Economic theories, in general, are based on the assumption that consumers are rational and make rational decisions. But last week, my class re-examined this assumption as we read Predictably Irrational.
The author, Dan Ariely, is a behavioral economist, which means that he studies the social, emotional, and cognitive elements that effect the economic decisions that we make, and the book.
Based on his own research, he refutes the idea that we are rational beings and supports this through a series of experiments that not only prove our irrationality, but also show that our irrationality is the most predictable thing about us.
He makes a really great argument, and by the end of the book you can’t help but reexamine many of your own decisions and feelings. For example, why do we feel better after taking a 50-cent aspirin, but don’t feel quite as good after taking an aspirin worth a penny.
In order to help us further explore the idea that people are predictably irrational, our professor assigned the class to carry out our own Ariely-inspired experiments this week.
Having an interest in marketing, one of the subjects that really caught my attention was the effect of expectations and, in particular, how expectations apply to brands.
Ariely discusses the idea that brand can affect how we perceive a product by discussing Pepsi and Coca Cola. He begins by discussing the “Pepsi Challenge” TV spots where consumers do a taste test of Coke and Pepsi. In a blind taste test, the consumers always choose Pepsi. And yet, a study done by Coca Cola around the same time found that when consumers could see what they were drinking, they overwhelmingly chose Coke.
So why is there a disconnect?
A group of neuroscientist found that while drinking the two sodas in a blind study had the same effect on the brain, once they subjects could identify the Coca Cola brand something different happened in their brains. Seeing the Coca Cola brand brought up all sorts of other associations for the subjects and that is why they would choose Coke more often in an open tasting.
That got me thinking. Coca Cola and Pepsi are both household names, but what makes Coca Cola a stronger brand than Pepsi? And when a really great product is on the table does it really matter what brand is attached to it? Conversely, if a really great product is presented by a brand with a lot of negative perception, will people automatically discount it?
With these questions in mind, I put together two surveys.
The Study
The first survey consisted of 10 questions that asked consumers about their purchase intent for products and services that were just about to be released to the market.
The products included a credit card that regulates its owner’s spending (an idea purposed in the book), a car that drives itself, an upscale café gas station, among others.
The group who got this survey would serve as the control group; they would give me an idea of general interest in the product itself.
The second survey used those same questions and attached brands to each of the products. Five of the brands I chose had been consistently listed as top brands in several different surveys over the past few years. The other two brands I chose specifically because their image had taken some hits in the past couple of years.
This second group was the variable group, which would help me show the effect that a brand would have on the consumers’ intent to purchase.
The two surveys were distributed over email and through social media, and then waited for the results to come in. In all I received about 30 responses for each survey.
Being a believer in the power of brand, I believed that whether good or bad, mentioning a brand in the question would result in a change in purchase intent.
I hypothesized that the variable group would have a much more positive reaction to the products where their was a popular brand attached to it. And in the case of the two brands with image problems, I suspected that if the control group responded positively to a product, the variable group would only respond slightly less positively.
Findings
Well, I was right, to a degree.
When people saw a brand as positive, the results were similar to the control group, but they showed a bit more interest.
For example, I asked the control group if they would be interested in purchasing a car that can drive itself and is only marginally more expensive than a regular car. 28% said they would be interested in purchasing the car and 28% said that they were somewhat interested, while 41% said that they were not interested.
When Google’s name was attached to the product, however, 35% were interested in purchasing the car, 35% were somewhat interested and only 27% were not interested at all.
What I wasn’t counting on that where consumers saw a brand as less than positive, their interest was completely the opposite from the control group.
This was the case with Microsoft.
I asked the control group whether they would be interested in purchasing a TV that would allow them to access on-demand content, browse the web, stream movies from a subscription service and download apps. 24% were interested, 37% were somewhat interested, and 38% were not interested at all.
But when the second group was asked if they would buy this product made by Microsoft, only 4% said that they were interested!
I was shocked! Mostly because while Microsoft may not have a great brand affinity among consumers, I would definitely think of it as neutral and not as negative as this survey illustrate.
AppleTV, which is consistently on Amazon’s top selling electronics list.
This guess it goes to show that its not just any brand that can sell a product, it has to be the right brand. And the wrong brand might be worse, in some cases, than no brand at all.
Another unexpected finding was that while I thought only two of the brands would elicit negative feelings, it turns out that only two brand elicited positive sentiments.
Among the brands mentioned – Microsoft, Starbucks, Google, Coca Cola, Bank of America, TOMS and BP – only Google and TOMS got any positive response in the surveys.
So in the end, yes, it seems that people do have expectations of brands that affect their interest in products and services. But it also seems as if there is a general dislike of brands and skepticism of their new product offerings.
And without even meaning to, I have stumbled into idea proposed in Predictably Irrational, that we’ve become less trustful of brands as we are bombarded with their ads, promotions, and PR.
“Some years ago, two very perspicacious researchers, Marian Friestad and Peter Wright, suggested that people in general are starting to understand that the offers companies put before us are in their best interest and not ours,” writes Ariely. “As a consequence, we’ve become more distrustful.”
A disheartening thought for brands and their marketers, but one that must be addressed.The first place to start would be to look at those brands that have a very positive brand appeal: Google and TOMS. I think we should also add Apple to that list, as they are often regarded as the gold standard of brands.
Ariely argues that companies must adopt a policy of transparency, honesty, and fairness to escape the cycle of mistrust.
I would also add that customers inherently put more trust in a brand that has been very clear about their purpose as a company, and their larger purpose within the society. If a brand can identify a sole purpose, and a bigger purpose, it gives consumers less reason to doubt their intentions.
For Google it is do no harm. For TOMS it is creating a better tomorrow by creating a compassionate today. And for Apple it is thinking different.
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