The following is an excerpt from Rethink Your Marketing: 7 Strategies to Unleash Revenue Growth (Stratabeat, 2017) by Tom Shapiro.
Do you believe that your audience members are in full control when they are considering making a purchase? Do you feel that they are highly rational in thinking through purchase decisions? Do you think they read every word of your website, newsletter, and marketing collateral and process each word in a logical fashion?
According to Nielsen, 90 percent of purchase decisions are made by the subconscious mind. (Gerald Zaltman, Emeritus Professor at Harvard Business School, actually places this figure at 95 percent.) Whereas 11 million bits of sensory information are processed subconsciously every second, less than 100 bits are processed by the conscious brain. As humans, we are dominated by the subconscious. Yet many marketers ignore this and focus their efforts on getting people to change their conscious minds.
There are approximately 100 billion neurons in the human brain. These neurons create trillions of electrical or chemical connections through synapses that help formulate thought, reasoning, and memory. PhD students from Carnegie Mellon and University of California, Berkeley found that the human brain is up to 30 times more powerful than the world’s most powerful supercomputer. Talk about power!
Considering the dominating influence that the human brain has on the purchasing decisions of a company’s target audience, it is stunning how little focus marketers apply to neuroscience and psychology in the customer acquisition process at many companies.
It behooves you to leverage the power of the brain in attracting attention, building relationships, and spurring prospects to action. Legere certainly understands how people think and behave, and he crafted his style of communication accordingly.
You would think that understanding and leveraging such a powerful driver of human behavior would be a must for marketers – that it would be at the top of the list of all MBA programs’ curriculum. Or that it would be a common topic of conversation at marketing planning meetings.
Yet that is just not the case, and this is one of the reasons why so many marketers have an incomplete view of their customers. It is one thing to be aware of a “customer need.” It is quite another to understand why your audience feels the way they do, and what you need to do to engage with them at that subconscious level.
It is critical to understand the way your customers think, so you can then connect and engage them more deeply, communicate with them in a manner that resonates more directly, and drive them to the actions that matter most.
Why You Pay More For Similar Products
Do you like ice-cream? I sure do. I do not care what day of the week or what time of day it is, if you offered me ice-cream I would be your best friend.
Seriously, though, I have an ice-cream problem. I get excited just thinking about ice-cream (or just writing about it here…). And that got me thinking, why is it that one ice-cream brand can call itself premium and cost a few dollars a pint, while another can charge almost 5X as much.
We all know good ice-cream when we taste it. Yet it is rather easy to find ice-cream costing a few dollars that tastes like a million bucks.
eCreamery rotates 16 flavors daily at its store in Omaha, Nebraska. It churns its flavors in a small batch process and hand packs flavors with care. It offers personalization of flavors as well as packaging.
It then charges you $69.99 for four pints (That is not a typo!), not including shipping costs for online orders. Wow!
I would argue it is this ridiculously high price that is garnering the brand such success. By charging 5X what others in the space are charging, it is a deviation that grabs your attention. You cannot help but take notice. You then immediately become intrigued, with your brain automatically trying to decipher why the ice-cream costs so much. The natural reaction is to think that the ingredients or the quality of the ice-cream is drastically greater than anything else on the market.
The social psychologist Robert Cialdini has explained that for “markets in which people are not completely sure of how to assess quality, they use price as a stand-in for quality.” In other words, raise your prices and your audience will often assume that you offer higher quality.
The strategy has certainly caught the attention of the press. The eCreamery brand has been highlighted by Oprah, The New York Times, Martha Stewart Living, Every Day with Rachael Ray, Esquire, ESPN, World News Tonight, and others. Warren Buffett and Paul McCartney have enjoyed ice-cream at the Omaha store. In the three months following the company’s appearance on ABC TV’s “Shark Tank,” eCreamery did $500,000 in sales. Not bad for a single-store ice-cream shop that charges 5X what you could essentially get down the street at the local supermarket.
If it were up to your new brain to decide whether the price of eCreamery ice-cream was logical, you would be at the supermarket looking at other brands in a flash. But because your brain operates mostly on a subconscious level, your brain lights up at the exceptionalism of the brand, making you actually yearn for the ice-cream. Not only is the price intriguing, piquing your curiosity, there is also a bit of exclusiveness and social proof that is influencing your decision. Add a story, add an emotional element, add branding that speaks to the subconscious, and like the effects of a magic pill, your pricing power immediately improves.
Significant Objects, an experiment conducted by writers Rob Walker and Joshua Glenn, provides proof of how adding stories increases a brand’s ability to raise the price people are willing to pay for a product. Walker and Glenn purchased thrift-store, garage sale, and flea market objects, packaged them with a backstory and then tested their purchase price on eBay. On average, the purchase price of the items was $1.25. After being branded with a backstory and placed on eBay, the average resale price was a staggering $36.12.
For example, they bought a cat napkin ring for 50 cents and then sold it for $31. They purchased a felt mouse in a chef’s hat for 50 cents and sold it for $62. They bought a wooden mallet for 33 cents and then sold it for $71. With a story, the buyer’s brain changes and what the buyer sees as valuable changes along with it.
A wine experiment by Professors Hilke Plassmann, John O’Doherty, and Antonio Rangel at the California Institute of Technology and Baba Shiv at Stanford Graduate School of Business offers further evidence of the power of how pricing influences perceived value. Theoretically, a person’s perception of a product should reflect the make-up of the product and the state of the individual. In other words, in evaluating wine, the molecular composition of the drink should determine whether the person likes it or not. Simple as that.
Participants in the study were provided five glasses of Cabernet Sauvignon to taste under the pretense of studying the effect of degustation time on perceived flavors. In reality, they were given only three different wines, including the same wine priced at $10 and $90. Overall, the prices displayed were: $5 wine, $10 wine, $35 wine, $45 wine, $90 wine (the same wine as that labeled $10), and a neutral solution.
Subjects were asked to focus on the flavor of each wine. The study found that participants thought the $90 wine tasted better than the $10 wine, even though they were the same wine. Not only did the participants self-report these perceptions, but their bodies physically reacted to the prices differently as uncovered through functional MRI brain scanning. The medial orbitofrontal cortex (mOFC), an area of the brain thought to encode experiential pleasantness, reacted very differently when the subject was drinking $10 wine versus the $90 wine, indicating great pleasure – much more pleasure – when drinking the $90 wine, even though in reality it was the same wine.
The conclusion: if you are told a wine is more expensive, you will think it tastes better than a “less expensive” wine. And you will enjoy the experience more, both mentally and physically. Even if both glasses contain the same exact wine. Funny how the brain works.
In other words, if your marketing speaks to only the new brain, your marketing power will be limited. If you speak to the subconscious, you can exponentially increase your pricing power and profitability for the very same items.
Want to hear more? Hear Tom Shapiro discuss how to use behavioral analysis, neuroscience and design to convert website traffic into leads and sales. Register for “Proven Methods to Increase Website Conversions,” July 11, 12 p.m. EDT/16:00 UTC/GMT. Can’t make it to the live event? Register anyway and we’ll send you a link to the recording afterwards.