Weird Hidden Forces That Shape Our Decisions

I was in the mall yesterday when a sterile female voice echoed through the PA:

“…And remember, please drive home safely. We want you to be our customer for a long time, so we do care about your safety,” she ended suddenly chipper,“Thank you!”

At first blush the recorded fembot’s words would fly over my head, barely noticed among a sea of commercial background noise. But this time, for whatever reason, I paid attention… and could scarcely believe what I’d just heard.

She might as well have said:

“…And remember, get back to work soon. We want to suck as much value out of your pathetic average lifespan of 78 years as possible. That’s our logical justification for your safety. Thank you!”

A month ago, I turned 27 years old… am I really getting this cynical already? Geezus, what would I be like as an old man? Or am I finally waking up to some sort of Matrix-like Truth?

Or maybe… I just think too damn much.

Whatever the case, my sleepwalk was disturbed and what I discovered gnawed on my mind. As a marketer, if I’m trained to keep an eagle eye on these hidden forces that direct our thoughts every day and many still fly right over my head… what must it be like for the average person to whom these messages are aimed?

Damn.

Subtle influences are all around us. In the next couple posts, I’ll share some of the most useful and interesting I’ve discovered during the past few months.

#1. Sacrificial Lamb Offers

This is where a marketer creates one offer solely for the purpose of selling another, which is the REAL offer they wanted to sell in the first place.

Take this example: You want to renew your subscription to The Economist (or in my case maybe Penthouse would be more appropriate.)

They give you 3 options:

- Economist.com subscription – $59.00
- Print-only subscription – $125.00
- Print & web subscription – $125.00

And no, that’s not a typo… those last two really are the same price. That’s the whole point.

The presentation above was split-tested with this one:

- Economist.com subscription – $59.00
- Print & web subscription – $125.00

Makes more sense doesn’t it? Logically, yes. But if your goal is to make money and bring in more subscriptions, it’s a failure.

Here’s what happened on a test of 100 smart MIT students when presented with offer #1:

- Economist.com subscription – $59.00 – 16 subscriptions
- Print-only subscription – $125.00 – 0 subscriptions
- Print & web subscription – $125.00 – 84 subscriptions

Total money made: $11,444

On offer #2:

- Economist.com subscription – $59.00 – 68 subscriptions
- Print & web subscription – $125.00 – 32 subscriptions

Total money made: $8,012

A huge increase in profitability just by throwing in a “sacrificial lamb” that nobody wanted.

More tests were done with women rating mens attractiveness. I’ll spare you the gory details but the end result was women were FAR more likely to choose a man who was the “better” version of someone who looked a lot like him, while often ignoring the great looking guy who was completely different.

The basis here is the brain is a big comparison machine… and it’ll take an easy choice over a hard one any day. Comparing 2 things that are similar is easy. Throwing in a rogue 3rd complicates things so the mind prefers to ignore or discount it.

So if you’re a real estate agent and need to sell a particuar house, find another just like it (but worse) and a 3rd house that’s wildly different. Show all 3 to the buyer on the same day. To avoid springs and sprockets flying out of their head, they’ll want to ignore the “different” house and focus on the 2 similar ones. Since the one you want to sell is the best, they’ll have to fight off some powerful mental forces to abandon it. The day is yours!

The same principle is what causes people to drive all the way across town to save a few bucks on gas, but think nothing of shelling out an extra $3,000 for heated seats in a car. The cost is all relative to it’s immediate comparison.

#2. Anchors

Stuff is only worth what we think it’s worth. So when introducing something new to a group of people (or a marketplace) the best way to establish its value is to present it alongside other similar things that already have a perceived value in the mind of your audience.

That’s what Jean-Claude Brouillet did with Tahitian black pearls:

To me they look like polished musket balls. Ugly. I’d grimace a bit if my girl wore ‘em. But the New York elite cared a lot when Brouillet displayed them in a Saks Fifth Avenue alongside diamonds, rubies, and emeralds.

The valued gemstones provided a basis of comparison (an anchor) and made the crazy price tag on the black pearl add to the high end mystique. Everybody “had” to have them.

People anchor themselves to existing price tags. This is also how you get markets to grossly overpay for a bottle of wine, coffee, clothes, or break out of a long-established price mold for a commodity.

Starbucks did precisely this when they were first starting out. Instead of “small, medium, large” they offered “short, tall, grande, and venti”…instead of “black or with cream” they had Caffe Americano, Caffe Misto, Macchiato, and Frappuccino. You can’t easily compare it to Dunkin Donuts.

And I’m addicted to Ralph Lauren clothes due in part to their use of anchors:

Ralph Lauren’s masculine yachting idealism

If she asked me to murder for her undying love, I’d be tempted to consider it

And finally…

The ultimate idealization of wealthy youthful elitism, adventure, and sense of belonging – the girl at 15 seconds makes me melt and the guy at 50 seconds cracks me up

Some more world-class anchoring for youthful fun and adventure

Traditional economic theory says we eat Big Macs, smoke, take vacations, listen to music, marry, have kids, vote, etc according to our likes and dislikes.

But traditional economic theory is bullshit.

Mostly we make buying decisions based on 2 things:

1. How much pleasure it gives us privately, and…
2. How it makes us look to others based on how we want to be perceived.

That’s really it. We establish our identity and then set out to discover the brands and products that best display it. Or if we have no identity, we look for a basis for one in the realm of stuff out there that already exists.

#3. The Explosive Power of the Lowly Penny

Consider two bowls of chocolate – one of truffles and one of Hershey’s Kisses.

We offer the truffles to passersby for 15 cents and the kisses for 1 cent. Each customer can only choose ONE. The truffle is obviously much higher quality and the price isn’t too much higher when compared with the kiss so 73% take the truffle and 27% take the kiss.

The same is true for whenever we charge 2 cents for the kiss and 16 cents for the truffle, keeping the margin of difference even.

Now we lower the price of each by 1 penny.

We offer the truffles for 14 cents and the kisses for 0 cents – free. Now 69% take the kiss and only 31% go for the truffle.

Traditional economic theory (again, bullshit) says that since the price difference stays the same, then the consumer will evaluate the decision the same. But this simply isn’t true.

Amazon.com discovered this when they started offering free shipping if you spent a certain amount of money. Buy more than you planned and save $4 bucks. Sales went up across the board… except France, where the French division was charging 1 franc for shipping instead of “free.” They wiped out the charge and sales boosted in proportion to the other countries.

Same goes for museums. On free entrance day, the place is packed. Charge a few bucks and the crowd thins out by 90%

So what’s really going on here? Why would someone take the “free” offer for something they don’t really want as much over a lower price on something they actually DO want?

Ah, welcome to one of my favorite subjects in the whole world… segmentation. Come inside, make yourself comfortable, and let’s chat for awhile.

Money is a way of demonstrating commitment. When you purchase something for real dollars that you got through selling your time at a job or providing value through a business, you’ve performed an action that separates you from millions of people on this planet… even if it’s something as small as buying a Hershey’s Kiss for a penny.

When I offer you the truffle for money and the kiss for money, you’re likely to choose the one that you prefer… hell, you’ll have to spend the money to get something anyway, so why not snatch the bargain on the expensive truffle?

But something magical happens when the Kiss is free. Now all commitment is released and it becomes a decision of “give up something” or “give up nothing.” The people who weren’t really serious about the chocolate will take the kiss, and the people who truly love their chocolate will still buy the truffle.

And if you’re the marketer of truffles, it is that smaller 31% (who are still willing to shell out money and spit in the face of “free”) from where your biggest profits will ultimately come.

Hark unto me: That lowly cent, almost flee-like with insignificance, acts as a giant knife hurling out of the sky – slicing the butter of society into 2 groups:

- the people who will DO, and…
- the people who will NOT do

That’s all it takes… a $1 trial or a simple penny to prove a customer’s commitment and therefore ongoing highest profitability. To separate the players from the wannabes. To divide the buyers from the non-buyers. To glimpse inside the minds of a mass of people.

I’ll talk more about this concept in future posts because with the right segmentation – one can conquer any world he wishes.

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