Steven Diebold | Strategy Consultant

WHY WE BUY WHAT WE BUY

Value System
New studies offer insight into the subjective, and often less-than-rational, ways we decide what to buy and how much to pay.

Think of life as one long afternoon at the mall, shopping. I know, I know. Some of you will squeal that you hate shopping, indeed that you're appalled by the whole consumer culture. But protest all you want, there's no way around it. We all spend a good amount of time contemplating value. Is that mocha latte really worth four bucks? Will you finally write a $200 check to your chosen candidate? How about that $100,000 college education for your kid? Not a day goes by that we don't ask ourselves the question "So, what's it worth?"

Such questions have no absolute and universal answers, of course. That's what makes it so hard. Judgments of worth and value are a complex meld of attitudes and feelings about both money and thousands of commodities that defy comparison. How can you say if hiring a plumber is worth more than buying a radio or a pet cat? Or if any of those things is worth the money in your wallet? Yet we make these market choices every day, confidently exchanging one thing for another.

A lot of people are very interested in how we value stuff, including psychologists. If these are not rational decisions, what are they? How does the brain sort through the impossible confusion of life's marketplace and arrive at a choice? Two Princeton University scientists have been exploring this problem in the laboratory and may have some clues to the subtle and surprising nature of these everyday decisions.

Psychologists Daniel Oppenheimer and Adam Alter believe that many of the economic decisions we make have little to do with objective value. Market choices have much more to do with the brain's basic, internal perceptions of the world and the way those perceptions shape our feelings of comfort and ease. In this view, even currency has no clear and absolute value; regardless of those numbers on bills and coins, they derive their true value from the individual mind. In a series of experiments, these psychologists have been studying the marketplace cues that trigger psychological comfort or discomfort, and thus shape us as economic beings.

The basic idea is that it's human nature to get anxious and wary when the world is strange or challenging. We're more at ease around the familiar and comprehensible. But the cues that signal us to be on guard may not be obvious; indeed, they may be almost undetectable at times. It's these nuanced signals that the psychologists have been exploring in the lab.

Here's an example of their work. Oppenheimer and Alter asked a group of volunteers to estimate how much of various commodities they could buy with a dollar. They were given choices such as paper clips and gumballs and paper napkins. Some of the volunteers were given a regular old dollar bill with George Washington on it, while others were given less-familiar currency of the same value: a Susan B. Anthony $1 coin, for example, or a dollar bill that had been ever-so-slightly tinkered with. Invariably, the volunteers believed that the familiar dollar bill was worth more—that it had more buying power—than the stranger currency.

That doesn't make sense, of course. But it was not a fluke. They got the same result when they gave some people a rare $2 bill and others two singles. It's not as though people never see a $2 bill, and it does have Thomas Jefferson on it after all, but just the slight unfamiliarity of the denomination was enough to make people devalue it.

Why would this be? Oppenheimer and Alter believe this irrational behavior is rooted in our most fundamental mental processes: The world is full of stimuli of various kinds, some more familiar than others, and the brain is tuned to process the familiar ones rapidly, effortlessly and intuitively. More difficult or alien cues require more mental work, more plodding deliberation, and the brain switches to its more cautious and calculating style to be on the safe side.

This is humbling to know. But there's more. The psychologists wanted to see if the same cognitive bias shapes our perceptions and attitudes toward goods themselves, and they came up with a clever way to find out. In this experiment, they gave everyone the same currency—the familiar dollar bill—but they made the commodities more or less accessible in a very subtle way. Some of the "consumers" purchased the gumballs and paper clips from a form that was printed in a clear black font while others had to select from a form printed in a difficult-to-read grey italic font. The idea was to make the strangeness as subtle as possible, to reduce it to basic perception. Even at this most fundamental level, the differences shaped economic judgment: Volunteers consistently rated identical goods as less valuable when they came in an unfamiliar, cognitively challenging form.

These findings echo some earlier, provocative studies of the stock market. In those studies, Oppenheimer and Alter looked at new stock offerings and found that companies with easy-to-read names were valued more highly by investors, at least in the short run. That is, companies with names like Barnings Incorporated consistently outperformed companies with names like Aegeadux Incorporated, simply because the names are more cognitively palatable.

So what do all these odd findings add up to? Well, the cognitive biases are not a bad thing, even if they are a bit irrational. In fact, they are essential to our everyday economic decision-making. We'd be paralyzed if we tried to make every market choice logically and the economic world would grind to a halt. But they should raise a cautionary flag about the very subtle ways marketers might manipulate our choices. Something to think about as we head off to the mall, not just this holiday weekend, but every day.

Wray Herbert
NEWSWEEK WEB EXCLUSIVE

The 4 People Every Business Owner Needs

Some 41 years after the Beatles introduced With a Little Help From My Friends, the concept still applies to new entrepreneurs, perhaps more now than ever. The increase in competition and the higher startup costs have made opening a business a worrisome task even for the most confident industrialist.

With so many facets to running a business--including sales, marketing, technology and protecting your physical and intellectual properties--having the right people in your corner can be a tremendous asset, providing both emotional support and business know-how. Unfortunately, many new entrepreneurs go it alone, without that emotional backing from friends or family.

"Getting this business off the ground was the most frustrating and lonely period of my life," says Paul McGrath, founder and owner of RideSpring, an online company providing carpool matching and scheduling, plus incentive programs for environmentally friendly commuting.

"I had great confidence in the concept and the market potential, but I was taken aback by the huge resistance to a new idea! I had no support from my friends, and in fact most of my old friendships fell apart," adds McGrath, who finally found some receptive drinking buddies plus a woman named Susie Leijten, a personal coach, whom he met at an improv class.

"She would help by role-playing various sales scenarios with me before my meetings with potential RideSpring clients. It was extremely helpful," McGrath says.

Those who are lucky enough to have an encouraging environment early on as they build and shape a business rarely realize their good fortune until much later. Typically, there are four common types of supporters who serve as emotional backers and/or advisors. If you are fortunate enough to find all four, you may have your own little village to help you raise a business.

"The Cheerleader"
Athletes have them, so why shouldn't you? Cheerleaders are those individuals who rally behind your ideas and believe in you as an entrepreneur through the initial startup struggles.

"I began talking about starting my own company right after college. My friend Andrea was a trusted confidant who recognized my entrepreneurial spirit. She really believed in me before I even believed in myself," says eco-designer Kelly LaPlante of Kelly LaPlante Organic Designs, based in Venice Beach, California.

Andrea not only served as a cheerleader when LaPlante was starting the business, but also continued to provide support as the business grew. When LaPlante introduced one of her new collections at the Sundance Film Festival, Andrea took on the job of handling the press for LaPlante, who couldn't afford a PR representative. She even cooked dinner for LaPlante's staff when they were exhausted after the festival.

"Clearly you need to have positive-thinking people around you at all times," says New York City business coach Marian Banker, who works with small business owners through her company Prime Strategies. "Your cheerleaders give you encouragement. You'll notice the word courage is in there, which is also something very important that a cheerleader helps you develop."

"The Role Model"
If he or she is actively teaching or training, then you might consider the role model to be a mentor. Often, however, someone is providing tremendous support through the simple concept of "do as I do." Lance Eng, a real estate broker from Los Angeles and author of Company You, a guide to managing your life by the guiding principles of successful businesses, learned what it takes to run a business from his own role models, his family.

"My family was very supportive because they provided me with business know-how and showed me how sheer determination could pay off," says Eng, whose parents moved to Minnesota from China and worked 12 to 14 hour days to run their own restaurant.

"They did it not to make a million dollars, but because they had four children to feed. Failure was not an option, so I learned from watching them, and helping them, how to build a business around a strong work ethic."

Eng believes it's very important for a business owner to build his or her own personal little board of directors, so to speak, to have key supporters around.

"The Expert"
There's a fine line between tapping into a friend's expertise and taking advantage. Yet some friends (or relatives) are more than willing to go the extra mile by providing their expertise in a specific area.

"We talked with friends who were realtors and attorneys because we wanted feedback on our business idea," says Lila Cummings, who, along with her friend Susan Church, co-founded Get a Move On Inc., a New York tri-state area moving business designed specifically to walk seniors through the process of planning, organizing and making a move.

"We got support and good advice from several experts that we knew personally," Cummings says.

However, it was the husband of a good friend who provided the much-needed business expertise.

"He talked us through a lot of the big picture stuff, such as our focus and a way of defining ourselves in the market. We were able to bat ideas off of him and he made us think about a lot of areas of business that we had not thought about when we were starting this business four years ago," explains Church, adding that they later hired him, when they had enough money, to set up their website.

Experts often provide the missing pieces for entrepreneurs who are focused on, and anxious about, getting the business off the ground and keeping it afloat. They fill in the gaps by asking questions that start with: "Have you given any thought to…"

"The Techie"
"Good technical help is difficult to find, and when you find it you want to hold onto it as if it's gold," Banker says. Although your "techie" may be considered part of the "experts" category, someone with the ability to provide such technical help in today's business world can be a godsend.

"I always looked for people with characteristics that I didn't have," says Jerry Jenkins, founder and CEO of The Jenkins Group, a custom publishing company based in Traverse, Michigan. "And I had zero computer skills. The son-in-law of a friend of mine was living in my neighborhood when I was starting the business, and he had the technical skills that I didn't have. He helped by showing me how to do an e-mail campaign, launch and run an active website and then optimize the site."

Jenkins hired this technical whiz, who has been an integral part of the company ever since.

Although many business owners dabble in technology, having someone who keeps up with the latest developments can free you up to focus on the big-picture issues that make up most businesses, even very small ones.

Though it's true that other than cheerleaders, you can hire experts and tech support and even pay for mentoring, having these people in your corner in the early stages of launching a business is both comforting and cost-effective. Some people are fortunate to have such supporters, while others may simply need to look more closely at those people already in their inner circle . . . or get out there and do more networking.

NEW WEBSITE OVERHAUL

We just wanted to post a little news release that we will be changing our blog to be more aligned with our new direction. We are a global brand consultancy specializing in e-commerce, technology, digital marketing and strategic advisory services. We will be blogging on these particular topics in weeks to come.

We will also be considering launching a video blog with bi- weekly updates on what is going on in the entertainment and technology industries. Look out for it in weeks to come.

I've also decided to open up a web clinic channel where we go over user experience design and conversion issues with current websites.

So in summary

1. The new blog will be focused around brand issues, e-commerce trends, current technology and how to use it properly, digital marketing and strategic application of all these areas properly to optimize your online business and engage your customers with a rewarding brand experience.

Happy Memorial Weekend.

How businesses achieve breakthrough performance by synchronizing value proposition and design fundamentals

This week started off pretty interesting with a visit to a market research facility where I was invited to participate in a study for SUV owners. I own a Jeep Liberty 2007 Sport 4x2 and I passed all their screening questions to be selected for this research test. We started off with the typical bagel and cream cheese dance after filling out our required paperwork to disclose our personal DNA for why we bought the car we did. All ten of us entered a small room where we were greeted by a nice middle-aged man named Jeff. I unexpectedly found this would be one of the most interesting discussions I’ve had in the past month about design fundamental cues and value propositions.

We were asked all these different questions about our attitudes and what we use our current car for. When we were done we were whisked outside to a parking lot full of 6 SUV’s and crossover cars all with the brands blocked out and brand cues taped off so we couldn’t tell whom the manufacturer was. We were given a clipboard with a bunch of questions on it and were asked to go around to each car and view it from 6 different angles to give our opinions on many different aspects of the design or concept. When we were finished with that exercise we were whisked back into the room again to discuss that exercise and drill down a bit more into our perceptions about SUV vehicles and what is a REAL SUV and what is a fake. Then we were asked where would we go if our ideal vehicle could take us there and what would that feel like. I head a lot of interesting answers from getting away from everyone to going on adventures in the snow to plowing through tough terrain in the outback after some intense hunting or fishing. Most of these people were under 40 except for one man in his 60’s. One guy was in his 30’s and an intense off-road enthusiast who spoke about all kind of gear differentials, skid plates, and ground clearances he would need to do some of the things he envisioned himself doing with this ideal car. Many would classify themselves as light to medium off-roaders while only a couple were intense.

After this exercise we were whisked outside again to review each car with Jeff to point out things we liked or disliked about each car and why. Before we started he asked us which were our favorite cars out of them all. I was fascinated by the answers to come. We looked around the lot and saw what appeared to be a FORD ESCAPE, a LANDROVER, JEEP COMPASS, NISSAN ROGUE, JEEP WRANGLER UNLIMITED and a NISSAN XTERRA. Only 2 cars were picked as the top favorites while everything else was not really even a consideration. Everyone picked the Jeep Wrangler Unlimited 4door and the Xterra SE. He would ask us to walk up to the car and point right to the areas we had an issue with or liked a lot about a car. We started off with what appeared to be a Nissan Xterra. Everyone commented on the overall concept that appeared to be sturdy and tough. They liked the rugged design cues of the SUV and commented on how much they liked the tires that even said RUGGED in big white letters. All the cues were pointing toward being a REAL SUV. The roof rack appeared to be really cool and the roof had an interesting slope to it that went up when it came to the rear doors. They liked the bump in the back of the car cause it seemed original looking. This is where the 1st aid kit is at inside the rear door. Everything was lining up to point towards being a REAL SUV.

But then we got to the JEEP WRANGLER, which was everyone’s TOP PICK. When we walked over to this cool looking car everyone agreed hands down it was the most authentic looking SUV on the market. Everyone commented on the original feel of it and its heritage and personality. Many said there just isn’t anything like it on the road today. We pointed out the design cues that lead us to feel this way. Some pointed to the hooks and hood latches, tire sizes, bumpers, toe hitches, convertible roof top, full spare mounted on the back, the block look of square designs and the non sleek or aerodynamic appearance. Then our off-road enthusiasts piped up and when into this long technical explanation about uni-body construction versus chassis on frame and why they are different. Many said every feature and design element from the dashboard to the exterior had the full utilitarian look, feel and performance they would expect from an SUV. There wasn’t anything just stuck there to try to be an SUV. All agreed that the JEEP WRANGLER had the most authenticity hands down.

When we were done with this exercise we test drove some cars and came back to do our final evaluation. Now they would test us to see what 4 elements would affect our purchase decision for a car like this given all other things were equal. On a computer they mixed and matched concept, brand, drive train and price to see which one would impact us the most. What I found most interesting was that when they mixed a concept and said it was from a certain brand I actually would not buy it because of my perceptions of value I get. The design could not overcome my perceived value feelings about the brand. When they attached another brand to it though I would pay even more for it. I actually would have paid $10,000 more if the JEEP Wrangler concept had the TOYOTA brand on it because of the value proposition a Toyota brings with it and the design characteristics that match my desire for functionality and fun. If the Jeep concept had any other brand matched with it I would not pick it no matter how cheap it was. The price I was comfortable with under the Jeep name was $22,500 but under the Toyota name it was $31,500. So you can see when you match PERCEIVED VALUE to DESIGN the worth of something can jump through the roof. No one was willing to even consider the other design concepts because they were not in synch with the perceived value once expects from an SUV in design and functionality. What is valuable for one group is worth nothing to another. In this category of SUV’s it was easy to see what everyone valued design and functionality wise and how that was totally in synch for the Jeep Wrangler- which made it stand out amongst everything else there as the clear winner.

I plan on getting my Jeep Wrangler 4door when my Liberty lease is up next year.

Steven Diebold :Brand & Interactive strategist brings over 20 years of proven business, creative, and human relations expertise to the table. He is the founder of d’bold strategic communications- a strategic advisory and interactive firm. Steven has coached numerous entrepreneurs and professionals to launch new ventures and develop their digital brands. His gift lies in identifying and communicating value propositions and assisting people with all levels of experience in taking their ideas from mind to market.

100 best places to live and launch a business

Are job worries tempting you to start your own company? We canvassed the country to find towns with the best mix of business advantages and lifestyle appeal. Check out our 100 top picks and find the perfect place to build your dream.
1 of 100
1. Bellevue, Wash.

Population: 111,608
Pros: Talented workforce, growing downtown
Cons: Pricey homes, high cost of living
Like many of the places on our list, Bellevue is a city in transition: no longer a bedroom community, but not yet a crowded, expensive metropolitan hub. Bellevue has grown with unusual grace in recent years. Huge corporations exist symbiotically with startups, a booming downtown abuts healthy residential neighborhoods, and the rising skyline is tempered by an abundance of parks, as well as lakeside and mountain views. Flash retailers such as Neiman Marcus draw regional shoppers, but Bellevue's excellent healthcare and schools are key attractions for relocating families.

While local businesses must pay the statewide Business and Occupations tax on their gross receipts, there's no corporate income tax. Businesses with less than $135,000 in taxable revenues (the highest threshold in the area) don't have to pay the B&O tax. Easy airport access and a highly skilled workforce make Bellevue an attractive option for startups looking to break big. -Mina Kimes

Marketer’s Intuition Revisited - Is There a Place for Intuition in marketing communication optimization?

Intuition (knowledge) - understanding without apparent effort, quick and ready insight seemingly independent of previous experiences or empirical knowledge.

So how do you really know when a marketing piece is going to strike a cord with the person or group of persons you’re targeting? The only way is if you actually get a response right? But in that time to build that piece you are imagining how well this piece will connect and motivate the target to take an action. An action hopefully that results in a sale. But how can one be sure what they just spent hours on will actually translate into someone taking action? It's a best guess scenario every time. But why is it some guess better than others and they get better results than then next marketer? Is it their experience, skills, knowledge, or is it something else that comes naturally for some? Could it be their intuition to just know when something just works or doesn’t work? Or is it a unique blend of everything together working in perfect harmony? What about the market research you did and your ability to translate that insight into a marketing piece that actually connects with your audiences’ pain or challenge or aspiration? Does the quality of that research matter or will intuition play a bigger part in the marketers’ choices in assembling a marketing communications piece?

Well I recently attended a research study webinar where they tested this idea of intuition out on over 200 marketers on the call and the results were staggering. The instructors began by showing a few different landing pages on the participants computer screen and asked all the marketers on the call to vote on which version they thought would perform best. They had a control page, and then 3 other versions of the landing page with various changes made to them. These pages had already been test on the Internet and test results collected by defining which pages converted the best. They wanted to see how well each marketer could predict the success of that communication piece based solely on their intuition and looking at the pages, as if they were going to make the final decision. All the marketers put in their votes one by one. Then it was time to see how they all did.

To everyone’s amazement on the call less then 30% of 200 marketers got the right answer. More than 70% failed to recognize which page would perform the best. Now why is that? We were studying the strength of the marketers’ intuition to predict which piece would be the most effective. Now if more than 70% failed to recognize which one would be successful, how could any of these marketers be successful at creating effective marketing communication pieces when they struggle with identifying and communicating an effective value proposition? The role of the marketer is to make his best prediction what will or won’t work and then taking it to print or web and spending thousands of dollars to see if it works or not. Is there possibly a better way to enhance ones ability to understand what will or won’t work and be more accurate than 30% of 200 marketers? I think so, but how you might ask.

Intuition is something we all have but need to develop. Intuition defies science many times because we cannot know how someone just knows something and they are usually right. Many go through years of training yet they never develop their intuition because they might not have a strong one or their confidence in their judgment is lacking due to many unsuccessful attempts before.
People usually develop self-efficacy by demonstrating their ability and then being validated in someway by others response. If you have more failure than success you might be building more character than intuition, which of course is never a bad thing, but you might not be building the self-efficacy along the way to really create solid intuition. So what does someone do who does not have a string of successes that have informed their ability to make accurate judgments? How do they know their judgment is impaired or how to fix it?

Most often this comes from a lot of unsupervised thinking along the way of life or their marketing philosophy is impaired because they do not understand that all marketing is TESTING, TESTING ,and more TESTING. Some just make their marketing communication piece and when it doesn’t work they have no idea why. The insight as to why its not working is worth millions of dollars to your company as well as promotional consideration for yourself to move up in your company. If the criteria you are using is fouled to judge marketing communications then the marketing piece itself will be fouled as well because you will be making a house out of sticks instead of bricks and building it on sand instead of cement. The foundation itself is flawed. Garbage in garbage out they say. Testing is really the only way out of these bad habits or old marketing philosophies that don’t seem to generate results. But you have to know what to test or even your test will be flawed. How can one build his intuitive powers so he can even setup a valid test?

One must really take a look at his criteria he uses to make or break marketing pieces to make sure that criteria is based on sound principles or just best guess work they might be calling intuition. Intuition is not a guess though. For someone to intuit you have to be correct in your interpretation otherwise it’s just a best guess. There is a difference. If you keep intuiting and keep getting it wrong then you are just guessing and your confidence in your own intuitive abilities will falter and you will not trust yourself or your judgment. You have to have a string of successes to improve ones intuitive confidence in generating and evaluating marketing communication pieces. Without that you are just doing what some call Spaghetti marketing. You will just throw whatever at the wall to see if it sticks. This is not testing. This again is guess. Testing is based on solid principles with scientific and intuitive reasoning behind it with quantifiable outcomes that allow you to measure your hypothesis.

IMAGINE YOU WERE BEING ELECTED BY A CLIENT. WHAT WOULD YOU CAMPAIGN ON TO WIN THEIR VOTE?

Look at the left side of the photo below in the area with checks and x's and imagine your business was competing on a particular platform to get elected by clients to perform a service. What would be the main things you would campaign on? how would you know what is really important to the client? If not healthcare, might it be delivery time? or perhaps your experience and personality combined with your being very likable?

Many service businesses do not know what to campaign on that makes a customer pick them over any one else doing the same thing. They pick bland things like customer service or price or friendly place to frequent. None of these things might be the reason someone actually does business with you. The only way to know is through research and interviewing your customer base. You might be surprised at the answers.

Run a survey to see if your customers would refer you to a friend for their next project and why they would elect you. Then compare that to what they have actually already elected you to do to see if there is disconnect with their answer. It will tell you how they perceive your services and how they might NOT be able to identify how to refer you for the right things. I'm sure everyone has an opinion on the future potential presidential candidate. Do they really understand the issues they are campaigning on?

YOUR BUSINESS IS RUNNING FOR ELECTION EVERY DAY

Daniel Goleman: Why aren’t we all Good Samaritans?

Fascinating to understand how the power of helping others will grow your network and business beyond your dreams. Many times we are so focused on ourselves that we forget to notice another person. This can be a family member or a customer. Not recognizing one of these types of people in your life tends to cost you in different ways. Compassion can be profitable for your business and relationships.

What I find equally interesting is how this presenter uses the story of the good samaritan to illustrate a point. Story is a part of how to connect with your audiences or customer. You can weave stories of your compassionate self into the framework of your company to improve your brand perception. Look for ways how you can weave stories how you helped a customer who was in a jam into your marketing materials. They will be far more compelling and truthful than anything else you can dream up. ITS RELEVANT...

Jeff Skoll: Making movies that make change

Fascinating to see how he uses the POWER OF STORY. Story is at the center of everything on this planet. There is nothing here that does not have a story behind it. Listen to his story to see how you can use stories to drive your brand or ideas into the minds of those you want.