The Hidden Value in Consumers' Decisions

The Hidden Value in Consumers’ Decisions

26th June 2012

An Introduction

Marketing is about influencing consumers’ decisions…

But how much do marketers really know about how people make decisions?

And shouldn’t we be thinking differently about it now?

• Explosion of information• Proliferation of choice• Decline in the power of brands• A “golden age” of understanding behaviour and how

humans make decisions

“Golden Age” of decision sciences

• Breakaway from “Homo Economicus” with establishment of Behavioural Economics

• Popular interest in behaviour, decision-making (Gladwell, Lehrer, Wray)

• Growing community of scientists studying and experimenting in decision sciences and related areas

• Improvement and accessibility of neuroimaging and biometric technology

• OUR CONCLUSION: THE ONLY WAY TO DEVELOP REAL

UNDERSTANDING IS TO ALIGN OURSELVES WITH THE SCIENCE…

… so we set up the Institute of Decision Making

• Committed resource – full time global head and key members in market

• Built relationships with academics and experts• Advisory board of Global Capability Leads• Three campuses worldwide (SF, Chicago, Vienna) and more

to follow

• With a focus on the instinctive or intuitive aspects of decision making

Instincts, intuitions or gut feelings are judgements

1. That appear quickly in consciousness Closer to 6.5 milliseconds than 6.5 seconds

2. Are strong enough to act upon They drive action, so they matter to the individual, and

matter to clients

3. Whose underlying reasons the individual is not fully aware of Cannot be explained by the individual in research

Michael Gilbert, author “The Disposable Male” and senior fellow at Center for Digital Future

“We daily test the electronic frontiers of cyberspace, but there are cavemen – and cavewomen – at the keyboards. Yet the motivational implications of our natural history, the neural and genetic “hard drives” powering so much of consumer behavior, go largely unexplored, even in sophisticated marketing circles”

Why this is interesting

• Intuitions are evolved capacities, so are part of our evolutionary development

• They are universal – affecting all people, across cultures, and across decision types

• They are often the dominant force in our decisions• They can make us feel very good… or very, very bad.

What we are doing

• Building relationships with the best minds to improve our understanding and stay at the forefront of the exploration

• Building this into agency thinking and processes• Running specific “decision consulting” workshops with

relevant experts to bring a decision-centric approach to marketing problems

NEWREALITIES 3.0Consumer Decision Making inToday’s New Information World

Today

3 forcesaffect decision

making

Explosion of product information- not only from manufacturersbut also from the new public

“experts” and advocates

Today3 forces

affect decision making

Consumer empowerment - “here I am,this is who I am, and what I want”

…and for marketers tocustomise their offerings

Today3 forces

affect decision making

Dramatic advancement inunderstanding how people

make decisions

ROLE OF RATIONALTHOUGHT VS. INTUITION

BEHAVIOURAL ECONOMICS

NEUROSCIENCE ANDNEUROECONOMICS

Today3 forces

Affect decision making

NEW REALITIES EXPLORES WORLDWIDE

…and what we can do about it for brands

These 3 forces Their effect on consumer decision making

Are they frustrated or confusedby all the new information?

What goes into a product decision today?

What personal and social benefits come alongwith their product research?

What’s the role and importanceof brand advocates?

How has experiential media changed the landscape and consumer expectations?

DECISION MAKERTODAY’S

2011METHODOLOGYOUR

INTERVIEWS US, BRAZIL, CHINA,INDIA AND GERMANY

600+/– ONLINE INTERVIEWS,PER COUNTRY:Men and womenInterviewing Oct. 26 - Nov. 10, 2011

Completed first wave ofresearch in 2009: US, China, Germany

CHINAUS BRAZIL INDIA GERMANY

With additional layers:Exploration of universal drivers through Institute of Decision Making and academics in neuro and behavioural sciences

Discussions with local teams to understand cultural/societal differences

OURMETHODOLOGY

1. Are we drowning in information?

3 FINDINGS TO TALK ABOUT THIS MORNING…

3. Information based approach to segmentation

2. The decision process doesn’t stop at the decision

IS INFORMATION OVERLOAD

A GROWING PROBLEM?

WHAT FRUSTRATION? WHAT CONFUSION?

US BRAZIL CHINA INDIA GERMANY

4.8 6.2 5.4 6.9 4.6

6.8 6.4 3.9 7.3 7.0

2.9 3.1 3.7 3.5 2.8

2.9 3.3 3.9 3.7 2.8

Helped you beat the system

Smarter

Frustrated

Confused

Feelings about Available Product Information (Mean Ratings; 1-10)

The Information Explosion Is Under Control

IN REALITY PRODUCT INFORMATION HAS MANY POSITIVE ASPECTS

THE SPECIESHAS EVOLVED

Information is my friend

Information gives me controlin my buying decisions

Information availability has mademe more confident in brand choices

I always seek out trusted sourcesfor information on brands

Increased information has alsoincreased my satisfaction with brands

US % BRAZIL CHINA INDIA GERMANY

63 64 52 54 58

64 62 49 58 51

53 61 55 57 38

53 62 55 59 52

46 58 49 55 31

STRONGLY AGREEING

COMPLAINTS ABOUT INFORMATION OVERLOADARE NOTHING NEW

“The abundance of books is a distraction”

Seneca the Elder, 1st Century AD

AREN’T CONSUMERSMEANT TO BE OVERWHELMED?

WHY MIGHT CONSUMERS BEMORE POSITIVE ABOUTMORE INFORMATION?

Not all information is the same.

High-noise information -- stuff that stresses us out and demands we pay attention or requires we do something.

People see most marketing as low-noise information -- free ofobligation and not a big part of the information overload.

As far as consumers are concerned better decisions, more available information = better decisions.

SEEKING POST-DECISIONAL BLISS

WE ARE INCLINED TONOTICE OR SEEK OUT PRODUCTINFORMATION AFTER PURCHASE

Ignore

Notice/Seek Out

0% 100%

898481 8680

11 16 1914 20


*Journal of Neuroscience 2011

Studies from the Brown Institute forBrain Science* show that confirming acorrect decision activates the dopaminereward system (the same ”feel good”chemical that is activated byaddictive drugs).

WHAT DRIVES THIS“POST-DECISION” RESEARCH?

WHAT DRIVES THIS“POST-DECISION” RESEARCH?

Making the “right” decision feels good… and we don’t want to spoil the party.

Seeking information to reaffirm our choices: a low risk venture.

After a decision, choice-supportive bias leads us to discount all butthe most overwhelming suggestions that we have made the wrong choice, and inflates evidence and memories that support our choice.

36 44 35 53 23

34 45 43 51 26

27 38 42 52 18

25 41 37 49 19

27 40 37 49 21

POST DECISION RESEARCH FEEDS“SOCIAL CURRENCY”

People value me and my knowledge about certain product categories

I have personal pride in knowing a lot about certain brands or products

My knowledge about certain brands enhances my self-esteem

Other people admire me because of my expertise

The reason I stay informed about certainproduct categories is to be helpful to others


WHAT DRIVES THE DESIRE TO SHARE PRODUCTKNOWLEDGE?

Although respondents attribute it to “helping others”, there is a deep intrinsic motivation.

From Jean-Jacques Rousseau’s 18th Century philosophy, to Freud, and now through neuroscience, the connection between self-esteem and belonging have been seen as fundamental to our mental health.

Simply posting information has beenshown to increase self-esteem.

“When people feel confident about their decisions two things happen. First they derive more utility from the product, and second their excitement makes their decision contagious”

- Professor Baba Shiv: Sanwa Bank, Limited Professor of Marketing, Stanford Graduate Business School

IN MORE THANONE WAY

GOOD NEWS FOR MARKETERS,

BUT NOT ALLDECISION MAKERS ARE ALIKEWe have identified 5 segments of decision makers

…with dramatic differences in how they view information, how they viewthemselves, and how they make decisions


Information ObsessedResearch deeply and extensively, get emotional fulfillment and brand satisfaction

“I research most of my decisions, and often enjoy the research as much as the product itself”


Information SelectiveSimilar to “obsessed” but less so, selective in categorising the research,motivated by self esteem and personal reputation

“I like to be expert in areas I‘m interested in, and it makes me feel really good when people ask for my advice when they are making those purchases”


Information FunctionalPurely functional users of information, least likely to value brand reputation

“I don’t enjoy searching for it, but you need information to make the right decisions.”


Information PassivesDefault to well known brands to make fast decisions, somewhat frustrated and confused by information

“I just want to make quick decisions, so will ask friends or chose the most popular brands”


Information HatersFrustrated and confused by all the information, least likely to getsatisfaction from research

“Help!”

New Realities Wave 2: International Comparisons

CHINAUS % BRAZIL INDIA GERMANY

31 36 52 61 33

26

15

14

14

20 10

16

12

12 257

26 1912 235

12

19 10 6 8

Selective

Haters

Passives

Functionals

Obsessed

SEGMENTDISTRIBUTIONS

There is a symbiotic relationshipbetween segments

ECOSYSTEM AN INFORMATION

Higher engagement segments (Obsessed, Selectives) are more likely to be an influencer or advocate…

…while the less engaged segments (Functionals,

Passives) say they are more likely to seek opinions from

others

THAN AN “AGE SET”MORE A MINDSET

“Digital Natives” don’t report being better or worse at dealing with information than “Digital Immigrants”.

Woman generally less“information enamored” than men.

Beyond demographics, psychographics, and product usage profiles…

“Decisiongraphics” – viewing how your category’s decision makers are segmented, and developing marketing programs that deliver the most appropriate information and experience programs.

RE-THINK SEGMENTATION ALL POINTING TO AN OPPORTUNITY TO

SUMMARY

Our research shows that consumers seeinformation as an ally. Consumer who areconfident as they approach choice makebigger, bolder and faster decisions.

Studies show that not only do they getmore satisfaction from their choice, butthey actually derive more utility from theproduct or service.

FEEL CONFIDENT IN DECISIONSIS A WIN/WIN

HELPING CONSUMERS

AND TOMORROW’S CONSUMERS

KEEP IT SIMPLE FOR TODAY’S

Marketers can serve theirobjectives and help consumers reduce negative feelings associated with choice by understanding how toremove, or at least reduce,confusion.

MORE THAN AN AFTERTHOUGHT

AFFIRMATION OF THEIR DECISION SHOULD BE

Our research shows that a significant amount of consumers continue their research after they have purchased.

This research spotlights the need for “social currency”. And neuroscience shows that affirmation of choice creates a feel-good expression in our brain’s reward system. Not only are these good feelings associated with the brand, but they create a sense of excitement, which creates irresistible advocacy.

Welcome to “decisiongraphics”

Understand the decision making segments, identify the key target segments and their unique characteristics, design and execute custom programs to meet up withtheir decision making styles

Uncover those consumers who celebrate their “soapbox”, who valuethe social currency of product knowledge…and who live for their advocacy and influencing.

Turn these advocates into mass connectors—a new, powerful (and relatively inexpensive) media channel

RECOGNISE THAT NOT ALLDECISION MAKERS ARE THE SAME

NEW OPPORTUNITYFOR MARKETING

NEW REALITY OF MARKETING

Marketing shouldn't simply be about getting consumers to a purchase decision that favours the marketer…

We need to activate the power of our consumers feeling good about the decisions they are about to make or have made.

A framework

for influencing

decisions

How do people make purchase decisions?The power of the Emotional Brain

System 1

(Emotional brain)

System 2

(Rational brain)5%

Source: Daniel Kahneman, Nobel for Economics, 2002

95%

The New Realities Research backs this up

Emotional campaigns tend to lead to greater sales success……and this is also true

for ‘rational’ categories

» Emotional strategies are more profitable

Campaign strategy

“I’ve never been particularly good at numbers, but I think I’ve done a reasonable job with feelings. And I’m convinced that it is feelings—and feelings alone—that account for the success of the Virgin brand in all of its myriad forms.”

Richard Branson

“Emotion leads to action,while reason leads to conclusions”Donald Calne, neurologist

Rational mind fallacy

Emotional mind reality

Source: Tim Ambler, London Business School

New Realities Research:Post-purchase research stimulates greater

enjoyment & advocacy

Our research shows that a significant amount of consumers continue their research after they have purchased.

And neuroscience shows that affirmation of choice creates a feel-good expression in our brain’s reward system.

Not only are these good feelings associated with the brand, but they create a sense of excitement, which creates irresistible

advocacy.

Influence Framework: From No to Volcano


FMCGe.g. face creams

IMPULSEe.g. ice cream

DesireATL

PR reviewsGirlfriends’

dressing tables

TriggerRun out

BuyPack standout

Offer?

Post-rationalisaton

On pack(ATL/PR)

EnjoyFeel

Bio-feedbackCompliments

AdvocacyGirls night in

DesireATL

Social media

TriggerSun comes

outPavement

media

BuyMenu board

PackagingShopper

Post-rationalisation

On pack(ATL/SM)

EnjoyInstant

gratification

AdvocacySocial media


HIGH RISK

e.g. cars

IMPULSEe.g. ice cream

DesireOn road

PR reviewsProgramming

TriggerExpensive

MOTPCP expires

BuyTest drive

NegotiationFinance


HandoverWelcome pack

& CRMRoadside presence

EnjoyFeatures

experienceSmell

+ve comment


In the pubOwnership

surveys

DesireATL

Social media

TriggerSun comes

outPavement

media

BuyMenu board

PackagingShopper


On pack(ATL/SM)

EnjoyInstant

gratification


Pre-rationalisation

WebsiteReviews

Expert adviceConfigurator


In summary…

Decision making is simple, complex, fast, slow, variable….

….our role is to understand exactly which buttons to press when….

…so our customers feel good about their decisions…

….for maximum effect & maximum return

Thank you

Career

The Hidden Value in Consumers' Decisions