Roger Dooley

Today’s episode features neuromarketing expert Roger Dooley.  I first met Roger at a small and very interesting seminar a few years ago.  We had some conversations about neuromarketing over the past few years that I found really interesting.  Roger is the author of Brainfluence, a book I highly recommend you pick up and read.

Neuromarketing is something you need to be paying attention to.  It’s the study of why people buy what you’re selling.  This episode will help you understand some of the basics and where to go if you want to learn more.

Here are some of the things you’ll learn today:

  • How behavioral economics and neuromarketing are first cousins.
  • Where you can go to learn more about neuromarketing.
  • How limiting choice can often bring you more business.
  • Why you need to stop talking about features and specifications.
  • Learn from a case study I brought up about my days in the vending business.

Transcript:

Narrator:         Welcome to The Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In The Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.

Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.

Josh:                Hey, how are you today? This is Josh Patrick and you’re at The Sustainable Business.

Today, you are in for a big treat. I have Roger Dooley with us. I met Roger at this very unusual retreat/workshop/program a couple of summers called The Baby Bathwater Institute. A hundred of some of the most interesting people I’ve ever met. And Roger was among the most interesting I talked to. And then lo and behold, about a year later, I run into Roger at a book retreat that Michael Port and Mike Michalowicz put together.

Roger is very accomplished author. He is the author of Brainfluence. We’re going to talk about that book. We’re going to talk about how you can help influence the folks who do business with you. So, let’s bring Roger in.

Hey, Roger, how are you today?

Roger:             Doing great, Josh. Thanks for inviting me on the show.

Josh:                Oh, it’s my pleasure to have you here. So, one of the questions that I’m just kind of curious about is that neuromarketing, it seems to me that it’s sort of a first cousin of behavioral economics. Would you say that’s true?

Roger:             Yeah, I definitely would, Josh.

And perhaps not everybody would agree but I think that the fundamental principle of behavioral economics is that people are not rational robots. They behave in strange and unpredictable ways. Sometimes, if we understand how our brains work better, which is one thing that behavioral economics tries to do, those ways may be strange but at least a little more predictable.

Neuromarketing began referring to using very specific neuroscience techniques to see how people’s brains were reacting to, say, advertising. So, the sort of probably classic, original thought of neuromarketing was that if you put somebody in a brain scanner of some kind – say, an FMRI machine and then show them three versions of a commercial that if you have the right science you can predict which commercial will hold their attention better, which will create greater emotional engagement and perhaps even which commercial would make them more likely to buy. But the definition has expanded somewhat.

And I guess, maybe I’ve been partly responsible for that because I use neuromarketing to refer to any use of our understanding of how our brains work to make your marketing better. And even the sort of hardware-oriented definitions of neuromarketing are shifting because the obvious sort of neurotechniques were FMRI – which probably most folks have seen, these giant FMRI machines that cost millions of dollars and you lay in them. They’re super-noisy and claustrophobic. But also, EEG where it’s a more commercially viable type of neuromarketing where you put the cap of electrodes on people’s heads and it analyzes their brain waves as measured at the surface as opposed to actually doing a sort of internal, inside-the-skull 3D imaging process.

But now, you’ve got all these other techniques that really have the same purpose as those brain scan or brain wave measurement techniques. You’ve got things like implicit testing that measures how long it takes people to make a choice. And the delay is indicative of what their inner feelings are about that topic.

You’ve got tools like eye tracking that are usually used in conjunction with these other things. Facial coding that looks at people’s facial expressions. Even microexpressions, the sort of very fleeting expressions that only last a fraction of a second before our sort of social brain takes over and says, “No, we can’t show a negative reaction to this person. Since we’re meeting them socially, we have to pretend to smile.”

And so, there are a lot of other techniques that are all now lumped in with neuromarketing. And indeed, a lot of my book Brainfluence is not so much neuro as more behavior science-based, bringing in behavioral economics. The work of social scientists like Cialdini, Fogg, Ariely and many others.

Josh:                So, you mentioned something which I find really interesting which is the word choice. And many of us think that more choice is better than less choice. And I’m going to bet that you think the opposite is true.

Roger:             Right. In general, yes. I mean, it depends because Amazon obviously offers a lot of choices and they’re very successful as a company. So, choice isn’t always bad. But, in general, our brains don’t cope very well with more choices.

There have been some classic studies of people buying jams in a store where scientists went in and put a display six different flavors and recorded the sales over a period of time. And then they changed the display to 24 which you would think would increase sales because you’re suddenly going to get that person that really craves persimmons or something.”Well, hey, there it is, I’m going to buy that.” In fact, sales went down. Now, that isn’t always going to be the case.

And I think the way that Amazon handles the choice effort is by guiding the consumer with various flags to help them choose. In other words, if you go to Amazon and see a page with 24 products displayed or something of it. They aren’t necessarily a raid in a manner that makes them indistinguishable, as you might expect a display of a couple of dozen kinds of jam on a table would be. Instead, they use all kinds of cues that these flags like “bestseller” or ”top-rated” that use reviews and stars to show both how popular a product is and how well other users liked it. And they give you a whole bunch of tools, like even questions answered about their product to differentiate between these products. So, they solve that choice problem very effectively.

But, by and large if, for instance, you are offering a software product to people, and you see a lot of these online these days that software is a service where we’ve got our basic package. It’s free but it has very minimal features. Then we’ve got our slightly better paid package. Then we’ve got the pro package that has more features. And then we’ve got a super-duper package. That’s probably about the limit that you want to go.

You don’t want to have a whole bunch of gradations in that because then it just gets too confusing for people to decide. And when people slow down the decision-making process, what happens is it kicks them into a different kind of decision-making mode. They may have been prepared to make an emotional or intuitive decision about the product. But when you start giving them either too much information, or too many choices, or somehow your process is confusing as to what they’re supposed to do, that can kick them out of that mode into a more rational, logical say “Okay, I really need to think about this, to figure out what’s going on here.” And it takes them out of the mode where they were ready to buy.

And the scientist that’ probably contributed most to that topic is Daniel Kahneman, the Nobel Prize winner, who wrote an amazing book – Thinking Fast and Slow. And I would highly recommend that to anybody and everybody who has an interest in marketing, or persuasion, or any related topic, or even just understanding how people think. It’s very well-written and simple but his key understanding is that we have two modes of thinking as people.

We have System One that’s fast, intuitive, emotional. It can be rule-based like, “I bought this last time and it works so I don’t have to think about it.” Or System Two, i.e. that sort of reflective, rational, logical pluses and minuses kind of decision making. And the latter is very hard work for our brains. Our brains don’t want to be in System Two – thinking any longer than they have to, so our brains will default to System One if they can and will stay as short of a time as possible in System Two if they’re forced into it.

And that’s why I really cringe when I see marketers who put all of their product features and specifications front and center in their marketing. I mean, there are some people who need that information but the smarter marketers hide part of that information. Even if you look at Amazon descriptions, what you’ll see is there is a paragraph or two of description and then it fades out with a little “more” link underneath it. And undoubtedly that’s to both clean up their page which is already super busy but also to try and avoid an information overload that would kick that buyer from a quick emotional decision into a “Wow, I really got to read all this stuff.” And that raises new questions and so on.

And this is all happening very quickly and mostly subconsciously. But suddenly it gets into a “Gee, you know, that’s interesting. I should probably look at another product.” And before you know it, they simply haven’t bought the product and haven’t bought anything.

Josh:                So, you said something which brings me back to my days when I used to own a vending company which you don’t know, but I did.

Roger:             I didn’t know that.

Josh:                I did. I spent 20 years in the food service business.

You know, it’s sort of like Amazon. When I go to Amazon, I go because it’s a long tail company, meaning that they have basically anything I could possibly want. I rarely shop at Amazon. I go to buy at Amazon. Now, I might end up buying more stuff because they’ll bring things to my attention that I didn’t know I was interested in.

The other thing which is really true to my vending company is that we used to have a huge selection in our machines. We had 40 snacks. We had 40 different selections. Then one day I had this conversation with a grocery store client of ours. He says, “You’re an idiot.” He says, “You’re forcing people to look for the popular stuff in the hard part of the machine and you keep running out of the stuff people want to buy.”

So what we did was, we cut down selections. We cut down selections. We cut down selections. When I sold the company, we were down to offering 13 selections in the machine, instead of 40. Our sales, per employee, doubled and our service costs went down by 75%. And the reason for that was we kept cutting down selection and offering people what they wanted to buy and never ran out of it.

Roger:             Right.

Yeah, you could put it in multiple rows of the popular items and that way you would always have it.

Now, that’s a great case study, Josh. That totally confirms the paradox of choice. And also, really sort of applies to anybody who’s selling products where the 80/20 rule really counts for most of us. For Amazon, their business is structured that they can really go out into the long-tail and still make money doing it. But for most businesses – particularly businesses that may have to manufacture the product or source the product directly from overseas or something like that, where inventory is an issue, the difference between selling a big selection where 80% of the products really aren’t contributing much to sales, it’s really a huge decision and important to look at.

Josh:                So, it seems to me, Roger, that too many businesses try to be all things to all people, meaning that they want to have so many features that there’s nobody who’s going to say no. It appears to me that when companies do that, they try to be all things to everybody but they end up being nothing to everyone instead.

Roger:             That’s true in so many Industries. We are both writers and one of the maxims of the publishing industry is that “a book for everyone is a book for no one.” And that is pretty much true of products. In general, people are looking for something that’s going to meet their specific needs. And if a product is designed to meet everybody’s need as well as can be done in a single product, it’s not going to do as well probably as a niche product.

Now, there are probably exceptions. You know, if you’re selling mints in the checkout aisle or something, you can have a broadly appealing product. But even there, you’ll see differentiation where you’ve got products for different purposes. So, you’ve got TicTacs that are really tiny and maybe fit in your pocket or your purse. You’ve got Altoids that emphasize curiously strong flavors and so on. So, even in what seems like a fairly generic market, there’s a lot of differentiation going on.

Josh:                So, one of the things that you wrote in your book, which I truly enjoyed by the way. And I highly recommend people pick up a copy of Brainfluence and read it and read it again, and then again because there’s so much good stuff in there. You talked about having multiple studies that show people enjoy a product more when they pay for it more. So, if you’re talking to somebody about pricing their product, how would you recommend they go about doing that?

Roger:             Well, I mean, there certainly are practical factors that enter into pricing beyond any sort of behavior science or psychological factors. You’ve got to understand where the market is, how the product will be used, and it’s got to be in some way – the price has to be appropriate for that. But pricing also is part of setting expectations.

And some of the more fascinating work that I’ve seen relates to wine because wine is a rather subjective product. Unless you’re a trained sommelier, you probably will taste a wine and say, “I like it or I don’t like it too much.” But you probably don’t have the palate to distinguish between the small differences. And even among experts, when they do blind tests, often, they can’t distinguish between the same wines or they’ll rate the same wine highly one time and the identical wine not so highly the next time. So, it’s a very subjective kind of product.

And what the scientists found was that when they put people in an FMRI machine to measure their brain activity while we were tasting wine. First of all, they use, as the best experimental product ever is two-buck chuck which–I don’t know if all of our listeners are familiar with it but this is a Charles Shaw Wine. It’s sold at Trader Joe’s stores. And now it costs about three bucks a bottle, so it’s a little bit more than two bucks in most places but it is a very inexpensive, mass-produced wine that I would say tastes wine like, so it’s not so terrible that people are going to spit it out and spew it all over your experimental setup.

It tastes like wine and it probably has a generally pleasing flavor although most sommeliers would not give it very high marks. But psychologists love it because it’s consistent. You know, this is made in giant batches, compared to artisan wines. And it’s cheap, so you can use a lot of it in your experiments and it doesn’t really cost you too much.

And they put people in these FMRI machines and gave them samples of wine. And these samples were all identical. They were all two-buck chuck Cabernet Sauvignon. But in some cases, subjects were told that it was a $5-wine, which is pretty much representative of the caliber of wine that it is. And then the other half were told that it was a $45-wine, so a rather expensive wine. You would expect to be quite good.

Now, if you did that experiment, just had people walk up to your tasting table and said, “Here, taste this $5-wine or taste this $45-wine.” You would expect people to say better things about the $45-wine if only to please you or to not sound stupid or something like that. But what the scientists found was that the wine that they thought was expensive actually lit up their brains more in areas associated with pleasure. So, not only did these people verbally say they preferred the $45-wine, they actually experienced a better wine.

So I think that that has implications for pricing. And also, for expectations in general because in wine the price is an indicator of what you can probably expect, or at least it should be. It isn’t always, based even on my own limited experience in tasting wines. But that’s what people believe. And because they believe it, that’s what they get when they taste it.

Josh:                Yeah. That makes perfectly good sense. And, Roger, we probably have enough time to talk about one more topic. And this one, I think, is actually a pretty important one for folks listening which is why we want to stay away from round numbers when pricing.

Roger:             Right. Yeah, well, this is a constant debate among retailers and just about anybody trying to price a product. And there are sometimes little conflicting factors here. Now, we’ll get into the major one but then, add a note of caution or two at the end.

The classic experiment on odd prices versus even round prices had people evaluate different products. And they were shown a product. Say, for instance, say television and different groups were told, “This is a $500-television, or this television costs $498.67, or 501.23 or some very close numbers but odd versus the nice round 500 price.

Then they were asked, “What do you think it’s a really worth?” And this is what was really remarkable, the people who saw the $500-price estimated that it was probably worth somewhere around $400. The people who saw the odd prices, whether they were a little bit higher or a little bit lower, estimated much higher. And my memory may not serve me perfectly but somewhere around $485.

And this was replicated with different kinds of products. The effect was bigger in some than in others. But what the scientists concluded was that our brains were interpreting that odd price is an indicator of precision. In other words, this wasn’t just some wild price that some marketing guy came up with. But rather, because it’s so precise that it must have some basis.

Now, again, this is not a conscious thing that people are thinking, but it seemed to have that effect in our brains. So, that’s the reason why normally I would recommend going with a more precise price than a round price.

But I’ll add a caveat there, there’s another study that shows that prices that appear shorter also, sometimes to our brains, seem a little bit lower. So, that even if you take the same price and write it out, say, if your price is $1199, you could write that as 1199 and that’s it. Or, you could write it as 1,199.00. Now, numerically, those are identical but what these researchers found was that the price with a punctuation and the trailing zeros was rated as a little bit more expensive than the other one when the subjects who saw one price or the other were queried.

And they were having a difficulty figuring out why that was because obviously they’re the same numerically. But they finally determined that people were totally, unconsciously saying the price in their head, sounding it out. And that when there were significantly more syllables in the price, that it seemed a little bit bigger. So, in that case, you might say that a very simple price with no decimal, no trailing digits, like the 97 cents at the end and so on, might seem a little bit higher.

In general, I would give a little more weight to the odd pricing but I wouldn’t necessarily forget the part about keeping the price looking as simple as possible. Currency symbols too, have the effect of triggering greed and self-interest in people and may make them a little bit more stingy. So, that’s why, on expensive restaurant menus, sometimes you’ll see no currency symbol. No dollar symbol, or Pound symbol, or Euro symbol next to the price but will just have a little number there.

And in those cases, if something, say, is a $39-entrée, you may just see a very simple 39 with no adornment. Actually, the price itself is put in very small. All of that totally de-emphasizes the price. It makes it look simple yet is inconspicuous and does not attract our attention or sort of trigger that evaluation mechanism – that putting $ sign 3-9-.-0-0 might.

Josh:                So, Roger, those are great points. And one thing I’m saying that really would add something around this is if you’re in negotiations with somebody. And what I’ve read, which I also find is true, when I’m negotiation with somebody, I’ve always started at 5000, they go to a 4000. And then I go to 4900, they go to 4200. If I go to 4795, often, I find that people think that’s a well thought out price. And as a result, they stop negotiating.

Roger:             Well, there you go.

You know, I think that in most cases that precision helps. But one thing that’s nice about the digital world these days, obviously, it’s not quite so easy for in‑store signage and so on. But online, you can test these different things quite easily.

And in Brainfluence I’ve got a hundred different techniques that people can use. And there are probably thousands more that you could glean from reading other books, and online sources, and blogs and research papers and so on. But just because something worked either on somebody else’s website or it worked in a lab, or in some other kind of situation, it does not mean that it’s going to work 100% of the time in yours.

Even really sort of obvious well-researched topics like social proof. In other words, a social proof is if you see other people doing something, you’re more likely to do it yourself. The restaurant with a line in front is going to be more appealing to you than the one with a lot of empty tables. So that’s why people put on their websites how many other people have bought this product or how many subscribers this newsletter has.

And probably, 95 times out of 100, that social proof works. But there’s always that example where, for whatever reason, it doesn’t. There are a few places where it clearly won’t.

If you are selling luxury products, nobody wants to know that thousands of other people are going to have this exact same product that you’re buying to separate yourself from the crowd. But sometimes, even in other situations that are less obvious, that social proof might not work. It might not give you any boost. It could even reduce your response a little bit. So, that’s why it’s always important to test things rather than just assuming they’re going to work and going forward and never testing.

Josh:                Well, Roger, I think testing is a great thing, something that we all need to do a little bit more of.

And unfortunately, we are out of time so we’ll have to end it here. I’m sure we could go on for a lot longer. I’m also going to bet that people who are listening are going to at least read your book or maybe even sign up for your newsletter, if you have one. So, if folks wanted to find you and find your books, how would they go about doing so?

Roger:             Well, the best starting point is RogerDooley.com. That’s R-O-G-E-R-D-O-O-L-E-Y. And that’s sort of a jumping off point to my other blogs. My most popular blog is my own, it’s neurosciencemarketing.com, but I also blog at Forbes and at Entrepreneur. I have got my podcast there are rogerdooley.com. But that website will be the gateway to these other places. And also, for interaction and social media, I do interact on LinkedIn and Facebook. But probably my weapon of choice is Twitter where I am @rogerdooley.

Josh:                Cool.

So, if you want to find Roger, that’s how you do it.

And I’ve got an offer myself. And mine is my one-hour free audio CD which is an audio CD course called Success to Sustainability: The five things you need to do to make your business personally and economically sustainable. It’s really easy to get. Take your smart phone out. Don’t do this if you’re driving. But take your smartphone out and text the word SUSTAINABLE to 44222. You’ll get a link. You just click on the link, send me your address, and we mail you the CD. It’s free. It’s a physical thing. You can listen to it in your car. And again, text the word SUSTAINABLE to 44222.

Thanks so much for being with us today. This is Josh Patrick and you’re at the Sustainable Business. I hope to see you back here really soon.

Narrator:         You’ve been listening to The Sustainable Business podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2, or visit us on our website at www.askjoshpatrick.com, or you can send Josh an e-mail at jpatrick@askjoshpatrick.com.

Thanks for listening. We hope to see you at The Sustainable Business in the near future.

 

Topics: sustainable business podcast, Marketing, behavioral economics, neuromarketing

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