The weekend edition of The Wall Street Journal features an article titled, “Traponomics.” It’s a fascinating essay, adapted from the book to be published, “Think like a Freak,” by Steven Levitt and Stephen Dubner (of “Freakonomics” and “Superfreakonomics” fame).
The title is unfortunate, given the potentially constructive power of thinking shared in the article. While it does not mention the words marketing or branding anywhere, the premise is founded on human behavior and economic “game theory.” As a model to explain the idea, the writers use examples of forecasting potentially destructive actions, or sorting through cheating, or lying, behaviors. The same predictive analytics and modeling could be used to encourage positive actions, like volunteerism, or donating for a good cause — and yes, purchasing products.
Incentivization is nothing new to marketing, but consider the somewhat indirect — even Machiavellian — way that it takes place according to this article:
David Lee Roth
By the early 1980s, Van Halen had become one of the biggest rock bands in history. Their touring contract carried a 53-page rider that laid out technical and security specs as well as food and beverage requirements. The “Munchies” section demanded potato chips, nuts, pretzels and “M&M’s (WARNING: ABSOLUTELY NO BROWN ONES).”
When the M&M clause found its way into the press, it seemed like a typical case of rock-star excess, of the band “being abusive of others simply because we could,” Mr. Roth said. But, he explained, “the reality is quite different.”
Van Halen’s live show boasted a colossal stage, booming audio and spectacular lighting. All this required a great deal of structural support, electrical power and the like. Thus the 53-page rider, which gave point-by-point instructions to ensure that no one got killed by a collapsing stage or a short-circuiting light tower. But how could Van Halen be sure that the local promoter in each city had read the whole thing and done everything properly?
Cue the brown M&M’s. As Roth tells it, he would immediately go backstage to check out the bowl of M&M’s. If he saw brown ones, he knew the promoter hadn’t read the rider carefully—and that “we had to do a serious line check” to make sure that the more important details hadn’t been botched either.
From biblical references of King Solomon, to employee orientation at the company, Zappos, to Middle Age judicial systems, this article goes into case after case to demonstrate how one can devise a “self-weeding garden.” Or in other words, how to create situations to our benefit through subversive planning.
Another example refers to the work of Dr. Cormac Herley, a computer scientist at Microsoft, who sought to understand the dynamics behind the ubiquitous Nigerian email fraud. Why, he wondered, would scammers in Nigeria always refer to Nigeria in their offers, when the world is so completely saturated with the scam, immersed many times over with the email experience and subject line, “Your Assistance Needed.”
All marketers are aware of the cost to earn new customers. There’s always a cost metric that takes into account the investment over time to solicit new, loyal customers from among a larger universe of broadly defined prospects. In the realm of surveying and speculation, the article refers to this as sifting out false positives.
As it turns out, even scammers have a cost-to-benefit analysis to consider. The Internet may serve as a low-cost environment to spam millions, but as soon as those hooks are cast, the ones that take the bait require time and attention — a cost to lure them further. So how can a Nigerian scammer minimize his false positives?
Nigerian Internet Scam
Dr. Herley, while modeling this question, identified the most valuable characteristic in a potential victim: gullibility. Who else but a supremely gullible person would send thousands of dollars to a faraway stranger based on a kooky letter?
But how can a Nigerian scammer tell who is gullible and who isn’t? He can’t. Gullibility is, in this case, an unobservable trait. But the scammer could invite the gullible people to reveal themselves.
How? By sending out such a ridiculous letter—including prominent mentions of Nigeria—that only a gullible person would take it seriously. Anyone with an ounce of sense or experience would immediately trash the email. “The scammer wants to find the guy who hasn’t heard of it,” Dr. Herley says. “Anybody who doesn’t fall off their chair laughing is exactly who he wants to talk to.” Here’s how Dr. Herley put it in a research paper: “The goal of the e-mail is not so much to attract viable users as to repel the nonviable ones, who greatly outnumber them.”
There is yet another example that I think is brilliant, which refers to a trick that Zappos actually devised as a way to ensure that they have made the right hires. It involves an offer to pay a bonus of $2,000 to new employees who have just completed their training — if they simply quit the company and agree to an exit interview. It’s a sorting process. The ones that do leave the company provide the confidence needed by management that the ones who are left have a deeper commitment to their new roles at Zappos.
Smart? Without question. Sneaky? Perhaps, but when applied with the right intentions, game theory would seem to be a vastly untapped methodology to achieve results for all kinds of successful business initiatives and even philanthropic, socially redeeming goals.
Tags: customer actions, customer behavior, game theory, human behavior, influencing opinion, predictive analytics
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