How Human Nature Affects Buyers’ Choices
June 10, 2020
Notes from the Show
Much of human behavior remains the same because so many things that drive our behavior are innate and hard wired. But context changes things enormously – even beyond recognition. Whether caused by a pandemic or the growing influence of AI in our lives, buyers are looking at their choices through a different lens. In this episode, Susan Tatum interviews Matthew Willcox, author and founder of behavioral insights consultancy, The Business of Choice, to learn more about what has changed and what has stayed the same.
Transcript

Susan: Hi, welcome back to stop the noise. I’m Susan Tatum and today I’m talking with Matthew Wilcox, who’s the author of the business of choice. Hey, Matthew.

Matthew: Hey, Susan, how are you?

Susan: I’m good. Thanks, hope you are too.

Matthew: We’re doing our best to keep well and keep safe in Northern California

Susan: Doing the same in Southern California. So I have many things to ask you about before we jump into that you want to give us just a one minute overview of what you’re doing now.

Matthew: So I’m Matthew. I run a consultancy called the business of choice, which is a choice architecture and behavioral insights consultancy and wrote a book called The business of choice, which was published in 2015. And we’re bringing out a revised and updated edition in September 2020.

It’s kind of an interesting thing, because so much of human behavior remains the same because so many of the things that drive our behavior are innate and, to use an overused term, hard wired.

But context does change things enormously and even beyond recognition. And so even in the five years since 2015, even before the COVID-19 crisis started, enough had changed for me to do a substantial revise of my book, in terms of how we should think about how people make choices.

Prior to setting up my own consultancy. I worked with global advertising agencies for a couple of decades. Most recently with one called Foote Cohn & Belding or FCB, and as well as being their chief strategy officer on the west coast, I ran a group called the Institute of Decision Making, which was a think tank that brought together academics who study choice and practitioners who could learn from what behavioral scientists, decision scientists have been learning about how people make decisions. And so that was sort of the impetus for me to move from being essentially a brand and communication strategist to somebody applying insights from behavioral science.

Susan: So what changed in the five years that led you to do another edition of your book – in the way that we look at human behavior?

Matthew: So I’ve changed. I’ve learned more. When I wrote the book, it was really at the beginning of business and organizations embracing insights from behavioral science. I would go to academic conferences and I would be the only practitioner in the room that is now changing. And in fact, there are behavioral science conferences and organizations specifically focused on practitioners. So I learned many things from the work I was doing.

But secondly, there has been new research. When I say new research, this isn’t research that tells us the world is flat when we’ve been taught it’s around. It’s not research that changes things dramatically. But it does build on some existing principles. And in some cases, it makes us feel that principles may not be as universal or as generalizable as perhaps we thought they were.

And I think there’s also some things that are changing in the world of the people whose decisions we want to influence. There’s a chapter in the book now about how artificial intelligence can work both with marketers and other people who are trying to influence choice, but also how it affects the chooser. So I want to make a quick distinction here. I don’t talk about people as consumers, I talk about them as choosers because what we do with marketing is we try to affect how and influence the choices that they make.

I also think that given the world we have been living in until the beginning of this year to focus on the notion of consumption is probably not tuned into how organizations should be thinking about the world as well. And let’s face it, a lot of businesses are not really just about consumption, a lot of the valuable things that people will pay for now experiences and I don’t think that counts as consumption in the same way as we’ve typically defined consumption in the past. So I don’t use the word consumer, I talk about choosers.

And so the world our chooser lives in has changed. Because one of the things we know is that many more choices that people make are influenced in some way by not just what they’re picking up themselves, but by what AI and machine learning is prompting to them. So I kind of looked into the research that tries to understand how marketers can use that, but also what that means from the choices that people can make and how they might feel about those choices.

When I wrote the book in 2014 Alexa hardly existed. And now we’ve got something like 120 million Alexa enabled devices in American households now. And in fact, I think it’s even more than that. So a number of things were changing that made it a good time to update and I think perhaps the biggest of them all, though, was just looking at stuff and saying, Do I feel quite the same about that now, as I did five years ago?

Susan: Do you think people.. are we changing or are we learning more about us?

Matthew: So when you say people do you mean is how people make choices change?

Susan: The biases that you discuss in your first book. Are those still the same?

Matthew: So largely, yes. Some of them are culturally dependent, but so many of them are, it seems are pretty much baked into human nature. One of the ways I talk about what I do is about bringing insights from human nature into an understanding of how we make choices, and bringing those insights from human nature into how we develop marketing programs.

There’s a whole chapter about the evolution of our decision making systems and a number of years ago, I spoke to a professor at the University of New Mexico called Dean Faulk. And she studies brain evolution and actually studies fossils of skulls to try to work out how the brains have changed over 10s and thousands of years. I mean, even going back 80, 90 100,000 years. And, even 10,000 years ago is essentially today in terms of the evolution of the brain, and how we make choices.

So these mechanisms that we use have a very, very long evolutionary history.

But the critical point is, and people sometimes forget this, they are massively context dependent. And so changes in context mean that those mechanisms will be triggered in very, very different ways.

An analogy I use is say you’re in a garage and it’s dark, the lights aren’t there, and you’re trying to find a small screw on the floor. And so you open your eyes as wide as you can to take in as much of that scarce resource of light to try to find the screw. And then your partner comes home and the garage door opens, and suddenly it’s illuminated with masses of sunlight. Now you’re squinting to try to see the object you’re trying to find.

And the point I’m trying to make there is that even though those behavioral responses are completely different, what’s changed and made them different is the context.

So context drives behavior in many different ways. And this is a really important thing to think about in the current situation with COVID-19. You know, I’ve been saying to a number of people I’m not making prognostications about how people might behave, because we really just don’t know; because this is actually a unique context. The closest thing is World War Two, and in the time of World War Two, we didn’t have the same understanding of cognitive biases and cognitive mechanisms. So one has to just observe and I think the best academics out there are not saying this is what’s going to happen. This is what people will do. They’re just saying we need to observe and see how these changes, in context, actually affect people’s behavior down the line.

Susan: Well, I can certainly say for me, and I didn’t think of this somebody pointed it out to me, but the things that we focus on of Maslow’s Hierarchy seem to be moving down the pyramid a bit from where they were a month ago.

Matthew: Yeah, one of the things which is interesting here is that it’s actually very, very difficult to get people to change behavior for threats that have a distant horizon. And so whatever one’s perspective is on global warming, it’s actually been really, really difficult to get people to significantly change their behavior, because that threat seems too far away. And what’s happening now is we have a very proximate threat. One of the really important things to understand is how a sense of now and the future and the recency of something actually affects what we do. Most people who run businesses intuitively know this. But sometimes people tend to think that just because somebody has said something in research that they will do this, that they will go out and do it.

Susan: Yeah, Yeah, I’d pay money for that. And they don’t.

Matthew: Yeah. And often that’s got to do with “I might do that in the future so I’m saying I will, but actually, my behavior today doesn’t reflect that”. I often borrow that phrase, I think from Harrison Ford in the bodyguard, which is “clear and present danger”. If people are to do something, they need to have a sense that there is danger, it seems real, and it’s present. And as much as possible, it needs to be clear. Now I’m not sure that the threat we’re all under at the moment seems perhaps as clear as it might do. And that’s not I think, because of misinformation. It’s just because people don’t know but those three things are what will drive people to take action.

Susan: You bring up the not knowing. To me that creates a lot of discomfort.

Matthew: It does. Yeah. There’s a cognitive bias called ambiguity aversion. We often settle for a bad result rather than an ambiguous result.

And there’s a great experiment, which has been replicated a number of times where people are told that there is a number of red and black balls in a jar, and they’re told there’s an even number, and there’s a 50-50 chance of them getting a black one or a red one. And people are very happy to take that bet on. If however, you say to them, there are red and black balls, we don’t know how many there are of each, then people are much more reluctant to make a bet on the color of the ball that they will get. Now, it could be there’s 80% of the balls in there are black, that could be 20%. But the ambiguity is something we’re really, really bad at dealing with and it actually stops us from making choices. And I think there’s no doubt that we’re seeing that happening a lot in people’s behavior in the moment.

Susan: So the uncertainty keeping us from making decisions could go to if you’re not really clear in your messaging, and maybe not right now – but anytime, you’re not clear in your messaging, if you haven’t given a good reason why you’re different or unique or whatever, then it seems like uncertainty could play into there. I can’t make a decision if I don’t know what the difference is between these things that are in front of me.

Matthew: And that gets us on to an interesting point, one of the revelations I had, as I started to understand more and more about behavioral science. And it’s actually the notion of differentiation. So one of the things that often as marketers we get focused on and certainly in my early career, I was working with massive clients and brilliant people in advertising agencies was the importance of differentiation.

But it turns out that, actually, the way the human brain works is the most important information is not how is something different. But what is that something like that I know already?

Susan: You mean what is it similar to?

Matthew: Yes, what is it similar to? And that’s kind of interesting, isn’t it? It’s almost like we’ve been obsessed in pointing out our differences. But so often telling people what something is similar to it is an easier way, and a way that people can get to more quickly an understanding of what you’re about, you know. And we see it happening a lot when people talk about old ads you’ve seen where a sewing machine is described as a Cadillac of sewing.

Susan: Or the Starbucks of banking.

Matthew: Or the Uber of pet care. So really, if you want to remove as much ambiguity about what you are, thinking about what you’re like, is a quicker and more intuitive way to get people to get that. And I talk about this a lot when I do my workshops with clients. They’re all very good at saying these are our points of difference. But we normally make sure we spend quite a lot of time getting them to think about, in the broadest sense, what they might be similar to.

I’ll give you two quite old advertising examples. One is Apple, the 1984 campaign was all about how Apple was different. And in fact, the tagline was “think different”. They ran these commercials celebrating the people who thought differently and change the world, whether it was Einstein or Maria Callas or Martin Luther King. And this worked for them as they grew to be a product for the creative classes.

But when they wanted to sort of break out of that, and become a computing platform for people running programs that would normally run on PCs, like Windows and PowerPoint and stuff, they actually moved to a campaign called Mac versus PC. And if you look at those ads, so many of them are not telling you that a Mac is better than a PC. They’re telling you that a Mac is the same as a PC. They’re telling you that the Mac can do the things that the PC can. And this was a breakout campaign for them in terms of getting them to that critical position where they were not just a niche product for graphic designers.

Another famous example that I love, and I don’t even think the marketers were aware they were doing this when they did it, is Dos Equis – The Most Interesting Man in the World, Even though it’s a little bit of an old case study, I kept it in the updated edition of my book. If you go back to about 2007, imported Mexican beers were not doing well and imported Mexican beers were the natural frame of reference for Dos Equis. It was a brand that you would think about in the context of the now unfortunately named Corona or Modelo or Pacifica. I mean it was one of those Mexican beers and as a category, they were lagging behind the general imported beers market.

And then you think about it the most interesting man in the world, Dos Equis became the fastest growing beer in America period, it became the fastest growing imported beer brand in America. But what they did was they did not say this is why we’re different from Modelo from Corona and the other brands. What they did was they actually kind of said they were similar to something but they chose what they were similar to in a very clever and inspired way. If you look at those ads, there was nothing about a beer drinker in those ads. They are set in cocktail bars. You have Jonathan Goldstein, the guy who played the original most interesting man in the world. He’s surrounded by women in cocktail dresses. He is wearing a tuxedo with a undone bow tie. He’s kind of James Bond meets Ernest Hemingway, which is also a great frame of comparison, a way of describing him. That’s how the creative directors described him. He’s got cufflinks on. And he says, I don’t always drink beer but when I do, I prefer Dos Equis. And I think what they did, which was brilliant there, was they associated themselves with luxury cocktails, sort of high end drinks, which are actually going through a growth moment at the time. They became the beer that kind of fitted with that. Rather than a beer that was slugging it out with some with similar competitors.

Susan: It is brilliant in hindsight, isn’t it?

Matthew: Yeah. As I said, I’m not sure how much of that they realized they were doing. But when I talk to people about this, I say, try to find the comparison that actually gives you the best shot at growth. And that may not be your competitors. It’s important, of course, to have your points of difference but it’s also really important, some would say more important, to understand what you’re similar to.

Susan: Yeah. So one of the things that comes out in your book and you and I talked about previously was loss aversion and the effect that that has on our decisions and buying decisions, I guess, might be one of those. Can you go into that a little bit more? For people that are listening that might not be familiar with it?

Matthew: Sure. So the idea of loss aversion came out of the work of the Nobel Prize winning father of behavioral economics, Daniel Kahneman and his work with Amos Tversky, back in the 1980s. And what they found, was that the behavioral effect of a loss, say of $100, turned out to be about twice the behavioral effect of a gain of $100.

So essentially, what they were saying is, we would do more to avoid a loss of the same amount than we would do to have a gain of the same amount. Now, from a classic economics perspective, that makes no sense because it’s $100 either way, but what they were getting to was this divergence between how economists think people should behave from a rational perspective and how people actually do behave. Now, loss aversion is, something I really encourage all of the people I work with to think about how it is affecting the choices that you want people to make. One thing one can do is frame things as a loss. So for example, rather than saying to people, save $100 over a year with our wireless plan, maybe it’s about not losing $100 a year with this wireless plan versus the wireless plan you have. And those are valid strategies to use. But what’s really interesting to me is when you understand how loss is stopping people from doing the things that as a marketer, whether you’re an NGO, whether you’re a for profit organization, from embracing the behaviors and the choices that you want them to make. One really good example of this was done for Kraft macaroni cheese. Kraft wanted to change the ingredients of macaroni cheese because Kraft across their business was trying to take out all of those horrible numbers and colors and things that aren’t necessarily natural ingredients. And when they started talking to people about macaroni and cheese, and said they were going to change it, even if they were going to be making those things, they had a lot of resistance. People didn’t want them messing with their Mac cheese, people didn’t want to lose something that they knew. If you enjoy this product, any change kind of registers as loss in some way or another. And the classic case of course is new improved coke. Even if you even if you are actually making the product better and your research tells you that product is better. I think it’s really important for all marketers to understand that any improvement can be seen as a loss by some people who buy your product. And in fact, this is a really important thing in the world of innovation, where we all get excited about the latest innovations we’ve developed without I think, realizing that embracing innovation always means some form of a loss in one way or another. And so what Kraft did with their agency was rather than telling people that they were changing mac and cheese and a new, healthier recipe, they simply kept marketing and all they did was change the ingredients panel on the side, which most people didn’t look at. The pack looked exactly the same. They then ran a campaign saying, “we’d ask you to try our new recipe, but you’ve probably tried it already”. They were letting themselves get beyond that hump of the potential loss and then saying to people, we made some changes, and you were fine with it. So this, is a good example of them understanding that there was a potential to lose customers because of a sense of loss. And, they came up with a really smart way of getting around that.

When I do my workshops, one of the things I’m always asking people is to think about what might people.. you want people to embrace this behavior, what might be their fear of losing by making that behavior. Not because you use that as a marketing message, but you can mitigate against it if you’ve thought about it and you understand it.

Susan: I’m thinking about some of our work where we’ve made changes in the delivery mechanisms of our programs. And maybe we’re making it easier for the client but some of them feel that they’re not as involved anymore. They really wanted to be part of it.

Matthew: That’s a classic example, when you make an easier process, people can lose a sense of mastery. People like to be the experts of figuring out how to do something. And then if you say, “Well, actually, we made it easy. You don’t need to do that anymore”. They may feel less attached. They may have less of an emotional involvement with what you’re doing.

Susan: It’s a lot to think about. When you’re talking about loss aversion it seemed like some of what you were describing might be resistance to change.

Matthew: So yes, That’s a good question. I talked earlier about how perspectives on research has changed even since I wrote the first edition of the book. And in fact, one area where it’s changed to some extent, is the notion of loss aversion. If you were to pick up a textbook from 5-10 years ago, you would see it pretty much described as an ironclad rule. And what we know is that sometimes people are more loss averse than others. In some cultures, loss aversion may weigh in more than others. And in some contexts, it certainly does weigh more than others. But so you get the notion of resistance to change and this is I think called the status quo bias. That’s the term used for the cognitive bias that describes lots of our aversion to change. But a lot of the underpinnings of status quo bias do come from loss aversion. There’s a great quote from a guy called Ron Heifetz. He’s a professor at the Kennedy School at Harvard, where he says, it’s not so much that people are change averse; it’s their loss averse, because in every change, that is the danger of a loss in some way.

Now that said, sometimes there is a resistance because it’s an effort, but even an effort is a loss. The effort of learning how to do something differently, or even just the effort of thinking about something differently, is effectively kind of a loss of energy resources. When we were chatting earlier, we talked about how we have a limited cognitive capacity and one thing we’re really smart at is how we use that.

Susan: So one last question for you. You mentioned in your book, our intuitions want to go for a short term answer. We want to get to a quick solution. We want to take action but sometimes we need to pause a little. And I know that you don’t want to be making predictions about the situation that we’re in now because it’s all too new. But is that, in your opinion, a concept or some advice that we should be listening to now and not trying to be too reactive?

Matthew: I think it’s really, really difficult at the moment, we’re not very good at imagining future outcomes. We are much more focused on something which is proximate and is now but you know, the notion of future outcomes is based on continuity and some certainty in the future. So saving for retirement, which most Americans are not as good as we have said they should be. And one of the reasons is that we want to take the reward now, rather than give that reward to ourselves in the future. And quite interestingly, when we think about ourselves in the future, there’s some great neuroscience research that shows it, it almost becomes like another person. So we’re not wanting to give that money that we could have now to someone else in the future. And I think what goes out of the window at the moment is that level of certainty.

I’m finding it very, very difficult to have a long term perspective on things because I just don’t know what things… I mean, this will be over. But I don’t think any of us know what that recovery will look like. And I think what I’m guided by most at the moment some of the academics who are just saying that don’t make predictions, just observe, keep observing. It’s almost like keep living in the question rather than trying to figure out what will happen.

So normally my advice would be, yes, try to get ahead of this and think into the future. But at the moment, I think we don’t really know what we’re getting ahead of.

Susan: Would you say that there’s more interest in human connection, and it’s more meaningful now, even though we can’t really connect face to face with people?

Matthew: We’re seeing a lot of studies. I was on a webinar yesterday, which was based on data which was a week old, and a week old data two months ago would have been as up to date as it could be. Yet in this webinar, the presenters were continually apologizing as to how their week old data. It’s like, well, we don’t know if this is true today because of this development, this development and this development. And this was about consumer behavior, media habits, and sensors about social behavior in the COVID era.

I mean, my sense would be human connection is always important. And very often we don’t realize the importance of things until they become scarcer. And this, again, is a behavioral principle, the power of scarcity makes us really want things more. And one of the things this research company did talk about the importance of community efforts as well. And so, perhaps one good thing which will come out of this will be a stronger focus on community and connection.

Susan: I think that’s something good to hope for, for sure, Matthew, thank you so much for spending the time with me. And I’m sure you’ve got people bugging you with questions constantly now.

Matthew: As I said, I’m trying to have a view, which is, I don’t know the answers, but getting people to think about what’s happening literally in the day to day of their business. If I say one thing, the most important thing at the moment that people can do with is a sense of feeling safe and empathy.

As businesses and as human to human humans, if we can just think about helping people feel safe and creating that sense of empathy whenever there is the occasion to do it, I mean, we all would have got an inbox full of emails from companies telling you how they’re dealing with the COVID crisis. The one I got that stood out for me was one from Levi’s, which said, buying jeans is probably the last thing on your mind at the moment. And I thought that is sort of what I want to hear from a company rather than, you know, well you can’t do this, but you can buy our product online, or you can do this, that and the other.

Susan: okay, anything else I should have asked you about?

Matthew: Not that I can think of. If people have questions and would like to get in touch, if somebody got a point of view, I’m very happy to be part of that discussion.

Great to chat, Susan and keep safe and well.

Susan: You too, Matthew.