Managing the Environment: A Study on the Broken Window Theory

by Gareth Kay

There’s a ton of good stuff out there about how people really do things, and how behavior really spreads (Mark clearly has contributed a huge amount to this). And as someone working in advertising, it’s often quite depressing learning that it’s not what we do that really matters, but what people do to what we do; that advertising hasn’t got the strong influence we might like to think it does (shock horror, people don’t do what we tell them or think about things how we ask them to).

So, is there a role and future for communications? Well, perhaps there is but it’s a little different to what we tend to think. This week’s New Scientist has an excellent article about some research at the University of Groningen that empirically proves the ‘broken window’ theory. Here’s an excerpt:

In the most striking experiment, Keizer left a €5 note protruding from a fully addressed envelope that itself was poking out of a mailbox. The team discovered that people were less likely to steal the money if there was no graffiti or litter on or around the mailbox.

With no litter or graffiti, 13% of the passers-by stole the money. Thefts doubled to 27% when the mailbox was daubed with graffiti, or to 25% when it was surrounded by litter. “It’s quite shocking that the mere presence of litter doubled the number of people stealing,” says Keizer.

In another experiment, motorists returning to collect their cars were three times more likely to trespass through an illegal, 200-metre short-cut to the car park if bicycles had been illegally locked to railings next to the forbidden entrance.

A massive 87% took the short cut when they saw the illegally parked bicycles, despite a police sign saying “No Trespassing”. This compared with 27% trespassing when the bicycles were not locked to the fence.

Another experiment in a cycle park bearing a clear anti-graffiti sign, revealed that cyclists were twice as likely to leave litter if the researchers had daubed graffiti on the walls. The team attached bogus flyers to the bikes’ handlebars to put the owners in a situation where they had to decide whether or not to litter.

So, perhaps we should think about communications as being more about environment management, creating an environment where people are more likely to behave in a favorable way. About seeding the right environment where behavior is more likely to take hold. Which puts us squarely back in the culture business…

Image by Nesster

You can read more great marketing content by Gareth Kay at his blog Brand New.

Predictably Irrational: Marketing Applications of Irrational Decisions

Predictably IrrationalI just finished reading Predictably Irrational and think it is a must read for all marketers because of all the marketing applications Dan Ariely describes in his book. Here is a list of some of the marketing applications of social psychology that I found most interesting and useful for marketers.

The Influence of Free
Ariely describes several experiments which show that people are more likely to choose something that is free because of the strong influence free has. In one experiment he discounted a premium chocolate to an attractive price but discounted a Hershey’s Kiss from 1 cent to free and this altered the behavior of customers dramatically with many more people choosing the Hershey’s Kiss. He observes that we often make irrational decisions when we are presented with a free option such as taking a radio promotion shirt that we don’t even want. Another example he uses is when Amazon advertised their free shipping and got a substantial boost in sales. Free has a tremendous influence on consumers.

Price Priming
In some experiments Ariely primed subjects to write down the last two digits of their social security number and then had them bid on items for sale. He found that people who wrote down higher numbers were willing to pay more for the items and suggested that priming people with high numbers can influence them to pay more. He also auctioned off a poetry reading and depending on whether he asked how much they were willing to pay to attend or how much they would need to get paid to attend, greatly influences the price they were willing to pay. This suggests that the price consumers are willing to pay can be influenced by priming them with a suggestion.

People tend to assume that a restaurant must be good if it is crowded or there is a long line to get in. This effect is called herding and has a great influence on perceived value. But Ariely also suggests that there is self herding, where we assume something has value because have often bought a product or service in the past. Many customers of Starbucks go to Starbucks simply because they have been customers many times in the past. Ariely says this is irrational because we often bypass a cost-benefit analysis when we buy out of habit. He also observes that Starbucks was able to create an experience so different from anything else on the market that people were not anchored to what they previously paid for coffee. Soon customers became accustomed to paying much higher prices for coffee and never asked if the high cost was worth it.

Placebo Effect
The placebo effect may be one of the most powerful effects in psychology and represents the cause to a lot of our irrational decisions. In the middle ages kings had “the royal touch” and it was widely believed that people could be cured from debilitating diseases just from being touched by the king. Marketing can use the placebo effect to create a belief in the mind of consumers that is so strong that it becomes a reality. Marketers can actually improve the satisfaction of customers by using the placebo effect in this way, thus creating real value.

Predictably Irrational has many more interesting examples of how psychology can affect the behavior of people. Economic theories often assume that humans will act rationally, but most marketers know that consumers often act irrationally when making purchasing decisions. If you are interested in understanding the irrational decisions that consumers often make, then it would be irrational not to pick up this book.

Why We Like Expensive Things More

Scientists at Cal Tech and Stanford have discovered that wine tastes better when it is more expensive. Subjects preferred wine labeled as $90 dollars over wine that was labeled as $10, even though they were the exact same Cabernet Sauvignon. The functional magnetic resonance imaging of the subjects showed that more blood and oxygen was sent to the medial orbitofrontal cortex, which is thought to be responsible for judging the pleasantness of an experience. The study shows that the practice by marketers to increase the price of a good can affect consumers actual experiences at a physiological level. This can explain why people tend to like expensive things more and how a price premium strategy works.

Source: The Naked Scientist Podcast

Happiness vs Status

It would seem logical that people would choose happiness over status but many consumers choose the latter. According to Dacher Keltner, Psychology professor at Berkeley, the data across studies show that once people have made it to the middle class, there is a very small correlation between money and happiness (he states a correlation of .11 to .13). “Economists got it wrong” he argues. Keltner explains that money matters to people in the lower class because it allows them necessities like health care and transportation. However, starting in the middle class money does not influence the sense of well being. If this theory is correct then why do consumers act as if more is better?

One explanation is the human the need to display status. According to– “In the end, when dealing with (and selling to) people, everything always comes back to status. In a traditional consumer society, he or she who consumes the most, the best, the coolest, the most expensive, the scarcest or the most popular goods, will typically also gain the most status.” The importance of status can explain why happiness is much lower in Japan then you would expect based on their economic prosperity and absence of crime and social ills. For consumers in America, the need to display status is one of the major drivers of demand and for many it supersedes happiness.

Another possible explanation to why consumers act as if more is better is because people are poor predictors of what will make them happy. This is the thesis of Daniel Gilbert, Psychologist and author of Stumbling on Happiness. For instance, people may predict that a promotion will give them a great boost in their happiness level, but despite the outcome their happiness level is virtually unchanged. Consumers might predict that buying that new 70 inch screen will make them happier, but it actually has little effect.

Economists are trying to refute this “money doesn’t buy happiness” theory, but there is strong explicit data across many studies that supports it. Fortunately for marketers, many people still choose status over happiness or poorly predict that better stuff will make them happy.

For a great lecture that discusses the psychology of happiness download UC Berkeley Pscyh 156 Human Emotion lecture 12/10 from iTunesU

Why Money Doesn’t Buy Happiness article in Newsweek

The Compromise Effect

The Compromise Effect states that a consumer is more likely to choose the middle option of a selection set rather than the extreme options. For example, a car-shopper who is given three options: the low-priced basic model with no extras, a high-priced fully loaded model with all the extras, and a mid-priced model with some extras, will most likely choose the middle option.

Retailers often take advantage of this effect to increase sales by adding a more expensive model. However according to the study Extremeness Seeking: When and Why Consumers Prefer the Extremes (Gourville and Soman), as the number of options increases and the trade-offs become less obvious, consumers become more likely to choose the low or high extreme.

Previous studies have demonstrated the compromise effect using alignable assortments, where number of features between options are clearly discernible like number of functions of calculators. But this study looked at non-alignable assortments like college majors, where trade-offs are more complex, making the decision more difficult. The uncertainty and perceived risk of purchase regret results in the consumer deferring to one of the extremes.

The study counters Compromise Effect that has been called the “among the most important and robust phenomena documented in behavior research in marketing.” Knowledge of this research can help brand managers set optimal product assortments to maximize profits. By increasing options in an alignable assortment a manager can encourage demand for the middle choice, while by increasing options of a non-alignable assortment he/she can increase demand for the extremes.

Self Checkout Can Make You Lose Weight

A study by IHL consulting shows that self checkout at grocery stores can help people lose weight. They found that when consumers used self checkout their impulse purchases dropped 32.1% for women and 16.7% for men. IHL suggested that this was due to self-checkout lanes having less junk food displayed and lines were shorter, limiting time captive audiences have junk food staring at them. According to IHL, women consume enough calories from impulse items to gain 4 lbs. a year, while men under 25 consume enough calories to gain 8 lbs. per year.

Does anyone not agree that every large grocer should have self checkout as an option. It saves people time, making their experience more pleasant. The study also found that 86% of users have a positive view of the technology (of those having used it at least six times). It frees up employees to do other things like help customers find items.

On a side note, the study found that the most popular voices for the self checkout were Tom Brokaw, Walter Cronkite, Don LaFontaine (the movie trailer guy), and Darth Vader.

KFC Pilots Nose-Based Advertising in Office Buildings

Here’s a crazy story from KFC is piloting an “scent-focused” campaign that will deliver food filled mail to corporate mail rooms at the lunch time mail drop. The mail will contain chicken, a side item, and a biscuit aimed to release the aroma of fried chicken throughout the office and trigger the cravings of busy cubicle dwellers.

“There is truly no better brand ambassador worldwide than the signature aroma of freshly prepared Kentucky Fried Chicken,” said James O’Reilly, chief marketing officer for KFC. “And we couldn’t think of a better way to showcase the value of our new $2.99 Deal than to inject the mouth-watering scent of Kentucky Fried Chicken into the corridors of corporate America.”

I applaud this very creative and risk taking move by KFC’s marketing team. This tactic can be effective because it’s such a unique approach. It could attract complaints but I think they are smart enough not to inundate office workers. Hopefully it’s not a new medium that will fill our office halls with a different scent ad every day.

KFC Press Release

I'll Have the Icecream Now and Vegetables Later

There is a great study by Harvard Business School titled “I’ll Have the Ice Cream Soon and the Vegetables Later: Decreasing Impatience over Time in Online Grocery Orders“. The study found that consumers tend to choose “want” items in the short run and “should” items in the long run.

So in other words a person shopping at Kwick-e-mart would buy the icecream, while the person shopping on would buy the vegetables. A person who will have immediate satisfaction will likely act on impulse and urge to satisfy their immediate desires. However if you have to wait a while to enjoy your product, you would be more thoughtful of the future consequences of your decision, and therefore more likely to choose the healthy option.

We analyzed a year of individual-level data from a North American online grocer to determine how the delay between when a person’s order was completed and when it was delivered affected the content of the order. In general, as the delay between order completion and the date a customer selected for delivery increased, customers spent less money per order (or behaved less impulsively), ordered a higher percentage of “should” items (e.g., vegetables), and ordered a lower percentage of “want” items (e.g., ice cream).

This is great news for marketers of health foods who can encourage consumption of their products by offering them via online channels. If online grocery became more cost efficient and widely adopted, we could see a healthier population as a result. The study about kids preferring anything in a McDonald wrapper shows the awesome power of influence marketers have over society. Online groceries could help healthy food marketers get more consumers to adapt a healthier lifestyle.

Emotional vs Logical Priming

There is a really neat study on how emotional and logical priming affects consumer choice described in the book Made to Stick. In 2004 Carnegie Mellon did a study to determine whether people are more motivated to give to a cause if they were primed emotionally rather than logically.

Subjects took an irrelevant survey in which they were paid 5 one dollar bills. They were unexpectedly given an opportunity to donate a portion of their payment to charity.

The first group was given a request letter that gave statistical evidence about the masses of needy people, for example: “In Zambia severe rainfall deficits have resulted in a 42% drop in maize production from 2000, as a result an estimated 3 million Zambians face hunger”.

The second group was given a request letter that told an emotional story about a single girl.
“Any money you donate will go to Roqea, a seven year old from Maui Africa. Roqea is desperately poor and faces the threat of severe hunger and even starvation. Her life will be changed for the better as a result of your financial gift.”

The logically primed people gave an average of $1.14 while the emotionally primed gave $2.38.

Then the researchers tried to give a third group both sets of information, thinking a emotional argument paired with a logical argument would encourage people to give more. This group gave an average of 1.43.

The study not only showed emotional priming was more than twice as effective as logical, it showed that logical thinking can interfere with emotional thinking. The researchers suggested that when people think analytically, it makes it difficult for them to think emotionally.

If your goal is to persuade, focus on the emotional and avoid logic.

Year of the Dog

Business Week explained a fundamental shift in the way consumers spend on their pets. Americans are treating their pets like furry little humans and the pet industry is currently at $41 billion a year which is greater than the GDP of all but 65 countries. The yearly cost of buying, feeding, and caring for pets is greater than the yearly cost of movies, video games, or listening to music.

The humanization of pets causes owners to buy products that fulfill human needs for their pets such as medical care, self esteem, and self actualization. Eli Lily makes a drug for Separation Anxiety and Phizer for Obeseity. People are buying strollers, nudicles, and treats shaped like eggs and bacon. One third buy gifts for their dogs on their birthday!

In the 22 Immutable Laws of Marketing by Al Ries, he uses the example of icecream for dogs to show how no amount of marketing can make a stupid idea work. I don’t think this is a bad idea anymore because of this shift in our culture.