7 Marketing Lessons From Happiness Research

Happiness research, also known as positive psychology, has grown rapidly as an area of academic study in recent decades, resulting in some fascinating findings about what can influence our level of happiness. These findings suggest that certain decisions like whether to get married, moving to the suburbs, or choosing a high paying job can have a significant long-term impact on our happiness. Understanding the key findings in happiness research can help marketers improve the lives of their customers as well as our own.

The Income Plateau

happinessData across studies suggest that increased income has a stronger effect on happiness level at the lower ranges of income, but this effect appears to plateau at a certain level. When people are living in poverty, increased income can provide shelter, food, and transportation, which can reduce worry about life’s basic necessities. However, once individuals reach the middle class, studies have shown that additional income has little effect on the level of happiness. According to the Happiness Hypothesis, the small correlation from increased income may be explained by reverse correlation because happier people tend to get promoted. Despite the ability of richer individuals to buy more products designed to improve the life of the purchaser, we tend to quickly return to our baseline level of happiness, in an effect known as the hedonic treadmill.

The Adaptation Principle

A study of major lottery winners and paralyzed accident victims found that on average, both groups returned close to their baseline level of happiness within one year (The Happiness Hypothesis). People are very good at adapting to changes, which also means that material goods often provide only a temporary emotional boost that quickly fades.

The Progress Principle

We receive positive feelings when we make progress towards our goal, and often overestimate how happy achieving a goal will make us. Tony Hseih, the CEO of Zappos, recounts when he received the call where he learned that his company LinkExchange was sold to Microsoft for about $265 million. “The excitement of LinkExchange had disappeared long ago. Now we just had the drudgery of sticking around uninspired and unmotivated for another twelve months. ‘I guess we should probably walk back to the office then’ I said. ‘Okay’ and so we did in silence”. Often we receive more pleasure from making progress toward a goal than we do from achieving a goal. Products like Farmville can be highly addictive because they provide constant signals that show continuous progress. A training course can be highly engaging if it provides feedback about how the student is growing during the course.

The Paradox of Choice

In the book The Paradox of Choice, Barry Schwartz discusses how more choice can cause anxiety for shoppers. More options can lead consumers to be less confident with their purchase and more likely to feel regret. Too many choices can also cause people to avoid making a choice. Offering a small number of choices can make it easier for customers to make a decision and can lead to less buyer remorse.

The Importance of Control

While too much choice can cause problems, no choice at all can also have a negative impact on happiness. A lack of control can cause negative feelings which can help explain why people tend to be stressed after a traffic-filled commute. Residents of a nursing home who were given small choices like when to have movie night and which plants they wanted, experienced better health and higher levels of happiness. Giving customers a sense of control or the ability to choose can often lead to higher satisfaction.

Experiences Versus Material Goods

The book Happiness Hypotheis describes a study where participants were asked about purchases of experiences (such as a ski trip or a great meal) and material objects. The subjects felt happier when thinking of the experiences and thought this money was better spent. People are often driven to gain prestige through conspicuous consumption, in what the author of Happiness Hypothesis calls a happiness trap. Experiences can provide more happiness because they have social value while luxury goods are often purchased to impress people.

The Importance of Relationships

Happiness research has shown that the quality and quantity of relationships is one of the most influential factors in increasing happiness. The impact of relationships helps explain why church-goers are happier on average than non-church goers since they are often involved in the church community. Products or services that help people improve relationships can have great value to consumers.

Do you agree with these findings or have any to add? Please comment below.

Photo credit: jaja_1985

Marketing Takeaways from The Upside of Irrationality

Understanding the important concepts in psychology can help marketers better understand how their customers think and how this affects their decisions. In his books Predictably Irrational and The Upside of Irrationality, Dan Ariely focuses on our tendency to make decisions that seem irrational. Many economists believe that individuals decisions are based on the rational choice, which involves weighing costs and benefits and seeking outcomes that maximize their utility. However, time and time again, we see scenarios where we tend to make the decision that is not what rational economists would expect. Here are a few interesting examples from the book:

We are very good at adapting to change

We tend to underestimate how quickly we will adapt to a change in our environment. In one experiment they measured lottery winners and paraplegics one year after their life changing event and found that both groups were equally happy with lives. One possible explanation for the unexpectedly low impact of lottery winnings on happiness is that the hedonic boost that you receive from goods often fades as we adapt to the new environment, which is also known as the hedonic treadmill effect.

Marketing takeaway: While the impact of goods on an individual’s sense of well being are often temporary, experiences can have a longer effect because we can derive pleasure from memories, like our childhood trip to Disneyland or our wedding day.

See also: Buying Experiences, Not Possessions, Leads to Greater Happiness Science Daily

The appeal of an individual can be stronger than a thousand

Why is it that when we see an individual drowning we will sacrifice our $100 suit to jump in and save him but we will not donate $100 if we know it will save a person Africa from dying from Malaria. A person that you can see is much more tangible than an individual that is half a world away. Similarly, Michael J Fox is successful at raising money for Parkinson’s because people can relate to him as the person from Back to the Future, whereas it may be difficult for a donor to relate to a charitable organization. Unfortunately we also see this bias when a baby falling down a well gets more media attention than thousands being killed in the genocide of Rwanda.

Marketing takeaway: When trying to appeal to people’s emotions, it can be more effective to use a well known spokesperson that people can relate to like Michael J Fox.

The tendency to seek revenge despite the costs

An experiment described in the book involved participants who were told they were taking part in a game where a stranger decided how much of a cash prize to share with them. The participant can take whatever the stranger decided to share with them, or they can reject the offer which would result in the stranger getting nothing. Although rational economists would expect the participant to take any amount that they are offered, most people will reject the offer if it is very disproportionate, in order to exact revenge on the stranger. Ariely suggests that we are biologically hardwired to seek revenge as brain studies have revealed that the pleasure centers of the brain are activated during the act of revenge.

Marketing takeaway: Although it may be costly in terms of time and money, angry customers can go to great lengths in order to achieve revenge against a brand.

There are several more interesting ideas that can have applications in marketing such as the “IKEA effect” which involves the inflated value individuals place on things that they create.

There are also many great psychology lectures available online for free such as Professor Paul Bloom’s Introduction to Psychology lectures which you can see at Academic Earth.

You can also read my post about Predictably Irrational: Predictably Irrational: Marketing Applications of Irrational Decisions

Marketing Takeaways From The 24-Hour Customer

Time is something that I think marketers often ignore or take for granted. Many marketers continue to push out a flood of messages through various channels like television, newspapers, and email although consumers do not have the time to receive these messages. Additionally consumers often will choose saving time over the added benefit of switching to a better product or service. In some cases, time can be your company’s biggest competitor. Time is the theme of the recent book, The 24-Hour Customer, which examines the role of time in consumer decisions and explains how marketers can design strategies that can overcome the problem of the time-starved consumer.

Dominate your customers time and they won’t have time for your competition

Webkinz is an extremely popular virtual world for kids that had 4.5 million unique visitors in January. With users spending an average of 154 minutes on the site each month, it was very hard for Beanie Babies World to compete. Since kids often have internet time limited by their parents, many are not able to also spend time on a different virtual world. I am a huge fan of the Madden game on Xbox and was willing to wait in line at midnight on release night to purchase it. There are other games that I would like to buy but I don’t because I wouldn’t have any time to play them since Madden dominates my time.

Create Dwell Time

The more time your customer spends in your store or website, the more likely they will buy something. According to the book, “Consulting firm Deloitte has found that customers that use a fitting room in a clothing store buy 85 percent of the time, compared with a 58 percent sales rate among shoppers who did not use the fitting room”. I think one easy way for retail stores to create dwell time is to provide comfortable chairs (or a secret hideout) for husbands who have to accompany their spouses to the mall.

Integrate Purchase Into Consumption
According to the book, “US customers spend only about six minutes a day with e-commerce sites”. However, Amazon is able to extend the time spent with a customer with the Amazon kindle. While the Kindle is great for consuming the books it sells, it also provides a way to purchase most books in under a minute from the same device. Nike also does this well with its Nike Plus site that tracks your runs with the help of the iPod sensor. While you are checking out your running stats, you can also view and order your next pair of running shoes.

Interesting Studies of Consumer Behavior

One reason I really like this book is that it is chalk full of interesting research on consumer behavior. Here are some findings that I that were really interesting.

  • Only 42 percent of Americans report that they enjoy buying goods and services.
  • Consumers are spending only about 28 minutes each day researching and buying goods and services -that’s less than 3 percent of waking hours.
  • A 2009 comScore report estimates that 8 percent of internet users are responsible for 85 percent of all ad clicks.
  • USC research estimates that 45 percent of people’s behavior is spent in repetitive and unthinking activities.
  • A UK study found that shoppers tend to buy from a selection of the same 150 items every week from grocery stores.
  • The Council for Research Excellence found that US adults spend an average of eight and a half hours a day looking at screens.
  • US customers spend only about six minutes a day with e-commerce sites.

This book is a good choice of time for marketers who are interested in learning how to use limited time and attention to their advantage. Adrian Ott also lays out a solid framework on how to evaluate how your product or service as it relates to the consumer’s propensity to spend time and attention.

Full Disclosure: I received a review copy

How Marketers Take Advantage of Cognitive Bias

This is a great presentation by Scott Berkun, who is the author of the book Confessions of a Public Speaker. The talk which is titled “How to Call BS on a Social Media Guru” makes some interesting points about marketing and cognitive bias.

SMC Seattle May Event: How to Call BS on a Social Media Guru from SMC Seattle on Vimeo.

Berkun discusses how marketers take advantage of cognitive bias to persuade consumers to want to buy things without them knowing why they want to buy it.

“It’s research that has been done over the past 10-20 years…that basically points out how flawed our brains are… at making decisions about things. There’s all these inherent kinds of bias that we have that influences us in ways that we don’t notice. Good advertising and marketing take advantage of these things” (9:40 minute mark of video).

He describes the example of a car commercial which shows a good looking guy driving a car through a beautiful valley next to an attractive woman, but the ad tells us nothing about the car.

According to Wikipedia’s definition:
A cognitive bias is the human tendency to draw incorrect conclusions in certain circumstances based on cognitive factors rather than evidence.

There are a long list of almost a hundred cognitive biases that can be seen at Wikipedia.

Some biases that are really interesting are:

Confirmation bias: the tendency to search for or interpret information in a way that confirms one’s preconceptions

Negativity bias: the tendency to pay more attention and give more weight to negative than positive experiences or other kinds of information.

Herd instinct: common tendency to adopt the opinions and follow the behaviors of the majority to feel safer and to avoid conflict.

Basically, Berkun wanted to raise awareness of how cognitive bias influences us to encourage us to make decisions based on evidence. I agree that we should be aware of how cognitive bias can influence our decisions, however I would point out that there are many situations where cognitive shortcuts are very helpful. If you are making routine decisions like which brand of soap to buy, it would be very time consuming if you conducted research on the empirical evidence on which brand is best for your skin. You will probably base your decision on which brand you have had positive associations with in the past with and go with that one.

Is focusing on eliciting emotional feelings in ads rather than focusing on the hard facts manipulative? It does appear to be a more effective method of marketing, but I believe that while marketing can influence people to have a stronger desire for a product or service, the individual always has the freedom of choice to not make a purchase and save the money.

The Placebo Effect and Marketing

dan aPlacebos are a fascinating and incredible phenomenon that demonstrates the power of our minds to shape how we perceive reality. A patient who is given a sugar pill instead of an actual pain reliever can feel the same decrease in pain as if they were to receive a medication with chemicals that block the pain receptors at the cellular level. One explanation of the placebo effect is that we tend to experience what we expect. If you expect to hate a new restaurant, you probably will. If a friend hints that the movie you are about to enter received great reviews, you will probably enjoy it. Our expectations can be so strong, they can create feelings that contradict the actual reality.

An example of this contradiction occurred during a study performed by MIT professor Dan Ariely, author of Predictably Irrational. He asked people to rate how they liked two beers, one was a Sam Adams and the other was a Sam Adams with balsamic vinegar. Most people preferred the Sam Adams with the balsamic vinegar. However when he told people beforehand that one contained balsamic vinegar, most people hated it.

Marketers can take this knowledge and use it to improve the real experiences of consumers by creating an environment of positive expectations. This can be visually appealing packaging- high quality wine glasses or an aesthetically designed box. Or by helping raving customers share their satisfaction through social channels like web forums or Twitter. It can be hinting to a prospect that your company was awarded for great customer satisfaction.

Now that you know the power of expectations to shape perceptions of customer’s experience, what will you do to improve customer experience?

Articles about Placebos

The Placebo Affect Seth’s Blog

Marketing and the Placebo Effect Nueromarketing

How the Placebo Effect Works HowStuffWorks

Article reposted with permission from The Executive Marketing Blog.

Consumer Psychology in a Recession: Harvard Business School Video

Recessionary consumer behavior is discussed in this video with Professor John Quelch of Harvard Business School. He also talks about 4 types of consumers who are reacting in different ways to the economic environment, whether current consumer behaviors will become permanent, and when you should invest in marketing in a recession.

Buyology: Can Brain Scans Provide More Accurate Insights Into Consumer Behavior?

Buyology is an interesting book because it describes a completely new approach to marketing research. Instead of traditional methods of research such as surveys, or focus groups, Buyology explores a new frontier in marketing research, neuromarketing.

Specifically, Martin Lindstrom, describes scientific studies in which subject’s brains are scanned to see what parts of their brain lights up when exposed to certain marketing stimuli such as a brand logo or an advertisement. When different regions of our brain are active, the increased energy requirement means an increased flow of oxygenated blood to that region, which the fMRI can detect and display in a visual format. Lindstrom uses data from these studies to disprove commonly held beliefs in advertising, such as the effectiveness of subliminal advertising and that warning labels on smoking packaging can actually encourage smoking.

According to the book, roughly 90% of consumer buying behavior is unconscious, which is part of the reason Lindstrom believes nueromarketing can a more effective method to find out what consumers really want and reduce the number of product failures.

“Markers and advertisers on the other hand have spent over a century, throwing spaghetti at the wall and hoping it will stick. The fact is that most marketing, advertising branding strategies is a guessing game…Until now marketers and advertisers haven’t really known what drives our behavior so they’ve had to rely on luck, coincidence, chance, or repeating the same old tricks all over again. But now that we know that roughly 90% of our consumer buying behavior is unconscious, the time has come for a paradox shift.”

I think this book is a very interesting read, though it is difficult for most marketers to implement fMRI studies without thousands or millions of dollars to spend on this new field of marketing. However, it looks very promising, as marketing becomes more science and numbers driven in the future.

You can download a free chapter of Buyology at the Martin Lindstrom website.

Behavior Often Contradicts Attitudes

seattle marketingOften times positive attitudes lead to behavior that mirrors the attitude. For instance, whether you like Obama or you like McCain, you probably voted for them. However positive attitudes don’t always predict behavior accurately. For instance, most American’s think it is important to eat a healthy diet, however two out of every three Americans are overweight (1). Most American’s think it is important to save for retirement, however our national savings rate was recently below zero, while Europe’s savings rate is about 20% and Japan’s savings rate is about 25%.

Why does behavior often contradict attitudes? One explanation is Lewin’s Equation, which describes behavior as a function of the person and the environment B=f(P+E). In other words environment often has a strong influence on our behavior.

For instance, if we personally have the belief that education is important, but all our friends think it’s a waste of time and encourage you not to study, then you may skip school or drop out. You may believe it is important to donate to charity, but you are broke, and so you don’t donate money to the Salavation Army bell ringer.

Often marketing assumes that if we can just improve the attitude of our brand, more people will buy from us. However there may be many environmental influences that make this ineffective. I really like the Geico commercials, but I buy my insurance from Esurance because they cost less. I really like Miller, but all my friends don’t, so I end up buying Coors a lot.

As a result, focusing all your marketing resources on attitudes can be ineffective. Spending lots of money on entertaining television commercials could mean more people have a favorable attitude about your brand, but it doesn’t necessarily mean they will buy from you. If environment is a big factor in the behavior of your consumers, it is smart to invest in improving the environment side of the equation. This can include focusing on only the consumers that are in an environment that is conducive to buying from you. Pay per click ads target people who have the means and the desire to buy. Rewarding existing customers focuses on the people who have already displayed the desired behavior. Word of mouth campaigns can create a favorable environment by using social influences of an individual’s peers.

The 5 Cent Hot Dog: How Value Attribution Affects Consumer Behavior

best marketing booksSway by Ori and Rom Brafman is a brilliant book about the forces than lead to irrational decision making. Understanding these forces can have many marketing applications since marketing often involves persuading customers to act irrationally.

One very interesting topic from Sway that relates directly to consumer behavior is value attribution. Basically this is when an individual is primed with a signal that forms a strong belief of the value of the item that sticks in the mind.

There are several fascinating examples of value attribution in action that are described in Sway. The authors tell a story of a Coney Island hot dog salesmen who attempted to undercut the competition by selling hot dogs for 5 cents instead of 10 cents back in the 1910’s. However, the pricing strategy didn’t work because people assumed there must be something wrong with them if they are only half the cost of the typical hot dog. Therefore people had associated a low value to the hot dogs even though they were made with real beef and tasted just as good at the 10 cent hot dogs.

There are numerous other examples of individuals who irrationally base value on one aspect of a product or person, even though additional information is present that contradicts their assumption. Sway describes an experiment in which a world renown violin player played a difficult piece on a million dollar violin at the subway while wearing jeans and a hat. Over a thousand people passed by and almost no one stopped to listen. NBA players who were picked later in the NBA draft played less minutes than players who were selected early in the draft, despite having statistics that were just as good.

The tendency of consumers to value something based on little information is very common. How can marketers use this to persuade individuals to make a desired buying decision? One method is dressing up an average product with superior packaging. Charging a higher price than competitors, having a celebrity endorse a product or advertising a single attribute that is superior to competitors can also sway consumer to assume a high value.

Learn more about the book at www.swaybook.com