Image: Norma Desmond

Now that started out a bit pompous, didn’t it? It’s not going to be “the” best books in marketing but rather my favorite ones.

Anyway, I often get asked to recommend books for those seeking to learn more about marketing, planning, brands, etc. Of course, there’s a huge, long list of good reads out there but, hey, since you asked…here are the books I’d recommend off the top of my head.

Some day I’ll sit down and do a proper list. Promise.

1. Simply Better - Barwise & Meehan
Because I love myth busting and this one busts the differentiation myth (sort of). But most of all because it’s spot on and puts what any marketer is doing into perspective.

2. Marketing in the Era of Accountability – Binet  & Field
Sure, this is not really a “book” (more of a booklet), it’s only about one slice of marketing – advertising – and it’s hideously expensive. But it’s such a goldmine of insight, thinking and facts rather than opinion, that it’s a must.

3. Strangers to Ourselves – Wilson
The analogy of the conscious mind being the tip of an iceberg is wrong. It’s more like a snow ball on the tip of that iceberg. The rest is non- och semi-conscious – or what Wilson labels “the adaptive unconscious”. A fascinating read into what really determines our behavior to a large – no, huge – extent.

4. Eating the Big Fish - Morgan
Nice book on challenger brands, with lots of thinking and neat tricks you can employ even if you’re not necessarily a challenger brand.

5. Marketing and the Bottom Line - Ambler
I cannot not include a book by one of my all-time favorite thinkers, Tim Ambler, on the list. Connecting marketing and branding to cash flow and other financial metrics is still a black hole in many marketers’ minds. “…on average, meetings of top UK management devote nine times more attention to spending and counting cash flow than to wondering where it comes from and how it could be increased.” Sends shivers down my spine every time.

6. How Brands Become Icons - Holt
An iconic book in itself within the cultural perspective on brands and branding – all that mushy, soft stuff that square types so detest but that has the power to leverage shareholder value in astonishing ways if you know how to use it. Of course, it’s pretty damn hard and requires not only brains, but balls.

And for you Swedes, there’s a new book out by Sara Rosengren & Henrik Sjödin at the Stockholm School of Economics: “Reklam: förståelse och förnyelse” . It’s the best introduction I’ve seen to the three main perspectives on advertising – business, consumer and society. So buy it, read it, and then read the rest.

Image: “Genius at work” by patries71

A lot of people in advertising are bound to have heard about behavioral economics by now – the discipline that delivers a groin kick to neo-classical economics and lends some academic backbone to what we’ve known in advertising for a long, long time: that people, for all practical purposes, aren’t rational. Behavioral economics’ ascent to popular fame began with Daniel Kahneman‘s Nobel Prize in economics in 2002, accelerated when Dan Ariely’s book “Predictably Irrational” climbed the charts and recently reached new heights in the form of Richard Thaler’s and Cass Sunsteins’ “Nudge”. In our little advertising business corner of the world, Rory Sutherland has been speaking on the topic here and here.

So much for the history recap (yawn). The question is: What’s it all about? Well, in its simplest form, behavioral economics is about people not behaving like the rational, utility maximizing agents economists often presume they are. But if you find that simple explanation a little too simple, yet have neither the time nor the inclination to read a bunch of scientific papers or even the books mentioned above (confession time: I haven’t read them either), here’s a run-down of some of the major take-outs of behavioral economics for all of us in marketing. No, it’s not a complete list. But hey, at least it’s a list.

1. Loss aversion

A core concept of “prospect theory”, developed by Daniel Kahneman and Amos Tversky. People strongly prefer avoiding losses to acquiring gains. In soccer lingo, people rather play defense. This has powerful implications, since it leads to risk-aversion when people evaluate a possible gain and risk-seeking then they evaluate a possible loss.

2. Ambiguity aversion

Like the old saying goes: “Better the devil you know that the one you don’t”. People prefer a known risk to an unknown risk, even if the known risk is high. This is shown by, for instance, the Ellsberg paradox.

3. The Allais paradox

Named after French economist and 1988 Nobel Prize laureate Marice Allais. It states that in a situation of uncertainty vs uncertainty (=risk) people maximize expected value, whereas in a situation of certainty vs uncertainty the same people prefer certainty and therefore maximize expected utility (=internal satisfaction) rather than value. The fact that people shun risk probably seems self-evident to you, but the inconsistent behavior illustrated by the Allais paradox contradicts any paradigm that holds individuals to be rational beings, such as neo-classical economics – or the paradigm that still seems to prevail in many companies, for that matter.

4. Framing

When people are to choose between different options, their decisions can be altered simply by how the options are expressed. A classic experiment by Tversky and Kahneman found that people made inconsistent choices in disease prevention strategy depending on whether the options involved were framed in a positive or negative manner.

5. Choice architecture

Similar to framing – but whereas framing deals with how choices are expressed, choice architecture has to do with how choices are presented structurally. For instance, organ donor programs could be made more successful simply by employing an opt-out process, where people would have to actively refuse donating their organs (“check the box if you do not want to donate your organs”) instead of an opt-in process.

6. Decoy effect

By introducing a third, assymetrical option in a consideration set of two options you can influence how people choose between the two original options. The important thing to keep in mind here is that the purpose of the added option is to alter people’s choice between the two original options (often to make people choose the more expensive option) and therefore the added option needs to be assymetrical, i.e. appear somewhat “strange” and make people go “hm, who would ever want to choose that?”. As the name implies, it’s a decoy.

7. Hyperbolic discounting

Would you rather be given $80 today or $100 a year from now? Given two similar (but not necessarily identical) rewards people generally prefer one that arrives sooner rather than later. We discount the value of the later reward, by a factor that increases with the length of the delay.

Congratulations, you are now a full-fledged behavioral economist. Or not. But these are interesting ideas that could possibly have – and have been shown to have – very practical implications for marketers. Exactly what to do with them and how to use them to your advantage will, however, have to wait until another post. So that’s all for now. Thanks for reading!

Update: As suspected, it turns out the list of 7 things should actually be the list of 8 things (or possibly 9, 10, 11…). Carl was kind enough to post a comment directing my attention to the concept of “anchoring”, which means when making decisions, people tend to overly rely on a specific piece of information or a specific value and then adjust everything else to that value or information. Thanks, Calle!

Image: Dunechaser

In the February issue of Admap, Paul Feldwick makes a brilliant bulls-eye comment on the supposedly “new” age we’re living in as marketers and advertisers. Essentially, he says it’s all bullshit. But he does put it a bit more eloquently than that, and since I can’t express his point nearly as good as he does himself (even though I have tried), here are a few excerpts from the article:

“There is a widely repeated narrative that goes something like this: the internet has changed everything. The new generation of consumers is sceptical, ‘empowered’, and no longer susceptible to advertising as we have known it. All previous marketing knowledge is irrelevant.”

“But what evidence supports this huge leap to the ‘radical new psychologies’ that supposedly make this group immune to advertising and brands? Are we to believe they no longer buy coffee at Starbucks, drink Coke or PG Tips, wear clothes from Primark or Uniqlo, fly Virgin or aspire to drive a Porsche?”

“A key part of such ‘world has changed’ narratives is the implication that everyone before the present generation (who miraculously appeared last week) were obedient patsies, who responded uncritically to every ‘message’ they received. But I don’t believe yesterday’s consumers – people such as me, you and Richard Scase – were much more credulous or naive than today’s.”

“Let me suggest, instead, that advertising as always worked by a more complex process of suggestion and seduction. Successful advertising may have influenced our choices, but it never ‘told us what to buy’. We may choose a brand that comes readily to mind, or one we associate with positive feelings: these factors can be influenced by advertising.”

Read that last paragraph again. Please. And please repeat it to anyone in marketing who doesn’t understand it already. Which seems to mean pretty much everyone in marketing these days.

John Wanamaker was a genius. He pioneered the concept of the department store, he was the first to systematically employ truth in advertising and he invented the price tag – believing that if everyone was equal before God, then everyone should be equal before price.

Nowadays, however, he is most widely known for the quote “half the money I spend on advertising is wasted; the trouble is I don’t know which half”. And who could blame him for it? After all, this was over a hundred years ago. Since then, mankind has learned to master heart transplants, invented the computer, eradicated smallpox and walked the surface of the moon. And, believe it or not, figured out a great deal about how advertising actually works.

What’s more, the thing is that Mr Wanamaker firmly believed in advertising and it was absolutely critical to his empire-building.  So I would interpret his quote not as meaning that advertising is a waste of money but rather as “advertising is so crucial that the advertising budget is the very last thing I’ll cut – no matter what”.

So I’ll say it again: Mr Wanamaker was a genius and should be admired for his achievements. Fast-forward to today and I’m not as impressed. Depressed, would be a more appropriate sentiment. Why? Because you hear the Wanamaker quote being thrown around even to this day, not only by cackling digital cockerels – which comes as no surprise – but also by people actually in advertising and marketing.

Well, I have two words for you: Blame yourselves. If in this day and age you don’t know better than to think that a big chunk of your advertising investments go to waste it’s nobody’s fault but your own.

Firstly, you don’t know whether your ad investments pay off because you don’t know how to measure them correctly. Advertising effectiveness always has to be evaluated both in the short term and long term, since the main thing advertising does is that it affects the brand being advertised, which in turn influences purchase behavior. The model for how almost all advertising works is thus Advertising -> Brand -> Sales and not, as most people still seem to think (probably because they even haven’t thought it through), Advertising -> Sales. In spite of this, the most common, and a lot of the times the only, way marketers measure “effectiveness” is by means of ad recall, ad liking and ad-induced purchase intent. I’m sorry, but that’s just plain stupid – and of course it will lead you to thinking that most of your ad money is wasted.

Secondly, and more importantly, you probably are wasting your money. But, again, that’s not advertising’s fault, it’s yours. You’re wasting money because you are stuck in an outdated model of how advertising works. You still sing praise to AIDA (born in 1896 as a model for personal selling and never meant for advertising) and still think advertising is about information processing, i.e. about transferring messages from sender to receiver, when, in fact, it works mainly through creating, altering and strengthening brand associations and brand relationships.

The reason behind this misconception is that marketers seem to be the only professionals on earth who still think that people are fundamentally rational beings (and also that they’re actually interested in actively decoding and responding to advertising). Ok, so it’s not enough for you that every psychologist, neuroscientist and behavioral scientist agree that’s not the case – so be it. But for heaven’s sake, when even the disciplines of economics and finance, which used to be all about rationality, are adopting the fact that people’s behavior is primarily irrational and emotional, don’t you think it’s time for you to rethink your position?

Probably not.

Because at the heart of the matter is an even more depressing fact: Most marketers aren’t all that interested in how advertising works and in how it should be used to sway people’s decisions in their favor. They have never read a book on the matter, never downloaded a research paper, never attended a conference or engaged in a discussion on the topic of how advertising works. And it doesn’t stop there. If they were merely passively ignorant, things would be ok. Not good, but ok. However, not only do most marketers not understand the fundamentals of communication and aren’t very interested in it; to make matters worse they insist on sticking to their obsolete models, mostly based on the despicable notion of “common sense” (of which Einstein said “common sense is the collection of prejudices acquired by age eighteen”), thus making it difficult and sometimes damn near impossible for people whose job it is to actually know and master these things to, well, do their job.

And then, at the end of the day, after all the nonsense, they still have the nerve to blame advertising, e.g. by firing away platitudes to the effect that half the money they spend on advertising is wasted.

So, Mr Wanamaker didn’t need it and may be excused for living a hundred years ago, but for anyone wanting to work in marketing in this century, here’s a piece of advice:

Take a look in the mirror. Read a book. And grow up.

It’s 11.58 pm and I do believe I’ve just about had enough of it all. Seriously.

(Image: gterez)

Image: Genista

That’s how John Maynard Keynes put it and although he wasn’t talking about marketing, his words certainly ring true to all of us working with marketing or advertising strategy. This became apparent to me after reading a post on Micco Grönholm’s “The Brand-Man” blog (Swedish only), where he discusses an experiment from behavioral economics dealing with the role of emotions in decision-making and why we don’t learn from our mistakes. Micco’s post was great in itself, but it also made me think of this clip where Daniel Kahneman makes a distgustingly excellent observation: “For a firm, in principle, there is a long horizon. People have a much shorter time-scale. They have to have three meals a day, a salary every month, a bonus every year…”

Bam! Right there, just like that, he blew strategy work right out of the water. Since strategy, in essence, deals with long-term planning and people concern themselves with the here and now, there isn’t much hope for the former. Sure, most marketing people like talking about strategy, workshopping their way through strategy processes and producing strategy documents. Maybe because it makes them (or should I say “us”) feel important. Maybe because it’s fun (it is).

But does it matter?

I’m thinking maybe not, because not only does adhering to strategy require people to be able to reason in abstract concepts, it also often means sacrificing small but concrete short-term gains for larger but long-term, and thereby more vague, ones. And as the Allais paradox shows, when faced with a situation of certainty vs uncertainty, people maximize utility over value, i.e. prefer the more certain outcome even if its value is smaller. Also, focusing on the long-term doesn’t seem to be very conducive to most marketing people’s careers.

However, I’m not prepared to throw my hands in the air and open a coffee shop on a small Greek island just yet. I haven’t given up on strategy, I have merely reached a couple of conclusions. For a strategy to even have the slightest chance of making a difference it has to be:

1. Dead simple (pun intended). If it doesn’t stick the first time, it never will. And nobody’s going to read the documentation.

2. Expressed as an idea. An idea that can actually inspire people. Not something that makes you nod your head going “yeah, that makes sense” but the kind of thing that makes you feel two inches taller.

I guess what I’m talking about is what is normally not labeled as strategy but as “vision”. Like Disney’s “We shall make people happy” or Nike’s “If you have a body, you’re an athlete”. The Romans called it casus belli, something to go into battle for. And possibly to die for. Perhaps that is the most realistic way forward for most companies – good tactics and good people combined with a clear casus belli that can energize them in the same direction.

Enough of this talk of death. To summarize, and to end on a somewhat more cheerful note, I’ll let Robin Williams express the essence of what I think any good strategy should be able to answer:

“According to the modern perspective, Freud’s view of the unconscious was far too limited. When he said (following Gustav Fechner, an early experimental psychologist) that consciousness is the tip of the mental iceberg, he was short of the mark by quite a bit – it may be more the size of a snowball on top of that iceberg. The mind operates most efficiently by relegating a good deal of high-level, sophisticated thinking to the unconscious, just as a modern jumbo jetliner is able to fly on automatic pilot with little or no input from the human, ‘conscious’ pilot. The adaptive unconsciousness does an excellent job of sizing up the world, warning people of danger, setting goals, and initiating action in a sophisticated and efficient manner. It is a necessary and extensive part of a highly efficient mind and not just the demanding child of the mental family and the defenses that have developed to keep this child in check.”

The book is “Strangers to Ourselves: Discovering the Adaptive Unconscious” by Timothy D. Wilson. More to come, I’m sure.

So…dopamine isn’t about reward, it’s about the anticipation of reward. And if you block the dopamine rise from occurring you won’t get the work done, which means that dopamine isn’t only about the anticipation of reward, it’s also about goal-directed behavior. Perhaps most interesting of all: if a “maybe” is introduced into the equation, i.e. if you don’t get the reward 100% of the time, your dopamine will increase even more. So there you have it, the reason we are suckers for playing lotteries, slot machines and other games of chance.

Do watch the whole clip and just bask in the genius of Robert Sapolsky. And, not the least, in the fact that someone who is one of the most outstanding professors at the second best university in the world can look this cool.