Neuromarketing: The New Science of Consumer Decisions: Terry Wu (Transcript)

Full text of thought-leader Terry Wu’s talk: Neuromarketing: The new science of consumer decisions at TEDxBlaine conference.

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Terry Wu – Founder, Neuromarketing Services

About 20 years ago, a group of researchers did a study at a wine store. They want to find out if store’s background music could influence shopper’s wine selections.

Here’s what they found: On the days when they play German music, German wines, also French wines by three to one. And on the days when they play French music, French wines, also German wines by three to one, but here’s the kicker:

They asked shoppers if the background music influenced their wine selections. You probably could guess, over 90% of shoppers say “No”. This study shows that our buying decisions can be influenced by something so subtle that we don’t even notice.

The study also raises some important questions. How do we make buying decisions? Do we make decisions constantly based on facts, reason and logic, or do we make decisions unconsciously based on emotions, feelings and intuition?

Next, I’d like to share with you how unconscious emotions influence our decisions. You remember New Coke? Here’s a story behind New Coke:

In 1985 Coca-Cola was losing market share to Pepsi. Pepsi had been taunting Coco-Cola by claiming that in blind taste testing, more people preferred Pepsi over Coke. Coca-Cola decided to improve the taste by changing its formula. They came up with New Coke.

Over 200,000 people who taste tested New Coke, overwhelmingly, people preferred New Coke over the original Coke. But more importantly, people prefer New Coke over Pepsi.

With a lot of confidence, Coca-Cola rolled out New Coke. But very quickly, this sweet drink turned into a bitter pill that cost Coca-Cola tens of million dollars. Angry customers started protesting around the country, demanding the original Coke back.

Anxious customers start hoarding Coke products left on store shelves. Coca-Cola headquarters received about 8,000 angry phone calls a day.

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You can’t help asking how 200,000 people could get it wrong. What did Coca-Cola miss?

What Coca-Cola missed was a strong emotional connection that people had. For nearly a hundred years, Coke had been marketed as a feel good product. Their marketing slogans included- “Have a Coke and a smile.”, “I’d like to buy the world a Coke”

Celebrities like Elvis, Marilyn Monroe, and the Beatles were the face of Coca-Cola. If you don’t feel well, have a Coke. Coke was more than a sweet beverage. Drinking Coke had to become a feel good experience. That ‘feel good experience’ involves thought, feelings, and memories.

Well, drinking Coke seems a bit complicated, doesn’t it? A study published in 2004 shows how Coca-Cola’s marketing has imprinted our brains with good thoughts, feelings and memories. In this study, volunteers were asked to drink either Coke or Pepsi while their brains were scanned to find out which part of the brain became active.

The researchers start out with blind taste testing, like the Pepsi Challenge. They were able to replicate the result of Pepsi Challenge. That is slightly over 50% of volunteers preferred Pepsi over Coke, no surprise there.

Then the research has made a slight change to the Pepsi Challenge. The volunteers were told exactly what they’re going to drink before taking a sip. There’s no longer a blind taste test anymore.

Suddenly, 75% of volunteers preferred Coke over Pepsi. More surprisingly while they’re drinking Coke, the emotional part of the brain, the memory part of the brain and the thinking part of the brain became very active. In sharp contrast, this elevated brain active pattern was not observed while they’re drinking Pepsi.

What did the study tell us?

The study demonstrates what happens in our brains unconsciously when we think of popular brands like Coca Cola. The study also demonstrates that our thoughts, feelings, and memories can unconsciously change our experience with the product. This is exactly how the unconscious mind influences our choices.

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The thoughts, feelings, and memories evoked by the Coca-Cola brand are the strong emotional connections people have. And Coca-Cola missed those strong emotional connections when they reduced this iconic drink to just taste. This is why New Coke failed.

Through this brain study, we can see how marketing influences our emotions and our decisions without our awareness. This is where neuroscience meets marketing.

Welcome to neuromarketing. Neuromarketing is the new science of consumer decisions. It studies how we make buying decisions and how our emotions and intuition shape our decisions.

But why did marketers start paying attention to our emotions, intuition and unconscious mind?

Here’s some of the reasons. Over the last few decades, neuroscience research has confirmed that about 95% of our decisions are made unconsciously. During the same time, medical studies have shown that without emotion, we simply cannot make decisions.

Inside the human brain, there are many highly specialized areas. Each area has unique functions. Some areas are response we’re seeing, some are for hearing, some are for tasting. And this large area of the brain colored in blue is what we call the limbic system, is our emotional brain. All our emotions depend on this part of the brain.

Our love, compassion, optimism, pride, joy, happiness, as well as anger, fear, anxiety, embarrassment, guilt, and sadness are centered in this part of the brain.

Neuroscientists often learn more about the brain when something goes wrong. Here, we have Frank, he had a stroke. The stroke damaged a large part of his emotional brain. What’s going to happen to him? What you will see is Frank will have a very difficult time making decisions, even the simplest decisions.

When he goes to a grocery store to buy breakfast cereal, he will agonize over the decision whether he should choose Willy’s, Charlie’s or Corn Flakes. Without his emotional brain being fully functional, he simply cannot make that decision.

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Every purchase involves decision making. Both neuroscience and marketing can help us understand how to make decisions and what influences our decisions. This marriage between neuroscience and marketing has given birth to neuromarketing.

But why does Neuromarketing matter?

Every year, 9 out of 10 new products fail. About a hundred billion dollars spent on marketing are wasted. The main reason is that traditional marketing fails to pay attention to consumer’s unconscious emotional experiences. This is what happened to New Coke.

If we can avoid wasting so much money on mindless marketing, both consumers and businesses win. With neuromarketing the focus is on creating better consumer experiences. And it does work.

First, I’d like the share with you how Google captures user’s unconscious behaviour to maximize its revenues. We all have seen Google ads before. The links in these ads are colored in blue. Every time you click on these links, Google makes money.

Naturally, Google wants the user to click on these ads more often. We know that color can impact our emotion and our behavior. The question Google asked was whether a subtle change of color in these blue links could change users’ clicking behavior.

Several years ago, Google tested close to 50 shades of blue in these links, wanting to find out if certain shades of blue will generate more clicks. One shade of blue did generate more clicks. By adopting that color, Google increased the annual revenue by $200 million. This is a power of neuromarketing.

If you know what clicks with a brain, you can apply that knowledge to create a better customer experience. A better customer experience can translate into a stronger bottom line. This is why neuromarketing works.

Next, I’d like to share with you how a slight, a notable speed improvement by Amazon increase the sales by over $1.7 billion. According to the Amazon, a one-tenth of a second speeding Amazon’s website can increase the sales by 1%.

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