Scarcity and Its Pull Toward Purchasing

Read Now Before Time Runs Out!

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The value of scarcity isn't a come-and-go tactic.

You've read, perhaps even written, marketing copy like this: Time is running out!  Read this important information now. It could forever change your marketing ROI and business profitability. 

Since the beginning of time, the race has been on for valuable but scarce resources.  In ancient days, blood was shed over rights to fertile hunting grounds. Today, outrageous amounts of money are spent on “things” that no one else can get.  For instance, five months after Michael Jackson's death, the prince of pop's iconic glove sold at auction for $350,000. Likewise, Elvis Presley's blue suede shoes were auctioned off at $80,000 in 2013. Why so much?  Beyond the celebrity factor is a key psychological driver called scarcity. No one else can have these one-of-a-kind items that are likely to sit on a shelf or in a safe. But because they may never be available again, they're in high demand and have obscenely high price tags.

The psychological influence of scarcity applies far beyond nostalgic celebrity tokens. RememberTwinkies? One of America's most popular snacks since the 1930s, Twinkies is a brilliant lesson for the powerful affect that scarcity has on humans.  As consumers became more nutritionally conscious and health minded, sales of sugary boxed pastries such as Twinkies declined.  At the end of 2011, with sales down nearly 2%, Hostess, the manufacturer of Twinkies, announced the end of this iconic American snack.  Suddenly, millions of adults who had long written off Twinkies had to have one before the opportunity was gone forever.  There was a nationwide run for Twinkies, and the American bygone became the top-selling snack item nationwide nearly overnight.

Note the news bulletin from AP News:

November 12, 2012:  AP News

Twinkies sales jumped over 31,000% on the etailer's "Movers & Shakers" sales ranking. On Friday, Hostess products accounted for 10 of the top 11 bestsellers in the grocery and gourmet food category. The 10-count box of Twinkies is No. 1.

What do we learn from this? Consumers crave what they fear they can't have, whether they need it or not. This suggests that the best way to jumpstart sales for a flailing product is to discontinue it.

In 1975 behavioral researchers, Stephen Worchel, Jerry Lee, and Akanbi Adewole conducted a study among 200 females to see if the perceived value of a product changed with the perceived abundance of it. To determine whether there was a correlation between value and scarcity, they put the same cookies in identical glass jars and asked participants to rate which cookies they were most attracted to and valued most. One jar had 10 cookies; the other jar had two. The cookies in scarce supply were rated as far more attractive and valuable than those in abundance supply. Results held true when the quantity of cookies in each jar were switched. The scarce cookies always held more perceived value despite being the very same product. 

This scarcity principle applies to all business categories. When you offer products in limited supply, sales are likely to go up—even if they're priced above market value. For instance, if you're a consultant who takes on a few select clients versus anyone who calls you, chances are you'll be in higher demand than others in your field. 

Experiment with this concept and see for yourself just how powerful the law of scarcity is for getting attention and closing sales. Do a direct marketing test with one piece promoting the function of the product, and another promoting a deadline for the product available only for a limited time. You'll be surprised.

Jeanette McMurtry, principal of e4marketing, is an authority on psychology-based marketing, speaking at business events worldwide. She is a Back by Popular Demand trainer, speaker, and course instructor for the DMA.

2

Getting Religious About Customer Psychology

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Does your brand have a devoted following?

Getting Religious About Customer Psychology

One of the largest, global businesses is one we don't price compare, tax, or even classify as a business: religion. 

On average Americans tithe 2.38% of their annual incomes to churches, according to a study by empty tomb inc., a Christian research and service organization that has been tracking tithing trends since 1968. That percentage equals about $93 billion a year across all religions for households tithing on a $40,000 income. To put it into perspective, the worldwide video game market—including mobile gaming and video game console and software sales—was projected to reach $93 billion in 2013, according to Gartner. 

Consider the following: The Catholic Church spent $170 billion in 2010 in the U.S. alone, according to a March 2013 MSN Money article. About $5 billion of that went to aid the poor. Compare that $170 billion spend in 2010 with Apple's 2013 gross sales of about $217 billion (Dazinfo 2013). Similarly, the fastest growing religion in U.S. history, Mormonism, generates $7 billion a year from just tithing in North America alone. The the Mormon Church also has real estate and for-profit assets well over $35 billion, according to Reuters. Since 1985 the Church has donated $1.4 billion to disaster relief; that's roughly $51 million a year out of a multibillion-dollar annual income. 

When you consider that religions don't pay taxes on multibillion-dollar incomes or have charitable requirements to meet, religion adds up to big business. Despite supplementing tithing income with gains from investments and for-profit holdings, it's essential for religious organizations to maintain a high-level of tithing obedience among faithful members and regularly convert new tithe payers. 

Psychologically humans are programmed to be faithful followers of religions. With 2.1 billion Christians, 1.3 billion Islam followers, 851 million Hindus, and 375 million Buddhists, the numbers speak for themselves. Whether part of a concerted missionary effort or not, religions offer us key elements to a rewarding human existence.  According to Steven Reiss, author of Who Am I? 16 Basic Desires That Motivate Our Actions and Define Our Personalities, religious affiliation can be associated with more than half of the strongest human motivators. See for yourself in the list below.

1.      Power

2.      Independence

3.      Curiosity

4.      Acceptance

5.      Order

6.      Saving

7.      Honor

8.      Idealism

9.      Social connections

10.  Family

11.  Status

12.  Vengeance

13.  Romance

14.  Eating

15.  Physical Activity

16.  Tranquility

Does your brand have a devoted following?

Getting Religious About Customer Psychology

Martin Lindstrom, author of Buyology, outlines 10 pillars of religion that influence faithful followers:

1.    Sense of belonging

2.    Clear vision

3.    Power over enemies

4.    Sensory appeal

5.    Storytelling

6.    Grandeur

7.    Evangelism

8.    Symbols

9.    Mystery

10. Rituals

The brands that successfully convert new followers and keep members faithful for years are those that tap into these basic human needs and pillars. Consider, for example, American Express. For 50 years the financial services organization has referred to its patrons as “members” rather than “customers.” It's also built an iconic brand by offering distinctive privileges, experiences, and services based on members' brand loyalty and participation. The goal is to make them feel privileged, superior, and part of an exclusive way of life for the chosen few. It works. Its membership rewards program grew exponentially within weeks of its initial launch and continues to be among the most successful loyalty programs today.

Apple is another “brand” religion. In fact, with a Q1 2014 record quarter of $57 billion in gross revenue, it's fair to say that has Apple has become one of the great religions of the consumer world. Like religion Apple has created symbols of belonging with its white ear buds, sleek iPads, and laptops with its radiant star-like Apple symbol. The brand presents a clear vision of how its products align with many of life's desires: freedom, power, connections, status, individualism.

Evangelism comes naturally among millions of Apple users. Just ask MacBook Pro or iPhone owners what they think of their product. Chances are, you'll find yourself in a long, enthusiastic conversation praising Apple and how it makes life better. Apple has also created unique rituals for its religion, such as its Genius Bar, its casual, personal style of selling, and its lack of cash registers and counters that would create barriers between customers and the preachers (i.e. sales staff). 

Building your brand's religion is simpler than it might seem. The first step is to move beyond orthodox marketing activities and towards those that connect with customers' souls—mainly, by tapping those strong psychological needs that validate our existence and promises of joy.

Consider the following:

• How can you create a divine unity among your members?
• What symbols and rituals set your brand apart from competing faiths in your space? 
• What are your promises that keep customers' faithful for years and inspire them to bring lost sheep into your fold?

Although you can't offer eternal life or lasting joy with much credibility, you can offer promises aligned with the unconscious and conscious desires that drive most behavior. How religiously you do this is what will set your brand up for success in your life and your hereafter.

Jeanette McMurtry, principal of e4marketing, is an authority on psychology-based marketing, speaking at business events worldwide. She is a Back by Popular Demand trainer, speaker, and course instructor for the DMA.

Jeanette McMurtry, principal, e4marketing

May 21, 2014

Building Sales With Authority

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Building Sales With Authority

From the beginning of time, we've been wired to believe and follow people in positions of authority. Be it a prophet, scientist, politician, teacher, parent, police officer, and so on, we're taught, directly and indirectly, to follow those who lead. We tend to follow even when “authorities” take us in the wrong direction, or encourage us to do things with which we're not comfortable.

A great example is the Milgram Study on authority and obedience. In 1963 Stanley Milgram, a Yale University psychologist, conducted an experiment to see how the presence of authorities impacted people's level of obedience, even if that obedience contradicted their moral beliefs. What he found was astounding and telling in terms of how marketers can use “authority” in branding, promotional, and engagement strategies.   

In short, Milgram rounded up 40 male volunteers and assigned each one to be a “teacher” in his experiment. Their role was to sit in a room with an experimenter, a person in a lab coat, and send an electric shock to a “learner,” a person in the next room, every time the learner answered a question incorrectly. The learner was actually part of the study and answered most questions incorrectly to receive shocks. The shocks got stronger with every delivery, starting at 15 volts and going to 450 volts. The teacher could hear the learner scream out in pain as these shocks were delivered. 

If the teacher hesitated or refused to deliver a shock, the experimenter in the lab coat ordered him to continue, even being told it was absolutely essential or that they had no other choice. 

Remarkably, despite showing anguish and dismay at hurting another individual, all participants continued to deliver shocks up to 300 volts. In fact, 65% went on to deliver the maximum pain of 450 volts! Why? Because they were told to by a person of authority (who was really an actor wearing a lab coat).

For marketers, the implications are significant. 

People look to “authorities” to help them make decisions. The chewing gum market is a good example. Since the 1970s Trident has been one of the top selling brands of chewing gum claiming that four of five dentists surveyed recommend sugarless gum for their patients that chew gum.

According to an article in (the authority) The New York Times, “authority” marketing worked then and still does.  For instance, the inclusion of the American Dental Association's seal on sugarless gum packages with claims such as chewing gum after eating helps reduce cavities, whitens teeth, or kills germs that can cause bad breath has bumped up sales significantly.  In one year sales for sugarless gum rose 6%. Sugarless gum—according to Information Resources Inc., another authority—makes  up 80% of all gum sold, up from 48%in 1998. 

If aligning with a credible authority can help the sugarless gum market secure 80% of total industry sales, chances are “authority” can help your brand, as well. And you don't have to organize a panel of “five” experts to recommend your product. 

Here are some simple ways to tap into the power of authority for marketing:

Cite the research: There's an abundance of research, articles, and opinions from experts on the Web about any given product or topic. If there are 3,980,000 results on Google for “lifecycle of an ant,” I suspect that there are at least a few results for any product or service being sold in a legitimate market today.

Endorsements by association: It's true that we're judged by the company we keep. Promote your client list as an authoritative statement that “others” who know your field of business find your expertise or products best in class. This tactic taps into social proof and authority, further increasing your emotional relevance.

DIY polls: With all the survey tools available today, you can easily and inexpensively poll consumers about your business category, brand preferences, price points, loyalty trends, and more. In just days you can get scientifically valid results. You can share the results of these polls that back up your position or product and cite the most credible authority for consumers today: other consumers.   

No matter what you're selling, any reference to an “authority” is likely to boost credibility for your claims and position. And now you can cite Direct Marketing News to prove it!

Its enjoying the little things in life that makes us happy, according to a new study by Time Magazine.  (Time, April 13, 2014, Eric Barker).  Here are some no-cost to low-cost ideas that work from Waldorf Astoria Park City from my recent article in DM News:

http://www.dmnews.com/give-consumers-a-reason-to-feel/article/342782/

Give Consumers a Reason to Feel

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Photo Source: Waldorf Astoria Park City

There's a reason that luxury hotels come with more than luxurious price tags. The comfy beds, jaw-dropping lobbies, exquisite room details, and “jump-to-it” service can make anyone feel like king for a day. But at some point, the pampered experience feels the same across chains—unless you're staying at Waldorf Astoria Park City in Utah. Under the leadership of award-winning hotel manager Kerry Hing, the Waldorf Astoria Park City has turned into one of the fastest-growing hotels in the company in just two years.

What sets Waldorf Astoria Park City apart from other luxury hotels isn't its 300-year-old fireplace from an Italian castle or the lobby's Baccarat Fine Crystal chandeliers. It's what Hing describes as “the power of observation” followed by the “power of surprise.”

Whether you're a luxury hotel or a fast food franchise, the survival of any business depends onmaking customers feel special and appreciated. We expect to be called by name, served quickly, and rewarded for our business. What we don't expect are highly individualized experiences based on what someone “observes” about us that have nothing to do with our recent transactions.

Case in point: Hing's top priority is to walk the floors of his boutique-like hotel at Park City's Canyons Ski Resort to observe how guests feel while relaxing in his impeccable lobby or his Green Bamboo–scented spa. On one occasion, he encountered a disheveled guest in ski attire sighing about needing a beer after a tough day on the slopes. Hing quickly looked for clues, like the initials on his rental skis, to help his front desk attendants identify the guest. Once identified, Hing sent a complimentary, chilled six-pack of beer to the guest's room and a note cheering him on for a better day.

On another occasion, a guest was peering in the hotel gift shop well after it had closed. After observing the guest's disappointment that the shop was closed, a front desk agent on duty surprised the hotel guest by escorting her  to the shop for a private shopping spree.

This kind of service goes well beyond what customers expect at any five-star resort. It goes beyond that feeling of being pampered, for which many of us are willing to pay. It creates a feeling of dignity, individual worth, pride, recognition, and even a sense of chivalry from eras past when ladies were treated like princesses and gentlemen like knights. This type of experience also satisfies our survival instinct. Having our needs met makes us feel privileged and protected. It also gives us a sense of status and achievement that defines much of our individual psyche.

While our generation doesn't necessarily want to go back to a time as formal and class-oriented as the early 1900s, unconsciously, we do want to feel like “princesses and knights.” And when we do, we reciprocate with loyalty, something many global brands are losing rapidly.

Reports from the Consumer Council and other groups show that high customer loyalty has slipped dramatically for many consumer brands in recent years, in some cases by 50% or more. Yet, when we feel privileged, or that our time and needs matter, we still assign loyalty—sometimes quite fiercely.

Consider Mac versus PC owners. When is the last time you met someone that switched from a Mac computer to a PC? Personally, I'm the only person I know who did this, and I immediately switched back. While my PC worked fine for my basic needs, I missed the level of service at Apple's Genius Bar. With the Genius Bar, I always got much more than 15 minutes with an expert, and I often walked away with surprises like a free $200 battery or software programs. I missed talking with people giddy to show me technologies to simplify my life and make me “feel” cool. I missed feeling like I was part of a forward-thinking environment.

That type of engagement is what Hing's approach creates, as well. Observation and surprise are the foundations of the training that all of Hing's staff members receive at Waldorf Astoria Park City. These two elements create experiences that have generated a high repeat-customer rate and have earned Hing coveted industry awards at every place he's managed.

What do you do to delight your customers? Good customer service simply doesn't cut it. Moments that surprise customers and make them feel like they matter do.

Regardless of your product or service, you can find affordable ways to observe and surprise and make your brand five-star in any industry. I suspect that the six-pack of beer was more than paid for by referrals and repeat visits from an over-the-top happy guest. Point made.

Jeanette McMurtry, principal of e4marketing, is an authority on psychology-based marketing, speaking at business events worldwide. She is a Back by Popular Demand trainer, speaker, and course instructor for the DMA.

The Law of Reciprocity and How It Builds Sales

Jeanette McMurtry, principal, e4marketing

March 19, 2014

The Law of Reciprocity

Chances are, you've thought that the chocolate or mint your waiter brings with your bill, along with a friendly smile, was a kind gesture, right?  Wrong—at least in many cases. The Journal of Applied Social Psychology summarized numerous studies showing that this mannerly move is actually a tactic used to get higher tips. How? By tapping into a driving force of human behavior: reciprocity. 

Various studies show that when someone does us a favor—stranger or friend—we feel compelled to repay them. When we indulge in free samples at the grocery store, we tend to feel guilty if we don't buy something. And using a gas station bathroom on a road trip without buying a thing has some of us scurrying quickly out the door. Perhaps it's part of our survival instinct to “hold our own” or a nurturing instinct to support others on a joint quest to thrive under the same societal rules. 

Regardless of what drives our need to reciprocate, it's a very real and key component of psychology-based marketing: strategies and campaigns founded on psychological principles and behaviors. Decades of research shows that we're more inclined to do favors for friends who once did something nice for us. When we return the favor, the value of our “payback” is often greater than the original good deed that initiated the act. 

Think about your own patterns. Or consider this example: You dog-sat your neighbors' poodle for 10 days in return for them watching your Shih Tzu for only two days. Somehow you called it even, despite the fact that you got a hyper, yapping dog that's smart enough to get even by leaving you daily messes for much longer than your neighbor watched your exercise-adverse Shih Tzu. Somehow, I suspect many of you can relate.

The same thing applies in business. When a salesperson offers to throw in a perk upon purchase, like free floor mats with the purchase of a $45,000 car, we're more likely to buy. Silly, given the $100 value of the free gift compared to the debt of the five-year loan; yet, we do it all the time. Similarly, when a company gives us something nice “just because,” we buy more.

In marketing, the rule of reciprocity rules when it comes to one of the most affordable things a business can do to achieve sales, and secure loyalty. Even a small token that costs you next to nothing can pay huge dividends. In fact, I've often wondered why gas stations and convenience stores don't give away their coffee free with purchase all day, every day to compete with the station across the street. For a free coffee that about a $1.50 value, which costs the station about $0.10, customers are more likely to come in for gas. Plus when they leave, they're likely to buy something else to “reciprocate.” 

There are many things thriving brands do today to trigger reciprocal purchases besides free coffee. Here are some examples:

• Beaver Creek, a ski resort near my home, hands out free hot chocolate when you get off the lift in the cold winter mornings and free, warm chocolate-chip cookies when you come off the mountain at the end of the day. It's no surprise that guests are loyal to this small but nice resort and return often, despite the fact that there are many other resorts at which they could ski.

• Gluten-free energy bar provider Larabar gives out free Larabars to community groups wanting to offer health fair or educational event attendants goodie bags or free snacks.  While I can't quantify the number of sales associated with this giving program, I can safely state that Larabar is one of the most popular snack-bar brands in the U.S. and beyond.

Reciprocity also works in the “pay-it-forward” context. Research by Cone Communications shows that consumers not only want to know that a brand engages in social responsibility programs, but they also want to know the actual impact of those programs on the intended beneficiaries. One report shows that more than 80% of consumers are more likely to purchase from brands that communicate the direct impacts of these programs than ones that don't. 

As you go about creating new customer engagement programs and direct marketing packages for your brand, look for opportunities to give rather than to get.  Whoever makes the first kind gesture, as studies show, tends to gain the most. 

Jeanette McMurtry, principal of e4marketing, is an authority on psychology-based marketing, speaking at business events worldwide. She is a Back by Popular Demand trainer, speaker, and course instructor for the DMA.

Enjoy some insights from my latest column for DM News at www.dmnews.com.

Making Ads Add Up for More than a Day

Making Ads Add Up for More than a Day

Remember Doberwawa? Oh, and that great Muppet ride, and that vignette on love versus war? Most important, do you remember what brands or products were behind these Super Bowl ads?

You're not alone if you answered no. Neither do at least 65% of Super Bowl viewers each year, according to advertising research firm Communicus. Beyond not recalling the products promoted in ads—which cost brands about $4 million for 30 seconds—44% of us can't even recall the ads shortly after. (As a Broncos season ticket holder, I'm trying not to recall the game either).

Super Bowl games give NFL coaches and commentators plenty to analyze game day and beyond. They also provide just as much fodder for advertising pundits to chew on, savor, and spit out, as the ad industry crowns its own champion at the end of the fourth quarter with the U.S. Ad Meter and other coveted honors. Beyond USA Today's "Most Liked Ads," researchers have been analyzing whether the industry's most expensive and creative endeavors pay off. The findings? Pretty much an epic thud by traditional marketing success standards—you know, the old fashioned metrics, like response rates, sales conversion, and ROI. Budweiser topped the likeability list this year and last with “Brotherhood” for 2013 and “Puppy Love” for 2014. However, “Puppy Love” may have helped sell more Labrador puppies than beer. The same Communicus study concludes that 80% of Super Bowl ads don't help sales. 

Yet every year, big brands return for more. Companies now compete for likeability, tweets, YouTube views, and other honors that really don't mean anything if you care about revenue gain and ROI. In addition, new Super Bowl success metrics have emerged in recent years, including the emotional reaction score. The emotional reaction score, calculated by Innerscope, looks for physiological reactions of ad viewers to determine which ads generated the most emotions like joy, excitement, and frustration.

Contrary to what many marketers may think, an ad's level of emotional impact doesn't always result in strong revenue impact, especially if these ads appeal to our "conscious" emotions versus our unconscious ones or those associated with key behavior drivers like loss aversion. 

Only one metric matters when it comes to Super Bowl ads, or any other ad for that matter, and it's purchase intent. What tugs at our heartstrings or moves us to giggle doesn't always move us to purchase, which is the ultimate test for all things marketing.  

This year's winner for purchase intent is yet to be announced; however, we have much to learn from past ads scoring high for this metric. For example, “Got Milk” was one of the leaders for 2013. The ad featured Dwayne Johnson, who put his job of saving the world on hold to get milk for his daughter. This ad hit deep into the psyche of parents by tapping their fear of failing their children. In addition, one of the highest purchase intent ads from 2012 was Chevrolet's “Apocalypse,” which depicted the reunion of fellow Chevy truck drivers experiencing the end of the world. This too scored highly because it tapped into our "unconscious" survival instinct and need to feel prepared for disasters.

Ads that are clever don't always sell. They entertain. Ads that are emotionally charged don't always sell either. But ads that appeal to our unconscious and instinctive emotions, like survival and security, tend to inspire behavior and influence purchase. When developing your brand's messaging platform for ads, social media, and all communications efforts, start with the following three mission-critical tasks:

1. Define the core emotion associated with your product. Is it fear of loss, frustration, fear of failing others, or uncertainty about the future? Or is it anticipation of security through social status improvement? Enhancing joy or acceptance from others? 

2. Determine how your product calms the associated fear or fulfills the anticipated joy. For example, if you're selling insurance, you're really selling assurance for quality of life.

3. Test different copy approaches for communicating the above emotional values. Once you nail the right one, keep it fresh by periodically testing new variations and offers.

Jeanette McMurtry, principal of e4marketing, is an authority on psychology-based marketing, speaking at business events worldwide. She is a Back by Popular Demand trainer, speaker, and course instructor for the DMA.

Honored to be asked to submit my projections for Hot Trends in 2014 for DM News this month.  Here's a link to the full article including my thoughts about marketing success and those of 29 other industry experts.  Enjoy some great insights on all aspects of marketing.  Our world is changing and its all good!

Click here for Hot Trends 2014.