The Laws of Choice: Predicting Customer Behavior - Hardcover

Marder, Eric

Hardcover

ISBN 10: 0684835452 ISBN 13: 9780684835457

Publisher: Free Press, 1997

Synopsis

How do customers decide what products and brands to buy? With the rise of sophisticated advertising and marketing research methods in this century, business leaders have spent billions of dollars attempting to answer this perplexing question. Occasionally, analysts emerge with suggestive trends, but ultimately with little hard evidence to support any definitive "laws" of customer choice.
Now, in this much-anticipated major work, Eric Marder reveals how universal patterns in survey responses lead not only to general principles in marketing but to empirically verifiable laws of human nature itself. Drawing on forty years of applying his pioneering experimental design techniques to marketing research surveys, Marder presents a global theory of choice behavior, supported by original data reported here for the first time from thousands of massive real-life experiments based on millions of interviews. His dramatic findings about pricing, optimal marketing tactics, product evaluation, the relative role of product and image, and advertising effectiveness will make this book required reading for the entire marketing community. Of special interest to social scientists and survey research practitioners will be Marder's powerful research designs and techniques, including the unbounded write-in scale for measuring desirability (attitude) and his methodological analyses of the relationships among beliefs (perceptions), desires, choice, and behavior.
In the Preface, he writes: "At the core of the theory are three laws of choice behavior the Law of Congruence, the Law of Primacy, and the Law of Persistence. These laws are both general and self-evident. At first glance, they are so self-evident that you might say: 'I have known this all along.' My reply is: 'Of course you have known it all along. But there is a difference between knowing and knowing, between the passive knowing that allows us to persist in actions that are inconsistent with what we know, and the active knowing that helps us change the way we do things.' I believe that knowing the laws of choice behavior-really knowing them -- changes the way we do things. My crass but stringent criterion has been that a good theory should enable someone equipped with it to make more money than someone who isn't. I believe my theory has passed this test."

About this title

About the Author:

Eric Marder is Chairman of Eric Marder Associates, Inc., a marketing research and consulting firm he founded in 1960. The company specializes in "Choice Research," a term Marder uses to distinguish the discipline presented in this book from traditional marketing research. His client list through the years has included American Home Products, AT&T, Campbell Soup, CBS, General Foods, General Mills, GTE, Hewlett-Packard, Johnson & Johnson, Pfizer, Scott Paper, Xerox, and others. He is married and lives in Manhattan.

Excerpt. © Reprinted by permission. All rights reserved.:

Chapter 1

Marketing and Choice

A Personal Note

I came to marketing in a roundabout way. I was working in survey research. Superficially, surveys are a commonsense matter. One asks questions. One gets answers. One analyzes and reports the results. But my ambition went beyond that. I had an intuition that what happens in a survey, or what could be made to happen if one approached it in the right way, is of greater significance than meets the eye. If one thinks of every question as a stimulus, if one thinks of every answer as a response, if one focuses not on what is said, attributing literal meaning to it, but on the fact that it is said, then the response constitutes a special kind of behavior which should be psychologically meaningful.

My ambition was to open a path to those aspects of human nature that become most peculiarly accessible by examining what happens when questions are asked and answers are given. I was not concerned with how people felt about any particular subject, be it toilet paper or nuclear energy, an inquiry I held to be equally trivial in both cases, but with the universal pattern hidden in the responses, which would, at the appropriate level of generality, lead to principles and laws, not laws about toilet paper or nuclear energy, but laws about patterns of responses and hence about some aspects of human nature itself.

In 1951, I was contacted by the head of a prestigious graduate school and invited to join the faculty to attempt to develop a theory of marketing. I had hardly ever heard the word and thought of it more as having to do with getting my groceries home than as a serious field of study. After some soul-searching, I declined. Marketing, or what I thought it was, seemed frivolous to me. I wanted to continue to think about the embryonic science of questions and answers. Several years later, I went to work at Kenyon & Eckhardt, then one of the ten largest advertising agencies in the country. The understanding was that I would continue to think about questions and answers but, in the new environment of the advertising agency, would channel these efforts into measuring the effectiveness of advertising and helping the agency's clients sell their products.

In 1960 I left Kenyon & Eckhardt to found Eric Marder Associates, Inc. (called "EMA" throughout this book). By then I was submerged in marketing research. To be sure, the central tool was still the survey. I was still asking questions and collecting answers. I was still thinking about the structure of these questions and about the general principles that might be extracted from them. But the emphasis had shifted entirely to looking for better ways of helping clients market products. To do this effectively, it became imperative to understand the client's problem, not in the vague terms he was prone to use in articulating it, not even in the way he actually thought about it, but in the way he should have thought about it. This became dramatically clear to me when I met a high-ranking marketing executive who said expansively, "We want to do a study to find out why Mercury isn't selling this year."

"No," I replied.

He was half startled, half shocked.

"I damn well know what I want to do," he said.

"I believe you want to do a study to find out what you can do to sell more Mercurys this year."

"But that's the same thing."

"It's not quite the same thing," I replied. "If I took the assignment at face value, I would do a study among people who have just bought some other car. I might find out that they considered a Mercury but decided against it because they didn't like the look of the front end. This would give you the right answer to your question, but it wouldn't do you any good. If I want to give you a useful answer, I must study people who haven't bought a car and find out what, if anything, I could promise them or do for them to induce them to buy a Mercury in spite of the fact that they don't like the look of the front end."

It became clear to me that assignments could not be taken at face value. The important thing was not to listen to what the client said he wanted, but to what he really wanted, or to what he should have wanted, or to what he could be made to see he wanted if the issues were properly dissected for him. I also realized that much marketing research was doomed from the outset. For how could it hope to generate the right answer if it had not addressed the right question?

This led me to ponder what the right questions were, and so I began to think about marketing. Before long, a theory began to emerge, an orderly way of looking at the problems every marketer must face and solve one way or another. Given my temperament, I made every effort to think in general terms, so the theory would apply with equal force to the marketing of a paper towel, a computer, a presidential candidate, a religion, or anything else someone might attempt to induce people to choose. Ironically, I had come full circle. In the end, I was thinking about marketing after all and was thus carrying out the very assignment I had arrogantly rejected as a young man. Arrogantly indeed, though perhaps not foolishly. Because even though the theory I offer now is so elementary that I should have been able to articulate it after a little thought, I confess that it has taken many years before I was able to strip it of involutions and complications, of big words and technical jargon, and reduce it to the commonsense form in which it is presented below.

Nomenclature

What is marketing? There is, of course, no right answer. Definitions can be neither right nor wrong. But definitions do matter, for they are the tools we use in thinking about things. And some definitions can be more useful than others in helping us think clearly and arrive at answers we might have missed otherwise. In that spirit, I believe it is useful to think of marketing as a game played by N players (the marketers), each equipped with chips (their respective budgets). The players make moves on a board (the principles governing choice behavior) by adjusting eight dials (the eight tools of marketing). To understand the game, we need to understand the board on which it is played. So I begin by describing that board, using the terms marketer, brand, customer, and choice.

The initial meaning of these terms is self-evident. The marketer is the provider of goods or services, such as automobiles, soap, paging, coffee, or computers. The brand is whatever the marketer is trying to sell. The choice is the selection of one brand from a set of brands. And the customer is the person who makes the choice. The marketer may also be a campaign manager, the brand a political candidate, the choice an election, and the customer a voter. In general, these terms, as well as the principles and methods dealt with in this book, are intended to apply to any situation in which:

Someone, anyone, (the marketer) is trying to induce someone, anyone (the customer) to make some selection, any selection (the choice) in favor of something, anything (the marketer's brand), often aided and abetted by a researcher whose job it is to subject the process to scientific scrutiny and to support it with empirical evidence.

Given the intrinsic limitations of the English language, which does not have gender-free pronouns, and being unwilling to use the awkward he or she, I am arbitrarily assigning genders to the cast of characters. The marketer shall be a she; the customer shall be a she; the researcher shall be a he. With some limited partiality, I am thus reserving my own gender for the actor with whom I identify most closely. I trust no one will take offense if the brand remains an it, even though it may on occasion be a political candidate.

A word of warning. This chapter consists of definitions, distinctions, and descriptions of commonplace events. I have taken pains to present these in the simplest terms possible. In doing so, I run the risk of losing you before we have gotten to the subject of the book. You are liable to say: "Why are you bothering to tell me things everybody knows?" If you bear with me, you will find that what I have to say may begin with definitions but will not end there. The basic variables will not only be described and defined. They will also be measured and used. And they will enable us to solve problems we didn't know how to solve until the obvious was articulated explicitly

Desires and Beliefs

How does the customer choose among brands? She begins by assessing her options. Each brand promises her benefits. She evaluates these. In effect, she examines each offer and asks: What does this brand give me? And what does it require me to give up? The more she believes she gets, the more likely she is to choose the brand. The more she believes she must give up, the less likely she is to choose the brand. Her judgment of what she gets and what she must give up depends on her desires, on the value she places on the attributes of the brand. These desires are highly individual. One customer may consider the spiciness of a spaghetti sauce an asset; another may consider it a liability One may consider an in-flight movie an asset; another may consider it: a liability It is less obvious that beliefs are individual. The commonsense expectation is that beliefs will not lag permanently behind objective facts. But this is not necessarily so. We therefore set aside objective facts. For our purposes, there are only desires and beliefs, and both are inside the head of the customer. If we measure them properly, they will help us predict what she will buy

Desires and beliefs refer to the attributes of brands. These attributes can be organized into groups called topics. For a computer notebook, for example, the attributes "It weighs 1.5 pounds," "It weighs 2 pounds," and so on, can be grouped under a topic called "weight." Obviously such topics differ from product category to product category. A coffee has different topics than an airline or a fax machine or a life insurance policy Nevertheless, these different topics can be grouped under some very broad headings that cut across product categories, that constitute common denominators. These are called the primary topics. They will help us understand how the customer chooses. Don't expect startling revelations. In one context or another, combined and rearranged in various ways, some or all of these factors have been mentioned by just about everyone who has thought about the subject. In this particular incarnation, they are product, branding, price, and familiarity.

The Primary Topics

Product attributes include attributes the customer can observe directly, as well as those she accepts on trust based on statements made to her. For example, the product attributes of an orange juice include the color and the sweetness, as well as the number of calories and the potassium content, which she may not be able to observe directly but which she accepts as factual, relying on government labeling regulations. The product attributes of a political candidate include his party and his voting record, as well as his marital status and the color of his eyes. In general, the product attributes comprise descriptions of the product and of the way it performs its principal functions.

By branding is meant collateral information that has been attached to the brand by external symbols: words, pictures, and music. This collateral information usually has two components: label and fable. The term label refers to the brand name together with the package graphics. The brand name is always part of the label, indeed its principal component by definition. Conversely, objective facts, such as 8 1/2 ounces or 320 mg of sodium per 100 grams, remain product attributes even if they appear on the label. But package graphics can belong either to the label or to the product. The graphics of a decorative facial tissue dispenser, for example, may be the very thing the customer is buying to decorate her bathroom, and hence an integral part of the product.

The following burlesque illustrates the role of label. A blue can with the name Nature-C and a red can with the name Vita-Life are filled from the same container of orange juice in the presence of a customer. We ask the customer to choose one of these "brands." She replies, "It makes absolutely no difference to me. Give me either one." But if we insist that she choose, her choice will not be random. One configuration of color and words will attract her more than the other, and that is the one she will choose. This is label at work in its purest form.

If labels are the intrinsic aspect of branding, because they consist of words and pictures that are permanently attached to the brand, fables are the extrinsic aspect of branding, because they are attached to the brand from the outside, most often by advertising. Typically, a brand is shown in close proximity to dogs, babies, boats, or undressed women, in the hope that the warm feelings customers have toward these objects will rub off on the brand and endow it with goodwill. Customers are also told overtly, ostensibly humorously, that if they buy this or that coffee, aftershave, or sailboat, they will become irresistible to the opposite sex. One particular type of fable has to do with social meanings. Buying a brand amounts to sending a message to the world, saying: "I am the kind of person who..." And this message is important to some people. We can imagine a customer who really does not like the seats, dashboard, styling, or handling of a Mercedes but buys one anyhow because she just has to have a Mercedes. Conversely, a multimillionaire might drive a beat-up pickup truck because he "wouldn't be caught dead" in his wife's Roils-Royce. To be sure, the social meanings of brands are particularly pervasive for major items, such as automobiles, homes, and jewelry, but they also operate, on a more modest scale, in the choice of coffee, toilet soap, and tennis racquets. A very special kind of fable comes into being when products are changed. For better or worse, some customers will continue to perceive products the way they were rather than the way they currently are, and they will hold beliefs about them they would not hold if they were unencumbered by associations with the past.

Everything has a price, and some brands have a higher price than others. We expect customers to prefer low prices. But like product and branding, price is individual and can have different value for different people. Upon learning that the price of a wine is five dollars per bottle, a customer asks whether the store carries anything "better," by which she means that she wants to pay more. One customer insists on buying a "real" diamond, even though neither she nor most jewelers (I am assured by a diamond dealer) can tell the difference between a diamond and a zircon with the naked eye. Another customer wants a zircon because she takes pride in making a "rational" choice. There are also choice situations in which no money changes hands -- voting for a candidate, for example. But the primary topics include price because they are intended to be comprehensive. This does not preclude the possibility that a primary topic will vanish in a particular case or will simply become nonapplicable because it has the same value for all brands.

The fourth primary topic, familiarity, is fundamentally different from the others. Beliefs about product, branding, and price may be accurate, inaccurate, or totally fictitious, but they ...

About this edition

• Publisher: Free Press
• Publication date: 1997
• ISBN 10: 0684835452
• ISBN 13: 9780684835457
• Binding: Hardcover
• Edition number: 1
• Number of pages: 464