How Consumers Really Make Decisions with Dan Ariely

00:00:00:06 – 00:00:25:01
Dan Ariely
So they did the study with an fMRI. When they image people’s brains, when they gave them Coke and Pepsi. And what you could see is that more of the frontal part of the brain, the part that has associations and higher order thinking lit up more with Coke than with Pepsi. So when you think about what brand equity, brand equity is, what’s happening in people’s brains when they are thinking and consuming your product.

00:00:25:03 – 00:00:32:02
Dan Ariely
That’s really what we’re going for.

00:00:32:04 – 00:00:58:18
Alex C
This is Alex Cleanthous on the Growth Manifesto podcast. And today we’re talking with Dan Ariely, who is the author of the book. Predictably Irrational. And we talk about how consumers make decisions and how brands can start to position their company and their products to stand out in an increasingly competitive landscape. I hope you enjoyed this episode, and make sure to hit subscribe to get the latest episodes as soon as they’re released.

00:00:58:20 – 00:01:25:19
Alex C
Now let’s get into it. So you wrote the book, the Predictably Irrational book, which kind of goes into how people are making these kind of choices and decisions and why did you go with the angle of irrational? Because irrational is an interesting kind of way, because I think that consumers think they know how they make a decision, but actually how they make a decision is not exactly what they think.

00:01:25:20 – 00:01:30:09
Alex C
And so could you explain to us what you mean by the word irrational?

00:01:30:11 – 00:01:51:06
Dan Ariely
Yeah. So first of all, I think I think it’s very good to start with, with what is what is irrational. I think what you’re saying is very much the essence of this, which is that we think that we understand what drives our decisions. We think our decisions are thoughtful and well reasoned, and we have debated them for a while.

00:01:51:06 – 00:02:18:03
Dan Ariely
And we understand why we make why we make choices. But the reality is that we have these brains that help us make decisions or make decisions for us. And these brains work in very different ways and the way we think that they work. And the reason that I call this predictably irrational is also to make it clear that we not only make irrational decisions, but we all make similar irrational decisions.

00:02:18:09 – 00:02:44:15
Dan Ariely
It’s about the structural thing. So maybe, maybe let’s take a step back and saying, how do we think about the human mind is a tool to make decisions. And my, my metaphor for this is a vintage Swiss Army knife has two components vintage and Swiss Army knife. Let’s start with the Swiss Army knife. The Swiss Army knife is not particularly good at anything.

00:02:44:17 – 00:03:07:05
Dan Ariely
There’s not a single task that you say I need tweezers. Let me find my Swiss Army knife. I need the can opener. Let me find. No, no, no, it’s not particularly good at anything. It’s quite okay in lots of things. And it’s easy to carry in. Our minds are like that. Not particularly excellent in anything, quite okay in lots of things.

00:03:07:05 – 00:03:30:08
Dan Ariely
And we can carry them with us whenever we go. So that’s the first part. But then there’s the second part, the vintage part, and the vintage part is the idea that our brains decision making tools evolved a long time ago in a very different environment. We lived in small communities, we knew each other, and we’re going to stay together for a long time.

00:03:30:10 – 00:03:55:13
Dan Ariely
We dealt with predators. We didn’t have long term retirement. We didn’t have cryptocurrency. We didn’t have, you know, compound interest. We didn’t have cookies. And and our brains developed like in that environment. So it was never excellent. But they were relevant tools for the time. Now, now what do we do is we still have this Swiss Army knife, but it’s a vintage Swiss Army knife.

00:03:55:13 – 00:04:18:23
Dan Ariely
The tools are not relevant. So when you come to somebody and you show, let’s think about your health care choices. Well, let’s think about your kids schools or let’s think about gossip online. The tools that we bring to play are irrelevant. All tools that were not designed for this environment, but that’s the tools that we have. So that’s what we deal with.

00:04:18:23 – 00:04:41:01
Dan Ariely
That’s what we do. And what it means is that whenever we make plans about people, we need to understand where they come from and what is what is very shocking is that in the physical world, we understand it very well. Like we understand that people are just not that good. I mean, you and I are wearing glasses. We understand our eyes are not as good as they used to be.

00:04:41:03 – 00:05:09:06
Dan Ariely
We have seats with cushions. We have all kinds of things. We understand that our bodies of frail and very far from perfection, and we fix them and create created technology envelope around them with clothes and air conditioning. We have lights, we have eyeglasses, we have bicycles. We have lots of things. When it comes to our minds. Our minds are just as frail as our bodies, just as likely not to function as well.

00:05:09:06 – 00:05:34:02
Dan Ariely
And what we need is help. And the question is, are we going to like in the same way that we create eyeglasses and chairs and so on? Will we create the help needed for our mind to work better? Sometimes we do a better job with it, sometimes we do a worse job. But that’s the issue is to understand that we have this vintage Swiss Army knife and you know, we’re not going to change it.

00:05:34:02 – 00:05:45:08
Dan Ariely
You can’t say you out, think better. It’s going to be very, very tough. What we need to do is create better tools for us to deal with this very complex world we’re dealing with.

00:05:45:10 – 00:06:12:08
Alex C
And so predictably irrational talk through the way that people are making decisions. And this for this conversation, it would be good to focus on the consumer side of things and understanding how. And as a marketer or as an ecommerce brand, as a business owner, the decisions that the consumers are making, on which of the companies or the brands that they are selecting.

00:06:12:12 – 00:06:29:21
Alex C
Now, when you ask somebody why they selected a choice, the thing that they are saying to you is not the actual thing that actually has caused the decision. And so what are some of the things that affect a decision that people are not aware of?

00:06:29:23 – 00:06:51:19
Dan Ariely
Yeah. So, the first thing that people are not aware of are defaults. When you look at countries that you’re assumed to be an organ donor and you have to sign something to get out of it, most people donate. When you’re in a country that is opt in, you assume not to be an organ donor and you have to sign to get into it.

00:06:51:21 – 00:07:16:14
Dan Ariely
Most people don’t sign into the different like 90, 90% versus 20%. It’s a very large number. But but here is the point. Imagine you and I stood outside the DMV and people came out and said, some people got the opt in form and therefore they didn’t sign it in. Join in. Some people get the opt out form because of it.

00:07:16:14 – 00:07:38:07
Dan Ariely
They didn’t sign, but they joined. So we had these two people, two types of people, and we approached them and said, hey, I see you sign for this program. I see you didn’t sign and explain to me why you think anybody will tell you. You think anybody will tell you? Oh, it was the default choice show. It was not.

00:07:38:10 – 00:08:05:04
Dan Ariely
What would people do? They will they will come up with the story. Oh, my parents raised me to be a wonderful, human, caring, person and care about other people after me. Oh, my parents told me to always be suspicious about health care and not not do not do, sign something and somebody might plug me a little too, too quickly or think about retirement.

00:08:05:06 – 00:08:33:13
Dan Ariely
You go to people and you say, I see it, you you’re saving 5% of your retirement and your income into 41K account. Why? How do you pick that number? People tell you lots of stories, but then when you look at it, it was whatever the default was when they joined the company. Emotions are very interesting because we feel them, they influence us, but we can’t reason about them.

00:08:33:15 – 00:09:05:17
Dan Ariely
So, you know, and there’s also, by the way, good things about being irrational, like falling in love. But when they ask you, why did you fall in love? You don’t have even the language to describe the emotional part of it. So, you know, think about something like strange, like smell. Smell predicts, friendship predicts, of course, romantic love. Nobody ever said, oh, you know, the smell of my partner is amazing.

00:09:05:19 – 00:09:27:15
Dan Ariely
You know, it’s oh, you know, we have the same values. And we were thinking the same way. And we’re compatible in our love of literature, you know, like, we give all these reasons, but but we’re missing a lot of the things that really drive our behavior. So anyway, so emotion is a big thing. Going back to your question, you say what is driving behavior that people don’t understand?

00:09:27:15 – 00:09:56:05
Dan Ariely
Default number one what’s the default option. Another one is emotions. Like we don’t know how emotions work and they drive a lot of our behaviors a third one is anchoring. And anchoring is the idea that when we when we come to a situation to make decisions, we start with our past decisions about things. So let’s say you wanted to buy a car today.

00:09:56:10 – 00:10:17:12
Dan Ariely
You don’t come to Tabula Rasa. You bought some cars before. So when you start to think about cars, you don’t say, oh, let me look at all the cars and the trade off the money and speed and all kinds of things. You come up with whatever is in your decision arsenal already. You’re kind of assuming that the decision you’ve made in the past are great decisions.

00:10:17:18 – 00:10:44:05
Dan Ariely
So you made them. They must be fantastic. Okay, so it’s as if you’re making a process saying, oh, my past decisions were amazing. So what I want to do is do something similar to what I’ve done before. My past TV was amazing. Let me do this. My past computer choice was amazing. Let me continue that. So anchoring is basically the idea that we rely on our past decisions as if they were really amazing decisions.

00:10:44:05 – 00:11:12:01
Dan Ariely
Then we continue doing similar decisions to those. And for marketers, it means that the first time you make a decision in a new category, it’s unbelievably important, because it’s not just about that one decision that’s likely to shape your decision arsenal and will stay with you for a long time. So let’s say we have we’ll have a market in the next few years for home robots.

00:11:12:03 – 00:11:31:15
Dan Ariely
Now we have many of us have roombas. So, you know, we have we have some experience with that. But the prices in which those things would show up at our homes initially, it’s not just about the initial price. How do you think about the robot, but home that does all kinds of things for you, like what’s the right price range now?

00:11:31:15 – 00:11:53:04
Dan Ariely
Whatever price range you’re saying now is going to be two way to influenced by the Roomba, because this is the robot you’ve had, but but you know, whatever prices will will get going. We’ll have a long term influence on how we view this kind of help at home. And it’s particularly important in new in new products and in old products.

00:11:53:10 – 00:12:19:00
Dan Ariely
It’s important to understand that you have to take that into account. If you don’t take into account, you’re not really breaking through consumers minds. So imagine that you have a new phone and imagine that it’s better than the iPhone, much better than the iPhone, and much more expensive. Are people going to be willing to to pay for it?

00:12:19:02 – 00:12:35:22
Dan Ariely
The answer could be very tough because people are tied to their historical prices. It’s not about cost benefit analysis. It’s about this is what we’re used to paying. We’ll pay something similar anyway. So it’s like.

00:12:35:22 – 00:12:59:00
Alex C
This. Yeah. No, this is fantastic. And and this is gonna help the conversation. So then if, if it’s a brand who’s trying to break into a competitive category, because there’s not that many categories that have not been created yet. And if they are, then more of a niche down version of an existing category that’s been created to and have a point of difference, right.

00:12:59:00 – 00:13:29:17
Alex C
But if you’re going into a competitive category and there’s existing competitors and the price has already been anchored, how does a brand now start to connect to the parts of the consumer that the consumer is not aware of? You start to get them to come over and engage with us instead of a competitor, because obviously, like in my experience, and I have had the experience of having a product and the product is better than the market leading product.

00:13:29:19 – 00:13:45:00
Alex C
I’m a high quality of ingredients. A better packaging is better. This that is a better idea from the labs and everything is better. But the price is 30% more and it just doesn’t work because the price was the most important thing.

00:13:45:00 – 00:13:47:13
Dan Ariely
Well, let’s let’s say let’s just that’s.

00:13:47:13 – 00:14:08:13
Alex C
What it seemed. It it seemed that transition, it seemed that the, it seemed that the price anchoring was a very large obstacle that we had to get past. And it felt like, we had to basically hit every other angle harder because of the price. So, yeah. So I love to get some thoughts about that.

00:14:08:13 – 00:14:19:00
Alex C
This around. Yeah. Kind of what, what could we have done a bit differently then? I mean, coming into a competitive market was with, you know, a product that was better, but that cost more.

00:14:19:02 – 00:14:43:23
Dan Ariely
Yeah. So, so, so part of the thing we need to understand, going back to, the human mind is that, those decisions are way too complex. And people, people don’t engage in these complex decisions. So what do we do to simplify decisions? One thing we do to simplify decision is brand. I like brand X. I don’t like Brant.

00:14:43:23 – 00:15:02:11
Dan Ariely
Why? Why I don’t know, but I like this brand. I’m used to it. I think of it highly. This one I don’t think is highly. So I’ll buy this one rather than this one. Right? These are not very detailed, thoughtful things. And and you know, if you think about the world of branding is basically saying, let me give you a shortcut for information.

00:15:02:13 – 00:15:21:19
Dan Ariely
But branding, by the way, it’s a terrible term because it does so many things psychologically. But we we it’s it’s a reminder, it’s association. It’s signaling. It does lots of things. But but for simplicity, let’s just say it’s a shortcut for information. A lot of what you do, it’s a shortcut for information. I tell you I drive car X.

00:15:21:21 – 00:15:37:23
Dan Ariely
There’s a lot of things, you know, I tell you, I drive car Y. There’s a lot of things. You know, if I tell you my my shirt comes from, you know, whatever the gap it says something. It comes from the Brooks Brothers. You think something else. So it’s a shortcut for lots of information. And that’s what we do.

00:15:38:04 – 00:16:00:01
Dan Ariely
We look for lots of shortcuts in pricing. And anchoring is a similar strategy. It’s a simplifying strategy. Imagine that every time we came to something, we say, let me look at the whole world. Let me try to understand my values and where things are. Is it too much work? Let me assume instead that my past decisions were great decisions, and I’ll continue with the same with the same thing, right?

00:16:00:03 – 00:16:25:02
Dan Ariely
You can see how branding and anchoring are simplifying strategies that help us, but the way the brain consumes lots of energy, about 25% of our energy and nature wants us not to do that much. Right? It’s kind of interesting. Nature wants us not to think as much and so on. So. So there’s lots of systems in our brain that are designed to slow down all our processes.

00:16:25:04 – 00:16:54:07
Dan Ariely
So. So we have these two simplifying approaches. Now why am I saying this? Because what you might want to do is fight this simplification approach. And one way I would try to do it I’m not sure what product you talking and so on. So I’m talking in generality is to create a consumption vocabulary for this consumption. So imagine we have lots of products and we have our product which is better in all kinds of ways.

00:16:54:09 – 00:17:28:13
Dan Ariely
What are we expecting from people to do lots of market research and to understand that this is better and to start trading off value for money and to go for a new brand component, like way too much consumption vocabulary is a way to force people to start thinking about things in new ways. And the experts of this is, of course, the wine industry and the wine industry took alcohol and grape juice and gave it lots of turns.

00:17:28:15 – 00:18:10:09
Dan Ariely
Tannin complexity, acidity, leg and what have we done? In response, we take these glasses and we put them to the light, and we do this and we slow down and we sniff and we often we and we say, oh, is this it? I can I can smell the raspberries in the cut grass, right. Like now in the process, what we have done is we have started paying attention to things that we wouldn’t have paid attention to before, like if I gave you a wine 100 years ago or even even last week, and I gave it to you from a beaker as you were working, you would consume the wine, but you would not think about

00:18:10:11 – 00:18:48:17
Dan Ariely
tannin, complexity, acidity, leg and so on. So. So what consumption vocabulary does is create a language around something, and it’s direct attention. And when we do direct attention, we start noticing new things. So if I was going to try and sell a new product, I would try to make people kind of source like high quality, differentiated product. I would have tried to create a language that would get people to observe, to, to be connoisseurs of that product from a product and in through that, observe the differences.

00:18:48:19 – 00:19:11:11
Dan Ariely
Right. So think about Steve Jobs. He would stand there on the stage and he would say, look at this goods, look at the glass. How smooth it is. Like before that it was just glass. Now the oh my goodness, look how smooth the glasses. He basically got this to pay attention to things. We wouldn’t have paid attention without it.

00:19:11:13 – 00:19:52:01
Dan Ariely
And and with attention comes willingness to pay. Right. So you say. And how much would we pay for, a laptop from Apple if we pay attention to screws and to the material and so on, versus if we did it very different story. So I would say that it’s an issue if you think that the human mind, you understand the human mind has not much capacity for attention and memory, but you have to fight against that, and you have to create to to drive attention to the attribute that your product is better on, then that’s your first task.

00:19:52:03 – 00:20:32:11
Alex C
So for companies who are going into a new, category or market, a product and the price is higher than the market leading product at the moment, it sounds like it would be a difficult challenge to break through and to change the, the vocabulary and to establish that across an industry. Right. And so then you need to focus a lot more on the brand side of things, because that is, something that specific just to you, but from the product perspective is price the, the most important thing to start with and start from brand.

00:20:32:11 – 00:20:52:01
Alex C
Right. But assuming that there is a brand, I’m starting into like a fresh category. Should I be at least the same as the existing kind of market later or less? Is that like an anchoring competitive advantage in a way, because like the value is there, the consumer understands the value. So is it enough to say, hey, this is the same as that, but it cost less?

00:20:52:02 – 00:20:58:06
Alex C
Is that as powerful of, a psychological tactic don’t trigger.

00:20:58:08 – 00:21:24:06
Dan Ariely
So look, and a lot of time price wars are very easy to do short term. No. You have product X, I have product y. My product Y is much better, but people are not perceiving it is better. Let me reduce the price. Yeah, yeah, it’s possible, but it defeats your long term objectives. I think a lot of times what people are doing is short term.

00:21:24:06 – 00:21:53:09
Dan Ariely
I think the long term fight is on branding and not on the branding of just recognition, but the deep sense of branding and on getting people to recognize the value, for example, through consumption vocabulary. Right. So I think, I think that’s, that’s the right way to do now if you have if you’ve tried and you can’t get it to work and maybe, maybe price is the last resort.

00:21:53:11 – 00:22:22:04
Dan Ariely
But if you start with with the cheap price, it’s very hard to escape. Now, if you do decide to go with pricing, there are ways to make it so that it’s a discount in the short term, but it’s not putting you forever in that in that place. So imagine, for example, that Google decided to start charging for its phones more than Apple is charging for their phones.

00:22:22:06 – 00:22:50:00
Dan Ariely
I don’t think they could. I don’t think there could. The prices are supposed to be cheaper and and, that’s the place that they have in consumer’s mind and to all of a sudden go up in price, not connected to that, to the to the quality of the product. It is going to be very, very top. So, so when you when you start a new product and you understand the quality, try, try to fight that for, for a while.

00:22:50:00 – 00:23:11:03
Dan Ariely
If you, if you, if you can’t manage the other things, it’s the last resort. But the way I, I often tell people when companies invite me to come and do a session within something and they say we want to be like the competitor, but like the, you know, the incumbent, but cheaper. I say that’s really not a good way to start.

00:23:11:05 – 00:23:44:05
Dan Ariely
Start with saying you want to be more expensive and you want people to say you’re not expensive enough. Like, you know what? What you want, like and I know it’s not possible that people would come to sell, you know, charging me enough, charging more. But but, you know, you want to say, how do I create the, the, the perception of a very different value if, if you, if you basically say, oh, I have to sell for cheaper than my, my competitor, then it means you’ve lost on the battle of communicating value.

00:23:44:07 – 00:24:03:12
Dan Ariely
Okay. If you declare defeat on that, go for it. But but try not to declare defeat on it for a while. Like that’s the that’s what you want to fight. If if your strategy is to be a meta, that’s fine. But but we’re saying no, no, your strategy is to be a high quality. But you’re not you’re not able to convince anybody to high quality.

00:24:03:14 – 00:24:30:18
Alex C
So to identify the thing that’s going to make you stand out in the consumer’s mind, I mean, we all have guesses in product development and product design and category selection and audience selection. Is there any tips or is there any advice on how you would go into it, aside from having to invest upfront and then kind of having to experiment, like in market, like, is there any way to get some insight on what the consumers are going to decide?

00:24:30:18 – 00:24:46:17
Alex C
Because if you want to focus group, let’s say, that is going to tell you what they think, not what is that they call that is triggering them. And then sometimes you need to launch your product to see how it goes in market before, you know, it starts the performance.

00:24:46:18 – 00:25:08:16
Dan Ariely
I think, I think that people are much more malleable. You could say, what will people notice on their own that there is not that much? Or you can say, what do I want people to notice? So think about consumer reports, let’s say consumer report rates televisions. And let’s say they rate them on six attributes. I don’t know if it’s exactly that.

00:25:08:18 – 00:25:31:05
Dan Ariely
When they pick the attributes, they pick the television that was going to be chosen. If they would pick the different attributes, they would pick a different television, right? Do they pick sound or not? Do they pick pixel size or not? Do they pick thinness or the weight of the screen? There’s lots of things to do. Your goal is to communicate to people.

00:25:31:05 – 00:25:54:13
Dan Ariely
What are the important things to pay attention to? So I wouldn’t say all consumers go out in the wild and notice whatever you want to notice. No no no no no. My goal is to redirect your experience so that you will notice the things that I think are important to to notice. And that’s that’s kind of the issue.

00:25:54:15 – 00:26:19:14
Dan Ariely
So think about think about the refrigerator. You know, what do you notice about like why why aren’t we refrigerator consumers. We’re not I mean I I’m not but but could we be could we could we get people to say, you know, look at this refrigerator. Like, you don’t have to pull the you can push it and then it opens by itself.

00:26:19:16 – 00:26:52:06
Dan Ariely
People. People love knowing things, but but very few companies actually educate consumers in a reasonable way, in a way that would let them enjoy what they’re doing in a better way. Like how many of the things that are around you you know enough to enjoy them beyond, the physical element. For example, if you have a piece of art and you know something about the artist that created it, it’s a very different experience.

00:26:52:08 – 00:27:06:06
Dan Ariely
If I gave you a mug. So I have these coffee mugs for people in my lab. Everybody has their name on it, and we’re using it because this way nobody leaves the dishes in the sink because we know who’s the craving something.

00:27:06:08 – 00:27:11:22
Alex C
I love that the psychological trigger in that isn’t that.

00:27:11:24 – 00:27:34:14
Dan Ariely
But but, you know, this this was done by local artists here in North Carolina. They did mugs for everybody in the lab. And actually we gave everybody two mugs, one for home and one from the office. And we also gave them one mug for the significant other, for home and, and we we gave it to them with a little story about the artist.

00:27:34:16 – 00:28:02:18
Dan Ariely
So this what these these mugs are not just functional. They have a behavioral change approach. The habit here in the at home, their spouse has one study different, skin has a different color. These mugs are not just substitutes for other monks. They are special. So look, okay, you know what placebos are, right? Yeah. Hundred percent.

00:28:02:22 – 00:28:29:16
Dan Ariely
Yes. And and, you know, the placebos are real. And what we mean by real is that placebo is really the power of the mind over the body. And in predictably rational, I talk about a few of those things, including talking about how like expensive placebos work better than placebos and how placebo for pain looks like. Okay, so you know, so I was I was badly burned.

00:28:29:16 – 00:28:48:11
Dan Ariely
I was in hospital for many years. That’s why I look so strange and why all of this is scar tissue. I just don’t have hair on the side. But when I was in the burn department, we had the limited number of injections we could get every day of morphine, and I counted. I mean, everybody counted how many we have.

00:28:48:11 – 00:29:07:12
Dan Ariely
And when we were running out in one night, the guy in the room next to me shouts that you want another painkiller. And the nurse goes and gives him another one. And I knew that he already had these injections for the day. So I called him and said, hey, you know, I know you gave you gave him an extra one.

00:29:07:12 – 00:29:28:19
Dan Ariely
I want one do. And she said, no, no, no, it was placebo. I just gave him, you know, IV fluid and I how did it work? Now, you know, it’s one thing when you, when you think you when you read about placebo, it’s another thing when somebody’s in the room next to me is having the same type of burns that I had.

00:29:28:21 – 00:29:53:11
Dan Ariely
I know how much pain is in. He’s getting an injection with nothing and he goes to sleep. So I started looking at placebos. And what happened with placebo is is following. When we get an injection and we think it’s a painkiller, our body secrete substances are very much like paintings. Like what happened over time is you get more painkillers.

00:29:53:13 – 00:30:16:17
Dan Ariely
Is that when the injection happened, you get substances from the injection, but also from internally, like if we give people like, I don’t know if you’re a coffee drinker, but if we take coffee drinkers and we give them one day decaffeinated, they have no idea that there’s a difference because the body is anticipating the caffeine and the body’s getting into a prepared mode.

00:30:16:17 – 00:30:36:13
Dan Ariely
And the difference is from what’s coming from the outside matters, much less. By the way, if you give people orange juice with caffeine, they don’t know that there’s coffee in it. The effect is not it’s not working. So the effect is both coming from the outside and the inside. And placebo is about some of the effect is coming is coming from the inside.

00:30:36:15 – 00:31:08:00
Dan Ariely
So I think that marketers need to control what’s happening in the mind. There’s a there’s a product. But but as a representation of the product in people’s minds, when the question is what is that representation and the and the, the marketing power is in creating that representation in people’s minds. So for example, if you look at the Coke Pepsi test, you know, it’s very well known.

00:31:08:02 – 00:31:29:19
Dan Ariely
You do the Coke, Pepsi test. Coke did it in Coke One, Pepsi did it. Pepsi. Well, but the the tests were very different. When Coke did it, you could see the Coke can and the Pepsi can. When Pepsi did it, you couldn’t see the cans. So Pepsi is sweeter than Coke. So people like on the blind taste like Pepsi more than Coke.

00:31:29:19 – 00:31:51:11
Dan Ariely
But when they see the cans, they like Coke more than Pepsi. So they did the study with an fMRI when they image people’s brains, when they gave them Coke and Pepsi, and what you could see is that more of the frontal part of the brain, the part that has associations and higher order thinking lit up more with Coke than with Pepsi.

00:31:51:13 – 00:32:01:06
Dan Ariely
So when you think about what brand equity, brand equity is, what’s happening in people’s brains when they’re thinking and consuming your product.

00:32:01:08 – 00:32:45:16
Dan Ariely
That’s really what we’re going for. And I think marketers need to to realize that that’s their their assets are not billboards and they’re not, movies on, you know, the Super Bowl, their their asset is to change people’s minds. So the consumption is better. I’m not saying like I’m saying have the consumption better. So it must have happened to you that you went to vineyard and you had such an amazing time and you bought some wine, and you take it home and you love it, and you think about the vineyard and the rolling hills and so on, and your friends are drinking that wine and they’re not enjoying it half as much.

00:32:45:18 – 00:33:09:24
Dan Ariely
It’s okay. That’s okay. Because that vineyard basically took over a part of your brain with extra association and enjoyment and history and so on. You know, when I when I think about what what is our task, I say there’s almost everything that we can do to create a better experience. You know, we have a million products to interact with.

00:33:09:24 – 00:33:33:17
Dan Ariely
It’s not everyone, but I think there’s not enough products that we truly enjoy. I think there are not enough products or trying to create an extra step like like wine of thinking and enjoying and so on. And the world is so magical. There’s so many magical things that are that are happening, and we’re not taking advantage of that.

00:33:33:19 – 00:34:05:01
Alex C
So really, we’re trying to, there’s so many different parts. Let me see if I can try and summarize a very complex topic into a couple of statements and see if I understand it correctly. And correct me if I’m wrong, obviously it’s fine if I am. But is it that predictably irrational? Is trying to put concepts and words behind what happens inside of a consumer’s mind just when the brand is starting to be applied to them, right.

00:34:05:01 – 00:34:24:17
Alex C
And so are the Coke version of Pepsi. So the reason someone likes Coke is not because of anything that is rational, because it’s not a rational product in any form, like there’s nothing about it that’s positive at all. It’s except that it tastes good. So that’s the positive. But sorry, the positives are all in our mind. But like it’s not.

00:34:24:17 – 00:34:25:04
Dan Ariely
But there is.

00:34:25:09 – 00:34:26:00
Alex C
Positive is.

00:34:26:01 – 00:34:26:14
Dan Ariely
Sugar.

00:34:26:14 – 00:35:02:02
Alex C
There is sugar. It is manufactured. It’s yeah there’s stuff in there. But I’m saying is that it’s not like I purchase that. So it’s good for me. I purchase it because it’s entertainment or that, but that entertainment has been imprinted in me since McDonald’s as a kid, since all these kind of years. And so is this what the book is trying to summarize is like, why are we like a particular kind of brand and kind of how the consumer asks, right, so how the brand manages what the business owners need to start to think about that kind of side of the brand, is that like, I’m trying to summarize it just for the audience that

00:35:02:02 – 00:35:03:16
Alex C
for myself as well. Obviously.

00:35:03:18 – 00:35:29:08
Dan Ariely
I would say that, the human mind is really, a mysterious one, and it’s working in very different ways than we think. And this book is trying to describe some of the ways in which we function differently than what people think and what it means, what it means for consumers and what it means for business. And what do we mean for how we understand human behavior.

00:35:29:10 – 00:35:55:15
Dan Ariely
It’s not comprehensive. Because there’s just there’s just too much out there. But, but, but it gives some of the of the basic and I think more than anything, it’s the approach. It’s basically saying don’t treat people like simple mechanical input output approach. There’s a lot of magic that happens. And it’s, it’s not that it’s unpredictable. It’s predictable.

00:35:55:15 – 00:36:22:15
Dan Ariely
But you need to understand human nature. So if we if we came to make some some changes or new products or something, you know, have a good view of the consumer and more elaborate view of the consumer before you make any changes. And that if you if you have oversimplified assumptions of people, you’re going to get things wrong.

00:36:22:16 – 00:36:24:03
Dan Ariely
So if you want to keep.

00:36:24:03 – 00:36:40:02
Alex C
It simple but you can’t and oversimplify what you think of the consumers, that’s, because that’s a mistake that often, like a lot of companies make. Is that not that they think the consumer is not smart, but they don’t think the consumer. That’s right.

00:36:40:04 – 00:36:41:12
Dan Ariely
I don’t think there.

00:36:41:14 – 00:36:46:08
Alex C
Is a lot, but I appreciate them, I guess, in the same way.

00:36:46:10 – 00:37:10:18
Dan Ariely
So you’re right in kind of getting this a bit confused because people are not they’re not running on pure intelligence to the level we think they are. But what they are running on is more complex than what we think they’re running. So people are not as cognitively complex as, you know, hard thinking as we think they are, but they’re also influenced by branding and emotions and other things.

00:37:10:18 – 00:37:27:01
Dan Ariely
And I’ll give you one, maybe final example, efforts, efforts, you would say buying this product. Why do I care how much effort has gone into it?

00:37:27:03 – 00:37:58:01
Dan Ariely
More effort. I care about the product, but it turns out people do. And consider the following experiment. Imagine that you search online for a flight. You search, you press enter, and you boom get the result immediately. People are happy. Condition do you search? You press enter and you wait 12 seconds. There’s a black screen and the wheel of death, and you wait 12 seconds and then you get the results.

00:37:58:01 – 00:38:21:24
Dan Ariely
People hate it. They love not waiting. And 12 seconds. They think it’s crazy to wait 12 seconds. Condition three you you you search you you type you you press enter. You wait 12 seconds. But those 12 seconds are like kayak. They’re filled with. We’re searching united. We’re searching American. Things are moving up and down on the screen. Things are being sorted for all kinds of things.

00:38:22:01 – 00:38:49:22
Dan Ariely
At the end of the 12 seconds, you get the results. How happy are people now? They’re happier than if they didn’t wait at all. Now do people say, I want to wait? No. But what do people say? They say, my goodness, now I understand what I got. So, so in those 12 seconds you got the opportunity to tell people what magic you’ve done for them.

00:38:49:24 – 00:39:23:09
Dan Ariely
Now some places we see the magic being done for us. Restaurants with open kitchens is an example. But but in most cases the magic that is being done for us is behind the scenes. We don’t see it, we don’t appreciate it. But communicating that creates higher willingness to pay. If I took a product now and I told you about the difficulty and challenges and so on, you would appreciate to a higher degree and you would be willing to pay more.

00:39:23:14 – 00:39:53:12
Dan Ariely
So we think that people are willing to pay for a product, but no, the effort is part of fairness, and fairness is part of our biological heritage. So if somebody put more effort into something, we are willing to pay more for it. Now, is it rational? No, because to some degree we reward incompetent people because, you know, incompetent people take a long time to do something.

00:39:53:14 – 00:40:08:01
Dan Ariely
But this idea of reciprocity is very, very deep. You know, human nature. So if somebody worked very hard for something, we feel a bigger need to reciprocate. And so, so anyway, so, so we, we.

00:40:08:01 – 00:40:20:22
Alex C
Just feel that way to reciprocate. Right. Because sometimes it’s like, well you said that extra effort, it might not have led to anything more, but they appreciate the effort itself and valued the effort.

00:40:21:01 – 00:40:42:12
Dan Ariely
Yes. That’s right. So if you ever hired McKinsey to do anything, you know, you’re getting a 500 page PowerPoint presentation. The answer you got is on the last page, the answer you asked for, for what you asked. But how much would you pay them if they just came to you with the last page? Not as much. But we did this.

00:40:42:13 – 00:41:05:18
Dan Ariely
We did this every year. Oh my goodness, this is worth a lot. The reality is that, reciprocity and fairness are kind of the backbones of humanity. No vintage Swiss Army knife. They are very, very prominent tools. So when we come to evaluate things, this is this is one part of it. And maybe I’ll finish with the following.

00:41:05:24 – 00:41:32:02
Dan Ariely
Okay. It turns out this is also good for couples. So imagine the following. You take couples, you put them in separate rooms and you say whatever you tell me now, I promise never to repeat your spouse, but tell me from the 100% work in your relationship, what percent do you do? Well, that’s the second answer. Then you add them up.

00:41:32:04 – 00:41:57:08
Dan Ariely
It’s always more than 100%. Now, why is it more than 100%? Because we are always in the kayak condition. We notice all the little details of what we do. You say to yourself, I take out the trash. That’s like a 16 step process which requires no agency ness. Not anybody could do that. My significant other, she only pays the bills.

00:41:57:08 – 00:42:24:15
Dan Ariely
I like one thing. So we end up, like, kayak over, over evaluating what we do and under appreciating what the other person, what the person does. Which, by the way, why it’s a good reason from time to time to tell each other what what we’re doing for them. But but when you say, okay, so human beings have a tendency to take things for granted in couples, but companies need to fight against that.

00:42:24:17 – 00:42:46:12
Dan Ariely
The moment you understand that one of our enemies is that we’re taking for granted, like if you’re a bank, your customers take you for granted, so you find lots of crazy way to charge them because they don’t really appreciate what you do for them. So you charge late fees and you charge this, and you sell this all because if you charge them directly for your services, they would say, you’re crazy.

00:42:46:12 – 00:43:10:03
Dan Ariely
I’m not paying you. I don’t appreciate you. By the way, it’s creating terrible distortion because rich people don’t pay as much. Poor people pay more. It’s it’s it’s not what we want. We do want it to do. But banks are a good example for a service that we don’t appreciate. And I would say that the banks are just not really good at communicating.

00:43:10:05 – 00:43:33:20
Dan Ariely
Why should we appreciate them? The same thing true for health insurance companies. I mean, you can just make the list of all the things we don’t appreciate. And I think these companies just the marketing department is asleep. The marketing department of a bank should make you wake up in the morning and say, my goodness, I can’t believe how lucky I am that this is my bank.

00:43:33:20 – 00:43:50:24
Dan Ariely
And I get to feel safe and secure and that the money is invested wherever they want. And there’s a huge room for brand equity in people’s minds. And we’re really far away from from, maximizing it.

00:43:51:01 – 00:44:11:01
Alex C
Which means that there’s a lot of opportunity for every company, every business out there just to stand out. Right. And make it a better experience for consumers. And thinking about the consumer experience is what you’re talking about, right? Experiences from the first touch all the way up to loyalty. Every single component of it, then I’m going to save time.

00:44:11:01 – 00:44:29:17
Alex C
But, this has been a fantastic conversation. The body of work is huge. And just like, the thing what you said before about how the book, which you wrote was just a small part of it. I mean, that book was extremely authored. That was extremely in-depth, but, it shows you kind of how much is involved with this topic.

00:44:29:17 – 00:44:36:07
Alex C
Right. And so I just wanna say I thank you for the conversation. It’s been extremely insightful. How do people just get in touch with you.

00:44:36:09 – 00:44:42:18
Dan Ariely
Or connect the website? My website is the best way, w w w then really.com.

00:44:42:20 – 00:44:55:22
Alex C
Fantastic. I’ll put the link in the show notes. Thank you so much for this interview. I thank you so much. It’s for that book, because that book has shaped a lot of the conversations that are happening across all marketing departments everywhere. So, thank you very much. And it’s been fantastic speaking to you today there.

00:44:55:24 – 00:44:57:09
Dan Ariely
Thank you. Very nice to meet you.

00:44:57:11 – 00:45:15:16
Alex C
Thank you very much. Bye bye. Bye bye. Thanks for listening to the Growth Manifesto podcast. If you enjoyed the episode, please give us a five star rating on iTunes. For more episodes, please visit Growth manifesto.com/podcast. And if you need help driving growth for your company, please get in touch with us at Web profits.io.