National economists and other people who like cubes and rational thinking have a long time sold everybody the view that if there is enough information, a person is rational and the decisions he makes are conscious and rational no matter if we buy a car, a house or toothpaste. In some funny way we believe in this rationally functioning and decision making person even if he is a fairytale figure like Peter Pan.
In real life the evolution has programmed our brains to work as effectively and resource saving way as possible. The best way of resource saving is to trust your instincts, “mental rules”. These rules are fantastic because they make some tough things very much easier, for example driving a car, going over a heavy-traffic street or searching things on shelves of a shop. We can put “the autopilot” on and do not have to actively think. If these tasks weren´t even half automatized, many normal everyday things would be too much and paralyze us.
The mental thumb rules also have a negative side – they distort the information for us. You can never trust on a humans ability to handle information. There are five rules are more important than the others in making the human behaviour predictable and which can successfully, in good and bad, be used in branding work.
The same way as a gosling becomes strongly attached to the first thing they see in their environment, our brains cling to the associations, especially initial associations or those that are communicated in media. These are formed quickly and cemented in our view of the world – which means that our first “idea” has a very strong influence on our behavior in both the short and long term.
Anchoring explains for example the phenomena that people believe they are more likely to die in a plane crash than in other statistically more risky activities like uncontrolled sunbathing (skin cancer), or in a car accident on their way to the airport – simply because flight crashes are reported more often in the media.
People that move to a new city compare housing prices on the basis of what they paid for their housing at the previous place of residence, even if the average price of a home differs significantly between the areas. Anchoring even explains the effect of retailers investment in “sale” signals – they work as irrational hot buttons that make us forget the financial minuses with our buying decision (you bought the shirt just because it was on sale now).
To use anchoring in your every day business, begin with these questions:
What strong new associations can you create?? (Diamonds=love, cheese+hamburger)?
What mental anchors are missing from your product category or clients decision making process?
What behaviours can you adapt from parallell product categories to for a new anchor for your brand?
What new rituals could your brand to start – or are there existing rituals that you can strengthen?
Which anchor makes it easier for people to imagine the consequences of the purchase decision or alternatively remind them of the negative consequences of past behavior that you want to change?
Human beings have “a mental blind spot”. In order to prioritize all the information our brain makes relative comparisons about the importance of our impressions. This means that the context and the way that a specific offer is presented is crucial to how our behavior will be affected.
Framing explains also why Rolls Royce sells more cars at boat shows; the buyer has been exposed to goods that cost between five and ten million so slightly over a million for a premium car can feel like a real bargain.
In the smaller scale framing explains why you gladly pay even five times the price that a coffee costs for you to drink at home. The competitors in the surrounding area have similar pricing and that justifies your enjoyment to a significant price premium.
To take advantage of framing in your everyday business, start with the following five questions:
What “problems” allow you to frame in a new way (=to change the reference frame?) For example Dove changed the reference frame for the “beauty” with its Real Beauty campaign.
What new reference frame, linked to a behavior, can you create for your brand? For example English bartenders asking “Still or Sparkling”, marks that the tap water is not part of the framework for the decision.
How can your brand change the reference frame about the “perceived value”, to stimulate a trade-up behavior?
What can you do to frame – and enhance – your brand associations through the media? For example Red Bull has worked actively and consistently with associations sponsoring extreme sports events.
How can you change the reference frame for people’s buying decisions in your category, in a way that simplifies the purchase option for them?
3. LOSS AVERSION
Our brains are programmed for risk minimization. In short, it means that we are twice as miserable of losing something we will be happy to acquire the same. This has been found to have two major consequences:
We have a puffed-up view of the value of the things we have.
We exaggerate the perceived risk of things that we have not had a direct experience of in the past.
Loss aversion explains why “money back guarantees” and “free introductory periods” are effective once you have something, it is very difficult to return it (or refrain from it). The best way to get people to save for retirement – and at the same time get them to save a higher amount – is to allocate a percentage of their future earnings, instead of a percentage of what they earn today.
Loss aversion also explains why people tend to be much more brand loyal in the so-called high-risk categories.
In order to utilize the mental thumb rule of loss aversion, start with the following three issues:
How can your brand prevent losses or eliminate perceived future losses?
How can you deliver your brand (your product, service, idea) to people before they begin to use / buy it “for real”?
How can you enhance the feeling “I do not want to miss the opportunity!
4. IMMEDIACY BIAS
When our poor brain is flooded with information, it selects to prioritize the new. How things feel right in this moment is extremely important to us. What is new is more important than what actually is perhaps most important in the long term. The consequence is that we make decisions that favor the short-term pleasurable or positively stimulating on the cost of long-term rewards or any (negative / positive) consequences.
Immediacy bias explains why people are more likely to put money on luxury consumption after they received the tax refund, compared to if they have saved up the same amount.
It explains why people are more likely to sign up for a life insurance after an accident has occurred – even if the statistical odds of another accident will remain unchanged.
Immediacy bias is also the reason why people eat fatty foods even when trying to lose weight; our brain is simply a slave to the immediate reward.
To use this mental thumb rule in your everyday business, start with the following four questions:
What new information could strengthen or encourage a behavior immediately?
How can you make a long process feel shorter, or even shorten the overall decision time?
How can you demonstrate immediate effect (or help to make the effect more concrete in the short term)?
How can you do the little things that push the behavior in a certain direction visible every day?
5. STATUS QUO BIAS
As we all are aware from our everyday lives, humans are creatures of habit. But why? It is because the habits make life easier for us. Changing routines or habits means that we must think. The more we repeat a specific habit, the stronger its ‘autopilot’ is with us, so strong that we are often not even aware of what we do. We do things as a reflex, even if it sometimes has (repeatedly) negative consequences for us.
This mental thumb rule explains why we eat more the larger the plate is but also why pre-selection has a very strong influence on our behavior.
Status quo bias also explains why up to 80% of motor vehicle insurance are renewed in even if the premiums can be significantly higher.
To benefit from the status quo bias in everyday your business everyday, start with the following four questions:
What automatic behaviours can you start or prolong through giving beforehand alternatives?
How can you strengthen rituals (eg noise, odor), which remind people of a certain behavior?
How can you reduce their effort to adopt a certain behavior?
How can you highlight how tedious and unnecessary it is to change behavior, eg to change supplier, in order to block your competitors?
Hopefully, greatly simplified summary of the psychological economy gives thoughts and ideas and maybe you have even learned something new? If the subject was already familiar earlier, I hope the examples and questions can help your daily work.
People of all nations are exactly as predictable in their behavior as all other mortals – only we dig deep enough. That is why it is there the branding work must begin – digging deep. If we seriously want to get better at changing behavior in a particular, desired direction, we need to understand how people function.