Posted tagged ‘Management’

The Psychology of Persuasion

June 1, 2009

About a week ago, I had dinner with one of my favorite friends. Andy’s mind is always racing. He had served as CEO of a very successful company in Buffalo, NY that was recognized as being a model for one of the most outstanding places to work in that region. Andy is also a serial entrepreneur and his quick and agile mind has enabled him to create, build and overcome almost any challenge.

I enjoy our dinners for so many reasons. It is a chance to catch up with a friend whom I admire and at the same time, I always discover that I have learned something insightful and valuable after we have spent time together. After four hours of dining and conversation with Andy, I found myself mentally exhausted but intellectually stimulated.

A significant portion of our evening’s discussion focused on the work of Dr. Robert Caldini. He’s the Ph.D. referenced in one of my earlier posts. I had bought his seminal work, Influence, The Psychology of Persuasion, about the same time as I had read the Time Magazine article. It was on my list of must-reads – I just hadn’t created the space to get through it.

Andy had met with Cialdini and was very favorably influenced by his thinking. This was the impetus that I needed to pick up Cialdini’s book.

Cialdini’s book is a mix of theoretical study and empirical research. He cites the works of others but frequently intertwines their research with his own experiences and investigations into how our minds assist others in moving us to certain decisions – often without us even realizing it.

His work is important. While it teaches us how our minds work, it also teaches us how to move people to appropriate directions. I don’t view his book as a study in manipulation. In fact, I believe it to be just the opposite. If you subscribe to the strategy of pre-eminence, that is, that as leaders and business consultants we have an obligation to help people past their fears while addressing their concerns, Caldini gives us methods to consider. Like everything in the world, it can be used appropriately or not.

With that as introduction, let us look at the six factors that he refers to as “weapons of influence.” These six are:

  1. Reciprocation
  2. Commitment and Consistency
  3. Social Proof
  4. Liking
  5. Authority
  6. Scarcity

Effectively employing these six factors allows one to perform a mental ju-jitsu on the other party. In his terms, it allows one to leverage the natural beliefs and inclinations of the buyer to create a preferred outcome for the seller.

To illustrate these weapons of influence / ju-jitsu perspectives, he poses the question about whether a salesperson would be more effective selling a high priced item before selling a low priced item or the other way around. In other words, which approach is more likely to result in both items being sold?

One’s initial thought might be to sell the low priced item and establish a “foot in the door.” However, marketers have discovered, particularly with higher priced items, that the exact opposite is true.

Think about it.

After you have bought the tailored suite or the fashionable dress, it is only then that the salesperson suggests that you might want to look at shirts, ties, socks, or accessories and shoes. There is a simple reason for this approach and it is the concept of “contrast.”

After spending a significant amount of money, the cost of the additional item does not seem all that much. By contrast, buying a sweater to complete a look is an insignificant purchase.

In our next post, we’ll look at the first of these weapons that Cialdini outlines – reciprocation.

How the Obama Administration Motivates Behaviors

May 26, 2009

The Time Magazine article was extremely instructive in helping us to understand the behavioral science oriented steps being taken by the Obama administration. In this post we’ll focus on a number of them. Specifically, they are:

  1. Supplying knowledge
  2. Making it easy
  3. Creating social norms
  4. Legislating the activity

According to the Time Magazine article, studies suggest that better information can help us make better choices. This information can be disseminated in the forms of public service announcements (PSA’s) or appeals from well respected figures (remember our discussion about the use of Hubs in building communities) and even serial dramas.

What this means is that aggressive rules for disclosure and clarity will likely result in people making more informed and better choices. Documenting best practices will also produce meaningful results.

The second way to influence behavior is to make it easy for those who wish to make the choice that you wish them to make. This is why default options – opt-out instead of opt-in – are very successful. The push to create an electronic health record (EHR) is one step along the path of making generic drugs our default prescription of choice.

The creation of social norms is yet another way to influence what we choose. An appeal to conformity is very effective as we are a herdlike species. If our peers are obese, we are more comfortable choosing to be that way. What works is creating a sense that choosing not to participate in an effort sets us apart from social norms and therefore, we will take steps to be in sync with our peers. This is a technique that has been used successfully even in forwarding goals that are inappropriate or morally wrong (think McCarthyism).

The last factor that the Time Magazine article addresses is what happens when a nudge is insufficient. At that point, a strategy of making something mandatory is very useful. That’s why there is interest in taxing undesirable behaviors such as cigarettes, alcohol and even trans-fats consumption and subsidizing desirable behaviors such as weatherizing a home or the purchase of fuel efficient cars.

Now, when we hear a new initiative being proposed by the Obama Administration, our awareness to the work of the behavioral scientists will be present. Let’s hope that these efforts though are used to move us in the right directions.

In the ensuing posts, we’ll look at like some of the other models and variants that allow us to influence others.

Understanding the Science of Change

May 22, 2009

I have always been a big believer that the universe has a tendency to bring ideas, concepts and even people to you when you need them to be in front of you. When that occurs in my life, after I finally recognize that it is happening – and yes, sometimes it takes me a while to notice — I begin to immerse myself in the idea or get to know that person better.

Lately, a new concept has been showing up and so over the next few posts, I’m going to write about it. I’m also going to read about it and share what I learn along the way.

In the April 13th, 2009 edition of Time Magazine, there was an article by Michael Grunwald called “How Obama is Using the Science of Change.” The article cited the work of behavioral scientist Robert Cialdini who found that that the most powerful motivator was that “people want to do what they think others will do.” Cialdini is the author of the best seller “Influence.” (For what its worth, Cialdini is the name that keeps popping up…more on that in the next few posts)

According to Time, Obama leans heavily on the work of the behavioral scientists to understand what makes people tick and then, using this knowledge, he intends to spur behavioral change throughout the country. He’s leveraging what he learned about people to move forward his agenda on the economy, healthcare and energy.

The power of these nudges is huge. For example, is there a difference in the number of people who participate in a 401 K plan if they have to sign up or would that number change if they were signed up already and had to opt out? Well, a 2001 study showed that only 36% of women joined a 401K plan when they had to sign up for it…but when they had to opt out, 86% participated.

The implications of using behavioral science in our business and personal lives are huge. This notion affects sales, marketing, management, leadership and even how we lead our communities or exist within our families.

So how is the Obama Administration using what they have learned? Consider the way Americans received the $116 billion in payroll tax cuts from the stimulus package. Obama chose NOT to send one lump sum check even if that would have put the money in the hands of Americans faster. His administration was concerned that a lump sum check might be viewed as a windfall and deposited in a bank account instead of being spent to rev up the economy. Instead, the money is being released through decreased payroll withholding. Smaller amounts spread over time are more likely to be spent. The idea is to subtly nudge us to spend the extra cash.

Make no mistake – this is a radical departure from the way that we have let the free market dictate how things work. Some might call this “manipulation,” but to change our ingrained behaviors, this might be necessary. And we may discover that behavioral science is compatible with free market thinking as it may prove to be an accelerator in how we interact with the free markets.

The Time magazine article goes on to highlight several elements that help us to change behavior. And that will be the subject of the next post.

Lesson 9: Understand Your Constraints and Leverage Them

April 21, 2009

When it comes to pragmatic marketing, Mitch Rothschild is the smartest person I know. He runs a marketing and sales company called Raspberry Red. His company has built a site, www.vitals.com, where consumers can check up on their doctors. This site provides consumers with the tools to investigate the backgrounds of physicians and make intelligent, informed decisions about which doctor to choose.

But here’s the cool thing.

According to Quantcast.com, an independent site that measures the characteristics of websites, “Vitals.com is a top 5,000 site that reaches over 1.4 million people monthly, of which 1.3 million (94%) are in the U.S. The site attracts a more educated, middle aged, fairly wealthy, slightly female slanted group.”

No bad for a site that’s slightly over a year old.

Mitch’s gift is that he’s sensible, focused and devotes himself to first understanding the constraints of the marketplace, before applying his know-how to a solution.

He cut right to the heart of the matter when I posed our challenge to him.

The biggest problem, Mitch explained, was that these houseware items are low cost. In completing any purchasing transaction, one should expect a cost of $40 per transaction. Housewares tend to be inexpensive so these transactional related costs cannot be built in and absorbed. Besides, it is very difficult to build a brand on the web.

Mitch then pointed me in a different direction.

You may have heard of a company called RealAge. They provide an online test. This “test” asks 150 or so questions about your personal habits, lifestyle and family history. Based on your responses, the company provides to you – via your e-mail address which you enter — your “biological age” and then makes recommendations on how you can get “younger.” Some of the suggestions are simple – eat a better breakfast, take a multivitamin – stuff like that.

Most important, the test is interesting and people like to take it. After all isn’t everybody intrigued by the analysis and the possibilities. Well, maybe not everybody. However…

More than 27 million people have taken the test. That’s a lot of people…and a lot of data.

How does RealAge make money? While its suggestions are non-medical, it really is selling better living through medications. It is acquiring priceless data that most drug companies could never be successful in getting from prospective patients. If a RealAge visitor becomes a member, his or her data goes placed into a marketing database.

To promote their site, RealAge employs a “hub,” Dr. Mehmet Oz of Oprah fame, as a spokesperson. His message complements RealAge’s – you too can change.

According to the New York Times who did a detailed story on RealAge, companies like Pfizer, Novartis and GlaxoSmithKline parse this data and target their products with a laser like focus to prospective consumers. (RealAge provides only the e-mail address and its site policy acknowledges that it shares data with third parties who can help fulfill its mission of “better living.”)  Because of this wealth of data, these pharma companies can target a specific demographic pretty easily, such as overweight smokers who are male between 45 and 50 and get depressed. The companies then send out e-mail advertisements that present the possibility of a treatment that can make a life-changing difference. Tthe e-mail recipient can then choose whether to investigate further.

So what does this have to do with our challenge…visit the RealAge site and stay tuned…

Lesson 5: A Brand Community is a Business Strategy

April 2, 2009

As fate would have it, April 2009’s Harvard Business Review presents an article titled “Getting Brand Communities Right.” The article written by Susan Fournier and Lara Lee highlights seven ideas that are important to our analysis. I’ve summarized them here. To purchase this fascinating article so that you can read it in its entirety, click here.

(1)    A brand community is no longer a marketing strategy. It is a business strategy. To be most successful, allow your brand community be a high-level strategy that supports all of your business goals. Communicating with the community allows your business activities to take on new meaning and reflect the needs of those you wish to have as customers.

(2)    A brand community exists to serve the people in it. The authors state that if you meet the needs of the individuals within the community, you will in fact be meeting the needs of the business. Here’s the challenge. All businesses like to control the products they sell, the conversations they have and how they are perceived. Being effective here though means being vulnerable, not all-knowing and committed to addressing a need – rather than building your brand. Now, here’s the payoff. You just might discover an unmet need not related to your opportunity but one that keeps people very related to your business.

(3)    Engineer the community and the brand will follow. There is a science to engineering a community. Typically, people try to build communities around pools. These are individuals united by share values or goals (such as Republicans or Democrats). The authors explain that the relationships these pools form are limited and suggest that Web affiliations based on strong one-to-one connections (the example they use is a Cancer Survivors Network) is the catalyst that creates an engaging energy that sustains the community. The last element is to build a web community around hubs, individuals whom the community admires and is related to. Hooking up with such an individual will again drive passion.

(4)    Smart companies embrace the conflicts that make communities thrive. The natural reaction when one hears a complaint is to address it or squelch it. But in order to be an “in” group you need an “out” group. (Think Apple vs. PC, Coke vs. Pepsi). Strengthen the conflict and you strengthen the community.

(5)    Communities are strongest when everyone plays a role. The best metaphor that I could think of for this principle was the physical neighborhood within which that I live. What gives a neighborhood color, charm and notoriety are the characters within it. Each contributes to the fabric. Allowing people to be diverse in their thinking, types of support and nature makes the community engaging. To see a full list of roles, check out the article.

(6)    Online networks are just one tool, not a community. On-line networks re not enough to create a community. Communities grow from traditional approaches as well. Companies build communities using advertisements, celebrity spokespeople (“hub”), social interaction, entertainment, expert advice, packaging…and on and on.

(7)    Of and by the people, companies defy managerial control. Much like your physical community, to thrive, an on-line community can’t be controlled. Yes, it can be supported and nurtured…but not controlled. Supporting and nurturing may be done with scripts that articulate behavior guidelines  and those that encourage appropriate behavior in a particular setting. In fact, you can create settings that have different rules and allowed behaviors.

The plan for addressing our challenge incorporates these rules. Still there is more analysis to be done.

Stay tuned…

Lesson 3: Know Your Segment, Know Your Category

March 27, 2009

Since Carl had been successful in dramatizing the importance of research, analysis and creativity, the next logical step was to learn how best to perform this activity. To discover more about these techniques, I turned to Suzy who has been a Senior Vice President for many, many years at a global, multinational advertising agency.

Suzy began our conversation by emphasizing the importance of segmentation. Today, more than ever, it is important to segment finely. She explained that selling to someone who loves to create in the kitchen is simply not good enough. For what types of dishes are they specialists? Are they novices or “hard-core” pros at what they do? Are they cooks or bakers?

Once a segment has been defined, you can begin to define the key opinion leaders (KOLs). Inventing the future is always a unique challenge so asking the hard-core baker what would make things easier for them is sometimes not the best way to learn what to invent. Suzy recommended that when interviewing these KOLs, one should try to get them to complain. Ask them what frustrates them in the process and delve deeply. (Is it the rolling pin? The surface?) These types of questions can create great opportunities.

We began to explore more deeply the other elements that go into understanding the target market segment. Suzy explained that a meaningful market research program will discuss the sentimental and emotional aspects that are so integral  to the design and marketing of the product.

Suzy classified this effort in the context of ethnography. Ethnography is founded on the idea that a system’s properties cannot necessarily be accurately understood independently of each other. Context is decisive and so one often needs direct, first-hand observation of daily behavior. This may lead to a discussion about the role of the family and the meaning of home. Such a process may also include participant observation. Sometimes this involves conversations with different levels of formality such as small talk to long in-depth interviews.

In our circumstance, this might mean going into several homes to observe how a housewares product is being used and in what context. While quantitative research can provide data, this type of research creates knowledge founded on intimacy, the connection between the mind and the heart and the way it is manifested in behavior. (These types of interviews are sometimes videotaped and used in campaigns to convince retailers to carry a product because of its emotional value to the consumer.)

All of this knowledge is valuable in so many contexts but none may be more important than this.

Understanding your product and the context within which it is valued allows you to know your product category and once you do, you can develop line extensions across multiple dimensions such as the target segment or whether your product is a time saver, problem solver or part of a suite of solutions that integrate with one another.

When you are very clear about this aspect, you are now ready to begin to build your consumer franchise…which will be the subject of our next post.

Lesson 2: The Only Way to Fight the Tyranny of Kings is with Creativity

March 23, 2009

Carl had exposed an interesting point to consider. If indeed this situation had occurred before, there probably would be some lessons to be learned in how these challenges were met in the past.

The solution, he explained, lies in creating a consumer franchise, a brand that is powerful enough to necessitate that the retailers seek your product out and put you in a position where negotiation is from strength. In consumer franchising, the goal is to communicate distinctive brand attributes, develop and reinforce brand identity that is consistent with the image of the brand, build long-term brand preference, encourage repeat purchase and long-term patronage, and engage active consumer involvement.

Put simply, if you are operating in a commodity category, you must bring something unique to the party.

There is, however, significant complexity in our particular challenge. In the housewares industry, there is a low frequency of purchasing items, that is, unlike other items, people do not purchase them again and again or very often. This attribute does not allow for the investment of heavy marketing dollars to create the brand.

Given that constraint, how can a housewares company develop their brand?

According to Carl, one of the most important elements is communication at the point of purchase. There are many factors, including packaging and color that can make the difference in getting consumers to try a product. He referred to this as the “sell-in” effort. (More definitively speaking, sell-in typically means how well one has been able to get the product into stores. Sell-through refers to how well the stores have been able to get the product into the hands of consumers.)

To be successful here, one must apply the greatest levels of creativity. He then offered a few insightful examples.

To sell a purse mirror for women, his company developed an end of aisle spinner that had mirrors placed on all sides. It proved effective because his target market, women who wanted to have a mirror available at all times to see how they were presenting themselves, would catch their reflection as they passed the display. They would stop, pause, and then notice the purse mirrors. Getting them to notice the product was the key first step in making the sale.

With corn brooms, his company took the unusual step of displaying it upside down, which was not how brooms were usually displayed, and again, would catch the attention of the consumer. By adding a distinctive angle to the handle, the product was further distinguished.

To achieve these distinctions and to create a unique selling proposition, one must look at each item separately and develop the element that makes it unique and impactful.  Should the design be simple? Can you “dress it in a tuxedo” and make it feel more upscale? What would make the difference to the consumer?

This means that inventing the product is only the beginning of the effort. The next step is to dissect the use of the product.

  • Visit stores and analyze how comparable products are displayed.
  • Who buys them?
  • Which displays and packages made the person stop?
  • Define the profile of the person who stopped at the display.
  • Ask them what caused them to stop.
  • Find out the process that they went through in making the buying decision.
  • Once the product has been bought, ask them why.
  • Be curious and creative in discovering why your products are worth buying.

Carl closed our discussion with a very interesting story.

A long time ago, Carl’s team was tasked with the responsibility of selling toothbrushes. The division had been losing significant money. To learn more about his targeted consumers’ motivations, Carl arranged for a focus group with a local dental clinic. The focus group members were asked why they were choosing certain toothbrushes and the answers he received were about the size of the brush head (husbands had larger mouths than wives and children required smaller toothbrush surfaces) and that some brushes were harder than others.

Valuable information…

The participants were then led into a room and on the wall of the room was a display of every possible toothbrush on the market at that time. The participants were then told that as a reward, they could select toothbrushes for their families.

After selecting their toothbrush reward, the participants were then led into another room and asked why they had selected these particular toothbrushes.

Their answer most often…color!

It seems that at this particular time there were only four colors available in the toothbrush industry. Carl and his team learned that even though it was never mentioned as a factor in the focus groups, color was deemed to be the most important attribute. Armed with this information, his team began to produce toothbrushes in 24 colors! The net result the product, which was a losing venture a year earlier, became a source of substantial profitable revenue within a year.

Carl had illustrated his point – creativity and research on an item by item basis was critical in establishing a brand and challenging leverage.