One of the most important elements of any advertising campaign is not the brand or media channels or call center or landing page. It’s the offer. The typical U.S. consumer is bombarded with more than 6,600 TV ads and 375 minutes of radio commercials each month, so no matter how compelling your brand story, an offer is required to break through. So how do you construct one?
Our favorite models come from the work of psychologist B.F. Skinner and behavioral economist Richard Thaler. Let’s start with the story of Skinner’s pigeon-guided missile.
Birds in the front of a WWII missile?
You likely remember Skinner from a college Psych 101 class as the Harvard psychologist focused on human behavior, famous for the concept that dogs, if fed after a bell rings calling them to dinner, would start to salivate every time they heard the bell. But did you know in World War II he trained pigeons to guide surface-to-surface missiles?
Skinner believed that all behavior was the result of such triggers, and complex actions were simply caused by the “chaining” of a series of trigger events. In the 1940s, he used these ideas to solve a vexing issue for the U.S. military: Missiles were expensive, but no autonomous guidance systems had yet been invented to fine-tune their direction as they flew through the air toward enemy boats once they had been fired. Skinner had the brilliant idea to set up three compartments at the front of a missile with lenses pointed in three directions, projected on three internal screens. A pigeon would be placed in each compartment, trained to peck on a screen if it saw the image of a battleship, and the peck would guide the missile to turn in that direction. Skinner received $25,000 in funding — about $420,000 in today’s dollars — but the military eventually stopped the project out of, er, disbelief.
To put a finer point on it, Skinner conceived there were two forms of behavioral triggers:
Respondent behavior, where an outside event makes a being respond. Pigeon sees image of battleship, and used to getting grain, it pecks. You smell toasted food from the oven, and you get a pang of hungry desire.
Operant behavior, a more complex trigger, in which a person performs an action started internally that is then reinforced or discouraged from the outside. Say, an executive smiles brightly in a meeting one day and everyone suddenly warms to her idea; she learns to smile repeatedly when she wishes to influence others.
Everything animals or people do, he suggested, came down to chains of respondent (outside) and operant (internal) triggers.
The components of a good offer
What’s interesting about this (rather crazy) missile idea is Skinner, when tasked with setting up the fastest response mechanism possible, guiding a missile, resorted to respondent behavior triggers from the outside — the simple visual cues that made pigeons peck. There were no complex chains of multiple trigger events. When a response was needed fast, he relied on simple triggers first.
Advertising offers work in a similar vein. While internal marketing departments tend to think deeply on their products (as is their job) and fall in love with the nuance of how they may be slightly different than competitors, outside customers who rarely think of you must make a decision in split seconds as to whether your story is enticing. The external trigger needs to be lightning fast — akin to the smell of warm toast, or an image they immediately recognize.
Richard Thaler, the University of Chicago mind who invented the field of behavioral economics in his landmark 1979 paper “Toward a Positive Theory of Consumer Choice,” created a model for building rapid-response triggers. In essence, Thaler suggested humans are irrational, busy, and apt to emotional judgments. Fairness is a classic cloud that causes people to make illogical decisions. Logically, if a business deal could earn you $10,000 in profit you should take it. But if you felt the deal should be worth $20k instead, you might walk away because the $10k offer feels “unfair.” On the flip side, if you thought $5k would be fair, you’d rush in to close the $10k deal, because you’ve somehow won extra. Thaler’s research found that the actual end result isn’t what matters for humans as much as the perception of whether we are victorious along the way.
Thaler suggests the best way to influence humans is to separate gains, minimize losses, and use a reference point to play to the human psychology that we all like to win more than we lose.
Combining Skinner with Thaler, here are the components of a good marketing offer:
- Set a reference point to “frame” your value. Decisions on gains are often made compared to a fictional “reference point.” Thaler found most people are bad at judging value, so we all like to be told what the starting reference point is on a product or service. A man may not want a suit priced at $500 … but if the suit is on sale marked down from the (fictional) price of $1,000, he suddenly covets it, now “50% off.” So one way to influence people is to show how the cost of your product is far below a (fictional) higher price.
- Set a time limit suggesting they’ll lose something. Thaler found that most people hate losing $100 more than gaining $100. We have a steep aversion to loss, because psychological it seems unfair. So set up a fictional loss, such as a time-constraint on an offer after which “savings” will disappear, to spur behavior.
- Segregate gains suggesting they’ll win more. In several studies, Thaler found that if given a choice between winning a lottery two times for $50 and then $25 respectively, or winning just once for $75, the majority of people preferred to win twice. Again, numerically this makes no sense, but emotionally we feel better about the “winning events” than the actual value. So marketers can separate gains into distinctive categories — “get X savings and also Y free!” — for the same value to drive greater response.
- Integrate and minimize losses. Unlike the lottery example above where people prefer to win smaller prizes more often than one big prize, if given a choice in pain, humans prefer to take a loss all at once. So make the actual cost (pain) of the product as simple and minimal as possible. Don’t charge for the coffee and the coffee cup and the lid and the sleeve separately, because even if they all add up to $1.50, people will be turned off by the multiple cost pain points. Don’t charge for the product and installation and service separately. Instead, lump all costs together, and if possible spread them out into low payments to make the “pain threshold of price” as low as possible. The best price point is simple, low, and nearly invisible. This is why Netflix charges one low fee per month for streaming video, and not a separate fee for every movie you want. This is also why Amazon.com has had huge victory with its “free shipping” that really comes bundled into an annual Prime membership fee. The loss, or price paid, comes once, but the benefit feels free every time you order something throughout the year.
- Consider bundling or price obfuscation. All of the above can be combined to maximize gain segregation (the series of good things the consumer “wins”) and minimize loss (the financial cost the consumer “loses”) with bundling. Omaha Steaks is the classic example, where a package of bacon-wrapped filet steaks comes bundled with burgers, franks, French fries, vegetables and something called apple tartlets. All marked down from $173.00 to $79.99. Is this a good deal? We don’t know. But this complex bundle coupled with a simple price below the reference point sure sounds desirable.
- Avoid complex service claims and focus on desire. Your long-term customer service may be incredible, and that’s great for building loyalty, but the “offer” in your ad must be a simple understandable hook that gets the consumer pigeon to peck. New response triggers must come from the outside and be easily understandable — an element of your product or service that is immediately desirable, and that consumers must feel if they don’t act now, they will lose.
In sum, marketing offers must be weighted toward Skinner’s “respondent behavior” — fast triggers from the outside that are immediately understandable — vs. “operant behavior,” the other more complex triggers learned over time. There is a difference between the elements of your product/service that build long-term loyalty and the sizzle that gets consumers to respond right now.
Like the enemy battleship screened before the pigeon, you have to make your offer immediately recognizable. Without a strong offer, you’ll miss the boat.