If you’ve ever felt the pressure to buy something because the website said there were just two left at that price or that the sale was ending soon, you’ve experienced just two of the many techniques using neuroscience to advertise online.
Today’s guest is Roger Dooley. Roger is an author and international speaker. His books include Friction, one of the Best Business Books of 2019, and Brainfluence now in 11 languages. He writes the popular Neuromarketing Blog and Brainy Marketing at Forbes.com. He co-founded College Confidential, the leading college-bound website.“There’s nothing inherently wrong with using scarcity in marketing. It’s when you see false scarcity, that’s not so clear cut.” - Roger Dooley Click To Tweet
- [1:02] – Roger’s background began in engineering but he found his way into marketing.
- [2:32] – Neuromarketing is using the understanding of how our brains work to market better. Roger describes it in more detail as well.
- [3:47] – One of the major techniques using psychology in marketing is scarcity.
- [5:27] – Another technique is to use social proof. Roger uses travel sites as an example.
- [6:16] – Many large companies, specifically travel sites and hotels, hire psychologists for the purpose of marketing.
- [7:50] – There’s nothing wrong with using scarcity in marketing, but Roger and Chris discuss those who do not use this technique ethically.
- [10:03] – Chris shares a personal story of a sales job where his ethical selling and integrity created return customers.
- [14:04] – The first step in recognizing the legitimacy of scarcity techniques is to be aware that they exist.
- [14:27] – Roger discusses another technique called reciprocity.
- [15:47] – Always evaluate the legitimacy of product reviews.
- [16:33] – Authority is another technique used. Roger explains how the psychology behind this works.
- [17:50] – Through Covid, the authority technique was seen often.
- [19:30] – One area that Roger has been recently focused on is the area of friction. How does this work in the sales field? Amazon has been using it for a long time.
- [21:33] – Roger shares a story about how LinkedIn used the friction technique.
- [23:40] – Even news sites use the startup friction technique to gather subscribers.
- [25:18] – How do vendors use more friction to retain subscribers or customers?
- [28:10] – The return process can also be sketchy, but in the case of Amazon, making this process easy has created reciprocal trust.
- [33:07] – There are many rebate offers that can be abused that were very popularly used in the past. Roger explains how that worked and that it isn’t used as often anymore.
- [36:20] – When you express the same deal to someone as a loss or a gain, the loss looms bigger than the gain. Deals like this prey on loss aversion.
- [37:54] – There was some research done about random higher prices put onto specific items.
- [39:14] – Decoy marketing is very popular recently because of the surge in subscription services.
- [42:03] – Another form of decoy marketing is when there’s a better product offered at the same price of the lesser product.
- [42:52] – Always look for things that might be manipulative.
- [44:02] – Everyone is impacted by these techniques differently. Price sensitivity, urgency, and fear of missing out are traits that are affected differently.
- [45:12] – AI is used to better control personalized/customized offers. Roger explains the pros and cons.
- [47:28] – Generally speaking, engagement on video content is great. When AI suggested videos are accurate, things are great, but engagement can actually be weaponized.
- [49:18] – What happens when there’s too much engagement?
- [51:51] – Adding friction in the right places can be a good thing for businesses.
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- The Persuasion Slide by Roger Dooley
I'm so excited to be able to talk to you. Can you give me a little background about how you got involved in marketing?
Probably my earliest exposure was way back in engineering school when, oddly enough, I minored in psychology and took a psychology persuasion class focused on advertising. But I pretty much set that aside for years. I worked as an engineer. I worked in then-product management and corporate strategy.
I'll find my way back into the marketing field in a big way when I bailed out of the corporate world to co-found a direct marketing business in the early days of home computers. That really acquainted me with a lot of marketing and really taught me some of the techniques I'm still using today in terms of testing and evaluating results and trying to take as quantitative an approach to marketing as possible.
About 15 years or so ago, I saw two areas coming together: neuroscience and marketing. I wasn't the only person to see that. There are already some early neuromarketing startups out there, but I began writing about it. I got a little bit of traction, focused more on that. I've been writing about that space ever since.
Over time, I changed a little bit from a more neuroscience-oriented approach to also incorporating behavioral science and psychology. Not only because I've always found those fields interesting, but because those tools are really more commonly used by brands, and they're much more accessible to smaller-scale businesses, too.
How do you define neuromarketing and that concept? Because I think, for me, I've done some marketing over the years. I'm a little more tied in with that, but someone who's not involved in the marketing space, neuromarketing? What the heck is that?My personal definition of neuromarketing is any use of our understanding of how our brains work to market better. -Roger Dooley Click To Tweet
My personal definition is any use of our understanding of how our brains work to market better. That's a little bit broader definition and somewhat used. Others would equate it with what's been called consumer neuroscience, using tools like EEG or FMRI or maybe biometric measurements to evaluate how people respond to ads or other kinds of marketing. But I prefer the all-encompassing approach, because really, I think you need to understand the continuum for one. Also, because until recently, those neuroscience tools have only been available to big brands.
BMW or Coca-Cola could run your marketing studies on the Super Bowl ad, but even fairly sizable businesses could not afford to try and answer many, if any, questions using those kinds of tools. Whereas, any scale business can use behavioral science to do a better job for their customers.
On a broad level, is this a more sophisticated way of adding urgency? Because that's one of those classic sales techniques. The sale is going to end in five minutes.
Right. Well actually, that is one of many techniques that are based on psychology behavioral science. Just about a week or so ago, I dropped on my podcast and interview with Robert Cialdini, the author of the classic book, Influence: The Psychology of Persuasion. He's just out with a new addition that added a seventh principle. The seventh principle has been out there for a bit, but now the new Influence incorporates all seven principles. These are fundamental for any understanding of how to use psychology in marketing.There's a huge amount of science that shows when something is scarce, that thing becomes more desirable. -Roger Dooley Click To Tweet
One of those seven principles is scarcity, i.e., we only have two left. There's a huge amount of science that shows when something is scarce, that thing becomes more desirable. The two things could be identical, but if one is scarce and the other isn't, the scarce one seems better. This is also related to urgency and fear of missing out because people are loss-averse. It's a fundamental principle that was found by Kahneman and Tversky years ago. Kahneman won a Nobel Prize for the effort.
When you combine scarcity and loss aversion, you've got a very potent tool there to influence our behavior. That's why when you go to a travel site, perhaps an airline or Expedia or someplace like that, you'll see all these queues for scarcity. There's only two hotel rooms left at this price, and 20 people are looking at this hotel right now. They're not saying they're looking at your particular room, but they're telling you this to create that sense of scarcity and add urgency. Another Cialdini principle is social proof, which is when you see other people doing something, you’re more likely to do it yourself.When you combine scarcity and loss aversion, you've got a very potent tool there to influence our behavior. -Roger Dooley Click To Tweet
That's why if you're advertising your product, you'll say you've got 10,000 satisfied users or a million customers, because that will give people comfort in saying, “Well, the people are doing this, so it's going to be OK.” You see these same travel sites saying, “Forty-three people have booked this hotel in the last 24 hours.” Then that's showing a lot of people are actually booking at this hotel, adding social proof.
If you want to see an interesting use of these various tools in behavioral science, I think many of these travel sites—whether an airline or a consolidator—are excellent examples because they employ behavioral psychologists to work on these tools. They employ extensive testing. They will A/B test stuff. I'm sure that if you see that only two rooms are left at this price, that's because two rooms left tested better than one room or three rooms. Some of the tricks…
There's nothing wrong with scarcity. If you go to Amazon, sometimes you'll see, “Only three of these left in stock. More are on the way.” To me, there's a very legitimate use of scarcity. It’s telling you that there are many left. They put that in big colored type, by the way, because they understand that's gonna be a lot more effective in selling. But it's honest. At least I believe it's honest that they really only have three on the shelf and there are more coming. That tells me that if I want this really badly, really quickly, maybe I should order sooner rather than later.
Where you see false scarcity is in travel sites. One of the tools or techniques they reportedly use is that they are carefully worded. There are only two rooms left at this price. Now, does that mean that when those two rooms are gone, the price is going to go up 10% or will it only go up $1 or $0.50? Who knows?
To me, that's a gray area. If there's going to be a legitimate significant price increase when those two rooms are gone, then that's a very ethical, valid use of scarcity. If it is a false scarcity, then that's not so clear-cut. Now, they can say that we’re technically being honest. An even more blatant example I've seen at […] websites I've visited—you’ll see a big sale: “Prices expire at midnight tonight.” You’ll say, “These prices are great. They're half off. Better make a decision.” Then you go back the next day and the same big sale is on and the prices still expire at midnight. To me, that is totally unethical.
When you talk to anybody—whether it's Robert Cialdini or even, say, the late Zig Ziglar who was the sales guru that taught salespeople many of these closing techniques that we hear about—they all emphasize that it is important to use these tools in a way that benefits the customer, that is not harmful to them, that’s not deceptive but is ethical.
In fact, Zig Ziglar said that your most important tool for persuasion is your own integrity. To me, that is a key lesson. Even though he taught salespeople 20 ways to close an order, he still emphasized that your integrity is what counts. He really believed, I think, when he was selling somebody—he started off selling cookware of all things, these expensive cookware sets—one sale was to a woman who did not have a lot of financial resources. She did not live in a very nice place. She bought this multi-$100 set of cookware that she clearly did not really need but it gave her a sense of pride and fulfillment.Zig Ziglar said that your most important tool for persuasion is your own integrity. -Roger Dooley Click To Tweet
She could bring her neighbors in for a meal. They could see this cookware. At least in Zig’s mind, this was an ethical sale. He wasn't taking advantage of a woman who couldn’t afford a product just so he could get a commission. He was getting her to a better place. Maybe not everybody else's definition of what a better place could be, but for her, it was. To me, if you're getting your customer to a better place, then any technique like those things that we talked about, any technique like that is fine.
It's funny. It reminds me of a story. Back in the early days before the internet—if there was such a time—I worked for a mail-order computer reseller. You get the magazine monthly in the mail and buy your computer over the phone. This lady called in and, “Hey I want the new Whiz Bang 8000.” It was a pretty expensive computer. For me, I was always like, “So what do you plan on using it for?” “I'm going to use this for this, this and this.” I'm like, “Well, you don't need the Whiz Bang 8000. Just get the Whiz Bang 2000. It'll save you $1000 by doing that.”
I shipped out the order and as soon as I got off the phone, the sales manager came up to me and was like, “What is wrong with you? She was going to buy a computer for $1000 more than what you sold her.” I'm like, “Well, she didn't need it.” Talking about integrity, I was like, “I don't feel comfortable selling something that is way more than the customer needed.” He was upset with me about that because he's like, “You're leaving money on the table.”
A few months later, some economic downturn happened and what I started noticing is that a lot of my customers were calling me back and saying, “You recommended me for this cheaper computer. I need a printer now. What do you think I should get?” While the rest of the guys were sitting around twiddling their thumbs waiting for somebody to call in, I had my customers calling back because they trusted me. Because they're like, “You told me what I actually needed to buy, not what the big flashy computer on the cover of the magazine was.”
I think that is an excellent example of an ethical sale because that leads to repeat business. That's something that, again, Zig Ziglar—going back to the ultimate salesperson of all time—that’s what he was striving for. He was looking for loyal customers who would trust him, and the next time they wanted something, they would come back. Where if you make that big sale and then 48 hours later, the customer’s saying, “Did I do the right thing? I think he pressured me into getting that expensive thing.” That's not how you build a long-term relationship.
If you look at car sales, people as examples, too, those that have those repeat customers, they use a lot of techniques. One of those is to understand what the customer wants and needs, and sell them that. Not something that is going to make them an extra commission on that particular day but the customer's going to regret it later on.
Also, one fun fact, Chris: I got my direct marketing started in the computer business as well. Back in those days when there's Computer Shopper Magazine, if you carry it on an airplane, it was counted as checked luggage. It was so big. Those were the days.
I remember the Computer Shopper Magazine. It wasn't really a magazine. It was a book.
Yeah. It’s a folio-sized telephone book that was really unlike anything else on the periodical shelf. You need two hands to carry it, practically, and 97% of the pages were paid ads. They had the least editorial content of any magazine I've ever seen, but people were desperate to advertise in there.
Yeah, because it was distributed everywhere.
And that was a place to go. If you were going to buy a computer product, what would you do? You spend a few bucks on a Computer Shopper because you could see 100 different vendors there and compare prices. It was a brutal market because customers could just pick off from page to page and see who was cheaper, but that's how computers were sold in those days.
Yeah, almost a commodity. From a consumer perspective, how can we tell when someone is employing these non-conscious persuasion techniques and influence to our benefit or if it's to their benefit? Is there a way for a consumer to tell which way it's pushing?
I think probably the first thing to do is just be aware that the technique is being used. At that point, then you can make a determination whether it's probably legitimate or not. We've talked about scarcity, loss aversion, as things we see an awful lot of.
A couple of other common techniques that are used—one is reciprocation. If I do something for you, then you are more likely to do something for me. Reciprocation doesn’t involve a quid pro quo, like, “I'll give you this thing if you give me that thing.” It’s like, “Chris, I'm going to give you this. I'm going to do this for you.” At that point, you'll be much more likely to grant a later favor.
One example that isn't necessarily unethical but it's maybe a little bit manipulative are these mailing labels that charities used to send. I don't see as many as I used to, because people don’t send that much mail. You would get a big envelope of personalized return address labels from some charity and they'll say, “These are yours to keep. But if you’d like to make a donation, here's the envelope you can use.”
The reason they did that was that they were employing reciprocation, and they were sophisticated direct marketers. Some of these places had giant buildings full of marketing people. They found that that worked better than just sending out a straight pitch for, “Here's our cause, here's the people we are trying to support, donate some money.” Even though these mailing pieces were very expensive and probably still one out of 50 actually resulted in a donation, it was profitable for them to do that. That's one example.
Another example: we talked about social proof. When people give examples of other customers using their product, you want to look at those and just evaluate them for how legitimate they appear to be. Sometimes you'll see anonymous testimonials.
Right. Maybe even a location, in Pittsburgh, Pennsylvania. Who knows if that's real or not? The vague testimonials used by millions or something, these things, I think, may be legitimate, they may not, but you want to look at those carefully.If you have a recommendation from an authority that something is good, you’ll be more likely to find the pitch believable. -Roger Dooley Click To Tweet
Authority is another one where if you have a recommendation from an authority that something is a good thing to do, somebody that is an expert in this space that is a trusted person in a particular space, then you'll be more likely to find whatever the pitch is believable. If LeBron James says, “These are the best basketball shoes I've ever owned,” then OK. He's an authority on basketball shoes.
You may want to step back and say, “Are his needs as a basketball player different from my needs? Does he have size 17 feet—I have actually no idea—that really don't relate much to my feet, and so on? Is he getting paid millions of dollars to make this endorsement?” You can look at that. You should just be aware that this is taking place. Still, if you find him to be a credible authority on basketball shoes and you're really into basketball, then it's probably OK.
You'll see people recommending stuff outside their space. You’ll see people recommending health care products. They're wearing a white lab coat that are not actual doctors. Lately, with the pandemic, we've seen people who identify as doctors making health recommendations often about rather sketchy things that COVID isn't real, or use this strange herbal treatment and it will help you or cure you. If you really dig it, say, “Well, is this person maybe a doctor? Are they an MD to begin with? If they're an MD, do they have any training in epidemiology or viruses?”
An ophthalmologist or something and they are making recommendations about treatment for viral infections. You really have to look at any authority cues and evaluate how trustworthy they are, and also whether they have any kind of vested interest in whatever it is they’re promoting.
Yeah. That's one of the things I always tell people. Whether it's politics or sales or whatever, follow the money. Who is financially benefiting from this transaction?
Yeah. I think that there are certainly celebrities who do have standards. They will not put their name on a product that they don't believe in or that they don't trust. I don't think LeBron James, even for a very huge fee from some really sketchy sneaker company, put his endorsement on it. I don't think he needs money that bad. He would say, “No, thank you.” They would have to settle for maybe a B-list celebrity basketball player or something.
What are some of these other techniques that are used to influence or manipulate us?
I think one area that I've been focused on in recent years is the area of friction, which I define as any unnecessary effort to perform a task. Where that works in marketing is if you make something easier for customers to do, they will likely do that thing. If you make something more difficult, they're less likely to do that thing. Now in general, friction reduction is a good thing.If you make something easier for customers to do, they will likely do that thing. -Roger Dooley Click To Tweet
Amazon has focused on friction since its earliest days back in 1997. Jeff Bezos was talking about frictionless shopping. People are still trying to figure out what's this e-commerce thing, and he was already saying, “This can be frictionless if we do it right.” In 1998, they patented one-click ordering. That was such an unusual patent at the time because it seems so simple and obvious. A lot of companies say, “You can't patent something that simple.”
It’s clicks. If somebody buys something, what's unusual about that? They defended that when Barnes & Noble implemented something similar. They went to court, spent millions of dollars and years in court. They won and kept their patent. Now here's the crazy thing. What did they get for all that money and all that effort? What level of extra effort did they impose on their competition? One little click.
Barnes & Noble had to add one-click to the checkout process,—Confirm Order. Let’s say they’re buying now and then Confirm Order. But that one tiny little effort reduction was worth millions of dollars to Jeff Bezos and Amazon.
This is how powerful that effect can be, and any marketer that's trying to create a better customer experience can focus on that. Chances are they will do better.
There are ways to misuse friction. I'm recalling it. I believe LinkedIn has phased out this particular approach, but LinkedIn wanted people to expand their networks, in particular, to invite people into their network. At one point, whenever you added somebody to your network, they would say, “Would you like us to email the people you are connected with that aren’t yet on LinkedIn?”
On the face of it, I don’t know, maybe. But if you think about it for a second and realize what they're going to do is take every address from your Gmail account and spam these people with invitations to join LinkedIn.
Now, this is a great way to grow a social site. It worked very well for WhatsApp. That's why they became worth $25 billion after just a few years in business and really no profit to speak of. No profit at all and very little revenue to speak of. But that is also perhaps a negative because, suddenly, your contacts are saying they are getting this spam that you inadvertently introduced them to.
One way that LinkedIn reduced friction for that approach was they showed you this prompt every time you made some kind of a change to your network. If you're multitasking, you're on the phone, you're clicking, “I’ll add that contact,” and see this OK or Continue button. I avoided that probably 100 times. Then on time 101, I was distracted and I said Continue. Get rid of the whole screen and hit Continue. Then I was like, “Oh crap. I just invited all my friends to LinkedIn.” These deceptive continue buttons, next buttons, are one way where something that is very low friction maybe induces somebody to do something they did not expect to do. On LinkedIn, to my knowledge, has stopped that practice now, by the way.
Certainly, you see those things in use everywhere. You can also manipulate friction in another way. I am a big fan of the Wall Street Journal. I like their reporting. They're one of the few news organizations that do a lot of original reporting and high-quality reporting. They also apparently understand behavioral science because I found that when you subscribe to one of their promotional offers, it's very simple. You can just click Subscribe Now and put in your email address or whatever and bingo, you're set.
Now, you have to give your credit card information and they let you know, “We will automatically renew at the end of your $1-for-three-months deal or free deal or whatever it is.” I mean, a legitimate way to reduce startup friction is to give somebody either a free deal or a very low-cost deal to subscribe to. That's great. It lets the person sample it, determine if they like the product or not without making a big or long-term commitment.
But what Wall Street Journal does, or at least did last time I checked this out, in this first instance I set a timer on my calendar saying, “OK, my 90 days are going to be up,” then on day 88, I put a note to turn off auto-renew.
When that day rolled around, I went onto the site and I turned off auto-renew and there's an auto-renew toggle, like a little toggle switch on their website, but it was grayed out. There's a More Info button next to it. There was a pop-up that said, “If you want to renew now, there is a link to click. If you want to turn off auto-renew, then you can call a customer service number.” That's it. Call customer service number.
What that forces the user to do is first, be proactive like I was to set that reminder; secondly, to hunt down elsewhere on their website their customer service number, then to call in, listen to a lengthy nine-item voice menu, maybe wait in queue for a while, get to a first representative who you can explain what you want and say you want to turn off auto-renew. “Sorry, I can't do that, you need to talk to somebody else.” They dump you into yet another queue where you may wait for a while. Then finally another person tries to make you additional offers so that you don't turn off auto-renew.
Now to me, this is getting into a dark-patterned area where you're making it so challenging that probably some subscribers are simply going to give up partway through and say, “You know, I kind of like it. I'm still reading it, so I'll just let it renew. I can't deal with this now. I'll get back to it tomorrow” and then forget about it. To me, I see nothing wrong with making ridiculously simple and easy trial offers and cheap trial offers or free trial offers, but please make it easy enough. If a person has tried and says, “I don't want to continue this at full price,” make it easy to do.
I've seen some magazine subscription offers that are just like that. You get an email saying, “If you’ve enjoyed your trial offer that was $2 for a year, you're going to renew in three weeks. If you don't want to renew, click this link.” It takes you right to a link where it says, “Don't want to renew.” You click it and they say, “Thank you.”
Now to me, that is far more ethical and I feel much better about dealing with that vendor. Whenever I deal with somebody who makes it very difficult to cancel a subscription or to return a product where you have to do things during certain hours of the day and get numbers and maybe jump through multiple hoops, that is all designed to slow down the process, create friction, and reduce the number of returns. I guarantee that does reduce the number of returns. The more difficult it is to return something, people will miss the deadline. They'll just say it's too much trouble to find packaging.
Amazon does what is amazing for any mail-order company. If you were in a mail-order company business or direct marketing business, you know the returns are horrible things. You can't sell a product, they cut into your margins, they waste your time, but Amazon makes it incredibly easy to return stuff. You can get a return authorization in a few seconds right online. With no effort, you can take your unpackaged, bare product into a UPS store or Whole Foods or Kohls with your phone and a barcode from your email. They’ll pack it up and ship it for you. This is incredibly expensive for Amazon but it's why they have such incredible customer loyalty.
In addition to that, I'm trying to think, I generally am pretty good about what I buy from Amazon and knowing, “Am I going to get something this low quality?” I know I'm going to get something this low quality and I prepared for that. There's a number of things that I've bought over the years from Amazon when I decided, fairly inexpensive, this isn't what I thought it was going to be. I want to return it and they say, “Thank you. We’ve refunded it. Don't even bother returning the product.”
I’m thinking to myself, “They're losing money. They're not getting the product back.” But then I started to think, “Well, it's got to get put in a box whether I'm paying or they're paying for it; they're going to end up paying the shipping. It's going to go to the Receiving department. Somebody is going to open up that box, make sure it's the right product.” I'm starting to think, for a $5 item, it’s probably just like you said, an easier, no-friction process to say, “Here's your $5 back. Have a nice day.”
Exactly. There's another element to that, too, that I think is interesting. It's showing they trust you, Chris. Because we're talking about reciprocation; trust is reciprocated. If I show that I trust you in some way, you're more likely to trust me.
In fact, there is the famous con artist trick of the found money, where somehow, somebody says, “I just found this wallet on the street. I want to find the owner. Can you hold it? It's got money in it. I’ll look for the owner.” You stand there and they come back saying, “I couldn’t find the owner.” And somehow, then they segue into getting you to withdraw some money from your bank account, but they trusted you with that wallet, so now you trust them.
Amazon isn't doing it in a negative way to manipulate your trust. That's why people trust Amazon. Another way Amazon shows trust is when you return something. You pack it up in a box, maybe, and you drop it off at FedEx or UPS or whatever—you arrange to drop it off. They may credit you as soon as that package gets scanned. Now, they don't know what you returned. It could be nothing in the box. It could be a brick. Who knows? They are showing, “Roger, I trust you.”
For me, that generates great trust. If you abuse that trust, every time you have bought a $5 item, then all of a sudden, “I'm going to return this.” Probably about the second or third time you did that, they'd say, “OK, here's your RMA, go for it, buddy.” As long as you are showing yourself to be trustworthy, they all extend trust to you.
Yeah. As I was saying that, this is reciprocity. They're making me have a good experience that they can leverage later. Not leverage in a bad way, but that they can use that good experience to deal with a potentially bad experience in the future.
Sure, because even if they said, “Take that $5 item and send it back to us, no questions asked.” And they're very nice about it and forthcoming, it would still be a bad experience because you would have to go someplace just to return a $5 item that, for some reason, wasn't right. They're taking what for you would have been a negative experience with that return and turning it into a positive experience.
Sometimes, maybe the returned item is still usable in some way. You ordered a certain type of pen and they sent you the wrong pen. The pens they say maybe you can still use, not for the purpose you wanted but you could use them for something. They're scoring these reciprocity points with you, at the same time, they're reducing their cost. To me, it's brilliant.
Yeah. It's also, just for them, a cost-saving. It's like a win-win for them. We've built reciprocity and we don't have to deal with the returned item that's going to cost us more than $5 to process.
Exactly, but there are definitely companies out there, Chris, who doesn't feel that way. They have the mentality that if we let our customers get away with something once, they're going to take advantage of us.
Maybe one time, somebody did take advantage of them. Now, they have rules in place to prevent that from ever happening again. What they're doing is they're penalizing the 99% of their customers that are perfectly honest for the bad behavior of one customer five years ago, but nobody's ever reexamined that process to say, “Do we still need this process? Did this process ever make sense in the first place?”
Yeah. Do you see a mail-in rebate just being that high-friction type of thing? You say, the product is $99 but you'd get a $50 mail-in rebate. In your mind, it's now a $50 product but when you see what you have to do to get your money back, it's like, “I have to send it in a blue envelope and there has to be a postmark on a Tuesday?”
Yes. I think that is one way that those things can be abused, if you will. I have seen a few of those offers lately. Lately, if there's some rebate, it can be applied pretty much automatically during checkout or some other way. For a while, that was a very popular thing to do. Yes, we'll give you this big amount off but you have to send in a copy of your receipt in a certain timeframe and the numbers of unredeemed rebates were huge.
In fact, we were talking about my start in home computing. It was triggered by Texas Instruments offering a $100 rebate on a $300 computer. This was years ago when $100 is worth even more than it is today. Today, $100 is nothing to sneeze at for a rebate. Even then, it was both high in absolute magnitude and high in a percentage of the purchase cost. My contact in their corporate structure would never tell me how many unclaimed rebates they had, but I gathered it was a huge percentage of millions of these computers. Many of those rebates were unclaimed.
Not only, it was, I don't know, tens of millions of dollars of value, a hundred million. Who knows, but a huge sum of money. Now, the loss on what happens to that money may vary. Maybe they didn't get to keep it all. I don't know. Definitely, that's one way they use rebates in a negative way. Thankfully, though, those high-friction rebates are mostly a thing in the past in my experience.
Yeah. I'm trying to think of the last time I saw one. It's been years since I can remember seeing one.
I think that companies are increasingly focusing on customer experience, not on how we can add a few bucks to our margin if we do this right, to make things a little less convenient for the customer? That was one of those things that I'm sure created negative sentiment. If they did any kind of polling of their customers, they would find that their customers did not like those kinds of rebates that they had to hunt down an envelope and mail-in or scan, perhaps, and email that in. How many people, even today, know how to scan stuff properly, and attach that scanned document to their email, or can even find that scanned document?Companies are increasingly focusing on customer experience, not on how to add a few bucks to our margin if we do this right -Roger Dooley Click To Tweet
Or better yet, you have to cut off the UPC code off the box and mail it in.
Right, which you discarded the other day.
Which you discarded 30 seconds after you got the product.
Are there any other big red flag persuasion techniques that we've missed discussing so far?
Well, there probably are. I think that humans are full of biases and these are non-conscious drivers of behavior that we aren’t unaware of. If somebody said, ‘Well, this is influencing in a certain way.” We'd say, “No, it's not true.” But it is.
We talked about loss aversion. When you express the exact same deal to somebody as a loss or a gain—in other words, I'm going to give you $50 and take $10 away versus I'm going to give you $40. Somehow, that loss of $10 looms bigger than the gain. When you see these deals that suggest that you're going to miss an opportunity, that is preying on loss aversion.When you see these deals that suggest that you're going to miss an opportunity, that is preying on loss aversion. -Roger Dooley Click To Tweet
There are some other things—anchoring. If you want to see some examples of both clever marketing and effective marketing, but also maybe occasionally borderline—I wouldn't call it deceptive—but manipulative marketing, if you look at infomercials, they use a whole sequence of techniques and they're practically the master class in influence marketing because they'll do the things like, how many of these have been sold? They'll tell you thousands sold at $500. That is what's called anchoring. They are setting the anchor price at the beginning.
You’ll be pretty sure that down the road, whatever they're going to ask you to buy is not going to cost you $500. It's going to be less, but they've set that thousands of people, millions of people paid $500 for this thing. That's really what it’s worth. In fact, some research by Dan Ariely showed that simply introducing a large random number causes people to assign a higher value to something.
One example that comes to mind is computer keyboards. Nobody buys keyboards. If you buy one keyboard in five years, it's probably most, unless you're a procurement officer of a large company or something. Nobody knows how much it costs, plus you don't know what the quality is. So you have people estimate the price of the computer keyboard.
Before asking them, he said, “OK, write down the last two digits of your Social Security Number on a piece of paper.” Clearly, your last two Social digits have nothing to do with the price of keyboards, but there was a progression for people whose numbers fell between 0 and 19, so the first 20 numbers. They had the lowest estimate of the keyboard price. On the way up to the people whose Socials fell between 80 and 99, they had the highest price by a factor of two or three for the keyboard. When you see an infomercial starting throwing up these prices, they say, “Now, here's what you're really going to pay.” It isn’t just infomercials. You'll see that on websites. They’ll compare at $500.
There's another technique called decoy marketing that I see a lot of, particularly these days, many things are sold as subscriptions. You can't just buy a product anymore. You subscribe to the product. Often, there are various levels of subscription. There's the basic, maybe the free version which is not too effective, but it's free. Then you've got the basic version, then the pro version, and finally the enterprise or the ultra-version of the product.
The one they probably want you to buy is the pro version—the middle one. Do a few things. They may present those in reverse order. First of all, they'll put the enterprise or ultra version with the highest price first. That sets the anchor up in a very high value for you. They will emphasize the one that they want you to buy, the pro version if you want to call it that, the medium version by making it a distinctive color, making that box a little bit bigger and stand out, and maybe flag it as most popular, add a little bit of social proof to that.
The decoy marketing aspect comes in when that ultra product—the enterprise product—they may expect to sell zero of those. There is research showing that if you've got two products, a good product, and the better product, maybe you're selling half and half of each, and you want to up your sales mix of the better product because that's more profitable, higher revenue, higher-margin, what you can do is add an even better product.
Now you've got a good, better, and best product. The best product can be quite expensive. What research shows is you will sell more now of the product that is now the middle product because it's the compromise. It's the version that, well, this is probably what most people would buy. It's not the cheapest, it's not the best. The only thing you've done is introduce a higher-priced product that you may sell zero of. If you actually sell some of that, so much the better. This is one form of decoy marketing. There are other kinds, too, but a little bit less commonly used.
That's really interesting. As you're talking about these things, I'm thinking of websites I've been at, stores I've been at, where I've seen these techniques played out. I think it's one of those things that you really have to think of, “What is it that I'm really needing to buy? What services fulfill my needs versus”—not that you're thinking, “What’s the middle option” but trying to really think out—“Which service level really meets my needs?”
Right. One other common decoy approach is to have the upgraded product for the same price or almost the same price. For a dollar more, you can get the better version of this product or even the same price on sale today. This is from research by Dan Ariely whose book, Predictably Irrational, by the way—it’s a classic now. It's been up probably for 10 years or something, I'm not sure, maybe longer, but it's an excellent book. Your brain makes this comparison of, “We've got this product, while this product is better, and it's the same price.” It's just a little bit better and it will dramatically shift preference to the better product.
All the way—that the way our brains are wired can just nudge us.
Yup. There are so many, and I think the main thing that people can do is step back and be aware of what you're seeing. Look for things that might be manipulative, whether it's testimonials, prices, sale prices, limited quantities, limited duration sales, and all these things. Just make a judgment as to whether they seem legitimate or maybe are manipulative.
Yeah, and I think that's always going to be the hard call to make, is to know, “Are there really two left or are they just trying to get me to buy it today?” If I was going to plan on staying there anyway, does it matter?
I've always seen that on hotel sites. There's always two rooms left, or whatever, or airline tickets. I don't know that I've ever gone, “Well, let me book that right now because there's only two left.” I’ve definitely thought, “I hope those two are left when it comes time for me to book.” Gosh, now I’m going to have to think about it when I do stuff and see, “Is this really influencing me to make purchases differently?”
I guarantee you that that does influence some people because firstly, there are some people who are very cost-sensitive. They don't know what the new price is going to be. None of us knows. For some of us, maybe we’ll be a little bit less price-sensitive. If it's a business trip and it's just me and there are two seats up, I'd say, “Well, OK, I'm not going to worry about it that much.” If I'm booking a personal trip and I'm needing two tickets and there are only two left, I think, “Well, OK, suddenly I might be going to be buying two tickets that are much higher price. Is there going to be an issue of getting on the same flight even?” Then that does move me to action I think, sometimes, if everything else is aligned properly.
I have one question that's maybe off-topic for you, but I want to ask because of my audience. Do you see more of an AI influence coming into marketing and working underneath all these things, or even the marketers don't even really know how these things are being modified, so to speak?
I don't know if I see it directly, or if I saw it if I would recognize it as such right now anyway, but I do think that that will be happening and probably it's already happening in certain ways, simply to better target personalized offers. I don't mind personalized ads or personalized offers from companies like Amazon. Generally, these things are based on their knowledge of the kind of stuff I buy.
At the same time, it sometimes drives me crazy when I was looking for a suitcase, I bought a suitcase, and now for the next 60 days, I'm seeing suitcase ads everywhere. To me, that's a thing that AI machine learning might be able to cure where they say, “OK, in this product category, this customer is not buying this frequently. He's not a luggage buyer per se. Maybe this one purchase will mean that he's done for 6 months or 12 months. We don't have to keep targeting him with those ads. We'll target him with stuff that he's more likely to buy because he's still shopping for it because you understand that behavior.”
I do think the big tech companies are making huge investments in AI. Google is, Amazon is, Apple is, Facebook is. One of the things that they'll be doing with this is trying to market better, understand their consumers better, and, in part, to create a better consumer experience, and then in part, probably, to be more successful. Meaning, whatever their business objectives are, whether it's getting more orders, increasing the users time-on-site and such.
What I always worry about is how these systems are trained. I look at YouTube and Facebook in terms of, if I watch a video, they're going to make suggestions of other videos in that category. “Hey, if you like watching this video, you might like this other video,” but they tend to skew towards more and more outlandish, dramatic. Those are the things that scare me about AI, is that it's pushing in a way that's maybe outside of where people would normally go.
Well, I think what they do is, first of all, I’ll look at your preferences, which, OK, you watch this cat video. Then, “OK, Chris likes cat videos; we'll show him some more cat videos.” Also, there's a secondary factor that they've determined is that certain cat videos get more engagement than others. It's OK, I guess, if it's cat videos, but we saw on the last big political season that the stuff that got the most engagement was the more outrageous content with political things that were inflammatory. Engagement is a good thing.
Along the way in my entrepreneurial career, I built a big community called College Confidential. It became the biggest website in the college admission space. I sold that to the Daily Mail Group back 10+ years ago now. I'm not involved in it anymore, but one of my metrics for success was how long were people staying on the site? Because I knew that if we were doing things right, people would spend time there. If people hit the site and bounced, you're doing something wrong.
In that respect, my objectives and Facebook's objectives were very similar. The problem is when you weaponize that engagement and you're saying, “OK, this person saw this thing about voter fraud.” If you miss the other thing about voter fraud that got tons of attention and shares, it ends up being a loop.
It is an issue and I'm hoping that there's a cure for this. The AI can't be more transparent, and I think that you have to go back and correct when you see, “OK, the AI is coming up with this solution.” You rewrite the rules a little bit so that you avoid some of the negative consequences, but you've got to have the focus on that. You can't just say, “Wow, engagement numbers are up again month after month,” and say, “That's a wonderful thing.” You need to be doing some quality control on what that engagement means, how it's affecting people.
One of the things that I worried about even in my forum days, community days, was the possibility of too much engagement. People were so engaged with the site that they were ignoring their priority.
If you've got high school seniors who are supposed to be working on their college essays and instead they're spending three hours on College Confidential, just chit-chatting and reading other people's posts and wasting time, you’re getting high engagement, that's not a good outcome.
I think by and large, it was a fantastic tool. I know that over the years I got many emails and people are saying, “I got into my dream school. I never could have done it without your site.” Even then, this over-engagement thing was out of our minds. We didn't have a way of estimating it or combating it really, but we didn't think about it a little bit.
And that's good because you're really trying to think, “What's in the best interest of my demographic, my target audience?” And it's not about me manipulating for my little metric of time on site.
We did actually have a few of our members who said, “I would like you to ban my account because I'm spending too much time here,” which of course we did. I mean, they recognize that they're wasting their time. We did that and they could not use the site anymore. And had they contacted us and said, “OK, hey now, can you unban us?” We would’ve done that, too, but that's OK.
I think the AI piece does have to be controlled because no metric can just be optimized indefinitely before some kind of negative consequence results. Weight loss is a good thing if you're overweight, but it reaches a point where, “OK, now, it's an eating disorder.”
I assume the same thing can happen with reducing friction. At some point, if you're making it too easy for people to buy the product, then you start having to deal with returns that you wouldn't have had to do if there wasn't at least some minimal amount of friction.
Yes. That's something that companies could use, and perhaps even AI can help with, is identifying those situations where, if you do have a high return rate on a product or category, instead of just having a one-click-to-buy button—a typical Amazon situation—you need to dig into, why are people returning this? Maybe it's something that's wrong in the description or the size or something—whatever—or maybe it's that people don't quite understand what they're getting into.
In that case, I've seen companies add a step, saying, “OK, great. Glad you want to buy. Here's what you'll be getting, or here's what's going to happen next.” Yes, that will reduce the conversion rate when you add that step in there. If it reduces the conversion a little bit, but at the same time increases customer satisfaction and reduces returns or unhappy customers, then that's a good thing. Yes, adding friction in the right place can be a good thing.
Almost like keeping someone in their lanes.
Yeah. Again, the numbers should tell you that. If you see that you've got problems with people converting, you're getting great conversions but the customers aren't happy, then maybe you're not explaining the product right. Maybe you need to either explain better or slow down the conversion process or something. I've seen companies do that where they go back and slow people down, make them think a little bit.
Yeah. I think that's a good idea. Sometimes, what we need, as consumers, to do. We need to take a breath, relax, slow down, and then make a decision.
Right. I've done that, too, where I'm saying I'm going to make this expensive purchase. I'd say, “OK, I’ll just bookmark this. I'll come back tomorrow and see if it still appeals to me.” Like most of the time, if it was something that I wanted and needed, I do make the purchase, but I try to give myself that breathing room to not make an impulse decision for a large sum of money that I'm going to end up with, what now? I like this product. Did I absolutely need it? No. Is it the best one? I didn’t really spend enough time shopping.
That's one of the things my wife and I have always done with a car purchase, is we'll go in, look at it—“Oh, I really like that one.” The sales rep will say, “Hey….” Then it goes just like, “Nope, I made a decision not to buy it today. If I still want it tomorrow, I'll come back tomorrow.” They're like, “No, get it now.”
“Price is only good for the next hour and it's the last one on the lot. I had another buyer look at that earlier today.” Car salespeople have been the worst about this. They also do friction reduction. Have you ever seen a car salesperson hand you the order form and say, “OK, just go ahead and fill out this info.” No, they don't do that. They say, “I'll fill this out for you,” because they want you to sit there, sip in your coffee or your soda while they do the hard work and then say, “OK, all you need to do is sign right here.”
Yup. “Hand me your driver’s license and I will fill out all the paperwork for you.”
Yeah. That makes sense. Your books are Friction—that’s your newest one—and Brainfluence, which has been around since 2011.
Coming up on 10 years.
If people want to find you on social media if they want to read more about what you write, how can they find you?
The best jumping-off overall is rogerdooley.com where I've got my podcast episodes, I’ve got links to my neuromarketing blog, my forums blog, my social media stuff. I am most active on Twitter where I'm @rogerdooley. On LinkedIn, I'm easy to find where I am simply Roger Dooley.
We'll make sure to include all those in the show notes for the listeners.
Great. Well, thanks, Chris. I enjoyed it. This has been a great conversation and fun to find a fellow computer direct marketing veteran.
Thank you so much. We don't run across a whole lot of direct marketing veterans these days on computers.