Tuesday, October 11, 2005

Behavioral Economics

Englewood, Colorado-based talent coach/consultant Doug Erickson (303.290.8839) has a way of getting me from thinking into ACTION:

It's not like I have to tell you that Radio is amazingly behind the curve in terms of marketing itself, and you can double that distance for many individual radio stations. When we compare our knowledge of our own customers, of what motivates them to action, to -- say -- Proctor & Gamble's knowledge of its customers and what motivates them to buy Tide rather than Cheer, this becomes shockingly clear.

We buy TV spots based on their "success" for other stations, in other markets, generally not spending lots of time analyzing the forces that shaped the other stations' success -- like individual market competition, format longevity, schedule dominance, etc. We buy Direct Mail pieces the same way, paying less attention to the outside than our HUGE CONTEST inside, believing that CASH must be king in moving consumers.

Well, check out this little piece from the current issue of FORBES: "Behavioral economics (is) an emerging branch of the field that seeks to integrate psychology with economics." Apparently, "tiny psychological effects can have potentially enormous impact on demand, more of an impact than price."

One example: In a Direct Mail offer "...having a wholesome, happy female picture in a corner of the letter had as much positive impact on the response rate as dropping the interest rate (advertised) by four percentage points."

"The practical takeaway is that an insurance company can probably sell more auto policies by featuring Reese Witherspoon in its brochures than by slashing margins and sending out letters that scream: 'Unprecedented Low Rates!' "
-- FORBES, Oct. 17, 2005

When Radio begins investing the same amount of time and money understanding what motivates our listeners to act, as it does in paying to see the results of those actions, maybe we'll round that curve and start moving forward again.

Invest in Research.

Get as close to your listeners as you can.

It's time to grow.

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