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.

Listen to the MP3 Audio here:

TRANSCRIPT:

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.

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.

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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.

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.

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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%.

Consciously we cannot detect one-tenth of a second difference, but unconsciously our brains notice it. By speeding up the website ever so slightly, Amazon creates a better customer experience. That better customer experience generates more sales. This is power of neuromarketing.

If Google’s notable change of a color makes to click more or Amazon’s notable speed improvement makes to buy more, what does that tell us about our decision-making? Are we in total control of our decisions or are they influenced by something so subtle that we don’t even notice?

A study published in 1975 shows how invisible social influence can shape our decisions. In this study, volunteers were asked to rate quality and price of cookies from two jars. One jar had 10 cookies. The other one had only 2.

Volunteers were told the cookies in the jar with only two left were in high demand and in short supply. Now, surprisingly those cookies were rated as higher in quality and price because it was believed that more people wanted them. What is surprising is that all the cookies used in the study were identical.

We tend to believe if something is wanted by more people, it must be good and valuable. Why is this invisible social influence so persuasive? It’s because decisions create uncertainty. We feel safer by following decisions made by crowd. This is a natural bias in our brains.

Amazon understands this bias very well and uses this bias to persuade us to buy. Imagine any new coffee maker. How does Amazon help you decide? First, you’re going to see a four-star rating. Then over 5,000 customer reviews or 1000 questions answered. Then number one bestseller, all this information is based on other customers’ opinions. This information comes before you see the price and the free shipping offer.

Amazon persuades you to buy using this invisible social influence. Most people have not heard of neuromarketing yet, but if you ever bought anything at Amazon, you’ve been persuaded by Amazon’s neuromarketing techniques.

Neuromarketing is still in its infancy, but there’s no short of misinformation. One big misunderstanding is that neuromarketing is all about brain scans and mind reading.

In 2011, the New York Times published a letter claiming that iPhone users had a romantic love for their phones. Here’s the evidence cited by the author: A brain structure called the insular cortex lit up human brain scans when a small number of iPhone users saw their phones.

No self-respecting neuroscientists would have drawn that conclusion because the same brain structure also lights up when you see something disgusting.

One brain structure can become very active for many different emotional responses. What do you call a mind reading brain scan? A brain scam.

Some snake oil salesmen claim that neuromarketing is all about finding what brings buy button. By pressing that buy button you can persuade anybody anytime, anywhere to buy anything until the cows come home.

Why does this claim also sound like a scam? Because it violates the basic principle: persuasion. If it seems too good to be true, it is too good to be true.

Neuromarketing is about buying decisions, but the impact has reached far beyond that because ultimately it’s about human decisions. We’re all decision makers. Through our lifetime we make millions and millions of decisions. Some decisions can be very difficult, even life-changing.

Over the last 10 years, I had to confirm many gut-wrenching decisions. Should I leave a stable job to work on my own business? How do I care for my aging parents who are 6,000 miles away in a different country? How do I support someone who battles depression?

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From neuromarketing we have learned that our decisions are not completely within our control. There are many invisible influences that shape our decisions without our awareness. Being mindful of that vulnerability gives us more power, not less.

Our decision can have a lasting impact on other people’s lives. From neuromarketing, we have learned that something very subtle can change our behaviour dramatically.

What does it take to save enough energy to power all the homes in Minnesota and Iowa? It’s not creating a massive government program, we’re switching to LED light bulbs or we’re upgrading for energy efficient appliances. It’s a tiny emoticon.

In a 2007 study, an energy company printed a tiny emoticon on energy bills to tell customers about their energy consumption. A happy face meant lower energy consumption… the neighbours. A sad face meant higher energy consumption…the neighbour.

Given how powerful the invisible social influence can be, it’s not surprising that our neighbor’s behavior can impact ours. What is surprising is that all these tiny emoticons reduced energy consumption by almost 3%. That’s enough energy to power all the homes in Minnesota and Iowa. Who would have thought something so subtle can be so powerful?

Now this subtle cue is showing up in our lives. Here’s the energy bill I recently received. It has a happy face.

I’d like to close my talk with one more story. This story has some bathroom humor. It’s about urinal spillage. When a guy stands around urinal, he often does his business mindlessly and aimlessly. Spillage happens. They cost money to clean it up.

In 1990s, the Amsterdam airport came up with a brilliant solution. All they did was to etch the image black fly near the train of urinal. When guys see that black fly, they start aiming at unconsciously. That reduces spillage by 80%. Well, other than my poor taste of humor, was the point.

I like this story because this fly serves a good metaphor. When you search what touches people’s hearts and minds, you want to find game changers. If you understand how the brain works, you understand how people make decisions, you can find a game changer that has a huge impact.

The most fascinating thing is very often this game changer is something we don’t even pay attention to. It can be something very subtle, like the background music in wine store; a slight change of color by Google, a noticeable speed improvement by Amazon, a tiny emoticon on your energy bill or a fly as a target.

Once you find something subtle by following neuroscience, the impact will be anything but subtle. You want to make a positive impact. You want to help others thrive. Here’s something I encourage you to try: find your fly.

And thank you very much everybody.

Thank you.