SD#5: instincts, statistics, and gratitude journals
February 13, 2022
Hi friends,
Welcome to the fifth edition of Seven Dawns, a weekly newsletter on marketing, psychology, copywriting, productivity and everything in between.
Our seven ideas this week:
1. (Marketing) In one of my previous newsletters, I spoke about brand loyalty as one of the most overused metrics/concepts in marketing. The 80:20 rule (Pareto law) could challenge brand loyalty for that claim. In various conferences, you hear marketing leaders proclaim how the bottom 80% of customers deliver only 20% of the brand’s sales, thus focusing only on that top 20% makes sense. Byron Sharp in his book ‘How Brands Grow’ again proved this law to be untrue. In reality, over long periods of time, across multiple brands and countries, the Pareto share comes closer to 60:20 (over a short period of time it is as low as 40:20). The implications are that, despite most buyers being occasional customers, they still account for over 40% of turnover. Focusing on these light buyers will be the primary source of growth and a huge portion of your revenue for the future. |
2. (Psychology) Last time I also discussed how rationality has entrenched the business world into one way of thinking. We discussed the implications of it, but why do we behave that way? Philosophers and social theories have long pondered the place of rationality in human behaviour. While it is still up to debate, one idea I heard focused on how our instincts are inherited but rationality tends to be learned. If we teach ourselves to post-rationalise after making our decisions, that kind of makes sense? Or is this me post-rationalising it myself? |
3. (Marketing) One of my favourite quotes of all time comes from the advertising legend David Ogilvy – ‘people don’t think what they feel, they don’t know what they think and they don’t do what they say’. One could write a whole article to deconstruct this quote (should I?), but the main point is that whether we like it or not, we are irrational creatures. We behave spontaneously to minimise required thinking and then post-rationalise our decision if we’re ever asked. These insights are particularly dangerous when marketers employ market research to survey potential clients. Surveys ask us to describe why we did certain things, but all we end up doing is post-rationalising what we think happened. This leads to inaccurate decisions being made following research. People might say they chose a specific shampoo bottle because it seemed like the best value one, or that they liked the smell, or because it had sustainability certification; in reality, our brain made that decision way before we thought any of that. Perhaps our parents had a similar colour shampoo during our childhood, or our last partner had a similar smell. Reasons are many and unbeknown to us. |
4. (Marketing) Display advertising could be the most confusing area within digital advertising. There are generally two ways display advertising is bought by companies – via an ad network or programmatic. The two are quite different: going via an ad network means engaging a third party that has agreements with a vast number of websites and buying advertising slots from them. Whereas programmatic is an automated way via algorithm-based technology, almost like an auction, to place your advert where you want and at the best price. Ad network is the one full of fraud, where millions of pounds are lost every year into the overly complicated abyss of display advertising. |
5. (Economics) Economic theory has shaped the world we live in today and there is no understatement saying that. That being said the way economics sometimes looks at numbers can be deceiving. It might count 10 people doing 1 thing the same as 1 person doing the same thing 10 times. 10 people purchasing 1 broom might be counted exactly the same as 1 person purchasing 10 brooms. The first scenario is a plausible one, whereas the second might require a check if the person is ok. The real issue appears when we use such counting in large scale business decisions. |
6. (Psychology) Keeping a gratitude journal increases your happiness levels. Studies have found a robust connection between higher levels of gratitude and wellbeing, including protection from stress and depression, more fulfilling relationships, better sleep and greater resilience. Simple things, such as writing down a daily list of three things for which you are grateful, can increase life satisfaction, decrease worry and improve body image. |
7. (Education) Over the last few decades, the price of higher education has gone up by 1400% but the product has largely remained the same. This sector has one of the highest needs for innovation and shake-up (together with medicine). US Ivy leagues have acceptance rates of 4% to 10%. A university president bragging about rejecting 90% of applicants is tantamount to a homeless shelter taking pride in turning away 90% of the needy that arrive each night. Scott Galloway, one of my favourite entrepreneurs (plus professor of marketing), believes that higher education goals should not be about taking the 1% and turning them into billionaires. Instead, our collective goal should be taking the bottom 90% and giving them a shot to be at the top 10%. We need to dramatically increase admittance rates and dramatically reduce tuition costs. The only losers in this situation would be higher education deans and directors. |
Fun things to click on:
Is pineapple on pizza good? Marvel or DC? Is Die Hard a Christmas movie? Let’s settle this. Some crowdsourced advice for when you’re stuck on a project. Pinterest predictions on 2022 trends.
Thanks for reading! If you have any learnings you’d like to share with me, or disagree with any of the ones above then do drop me a message.
Loving this newsletter? Then why not share it with your friends.
Speak soon,
Tom