The Ripple Effect: The Influence Of Others On What We Buy
Editor’s Note: Neal Cole wraps up his exploration of Behavioral Economics through the lens of Mark Earls’s book I’ll Have What She’s Having. You can catch the previous related posts here and here. Neal continues to challenge insights pros to think about how these models may impact both the process and interpretation of research and in this post he brings it all together. It’s a must read.
Want to hear Mark Earls in person? He’ll be one of the stellar lineup of presenters at the Insight Innovation Exchange event in Sao Paulo in March. Tickets are going fast and Mark always draws a big crowd, so make sure to register today!
By Neal Cole
Can most of the things we buy really be the result of other’s behavior and opinions, whether openly or through covert imitation? This was a response to my blog about how social networks influence mass behavior. The idea does challenge conventional thinking about how people make decisions and common assumptions that most market research is based upon. However, many of these are false assumptions so isn’t it about time we looked at the data and came up with a model of human decision making that doesn’t neglect social influence?
- The Power of the Herd:
My original post was mainly based upon the book I’ll Have What She’s Having by Mark Earls (@herdmeister), Alex Bentley and Michael O’Brien. This asserts that social learning (imitating other people) is the engine for the spread of culture, behavior and new ideas. The basic premise is nothing new. ‘Herd behavior’ was first popularized almost one hundred years ago by Wilfred Trotter in his book Instincts of the Herd in peace and war (1914).
However, more recently the economists Thaler and Sunstein suggested that social influence is important because most people learn from other people and it is one of the most effective ways to nudge behavior. They noted that in Jonestown an entire population committed suicide due the power of social influence. That teenage girls are more likely to become pregnant if they see other teenagers having children. But also obesity, academic effort of students, broadcasting fads and the behavior of US federal judges have all been found to be heavily influenced by their peers.
Is it a co-incidence that we buy so many of the same brands as our parents and have adopted some of their behaviors’ and phrases? Some of these preferences change as a result of friends, partners, colleagues, and others in our social networks. But who were they influenced by? Our personal belief system is also the result of interactions with other people. We largely rely on people we respect and trust rather than actively seeking experiences to form our beliefs.
- Super Social Humans:
Earls and his co-authors suggest that our tendency to copy results from humans being the most social of all primates. Living in groups we possess superior cognitive abilities that allow us to copy behavior and ideas. These characteristics have enabled humans to adapt and survive in changing social landscapes. We only have to look at how people now use smart phones to see how quickly humans find new ways to interact and exploit opportunities that didn’t exist just 20 years ago.
That is not to say that people automatically follow each others like lemmings. Humans do of course innovate. Earls and co assert that ideas spread through a small amount of individual learning (innovation), and then social learning by the vast majority of people. Sales and motivation consultant Cavett Robert confirmed the same observation:
“Since 95 percent of the people are imitators and only 5 percent initiators, people are persuaded more by the actions of others than by any proof we can offer.” Cavett Robert
- Interactions and Conformity:
Further, Earls and his co-authors point out that even if an idea or behavior is intrinsically appealing, unless the knowledge of, motivation for, or acceptance spread through our interactions with others it will not get very far. Indeed, social norms emerge and change in our cultures as a result of behavior spreading through conformity. No one sets out what these norms should be. But people from a particular culture will generally agree on social norms without having to confer with each other. We learn what the norms are through our interactions with other people. Further, as Robert Cialdini and other social scientists have found social norms can be a powerful way to persuade people to behave in a certain way.
- Too much choice!
The psychologist Barry Schwartz points out that as the number of choices we are faced with continues to rise people have no alternative but to rely on second-hand information rather than personal experience. His concern was about global telecommunications and how these networks copy and distribute the same stories. Even if a story is false or biased the danger is that the more it is repeated the more people assume it is true.
In our modern societies copying is likely to be the most effective strategy for most decisions. We neither have the time or capacity to process so many choices. Schwartz visited a US consumer electronics store as part of the research for his book The Paradox of Choice. He estimated that the individual components in the store would enable one to create 6,512,000 different stereo systems. Perhaps it’s not surprising the iPod became so popular!
- Market Patterns:
Earls and is his co-authors point out that patterns in market data are the best guide as to whether decisions are heavily subject to social influence. If people largely make decisions independently of each other, and use some kind of rational cost-benefit selection process, we would expect to see a normal distribution (short-tail) of brands. This is most likely to occur where there are relatively few similar products to choose from.
Further, brand loyalty would not to be correlated with brand size and advertising would be as effective at attracting new customers as it is with existing buyers. Markets would be more stable as people wouldn’t follow trends. Sudden and massive cascades (e.g. the switch to digital cameras) wouldn’t occur as peoples’ preferences would not change until they had decided for themselves that a new product would better meet their needs.
However in reality many markets are characterized by long-tail distribution that marketers recognize by the 80:20 rule. Andrew Ehrenberg’s work in social and market research identified that short-tail distribution can exist in static and non-segmented markets. This means there is no turnover of products. But in many of today’s highly segmented markets we can see countless products come and go during a year.
However, Ehrenberg’s work confirmed the double jeopardy law that small brand’s suffer from both fewer buyers and also less loyal customers compared to large brands. He also found that price elasticity declines in magnitude as a brand’s share rises. Why should this be if we are not influenced by others? His work indicated that most promotions only have a short-term impact on sales and almost all buyers during promotions are repeat purchases rather than new customers. He concluded that most advertising simply raises awareness of a brand but rarely seems to persuade. Indeed, one of his key conclusions is that most FMCG markets lack any real brand loyalty. Purchasing patterns are driven more by habit and availability than any emotional attachment to a brand.
Earls and his co-authors make an important distinction between two kinds of copying that humans use to learn from. These are crucial for marketers as they influence the dynamics of the social landscape and how markets change over time.
When we have a choice between many apparently equivalent options we often find copying the behavior or decisions of a particular person preferable to trying to evaluate all the different options ourselves. Directed copying occurs where people copy in an advantageous direction. This may involve copying successful people, members of our family, people who are similar, or celebrities. When we copy people or groups that we wish to identify with this may lead to social diffusion within the confines of the group.
Undirected copying occurs where we copy people, probably subconsciously, with little if any knowledge of the person we are imitating. This often happens where there are not just a huge number of similar options to choose from, but there are also too many people or groups of people to copy from. Further, people appear as equally uninformed as you and are probably copying other people themselves.
Undirected copying is particularly useful for all those thousands of little choices that we hardly given any thought to and so it is largely an unconscious process. However, it is a model that can be used at the population level. This is because even if individually we have specific reasons for copying someone else, there are likely to be so many and varied reasons for copying that we can consider it undirected.
Undirected copying is probably the norm in many situations and may help predict rates of change. It acts like the interactions of cascade models and is characterized by continual flux, unpredictability and long tail distributions. The latter reflects the fact that only a small percentage of new ideas ever becoming popular as most fail. This is why we see turnover of ideas as the most popular ones are more likely to be copied again.
- Directed copying can explain variations in the normal ebb and flow that results from undirected copying. This could be caused by a cultural or media event (e.g. the Olympics or a motion picture release) as well the adoption by a celebrity. Celebrity endorsements don’t tend to have the same impact as they are often not perceived to be genuine behavior.
- Where an idea is perceived to be better than all the others directed copying kicks in and increases its popularity until something better comes along. Provided copying is primarily influenced by the quality of ideas, then the more people in the population, the more good ideas are likely to be identified.
- The nature of copying among populations can be influenced by their interconnections. Large, interconnected networks of people where there are relatively few similar products tend to favour directed copying. In such networks the behaviour of individuals is greatly influenced by those upstream. If we hope that people will select on the basis of quality (i.e. the follow the copy if better rule) then this kind of network is more likely to benefit a superior idea. This is similar to the early adopters marketing model where innovators generate new ideas that are picked up by early adopters and then copied by others.
- Undirected copying produces unpredictable landscapes where probabilities are the best guide to picking winners. In financial markets for instance a balanced portfolio has more chance of selecting a winner than trying to pick individual stocks.
- The success or failure of an idea is often unpredictable and largely random. What determines success at any one moment is how popular it is.
- Conventional marketing and market research thinking significantly underestimates the power of social influence in determining many of the things people buy and the behaviors we adopt. Further, emotional brand loyalty may be a lot less prevalent than many marketers believe it is. Behavior mainly drives attitudes to brands, but what influences behavior? I suggest that it may be time to believe the math, not the myth.
If you want to understand more about mapping social behavior I recommend you read I’ll have What She’s Having by Bentley, Earls and O’Brien. Thank you for reading my post and I hope it has challenged a few ideas you have about marketing and influencing human behavior.