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Applied Behavioral Economics with Melina Palmer

Melina Palmer is a Behavioral Economics consultant whose podcast, The Brainy Business: Understanding the Psychology of Why People Buy, is listened to in over 160 countries. We discuss Melina’s book, What Your Customer Wants and Can’t Tell You, and how advertising professionals can benefit from understanding framing, priming, and herding. Melina provides practical applications of Behavioral Economics that maximize the impact of advertising and marketing.

Episode Transcript

Adrian Tennant: Coming up in this episode of IN CLEAR FOCUS:

Melina Palmer: The brain doesn’t work the way we think it should. In reality, the subconscious is making 99 percent of the decisions at any given time. Because we are a herding species, we look to others for making decisions. So when we see testimonials and star reviews we feel more comfortable making a decision.

Adrian Tennant: You’re listening to IN CLEAR FOCUS, fresh perspectives on the business of advertising, produced weekly by Bigeye: a strategy-led, full-service creative agency, growing brands for clients globally. Hello. I’m your host, Adrian Tennant, Chief Strategy Officer. Thank you for joining us. Last week, guest Kevin Perlmutter of Limbic Brand Evolution discussed how neuromarketing research and an understanding of behavioral economics can guide the development of brand strategy. Continuing the theme, this week’s episode provides another opportunity to hear an interview with behavioral economics consultant and CEO of The Brainy Business, Melina Palmer – which we first published last June. [MUSIC] Over the past couple of decades, our knowledge about the relationships between neuroscience, psychology, and real-world consumer behavior has grown considerably. Notable contributions to the literature include Daniel Kahneman’s Thinking: Fast and Slow, Nudge by Richard Thaler and Cass Sunstein, and Predictably Irrational, by Dan Ariely. These works and others collectively provide insight into how social and psychological factors influence us every day and reveal that personal decisions are made at a subconscious level more often than not. With implications for advertising, marketing, product design, and customer experience, the principles and techniques that influence consumers to change their behaviors through non-conscious persuasion are categorized as Behavioral Economics. Our guest today is an expert and practitioner in this fascinating field. Melina Palmer is the founder and CEO of The Brainy Business, which provides Behavioral Economics consulting to businesses of all sizes around the world. With a Bachelor’s degree in business, Melina worked in corporate marketing and brand strategy for over a decade before earning her Master’s in Behavioral Economics. Melina’s excellent podcast, The Brainy Business: Understanding the Psychology of Why People Buy, is listened to in over 160 countries and used as a resource by many universities. And her first book, What Your Customer Wants and Can’t Tell You was published just last month. To talk about the book and how brand marketers and advertising professionals can leverage Behavioral Economics, Melina is joining us from her home office in Tumwater, Washington state. Melina, welcome to IN CLEAR FOCUS!

Melina Palmer: Well, thanks so much for having me.

Adrian Tennant: Well, I attempted an introduction. Melina, how do you define Behavioral Economics?

Melina Palmer: I think you did a wonderful job with your introduction. And I typically just say that, you know, if traditional economics and psychology had a baby, we would end up with Behavioral Economics. The field really came about because traditional economics assumes logical people making rational choices in everything that they do. And because we’re all human and we know that’s not the world we live in, you end up with a bunch of models that don’t accurately predict behavior. So over time, you had economists and psychologists and neuroscientists entering into one another’s fields or working together on projects to see if there were these themes within the brain that could be used to more accurately predict behavior and what people will actually do instead of what we all think they should do. And Behavioral Economics was born.

Adrian Tennant: Now, prior to establishing your business, you had a decade of experience in corporate marketing and brand strategy. When were you bitten by the Behavioral Economics bug and realized it was something you wanted to go all-in on?

Melina Palmer: Well, it’s actually when I got my undergraduate degree in business administration and marketing, there was just one section of one book and one class had this like little tidbit that was about buyer psychology. And I remember reading it and thinking, “Oh, this is the coolest thing I’ve ever seen. This is so awesome!” And saying, “I’m going to go back and get a Master’s in this someday.” Like at that moment, I knew it wasn’t going to be an MBA, this is what I was going to do. And I spent the better part of ten years calling universities and seeing what schools and options they had available and was continually told, “That’s not a thing, that doesn’t exist, sorry!” And I was a little bit discouraged, but just working in my marketing space and loving what I did and doing some research and innovation and things like that. And I was part of an innovation program for credit union professionals. It’s kind of like a fellowship program and they brought in some people from The Center for Advanced Hindsight to talk about what they were doing in their work.

Adrian Tennant: What is The Center for Advanced Hindsight?

Melina Palmer: Yeah. The Center for Advanced Hindsight is the group out of Duke University. So that’s led by Dan Ariely, and I remember seeing the studies and had that epiphany moment of, “Oh, this is what I’ve been looking for.” And so I like cornered them, like “Tell me everything! What is this?” And so found that it was called Behavioral Economics and got myself into a Master’s program and here we are.

Adrian Tennant: Consistent themes of IN CLEAR FOCUS are developing customer intimacy and using consumer insights to inform strategy. What are some of the ways that a knowledge of Behavioral Economics can help us improve the ways we design and conduct marketing research?

Melina Palmer: The biggest thing to note across Behavioral Economics, and just anything that you’re doing in life is, is that the brain doesn’t work the way that we think it does or the way we think it should. Like to say that “should” is a four-letter word here at The Brainy Business. And in that way, we like to think again, that we’re logical conscious creatures and we’re using these computers in our brains very strategically in everything that we do. And in reality, the subconscious is making 99 percent of the decisions at any given time using rules of thumb, things that have worked in the past that help us to survive as a species: we need to operate in this way. But if you don’t understand those rules that are being triggered and your logical brain is trying to communicate with what you think is your buyer’s logical brain, that’s not what’s doing most of the actual buying and leading people through a grocery store or on a website or whatever it is. So understanding that 99 percent is done using these rules and then having some awareness of some of the most common ones can help you to just be much more effective and efficient in your communications, both internally working with team members as well as when you’re creating marketing materials, presenting prices, putting things on a website, whatever it is to be built out so that it works with the 99 percent instead of only that little bit of logic when you are able to trigger it.

Adrian Tennant: Reflecting on your past experience as a corporate marketer and the need for brands to develop creative messages that really resonate with consumers, which three principles drawn from Behavioral Economics would you say are the most important for advertising and marketing professionals to know about?

Melina Palmer: Well it’s hard to narrow to three, but I shall rise to the task. So the first one that I would say is most critical would be understanding the concept of framing. So the way you say something matters much more than what it is, you’re actually saying. One of my favorite examples of this would be: imagine you’re going to the grocery store and you need to buy some ground beef and you see two stacks. One is labeled as “90% Fat-Free” and those next to it labeled as “10% Fat.” Which one would you rather buy? And most everybody says “90% Fat-Free”. It just sounds and feels better, you know, “10% Fat,” you think, “Ooh, I haven’t been to the gym in like 18 months. Where’s that going to go? I don’t like this at all.” And “90% Fat-Free,” you think, “Oh, I’m making such a great choice for myself and my family.” It’s exactly the same thing. And we know that logically, but the subconscious hears it differently. So looking for places within your business or where your competitors may be are all talking about 10% fat, you know, where can you be the 90% fat-free message that’s going to just easily resonate? Even if the packaging looks exactly the same or the pricing is different, it’s just not about that. The way the subconscious hears it will trigger the behavior in that way. So framing, I would say is number one – there’s a reason it’s the first of the concept chapters. So I think that one is easy enough. The next would be looking, I think, at herding and social proof, they go super hand-in-hand. So it’s one thing there, but because we are a herding species, like cows and sheep and guppies, we look to others for making decisions and especially people who are like us. And when there are many people who are like us. So when we see testimonials and star reviews and long lines at a particular restaurant or whatever it is, When we see others have been there and have done something, we feel more comfortable making a decision. So that has a lot of power. or even being able to say that this particular product is the most popular can increase the likelihood that it’s going to buy it and it will become even more popular when you put that moniker on it. So be truthful, but if you have something that is popular or the best value or whatever, may feel like you don’t have to say it, but when you do it can increase the likelihood that more people will pick it. So that is one more. And I would say a third, we’ll go with priming, which is whether it’s imagery or word choice, something that happens just before the action can be very influential on a choice that someone is going to make. One example being: people were asked to work together on a project, put into a room and in one instance, there happened to be a briefcase that was in sight. The other half, there was a backpack in sight. Nobody said they even saw or noticed it. But those in the briefcase room were a lot more combative and keeping information to themselves on these cooperative tasks they were supposed to be working on. Whereas those in the backpack room were more cooperative. Because when we think about the associations that our brain has with a backpack is when we were, you know, in elementary school or high school and working on team projects. And briefcases are for boardrooms and battling it out over money or whatever it is. So again, everybody said they didn’t see it just like people may say they never notice Facebook ads or “Commercials don’t work on me.” That’s just wrong. Even if they don’t realize it, these things are happening in our brains all the time.

Adrian Tennant: What are some of the most common mistakes that are made in marketing communications, which could be avoided if Behavioral Economics principles were applied?

Melina Palmer: So I do have… and this was the second episode of my podcast. And at the time of recording, we’re coming up on three years, so there are many episodes there! But number two was the top five wording mistakes businesses make. So I would recommend checking that one out as it’s the second most downloaded podcast episode, still three years later. So one of the biggest things there is too much. And we like to think that people want tons of choices and they need all this additional information to be able to make a decision, when presented with too many options or features or whatnot, our brain just sort of gets overwhelmed, and the status quo, in that case, is to do nothing. And so “I’m going to think about that later” sort of a deal. So you can always say it in fewer words, whatever it is, if you boil it down,  how can I say this in the least possible amount of words? What’s the fewest bits, I can put here to help someone take a next step? And I do have a chapter in the book that’s dedicated to thinking about things in a series of small steps. We tend to think when we’re building out a marketing plan or whatever it is to say, “Well, you know, we’re going to mail the postcard or we send that email and people either buy or they don’t and we’ll track it.” and in reality, there are a lot of little micro-decisions in that process that are being ignored. That is what we would call a “nudge-able” moment. You mentioned the book Nudge. and so if you think actually with the email, as an example, you have to get through a spam filter. You have to then make sure that the subject line is enticing enough that someone doesn’t immediately hit delete, but they’re actually going to open it that then when they see what’s in there, they don’t go, “Oh, this is spam” and delete it. They keep reading and then they go to the next step of maybe going to click to learn more. And then they’re on your website and you have to not get distracted, especially if they’re on their phone and maybe they decide to open up Instagram and you want them to read something else and fill out a form, like lots of stuff happening. So, the least steps as possible, but think about how do you get them just to the next tiny little moment in each of those points and using behavioral tactics along the way to really just kind of keep them moving through that process.

Adrian Tennant: Pricing is an area that product and brand development professionals often have to consider. While there are quantitative research and statistical analysis tools that can help us find optimal price ranges for new products, as you describe in your book, Behavioral Economics can also be our friend here. Melina, can you tell us about the one word that increased sales by 38 percent, and the concept that’s at play there?

Melina Palmer: Yeah, absolutely. And pricing strategy is one of the biggest things that I do. I teach a course on it at Texas A&M, I also have a DIY course that’s available for anyone to go in and get. And so check those out. There’s lots of stuff for where Behavioral Economics applies to pricing. In the case of the 38 percent, that is another of my favorite stories and one that had a study. So they used grocery store end cap displays. And so one said, “Snickers bars – buy them for your freezer.” And the other says, “Snickers bars – buy 18 for your freezer”. Of which most of us can agree eighteen’s a lot and not really what we would buy in our logical brains. If you were the marketer setting up this ad, you would probably say, “I don’t know that I want to put out 18. It’s a big number and it’s arbitrary. And I don’t want to have to justify why I picked it and them is unlimited and people get a hundred snickers, if they want blah, blah, blah”. All your conscious brain trained to logic, why your subconscious feels uncomfortable and it maybe feels like it’s not that big of a difference. But when the number 18 was used instead of the word “them”, you had an increase of 38% in sales. And so there are actually a couple of things at play here. One is the concept of anchoring and adjustment. So the number that’s presented sets an anchor in the brain via priming, like we’re primed by the number to make a decision here. And in that case, “them” is like a fancy word for zero when we’re logic-ing about it, we’re talking about how it’s like unlimited, but someone going to buy, like “Maybe I’ll pick up two or something.” When we have the number 18, it’s more likely to get through that subconscious filter and your brain is going to then say, “Oh, 18. I’m so much better than everybody else. I don’t need 18. I’ll just get 6.” And you don’t even realize that you adjusted down from the high number instead of up from zero. And you still feel good about yourself and the decision and you move along with your day. The other really critical piece to this is underneath and kind of like behind the statements, there’s an implied question happening with the brain of the customer. So in the case of the word “them”, the question being asked, it’s being framed as “Would you like to buy some Snickers?” In the case where you swap that out for the number 18, the question is now “How many do you want to buy?” So there is this implied sale that’s in that framing of that kind of like subtext underneath the message that can make buying that much easier.

Adrian Tennant: Let’s take a short break. We’ll be right back after these messages.

Adrian Tennant: Each month, in partnership with our friends at Kogan Page, the Bigeye Book Club features interviews with authors who are experts in specific areas of marketing and consumer research. Our featured book for May is Influencing Shopper Decisions: Unleash the Power of Your Brand to Win Customers by Rebecca Brooks and Devora Rogers. IN CLEAR FOCUS listeners can save 20 percent on a print or electronic version of the book with exclusive promo code BIGEYE20. This code is valid for all products and pre-orders and applies to Kogan Page’s free e-book offer. To order your copy of Influencing Shopper Decisions, go to KoganPage.com – that’s K O G A N P A G E dot com.

Adrian Tennant: Last October, Bigeye published a market research report, entitled Retail Disrupted: What Shoppers Want From Brands Today. We surveyed consumers across America to find out how their shopping behaviors had changed as a result of the pandemic. In a special Bigeye video event, we’re joined by four experts who reflect on the study’s findings and explore the implications for retailers and brand marketers in 2022.

Doug Stephens: It’s logical to assume that as we see this metaverse construct, as we as individuals spend more and more time in these virtual worlds, that the adoption of things like virtual apparel might start to make more and more sense.

Ingrid Milman-Cordy: I think being channel agnostic and just making sure that you are you know meeting your consumer, where they are is important. to not think about channels as competitive to each other, thinking about them as complementary.

Andy Sheldon: When you’re watching something as a live stream, that’s linear, there’s no choice, but to watch what’s going on at that moment on the shopping teller.

Syama Meagher: I see NFTs as an invitation for consumers to join brands on a digital journey and for brands to invite consumers to spend their cryptocurrencies and their time into building a relationship with the brand. 

Adrian Tennant: For a lively discussion about the future of retail and marketing watch Bigeye’s Envision 2022. For details, go to bigeyeagency.com/insights.

Adrian Tennant: Welcome back. I’m talking with Melina Palmer, CEO of The Brainy Business and author of What Your Customer Wants and Can’t Tell You: Unlocking Consumer Decisions and the Science of Behavioral Economics. Melina, what led you to write the book?

Melina Palmer: So I started my podcast while I was actually still in my Master’s program, because when I started, you know, I knew I was sort of early because I had been calling for years trying to find a program like this. And you know, on the academic side of Behavioral Economics, the field is built on decades’ worth of research. But in the applied space, it was surprisingly little that existed in the materials that my teachers were providing for me, just in what you could find. And so, things that were really clear to me as far as how this applies to brand strategy and pricing and communications and all of that, you just didn’t really see anywhere. And so I had gotten some advice to start a podcast and mine, as far as I still know, is the first real Behavioral Economics podcast that existed. Which is why there were so many people finding it from around the world. And in that way to make it really this applied space of being able to say, “This is what it is, and this is how you can do something with it.” And it really resonated with the audience to be able to get what you need without all the extra stuff and not having to go read oodles of academic journals and research papers. I can do that, so other people don’t have to. In the same way with the book, finding from the podcast was still having people reach out from around the world with this kind of common question of like, “You talk about it and it makes total sense. Like I get it, I hear what you’re saying. But where do I start?” And really, it just became clear that being able to put some of the boiled down to the most important, applicable stuff for people in business, to be able to go use without having to go get a doctorate and become an academic researcher because they have some interest in Behavioral Economics. So that’s I guess where the book kind of came from.

Adrian Tennant: Certainly one of the things that I really enjoyed about the book is the use of practical examples throughout the text. So, after introducing each concept, you present the reader with ways in which it can be applied in a business context to solve real-world problems. What prompted you to take this more action-oriented approach?

Melina Palmer: I would say it’s just my style more than anything. It’s – while I’ve only begun teaching professionally recently, I would say I’m a teacher at heart. And I think the podcast – for anyone that listens – knows that. And so, so many episodes of my podcast I have a worksheet, that’s a freebie that goes along with it. And just for me, I really wanted to do anything possible to make it so this book wasn’t something that would just sit on a shelf proverbial or otherwise collecting dust. I really want people to understand and get some comfort in using Behavioral Economics in their business in a way that it can, it just can change so much with really simple tips and tidbits.

Adrian Tennant: Purchasers of What Your Customer Wants and Can’t Tell You also receive access to a companion workbook. Could you tell us more about that?

Melina Palmer: Yeah. So I just can’t help myself when it comes to making everything as applicable as possible for listeners or readers. And so while the book does have a thing to try at the end of each chapter to start applying, there are additional worksheets and things to go about trying yourself in that companion workbook, which is 111 pages long. So lots of great content there for anyone who wants to continue to apply Behavioral Economics from the book and make it just really usable.

Adrian Tennant: You offer an example of how the temperature of coffee can make a difference in how people perceive each other. Can you tell us more about how Behavioral Economics concepts can be applied to our personal lives?

Melina Palmer: Yeah. So that is priming again, and in that study where someone unrelated held a coffee for just a few seconds before doing a study, those who held an iced coffee were more likely to rate people’s personalities as being cold and distant and difficult, compared to those who held the hot coffee and something they had no idea was related to what they were working on. So, you know, I kind of joke in the book of like, “Don’t deliver bad news to someone holding an iced coffee.” But I would say I do a lot of work with people and I have episodes dedicated to mindset and goal-setting. And so if you take this too, this is the same as the backpack and briefcase, there was another study that was just for a tiny fraction of a second people where they were watching a video. And there was a flash of a logo that you consciously couldn’t even pick up on. Half the people were shown an Apple logo, the other half an IBM logo. And then they were working on a project. And those who were shown the Apple logo were much more creative and innovative in what they came up with even though they didn’t notice that they saw the logo. And those who saw a Disney logo were more honest than those who saw the E Entertainment logo, you know, going on. And if you think about the power of a brand for one thing, that where people don’t even recognize that they saw it, but Apple is so impactful on the future decisions and actions that someone is making, if you want to be more innovative and creative in the work that you are doing and the way that you interact with others, you want to be more friendly. Yeah. Think about what’s around you in your office space. And if you have a bunch of, notebooks that say “TGIF” or like, “Ugh, another case of the Mondays, can’t wait for the weekend”, I’m a big fan of sarcasm, but I don’t have a lot of little sarcastic quotes around me when I’m working, because I know that they will impact everything that I’m doing. So if you want to be more innovative, put a big Apple logo on your wall and it’ll be constantly reminding you throughout your day. And if you want to be more friendly, I guess maybe have some Disney characters for when you’re talking with coworkers or other people in your life. But those priming things we don’t realize our eyes are scanning the world around us constantly two to three times per second. And it’s picking up on all of that, even if you don’t consciously recognize it and it impacts your behavior.

Adrian Tennant: In the final pages of your book, you offer advice for readers to help internalize Behavioral Economics concepts. You suggest that we all become curious questioners in the context of reading advertisements, so can you walk us through that?

Melina Palmer: Absolutely. It’s one of my favorite things. I love asking lots of questions and I think just approaching the entire world around you with curiosity is a great way to get started in thinking about things differently. So when you have a postcard in your mailbox. If you just go to throw it away or you go “Nah!” take a moment and go, “Why didn’t I care about this? Like, what does this look like? And how is that different from what I’m sending out to people?” Or if there’s an article that you want to click on a link, or when you’re walking through the grocery store, if your eye is drawn to a particular product, why is that the one you looked at? Why do you think they put it on that shelf instead of somewhere else? Going back to some of the priming, you know, there’s prime real estate in the cereal aisle, where and you’ll notice potentially now that the ones that are targeted for children, the mascots’ eyes are looking down. And there’ll be closer down on the shelf. And those targeted at adults, the eyes are looking straight on to try to have that relationship with the ultimate buying person who wants that particular product. So being able to look and just ask, “I wonder if they did that on purpose and if I was doing it, why would I have done that? Or why might I do something else?” Getting to question what others are doing can help you be more thoughtful about your own products and services and approaches as well.

Adrian Tennant: Another of the things that I really like about What Your Customer Wants and Can’t Tell You is the inclusion of links to episodes of your podcast that offer additional examples and further discussion of the principles you introduce. How many podcast episodes have you recorded to date?

Melina Palmer: 155 is the most recent and within the book, you know, there were a few less, I think we were in the one twenties or one thirties or something. But there are many links to episodes and some I knew were coming and conversations that have been recorded and things. So, really again, it is about being that additional resource. I know from my podcast, I have people constantly say that my show notes are some of the gold standard just very extensive with timestamps and tons of links to articles that I was reading, or the book that this quote came from, or where you can get more information in past episodes. So there’s just tons of stuff in those show notes. And people really value those who do want to dig deeper. It’s nice to have a reference that you can go to and know that that’s where that fact came from or whatnot. So the book itself outside of my podcast episodes, even there are over 200 citations within the book, so there’s lots and lots of past content and additional information for people to go find if they want to dig deeper.

Adrian Tennant: Melina, how does your company, The Brainy Business, typically work with clients?

Melina Palmer: You know, there’s a bit of a mix to make sure that there is kind of something for everyone. We have everything from for entrepreneurs and small business owners, some DIY courses and the books and the podcasts and things that people are able to get. And then also we have for corporate consulting, so that’s more like I would be going in and working with a team on a project if there’s a specific goal. I teach at Texas A&M University through the Human Behavior Lab there. And so having a tie-in, if we were wanting or needing to build out a project, that’s using the research lab to where we’re able to bring in the eye-tracking, and EEG scanning, and facial recognition, and all of that, we have the human behavior lab to lean on for those types of projects. So it’s a bit of a mix, which I enjoy. I like to say I’m kind of like a chameleon that would work best for the business instead of saying, “This is how you work with us and you have to fit within our box” I like to see what is the best fit for a company and what would work well for them in their team. And, we usually just sort of make it work.

Adrian Tennant: Do you foresee a greater adoption of Behavioral Economics in marcomms over the next few years?

Melina Palmer: Yes, and I really, really hope so. There’s so much more buzz and interest in questions and where I’ve been speaking at market research conferences. There’s a huge awareness of the field now. A lot of books have been coming out that are more mainstream. Bloomberg named Behavioral Scientists the top job of this decade back at the end of 2019, and there are programs in universities. I hope that every business school, honestly, Behavioral Economics should be a part of every single business curriculum. So hopefully, resources like my book, What Your Customer Wants, and Can’t Tell You, and those from others will be making their way in to help people to really use the information and have it be adopted across the industry.

Adrian Tennant: Melina if IN CLEAR FOCUS listeners would like to learn more about you, your consulting with The Brainy Business, your podcast, your online community, or your book, where can they find you?

Melina Palmer: Well, the best thing is everything is, easily found at thebrainybusiness.com and you can find the book, the podcast, social links, things like that. I am on all the socials pretty much as TheBrainyBiz, or you can find me as Melina Palmer on LinkedIn. And, yeah, if you want to even send an email – Melina@TheBrainyBusiness.com, you can find me that way too.

Adrian Tennant: Melina, thank you very much for being our guest this week on IN CLEAR FOCUS!

Melina Palmer: Thanks for having me.

Adrian Tennant: You’ve been listening to an encore edition of IN CLEAR FOCUS with guest Melina Palmer, behavioral economics consultant and CEO of The Brainy Business. Since we first published this episode last June, Melina has announced that she has a new book coming out later this year, entitled What Your Employees Need and Can’t Tell You: Adapting to Change with the Science of Behavioral Economics. Her new book is available for pre-order. As always, you’ll find a transcript with links to the resources we discussed today on the IN CLEAR FOCUS page at bigeyeagency.com under “Insights”. Just click on the button marked “Podcast”. Thank you for listening to IN CLEAR FOCUS, produced by Bigeye. I’ve been your host, Adrian Tennant. Until next week, goodbye.

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