Category Archives: Consumer Psychology

The Balancing of Market Information

First published October 25, 2012 in Mediapost’s Search Insider

In my three previous columns on disintermediation, I made a rather large assumption: that the market will continue to see a balancing of information available both to buyers and sellers. As this information becomes more available, the need for the “middle” will decrease.

Information Asymmetry Defined

Let’s begin by exploring the concept of information asymmetry, courtesy of George Akerlof, Michael Spence and Joseph Stiglitz.  In markets where access to information is unbalanced, bad things can happen.

If the buyer has more information than the seller, then we can have something called adverse selection. Take life and health insurance, for example. Smokers (on the average) get sick more often and die younger than non-smokers. If an insurance company has 50% of policyholders who are smokers, and 50% who aren’t, but the company is not allowed to know which is which, it has a problem with adverse selection. It will lose money on the smokers so it will increase rates across the board. The problem is that non-smokers, who don’t use insurance as much, will get angry and may cancel their policy. This will mean the “book of business” will become even less profitable, driving rates even higher.   The solution, which we all know, is simple: Ask policy applicants if they smoke. Imperfect information is thus balanced out.

If the seller has more information than the buyer, then we have a “market for lemons” (the name of Akerlof’s paper). Here,  buyers are  assuming risk in a purchase without knowingly accepting that risk, because they’re unaware of the problems that the seller knows exists. Think about buying a used car, without the benefit of an inspection, past maintenance records or any type of independent certification. All you know is what you can see by looking at the car on the lot. The seller, on the other hand, knows the exact mechanical condition of the car. This factor tends to drive down the prices of all products –even the good ones — in the market, because buyers assume quality will be suspect. The balancing of information in this case helps eliminates the lemons and has the long-term effect of improving the average quality of all products on the market.

Getting to Know You…

These two forces — the need for sellers to know more about their buyers, and the need for buyers to know more about what they’re buying — are driving a tremendous amount of information-gathering and dissemination. On the seller’s side, behavioral tracking and customer screening are giving companies an intimate glimpse into our personal lives. On the buyer’s side, access to consumer reviews, third-party evaluations and buyer forums are helping us steer clear of lemons. Both are being facilitated through technology.

But how does disintermediation impact information asymmetry, or vice versa?

If we didn’t have adequate information, we needed some other safeguard against being taken advantage of. So, failing a rational answer to this particular market dilemma, we found an irrational one: We relied on gut instinct.

Relying on Relationships

If we had to place our trust in someone, it had to be someone we could look in the eye during the transaction. The middle was composed of individuals who acted as the face of the market. Because they lived in the same communities as their customers, went to the same churches, and had kids that went to the same schools, they had to respect their markets. If they didn’t, they’d be run out of town. Often, their loyalties were also in the middle, balanced somewhere between their suppliers and their customers.

In the absence of perfect information, we relied on relationships. Now, as information improves, we still want relationships, because that’s what we’ve come to expect. We want the best of both worlds.

Will Customer Service Disappear with the Elimination of the “Middle”?

First published October 18, 2012 in Mediapost’s Search Insider

In response to my original column on disintermediation, Joel Snyder worried about the impact on customer service: The worst casualty is relationships and people skills. As consumers circumvent middlemen, they become harder to deal with. As merchants become more automated, customer service people have less power and less skills (and lower pay).

Cece Forrester agreed: Disintermediation doesn’t just let consumers be rude. It also lets organizations treat their customers rudely.

So, is rudeness an inevitable byproduct of disintermediation?

Rediscovering the Balance between Personalization and Automation

Technology introduces efficiency. It streamlines the “noise” and marketplace friction that comes with human interactions. But with that “noise” comes all the warm and fuzzy aspects of being human. It’s what both Joel and Cece fear may be lost with disintermediation. I, however, have a different view.

Shifts in human behavior don’t typically happen incrementally, settling gently into the new norm. They swing like a pendulum, going too far one way, then the other, before stability is reached. Some force — in this case, new technological capabilities — triggers the change. As society moves, the force, plus momentum, moves too far in one direction, which triggers an opposing force which pushes back against the trend. Eventually, balance is reached.

A Redefinition of Relationships

In this case, the opposing force will be our need for those human factors. Disintermediation won’t kill relationships. But it will force a redefinition of relationships. The challenge here is that existing market relationships were all tied to the “Middle,” which served as the bridge between producers and consumers. Because the Middle owned the end connection with the customer, it formed the relationships that currently exist. Now, as anyone who has experienced bad customer service will tell you, some who lived in the Middle were much better at relationships than others. Joel and Cece may be guilty of looking at our current paradigm through rose-colored glasses. I have encountered plenty of rudeness even with the Middle firmly in place.

But it’s also true that producers, who suddenly find themselves directly connected with their markets, have little experience in forming and maintaining these relationships. However, the market will eventually dictate new expectations for customer service, and producers will have to meet those expectations. One disintermediator, Zappos, figured that out very early in the game.

Ironically, disintermediation will ultimately be good for relationships. Feedback loops are being shortened. Technology is improving our ability to know exactly what our customers think about us. We’re actually returning to a much more intimate marketplace, enabled through technology. Producers are quickly educating themselves on how to create and maintain good virtual relationships. They can’t eliminate customer service, because we, the market, won’t let them. It will take a bit for us to find the new normal, but I venture to say that wherever we find it, we’ll end up in a better place than we are today.

A Decade with the Database of Intentions

First published September 27, 2012 in Mediapost’s Search Insider

It’s been over 10 years since John Battelle first started considering what he called the “Database of intentions.” It was, and is:

The aggregate results of every search ever entered, every result list ever tendered, and every path taken as a result. It lives in many places, but three or four places in particular hold a massive amount of this data (ie MSN, Google, and Yahoo). This information represents, in aggregate form, a place holder for the intentions of humankind – a massive database of desires, needs, wants, and likes that can be discovered, supoenaed, archived, tracked, and exploited to all sorts of ends. Such a beast has never before existed in the history of culture, but is almost guaranteed to grow exponentially from this day forward. This artifact can tell us extraordinary things about who we are and what we want as a culture. And it has the potential to be abused in equally extraordinary fashion.

When Battelle considered the implications, it overwhelmed him. “Once I grokked this idea (late 2001/early 2002), my head began to hurt.” Yet, for all its promise, marketers have only marginally leveraged the Database of Intentions.

In the intervening time, the possibilities of the Database of Intention have not diminished. In fact, they have grown exponentially:

My mistake in 2003 was to assume that the entire Database of Intentions was created through our interactions with traditional web search. I no longer believe this to be true. In the past five or so years, we’ve seen “eruptions” of entirely new fields, each of which, I believe, represent equally powerful signals – oxygen flows around which massive ecosystems are already developing. In fact, the interplay of all of these signals (plus future ones) represents no less than the sum of our economic and cultural potential.

Sharing Battelle’s predilection for “Holy Sh*t” moments, a post by MediaPost’s Laurie Sullivan this Tuesday got me thinking again about Battelle’s “DBoI.” A recent study by Google and EA showed that using search data can predict 84% of video game sales.  But the data used in the prediction is only scratching the surface of what’s possible. Adam Stewart from Google hints at what might be possible, “Aside from searches, Google plans to build in game quality, TV investment, online display investment, and social buzz to create a multivariate model for future analysis.”

This is very doable stuff. All we need to create predictive models that match (and probably far exceed) the degree of accuracy already available. The data is just sitting there, waiting to be interpreted. The implications for marketing are staggering, but to Battelle’s point, let’s not be too quick to corral this simply for the use of marketers. The DBoI has implications that reach into every aspect of our society and lives. This is big — really big! If that sounds unduly ominous to you, let me give you a few reasons why you should be more worried than you are.

Typically, if we were to predict patterns in human behavior, there would be two sources of signals. One comes from an understanding of how humans act. As we speak, this is being attacked on multiple fronts. Neuroscience, behavioral economics, evolutionary psychology and a number of other disciplines are rapidly converging on a vastly improved understanding of what makes us tick. From this base understanding, we can then derive hypotheses of predicted behaviors in any number of circumstances.

This brings us to the other source of behavior signals. If we have a hypothesis, we need some way to scientifically test it. Large-scale collections of human behavioral data allow us to search for patterns and identify underlying causes, which can then serve as predictive signals for future scenarios. The Database of Intentions gives us a massive source of behavior signals that capture every dimension of societal activity. We can test our hypotheses quickly and accurately against the tableau of all online activity, looking for the underlying influences that drive behaviors.

At the intersection of these two is something of tremendous import. We can start predicting human behavior on a massive scale, with unprecedented accuracy. With each prediction, the feedback loop between qualitative prediction and quantitative verification becomes faster and more efficient. Throw a little processing power at it and we suddenly have an artificially intelligent, self-ssimproving predictive model that will tell us, with startling accuracy, what we’re likely to do in the future.

This ain’t just about selling video games, people. This is a much, much, much bigger deal.

Paralyzed by Choice

First published June 28, 2012 in Mediapost’s Search Insider

In last week’s column, I looked at how Harvard Business Review bloggers Karen Freeman, Patrick Spenner and Anna Bird spelled the end of the purchase funnel. Today, I’d like to look at the topic they tackled in the second of the three-part series, “If Customers Ask for More Choice, Don’t Listen.”

Barry Schwartz, the author of “The Paradox of Choice,” believes we’re overloaded with choices. In fact, we have so many choices to make, often about inconsequential things, that we live with the constant anxiety of making the wrong choice.

This paradox meets today’s consumer head on, over and over, in situation after situation. The other factor, which I’ve seen play a massive role in buying behaviors, is the degree of risk in the purchase. The bigger the purchase, the higher the risk.

The final piece of the buying puzzle is the reward that lies at the end of the potential purchase. Our brains are built to balance risk and reward in fractions of a second. But we don’t do it by a calm, rational weighing of pros and cons, thus engaging the enlightened thinking part of our brains. We do it by unleashing emotions from the dark, primitive core of our brain. The risk/reward balance whips up a potent mix of neural activity that sets our decision-making engine in motion.

The degree of risk or reward sets the emotional framework for a purchase. High reward, low risk generally means a fairly fast purchase, such as an impulse buy. High risk, low reward may mean a very long purchase cycle with an extended consideration process. Whatever the buying path, there will be an undercurrent of emotion running just below the surface.

Now, let’s match up the findings of the HBR team. High-risk purchases automatically ramp up the level of anxiety we feel. We’re afraid we’ll make the wrong decision. And, in a complex purchase, there’s not just one decision to be made – there are several. At each decision point, we’re bombarded by choices. If the hundreds of purchase path evaluations I’ve done are any indication, the seller spends little time worrying about presenting those choices in a user-friendly way. Catalog pages are jammed with useless and irrelevant items. Internal site search results are generally abysmal. And product information typically takes the form of a long shopping list of features. Very little of it speaks to buyers in a language they care about.

This is a dangerous combination. We have the natural anxiety that comes with risk. We have a gauntlet of decisions to make, each raising the level of anxiety. And we have websites that contribute greatly to the frustration by making it difficult to navigate the information that does exist, which is either too little, too much, too irrelevant or too salesy — never does it seem to be just right.

Again, Freeman, Spenner and Bird ask us to make it simpler for the buyer. Provide them with fewer choices, and make them as relevant and compelling as possible. Ease the burden of risk by providing information that reassures. Realize that one of the components of risk is the degree of bias in the information we’re given. It that information reeks of marketing hyperbole, it will be discounted immediately.

In our numerous eye-tracking studies, we’ve found that in most instances, three to four options seems to be the right number to consider on a Web page. These can be easily loaded into working memory and compared without causing undue wear on our mental mechanics. So, on a landing or home page, three or four groups of coherent and relevant information seems to be an optimal level. We call them “intent clusters.” For navigation bar options, we try to keep it between five and seven choices. If we expect mostly transactional traffic, we ensure there is a “fast path” to purchase. If we expect a lot of purchase research, we aim for rich promises of relevant and reliable information.

As Freeman, Spenner and Bird remind us, “The harder consumers find it to make purchase decisions, the more likely they are to overthink the decision and repeatedly change their minds or give up on the purchase altogether. In fact, regression analysis points to decision complexity and resulting cognitive overload as the single biggest barrier to purchase.”

As marketers, our job is to eliminate the barriers, not erect new ones.

The Death of the Purchase Funnel

First published June 21, 2012 in Mediapost’s Search Insider

A recent series of three posts on the Harvard Business Review blog by Karen Freeman, Patrick Spenner and Anna Bird explored some of the myths about how consumers make decisions. I think each of these has direct implications for search marketers, so over the next three weeks I want to explore them one at a time.

The first, titled “What Do Consumers Really Want? Simplicity,” talks about the breakdown of the purchase funnel. The HBR bloggers contend the funnel, which has been around for well over a hundred years, no longer applies to consumer behaviors. I concur, and said as much in my book, “The BuyerSphere Project.”

We differ a little on the reason for the demise, however. The HBR team credits the demise to cognitive overload on the part of the consumer. We’re simply bombarded by too much information on the purchase path to fit it all into the nice, simple, rational filtering process captured in St. Elmo Lewis’s elegant funnel-shaped model. The accompanying research, a survey of 7,000 consumers, shows decision simplicity was the number-one thing people wanted when making a purchase.

I agree that information overload is part of it, but I also believe that two other factors have led to the end of the purchase funnel. First, the purchase funnel assumes a rational filtering of options based on careful consideration of a consumer’s requirements. I don’t think this was ever the case. Emotions drive our decisions, and more often than not, rationality is applied after the fact to justify our choices. Prior to the Internet, emotion was tough to distinguish from rationality, as buyers didn’t have much control over the content they accessed during the consideration process. They were limited to whatever the marketer pushed out at them. So, whether driven by emotion or logic, they tended to go down the same path and display many of the same behaviors. Given the pervasive believe in humans as rational animals at the time, it was not surprising that a logic-driven model emerged.

The other factor, as I alluded to, was that the Internet shifted the balance of power during the purchase process. Suddenly, we could choose which paths we took during the consideration process. We weren’t all forced down the same path, according to some arbitrary notion of a funnel-shaped model.

What became clear, when consumers could choose their own path, was that the simplicity of the funnel model bore little relation to the actual paths consumers took. And those paths were driven by emotion. People bounced all around, depending on what they were looking to buy. They could go all the way to a shopping cart, then suddenly abandon it and go back to a destination that would be considered “upper funnel” and start all over again. From the outside looking in, this resembled a bowl of spaghetti much more than it did a funnel.

So, we have a trio of suspects in the death of the purchasing funnel: cognitive overload, emotion trumping logic, and consumers gaining more control over their consideration path. All lead to an interesting concept to consider: laying an online path that anticipates the emotional needs of the buyer, and yet keeps the information presented from overwhelming them. For example, marketing has traditionally taken a “turf war” approach to persuading a prospect: “as long as they’re on our turf, we do everything possible to close the sale.

But this doesn’t really match up with the three trends we’re talking about. What online consumers are looking for, according to the HBR research, is a safe online zone that will make their decision easier. Rather than going from site to site, collecting information and filtering out overt marketing hyperbole, what consumers want is a single information source they can trust. They want to be able to lower their “anti-BS” shields, because being a rational, cynical shopper takes a lot of time and effort.

Today, it’s extremely rare to find that trustworthy information on a site you can actually purchase from, but it’s starting to happen in some high activity categories, where independent portals facilitate this simplified approach to shopping. Travel comes to mind.

But let’s consider what would happen if a brand’s website took this approach. Rather than bombard a prospect with exaggerated sales pitches, putting them on the defensive, what if a more neutral, objective experience was provided?  After all, why shouldn’t the decision path be built on your own turf, giving you a home field advantage?

Brand Beliefs and the Facebook Factor

First published May 17, 2012 in Mediapost’s Search Insider

Last week I talked about the power of our beliefs to shape our view of the world around us. I also mentioned how our belief constructs impact our view of brands. As luck would have it, two separate pieces crossed my path this week, both of which provide excellent examples of how we may perceive brands, and how marketers often get it wrong when trying to shepherd a brand through the marketplace.

The first piece was “Does Branding Need to be Rebranded?” by Mediapost’s Matt Straz in Online Spin. In it, Matt mentioned the backlash against Sir James Dyson (he of the cool vacuums) when he dared to mention that he doesn’t believe in branding. Now, to clarify, Dyson doesn’t believe in branding the way it’s practiced by many companies, where through sheer force of advertising, their heavily controlled (and often contrived) brand story is theoretically imprinted in your brain.  This isn’t so much branding as brain-washing. Let’s call it “brand-washing.”

But let’s go back to how our beliefs define our view of brands. We use beliefs as a heuristic short cut allowing us to operate efficiently in our world. We form beliefs so we don’t have to endlessly think through every single decision. Beliefs form based on our own experience, but they are also formed based on what we’re exposed to. All this input gets synthesized into a reasonably coherent and remarkably resilient belief. Once in place, this belief guides our action.

So, from our perspective, a brand can be defined as what the buyer believes a brand to be.  In the ad community, there is much debate about the definition of a brand. But, in the final analysis, the only definition of brand that matters is the one that rests in the mind of the buyer. All else are simply inputs into that final mental model, which is created solely by the customer.

James Dyson believes the best of those paths is by producing great products and then letting them speak for themselves. If you create products that consistently exceed expectations, that is enough to build an authentic and enduring brand belief. It’s hard to argue with that logic, and, in fact, it’s what P&G called the Second Moment of Truth with consumers: their experience when your product is in their hands. In this definition, brand is intimately coupled with the product itself.

But, if Dyson is right, why is there an advertising industry at all? Even Dyson buys ads to sell vacuum cleaners. This brings us to the second piece that I saw in the past week. It was a report out of Forrester called the Facebook Factor. This is a bit of a tangential detour, so bear with me.

The report posits that we can now quantify the value of a Facebook “like.” The reasoning is fairly simple. If you add a few questions to a typical customer survey, you can start to quantify the correlation between someone liking you on Facebook and subsequent purchasing of your product. But, as Forrester points out in the report, there is a correlation/causation trap here that could lead to many marketers making the wrong conclusion.

If you try to equate people who felt motivated to “like” you on Facebook with likelihood to purchase, you run the risk of mistaking correlation for causation. People didn’t buy your product as a result of “liking” you on Facebook.  The Facebook “like” came as a result of a positive “belief” about your brand. It was an effect, not a cause. At best, the Facebook Factor should be considered as nothing more than a leading indicator of brand preference.

But many marketers will confuse cause and effect. They will believe that driving Facebook “likes” will drive higher brand loyalty.  This is where brand and product can potentially become decoupled. Here, once marketers start assigning a value to a Facebook “like” based on Forrester’s methodology, they will start regarding Facebook “likes” as the end goal, trusting in the mistaken belief that a Facebook “like” will always correlate positively to purchase behavior.

Once this decoupling happens, the value of the Facebook “like” starts to erode. The motivation for the “like” often has little to do with a positive brand experience. It’s driven by a promotion or campaign that has just one aim: to drive as many likes as possible. From the customer’s perspective, it’s easy to hit the “like” button. They have no skin in the game. There is no belief behind the action.

In the end, I believe Dyson’s definition of brand is the more authentic one. It goes back to the very roots of branding, which was a reassurance to buyers that they were buying what they believed they were buying.

Read more: http://www.mediapost.com/publications/article/174966/brand-beliefs-and-the-facebook-factor.html#ixzz2ik9IjRDB

Believing is Seeing

First published May 10, 2012 in Mediapost’s Search Insider

In his book “The Believing Brain,” Michael Shermer spends several hundred pages exploring just how powerful beliefs are in forming our view of the world. Beliefs affect not just what we think, but they literally filter what we see and do. And, once in place, beliefs tend to be stubbornly unshakeable. We will go to great extents to defend our beliefs with rationalizations that are often totally or partially fabricated. As Shermer says, “Beliefs come first, explanations for beliefs follow.”

In the world of consumerism, this becomes important in any number of ways. For one, we have beliefs about brands, both positive beliefs and negative ones. And, as previous neuro-research has shown, those beliefs can dramatically alter how we sense the world. In a study at Baylor University, Dr. Read Montague found that the reason Coke devotees are so loyal has almost nothing to do with the actual taste, and much more to do with the Coke brand and what it says about them as people. It’s not the taste of Coke we love; it’s the idea of Coke.

A few weeks ago, I saw a press release from another study that takes this concept even further. The implications for understanding consumer decision-making are dramatic. In the study, Ming Hsu from the University of California, Berkeley, conducted an fMRI test of individuals participating in a multi-strategy economic investment game. As they made decisions based on the actions of their opponents, the parts of the brain that were firing were recorded.

Games of this sort require that the participants learn from events and adjust their strategies according. Here’s an excerpt from the media release: “The researchers focused on two types of learning processes. So-called ‘reinforced-based learning’ (RL) operates through trial and error. In contrast, more sophisticated ‘belief-based learning’ requires decision-makers to anticipate and respond to the actions of others. The researchers computed the areas of the brain where activity tracks these two types of learning. In addition, they discovered that the prefrontal cortex is an area that processes learning about others’ beliefs. The same area also predicts an individual’s propensity to engage in either belief learning or simply RL.”

This is interesting. Reinforced learning is completely reactive in nature. It’s learning after the fact. But if that was the only way we learned, we wouldn’t survive long. So the brain needs to adapt a proactive learning framework, and that framework relies on beliefs as its primary construct. We act based on what we believe the best outcome will be, and alter as necessary based on the success or failure of our decisions.

Now, if we were purely rational and empirical in the way we form those beliefs, this would seem to be logical way to live our lives. But, as we’ve seen, our beliefs are often anything but rational. They are usually formed with little thought or input, and once formed, tend to resolutely remain in place, even in the face of overwhelming evidence to the contrary. If you think I’m exaggerating, consider this: 55% of Americans believe in angels, 39% believe in evolution, 36% believe in global warming and 34% believe in ghosts. I’ll leave it you to decide which of those stats you find most troubling.

The other note in the above excerpt that’s interesting is where this belief mechanism sits in the brain: the prefrontal cortex. This, by the way, was the same area of the brain that lit up in Montague’s test when his subjects knew they were drinking Coke. It’s the one part of the brain that really makes us who we are — quite literally, in fact.

Even in something as fleeting and supposedly unemotional as using a search engine, I’ve seen firsthand the powerful impact a strong brand belief can have. It physically alters what we see on the page of results. We’re just getting preliminary results from our own neuro-scanning study, done with Simon Fraser University, and it appears that looking for a favored brand affects how quickly we can find relevant information, how much time we spend looking at it (counterintuitively, we actually spend less time engaging with favored brands) and how easily distracted we are by other information on the page.

Truly, in consumerism, as in all areas of our lives, our beliefs determine how we see and sense the world around us.

 

Reinventing AIDA

First published April 5, 2012 in Mediapost’s Search Insider

Last week, my column was about how branding differs between search and more traditional brand channels like TV and print. It came from a recent client conversation I had. Rob Schmults from Intent Media added a well-thought-out, on-the-mark comment that deserves a follow-up. There are three points in particular I want to dive deeper into.

“ I think part of the problem in attempting to do so is that branding is all too often an end in and of itself rather than a means.”

Absolutely. Most sales and marketing happens in dozens of disconnected siloes, with little thought about how the actions of one silo affect all the others. Each silo measures progress by its own metric and set its own agenda. The problem is that all these different initiatives are aimed at the same target, but there is little thought as to how each initiative can impact the prospect.

For the past year, I’ve been thinking about how to approach marketing by starting first with creating a common understanding of the buyer’s motivations and behaviors, and then mapping a decision landscape so we can begin to understand the path the buyer takes through it. Much of my writing over the past two years has explored various aspects of this landscape: things like the role of risk and reward, and how they affect the emotions drive our buying decisions.

If branding becomes disconnected and “an end in and of itself,” it starts to lose touch with the chain of “means” that translates brand awareness into action. I saw a particularly acute example of this in a recent meeting: a brand agency presented research showing each point of movement in its unaided brand awareness metric translated into X of additional revenue. I didn’t dispute the finding, as I believed it to be true. What was missing was the long chain of interdependent “means” taking us from there to here. It was like saying that each inch of rain translated into X increase of revenue at the local farmer’s market. We’re jumping from “A” to “Z” without worrying about the 24 intervening letters.

“SEM is clearly a means — it’s a step to driving a conversion event (typically a sale).”

As I mentioned last week, presence on the search page is very often a critical intermediate step between the lofty heights of brand-building and the nitty-gritty of bringing cash in the door. In fact, if you take the time to understand how search is typically used in the purchase process with your typical buyer, it typically falls into the “no-brainer” category, because the prospect has intent and is completely open to being persuaded. Which brings me to Rob’s next point:

“Branding has value, so the war Gordon describes doesn’t have to end with total victory and branding’s extinction.”

As effective as search is, it’s a channel with built-in limitations, including available inventory. If there is no awareness, there is no inventory. People can’t search for something they don’t know exists (at least, not yet). Branding creates awareness, which, if the dots are connected properly, eventually turns into intent. And when intent is present, search is very effective at converting that intent into action. The chain then is Awareness – Intent – Action, which is a variation on the venerable AIDA branding model: Attention – Interest – Desire – Action. If you combine the two you end up with Awareness – Interest – Desire – Intent – Action, or AIDIA. You need branding at the front end, to create awareness, spark interest and create desire. You need search at the back end to allow prospects to act on their intent and discover how to take action.

It’s interesting to note that the original AIDA model jumped all the way from desire to action without much explanation on how to get there. Given that two of the steps –“interest” and “desire” — seem pretty similar, it’s odd that there is such a huge chasm between the domain of branding and the ultimate transaction itself. The AIDA model was definitely biased towards the front end of the marketing process.

I think what digital has done, especially through search, is to provide much more granularity and clarity on the many steps you can take to get from desire to action. But, as Mr. Schmults reminds us, none of these steps is “an end unto itself.” They’re part of a journey. They depend on each other. And each is passed through by your prospects as they travel down the path of purchase.

To come full circle, that was my original point. I’m not calling for the abolition of branding. I’m just asking that we take the time to understand the journey our customers take, and be there at each step.

 

The Psychology of Couponing: Where Agillitee Went Wrong

First published September 22, 2011 in Mediapost’s Search Insider

Is a Groupon model the next big thing for B2B? Apparently not. Or, at least, not now, based on an early trial by a Chicago-based consulting firm, Ajillitee. The company used Groupon to offer $25,000 worth of consulting services at half price.

It was the biggest deal Groupon had ever offered. Hey, keeping $12,500 in your pocket is nothing to sneeze at. And, since buying consulting services is not exactly the same as snagging a half-off lunch coupon, the offer stayed open for three weeks, giving all potential takers plenty of time to act.

But, at the end of the three weeks, the offer disappeared. The result? Nary a sale — not even one. Ajillitee extended the offer on its own website, with the same result.

“We were really trying to test the market,” said Ajillitee CMO Diann Bilderback. “What we learned was that we were early to the game. Groupon’s platform is the platform for this (online coupons), but it’s very consumer-oriented. The rules didn’t align with our kind of sale. Groupon works on snap decisions, but business decisions typically take longer.”

Well, that’s true. But there’s another element at play here. It’s the psychology of the deal itself. Do you really want to buy thousands of dollars of consulting services with a coupon? Even one saving you 50%? Thought not. Pizza? Sure! A pedicure? Maybe.  Half-price yoga? Sign me up. But critical information systems for your company? No thank you!

Coupons work well in certain markets, and not so well in others. For example, would you use a coupon for a doctor or a lawyer?  Probably not, but why? Why a pizza, and not a heart surgeon?

The answer can be summed up in one word: risk. Coupons work extremely well in some well-understood circumstances — to save money on something you were going to buy anyway, or when you want to treat yourself. In a previous series of columns, I talked about how all buying decisions are predicated on a balance of risk and reward.  Reward is the gas pedal, and risk is the brake pedal. If risk is very low, coupons can serve to push you past the tipping point and get you to act immediately rather than “someday.”  They accelerate latent consumer demand.

Coupons can also sway a purchaser from one brand to another, but this typically only happens when risk is minimal. Coupons work in the world of the “pretty good problem,” where all the options are within a range acceptable to the buyer. Think of laundry detergent, cheese slices or hand soap.

Finally, coupons can reduce the barriers keeping you from an indulgent impulse purchase. Coupons play on short-term gratification, introducing the promise of reward, compounded by the dopamine rush that comes from snagging a great deal. It amps up the “reward” portion of buying motivation so that the “risk” limiter doesn’t stand a chance. Groupon, in particular, pulls out all the psychological stops by throwing in equally addictive elements of geographically targeted rewards, limited availability and elemental crowd psychology. If this is the mental landscape you’re playing in, online couponing can definitely stack the odds in your favor.

But alas, B2B purchasing, especially big-ticket items like consulting, meets none of the above criteria. B2B is all about risk avoidance, and there is little reward driving these types of purchases. This came through loud and clear when I was researching my book, “The BuyerSphere Project.” Not only will a coupon offer fail to eliminate risk in these circumstances, it will actually increase risk by raising questions about the credibility of the consulting firm offering the coupon. If the consulting is any good, why are you offering it at half price? Are you that desperate for business?

Apparently, companies like Ajillitee haven’t given up on the concept.  A new rash of B2B oriented online couponing companies like BizyDeal and RapidBuyr are jostling each other in a rush to jump on the Groupon bandwagon.  If the types of deals offered are targeted to low-risk scenarios (copy paper and toner cartridges), they’ll probably work. But don’t expect to get a rush on coupons for consulting services, enterprise-level solutions or other big-ticket, complex purchases. When the buyer (or buyers) is looking at all risk and no personal reward, using couponing is like bringing a knife (or, more appropriately, a spatula) to a gunfight. It’s absolutely the wrong tool for the job.

Marketing in the ZMOT: An Interview with Jim Lecinski

First published July 21, 2011 in Mediapost’s Search Insider

A few columns back, I mentioned the new book from Google, “ZMOT, Winning the Zero Moment of Truth.” But, in true Google fashion, it isn’t really a book, at least, not in the traditional sense. It’s all digital, it’s free, and there’s even a multimedia app (a Vook) for the iPad.

Regardless of the “book” ‘s format, I recently caught up with its author, Jim Lecinski, and we had a chance to chat about the ZMOT concept. Jim started by explaining what the ZMOT is: “The traditional model of marketing is stimulus – you put out a great ad campaign to make people aware of your product, then you win the FMOT (a label coined by Procter and Gamble) — the moment of truth, the purchase point, the shelf. Then the target takes home the product and hopefully it will live up to its promises. It makes whites whiter, brights brighter, the package actually gets there by 10:30 the next morning.

What we came out with here in the book is this notion that there’s actually a fourth node in the model  of equal importance.  We gave the umbrella name to that new fourth moment that happens in between stimulus and shelf: if it’s prior to FMOT, one minus F is zero, ‘Zero Moment of Truth.'”

Google didn’t invent the ZMOT, just as Procter & Gamble didn’t invent the FMOT. These are just labels applied to consumer behaviours. But Google, and online in general, have had a profound effect on a consumer’s ability to interact in the Zero Moment of Truth.

Lecinski: “There were always elements of a zero moment of truth. It could happen via word of mouth. And in certain categories, of course  — washing machines, automotive, certain consumer electronics — the zero moment of truth was won or lost in print publications like Consumer Reports or Zagat restaurant guide or Mobil Travel Guide.

But those things had obvious limitations. One: there was friction — you had to actually get in the car and go to the library. The second is timeliness  — the last time they reviewed wash machines might have been nine months ago. And then the third is accuracy: ‘Well, the model that they reviewed nine months ago isn’t exactly the one I saw on the commercial last night that’s on sale this holiday weekend at Sears.'”

The friction, the timeliness and the simple lack of information all lead to an imbalance in the market place that was identified by economist George Akerlof in 1970 as information asymmetry. In most cases, the seller knew more about the product than the buyer. But the Web has driven out this imbalance in many product categories.

Lecinski: “The means are available to everybody to remove that sort of information asymmetry and move us into a post-Akerlof world of information symmetry. I was on the ad agency side for a long time, and we made the TV commercial assuming information asymmetry. We would say, ‘Ask your dealer to explain more about X, Y, and Z.’

Well, now that kind of a call to action in a TV commercial sounds almost silly, because you go into the dealer and there’s people with all the printouts and their smartphones and everything… So in many ways we are in a post-Akerlof world. Even his classic example of lemons for cars, well, I can be standing on the lot and pull up the CARFAX history report off my iPhone right there in the car lot.”

Lecinski also believes that our current cash flow issues drive more intense consumer research.  “Forty seven percent of U.S. households say that they cannot come up with $2,000 in a 30-day period without having to sell some possessions,” he says. “This is how paycheck to paycheck life is.”

When money is tight, we’re more careful with how we part with it. That means we spend more time in the ZMOT.

Next week, I’ll continue my conversation with Jim, touching on what the online ZMOT landscape looks like, the challenge ZMOT presents marketers and the seven suggestions Jim offers about how to win the Zero Moment of Truth.