As an assistant professor of marketing at LSU, Dan Rice, PhD knows what you’re thinking when you walk into a car dealership or the grocery store. He knows what triggers your buying decisions because, like it or not, we all tend to think the same. He’s a consumer behavior expert who studies this stuff and is now sharing some of his insight with us. Dan also provides reaction to the troubles facing Toyota and Tiger Woods. Get ready to take some notes because Professor Rice is taking us back to school!
Tell us a little bit about your line of expertise, consumer behavior.
Well, you could generally breakdown marketing academics very broadly into three major groups: modelers, marketing strategists or managerial and consumer behaviorists. The last group is the researcher type I fall into, but I like to think my work is closer to the line of the managerial marketing researchers. I like to term myself a consumer behavior researcher with managerial tendencies, in that I care a bit more about the eventual application of my work than the true theorists. In simple terms, consumer behaviorists apply psychological theories, and often experiments, to predict and explore how consumers will respond to different components of marketing campaigns.
So, how are brands influencing psychological behavior to increase their sales?
Books have been written on this topic, literally. In today’s day and age, most portions of a branding plan and many of the “little” changes you see in products or their marketing campaigns are planned and deliberate. I’ll just have to highlight a few interesting points. Let’s look at packaging for example. A change in packaging color would probably be unnoticed by most unless an old package was next to a new one, but it might have been done deliberately to catch your attention as you’re walking down the aisle.
Another change might be to highlight an ingredient or lack thereof, which might be important like “zero trans fat.” The funny thing about a lot of these types of changes is that most competitors can make the same claim, but only include it in the nutritional section. Most people don’t read the label so making it easier for them to get the information by displaying it prominently on the box can make a difference in their purchase decisions. And it’s not just what’s on the bottle or box, it’s how you say it. Experiments have shown people’s tastes are affected by the “frame” of a label. For example, people might think beef tastes better when labeled as 85% lean vs. 15% fat, though objectively both are exactly the same.
One of my all time favorite packaging tricks was with a yogurt brand, which advertised “25% less fat.” I was somewhat disappointed to realize that while the claim was true, the package also contained 25% less product, 6 oz. vs. the former 8 oz. Of course that wasn’t the way the change was framed. I stopped buying that brand, but I suspect many people never noticed the drop in product amount or simply liked the “25% less fat” framing better.
How much does a brand consider consumer behavior when establishing price points for their products?
Most people would think that high price is always a bad thing, but sometimes it can actually influence people’s perceptions of your product. In a taste test, researchers have found that the exact same wine will rate higher when told that it costs more. It’s not a phenomenon that is limited to taste. Pain pills that are purported to cost more have been rated higher in effectiveness in experimental studies, even though they are the exact same pill! Why do you think marketers use the “reference price,” i.e. was $900, now $150? It creates a reference point that is high, the $900, and tries to make you think the $150 must be a great buy. Even if you think the reference is inflated a bit, it still can make you more willing to buy at $150 - crazy right? It also leads to a bit of prestige for the owners. For example, would owning a BMW be as much of a status symbol if they priced competitively with the Chevy Cobalt?
What are some other elements that can enhance a consumer’s perception of a brand?
The perception of a brand can be affected by all sorts of things besides price and packaging. Where it is sold can make a huge difference. Is this a shirt from Wal-Mart or from Macy’s? That difference affects quality, price and brand meanings. Want to make your brand look better? Put it next to other competitors that are not as good on a specific dimension and stress that in your display and advertising; for example, a 29 mile-per-gallon car looks much better when advertising good gas mileage and compared to a Cadillac Escalade than compared to a Toyota Prius.
Brand names are also important, and choosing one that won’t alienate people or give the wrong idea is important. Think about how well Bic Pens would have gone over if Marcel Bich had called them Bich pens in the U.S. In short, most ads and promotions you see today have probably been tested either in the laboratory or the field to see what types of attitudes and behavior they are likely to spur. The marketers are probably far craftier than most people are likely to give them credit for.
What kind of trends in advertising have you witnessed while the economy continues to struggle?
In tough economic times, the general focus in the market place will shift more towards the frugal side of things. While Bill Gates probably hasn’t adjusted his spending patterns too much, most people have an eye toward the bottom line of their purchases. There was a great article in the Wall Street Journal about a year ago as we were starting to get into the recession, and it was comparing how Starbucks had been experiencing significant difficulties because fewer people could justify the expensive latte on the way to work. On the other side of the coin was the McDonald’s dollar menu and low-priced coffee. McD’s over the same time period had been showing an increase in revenue and traffic as more people started to try it to save money. Particularly with the new line of coffee, they realized McD’s wasn’t that bad and the price was right. Often Starbucks has fared poorly in blind taste tests, but always seems to recover; again probably a branding thing. If you tell me it’s Starbucks, I think it tastes better. In a blind test, it tastes worse…ah the power of branding.
Just the other day, I saw a BMW ad stressing how it was the most fuel efficient luxury line available. While I think that this might be beneficial in a number of ways, including giving an environmentally friendly look to a luxury car, it is also likely a subtle play on peoples’ need to be more efficient with their money in these tough economic times. One of the best examples might be Wal-Mart which is faring better than many, if not most, of the higher-priced chains. In fact, I was listening to an NPR commentary that was half-jokingly wondering if Wal-Mart could survive the recovery. The reason is that as people try to save money, they look to stores associated with low prices and Wal-Mart is the strongest brand for cheap department stores; another example of the power of branding. Thus Wal-Mart gets a lot more business. When the economy recovers, perhaps some people will shift back to Macy’s or at least head upstream to Target. Wal-Mart will probably survive, but may not see the benefits of the recovery as much as some other chains. So the general shift to value and frugality is very prominent in the ads that you see today, I think.
Why are endorsements by celebrities so powerful? Are they really that persuasive?
There are a number of ways that celebrities can influence consumers’ views of different brands. One theory that consumer behavior researchers often use to explain the effects is the Elaboration Likelihood Model. The model suggests that there are two routes that ads can take to influence people, a central processing route and a peripheral processing route. In a nutshell, to be effective in a central processing route, consumers must see a strong persuasive argument being made like, “LeBron James is a great basketball player, his shoes must be fantastic.” On the other hand, there can also be more of a peripheral route, where you don’t really look at the claims of the ad that much, but just the attractive nature of the celebrity brings a positive feeling to the brand as when Gene Simmons is promoting Dr Pepper. They wouldn’t be an expert or have any particular connection to the brand, arguably Dr Pepper is tied to “Dr. Love” by the “Dr,” but just a nice face could bring some positive benefit. There’s also been great discussion of how a celebrity’s persona can help a brand if there’s a good “fit” between the two images.
So, it seems as if you need a celebrity endorser these days?
These ads can be pretty persuasive. Perhaps the practice could have been more effective in the past when far fewer celebrity ads were used, but it still can show benefit today. Many times though now, it may almost be that you’re at a disadvantage if you don’t have a celebrity spokesperson and your competition does. A general rule of thumb in the industry is that so called “virgin” endorsers, those who haven’t endorsed a brand in the past, are more beneficial to the brand. They tend to command higher priced contracts and companies sometimes include exclusivity agreements and no-compete clauses should they ever be dropped by the brand.
Can you weigh in on the Tiger Woods ordeal for a minute? He’s managed to still hang onto some big time sponsors like Nike and Gillette. How do you see these relationships playing out?
I personally couldn’t care less what Tiger has or hasn’t done from a news perspective. Academically, these types of scandals are sometimes interesting, but personally I find the social intrusion into someone’s private life pretty disturbing. Unfortunately, the situation does make for interesting theoretical observation from a marketing perspective. He’s the biggest celebrity athlete endorser ever and his fall from grace is unparalleled. I think the view held by one of my colleagues’ students could probably come pretty close to the truth: Companies like EA sports and Nike, which rely on his athletic expertise, are potentially more likely to stick with him unless his performance tanks when he returns to the PGA tour. That being said, Gatorade just decided to cut him as an endorser, so even those companies may at least temporarily cut him. Companies that rely on his hardworking, clean image like Accenture will likely make their cut permanent. And companies that rely on his good looks like Gillette are in more of a gray area. For the present though, all companies are likely to de-emphasize their relationship with him until the situation changes
Toyota’s growing safety issues and monumental recall is every company’s worst PR nightmare. How bad do you think this will hurt the automaker?
Well, the crisis is big, but I don’t think it’s as dire as the media is making it out. The brand will likely take a hit, but for the millions of loyal Toyota drivers without a model that was recalled there might be little issue. It’s probably the people who are on the cusp of buying another brand, or younger drivers forming opinions of auto brands, where this will do the most damage. Some pundits have said that a major issue like this could take a (human) generation to pass. So the situation is certainly not one that can be easily forgotten.
My personal view is that for a lot of people it’s not going to be the problem itself but the manner in which the company has dealt with it that will hurt the brand. First, there was no problem. Then it was the floor mat. Then it could never be the brakes or the electronics - now it could be both. Executives didn’t want to speak before congress, for which I really can’t blame them as congressional hearings are becoming more and more of a joke, and from a public relations perspective it could be damaging to appear to be forced to speak about the issues. Lastly, you have this new internal memo about an executive who saved $100 million by suggesting a cheap fix a long time ago, which the media is of course hinting toward being a huge disregard for safety and ever so fairly juxtaposing it against a funeral on front page news.
The ultimate strength that Toyota’s brand image had before this all occurred is likely to carry it through the downturn that these recalls have caused. Also important to note is that Toyota’s brand is known for dependability, and these problems strike right at that main strength, so it might be more damaging to them than a company that isn’t as well known for reliability. The safety implications however could be harmful to any brand.
If you’re Ford or GM, how do you capitalize on this opportunity in the automotive space?
You price promote to encourage people to switch brands, give good trade-in offers, and stress any “objective” industry ratings you can find that put your vehicles high on dependability and value; basically exactly what they are doing. They don’t want to get into saying anything bad about Toyota, maybe largely from a legal perspective, but they certainly want to strongly hint that they are showing superior safety and quality. Although, as noticed by one of my students, they have to be careful not to run into issues of their own.
Tell us a little bit about your line of expertise, consumer behavior.
Well, you could generally breakdown marketing academics very broadly into three major groups: modelers, marketing strategists or managerial and consumer behaviorists. The last group is the researcher type I fall into, but I like to think my work is closer to the line of the managerial marketing researchers. I like to term myself a consumer behavior researcher with managerial tendencies, in that I care a bit more about the eventual application of my work than the true theorists. In simple terms, consumer behaviorists apply psychological theories, and often experiments, to predict and explore how consumers will respond to different components of marketing campaigns.
So, how are brands influencing psychological behavior to increase their sales?
Books have been written on this topic, literally. In today’s day and age, most portions of a branding plan and many of the “little” changes you see in products or their marketing campaigns are planned and deliberate. I’ll just have to highlight a few interesting points. Let’s look at packaging for example. A change in packaging color would probably be unnoticed by most unless an old package was next to a new one, but it might have been done deliberately to catch your attention as you’re walking down the aisle.
Another change might be to highlight an ingredient or lack thereof, which might be important like “zero trans fat.” The funny thing about a lot of these types of changes is that most competitors can make the same claim, but only include it in the nutritional section. Most people don’t read the label so making it easier for them to get the information by displaying it prominently on the box can make a difference in their purchase decisions. And it’s not just what’s on the bottle or box, it’s how you say it. Experiments have shown people’s tastes are affected by the “frame” of a label. For example, people might think beef tastes better when labeled as 85% lean vs. 15% fat, though objectively both are exactly the same.
One of my all time favorite packaging tricks was with a yogurt brand, which advertised “25% less fat.” I was somewhat disappointed to realize that while the claim was true, the package also contained 25% less product, 6 oz. vs. the former 8 oz. Of course that wasn’t the way the change was framed. I stopped buying that brand, but I suspect many people never noticed the drop in product amount or simply liked the “25% less fat” framing better.
How much does a brand consider consumer behavior when establishing price points for their products?
Most people would think that high price is always a bad thing, but sometimes it can actually influence people’s perceptions of your product. In a taste test, researchers have found that the exact same wine will rate higher when told that it costs more. It’s not a phenomenon that is limited to taste. Pain pills that are purported to cost more have been rated higher in effectiveness in experimental studies, even though they are the exact same pill! Why do you think marketers use the “reference price,” i.e. was $900, now $150? It creates a reference point that is high, the $900, and tries to make you think the $150 must be a great buy. Even if you think the reference is inflated a bit, it still can make you more willing to buy at $150 - crazy right? It also leads to a bit of prestige for the owners. For example, would owning a BMW be as much of a status symbol if they priced competitively with the Chevy Cobalt?
What are some other elements that can enhance a consumer’s perception of a brand?
The perception of a brand can be affected by all sorts of things besides price and packaging. Where it is sold can make a huge difference. Is this a shirt from Wal-Mart or from Macy’s? That difference affects quality, price and brand meanings. Want to make your brand look better? Put it next to other competitors that are not as good on a specific dimension and stress that in your display and advertising; for example, a 29 mile-per-gallon car looks much better when advertising good gas mileage and compared to a Cadillac Escalade than compared to a Toyota Prius.
Brand names are also important, and choosing one that won’t alienate people or give the wrong idea is important. Think about how well Bic Pens would have gone over if Marcel Bich had called them Bich pens in the U.S. In short, most ads and promotions you see today have probably been tested either in the laboratory or the field to see what types of attitudes and behavior they are likely to spur. The marketers are probably far craftier than most people are likely to give them credit for.
What kind of trends in advertising have you witnessed while the economy continues to struggle?
In tough economic times, the general focus in the market place will shift more towards the frugal side of things. While Bill Gates probably hasn’t adjusted his spending patterns too much, most people have an eye toward the bottom line of their purchases. There was a great article in the Wall Street Journal about a year ago as we were starting to get into the recession, and it was comparing how Starbucks had been experiencing significant difficulties because fewer people could justify the expensive latte on the way to work. On the other side of the coin was the McDonald’s dollar menu and low-priced coffee. McD’s over the same time period had been showing an increase in revenue and traffic as more people started to try it to save money. Particularly with the new line of coffee, they realized McD’s wasn’t that bad and the price was right. Often Starbucks has fared poorly in blind taste tests, but always seems to recover; again probably a branding thing. If you tell me it’s Starbucks, I think it tastes better. In a blind test, it tastes worse…ah the power of branding.
Just the other day, I saw a BMW ad stressing how it was the most fuel efficient luxury line available. While I think that this might be beneficial in a number of ways, including giving an environmentally friendly look to a luxury car, it is also likely a subtle play on peoples’ need to be more efficient with their money in these tough economic times. One of the best examples might be Wal-Mart which is faring better than many, if not most, of the higher-priced chains. In fact, I was listening to an NPR commentary that was half-jokingly wondering if Wal-Mart could survive the recovery. The reason is that as people try to save money, they look to stores associated with low prices and Wal-Mart is the strongest brand for cheap department stores; another example of the power of branding. Thus Wal-Mart gets a lot more business. When the economy recovers, perhaps some people will shift back to Macy’s or at least head upstream to Target. Wal-Mart will probably survive, but may not see the benefits of the recovery as much as some other chains. So the general shift to value and frugality is very prominent in the ads that you see today, I think.
Why are endorsements by celebrities so powerful? Are they really that persuasive?
There are a number of ways that celebrities can influence consumers’ views of different brands. One theory that consumer behavior researchers often use to explain the effects is the Elaboration Likelihood Model. The model suggests that there are two routes that ads can take to influence people, a central processing route and a peripheral processing route. In a nutshell, to be effective in a central processing route, consumers must see a strong persuasive argument being made like, “LeBron James is a great basketball player, his shoes must be fantastic.” On the other hand, there can also be more of a peripheral route, where you don’t really look at the claims of the ad that much, but just the attractive nature of the celebrity brings a positive feeling to the brand as when Gene Simmons is promoting Dr Pepper. They wouldn’t be an expert or have any particular connection to the brand, arguably Dr Pepper is tied to “Dr. Love” by the “Dr,” but just a nice face could bring some positive benefit. There’s also been great discussion of how a celebrity’s persona can help a brand if there’s a good “fit” between the two images.
So, it seems as if you need a celebrity endorser these days?
These ads can be pretty persuasive. Perhaps the practice could have been more effective in the past when far fewer celebrity ads were used, but it still can show benefit today. Many times though now, it may almost be that you’re at a disadvantage if you don’t have a celebrity spokesperson and your competition does. A general rule of thumb in the industry is that so called “virgin” endorsers, those who haven’t endorsed a brand in the past, are more beneficial to the brand. They tend to command higher priced contracts and companies sometimes include exclusivity agreements and no-compete clauses should they ever be dropped by the brand.
Can you weigh in on the Tiger Woods ordeal for a minute? He’s managed to still hang onto some big time sponsors like Nike and Gillette. How do you see these relationships playing out?
I personally couldn’t care less what Tiger has or hasn’t done from a news perspective. Academically, these types of scandals are sometimes interesting, but personally I find the social intrusion into someone’s private life pretty disturbing. Unfortunately, the situation does make for interesting theoretical observation from a marketing perspective. He’s the biggest celebrity athlete endorser ever and his fall from grace is unparalleled. I think the view held by one of my colleagues’ students could probably come pretty close to the truth: Companies like EA sports and Nike, which rely on his athletic expertise, are potentially more likely to stick with him unless his performance tanks when he returns to the PGA tour. That being said, Gatorade just decided to cut him as an endorser, so even those companies may at least temporarily cut him. Companies that rely on his hardworking, clean image like Accenture will likely make their cut permanent. And companies that rely on his good looks like Gillette are in more of a gray area. For the present though, all companies are likely to de-emphasize their relationship with him until the situation changes
Toyota’s growing safety issues and monumental recall is every company’s worst PR nightmare. How bad do you think this will hurt the automaker?
Well, the crisis is big, but I don’t think it’s as dire as the media is making it out. The brand will likely take a hit, but for the millions of loyal Toyota drivers without a model that was recalled there might be little issue. It’s probably the people who are on the cusp of buying another brand, or younger drivers forming opinions of auto brands, where this will do the most damage. Some pundits have said that a major issue like this could take a (human) generation to pass. So the situation is certainly not one that can be easily forgotten.
My personal view is that for a lot of people it’s not going to be the problem itself but the manner in which the company has dealt with it that will hurt the brand. First, there was no problem. Then it was the floor mat. Then it could never be the brakes or the electronics - now it could be both. Executives didn’t want to speak before congress, for which I really can’t blame them as congressional hearings are becoming more and more of a joke, and from a public relations perspective it could be damaging to appear to be forced to speak about the issues. Lastly, you have this new internal memo about an executive who saved $100 million by suggesting a cheap fix a long time ago, which the media is of course hinting toward being a huge disregard for safety and ever so fairly juxtaposing it against a funeral on front page news.
The ultimate strength that Toyota’s brand image had before this all occurred is likely to carry it through the downturn that these recalls have caused. Also important to note is that Toyota’s brand is known for dependability, and these problems strike right at that main strength, so it might be more damaging to them than a company that isn’t as well known for reliability. The safety implications however could be harmful to any brand.
If you’re Ford or GM, how do you capitalize on this opportunity in the automotive space?
You price promote to encourage people to switch brands, give good trade-in offers, and stress any “objective” industry ratings you can find that put your vehicles high on dependability and value; basically exactly what they are doing. They don’t want to get into saying anything bad about Toyota, maybe largely from a legal perspective, but they certainly want to strongly hint that they are showing superior safety and quality. Although, as noticed by one of my students, they have to be careful not to run into issues of their own.
