the mountain view

iNudge - How Apple uses psychology to crush the competition

Patrick Fagan in London Today the business pages are full of doom and gloom, with household retailers reporting store closures and electronics giants facing liquidation. Yet one brand has, over the last decade, instigated a revolution in high-street shopping, not just burying the competition, but perhaps also showing how other brands can dig themselves out. Shoppers are little monsters. Theyre both powerful and unpredictable like a monkey with a bomb. Just what exactly do they want? Do they even know? Retailers all over the world nervously throw $billions into market research, price promotions and advertising but for the most part shoppers seem almost impervious to these weapons. Luckily, there is an alternative, a group of concise, direct and extremely effective solutions that we call silver bullets. What is remarkable is that despite their effectiveness, they are known to only a limited number of executives and marketers, among them the leaders at Apple Inc. Ten years ago, Apple was nearly bankrupt; now, Steve Jobs and his team are sitting on a $40billion cash pile. There are many reasons for Apples success (innovation and physical availability being two of them) but competitive pricing via discounts is not one of them.

We speculate that one of the main reasons for Apples success is the use of these silver bullets the non-conscious tools that smart retailers are now using to nudge customers towards making a purchase. There are two main ways in which these non-conscious influences can be applied. Firstly, they can increase store traffic; secondly, they can increase instore sales. This idea is intuitive; we call it the pathway to purchase. To get to the end result (a sale), the customer first must be led down a certain path. Dating gurus understand this: they teach that you must progress from a conversation, to an email, to a date, to coffee at their place, to...

Every iPhone sold, requires as many shoppers as possible to play with it in store (act), more of them to have entered their stores (consider), still more to have sought out information (respond), which in turn is a consequence of hundreds of thousands of shoppers remembering a communication about the brand (notice). Our research indicates that the more buyers you want, the more store visits you need, and the more people you must reach with your message. Psychological tools can be applied at each stage, amounting to significantly increased sales. Scarcity is a heuristic (a mental rule-of-thumb) where greater value is ascribed to things which are in limited supply. Apple used scarcity very shrewdly with its iPhone 3G.

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They made sure that demand exceeded supply, even producing pre-printed out-of-stock posters to put in iPhone retailers shop windows! Making the product scarce in this way increased its value and sent customers to stores in droves. Reciprocity is where people are more likely to make a purchase having been given a prior free gift. Apple allows people to check their email on computers in store, as well as providing free advice, iPhone charging and tech support. As one sign put it, Only the Apple store gets you up and running before you leave. This degree of personalisation, and the variety of free services, leaves shoppers indebted and more likely to buy; as well as increasing liking and positive affect.

The Apple store moved the electronics retailing forward by giving the customers enough unmonitored examples of all their products, that anyone who enters the store can use them at will. Playing with an iPhone is a physical commitment, from which purchasing is the next and most consistent step. Fluency is a heuristic wherein the more mentally and physically simple you make something, the more likely people are to do it. Apple has always sold itself on easy of use, with Mac files organised in as simple and intuitive a fashion as possible, and iPhone users having simply to press large coloured toy-like buttons to access their Apps.

This simplicity is reflected in Apples look and feel, their marketing, store layout and their pricing Commitment & consistency strategy (each range rarely excauses us to experience psy- ceeds five options, and model chological tension if we do not names rarely change). By reremain consistent with a posi- ducing the mental processing tion we have adopted. Physi- involved in both using and buycally interacting with a product is ing their products, Apple make a commitment. themselves hard to resist.

Suggestion. There is an old maxim in retail that says unseen is unsold. Its called mental and physical availability the more a customer can notice, reach and think about a product, the more likely they are to buy it. Apple products are ubiquitous and appear in many movies and TV programs, and these links are leveraged in store. The products are set out such that you are encouraged to pick them up and play with them. An iPad might have Angry Birds out ready to play, or an iPhone might have a conspicuous email saying I thought youd be interested in this presentation with a file attached, encouraging the customer to pick it up and quickly experience the products features first hand. By getting customers to engage with the products in this way, there is greater cognitive processing and mental availability is increased. This puts Apple at the forefront of peoples minds, enhances attitudes towards them, and makes customers more likely to buy them.

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Copyright 2011 Mountainview Learning, all rights reserved. No part of this material may be reproduced, stored in a retrieval system or transmitted, in any form, or by any means without the prior permission of Mountainview Learning.

Social proof is a heuristic wherein the value of a course of action is dependent on the number of people doing it. When Apple used scarcity to increase the iPhones value, people queued for hours outside stores to make sure they could get one; these record queues made news headlines. Through the social proof principle, these queues increased the perceived value of the iPhone, driving yet more traffic to the stores. In store, social proof is again used very effectively. The products are laid out for customers to play with, the store is open plan, so that from any vantage point you can see many people playing, experts are on hand to help overcome any problems, and lectures are taking place on the latest developments. Being surrounded by so many Apple disciples exerts a powerful pressure to follow the crowd.

Liking. We are more easily influenced by people we like. Apple employs trendy, friendly, attractive young people. We tend to like attractive people, and this increases our tendency to comply. Staff seem to be trained to smile something proven to increase bar tips by around 140%. When we see someone smiling, the smile mirror-neurons in our brains are activated, which puts us in a good mood and lowers our resistance to persuasion. People rate products more highly when theyre happy, as they misattribute their good feelings to things around them, and, importantly, they spend more money! Authority is a tool of persuasion wherein people comply when the source of the request is seen as trustworthy and credible. Apple uses this extremely well to position their products as the epitome of the industry.

Theyve created a there is us and then there is everyone else culture, which helps to convince shoppers that a purchase is the right thing to do. The employees are named Specialists they give lectures, training and work behind the Genius Bar. Price psychology heuristics are also used by Apple to increase products value and encourage sales. There are no price tags; the prices are instead embedded with stats such as screen size and weight as an insignificant detail. Prices are also made less salient by using small pound signs next to the number. Additionally, decoys are used. This is where a less attractive alternative is added to a choice set, so that people will view the target product more favourably. For example, people will be more likely to buy a 16GB iPhone when it is presented next to the more expensive 32GB model.

mountainviewlearning
teaching brain science to business

Mountainview Learning Ltd. F160 154-160 Fleet Street, London EC4A 2DQ www.mountainview.co.uk Email patrick.fagan@mountainview.co.uk

Emotions. Hedonic consumption is no secret in marketing, and yet Apple are world-class when it comes to engaging the emotions. Their adverts use emotions to get noticed and remembered, and to sell the experiential benefits of the product. For example, one advert has a grandfather using his iPhone to see his grandsons face for the first time. And once customers are in the store, this emotional engagement continues. The posters on the walls, and the products laid out for use, all depict emotional scenes of family bonding, play and childlike excitement; the products are described as magical with even more to love; and the Beatles are strumming away in the background. These products are arguably not for children, and yet pictures and videos from films like Toy Story surround customers, and products are laid out with simple, colourful games ready to be played. Apple cleverly market these products as a connection to the emotionallyladen play of our youth. Apple shops also masterfully appeal to our sense of beauty. Posters adorn the walls like artwork; the iPhones and iPads themselves sleek, black Kubrickesque monoliths are displayed on wooden alters as the focus of the store. The store in London has a large glass staircase like the V&A museum, and in New York a glass cube architecture mimics the Louvre Representativeness says, If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. As discussed, we make heuristic inferences about the world around us.

If you want your customers to value your product, then all you have to do is make it representative of something of high value. Apple achieves this using fashion, religion and art. Customers make pilgrimages to the Apple flagship stores, which are located amongst stores like Karen Millen and Ted Baker, imitating the high-end value of their products. In-store, iPhones are sold alongside designer-label laptop bags (e. g. Paul Smith) and Dr Dres exclusive Beats headphones. Behavioural economics is a well established academic field. Yet despite three decades of ground breaking research, very few business people are keyed into it. A growing body of research indicates the silver bullets which the discipline has uncovered can nudge people into buying they cost very little to implement and your competitors literally wont know what hit them!

At Mountainview, we are a team of experts in the field, a group of Black Swans with PhDs and MScs. As well as research in areas as diverse as eye-tracking, fMRI and in-store experiments, we also provide tailor-made training to clients, most of whom are market leaders. Our breakthrough training programmes such as WHAM (Winning Hearts & Minds) enhance communication and persuasion skills to help retailers get more customers into their stores; and Nudge teaches retailers all they need to know about in-store heuristics to drive value perceptions and sales. As one market leading retailer said of our work The impact on our thinking, and our results, has been breathtaking. To arrange a meeting to discuss how heuristics can transform your sales, and grow your organisation, email: evgeniya.petrova@ mountainview.co.uk or call: 0207 884 9165

mountainviewlearning
teaching brain science to business

Copyright 2011 Mountainview Learning, all rights reserved. No part of this material may be reproduced, stored in a retrieval system or transmitted, in any form, or by any means without the prior permission of Mountainview Learning.