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Grey Marketing & Revenge BUS-149: Week 6 Boris Maciejovsky
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Grey Marketing & Revenge Agenda
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Agenda Grey Marketing & Revenge
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
Replicated at check-out Hassle of paying is not an explanation
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
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Psychology of Money The Price of Free
We only see the benefits, not the costs, of things are FREE.
Seinfeld Parking
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Psychology of Money The Price of Free
Since FREE is special, we could use it to incentivize people.
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Psychology of Money The Price of Free
Also works for parts of products.
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Psychology of Money The Price of Free
Also works for parts of products.
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Psychology of Money The Price of Free
Also works for parts of products.
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Psychology of Money The Price of Free
Also works for parts of products.
?
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Psychology of Money The Price of Free
Going out for dinner
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Psychology of Money The Price of Free
Going out for dinner Why is a single payer best?
For recipients: Pain of paying is eliminated They get a FREE meal
For the payer: Warm, fuzzy feeling of giving Pain of paying has diminishing returns as price increases
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Psychology of Money The Price of Free
Going out for dinner Why is a single payer best?
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Psychology of Money Micropayments
Micro-pricing breaks up the cost of a purchase into smaller components.
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Psychology of Money Micropayments
Micro-pricing breaks up the cost of a purchase into smaller components.
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Psychology of Money Micropayments
Micro-pricing breaks up the cost of a purchase into smaller components.
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
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Psychology of Money Micropayments
Keeping prices equal simplifies the decision making process, making us more likely to buy.
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Psychology of Money Micropayments
App-store Consolidating multiple purchases into one invoice reduces the pain of paying. Gift certificates and pre-payment options reduce micropayments and therefore the pain of paying. Offering apps for FREE reduces the number that be sold for a profit.
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Psychology of Money Summary
The psychology of money is a topic where our intuitions are not always correct.
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Grey Marketing & Revenge The commercial cycle of cheating
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Grey Marketing & Revenge The commercial cycle of cheating
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Grey Marketing & Revenge The dark side of marketing
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Grey Marketing & Revenge The dark side of marketing
Grey marketing has always been around, but it seems to have become more popular and salient.
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Grey Marketing & Revenge Grey marketing
Misleading advertising Hidden fees of credit card loans “Fine prints” on agreements & promotional offers Requirement for long-term contracts for cellular services
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Grey Marketing & Revenge The dark side of marketing
Example
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Grey Marketing & Revenge The dark side of marketing
Example
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Grey Marketing & Revenge The dark side of marketing
Example “Get your first month FREE on a Comcast Digital Cable package with HBO!”
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Grey Marketing & Revenge The dark side of marketing
Example
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Grey Marketing & Revenge The dark side of marketing
People stopped believing marketing claims
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Grey Marketing & Revenge The dark side of marketing
What do you think happens?
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Grey Marketing & Revenge The dark side of marketing
Free money?
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Grey Marketing & Revenge The dark side of marketing
Free money?
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Grey Marketing & Revenge The dark side of marketing
Free money?
People are suspicious! Cynical! Magnitude of suspicion seems to be very high
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Grey Marketing & Revenge (Un)ambiguous statements
Endorsed by No-one Commercial company (P&G) Political party (Republicans) Political party (Democrats)
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Grey Marketing & Revenge (Un)ambiguous statements
Correct level would be 0.50 Above 0.50: too trustworthy Below 0.50: too distrusting
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Grey Marketing & Revenge (Un)ambiguous statements
If endorsed, reaction time increased -> subjects tried to determine how strong to discount the statements
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Grey Marketing & Revenge Source and judgment
Discounting of marketing claims
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Grey Marketing & Revenge Source and judgment
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Grey Marketing & Revenge Source and judgment
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Grey Marketing & Revenge Revenge
Exposure over years to un-met marketing claims (grey marketing) leads to revenge…
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Grey Marketing & Revenge The commercial cycle of cheating
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Grey Marketing & Revenge The commercial cycle of cheating
United breaks guitars David Pogue – Revenge Song
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Grey Marketing & Revenge The commercial cycle of cheating
Also applies to employees (Ryan Air)
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge Revenge
A real case…
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Grey Marketing & Revenge TASK
Revenge vs. Avoidance When do you expect them? For what customers/services? How do they evolve over time?
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Grey Marketing & Revenge Marketing fact
Customer satisfaction begets loyalty Loyalty begets profits
Why then infuriate customers? Confused & ill-informed customers are profitable (at least it seems)
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Grey Marketing & Revenge Sources for discontent
1. Cell phone service industry Customers choose a pricing bucket Predict usage Both over-usage and under-usage are beneficial to service providers
Customer complaints (verizarape.org) High customer churn
T-Mobile: no more contracts
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Grey Marketing & Revenge Sources for discontent
2. Retail-banking industry Minimum balance -> interest rate Fall below: penalties & service charges Are above: interest rate does not adjust “Courtesy” overdraft provisions
ING Direct
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Grey Marketing & Revenge Sources for discontent
3. Health club industry Short-term offers -> long-term contracts NYC council:
41% did not explain fees 81% no contract to read for home 96% did not inform about cancellation options
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
$10
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
$10
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
$40
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
$40
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game
$20
A B
$20
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game Let’s pause: What would you do?
A B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game Let’s pause: What is the rational thing to do?
A B
Backward induction Starting with player B
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game + Revenge
$40
A B
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Grey Marketing & Revenge Let’s play it
A B
Student ID ends in EVEN -> A
Keep Money
Send Money
Student ID ends in ODD -> B
Keep Money
Return Money
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game + Revenge
$1
A BBoris
$1 $2
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game + Revenge Would you be willing to do it?
-$1
A BBoris
$1 -$2
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Grey Marketing & Revenge Is Revenge Adaptable?
The trust game + Revenge Subcortical region: Striatum is activated That region is associated with rewards
Reward and revenge are two sides of the same coin Revenge is an enforcement mechanism
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Grey Marketing & Revenge Case Study
Car manufacturer “Atida” Proud 70 year history Better reputation for innovation & styling than for service But new changes
Comprehensive warranty Red Carpet loyalty program Call center in Bangalore New model: Andromeda XL
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Grey Marketing & Revenge Case Study
Escalated customer message 1 (Jessica)
Replaced Andromeda XL 3 months ago & new repairs needed Break pads needed replacing
Called customers service – 90min Local dealership won’t reimburse
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Grey Marketing & Revenge Case Study
Escalated customer message 2 (Tom)
5th Atida
Breakdown on way back from LV
Bad motel & taxi to LA in the morning
No reimbursement Unhelpful customer service line
Legal help & Lemon Law
Thinks of slick & nasty film for Youtube
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Grey Marketing & Revenge Case Study
How should Atida deal with its unhappy customers?
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Grey Marketing & Revenge Case Study
How should Atida deal with its unhappy customers?
Realize they are a service provider (not a manufacturer) Most people don’t even complain
They just stop buying & spread negative WOM Feedback is important
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Grey Marketing & Revenge Case Study
How should Atida deal with its unhappy customers?
Indirect word-of-mouth effect (WOM) Classify customers according to historical and future value (recency, frequency, value)
Helps figuring out prioritization Endorse reality of decentralized, peer-to-peer communications
Online dialogue
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Grey Marketing & Revenge Case Study
How should Atida deal with its unhappy customers?
Call center in Bangalore Reduces costs, but too distant?
Customers evaluate experiences according to fairness Distributive: evaluation of the outcome of an exchange Procedural: refers to processes used to reach desired outcome Interactive: treated with respect & empathy
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Grey Marketing & Revenge Summary
Grey Marketing Revenge
Marketing activities create/strengthen expectations on part of consumers If these expectations are violated, customers might be skeptical about products/services & might even retaliate Companies need to understand these mechanisms and mitigate them
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Wednesday Midterm 2 Please bring a blue-book for backup & ID
Next week: No class Next regular class on Wednesday (2/19)
