Decoded is an introduction to the discipline of Decision Science and its application to marketing. Any book that discusses the application of behavioural science to marketing should be of interest to all market researchers. Phil Barden is quite active online and as a podcast guest.
Decoded was one of the very first books to fully embrace Daniel Kahneman’s view of human decision-making and apply this to marketing and market research. It is full of examples of the practical implications of behavioral economics on shopper behavior, backed by references to many of the key scientific papers that can help explain what marketers need to know about the science of decision making. It is backed by 25 years of experience both as decision scientist working with clients and a marketing professional applying the principles at Unilever, Diageo and T-Mobile.
Phil Barden begins with an overview of decision science, opening with the much-discussed Cadbury ‘Gorilla’ TV advert and its follow-up. Why did the follow-up fail when it had all the same ingredients as the successful ‘Gorilla’? Using brand examples from the UK, he discusses the importance of (visual) brand assets in helping brand recognition and driving automatic brand choices through Kahneman’s System 1 (implicit mental processing).
System 1, which Phil Barden calls the “autopilot”, processes every piece of sensory information from the senses (11 million + by some estimates), whereas the pilot system (explicit mental processing) is limited to around 40-50 pieces of information (which is why we can’t remember long phone numbers). This huge processing power is why the average duration of contact with adverts across a wide range of media is between 1 and 3 seconds only. That’s all the time that our unconscious mind needs to capture all the relevant information!
The discussion of decision science ends with the importance of ‘frames’ (context) in decision-making. We know that the brain processes both objects and context in order to attach the right meaning to things, and Phil Barden discusses this in the context of marketing creates a ‘frame’ for decision making – for example, is a brand of café framed as a ‘pit stop’ (focus on coffee) or a short holiday (Starbucks’ third place). The latter frame justifies a much higher premium. He argues that branding is all about framing products.
The next section of Decoded focuses on buyer behavior (the ‘first moment of truth’ in the language of some big brands). He argues that purchase decisions are essentially a trade-off between the perceived reward of the brand or product and the ‘pain’ of the price (i.e., value = reward – pain). The value of frames is that they can increase perceived value, by changing the context and reference point. Indeed, price itself can increase perceived value, as well as increasing pain of paying, and research has shown that price itself changes the experience of a product by changing expectations of quality.
The concepts of loss and gain are an important part of a prospect theory that is central to behavioral economics (and one of Kahneman’s most important accomplishments). However, the way in which prices are framed can itself influence the perception of the ‘pain’ of paying, by anchoring the price to another price (as in sales). Price is always relative and never absolute, and the judgement of ‘pain’ is always therefore relative to the most relevant benchmarks. Changing the frame of reference, changes the choices that shopper’s make, as in Dan Ariely’s famous experiment with subscriptions to The Economist.
Decoded moves on to discuss how human perception works to decode the environment. Most importantly, the eye is not a camera, and perception is as much about the brain’s construction of reality than about what we perceive. Phil Barden illustrates this by looking at the difference between central and peripheral vision (which is much more limited, although we don’t generally realize these limitations). Examples in the book show what peripheral vision actually sees – a blurred mess from which the brain needs to pick out the most relevant information and brand cues. The difference between central and peripheral vision is one of the reasons that some of the most radical packaging re-designs (such as the Tropicana disaster) fail, as the perceptual cues that are habitually sought are suddenly not there.
The implications of perceptual processing are discussed in the next section of the book which focuses on how marketers can optimize the path to purchase, often by making choices simpler and easier, through the mental heuristics that we all use including endowment effects, social proof and others. He breaks these down into three broad principles of optimizing heuristics: tangibility, immediacy and certainty. That is, concrete signals with immediate rewards (versus long-term ones) and certain choices (without fear of loss).
The final sections of the book focus on the importance of customer goals (motivation) in driving the relevance of environmental cues to decision-making. At the simplest level, when you are hungry you are more likely to notice food-related cues in the environment and will be willing to pay more for items than if you are not hungry. Brands and products that fit with customers’ emotional goals are much more likely to get attention and be chosen.
Phil Barden argues that there are six such goals: adventure, excitement, enjoyment, security, discipline and autonomy. Some (like me) would argue that there are more than this, but the important point is to think about customers’ implicit goals and communicate the relevance of brands to these goals through the meanings that are communicated in brand advertising and at point of sale. For example, the book shows an example brand profile of the two Cadbury adverts against these six goals, showing that the successful ‘Gorilla’ ad has a much closer fit to the Cadbury brand than the follow-up ‘Trucks’ ad.
The final part of the book describes the importance of using sensory symbolism in communicating these implicit goals (the main focus of Brand esSense). Decoded shares much of the ‘System 1’ thinking of my own book, especially the importance of the meanings that are attached to the design and communication of all brand touch points.
Decoded is much more focused on buyer behavior and the drivers of decision at point-of-sale and is therefore a must read for anyone interested in shopper marketing and shopper research. I would recommend it to anyone who wants to understand the practical implications of the latest understanding of decision-making to decoding shopper behavior and optimizing in-store execution.
[This review was originally written in 2014. I am reposting as one of ten books I recommended market researchers read if they would like to upskill and have time to spare. You can see the recommendations here.]