Marketing to our Emotions
Long ago, I read Dale Carnegie's How to Win Friends & Influence People, a book that I think should be required reading for all managers and marketers. The one lesson from the book that remained with me for all of these years, was a reminder that although we like to think of ourselves as rational decision-makers, we are first and foremost emotional beings.
In finishing my reading of Jonah Lehrer's How We Decide, which will be a new required book for my graduate students, I was reminded of a couple of important ways in which emotions override logic in decision-making:
Loss Aversion. The fear of loss is more powerful than the appeal of a gain, so powerful that often times it makes us make irrational decisions. To prove this principle, Lehrer discusses several studies and experiments involving investments. It has been proven over the past seven decades that stocks outperform bonds almost 12 to 1, leading one to question why bonds are so popular. In the early 1950s, an economist named Harry Markowitz won the Nobel Prize for developing an equation for the best investment ratio to ensure optimum performance. However, when it came time to implement his own theory, which supported heavier investments in stocks, he decided it was too risky and invested in stocks and bonds equally. In applying this principle to the performing arts, one could infer that the most powerful marketing message would be a message that demonstrated how one could avoid a loss (instead of acquiring a gain). For example: "Tickets selling out fast! Select dates still available. Don't be left out in the cold--call today!"
Expectation of Price. Arts marketing lore has it that price can affect one's perceived value of a brand. The thought is that selling tickets at a lower price will devalue the experience. According to Lehrer, there is some wisdom to this theory. In his book, he discusses a wine tasting experiment at Stanford. In front of a panel, scientists placed five bottles of wine ranging from $5 to $90, and the panelists were told that each bottle contained a different wine. However, there were only three types of wine, so two types were repeated (actually the $5 wine was placed in the $5 bottle and the $45 bottle). Even though the $5 and $45 bottle contained the exact same wine, the $45 bottle was considered far superior. The scientists followed up with another experiment, this time not listing any of the prices. When the taste test was executed completely blind, the cheapest wine got the highest rating of the group. Using the expectation of price to our advantage, wouldn't it be more beneficial to set the prices of our products a little higher (thereby establishing a higher perceived worth), and then discount if need be, allowing the customer to think that they are getting a bargain? Which is a great segue to...
The Anchoring Effect. Lehrer contends that a meaningless anchor--in many cases a contrived number--can have a strong impact on one's decision-making habits. To bolster his case, he describes a process that most of us are all too familiar with. When purchasing a car, we might first be drawn to the sticker price, even though most of us know that almost no one pays the actual price listed. That's because the sticker price is an anchor which allows the car dealership to sell a car at the actual price and make it look like a deal to the consumer. We leave the dealer thinking we just got a $20,000 car for a few thousand dollars less, when in actuality, we paid what the dealer was hoping for or else we would have never driven the car off the lot. So in our lives, if we need the average ticket price to be $50.00, why not set the price a little higher and discount so that our product's perceived quality is higher and the consumer walks away thinking they got a deal?
The Power of the Personalized One. Good fundraisers use this emotional quirk of our brains all the time. Lehrer examines a couple of experiments by Paul Slovic, a psychologist at the University of Oregon. In his experiment, Slovic shows a group of people a photo of a specific starving child while telling that child's story. Afterward, he asks for a donation to a charity designed to address starvation. For a different group, he provides statistics about starvation throughout Africa--numbers that illustrate the staggering size of the problem, and then he asks for a donation. The funds raised by the second group were 50% less than the first. The lesson -- causes need to be personified and at a scale where a person believes he or she can have an impact. In our daily lives, having a specific child tell how your organization's programming affected them could be more impactful than even the most compelling statistics.
Although not written for marketers or the arts, I would encourage everyone to read Jonah Lehrer's How We Decide. On average I tend to read a book about once a week, and I have found How We Decide to be one of the most challenging and intriguing reads I have had in a very long time.
In finishing my reading of Jonah Lehrer's How We Decide, which will be a new required book for my graduate students, I was reminded of a couple of important ways in which emotions override logic in decision-making:
Loss Aversion. The fear of loss is more powerful than the appeal of a gain, so powerful that often times it makes us make irrational decisions. To prove this principle, Lehrer discusses several studies and experiments involving investments. It has been proven over the past seven decades that stocks outperform bonds almost 12 to 1, leading one to question why bonds are so popular. In the early 1950s, an economist named Harry Markowitz won the Nobel Prize for developing an equation for the best investment ratio to ensure optimum performance. However, when it came time to implement his own theory, which supported heavier investments in stocks, he decided it was too risky and invested in stocks and bonds equally. In applying this principle to the performing arts, one could infer that the most powerful marketing message would be a message that demonstrated how one could avoid a loss (instead of acquiring a gain). For example: "Tickets selling out fast! Select dates still available. Don't be left out in the cold--call today!"
Expectation of Price. Arts marketing lore has it that price can affect one's perceived value of a brand. The thought is that selling tickets at a lower price will devalue the experience. According to Lehrer, there is some wisdom to this theory. In his book, he discusses a wine tasting experiment at Stanford. In front of a panel, scientists placed five bottles of wine ranging from $5 to $90, and the panelists were told that each bottle contained a different wine. However, there were only three types of wine, so two types were repeated (actually the $5 wine was placed in the $5 bottle and the $45 bottle). Even though the $5 and $45 bottle contained the exact same wine, the $45 bottle was considered far superior. The scientists followed up with another experiment, this time not listing any of the prices. When the taste test was executed completely blind, the cheapest wine got the highest rating of the group. Using the expectation of price to our advantage, wouldn't it be more beneficial to set the prices of our products a little higher (thereby establishing a higher perceived worth), and then discount if need be, allowing the customer to think that they are getting a bargain? Which is a great segue to...
The Anchoring Effect. Lehrer contends that a meaningless anchor--in many cases a contrived number--can have a strong impact on one's decision-making habits. To bolster his case, he describes a process that most of us are all too familiar with. When purchasing a car, we might first be drawn to the sticker price, even though most of us know that almost no one pays the actual price listed. That's because the sticker price is an anchor which allows the car dealership to sell a car at the actual price and make it look like a deal to the consumer. We leave the dealer thinking we just got a $20,000 car for a few thousand dollars less, when in actuality, we paid what the dealer was hoping for or else we would have never driven the car off the lot. So in our lives, if we need the average ticket price to be $50.00, why not set the price a little higher and discount so that our product's perceived quality is higher and the consumer walks away thinking they got a deal?
The Power of the Personalized One. Good fundraisers use this emotional quirk of our brains all the time. Lehrer examines a couple of experiments by Paul Slovic, a psychologist at the University of Oregon. In his experiment, Slovic shows a group of people a photo of a specific starving child while telling that child's story. Afterward, he asks for a donation to a charity designed to address starvation. For a different group, he provides statistics about starvation throughout Africa--numbers that illustrate the staggering size of the problem, and then he asks for a donation. The funds raised by the second group were 50% less than the first. The lesson -- causes need to be personified and at a scale where a person believes he or she can have an impact. In our daily lives, having a specific child tell how your organization's programming affected them could be more impactful than even the most compelling statistics.
Although not written for marketers or the arts, I would encourage everyone to read Jonah Lehrer's How We Decide. On average I tend to read a book about once a week, and I have found How We Decide to be one of the most challenging and intriguing reads I have had in a very long time.
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