Reinventing marketing: Behavioural economics will shake marketing to the core

LONDON - Approaches based on rationality and emotional added value have been so thoroughly discredited that marketers now need to revise their notions about how branding works, writes Alan Mitchell.

Have you got a theory of how branding works, and why? Before reading on, please set aside just one minute to write down 15 or so words which sum up your theory. Date it and put it safely in a drawer. Now read on. I suggest you do this because long-held assumptions about how and why brands work face some fundamental challenges - challenges that could radically change how you manage and measure your brand.

Let's start with two warring world views of branding that, together, pretty much define our status quo. The first is an echo of 20th-century economists' belief that we are all 'rational' decision-makers, carefully weighing all available options and then choosing the one that maximises our utility. This led marketers to use rational, functional product claims ('washes whiter'), highlight unique selling points, and treat brands as basically a sort of rational legal contract. The brand makes a promise, the consumer buys it, the brand keeps it, so the consumer is satisfied and buys again.

The second great theory of branding grew from marketers' realisation that very few consumers behave in the ways predicted by economists. So marketers replaced (or added) emotions to 'rationality'. Products are made in factories, but brands are made in peoples' heads, we were told, so marketing switched its attention from USPs (dismissed as mere table stakes) to lodging emotional associations in consumers' heads. Phrases like 'aspirational imagery' and 'emotional engagement' tripped off everyone's tongues as marketers embraced brands as sources of emotional 'added value'. Clean clothes for your kids meant that you had the emotional satisfaction of knowing you were a good mother. How much better is that than just having clean clothes?

Trouble is, much of what followed was hocus-pocus and it left marketing with two thumping headaches. Building brands by lodging messages in peoples' heads is both expensive and risky. Often, it doesn't work as intended - thus today's obsessive quest to demonstrate marketing accountability. At the same time, it also had the unfortunate side-effect of progressively eroding consumer trust - a legacy we are wrestling with to this day.

So what's new? Behavioural economics (BE), that's what. By now, every self-respecting marketer will have drunk at least a little from this fountain, so let's focus on just one of the ways it is setting the cat among the pigeons: measurement.

In the good old days of rational USPs, sales and market share were the critical indicators of success because they told us whether consumers were choosing our product or not. In the good old days of brands as emotional added value, attention switched to calibrating how much value the brand was adding. The tried-and-tested way of doing this was to take the price/market share of a generic commodity (often artificial and invented) and compare this with the market share and price charged by the brand. Out pops the value added by 'branding'.

Oh dear. Why 'oh dear'? Because BE suggests that many people may buy brands for reasons that have little or nothing to do with the brand strategies adopted by marketers - emotional or rational. So, your brand measurements may not be measuring what you think they are measuring and when you 'do' branding you may not be doing what you think you are doing. Let's look at just a few BE findings that open up this can of worms.

The power of familiarity

For deep, instinctive reasons, human beings are fearful and suspicious of things that aren't familiar to them.

So, when comparing an unfamiliar item with a familiar one, they almost always prefer the latter. Far from breeding contempt, familiarity fosters fondness. However, much of this liking has nothing to do with the lovingly crafted content of the branding or advertising that created the familiarity. Instead, it has got everything to do with the simple fact that it is familiar.

Status quo bias

In Austria 99% of citizens are organ donors. In neighbouring Germany only 12% are. Why is this? Are Austrian donor marketers eight times more persuasive in their marketing than their German counterparts? Not at all. The numbers tell us nothing about 'effective persuasion' and everything about default options.

Austrians have to opt out of being a donor; Germans have to opt in. If, as a brand, you somehow end up as a default option, you've got it made. What the actual option is - and what the competing options are - may have almost zero bearing on the matter. Just make yourself the default.

Likewise, if the status quo is that 'in this household we always buy Brand X', once created, it can be very difficult to shift. This is not because people really love the brand, but simply because they don't like change. If the status quo were different, they would be equally loyal to that, so it's got nothing to do with 'brand loyalty' and everything to do with 'loyalty' to the status quo. That's fabulous if you happen to be the incumbent, but disastrous if you are not. This is why, despite all their breast-beating, marketers endlessly play the promotions game they profess to hate: because disrupting the status quo is a must, and once you are the status quo someone is desperately trying to disrupt you.

The power of heuristics

In the real world, 'rational' decision-making (where you stop to gather, consider and weigh all the options before making a decision) is actually supremely irrational, because by the time you have done this you would be a predator's lunch. Instead, we instinctively seek quick-and-dirty decision-making short-cuts, or heuristics, and routinely rely on dozens of them.

Some are deeply instinctive, others are learned. 'Do what other people are doing' is a pretty sensible strategy for reducing risk when you want to act fast on the basis of limited information. It also brings the added emotional benefit of a sense of belonging.

The same instinct transfers very easily to brand buying, which means that if your brand is popular, it may have little to do with its unique qualities, positioning or whatever, and lots to do with the simple fact that it is popular. Ditto, if your brand is unpopular, nothing in particular may be making it unpopular other than its unpopularity.

Other heuristics are learned. Price as a signal of quality is a good example. 'Buy the leading brand' is another. This is a dominant shopping heuristic for some people partly because of the effects of popularity described above, but it is also partly because status, as 'the leading brand', imparts signals of quality, reliability and value.

What people are choosing is not the particular rational or emotional benefits that are provided by that brand, but the signal that it is the leading brand. (This is why maximising 'share of voice' often works so powerfully as an advertising strategy.)

In each one of these cases, the effects of 'branding' may be attributable wholly or in part, not to the quality of the product per se or the power or persuasive content of its marketing, but to the strange ways in which human beings make decisions.

There's a sting in the tail here: these effects may be 'wholly' or 'partly' attributable to BE. However, right now, we don't know when or whether it is 'wholly' or 'partly' and if so, by how much. In fact, there is a huge amount we don't know.

We do not have a single, comprehensive list of all known BE effects or an agreed way of categorising them. There are no measures of how big an impact they have in different contexts (most effects so far have been studied in very artificial laboratory environments).

Similarly, we have no understanding of any pecking order of effects, or how different effects work together (or cancel each other out) when in combination with each other, or with the elements of truth in rational and emotional approaches to branding.

However, over time we can expect that the mists will slowly clear. So keep hold of that piece of paper and look at it from time to time. It may become a useful guide to what you are learning during the roller-coaster times to come.

- Alan Mitchell is a respected author and a founder of Ctrl-Shift and Mydex. Alan.Mitchell@ctrl-shift.co.uk

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