Reinventing marketing

Are you a faux marketer?

Alan Mitchell — Thu, 19 Nov 2009 07:26:00 GMT

The quest for brand or customer ‘loyalty’ is one of a number of examples of what we could call faux marketing.

Faux marketing adopts all the trappings of real marketing, so it looks like the real thing. But underneath the surface it’s doing something entirely different. It uses the terminology, concepts, tools, metrics and methods of real marketing, but for non-marketing purposes.

How to distinguish between the two? Simply, apply the core marketing mantra of ‘identify and meet customer needs and wants’ to the marketing strategy or theory itself.

Real marketing is about identifying what customers want and need and finding a way of profitably providing it. Its essence, therefore, is about designing, constructing and sustaining win-wins with customers.

Faux marketing pretends to be doing this while doing something else entirely – pushing the organisation’s agenda regardless of what its customers want. It’s the practical manifestation of marketing schizophrenia.

Loyalty is one example of faux marketing. (Do customers say in research that right now, their priority is to be loyal to a brand? No.) The quest for differentiation is faux marketing. (Customers don’t want things to be ‘different’, they want things to be ‘better’ as Paddy Barwise pointed out years ago in his brilliant book Simply Better.)

The quest for ‘brand premium’ is another case of faux marketing. (Not many customers tell us they want to pay more for stuff – if a brand premium exists, it doesn’t arise from marketing strategies designed to build such a premium). Most of the current market metrics/accountability debate is also faux marketing. (It doesn’t even ask what the customer’s metrics are.)

Marketing's persuasion paradigm is yet another example of faux marketing. (Customers want to make better decisions according to their own lights, not to be persuaded into making the decision a brand manager wants them to make.)

So, actually, quite a lot of the marketing we see around us is faux marketing of one form or another. That’s why so little of it is effective.

Is anything left once we strip away the many layers of faux marketing that have grown up? Yes. A huge amount of rich, value adding stuff. That's what Reinventing Marketing is about - sorting the wheat from the chaff.

Alan Mitchell www.ctrl-shift.co.uk Newsletter

Building our own Berlin Walls

Alan Mitchell — Mon, 16 Nov 2009 08:18:00 GMT

I did a talk to the CEOs of major car company’s dealerships last week. Not sure if it went down too well. It was on the theme of customer loyalty and I was a tad challenging.

This is the gist of what I said: The notion of customer loyalty is a modern-day equivalent of East German marketing: the attempt to keep customers confined within the walls of the brand’s own making.

There’s nothing wrong with wanting to achieve higher levels of repeat purchase or to retain more customers, but the notion of customer loyalty is a denial of the first principles of marketing. It’s not about identifying and meeting customer needs or wants. Imagine you asked customers to choose one of two options:

- Option A: “I want to be loyal to a brand".

- Option B: “I want to exercise freedom of choice between competing alternatives”

How many customers do you think would choose Option A?

Evidence of the Berlin Wall attitudes behind most loyalty marketing comes from the language. How many times have you heard marketers talking about strategies to ‘own’ the customer [the only people who are ‘owned’ are slaves], construct ‘barriers to exit’ and achieve ‘lock in’?

Of course, often these underlying attitudes are heavily disguised by layers of high-sounding rhetoric (just like the East German leaders). For example, the loyalty initiative is introduced in terms of ‘delighting the customer so much that he has no thought other than to stay loyal to us’.

To test the company’s depth of commitment to this idea, we need to look at how it measures success. Here are the six key benefits of customer loyalty as first espoused by the great loyalty guru Fred Reichheld:

- Reduced customer acquisition cost

- Greater customer longevity leading to increased life time value

- Increased cross-sales

- Lower cost to serve

- Greater word of mouth recommendation

- Reduced price sensitivity

Now answer this question. How many of these metrics measure the benefits of customer loyalty to the customer, and how many of them measure the benefits of customer loyalty to the company? There you have your answer.

The Berlin Wall came down 20 years ago, and its citizens celebrated. Under the banner of ‘loyalty’ thousands of marketers are still busy trying to construct their own mini Berlin Walls – with about as much long term success.

Alan Mitchell www.ctrl-shift.co.uk Newsletter

The new rules of customer data

Alan Mitchell — Wed, 11 Nov 2009 07:30:00 GMT

Last night, eloquently supported by my colleague William Heath, I gave a master class on Volunteered Personal Information for the IDM (Institute of Direct Marketing).

My concluding summary was:

•   We are in the midst of a once-in-a-century tipping point in the information flows in our society: from ‘top down’ (organisation to individual) to ‘bottom up’ (individuals to organisations and each other).
•   Marketing as we know it was constructed around the assumptions and operational requirements of ‘top down’.
•   Most of its current problems and constraints are a by-product of this heritage.
•   In the course of organising and managing their daily lives – making and implementing decisions – individuals generate huge amounts of new, rich, accurate, timely information about who they are and what they want..
•   An emerging industry of Personal Information Management Services (PIMS) is making it possible for individuals to capture and share this information.
•   For this information to be shared on a mass scale however, three new ‘rules’ of personal data must be accepted: personal information is the person’s; the individual must have control over what information is shared with who, for what purposes; the individual has to derive a genuine benefit from the information sharing process.
•   Once these rules have been accepted, multiple different types of VPI will begin to flow.
•   Separately and together this VPI can help organisations cut guesswork, waste and costs, identify customer needs better and focus available resources on truly adding value: a ‘VPI value explosion’.
•   Every organisation needs to develop its own VPI strategy.

If you want to find out more, get in touch with me at Alan.Mitchell@ctrl-shift.co.uk and I will send you a shortened version of my presentation.

Alan Mitchell

Consumer decision making

Alan Mitchell — Tue, 10 Nov 2009 10:57:00 GMT

I’ve written about ‘the consumer decision-making revolution’ in today’s issue of Marketing magazine.

If you’ve read my previous articles, I hope you’re beginning to get the picture. Information-flows (top down or bottom up?), metrics (are we measuring successful ‘influence’ or ‘alignment’), consumer psychology (are we on the verge of discovering the buy button?), and the underlying role of marketing (is marketing’s job really to changing consumer attitudes and behaviours?) – they all grew up together as part of the same mental construct. They are all inextricably intertwined in a passed-its-sell-by date picture of what good marketing looks like.

If we want to reinvent marketing, we cannot address just one aspect – processes, content, metrics, purpose – in isolation. We have to see how they all fit together. We have to address them all.

That’s quite a challenge!

Alan Mitchell www.ctrl-shift.co.uk

The Attention Economy?

Alan Mitchell — Fri, 30 Oct 2009 08:38:00 GMT

I’ve just been revisiting a debate which flared up a couple of years ago and which seems to be returning: are we moving towards an attention economy or, perhaps an intention economy?

Thinking about it, I don’t think we are moving towards either because they are both sub-sets of something much bigger. When push comes to shove, economies are organised around human beings’ physiological, psychological and social needs and wants. How we address these needs and wants changes over time and this is driven by decisions: we achieve our goals by making better decisions, and implementing these decisions better.

Call MAIDB for short: Making and Implementing Decisions Better.

The more I look at this, the bigger it gets. It's the defintion of consumer value

Alan Mitchell www.ctrl-shift.co.uk

Have you got a VPI strategy?

Alan Mitchell — Fri, 23 Oct 2009 07:52:00 GMT

From what I can see, CRM can never deliver its hoped-for benefits because of a series of intrinsic, structural flaws in the ways it gathers and uses personal data. In the new digital environment, I suspect marketers are going to have to recalibrate and redirect their customer data strategies - progressively reducing their reliance on data collected about customers behind their backs, and increasing their reliance on information elicited from them ('Volunteered Personal Information' or VPI for short).

Of course, this begs the question: "why should I bother?" The equally obvious answer is: "because there's something in it for me". In other words, the data relationship with customers needs to be redesigned to deliver a) a win-win value exchange and b) trust.

I've written more about this for MyCustomer.Com here. For more about research which values the emerging market for VPI and its likely evolution go here.

Alan Mitchell www.ctrl-shift.co.uk

Marketing's missing metric 2

Alan Mitchell — Mon, 19 Oct 2009 07:40:00 GMT

Marketing’s situation with metrics has an analogy with the metrics turmoil currently embroiling physics and astronomy. Back in 1998, cosmologists realised that 75% of the universe is made up of something their measuring instruments had never measured before: dark energy.

Writing about dark energy, Scientific American noted that it almost certainly shapes the evolution of the universe – stars, galaxies, galaxy clusters. “Astronomers have been staring at its handiwork for decades without realizing it.”

I think something similar is happening with customer metrics. It’s the customer’s metrics that shape the evolution of markets, big and small. But because marketing metrics only measure the marketer’s side of things – how much marketing campaigns and activities cost and what ‘changes’ they induce to the marketer’s metrics (brand awareness, sales uplifts etc) – they have failed to measure something (to ape Scientific American’s words) that “holds the fate of the cosmos/market in its grip, but to which we are almost totally blind”.

The usual objection to this is “Ah! We do have customer metrics – we measure customer satisfaction.” That’s all well and good, but it’s not good enough on two counts.

First, customers measure what is important to them, not what is important to marketers. Marketers want to know how valuable or satisfying their product is; customers want to know the relative costs and benefits of alternative ways of achieving desired outcomes or goals in their lives. Marketers need to know how their products or services fit in to this broader customer perspective.

Second, customer metrics cannot be reduced to a single money number. In addition to money, I think there are at least five other dimensions of value people’s behaviours are shaped by:

o    time costs and benefits (Accenture has recently recognised the importance of this theme in this article);
o    the physical work/energy required to achieve the desired outcome;
o    the information, knowledge and skills that are needed as a pre-requisite to achieving this outcome or which need to be acquired or shared;
o    the emotions generated along the way (positive or negative); and
o    the amount of attention the customer has to, versus wants to, devote to it.

Quite simply, marketing ‘works’ when it improves these customer metrics. This applies to both the product itself and its marketing, and it’s the marketer’s job to work out which metrics the customer is trying to improve and how to do this. Of course, this is impossible if we don’t know what these metrics are.

In its article, Scientific American said dark energy’s discovery will almost certainly require the development of new theories of physics. It will also require the development of new measuring instruments/approaches. I think the same is true of customer metrics and marketing.

Our current approach to metrics is not the way forward it’s so widely touted to be: e.g. the way to ‘demonstrating accountability’ and therefore ‘boardroom credibility’. It’s what is actually holding us back.

Alan Mitchell www.ctrl-shift.co.uk

The metrics muddle

Alan Mitchell — Tue, 13 Oct 2009 07:39:00 GMT

Commenting on my last post on ‘stimulus-response’ Andrew Weir says: “In my humble view marketing should focus on delivering great brand experiences (experience of a product, service, brand) as well as brand promises (stimulus-response?). It is vital that the promise matches the experience (alignment).”

Thanks for your comment, Andrew. I agree with you on the delivering great experiences bit, but I think you might be missing my point about stimulus-response.

In my view, marketing is currently suffering from a bad case of schizophrenia.

On the one hand, marketers say their job is identify and meet peoples’ needs – or, as Andrew put, ‘deliver great brand experiences’. This is all about aligning what the company does to what the customer wants.

On the other hand, marketers also believe their job is persuasion, to change consumer attitudes and behaviours in their brand’s favour. Here, the marketer is trying to align what consumers do to what the company wants.

Sometimes they might amount to the same thing. Sometimes they are complete opposites – and that’s the point: this ‘sometimes’ is a source of endless confusion.

I now believe it lies behind marketing’s current metrics impasse. When marketers measure the effects of their marketing activities, what are they measuring? How good they were at aligning what they did to their customers’ priorities? Or how good they were at changing customer attitudes and behaviours?

As long as we jumble these opposites up in the same metrics, our metrics will never tell us much. We are measuring chalk and cheese at the same time, without being able to distinguish the two.

In my view this isn’t a trivial problem. It’s a roadblock stopping the progress of marketing: it means we have to rethink marketing metrics from scratch: do we actually know what we are measuring?

I’ve written more about this in Marketing magazine this week.

Alan Mitchell www.ctrl-shift.co.uk

How wrong can we get?

Alan Mitchell — Fri, 09 Oct 2009 14:49:00 GMT

OK. This is a real biggie. It’s about an error – a misperception – that pervades everything marketers do: their beliefs about how marketing works (and therefore what they are trying to do when they do marketing), how they seek to do it, and how they measure success.

What’s more, like the evidence of the sun orbiting the earth – evidence that’s apparently confirmed by our actual experience every day of our lives – these mistaken beliefs seem to be supported by mountains of ‘hard evidence’.

So what is this error? It’s the belief that marketing is a ‘stimulus-response’ activity – an activity where marketers send out various types of stimuli to consumers, whose attitudes and behaviours are then changed, to elicit certain desired responses.

I don’t believe this is how marketing works at all, and I believe there’s a growing body of scientific evidence to back me. If I’m right, it means:

Marketers are investing/wasting huge amounts of money, time and energy looking for a holy grail that doesn’t exist
When their marketing does work and when it doesn’t, they are ascribing the wrong reasons for success and failure, thereby guaranteeing that they can never really learn from their experience
Their metrics aren’t measuring what they believe they are measuring, thereby compounding these first two problems.

Unfortunately, stimulus-response assumptions are really deeply ingrained into the modern marketing mindset, so to tackle them it requires quite a lot of unpicking - part of my current research project … so apologies for the length of what follows!

How we were led astray

Stimulus-response has its origins in 19^th and 20^th century psychology starting with Konrad Lorenz who noticed that greylag geese fixated on the first thing they saw moving. Usually, in nature, it’s the mother. But in Lorenz’s case it was his Wellington boots.

Ivan Pavlov built on this observation in his experiments with dogs. He showed he could get them to salivate at a signal which they had come to associate with food – a ‘conditioned’ or learned response.

John B Watson then took these learnings to develop the school of behaviourist psychology whose founding belief was that:

"...the goal of psychological study is the ascertaining of such data and laws that, given the stimulus, psychology can predict what the responses will be; or, on the other hand, given the response, it can specify the nature of the effective stimulus."

“Psychology,” he wrote, “is a purely objective experimental branch of natural science. Its theoretical goal is the prediction and control of behaviour …The behaviorist, in his efforts to get a unitary scheme of animal response, recognizes no dividing line between man and brute. The behavior of man, with all of its refinement and complexity, forms only a part of the behaviorist's total scheme of investigation."

The great behaviourist psychologist B. F Skinner followed Watson with a research effort dedicated to the study of learning as ‘conditioning’ (association of stimulus with response) for the purposes of control.

Skinner argued that the human mind was a ‘black box’. We don’t need to look inside this black box to understand what’s going on. Indeed we shouldn’t, because inside there are just subjective thoughts and feelings. To be ‘scientific’ we need to study only objective facts – the inputs that go into the black box (stimuli) and the outputs that come out (responses).

Skinner believed we could understand all animal behaviour, including human behaviour, in terms of correlations between stimuli and responses; and we could use this understanding (by using rewarding stimuli to reinforce some behaviours and punishing stimuli to stop others) to ‘condition’ animals and people to behave as we want them to behave. Thus, for example, behaviourist child care manuals taught mothers not to attend to babies that cried, because this ‘rewarded’ crying behaviour. Babies rewarded in this way would ‘learn’ to cry more. Instead, mothers had to ‘teach’ their babies to be ‘good’ by ignoring (i.e. punishing) crying behaviour, and by ‘rewarding’ non-crying behaviour.

What we need, Skinner wrote in his behaviourist manifesto Beyond Freedom and Dignity (1971) is “a behavioural technology comparable in power and precision to physical and biological technologies.”

The task of psychology, he continued, was to:

“dispossess man of his autonomy” by transferring causation to the environment. “Effects once assigned to states of mind, feelings and traits are beginning to be traced to accessible conditions, and a technology of behaviour may become available. A scientific analysis,” he concluded, “shifts both the responsibility and the achievement to the environment.”

This was the intellectual milieu in which modern theories of marketing were developed: with branding as a method of imprinting the consumer’s mind so that he or she follows the brand as Lorenz’s goslings followed his Wellingtons; with ‘the marketing mix’ as the toolbox for effective conditioning, deploying rewards and disincentives to create ‘brand associations’ and learned behaviours so that consumers mentally salivated at the thought of their brand as Pavlov’s dogs salivated at the sound of a bell.

Thus, writing soon after the second world war in his book The Process of Persuasion Clyde Miller, a professor of education at Columbia University, wrote:

“It takes time, yes, but think what it can mean to your firm in profits if you can condition ten million children to grow up as adults trained to buy your products as soldiers are trained to advance when they hear the trigger words ‘forward march’.”

OK. We’re not so naïve now – or are we? If you pick up marketing textbooks such as Philip Kotler’s Principles of Marketing – upon which recent generations of marketers have been weaned – you will find the same behaviourist psychology swallowed hook, line and sinker.

On page 143 of my edition of Kotler for example, he has an illustration showing “marketing and other stimuli” entering the consumer’s head (labelled “the buyer’s black box”) and coming out the other side as the “buyer’s response”. The accompanying text explains:

“The central question for marketers is: how do consumers respond to various marketing efforts the company might use? The starting point is the stimulus-response model shown in Figure 5.1. This figure shows that marketing and other stimuli enter the consumer’s ‘black box’ and produce certain responses. Marketers must figure out what is in the buyer’s black box.”

Of course, since Skinner, there have been countless sophistications and embellishments around this basic theme. After a while, for example, cognitive psychologists began to study the thought or perceptual processes that intervene between the stimulus and the response. More recently, neuroscientists have used new techniques such as fMRI scanning to study how the brain processes incoming stimuli.

Along the way marketing has also adopted a number of its own sophistications and embellishments leading to a number of warring schools of thought. Their main ‘fall-out’ factor: which stimuli works best to get the desired response.

In the olden days, marketers influenced by economists’ pink-elephant theories of human rationality prioritised the ‘rational’ appeals of unique selling points. They were challenged by the school of emotional appeals: the belief that consumers are better influenced by brands’ ‘emotional associations’.

There are also divisions over whether conscious or unconscious stimuli work better – is ‘effective’ advertising all about conscious attention and memory? Or is it best delivered under the radar of consciousness by carefully placed ‘somatic markers’?

More recently, a new fault-line has opened up with a division between those who think that personally targeted and ‘relevant’ one-to-one stimuli work best, versus the ‘social’, ‘viral’ or ‘herd’ stimuli of the crowd.

What they all agree on, however, is the underlying assumption of stimulus-response.

In fact, I challenge you take any modern theory of marketing you like, peel away the outward layers of apparent sophistication and look at its inner workings and assumptions. Please, please tell me if you can find a theory of marketing or advertising that doesn’t take behaviourist stimulus-response assumptions as its starting point: ‘we issue this stimulus (a brand message, an emotional association, a unique selling point, a promotional incentive) in order to get that response’.

Nonsense on stilts

Trouble is, it’s all nonsense. The phenomena we are looking at are real enough. Of course, human beings are bombarded with stimuli: thousands – millions – of them every day. And of course, there are occasions where we demonstrably respond to external stimuli, as when we sit on a drawing pin for example. What’s wrong with behaviourist theories of marketing is the way they extend something that's true for one or two percent of behavioural phenomena to become a catch-all explanation of everything. At the heart of this is their cause-effect assumptions – that it is outside stimuli created by marketers that ‘cause’ internal emotions and thoughts which in turn ‘cause’ responses.

In fact, recent discoveries in psychology seem to indicate the exact opposite. Yes, human beings are constantly scanning their environment for opportunities and threats, but they process this in-coming information largely according to their own internally-generated agendas.

So, incoming stimuli do not necessarily ‘cause’ us to think this or feel that. A huge part of the brain’s processing function (probably by a factor of over a thousand to one) is devoted to filtering out incoming stimuli and ‘deciding’ which ones to ignore (the vast majority of them).

Most of this is done unconsciously. You can get some idea of the scale of this stimulus-filtering process by stopping right now …and becoming aware of your surroundings.

Think of the sounds you can hear, the sensations of your skin against your seat, your clothes, your shoes; all the things you can see in your peripheral vision, the feeling inside your mouth, what you can taste, the droopiness of your eyes, the hair at the back of your neck, and so on. These are all stimuli which our brain is monitoring for us, and deciding not to respond to.

So, in reality, the only stimuli which we respond to are the ones which we decide matter (most of these decisions taking place unconsciously). We pay attention to – or ignore – incoming stimuli depending on what we already think and feel and what we are currently trying to achieve.

It is not external stimuli, then, that ‘cause’ us to behave this way or that, but internally-generated goals and motivations. We ‘choose’ which stimuli to respond to, and we also ‘choose’ how to respond. It’s not the cold outside that ‘causes’ me to put on a jersey for example, it’s my desire to stay warm. You may decide that you want me to put on a jersey, and to achieve that, you may decide to reduce the temperature of my surroundings. It might work. But you might be disappointed. I might decide to get warm by building a fire, doing some physical jerks, moving to a different environment, or hugging you. Or a combination of all five. And if your ‘stimulus’ worked at all, it only worked because it connected with my pre-existing desire for warmth and comfort.

The real ‘cause’ of human behaviour, then, is these internally-generated choices which have very little to do with the stimuli that constantly bombard us. And most of these internally-generated goals are ‘hard-wired’ into us by millions of years of evolution: instincts of survival and safety for example. (Hard-wiring is a terrible term, because actually, the brain is not hard-wired at all. It’s much cleverer than that. But let’s stick with that terminology for the moment).

In fact, ironically, the very experiments the behaviourists used to prove the power of conditioning actually demonstrated precisely the opposite: the pervasive nature of this ‘hard-wiring’.

‘Imprinting’ doesn’t work on geese younger than 13 hours and older than 16 hours for example: geese are ‘programmed’ to imprint during that window and not to imprint at other times. No matter how hard you try, you will not be able to condition an adult goose to fall in love with your Wellies. It’s already made up its mind.

Likewise, dogs can never be conditioned to salivate at flowers, because they want food and they’re not interested in flowers, except for territory marking purposes. This ‘wanting’ isn’t caused by an external stimulus, it’s internally-generated. Ditto: dogs cannot be conditioned to not salivate at the sight of food no matter how much you punish them, because the salivating process is hardwired and has nothing to do with conditioning.

In fact, so scant was the laboratory evidence of the power of conditioning that Skinner’s own students at Harvard University formulated the ‘Harvard Law of Animal Behaviour’. It goes like this:

“Under controlled experimental conditions of temperature, time, lighting, feeding and training, the organism will behave as it damn well pleases.”

(Quoted on page 177 of Steven Pinker’s book The Blank Slate.)

Facts and evidence

Every sinew and instinct of every marketer is drawn naturally towards stimulus-response theories of marketing. It’s what marketers appear to do every day. “Look. We issued that stimulus, and look there! You can actually see the responses!” (If you’re lucky you can count them too).

These experiences are real. Just as the experience of the sun rising in the east and setting in the west is real. We can see the sun move.Yet, it is we who are moving, not the sun.

Something similar is happening in marketing. Marketing ‘works’ when it aligns to what people want. That’s about all we need to know. When it aligns, people pick it up and use it. In such cases, they appear to be ‘responding’ to our ‘stimuli’. When it doesn’t align, they ignore it. When this happens, we assume that there must have been something wrong with the stimulus. There wasn’t. There was something wrong with the alignment.

This distinction is important because the belief that marketers’ ‘stimuli’ can ‘change’ consumer attitudes and behaviours sets them on to a wild goose chase – the search for ever more powerful stimuli rather than ever better alignment.

When pushes comes to shove, the belief that the right ‘marketing mix’ can change consumer attitudes and behaviours in ways that marketers want them to change is a dangerous conceit. It has as much intellectual foundation as the alchemists’ conceit that they could turn lead into gold. Both conceits spawned enormously wasteful wild goose chases.

Yes, OK. This bald, bold statement does need a little bit of tempering. There are some short-term, superficial layers of effective influence – where marketers take advantage of consumers’ ‘predictable irrationalities’ for example. It's very important we measure these effects. But their ultimate effect is only to obscure the underlying reality, just as friction helps obscure the underlying reality of matter always being in motion.

What does this mean for us?

Behaviourist inspired stimulus-response theories have five devastating effects on marketing.

1. They place marketing on about the same scientific level as alchemy. The alchemists built up an impressive body of ‘knowledge’ in the form of known facts, experimental results and correlations. But they could never understand why these results occurred, so they ended up repeating the same errors again and again.

Stimulus-response has the same effect on marketing. It means we can never learn from our mistakes, because we cannot distinguish between what’s mistaken and what’s not mistaken. (Ever heard the maxim ‘50% of my advertising works but I don’t know which’?).

2. As with the alchemists and their quest for the magic ingredient of transmutation – the philosopher’s stone – stimulus-response places marketers on the wild-goose-chase quest for the perfect, all-powerful stimulus. It doesn’t exist. We will never find it.

3. In the meantime, the same stimulus-response theories tell marketers not to look where they should be looking: how to generate and deliver greater alignment, not only with their products but with their marketing, with customers?

4. Stimulus-response assumptions have made a complete dog’s dinner of marketing metrics (saliva included). Stimulus-response theories induce us to:

a) focus our attention on measuring the wrong things

b) misinterpret the measures we do use (because, very often, these measures aren’t measuring what we think they are measuring)

My next article for Marketing magazine (published October 14) goes into detail on this.

5. The practice of stimulus-response marketing tactics generate adversarial relationships and destroy trust because it treats human beings as a ‘target’ for stimuli – like a punch bag. The stimulus-response marketer inevitably ends up on a quest for control: the philosophy and practice of ‘using’ other people, including their weaknesses, for his own ends. Guess what? People don’t like being used – something Skinners’ poor old tortured rats could never tell him.

Put these things together: a theory which misdirects attention and creates confusion rather than clarity, metrics that compound and reinforce this confusion, and practices which undermine trust and you have a recipe for … well, you tell me.

As I said, this is a biggie. We have to get over it. If we don’t, we will never be able to reinvent marketing.

Alan Mitchell www.ctrl-shift.co.uk

The Consumer Decision-Making Revolution

Alan Mitchell — Mon, 05 Oct 2009 18:07:00 GMT

I tried to do a summary of what the long-term effects of new discoveries in psychology might be on marketing here.

If you're busy, I've also done a quick 8-point summary.

The bottom line is very simple. There are lots of people out there touting the belief that, at last, companies are on the verge of discovering the secrets of effective influence; the ability to use psychological insights to get customers to do what we want them to do.

I suspect the opposite will turn out to be true: the more we understand about human decision-making, the greater the pressure will be on brands and organisations to help their customers make better decisions.

The implications of this are quite profound. One of them is that brands will have to evolve into 'information services'. I did a talk about this recently to the Association of Publishing Agencies. You can see more on this here.

Alan Mitchell www.ctrl-shift.co.uk

Rational and irrational decision-making

Alan Mitchell — Wed, 23 Sep 2009 10:14:00 GMT

From what I can see, there are two very good ways of getting lost in the maze of psychology and human decision making. The first is to accept, at some level or other, the insane delusions of ‘rationality’ as invented by the economics profession. I say ‘at some level or other’ because many people dismiss the economists’ ravings at one level only to find themselves trapped by their assumptions at a later stage in the argument.

The second is to accept the equally delusional assumptions of ‘stimulus-response’ as invented by the behaviourist school of psychology in the 20th century. Unfortunately, stimulus-response assumptions form the bedrock of most modern theories of marketing.

In this post, I’ll concentrate on ‘rationality’: that is, the assumption that all human beings always ‘maximise utility’ (or try to, anyway) and that the cost of researching and making these decisions is zero. You could write books about why this assumption is wrong (there are few already), but for our purposes we can sum the 'rationality' assumption up in a word. It’s bollocks.

It’s probably much safer to say that all human decisions are emotionally driven (i.e. motivated by a goal that is emotional in some way), and emotionally judged (i.e. we judge success versus failure not by some finely calculated balance sheet or profit and loss account, but what we feel about our experience overall). Reason and logic and calculation have a different function: to help us achieve emotional goals.

Four things follow from this.

1. Most emotional goals are reasonable. It’s a testimony to the power of the ideology of ‘rationality’ that we tend to assume that any decision that is emotional has to be wrong or dangerous in some way – ‘irrational’. The opposite is probably true. We evolved emotions to help us survive. Emotions usually point us in the right direction. We evolved reason a) because ‘usually right’ is not the same as ‘always right’, and in terms of survival being ‘usually right’ is still risky, and b) because thinking things through (i.e. using ‘what if’ models of cause and effect) can help us achieve emotionally driven goals better.

2. To see emotion as the enemy of reason in decision-making is therefore misleading. This is important, because the rationality assumption has bred dangerous delusions about the powers of marketing – both amongst marketers and their critics. If your starting assumption is that human decision-making is pink-elephantly rational, and if you assume that marketers ‘divert’ or ‘manipulate’ human beings away from the perfectly rational decisions that they should be making, then that makes marketing look supremely powerful (because so many people make supposedly ‘irrational’ decisions).

In fact, what’s going on is quite the opposite. People pay attention to marketing that recognises, addresses and appeals to the emotions they already have, and ignore it when it fails to do this. The marketer is not really influencing or changing the consumer; the consumer is influencing what the marketer does.

Exaggerated belief in the powers of marketing has two negative effects. First, it breeds delusions of grandeur among marketers, who begin to believe and claim that they can influence peoples’ decisions far more than they can. Disappointment follows as night follows day. Unrealistic expectations about what marketing and advertising can do lie behind many a debate about declining marketing and advertising ‘effectiveness’.

On the other side of the coin, there are also many people who accept the same basic premise (that marketers are diverting or influencing people away from the rational decisions that they should be making), but think this is wrong and should not be allowed. This is the starting point for many pressure groups, media commentators and regulators.

Both sides of this argument are actually sharing the same basic assumption but drawing opposite conclusions from it. This is a recipe for perpetual motion (or conflict). The arguments will last as long as the assumption remains unchallenged. If I’m right on this, we won’t get past these adversarial relationships until we build a better understanding of what’s going on.

3. Every human decision has a strong emotional element. In fact, people with damage to parts of the brain which process emotions find it almost impossible to make the slightest of decisions: shall I make a cup of tea or not?

This is important because marketers tend to lump consumer decisions into two different baskets: there are ‘rational’ decisions and ‘emotional’ decisions.

For example, marketers might say that a decision to buy own label is driven by ‘rational’ considerations while a decision to buy the branded version is driven by ‘emotional’ considerations. This is rubbish. Both decisions are highly emotional – they just involve different emotions. For example, buying own label might be driven by emotions relating to thrift or smartness (‘those brands can’t fool me’) or by different emotional priorities (‘I would rather spend the money on giving the kids a treat’). Buying the brand might be driven by other emotions. But the emotions are there, either way. An individual’s decision to focus on the ‘rational’ aspects of a decision is, in itself, emotionally driven.

Following on from this, marketers also tend to dump some aspects of value (such as money) into one basket called ‘rational’ and other aspects of value (such as a sense of status) into another basket called ‘emotional’. When they do this, they are still trapped by economists’ pink elephant rationality assumptions. In reality of course, money is one of the most emotional things around, arousing all manner of strong feelings about control, status, conflicting priorities, pride, giving, feelings of success vs failure and so on.

4. If all the above are correct, the widespread marketing theory that ‘the product’ offers the consumer functional/rational benefits while its marketing and advertising add ‘extra’ emotional benefits, is wrong and misleading. For a start, you cannot simply equate ‘functional’ with ‘rational’ because ‘functional’ is as emotional as money. More importantly, these categories of analysis are, in fact, meaningless. Doing marketing using them is a bit like doing chemistry without any notion of the periodic table and relying instead on the inherently confusing assumption that the fundamental building blocks of matter are earth, air, fire and water (We did this for thousands of years).

There’s lots more we could say about the damage down by the rationality assumption. But the bottom line is this. Taken superficially, you might think that marketers should be praised for emphasising the importance of emotion, and for looking past the economists’ mistakes. Dig a little deeper, however, and it turns out that marketing is still trapped by inbuilt intellectual confusion about ‘rationality’. To successfully reinvent marketing, we have to go back to the drawing board.

Alan Mitchell www.ctrl-shift.co.uk

The psychology of decision-making - a reading list

Alan Mitchell — Fri, 11 Sep 2009 07:27:00 GMT

A number of people have asked me what I read as background to my Marketing article on ‘predictably irrational’ consumer decision-making. Aside from various interviews I’ve done over the years, here is a list of the main books I’ve read in this arena.

The first two books are game-changers in my view – the two game-changing concepts being ‘choice architectures’ and ‘fair process’. The next five certainly changed the way I thought about these things, and have clear implications for marketing. The rest are in random order.

If there’s something I’ve missed, or if you think my assessment is wrong in some way, please add a comment. It would be great to share notes and create a collective learning exercise.

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Nudge (Richard H Thaler and Cass R Sunstein) A seminal piece of work for the way it shifts the focus away from ‘free choice’ – and the assumptions of perfect (i.e. pink elephant) rationality that lie behind it – to ‘choice architectures’: the frameworks, contexts and conditions in which people make their choices. Key message: the most powerful influence on choices is not ‘persuading’ people to make this or that choice, but the ability to tweak their choice architectures: power tends to lie with the choice architect, not with the chooser.

In my view, this book is seminal for marketers. It transforms the agenda when it comes to understanding and influencing decision-making, shifting the debate to another level: to the role of ‘choice architects’ and whether they are using their power responsibly (i.e. to help individuals make better decisions) or manipulatively. Now this genie is out of the bag it cannot be put back. It’s no surprise that one of the authors is now an advisor to the Obama administration. I will return to this seminal debate in future blogs.

Markets and Moral Sentiments (ed Herbert Gintis) Path-breaking series of research essays on the power of reciprocal instincts in decision-making (‘an eye for an eye’/ ‘you scratched my back so I’ll scratch yours’) including their neurochemical underpinnings. My take-out: demonstrates why ‘fair process’ is the next big thing in marketing/business, along with choice architectures.

The Happiness Hypothesis (Jonathan Haidt) Not supposedly about decision-making, but actually one of the best expositions there is. A brilliant book. The first chapter on ‘The Divided Self’ explains more, quicker and better than virtually anything else I have read.

The Things We Do (Gary Cziko) Demolishes behaviourist stimulus-response theories of human decision-making and behaviour and convincingly advocates the equivalent of a Copernican revolution in psychology. The surface appearance – equivalent to believing the sun orbits the earth – is that perceptions (i.e. environmental stimuli) control behaviour. In fact, behaviour is “the control of perception”; organisms are autonomous, goal-seeking entities that behave as they do to control their perceptions (i.e. what they sense). If this is right, the implications for marketing are profound.

Basic Instincts (Pete Lunn) Goes furthest in applying what we’ve learned so far to economics – a valuable contribution.

The Paradox of Choice (Barry Schwartz) Brilliant analysis of the psychological costs of choice.

The Blank Slate (Stephen Pinker) Tour de force demolition of 20th century (and earlier) theories that the human mind is like a piece of wax that’s moulded into shape by impressions received from the environment. (Next step: think through what this means for many common theories about branding, media buying and media measurement).

The Emotional Brain (Joseph Le Doux) Powerful exposition of the power of primeval emotions in decision-making and behaviour.

Descartes' Error (Antonio Damasio) Makes a huge contribution by helping us get past pink elephant theories of ‘rationality’. The key sentences of this book for me are: “certain aspects of the process of emotion and feeling are indispensable to rationality. At their best, feelings point us in the proper direction, take us to an appropriate place in the decision-making space, where we may put the instruments of logic to good use.”

Also useful for its careful exposition of a truly scientific approach. Just one example: “in monkeys whose behaviour is socially well-tuned (as measured by displays of cooperation, grooming and proximity to others) the number of serotonin-2 receptors is extremely high in the ventromedial frontal lobe and the medial temporal cortices in its vicinity, but not elsewhere in the brain; in monkeys exhibiting non-cooperative antagonistic behaviour, the opposite is true.” In other words, there are countless contextual devils in the detail – devils which can turn your previous understanding upside down if you are not careful.

My take-out: when gurus start talking abstractly about things in general – e.g. the effects of serotonin or dopamine on decision-making or behaviour – they are probably talking out of the back of their hats. In this field, my advice would be to start with the assumption that the claimed expert is bullshitting, and then work backwards. (Remember, one well-researched predictable irrationality is our ‘stop there’ tendency; our willingness to believe explanations that ‘seem to make sense’ without really investigating whether they have any real foundation. In marketing, the concept of brand ‘loyalty’ is a classic example.)

Influence: the psychology of persuasion (Robert B Cialdini) One of the earliest books on human decision-making foibles that’s stood the test of time. Good on what happens, less good on why (because at the time it was written, a lot of the research hadn’t been done).

Predictably Irrational (Dan Ariely) Important for its emphasis on the fact that perceptual biases and non-‘rational’ influences on decision-making are not arbitrary. In fact, they are highly predictable and we can understand this predictability – the implication being that we can also find ways of addressing it. This represents another nudge away from a narrow focus on ‘free choice’ to the nature of ‘choice architectures’. In the end however (in my view) the book fails to provide a framework for understanding and becomes a bit of a haphazard list of ‘interesting things’.

The User Illusion (Tor Norretranders) Mind-boggling round-up on brain research that’s still got my head reeling. Two examples: 1) your brain registers what you are going to do a half of second before you ‘decide’ to do it. This seems to suggest that most ‘decision-making’ is not decision-making at all, but merely your consciousness registering that fact that a decision has been made. Can that be true? 2) The conscious brain processes less than 40 bits of information a second; the unconscious brain processes about 11 million bits of information a second. So the unconscious brain outdoes the conscious brain by nearly a million-to-one. Hmm.

Irrationality (Stuart Sutherland) A well-researched round-up of research findings. Full of well-explained, interesting examples. However, lacks a coherent framework and ultimately degenerates into a rather confusing list.

The Brain that Changes Itself (Norman Doidge) Reports on latest research into brain plasticity and its role in learning. Fascinating. The implication is that in many ways we are still living in the dark ages.

The Empathy Gap Focused mainly on US public policy issues, but useful for the way it expands on the ‘choice architect’ idea.

The Mind of the Market (Michael Shermer) A me-too round-up of much of the above, but OK for that.

The Advertised Mind (Erik de Plessis) A curate’s egg. Well explained round-up of lots of brain research marred by unquestioned stimulus-response assumptions and selling a particular advertising measurement methodology.

The Hidden Persuaders (Vance Packard) The first classic exposé of the marketing industry’s attempts to use psychology to ‘manipulate’ consumers. Interesting for what it said about what some marketers/agencies were trying to do in the 1950s and 60s. Trouble is, Packard made the mistake of actually believing their sales pitches.

Similar things are happening today with a gullible press breathlessly and unquestioningly reporting charlatan gurus’ claims that we are close to discovering ‘the buy button’ or the neuroscientific secret of brand preferences. Yuck.

Some books that are not worth reading because they are sensational and/or superficial: Sway (Ori and Rom Brafman) and Buy-ology (Martin Lindstrom).

There are also many books such as Robert Franks’ Luxury Fever that highlight specific types of ‘irrational’ consumer behaviour. The drawback of many of these books is that they focus only on 5% of the picture and talk about it as though it were 100%. They are valuable if you put them into a broader context.

Alan Mitchell www.ctrl-shift.co.uk

Reinventing Marketing - a road map

Alan Mitchell — Wed, 09 Sep 2009 07:39:00 GMT

So here’s the agenda for reinventing marketing I promised a while ago.

First off, we need to recognise the core. Organisations apply knowledge and resources to supply individuals with products and services that are better quality and/or cheaper than these individuals can provide for themselves. This isn’t without its problems (we can return to these problems later), but it’s got ‘win-win’ at the heart of it. It’s what makes marketing successful.

But then there’s this extra layer of persuasion. Here, the underlying theory goes like this.

Goal        Marketers’ job is to help their organisations make money by changing consumers’ attitudes and behaviours in their brand’s favour (the persuasion paradigm)

Method   The way they do this is by issuing stimuli designed to elicit the right responses – the changes in attitudes and behaviours they want.

Metrics   They measure success by comparing the state of affairs before our campaign/initiative with after.

Underlying philosophy   Value extraction; extracting as much value from ‘the market’ as possible.

This model pretty much underpins virtually any marketing theory you come across – whether explicit or implicit. It has multiple variations. People disagree for example as to whether the best or most ‘effective’ stimuli are rational or emotional, conscious or unconscious. They also argue endlessly about which is the right stimulus delivery mechanism or channel (is it traditional TV, the internet or database marketing? Or perhaps retailing and sales? Or customer experiences?).

But when you peel away these differences, they all come back to the same basic model. The marketer issues a stimulus. The consumer responds. Success happens when the consumer responds in the right way.

There’s only problem with this model. Every step in its logic is codswallop. Balderdash. Baloney. Poppycock. Combined, it creates a mesmerising circular logic that’s almost impossible to see beyond once you’re inside it; a circular logic that dooms practitioners to repeating the same basic mistakes again and again without ever learning any fundamentally new lessons.

It’s also deeply schizophrenic.

What this theory suffers from is the observer’s illusion. All the evidence seems to point in its direction, just as all the evidence seems to point to the fact that the sun orbits the earth, the earth is flat, and the natural state of matter is rest.

To make real progress we have to leave each of these assumptions – about goals, methods, metrics and underlying purpose – behind. That’s why I called my blog ‘Reinventing Marketing’ and said marketers need to challenge their deepest assumptions.

The alternative model looks something like this.

Goal       The job of marketing is to make money by helping individuals make and implement better decisions.

Method   The best way to do this is by eliciting information from them about their needs, circumstances, plans, preferences and priorities and to act on this information in a value adding way.

Metrics   The challenge in metrics is not to understand our own ROI in isolation to that of our customers, it’s to identify the biggest win-wins. Focusing obsessively on your own ROI without knowing whether you’re creating a genuine win-win is not clever, it’s dangerous.

Underlying philosophy   Value exchange; win-win.

This agenda isn’t actually new: these have always been the underlying secrets of success. They’ve just been obscured by off-the-wall 20th century theories of economics and psychology on the one hand and prevailing technology infrastructures on the other. Together they created a layer of obfuscation that clouded the underlying reality.

All that’s happening today is that we are now beginning to see what was invisible before. New discoveries in economics and psychology and new developments in technology are handing us a microscope and telescope to pursue our investigations.

Marketing’s reinvention agenda is an all and nothing affair. By that I mean it changes everything: we need to revisit everything we think and do and sift the wheat from the chaff: What serves only the old, misguided agenda? What serves the new? How to connect it to the win-win core of value provision? Along the way, we’ll change what we do, how we do it, and how we measure what we are doing.

On the other hand we might also find it changes surprisingly little. As we work our way through, I think we may end up doing virtually everything we do today – albeit for different reasons and in different ways.

This is a vast agenda for R&D, experimentation and learning. It’s also very exciting!

Alan Mitchell www.ctrl-shift.co.uk

A fundamental question

Alan Mitchell — Tue, 08 Sep 2009 07:14:00 GMT

I wrote today in Marketing magazine about discoveries in psychology that are revolutionising our understanding of human decision-making.

Many marketers are seizing upon these findings as grist to the mill of marketing’s prevailing persuasion paradigm. I think the opposite is true. As we dig deeper, I think we’ll find that these discoveries point us in a very different direction.

Here’s a parallel. Aristotle said the natural state of matter was rest, and for 2000 years everyone believed him – a belief that acted as a highly effective block to further learning.

To explain motion, Aristotle had to invent a Prime Mover. Then Newton came along and turned Aristotle on his head. Newton said the natural state of matter is motion. There is a separate explanation for things whose movement has been blocked – friction. Friction doesn’t do away with the underlying reality of matter in motion, it simply helps to mask this reality – it helps explain why we have so much ‘evidence’ of matter being at a state of rest.

Modern marketing is victim of an illusion of Aristotleian proportions. The illusion goes like this. ‘The consumer’ is a basically an inert entity which is motionless unless moved by marketers’ stimuli. Marketers are the Prime Movers of markets.

‘Effective’ marketing delivers the right ‘stimulus’ – advertising, promotion, sampling, branding, etc – to get the right ‘response’ (where the right response is when the consumer does what the marketer wants her to do).

In reality, human beings are restlessly active in the search for value in their lives – always in motion. They are the prime movers of markets, and for them, the essence of value lies in the ability to make and implement better decisions. This is their natural state.

But there is a second layer of friction which helps mask this natural state: the fact that consumers are indeed open to various forms of persuasion and influence. The existence of this second layer doesn’t do away the underlying reality. As I said, it simply helps to mask it, making things a little more complicated.

When marketers attempt to influence consumers’ decisions to suit their own corporate goals – when they interrupt, obstruct and divert consumers’ from their natural decision-making processes – they are creating marketplace friction. In the consumer’s eyes, this is value-destroying, not value adding.

That’s why, in lay circles among people who don’t know better, marketers are so unpopular. In fact, they do know better.

To navigate our way through this intellectual maze we need to remember some important points, such as:

• ‘Better decisions’ are not the same as ‘rational’, pink-elephant decisions. A better decision is one that helps an individual achieve a desired goal better. This goal may be emotional and ‘irrational’ as well as ‘rational’.

• Not all marketing creates friction, some of it helps remove friction.

• Judging marketing ‘effectiveness’ from a ‘stimulus-response’ perspective (‘how effective were we in getting them to respond to our stimuli in ways that we want?’) is a sure-fire way of never being able to distinguish between marketing that adds consumer value and marketing that destroys consumer value. It’s a perfect recipe for non-progress. This is what I alluded to in my articles and blogs about Mad Sheep Rage.

Once we have made our way through this maze, we will have arrived at a point we can start reinventing marketing (at last!) .

I’ll outline that agenda tomorrow.

Alan Mitchell www.ctrl-shift.co.uk

The real home of customer insight

Alan Mitchell — Mon, 07 Sep 2009 07:42:00 GMT

If you had to answer the question ‘where is the natural home for knowledge about the customer?’ what would you answer?

OK. This is a bit simplistic but it’s also fundamental. The natural home for knowledge about supply is the supplier, and the natural home for knowledge about customers is … the customer.

Companies and brands may desperately want to accumulate more knowledge about their customers – to generate ever more, deeper customer insights – but when push comes to shove, the customer will always know more about the customer than the company.

Until recently this was an academic observation. There was no way for information to flow ‘bottom up’ from individuals to organisations or markets on an organised, mass scale (the only way information could flow was ‘top down’), so marketers had to do what they could with the tools available – focus on organisational information gathering and top down messaging.

In our research into Volunteered Personal Information (VPI) however, we identified a wide range of different types of information that individuals can, or soon will be able to, volunteer if they have good reason to do so. They include:

•   Administrative data, such as ‘my new email’ or ‘my new postal address’
•   Organisational arrangements: when and how to arrange conversations, visits, deliveries, payments etc
•   Questions about how to, what if, what’s possible, what the pitfalls are – an opportunity both to deliver immediate value and to learn directly about customer concerns
•   Expressions of demand: “right now, I want to buy a …” or “right now, I want rich, detailed information about …”
•   Forward looking plans and intentions: “some time over the next six months I intend to retire/buy a new car/move home/organise a once-in-a-lifetime world trip”
•   Opinions, including brand and corporate preferences, values and beliefs etc
•   Explanations as to why I did this and not that, or plan to do this and not that
•   Contextual information about my changing lifestyle, from big issues such as health, money, interests, family commitments etc to smaller details like a genuine as opposed to organisation-centric single customer view of my book purchases, or my financial situation.

If we look at this list it ranges from the mundane to the profound, informing every aspect of the organisation’s activities from operational efficiencies (admin data and organisational arrangements) though to customer insight, innovation and product development, taking in marketing, sales and customer relationship management along the way. It takes us way beyond social networking.

Yes, much of it is still more nascent than actual. But it’s also the direction in which technology is taking us – towards a new customer knowledge and insight world where empowering customers to generate, and share, information and insights about themselves generates far richer win-win opportunities than the historic agenda of gathering insights about customers behind their backs and without their involvement.

Both practically and mentally the shift to VPI is a huge change for marketers. It points to a world where top down messaging and corporate data gathering may no longer be pivotal.

Because of this it may be threatening to some, tempting them to look in the opposite direction. Given the scale of what’s now unfolding however, that would be folly. If your company isn’t already developing its own VPI strategy it needs to … if it doesn’t want to miss the boat.

Alan Mitchell www.ctrl-shift.co.uk