How Consumers Really Make Decisions with Dan Ariely

Speaker A: So they did this study with an FMRI when they imaged people's brains, when they gave them Coke and Pepsi. And what you could see is that more of the frontal part of the brain, the part that has associations and higher order thinking, lit up more with Coke than with Pepsi. So when you think about what's brand equity, Brand equity is what's happening in people's brains when they are thinking and consuming your product. That's really what we're going for.

Speaker B: You're listening to the Growth Manifesto podcast where we host in depth interviews with business leaders, authors, industry experts and entrepreneurs with a singular focus around business growth. At the end of each podcast, we want you to walk away inspired to think bigger and to have actionable takeaways you can apply to improve your business. Each episode is like a masterclass on a key topic, so make sure to browse the episodes to find the topics that are most relevant to your biggest business challenges today. This podcast is brought to you by Web Profits, a digital growth consultancy that helps challenge your brands drive growth in a complex and fragmented digital landscape. You can find out more about web Profits at. Ah, Web Profits. IO. Uh, now let's get into it. This is Alex K. On the Growth Manifesto podcast and today we're talking with Dan Ariely, who is the author of the book Predictably Irrational. And we talk about how consumers make decisions and how brands can start to position their company and their products to stand out in an increasingly competitive landscape. I hope you enjoyed this episode and make sure to hit subscribe to get the latest episodes as soon as they're released. Now let's get into it. So you wrote the book, the Predictably Irrational book, um, which kind of goes into how people are making these kind of choices and decisions. And why did you go with the angle of irrational? Because irrational is an interesting kind of way. Because I think that consumers think that they know how they make a decision, but actually how they make a decision is not exactly what they think. And so could you explain us what you mean by the word irrational? Yeah.

Speaker A: So, first of all, I think, I think it's very good to start with, with what is, what is irrational. I think what you're saying is very much the essence of this, which is that we think that we understand what drives our decisions. We think our decisions are thoughtful and well reasoned. And we have debated, uh, them for a while, and we understand why we make, why we make choices. Uh, but the reality is that we have these brains that help us make decisions or make decisions for us. And these Brains work in very different ways than the way we think that they work. And the reason that I, I call this predictably irrational is also to make it clear that we not only make irrational decisions, but we all make similar irrational decisions. It's about the structural thing. So maybe, maybe let's take a step back and saying, how do we think about. The human mind is a tool to make decisions. And my, my metaphor for this is a vintage Swiss army knife. It has two components. Vintage and Swiss army knife. Let's start with the Swiss army knife. The Swiss army knife is not particularly good at anything. There's not a single task that you say, I need tweezers, let me find my Swiss army knife. I need a can opener. Uh, let me find my. No, no, no. It's not particularly good at anything. It's quite okay in lots of things. And it's easy to carry. And our minds are like that, not particularly excellent in anything. Quite okay in lots of things. And we can carry them with us whenever we go. So that's the first part, but then there's the second part, the vintage part. And the vintage part is the idea that our brains, uh, as decision making tools, evolved a long time ago in a very different environment. We lived in small communities, we knew each other. Um, we're going to stay together for a long time. We dealt with creditors, we didn't have long term retirement, we didn't have cryptocurrency, we didn't have, you know, compound interest, we didn't have cookies. And our brains, uh, developed like, uh, in that environment. So they were never excellent, but they were relevant tools for the time Now. Now what we do is we still have this Swiss army knife, but it's a vintage Swiss army knife. The tools are not relevant. So when you come to somebody and you say, oh, let's think about your healthcare choices, let's think about your kids, schools, or let's think about gossip, uh, online. The tools that we bring to play are irrelevant. Old tools. We were not designed for this environment, but that's the tools that we have. So that's what we deal with, that's what we do. And what it means is that whenever we make plans about people, we need to understand where they come from. And what is very shocking is that in the physical world we understand it very well. Like, we understand that people are just not that good. I mean, you and I are wearing glasses. We understand their eyes are uh, not as good as they used to be. We have seats with cushions. We have all kinds of things we understand that our bodies are frail and very far from perfection. And we fix them and create a technology envelope around them. We have clothes and air conditioning, we have lights, we have eyeglasses, we have bicycles. We have lots of things. When it comes to our minds, our minds are just as frail as our bodies, just as likely not to function as well. And what we need is help. And the question is, are we going to like, in the same way that we create eyeglasses and chairs and so on, will we create the help needed for our mind to work better? Sometimes we do better job with it, sometimes we do worse job. But that's the issue is to understand that we have this vintage Swiss army and you know, we're not going to change it. You can't say, oh, think, uh, better. No, uh, it's going to be very, very tough. What we need to do is create better tools for us to deal with this very complex world we're dealing with.

Speaker B: And so predictably irrational. Talk through the ways that people are making decisions. And just for this conversation, it'd be good to focus on the consumer side of things and understanding how. And as a marketer or as an E commerce brand, as a business owner, the decisions that the consumers are making on which of the companies or the brands that they are selecting. Now, when you ask somebody why they selected a choice, the thing that they are saying to you is not the actual thing that actually has caused the decision. And so what are some of the things that affect a decision that people are not aware of?

Speaker A: Yeah, so, um, the first thing that people are not aware of are defaults. When you look at countries that you're assumed to be an organ donor and you have to sign something to get out of it. Most people donate. When you're in a country that is opt in, you assume not to be an organ donor and you have to sign to get into it. Most people don't sign into the difference like 90, 90% versus 20%. It's a very large number. But, but here is the point. Imagine you and I stood outside the DMV and people came out and some people got the opt in form and therefore they didn't sign it in John. And some people got the opt out form because of it. They didn't sign, but they joined. So we had these two people, two types of people, and we approached them and said, hey, I see you signed for this program, I see you didn't sign. Um, explain to me why you think anybody will tell you? You think anybody will tell you, oh, it Was the default choice?

Speaker B: Sure.

Speaker A: Of course not. What would people do? They will come up with a story. Oh, my parents raised me to be a wonderful, human, caring person and care about other after me. Oh, my parents told me to always be suspicious about health care and not, not to, not to sign uh, something and somebody might plug me a little too, uh, too quickly or think about retirement. You go to people and you say, I see that you, you're saving 5% of your retire of your income into 401k account. Why? How do you pick that number? People tell you lots of stories. But then when you look at it, it was whatever the default was when they joined the company. Emotions are very interesting because we feel them, they influence us, but we can't reason about them. So um, there's also by the way good things about being irrational like falling in love. But when I ask you why did you fall in love? You don't have even the language to describe the emotional part of it. So you know, think about something like strange like smell. Smell predicts friendship, predicts of course, romantic love. Nobody ever said, oh, you know, the smell of my partner is amazing. You know, uh, oh, you know, we have the same values and we were thinking the same way and we're complaining. Compatible in our love of literature. You know, like we give all these reasons but, but we're missing a lot of the things that really drive our behavior. So anyway, so emotion is a big thing. Going back to your question, you say what is driving behavior that people don't understand? Defaults. Number one, what's the default option? Another one is emotions. Like we don't understand how emotions work and they drive a lot of our behaviors. And uh, a third one is anchoring. And anchoring is the idea that when we come to a situation to make decisions, we start with our past decisions about it. So let's say you wanted to buy a car today. You don't come to tabula Rasa. You bought some cars before. So when you start to think about cars, you don't say, oh, let me look at all the cars and the trade offs and money and spend speed and all kinds of things. You come up with whatever is in your decision arsenal already. You kind of assuming that the decision you've made in the past are great decisions, after all you made them, they must be fantastic. So it's as if you're making a process. And oh, my past decisions were amazing. So what I want to do is do something similar to what I've done before. My past TV was amazing. Let me do this. My past computer choice was amazing. Let me continue that. So anchoring is basically the idea that we rely on our past decisions as if they were really amazing decisions. Then we continue doing similar decisions to those things. And for marketers it means that the first time you make a decision in a new category it's unbelievably important because it's not just about that one decision that's likely to shape your decision arsenal and will stay with you for a long time. So let's say we have, we'll have a market in the next few years for home robots. Now we have, many of us have Roombas. So you know, we have, we have some experience with that. But the prices in which those things would show up at our homes initially is not just about the initial price. Like how do you think about the robots at home that does all kinds of things for you like what's the right price range? Now whatever price range you're saying now is going to be two way to influence by the Rhomba because this is the robot you've had. But whatever prices will get going will have a long term influence on how we view this kind of help at home. And it's particularly important in new products and in old products. It's important to understand that you have to take that into account. If you don't take into account you're not really breaking through consumers minds. So imagine that you have a new phone and imagine that it's better than the iPhone, much better than the iPhone and much more expensive. Are people going to be willing to pay for it? The answer will be very tough because people are tied to huh, the historical prices. It's not about cost benefit analysis, it's about this is what we're used to paying, we'll pay something similar anyway.

Speaker B: So yeah, this is fantastic. And this is going to help the conversation. So then if, if there's a brand who's trying to break into a competitive category, um, because there's not that many categories that have not been created yet and if they are, they're more of a niche down version of an existing category that's been created to kind of have a point of difference. Right. But if you're going into a competitive category and there's existing competitors and the price has already been anchored, how does a brand now start to connect to the parts of the consumer that the consumer is not aware of, start to get them to come over uh, and engage with us instead of the competitor? Because obviously like in my experience and I Have had the experience of having a product and the product is better than the market leading product. I mean it's high quality, ingredients are better, packaging is better. Uh, this studies are better from the labs and everything's better, but the price is 30% more and it just doesn't work because the price was the most important thing.

Speaker A: Well, let's, let's say it doesn't work.

Speaker B: That's what it seemed. It, it seemed that uh, it seemed that the um, it seemed that the price anchoring was a very large obstacle that we had to get past. And it felt like uh, we had to basically hit every other angle harder because of the price. So uh, yeah, so uh, I'd love to get some thoughts about that just around. Yeah, kind of. What, uh, what could we have done a bit differently then? I mean coming into a competitive market just with our uh, product that was better, but they cost more.

Speaker A: Yeah. So, so part of the thing we need to understand going back to our, the human mind is that um, those decisions are way too complex and people, people don't engage in these complex decisions. So what do we do to simplify decisions? One thing we do to simplify decision is brand. I like brand X, I don't like brand Y, Y, I don't know, I uh, like this brand. I'm used to it. I think of it highly. This one I don't think is highly. So I'll buy this one rather than this one. Right. These are not very detailed, thoughtful things. And, and you know, if you think about the world of branding, it's basically saying, let me give you a shortcut for information. Branding, by the way, it's a terrible term because it does so many things psychologically. But we, it's, it's, it's a reminder, it's association, it's signaling, it does lots of things. But, but for simplicity, let's just say it's a shortcut for information. A lot of what we do, it's a shortcut for information. I tell you I drive car X, there's a lot of things, you know, I tell uh, you, I drive car Y, there's a lot of things, you know, if I tell you my, my shirt comes from, you know, whatever the gap, you say something, it comes from the Brooks Brothers, you think something else. So it's a shortcut for lots of information. And that's what we do. We look for lots of shortcuts. And pricing and anchoring is a similar strategy. It's a simplifying strategy. Imagine every time we came to something we say, let me look at the whole world. Let me try to understand my values and where things are too much work. Let me assume instead that my past decisions were great decisions, and I'll continue with the same. With the same thing. Right. You can see how branding and anchoring are simplifying strategies that help us. By the way, the brain consumes lots of energy, about 25% of our energy, and nature wants us not to do that much. It's kind of interesting. Nature wants us not to think as much, and so on. So, so there's lots of systems in our brain that are designed to slow down our, uh, our processes. So we have these two simplifying approaches. Now, why am I saying this? Because what you might want to do is fight this simplification approach. And one way I would try to do it, I'm not sure what product you're talking, and so on. So I'm talking in generality, is to create a consumption vocabulary for this consumption. So imagine we have lots of products and we have our product, which is better in all kinds of ways. What are we expecting from people to do lots of market research and to understand that this is better and to start trading off value for money and to go for a new brand compared and like way too much. Consumption vocabulary is a way to force people to start thinking about things in new ways. And the experts of this is, of course, the wine industry. And the wine industry took alcohol and grape juice and gave it lots of terms. Tannin, complexity, acidity, leg. And what have we done in response? We take these glasses and we put them to the light and we do this and we slow down and we sniff and we oh. And we, and we say, oh, there's a. I can smell the raspberries and the cut grass. Uh, now in the process, what we have done is we have started paying attention to things that we wouldn't have paid attention to before. Like if I gave you wine 100 years ago or even last week, and I gave it to you from a beaker as you were working, you would consume the wine, but you would not think about tanning, complexity, acidity, leg, and so on. So what consumption vocabulary does is create a language around something and it directs attention. And with the direct attention, we start noticing new things. So if I was going to try and sell a new product, I would try to make people connoisseurs, uh, like high quality, differentiated product. I would have tried to create a language that would get people to observe, to be connoisseurs of that, uh, product. And through that, observe the differences. So think about Steve Jobs. He would stand there on the stage and he would say, look at the schools, look at the glass, how smooth it is. Before that it was just glass. Now oh my goodness, look how smooth the glass is. He basically got us to pay attention to things. We wouldn't have paid attention without it. And with attention comes willingness to pay. So you say, um, how much would we pay for um, a laptop from Apple if we paid attention to screws and to the material and so on versus if we didn't? Very different story. So I, I would say that it's an issue. If you think that the human mind, you understand that the human mind has not much capacity for attention and memory, but you have to fight against that and you have to create to, to drive attention to the attribute that your product is better on. Then that's your first task.

Speaker B: So, or companies who are going into a new category, uh, or market or product, and the price is higher than the market leading product at the moment it sounds like it will be a difficult challenge to break through and to change the um, the vocabulary and to establish that across an industry. Right. And so then you need to focus ah, a lot more on the brand side of things because that is, or something that's specific just to you. But from the product perspective, is price the um, the most important thing to start with aside from brand. Right. But assuming that there is a brand, I'm starting into like a fresh category, should I be at least the same as the existing kind of market leader or less? Is that like an anchoring competitive advantage in a way because like the value is there, the consumer understands the value. So is it enough to say, hey, this is the same as that, but it costs less. Is that as powerful of a, uh, uh, psychological tactic?

Speaker A: So look, and a lot of time, um, price wars are very easy to do. Short term, you know, you have product X, I, product Y. Um, my product Y is much better, but people are not perceiving it as better. Let me reduce the price. Yeah, yeah, it's possible. But it defeats your long term, uh, objectives. I think lots of time what people are doing is short term. I think the long term fight is on branding and not on the branding of just recognition, but the deep sense of branding and on getting people to recognize the value, for example through consumption vocabulary. Right. So I, I think, I think that's, that's the right way to do now if you have, if you've tried and you, you can't get it to work, maybe, maybe Price is the last resort. But if you start with, with a cheap price, it's very hard to escape. Now if you do decide to go with pricing, there are ways to make it so that it's a uh, discount in the short term but it's not putting you forever in that place. So imagine for example that Google decided to start charging for its phones more than Apple is charging for their phones. I don't think they could, I don't think they could. Their prices are supposed to be cheaper and that's the place that they have in consumers mind and to all of a sudden go up in price not connected to the quality of the product. It's just going to be very, very tough. So when you start a new product and you understand the quality, try to fight that for a while. If you can't manage the other things, it's the last resort. By the way, uh, I often tell people when companies invite me to come and do a session within something and they say we want to be like the competitor but like the, you know, the incumbent but cheaper. I said that's really not a good way to start. Start with saying you want to be more expensive and you want people to say you're not expensive enough. Like you know what, what you want. Like I know it's not possible that people would come to you and say oh, you're not charging me enough, charge me more. But, but you know, you want to say how do I create the, the, the perception of a very different value? If, if you, if you basically say oh, I have to sell for cheaper than my, my competitor, then it means you've lost on the battle of communicating value. Okay, if you've declared defeat on that, go for it. But, but try not to declare defeat on it for a while. Like that's the, that's what you want to fight. If, if your strategy is to be a me too, that's fine. But we're saying no, no, your strategy is to be high quality. Uh, but you're not able to convince anybody to high quality.

Speaker B: So to identify the thing that's going to make you stand out in the consumer's mind, I mean we all have guesses in product development and product design and category selection and audience selection. Is there any tips or is there any advice on how you would go into it aside from having to invest upfront and then kind of having to experiment in market? Like is there any way to get some insight on what the consumers are going to decide? Because if you run a focus group, let's say um, they're just going to tell you what they think, not what is at their core that is triggering them. And then sometimes you need to launch a product to see how it goes in market before, you know, um, it starts to perform or not.

Speaker A: I think, I think that people are much more malleable. You could say, what will people notice on their own? The answer is not that much. All you can say, what do I want people to notice? So think about Consumer Reports. Let's say Consumer Report rates televisions, and let's say they rate them on six attributes. I don't know if it's exactly that. When they pick the attributes, they pick the television that was going to be chosen. If they would pick the different attribute, they would pick a, ah, different television. Right. Do they pick sound or not? Do they pick pixel size or not? Do they pick thinness on the weight of the screen? There's lots of things to do. Your goal is to communicate to people what are the important things to pay attention to. So I wouldn't say, oh, consumers, go out in the wild and notice whatever you want to notice. No, no, no, no, no. My goal is to redirect your experience so that you will notice the thing that I think are important to, to notice. And, and that's, that's kind of the issue. So think about, think about the refrigerator. You know, what do you notice about, like, why, why aren't we refrigerator connoisseurs? We're not. I mean, I, I'm not, but, but could we be, could we get people, um, to say, you know, look at this refrigerator, like, you don't have to pull the, you can push it and then it opens by itself. People, people love knowing things. But, but very few companies actually educate consumers in a reasonable way, in a way that will let them enjoy what they're doing in a better way. Like how many of the things that are around you, you know, enough to enjoy them beyond the, uh, physical element. For example, if you have a piece of art and you know something about the artist that created it, that's a very different experience. If I gave you a mug. So I have these coffee mugs for people in my lab. Everybody has their name on it and we're using it because this way nobody leaves the dishes in the sink because we know who is the criminal.

Speaker B: I love that there's a psychological trigger in there, isn't there?

Speaker A: But, you know, um, this was done by local artists here in North Carolina. They did mugs for everybody in the lab. And actually we gave everybody two mugs. One for home and one from the office. And we also gave them one mug for the significant other, uh, uh, for home. And we gave it to them with a little story about the artists. So guess what? These mugs are not just functional. They have a behavioral change approach. They have it here and at home. Uh, their spouse has one slightly different, has a different color. Um, these mugs are not just substitute for other monks. They're special. So look. Okay, you know what placebos are, right?

Speaker B: Yeah, 100%. Yes.

Speaker A: And, and, you know, the placebos are real. And, and what we mean by real is that placebo is really the power of the mind over the body. Um, in. In predictably rational. I talk about a few of those things, including talking about how why expensive placebos work better than cheap placebos and how placebo for pain looks like. Okay, so, you know, so I was, I was badly burned. I was in hospital for many years. That's why I look so strange and why, you know, all of this is scarcity. So I just don't have hair on this side. But when I was in the burn department, ah, we had the limited number of injections we could get every day of morphine. And I counted, everybody counted how many we have and when, uh, are we running out? And one night, the guy in the room next to me shouts that he wants another painkiller, and the, the nurse goes and gives him another one. And I knew that he already had his injections for the day, so I, I called him, I said, hey, you know, I know you gave, you gave him an extra one. I want one too. And she said, no, no, no, it was placebo. I just gave him, you know, iv, uh, fluid. And how did it work? Now, you know, it's one thing when you, when you think, when you read about placebo, it's another thing when somebody in the room next to me is having the same type of burns that I had. I know how much pain he's in. He's getting an injection with nothing, and he goes to sleep. So I started looking at placebos. And what happened with placebo is as follows. When we get an injection, and we think it's a painkiller, our, uh, body secretes substances, are very much like painkillers. What happened over time is you get more painkillers is that when the injection happened, you get substances from the injection, but also from internally. If we give people, I don't know if you're a coffee drinker, but if we take coffee drinkers and we give them one day decaffeinated. They have no idea that there's a difference because the body is anticipating the caffeine and the body is getting into a prepared mode. And the differences from what's coming from the outside matters much less. By the way, if you give people orange juice with caffeine, they don't know that there's caffeine in it. The effect is not working. The effect is both coming from the outside and the inside. Placebo is about. Some of the effect is coming, is coming from the inside. So I think that marketers need to control what's happening in the mind. There's a product, but there's a representation of the product in people's minds. And the question is, what is that representation? And the marketing power is in creating that representation in people's minds. So, for example, if you look at the Coke Pepsi test, m, you know, it's very well known you do the Coke Pepsi test. Coke did it and Coke won. Pepsi did it, Pepsi won. But the, the tests were very different. When Coke did it, you could see the Coke can and the Pepsi can. When Pepsi did it, you couldn't see the cans. So Pepsi is sweeter than Coke. So people like, on the blind taste, they like Pepsi more than Coke, but when they see the cans, they like Coke more than Pepsi. So they did this study with an FMRI when they imaged people's brains when they gave them Coke and Pepsi. And what you could see is that more of the frontal part of the brain, the part that has associations and higher order thinking, lit up more with Coke than with Pepsi. So when you think about what's brand equity, brand equity is what's happening in people's brains when they are thinking and consuming your product. That's really what we're going for. And I think marketers need to realize that their assets are not billboards and they're not movies, uh, on the Super Bowl. Their asset is to change people's minds. So the consumption is better. I'm not saying lying, saying have the consumption better. So it must have happened to you that you went to a vineyard and you had such an amazing time and you bought some wine and you take it home and you love it. And you think about the vineyard and the rolling hills and so on, and your friends are drinking that wine and they're not enjoying it half as much. That's okay. That's okay because that vineyard basically took over a part of your brain with extra association and enjoyment and history and so on. When I think about what is your task, I Say there's almost everything that we can do to create a better experience. Uh, we have million products we interact with. It's not everyone, but I think there's not enough products that we truly enjoy. I think there are not enough products who are trying to create an extra step like, like wine of thinking and enjoying and so on. And the world is so magical. There's so many magical things ah, that are happening and we're not taking advantage of that.

Speaker B: So really we're trying to, uh. There's so many different parts. Um, let me see if I can try and summarize a very complex topic into a couple of statements and see if I understand it correctly and, and correct me if I'm wrong. Obviously it's fine if I am. Um, um. But is it that predictably rational is trying to put concepts and words behind what happens inside of a consumer's kind of mind is when the brand is starting to be applied to them. Right. And so are the Coke versus kind of Pepsi. So the reason someone likes Coke is not because of anything that is rational, because it's not a rational product in any form. Like there's nothing about it that's positive at all. It's. Except that it tastes good. So that's the positive. So uh, sorry, the positives are all in our mind. But like it's not.

Speaker A: There is positive. There is sugar.

Speaker B: There is sugar.

Speaker A: It is manufactured. It's.

Speaker B: Yeah, there's stuff in there. But I'm saying is that it's not like I purchased it, it was good for me. I purchased it because it's entertainment. But that, but that entertainment has been imprinted in me since McDonald's as a kid, since all these kind of years. And so is this what the book is trying to summarize is like why we like a particular kind of brand and kind of how the consumer. Sorry, it's how the brand managers or the business owners need to start to think about that kind of side of the brand. Is that like I'm trying to summarize it just for the audience that for myself as well.

Speaker A: Obviously I, I would say that uh, the human mind is really, um, a mysterious one and it's working in very different ways than we think. And this book is trying to describe some of the ways in which we function differently than what people think and what it means, what it means for consumers and what it means for business. And what do we mean for how we understand human behavior. It's not comprehensive. Um, because there's just. There's just too much out there. But, but, but it gives some of the, of the basic. And I think more than anything, it's the approach. It's basically saying don't treat people like simple mechanical input, output approach. There's a lot of magic that happens and it's uh, it's, it's not that it's unpredictable, it's predictable. But you need to understand human nature. So if we, if we came to make some changes or new products or something, have a good view of the consumer, a more elaborate view of the consumer before you make any changes. And if you have oversimplified assumption of people, you're going to get things wrong.

Speaker B: You need to keep it simple. But you can't oversimplify what you think of the consumers because that's the mistake that often, like a lot of companies make is that not that they think the consumer is not smart, but they don't think the consumer, sorry. Appreciate them. Um, I guess in the same way.

Speaker A: So you're right in kind of getting this a bit confused because people are not, they're not running on pure intelligence to the level we think they are, but what they are running on is more complex than what we think they're running. So people are not as cognitively complex as m. You know, hard thinking as we think they are, but they're also influenced by branding and emotions and other things. And I'll give you one maybe final example. Um, effort. Effort. You would say, I'm buying this product. Why do I care how much effort is going into it? More effort. I, I care about the product. But it turns out people do. And consider the following experiment. Imagine that you search online for a flight. You search, you press enter and you, boom, get the the result immediately. People don't happen. Condition two, you search, you press enter and you wait 12 seconds. There's a black screen and the wheel of death and you wait 12 seconds and then you get the results. People hate it. They love not waiting and 12 seconds. They think it's crazy to wait 12 seconds. Condition three. You, you, you search. You, uh, you type, you, you press enter, you wait 12 seconds. But those 12 seconds are like kayak. They're filled with researching United, researching American. Things are moving up and down on the screen. Things are being sorted for all kinds of things. At the end of the 12 seconds, you get the results. How happy are people now? They're happier than if they didn't wait at all. Now do people say I want to wait? No. But what do people say? They say, my goodness, now I understand what I got M. So in those 12 seconds, you got the opportunity to tell people what magic you have done for them. Now, some places we see the magic being done for us. Restaurants with open kitchens is an example. But in most cases, the magic that is being done for us is behind the scenes. We don't see it, we don't appreciate it. But communicating that creates higher willingness to pay. If I took a product now and I told you about the difficulty and challenges and so on, you would appreciate your higher degree and you would be willing to pay more. So we think that people are willing to pay for a product, but no, the effort is part of fairness, and fairness is part of our biological heritage. So if somebody puts more effort into something, we are willing to pay more for it. Now, is it rational? No, because to some degree, we reward incompetent people because, you know, incompetent people take a, uh, longer time to, to do something. But this idea of reciprocity is very, very deep in our human nature. So if somebody worked very hard for something, we feel a bigger need to reciprocate. Right. So, so anyway, so. So we have.

Speaker B: We just feel that way to reciprocate. Right. Because sometimes it's like what you said, that extra effort, it might not have led to anything more, but they appreciate the effort itself and value the effort.

Speaker A: Yes, that's right. So if you ever hired McKinsey to do anything, you know, you're getting a 500 page PowerPoint presentation. The answer you got is in the last page. The answer you asked for. For what you asked. But how much would you pay them if they just came to you with the last page? M. Not as much, but. Oh, we did this, and we did this. Oh, my goodness. This is. Is worth a lot. Um, the reality is that, uh, reciprocity and fairness are kind of the backbones of humanity. Vintage Swiss army knife. They are very, very prominent tools. So when we come to evaluate things, this is one part of it. And maybe I'll finish with the following. It turns out this is also good for couples. So imagine the follow. You take couples, you put them in separate rooms, and you say, whatever you tell me now, I promise never to repeat your spouse. But tell me, from the hundred percent work in your relationship, what percent do you do? One answer, you get the second answer, then you add them up. It's always more than 100%. Now, why is it more than 100%? Because we are always in the kayak condition. We notice all the little details of what we do. You say to yourself, I take out the trash. It's like a 16 step process which requires knowledge and finesse. Not anybody could do that. My significant other, she only pays the bills, uh, like one thing. So we end up like kayak over evaluating what we do and underappreciating what the other person, what the person does. Which by the way, why it's a good reason from time to time to tell each other what we're doing for them. But when you say, okay, so human beings have a tendency to take things for granted and couples, but companies need to fight against that. The moment you understand that one of our enemies is that we're taking for granted. Like if you're a bank, your customers take you for granted, it. So you find lots of crazy way to charge them because they don't really appreciate what you do for them. So you charge late fees and you charge this and you charge this all because if you charge them directly for your services, they would say you're crazy, I'm not paying you, I don't appreciate you. Uh, by the way, it's creating terrible distortion because rich people don't pay as much, poor people pay more. It's, it's, we, it's not what we want, we wanted to do. But banks are a good example for a service that we don't appreciate. And, and I would say that the banks are just not really good at communicating. Why should we appreciate it? The same thing true for health insurance companies. I mean you could just m, make the list of all the things we don't appreciate. And I, I think these companies just. The marketing department is asleep. The marketing department of a bank should make you wake up in the morning and say, my goodness, I can't believe how lucky I am that this is my bank and I get to feel safe and secure and that their money is invested whatever they want. There's a huge room for brand equity in people's minds. And we're really far away from, uh,

Speaker B: maximizing, which means that there's a lot of opportunity for every company, every business out there just to stand out, right? And make a better experience for consumers. And thinking about the consumer experience is what you're talking about, right? Experiences from the first touch all the way up to loyalty. That's every single component of it. Dan, I'm conscious of time, but, um, uh, this has been a fantastic conversation. Uh, the body of work is huge. And just like, um, the thing which you said kind of before about how the book which you wrote was just a small part of it. I mean that book was extremely. I thought that was extremely in depth. But, um, it shows you kind of how much is involved in this topic. Right. And so I just want to say I thank you for the conversation. It's been extremely insightful. How do people just get in touch with you or connect my website?

Speaker A: My website is the best way. Www.danielreali.com Fantastic.

Speaker B: I'll put the link in the show notes. Uh, thank you so much for this interview. Thank you so much for that book because that book has shaped a lot of the conversations that are happening across all marketing departments everywhere. So thank, uh, you very much. Um, and it's been fantastic speaking to you today.

Speaker A: Dan, thank you. Very nice to meet you. Thank you.

Speaker B: Thank you very much. Bye Bye. Bye bye. Thanks for listening to the Growth Manifesto podcast. If you enjoyed the episode, please give us a five star rating on iTunes. For more episodes, please visit growthmanifesto.com podcast. And if you need help driving growth for your company, please get in touch with us at, uh, Webprofits IO.