Category: Consumer psychology

Do you know how your customers make a purchase decision? Do you want to influence it? There’s no better place to start learning.

How Do You Win the Price War? By Avoiding the Fight
Imagine that a customer you are trying to win uses the argument “the X company is selling it cheaper”. You check. There are a couple of answers you may encounter.
- First: company X is really offering the same thing cheaper.
- Second: the company X is selling cheaper a product that is only similar to yours but your client failed to see the difference.
- Third: it’s not cheaper at all but the offer has been constructed in such a way that the consumer thinks so (or he is bluffing all the way just to get you to lower the price).
What do you do?

A standard reaction would be to lower the price. After all, you’ve invested so much into acquiring this customer, it would be a shame to lose him “during the final lap”.

Wrong. You may be thinking you’re profiting off this client but the truth is you earned less (or you did not profit at all) in the short-term. And the long-term consequences of lowering the price permanently will be even more devastating. To keep selling for less, you start to skimp on quality. You earn less so you spend less on advertising and R&D. Fewer people buy less innovative products from you. Can you avoid the price war?

Sometimes this is just what doctor ordered.

When not to react to the price drop?

The simple information that your competitors have dropped their prices should not warrant an immediate reaction. Try to dig deeper, learn the reason for lowering the price. Because these price drops may be prosaic and you’ll be best off by… doing nothing.

Question one: do the customers know about the price drop?

In psychology, we have these cognitive biases. One of these biases causes you to assume a higher probability of a phenomenon you encounter more often. That’s why the fear of flying the plane is greater than a fear of driving a car — you encountered a safe car trip more often than a safe plane trip. But the statistics say that it’s the plane that is the safest.

It’s the same with your observation of the market: you keep an eye on your competition and know exactly when and how much they changed their prices. And because you know, you think everybody is aware of this as well. Yet it doesn’t have to to be true! So, until your customers start complaining — do nothing!

Question two: is the discount local or temporary?

There are many reasons why your competitor may want to lower the prices. Perhaps he wants to move the goods that are expiring soon. Or they need a quick cash fix to pay a due loan. Or maybe it’s just a local sale of certain goods (because they’re opening a new store)? In all the above cases, you’ll be better off keeping your prices intact. Wait it out. Or answer with a precise strike, targeting exactly the same customers. After all, if your competitor is discounting only to students, why would you discount anyone else?

Is it really cheaper? Instead of lowering the price… try to make the comparison harder!

OK, you’ve done your homework and it turns out that you really need to lower your price. Or do you? You may still have some tricks up the sleeve that allow you to avoid the price war.

Look to what Amazon did: now you buy your own price discounts.
- Price variations. If your customer is complaining about the price… introduce a more expensive version of the product! Thus the thing you want to sell appears as the cheaper alternative. But there’s more to it. For your customer, it’s easier to compare your cheaper product to your more expensive one than to a completely different product offered by your competitor. It’s called “-A rule”. And it works. More on this in this article on the psychology of pricing.
- A different unit. Two cans of soda at two different stores cost 70 and 90 cents. Which is cheaper? The answer may be obvious, but you failed to ask about… the can’s capacity. The first one holds 200 ml, the more expensive one is 250 ml. Which soda (not the can!) is more expensive? If the customer pays attention to cans, you can offer a cheaper can but with less soda in it.
- Packages. The price of gas is easy to compare between stations. But if you create a package (the gas with a sandwich) you can speak about the lower price for the gas (because your margin will be in the sandwich).
- Split the price. When you “buy” a bank deposit, you look at “the price” — namely, the interest rate you are getting. The higher the rate, the better, right? But when you actually come to the bank it turns out that the high rate only applies to a chunk of the money. Or is available only when you buy an insurance or a credit card with the deposit. Split the price and show off only the part that your customers pay most attention to.
- Make them… pay for the discount! Amazon allows its customers to pay extra for the Prime service — and then get free delivery with every purchase. WizzAir has a Wizz Discount Club — for 30 EUR a year you can… buy cheaper tickets. In both cases, customers pay upfront for the discounts you are going to offer them.
Lowering the price permanently and for everyone should be your last resort. If you don’t want to harm your business, treat the above analysis as a mandatory element of each discounting process. Because discounting is easy. Converting the customer back to paying the full price — not so much.
10/29/2019
Six Memetic Strategies To Make Your Product More Memorable
Every entrepreneur would love to see people standing in lines to buy his or her product. The first and obvious step towards this is, of course, offering a product or service people would love. Bear in mind that I did not write a high-quality product. Quality is a subjective term, it means different things to different people. A product people love simply keeps the promise of fulfilling one’s needs. The ice cream sold by a walking salesman at the beach doesn’t have to be top-notch — as long as they chill, people will stand in lines to buy them. There is one more thing company owners often forget. They think that having a great product and telling about it is enough. Yet there is something much stronger than advertising a product: it’s a product that advertises itself. The one that infects others with its mere existence. How do you make a product more memorable?

The first iPod ads featured a black silhouette on a colorful background, and… white earphones.

I want that too!

The ice cream on the beach is a great example. You can, of course, see the seller from very far, you can hear him screaming “Cold ice cream!” but there is a greater chance that before he reaches you, you’ll see people eating ice cream. And when you do, you’ll want ice cream for yourself, too, right? When you walk through a park full of people, you might get infected by plenty of product-related ideas: frisbee, running, a new model of a bike… Such need creation is far more effective than traditional advertising. Especially in groups characterized by strong peer influence, such as teenagers. Producers have long been aware of that fact and have been modifying their products slightly so that everybody knows when someone is using their product. When Apple produced first iPods, they faced a problem: when you’re using your iPod, it stays in your pocket. But all it took was adding characteristic white ear-buds and you have yourself a viral idea. Nikon One or Beats use a similar strategy.

Ideas like viruses

Richard Dawkins,
“The Selfish Gene”

Fashion or trend is an idea that spreads. It’s a dream of nearly all producers: to create a fashionable product increases the number of customers exponentially. But how do you go about it? Can you program fashionable? The science behind infectious ideas is called memetics.

The term meme describing an idea that replicates itself by infecting others was coined by Richard Dawkins, an evolutionary biologist at Oxford University. In 1976 his book, The Selfish Gene popularized memetics. Just like genes store the information on our appearance, eye color, height and so on, the memes store cultural information: behaviors, fashion, clothes… And just like we are trying to modify genes in order to achieve certain goals, we can also try to modify memes to influence behaviors. The latter is especially interesting for marketers.

Memetics claims that different memes compete for the finite amount of our attention, there are only so many ideas we can consume. The fashion is created from the strongest memes, the ones that won the race for attention. This means there’s no definite way of creating a successful meme, as its success depends not only on its strength but is also dependent on the strength of competition. Though we can take some measures to ensure our meme is stronger. What can we do?

Show, teach, connect

Richard Brodie, “Virus of the Mind”

In his book Virus of the Mind the author, Richard Brodie, defines three kinds of memes. If you’re doing any kind of marketing, you should familiarize yourself with them.
- Distinction — when you teach a person to tell a difference between one earphone and the other, he will be more likely to notice what he’s learned to distinct. Sociologists are perfectly aware of this phenomenon: a pregnant woman starts seeing other pregnant women around her. The owners of Alfa Romeo start to realize the streets are full of similar cars. Advertising explains to the masses, why a product is better, but the product should be easy to recognize by itself.
- Strategy — a strategic meme programs us to take a certain action. We keep quiet when in a library, we buy popcorn when in a movie theater, we wear a baseball cap to the stadium. When building a brand, we program things we call brand rituals — like wearing Beats around your neck and not in the bag when you’re not listening to them. Earphones are treated as an element of clothing, thus becoming more visible.
- Association — an association meme binds two things creating something new. When you put two known, positive ideas in close proximity and then put another, unfamiliar idea next to them, proximity association is formed. If I had a photo with George W. Bush and Barack Obama in my Facebook profile you would assume I mingle in American politics. We create similar associations by placing a product next to an attractive person or a star. Beats by Dr Dre, right?
Memetic products and services

If you start looking at your products using memetic point of view you’ll soon realize you can make them better by trying to win the attention race. Advertising and marketing strategists are aware of this fact. So next time you plan a product or service, consider using one of those winning strategies:

One of the first Coca-Cola ads targetting African American consumers, directed by Moss Kendrix, the first African American marketing specialist hired by Coca-Cola in 1948.
- Tradition — if a product or service has always been around, there’s a greater chance people will try to promote this tradition. That’s why Coca-Cola tries to convince us that even your grandfather had it at his dinner table.
- Evangelism – a product that creates a ritual of inviting others to join stands a much better chance of prevailing on the market. That’s why most social networks begin with invite your friends or see who’s already here ritual.
- Familiarity — products that are compatible with what’s already in your head, wallet or house. The language barrier is a great example of overcoming this barrier. If you’re reading this but English is not your mother tongue, the same content would stand a better chance of going viral if it was translated into your own language.
- Explanation — products that explain the way they work in a meaningful way sell better than the ones full of abstract or technobabble. The explanation does not have to be precise, it just has to make sense. That’s why stories or spatial metaphors are so powerful. See the painkillers that precisely target the source of your pain. It’s not how painkillers work, but it’s easy to believe in a targeting pill.
Memetics will not replace traditional marketing or brand building strategy, but adding this knowledge to your arsenal will let you take over the competition. Because the brand happens in the head. Well? Will you share this post now? Even your grandparents knew that Facebook and Twitter have always been the best way of spreading knowledge.
10/21/2019
The Psychology of… Your Name

Your first name and second name have a certain power. In fact, they affect you and those around you more than you might think. They can make a difference to which job you choose, where you choose to live and… which type of marketing works on you. In this article, I will write about what psychology tells us about your relationship with your name.

How Did Your Parents Come Up With Your Name?

Firstly, in the absence of any better criterion, your name is a label which the world judges you by. We all do it. Who’s more likely to have a mustache: Chris or Harry? You chose “Chris”, right?

The story behind a name is often related to the story of a famous person with that name — thanks to certain German and Austrian leaders, the name “Adolf” was quite common up to the end of the first half of the 20th century, but this name practically disappeared after the II World War. In Poland, the same thing happened with the name “Joseph” (this time, thanks to Stalin). For this to happen, the particular name doesn’t even have to belong to a real person – Dickens’ “A Christmas Carol” made the name Ebenezer rather unpopular…

If you can’t decide on a name for your newborn child, I’ve got you.

Names tell you something about how old someone is and which social stratum that person hails from. A name (let’s say, Julia) often starts to be more common as a result of influences from popular culture, for example, thanks to a TV series; and that names tend to move down from a society’s upper strata to its lower strata. First, the aristocracy (or celebrities) choose an unusual name for one of their children and then this name becomes more and more widely accepted. Interestingly, such unusual names are taken up most quickly by people in society’s lowest strata. This is confirmed in the writings of, for example, Steven Levitt and Stephen Dubner.

Here’s a little task for you: find out the names of Kanye West’s child and Jamie Oliver’s children. And then think if you actually know someone who is called, for example, „North”.

Does Your Name Influence Your Career? You Bet!

In order to be invited to a job interview, how many CVs does a David have to send? Does a person named Marianne with the exact same CV have to send more of them to get an interview? Two researchers from MIT and Chicago University, Marianne Bertrand and Sendhill Mullainathan, claim that the answer is yes. Of course, they didn’t investigate the names Marianne and David — they did their research on American names from which it was possible to guess at the ethnicity of the holder of that name. It turns out that someone with the name Greg (which is the most popular name associated with white guys) has to send 10 CVs in order to be invited to a job interview, whereas Jamal (whose name is popular amongst African-Americans) must send a further five CVs just to get a job interview (even though the two CVs are otherwise identical).

But the conscious pinning of a “label” to your name (and thereby pinning the “label’s” story to you as a person) is not the only thing that happens with names. Your name also has an unconscious effect on others. For example, how easy it is to pronounce a name makes a difference.

Which Names Get Promoted Quicker?

Simon Laham and Peter Koval from Melbourne University carried out a very interesting analysis of lawyers’ names and their careers. It turns out that, if someone’s name is easy to pronounce (and to remember), that person’s chances of becoming a partner in a law firm within the first 4-8 years of being employed in that firm increase by 10%. That positive effect continues for about 15 years and then it seems to disappear, which the researchers think is based on the fact that, by that time, the career of a given lawyer is based purely on his or her reputation. So, if your name is Paweł Tkaczyk and you’re looking for work in Ireland, it could be a good idea to use an alias instead… Believe me, I know.

George, Where Do You Want To Live?

On the question of where we choose to live, more people with the name “George” live in the US state of Georgia than one would expect. Sociologists from New York University ploughed through large quantities of statistical data and came to the conclusion that we are unconsciously attracted to places which have names which are similar to our own name (the names don’t have to be exactly the same — it’s enough if our initials or some of the letters in our name appear in the name of the place).

Lauren, Who Do You Want To Be When You Grow Up?

The same researchers claim that a given name may affect the job you choose to do. They tested that theory on dentists and lawyers: they found the position of the name “Dennis” in the list of most popular names and then found which name was above and which name was below “Dennis” in the list. Next, they took the register of dentists and they checked to see if more dentists had the name “Dennis” than the statistical average. And what did they find? The probability that a little Dennis will become a dentist is almost twice as likely as the probability that someone with a different name will become a dentist (1.83 times more likely to be precise). It’s the same for Lawrences and Laurens, who are more likely to choose a career as lawyers. This is known as implicit egotism.

Have a go at this: what would be a good name for a child if you want to increase the chances of him or her becoming a doctor? And how about if you want him or her to be a blogger?

The Last Name Effect

Here’s one more interesting phenomenon, this time not related to your first name, but related to the effect that your surname has on… how you react to sales promotions. In 2011, Kurt Carlson and Jacqueline Conrad published their paper called The Last Name Effect in which they claim that, according to their research, people who have surnames which start with letters towards the end of the alphabet react much more quickly and more positively to sales offers which are open for a limited time period only. In brief: if you send a newsletter in which you write that a promotion for product X will end in two days, then it is probable that people with surnames beginning with the letters N to Z will answer more quickly than other people.

They explain this phenomenon in an interesting way. Carlson and Conrad (both names start with the letter “C”, which we’ll come to later) claim that this is a reaction to children being put on all sorts of lists and also being lined up in alphabetical order. People with surnames which start with letters in the second half of the alphabet “spent quite a lot of time at the end of the queue” and, as a result, have learned to react quickly to what’s going on — they know the feeling when there isn’t enough of something to go round and they are at the end of the queue. And what happens when a woman marries a man and then changes her name? In fact, the effect remains the same because the effect relates to the name which someone had when they were a child, and that habitual way of thinking has become part of that person from then on.

Researchers found something similar in the way that those who gained a Ph.D. subsequently looked for work. Those with surnames starting with any of the letters from “N” to “Z” put their CV online much more quickly than those whose surnames started with letters from the beginning of the alphabet. So, if you’re looking for an employee who will be very competitive, someone with the name “Anna Anderson” may not be a good choice.

Ignore Those Findings. Here’s How.

One important comment at the end. Remember that your destiny is not ruled by your name — you decide what happens in your life. The research mentioned above only indicates that there is a higher probability of something occurring by proving some kind of correlation between (on the one hand) someone’s name and (on the other hand) some kind of life-decision. If you would rather ignore those findings, I will help you to do that too. A very similar statistical analysis has proven that people whose names begin with letters at the start of the alphabet have more chance of publishing their research than people with names starting with the letters from “N” to “Z”. So the fact that Carlson and Conrad have already published their findings does not mean that there isn’t somewhere a Zych and a Yanecky who have come to completely the opposite conclusions but haven’t yet managed to get their research published.

10/14/2019
Persona — A Tool For Building Your Brand
If you want your message to spread, if you want your brand to be a topic of many conversations, you have three platforms you can use to distribute your content. First, you can pay for advertising (paid media is the name we use). Second, you can do something awesome so the media and consumers will talk about that (we call this earned media, the buzz you deserve). Third, you have your own channels at your disposal: your website, blog, your newsletter or Facebook fanpage — if you manage to gather the audience this may be an efficient and cost effective way to get your message across (we call this owned media).

But in order to succeed in using any of these platforms some strategic work is needed. You have to decide which you are going to use and what to write about. Creating a persona helps a lot with making these decisions. A persona is a list of information about a certain member of your audience. No matter if you are in B2B marketing or B2C, there’s always human buying from you in the end. So getting the characteristics of persona right makes it easy to reach this human with an interesting message.

https://www.youtube.com/watch?v=d4jPp2NdDYY&frags=pl%2Cwn
Learn more about personas in marketing from this short & sweet video

The danger with creating a persona is filling it with a meaningless content. So here’s a list of questions that help you get it right.
1. Demography. Who is your audience? Age, sex, location or education allow you to tailor your message. You will use one set of arguments when writing to a young woman from a small town, and another one when persuading a fifty-year-old university professor. And remember you have to choose only one version. You can’t be Jack of all trades.
2. Work. What does he or she do? Position, job description, how large is the company (corporations tend to have a different set of values than mom and pop’s stores), what’t the industry (the slang they use will give you authority).
3. Rituals. What does his or her day look like? What time does he get up? What does she read when eating breakfast? How does he spend his free time? This part will allow you to define the perfect brand touch points. If your customer spends half an hour on the bus on his way to work, you can decide to record a 20-minute podcast or serve him a longer text to read on his phone.
4. Pain. What problems can you help to solve? These problems can only loosely relate to what you have to offer. It’s hard to imagine them reading your advert every single day. But if you manage to identify their problems, you have their attention.
5. Values. What he or she values? What ambitions does he have? You can buy a product either to impress your boss, or to have no worries at work. If you identify the carrot, the prize they’re after, it’s much easier from there.
6. Fear. What are they afraid of? When there’s a carrot, there’s usually a stick as well. If you want them to act on something, a fear serves as a great motivator. What is your customer afraid of? Which of his fears is the strongest?
Answering these questions will give you a scope of topics you can use to have a conversation with your customer. Remember: a good brand is a great conversation starter.
10/07/2019
What Don’t You Know About Being Creative?

Do you think you’re creative? How do you define being creative? Many people would say that being creative means solving problems in a non-standard way. But I’m afraid it’s a little more complicated than that.

The American psychologist Mihály Csíkszentmihályi, who is famous for his theory of Flow, carried out some research on creative people and… creativity. Where did he find the people for his research? Of course, at an Art College. Students were given this task: look at a group of objects on a table and paint a still-life picture. So this was the same as they did every day at College.

Listen to the famous Flow TED Talk

Csíkszentmihályi observed that the students approached this task in two different ways: some quickly had an idea, set up the objects and started drawing. The others looked at the objects from all sides for a long time before actually starting work. Still the result was that every student fulfilled the brief and drew a still-life picture. But, was it possible to compare the value of the pictures?

The psychologists pulled in some experts and invited a group of artists to assess the quality of the pictures, naturally without knowing who drew which picture. And what happened? The first group, whose intention was just to complete the task, got significantly lower marks for their work than the second group. Csíkszentmihályi called this second group “problem finders”.

When we think about what makes creative people visionary and special, we don’t usually think about their ability to solve problems, but rather about their ability to see problems which no-one else saw previously. Coco Chanel with her “little black dress”, Steve Jobs with his iPhone and Mark Shuttleworth with his vision of a Linux eco-system: these are not people who solved problems which already existed nor are they solving problems which currently exist. They find problems which are waiting to be solved, and usually the solving itself is done by others.

Why am I writing about this? Because that’s the future for our line of business. Advertising agencies who only solve problems are doomed. Michael O’Leary, MD at Ryanair, claimed in an interview in the august edition of Marketing Magazine that “agencies are useless, expensive and serve up rubbish”. And I agree. I don’t agree that this applies to all agencies, but I agree that it applies to those agencies whose role is, as I see it, to “design logos and brochures”. A client comes to such an agency and says: “Design a logo and leaflet for me”. So what does the agency do? Of course, it designs a logo and brochure.

Click on the image to read more about Michael’s approach to marketing

But a client who sees clearly his or her problem is just one step away from solving that problem. In the era of the Internet and omni-present information, finding a solution to any problem often means … just searching in Google. But Google cannot solve a given problem if someone does not know that a given problem exists. Finding problems to solve is the future for all types of creative agencies, whether they are interactive agencies, advertising agencies, brand agencies or social media agencies.

When Rockefeller paid a car mechanic for some work, do you know what the mechanic famously said to Rockefeller? According to the story, Rockefeller paid him ten dollars. At that time, that was really a lot of money. The mechanic justified his bill: “For hitting something somewhere with a hammer: 1 dollar. For knowing which thing to hit and where: 9 dollars.” If you don’t know the story, check it out on Google. Actually that’s an easy fix!

09/30/2019
Six Types of Ads To Include When Designing an Advertising Campaign
Do you want to design an online advertising campaign? Here’s what you need to know

Did you know that the customer has to see your brand’s message 4-6 times before they are ready to trust you enough to buy something from you? Therefore campaigns with ads that focus solely on the “buy” call to action will not work. Even if your customers register the ads, they still will not trust you enough to buy from you on the spot. Fortunately, when designing an advertising campaign, you can use a template that increases the effectiveness of your ads by incorporating the psychology of decision-making. How does it work?

Building awareness

The first stage of a good advertising campaign is called “building awareness.” Facebook even allows you to choose this as a goal for your campaign in the Ads Manager. What it does not tell you is what to include in those ads.

Meanwhile, the answer is simple: the customer has to get used to the fact that you exist. Don’t try to sell yet! You don’t know one another well enough, the time will come. Instead, show your logo, your product, your company name. That’s it. Why only this? Because your brand has not yet earned more attention.

If you’ve ever wondered why companies pay for big signboards or neon signs at the tops of buildings, then you have your answer. A neon sign with the name of the company doesn’t sell anything, it merely builds so-called aided brand awareness. A customer who is asked, “Do you know the brand X?” will answer “yes.” And this is the first step to selling.

A logo (or a face in case of a personal brand) and a brand name. That’s all. The goal is the maximum reach.

Assigning to a category

When you’re building your brand, there are two basic measurement dimensions you should pay attention to. We covered aided brand awareness in the previous paragraphs. In addition to that, there is also a dimension called spontaneous brand awareness. How do we measure it? We ask the customer, “Name products in X category.” Try it on yourself: digital cameras, gaming consoles, elegant shoes. The brands that come to your mind spontaneously are called “top of mind” brands. It is imperative that your customers can assign your product to a specific category.

How to design an advertising campaign at this stage? Think. Why do people go to McDonald’s? To eat something (cheap and consistent quality). We go to IKEA to buy furniture. You’ll reach for Dan Brown’s book when you’re looking for a holiday read, and Jimmy Fallon will make you laugh (the process works the same whether you’re building a personal brand or a product brand). Your audience thinks in categories before they start thinking about individual brands.

So if you want to sell, you need a message that will assign your brand to the category that is present in the mind of your client. Remember one thing: the category should be useful. If you help solve a real — and frequent, if possible — problem, you are golden. BMW’s “Designed for Driving Pleasure” ads are an example of such a campaign.

So, find a category and attach yourself to it. But watch out for category names that are too professional (hence not commonly used) — your clients who want to “have a website” can’t really tell the difference between a front-end developer, a programmer, and a UX specialist. It’s like with doctors: more people know they have the cough, they don’t know they want to see the pulmonologist.

A familiar key visual (colors, image, fonts, logo) and assigning to a category. This is a typical ad for the second step of the ad campaign. This one is also aimed at maximum reach.

Look at the picture in this article. Graphics and fonts are the same as in the first stage. Thanks to this, the “familiarity effect” is activated in your client’s mind — he’s ready to devote more attention to something he has encountered before. That’s why we needed the first stage: to increase the effectiveness of the ads displayed in the second one.

Liking

Many companies think that proving their product is better than the competition’s is enough for the customer to choose them. And you know what? They are right. If your customer is convinced that your product is better, he will buy from you. However, consider the following scenarios:
- You sell the exact same thing as your competition. Apples, hammers, English classes, or chips. Your product is easy to understand, or the consumer doesn’t care much about differences.
- You sell a complicated product that isn’t necessarily better than the competition, though it is definitely different. And the consumer cannot compare one with the other. Cars, bank accounts, trips to Scandinavia — they all have a lot of parameters, and everyone will value something else in them.
- You sell a product significantly better than the competition, but understanding this difference requires a lot of attention from the consumer.
The consumer who doesn’t see or understand the difference will choose the product… which he likes more. The one which made him laugh, feel better, more appreciated… A consumer who feels that is willing to devote time to understanding the differences between you and the competition. Therefore, “liking” is a kind of emotional foundation for the next stage of your campaign — building preferences.

Duplicate or similar image? Check. Joke? Check (though it’s a groaner). This is the stage at which you build an emotional bond with the client. Show these ads only to people who saw the first and the second one.

Building preference

One definition of loyalty in marketing says that it is a “lasting preference.” Therefore, your ad must first build preference and then maintain it. How?

First, understand that preference is always based on a comparison. I choose X instead of Y — awareness of X’s existence, even the perception of X’s individual features won’t help you if the customer is unable to say how it differs from Y. So are we doomed to comparative advertising? At this stage of the campaign… yes. Although you can cheat a little. How? We will come back to that in a moment.

Secondly, understand that our brain has an enormous problem with processing numbers. They are perceived as abstract values. The brain desperately wants to put them in context, which gives room for some manipulation.
- Sentences like “Works twice as fast” or “Hits the source of pain more precisely” create an imaginary context (you don’t have to say that your product works faster compared to X, the customer will fill it in himself).
- Anchoring is placing product features (such as price) near other numbers (for example a higher price crossed out). The brain combines these numbers and builds relationships between them — and we remember those relationships (cheaper, faster, brighter) much better than the numbers themselves.
- Authority transfer is “borrowing” authority from something that the customer already knows and respects. Esteemed clients for whom your company has worked or the awards it has won.
Transfer of authority from an award I received. Thanks to that, your consumers are convinced of the superiority of your product over others. This ad should be seen by those who have already gone through the previous stages of the campaign.

Purchase

At this point in our campaign, the customer knows you. He knows what you do. He likes you and can see the differences between what you offer and competitive products. It’s probably high time to start selling.

Advertisements at this stage should have a clearly defined call to action (buy now, visit the site, register) — remember that “sale” doesn’t necessarily mean spending money. The customer can pay with his attention, personal data, opening a new communication channel… In the end, you must, of course, earn, but look at the “purchase” in a broader meaning.

What helps at this stage? “Spurs” and deadlines.
- Spur is a short-term stimulus, often negative, which you emphasize in your advertisement and which is meant to force the customer to act. “Only two tickets left,” “three people are watching this product at the moment” — if you choose them wisely, you will push an indecisive customer towards the purchase.
- Deadline is exactly what you think it is: “the discount is valid for 30 minutes” or “if you subscribe to the newsletter within an hour you’ll receive…”
Call to action? Check. Limited places and dates? Check. Typical sales ad. It works better if your customer knows what to buy and why it’s worth it (and this was said in the previous stage of the campaign).

If you want to know more about this step in designing an advertising campaign, read the article on the psychology of pricing.

There’s an entire book on building a recommendation engine.

Recommendation

What if you sell products that the customer rarely buys and you can’t speed up the process? Imagine you’re selling wedding dresses (driving lessons or apartments). If the customer isn’t getting married, they won’t need your product. And what about the customers who just passed their driving license exam? You put a lot of money into convincing them to buy from you. And now they’re not coming back. What then?

You can design a campaign in such a way that clients who don’t necessarily have the need or opportunity to use your services (but know you, like you, and appreciate you) recommend you and your services. Launching the “recommendation engine” using an extensive advertising campaign (for example, on Facebook) is often much more effective than a tedious hunt for customers who are ready to buy from you. Let your would-be and former customers be your advertising media.

Have your customers already bought from you? Or they are not ready to buy yet? Convince them to do something else!

The question of how to design an advertising campaign is — I hope — already behind us. The campaign created according to the above six steps will be much more profitable than even the best-constructed sales creations. Good luck!
08/28/2019
The Psychology Behind The Pricing Strategy
“How much should I charge for my product or service?” – If you’re among the people asking themselves this very question, I have to break it to you – there is no easy answer. I am, however, able to guide you through the results of research which will help you in establishing a good pricing strategy.

You are pricing yourself too low

Let’s start with the basics: If you’re putting your own services (or products) on the market, you’re probably pricing them too low due to two reasons:
- You’re doing that which you love. Therefore, you consider what you do as pleasant. Imagine you love mowing your lawn and absolutely hate doing the dishes. You are willing to pay more to have someone do your dishes for you (because you loathe the chore) than to have them mow your lawn, right? In consequence, if someone asks you how much you would charge for an hour of lawn mowing… you’ll name a lower price.
- You’re good at what you do. While deciding on the pricing of our services, we often take time as a critical factor. A lawyer who charges $1,000 for a document which he prepared in 10 minutes is ripping you off. If the same material took two days to write up, it could easily cost $1,000. Try to remember how furious you were when the doctor charged you some ludicrous sum for a visit, and when he finished with you, all you could think of was that it took only ten minutes! Hence, you also have quarrels about charging a customer a thousand dollars for updating his website, knowing that it will only take you twenty minutes.
These two factors coalesce into what psychologists describe as negotiating with yourself. Before setting out for a meeting, you convince yourself to drop the price at least a little bit. You begin the conversation by offering a discount – or quite simply, your prices are lower than they should be from the very beginning. How should we go on about this?
- Ask somebody else to negotiate the prices for you. If you’re able to do so, it’s by far the most comfortable option. An “outsider” who knows how much your services are worth on the market, doesn’t have as strong of an emotional reaction towards your customers as you do.
- Negotiate with a note in hand. Be honest with your calculations on how much your services are worth, what are your costs and how much you want to earn. Write down the results on a sheet of paper and take it with you when sitting down to negotiations. Let it play the “bad accountant” role – you should even set some form of punishment for yourself should you go below the sum you jotted down. If it turns out you’re dropping prices too often, go back to the drawing board and review your calculations.
Your customers are more elastic than you think

Do you know what the “price elasticity of demand” is? It doesn’t sound too appealing, but it’s an incredibly important factor when you design your pricing strategy. It shows how the demand for your products changes should you change your prices. In other words: If you raise your price by X percent, what percentage fewer clients will still buy from you?

Designing the pricing strategy without the basic knowledge of economics is a disaster in the making. Learn more about the price elasticity.

A staggering majority of entrepreneurs (since the task doesn’t belong solely to the area of marketing) doesn’t measure and analyze the price elasticity of demand. The effect? They earn less than they could with the same amount of work. Look for yourself:

You run a language school. One term costs $1,000, and you have 80 customers. You earn $80,000 per semester. What will happen if you raise the price up to $1,200?
- If no more than 13 customers leave… you must raise your prices. This is due to the fact you’ll earn more having 67 customers paying $1,200 than while having 80 customers paying $1,000
Do you know what the most interesting part is? In many cases, the drop in customer level will be exactly… zero. If you don’t operate on the border of price elasticity (you price yourself lower due to the reasons I mentioned above), your customers will be ready to pay you more.

OK, so how do we design a pricing strategy?

A rounded price ($500) or one with a nine at the end ($499)? Or something else entirely ($473)? The price of your products or services influences price elasticity. If that wasn’t enough, the way you present the price also matters! Let us move on to the issues of the psychology of pricing strategy.

A pretty price

Take prices with a nine at the end. The nine itself doesn’t matter. Research shows that the most important is the leftward most number. If during price reduction the price dropped from $430 to $390, such a reduction is perceived as more attractive (will gain you more customers) than one where the first digit remained unchanged i.e., from $450 to $410. Even though it’s the same amount of dollars!

If that wasn’t enough, Keith Coulter conducted research which showed that the effect is amplified if the cents are in the fine print. Off to redo our price lists!

Note, however, that the effect of a pretty price works mainly on things we buy due to rational reasons (needed or necessary products), for example, bread, milk, a new school backpack or a winter jacket. If you’re selling things we purchase due to whims, you’re better off using a different pricing strategy, namely prestigious prices.

Prestigious prices

While shopping for luxury items (gaming consoles, sweets, a dinner in a restaurant) rounded prices such as $500 rather than $499 work best. Why? Research on this matter has been conducted by Kuangije Zhang and Monica Wadhwa. According to them, rounded numbers increase the “cognitive ease of processing.” Simply put, rounded numbers feel better and are easier to wrap our heads around.

While we’re at the ease of processing – prices with fewer characters or symbols (1400 instead of $1,400) are also easier to take in. And my favorite part of the research – which one “sounds cheaper”? One thousand five hundred or fifteen hundred? Prices with fewer syllables are perceived as lower. Perhaps we should charge $28,50 (5 syllables) instead of $27,70 (7 syllables)?

Among the research on cognitive ease and prices, I have my favorite: it was proven that a factor which spurs us into shopping is… the price matching our age! A consumer celebrating his thirtieth birthday should be offered a selection of products for $30!

Before you go on to rounding your prices, there’s one more thing to note concerning very expensive products.

Unit prices

There are products which customers perceive as “units” — bought individually, in small quantities and quite rarely at that. A house (or the architectural design of one), a website design (personalized not out of a template) or a car with custom equipment. In such cases, the price shouldn’t be a template either. Website design for $3,990 sounds a lot cheaper than a website for $4,130

A unit price offers the impression of uniqueness — for which the customers are willing to pay. It suggests that we took into account a few modules or elements and that neither the product nor the price is a template. While we’re talking about packages and modules…

Pricing strategy: package deals

When buying a car for $134,700 (you know, unit price), it’s much easier to justify throwing in that winter package for an extra $9,000 rather than “winter tires for $3,000”, “heated seats for $3,000” and a “towing hitch for $3,000”. In the second case, the customer has to make three individual decisions, whether to buy something or not. In the first, all it takes is one decision – and the price of $9,000 doesn’t seem so high when compared to the cost of the whole car.

It doesn’t seem so high due to the Weber-Fechner law, which states, that even if the price changes are fluid (raised by a single dollar), customers will still notice the changes in segments. Initial changes won’t affect them at all, but if you exceed the segment’s threshold, the price starts to sting. When it comes to price changes, the average worth of a segment is about 10%. If you increase your prices by an amount within 10%, chances are your customers won’t even notice the change. All that’s left is the matter of anchoring…

How do customers compare prices?

A $90 “Shrimp Feast” at a restaurant (the product is a luxury item, that’s why we use the prestigious, remember?) looks expensive… until we pit it against a “Shrimp Extravaganza” for $290. Our brain has trouble processing numbers without context. That’s why instead of assessing the worth directly, it often tries to compare it with something. “Anchoring” is an effect in which we compare something with things in its closest vicinity. Make the comparison easier and reap the rewards.

As the people at The Shopping Channel like to say, “But that’s not all!” What if we were to add a third option to our menu?
- Shrimp Feast $90
- Shrimp Feast Premium $120
- Shrimp Extravaganza $290
What do you think will happen? People will start choosing the “Shrimp Feast Premium” more often. Aside from anchoring, we observe something that Daniel Kahneman pointed out as a “minus A rule”. While comparing three products, our brains tend to cast aside the one which is more difficult to compare with the rest (In this case the “Shrimp Extravaganza” seems something completely different than the other two “feasts”) and directs the choice to the remaining two. In the case of luxury items, the more expensive ones win far more often.

Time over money

Do you want customers who purchased your shrimp feast to come back for more? Don’t mention money! In her studies, Jennifer Aaker proved that people are willing to buy more if we remind them of the time they spent with our product or service rather than the money they saved on it. That’s why “Remember the fun you had with your friends sharing our shrimp feast?” is a far better pitch than “Remember the 30% you saved on the shrimp feast?”.

Speaking of time – a high price spread throughout a time period works better, too. Would you prefer to spend $168 for a year of Premium Netflix access for a year or just $14 per month? That’s why certain companies inform customers about a monthly subscription plan… yet charge them for a full year on purchase.

Designing the pricing strategy isn’t an easy task, but knowing how people react to prices and how they assign worth enables you to increase your income without undergoing any internal changes within your company. Hence… it’s worth it! Good luck!
08/24/2019
Cognitive Biases: Hyperbolic Discounting
Imagine I’m offering you to take one dollar today or two dollars tomorrow. Which option are you going for? Which option will most people choose? Would you be willing to wait? And what about the others? You might think that a reasonable human being with an average life expectancy would also choose the two dollars deal. However, studies show that the absolute majority of people go for a lower-yet-sooner reward.

This phenomenon is well known in the world of behavioral economics. It’s called the hyperbolic discounting bias. And I will show you how to use it on your customers.

Hyperbolic discounting in your life

Before we dive into business stuff, take a second to think of all the situations in which you fall for hyperbolic discounting and how it affects your life. You watch Netflix for a quick hit of dopamine instead of organizing the closet that’s been driving you insane for months. Or you drive out to KFC because you ran out of food in your fridge even though grocery shopping and meal-prepping would have been more consistent with your weight-loss plan.

Most of our human flaws, weaknesses, and procrastination have something to do with hyperbolic discounting. We make the mistake of getting carried away today and forgo future consequences. Despite what mindfulness coaches tell you, people do tend to prioritize living in the moment. Just not the way these coaches meant for them.

Okay, I’ve made you feel bad about yourself. But what implications does all this have for your businesses? Why did I make the bold claim that overcoming hyperbolic discounting might make your customers way eager to spend their money with you? Well, all of these ungodly things I’ve listed above, your customers do them. If you’re in the fast-food, alcohol or entertainment on-demand business, that’s excellent news to you. But if you’re selling organic cherries, life insurance, or online courses that take a year to complete, you begin to see the problem, don’t you?

Use It To Your Advantage

“Nudge” by Richard H. Thaler & Cass R. Sunstein

Fortunately, there are ways to use hyperbolic discounting to your advantage. Even if you’re running a business that doesn’t offer immediate results (think long-term goals like optimal health or mastery of a topic), you can trick your customers into making a buying decision more often. I’ve only used the t-word because you’re doing it for their good and they want you to do it. Clients need your help in making decisions that will benefit them today and in the long run. They want you to nudge them in the right direction (there’s a great book about it — check it out).

The nudge above should be packaged as a promise. My product will not only take care of you in the long run, it also gives you something positive right after the purchase. If you design and market that way, your chances of success go way up.

There are countless ways to tap into this philosophy, so get creative. Here are a few ideas to jump-start your brainstorming session:
- You’re selling an in-depth course that makes your clients master chefs in a year? Tell them that it will turn them into a chocolate cake wizard in just four days.
- Your organic food catering program promises shinier hair after six months? Run some tests to check if it lowers people’s blood sugar levels after only a week.
- Your gym requires, well, consistent use to help create that bikini bod? Set up a precise body fat measuring machine so that your clients can track minimal progress every time they leave.
I hope you’ll come up with plenty of your ideas and notice your business growing. Just remember not to put it off!
07/20/2019
A marketing lesson from Benjamin Franklin himself
Have you heard of the book “You are not so smart”? Please don’t get offended by the title, it’s a truly great read. David McRaney, the author, takes you through a heap of your beliefs and… debunks them, one by one.

You Are Not So Smart
by David McRaney

It turns out that us human beings don’t think as independently as we’d like to assume. Our lives are ruled by cognitive biases – sets of frames, contexts, and tendencies that impair our ability to draw logical conclusions. I’m sure you’ve experienced some of them. Such as the “bandwagon effect” – you’ve wanted something badly just because a lot of other people did.

Today we’ll take a look at one particular bias, that has a lot to do with marketing. It’s called the Ben Franklin effect. In his autobiography, he wrote the following words:

He that has once done you a kindness will be more ready to do you another, than he whom you yourself have obliged.
Benjamin Franklin

Beautiful words, but what exactly does it mean?

Basically, if someone has done something nice for you before, the person is more likely to do it again. And, more surprisingly, if it was you who did the favor for the person first, they would actually be less likely to return that favor. What is the reason for that? Is it us being such a social species? Not necessarily. We assume that we would have helped the person we liked. But because our minds aren’t that good at separating causes and effects (actions from perceptions), we assume the opposite is also true: we should have liked the person we helped. And we should like that person even more than a person who has helped us.

Let me show you some tricky (or surprising) implications of that effect. If you think your mother-in-law is the worst nag, do something nice for her. You might just trick your mind into believing she’s not that bad and make those Thanksgiving dinners a bit easier on yourself. But what about marketing?

All this time, we’ve been fed the reciprocity principles: do something for your client, so in return, he’ll do something nice for you. We gave away cheese samples, offered free consultations, and built unpaid bonuses around our products and services. All great strategies, but it’s time to step up our game and use some Franklin wisdom to do it.

How do you get your (potential) client to first do something for you? As always, keep it simple — ask. Here are a few examples to get those brain cells of yours moving:
- have your Facebook audience help you pick out your book cover
- poll your Instagram followers on an outfit choice
- interview your co-workers for pediatrician recommendations
- ask your business partner to hold your briefcase while you’re getting coffee
The opposite effect also appears to be true. We tend to like the people we wronged a bit less. Perhaps it’s our effort to justify the wrongdoing. Nevertheless, keep that in mind before you work yourself up too much.

Did I inspire you? It just seems that there are no losers in this principle: everybody wins. So why not implement it today? Do you have any ideas already?

One more thing. Could you please click one of the share buttons below? You will like me even more 😉
06/21/2019