Behavioral Economics


Is Persuasion Psychology the Key to Growth?

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Marsha Lindsay

Would hula hoop if put in an agency talent show.

A Wall Street analyst recently lamented that “flat” is the new normal. And it’s not just analysts who note it will take a minimum of three years of growth in GDP like that of Q4 “˜09 to even get us back to where we were in production and employment years ago. Consumers know it too. As a result, they’ve adopted a set of new behaviors of which spending is not one of them.

But since growth is the objective of every CEO and shareholder, finding a way to grow is critical for every marketer who wants to hold on to their job. That’s why so many are searching for new insights and methods on how to persuade consumers to open their wallets.  It’s not easy in an economy where consumers are less interested in acquiring things for money than acquiring, for free, a social network full of friends who can provide interesting conversation and life rich with ideas.

Ahhh, ideas. As David Brooks wisely noted in a December 2009 column: “When the economy was about stuff, economics resembled physics. Now that it is about ideas, economics resembles psychology.”  That is why brands like Coke, McDonald’s, Apple, Amazon, Benjamin Moore and Kayak, are growing their top lines by tapping into the persuasion psychology that’s evolved for our more digital, social and mobile world.

This brand of psychology leverages both explicit and implicit consumer data and analyzes it through the frameworks of predictive modeling, behavioral economics, and social science. By revealing the motivations, products, incentives, words, design, and touchpoints that jumpstart the behaviors a marketer wants, it hints at ideas that increase engagement, response rates and click throughs, sales, repeat sales, retention, the acquisition of customers with greater value, a higher NetPromoter score, and growth in the top and bottom line.

But this brand of persuasion psychology is only for marketers ready to give up most of what they thought they knew. For as Richard Thaler, professor of behavioral sciences and economics at the University of Chicago Booth School of Business says: (Wall Street Journal Sept. 14, 2009) “Taking a behavioral approach completely changes the way you view the consumer.” And as Dan Ariely, behavioral economist with joint appointments at Duke and MIT explains, that’s because it moves you from chronicling  consumer intent and rational alibis to uncovering the often irrational and subconscious but very real drivers of buying behavior.

The prediction and testing of behavioral insights, then psychologically inspiring and tracking the resulting behaviors is the key to growth for a marketer. And it comes none too soon, as marketers now face a threat as big if not bigger than a lagging economy: Irrelevance.  Today’s marketer faces a world where consumer to consumer marketing is real, real time and more trusted; where consumers willingly share data on their own behaviors with friends, family, strangers. Where members of a social network can know more than marketers about each others’ behaviors and desires.

And we’re only in the early stages of understanding the psychological impact of consumer to consumer sharing of brand preferences, product performance rankings, geo-locational data. What kind of behavioral change will come when peers share data on energy usage, weight loss, health data, athletic performance, test scores and more? With Internet usage in many parts of the world still in its infancy, and with technology improving its reach and speed, there is dramatically more data sharing to come, and come more quickly.

With so much behavioral data about to be shared, some see a potential for powerful behavioral insights. Others predict (with no small amount of concern) a cultural revolution. Others argue that the abundance of behavioral data, shared, will force the ultimate in consumer centric marketing, spawning a renaissance for any marketer who knows the latest in persuasion psychology, and uses it responsibly.

What do you think?
ML

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