Consumer Psychology

GOOD-BYE

2012-05-05T15:50:00.002+10:00

This blog is moving to a sexier platform. Please see www.theconsumerpsychologist.com for the new and improved site.

Adam

Fast Company: The Fight for the Fifth Screen

2012-04-25T00:00:00.001+10:00

The article below is from Kit Eaton and lifted from Fast Company. It's interesting.

Smartwatches, AR goggles, and more: There's a mighty scramble afoot for your last sliver of attention. Is the the start of ad-mageddon?

Screens: can't live without 'em; can't avoid 'em. And surely where there are screens, there will be companies hocking goods. How will this change the ad game--and us?

Smartwatches are suddenly big news: Pebble, an upcoming and rather radical device from young firm Allerta, has raced past the previous project funding record on Kickstarter and looks to be already a big hit--it may even end up on 100,000 wrists before the end of this year.

Pebble's success is one of those long-build-up/ overnight success phenomena, and while great leadership and a degree of luck played its part, maybe the critical mass of smartphones has been reached: The time might just be ripe for this smartphone companion. In fact, Sony last week launched its latest effort, designed specifically for its Android smartphones and destined to be a similar, if more expensive (and definitely iPhone-hostile) rival to Pebble.

Meanwhile, the New York Times notes that: "Wearable Computers Are The Next Big Devices, Report Says." The conclusions from a Forrester Research report are important: Consumers are ready to experiment with wearables, particularly if they deliver value in "health and fitness, navigation, social networking and gaming."

This comes just a short while after Google revealed its Project Glass endeavor, a fully-fledged augmented reality goggles system, ready to display Google's location-pertinent info on your view of the world as you walk around, helping you navigate, communicate, social network and play. And...other things, more of which in a moment. Glass is a prototype for now, but Google's Sergey Brin, who recently wore one to an event, has spoken up and said they're definitely developing them and to give his company time to get it right.

Piqued that it may get shunted out of this limelight, Oakley--maker of stylish sunglasses that even X-Men wear, and also of the lamentable MP3 player/glasses combo "Thump"--has piped up and noted its been working on developing AR goggles since 1997. Vuzix, meanwhile, has quite definitely been selling specialist VR and AR goggles for some time. They've not exactly leaped into the mainstream but perhaps that's because the tech to project the imagery into your eye was evolving too slowly and was too bulky to create a device that looked non-hackerish.

What these efforts all have in common is that they're all trying to be the fifth digital screen in your life. We'll discount the cinema, as that's not an everyday thing, but the other four are your TV, your tablet PC, your smartphone and your computer. All of these deliver entertainment and information to you, let you update your social network, and even make the odd phone call or video chat.

And they can all deliver advertising. That's the "other thing" that Google does. And that's why there's a scramble for the fifth screen in your life. Wearable technology is potentially with you much more of the time--your smartwatch is more on display and more accessible than your smartphone lodged in your pocket or purse, and your AR goggles may become a big part of daily life for some users. And thus advertising could become even more prevalent in our daily lives.

Tiny ads, micro ads, perhaps combined with highly-accurate targeting, based on the extra digital information--including location--that your fifth screen device reports about you to Google, to Apple, to Nielsen or whoever. As Adam Ferrier, psychologist and founder of Naked Communications, explains to Fast Company, "Repetition of messages, whether we are aware we are experiencing them or not makes brands more familiar to us, and therefore more likeable, and therefore more likely to be purchased. In that regard it's in a brand's interests to be in our face all the time, whether we notice it or not."

In this way the fifth screen is basically an advertiser's heaven. It gives advertisers the power to deliver both high-involvement ads (ones that you actively like to engage in like free numbers you call in response to ads, or viral videos that you promote to friends) and low-involvement ones like, as Ferrier explains, "things you hardly notice, the billboard you drive by, the TV ad you didn't notice."

In an era of fifth-screen smartwatches or AR goggles this means a pop-up ad in your vision, or a buzz on your wrist, could alert you to a deal at a local Starbucks as you stroll through town, offering a $1 discount if you hand over a promo code to the barista. And it could also mean more subtle messages, ones that flit onto the fifth screen and off it in an endless array of ads that barely attract your attention. But as Ferrier notes "The scary thing about a future of ubiquitous advertising is not the 'high involvement' stuff, as that advertising we will only opt in for if the pay-off is greater than the effort--it's the low involvement stuff. Interesting low involvement advertising works, and works well."

Essentially, the fifth screen represents a paradigm shift in advertising as much as it represents a change in the way we use computers on the move. It means ads everywhere, and different kinds of ads too--something TV advertisers are beginning to wake up to, now viewers usetheir iPads and phones while watching TV (music-recognizer app Shazam partnering with a U.K. TV channel for ads is a great example of this). Ferrier thinks that, "Every single piece of advertising now has as its goal behavior change. Understanding how to change behavior, and what people will choose to interact with is key for advertisers. Expect to see more science, more psychologists, and more behavioral data informing advertising in the future."

Is this a good thing? Ubiquitous advertising could spell trouble, as the satirical remake of Google's Glass video suggests:

But brands know that if they piss consumers off, then that's more of an incentive for them to actively engage with a rival brand. Ferrier says that in the future "we'll live in an increasingly advertising-saturated society," which is the bad news, but the good news is that "advertising will be more useful, entertaining, charming and playful than ever or else it will get ignored." It seems likely then, that it'll be the fifth screen in your life that will be responsible for introducing us to this brave new, trademarked and slogan-swamped world.

Behavior Change: Why Action Advertising Works Harder Than Passive Advertising

2012-04-22T11:05:00.001+10:00

Motivation & Conceptualisation

Billions of dollars are spent each year by marketers in efforts to change consumer behavior. These are often direct and overt, such as persuading consumers to consume a product over that of a competitor. Even indirect attempts, such as campaigns aimed at creating brand image and raising awareness, ultimately have the end goal of changing consumer behavior.

In the marketing and advertising industry it is usually assumed that communicating a message to a consumer in a one-way direction is all that is required to change behavior. This is despite the proliferation of both academic and commercial research into consumer motivations (e.g., Bargh, 2002; Jacoby, 1976; Tybout & Artz, 1994). Though much effort is invested into the message itself, the direction of communication is rarely questioned.

The prevalence of this approach is interesting, since alternative methods of communication to change behavior have long been developed in other industries, such as education. Two-way communication (e.g., student involvement in lectures) has long been recognised for its contribution to learning and behavior change (Gosen & Washbush, 2004). For example, a study found that children who had participated in gardening as well as receiving nutrition education had significantly higher vegetable consumption levels, in comparison with children who received nutrition education only (Parmer at al., 2009).

Problematically for marketers, the most successful ingredients of an advertising campaign are often difficult to pinpoint. However, in recent times, aided in part by an increased industry focus on digital technologies and social media platforms, ‘action’-based campaigns have demonstrated encouraging results. Campaigns such as Burger King’s Subservient Chicken, McDonald’s Name It Burger, and the Tate Modern’s Warholiser all required some form of consumer interaction, whether this was by playing a game, naming a product or transforming a photo of themselves.

Viewed through a psychological lens, these campaigns reflect various forms of experiential learning. Based on the theories of Dewey (1938) and Lewin (1947), experiential learning is defined as “the process whereby knowledge is created through the transformation of experience” (Kolb, 1984). Thus, consumers who have the opportunity to interact with, or experience, rather than passively receive a message, should be more likely to create personalized meanings and associations from this information, and then change their behavior accordingly.

There appear to be at least three significant reasons that experiential learning is effective: autonomy, discovery and personal relevance (Smith, 1980). Autonomy may circumnavigate resistance to a message, facilitate discovery, and enhance motivation. For example, in a study that measured different parenting styles of parents of 180 elementary school children, Grolnick and Ryan (1989) found that children of participative parents (e.g. where children were involved in decision making and problem solving) were more internally motivated and successful at school.

The experience of coming to a realisation oneself appears to be essential for processing and retention of information. Also, when one is personally involved in action learning, information feels more relevant and therefore, more interesting, with greater perceived consequences for oneself (Smith, 1980). Another potentially explanatory theory is that of cognitive dissonance (Festinger, 1957). Consumers may be more open to a brand once they have begun the interaction process, due to the need to maintain consistency between thoughts and behavior.

Thus far, this subject has received little empirical attention in an applied sense. Therefore, our research aims to investigate the effectiveness of action-based communication versus traditional, passive forms of communication, with effectiveness defined as a measurable change in consumer behavior. We propose that:

H1. Participants in Condition 3 will donate a higher mean amount per person to charity than Conditions 1, 2 or 4.

Methodology

Participants

A convenience sample of 181 delegates at an Australian media and marketing conference was used (Condition 1 = 94, Condition 2= 27, Condition 3= 42, Condition 4 = 18). The age range was approximately 20-65.

Materials

For each group, a video was created comprising an introduction and the experimental manipulation, led by a charity representative. Behavior change was operationalized as monetary donations to charity tins.

Condition 1 (passive/rational) viewed a verbal presentation of key factual information about the charity.

Condition 2 (passive/emotional) viewed a video montage of the charity’s activities and positive effects, accompanied by an upbeat song.

For Condition 3 (active/high personal involvement/neutral), participants were asked to create an advertising idea for the charity, by drawing an image, some words and an encapsulating ‘tagline’ on paper. The task was deliberately unguided so as to facilitate autonomy.

For Condition 4 (active/low personal involvement/neutral), participants were asked to complete some unrelated word puzzles.

All groups were supplied with a written overview of the charity’s core functions, to ensure a baseline level of understanding.

Procedure

Consent was obtained prior to conference attendance.

No random allocation was possible, since participants were required to self-allocate to one of four rooms for the following conference presentation. Participants were blind to experimental conditions (ostensibly sponsorship messages, so as to prevent demand effects). Assistants collected donations immediately after the manipulation.

Participants were debriefed the following day.

Major Findings

Results suggested that those participants in the active learning condition were likely to donate more. Condition 3 received the highest donations per person ($3.84). Following this was Condition 2 with $3.69, Condition 4 with $2.58 and Condition 1 with $2.39. A lack of data points at the individual level precluded examination of statistical significance.

Some additional participants entered the room in Condition 3 after the manipulation had begun. Attempts were made to exclude these from the dataset. We cannot rule out, however, the possibility that additional donations may have slightly inflated the mean donation per person.

Overall, the present research has yielded encouraging support for the effectiveness of action-centred communications, although logistical limitations limited the reliability of the data collected. However, given the pattern of results obtained, and robust theoretical underpinnings of our central hypothesis, we feel that this is a very strong direction for further research.

Future research is planned to replicate these findings in a more controlled environment, across a range of product categories, and across a range of types of ‘action’, and with representative populations.

In Press
Ferrier, A., Ward, B., & Palermo, J. (2012). Behavior Change: Why Action Advertising Works Harder Than Passive Advertising. Working paper presented at Society for Consumer Psychology: Proceedings of the 2012 Annual Conference, Las Vegas, Nevada, February 16 – 18, Society of Consumer Psychology, USA.

References

Bargh, J.A. (2002). Losing consciousness: Automatic influences on consumer judgment, behavior, and motivation. Journal of Consumer Research, 29(2), 280-285.

Dewey, J. (1938). Logic: The Theory of Inquiry. New York: Henry Holt & Co.

Festinger, L. (1957). A theory of cognitive dissonance. Stanford, CA: Stanford University Press.

Gosen, J., & Washbush, J. (2004). A review of scholarship on assessing experiential learning effectiveness. Simulation & Gaming, 35(2), 270-293.

Grolnick, W. S., & Ryan, R. M. (1989). Parent styles associated with children's self-regulation and competence in school. Journal of Educational Psychology, 81, 143-154.

Jacoby, J. (1976). Consumer psychology: An octennium. Annual Review of Psychology, 27, 331-358.

Kolb, D.A. (1984). Experiential learning: experience as the source of learning and development. New Jersey: Prentice-Hall.

Lewin, K. (1947). Frontiers in group dynamics: Channels of group life; social planning and action research. Human Relations, 1(2), 143-153.

Parmer, S.M., Salisbury-Glennon, J., Shannon, D., Struempler, B. (2009). School gardens: an experiential learning approach for a nutrition education program to increase fruit and vegetable knowledge, preference and consumption among second-grade students. Journal of Nutrition Education and Behavior, 41(3), 212-217.

Smith, M. (1980). Creators not consumers: rediscovering social education. Leicester: National Association of Youth Clubs.

Tybout, A.M., & Artz, N. (1994). Consumer psychology. Annual Review of Psychology, 45, 131-169.

Authors: Adam Ferrier, Brook Ward, Naked Communications, & Josephine Palermo, Deakin University

Experiential Advertising is Dead, Try Existential Advertising

2012-04-19T07:31:00.000+10:00

This Article First Appeared in Adnews

Anyone read Existential Psychotherapy by Irvin Yalom? Okay, anyone watched Groundhog Day with Bill Murray? Same thing, and both will help you with brand management. Let me explain.

If you read Existential Psychotherapy please be careful. I read this book in 1996 and was so moved by it I went to the Office of Births, Deaths and Marriages the next day and officially changed my name to Max. According to the registrar it still is.

The book outlines the four major conflicts we must resolve in order to come to terms with our existence and live a fulfilled life:

Death. Coming to grips with the reality that one day we will die, or as Freud put it, ‘the meaning of life is death’.
Isolation. Realising that we are alone. No one can ever truly know what it’s like being you.
Meaninglessness. Accepting that none of this has any meaning at all.
Freedom. We have the freedom to make our own choices and hence are responsible for the life we lead.

Interestingly (but not as highbrow), Groundhog Day was voted the most existential film of all time.

You can see Bill come to grips with each of these existential issues as one day is repeated over and over from the start. Bill can’t accept this predicament and goes through many stages of conflict: nihilism, disbelief, shock and social detachment. He becomes hedonistic and cruel, then depressed and suicidal until he eventually accepts his situation and starts to act constructively. It is only this acceptance that frees him from the repetitive turmoil.

I pointed out this existential stuff recently to some people from the life insurance industry who had asked me to talk to them. What struck me was that life insurance is a category that is incredibly close to one of the four pillars of life’s great conflicts - death. It’s incredibly rich and meaningful. Yet I see life insurance ads on TV a fair bit, and some are pretty ropey. I’m convinced they could be much more powerful. Getting life insurance should be something that is treated as a high-involvement category, not something with a ‘call now and get a free set of steak knives’ mentality.

It’s the same with financial services. Their category is money. Most banks treat money as if it were the most boring, droll category on earth. But money is closely associated with freedom (and can also probably help reconcile meaninglessness if spent wisely). Banks and other financial institutions are in one of the most high-interest categories there is, yet you wouldn’t know it by the communications they produce (with one or two obvious exceptions).

But it doesn’t stop there.

Toothpaste can help reconcile isolation. Wine can help reconcile freedom. Breakfast cereal? You figure it out. Point is,
there are no brands in low-involvement categories, only marketers who have a low involvement with their brands. All brands can have a clear purpose and help people reconcile life’s big questions, even if it’s in a spectacularly small way.

I make this point in a time when marketers are still being convinced by agencies that tone, values and personality are so important to get right (they sort of are but they’re the easy bit). Brands with too much focus on values and personality are doughnut brands - they look sweet and desirable, but there is a hole in the centre. There is no reason for being. The more difficult part of marketing is to be clear about the purpose of your brand and how it helps people in both a practical and meaningful way.

So with this I suggest you grab a glass of red wine, purchase a copy of Existential Psychotherapy or any other good book with real ‘meaning of life’ type questions (all the stuff you skipped over at university as you were too busy trying to get laid) and establish where your brand fits in the purpose of life. Failing that, watch Groundhog Day again. It’s still pretty funny.

P.S. Image taken from Wanderstan, interesting post

WorkSafe: Don't ask people to do Dangerous things, as they'll probably do it.

2012-04-18T13:15:00.000+10:00

If you studied undergraduate psychology you would have been lucky enough to witness the great social psychology experiments of the 1960's. These experiments were conducted long before ethic committees were set up and pushed the boundaries of insights into human behaviour.

One such series of experiments was conducted by Stanley Milgram, he was interested in understanding why normal people do horrible things, just because they are told to. That is, he wanted to understand how obedient people were, and why they obeyed others in authority, even to the point where their behaviours were harmful (look no further than the atrocities committed in Germany during World War II)

His experiments demonstrated that most people (around 60 to 70%) were prepared to follow orders that involved harming others (via electrocution in this instance) if told to do so by an authority figure. Watch the video for more.

In 2012, we worked with WorkSafe Victoria to help the public understand that obedience still exists in the workplace. People still ask others do do dangerous things, and people still do the dangerous things asked of them. We adapted the Milgramexperiments and put them into a simulated workplace setting to see if people are still willing to obey requests, even if it means others may be harmed. See the video below - 90% (63 of 70) of people we asked to pass a dangerous live wire unprotected from one person to the next did so - and many did so repeatedly.

This experiment was supplemented by quantitative research (conducted by Galaxy Research) that showed the willingness of supervisors to ask employees to do risky or dangerous acts in certain circumstances. The research found:

One in five supervisors admitted they would ask their employees to bypass safety to complete a task quickly.
One in four supervisors would bypass safety if a $1,000 performance bonus was at stake.
Supervisors rate keeping up with productivity and meeting client deadlines as their most important priority ahead of safety

We've had some strong reactions to this 'street experiment'. The Age wrote about it here, The Herald Sun here, and The Project (it's about two minutes in) here. Plus a load of other comments online. All of this PR activity is helping reinforce the message that we should not be asking people to do dangerous things in the workforce as there is a good chance they'll do it!

All of this activity can be viewed at Facebook.com/Worksafevictoria

This is one of the fantastic ads that inspired the experiment, along with Milgram's original experiments of course.

Finally go to the Facebook page and measure your own level of obedience you might be in for a bit of a shock! (sorry about that).

Jason Russell vs. Joseph Kony: Kony2012, A Race to the bottom

2012-03-20T12:23:00.000+11:00

Click here to see Tim Costello and myself discuss on Ten's Breakfast.

Here is a 20 minute podcast on Joseph Kony and Jason Russell. It's a discussion I had on 'Sunday Nights with James O'Loghlin', on ABC Radio. It holds no punches, in short I think the 'Invisible Children' movement is advertising at its worst, making a crap product seem desirable. I think time will show Jason Russell to be more deluded cult leader, than saviour of the world.

Kony 2012 is advertising at its worst. At it’s worst advertising can make the most ridiculous of products seem irresistible.

For many years the powers of advertising have been locked up in the ‘fast moving consumer goods’ cupboard. Advertising was mainly used for corporations with products to sell. They realized if you had nothing to say, or nothing credible to sell then at least you could just create a desirable image of your product, and sell that instead. The euphemism is called ‘perceived value’, the value is in the imagery not the actual product (it’s why we pay $10.00 for a beer that cost $1.00 to make).

However, locked out of the advertising game for many years were the charities and causes. The ‘tin rattlers’. To get their message across they had to make do with rational arguments of persuasion, lobbying government, providing facts and figures to get a grant, or a gift from some government department. If someone in the charities marketing department had a great idea it could be executed but only if it didn't cost any money. So whist advertisers had budgets to create images of desire and show them on TV, charities had guys dressed up in tatty Koala suits on the streets with cup in hand. In about 2010 that all changed.

Enter stage left the most powerful; influential and cheapest media channel to ever walk the earth ‘social media’. Social media has changed the way messages get around the world forever. Even charities and social causes can reach the masses cost effectively.

However, it's the people like ‘Invisible Children’, who have not only mastered the social media platforms (this is well documented), but they have learned the dark art of advertising as well, and that’s what makes them so dangerous (I mean influential). Married the two together (advertising and social media), to create an irresistible image for a truly questionable organisation.

Advertising doesn’t work by providing facts and figures; presenting both sides of an argument, and hoping you make the right decision. Advertising is a master to just two things 1. Desire; what can I say about my product that will make it irresistible. This could be a tangible thing (something about the product), or an intangible thing (something not about the product at all) – in fact to create desire you can say just about anything at all. And 2. Permission; what do I say about the product so someone gives themselves permission to act on the desire I’ve created. For example ‘Buy my creamy indulgent ice-cream (desire), it’s 97% fat free (permission)’.

The advertising tactics Koni2012 has embraced are:

Desire: Koni2012 has used every trick in the handbook of advertising 101 to build a strong emotional response. Guilt about inaction, close ups of children, big music ending in a krushendo, slow motion to build drama, sweaty, evil looking bad guys. It’s not story telling, it’s manipulation.
Permission: He’s given people the excuse to act via two clever techniques; scarcity; act now or miss out, and social norming, this is the new world order, act now everyone else is. He’s also ensured other well known popular celebrities are involved, modeling the appropriate behaviour so others follow (like sheep). There are also some light touch statistics and funny diagrams thrown in to make the cause seem real and alive today.

As stated above Russel has coupled these advertising ‘message’ with social media. This has allowed him to create free distribution around the world. But the scarier thing is for everyone who has passed this message on via social media (all 112 million of you) there is a significant issue. All of you people have publically declared you support Invisible Children and its cause. You’ve taken acrion, just by passing it on, liking it, or even worse, buying an action kit (and that's why they were so cheap!)

Once you’ve acted they’ve succeeded, they’ve created a sense of cognitive dissonance that you must redressed. If you’ve have passed a message on saying your saying ‘I support this cause’, then you will change your (previously probably neutral) thoughts and feelings to agree with that action.

Hence there are now 112 million people around with their thoughts feelings and actions all nicely aligned around supporting Invisible Children and Jason Russel.

However, as more information comes to light about the organizations fictitious goals and their leaders increasingly erratic behaviour (past and present) it is difficult to shift their views. They have already acted towards the cause. To back out now will make them (you) look silly. That is the power of action – and Jason Russel knows this.

It all starts to feel very cult like, very evangelical, and very wrong.

So as we leave the information age we realise one thing. Information does not create action. All the information in the world hasn't solved any of the world’s problems. Ironically Google (a company created before social media) with a mission to organize the world’s information may find its mission superfluous. You see information doesn't have anything to do with it.

Koni2012 has proven, (and its just one of many causes that has and will continue to), you can create a fictitious cause, with a retarded goal and everyone will join in – if the image is good and you follow the twin rules of advertising and social media.

The power of advertising if left unchecked in the fast moving consumer goods space is fine (I mean really what’s the worst that can happen if you purchase more shampoo than you really need), but in the area of social cause and justice? It needs a hand break.

So far advertising, social media and a seemingly deranged cult leader have mobilized a mob of over 100 million people to do what? Hunt down a guy who once did terrible things, and make him pay. That’s it. Their cause isn’t about the country he’s left decimated. It’s not about helping the children harmed. I don’t think it’s even about bringing the sucker to justice. It’s about Jason. Jason wants to make Jason famous, by making Kony famous.

If people can’t see the warming signs in all of this – then I’m getting a little worried. The campaign is called ‘Get Kony’, my mum always said when you point a finger you have three pointing opining back at yourself (try it). Who is it that we should be most scared of?

PS I love this...

Postscipt: Click here to see my tweet as reported in The Guardian - no less (it's not referenced to me, so perhaps someone gave the exact same Tweet about it, but I doubt it! The tweet was this "Find the silence around #Kony'12 interesting. It's muted embarrassment from prior supporters, mixed with quiet smugness from detractors".... and that pretty much sums the whole thing up. Next!

Kony2012: The worst and best of advertising

2012-03-13T19:21:00.001+11:00

This is a discussion on Kony2012 on Ten Breakfast. More thoughts on this coming.

Click here to see Tim Costello and myself discuss on Ten's Breakfast.

Here is a 20 minute podcast on Joseph Kony and Jason Russell. It's a discussion I had on 'Sunday Nights with James O'Loghlin', on ABC Radio. It holds no punches, in short I think the 'Invisible Children' movement is advertising at its worst, making a crap product seem desirable. I think time will show Jason Russell to be more deluded cult leader, than saviour of the world.

Political Brands

2012-03-10T11:42:00.000+11:00

Managing a brand is a simple affair. Simple, but not easy. A brand is simply “a promise kept”. You’ll hear marketers and advertisers spin much more rhetoric around this concept, but the hallmark of a strong brand is saying you’re going to do something and then doing it. It’s “a promise kept”.

To keep reading, and see a lot of really right wing comments underneath then visit http://www.thepunch.com.au/articles/Brand-new-Julia-needs-to-renew-her-brand/

Books on Behaviour Change and other Psychological Inspiration

2012-02-24T15:45:00.000+11:00

I often get asked which psychology books are the best to read. I was also asked last year by the International Journal of Advertising to participate in their ex libris, and comment on the books that have had an influence on me. I've taken the liberty of photo-copying what they printed. If you're ever looking for some good psychology books, books in general, or books on behaviour change in particular then this is as good as place as any to start.

Great Marketing Communications Involves Getting The Uninterested to Participate With Your Brand

2012-02-19T21:33:00.000+11:00

We wrote a paper recently, Behaviour Change: Why Action Advertising Works Harder Than Passive Advertising’. It's been presented in Las Vegas this weekend at the Society of Consumer Pschology Annual Conference. It was jointly authored by Brook Ward, Deakin University academic Josephine Palermo, and myself. It's a discussion paper to promote the effectiveness of participatory messages in advertising. In short it puts forwards evidence that getting people to participate in communications is more effective than just passively receiving a message.

I've now come across this brilliant blog Behaviour Change and Technology there is one particular meta-study they site by Webb, Joseph, Yardley & Michie (2010). It has looked at a number of behaviour change programs that harness interactive technology (internet, smart phones etc) to establish their effectiveness in behaviour change. In short its effective, but the effectiveness obviously varies widely.

Link this with another interesting blog that was posted on Mumbrella by Simon Lawson, called Canalside View this blog has an article on it looking at 'The Participation paradox and how it relates to advertising. In short - it says the following (and if I have got this wrong please let me know):

We should focus on getting those people who don't buy our brands very often to purchase more, rather the getting the 'loyal' to purchase more (this is pretty well established for several categories (especially impulse categories))
To get these people to purchase 'awareness' isn't enough, we need to get them interested in our brands
A great way to get people interested in a brand is to get them to participate.
However, only those who are already interested in the brand are likely to participate.

So if you go with both of these interesting points of view then the biggest marketing challenge facing marketers is how to get people currently uninterested (or even unaware) of your brand to start to participate with your brand. The ideas that create participation for a brand, but are so big that they draw others into the brand for the first time are the types of ideas that are likely to change brand fortunes. There are a few examples of such ideas dotted around this blog, but for some others on a global scale think Chalkbot and The Man your man could smell like.

Sometimes I Post Things That Make Me Cringe...

2012-02-12T11:39:00.002+11:00

....this is one of them.

Australian Creative recently put up there list of the 'Power 20', people in the creative industries who are having an impact / have some momentum. They asked us 6 questions:
1. What do we think is the definition of power
2. Lightbulb moment when we knew we wanted to enter the industry
3. What is the best thing you've learned about creativity
4. Coolest quote someone has ever said about us!
5. What we will leave behind
6. Are you brave

You can purchase a copy of the magazine here.

Kyle Sandilands: A Tragedy Set in Social Media

2012-02-05T16:42:00.001+11:00

Kyle Sandilands, is in a very unfortunate position. He is massively popular, yet widely disliked and no one wants to be associated with him - especially those with something to sell.

We live in a world where most entertainment is commercially funded. Whether we watch TV, listen to the radio, or something else – the entertainment we choose is normally (at least in part) reliant on advertiser dollars.

A particular niche of commercially funded entertainment responds very well to controversy. I say niche, but I think it's the majority. Think of any reality TV shows you watch they are kept always kept alive and promoted via the latest ‘controversy’. Overweight, washed up singer has a hear attack whilst trying to loose weight – quick send out a press release. Washed up singer is acting like a deranged bitch, send a press release. It’s been well documented elsewhere that Kyle Sandilands has built his career with controversial acts. The 'controversy as media' MO goes a little something like this

Kyle has an audience
Kyle’s audience live normal every day lives and they listen to him to spice up their otherwise ordinary existence
Kyle therefore has lots of advertisers who want to reach this audience
Every time Kyle does something controversial (normally a euphemism for something cruel, unethical, immoral, or potentially illegal) then Kyle’s audience is titillated and his audience numbers go up.
Kyle gets more advertiser interest and dollars
Kyle is paid more, and adopts the moniker ‘King’

This is the way it’s always been – buffoons around the world have made a dollar resorting to the lowest common denominator so they can get paid well. 'King' Kyle is just the latest. However, something has changed. The old model is now broken. What has changed things is (in this case the aptly named) social media. Between stages four and five, enter the new player ‘social media’. Social media will now step in and say ‘advertisers this guy is a buffoon and his behaviour is not acceptable. He is being cruel, immoral or possibly illegal. Stop supporting this buffoon or I will encourage people to stop buying your products'. Interesting hey?

Therefore, the new 'controversy as media' chain looks like this

Kyle has an audience
Kyle’s audience live normal every day lives and they listen to him to spice up their otherwise ordinary existence
Kyle therefore has lots of advertisers who want to reach this audience
Every time Kyle does something controversial (normally a euphemism for something cruel, unethical, immoral, or potentially illegal) then Kyle’s audience is titillated and his audience numbers go up.
Social media says 'dear advertisers this is completely unacceptable'
Advertisers leave the show
Kyle no longer makes money for his boss in the ‘commercially funded entertainment’ model
Kyle looses is job

Social media is providing a direct feedback loop between the ‘ outraged listener’ and the advertiser and this is the new paradigm. Social media is giving people a direct voice to change what they want, and create their own standards (as an aside note don't think ACMA the Commercial Radio Standards Board of Australia has ever doing anything to protect the standards of commercial radio so lets just leave them out of this debate as largely irrelevant).

I’m extremely glad ‘Karl’ will be off the airwaves soon. I asked advertisers to boycott his show some years ago, and it’s with interest I see Mat Baxter CEO of one of Australia’s largest media buying shops giving the opinion that 'King' Kyle will be forced to abdicate and will have to leave Southern Cross Austero as his position there has become untenable (noncommercial). Power be to social media. Tim Burrows gives an accurate and well researched account of the role social media (Twitter in particular) played in 'King' Kyle's latest downfall.

However, the story doesn’t end there. For those who are interested please consider the following:

a) who were the people on social media who convinced the advertisers to stay away? In some instances it was media professionals and academics – distant from Kyle’s audience itself. However, in other instances it was the community of the brand trying to actually sponsor the show. For example when Jenny Craig tried to sponsor the show her community let her know that was a silly move it was instantly.

b) What happens next? A new buffoon will come along to replace Karl. He’ll too will try and create controversy, but he wont go as far as Kyle – he doesn’t want to get sacked. So he plays it safer. The masses who listen to the new buffoon in Kyle’s place have a slightly more humane and less cruel station to listen to. This on the face of it seems like a good thing, however, is commercial culture being held to ransom by keyboard activists (and if so is this a bad thing)??

c) Our advertisers the new community standards arbitrators? This is an interesting one. Advertisers ultimately have one agenda, shareholder value. Everything they do is ultimately about satisfying their bottom line. Hence in a capitalist driven culture it makes sense to have community standards dictated by a capitalist mandate (at least you know their agenda). However, are there other alternatives? What if we lived in a socio-capitalist world where the social good was given as much importance as the financial gain? Perhaps that’s what’s happening via social media?

It’s a complicated issue.

At the end of the day I’m just glad it appears very likely that Karl will be off the airwaves soon, and the world will be just that little bit better, just that little bit nicer.

POSTCRIPT

This is a link to the session on ABC Radio 'Sunday Nights with James O'Loghlin'

Why Western Australia is The Healthiest State in The World: Good TV Advertising in the 1970's

2012-01-15T11:04:00.000+11:00

I was talking to my wife Anna this morning and started singing the benefits about vitamin E. She asked me why I was singing, and how I knew this?? I recounted to her where I learned about the various benefits of vitamins - TV ads. In particular this iconic piece of communications from my childhood in Perth

It's a Community Service Announcement, (CSA) that looks like ti was written and produced by Channel 9. It was brilliant. This ad, and the rest that follow have stayed with me my entire life. I can still sing every word to some of them. It was great fun watching these. They feel as relevant today as ever. It's proof that as an industry advertising hasn't really gotten any better over the last thirsty years. What I think works with these ads are:
a) A jingle: I have no idea why advertisers and marketers have moved away from catchy joggles - they stick in the head - its what we want isn't it
b) an own able treatment: The squiggly animation cuts through, coupled with beautifully written songs
c) The length: these ads give enough time to tell a story
d) clear message linked into each son.

If done today they would be linked through social media, have a strainer participative element, and so on, and would be all the stronger for it. But for classic 1970's / 80's advertising this can't be beat.

What do you think? Like?
Do people growing up in places other than Perth have a similar set of CSA's that have state with them? Bet they are not as good as these.

Advertising Trends for 2012

2012-01-08T12:42:00.001+11:00

So I’m a week or two late with my predictions, but these are the big advertising trends I see happening in 2012. I’ll be discussing these on ABC Radio tonight with James O’Loghlin. If you disagree then please let me know here, or call in tonight.

The Context

Advertisers are (slowly) coming around to the idea that all advertising is going to work harder if it involves a degree of participation from the consumer. This coupled with smart phone and social media technology means that interactive messaging will become the dominant force. Couple this with increasingly expensive space in traditional media (same amount of space many more brands wanting it), and consumer control of messaging means that traditional advertising will become less effective per dollar spent. With this context in mind here are the big (and small) trends for 2012.

The Trends

1. Advertising Platforms as Content

Masterchef is sponsored by a well known retailer, Coles. It has been a massive success because a) it’s great TV, but b) it has a natural synergy with its biggest sponsor that can then help co-promote the show. The sponsor will also act as a platform of multiple levels of sponsorship, from a multitude of brands, all of whom fit naturally into the show (in fact they help build the shows credibility. Watch out for networks building show platforms that are natural places for brand and product integration.

2. Video and Audio Print

2011 saw a few examples of video enabled and audio enabled print. We now have the technology, and the price has come down sufficiently for advertisers who want to stand out to embed their favourite video content into the traditional magazine environment. Magazines may be become noisier – but it seems fun. Check out this attempt by Peroni, via Mumbrella.

3. Consumer Completion

OK so it’s not new, and really had it’s breakthrough in around 2009, but the trend of asking consumers to finish the marketing off for us, aint going anywhere. You'll be asked to like things on Facebook, Twitter certain things on, name new flavours, write the script, star in the ad, or send a message to the CEO. All in the name of to brand wanting to give the consumer a sense of ownership. This is a nice example of people being allowed to become members of the crew for the latest AAMI ad via Facebook. (image via campaign brief.com)

4. Dirty Realism

You'll see less glamour and polish and more everyday people – as we demand authenticity from our advertising. We’ve seen reality TV blossom over the last 10 years, and documentaries become as mainstream as fiction in cinema. However, some deluded marketers insist on portraying shiny, happy people in their advertising. It doesn’t work like this anymore. We purchase the majority of our brands, primarily to reflect who we are and our tastes, not to show who we aspire to be. Expect to see more average looking people in advertising commercials (AMMI makes a pretty good example of this too!). We’ll see more reality in advertising in 2012 and beyond.

5. Geosocial Offers

Offers and promotions that take place through social media and are activated when you are at a certain place at a certain time. I Imagine this will become mainstream quickly. Here are two promotions that have had mixed and very good success for McDonalds and Dominos pizza respectively. Wagamama did something in Australia recently too, offering free soups to people who checked in 5 times or more. Expect more soon. In fact every major retailer will soon offer them I expect.

6. Gamification

OK so it was the buzz word of 2011, but I think it will be a significant trend of 2012. If you can have people spend time with your brand, whilst at the same time offering them an experience they enjoy – then why wouldn’t you. We created a game that finishes this week – Steal Banksy. The success has been phenomenal. We offered a two prizes to the value of $20,000 but gamified the mechanic (you had to steal the prize to win) this created a level of engagement with the promotion far beyond what would have otherwise happened.

One Trend that may die (or morph)

1 Group Buying

I think people will realize that there are only so many dog washing services they need, or aromatherapy classes they can attend before the group buying sites have a very quick fall from grace. That said, they may well respond with a fundamental change of offer that makes them stronger than ever.

How Advertising Changes Behaviour: Ease versus Motivation

2011-12-28T17:39:00.000+11:00

All marketers and advertisers are in the business of behavior change. There is not a marketer in the world paid to keep things as they are. As long as business growth in a given then every brief will end in someones behaviour needing to change. As a result of nearly all marketing activity people are ‘required’ to change brands, pay more, consume more often, or have more people consume.

In order to change peoples behaviour there are two key factors we can influence; Motivation and Ease. The higher the motivation, and the Easier it is, then the more likely that behaviour will occur.

Historically, the advertising industry has been obsessed with just 50% of this equation - building motivation. The products were available in store, the advertisers job was to increase motivation to get people to go and buy it. The main weapon advertisers have had to build motivation is ‘creativity’. The issue with being ‘creative’ is it’s as much luck as it is skill. So even though it’s been the area of focus for most advertising agencies, none I know have a robust model on how to build motivation – they just have a creative department that comes up with ‘ideas’. Sometimes these ideas are brilliant, sometimes average, and often worse than ordinary. If you ever talk to someone in advertising ask them how their agency builds motivation - at best you'll get a corny metaphor about 'falling in love with brands'. Watch Madmen and you'll learn more about how to build motivation than you will from most agencies. It's not that they can't do it (build motivation), they just don't know how they are doing it - it's often luck.

However, something exciting is happening in advertising. Some are taking a broader view of how to change behavior rather than just building motivation. Making the desired behavior ‘easier’ to complete is just, and often a significantly more effective way to get the result you are after.

The advent of social media and smart phones, means that the race is on to making things easier for consumers (us). A Grand Prix winner at Cannes this year bought a virtual supermarket (Tesco) to train stations in South Korea, everything you ordered was delivered by the time you got the train home. If the desired behaviour change was get more people shopping at Tesco versus competitors this was a brilliant way to do it. They didn't build motivation, they just made it easier.

My prediction for 2012 will be that agencies change of focus as they rejoice not in increasing consumer motivation, but in making things easier for people.

Steal Banksy: Stealbanksy, Stay the night, Steal the art

2011-12-08T00:52:00.001+11:00

Here's a campaign we've created for the Art Series Hotels that allows people to really express their dark side, and commit the perfect crime - all going to plan. The below is taken largely from teh press release. It's fun, it gets people involved, and it's highly talkable. it had a good first day today. Fingers crossed the campaign unfolds nicely.

Art has a history of theft and heist, a history that Melbourne has shared. In 1986, Picasso’s Weeping Woman was stolen from Melbourne’s National Gallery Victoria and held for ransom. There have also been rumours of a Banksy being stolen in the streets of Melbourne.

Steal Banksy from Art Series Hotels on Vimeo.

Now Art Series Hotels is offering the public the chance to steal a Banksy for themselves, No Ball Games This work is just one of a handful of signed and authenticated Banksy’s available in Australia (valued at $15,000). From 15^th December 2011 till 15^th January 2012,

Art Series Hotel guests will have the opportunity to try and steal it. If they succeed, it’s theirs to keep. If they get caught, back on the wall it goes.

Expert in street art and editor of Invurt Magazine, Fletcher Andersen, said: “Banksy has helped to place a global spotlight on the street art genre, transformed multiple urban spaces and become a household name in the process. The chance to own one of his works is a great opportunity, and more than worthy of a heist attempt.”

Will Deague, CEO of Art Series Hotels, said: “The Art Series Hotel Group is passionate about supporting the arts in Melbourne and we’re very excited about the StealBanksy concept.”

It's Gone! 2 #stealbanksy from Art Series Hotels on Vimeo.

Post script: As you can see from the above video, Banksy number one got stolen, by two very clever thieves. See the full story at www.banksy.com.au, or on the Facebook site, or Mumbrella. Needless to say we have a spare and Pulp Fiction is up and ready to be stolen.

Twitter: @stealbanksy

Facebook: facebook.com/artserieshotels

Building Interactivity Into TV

2011-11-26T16:00:00.001+11:00

Thought I'd put this up on the blog. It's an initiative from Channel 10 News called Sydney Soapbox. It's an example of making a TV show, in this case the nightly news interactive, and building a sense of community. The Soapbox is represented online via Facebook and Twitter, and gets a high level of interaction. It's an interesting trend as articulated in this article in The Australian, Social Media the X Factor in Boosting TV Ratings. I've seen stats showing Q&A audience increased 23% after introducing Twitter feeds. I also had the pleasure to speak at Promax, the industry responsible for all promotional material on air. It surprises me that so few of the promotions ask the viewer to get involved in the message. The promotions often just ask people to watch the next show (or don't miss out - as loss aversion is a significantly strong motivator for action). However, getting people to Tweet the show, or join the Facebook group, or in some way be part of the show's community before the show is launched could be an even stronger conditioner - and ensure the show starts with positive momentum.

Here's a completely random clip from Sydney Soapbox I've chosen as an example! Just so happens to be linking to my favourite cause at the moment - hoping Karl Sandilands is squeezed by advertisers to get off air.

If you want to see more or follow it go to the Ten News Facebook or Twitter pages.

Marketing Hoaxes: Why I Love Them

2011-11-18T07:38:00.003+11:00

OK so this is my POV on Hoaxes. It was printed in the last edition of Adnews. I also spoke about the topic on ABC radio with James O'Loghlin on Sunday night. I asked listeners what they thought. By and large they said they didn't like them and it put them off the brands that did them. I'm not convinced.

You'll have to click the image to read and hopefully it's big enough.

It's Like The Beams Crossing in Ghostbusters

2011-11-05T11:37:00.001+11:00

I was in the airport lounge yesterday when I heard over the pager 'Could Professor Noam Chomsky please come to the reception area'. What?!? I then realised Noam was in town to pick up his Sydney Peace Prize, so thought, unless it was a coincidence of linguistic proportions that it must indeed be the Noam Chomsky (that is the distinguished American social scientist, author and human rights campaigner (including spotting that 9-11 was a terrorist act that differed from other terrorist acts only in that it was committed on American soil and not by Americans on other nations soil).

I went to the reception are to wait and try and get a glimpse of the great man but to no avail (he didn't turn up after being paged - no manufacturing consent with Noam).

Anyway, thinking I had missed my chance I left the lounge to board my plane, and there he was, sitting in business class looking bemused! I went to my seat and wondered how I could meet him - I'd get him to sign something. The only thing I had was todays Adnews, so I grabbed it and off I went to have it signed.

So now I'm getting what must be the only piece of advertising trade press in existence to be signed by Noam Chomsky framed. It will hang in my home among works by Shepard Fairey, an infamous Australian serial killer, and my sister Tania Ferrier.

I wonder what the Occupy crew must think?

Roland Barthes "Mythologies" and Consumerism in the Occupy Wall Street Movement

2011-10-27T21:31:00.002+11:00

A student called Anthony emailed me asking he could write a post on my site about Occupy Wall Street. I said yes here it is. His name is Anthony Garcia he writes at www.onlinegraduateprograms.com what do you think? He'll probably be incredibly famous one day.

Students in online graduate programs and traditional colleges read and discuss the world famous theories Roland Barthes. When Barthes published his seminal 1957 work, Mythologies, the way linguists, philosophers, and semiologists thought about symbols and myths was significantly altered. Barthes was concerned with the ways in which symbols function in contemporary society, particularly in a consumerist context. For Barthes, consumers purchase products because there is an unmeasured value attached to them through myths and symbols. A luxury car may not be any better than a family sedan, but society tends to view people who drive luxury cars differently. According to Barthes, a symbol can be a sign, product, or even a word (for example, he notes that the word "tree" is a symbol for a concrete object). Symbols impact and affect daily life in myriad ways that continue to interest curious observers.

In protests about how the economy functions, education is always a key factor. The effects today of this regime of symbols are seen nowhere more clearly than in the Occupy Wall Street movement. For the past several weeks, protesters have gathered in New York City and other major metropolitan areas to protest what they view as the inequitable distribution of wealth in American society. The members of this movement are concerned with how business and banking practices have affected American democracy and the well-being of millions of citizens. In an era of bailouts and recessions, members of the Occupy Wall Street movement are putting the spotlight on consumer practices in the U.S.

For Barthes, symbols represent ideas beyond the objects to which they are attached. A diamond engagement ring is not just a ring; a diamond engagement ring is a representation of love and devotion. Symbols of wealth are central to the Occupy Wall Street movement. Much ado has been made about bonuses in the banking and insurance industries in the last decade. In Barthes system, bonuses are more than just checks. Bonuses are a representation of who is deemed worthy in society and business.

For the protesters gathered with the Occupy movement, penthouses and bonus checks communicate a great deal about bankers and businessmen. These are not just homes and checks, they are symbols of a kind of ultra-wealth. Housing is a particularly potent symbol, considering the 'brand awareness' many Americans have of ultra-rich neighborhoods like Central Park, Beverly Hills, and Nob Hill. The arrest protesters are a potent symbol of government power. We are led to ask who has it, who does not have it, who will get it in the future? Education can symbolize many things, and certainly does in this movement.

Symbols and their attendant myths are not just attached to the powers that the Occupy Wall Street protesters are fighting, though. The protesters themselves are also characterized by signifying symbols. Slogans written on simple cardboard signs have a mythology—a history—of their own in American society, and they are certainly communicating a whole set of ideas about the Occupy Wall Street protesters. American flags are a potent symbol which can take on many different meanings. Some protesters have been spotted waving the original 13-stars version of the flag, perhaps in a call for fellow citizens to really consider the philosophies of the Founding Fathers.

Perhaps the most potent symbol of all in and around the Occupy Wall Street movement is Wall Street itself. One of the most famous streets in America, Wall Street alternatively signifies the dreams and nightmares of citizens. It has appeared in movies as a potent symbol of absolute wealth and power, and has also been used as the symbol of absolute corruption and greed. No matter what end the Occupy Wall Street movement comes to, the attention it has drawn to consumerism and symbols in America and could potentially change the way everyone thinks about wealth, power, and opportunity.

Occupy Melbourne: The Good and Bad

2011-10-16T16:41:00.001+11:00

I ventured down to Occupy Melbourne yesterday. It was the first Melbourne event in a global 'movement', originally started as Occupy Wall Street in New York. The movement was originally started by Adbusters, and was a protest against the uneven distribution of wealth. The movement has sort of, kind of, taken hold and at this early stage in the movements inception it's worth noting what they are doing right and wrong.

Wrong

Lack of clarity: Lets assume the goal of the movement is to have economic equality - if that's the case then everything they do should be single minded towards that goal (think Wall Street protest by Adbusters). The rallies should be held in the financial quarter of the capital cities (not the city square), and protest should be limited to that agenda (not land rights, gay marriage, or 9 / 11 conspirators. Like any good brand keep it focused.
Vitriol towards the 1%: Nelson Mandela said 'The stronger the enemy the stronger you are.' He was keen to embrace the enemy and work with them. Capitalism isn't broken, it provides happiness and opportunity for most people in most countries where it takes hold - however it can certainly be improved. There were also too many hippies and hipsters. The rally felt like no less of a lunatic fringe than the type of crowd Allan Jones and Tony Abbott could muster - not at all representative of the 99%.
Lack of credibility: The issues of fair distribution of wealth is a complex one. An economist or someone with credibility should have been on hand to talk about how the trickle down economy is broken and doesn't work, and provide other sound robust economic models to consider.

Right

Open source content: Instead of having an agenda they make people listen to the floor is opened up for anyone to suggest anything and then voted on by the general assembly. This then dictates the movements actions. If this remains focused it's a great way to galvanise and direct the masses.
Social media and PR: The campaign has created huge amounts of noise on and online by clever and consistent use of social media.
The right cause: It feels like the cause of unfair distribution of the countries wealth is a fair and timely issue to go after. No one else owns this ground.

Watch Occupy closely - If they can keep it focused, and not get hi-jacked by the lunatic fringe (it's meant to be the 99% involved) then this one may be here to stay.

Here's my take on how to modify our capitalist urges into something more useful.

The Steve Jobs Hoopla

2011-10-11T21:43:00.001+11:00

Heres an opinion piece on Mumbrella about our reaction to Steve Job's death. The Naked office is a reasonably fun and happy place. On the whole it’s free of workplace bullying, and most people clock in and out at a reasonable hour. However, recently something happened that caused great upset to our staff – it was beyond our control and very worrying. There were group emails sent around with messages of condolence, and perhaps even a tear or two. However, it wasn’t just our office – the same scenes of morning could be seen right across the world. What happened?

Well…. Last week a very good manufacturer of consumer electronics died, Steve Jobs.

After his death The Economist describes Steve Jobs as a man who “Stood out in three ways – as a technologist, as a corporate leader and as somebody who was able to make people love what had previously been impersonal, functional gadgets.”

Could not have said it better myself.

We are living in a world where there is an unparalleled outpouring of grief for someone who has made us fall in love with our PDA’s, computers, and MP3’s.

What the fuck?

Continue reading it (and seeing the comment thread which are great) here.

Don't get Ripped Off By Real Estate Agents

2011-10-09T20:40:00.000+11:00

I'm selling a house, and I'm very well aware of the research that demonstrate the many forces at play to ensure a real estate agent will try and sell my house for a low price not a high one. However, I'm also lazy and / or don't have the confidence to sell it myself. So what do you do?

Real Estate Agents Will Try and Sell Your House For a Low Price
Real Estate agents in Australia work on a commission of between 1.6% and 2.2% - whatever they can get away with. It's a flat fee and one that only gets paid if the house is sold. If the commission is 1.8% and you sell the house for $1,000,000 that means the agent will make $18,000. If the house doesn't sell - the agent gets nothing.

However, if you sell the same house for a terrible price say $850,000 (compared to the $100,000 expected) the agent will still make $15,300, that's only $2,700 less. Conversely if they sell it for $1,200,000 then they only make $21,640 The figures between a low amount for a property, and a high amount for a property mean a lot to you -but not that much to the agent - especially when you consider how much they make if the house does not sell at all $0.00. Hence, your real estate agent will want to sell your house AT ANY COST. it matters much more to them that the house sells, rather than what they sell it for. You can see this below:

No Sale = $0.00
Sell at bad price = $15,300
Sell at ok price = $18,000
Sell at great price = $21,640

The Freakonomics authors refer to this study that also shows real estate agents reduce the value of a property sale. They also show evidence here and here why and how real estate agents try and sell houses for a lower price. Anyway, if you believe the Freakonomics guys (and associated research) or not, the logic I put upfront is - I think, compelling.

The Solution
Create your own incentive scheme for the real estate agent, one that will change their behaviour, and have them motivated to sell the house, at a high price, not be motivated to sell the house at any price. I personally have just negotiated with an agent and have put the following incentive scheme in place*:

1.0% commission for every dollar they get for selling the house up to $1,000,000, plus
10% commission for every dollar they gets between $1,000,000 and $1,150,000, plus
20% commission for every dollar they gets over $1,150,000

So if the real estate agent does there brilliant best and we sell the house for $1,200,000 they would make $35,000 (that's $10,000 (1.0% of 1,000,00) + $15,000 (10% of $150,000) + $10,000 (20% of $50,000), compared to the $21,640 he would have made if we had a flat rate of 1.8%. And believe me, if I sell this house for $1,200,000 I would be more than happy to part with $35,000:

No Sale = $0.00
Sell at bad price = $8,500
Sell at ok price = $10,000
Sell at great price = $35,000

What do you think?
So what do you think? If the house sells for an great price I owe $35,000 in fees rather than $21,640 in fees. However, everyone wins as the real estate agent is on my side. There is, from I can gather very little written about this confusing world. I would like to know from real estate agents, economists, and the general public if I am on the right track or not. In short we need to incentivise people to work in our interests, not against them. In the current paradigm real estate agents are incentivised to work against the person paying the bills (the seller) and in the interests of the buyer. It's a silly system and needs to be rethought.

Note the photo is courtesy of Mumbrella - spot the IT guy.

* Please note all prices are indicative - to make the point. Not actual prices.

Social Media Suggestions: How to Charge TARPS into BANANAS

2011-10-02T15:31:00.000+11:00

Caption Added: Click to make big (but you should be able to read it anyway)

Two key rules for social media are discussed in the article above originally printed in Adnews. It's also the reason why everyone now refers to TARPS as BANANAS.

The Happily-Healthy Project

2011-09-24T11:41:00.001+10:00

Recently Naked Communications have been working with Nestle and a number of psychologists and nutritionists to create Australia's most comprehensive study on happiness and health, The Happily Healthy Project. The study looks at the inter-relationship between health and happiness, and gives everyone who completes the lengthy questionnaire a HHQ (Happily Healthy Quotient). So far over 60,000 Australian's have completed the survey, an incredibly large number for a study of this nature.. Australian's have an average HHQ of 59, more results will be released shortly.

The study supplements work in Positive Psychology and the latest in nutrition, such as that released from Harvard Medical School where the relationship between happiness and health is proving to be inseparable "Want to improve your health? Start by focusing on things that give you happiness?"

The Happily Healthy Project also gives people advice on how to improve their scores, and will form the basis for future studies in this area. There are several psychologists and nutritionists involved in the project, but please go to www.happily-healthy.com.au to find out more.

You may see ads on TV like the one above reminding you to take the survey. Please complete it, and let me know if you beat my terrible 57!