk to people about consumer decision-making and the potential for buyer-centric services, the more I hear what appears to be a new conventional wisdom: that consumers don’t know what they want until marketers tell them.

This was one of the pushbacks I got from my talk at Nottingham Business School. Like so much else that’s said about the so-called ‘irrationality’ of consumer decision-making, it’s a) more complicated than the simplistic slogan and b) fuelled to a large degree by marketers’ own self-serving propaganda.

So let’s look a little closer.

First, there is the whole debate about the role of conscious and unconscious processes in decision-making. I’ve touched on that elsewhere so won’t return to it here. So what else is there?

Innovation

Well, there is one important area where it is absolutely true that consumers don’t what they want until marketers tell them: the arena of innovation where the consumer doesn’t know what’s possible.

For example, he is ignorant of technological or other capabilities and doesn’t know that it’s possible to fly through the air in a steel tube, or talk to a person on the other side of the world in real time, so he thinks he has to go by boat or write a letter.

This is probably the most important area where the line ‘consumers don’t know what they want until marketers tell them’ is absolutely true. It’s the background to Henry Ford’s oft-quoted remark that if he had asked consumers what they wanted, they wouldn’t have said a motor car; they would have said a faster horse. It’s where innovators and inventors come along and say ‘you never knew this before, but now it’s possible to do X!’

But we also have to keep it in perspective. Time and time again, studies of new product launches show that the vast majority of so-called ‘new’ products are actually new versions of old products – an added tweak or feature, a variant of some sort. A tiny minority of supposedly new products – around 1-2% – are actually new to the world. So while it’s true that consumers don’t know that they want innovations till they see them, this truth actually only accounts for a tiny proportion of total marketing activity.

Clever marketing?

So, apart from this tiny proportion, where else does the adage hold true? Well, there are number of areas where it seems like it holds true, but probably doesn’t. Here are three examples:

• The consumer doesn’t know what’s available. In most markets, especially where consumers are relative novices, they only have a cursory knowledge of what’s available on the market. Because the costs of searching for information about these different choices is so high they often don’t bother. In these circumstances, they become at least partially reliant on marketers telling them what’s available – and when they come across what they want, they go out and buy.

Viewed from the point of view of the marketer, this looks like the consumers waiting for the marketer to tell them what they want, but actually it’s nothing of the sort. Consumers’ apparent passivity is a by-product of the high costs of searching, sifting, comparing what’s available. The job of buyer-centric services is to help consumers know what’s available, thereby reducing their dependency on this sort of spoon-feeding.

• The consumer doesn’t know what’s best In some cases, even where the consumer is aware of a wide range of alternatives, he still doesn’t know which option to go for: he needs advice. Again, this is especially true when the consumer is a relative novice and where the product or service is relatively unfamiliar or complex.

What the consumer really needs here is trustworthy advice. But usually that’s not available at an affordable price, so the consumer has to take a different approach. Historically, one of the lowest risk routes available was to opt for the most reputable, most famous supplier i.e. the one that did the most advertising.

Again, the ‘evidence’ seems to show that it is the marketer telling consumers want they want, but actually this evidence is just a manifestation of a deeper issue – the high costs of getting trustworthy advice.

The job of buyer-centric services is to provide the trustworthy advice (see Problem Solving Communities) thereby reducing dependentce on these short-cuts.

• Impulse purchasing, where the consumer is titillated by the marketer’s marketing I remember once, I went out and the weather turned nasty. I was on my way home feeling cold, wet, hungry and miserable when I saw an ad for Heinz Tomato Soup. I looked at the ad and thought ‘that’s just what I want to warm and comfort me’ – and bought a tin there and then. I didn’t know that I wanted a bowl of hot tomato soup until the ad ‘told’ me and triggered the desire.

Marketing activities such as these crystallise desires by stimulating consumers’ senses. This is the secret behind impulse purchases, and it will remain a feature of life as long as human beings have impulses.

But again, if you look at purchasing as a whole – especially in terms of amounts of money spent – most purchases aren’t impulse, they are considered to some degree or other. And on many occasions, the consumer defaults to an impulse approach because the cost or complexity of making a better, more informed decision is so high.

So if we look at the above four scenarios, we discover that only one of them really holds true: the case of ‘newness’ where much of the value that’s being provided comes from the very fact that nobody has thought of this before. The other three areas where it seems that consumers need to be told what they want are actually symptoms of the deeper problem: that in today’s commercial environment, the costs of decision-making are so high that most people opt for short-cuts, because otherwise they would go mad.

When we do know what we want

The other side of the coin is that there are also a number of cases where it’s palpably not true that consumers need to be told what they want. In every market you can think of, there is always a spectrum of consumers ranging from the complete novice who doesn’t even know what questions to ask, to the absolute connoisseur. In other words, market by market, category by category, product by product, situation by situation we are all of us on some sort of learning curve.

The more experienced and knowledgeable we become, the more we know what we want and the less helpful marketers trying to tell us otherwise becomes. In fact, at this end of the spectrum the boot moves to the other foot, where marketers need to engage with these consumers because they know what they want better than the marketers! This is the impetus behind the growing interest in ‘co-creation’.

A common half way house here is where people ‘sort of’ know what they want, but find it hard to articulate and express.

The really big area is in the middle: the many cases where consumers currently rely on marketers telling them what they want because, the way markets currently work, the sheer hassle of doing anything different is simply much too much.

The buyer-centric opportunity

Now, if we look through this list, we discover the potential for a whole range of different buyer-centric services. For example:

• Where the consumer doesn’t know what’s available, making it easier and quicker for the consumer to find out (by for example, using search, peer-to-peer, buyer’s guide and other mechanisms)
• Where the consumer defaults to heuristics for lack of good advice – here the buyer-centric service can make the consumer less reliant on the marketer by providing better advice via peer reviews, expert reviews, problem solving communities and the like.
• Where the consumer needs help in articulating exactly what they want/need. Looking forward, this is probably one of the richest areas of buyer-centric service, and it’s made possible by consumer-to-consumer information sharing: ‘I might not have been on this journey before, but many others have – and I can pick their brains to help me work out what’s right, and what’s not right, for me’.
• Where the consumer wants to specify what they want but can’t get. This is the arena of specialist ‘request for proposal’ services which reverse the flow and which help consumers to talk to marketers and say ‘actually, this what I want’.

So what’s our net conclusion?

• First, there is a role for the marketer ‘telling consumers what they want’. But in reality, it’s actually quite restricted – mostly to the arena of innovation.
• Second and much more important, there is a massive unmet need for services that help consumers work out and articulate what they want for themselves.

Most marketers’ claims about consumers needing to be told what they want do not relate to the passivity or lack of imagination of consumers – they relate to the costs consumers incur when they go to market; costs which are, for the most part, created by marketers themselves; costs which make navigation, choice etc expensive and difficult and which prompt consumers to opt, instead, for whatever marketers put in front of them.

Alan Mitchell

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AlanMitchell Advertising, Branding, Buyer centric services, Marketing, The Persuasion Paradigm, Uncategorized

I have just received a missive from the IPA, the UK’s advertising agency trade body, waxing lyrical about the Inaugural speech from their new president, Rory Sutherland, Vice-Chairman of Ogilvy Group.

In it, he urges the advertising industry to pay more attention to new discoveries in areas such as consumer psychology, behavioural economics, herd theory (whatever that is), social theory and neuroscience.

“The most effective way for any organisation to achieve its ends,” Sutherland declared, “is often through better human understanding:” Advertising is “the business of turning human understanding to our clients’ advantage”.

Sutherland’s speech goes straight to the heart of the issue raised in my recent blogs on consumer psychology and decision making and marketing schizophrenia. Unfortunately, he approaches it from the wrong side up.

Question: what do we want to do?

1) Use our understanding of human psychology, decision making and so on to help human beings to achieve their ends, for their own advantage?

OR

2) Use our understanding of human psychology, decision making and so on to help organisations achieve their ends, for their advantage?

The ad industry’s new found love affair with behavioural economics, neuroscience and the like is a disaster waiting to happening. As it unfolds it will:
1)    intensify the already toxic climate of mistrust between advertisers trying to ‘change’ consumer behaviours and consumers wanting to look out for their own interests
2)    generate an even more aggressive consumer and media backlash against organisations and their marketing, instead of finding and building win-wins
3)    prompt even more intrusive, heavy handed interference from regulators – precisely what the advertising industry spends most of its time moaning about.

Marketers can duck, dive, fudge and wordsmith as much as they like, but either they are in the business of helping people make and implement better decisions (in which case they are adding value), or they are in the business of obstructing, sabotaging and undermining peoples attempts to achieve this goal (in which case they are destroying value).  If you try to turn ‘understanding people’  (sounds so warm and friendly, doesn’t it?) into the instrumental pursuit of organisations’ ends and advantage, you are doing the latter.

Well meaning it might have been, but Rory Sutherland’s speech was a clarion call for intensified value destruction. It will be counterproductive.

Alan Mitchell

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AlanMitchell Advertising, The Persuasion Paradigm

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.)

Pink Elephantism

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.

Alan Mitchell
7 April 2009

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AlanMitchell Advertising, Buyer centric services, Marketing, The Persuasion Paradigm

It’s always nice to get supportive comments so Sivaraman Swaminathan’s comment that ‘your model definitely makes sense and is worth pursuing’ is welcome. However another one of his comments – that “we will have to forget the word advertising in this eco-system” – sets alarm bells ringing: I am not so sure.

Let’s start with the assumption that we are indeed moving away from yesterday’s persuasion paradigm towards a new, personal decision making paradigm (Beyond the persuasion paradigm). Does that mean ‘the death of’ or even the decline of traditional advertising?

I don’t think so. To see why not, we need to disentangle different elements of the blanket term ‘advertising’: like the air we breathe, it’s actually an amalgam of many different elements.

The drivers of advertising

We tend to think of advertising in terms of seller-centric huff-puffery where companies narcissistically interrupt what we happen to be doing to shout “Look at me! Aren’t I wonderful!” There is a lot of this sort of advertising around. But it is not the complete picture.

Some advertising is actually used by ‘consumers’ as an input into their decision-making processes. Yes, most advertising is just self-interested hustle, but when companies bring new products to market (for example), their ads do actually announce new value opportunities to a sometimes eager audience. That’s why much of the research into so-called advertising ‘effectiveness’ finds that ads which announce ‘new news’ tend to generate bigger, better responses than ads which simply continue tired ‘brand wars’. To a certain degree (and it is only a certain degree) these ads are useful to their recipients.

Advertising generates a ‘win’ for consumers in another important way. This time, the benefits have nothing to do with the actual content of any particular ad but its economics – the fact that it subsidises the provision of editorial content. Yes, interruption advertising can be incredibly irritating, but still many people are willing to put up with these annoyances in return for free access to content they want. This may change at the edges, but the model as a whole is quite robust. It is unlikely to disappear soon.

There are other detailed niches of advertising which also generate consumer value. In magazines like Vogue, the ads are effectively part of the editorial content: people buy the magazine to look at the style suggestions being made by the ads as well as to read the articles. In the case of luxury goods, the ad provides a large part of the product’s value: the symbolic value that users so crave: ‘Look how rich I am! Look how stylish I am!’ We may sneer at such foibles, but I suspect they are a human universal and are therefore here to stay.

In each of these cases, the fact that there is a consumer benefit as well as a seller benefit means that these forms of advertising are probably here to stay.

In addition, there are other benefits for sellers which arise whether they benefit consumers or not.

Advertising agencies like to sell dreams of strong advertising effects to corporate clients: ‘if you use our advertising, it will press buttons in consumers hearts and minds to make them do exactly what you want them to do’. This sales pitch works time and time again, not because it has any foundation in fact but because clients desperately want to hear it. Hope springs eternal and opens boardroom purses, thereby providing an ongoing impetus for the advertising industry (even if, nine times out of ten, the client ends up being disappointed).

There is, however, another way in which advertising really does ‘work’. This is a ‘weak’ influence, but an important influence nevertheless. Human minds are bit like broadband internet: they are ‘always on’, forever taking information in from their environments, the vast majority of which goes in under the radar screen of consciousness. This is how, as organisms vulnerable to danger, we scan and monitor our environments to stay alive.

Ads have become a part of our environment. We ‘notice’ them just as we notice the sound of an aeroplane, the temperature of the room, the smell of the coffee – we just take the information in as part of the routine of every day life.

The effect of this advertising is that when we see the product or brand concerned we ‘recognise’ it. This means two things. First, (by definition) we can only remember products that we recognise – and memories do influence purchases. Second, we are more likely to positively choose a product that we recognise than one we don’t. It’s more familiar, safer, less risky.

This sort of advertising doesn’t actually ‘persuade’ us to do anything and its actual effect on purchasing decisions is quite small. But it is real. Brand and product ‘fame’ creates a competitive advantage for products that are advertised over products that are not advertised, forcing advertisers into advertising arms races – whether they like it or not.

This means that regardless of how much it costs, how wasteful it is, how annoying it is to consumers, and how little persuasive effect it really has, selling companies will probably feel compelled to advertise long in to the future.

Advertising channels

All of the above comments relate to ‘advertising’ in general – not to any particular media channel or industrial category. Once we drill down a level to different media channels and industry categories, a whole series of specific issues kick in, with highly specific implications for each channel.

So, for example, traditional classified advertising for jobs and property can be far more efficiently displayed and far more efficiently accessed by users on the Net. So, far from this form of advertising going into decline, it is likely to grow and expand in the more supportive online environment. This may mean an earthquake for traditional media vehicles which rely on classified ads: even a 15-20% decline in classified ad revenues spells real profitability problems for many trade and professional magazines and many local newspapers. This is a real crisis for the businesses involved. But it is driven by a migration of advertising, not its decline.

The same is true for direct marketing. There are some purposes for which direct mail to physical postal addresses is both efficient and effective from the seller’s point of view, but in many cases data-driven ‘personalised’ online communication is both cheaper and generates a higher response rate. Again: a migration of advertising, not a decline.

The rise of bottom-up demand signalling models – ‘here I am, this is what I want to buy right now’ – may well lead to a diversion of some advertising funds from mass display to personalised sense-and-respond mechanisms in some advertising sectors such as motors or financial services. However, volume-wise, this development is likely to affect a relatively small proportion of total advertising in the short to medium-term future.

Meanwhile, in display arenas such as TV and national newspapers, the twin forces of the editorial subsidy and the inter-advertiser ‘weak force’ arms race means that total advertising spends are unlikely to decline by a huge amount, if at all.

One key factor here is that if a major advertising sector such as motor, financial services, retail or consumer goods decides to shift its spend elsewhere, there are plenty of other industry verticals who would just love to advertise in these vehicles if only they could afford to do so. So we are more likely to see a continuous shuffling of the revenue/advertiser pack than a precipitous cliff-face decline in these media channels.

Meanwhile, all the pro-advertising forces described above – the win-wins behind ‘new news’, the editorial subsidy, the niche markets, the unavoidable ‘weak’ effects of brand fame – apply as much to the Net as to other media. So yes, it is inevitable that the Net is going to become a major advertising vehicle.

Chalk and cheese

What has all this got to do with the rise of personal information management and decision making services? The answer is ‘very little’. The forces that are keeping advertising afloat and driving large parts of it to the Net have actually got very little to do with the forces that are driving the rise of personal information management services. And where they do overlap they are likely to be more complementary than opposing.

For example, as services which help individuals make better decisions grow and mature, many of them will become significant advertising channels in their own right. Take Edmunds.com. It is now the most influential source of buying information for car buyers in the US, and because it provides such useful information to car buyers it attracts huge audiences. These audiences make it a valuable advertising vehicle for car sellers, which is how and why it makes its money – by selling advertising. From the advertiser point of view, it is just another ‘channel’.

So here’s the bottom line. The development of new personal information management services is unlikely either to be helped by a decline in traditional advertising or hindered by its continued healthy growth. ‘Person centric service’ is a new growth industry in its own right.

Yes there are overlaps and these overlaps will grow, but creating the new is not the same as demolishing the old. And the really big, exhilarating opportunity is to create the new.

Alan Mitchell

5 October 2007

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AlanMitchell Advertising, Branding Advertising

Now the great advertising guru Lord Maurice Saatchi has entered the fray on Google’s quest for personalised search.

Below is a textual critique of his article in the Financial Times (Google data versus human nature, May 30, 2007). I’ve done it for two reasons.

1)       to illustrate the slick and slippery intellectual trickery often used by the advertising industry to help sell its wares

2)       to uncover the assumptions which it relies upon, and actively peddles.

Saatchi starts his article with the parable of the frog and the scorpion. The scorpion asked the frog to carry him across the river, and at first the frog said No, because the scorpion would take the opportunity to sting him in the back. The scorpion replied that that wasn’t logical, because if he did, the scorpion would die too. So the frog said Yes, and then half way across the river, the scorpion did it anyway. He couldn’t help himself, he said, it was in his nature to do so.

With this little story Saatchi does three things. First, he elides and confuses two concepts of rationality: the economist’s dream of perfect decision-making based on access to all the information in the world (a set-up for his coming attack on Google), and the everyday use of the term ‘rational’ to mean ‘not ridiculously stupid’.

Second, he subtlely introduces one of the main – but carefully unstated – themes of his article: consumers are stupid like the frog (everyday meaning number two) because they are not rational (technical meaning number one).

Third, he introduces a complete red-herring: the issue of ‘human nature’.

Saatchi then moves on to set-up a straw man. Today, he tells us “the world’s great consumer goods companies are agog at the potential of the Internet to identify ‘human nature’, measure it, control it … [leading to] an earthly paradise … where all the problems of selling and marketing are solved by the same method: the method of data.”

Not just one straw man, actually. Two. First, he returns to his red herring of human nature, thereby carefully leaving the real issue behind – an immediately practical debate about the possible uses of real information from and about real human beings. Then he smuggles in the classic straw-man debating technique of the false black/white either/or. Either this solves all the problems of marketing or (presumably) it solves none of them.

The net effect? Instead of addressing the reality – that we may be able use more, better data from and about real human beings to solve some of the problems of marketing – we are presented with a self-evidently absurd and grandiose vision of measuring and controlling human nature via data. Absolutely nothing to do with what we are really talking about. But hey! Why not, if it suits our debating purpose?

Saatchi then reassures his readers that he is in touch with reality by accepting that they are attracted to Google and the possibility of not having to advertise to people who not currently in the market for their product. To achieve this goal, he concedes, you need good data. “No wonder people are so excited about all the saving of money this knowledge could bring.”

Yes, they are. Quite rightly. Which is a real problem for him. So he then uses debating trick number three to get out of it: if you haven’t got an answer to your opponent’s strongest argument, simply don’t answer. Instead, avoid it like the plague. Simply don’t talk about it and do your best to suck your audience down a different path.

This is what he does in the next paragraph by introducing a new Aunt Sally: perception. “All of us know that the sensations produced by the same object can vary with the circumstances,” he tells us, introducing two more paragraphs on the vagaries of human perception. Hidden agenda here: to reinforce his original implied message that consumers are not rational and therefore stupid. Like the frog.

Which is when he delivers his payload: “People do not know what they want until a brilliant person shows them”.

Here we have Maurice Saatchi’s real message. “People are stupid, like the frog. They work according to perceptions, not facts. They need to be told what to buy by brilliant people (like me) who know how to manipulate and change their perceptions. So ‘better marketing’ has got nothing to do with richer, better information. But it has got a lot to do with giving my company vast sums of money to spend on advertising.”

Having delivered his payload, Saatchi quickly needs to cover his tracks: it wouldn’t be wise to let people stop to think about how absurd and self-serving this message really is. So, quick as a shot, he introduces another red herring: the statement that “Henry Ford confirmed as much.”

Ford’s point was that if he had asked people what they wanted, they would have said ‘a faster horse’, not a motor car. Ford was making a comment about introducing a brand new world-changing innovation which people have never experienced before – as distinct from the thousands of products and services which people use everyday and which advertisers seek to promote through advertising. By using Ford here, Saatchi is talking about chalk as if it were cheese. But then that’s his purpose. He wants to convey the idea that not only do people need to be shown brand new innovations they’ve never seen before, they also need to be told what they want when it comes to the day-to-day decisions they make to manage their everyday lives.

Having presented two polar opposites as if they were the same, Saatchi now wants to get down to business: how, exactly, are people to be told what they want? Thankfully, he’s already prepared the ground in his discussion of brilliance and innovation, taking it one step further with the concept of ‘creativity’.

Now, ‘creativity’, like ‘rationality’, has two meanings. There is the creativity of the artist/inventor. And there is the so-called ‘creative’ work done by advertising agencies. Saatchi deliberately confuses the two, implying that what advertising agencies do is on a par with Bach, Mozart, Goya and Michelangelo.

He does this by making the breathtakingly obvious (and utterly irrelevant) point that no amount of data can substitute for the “startling creativity of the kind practised by great artists, directors, writers, musicians, actors [and, of course, himself] who know how to touch a chord in humans everywhere.” Having made this point, he then makes a fantastic leap (next sentence): “They are the people that are needed to help advertisers navigate the Internet”. From innovators like Ford and creative geniuses like Mozart to Maurice Saatchi. Of course! Clearly, it’s a straightline progression!

So there you have it: people are stupid and need to be told what to buy, by brilliantly creative people like Maurice Saatchi. But because this claim is so clearly specious, 1) only a part of it can be stated directly and the rest has to smuggled in as inference, and 2) it needs to be disguised via a deliberately confusing and tendentious tour of supposedly ‘deep’ concepts relating to rationality, human nature, perception, innovation and creativity – but which are actually being used as nothing more than Aunt Sally rhetorical devices.

Here, you have modern advertising at its best!

By the way, the one truly important issue raised by Google’s personalised search initiative is completely ignored throughout the entire article (of course).

The unstated assumption of the whole piece is that the only point of collecting more and better data is to ‘solve the problems of selling and marketing’. Whereas, of course, the real opportunity lies elsewhere entirely: for individuals to be able to collect and use personal data to better solve the problems they face in their lives. To search for, and find better answers to their questions, for example.

What? People using collecting and using information for their own purposes to solve their own problems, rather than being told what they want by brilliant persons? We can’t have that! Can we, Maurice?

Alan Mitchell

30 May 2007

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AlanMitchell Advertising

The other day I had the privilege of listening to a lecture by Kevin Roberts, CEO of Saatchi & Saatchi.

Roberts linked a series of propositions to create an argument that goes like this.

1) “Brands were invented for one reason only: to charge a premium; a higher price, a higher margin.”

2) Creating an emotional connection with the consumer is “bigger and better than more quality, more value. These table stakes aren’t enough”

3) 85% of human decisions are made emotionally, not rationally.

4) “Great communication works inherently at an emotional level”

5) “The only point of advertising is to drive people to do something”.

6) So the role of marketer is to do great communication that works at an emotional level, to create a ‘lovemark’ which “inspires loyalty beyond reason. That is where the money is. Beyond price. Beyond benefit. Beyond attribute. Beyond logo.”

In other words, the role of the marketer is to ‘drive’ people to ‘love’ you so much that they no longer use their reason and hand over loads more cash to you – more than if they still had the use of their reason. And you do this by emotional advertising.

Never mind the fact that each one of these six propositions is flawed in its own right. Look at the instrumental, self-seeking motives. Look at the attitudes it displays towards people – ‘the consumer’.

Kevin Roberts’ arguments sum up everything that is wrong with marketing today.

Alan Mitchell

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AlanMitchell Advertising, Branding, Marketing

Globally, the marketing services industry is worth about one trillion dollars. That’s an awful lot of dosh spent employing an awful lot of very clever people doing mostly less-than-wonderful things.

The underlying problem for the marketing services industry is it has lost sight of its real customer. It has confused the person who pays the bills (the client) with the person who stumps up the cash (‘the consumer’, who pays covers the cost of the bill when he or she buys a product or service).

Clients and ‘consumers’ have different objectives when they go to market. The client’s prime concern is the search for (profitable) customers. The buyer’s prime concern is the search for best value.

The output of the marketing services industry – 30 second TV spots, junk mail and so on – is designed solely to pursue sellers’ purposes. Buyers’ purposes go unaddressed, even though buyers are actually footing the bill.

To test this thesis out, just ask yourself this. If junk mail or 30 second TV spots were products like any other – in other words, if they were purchased or not purchased according to buyers’ perceptions of the value they deliver – how big would the industry be then?

Alan Mitchell

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AlanMitchell Advertising, Marketing

Emotion is a resource marketers use to drive sales of their products.

By adding a layer of ‘emotional added value’ to the functional benefits offered by their products and services, marketers hope to persuade consumers to buy more, more regularly, at a higher price.

Marketers see human beings’ emotions as a potential resource for the firm – as ‘triggers’ to be pulled and ‘buttons’ to be pressed to ‘build loyalty’ to their brands – not as a potential source of value to the people feeling these emotions.

Marketers’ actual ability to corral and deploy peoples’ emotions in favour of their brands has never been as strong as their ability to use information or grab attention. So we’re likely to see less change here.

But change there will be. The attempt to corral peoples’ emotions as a resource for brands will become increasingly despised and resisted, and personal emotional fulfilment will emerge as part of the commercial agenda.

Emotional fulfilment was always central to individuals’ agendas anyway. But, just as making the most of individuals’ information and attention are part of the buyer-centric agenda, so helping individuals make the most of their emotional lives will be an important contribution of certain types of person-centric business.

Alan Mitchell

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AlanMitchell Advertising, Branding, Marketing

Attention is a resource marketers use to drive sales of their products.

They use advertising and other marketing devices to draw attention to their offerings, remain top of mind and influence preferences, choices and behaviours.

Marketers treat attention as a potential resource for the firm, not as a potential source of value to the attention holder.

The media makes its money by trading in consumers’ attention; by selling it on to advertisers. But as information overload sets in the ‘price’ of attention is rising. And new technologies are enabling individuals to filter, edit and specify what they pay attention to. Power is shifting from the media owner to the attention owner.

This means the marriage between media and marketing is coming to an end. ‘Return on attention’ – creating value for the attention holder – is the emerging attention agenda.

Alan Mitchell

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AlanMitchell Advertising, Branding, Marketing