Why Marketers Need to Quit Acting Like Real People

They Resist Behavioral Economics Because of, Well, Behavioral Economics

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Tom Hinkes
Tom Hinkes
Behavioral economics is overturning many of the long-held "truths" about advertising strategy and building consumer brands. As a result, the marketing game should be changing. But it's not. Instead, despite the obvious benefits, only a handful of marketers have changed their approaches. And the explanation for this inertia can be found in, well, behavioral economics.

Behavioral economics focuses on those instances when people make irrational decisions that run counter to their own best interests. They help explain why we procrastinate, why we prefer chocolate now and a salad tomorrow, and why we neglect to sign up for matching 401Ks. They demonstrate how a group of consumers display risk-aversion when offered a choice framed one way, but risk-seeking behavior when offered the same choices framed differently. Or in another example, a group of people who will drive across town to save $5 on a $15 calculator think it makes no sense to drive across town to save $5 on a $125 coat.

New insights are published almost weekly, and they should be rapidly gaining traction in the marketing community. But they're not. Paradoxically, behavioral economics help explain why so few marketers are adopting behavioral economics.

Most people (marketers included) think their decisions are smart and think they have a good handle on why they make them. But in reality, their decisions are very much determined by their environment. Successful marketers have learned that you persuade by attaching yourself to preexisting maps of association. Harvard's Andrei Shleifer describes it as "confirmation bias." For example, because consumers have a preexisting belief that cowboys are paragons of masculinity and independence, Marlboro Man ads persuade by tapping into and confirming this existing belief. Similarly, BMW and Mercedes tap into and confirm the bias toward superior German engineering.

But because successful marketing requires using only those messages consistent with the consumer's existing worldview, most educational messages are doomed. There's growing evidence that "educating with facts" may have the opposite effect on strongly held beliefs. People resist facts inconsistent with one's belief system, and they may simply strengthen the resolve of the true believer. Some have compared this phenomenon to an inadequate dose of antibiotics; the bacteria emerge stronger than ever.

And because the new findings from behavioral economics fail to confirm many preexisting biases about consumer behavior and require marketers to re-educate themselves, behavioral economics suggest marketers will resist the new ideas. Some marketers resist new thinking, the way a Rush Limbaugh listener rejects President Obama's citizenship.

This finding is not particularly challenging until we add the behavioral economics caveat: Consumers choose brands they agree with. In behavioral economics, how a consumer thinks of a product is how he describes it to himself. A majority of men describe themselves as above-average athletes, so Nike's premise of "talking to fellow athletes" was brilliant. A successful brand's message has to be consistent with and confirm the consumer's map. Behavioral economics don't fit with traditional marketers' maps. And there's no brand manager to figure out how to frame behavioral economics for other marketers.

Consumers routinely punish their "future self" with decisions their "present self" makes: "I'll start my diet tomorrow" or "I'll read about those behavioral economics next month." Pre-commitments are one solution to this "inter-temporal choice" gap. By lashing himself to the mast, Odysseus' present self committed his future self to "do the right thing." Less mythic possibilities are to reduce the cost of present action for "present self." "Nudge: Improving Decisions About Health, Wealth and Happiness," by Richard Thaler and Cass Sunstein, is filled with examples of how marketers can do this. (I suggest your "present self" order it now so that it's available for your "future self" to read later.)

Once we own something, we tend to overestimate its value. Every parent thinks his children are special because they're his. People also consider their ideas to have more merit than the ideas owned by other people. The "I'm a Mac/I'm a PC" campaign tried to overcome this effect with humor, with a strong assist from Microsoft Windows. Marketers can be extremely possessive about their approaches to branding and extremely reluctant to admit some ideas are no longer the best.

We feel more pain from losses than pleasure from gains. We are loss averse. So as a result, we overestimate the value of what we have and overvalue stability and the status quo. Marketers who consider themselves corporate change agents may need to look much closer to home.

Several financial-service firms have incorporated insights from behavioral economics into their advertising. TIAA-CREF's campaign, for example, fights the inertia surrounding retirement savings by urging clients and potential clients to imagine and then "Become Your Future You." Lincoln Financial TV spots seek to overcome "present-self" inertia by creating an older, successful "future self" for their investor prospects to meet.

But the "new tricks" adoption rate is embarrassingly slow and nowhere near what it should be. The confirmation bias must be particularly powerful with professional experts. Marketers need to quit acting like real people, and we need to check our egos, open our minds and embrace behavioral economics-inspired marketing.

Tom Hinkes is principal consultant at OutBranding Results, a branding consultancy. Previously he was VP-milk marketing at Dairy Management for the "Got Milk?" campaign, as well as the director-marketing for Keebler Crackers.
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