Archive for October, 2008

October 25th, 2008

Habits and Down Markets

By Neale Martin

The U.S. and global economies are entering uncertain times and companies are scrambling to figure out how to respond.  Exacerbating the financial meltdown is the uncertainty of the upcoming presidential election.  It is likely that no current managers have ever had to deal with the prospect of a deep recession, restricted access to credit, and the prospect of democrats controlling all three branches of government.  Predictably, managers have already begun to lay off employees and cut costs wherever possible.

In the midst of this crisis, managers must decide how they will approach marketing.  Cuts to advertising and promotion are attractive because they go right to the bottom line, but at what future cost?  Marketers have long contended that companies that invest in the ‘trough’ of a downturn will reap outsized reward when the market rebounds.  But is the current situation part of a cyclical downturn or something substantively different?

It is possible to view the appropriate amount of investment from a far more practical and fact-based position.  The habit-perspective posits that a company’s most important asset is the habitual repurchase behavior of its customers.  Accordingly, companies should invest sufficiently in their marketing efforts to maintain the habit-based behavior (inertia) their brands have created.  This level of marketing effort can be measured in real time by the utilization of relational databases.

October 24th, 2008

Habits and the Election, Part II: Negative Campaiging

By Neale Martin

Much has been made of negative campaigning in the last few election cycles as if this is some sort of new phenomena.  All one need do is look at the vitriol of the Adams/Jefferson election to realize how silly that claim truly is.  Not only is negative campaigning as American as elections, but ultimately an important and necessary part of the process.

In the first part of this blog, I made the point that most voters are making a gut-level decision when they cast their vote.  While we have long labored under the false idea that rational decisions are superior, recent research from the brain sciences reveal that our emotions are essential to making decisions.  In addition, we know that the vast majority of communications we rely on to make decisions is non-verbal.  Fast, efficient decision-making was critical to our ancestors’ survival and this mechanism guides us the same today as it did when we lived on the African veldt.

To be successful, politicians must create a caricature of themselves to ‘sell’ to the public.  This process is necessary, as the majority of the electorate will not take the time to analyze the politician’s actual position on issues.  The dark side of this process is that politicians often craft facades that are in stark contrast to their real selves.  Negative campaigning is necessary to provide voters with an opposing view.  This assault on a politician’s crafted persona, provides voters the kind of contrasting information that works in the fast, efficient way their brain is trying to make a decision.  While we may lament the ‘good’ politicians who are wrongfully smeared, we must never forget that this process may be the only way to kick the scoundrels out or keep them from gaining positions of authority in the first place.

October 24th, 2008

Habits and the Election, Part I

By Neale Martin

Habits influence all of our behavior even which button we push when we enter the voting booth.  For all of the brouhaha surrounding this year’s election, nothing has really changed about the process of selecting the most powerful person in the world.  By this I mean, every four years the vast majority of voters cast their ballots based on a gut feeling.

Oh, if you ask them they will come up with a logical sounding answer, but the reality is that the real heavy lifting in candidate selection comes from the unconscious part of our brains.  Pundits, columnists, and other self-important commentators might be dismayed to discover how little their opinions really matter.  Research shows that voters make two evaluations of candidates; one rational, the other emotional.  Tellingly, they vote based on emotion.

It is amusing to hear the rationalizations people come up with to justify their emotional choice, whether they are voting for McCain or Obama.  And, of course, the media wants to hype the historic nature of this election because one of the candidates is of clearly mixed race.  The reality is that race is simply a novelty.  Obama is a young, good-looking charismatic candidate running against an elder statesman.  The dynamic would be the same if Obama was white, Asian, or whatever admixture you can think of.  While African-Americans feel justifiable pride in the prospect of a black president, his election can only be secured by a very broad appeal to voters of all ethnic backgrounds.

October 8th, 2008

Habits and the Marketplace

By Neale Martin

Though I finished writing habit in the spring of 2008, the world we live in now is far different than the one I wrote about.  Yet the ensuing global economic meltdown gives increased relevance and urgency to the book’s central themes.

In short, habit seeks to update marketing theory and practice based on recent finding from neuroscientists and cognitive psychologists.  The book’s most startling claim, that up to 95% of behavior is the product of unconscious (habitual) processes, is in stark contrast to current marketing theory that assumes customers make conscious choices.  This explains why customer satisfaction doesn’t predict repurchase, why most new products fail and why most advertising is wasted.

From this new understanding, marketers are encouraged to approach customers in ways that otherwise would seem heretical and counterintuitive.  (more…)