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April 18, 2005

Marketing Lessons Learned from FREAKONOMICS

Freakonomics_1

This weekend I read FREAKONOMICS with rapt attention. The authors, economist Steven Levitt and journalist Stephen Dubner, apply economic measuring tools to reveal, in a fascinating way, how and why conventional wisdom is oftentimes wrong.

The material covered in FREAKONOMICS could serve as Malcolm Gladwell book fodder for eons to come. And just as with Gladwell’s writings, the takeaways from FREAKONOMICS are not readily apparent, nor immediately applicable in a business sense.

While there are many lessons to be learned from FREAKONOMICS, I came away with four lessons learned I plan to use as a marketer.

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Marketing lesson learned #1demystifying the assumption the amount of money spent by political candidates matter greatly in an election.

What really matters for a marketing campaign is not how much you spend on tactics. What matters most is what your product/service can do.

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Marketing lesson learned #2demystifying how monetary incentives (and disincentives) results in changing one’s behavior in an unintended manner. [LINK: book excerpt on incentives and the dark-side of cheating]

Don’t think a customer loyalty program which doles out monetary incentives will alter consumer behavior for the better. Instead, find ways to base so-called customer loyalty programs on social currencies like recognition and admiration.

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Marketing lesson learned #3how the diffusion of information eradicates the power of knowledge being a leverageable asset in business. [LINK: book excerpt on how experts try (and have tried) to use knowledge as leverage]

The abundance and availability of information today makes storytelling more important than ever for marketers. Storytelling, not information, is the new leverage-able asset in business. (This ‘storytelling’ story is one Seth Godin tells in his to-be-published book ALL MARKETERS ARE LIARS.)

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Marketing lesson learned #4how conventional wisdom is a powerful story most people want to believe even when shown sound analysis to the contrary. [LINK: book excerpt on why drug dealers still live with their Moms]

Don’t try to change one’s conventional wisdom by marketing how your product/service upends one’s thinking -- it’ll take too much money and time. Instead, success will come truer if you focus on telling your product’s story to people who are more inclined to believe your story from the get-go. (Again, this marketing lesson learned has been shaped by Godin’s LIAR thinking.)

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Comments

Not sure about #1 and #2. Having spent lots of time working on campaigns where the results scaled pretty well to the amount of money spent on advertising and the amount of money subtracted from prices or thrown into promotions, I'd have to see some pretty amazing new data to believe that, in the aggregate, money has stopped being a driver or a motivator. Now... is it the only one? Clearly not. Bringing us to...

#3. YES. And I've been saying this (officially) for more than a year now, and to my drinking buddies for quite a bit longer than that. See our newsletter from March 2004. When anything of value becomes a commodity, you need to move one step up the value chain to start making hay. If information is ubiquitous, you need to move up the chain. What's above information? Knowledge. Which, when monetized, is content. We are living in the Age of Content.

So the Chunky Bearded Prophet sayeth.

Oh. And #4. Yes. For sure. Read, "The Hero and the Outlaw" by Margaret Mark and Carol Pearson. Wonderful book about how you should build your brand starting with Jungian archetypes that have built in cultural relevance already. Basically, if there's already lots of pent up pscychological momentum behind the idea of a cowboy being a quiet loner, and that is the essence of your brand, why not tap in? It's a story we all know already, and that we believe. Just retell it with your own voice. A great read, not too egg-headed, and very practical.

Especially in the... AGE OF CONTENT! (sound of gong)

Oh chunky bearded prophet (that's funny) ... I should clarify what Levitt means regarding political spend and monetary incentives

In FREAKONOMICS, Levitt says it is true that the candidate who spends the most money in a political campaign usually wins. However, he asks and answers the question of "... is money the cause of the victory?"

Levitt writes, “Here’s the surprise: the amount of money spent by the candidates hardly matters at all. A winning candidate can cut his spending in half and lose only 1 percent of the vote. Meanwhile, a losing candidate who doubles his spending can expect to shift the vote in his favor by on the same 1 percent. What really matters for a political candidate is not how much you spend; what matters is who you are.”

For the doling out of monetary incentives to reward behavior, Levitt basically argues it creates a system where people scheme to earn the money and it many times doesn’t change behavior for the better. He goes to great length to tell of how a day care center implemented a fine, which failed miserably, for parents who were late in picking up their kids. He also tells of how when people are financially rewarded for donating blood they actually donate less blood than if they were recognized for their altruism. Levitt goes on to highlight other instances of where financially rewarding a change in behavior doesn’t change behavior for the better.

After learning about "Freakonomics", I saw the similarities to Gladwellian analysis that John Moore's mentioned in his blog.

I first googled to John's commentary while tracking what others might think of the marketing implications of Levitt's perspective. I appreciate the relevance of conclusions 2 through 4. Extrapolation number one, I think could go deeper.

By the way, I'm intrigued with why media buyers for congressional campaigns would NOT have access to, and therefore modify their buying behavior in accordance with the stats on congressional races (sorry, that is some smelly syntax). I'm more comfortable with there being a "break" in the behavior and thinking about abortion and cheating than about the former statistic.

In browsing http://brandautopsy.com and its links, I became curious about the following: why is http://brandautopsy.typepad.com/ not linked back to http://brandautopsy.com? I have two theories:

1. It's an overlooked glitch.

2. It's a clever ploy to filter and qualify future clients of Brand Autopsy.

If it's number two, I've blown your cover. OOps.

I was really looking forward to reading the book (and still might), but when I read their excerpt about real estate agents in the May issue of Wired magazine - I was extremely disappointed to say the least. They are almost completely wrong in their assumptions and *insights*. I've been in the middle of posting a rebuttal on my blog, TwinCitiesREalEstateBlog.com.

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