Marketing with the Placebo Effect

Placebos are a fascinating and incredible phenomenon that demonstrates the power of our minds to shape how we perceive reality. A patient who is given a sugar pill instead of an actual pain reliever can feel the same decrease in pain as if they were to receive a medication with chemicals that block the pain receptors at the cellular level. One explanation of the placebo effect is that we tend to experience what we expect. If you expect to hate a new restaurant, you probably will. If a friend hints that the movie you are about to enter received great reviews, you will probably enjoy it. Our expectations can be so strong, they can create feelings that contradict the actual reality.

An example of this contradiction occurred during a study performed by MIT professor Dan Ariely, author of Predictably Irrational. He asked people to rate how they liked two beers, one was a Sam Adams and the other was a Sam Adams with balsamic vinegar. Most people preferred the Sam Adams with the balsamic vinegar. However when he told people beforehand that one contained balsamic vinegar, most people hated it.

Marketers can take this knowledge and use it to improve the real experiences of consumers by creating an environment of positive expectations. This can be visually appealing packaging- high quality wine glasses or an aesthetically designed box. Or by helping raving customers share their satisfaction through social channels like web forums or Twitter. It can be hinting to a prospect that your company was awarded for great customer satisfaction.

Now that you know the power of expectations to shape perceptions of customer’s experience, what will you do to improve customer experience?

Articles about Placebos

The Placebo Affect Seth’s Blog

Marketing and the Placebo Effect Nueromarketing

How the Placebo Effect Works HowStuffWorks

The Correlation with Customer Experience and Profit

by Anna Farmery

Peer Insight did a 3 year study of 40 Fortune 500 companies – the results show that companies that focused upon customer experience design outperformed the S&P 500 by a 10-1 margin from 2000 to 2005.

The test would be whether these companies are STILL focused on customer experience. For instance, I love Amazon…they took the pain out of much of my shopping for me….last night I tried to order some stuff ready for Xmas. Order process great…but delivery for products in stock, ordered now…Dec15? What??…if they are in stock why would the delivery be so long…large order canceled as the delivery date is far too near Xmas. This is now the 3rd time I have canceled orders based on the delivery dates they have given me in the last 3 months. Amazon was the ultimate experience for me…but over the last months the delivery element is falling way behind my expectations.

My customer experience is on the decline and it reminds me of something my maverick Uncle used to say…my Uncle was a multi-millionaire several times….bankrupt several times!!!…he said “Anna, it is easy making a million, hard part is holding on to it”

When a brand connects with their customer, that in some ways is the easy part, the hard part is keeping the customer at the centre after the success/profits comes flooding in. Success can breed complacency, success can breed arrogance.

I was once in a meeting with a marketing person who said “The customer feedback is irrelevant, they don’t understand marketing”

I would argue …that marketer is irrelevant, as they don’t understand customers!

This article was originally posted on The Engaging Brand and is licensed under the Creative Commons 3.0 license.

Sustaining Customer Service While Cutting Costs

A recent article in BusinessWeek titled Customer Service in a Shrinking Economy, discusses how companies are dealing with the need to maintain a high level of customer service while there is tremendous pressure to cut costs. For instance Zappo’s CEO Tony Hsieh is shifting dollars that were previously used to surprise new customers with overnight shipping and instead focusing these resources on overnight shipping for the most loyal customers.

Here’s an excerpt that describes how BMW was able to cut costs while improving customer satisfaction in dealerships by offering free wifi.

When No. 22 BMW rolled out Wi-Fi service at its dealerships last year, the move was intended to give customers a cheap way to pass the time while their cars were serviced. The cost was next to nothing since BMW just expanded the broadband dealers already used to run their businesses. But now that customers can use their waiting time productively, fewer are opting for free loaner cars, which are pricey for dealers to maintain. BMW’s Alan Harris says Wi-Fi, along with software that helps dealers better estimate loaner needs, has helped BMW cut its monthly loaner expenses by 10% to 15%.

The article found that the best service companies are finding ways to creatively cut costs without sacrificing service and allocating their scarce resources to retaining loyal customers rather than trying to acquire new customers. This is often better than simply cutting customer service staff, which Hertz did when it announced layoffs of 4,000 employees on January 16th. Loyal customers became very frustrated when there was not enough staff to help them and many customers probably left due to bad experiences.

Bad experiences can have a damaging impact on a brand since customers are much more likely to tell others when they are unhappy and encourage their friends and family to avoid that company. I recently heard a story at a company party in which Delta refused to help out this poor individual who needed to fly out a day earlier when her interviewer had something unexpected come up. From talking to the agent she learned that it would have been easy to change the flight since the plane was mostly empty, but the agent and her manager were on a mission to do everything they could to not help the customer. They actually said that they would only help her out if it was an extreme emergency like a funeral, in which case she would have to provide a copy of the death certificate! They made the customer pay an extra $180 dollars to re-book, which was as much as buying an entirely new ticket. It made me wonder if Delta management instructed agents to be extremely difficult if someone wanted to rebook, so they could double charge the customers for added revenue. However, tactics like these only lead to angry customers who actively avoid doing business with you in the future.

Photo by Thad Zajdowicz

More Magic, Fewer Tricks

by Gaston Legorburu

In doing a search on CMO, looking for some information about chief marketing officers, up popped a story about Disney’s nationwide contest for its first ever Disney Parks CMO – a chief magic official.

The CMO job responsibilities: traveling to Disneyland and Walt Disney resorts to help create magical experiences for guests, participate in events and be a behind-the-scenes wizard with the Walt Disney Imagineers.

More than 1,300 people entered the contest. Peter Yu, one of the finalists, got high marks for his infomercial promoting a fictional CMO College called the Magical Institute & Center for Knowledge, Education & literacY (MICKEY, sort of.) Classes included “How to Whistle While You Work,” and “How to Fastpass Your Way to the Top.” Not bad ideas for we marketers. But it was high school teacher Justin Muchoney who won based on his ideas on how to connect people with the Disney Magic.

His wining idea came down to five concepts that he believes can be shared with people in many ways, big and small:

1. Exuberance.
2. Optimism.
3. Vision.
4. Passion.
5. Innovative Magic.

Explaining why he’s the man for the job, Justin wrote, “It is my supreme goal in life to create unforgettable experiences that draw people closer together. I aspire to build deep and meaningful relationships and to help people experience the awesome wonders life has to offer. I constantly dream up new events experiences or even moments when the people I encounter can join together and share in a memorable adventure.”

Justin may be more experienced in leading the high school marching band, but his concepts are as relevant for today’s chief marketing officer as Disney’s chief magic official. Create experiences for people that are memorable. That they rave about with other people. That they keep coming back to in order to buy more of.

Justin also may be onto something about the potential value of the five concepts to how we think of ourselves as marketing leaders, in shaping marketing strategy, and in creating focus for your people and agencies.

• Be passionate and exuberant about the value your brand is providing to your customers. (If you can’t be – is it you or do you need to improve the brand?)

• Be innovative and visionary about constantly improving the current offering and customer experience. (Blockbuster brought a more innovative approach to traditional video rental stores, but then go eclipsed by Netflix.)

• Above all, be optimistic in believing what’s possible. People follow optimists, get energy from them, want to buy from them and work with and for them.

Many today say that technology has transformed marketing. Personalization. Search. Behavioral analytics. Social media co-innovation. Rebates. Cookies. Mobile marketing. Profiling. It’s amazing what’s possible with technology – and more so every day. So much so that too many of us have gotten caught up in the technology tricks and forgotten about the magic.

Magic is what sets two relatively similar companies apart, and there is always an angle to do this. Marketing magic doesn’t just happen. As Justin knows, someone has to create the magic. I’ve seen the same offers and the same ads and the same placements for two retailers and they performed completely different. One had the magic, the other had none. If you are the brand with magic your cost per customer acquisition cost will be lower than your competition. If you are the brand with magic, people will find you – vs. you having to spend so much to find them.

We can do a lot of tricks with technology today. But technology without the magic – creating the “that was great” customer experience – is just another trick in the big marketing bag of tricks that often weighs us down.

Magic comes before the technology; technology helps deliver the magic.

This article was originally posted at CMO Rants and is licensed under the Creative Commons 3.0 license.

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