October 20, 2014

The Duality Of Consumer Behavior

Today we begin a 3-part series that will attempt to develop a "theory of everything" for advertising. Okay, maybe not a "theory of everything", but...a theory, anyway. Or maybe it will be just another load of bullshit. Who the hell knows? After 7 1/2 years of writing this blog, I think I've finally figured out what the hell I'm trying to say. It's going to get a little heavy on hypotheses and philosophy, so buckle-up and hang on tight.

As we sit here today, we have two competing models of consumer behavior.

The first model suggests that consumer behavior is basically logical. This theory asserts that people behave rationally and do not throw their money away on stupid crap. There is a lot of persuasive evidence for this model. A good example is in retailing. Retailers know that they can stimulate sales by lowering prices, offering discounts, and utilizing other types of promotional activities. This is clear evidence for a rational basis to consumer behavior.

The second model asserts that consumer behavior is essentially irrational. This theory, brilliantly demonstrated by Daniel Kahneman, holds that people are not really aware of their motivations and are ruled by emotions. The evidence for this model is equally persuasive. In this space, I have previously related the story of the Toyota Corolla that was the exact same vehicle as the Chevy Geo Prism, cost $1,500 more, and outsold it 3 to 1.

So we are faced with a problem. We have contradictory models of consumer behavior that both seem to be valid. Either there is another model which we cannot see underlying them both, or we need a more comprehensive explanation that unifies the two.

In quantum physics an elementary particle can be understood as either a particle or a wave. I am going to suggest that in marketing consumer behavior also has a dual character.

Also in quantum physics there are no certainties -- just probabilities and likelihoods. I am going to suggest that in marketing, advertising, and media our strategies have no inevitability about them. Just probabilities and likelihoods.

On the nature of light, Einstein said:
"We are faced with a new kind of difficulty. We have two contradictory pictures of reality; separately neither of them fully explains the phenomena of light, but together they do".
Another type of duality is described in the uncertainty principle which posits that you can know a particle's position or its velocity, but you can't simultaneously know both.

I believe this type of duality and uncertainty is true in advertising and marketing as well.
  • Under certain circumstances, a brand can be described as having a powerful effect on a consumer. And in certain circumstances it may have little to no effect.
  • The same person may buy a brand whose advertising she likes, as well as a brand whose advertising annoys her.
  • The same person may buy products that are clearly differentiated, and products that are generic.
  • The same person may buy products that are exceptionally good values, and some that are hideously overpriced.
This is not unusual. This duality is typical of consumer behavior.

In other words, there is an inherent contradictory duality that confounds us and mocks our most cherished beliefs about consumer behavior.

I'm going to invent an obnoxious term here, but it's necessary to communicate what I'm trying to say. The term is "behavior-plasticity."
  • A customer may behave as if she is strongly attached to a brand, but she can also be easily detached from it. It seems contradictory, but my experience tells me it's true.
  • A customer who seems to be perfectly targeted by a media type, may turn out to be completely immune to it.
  • In the same product category, an emotional message or a logical message may be equally effective, or equally ineffective.
The point is that because of the duality of consumer behavior, people who think they can describe it as either this or that are wrong.

"Behavior-plasticity" -- or the duality of consumer behavior -- is the most mysterious and confusing element of marketing. It is the one factor that marketing people continuously misunderstand in their struggle to describe and predict consumer behavior.

Believing in the orthodoxy of one marketing philosophy, one media philosophy, or one creative philosophy is a trap that disguises the mysterious and fascinating real-world behavior of consumers.

Human beings are both particles and waves. Their behavior can be described in ways that are contradictory, but equally true.

I know what you're thinking...
" ...Okay, Mr. Big Shot, so now you have me all fucking confused with all this uncertainty crapola. So what the hell are we supposed to do?"  Well, stay tuned for our next two exciting episodes and all will be revealed.

Big thanks to Maria Winston for the germ of this idea. 


Schweigh said...

Know that I am infinitely pleased that there is a cynical ad man out there with a horrendously popular blog who described, using quantum physics, the dual nature of human - and by extension, consumer - behaviour.

You nailed it.

Sell! Sell! said...

I agree Bob, I think something that makes ad agencies look particularly stupid is what I call their 'blind absolutism' where they believe that one kind of consumer behaviour is all pervading across all categories and brands, and therefore that one kind of advertising is the answer…


Jeffrey Summers said...

Spot on! You should just post all three so I can binge read them before tomorrow's marketing meeting.

Jim Powell said...

Looking forward to 2 and 3 - brilliant post. It interests me that agencies and marketers tend to see themselves in one camp or another regarding how consumers are. The problem with this is to focus on the individual (are they emotional or rational) and not social context.

The car example is a good one for showing people to be irrational for example. Yet if we look at what it means to some people to own a Toyota v a Chevy in society we may gain some answers. However, how did one car get to be seen as more desirable for example than the other in the first place, what is the brand trading off of?

The heuristic / short cuts that people make are often shown by cognitive scientists like Kahneman for example to show the faults or irrationality in people. Yet the psychologist Gigerenzer shows that many heuristic that people use actually are reasonable and help people make pretty good decisions.

Predicting human behaviour by focusing on whether people are rational or emotional agents will under perform I think compared to utilising social trends that predict behaviour. However, this may mean that you are predicting behaviour that may not be to your liking.

So the question I think becomes what human capacity would you like to defend?

Davis said...

This couldn't be more relevant, I literally just put down Predictably Irrational last night. Great post! Can't wait for the follow ups.

Cecil B. DeMille said...

Classification is a man-made construct. It works in the specific, but fails in the general. You can call the Road Runner "supersonicus delicious" but not all birds are the Road Runner. They could be fleet of foot or tasty or neither one or both. Is that what you're saying? (I'm not very smart and require cartoon analogies to fully grasp complex subject matter.)

I agree with your theory, Bob – which has far more proof than the word "theory" would suggest – and I'm eager to see how you develop it.

Swopard said...

the analogy seems right, but definitions of rational and irrational are not perfect as psychologists define rationality in an abstract way and not in a way that reflects human knowledge of risks (see Taleb 'Silent Risk'). So I bet you will present one unifing theory :) can't wait

MG said...

In the Corolla case, is the decision truly based on emotion, or does the perceived TCO come into play? In other words, do the Toyota buyers pay more for the vehicle because of a historical, data-based lower total cost of ownership over the long haul.

If that is the case, fallacy or not (based on how and where the vehicle were manufactured), it would seem that buyers were in fact attempting to inject financial logic into the argument, not buy purely on the basis of brand.

Stephen Eichenbaum said...

correct again

G said...

Another factor could be that consumers thought (at the time) that Chevy, who did muscle cars well, couldn't compete with the Japanese when it comes to small, fuel efficient and reliable.

Anyone who ever drove or rode in the cars that were developed as a result of the 70s energy crisis knows what I'm talking about.

Chrysler K-Car anyone?

Cecil B. DeMille said...

If I, as a consumer, knew that the vehicles were the same aside from the badge, I think that's an emotional trigger to pay more for one than the other. Identical vehicle = identical TCO. The only rational differentiators at that point are service quality and resale value. Right? The emotional trigger would be pride, I think, but I find that difficult to swallow at that price point. Still, could be...

timorr said...

I am told by economics students that the principle of "ceteris paribus" (translated as "other things being equal") almost never truly applies. I had a client who manufactured identical products (same materials, same factories, same designs) under different brands to create price points. Needless to say, the more expensive brand was perceived, in nearly every test, as being better.

However, there was better distribution of the more expensive brand, better tech support, etc. So the products were not only perceived as differing in quality, but actually were different.

I also suspect there's an effect akin to Gladwell's "thin-slicing" that takes place: Sometimes, when I want a thing, I want it, and become immune to rational appeals, or even price points.

I see the difference you describe in agencies' attitudes toward B2B: Some insist B2B is different from B2C. Others insist it's identical. Not so paradoxically under your thesis, both are wrong.

Yup, I'm both a particle and a wave.

Shanghai61 said...

You're going to have to change the name of your agency ...

Type A. Or Type B. It depends.

Hank said...

Emotion isn't the opposite or contrary of reason. Emotion and reason are two components of the human consciousness. Emotion is the reaction to sensory stimulation. Reason is the power of the intellect to penetrate beneath the surface of a thing to perceive truth. You can pit them one against the other to see a set of polar opposites, but you can see them as cooperating parts of a system. That's more accurate and more productive an outlook.

Eccles9 said...

As a very wet behind the ears young copywriter, a grey haired strategist once told me that 'allowing for all possible variables the consumer will do exactly as they damn well please'.

It's an insight into human nature that has served me well over the decades.

LeShann said...

Funny, I was in the middle of writing something similar, but targeted at a different aspect - the difficulty of a unified marketing theory (similar to quantum/relativity in physics) between the "laws" dictating performance of smaller/niche brands and those of the larger/leading brands. I guess studying/teaching physics is inevitably driving to hyperbole.

Anyway, I do wonder if the availability model put together by Sharp and co is not part of the response to most of these. I suspect convenience is a great normalizer of consumer decision, whether in "wave" or "particle" mode - eg easier to chose, easier to remember, easier to find, easier to buy. I also think more work needs to be done in understanding salience (not just TOM awareness or attitudes, which can at best be proxies of understanding mental convenience/availability).

Another way to look at it is the probabilistic nature of behavior. Individual decisions are very random, influenced by so many variables, but what models like the Dirichlet model show is that with enough time things tend to get back to a norm. This is in part why high penetration brands have an edge over the smaller ones, which I would hypothesize could explain the Corolla thing - Toyota has a higher penetration with the consumer segment than Chevy, if that penetration was inverted it's likely that Chevy would outsell Toyota, without having any changes in brand positioning. In other words, big brands have a strong head start on convenience, and convenience could be a much better driver of decision making than any other metric we normally use.

We do not understand yet the full implications of the mental/physical availability model put forward by the Ehrenberg Bass institute, but they might hold a key to better understanding it.

LeShann said...

NB: in scientific terms, theory is a perfectly appropriate word if you have proof - "hypothesis" is what you're thinking about. Evolution or General Relativity are referred to as theories because they are proven to work.

John McCreery said...

Do ad agencies in the West actually think so simplistically? My colleagues in Japan seem well aware that the proper balance of appeals to reason and emotion varies from product to product and from one target group of consumers to another.

Graham Strong said...

Actually, Toyota tends to have higher shop rates (at least where I live...) so the TCO (note: actual, not perceived as MG touched upon above) would also be higher for the Corolla. Which supports the argument still; it simply means the emotional trigger has to be even bigger.

That being said, emotional triggers can be "rational" as well. If you've had great experiences with Toyota and bad experiences with Chevy, choosing the more expensive option is a "won't get fooled again" hedge against perceived future costs (and pain).

The (imperfect) litmus test would be this: if a decision is based on facts, either real or perceived, it is a rational decision and the emotional triggers are a bonus. If it is a rationalization based on conjecture (as often happens in sales), then the emotional trigger is firmly in control. As Bob mentions though, there is a duality at work that is hard to predict at any given moment.

(I think that's called "Iacocca's Cat"...)