Thursday, April 14, 2011

A Marketing Lesson From American Idol

Have you noticed how often incompetent people are supremely confident? Not just auditioning for American Idol, but throughout life?

Professor Justin Kruger and graduate student David Dunning of Cornell University studied this effect in their 1999 paper, Unskilled and Unaware of It. Their conclusion: those who knew the least rated themselves most knowledgeable, and those who actually understood the topic were far less sure of themselves.

This result has been confirmed in multiple follow-up studies involving several skills and fields of expertise. It is known as the Dunning-Kruger effect, says marketing consultant Chuck McKay.

Which begs the question: why does this happen?

Answer: the basic skills and awareness needed for competency are exactly the same skills necessary to evaluate the competency.

Their lack of knowledge (incompetence) prevents them from recognizing their lack of knowledge (incompetence). People don’t know what they don’t know. They don’t even know where to look or how to look at it.

And it doesn’t dawn on them that skilled performers DO know this stuff, until they’re exposed, dramatically to their own ignorance. Until then, they delude their incompetent selves into illusions of confident competency.

If you’ve ever wondered how:
• people who can't articulate the issues, still feel confident casting their vote (or making inflammatory statements);
• how people with no experience teaching, know exactly what's wrong with our education system; and
• how those who have never studied investing, can blithely plow their life savings into the real estate market
Incompetence leads people to make poor choices. Incompetence prevents them from realizing they make poor choices. This is the Dunning-Kruger Effect (DK). On the other end of the DK continuum, competent people tend to rate themselves lower than they should. Their internal voices seem to say, "Hey, everyone knows this."

The dumb get confident; the intelligent get doubtful. And to a greater or lesser degree we're all guilty.

How Biased Feedback Makes it Even Worse

Imagine a typical Friday night in any typical neighborhood watering hole. The regular crowd shuffles in. One of them, Miss Karaoke Singer, is recognized by the rest as being the "best" in the club.

What kind of feedback does she get?

Do any of the other contestants tell her that her breath control is bad, her vibrato unnatural, or mention the odd affectation she's developed? Hardly. They don't know anything about nuanced performance. Since the only feedback she gets is positive, she thinks she's good.

Good? No, FANTASTIC! The Dunning-Kruger effect helps her to believe she's ready for American Idol!

Then comes the audition.

The judges tell her she's a poor singer. Her own incompetence prevents her from understanding what they're telling her. These judges must be stupid. After all, she just gave a great performance.

She gets angry. Tells off the judges. Not because she's defending herself. Not because she's trying not to look bad in front of her supporters. But because she's completely incapable of understanding just how bad she is.

Advertising That Doesn’t Work Probably Has More to Do With Dunning-Kruger Than Advertising

Much like our karaoke singer, every city has an advertiser who, rather than admit his advertising strategy and execution are flawed, convinces himself that advertising doesn’t work.

Does anyone in Mr. Businessman's entourage tell him his ads have nothing substantive to say? That they don’t speak to the buyer in natural language, and instead just spew out ad clichés like "fast, friendly, service?" Does anyone tell him that putting his kid and his dog in the ad won’t convince anyone to buy things from him?

Or more technically, does anyone tell our businessman that his ads don’t have enough frequency to make an impact? That he’s using the wrong medium? That his competition has effectively co-opted his position?

No. His friends get a kick out of seeing him on TV, or in the paper, or on radio, and the only feedback Mr. Businessman gets is positive. He thinks he's good.

Until he sees his sales figures. Plummeting or flat-lined sales force a confrontation with reality, and it’s the rare businessman indeed who doesn’t address his frustration and anger at advertising medium - or on advertising in general. Hence, the near-ubiquitous refrain of: "I tried advertising and it didn’t work."

Unfortunately for Mr. Businessman, if he doesn’t want to follow Miss Karaoke Singer back to waiting tables, he still needs to get more customers. And fast!

How Small Clients Can Get the Best Ads And Grow to Become Big Companies

The thing about big fish / small pond business owners is, they often believe their success in one field translates to competency in almost everything else. Rather than leveraging the expertise of their ad man, they’ll bully him until they get the kind of ads they want - ads full of Dunning-Kruger-esque follies.

But sometimes business owners who are genuinely good at what they do manage to overcome the Dunning-Kruger effect. They find a professional to bring to them the same hard-won competency and expertise they offer to their own customers.

Its much like what happens when a truly talented singer gets on American Idol: with the right direction and promotion, some dreams do come true.

What about you?

Are you an average karaoke singer? Or a true star in search of the right stage and the right spotlight? Knowing which is critical when you're fishing for customers.

Monday, April 11, 2011

How People Make Buying Decisions


The most important purchase you get from a customer is the second purchase.

Why? Because a two-time buyer is at least twice as likely to return and buy again as a one-time buyer, says marketer extraordinaire Jamie Turner.

So then the question becomes, "How do I get a one-time buyer to become a two-time buyer?"

Typically, that involves a combination of good customer service and the good sense of value. A good sense of value is achieved when a customer feels as though they're getting more of your product or service than they paid for.

For example, a Mercedes Benz is typically twice as expensive as a Volkswagen. Given that, you might assume that Mercedes Benz' market share would be significantly less than Volkswagen's, but it's not. They're almost equal (1.9% for Mercedes Benz vs 2.2% for Volkswagen).

Why? Because while a Mercedes Benz is twice as expensive, the perceived value is 2.5 to 3 times greater than a Volkswagen's. Customers who pay twice as much for a Mercedes Benz feel as though they're getting 2.5 to 3 times more value for their purchase.

See how that works?

How all This Relates to You
When you're thinking about how to sell more of your products and services, you can start by understanding how people make buying decisions.

Remember, most people make buying decisions in one of three ways:
With their gut
With their heart
With their mind

People who make decisions with their gut are intuitive, non-linear thinkers. They don't analyze a purchase in a structured "A...B...C" way as much as they analyze a purchase in a less-structured "A...Q...Z...Y...C...oh, look, there's a bird outside my window" way.

People who make decisions with their heart are driven by emotion. If your target market is driven by emotion, you'll want to work extra hard on establishing a strong, meaningful brand.

People who make decisions with their mind are logical, linear thinkers. If that's your target market, you'll want a feature-oriented, benefits-based marketing campaign.