Mr. Ariely: If you think that people are
inherently rational and doing the right thing, what should you do?
You should get out of their hair, right? At most what you should do
as a marketing organization is give them information because people
would do the right thing. If you look at the recent campaign in New
York to add calorie labels to fast-food restaurants, that's a
[standard] economic argument. It turns out that this experiment in
New York yielded basically no change in calorie consumption, which
says that information is not the key to this problem. When you go
beyond information into mechanism design, behavioral economists
have a lot to say to marketers.
Ad Age: In "The Upside of Irrationality," you talk about
the human need for revenge. How does that apply to marketers?
Mr. Ariely: Revenge is a useful thing because revenge
allows for trust. If your computer crashes, you might get upset but
you wouldn't feel the same need for revenge as when a human being
betrays your trust. The anger that can be caused by bad customer
service is really kind of incredible. That's the first thing that
companies just need to understand. Things can quickly deteriorate
to a level to which there's no return. You can really calm people
very easily if you do it at the right moment.
Ad Age: How does social media change that?
Mr. Ariely: The development of things like YouTube adds a
whole new level of complexity. It creates a huge challenge because
it shifts the power equation to the consumers when they're
revengeful. You can compare it to terrorism. In the old days, let's
imagine that terrorists only had knives. How much damage could they
Ad Age: Can you talk a little bit about the Ikea
Mr. Ariely: The Ikea effect is kind of simple: You build
something and you fall in love with it. When marketers do sell you
a product, their theory is about preference fit. You like pink and
I like orange and I like this a little higher and everyone knows
their preference. That's important. But I think the more important
issue is not the preference fit but the investment in the product.
Say you like orange and pink. Imagine that in one universe you
found shoes that are orange and pink and in other you had to invest
five minutes of effort and attention and care to choose the exact
shades. What we show is that when you've invested into it, you
would appreciate them more and you would think about them more. You
might talk about them more, you might be more likely to buy them
again from the same vendor, your connection would be much higher.
It takes very little investment to make something your own. ...
It's sometimes surprising how little that is.
Ad Age: Let's look at one more concept from your books:
Mr. Ariely: The basic principle with self-herding is that
people don't know what they want very often. Figuring out our
preferences is in fact very hard. If I ask you, "What is the best
place to eat?" you have many choices. These are hard questions with
lots of possible answers. They way we often answer these is by
asking, "What have I done before? What I did before must have been
a good decision, after all I wouldn't have made it if it wasn't a
great decision, let me repeat it." We can consult our preferences
or we can consult our memory. It turns out it's often easier to
consult our memory.
What does it mean to marketers? To the extent that you can get
people to behave one way there's a good likelihood that people will
keep on doing that later. If you can remind people how they
behaved, there's a good chance that they will keep on behaving that
way. So the logic suggests that the efforts of marketing should be
particularly concentrated when people make first decisions about
the product, like people in college who are making first decisions
for themselves. It could include product introductions. It could
also include things that happen when there's a shift in the
economy. The recession caused many people to reconsider their
This is the fifth in a series of AdAgeStat Q&As with
researchers who have extensively studied pieces of the demographic
puzzle. Earlier we spoke to Richard Florida
about cities, Paco Underhill
about women, Rose Cameron
about men, and Tammy
Erickson about Generation X.