Saturday, June 18, 2011

7 Smart Tricks Brands Use To Make Us Spend (Wired, July 2011)

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OK, let's review. Because I've seen a few thoughts recently about branding that I wanted to comment about. The last one is the subject of this post.

I'll call the 5 things below "myths v. facts" even though the "facts" are really my opinion. If you disagree, tell me.

1. Myth: Companies have brands. Fact: Companies do not have brands. The companies are the brands. Those brands have other brands. The entire thing is called a brand portfolio.

2. Myth: Branding is about passion. Fact: The point of branding is not to stir passionate love or hatred. The point is to foster addiction to whatever it is you're pushing.

3. Myth: Branding is successful if you've built "buzz." Fact: Branding does not end with "buzz." It goes like this: 1) Awareness 2) Interest 3) Initial Purchase 4) Loyalty 5) Addiction

4. Myth: Brands compete with other brands. Fact: The competition is with yourself not others. The ideal compliment for a brand: "There's really nothing else out there like it...no way to describe it even." PLATINUM words.

5. Myth: Branding is about creating beautiful exciting fantabulous art that shows how very brilliant and on-point you are. Fact: The point of branding is to make money. (Thank you for reminding us of this always, Al Ries.)

With #5 in mind, here are some neat tricks brands use to facilitate same, shared by Wired Magazine (Dan Ariely, "Gamed," July 2011). 

(By the way - I am a magazine freak and very harsh critic. But Wired's layout and writing is fantastic. Bonus tip: 5 magazines always worth the time and money - Wired, Vanity Fair, Fast Company, People, and Fortune.)

Keeping in mind that branding is about making money and not stroking your ego with a lot of hits to your website. So if you're a marketer, memorize. 

(If a consumer, beware. Maybe they're making it "convenient" for you, but they could also be fueling overspending on your part. Marketers are selling fantasy, they're not your parents - so by no stretch of the imagination should you assume that they really care about ethics.)

By the way - it is noteworthy how much of this information comes from academics. If you didn't care what "behavioral economics" was before, you'll be begging to take that class now.

The bottom line is, the decision to spend is mostly PSYCHOLOGICAL and only partially rational. 

Tactic #1. Be the default. (Amazon.com)

"For many of us, Amazon.com functions as a default because it has all our credit cards and addresses on file." 

So intelligent. Nobody wants to spend time registering with another site when they have a trusted vendor who already has their information.

Tactic #2: Offer low-threshold free shipping (Amazon.com)

"Super Saver Shipping, which sets a $25 threshold to qualify for free shipping....turns a lot of one-item purchases into two-item sprees."

I'm not sold on Amazon Prime, though, which Wired endorses as well. The $79 figure is daunting for me and I don't need most things in two days.

Tactic #3: Charge more upfront rather than tack on a fee later on (Netflix)

"Netflix built a billion-dollar business on one simple principle: People hate late fees." Versus regular video stores, where you always had to worry about getting the movie back on time.

This is the same issue people have with luggage fees. Better to build the price into the ticket than to nickel-and-dime the customer later on.

Also the problem with eating out. Just put the tip on the bill. I don't want to think about the fact that I'm paying a ridiculous amount of money for the same thing I could buy from takeout. Let alone the fact that I have to add 15% more to that amount.

Interesting sidebar: research cited in the article showing that if you force people to decide what they will want in the future, they will choose something "aspirational" rather than something real. Like with the DVDs, people chose "highbrow" movies rather than "lowbrow" ones because they actually had to think and plan.

Similarly, the article talks about a mistake people make with long-term scheduling. If you ask someone whether they'll be free to do something in a year (according to the article), they will tend to say "yes" even though they'll most likely be busy. In other words, they're aspirational about time. Rather, the suggestion was, imagine a year ahead as if it were two weeks ahead and assume that however busy you would be in two weeks, is how busy you'd be then. This turns your thinking more realistic.

Tactic #4: Make taboos acceptable by showing how the crowd buys into them (Groupon)

"The stigma of coupon use is real and broad-based."

The article cites research from the "Journal of Consumer Research" showing that if you are standing NEXT TO a coupon user, people tend to perceive you as "cheap or poor." Talk about branding by association! Groupon makes it OK to be a coupon user.

This reminds me of my Grandma who used to have the envelope thing with all the dividers for the different kinds of coupons that you clip from the Sunday paper. I used to think of them like trading cards or Monopoly real estate. Pretty and fun. But as an adult I have to admit, I really feel cheap when I use coupons so this research seems pretty accurate.

Similarly, other research (Noah Goldstein, UCLA) people were more likely to reuse towels in hotels if the hotel hung a sign saying that a specific percentage of other guests ("almost 75%") had complied. Versus if the hotel just asked them to help the environment by doing so, a smaller percentage went along with it.

Another thought about the taboo associated with coupons: Use a different name for them. Transform the perception of "cheap" into something different - like winning a prize, or being part of an exclusive club. For example, using "promo code" is good. Or saying, "mention code ____ for a 10% discount" works well.

Tactic #5: Get the customer to participate in an extended interaction (Farmville, Facebook)

I totally do not get Farmville. But I know a lot of people who do. And until now I never understood why.

First, it takes time to build the virtual "farm." And: "The more complex and difficult and time-consuming a process is, the more we fall in love with our creation and the more we become interested in the game."

Second, people give you virtual gifts, which makes you feel that you have to give things back to them.

In general the whole concept of "gifting" on Facebook is brilliant. "In the first 10 months of the program (the Gifts service, which is now dissolved), more than 24 million gifts were sent." (In my view, taking it away was only to figure out ways to capitalize on the concept more.)

Tactic #6: Bill later (Apple)

When you buy on iTunes, there's a lag between the purchase and the confirmation (vs. on Amazon, you see it right away.) 

Tactic #7: Offer random rewards, not predictable ones

This was discussed in the context of email but it can be applied more generally. People read email even though most of it is junk. Because once in awhile they get something really good, and they never know when that will be. 

The article cites research by Skinner & Ferster: "If a pigeon gets food every 100th time it presses a button, it will usually keep pressing. But if the reward comes randomly...the pigeon will press with much more vigor, even after the rewards are removed entirely."

All in all, from a marketer's perspective, it's good to be armed with this information so that you can use it to sell more things to more people. (Hopefully you'll be selling quality things that actually make their lives better.)

Have a good weekend everybody, and good luck! 

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