Mascara, Apple and the limits of rationality: A behavioural economist’s take on marketing

The theory and application of economics: a vague mystery to most, but a highly rigorous and mathematical discipline to a select few.

Economists have weighed in on many things: from the apples vs. oranges debate, to why China produces more clothing than the USA.

But what do economists have to say about the application of marketing?

Our economic consultant Jennifer Leslie-Barrett explores.

Mascara, Apple and the limits of rationality: A behavioural economist’s take on marketing

As an Economic Consultant I became frustrated with the strict assumptions placed on individuals’ preferences, and the concept of rationality. Mostly my frustration came from the knowledge that I myself was anything but rational.

Any woman who has ever gone to buy a replacement mascara and found herself coming home with the mascara, an unwanted lipstick and the piece of marketing genius that is the gift with purchase will understand what I’m getting at. I can’t begin to tell you how many mystery day/night creams have sat in my bathroom cabinet for a year before finally being thrown out. But economics says that we should know our preferences, we should be able to see what our future selves will want, and is tragically quiet on the subject of the little buzz of happiness I get leaving the store with my bag of mystery products.

Is mascara a rational purchase? Maybe.

You may wonder why, at this point, I didn’t just leave the lucrative field of economic consultancy and accept that rationality and I were not a good mix.  By some happy chance in my search for an island getaway I ended up at a conference on behavioural economics (it also met my criteria of free cocktails).

I found that this area of economics was able to explain almost all of the supposedly irrational behaviour I had observed in myself, and to analyse it and consider the consequences in an economics framework. Marketers have informally known behavioural economics for far longer than economists. But by taking advantage of the systematic study of peoples’ irrationality, we can use this knowledge to enhance brands. Behavioural economics is a very wide field, so for now I’ll just outline one of the key concepts, which is already used in marketing, but which we can take advantage of more effectively by having a better understanding.

The economics of Apple: What's your reference point?

Reference dependent preferences

Basically this says that individuals are not merely risk averse. They are in fact loss averse, relative to some mental reference point. What this means is that if we are able to incorporate our product into the customer’s reference point, their loss aversion will make them unwilling to leave the store without the product.

Apple takes advantage of this phenomenon. Mac stores are designed such that customers are able to use the product in the store. The customer incorporates the product into their reference point, and does not want to face the loss of leaving the store without it.  An action as simple as getting a customer to try on an item of clothing or jewellery begins the process of adapting their reference point.

But we can take advantage of reference dependent preferences to a greater extent than just introducing a product into the customer’s reference point. The aim of any effective campaign should be to incorporate your brand into the customer’s reference point.  If you can, customers will feel attached to your brand and be unwilling to leave the store without it.

<< Jennifer Leslie-Barrett

Do you have what it takes to answer The AnthonySchumann5?

The AnthonySchumann 5.

5 questions which provide a window into the minds of some leading thinkers, creatives, and experts.

So far two people have answered the questions, our very own Jules and freelance creative Eliza Carmen.

But for our next installment, we are looking to feature somebody from outside AnthonySchumann.

Do you have what it takes?

We are looking to feature someone with creativity, insight and flair as well as a strong passion for what they do.

If this sounds like you, send us a tweet or a DM via our twitter account, or get in contact through this blog.

We’ll also feature your website or blog on Designing Tomorrow.

…

Looking forward to hearing from you.

// Alec Schumann

5 reasons why your brand’s Facebook page needs a ‘dislike’ button

Facebook.  Just about everybody is on it.

Consequently, many firms are joining the ever expanding and evolving social networking platform to put their brands where their current  and potential customers are.

Typically the goal here is to use Facebook to encourage consumers to positively engage with your brand, share content with their friends, and generally ‘do the leg work’ of traditional marketing – but with a much higher level of interactivity and often at a lower cost.

A common way that the success of Facebook campaigns is measured is through the amount of ‘likes’ it gets.  If a consumer ‘likes’ your page, it typically shows up on their profile page and in their public newsfeed, promoting their friends to see it.

‘Likes’ also provide feedback  about brands and marketing campaigns, and provide a simple quantitative measure of success.

But whilst it’s always valuable to know who likes your brand, in many cases it would be equally valuable to know who dislikes your brand.

So what about a ‘dislike’ button? And why would it be valuable for your brand?

Alec looks at 5 surprising ways in which your brand could benefit from a ‘dislike’ button.

1. Gain a better understanding of marketing effectiveness

What do you Dislike?

Your brand might have 1,000 likes.  Great.  But in reality it might also have 2,000 ‘dislikes’ which are essentially invisible.  Therefore without a way to track this via a dislike button, you might be inflating the success of your brand and its marketing campaigns.

Therefore, a ‘dislike’ button would facilitate a more accurate and accountable net measurement (i.e. likes minus dislikes), rather than just a gross measurement (total likes) of campaign effectiveness.

2. Get to know who doesn’t like you

A great deal of marketing research, although valuable, is about discovering, understanding and profiling who likes your brand and regularly purchases it in, thus allowing you to better sell your brand.

However, it can be equally as valuable (if not more so) to better understand the people actively dislike like your brand.  It would enable you to more clearly define your target market and may highlight ways to improve your product or service.

3. Recover dissatisfied customers

A ‘dislike’ button may highlight customers who have had a bad experience and require some feedback from your firm.  Synch your Facebook page with your loyalty database and you have a ready-made list of high traffic customers who may now ‘dislike’ your brand, without lodging an official complaint.

This would give your firm an opportunity to recover dissatisfied customers.

4. Novel ways to connect with and surprise customers

Consumers who click the ‘dislike’ button would demonstrate that are aware of and to some extent, engaged with your brand.  In many ways a lot of the hard work is done.  Now you just have to provide a reason for the consumer of turn their frown upside down.

What about sending a surprise voucher to all the customers that ‘dislike’ your brand? Crazy?  Perhaps, but it would certainly turn some heads and maybe convince some non-believers to try your brand for the first time or give it a second chance.

5. Embrace your brand’s enemies

The "us against them" nature of brand loyalty: The more 'dislikes' the better

This may not be effective for every brand, but for some brands it would foster loyalty amongst supporters to have a vocal and visible crowd who dislike your brand.  Many brands thrive on having enemies and a ‘dislike’ button would be a way to identify this common enemy.

Think sporting teams for example: Manchester United, the New York Yankees, the LA Lakers, the Dallas Cowboys and the Collingwood Magpies, are some iconic brands which thrive on the love/hate mentality of their respective marketplaces , whilst encouraging an “everybody against us” mantra amongst their fans.

Thus, they are examples of brands which would benefit immensely from thousands, if not millions, of dislikes.  And if your brand thrives on a common enemy, a ‘dislike’ button could be the best thing Facebook has done for your brand.

…

So what do you think?  Feel free to let us know if you ‘like’ or ‘dislike’ this article.

// Alec Schumann

Branding: experiential marketing on caffeine

How do you take your coffee?

Hot?  In a paper cup?  Well if you take it takeaway read on.

Coffee is the undisputed global leader of hot beverage.  Consumed in the home, workplace and in our social lives, it is arguably the fuel of our economy.  It is unsurprising to observe a strong correlation between an increase in coffee consumption and economic growth in many developed nations.  Don’t believe me?  Well observe the below graphic*.

Global coffee consumption: Coffee clearly leads to economic growth

If you take a walk through your local city you will likely pass by many coffee shops, such as: the large franchises (often inhabited with families with children), those attached to cafes (visited by the type people go on that awkward first date) and the more boutique, niche  stores (typically inhabited by hipsters – think skinny jeans, sharp haircuts and mustaches).  (For further reading on coffee and image see here).

The Hipster: "effortlessly cool" or “tenaciously passé”?

But why does one always seem busier than the others?  The actual coffee? Mass advertising campaigns?  Caffeine dependency?  Perhaps, but it is unlikely.

Well then why do people make a particular shop part of their daily ritual recommend it to their friends?

Takeaway coffee is an industry in which the seemingly small things often have the most impact, working together to creating a brand experience which gives outlets a personality and point of difference from the myriad of others, which essentially sell the same product – hot, bitter, brown, and caffeinated liquid (or you ask Levi, a lukewarm decaf with three sugars, a twist of honey and frothy soy milk).

It may be a cup of rubbish, but the experience keeps you coming back

Rubbish? Well consider some of the small questions which can differentiate one takeaway coffee place from another simply on experience.

Do the barristers remember your name?  Your preferred type of coffee?  Will they make friendly, yet meaningful small talk?  Do “your type” of people go there?

Does the coffee shop have nice takeaway cups?  Would they spot you a free coffee if you are out of change?

The answers to these seemingly small questions are infinitely more important to consumers as opposed to how much the firm spends on advertising.

So what does this mean for your brand?

Well the insight here is that the small things can often have a significant impact.  Want to increase the experience consumers have with your brand, thus driving revenue and all those tangible things that your CFO is riding you about?  Well maybe before launching a multi-million dollar advertising campaign, commit to remembering what type of coffee each of your clients take.  These small things will help create an experience that keeps them coming back.

// Alec Schumann (long black, no sugar)

*This is a potentially risky argument (everyone knows correlation doesn’t equal causation!), however it supports the claim I was making.

…

In the next installment of his series on image, Ted Anthony will take a look at fad marketing and the rise and fall (and annoyingly cyclical return) of the hipster.

Stay tuned.

Brand Adaptation: lessons from Nicolas Cage

In recent some blog posts, I have stressed the importance of staying consistent to your brand’s core message.  However, can your brand be successful if it does the opposite?  Can your brand be successful if it constantly changes and is often indistinguishable from its previous iteration?  For inspiration, let us turn to the often contested, but always brilliant, career of Nicolas Cage.

In his next role Nicolas Cage will portray a deaf librarian who travels back to the ice age to battle dinosaurs and space monkeys in order to save his son who has been kidnapped by pirates.

Nicolas Cage might be Hollywood’s most diverse and successful “brand”.  While the first point of this claim can hardly be contended, the second certainly is.  Whilst became the fifth youngest actor ever to win the Academy Award for Best Actor (in Leaving Las Vegas), the past decade in particular decade has seen him take on a wide variety of often controversial roles with fearless abandon – and has been met with equal servings of praise and criticism.

As a “brand” he stands apart from his contemporaries, who often stick to relatively safe and similar roles.  Who else but Cage would have stepped into the shoes of Harvey Keitel’s Bad Lieutenant – the crack smoking, heroin shooting and publically masturbating cop – following the portrayal the likeable treasure hunter in the family friendly National Treasure series?

Perceptually mapping the career of Nicolas Cage: via http://www.theshiznit.co.uk

According to Roger Ebert, he Cage commits himself “with every atom” to each character, no matter how improbable his character is.  Whether portraying suicidal alcoholic (Leaving Las Vegas), a heroic fire fighter (World Trade Center) or a muscle car driving badass who breaks out of hell to save his granddaughter who has been kidnapped by a satanic cult (Drive Angry 3D) Cage always stays in character.

However although his performances often puzzle critics and the public alike he remains one of Hollywood’s highest paid and most bankable actors, earning $40 million in 2009.  Clearly Cage is doing something right.  But what is the message?  How can a “brand” stretch and morph across many different areas and still be profitable and receive critical praise?

Well as with all marketing and branding questions there is no simple silver bullet.  The Nicolas Cage “brand” is highly idiosyncratic and is underpinned by an exceptional level of acting ability.  Few, if any, Hollywood actors have been able seamlessly move between diverse roles as Cage does.  Lesser talented actors simply don’t take the risk, or fail trying.

In closing, the simple message might be if your brand is going out on a limb – go right out on a limb – and commit to whatever path you have chosen with the dedication of Nicolas Cage.

// Alec Schumann

If you need some inspiration,  take a look at the dedication which Cage brings to his roles.  A language warning for the feint of heart…

Make A Milli from co-branding: A Blueprint to make your brand Stronger

Have you ever considered a co-branding strategy for your brand?  No?  Well grab your Rocawear, Nike Airs, mean bucket, an Armadale in the club, couple o’ duckets and couple chicks by your side and read about how hip-hop can help guide a co-branding strategy for your brand.

Co-branding commonly involves combining two or more well-known brands into a single product, which has the potential to achieve a “best of both world’s synergy” by capitalizing on the unique strengths of each contributing brand (Leuthesser et al. 2003 p 36).

Co-branding is an extremely popular method of promotion and product design in the hip-hop industry – typified by 2011’s two most hotly anticipated releases: Lil Wayne’s Tha Carter IV and Jay-Z and Kanye West’s Watch the Thorne.

Weezy’s new LP for instance, does not just promote the Lil Wayne brand.  Rather it is an impressive exemplification of co-branding, featuring guest appearances from a who’s who of up-coming and established hip-hop ‘brands’: Cory Gunz, Drake, T-Pain, Rick Ross, John Legend, Jadakiss, Bun B, Nas, Shyne, Busta Rhymes, Bruno Mars, Kevin Rudolf and Birdman.

Lil Wayne: his brand value is so high it can vomit on a comet

However, co-branding is not embraced in a lot of industries.  You simply can’t walk into KFC and buy a Big Mac or phone Dell to purchase an iMac.  Evidently a lot of firms seem focused on promoting their own brand whilst attempting to devalue so called competing brands.  (Does this sound your your company?).  Do you think of other brands in your category as competitors, or possible collaborators?

Jigga and Yeezy are hip-hop’s two self-proclaimed, obscenely-talented kings.  However, if they were Microsoft and Apple or Coca-Cola and Pepsi, collaboration would be the last thing on their mind.  They would continue to proclaim their sheer awesomeness, but ground such assertions on distinct differences, and attempt to grow their brand and sales relative to the other.

However, it is likely that both the back catalogues of Jay-Z and Kanye will experience a surge in sales due to the success of Watch the Throne.  Thus, their collaboration is an opulent demonstration that two brands, which would be thought of as competitors in most other industries, can combine to successfully and grow both the broad hip-hop category and their personal brands simultaneously.

Hova and Yeezy: Not businessmen, they’re a business… man.

It is likely that most hip-hop fans don’t buy only Jay-Z or Kanye albums.  Rather, it is likely that the buy both.  Furthermore, people don’t simply buy McDonalds OR KFC, Coca-Cola OR Pepsi or Apple OR Microsoft products but likely buy both.  Although unprecedented, all of the brand in these examples may benefit from an effective co-branding strategy, which would grow the category and the specific brands.

Thus, co-branding could be an effective method of promotion and/or product design for your brand which, in tandem with a competitor, could help grow both the broad product category and your brand.

Let us know if your interested in using hip-hop to guide some outside the box thinking to make Mo Money* for your brand.

// Alec Schumann

*which may lead to Mo Problems – but that’s another issue for another day.

Insight: Coffee & Image

Why is a “skinny cap” less gay than a “skinny latte”, and why are we afraid to say “skinny cappuccino”? Ted Anthony explores.

This guy ordered a skinny latte...

Harvest Barista: Hi Mr Schumann, regular skinny cap no chocolate?

Ted: On the ball as always Giovanni.

Barista: Got it! (proceeds to make a rich and full bodied coffee)

Ted: (pays three dollars) Thanks Giovanni, have a good day

This is 8:00 am every week day for Ted Anthony. You maybe thinking “Ted, isn’t a cappuccino without chocolate a latte? Why on earth didn’t you just order that?” It’s a valid question. Indeed, a cappuccino without chocolate is indeed very much like a latte (my good friend Jimmy McNobbleson- part time new-business consultant for Anothony Schumann- might objectify the matter and argue that in fact the frothiness of each should differentiate, but that is for him to dispute).

The simple fact is, skinny cap sounds better than skinny latte. There is just too much… frothiness in the latter (two uses of the term twice within the space of two sentences). You see, you might think a man whose job it is to conform markets to identify with a brand, product or service might be immune to such crisis of image. But Ted Anthony, quite conversely, is all about image. He (and I am talking in the third person) must embody the image that he imparts on Anthony Schumann and subsequently that of the client. Our clients pay a premium because we are Anthony Schumann and we inhibit the Anthony Schumann image- subtle bravado. So why is a skinny latte not subtle or bravado? And why is a skinny cap both? Quite simply, successive words with alliteration are gay (and I stress I use the new street definition of the word, I am not referring to the queer culture in anyway). Okay, I can already hear the user comments “Ahhhh, Ted, you order a skinny cappuccino and you say successive words with a litteration are gay”. Ummmm, did you ever hear me ordering a skinny cappuccino? No, I ordered a skinny cap (no chocolate). That is not gay. Anthony Schumann is not gay (and not homophobic, see clarification above). 

There is a huge difference between the ordering of a skinny cap and a skinny cappuccino/latte. One is wussy, the other is not. The taste? Some might argue none, but I would argue that there is a huge difference. One tastes like a frothy coffee the other like success. There is so much to a name and the way it is said. Do we get an old, Stephen Fry sounding Englishman as the voice over for a coke ad pronouncing every syllable of “Coc-ca Coll-lla” with unnerving intensity? No, we get a young, hip surfer type laconically crooning the word “Coke”, because that’s who the target audience wants to be dictated to by. In the same way, to people want to hear a man of Ted Anthony’s status asking for a skinny latte? (just typing it makes me snicker, imagine the reaction at the coffee shop). The fact is, while they might laugh to themselves at the time, when they go away to think about it they’re just going to think its plain uncool. Disturbingly uncool. Why would a man concerned about his figure also order a frothy coffee, why should he get the best of both worlds? Well, the truth is I do, yet no one realises that I do.

But sshhh, don’t tell anyone. Its our little secret.

-Ted.

“Han shot first!!!” Your brand doesn’t belong to you

Your brand belongs to these people

Recently the Internet has been abuzz with the imminent release and most recent update of the Star Wars saga.  But before you hope your Millennium Falcon and head to Mos Eisely to pick up a copy, read about what your brand can learn from Star Wars.

Star Wars is a classic example of a brand which no longer really belongs to its creators.  Although Han, Luke, Darth and Jar Jar* were conceived inside the mind of George Lucas, they no longer really belong to him or 20^th Century Fox.  Rather, they belong to a passionate community of geeks, tragics, and everyday people who feel a strong sense of ownership over the intergalactic space opera and its various heroes and villains.

Sadly, Star Wars fans (clearly some of the most committed and loyal fans too) have been abused by a company that has demonstrated their desire to exploit the brand at every touchpoint imaginable.  Don’t believe me? Well you should – the sheer quantity of idiotic Star Wars merchandise is enough to make James Earl Jones cry.  Seriously, the iconic Darth Vader mask was never supposed to adorn your crotch.

"Join me, and together we can rule the galaxy as father and son"

Furthermore, George Lucas seems intent on changing the ‘core product’ in a way which fundamentally alters its meaning.  For example, various updates to the original trilogy have seen Darth Vader shouting “No. Noooooo!” just before he stops the Emperor from torturing Luke to death in Jedi.  And (in)famously, altering the Mos Eisley cantina scene to make it appear like Han Solo shoots Greedo after the bounty hunter gets a shot in himself.

These are not simply aesthetic changes to ‘update’ the Star Wares brand to keep pace with the marketplace.  Rather they were perceived by the brand’s loyal community to be “a great disturbance” – profoundly altering the way in which their heroes are portrayed.  Han isn’t a wimp; he’s a cavalier space cowboy who definitely shot first.

Thus, the decision to make such seismic changes to the films indicate either the lack of knowledge that the Star Wars brand and all its mythology doesn’t really belong to the organization anymore, or simply a brazen disregard for the staunchly loyal Star War fan base.

So what does this mean for your brand?  Again, it comes down to consistency with your core message and understanding that this core message is likely to become a strong part of who your customers are.  And making core changes to your brand in a way in which fundamentally alters its meaning is an extremely risky proposition.

// Alec Schumann

*On a serious note, extensive scientific research has demonstrated that Jar Jar Binks is the worst character in the history of cinema.

Building bran equity: the importance of being regular

Bran-based cereals have long been marketed as a convenient and tasty way to promote good digestive health.  Furthermore, they have as also been suggested as an effective method of breaking the vicious cycle of dependency on laxative drugs (Do you think this is a trivial issue? Well the medical literature would disagree*).

This consistency in their message has seen cereals like All-Bran carve out a niche in the marketplace as a brand which addresses real consumer needs, such as balancing the need for a full breakfast and the need to maintain a regular pattern of bowel movements, in a socially acceptable way.

All-Bran: even the Romans knew it keeps you regular

However, relatively recent advertising suggests that All-Bran may be trying to move away from its core value proposition and dominant perception in the marketplace by  attempting to branch out with their communications to reach consumers who may not like the taste, or have some perception of social risk in purchase situations involving All-Bran.  (Seriously, it’s not like the cashier thinks you are constipated if you are buying All-Bran and rushes to tell all their friends…).

Although, these types of branding strategies are relatively common, they risk diluting the strength of the brand by confusing customers through re-positioning the brand and changing its value proposition.  Consequently, All-Brand’s move into the ‘flavour’ category might be risky.  Think not?  Well how many cereals can you name that compete on flavour?  And how many can you name that compete on their ability to send you to the bathroom at regular and predictable intervals?  I thought so.  (If you answer to the latter was higher than the former I suggest you put down your copy of Digestive Endoscopy).

Therefore, this strategy may see All-Bran damage their equity accrued to their brand through moving away from a well-established niche value proposition they had created, to a much larger and riskier segment of the marketplace.  The brand risks becoming as stagnant as those consumers which it has traditionally tried to relieve.

So what does this mean for your brand?  The message here is essentially be consistent and be regular.  If your brand has established a niche image, don’t be ashamed of it and try to change it – embrace it.  And if you are trying to update your message to meet the new marketplace, consider updating the medium rather than the core message.  For instance instead of a new message, All-Bran might consider a new medium, such as an online forum which encourages consumers to exchange stories of how All-Bran has kept their lives regular and dependable.

Something to ponder the next time you are doing some serious thinking about changing your branding strategy.

//Alec Schumann

*Glia, A., Lindberg, G., Nilsson, L. H., Mihocsa, L. & Akerlund, J. E. 1999. Clinical Value of Symptom Assessment In Patients With Constipation. Diseases of The Colon & Rectum, 42, 1401-1408.

Can your brand reproduce? Lessons from insect societies

Brand extensions are one of the most common strategies which firms use to move into new markets by leveraging the equity they have accrued to their original brand.  In fact, launching brand extensions have become much more popular that completely new brands, particularly in fast moving consumer goods industries.

However, the strategy can also be dangerous if not handled correctly and there are numerous examples of brand extensions that have failed spectacularly, causing both financial losses and  damage to the original brand (Hooters Air anyone??)

Hooters Air: A brand extension which flew to close to the sun

Unsurprisingly, clients will often ask me: “Alec, we want to extend our brand, but how do we do it?  What is the best approach to take?  What works and why?”

A typical consultancy will encourage the client to maximize the “fit” between the original brand and the new brand and to make sure that customers perceive that the extension requires some expertise to make.

Bored yet?

I am.

In contrast to this out-dated paradigm, a new approach is needed, one which uses an interdisciplinary approach which allows us to look at a familiar problem with a unique strategy.

Thus, to address this question I turn to insect societies to answer this question.

…

In insect societies, only a few individual members of a colony can reproduce, whereas the other the other members of the colony have their reproductive capabilities suppressed.  Similarly, there are a few strong brands which consistently reproduce through various brand and line extensions.  Apple for instance with ipod, iphone, imac, itouch.  It won’t be long before we have an i-something for everything we ever need.

This image speaks for itself really

Extending this analogy further, a strong brand represses the reproductive capabilities of other brands. Apple’s well publicized lawsuit to prevent Samsung’s move into the tablet market with their Galaxy Tab is a striking demonstration of this phenomenon.

In insect societies, the ability to reproduce is generally a predetermined choice. However, this is not the case in the “brand” world.  What is the causal relationship between reproduction and strength in the context of brands?  Which comes first and does one concept cause the other?  In the case of Apple, does its strength lead to its reproductions, or has its reproductions lead to its strength?  And what does this mean for your brand extension?

A tough question.

…

However, it is something which our research team is currently considering at AnthonySchumann.  Initial insight suggests that the answer is likely a combination of both pathways and it is critical to consider feedback loops.

Generally, a brand must achieve some strength before it can extend, with these subsequent extensions serving to increase the strength of the brand.

…

So where is your brand?  Do you want it to be stronger?  Or to reproduce?

Let us know if we can help.

// Alec Schumann