by: Roger Dooley
How can neuroscience inform marketing? One example comes from the increasingly hot field of neuroeconomics: a practice called asymmetric paternalism.
In New Yorker writer John Cassidy’s superb neuroeconomics article, Mind Games: What neuroscience tells us about money and the brain, the practice is described as “a new political philosophy based on the idea of saving people from the vagaries of their limbic regions.” The specific example of asymmetric paternalism provided in the story is redesigning corporate retirement plan enrollment procedures based on brain scan-based studies of how individuals react to risk.
The article describes work by neuroscientists at Harvard and Princeton:
they used an MRI machine to scan a group of student volunteers who were asked to choose between receiving a fifteen-dollar Amazon.com gift voucher today and receiving a twenty-dollar Amazon.com gift voucher in two weeks or a month.
The scans showed that both gift options triggered activity in the lateral prefrontal cortex, but that the immediate option also caused disproportionate activity in the limbic areas. Moreover, the greater the activity in the limbic areas the more likely the students were to choose the voucher that was immediately available and less valuable.
Building on these findings, the researchers suggested that to get people to save, you need a “pre-commitment” device. Enrolling in a 401K retirement plan in which the employer matches employee contributions should be a no-brainer (sorry!) for eligible employees, since they are basically getting free money with little or no risk; despite this, firms often find that many employees do not enroll. A pre-commitment device in this case would be automatic enrollment with the ability to opt out. And, indeed, when this approach is taken enrollments are significantly higher.
A skeptic might say, “Big deal… when won’t an opt-out approach work better than one where the individual has to opt in?” Nevertheless, by exposing the ways people evaluate choices, sometimes in an irrational but ultimately predictable nature, neuroscience can help us develop better approaches to offering these choices. The article notes that warning labels on cigarettes are a form of asymmetric paternalism; neuroscientists suggest steps like warning labels on lottery tickets and mandatory “cooling off” periods after major purchases to avoid bad decisions driven by emotions.
What does this have to do with marketing? Quite a lot. Forget the unappealing and vaguely Orwellian name, asymmetric paternalism. Think, instead, about efficient and effective marketing. A financial services vendor has to deal with similar issues to those of the company offering a 401k plan, and can benefit from understanding how customers think about risk, and about present value vs. future value.
A broader spectrum of firms offer “deals” that involve risk and/or time. I haven’t seen any neuromarketing studies on the topic, but I’ve always found “scratch off” discount coupons interesting. “Save 20%, 30%, or even 50% on your purchase - when you check out, just scratch here to reveal your discount!” These sales are common enough that one presumes they do work better than a standard discount, at least in some situations. Rational cynic that I am, I always assume that my coupon (and just about everyone else’s) has the lowest value on it, but I’m sure there’s part of my limbic region whispering, “Hey, it COULD be 50%!” In a similar vein, we often see stores award gift certificates with a purchase - these certificates can be used only a week or two later. This has some benefits for the store, as it greatly increases the probability of a return visit, and there’s no doubt that some percentage of the certificates will never be used at all.
The research mentioned above, though, shows that consumers DO find a major difference between immediate money and future money (even when the future is only a few weeks away) and make seemingly irrational decisions in favor of the immediate reward. A store offering time-restricted gift certificates to get customers to shop right away might find that a smaller but immediate reward gets more customers into the store.
Neuroeconomics is still in its early stages, but marketers need to pay attention to this research. The types of decison making studied by neuroeconomists are often the same ones of interest to marketers. Some of it may be considered neuromarketing, some is common sense, and some is old-fashioned test marketing… but one can’t ignore the area.