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Mar 9, 2010 | Comments

My last post praised the glory of behavioral economics. I discussed how marketers can use behavioral economics to influence behavior. One example was a behavioral economist who manipulated the elements of a bank letter, like the interest rate, copy, and imagery. He discovered that the photo played a larger role than the interest rate in converting loan letters.

And it got me thinking: what about the bank itself? What if the same letter tested the brand, like Citibank, Bank of America, Capital One? What would we learn?

In short, what if behavioral economists took a critical eye to brands?

It’s a question of strategy vs. tactics. Behavioral economics, sadly, favors the latter. Time to throw down some classic Sun Tzu:

“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat” [via Mike Hudack].

When we apply behavioral economics, in its current state, to marketing, it’s overwhelmingly tactical. Everything is framed on our decisions in the moment, how to exploit our irrationality by leveraging a host of cognitive biases.

Could behavioral economics advise on the strategic side of creating and managing brands? The current frameworks for brand strategy (brand equity analysis, positioning) aren’t scientific enough. The core tools are based on a 50 year old methodology developed by P&G. I’d welcome any new research, especially with the degree of academic rigor that I’d expect from behavioral economists.

Imagine this: research on how to create a brand identity that drives loyalty and passionate fans. Or why are we emotionally connected to some brands.

Just as a prospect can be influenced by a photo on a loan letter, so too can the emotional qualities of a letter’s brand affect our behavior. Such research isn’t accomplished by a marketer-led analysis with focus groups–I’m talking hard-core fMRI.

Something to think about: Can there be a more disciplined approach to brand building, where we determine the right emotional qualities via a scientific process? Would this free us from sweating over the tactical stuff?

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  1. Matt, here's a question. Can you name one brand that people truly, genuinely love that gives two shits about these things? I can think of one and that's Google and even the most basic investors knows by now that it is their BIGGEST weakness.

    These things are distractions. They appeal to greedy executives, optimistic marketers and journalists. At the end of the day, brands are built by personalities – people who love what they are doing and make gutsy decisions – and then ironically, destroyed when investors and consultants bring in autistic, short term strategies like these.

    At the best they are optimizers. Never creators or builders.

  2. Suppose we take a brand, like American Apparel. Surely no one would live or die by AA–this is not my point. But I guarantee that the AA brand influences behavior, not because of what's in its clothes and who works in its factory, but because of its emotional and self-expressive qualities (forgive me for using those terms, but it's the best that marketers' have). This is what I'm getting at–those fuzzy attributes that give a brand like AA so much power over another brand without them, like Hanes. This is important, and any naive marketer or founder should definitely give two shits.

    P&G has created and maintained some of the most successful brands for decades. Brands like Tide were not created by the brilliance of a founder (though a valid track), but by careful maintenance from consultants and business-folk–those who you detest in your comment. Founder's will always be an incredible source for inspiration, and Steve Blank (someone whom I follow closely) has great thoughts on a founder's role in marketing (often debilitating).

    Anyway, the founder vs. marketer debate is an on-going debate, with blanket statements like yours favoring the former.

  3. But here's the question, can you name any company that possess these “emotional and self-expressive qualities” – a brand that people genuinely like and love – that have these principles at their core? I imagine you can't. This kind of thing precludes what makes companies attractive to customers. They look good on paper, they make excellent academic papers and blog posts but at the end of the day, they do little to no real good.

    Here's what would happen if behavior economists took a look at building brands. Nothing. They affect change at the margins.

  4. I think you're giving this “emotional” stuff a bad rap because we're so used to hearing fuzzy terms like “dialogue,” “engagement,” and “conversation,” especially in the social media space.

    “Emotional and self expressive qualities,” by contrast, are not some mythical concept–they are as real as price and quality. It assumes that we buy shit for other reasons than what they actually do (i.e., functional value).

    Again, the emotional or self expressive qualities of brand like AA might be, “Makes me feel independent, “Makes me feel socially conscious,” “Connects me to other people like me,” or “Helps me feel part of a community.” We wouldn't pull these terms of a hat, but rather conduct actual customer research.

    Sure–these seem like bullshit. But any quant research would reveal that such ideas play a much larger role selling t-shirts than the garment itself. This is one school of thought–fundamentally it might seem inefficacious, but at least there is evidence to support it and we're not relying on intuition-based marketing dogma.

  5. As a behavioural economist I see what you are saying and agree that much of what behavioural economics offers appears to be tactical. That isn't the whole story though.What behavioural economics does is give much deeper understanding of buyer behaviour. Ultimately brands should be about influencing buyer behaviour. Behavioural research is uncovering some fascinating details about buyer behaviour. You should have a look at the stuff coming out of Ehrenberg Bass institute in Australia. Have you heard about the concept of double-jeopardy? Check it out and you will see that this approach is answering questions like: How do brands actually grow? How valuable is differentiation? What purpose does a focus on brand loyalty have?
    With these sorts of insights it starts to build up to a very strategic tool. Not a replacement for creativity and passion but a way to harness it.

  6. Do you have examples of the things that you listed, beyond lab studies? I don't discount the insights that or concepts, but it's tough to understand its value until I see it in practice.

  7. Hi Matt, I specifically avoided referring to things that are 'lab'-based. I guess to an extent it all hinges on what one's definition of behavioral economics is. In my (granted broad) definition it is looking at how changes in situation/context lead to changes in behavior, or how different behavioral patterns can be seen in differing contexts/scenarios. The work I mentioned is available for perusal at http://www.marketingscience.info/resources/comm… . It is a body of research based on actual purchases in the real world. Not a lab result in sight. Best. S

  8. Thanks Simon–I'll check out some of the articles from the Ehrenberg Bass Institute. You're right–most behavioral economics insights will not be lab-based–I'm just looking for some actionable examples of brands actually doing stuff, rather than studies/experiments from academics

  9. Thanks Simon–I'll check out some of the articles from the Ehrenberg Bass Institute. You're right–most behavioral economics insights will not be lab-based–I'm just looking for some actionable examples of brands actually doing stuff, rather than studies/experiments from academics

  10. Jamie Gordon

    The key is understanding human values (for a brand – that means identifying who their truly most valuable customer is and looking at those people as a collective) – those are what create the behaviors that create the culture within which our choice frameworks operate. Behavioral economics only focuses on the head / heart battle without seeking to context to the deeper context of belief that guides those decisions. In my opinion. ;)

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