Wednesday, November 25, 2009

Who will be the CMO’s most trusted advisor?

The business of marketing is moving quickly away from a one-way, linear process, where communications start with the Chief Marketing Officer (CMO) and end up with the customer or consumer.  With the rise of digital and social media, we have moved to an environment where marketing is more complicated and shared across a number of disciplines within the client organization, requiring an increasing number of internal and external channels, different stakeholders and advocates, as well as multi-level conversations.  
The CMO must also respond to increasing consumer demands from brands. Consumers want great products, services and experiences. But they also want brands to do good deeds for people and the planet, and provide education, entertainment, information and the ability to connect with other like-minded people.
While this is an incredibly exciting time, many marketing people are struggling to keep up the market changes.  An increasing number of influencers and advisors are moving in to help fill the gap and become the CMO's top advisor.  Some of these players are existing partners including Brand Consultancies, Creative Agencies, Digital Agencies, Media Agencies, Public Relations companies and Research Houses.  Others are new players, including Business Process Consultants and Internet Companies such as Google and Microsoft.
Given a backdrop of increasing complexity and expectations, who will become the most trusted advisor(s) to the CMO?  The winner will almost certainly be the one who is able to serve the CMO's needs – as outlined below – in a manner better, faster, cheaper and more comprehensively,  than others. Who is best positioned to do this?
1. Brilliant Ideas and Thought leadership
Trusted marketing advisers need to be inspirational, presenting big, inspiring ideas to build businesses in these changing times. To do this the need to involve both the best people in their organizations and to bring in outside experts in relevant fields e.g., youth experts, authors, editors, film makers…. who have both a vision of the future and the means to help marketers achieve their objectives and goals.  The leaders of these advisory companies must share their time and skills with both their key clients and the people who work in their organizations.
Apparent leaders: Creative agencies and Brand Planners tend to be strong in this area of "Big ideas" so they have an advantage here. PR agencies also excel at bringing outside advocates in to support brands and marketers.  Business Process Consultants have great ideas on how to run business more efficiently but are not necessary attuned to consumers. In short, no one has a corner on thought leadership, and many will compete in this arena.  
2. Unique insights
Trusted marketing advisors must provide unique insights into how to build brand affinity and drive sales and repeat purchases. These insights will come through:
  • Analytics of existing data. (Most brands have a wealth of data. The real challenge is how to draw insights from this data.)
  • Proprietary Research related to the specific target groups and brand industry
  • Round-table Discussions where the marketing partner brings in a number of clients and experts to tackle specific topics that have shared interests. 
Apparent leaders:  Research agencies obviously have a wealth of information from dealing with many clients and have advantages here. Media agencies also have strong target group data and have done research into Social Media which gives them an advantage here. In addition, the top PR agencies have released studies on Advocacy, CSR and Trust, which give them strength here. Digital agencies and Internet companies also bring a wealth of data to uncover insights and future trends.   Finally creative agencies are often able to combine data with qualitative thinking to provide insights. So a number of players are competing for dominance in this area and the CMO and Brand should be able to benefit from this competition.  
3. "Whole brain" thinking
Trusted marketing advisors need to bring both creative and analytical thinking to support their recommendations. While in the recent past it was possible to be strong with "right brained" creative thinking or excel at "left brained" rational support, today's market requires both sides of the brain to work together. So the brilliant idea is not just inspirational to some but has been analytically proven to have broad appeal. Marketing investments needs to both "smart" and "safe", meaning they will deliver a proven ROI.
Apparent leaders:  This area does not seem to have a strong leader as agencies tend to be either creative or analytical.  An "integrative" solution is not widely available suggesting opportunities for a new type of agency.
4. Financial acumen
Trusted marketing advisors need to better understand the financial elements of their clients business and present ideas from the position of driving bottom line results.  They need to demonstrate to both the CMO and its Finance and Procurement divisions, the direct relationship between spending and results.  Financial acumen can be improved by involving financial people in the account management function.
Apparent leaders: The media agencies have strength here because they work with thin margins and tend to have stronger finance functions.  However all agencies can and should think more about the broader context of client financials.
5. Internal communications
Trusted marketing advisors should help their clients align the "cultures" of their organizations (i.e., the people who work on the brands) to the Vision and Image of the brand.  A key reason for this is that brands are judged more on what they do versus what they say. So it's increasingly important to involve more players in the marketing decisions across organization – for brands are only as strong as their weakest links.  Increasingly organizations will have to live up to their brand promises or be held accountable through the transparency provided by the Internet.  
Apparent leaders: Business Process Consultants and Branding Consultancies have  strength in this area, as they help advise clients on structuring organizations to more effectively and efficiently delivery products, services and experiences, and in expressing a unique "Behavior identity".  
6. "Added value"
Trusted marketing advisors will have to generate ways to help the CMO provide added value to consumers beyond great products, services and experiences. They will have to develop ways for brands to do good deeds for people and the planet in addition to being profitable. They will also need to help brands and CMO's share their know-how in their particular expertise to educate, entertain, inform and help consumers connect with other like-minded people.
Apparent leaders: The PR agencies have strength in this area because much of this involves brand advocates. Further, there are a number of CSR and Sustainability consultancies that can help companies with the "Triple bottom line" of profit, people and planet. However, there is no one group that has an edge in this area for added value is tied closely with consumer insights.
7. Content generation and continuous communications
Trusted marketing advisors need to help develop on-going content to keep up with the continuous conversations that revolve around brands. Consumers interact with brands on a 24×7x365 basis. They are increasingly demanding fresh content and two-way communications, with the result that the model of campaigns is now obsolete.
Apparent leaders: Digital agencies, retail marketers and PR companies have strengths in continuous communications. That said, digital agencies are probably best at generating on-going content as it has been easiest and cheapest to produce, when compared with traditional communications.
8. Integration
Trusted marketing advisors need to help their clients integrate the specialists from the various disciplines including BTL, brand identity, creative, digital, media, research etc.  Given the huge developments in digital (and particularly search and social media) clients are finding it difficult to manage the complete communications of their brands.
Apparent leaders: While the large holding companies are in the best position to help integrate the various communications disciplines they have not been overly successful in doing this as the individual silos are often fighting for the same portion of the marketing budget. Holding companies still have an edge but need to find better ways to provided integrated services to the CMO.
To conclude, consumer behavior has dramatically changed and placed higher expectations of brands. Companies are also demanding more accountability from the marketing function. As a result, the CMO's job is becoming increasingly complicated.
While this is an exciting time for the CMO, it is difficult to get on top of all the changes in the market place. And the marketing advisors see this time as a chance to increase their position and the trust they earn from the CMO.  But it is not clear which ones are gaining ground in this area.
Until this resolves, the role of the CMO will be to get the best from the varied advisors and to let time, ideas and results decide who will be the most trusted advisor.  

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Wednesday, November 4, 2009

Creativity expert Sir Ken Robinson challenges the way we're educating our children

About this talk
Sir Ken Robinson makes an entertaining and profoundly moving case for creating an education system that nurtures (rather than undermines) creativity. Peppered with humor he makes a case for discovering and nurturing creativity in our children through the educational system.

Good morning. How are you? It's been great, hasn't it? I've been blown away by the whole thing.In fact, I'm leaving. (Laughter) There have been three themes, haven't there, running through the conference, which are relevant to what I want to talk about. One is the extraordinary evidence of human creativity in all of the presentations that we've had and in all of the people here. Just the variety of it and the range of it. The second is thatit's put us in a place where we have no idea what's going to happen, in terms of the future. No ideahow this may play out.

I have an interest in education -- actually, what I find is everybody has an interest in education.Don't you? I find this very interesting. If you're at a dinner party, and you say you work in education --actually, you're not often at dinner parties, frankly, if you work in education. (Laughter) You're not asked. And you're never asked back, curiously. That's strange to me. But if you are, and you say to somebody, you know, they say, "What do you do?"and you say you work in education, you can see the blood run from their face. They're like, "Oh my God," you know, "Why me? My one night out all week." (Laughter) But if you ask about their education, they pin you to the wall. Because it's one of those things that goes deep with people, am I right? Like religion, and money and other things. I have a big interest in education, and I think we all do. We have a huge vested interest in it, partly because it's education that's meant to take us into this future that we can't grasp. If you think of it, children starting school this year will be retiring in 2065. Nobody has a clue -- despite all the expertise that's been on parade for the past four days -- what the world will look like in five years' time. And yet we're meant to be educating them for it. So the unpredictability, I think, is extraordinary.

And the third part of this is that we've all agreed, nonetheless, on the really extraordinary capacities that children have -- their capacities for innovation. I mean, Sirena last night was a marvel, wasn't she? Just seeing what she could do. And she's exceptional, but I think she's not, so to speak,exceptional in the whole of childhood. What you have there is a person of extraordinary dedicationwho found a talent. And my contention is, all kids have tremendous talents. And we squander them, pretty ruthlessly. So I want to talk about education and I want to talk about creativity. My contention is that creativity now is as important in education as literacy, and we should treat it with the same status. (Applause) Thank you. That was it, by the way. Thank you very much. (Laughter) So, 15 minutes left. Well, I was born -- no. (Laughter)

I heard a great story recently -- I love telling it -- of a little girl who was in a drawing lesson. She was sixand she was at the back, drawing, and the teacher said this little girl hardly ever paid attention, and in this drawing lesson she did. The teacher was fascinated and she went over to her and she said, "What are you drawing?" And the girl said, "I'm drawing a picture of God." And the teacher said, "But nobody knows what God looks like." And the girl said, "They will in a minute." (Laughter)

When my son was four in England -- actually he was four everywhere, to be honest. (Laughter) If we're being strict about it, wherever he went, he was four that year. He was in the Nativity play. Do you remember the story? No, it was big. It was a big story. Mel Gibson did the sequel. You may have seen it: "Nativity II." But James got the part of Joseph, which we were thrilled about. We considered this to be one of the lead parts. We had the place crammed full of agents in T-shirts:"James Robinson IS Joseph!" (Laughter) He didn't have to speak, but you know the bit where the three kings come in. They come in bearing gifts, and they bring gold, frankincense and myrhh. This really happened. We were sitting there and I think they just went out of sequence, because we talked to the little boy afterward and we said, "You OK with that?" And he said, "Yeah, why, was that wrong?"They just switched, that was it. Anyway, the three boys came in, four-year-olds with tea towels on their heads, and they put these boxes down, and the first boy said, "I bring you gold." And the second boy said, "I bring you myrhh." And the third boy said, "Frank sent this." (Laughter)

What these things have in common is that kids will take a chance. If they don't know, they'll have a go.Am I right? They're not frightened of being wrong.Now, I don't mean to say that being wrong is the same thing as being creative. What we do know is,if you're not prepared to be wrong, you'll never come up with anything original. If you're not prepared to be wrong. And by the time they get to be adults, most kids have lost that capacity. They have become frightened of being wrong. And we run our companies like this, by the way. We stigmatize mistakes. And we're now runningnational education systems where mistakes are the worst thing you can make. And the result is that we are educating people out of their creative capacities. Picasso once said this: he said that all children are born artists. The problem is to remain an artist as we grow up. I believe this passionately:that we don't grow into creativity, we grow out of it. Or rather, we get educated out if it. So why is this?

I lived in Stratford-on-Avon until about five years ago. In fact, we moved from Stratford to Los Angeles. So you can imagine what a seamless transition that was. (Laughter) Actually, we lived in a place called Snitterfield, just outside Stratford, which is where Shakespeare's father was born. Are you struck by a new thought? I was. You don't think of Shakespeare having a father, do you? Do you? Because you don't think of Shakespeare being a child, do you? Shakespeare being seven? I never thought of it. I mean, he was seven at some point. He was in somebody's English class, wasn't he? How annoying would that be? (Laughter) "Must try harder." Being sent to bed by his dad, you know, to Shakespeare, "Go to bed, now," to William Shakespeare, "and put the pencil down.And stop speaking like that. It's confusing everybody." (Laughter)

Anyway, we moved from Stratford to Los Angeles,and I just want to say a word about the transition, actually. My son didn't want to come. I've got two kids. He's 21 now; my daughter's 16. He didn't want to come to Los Angeles. He loved it, but he had a girlfriend in England. This was the love of his life, Sarah. He'd known her for a month. Mind you, they'd had their fourth anniversary, because it's a long time when you're 16. Anyway, he was really upset on the plane, and he said, "I'll never find another girl like Sarah." And we were rather pleased about that, frankly, because she was the main reason we were leaving the country.(Laughter)

But something strikes you when you move to America and when you travel around the world:every education system on earth has the same hierarchy of subjects. Every one. Doesn't matter where you go. You'd think it would be otherwise, but it isn't. At the top are mathematics and languages, then the humanities, and the bottom are the arts. Everywhere on Earth. And in pretty much every system too, there's a hierarchy within the arts. Art and music are normally given a higher status in schools than drama and dance. There isn't an education system on the planet that teaches dance every day to children the way we teach them mathematics. Why? Why not? I think this is rather important. I think math is very important, but so is dance. Children dance all the time if they're allowed to, we all do. We all have bodies, don't we? Did I miss a meeting?(Laughter) Truthfully, what happens is, as children grow up, we start to educate them progressively from the waist up. And then we focus on their heads. And slightly to one side.

If you were to visit education, as an alien, and say "What's it for, public education?" I think you'd have to conclude -- if you look at the output, who really succeeds by this, who does everything that they should, who gets all the brownie points, who are the winners -- I think you'd have to conclude the whole purpose of public education throughout the world is to produce university professors. Isn't it?They're the people who come out the top. And I used to be one, so there. (Laughter) And I like university professors, but you know, we shouldn't hold them up as the high-water mark of all human achievement. They're just a form of life, another form of life. But they're rather curious, and I say this out of affection for them. There's something curious about professors in my experience -- not all of them, but typically -- they live in their heads.They live up there, and slightly to one side. They're disembodied, you know, in a kind of literal way.They look upon their body as a form of transport for their heads, don't they? (Laughter) It's a way of getting their head to meetings. If you want real evidence of out-of-body experiences, by the way, get yourself along to a residential conference of senior academics, and pop into the discotheque on the final night. (Laughter) And there you will see it, grown men and women writhing uncontrollably, off the beat, waiting until it ends so they can go home and write a paper about it.

Now our education system is predicated on the idea of academic ability. And there's a reason. The whole system was invented -- around the world, there were no public systems of education, really, before the 19th century. They all came into being to meet the needs of industrialism. So the hierarchy is rooted on two ideas. Number one, that the most useful subjects for work are at the top. So you were probably steered benignly away from things at school when you were a kid, things you liked, on the grounds that you would never get a job doing that. Is that right? Don't do music, you're not going to be a musician; don't do art, you won't be an artist. Benign advice -- now, profoundly mistaken. The whole world is engulfed in a revolution. And the second is academic ability, which has really come to dominate our view of intelligence,because the universities designed the system in their image. If you think of it, the whole system of public education around the world is a protracted process of university entrance. And the consequence is that many highly talented, brilliant, creative people think they're not, because the thing they were good at at school wasn't valued, or was actually stigmatized. And I think we can't afford to go on that way.

In the next 30 years, according to UNESCO, more people worldwide will be graduating through education than since the beginning of history. More people, and it's the combination of all the things we've talked about -- technology and its transformation effect on work, and demographyand the huge explosion in population. Suddenly, degrees aren't worth anything. Isn't that true?When I was a student, if you had a degree, you had a job. If you didn't have a job it's because you didn't want one. And I didn't want one, frankly. (Laughter)But now kids with degrees are often heading home to carry on playing video games, because you need an MA where the previous job required a BA, and now you need a PhD for the other. It's a process of academic inflation. And it indicates the whole structure of education is shifting beneath our feet. We need to radically rethink our view of intelligence.

We know three things about intelligence. One, it's diverse. We think about the world in all the waysthat we experience it. We think visually, we think in sound, we think kinesthetically. We think in abstract terms, we think in movement. Secondly, intelligence is dynamic. If you look at the interactions of a human brain, as we heardyesterday from a number of presentations,intelligence is wonderfully interactive. The brain isn't divided into compartments. In fact, creativity -- which I define as the process of having original ideas that have value -- more often than not comes about through the interaction of different disciplinary ways of seeing things.

The brain is intentionally -- by the way, there's a shaft of nerves that joins the two halves of the brain brain called the corpus callosum. It's thicker in women. Following off from Helen yesterday, I think this is probably why women are better at multi-tasking. Because you are, aren't you?There's a raft of research, but I know it from my personal life. If my wife is cooking a meal at home -- which is not often, thankfully. (Laughter) But you know, she's doing -- no, she's good at some things -- but if she's cooking, you know, she's dealing with people on the phone, she's talking to the kids, she's painting the ceiling, she's doing open-heart surgery over here. If I'm cooking, the door is shut, the kids are out, the phone's on the hook, if she comes in I get annoyed. I say, "Terry, please, I'm trying to fry an egg in here. Give me a break." (Laughter) Actually, you know that old philosophical thing, if a tree falls in the forest and nobody hears it, did it happen? Remember that old chestnut? I saw a great t-shirt really recently which said, "If a man speaks his mind in a forest, and no woman hears him, is he still wrong?" (Laughter)

And the third thing about intelligence is, it's distinct. I'm doing a new book at the moment called "Epiphany," which is based on a series ofinterviews with people about how they discoveredtheir talent. I'm fascinated by how people got to be there. It's really prompted by a conversation I hadwith a wonderful woman who maybe most peoplehave never heard of, she's called Gillian Lynne,have you heard of her? Some have. She's a choreographer and everybody knows her work.She did "Cats," and "Phantom of the Opera." She's wonderful. I used to be on the board of the Royal Ballet, in England, as you can see. Anyway, Gillian and I had lunch one day and I said, "Gillian, how'd you get to be a dancer?" And she said it was interesting, when she was at school, she was really hopeless. And the school, in the '30s, wrote to her parents and said, "We think Gillian has a learning disorder." She couldn't concentrate, she was fidgeting. I think now they'd say she had ADHD. Wouldn't you? But this was the 1930s, and ADHD hadn't been invented at this point. It wasn't an available condition. (Laughter) People weren't aware they could have that.

Anyway, she went to see this specialist. So, this oak-paneled room And she was there with her mother, and she was led and sat on a chair at the end, and she sat on her hands for 20 minutes while this man talked to her mother about all the problems Gillian was having at school. And at the end of it -- because she was disturbing people,her homework was always late, and so on, little kid of eight -- in the end, the doctor went and sat next to Gillian and said, "Gillian, I've listened to all these things that your mother's told me, and I need to speak to her privately." He said, "Wait here, we'll be back, we won't be very long." and they went and left her. But as they went out the room, he turned on the radio that was sitting on his desk. And when they got out the room, he said to her mother, "Just stand and watch her." And the minute they left the room, she said, she was on her feet, moving to the music. And they watched for a few minutes and he turned to her mother and said, "Mrs. Lynne, Gillian isn't sick, she's a dancer. Take her to a dance school."

I said, "What happened?" She said, "She did. I can't tell you how wonderful it was. We walked in this room and it was full of people like me. People who couldn't sit still. People who had to move to think." Who had to move to think. They did ballet, they did tap, they did jazz, they did modern, they did contemporary. She was eventually auditioned for the Royal Ballet School, she became a soloist, she had a wonderful career at the Royal Ballet. She eventually graduated from the Royal Ballet School and founded her own company, the Gillian Lynne Dance Company, met Andrew Lloyd Weber. She's been responsible for some of the most successful musical theater productions in history, she's given pleasure to millions, and she's a multi-millionaire. Somebody else might have put her on medication and told her to calm down.

Now, I think -- (Applause) What I think it comes to is this: Al Gore spoke the other night about ecology, and the revolution that was triggered by Rachel Carson. I believe our only hope for the future is to adopt a new conception of human ecology, one in which we start to reconstitute our conception of the richness of human capacity. Our education system has mined our minds in the waythat we strip-mine the earth: for a particular commodity. And for the future, it won't serve us. We have to rethink the fundamental principles on which we're educating our children. There was a wonderful quote by Jonas Salk, who said, "If all the insects were to disappear from the earth, within 50 years all life on Earth would end. If all human beings disappeared from the earth, within 50 years all forms of life would flourish." And he's right.

What TED celebrates is the gift of the human imagination. We have to be careful now that we use this gift wisely, and that we avert some of the scenarios scenarios that we've talked about. And the only way we'll do it is by seeing our creative capacities for the richness they are, and seeingour children for the hope that they are. And our taskis to educate their whole being, so they can face this future. By the way -- we may not see this future,but they will. And our job is to help them make something of it. Thank you very much.

Tuesday, November 3, 2009

Why advertising needs behavioural economics


Campaign, 23 October 2009, 00:00am

Rory Sutherland delves deep into the consumer's psyche to find the subconscious economic drivers of action and choice.

Why is marketing - and, more importantly, the vital study of human behaviour - so little celebrated in the wider world of business? And why have marketers and agencies not fought back against a left-brained business culture, which seems to place human understanding so low on its list of priorities?

In recent years, marketing's models of human behaviour have been mostly naive or self-interested. Every discipline (advertising, DM, online, sales promotion, PR, design) has simply created a model of human persuasion designed to suit whatever proxy measure their own discipline moves most. Just as troublesome, these models date from a pre-digital media age, where commercial communication was largely one way and occurred at the behest of the advertiser, not the consumer.

As a result, agencies and marketers have formed no common philosophy - making it all the harder to put up a united front. Without a coherent world view, it is now assumed that the only way to grow an agency is at the expense of another agency; the only way to grow a discipline is at the expense of another discipline; the only way one medium can grow is at the expense of another. Our Balkanised sector hence spends most of its time in snarky infighting, rather than promoting the value of marketing ideas in general and trying to grow the whole sector.

If not now, when?

Behavioural economics - a decades-old, yet newly fashionable, field of study might help us answer this. It has a vocabulary (unlike that of marketing and brands) that can play in the boardroom or the ministry. It is an area of study that might earn us consideration in the FT and The Economist - and in government policy-making - in a way that simple pleas for creativity won't. Most importantly, it provides us with an intellectual framework, which allows us to better justify (and charge for) the ideas we already generate as well as generate new and better ones.

My interest in this field follows several rest-stops on the road to Damascus.

The first came while reading Nudge, by the University of Chicago economists Dick Thaler and Cass Sunstein. In this groundbreaking book, Thaler describes his idea for the "save more tomorrow pension" - a new pension format designed to appeal to young people, a group who are famously averse to saving. Using the concept of "loss aversion" (qv), Thaler created a pension plan where investors signed up for a pension that costs nothing until they receive a pay rise - at which point a percentage of their pay rise would automatically be directed into their pension fund. By making sure the saver never saw a reduction in his disposable income, the plan was both ingenious and effective: pension contributions among this group were 200 per cent higher than normal.

Why didn't a marketer or an agency come up with this idea?

Possibly because we didn't know about loss aversion. Or, more likely, because we knew of it instinctively - but didn't know what to call it.

But this is only one small example. Below are a few more - large and small. As you will see, behavioural economics is not, in itself, a grand theory. It is, in fact, marvellously scalable - allowing you to ask questions on, for instance, the optimal rate of inflation - or equally to ask why people are prepared to pay such exorbitant prices for cinema popcorn. By understanding and categorising the disparities between actual human behaviour and the theoretical behaviour predicted under the classical economic theory, it can help us improve marketing effectiveness and prevent millions being wasted on activities, which, while ostensibly logical, run contrary to human nature.

The nine examples below are merely an indication of some of the concepts so far revealed in experiments. Significantly, many of these non-rational behaviours affect us unconsciously, and hence will not be revealed by conventional market research.

Loss aversion

People will work harder to avoid losing something than they will to gain it.

Indeed, behavioural economics tells us that it can be twice as painful to lose a fiver as it was enjoyable to acquire it in the first place. This has simple consequences.

- People hate to see a fall in their net earnings. An argument to increase VAT may be an easier sell than raising income tax.

- People who never normally use a debit card will suddenly remove it from their wallet to avoid a credit card surcharge when booking online for flights.

If you want to persuade people to use a debit card, you are better off referring to a "surcharge" for using a credit card than to a "discount" for using a debit card - we are more eager to avoid a loss than to bank a gain. Likewise, don't tell people they can "save £200 a year with loft installation" - tell them they are "wasting £200 a year by not having it".

I'll have what she's having

People frequently simplify decisions by mimicking the actions of people around them and by adhering to social norms.

In Australia, water consumption was cut dramatically by simply printing the average consumption figure for his street on an individual's water bills.

The power of now - and of instant feedback

We tend to respond to stimulus and feedback in proportion to its immediacy, not its strength.

- Vehicle-activated signs that instantly flash your speed at you do more to reduce accidents than cameras that trigger a fine that will arrive days later. An immediate "nudge" is more motivating than delayed punishment (this finding has helped change Conservative Party policy on speed cameras).

The power of channel preference and interface

People's propensity to respond to marketing is hugely dependent on their individual channel preference - and the introduction of new channels attracts new customers.

Interestingly, while young people typically don't give much money to charity, if you allow them to give via text messaging they can become quite generous.

Scarcity value

When we perceive something to be scarce, it has a greater value in our eyes. Conversely, when we perceive it to be plentiful, its perceived value falls.

- The turnaround in popularity of the potato was due mainly to them being declared as fit only for royalty. Frederick the Great declared the potato a royal food. As a result, the people pilfered the King's potato fields and the plant quickly ended up in gardens all over Prussia.

- In the 60s, live music was plentiful and cheap while recorded music (and the equipment to play it on) was relatively scarce and expensive. This produced the golden era of the LP - beautiful, treasured and coveted items. Now recorded music is so plentiful as to be virtually free. Live music, however, is increasingly in demand.

Goal dilution

When items promise multiple benefits, they are less convincing than items that appear to do only one thing.

- Ever wondered why Google is so successful? At a time when everything else was a portal, a page trying to do many things, Google was a single-minded search engine. We hence believed it must be very good at the one thing it did. Generally, if you give someone a combined TV and DVD player, they assume it's effectively a crap TV yoked to a crap DVD player.

- Now take the example of the success of apps and widgets versus browsers on mobile devices. Browsers are designed to access all of the internet. Apps and widgets only do one thing - so their focus and specialism makes them feel far more effective. On 28 September 2009, Apple announced it had sold two billion iPhone apps ...


Parts are easier than "wholes". The way a task is presented affects people's willingness to take it on and complete it. Something presented as one long task to be conducted in a single act will be less likely to attract people than something "chunked up" into bite-sized stages.

- There is a huge risk incurred when people fail to complete courses of antibiotics. If people were given 20 white pills and eight blue ones and were told to take the white pills first followed by the blue ones, would people be more likely to take them?

Price perception

In theory, price should be a consequence of the value people attach to something. We should be willing to pay what we think something is worth. In practice, this causality runs backwards. The price that is demanded for something makes us value it more.

Blind taste tests have long alerted us to the fact that consumers do indeed "taste the brand" with many food and drink products.

However, behavioural economics has gone further.

- Studies have shown that the efficacy of a soft drink that claimed to help mental acuity was affected by price. People who paid more for the drink performed better on mental acuity tests, benefiting not just from a trivial taste effect, but apparently gaining extra mental powers.

- Similarly, people who paid more for the same over-the-counter pain- relief products reported more effective pain relief despite price being the only variable.

- The effect is also observed with cultural products. In a notorious example, a violinist who could sell out concert halls above ground struggled to gain a few dollars underground busking in the subway. The context determined the value.

Price-cutting can, and does, reduce perceptions not just of product quality, but of experienced efficacy.

Choice architecture

Choosing is relative to what you can have, not absolutely about what you want. In broad terms, "choice architecture" concerns itself with how people gather information when they choose and how absolute values are crowded out by other influences. The area of behavioural economics dedicated to choice architecture is one of the richest seams for our industry, and the one we believe we should make into a special subject for priority investigation of its potential applications.

- We are all familiar with choosing the second-cheapest wine on the wine list. We are also familiar with never choosing the most expensive item on the menu. However, having one very expensive item on the menu can increase the average value of dishes ordered, even if the most expensive choice is rarely chosen.

- In an ingenious exploitation of framing effects, one salesman sold Rolls-Royces at a yacht show. Seen alongside a $10 million yacht, a $500,000 car seems like a bargain.

Our vision of the future

Where might a fuller understanding of behavioural economics take IPA member agencies?- Imagine a future where product and service innovations can be offered by agencies to provide a greater value-added service to clients and their customers. And where we can comment intelligently on every single brand- interaction, not just messaging.

- Imagine a future where agencies are invited into board-level talks with clients in both the private and public sectors to explain how better choice architecture can structure their organisations to make it easier for people to choose from their offerings.

- Imagine a future where the first step in answering a communications brief is to engage the client in a workshop with all roster agencies to investigate the order effect of different communication channels and the role of each in the consumer decision-chain.

What this discipline offers us is some badly needed common ground from which IPA agency members can make common cause. It is too early to say how quickly we can turn this study to our advantage, but one thing above all makes me optimistic.

At every event the IPA has hosted on the subject, it has attracted sell-out audiences from a spectacular mix of backgrounds: planners, creatives, account people ... from media agencies, ad agencies, digital agencies, direct agencies, promotional agencies.

If there is another field with the same power to unite and enthuse the IPA's membership, I don't know what it is.

- Rory Sutherland is the IPA president and vice-chairman of Ogilvy Group UK.

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