How Marketing Works

I recently finished teaching a marketing class where I asked my students to get into groups and do some ‘market research’ on why their fellow classmates would or wouldn’t buy a particular brand.  Then they would report their ‘marketing insights’.  One group chose Ralph Lauren and then asked a group of female students whether they would buy Ralph Lauren products (including perfumes, sunglasses, etc.).  The female students said no, it was too expensive and so the marketing insight was that Ralph Lauren was priced too high and they should lower it.

I then asked the female students a few follow-up questions. First, I asked them whether they own/regularly wear clothes, perfumes that are as expensive as Ralph Lauren, to which they replied that they did – and that many of their clothes were about equally or even more expensive.

The second question I asked was if I gave them a Ralph Lauren shirt or some Ralph Lauren perfume, how often would they wear it? The female students said they likely wouldn’t.

So it’s not really about the price, is it? I asked.

I guess not, they responded.

But then what was truly motivating this decision and why would they ‘lie’ about it?

As consumers (or as people in general), we like to think of ourselves as ‘rational’.  When it comes to buying things, we love to tell ourselves that we are getting quality stuff for reasonable prices – that we are maximizing our utility. If we buy something relatively expensive, it’s worth it, because it’s quality,  it provides certain features, or we give some other rationalization.  And yet our decisions are not actually made this way.

Recently, I read an article on reddit (Ad’s Don’t Work that Way) outlining some of the misconceptions about how marketing influences us (I won’t go into those here but feel free to read the article for some context) and providing some insights into what is really going on ‘under the hood’ of consumers.  The article was relatively well-done but I felt it was wrong in a few places and could have provided a bit more information of the underlying processes.  When I suggested I could write something on this if people were interested, the response was a resounding yes.

Obviously I can’t detail decades of psychological and marketing research but I will try to give a good overview.  If you want to know more – please let me know.

 

Clutter and Information Overload

 

 

To begin, it’s important to recognize that marketing is more than just advertising. For example, when you walk into or past a store – the layout, music, the way the sales people interact, and even it’s location have been designed in a specific way to signal a specific idea (more on that in the next section).  Further, most products have been branded very specifically – from clothes to cars to computers, each exposure provides some level of information to you.

Current estimates suggest that we are exposed to between 4,000 to 10,000 of theses messages a day, with around 360 specific ‘ads’.  Couple this marketing information along with all the other information we received in a day (our jobs/school, social media, news, etc.) – there’s clearly too much for us to process everything.  Attention and cognitive activity is a scarce resource and we tend to conserve it when and where we can.

As such, marketing messages aren’t typically telling us about their features in any great depth or why we should buy them.  That information can be found if you are motivated enough.  Rather, the information is made to convey a specific association and/or a clear value proposition.  These two ideas are discussed in the following sections.

 

Cognitive Associations,  Categorization, and The Self.

 

Consider for a moment what happens when you walk into a room you’ve never been in before (like the one above).  Immediately and without any thought you know exactly what the items in the room are.  You know that the chairs are chairs and that the table is a table and not a desk. You even know the difference between the coffee table and the dining table.  You may have never seen tables or chairs like these before and yet you know exactly what they are.

Despite requiring no effort, this ability to quickly form associations and categorize items is an extremely impressive feat. Robotic engineers and AI developers have struggled with this problem.  For example, driverless cars struggle with identifying whether an item in front of them can be driven over/through (like a plastic bag) or whether it must be avoided (like an animal or large rock).  While we like to think of certain cognitive feats, such as solving mathematical problems or playing chess, to be the pinnacle of human achievement – this ability to automatically associate and categorize a seemingly infinite number of items, which even young children can do, may be the most remarkable.

To better understand how we do this, consider and reflect what happens when you read – ‘Santa Claus’

You automatically generated associations of Santa – red, fat, elves, reindeer, Christmas, which in turn generated even more associations.  These associations come with valence too – which means they are tied to emotions (which might be where the meme of emotional advertising comes from).  For many, the idea of Santa comes with the emotion of happiness because of the strong association with Christmas, presents, and family (although if Christmas is an anxious-filled difficult time for you, Santa probably won’t come with that same feeling of happiness).

This process is implicit – which means it is generally automatic, uncontrollable, and also can operate non-consciously.  If I say don’t think of a white elephant – you will automatically and uncontrollably generate associations of a white elephant. Didn’t you?

What does this have to do with marketing? Marketing is designed to create these associations.  Think of any brand – Coke, Apple, McDonald’s Walmart, Amazon, Nike – immediately these brands come with a set of associations.  Some good and some bad.  Marketing’s goal is to generate strong positive associations.

Image result for Brand Associations

This is why brands get anxious when their spokespeople do something not in-line with these associations – like Tiger Woods being dropped from most of his endorsements after his infidelity scandal or why Google fired James Damore after his memo was leaked.  These companies are worried about the negative associations that might form and often with good reason.  Estimates suggest that the Tiger Woods scandal cost shareholders 12 billion dollars. 

An example I like to use in my class is Dyson.  Once again, what comes to mind when you think of Dyson? And how do those associations differ from your associations with, for example, Hoover? If you are like most people – Dyson is associated with modernity, innovation, ‘coolness’, etc. whereas Hoover is associated with your grandmother – older and more traditional.

When I ask my students whether they’d rather buy a Dyson or a Hoover – virtually all of them answer Dyson.  However, then I show them a recent consumer report (below) which demonstrates that Hoover beats out Dyson (at least on these bigger vacuums).

The kicker? I then ask them again – Dyson or Hoover? and still, despite it being more expensive and rated worse, a large majority of students continue to choose Dyson.

HooverDyson1.png

But why? Because products are our extended self.  We integrate the associations of the brand into associations of our self.  When we buy (or experience) something, that consumption is not simply providing us with functional utility – it is saying something about us as people.  We care about this a bit more when it’s public, but even in private, we care about what a brand says about us.  We don’t want to feel old, we want to feel young and innovative – so we buy a Dyson.

The below image comes from a very influential paper detailing how we develop self-esteem and identity.  In essence, the authors argue that our self-esteem and identity is a function of the associations we have with ourselves (e.g. professor, intelligent) and the valence or categories we have with each of these items. Since products also carry associations and we integrate these products with our sense of self; they in turn become instrumental to our self-esteem and our identity.

Greenwald 2002.png

The article that spurred this post explored the idea of ‘cultural imprinting’ – which ultimately is just the shared set of associations we have in a specific culture.  It’s important to note that these associations can differ from one specific culture/social group/person to another. For example, Tattoos may be see as ‘trashy’ to some people but as a signal of toughness or beauty to others.  When Starbucks came to Australia, a country with a strong laid-back coffee culture, it assumed its strong associations would carry over. In doing so, it quickly opened a number of stores contributing to Starbucks being viewed as just an impersonal corporate coffee shop.  Eight years later, it closed 60 stores, sold it’s remaining 24, and posted a loss of a $143 millions dollars.

Returning to the Polo shirt example from the beginning – why then did the female students not want to wear Polo? Because to them Polo is likely associated with male, preppy, etc. and that’s not who they want to be, nor how they want to be seen.

Associations change Perception

 

To see the power of these associations, consider the following:

In blind taste tests, Pepsi beats Coke.  But put labels on them and Coke beats Pepsi.  Why? Because when you’re drinking Coke, you aren’t just drinking sugar/aspartame water – you are drinking the associations you have with Coke (As an aside, many people like to rationalize this by saying that Pepsi is sweeter so that they prefer Pepsi in a single sip but not an entire can.  However, if true, this wouldn’t explain why Coke beats Pepsi when branded)

A recent large study found that, on average, people prefer cheaper wines to more expensive wines.  But put labels on them, tell people how much they cost and this effect reverses.

Wine.png

Or consider that in blind taste tests McDonald’s coffee beats out Starbucks and GreyGoose Vodka does not live up to the hype.

We tend to associate high price with high quality.  One of the reasons that Iphones never/rarely go on sale is because they don’t want to signal that their phones are worth less than they charge.  If they had a one-time sale of Iphones for $400 – then people would think that their phones are only worth $400.

To demonstrate just how these associations can change perceptions, I give my class a container of Dove soap and a container of Old Spice, except I replace the Dove with Old Spice.  I pass it around and ask people to smell it.  Not only do the men say they would buy the Old Spice and women the Dove, but the students actually report a difference in the way it smells.

Ultimately, we tend to conform to our expectations.  Think something is suppose to be good, it usually is.  Although this can backfire when the difference is too large (we all have those experiences when something is over-hyped), this is the exception rather than the rule.  It is the Placebo effect – except instead of mitigating pain or sickness, it’s associations of status, masculinity, coolness, or general taste and quality.

Accessibility, Bounded Rationality, and the Value Proposition  

 

You might be thinking that this might be true for certain things or for certain people, but surely there are some instances where people are looking at actual metrics and buying based on that.

Fair enough but you’d only be partially correct. Messages that are put out there still have an effect in another way.

Think about the last phone you bought.  How many different phones did you compare?  I recently asked my class and many people didn’t even compare any.  If they wanted an Android, they bought Samsung and if they wanted IOS, they bought the latest Iphone.  At the high end was three.   There are dozens of alternatives, each with different price points, advantages and disadvantages.  They aren’t cheap either, so one would think they would be a product category that people would do their research.  And yet, most people make their decisions without it. Why?

Marketing creates our set of alternatives.  When we need to buy something we think of the few products that come to mind.  Need a new printer – you’ll probably check out a few of the ones you know – HP, Canon, Brother, Epson.  Not only are they the ones you are likely to type into Google for searching, but the brands you know and have heard of tend to convey some level of reliability and quality.  How likely are you to buy some printer you’ve never heard of even if the ratings are good? In the vacuum example, Shark was rated as the top vacuum in that category – but many people haven’t even heard of it – so could they even consider it?

And when we compare, we are like single issue voters. We look at the few features that are important. Marketing – both in the advertising sense and in the product development sense – tends to focus on and delivering these one or two values.  Decisions are typically made as some trade-off between these core values and cost.  Buying a car? What do you care about – power, fuel efficiency, speed, luxury, reliability? You’ll buy something that fills those values and marketing’s job is to make you think that their product is the best in those categories.

It should be noted that the associations we form are important here as well.  For example, people tend to think of green products as less powerful/effective.  As such selling green cleaning agents or hybrid trucks has been a challenge.  People who are buying cleaning agents or trucks want power and/or effectiveness and if the perception is that they will be less powerful or effective they will be harder to sell – even when consumers want greater fuel efficiency or to be environmentally conscious.

Lastly, the values that we care about are also influenced by marketing.  Although there is debate about whether marketing simply reflects current cultural values or actually creates them, it does at least perpetuate them.  Not only does marketing make certain products more accessible – it makes the values we care about more accessible too.  Accessibility (or availability) refers to the idea that whatever can be easily recalled must be more important than information that is less easily recalled and people tend to weigh judgements towards this more available information.  This tends to bias us in terms of risk – such as not opting for any Samsung phone when information that a few of the Note 7s were catching fire.  Similarly, if we are consistently inundated with pictures of models and ways to look like them, it serves to consistently keep that motivation at the front of the brain.

Some Criticisms about ‘Ads Don’t Work that Way’ 

 

As noted, although The Ads Don’t Work That Way article was generally well-done, there were a few areas that the author made some arguments that were at best, too extreme. The evidence reflects cherry-picked examples, while counter-examples (and counter-evidence) are readily apparent.

First, the author argued that these associations will only work for conspicuous products – and that all associations are meant as signals to other people.  While the motivations for personal consumption may be different, it does not mean the associations are non-existent. As in the Dyson or Old Spice examples show – we care about how the product makes us feel, regardless of who sees them.

The author even talks about drinking coke and compares it to gas stations, suggesting the former is a social activity while the latter is not.  One can definitely drink coke in the company of others but also by themselves.  Similarly, individuals often go to gas stations with friends and family – not to mention that other people see you getting gas too. Further, given his argument, one would expect toilet paper, types of soap, or underwear to be not advertised or less advertised.  Or consider make-up, that which once applied, has no explicit brand-message, shouldn’t be advertised since no-one needs to know what you are wearing.  Clearly, this isn’t the case.

Relatedly, motivations for how we want to be seen by others and how we want to see ourselves can differ and be in conflict. Our motivations can shift from buying products in-line with how we see ourselves now, buying products in-line with how we’d like to see ourselves, and buying products to convey a signal to other.    For example, a colleague of mine is a Harley Davidson Biker and on weekends he loves getting on his bike. Being a Harley rider is a huge part of his life and his identity.  However, he’s also an academic and is aware of the associations connected to being a Harley Rider.  As such, he generally hides this part of his life at the office, rarely riding his bike to his school, but still opts to wear a Harley shirt underneath his suit.

Second, the author argues that an ad should scale even more than linearly with the size of the audience.  However, this is not necessarily true (and arguably the opposite is true as will be discussed next), at least not for the reasons specified.  It may be true, in that mass advertising conveys some information simply by being mass advertised.  That is, large scale advertising says something positive about the firm’s size, popularity, success, and subsequent quality.  As alluded to in the phone example, Samsung’s dominance is due, in large part, to conveying that they are the best and most popular Android phone.  People assume it’s the best because it’s the one they see the most advertised.

However, the most effective/efficient way to advertise is to target the specific people who care about those associations.  The ads during the commercial break of ‘The Bachelor’ are different compared to ads during an average NFL game.  Fox News shows different ads than the ads during Saturday morning children’s cartoons. Marketers have learned to shift from ‘broadcasting’ to ‘narrowcasting’ and ‘targeted advertising’ – where ads are specifically targeted to people with specific values and preferences.  As noted earlier, we are exposed to so many different pieces of information and in order to break through this clutter, the message has to resonate with the consumer.  As such, a lot of market research is designed to understand what the target customer values and where they will be exposed to media.  By understanding what a customer values, messaging can be crafted to build the specific association and value proposition that will motivate a consumer to buy it.

The lack of being two-faced as described by the author (e.g. creating multiple associations for multiple targets) is a function of needing to form clear and consistent associations. This is important regardless of whether the product is conspicuous or not and thus is not simply a function of cultural imprinting.  Brands often either completely or partially mask products they wish to convey different associations for.  For example, Unilever owns both Axe and Dove but purposefully hides this fact. While Dove has built its brand focusing on body-positivity for women, Axe has traditionally focused on sexualizing women.  Could you imagine if both were both prominently branded under the umbrella of Unilever?

That being said, some companies that have very broad and abstract associations can pull this off, adjusting their targeting slightly, but still remaining consistent.  Apple for example can target the youth with their camera, selling the association of creativity, status, and/or independence while targeting parents and the elderly with associations of family and/or simplicity.

Lastly, it isn’t entirely clear what point the author is trying to make with his ‘personalized selling’ section at the end of the post.  Indeed, people do attempt to motivate themselves by cutting out models and posting them on their mirror in an attempt to motivate them towards more healthy goals.  Further the idea of Pavlovian-style stimulus-response marketing that the author suggests in this section is clearly just a strawman of how marketing works – a point he makes earlier in the post. A “personalized ad with the slogan “Be more social” imposed next to a supermodel or private jet” would not make one more social – but it might make the ‘be more social’ goal more accessible and motivate one to buy some luxury goods to help achieve that goal.

 

Final thoughts on Marketing

 

As noted, there is debate about whether marketing simply reflects current cultural values or actually creates them.  However, at the very least, it effects our culture by keeping certain values more or less accessible and creating the associations we think will help achieve them.  Thus, like any science or technology, it is a tool that can be used for good, such as informing and motivating individuals to donate to a charity or to a hurricane relief fund, or for ‘evil’ – motivating people to smoke because it’s cool.

Although I don’t share the view that specific brands need to create cultural imprint to be successful, I share a somewhat related view that marketing (and media in general) help to establish a generalized cultural imprint that establishes our normative values.  A UCLA longitudinal study since 1967 has found a significant change in our primary values.  Whereas in 1967, community and benevolence ranked as the most important values – fame and achievement became the most important values in 2007.  What else could have spurred such a change in our normative values if not for marketing?

UCLA Study.png

These norms are extremely important, but we are often completely oblivious to their effects.  They shape what we care about and how we go about achieving them.  I pointed out the shift in values with the intention of elucidating how misguided we have come, barely realizing the irony that I only feel that way because the value of community and benevolence are my norm.  Had you taken this survey and assigned fame and achievement as your most important values, you likely would have not seen an issue.  Rather you’d feel that we have moved in the right direction.

Questions about what we ought to care about go beyond this post. However, I think it’s important to realise that values we have and the things we think we want are influenced by the marketing around us. There’s so much information that we often fail to stop and really think about what it is we want and why.  We would do well as a society to take a step back and reflect on where we want to go and how we want to get there.

 

 

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