Intuitively, we can relate to this: as we get closer to completing a goal we can feel more motivation to complete it. Getting close to the last piece of a puzzle, the last clue of a murder mystery or escape room, the final chapter of your book (perhaps), the final kilometre of a marathon, or as you find you need just one more stamp to get a free coffee, being so close to our goal can give us a motivation lift to get to the end. It has a name:  the goal-gradient effect*.

In the example in the sketch, Oleg Urminksy and coauthors found that as people approached the final stamp towards a free coffee they were more likely to pick up the rate of buying coffees. And when issued with the new card, the coffee buying rate went back down again. They also found that it wasn't so much the absolute 'distance' from a goal, but the perception of distance. So, people who started out on a 12 stamp card with 2 stamps already complete tended to complete the card faster than the people who had a 10 stamp card starting empty even though it was the same number of stamps to the goal.

Read more in Katy Milkman and Kassie Brabaw's Scientific American article, Why Feeling Close to the Finish Line Makes You Push Harder.

Katy Milkman also educated me about the fresh start effect.

*The goal-gradient effect is also known as the goal-gradient hypothesis

The goal-gradient effect

This is what you get when someone is able to launch something that is not only cheaper, but also better. It’s kind of an irresistible	proposition. Most new things that are better don’t tend to also be cheaper. Often this is only possible with a whole new technology or approach. It’s like when the first taxi apps started appearing. To me it was like hang on, this is way better — no trying to catch a taxi in the rain, simple, non-awkward, no swinging by the ATM payments — and also cheaper. It’s also similar to Target’s Cheap Chic.

It is of course, not the only way to compete. If you make something better, people will pay what it’s worth to them. But if you can do it cheaper too you’re on to a winner. 

Sexy value is a name, I believe, from Ogilvy and Mather.

You might also like another model of theirs: The Big Ideal.

Sexy value

Perhaps, like me, you’re used to thinking about bringing customers onboard as a funnel. It’s a very natural metaphor for thinking about customer acquisition. For example, you market to 10,000 people, 500 people visit your website, 50 of them put something in the basket and 10 of them buy. If you draw it out it looks like a funnel. And the next time you market you start fresh with a new 10,000. But the real world isn’t like that. Delivering a good service to your customers helps the next customers come in. Hence the flywheel model.

A flywheel is typically a big heavy wheel that stores and releases energy from an engine or vehicle. The flywheel metaphor is about happy customers driving your growth. And when you think about your business this way it can cause you to make different decisions. Having more customers is like a bigger, heavier flywheel containing more energy. Happy customers speed you up, unhappy customers slow you down. Making it easier for customers to try your product reduces friction, as does making it easier for for customers to talk about and share your product. Get your flywheel big, heavy and spinning like crazy and your business is doing well.

The flywheel model is from Brian Halligan at Hubspot. I’ve thought about customer funnels for literally years and I wish I’d known about the flywheel long ago. Check out Hubspot’s flywheel intro for more.

The business flywheel

It’s named Streisand after Barbara Streisand tried to have an aerial photo of her house removed from a set of California coastline photos intended to document coastal erosion. Views of the photo apparently went from 6 to 420,000.

The Effect Effect

A model from Ogilvy and Mather that’s a really interesting way to get to the heart of what could make your brand thrive. The intersection between what people care about (a cultural tension) and what you could be famous as a business (your brand’s best self) is a recipe for doing something good that matters.

Try starting from a question: “The world would be a better place if…” and see where you get to.

Check out The Big IdeaL on Ogilvy and Mather for more.

The Big Ideal ™

The technique of adding a significantly more expensive option in order to instantly make the other options look reasonable by comparison. These kinds of manipulations have been shown to be scarily effective.

Pricing decoys are another way retailers get you to part with more money than you planned on. In his book Predictably Irrational, behavioural economist and professor Dan Ariely demonstrates how a large magazine successfully employed a strategy called the “decoy effect” to increase revenue from subscription sales. Prospective subscribers were given three choices:

1.       Web-only subscription for $59
2.       Print-only subscription for $125
3.       Web + print subscription for $125

At first glance, the middle price point appears to be superfluous. Why would anyone buy a print-only subscription for $125 if they could get a web and print for the same price? Ariely tested the price points with MIT students and found that 16% of students chose option 1 and 84% chose option 3; not surprisingly, none chose option 2.

Then Ariely did something really interesting; on the assumption that having a decoy price (option 2) was influencing people’s choices, he removed the decoy and retested the price points. This time, the subscription choices were as follows:

1.       Web-only subscription for $59
2.       Web + print subscription for $125

With the decoy removed, the option that had previously been the most popular – the more expensive print + online access subscription – suddenly became the least popular choice. Only 32% of those surveyed chose the more expensive option, with 68% selecting the online-only subscription. Clearly the middle price point wasn’t superfluous; it was smart marketing that made option 3 look more attractive to subscribers.

Avraham Byers, Here’s why you should always pay full retail price, Financial Post, April 22nd 2014

The decoy price

Mnemonic from the entertaining and informative book Made to Stick.

Sketchplanations tagged with marketing