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Thursday March 4, 2010

Topic: Sales & Marketing Management

Reference: Welch, Ned. “A marketer’s guide to behavioral economics.” McKinsey Quarterly, February 2010. Http://www.mckinseyquarterly.com.

In a tough economy and a difficult selling environment, smart companies are trying innovative ways to attract and retain customers. A number of initiatives are Web 2.0 centric involve email marketing campaigns, search engine optimization techniques, Google Ad words, and the power of social media using Facebook and Twitter among others. 

Thursday March 4, 2010

Topic: Sales &Marketing Management

Reference: Welch,Ned. “A marketer’s guide to behavioral economics.” McKinseyQuarterly, February 2010. Http://www.mckinseyquarterly.com.

In a tough economy and a difficult selling environment,smart companies are trying innovative ways to attract and retain customers. Anumber of initiatives are Web 2.0 centric involve email marketing campaigns,search engine optimization techniques, Google Ad words, and the power of socialmedia using Facebook and Twitter among others. With the number of mobile phonesdomestically now exceeding the number of people in the U.S., and with many ofthem with web browsers, GPS, and other handheld sophistication (e.g. Smartphones),vendors are looking at pushing information to consumers based on theirproximity to retailers, restaurants, and other friends. Savvy customer huntersare also using aggressive price and product positioning to entice customers tomake specific purchase decisions. Many of the principles being deployed arederived from the discipline of behavioral economics. Behavioral economics isthe science that links economic decisions to specific behaviors. Because of thebehavior factors all dollars are not created equal and all economic decisionsare not rational. In the referenced article, the commentator shows howbehavioral economics impacts consumer decisions and makes a strong case fordeploying the techniques in your marketing campaigns. “Payments, like losses,are viscerally unpleasant. But emotions experienced in the present-now-areespecially important. Even small delays in payment can soften the immediatesting of parting with your money and remove an important barrier to purchase.”The commentator identifies at least 4 techniques that should be adopted today.These include: (a) making a product’s cost less painful; (b) using strategicdefault options to establish ownership; (c) restricting consumer choice bylimiting product options (forces decisions and improves satisfaction); and (d)carefully positioning your preferred option (benefit from offering a fewinferior options). “Marketers have long been aware that irrationality helpsshape consumer behavior. Behavioral economics can make that irrationality morepredictable. Understanding exactly how small changes to the details of an offercan influence the way people react to it is crucial to unlocking significantvalue…” Choice (c) is very interesting and runs counter to the thinking thatmore is always better. Understanding how to limit choice and maximizesatisfaction can be critical in many industries from computers to lotterypurchases and may be the key to establishing new segments (e.g. iPad).Certainly, these factors make a strong case for strategic incorporation in yourproduct and service strategies. The smart money says load up on thesebehavioral concepts immediately.