Your Customer’s Motivations Are A Total Monet

The one fundamental law of business is that consumers respond to incentives.  They don’t always respond the way you expect or want them to, but they always respond.  When marketing a product, sometimes it’s easy to get caught up in the who, what, and where and forget about the why.  Building the most creative marketing campaign in the world doesn’t mean anything if it doesn’t connect with consumers and induce them to behave in a beneficial way.  I want to run through a few different types of incentives and see how they can affect how we run our businesses.

Price

On the surface, this is the simplest of incentives.  Financial incentives are thrown into our faces constantly, whether its Toyota promoting 0% interest rates on its new Sedan or McDonalds announcing the McDonkey sandwich will be available for $1 on Tuesday to celebrate Shrek Week.  However, I’d like to discuss the less obvious, but in many ways more attractive, utilization of price.

Go into your medicine cabinet and see if you have any Tylenol or Advil.  If you do, then you’ve fallen for a common signaling trap in consumer products.  Drugs are highly regulated by the FDA; as a result, there is essentially zero difference between brand name and private label drugs if they have the same active ingredient.  Our health is important to us so we’re willing to go the extra mile and spend a bit more to make sure we secure the highest quality products.  Few of us have the time to research all the drugs available at CVS, however, and so we take our queue on quality from the immediately available and easy to understand price.  Instinctively, we assume higher prices are associated with higher quality.  Understand how your consumer feels about your product to make sure that your pricing strategy is providing the proper incentive.

Morality

One of my favorite economic studies involves the human kidney market.  (On editing this section, I’ve learned that much of what I’m going to talk about here was covered in SuperFreakonomics.  Steven Levitt is always stealing my questionably interesting anecdotes.)  Other than the fact that the kidney is my seventh favorite internal organ (right between the pharynx and gallbladder), it’s a fascinating environment for understanding how people make decisions on a day to day basis.  The study goes as such:

Researchers began with a situation similar to what we have currently in the kidney “market”, where pricing a kidney is illegal and anyone who wishes to donate one does so out of benevolence.  Under these restrictions, we end up with a total of 1,000 kidneys donated.  When researchers offered a $50 reward for donating a kidney, donations dropped for 500 in the same period of time.

At first glance this makes no sense, donations should increase as an additional price incentive has been added to their actions.  People aren’t perfectly rational (at least in the traditional economic sense) though, and adding a financial incentive to kidney donations takes more away from the moral gains than it adds in monetary gains.  Money can not only corrupt people, but also transactions.  Believing that consumers are morally ambiguous when crafting a product strategy is a mistake that can cost a business in a big way.

Community

As I’ve stressed in previous blog posts, humans are inherently social animals.  We weren’t born with awesome horns or paralyzing cuteness, our strength as a species is rollin’ with the homies.  The ability to join and increase one’s standing in a community is a tremendous incentive for consumer action.  Would nearly as many people watch Lost if there weren’t massive communities dedicated to analyzing and discussing every piece of minutiae associated with the story?  It’s human nature to want to connect with others over common interests and activities.

The great thing about this incentive, as someone who works in the field of social media, is that the ability to cultivate communities around your product or service is easier than ever.  A simple Facebook page, when properly executed, can act as a rallying point for every consumer who feels a connection with your brand.  Customer service is a tangential aspect of this as well.  Aside from the improvement in convenience, a successful customer service strategy can make consumers feel as though they’re a valued member of the brand community.  When you’re engaging with consumers over Twitter, you’re not only answering their questions and solving their problems, you’re creating a bond that will drive them to interact with your brand in the future.