It’s early in the season at a tourist resort. Two restaurants compete side by side. They both offer pretty similar food at pretty similar prices with pretty similar services and ambience. The first tourists arrive and, not seeing much difference between the two, they plump for one almost at random.
Ten minutes later, some more tourists turn up. When they look, they see one restaurant with what seems like a happy couple enjoying their meal, and an empty one. They infer that the restaurant with the customers is the better one, so they opt for that one too.
Then a third group arrive. The message is very clear now. This restaurant must be really good, that one must be really bad. So they join the growing throng. Within no time, the first restaurant is a raving success and the other is a disaster.
According to economic theory such an outcome shouldn’t happen, not because it isn’t fair but because it isn’t rational. Economists work on the assumption that people only make rational decisions, which are made after gathering all the facts, weighing the evidence without bias, and coming to a carefully considered conclusion.
Trouble is, it’s well-nigh impossible to make decisions in this way. Most times, we haven’t got all the facts to hand, and we don’t have the time or resources to gather them either. Nor do we have the means to judge the relative importance of every bit of evidence. So we opt for short cuts instead.
There are plenty more such rules of thumb. They include "if in doubt buy the cheapest" (because nowadays the quality of most products is pretty similar), "buy the most expensive one I can afford" (because expensive equals better quality), "buy what’s on offer", "buy what’s in front of me" (in other words, cut to the chase and avoid wasting any more time), "buy the one that seems most familiar to me", or "buy what I bought last time". None of them investigates the full facts. Instead they focus on just one aspect of the situation and let that aspect be the deciding factor.
Holes in the heuristics
This little list of decision-making heuristics is pretty straightforward, but as American social psychologist Robert Cialdini has shown in his book Influence, The Psychology of Persuasion, there are many more decision-making influences whose workings are less obvious but probably equally powerful. One of them is the "social proof" approach to decision-making/ if in doubt, don’t weigh the evidence relating to the thing itself, look at what other people are doing. This is the restaurant example: "if everybody is eating at that restaurant, it must be good". It’s also the instinct behind word of mouth.
Another is reciprocity. We seem to be hard-wired to act in reciprocal ways. If somebody gives us something we feel obliged, sometimes compelled, to give something back. Marketers and retailers have understood this for years. Look at "gifts" such as the free pens sent by fundraising direct marketers, free taste and samples, the flight upgrades offered by airline loyalty schemes, the provision of free information or advice, the offer of a free survey or inspection. They are all designed to create a sense of obligation. Once obligated, we feel we just have to give something back.
The commitment and consistency that signifies integrity is another hugely powerful influence on our decision-making. One result is the hard-to-shake assumption that "the harder it is to achieve, the more valuable it is". Another resulting behaviour is the extraordinary lengths people will go to to appear consistent or to justify decisions they have made either to themselves or others. Researchers have found, for example, that many brand preferences are formed after and not before purchase – as we seek to justify and rationalise the decisions we have made.
Then there’s liking. If we like somebody we are more likely to trust them, and buy from them. And liking goes a long way. We can’t help making associations between things when they appear together even if they have no logical connection (a picture of a fast car and a pretty girl signifying sexual success for example; or the power of celebrity to promote products).
Now add authority. The advice of an expert can be hugely influential, but so can the advice of someone with just the trappings of authority such as the title "doctor" or a smart suit or uniform.
But what can we learn from such insights? In one sense, they’re what marketing is all about: its insistence that we understand both the rational and the emotional. But as we’ve seen, words like "rational" and "emotional" can be treacherous. As Cialdini points out, the short cuts described here are not rational in the strict economic sense of the term, but they are largely reasonable and sensible. Particular applications of the decision-making rule may be misguided, but generally speaking we have good reason for believing it will work. Understanding decision-making heuristics is not the same as building "emotional attributes".
Also, while ruthless attempts to exploit these short cuts for a quick buck – putting up prices to infer superior quality for example – can be spectacularly successful in the short term, they tend to backfire in the long term. People react badly when they realise they’ve been taken for a mug. Decision-making heuristics also evolve as people learn to see the difference between the right short cuts and the wrong ones. Twenty years ago, a cold telephone sales call was treated by many consumers as a sort of gift: "these people are actually taking the trouble to talk to me personally". Today it is seen as aggressive intrusion. Many brands have been floored by a failure to understand shifts in consumer perceptions say, from "expensive = superior quality" to "expensive probably means over-priced".
More subtly, it’s easy to forget the power of these decision-making rules when assessing the effectiveness or otherwise of marketing initiatives. The chef in the first restaurant probably thought he was a brilliant success while the chef in the second restaurant felt a dismal failure. Both would have been wrong. Building a career plan on this assumption is not advisable.
Here’s another example. Two soft drink brands Wow! and Duh are launched pretty much at the same time. They’re pretty similar in taste, price and quality but Wow! does one thing Duh doesn’t. It advertises widely.
It goes without saying that people can’t buy a product without being aware of it, so to this degree Wow! has created an advantage for itself. But it so happens that simple awareness of something has another knock-on effect on the way we make decisions. If we have never come across something before, it seems strange and unfamiliar so we tend to stay clear of it. It represents a risk. But if we have grown familiar with something, it loses its risk connotations. We like it more. So, when given a choice between Wow! and Duh, most consumers choose Wow!
Into the familiar zone
Now that they’ve drunk Wow! there’s a further knock-on effect. If you use something regularly you get used to it and you tend to like it more than unfamiliar alternatives. So awareness turns to familiarity, to liking, to habit. Then other factors kick in. There’s the social proof or restaurant factor. (If in doubt, follow the crowd and buy Wow!) There’s the commitment factor: the post-hoc rationalisation of commitment (Yes, I’m a Wow! buyer. I don’t buy Duh).
Now, please note that none of these factors behind Wow!’s success have anything to do with the actual content of its marketing: the jingle, the imagery, the brand personality, the slogan. If Wow! marketers connect their brand’s success to its particular jingle, imagery and so on they may be making the wrong connections. So when they launch a new brand Dong into a crowded market where all these factors are working in reverse, they are stunned when they are not successful.
Most marketers think of and develop their marketing strategies assuming that the detailed content of their messages is hugely important. Of course it is important, but only within the context of human decision-making heuristics. Do you really understand the decision-making short-cuts of your particular customers? More important, do you understand if, and how, these decision-making heuristics are changing?
Alan Mitchell, www.alanmitchell.biz