What Placebos and Mexican Coke Teach Us about Customer Expectations

The power of placebos continues to confound the medical community. How is it possible in double blind clinical trials that sugar pills provide as good or better treatment results than actual medications?  A lot of it has to do human biology and how our brains perceive the benefits of a product or service – even before we use it.

Creating self-fulfilling prophecies first starts with understanding customer expectations. Dr. Gary Small, Director of UCLA’s Longevity Center and co-author of The Alzheimer’s Prevention Program cites research confirming how our brain neural circuitry drives our choices based on prior experience and expectations. The frontal lobe or “thinking brain” as it’s sometimes called seems to determine these perceptions he says.

What we expect to happen often actually does. And that’s why marketing is so darn important in identifying customer expectations and then designing a plan to deliver or exceed those very expectations.  Read Inc Magazine article

Has Personalized Filtering Gone Too Far?

In a world of plenty, algorithms may be our saving grace as they map, sort, reduce, recommend, and decide how airplanes fly, packages ship, and even who shows up first in online dating profiles. But in a world where algorithms increasingly determine what we see and don’t see, there’s danger of filtering gone too far.

The global economy may be a wreck, but data volumes keep advancing. In fact, there is so much information competing for our limited attention, companies are increasingly turning to compute power and algorithms to make sense of the madness.

The human brain has its own methods for dealing with information overload. For example, think about millions of daily input the human eye receives and how it transmits and coordinates information with our brain. A task as simple as stepping a shallow flight of stairs takes incredible information processing. Of course, not all received data points are relevant to the task of walking a stairwell, and thus the brain must decide which data to process and which to ignore. And with our visual systems bombarded with sensory input from the time we wake until we sleep, it’s amazing the brain can do it all.

But the brain can’t do it all—especially not with the onslaught of data and information exploding at exponential rates. We need what author Rick Bookstaber calls “artificial filters,” computers and algorithms to help sort through mountains of data and present the best options. These algorithms are programmed with decision logic to find needles in haystacks, ultimately presenting us with more relevant choices in an ocean of data abundance.

Algorithms are at work all around us. Google’s PageRank presents us relevant results—in real time—captured from web server farms across the globe. Match.com sorts through millions of profiles, seeking compatible profiles for subscribers. And Facebookshows us friends we should “like.”

But algorithmic programming can go too far. As humans are more and more inundated with information, there’s a danger in turning over too much “pre-cognitive” work to algorithms. When we have computers sort friends we would “like”, pick the most relevant advertisements or best travel deals, and choose ideal dating partners for us, there’s a danger in missing the completely unexpected discovery, or the most unlikely correlation of negative one. And even as algorithms “watch” and process our online behavior and learn what makes us tick, there’s still a high possibility that results presented will be far and away from what we might consider “the best choice.”

With a data flood approaching, there’s a temptation to let algorithms do more and more of our pre-processing cognitive work. And if we continue to let algorithms “sort and choose” for us – we should be extremely careful to understand who’s designing these algorithms and how they decide. Perhaps it’s cynical to suggest otherwise, but in regards to algorithms we should always ask ourselves, are we really getting the best choice, or getting the choice that someone or some company has ultimately designed for us?

Question:
*  Rick Bookstaber makes the case that personalized filters may ultimately reduce human freedom. He says, “If filtering is part of thinking, then taking over the filtering also takes over how we think.” Are there dangers in too much personalized filtering?

Sad, Spending and Overpaying

If you are depressed or even a little bit sad, keep your wallet at home. That’s the advice from experiments conducted by social psychologists at Harvard, Stanford and other universities. Behavioral research studies show that “feeling sad” may cause people to overpay for commodities at the rate of 30-300% more than they otherwise would. This research of course, flies in the face of New Classical economists claiming most individual consumers evaluate and make rational purchasing decisions. When it comes to spending, are you rational, or does emotion play a larger role?

A PBS special, “Mind over Money” mentions two schools of thought in economic decision-making; rationalists vs. behavioralists. The rationalists assume that consumers are completely rational, evaluating all available alternatives in a world of perfect information. Behavioralists, on the other hand, believe that emotion, excitement, and mood play a larger role in economic decision-making than previously considered.

A research report titled “Misery is Not Miserly” sheds some light on which line of thinking currently has the upper hand.

In a study, researchers hypothesized that people who “feel sad” and are more “self-focused” tend to spend more for commodities. To prove this hypothesis, psychologists set up two groups in different rooms. The test group was shown a sad video clip (the death of a boy’s mentor from “The Champ”), asked to write an essay, and then instructed to buy sporty water bottle. The baseline group was given the same task, but instead of watching the emotional video clip, members viewed a National Geographic segment on the Great Barrier Reef.

Though rationalists would say that there shouldn’t be any emotion carry-over effects from watching the scene from “The Champ,” the group exposed to the tragic video scene tended to pay up to four times more for the water bottle than the control group. This, in spite of many of the control group participants claiming the video did not affect their decision-making!

The researchers surmise that “sad and self-focused individuals spend more on commodities than other people do because they seek self-enhancement.” This in turn allows them to “increase the valuation of possessions that one might acquire.” In other words, people feeling sad or even depressed may find themselves overpaying for items in an effort to improve their state of mind.

Perhaps at this point you may be thinking that an experiment with water bottles has little relevance in your daily decision-making. Harvard social psychologist Jennifer Lerner would counsel you otherwise. She says, “(These) experiments have been done with high stakes money—a thousand dollars, etc.,—and what we find is that these results scale up, even when you use big money.”

Rational economists like John Cochrane from the Chicago School of Economics say emotions matter very little in economic decision-making. “The observation that people feel emotions means nothing,” he says. “If you’re going to just say markets went up because there was a wave of emotion, you’ve got nothing. That doesn’t tell us what circumstances are likely to make markets go up or down. That would not be a scientific theory.”

Counter that statement with Harvard’s Lerner, who claims emotions play a pretty significant role in economic decision-making, especially when experiments show sad and self-focused people spend more than they should.

The conclusions drawn from this debate matter very much, especially considering economic thought over the past 40 years has centered on rational decision-making. If rational decision-making isn’t the norm for consumers, it may be time to take a fresh look at the power of emotion in driving daily purchasing decisions.

Questions:

• The PBS Mind over Money special asks, “Does raw human emotion dictate your financial decisions, or are we rational calculators of our own self-interest?” What are your thoughts?
• Have you ever shopped when sad or depressed? Would you agree with the Harvard studies that “sad and self focused individuals spend more”?

Customer Experience: Smells Like Memories

Scientists have researched olfactory perception and discovered it’s quite common for people to associate memories and experiences with certain smells. However, it’s probably fair to say that most businesses haven’t given much thought as to what their showroom, waiting room or lobby smells like. In an effort to design a better customer experience, does your business pass the “smell test”?

Some smells bring us back to places, memories, or points in time. In a New Yorker article titled, “The Dime Store Floor,” author David Owen visits childhood haunts to recapture smells from his youth. In his journey, he checks to see if his old dentist office still smells of “volatile solvents and fear” or the basement in his childhood home still reeks of “dust and damp and plywood and clothes dryer exhaust.” Indeed, some smells linger on. Owen discusses how decades later, he can still generate a mental image of the smell of a museum he frequently visited as a child.

If you think about it long enough, chances are you can mentally reproduce a smell from a memorable time or place. That’s because the human mind creates deep sensory links to a variety of smells, and these sensory links are especially prevalent when attached to an emotional experience.

This familiarity is well documented in the research of Dr. Rachel Herz of Brown University. The whitepaper “I Know What I Like: Understanding Odor Preferences” cites three findings regarding the power of olfactory perception:

• Like or dislike of various smells is due to our emotional associative history with the odors in question
• Culture can influence our emotional attachment to smells
• Context sets the stage for perception of smells

First, the whitepaper mentions, “Whether we have a preference for a certain smell or not is due to our acquired emotional associations to that scent.”

For example, let’s suppose you run an auto repair shop. It would be pretty difficult, outside the installation of a coffee maker in the lobby, to change the odor of your business. Not to fear—the research of Herz and others show that what matters most is the pairing of odors to the customer experience.

In an experiment, Herz and other researchers noticed that when an “unpleasant odor was paired with a positive emotional experience, subsequent evaluations of that odor were more favorable and when a ‘pleasant’ target odor was paired with a negative emotional experience, subsequent evaluations of that odor were more unpleasant.” So yes, it’s possible that over time your customers could ultimately begin to love the smell of auto grease and car exhaust—provided, of course, that you’re offering them an incredible customer experience every time they walk into your repair shop.

Cultural differences also matter in olfactory preference. A supermarket poll by the Times of London cites that Britain’s top five favorite smells are: fresh bread, frying bacon, coffee, ironing, and cut grass. But if you plan on marketing a new chewing gum in Britain, just don’t try “wintergreen” as most Brits associate wintergreen with medicine! When it comes to “smell”, cultural associations matter, so do your homework and know your customer!

Finally, when it comes to smell, context sets the stage. Herz mentions an experiment where a particular odor is labeled “vomit,” when in actuality it’s parmesan cheese. Simply labeling an odor can influence end user perception of how it smells. To this point, Herz cites a clever example for marketers to think about: Are you selling a pine-scented disinfectant or is the smell actually “Christmas Tree”?

When designing a customer experience, smell matters. What associations are your customers forming from scents emanating from your business? What emotional attachments are you creating?

Questions:
• Are women more sensitive to some odors than men? Which smells?
• Suppose you plan on opening a maternity shop, which smells should you probably avoid?
• What odors do you powerfully associate with past experiences? What smells can you visualize—even from events decades ago?

Should Online Companies Be Forced To Forget?

Online companies have raised the eyebrows of privacy advocates who think web generated data should only be archived for a specified period of time. And while some companies have bowed to public pressure and only keep data on customer searches for a maximum of three months, others have not acquiesced. When it comes to privacy concerns, should Internet based companies be required “to forget?”

Neuroscientists have long claimed the act of forgetting is important to the processes of the human mind. Humans have a need to forget especially because each day our brains deal with tons of trivial information and clutter, not to mention hundreds if not thousands of marketing messages.

Therefore, our mental processes must prioritize which facts should have more importance than others—such as ‘where are my car keys?’ versus ‘what did I eat for lunch last Thursday?’ We must forget, because according to neuroscientists, our brains would overload if we captured every detail of our lives.

Yet, unlike the human mind which has a fixed capacity, computer data stores (i.e. disk, tape etc) are getting larger and cheaper to manufacture thereby allowing companies to keep more transactional details very inexpensively.

In fact, thanks to accelerating technological change, companies can now take advantage of less expensive data storage to keep transactional data for longer periods of time—with the ultimate goal of mining data for insights to improve the customer experience.

However, data retention policies of considerable length run head first into concerns from privacy advocates. For example, according to a Washington Post article, online search companies have policies in which they actively keep query data from 3-18 months, and in some instances longer. Their rationale? Online search companies say query data is used to improve their algorithms, optimize search results, and provide advertisers better targeting.

Privacy advocates, however, argue that search queries often contain personal details, and taken collectively can reveal a complete picture of the person using the search engine. Ultimately they say, too much power in the hands of a few key search engines is a privacy nightmare.

To effectively meet customer needs in a very complex and fluid economic environment, companies must be able to collect and analyze data to understand customer behavior, drive better communications and respond to changing customer needs. That said, the benefits of data collection and analysis must coincide with responsible behavior.

Questions:

  • Should online companies be required to “forget” what they know about their customers and transactions? If so, what is the cut-off point?
  • Should corporations advertise that they quickly “forget”—much as Ask.com has?
  • Are consumer privacy concerns regarding data collection policies more bark than bite?

Beating The Placebo Effect: Red Pill or Blue?

placeboPlacebo pills routinely beat Big Pharma medications in clinical trials. As more drugs fail to make the cut due to increased “placebo effects,” what does this say about the inner workings of the human brain and what does any of this have to do with marketing?

Since 1962, double blind testing with placebos has been the norm for medications wishing to pass muster from the US Federal Drug Administration (FDA). However, over the years the placebo effect has been more pronounced with fewer drugs passing clinical trials. To be sure, unusually high responses to placebos have been blamed on ineffective compounds, but there might be other causes at work.

A Wired Magazine titled, “Placebos Are Getting More Effective. Drugmakers Desperate to Know Why” cites some of the challenges facing Big Pharma. Over the years, drug makers have diligently worked to uncover why—for some patients—the act of taking a placebo works as good (or sometimes better) than a promising compound. In fact, according to the article, researchers are discovering, “the body’s response to certain types of medications is in constant flux, affected by expectations of treatment, conditioning, beliefs and social cues.”

For example, for some patients the simple act of watching another person gain relief from a medication sets “expectations” that the medication will indeed provide relief. And since consumers have been bombarded with billions of dollars in drug advertising over the years, Big Pharma has also increased expectations that simply taking a pill will solve a patient’s ills. In addition, a kind and empathetic doctor can also boost the placebo effect.

To help remove the noise from the above variables, drug makers have taken to testing medications in countries across the globe. However clinical researchers are discovering that even this isn’t a perfect solution as doctors are “paid to fill up trial rosters quickly which may motivate them to recruit patients with milder forms of an illness.”

Part of the challenge for drug makers is defining the illness in question. The Wired article notes that many new drugs today target “higher cortical centers that generate beliefs and expectations, interpret social cues and anticipate rewards.” Defining “depression” in a patient is often difficult enough, but then try and see if that same definition holds for patients in different countries and communities! It’s tough stuff.

In a sign that the white surrender flag has been waved, drug makers have now all but acknowledged the benefits of placebos. What they’re looking for now is, “the best placebo response plus the best drug response.”

A key lesson from this article is that the human brain is very powerful and scientists don’t quite yet understand exactly how it works. Why or how does the human body improve its condition from the simple act of taking a medication (placebo or not)? Why do patients improve their conditions of depression when a doctor—knowingly—prescribes them a dose of medication that’s too low to be effective?

Another interesting discussion avenue is how customer expectations can be defined and created. For example, the Wired article mentions that drug makers have long known that simply coloring pills can help create expectations of efficacy. Yellow pills may create “doses of sunshine”; red pills let patients know they have potency, and green pills help reduce anxiety. Pills stamped with a brand name also offer a patient assurance and comfort.

Helping our companies understand, create and manage customer expectations is where the marketing function can add significant business value. But as Stan Lee of Marvel Comics fame reminds us, “With great power comes great responsibility!” Marketers must be willing to resist the urge to manipulate customer expectations in an unethical and immoral manner—especially if our products and services are no better than a comparable “do nothing” placebo.

Questions:

  • In recent tests, durable warhorse drugs like Prozac have been beat by placebos. If you worked for Big Pharma, how might you suggest that your company “test out” consumer expectations—to see if your drugs actually worked?
  • It would be difficult to argue that consumer expectations haven’t increased over the past ten to twenty years. What is a good strategy to manage expectations – keep them low and over deliver?
  • Does experimentation with control groups have a place in your marketing function? If so, how? What are you learning?

The Simple Minded Effects of Social Media

dunceNeuroscientists have shown in study after study, that multi-tasking isn’t helping us be more productive, but in fact, is making us dumber. Are social media tools, with their promise of instant connectivity, notification, and collaboration adding fuel to the fire?

There is a lot of excitement about staying up-to-date and making personal connections with new media tools and applications (think: Facebook, Twitter etc). However, in our attempt to multi-task and keep up to speed on everything we deem relevant, there’s a potential dark side—the dumbing down of our brains.

The Atlantic, features an article titled, “The Autumn of the Multi-Taskers”. In the article, author Walter Kirn, discusses the stress we place on our minds and bodies when we attempt too much multi-tasking with social media tools, Blackberry’s, IM and more.

For example, Kirn notes that through the use of functional magnetic resonance imaging, scientists have discovered:

“Multi-tasking messes with our brains in several ways. At the most basic level, the mental balancing acts that it requires—the constant switching and pivoting—energize regions of the brain that specialize in visual processing and physical coordination and simultaneously appear to shortchange some of the higher areas related to memory and learning.”

We like to pride ourselves on the ability to keep up with it all. We ask ourselves, “Why can’t I be on Outlook, have my IM application open, pick up the phone, read a business magazine, and have Linked In and Facebook running all at the same time?”

We’re taught that multi-tasking is the wave of the future. Do more with less. Keep up on everyone and everything. We tell ourselves we can do it all.

Neuroscientists, however, would disagree.

Kirn’s article mentions a study where two groups were asked to sort index cards. One trial group sorted in silence, the other had the same task but also was required to listen for specific tones from a grouping of sounds. At the end of the experiment, both groups sorted the cards properly, but the multi-tasking group couldn’t remember what “exactly” they were sorting.

As social media technologies (i.e. RSS, social networking and web applications, micro-blogging etc), become more prevalent and adoption rates climb, it seems we’re staying more connected with our communities and world, but forgetting half the stuff (perhaps purposefully) pushed to us via these technologies.

Our brains are out-tasked and overloaded—and yet we often look for more opportunities to cram additional information into our heads.

Sometimes, this pursuit of an “always-on” world translates into ill effects for our bodies. The article continues;

“Certain studies find that multi-tasking boosts the level of stress related hormones such as cortisol and adrenaline and wears down our systems through biochemical friction—prematurely aging us. In the short term, the confusion, fatigue and chaos merely hamper our ability to focus and analyze, but in the long term they cause (our brain) to atrophy.”

Despite the provocative title of this post, it is not my intention to indict social media technologies, or the use of any other technology such as cellular phone, PDA, instant messaging and the like. The real issue of concern is lost focus and effectiveness when we use too many of these technologies at the same time.

I believe the best course of action is a careful balance of the use of these value adding technologies with our innate ability to capture, process and store information.

We’re not a machine, but I wonder sometimes if we think we are.