Boundaryless Marketing by Paul Barsch

Entries tagged as ‘consumer behavior’

Beating The Placebo Effect: Red Pill or Blue?

September 17, 2009 · Leave a Comment

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?

Categories: Ethics · Neuro and Behavioral Science · Strategy and Leadership · decision making
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Methods to Systematically Reduce Customer Choice

August 26, 2009 · Leave a Comment

grocery storeNew research regarding online dating websites shows that when it comes to presenting customers with choices, in fact “less is more.” And while marketers inherently know that too much choice leads to cognitive meltdown, sometimes we’re confounded with the best way to remove options presented to customers. Is there an ideal way to cull customer choice?

Sometimes marketers believe that customers want more choice. According to an MIT Technology Review article, however, in the online dating market new research shows that, “users presented with too many choices experience cognitive overload and make poorer decisions as a result.”

The Technology Review article cites research from two professors from National Sun Yat-Sen University in Taiwan where in an experiment they presented online dating users with wide and deep selection of potential matches. After all, customers want more choice—right?

Not so according to the study: “More search options (led) to less selective processing by reducing user’s cognitive resources, distracting them with irrelevant information, and reducing their ability to screen out inferior options.” In effect, users suffered from data overload where too many choices prohibited them from making an optimum decision.

Here’s where statistical analysis can help reduce choice overload.

Online dating sites often attempt to use sophisticated computer applications and proprietary algorithms to divine appropriate partner matches based on user inputs such as preferences for race, religion, eye or hair color and more. EHarmony’s matchmaking algorithm, for example, helps select potential partners based on a 258 question personality test.

With a deep historical data set of what EHarmony determines as “success” (236 marriages a day according to the site) this online company believes they can predict matches with a high degree of probability.

For sites like EHarmony, Match.com or others, the challenge isn’t showing all relevant results (like a Google search that delivers 2,000 hits) but just the top ten and maybe worst case—twenty. This of course, assumes that the algorithm is based upon the right “predictors” of successful match making, and that the science behind the scenes can be trusted.

The lessons for online dating companies—much less any business—is due to carrying costs or customer confusion, less choice can actually increase sales and profitability! In fact, some large U.S. retailers are starting to investigate this idea by reducing the variety of different products carried by up to 15%.

The experiment run by the Taiwanese professors shows that when it comes to choice – less is more. If this hypothesis is true, how then does a marketer decide which choices to reduce?

Reduction in customer “options” must be based on carefully considered variables and analytical analysis. For example, a category manager at a retailer—let’s say the toothpaste aisle—shouldn’t automatically assume that the products with the lowest sales should be removed.

Careful analysis including variables such as year-over-year sales comparisons, seasonality, pricing, profitability, trade promotion dollars, etc should be considered. In addition, market basket analysis may inform the retailer that a brand of slow selling toothpaste is in fact often purchased with other very profitable items. Indeed, assortment optimization and shelf space allocation can be a very scientific exercise. A company should also set up control groups for experimental purposes to test a hypothesis before making any permanent changes.

The use of algorithms and careful analytical analysis are two ways that companies are reducing and optimizing customer choice. In the end, customers may not ultimately want more choice—just more relevant options.

Questions:

  • In online dating, some users may want more results (choices) presented because they feel that they can judge a “match” more effectively than a computer. Are there instances where delivering more choice options is the better strategy?
  • Are there dangers of optimizing customer choice—especially when it comes to encouraging new innovative products/services with no sales history?
  • Predictors of a “good match” in online dating can be highly subjective. How would you counsel online dating companies to improve their matchmaking capabilities?

Related article: Less is More in Consumer Choice

Categories: Analytics · Information Technology · Neuro and Behavioral Science · Strategy and Leadership · decision making
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Perishing for Lack of Vision

June 2, 2009 · Leave a Comment

toxic warningMarketing executives should have a pulse on shifting consumer preferences, macro-economic conditions and emerging competitors. However, in forecasting the financial crisis of 2008 and beyond, most marketers (and economists for that matter) failed to accurately “call” the collapse, even though signs of catastrophe were ubiquitous.

Does marketing have a leadership role in influencing business strategy, and if so, why did so many of us miss the warning signs?  read original column

Categories: Forecasting and Modeling · Risk Management · Strategy and Leadership · decision making
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