New research shows the best business minds make decisions very differently than we thought. If you want to know more about the inner workings of the executive brain, try this WSJ article.
Why do we buy stuff? Psychologists have known for a while that we’re at the mercy of two related facts. Firstly, as Van Praet suggests, that the seven generations or so humans have spent living in the industrial age, are dwarfed by the 84,000 generations living as hunter-gatherers. The implication is that from an evolutionary perspective we are still relying on ‘stone-age’ thinking.
Secondly, this means our brains have to process an enormous amount of information for which they were not designed. So whilst our senses take in about 11 million bits of information per second (that’s something like 34GB per day), we are only aware of 40 bits. What’s happened to the rest?
Most of the information that hits our senses is processed automatically at an unconscious level. It relies both on our primitive and often emotional brain, just as much as it does on any rational thinking. When it comes down to it, what drives our behaviour has a lot less to do with weighing up the pros and cons of a decision, and at a lot more with how we feel.
To cut a long story short, this book is about how to hit the marketing nail on both heads – the rational and emotional – rather than just the one. To understand that how we act often has little connection with how we say we will act, and that we tend to behave in a way that is consistent with a much older script: a script that we may not even be aware of. And critically this script is full of shortcuts and cognitive ‘rules of thumb’.
The considerable research which underpins this book draws on contemporary neuroscience, and work by many experts, in particular doyens both of decision-making and persuasion. For example, as Daniel Kahneman (the only Psychologist to win the Nobel Prize), points out, compared to our unconscious systems, the cognitive, rational part of the brain, is just plain lazy. Thoughtful analysis of a situation is slow and tiring: it’s a lot easier to rely on past experience or quick fixes.
This means that if we think about brands, what’s happening is that our brains are heavily influenced by memory; and here’s the interesting bit, that those memories, which often involve imagery (think: Coke label), are processed in the prefrontal cortex, the same part of the brain that plans future behaviour. Another brain shortcut.
What’s in a name?
Van Praet, an acknowledged brand expert, takes what is known about unconscious processing and uses it to build a seven step persuasion model. Thus because we are animals that rely on recognising patterns – one of those brain energy saving tricks – a marketer needs to understand how to disrupt existing patterns in order to grab our attention.
Additionally, any interruptions must engage the right associations in order to spark constructive emotions. To get us to move, it’s necessary to retain elements of the familiar because we find comfort in it, or to make something new feel comfortable. So this is the second step: how to create customer comfort.
The remaining steps look at how to lead the imagination, shift feelings, satisfy the rational part of the brain (which, despite everything, needs to be satisfied!), and change the nature of the association between memory and mind, in order to generate actions that promote positive brand impressions.
To pull out the point about memory, this can be illustrated using product names. Marketeers need to spend time looking at all the associations linked to a name. The important thing is to find a name with no baggage, or unfortunate associations; or better still, to find a name that is already linked (in most people’s minds) to positive thoughts or feelings. Naturally having done this the name needs to be protected, for instance it can be easily damaged by the wrong sort of endorsements: celebrities not living up to the values of the brand!
In conclusion this book is jam packed with examples and ideas, and lifts the veil on how to engage ‘consumers’ at a human level, in order to shift attitudes and behaviour. Something we all need to do, in our various ways, every day.
Unconscious Branding: How Neuroscience can Empower (and Inspire) Marketing
Douglas Van Praet
Palgrave Macmillan; 2012; Pb £10.99.
Image courtesy of Kromkrathog/FreeDigitalPhotos.net
It seems that money can buy happiness but only if you spend it in the right way. In their new book, Happy Money: The Science of Smarter Spending, Elizabeth Dunn and Michael Norton lay out the five principles for turning cash into pleasure:
- Buy experiences. Activities like concerts, days out and vacations are more satisfying than buying objects.
- Make it a luxury. Only have your favourite things occasionally, that way you will continue to enjoy them.
- Buy time. Extra time and the freedom to do what you want are more satisfying than money.
- Delay gratification. Having to wait will make you appreciate things more, so buy now and experience later.
- Treat others. Spending money on other people makes us happier than spending it on ourselves.
What’s this got to do with business? To pick one of the above – Make it a luxury – this can be used to shape behaviour by using the power of scarcity. People are programmed to want things more if there is limited availability (the power of ‘sales’); and if it’s memorable, which can of course be enhanced by having to wait (the power of anticipation)…
Book: Happy Money: The Science of Smarter Spending by Elizabeth Dunn and Michael Norton (Simon & Schuster, 2013)
Talk: Great presentation by Michael Norton:
One of the critical things about making a decision is to have enough information to make a proper judgement. To do this a person needs to be able to identify the gaps in their knowledge, to fill them, and then to come to a sensible conclusion.
Someone who does not see that there are gaps, or who jumps to a conclusion with too little (or inaccurate) information can blindly make decisions without realising what is missing or unclear. What this amounts to is that for judgement and decision making there are four basic types of people:
Over-confident: This is someone who has high confidence in their judgements even when their thinking is faulty. They believe that it’s better to make a decision, even if it’s the wrong one!
Development point: The positive side is that over-confident people take the initiative and get on with life. However they do need to ‘take five’ and learn to recognise when more information is needed. It’s all about thinking before acting!
Animal: The over-confident person is like a Cobra – quick and decisive, but not always hitting the right target.
Under-confident: This is the sort of person who generally has no confidence in their judgement and decision making, even when they’re right. They often find it difficult to get ‘off-the-fence’ because they believe they’re going to jump the wrong way.
Development point: The positive side is not ending up in tricky situations just because they haven’t thought things through properly. However this may end up in no action at all; so to move on someone needs to force themselves to make decisions in low-risk situations, just to recognise that the sky doesn’t necessarily always fall in!
Animal: The under-confident person is like a Gazelle – bouncing around trying to decide what to do, and never quite making their mind up.
Accurate: This is the sort of character who reads situations with confidence, and knows when they’re getting things right or wrong. They have the savvy to check the signs and know if they are taking a risk.
Development point: This person is on the button and has got decision making pretty well organised.
Animal: The accurate person is like a Fox – weighing up the situation, balancing the risks, and picking their battles.
Inaccurate: This is someone who charges at things and gets most decisions the wrong way round. They are not confident when they’re getting things right, and over-confident when they’re getting stuff wrong.
Development point: The good news is that this person wants to do things, it’s just that they have a habit of getting everything upside down. A bit like the Cobra this person really needs to think before acting, in fact they need to think, and think again before acting!
Animal: The inaccurate person is like a Bull – enthusiastically charging backwards and forwards, but tending to put their foot in it.
What sort of an animal are you?
1. How do you feel when you have to make a snap decision?
A Energised – It’s better to make a decision than no decision at all
B Decidedly queasy – I don’t like having to make a decision
C Confident – I’m pretty good at weighing things up quickly
D Resigned – I’m famous for making the wrong decision.
2. When deciding between a number of options, do you…
A Pick one and stick with it, even if it turns out not to be the best
B Want more and more information (you can never have too much)
C Dispassionately check out the options and move on
D Home in on the wrong one like a guided missile?
3. If you haven’t got enough information, how do you decide what to do?
A Gut instinct
B I can’t decide (you just said there isn’t enough information!)
C Go with what I calculate is the best bet
D Pick anything – it’ll all go pear shaped anyway.
4. You’re going to make an expensive purchase in a shop, do you…
A Just go in and buy it
B Come over all uncertain
C Check that it’s what you want, and then buy it
D Feel like you’re about to make another costly mistake?
5. It all goes horribly wrong, what do you do next time?
A Exactly the same!
B Nothing (there isn’t going to be a next time)
C Better research
D Take a lucky rabbit’s foot.
6. What’s happening in your head when making a really BIG decision?
A Surprisingly little
B A Headache
C A meticulous balancing of the pros and cons
D A feeling of déjà vu (and not a pleasant one!)
7. You have a number of things to do, how do you decide where to begin?
A First on the list
B Definitely look at the list, but it won’t be nearly long enough
C The most important thing on the list
D Gave up using lists years ago.
8. How would your best friend describe your judgement?
A Shoots wildly from the hip
B Never gets his gun out
C Hits the target, every time
D Judgement, what judgement?
Mostly A = Over-confident (Cobra)
Mostly B = Under-confident (Gazelle)
Mostly C = Accurate (Fox)
Mostly D = Inaccurate (Bull)
Note: This is a fun questionnaire! However it is based on sound research and I wrote it for a magazine a couple of years ago.
Executives are the Simon Cowell of the business world: impatient, critical, often caustic. But they’re also desperately searching for talent. How do you make the right impression? Is the secret just to tell a good ‘story’? Here’s five hot tips to get you going:
Swedish researchers have discovered that elite soccer players achieve higher scores on certain tests of cognitive ability than their lower division colleagues, and both sets of players do better than the general public!
Over the moon
It seems it’s all about ‘executive functions’ and working memory. Specifically that successful players are able to constantly assess the situation, compare what’s going on with past experiences, create new possibilities and make quick decisions. In short it’s all about making fast decisions under extreme time pressure. Sounds great! Do the England team know about this?
Sick as a parrot
Of course, there may be a physical explanation. Sports psychologists have known for a while that cognitive abilities are correlated with aerobic capacity. So it may just be that footballers, and other athletes, do better simply because they’re fitter. Mind you, if all this is true, it’s a good argument for getting out there and doing a bit more exercise…
Read the article here.
On why less is more… Psychologist Barry Schwartz (the one wearing the shorts) takes aim at a central tenet of western societies: freedom of choice. In Schwartz’s estimation, choice has made us not freer but more paralyzed, not happier but more dissatisfied. Try this great TED talk:
Below are a set of numbers. Give a friend five seconds to estimate the answer, without resorting to a calculator.
Set-A 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1
Here’s another set of numbers. Find a second friend and give them the same instructions.
Set-B 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8
You will find that the second person gives a smaller estimate than the first, and both will be way off the correct answer (which, rather startlingly, is 40,320).
Maybe you’re not surprised that people find it difficult to quickly multiply eight digits, but why the smaller estimate for Set-B? The answer is provided by the only psychologist to win a Nobel prize, Daniel Kahneman. Check out his ground-breaking 1974 article, written with Amos Tversky, in Science magazine.
A little clue: It’s all to do with ‘anchoring’ - a psychological effect that has a profound effect on our decision-making ability, and which in real life trips us up when we try to buy expensive things like houses or cars!
Photo credit: Scottchan/FreeDigitalPhotos.net
Picture the scene: you’re walking down the street trying to decide where to eat. But it’s early evening and all the restaurants are empty. So you pick what you consider to be the most appealing – you think it has the tastiest menu – and go in. After a while some more people come along and see you sitting at a table. They assume that if you’re in there it must be OK, and enter and sit at another table. Very soon there are lots of people in the restaurant and all the other possible eateries are lagging well behind. This process is called the information cascade.
Information cascades are important in economic psychology as they are used to explain the behaviour of financial markets. That’s because they feed the process of speculation, including frantic buying or selling: bubbles v crashes. Now of course all this starts at a vaguely rational level (remember the restaurant example) but rapidly moves into irrational herd-like behaviour. Thus maybe it’s no accident that we talk about confident or ‘bull’ markets! Although perhaps in reality it’s more cow-like: put your head down, eat the grass and stick with the herd.
The bigger point is that information cascades affect all manner of decision-making. And the movement of the ‘herd’ (group, team, board) can be very difficult to resist, even if you, the individual, recognise it as being irrational. People en masse are easily convinced they are moving in the right direction, and frequently do not stop to ask the obvious question: why are we doing this?
At work this is made worse by the fact that many managers do not know how to probe the thinking of their colleagues. They simply base their understanding on what they assume is going on, and assumptions, as we all know, are often vague and unpredictable beasts. The real trick is to return to the beginning and pose clearly framed questions about the logic of projects and plans, and also to ask questions about the organisation. Not just, ‘why are we doing this?’ but ‘why are we doing it this way?’ So maybe the competency lists that are so beloved of HR professionals should always include the ‘ability to ask good ‘why’ questions’ behaviour…