AudioTech Summary of "Decoded: The Science Behind Why We

 


Decoded: The Science Behind Why We Buy

by Phil Barden

A summary of the original text.

Decoded, summarized by arrangement with John Wiley & Sons, Inc., from Decoded: The Science Behind Why We Buy by Phil Barden. © 2012 by John Wiley & Sons, Inc.

In this summary...

·                  Empower yourself and everyone on your team to harness the latest scientific knowledge about customer behavior and apply it to everyday marketing work.

·                  Unlock the underlying principles of purchase decisions by understanding the two systems driving consumer decisions: the autopilot and the pilot.

·                  Learn how to trigger the six implicit goals that motivate human behavior: security, enjoyment, excitement, adventure, autonomy, and discipline.

·                  Discover how to influence consumer decision making by increasing the "reward" consumers feel when they buy, while also decreasing their "pain."

·                  Improve your marketing efforts by leveraging three meta-principles that help to optimize decision interfaces: tangibility, immediacy, and certainty.

Decoded

In marketing, the goal is to influence purchase decisions. But what really drives those decisions? Decision science helps to answer this crucial question by uncovering the underlying mechanisms, rules, and principles of decision making. It allows us to see what really drives purchasing behavior, and how to apply these insights to maximize the benefit to marketing.

For example, in a study on the neural bases of decision making, German neuroeconomist Peter Kenning and his associates looked at brain scans of people who had been shown photographs of pairs of brands. These photos either included the person's stated favorite brand or did not. Every time they were shown one of the photographs, each person was told to choose a brand to buy.

There were two main findings:

 ·                  First, when the favorite brand was included, the brain areas activated were different than when two non-favorite brands were exposed. When the favorite brand was present, the choice was made instantly and the brain showed significantly less activity in areas involved in reflective thinking, an effect the scientists named "cortical relief." Instead, brain regions involved in intuitive decision making were activated. In other words, strong brands enable intuitive and rapid decision making without thinking.

·                  Second, the cortical relief effect occurs only for the individual's number one brand. It isn't enough to be in the target consumer's consideration set to enable this intuitive decision making.

Intuitive decision making is what enables a shopper to make purchase decisions in milliseconds. But it's not only about brand and product purchases; it is even relevant when it comes to numerical logic. Psychologist Daniel Kahneman poses the following simple question:

A baseball bat and a ball cost $1.10 together. The bat costs $1 more than the ball. 
How much does the ball cost?

Nearly everyone answers that the ball costs 10 cents. This intuitive response is incorrect. The ball actually costs only 5 cents. Something in our brain leads most of us, intuitively, to give an incorrect answer to this apparently simple calculation.

This intuition is based on the ease of perceiving the split of the 1.10 price tag into two chunks of $1 and 10 cents respectively. Doing the actual calculation is much harder for our brain, and most of us don't bother because the 10-cent answer feels right.

Using examples like these, Kahneman investigates how decisions are influenced through psychological processes. By bridging psychology and economics, Kahneman's work results in a major opportunity to exploit the full explanatory power of consumer decision making that the combination of both approaches provides.

The core of Kahneman's framework, for which he was rewarded with the Nobel Prize, is the distinction between two systems of mental processes that determine our decisions and behavior.

·                  System 1 integrates perception and intuition. It's always running. It's very fast, processes all information in parallel, and is effortless, associative, and slow learning. It is made for fast, automatic, intuitive actions without thinking.

·                  In contrast, System 2 is slow, works step-by-step, and takes up a lot of energy, but has the benefit of being flexible. It enables us to make reflective, deliberate decisions. It is made for thinking.

The experiment cited earlier that revealed that brands induce "cortical relief" shows that strong brands are processed in System 1. In fact, the hallmark of a strong brand is to activate System 1 and circumvent System 2 processing. Weak brands, by contrast, activate System 2 — that is, consumers have to think about the purchase decision.

Subjectively, we do not usually experience that there are two separate systems at work and, in the end, we make one coherent decision.

A useful metaphor for how the two systems work together is to see System 1 as an autopilot and System 2 as a pilot.

The pilot is responsible for tasks that require flexible decision making, such as take-off and landing and when a problem occurs, whereas the autopilot is responsible for all the decisions that can be made automatically.

As long as there are no problems, the pilot relies on the processing of the autopilot for the entire flight without really knowing what is going on in the autopilot. None of the workings of the autopilot are transparent to the pilot. The autopilot works implicitly, whereas the decisions of the pilot are explicit.

When we learn something for the first time, the pilot is engaged. Then, with repetition and based on the experience, we develop intuition and the processes become automated and, consequently, more efficient. For example, we become driving experts to the point that we sometimes wonder how we even got to work because we did not pay conscious attention to our driving throughout the entire journey.

The underlying learning process is the same in general, for doctors, chess masters, agency creatives, and even consumers since they have a lot of experience with seeing advertising and of buying and using the products.

Once we have sufficient experience, and have developed our intuition, the pilot system comes into play only when we face new problems or something we have not experienced before. If, on our way to work, the road we normally use is closed due to construction, we suddenly have to think about what detour to take. In this situation, we probably turn down the radio or end our phone conversation because we need to concentrate.

For marketers, it's crucial to understand these two systems, as they determine purchase decisions across all categories, industries, brands, and products. So let's look further at how the autopilot and the pilot work.

The autopilot processes a huge range of information, not only that on which we focus but also the contextual information in the environment. When we are in front of a shelf in the supermarket, our autopilot processes much more than just the product on which we are currently focusing: other products on the shelf, the shelf layout, colors, interior design, light levels in the store, music, and much more.

Similarly, when we visit a Web site, our autopilot processes the page layout, colors, design, and content over and above that which we're looking at.

 

The autopilot processes every single bit of information that is perceived by our senses. It has a huge processing capacity of 11 million bits per second, roughly the size of an old floppy disk. So each second, our senses deliver 11 million bits to the autopilot — no matter whether we're aware of this input or not.

Every input is processed by the autopilot and can potentially influence our behavior. One study shows that when we visit Web sites, the autopilot will derive a first impression within less than one second — and this impression strongly influences our subsequent behavior.

Comparing this with the very limited capacity of the pilot system, the superiority of the autopilot becomes obvious. A classic finding in cognitive psychology is that the upper limit of our working memory, which is the basis for the pilot to do its thinking, is seven chunks of information — such as numbers, letters, words, or faces — which amounts to roughly 40-50 bits in the case of numbers or letters.

This limited capacity of the pilot is the reason why we find it difficult to remember phone numbers that exceed seven digits. It is also why, if we were to reflectively think about every purchase decision in the supermarket, it would take so long to do our shopping that we would starve to death. Even if we wanted to decide reflectively, our very limited capacity constrains us from doing so.

What's more, the time that people typically spend with advertising media also shows that most processing does not involve the slow pilot system:

·                  Ads in popular magazines: 1.7 second

·                  Ads in trade journals: 3.2 seconds

·                  Mailing: 2 seconds

·                  Banner ad: 1 second

This makes it clear that most marketing communications need to deliver their core messages within seconds. Given the time that would be required to reflectively process all the information in an ad, it is obvious that very little of this will be processed by the slow pilot system.

The autopilot processes everything that is perceivable in the environment at any given moment in time, even without focused attention. We've all experienced the power of the autopilot in action without our focused attention in the so-called "cocktail party effect." While fully engaged in conversation at a loud party, we nevertheless immediately notice if someone around us mentions our name.

This phenomenon occurs because our autopilot is constantly processing everything, no matter whether we are focusing on the information or not. So if we manage to use this high bandwidth efficiently in our marketing communications, then our messages can have significantly more impact.

What does the autopilot do with all the input it receives? It's used for learning. But the way the autopilot learns is not the way we learn in school; rather it is based on associative learning.

The principle underlying associative learning is: "What fires together wires together." Neuropsychology shows that our brains build associative connections between signals when they appear at the same time or space and when this simultaneous appearance happens repeatedly over time. If something happens to us once, it's probably a random occurrence; but if the same thing happens regularly, then our brain starts to learn it, as it has a high probability of occurring again. Neural cells, which repeatedly fire together, get wired together more and more tightly.

If, as children, we smell freshly brewed coffee and a few minutes later the family gathers together in the same room and we experience this several times, a link is created between this smell and the concept of "companionship." If we see our parents making a pot of coffee when they have to work, we build the association of "work" with coffee. So when we grow up, it just feels natural, and intuitive, to drink coffee at work.

The brain does not store information individually like a computer, but instead organizes the world into neural networks where everything is interconnected, which is why this type of memory is also called "associative memory." So when we think of coffee, not only is companionship activated, but so is everything else that is associated with companionship, such as cake.

The autopilot needs about 10,000 hours' experience of a specific topic before intuition develops fully. It is not sufficient to see our parents make a cup of coffee once while at work. Rather, we need to experience this very often for the autopilot to establish a strong connection between work and coffee.

Once established, this intuitive knowledge enables rapid decision making. Experienced cardiologists simply have to look at an ECG to see the relevant patterns. They just know what to do intuitively.

Consumers are experts as well. Their autopilots have spent more than 10,000 hours in consuming products and brands, making purchase decisions, and being exposed to advertising all day long.

How does this work? How do the autopilot and pilot interact when we buy? Let's look at an example.

In an experiment on scent, people entering a shopping mall were exposed to different kinds of aromas, such as baking cookies or roasting coffee beans. On their way through the mall they encountered someone who pretended to need help in picking up items they'd dropped. The people who had been exposed to the aroma of baking cookies were more likely to help than those who hadn't. The test subjects were not aware of the scent when they entered the mall, but this signal influenced their behavior.

As Kahneman explains, the principle at work is the "framing effect." Framing is a key concept in understanding how decisions are made. Understanding this principle leads to a comprehension of how the autopilot and pilot come up with an integrated purchase decision together.

If you look at two small gray squares in the center of two larger squares, they appear to be different sizes and shades of gray depending on the frame. If a small gray square is enclosed in a darker square, it seems lighter and bigger than an identical square framed within a lighter square. Simply put, the frames change perception.

Similarly, the scent of cookies framed the perception of the experience in the mall and thereby influenced behavior. This framing happens implicitly. We are not aware of its influence, but it changes our perception and, hence, changes our decisions.

This is how the autopilot and pilot work together. The autopilot provides the frame, and the pilot focuses on the figure. Together, they create how we experience the world and build the basis for our decision making.

This framing effect is crucial for marketing. Framing explains how brands influence purchase decisions: Brands operate as the background, framing the perception and, with it, the experience of the products.

Framing explains the real equity of brands for selling products. This framing effect of brands increases the perceived value and the willingness to pay a premium price — even for objectively identical products and services. In the UK, Virgin Mobile has higher perceived network quality and satisfaction scores than T-Mobile despite the fact that it uses the exact same network.

Similarly, it is unlikely that in a blind test consumers would be able to judge a difference in taste or quality of a Starbucks coffee versus its competitors. Nevertheless, people are willing to pay a significant price premium for the frame that the brand and the outlet provide. This implicit value that the frame adds is exactly what is meant by the intangible asset we call "brand equity."

The Virgin Mobile example indicates that framing works not only for tangible products like coffee, but also for intangibles such as network quality. In fact, one can argue that brands as frames for products are especially important for intangible offers like services, high-speed Internet, or content because quality and value are hard to judge, and even harder to compare, in these cases.

Framing influences perception even when our other senses are telling a different story. For example, in an experiment, consumers were given a vanilla pudding that had been made to look brown by using tasteless food coloring. When the consumers were asked to describe how it tasted, most of them described the taste of chocolate. They all subjectively experienced what they implicitly expected, misled by the appearance of the pudding.

Subjects in a related study who believed they had been given standard coffee showed an increased pulse and heart rate even if they had, in fact, been given decaffeinated coffee. This explains the difference in performance experienced by consumers when using their preferred brand as opposed to an unbranded equivalent, even though the two products might be exactly the same — the brand frame activates expectations, and these, in turn, influence the subjective, perceived product experience without us being aware of this influence. Our perception, and hence, our product experience, is created mainly by implicit processes in the autopilot.

The pudding experiment shows that expectations are part of the autopilot. We expect a brown pudding to taste like chocolate and this expectation changes, in the background, the subjective taste experience.

In addition to implicit expectations, there are implicit attitudes. For example, while most of us have positive attitudes towards healthy food at an explicit level, the autopilot has a different take. A study found that the less a product was presented as healthy, the better its taste ratings were before, during, and after consumption. The autopilot uses the rule "unhealthy = tasty."

This implicit attitude frames the experience irrespective of the stated, explicit attitude. It explains the failure of Pizza Hut's low-cal pizza or the fat-reduced McLean burgers — the subjective taste changes when we eat a burger that we know contains less fat.

So we have reached the first stop in our journey to understanding the why of consumer behavior. What has emerged is that we have an analytical framework to manage the explicit and implicit level of decision making. Let's now see how we can build on this to increase the effectiveness of marketing.

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The Moment of Truth: Decoding Purchase Decisions

We have seen that there are two systems driving our decisions: the autopilot and the pilot. But when we are standing in front of a shelf in a supermarket or comparing alternative service providers, how do we arrive at our decision? What determines whether we buy one brand or another? In this section, we'll explore these crucial questions and unlock the underlying principles of purchase decisions.

In a groundbreaking experiment, neuroscientist Brian Knutson of Stanford University and his colleagues wanted to find out if it was possible to predict purchase behavior by analyzing neural activity. His research began with images of products and brands — for example a box of chocolates — shown for a few seconds. Then the price appeared on the screen, and finally the respondents had to state, by pushing a button, whether they would buy the chocolates or not.

Brain activities were measured during the entire time using brain imaging (fMRI). This showed that the picture of the product or brand increases the activation of the so-called "reward system," which is known to be triggered when we value something. It's as if the brain says, "I want to have this."

This wanting is based upon the value that we expect the product to deliver. In our associative memory, we have experiences with the brand — from using it directly or indirectly, from processing its advertising, or from seeing other people using it. Based on this associative learning, we have an expected value delivered by the brand. If this expected value is high, then the reward system shows a high level of activation. If the value is low, then the level of activation will also be low.

What happened when the price was also shown? An entirely different area of the brain was activated, namely the insula. This area is normally activated when we experience pain — for example, when we cut our finger or if we are excluded from a group. In other words, when looking at price, the brain experiences pain.

This makes intuitive sense. Products and brands reward us because they help us to achieve our goals. Prices imply giving away something we already own, and which is of significant value to us: money. That this is coded as a painful experience seems reasonable.

The scientists then uncovered the underlying principle that determines whether the brand or product will be bought or not. If the relationship between reward and pain exceeds a certain value, people are willing to purchase this item for this price. Our brain calculates a kind of "net value" and if this is high enough — if the difference between reward and pain is great enough — then we buy.

Knutson's results show that purchase decisions are based on a reward/pain relationship. This means that in marketing we have two levers to influence consumer decision making — reward and pain — and that they can be independently addressed. In order to make consumers buy, we can increase reward and at the same time decrease pain.

The goal is to increase the "net value" the brain calculates based on the expected reward of the product and the price. This enables the same piece of advertising to focus on the value that the brand or service offers, but also to include a "hard sell" price message such as "for a limited time, 30 percent off." The first message increases the expected reward, the second reduces the pain, and the unity of both increases the net value.

This simple but fundamental basis of decision making explains why Starbucks can command a premium price for its coffee. The reward triggered by the brand increases the perceived value, which makes us less resistant to the higher price. The price is higher but, correspondingly, the reward is too, so that, subjectively, a better value-cost relationship exists than that for cheap coffee.

The reward is based on a combination of implicit and explicit value. We know a lot about the explicit value that a product needs to deliver. For example, a shower gel needs to clean, it must smell good, it has to produce foam, and so on. Consumers have no problem telling us what they want at a functional level. The challenge is that all shower gels in the market deliver this basic value, and differentiation at this level is hard to achieve.

The "Dynamic Pulse" shower gel from Adidas is still a shower gel, fulfilling all the explicit needs that consumers have. But in this case, the packaging adds extra value through framing. The shape of the bottle is reminiscent of motor oil, which suggests that the shower gel can help the user to refuel and kick-start. It makes the shower a more energizing experience because this signal is processed by the autopilot and it increases the overall net value of the product in the consumer's mind.

The same principles and mechanisms that increase perceived value can be used for managing price perception: As with value, there is an explicit and an implicit level of cost. The explicit level of cost is clear: It is the objective price point. But even here there is an implicit level. Instead of lowering the real price, we can change the perceived price with contextual signals that the autopilot "understands."

For example, researchers found that when the same price of $4.99 was presented five different ways, people perceived it very differently. The price with a shiny star above it was rated as the most expensive, much more so than when the same price was presented simply as black on white. In turn, black on white was rated as more expensive than a price with the words "Discount Price" next to it, which in turn was rated more expensive than the price accompanied by the words "Special Price." The cheapest perceived price was one that was shown along with an "old" price that was crossed out.

Objectively, the price is always the same, but the valuation of the "pain" is different due to its presentation and, therefore, the impact is very different.

Another approach to reduce perceived cost is a mechanism called "anchoring." When Steve Jobs introduced the iPad, he said that pundits expected Apple to price it at under $1,000. A giant "$999" came up on his presentation screen. When he announced the actual price, the "$999" price was then visibly crushed by a falling "$499." So the final price point appeared to be a very good deal — it reduced the perceived cost. The first price is the anchor, and the next price is evaluated relative to this anchor.

Other research shows that prices ending in the number "9" are perceived as lower by the autopilot. In a fascinating field experiment run by MIT scientists, a mail-order company selling women's clothing tested an item that was priced differently in three different versions of its catalogue: at $34, $39, and $44. What happened? There were more sales at the $39 price than either of the other two prices — in fact, 23 percent more people bought the dress at $39 than at the lower price of $34.

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Decoding the Interface: How the Autopilot Perceives Touchpoints

Perception is the door through which our marketing activities enter the mind of the consumer. This part of the summary shows how perception works and how we can use the core insights to optimize our marketing activities.

To illustrate how powerful perception is and how it influences our decisions, consider two bottle shapes: One is taller and concave through the middle, while the other is shorter and wider.

Most people anticipate that the taller bottle has greater volume, yet both bottles hold the same. Why is this? Priya Raghubir, Professor of Marketing at New York University, found that consumers use the height of a package as the dominant signal, leading to more purchases and increased consumption.

But why? Our perception is not an equal 1:1 representation of the world. What we see is an interaction between the objective signal and the experiences stored in our memory and expectations derived from these memories. Vertically elongated packages are perceived to contain more volume because we have implicitly learned that taller objects are often bigger — such as an elephant versus a mouse — and we transfer this rule of thumb to judge volume.

This leads to a broader principle: Marketing has to reflect the way our brains create our perception of the world. We imagine that we see everything in high resolution and full color. This is our subjective view of the world: It feels as if we had a camera sitting on our eyes. However, the reality could not be more different.

We actually see only a small part of a scene in sharp focus and in color, and the rest becomes more and more blurred and loses more and more color towards the periphery of our field of vision.

For advertising, the implication is that if we can communicate the brand and its value, even through peripheral vision, then we will be much more effective since our ads will communicate even when a consumer's focus is on something else.

If we could look at a retailer's shelf through the lens of the autopilot, the products would be blurred. None of the text could be read. All we would see are colors, shapes, and sizes.

For this reason, a useful exercise is to blur ads, packaging designs, and Web sites and ask what is perceivable in this "blurred mode." Does the brand come through? How differentiated are we?

In one study, print ads from Garnier and Dove emerged as the most effective in communicating product and brand, even in highly blurred versions, after an exposure of less than 100 milliseconds. This is less than one-tenth of a second, or one quarter of the blink of an eye. This has obvious advantages when the average "dwell time" on a giant ad in a popular magazine is less than two seconds.

The fact that consumers perceive brands and products through the blur of peripheral vision has implications for top brands as well as private labels. In many cases, the "copycat" colors on the package of a generic brand look strikingly similar to the familiar package of a heavily advertised brand. This is beneficial for the private label, but not for the branded product.

Another finding is that when our brains see a light blue package, we expect the product to be "light," or low in calories or fat. Based on associative learning, we learn that the probability is high that if a product uses a light blue in its packaging it is a light product.

But what if we see a car colored like this? Or a shirt? We don't recognize these as light products because recognition is context sensitive. Our experience from the visual world dictates our predictions about what other objects to expect in a scene, and their spatial configuration.

MIT neuroscientist Moshe Bar and his team found two working streams in the brain that, together, enable recognition. One stream focuses on the object we are looking at and the other stream processes information about the context we are in. For example, when blurred, a hairdryer and a power drill look identical; so the brain uses the other nearby objects — such as hairbrushes or hammers — to identify the object.

Recognition is driven by both the object and the context in which the object is placed. In this way, the brain answers the question, "What is it?"

The second major question the brain "asks" when perceiving something is: "What does it stand for?"

Let's have a closer look at this crucial second step in decoding brands and products.

Imagine you are invited to the birthday party of one of your work colleagues and as a present you bring her a bouquet of roses. This is likely to lead to an uncomfortable situation because roses stand for romance and love. A sunflower, in contrast, stands for happiness. They mean different things and this meaning determines the perceived value in a given context.

What happens in the brain is this: After we have recognized what an object is, this information is translated into a mental concept where additional meaning is applied. We see the rose, we recognize it is a rose, and then our associative memory activates prototypical things we have already learned about roses, such as occasions where we came across a rose. By this process, we apply meaning.

A luxury car in the driveway is only partly about the need for transportation; the concept is social status. Dozens of studies have teased out the many ways in which such concepts can influence people's purchase or consumption, over and above the physical product itself.

Rounded logos, for example, are generally perceived as more harmonious and less aggressive than angular logos. Likewise, studies have demonstrated a relationship between a product's relative height and perceived dominance.

Therefore, we should not judge visuals, colors, font types, or shapes on the basis of whether something is aesthetically pleasing. Rather, we should ask what the signal stands for, and which concept it triggers.

We have now experienced how the brain recognizes products and brands, and how it recodes signals into concepts, using the context within which the signals are perceived.

One key question remains, though: How do we allocate attention to signals? What determines whether we pay attention to this or that product, ad, or package design?

Again, it comes back to the basic principle of decision making: It is based on value.

If we're hungry, our autopilot scans the environment and directs our focus to the signals that promise to fit with our goals, such as a McDonald's sign. If we are looking for shoes, our focal attention is guided towards other signals such as shop windows. In other words: Value drives attention.

Many studies show that our current goals guide the automatic allocation of our attention. Looking for a can of Coke will enhance processing of red areas in our visual input by increasing the neuronal sensitivity for that particular color. Therefore, red cans will be seen with higher attention and thus noticed more quickly compared with, for example, blue cans.

The same scenario plays out when we are in a supermarket aisle. The autopilot will search for signals that "tell" us, based on input that is mostly blurred, which of these packages most probably fits our goals best.

But there is another element of perception that influences how much attention we pay to something: perceptual fluency.

For example, imagine that you were to look at two nearly identical pictures of a piece of cake; the only difference is that in one picture a fork is on the left of the cake, and in the other image the fork is on the right. Which one would lead to the highest purchase intent?

If you thought the one with the fork on the right, you're correct: It resulted in a 20 percent increase in purchase intent. But why? The only difference is the orientation of the fork. Why should something so trivial affect our behavior? Simply because it's a better fit to what we normally perceive if we are right-handed. What we are familiar with requires less effort to process and is therefore valued more highly by the autopilot.

Before we move on, let's discuss how the brain perceives prices. It turns out that our brain processes prices using very similar principles as when we're seeing, hearing, or touching. Most importantly, price perception is influenced, like all of our senses, by context and is therefore fundamentally relativistic. Previously, we saw that perceived cost can be reduced by contextual signals such as how the price is presented.

However, does the distance, or spacing, between the two prices matter? This was the question that a study by pricing researcher Keith Coulter looked into. The result? The greater the physical horizontal distance between a reference price and a discount price, such as "Was $7" and "Now $5," the greater the perceived difference between the two prices.

In other words, to show that the new price is significantly lower, put more white space between it and the old price. The perceived price discount increases with physical distance, and so does the probability of purchase.

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Optimizing the Path to Purchase: The Decision Interface Makers the Difference

The next step in our journey through the autopilot is to optimize the decision interface.

The commonly held view in marketing is that, in order to change behavior, it's first necessary to change attitudes. However, research shows that the decision interface can profoundly influence behavior without people even realizing it.

For example, an experiment at Cornell University focused on improving students' eating habits. The traditional approach would be to use an internal "advertising" campaign to change students' attitudes towards high-calorie food; studies have found, however, that such campaigns make very little impact on actual behavior.

Brian Wansink, Professor of Consumer Behavior at Cornell, approached this topic in a very different way. In his experiment, he didn't change any items on the menu, he only changed how it was presented — he changed the decision interface.

·                  Broccoli was moved to the very beginning of the lunch line, increasing its consumption by 10-15 percent.

·                  Including fruit within the price of the lunch, but having to pay separately for a cookie, led to 71 percent more fruit being consumed and 55 percent fewer cookies.

·                  Relocating the salad bar away from the wall and placing it in front of the checkout register tripled sales of salads.

The principle that behavior is highly influenced by the decision interface even works for nutrition experts, as another study by Wansink shows. The experts were attending an "ice-cream social" to celebrate the success of a colleague. They were randomly given either a small or a large bowl and either a small or a large ice-cream scoop.

Even though they were experts on nutrition, when they were given a larger bowl they served themselves 31 percent more ice cream without being aware of it. Their servings increased by 14 percent when they were given a larger serving scoop.

This illustrates a fundamental result of decision science: Decisions are strongly influenced not only by what is presented but, to a high degree, by how it is presented.

In marketing, we are constantly searching for ways to gain a competitive edge over the competition by developing new products and features and improving quality. However, there is a big opportunity to gain competitive edge by improving the decision interface through changing small things at low cost. The impact can be highly disproportionate to the investment required.

So, let's look more concretely at how this can help. Scientists conducted a field experiment with a carwash and its customers using "loyalty cards" as the decision interface. Customers had the card stamped each time they used the carwash and they could collect stamps to obtain a free wash.

·                  One half of the customer base required ten stamps in order to receive the free wash. Their cards had already been stamped twice — therefore, another eight car washes were required for a free wash.

·                  The other half of the customers received a card without any "free" stamps, but they needed only eight stamps rather than ten.

Since both groups of customers had to buy eight car washes in order to get the free one, they should be just as likely to make the purchases that would trigger the bonus.

But something entirely different happened. The customers who had received the pre-stamped cards were twice as likely to buy the additional eight carwashes compared with the group without the free stamps.

What happened? The signal of "two stamps" had triggered what's known as "process endowment": The customer was already on his way to filling the card and this activated the goal to finish the process.

Framing the task as one that has already been started and is incomplete, rather than one that has not yet begun, leads to people being more committed to completing the task and, moreover, they complete the task more quickly. This small and cost-neutral change to the decision interface has a significant impact on sales.

Similarly, consider the effect of a small change to the menu in a restaurant in Europe offering a daily "special." The prices on a menu were displayed in three different ways:

1.               Numerical with Euro sign: 10,00 €

2.               Numerical without Euro sign: 10

3.               In written form: Ten euro

The numerical display without the Euro sign was the most successful. Each table spent a full 5 Euros more if they had menus with prices not referencing the Euro, compared with the two other groups. Why? Prices activate the pain area in the brain, and this result shows that the pain was perceived to be higher when the symbol or word for "Euro" was tangible.

Without a tangible signal for cost, the price was perceived to be less costly. This tiny change, one which was easy and cost nothing to implement, had a huge impact on the customers' purchase decisions and resulted in increased revenue for the restaurant.

Another principle of decision science is that we dislike losses more than we like gains of an equivalent amount. An energy company found that when it communicated to its customers that switching to energy-saving mode would save (and therefore they would gain) $200 a year, very few customers signed up.

However, when the company changed the message to show that by not switching to energy-saving mode customers would lose $200, there was an extremely positive response. The mechanism behind that is loss aversion: Avoiding loss is valued more highly than gaining something of the same monetary value.

Most measures of loss aversion find that people place approximately twice the value on giving up an item than they do on receiving it. The value-cost equation in the autopilot is skewed, indicating that emphasizing the money that people will lose by not taking an action will motivate them more than telling them what they can save.

Small changes in the decision interface can have a huge impact on purchase decisions and sales. The underlying mechanisms in these three examples, like process endowment or loss aversion, are automated decision rules — heuristics — that can be deliberately activated by the interface and that, in turn, influence our perception of value and cost. These heuristics are rules of thumb that the brain uses in response to situations and environments. They are fully automatic and thus allow for rapid, autopilot decision making with little effort. The benefit of these decision rules is that we can decide very quickly and intuitively without energy-consuming reflective thinking.

The following three meta-principles help to optimize our decision interfaces:

1.               Tangibility: To trigger heuristics, there must be tangible and perceptible signals.

2.               Immediacy: The autopilot prefers immediate rewards compared with future rewards.

3.               Certainty: The autopilot prefers the safe, certain choice.

There's another aspect that makes implicit decision rules so attractive for marketers: They work internationally.

Researchers tried to understand how sales can be influenced by the structure of an offer. They used the example of ordering pizza in both the U.S. and Italy. Consumers were asked to either build up from a base product by adding extra toppings, or to scale down from a fully loaded product by subtracting toppings.

In both countries consumers ended up with twice as many ingredients when required to remove items from the offer instead of adding them. This, of course, means higher revenue and profit for the seller.

In a related study, consumers presented with a "fully loaded" car and given the opportunity to remove optional features in order to save money ended up with a more expensive set of features than those presented with a basic model and given the opportunity to add features.

Adding features or toppings focuses attention on increasing the price, whereas subtracting is all about reducing the costs. The marketing implications of this are clear. Starting with a large number of components or features and allowing consumers to scale down from there leads to the acceptance of a higher-priced product than starting with a basic product and asking consumers to build up from it.

But why do people want a car or pizza anyway? To answer this question, we need to look into another key driver of purchase decisions: the goals consumers pursue when buying products and services.

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Goals: The Driving Forces of Purchase Decisions

To fully understand purchase behavior, we need to understand what motivates people to buy products and brands in the first place. Why do we buy what we buy?

A study in 2008 by three leading neuroeconomists, Antonio Rangel, John O'Doherty and Hilke Plassmann, monitored hungry people in a brain scanner during an auction in which the respondents had to place bids in order to get items. Some of the items in the auction were nonfood, while others were food items such as a candy bar.

The key result was that the reward center in the brain determines willingness to pay for the food items. Hungry participants were willing to pay more for a food item because the hungry brain evaluated the food item as more rewarding. For satiated participants, the food items were less rewarding and, hence, they were less willing to pay.

It appears plausible that if we are hungry, and therefore have the goal to eat, we associate high value with a product that fits this active goal and this, in turn, increases our willingness to pay. Neuroscientists call this the goal value.

Of course, we don't always have consistent, active goals in every situation. At work, we strive for achievement and recognition, whereas at home, harmony and companionship are more important.

We have different active goals when choosing a car than we do when buying toothpaste. The way the brain derives the final decision is by establishing a relative ranking of the options based on their relative goal value. It then chooses the one with the highest overall goal value specific to the given context.

This explains why some consumers consider purchasing our brand but, in the end, do not. Our product in this case offers good goal value, but not the best. This is what neuroeconomists refer to as the "winner takes all" effect. Only the number one brand in the consumer's goal ranking will be chosen.

The calculations of goal value and willingness to pay — no matter whether it is food, music, services or cars — are mainly processed in the reward center. Based on experience and expectations, our brain calculates the extent to which a product fits with, and helps to achieve, our goals.

What does this mean for marketing? Goals are the key concept to understand why we buy what we buy. We buy drinks in order to quench our thirst. We buy detergents in order to clean our clothes. We purchase a car because we want to drive from A to B, and we choose the Volvo brand because we want to do that in the safest possible way. Others have the goal to show off their wealth, so they drive a Porsche.

Products and brands are instruments with which consumers achieve goals. Harvard Professor Clayton M. Christensen refers to this requirement as the job for which a product is "hired" by consumers. When people have a job that needs doing, when they have a goal that they want to achieve, they hire products to do that job for them. As marketers, we therefore need to create product experiences that deliver these consumer goals.

If motivated behavior is driven by goals that are currently active, it appears only logical that goals act as the core criteria that the brain uses to filter incoming signals. If our goal is to buy an energizing shower gel, our autopilot is tuned to look for signals in the environment that promise to fulfill this goal. When we spot some packaging that resembles motor oil and that carries the name "Dynamic Pulse," the match is high and we turn our attention towards this product. In other words, goals determine our attention — we notice things if they signal high goal value.

An experiment at Duke University demonstrates that brands are linked to goal achievement and that goals can be activated and monitored at an implicit level.

Under the pretext of an eye test, participants were placed in front of a monitor. They were shown pictures and had to decide whether the picture could be seen on the left- or right-hand side, while adding up numbers at the same time. This ensured that their (limited) pilot system was at full capacity.

Immediately before showing the pictures, the researchers displayed brand logos, but for such a short period of time that they could only be processed implicitly in the autopilot. There were two participant groups in this study — one was exposed to the IBM logo, the other to the Apple logo.

Immediately afterwards, participants were asked to perform a creativity test. They were asked, for example, to name possible uses for a brick (other than its usual role in the building of a wall). So a brick could be used as a paperweight, or as a hammer.

The astonishing result was that those participants who had seen the Apple logo came up with significantly more ideas than those who had seen the IBM logo. Additionally, the ideas from the Apple group were rated by an independent jury as being much more creative.

This study shows that goals can be implicitly activated in, and implicitly managed by, the autopilot. The Apple logo changed the behavior of participants, without them being aware of this process.

Another important lesson is that when it comes to goals and goal value, there are two levels:

·                  Explicit goals that are category-specific, such as moisturizing our skin, reliability of a car, removing stains.

·                  Implicit goals that are more general and that operate on a psychological level, such as energizing, being sensible, fun, or status.

In marketing, we tend to focus a lot on the category-specific, explicit goals. But which body lotion doesn't claim to be nourishing? Which insurance company doesn't have to be reliable?

The explicit goals are the reason why a product category emerges, so all competitors who want to survive in the market have to meet these goals.

When we ask consumers about brands and products, they will focus on the explicit goal level and talk about quality, reliability, or price. The reason is, of course, that the implicit level operates in the background and does not come to the fore when we ask consumers such explicit questions.

However, there is little difference between competitors at the explicit level, particularly in mature markets. In order to deliver the highest possible goal value and to provide differentiation, we have to address the implicit goals within our brands, products, and communication.

In order to increase relevance and, hence, willingness to pay, the key is to increase goal value on two levels: an explicit level that is specific to a given product category, and an implicit, psychological level that emerged long before products existed.

This psychological level of goals is the key for developing differentiating propositions that go beyond the explicit goal value, yet it is much more challenging to capture systematically because we cannot simply ask consumers what it is.

Fortunately, recent advances in neuroscience offer insights into better marketing.

The two most basic motivational drives in our brain are:

1.               Promotion: approach, going forward, fighting, gain, etc.

2.               Prevention: avoidance, protection, avoiding loss, etc.

These two motivational forces date back to ancient times, when our choice for survival was either to fight or to take flight. They are two sides of the same coin.

If we want to attract users of a shampoo for colored hair, we can address a promotive motivation by claiming that this shampoo makes the hair shine in brilliant colors. Or we can claim the preventive proposition that this shampoo helps to avoid the loss of color.

Both propositions are possible. To maximize relevance, we have to know which focus is the most dominant one for the majority of customers.

Human motivation is, of course, more elaborate than just prevention and promotion. Various scientific disciplines show that out of the basic motivations of prevention and promotion, there developed three motivations that are the key drivers of human behavior:

1.               Security: The main goals of this system are to avoid danger, avoid change, keep the status quo, avoid uncertainty, strive for stability, and not waste energy.

2.               Autonomy: The main goals of this system are to outperform others, assert yourself, increase your power and influence, expand your territory, and stay in control.

3.               Excitement: The main goals are to seek new and unfamiliar stimuli, break out of the familiar, discover and explore your environment, seek change, avoid boredom, and be different from others.

How do products and brands serve these implicit goals? Let's have a look.

One brand of power drill fulfills an autonomy goal by empowering the handyman. A different brand may frame its drill with excitement goals by focusing on the innovative features. Yet another brand may stress its longevity and durability, thereby addressing a more security-oriented goal.

In practice, it makes sense to supplement the three basic goal types by adding in their hybrid forms. Rock climbing, for example, is a mix between autonomy goals, like getting to the top, and excitement goals, such as vitality, fun, and discovery.

This results in a system of six implicit goals:

1.               Security

2.               Enjoyment

3.               Excitement

4.               Adventure

5.               Autonomy

6.               Discipline

People differ in which goal they want to achieve with a certain category. Ice cream can be a pragmatic choice for dessert (discipline). It can be linked to autonomy in the case of exclusive and sophisticated ice cream; it can help to achieve refreshment (excitement), or the goal of indulgence or escapism (adventure).

Therefore, in order to provide the best possible value proposition for our customers, we have to intertwine explicit goals with implicit goals. To see how this can be done, let's imagine we need to develop a proposition for a new car braking system.

The explicit goal that this fulfills is obvious: preventing an accident by getting the car to stop more quickly. Now to what implicit goal could this be potentially linked in order to increase goal value?

Security is an obvious candidate — we want to protect ourselves and our family by preventing accidents. Excitement can also be linked to this feature and the explicit goal — we can drive faster and enjoy driving more dynamically because the system enables us to react more quickly. Autonomy can be linked to this as well, because owning this advanced technology product provides superiority. The resulting value propositions intertwine the explicit functional goals with the implicit psychological goals.

But now we have developed three potential value propositions. How do we choose the right one? At this point, the brand comes into play. In order to be credible, the value proposition needs to fit the brand.

For Volvo, the security proposition would be credible. For Mercedes, in contrast, the superiority proposition would be the right choice.

The connection between explicit and implicit goals is not arbitrary: The entire product experience determines which implicit goals can be credibly linked to the explicit goal.

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Last Word

Based on what we have discussed in this summary, marketing appears to be quite simple: We have to create a value proposition consisting of both explicit and implicit goals, translate this proposition into signals that will activate mental concepts within the consumer, and then, if these mental concepts fit with the consumer's active goal better than those activated by competitors, they will buy our brand or product.

As a result, we now have a more analytical, evidence-based framework to access consumer decision making. The core insight behind this is the importance of the implicit level of decision making. Integrating this implicit level into our day-to-day marketing practice results in a paradigm shift, giving us an entirely new perspective from which we can manage our products, services, and brands.

This new perspective offers us a great opportunity to generate superior net value for our customers, and hence to significantly increase our sales. It also helps us to close the implementation gap between strategy and execution and, in doing so, substantially reduces the risk of failure of new product developments and relaunches, and also makes our advertising budgets more effective.

With the knowledge you've gained, you're now ready to adopt this approach to brand management in your business.

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About The Authors

Phil Barden is a proven marketer with over 25 years' experience, including senior and international roles at high profile companies such as Unilever, Diageo, and T-Mobile. Fascinated by the insights from decision science and by the value these can bring to marketing, he has latterly immersed himself in this new field.

The author is now one of very few experts to combine a practitioner's perspective with a profound knowledge of decision science, making him very much in demand among clients and conference organizers alike.

If you want to keep up with the latest insights from the fields of behavioral economics, psychology and neuro-science, sign up to the author's regular Science Updates at: www.decoded-book.com.

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