5 Marketing Psychology Strategies You Can Use Today with Phill Agnew, Host of Nudge | Ep. 340

0:00Yes, we are back with another episode of the Marketing Millennials podcast and today's guest is my good friend, Phill Agnew, host of the Nudge podcast and one of my favorite people to jam with on psychology of marketing. We dig into why loss aversion works better than gain framing, how to use the endowment effect to make your product stickier, and a bunch of other principles that can change how you think about marketing. If you could take one of these principles and apply it today, I would consider this podcast a success. So let's get into that. Welcome to the Marketing Millennials, the no BS marketing podcast.

0:36I'm Daniel Murray and join me for unfiltered conversations with the brains behind marketing's coolest companies. The one request I tell our guests, stories or it didn't happen. Get ready to turn the f*** up. back for round two i have my good friend phil on the podcast we're going to go into some spicy things that he has when it comes to psychology and marketing but i'll let him introduce himself first welcome back phil all right daniel thank you so much for having me back on um for those of you who are long-time listeners you might have heard my voice before I'm Phil Agnew. I spent the last decade in marketing and I've got a deep interest in behavioral science.

1:25So basically understanding how people make decisions. I talk about that mainly on my podcast, which is called Nudge, which is the UK's number one marketing podcast. I love that. See, I like that hook. I've tried to fight him in the UK for his podcast rankings, but I can never get close. I love that. You need AI to give yourself a lovely British accent. and then you know i feel like if i could just release it in two voices that'll be fine but i want to go into some topics i think the first one rabbit hole i want to go down is loss aversion beats gain framing and what is loss aversion what is gain framing and then why does it beat gain framing yeah you know you and i i think when we were discussing this episode we wanted to cover some of these principles that are proven to work in psychology but often overlooked by marketers so what are some of the things that maybe marketing textbooks tell us to do or just as marketers we feel like gut instinct we should do that and one of those things one of those things i've always traditionally thought as a marketer maybe it's because i've been taught it when i was at university is when you're promoting your product or service you should also you should always try and talk about the things that the customer will gain from buying your product we've all seen that Super Mario meme of Mario before eating the mushroom.

2:44This is what your customer is now. Your product is the mushroom or the flower and here's what they could become. And so we always talk to talk about games. Here's what you could gain. Netflix will give you a thousand new shows to watch. Amazon will give you the free delivery. But what you actually find in psychology is in many examples, it is more powerful to talk about what the customer might lose if they don't purchase your product rather than what they'll gain if they do. So this is known as loss framing. And the reason this works so well is because of loss aversion. Loss aversion, classic principle discovered by Tversky and Kahneman, published in the famous book, Thinking Fast and Slow.

3:22And that's the idea that losses feel twice as painful as equivalent gains. So if our bosses came on screen right now and told us that we would gain an extra$50 this month in our wage, we'd be a bit happy, but probably wouldn't think about it too much. If the boss came on and said, you'll be deducted$50 from your wage, that would feel twice as painful as them saying that you would gain$50. We don't like to lose things. And what marketers can do with this framing is start to talk about what a customer might lose, and that can be more powerful. So the classic example of this is a 1988 study by Elliot Aronson.

3:59He found that if you talked about how much money you could lose by not insulating your home, you can encourage far more people to start insulating your home. So rather than saying, save 75 cents a day, insulate your home, you should say, you are losing 75 cents a day, insulate your home, for example. That's a classic example of how to use loss framing to improve your message. But the one that I think is most interesting and the one that most people will have encountered is anybody who has an Amazon Prime subscription who has tried to cancel. So that has been me. I've had a Prime subscription. I thought, I'm paying too much for this.

4:33I don't need this. I'll try to cancel. You go to the cancellation flow. And what they don't say is they don't say all the things that you gain from having Amazon Prime. They don't talk about the music, the TV shows, the free delivery. Instead, they explicitly call out the exact amount of money you have saved and say, this is how much you will lose if you continue to keep using Amazon, but stop using Prime. So for me, they said, hi, Phil, sure, you go ahead and cancel, but you'll probably lose£313 over the next year if you cancel. And that message, talking about what you will lose rather than what you gain from retaining with Amazon, is, according to Richard Chataway in his book, Behavioral Business, well, has, I think, decreased churn for Amazon by 44%.

5:13So a classic example of how going against the grain, don't talk about what you're getting as a marketer, talk about what the customer might lose, can be far more effective at persuading them. I love that. I want to ask you one question, though. Is there a way that marketers could do this wrong? Is there a way that people are using loss aversion the wrong way? For example, is there any situation where you say you might lose something, it's actually kind of a deterrent? Yeah, yeah. No, that's a good point. And I think there's always ways that you can misapply, right? Like Amazon, if they said perhaps something which was a little bit more, you know, what Amazon feel like they're doing with that message, Phil, you will probably lose 313 quid, is it feels like they're doing me a favor, right?

6:05It feels like they're saying, Phil, we've calculated it for you. You will lose more money than you will gain if you cancel. So I almost feel grateful for them, right? They feel like they've done me a favour. If they reframed that, so the example in the UK at the moment, and this is so niche, but there is an ISA, which is a cash, a savings account in the UK created by the UK government, which was set up 10 years ago to encourage people to save for their first home. They encouraged thousands of people, including myself, to put this money into to save for their new home, except they put a cap on how much money you could use to spend on your house.

6:40Now, what that has meant is thousands of people like me and other first-time buyers have actually had to pay a huge penalty to take our money back out of this savings account. So we put our money in the savings account. We've ended up with less than we put in. And that is awful loss framing, because what we've ended up doing is actually being paid a penalty. If Amazon did the same thing, if they said, Phil, we will actually charge you a penalty for leaving, that'll be so, that'll cause so much aggression and pain, that'll actually probably increase the amount of churn they'll get, even though they're putting a disincentive in there, and even though it's probably quite illegal so the reason amazon's framing works so well is because it feels like they're doing us a favor yeah i love it and it's also i think there's also like applying principles and then there's also using it in a great way to of copywriting versus like applying principles and doing the wrong way because you could mistake one word and lose it like make it seem like worse off for you saying something like that.

7:36But I want to go into another principle you talk about a lot, but is why does scarcity work so much in marketing? Well, let's start with the basics, which is that all of these behavioral principles are based on evolutionary traits that we have developed over the past 10 ,000, 20 ,000, 30 ,000, 100 ,000 years as humans. And as humans, we've learned over time that resources that are scarce tend to have more value than resources that are abundant. The classic example, if you're a hunter-gatherer and you find berries, which are extremely highly sugar content, very, very valuable for a hunter-gatherer to find because it's a lot of energy that's scarce because you can't find them everywhere, depending on where you are and what time of year.

8:21But you are incentivised as a creature, as a species, to collect as many berries as possible, to stockpile them. We've learnt this as a trait, as an evolutionary trait, because it's helped our survival. If you only just ate one berry and left the rest, you would probably not survive very long. So we've learned to really highly value scarce resources. Now, I think most marketers know this, and we're doing a podcast episode about things that marketers overlook. Now, I think the way this is overlooked is that it is applied so simply. The simple way of applying scarcity is to say, three items remaining, buy soon, or soon to be sold out, or offer ending soon or 10 people are also looking at this hotel room.

9:04We've all seen that. And because it's so familiar, it started to lose its novelty value and we've started to sort of stop paying attention to it. And yet I think there are so many other wonderful ways you can apply scarcity. Let me give you an example. Movie posters. We've all seen posters for movies. They always say, trailers do the same thing. They always say when the movie will air, airing this fall, airing this Halloween, whatever it might be. They all say that. Movie trailers never say when the movie will stop airing. They don't say going off screen this fall will only be shown up until this weekend.

9:38That's mainly because they can't actually tell. In many cases, they don't know. I think they could edit adverts to do this, and I think they should, because Richard Shotton ran a study which he cited in his book The Choice Factory. In the study, he asked a bunch of participants, will you see this movie? And they gave a yes or no answer. He then told the different group of participants, he asked them the same question, will you see this movie? But he added an extra line. He said, I should let you know that this movie will stop airing in the cinemas this weekend. That was true for both groups. So the movie was always going to stop airing in the cinema this week, but he only told that to one group of people.

10:13When he added that the movie ends this week, people were 36 % more likely to actually go and watch the movie. We are driven by scarce resources and yet we often don't talk about them. So it's crazy to me that movie producers don't talk about when the movie will stop airing. It's 36 % more likely to drive people to actually go and buy a movie ticket and go and watch it. We're incredibly driven by scarcity. I think my favourite example of this is when you turn a nine ending age. So when you reach an age like 29, 39, 49, you know, you're about to go into a new decade. We think about the scarcity of our lives in those years.

10:50We actually start to imagine how short our lives are. I'm 31 and went through that a couple of years ago. And what happens when you look at data is you see that when people reach a nine ending age, they start to take all these drastic life decisions because they're so impacted by scarcity. So people that are nine ending age, 29, 39, 49, far more likely to run their first Marathon. You download Marathon data, Boston Marathon, London Marathon, you see that to be the case. They're far more likely, if you look at death certificates, to commit suicide. Incredibly, if you're at a nine-ending age, 29, 39, 49, because you're thinking of the scarcity of your life.

11:25Perhaps the most shocking, most surprising, or maybe not to any of those reasons, is there was a leaked Ashley Madison data, which is a website married people can use to have illicit affairs with other people. What they found in this leaked data was that the people who signed up were far more likely to be aged 29, 39, 49, 59 than they were to be any other age. Because when you reach that nine ending age, you think about the scarcity of your life. So I think scarcity is used in marketing. I think there are ways you can use it more, and it is incredibly powerful. It really changes our behavior in all sorts of ways.

11:59And I also think, I mean, it's a form of loss aversion too, right? Because you feel like the scarcity you losing out on a potential deal a potential sale like we're like when people when companies say like this is our only sale of like the year or like our like our sale ends but this is like this is the only sale that you'll ever get there or we will never go and we'll never go on discount again like something like where like people feel like they're losing out on like a potential savings like um i feel like it's also you can use like multiple of these principles together where like there's scarcity plus loss aversion yeah yeah those things you don't want to lose out on a deal there's it's remind you've reminded me of a wonderful example it was a study done in an iowa supermarket i believe where they they put up big signs and they told people to buy soup and i think on average people who saw these signs and bought soup bought about three cans of soup per person.

13:00Fantastic. Marketing works. You put up a sign saying buy soup, people buy soup. And then they added an asterisk. You were talking about copywriting. This is such an incredible example. They added just an asterisk to the buy soup banner. And it simply said, limited to 12 cans per person. Totally irrational. You're not losing anything there because nobody was buying 12 cans before. Remember, the average was three. And yet just putting that asterisk, it made it feel like there was some scarcity, made it feel like you might lose out if you don't buy it like oh this must be popular if they're limiting it to 12 cans per person and just adding that asterisk that one line increase the amount people bought from three cans on average per sale per person to 4.5 cans on average per sale per person just limiting the amount people can buy can actually impact it as well i i felt this too because we had like a egg shortage in the united States.

13:52And when you would go to the like supermarkets, a lot of them would say like, you can only have, I also had this happen in COVID with like toilet paper and stuff like that. They used to say like only two per person. And I was like, if I come back tomorrow and it's gone, I might not get eggs. So I got two eggs, even though I needed only one. You have to. And this is what we're talking about. This is how marketers overlook this stuff. if we don't pay attention to human psychology you will make mistakes like that what they want to do with that limit is reduce the amount of eggs and toilet paper people are buying but what the psychology says is you're only increasing it limiting the amount of eggs people can buy to two per person actually makes people buy more than they probably would have done anyway but now there are other factors at play i think this is more the case with toilet paper where there was more of an abundance than there was the eggs but it's a great example of how sometimes this stuff has really misapplied yeah it's misapplied but it's also like sometimes you miss like the intention of the the shop i i guarantee the attention of those grocery stores wasn't for people to buy more but since it was limiting it does it does that even you see this with like natural disasters too or so like like a pending natural disaster like a hurricane because i live in miami people will go to the store like a week before and get everything even though they it might not happen just because they don't want to the potential to happen and it's like this humans always are like planning on like so like their survival instincts kick in when they like think they're gonna lose something um so it's right it's just survival instincts yeah at the end of the day yeah um um i want to go into another one so um could you go into the endowment effect this is a i'm really glad to ask me about this one because i think this is a really interesting one so this is the idea of when we feel ownership over something we value it more and you might think well like why is this interesting how like how can a marketer use this to get people to to value things more?

15:59Well, one way you can do it is actually involve people in the creation of your product. So a slight subtext of this is the IKEA effect. And this is an amazing study by Michael Norton, which found that when people build their own IKEA chairs, they value those chairs far higher than when an expert builds them. So this is why Subway is very successful. People value Subway sandwiches. They think they taste better because they've had a role in the creation of the sandwich they picked what goes into it uh the classic one builder bear workshops do you have builder bear workshops in the states i think you've yeah we definitely do yeah this is crazy to me because what this is is some of the most potent behavioral behavioral science and psychological tactics used on kids and it's so effective you know you get a kid to build their own bear they will genuinely love that they're not only do they build their own bear they actually place a tiny heart into the bear at the end of the building process.

16:52It's incredibly powerful what they're doing. And they're, in a way, you could say massively influencing these kids to love this product, which maybe they shouldn't love as much as they should, and force them to spend, what, 50, 60, maybe even more dollars on a bear. So the endowment effect works in that sort of way. But there's another way it works as well, which is the idea that once you've started a task or an action, you're more likely to finish it because you feel that ownership on it. So this is an an example that I do think marketers overlook is an example from I.L. at Fishback's book, Get It Done.

17:23And it's three researchers. They partnered with a New York cafe. And at the cafe, the cafe had always given out loyalty cards to customers. And when the customers bought 10 coffees, they got their 10th or nine coffees, they got their 10th coffee for free. And what I.L. at Fishback found in this book and found with this study is that you can actually make people more likely to buy the coffees if you give them a head start, if you make them feel like they've already begun the process of getting their free coffee. So in the variant, these three researchers, what they did is they created a second loyalty card, which they gave out to half of the customers.

17:59This card had 12 stamps that you needed to collect, not 10, but they had always plugged in the first two stamps for free as bonus stamps. So an economist would look at both of these loyalty cards and say, well, they are identical. Both sets of customers need to buy nine coffees in order to get their 10th for free. However, a behavioural scientist looks at this and says, no, the 12-card variant with two bonus stamps plugged in might be more effective due to the endowment effect. And it is. What you find when people plug in those first two stamps is that I think there's a 65 % more likelihood that they'll come back and finish the card.

18:36And I think when it's measured on days, those who get the 10-stamp variant only completed the card within 15.5 days. Those who get the 12-stamp variant completed it within 12 days. So people are far more motivated to complete a task than they feel like they have already begun. Ernest Hemingway knew this. He is famously quoted as saying that he never finished a day's work with a sentence finally finished. He would always leave the sentence halfway finished because he knew he would be more motivated in the morning to finish the sentence if it had already begun. Same thing is happening with the coffee cards.

19:08Same thing will happen if you're dreading sending an email to your boss this evening, just start writing it. Write the first word write hi boss and it will be much easier to actually finish it i think i mean another thing to add here is that why this is why like free trials work so well too because like you get people a sense of ownership of building into something without paying and then they have owners like they've already owned something they've already started customizing their own workspace notion does this really well too like with customer and then they feel like the ownership's there and then And they feel more entitled to buy because they feel like they've done something in that platform ahead of time.

19:51So that's like a SaaS example. The best SaaS example I have is Wave App, the invoice company. You load up the invoice, you put in your website, and it immediately, automatically, in the free trial, customizes your invoice with the brand colors and logo based on your website. You don't have to do anything. And that's incredible. Making you feel like you've started the process. Something is customized for you. classic builder bear technique there as well you feel like you've had a role in the creation it does it automatically and doing that in their free trial i think dramatically increased to increase their conversion rate yeah i mean it's just a call to action to the market out there like what what in your current flow could you make feel a little bit more customizable to your audience to make it feel like they have more sense of like a simple thing of like just making people put their brand colors in a platform or making their logo on top it makes them feel like they own that space more than just having an out-of-the-box experience yeah yeah there's a reason why every video game that's successful tends to let you create your character even if you can't even look at that character for the majority of the games if you look at a lot of the Bethesda games for the gamers out there you can spend hours creating your character you'll probably never see it because you play it in first person but just having that time spent creating it will make you more likely to continue playing that game yeah that's a really good example video games have so many like good parallels to um marketing because they use so much game theory and game design and psychology in there yeah let's go into another thing that you talk about a lot is like distinctiveness is more powerful than positioning so so what do i mean by this i think it's important for marketers to realize something that is perhaps well known and yet at the same time is a little bit overlooked.

21:35And this is the idea that distinct things, so things that stand out, and that could be as simple as one person on the tube or train with a mohawk while everybody else is wearing a suit, those items stand out in our mind and we're more likely to remember them. So the important thing here as a brand is you want to be recalled probably, because most times that you see a brand isn't at the point of sale. So I will see dozens of ads for a beer brand before I'm ever at a supermarket where I can actually buy that brand or at the pub where I can buy that brand. Typically at the pub, you won't see any ads for a beer brand.

22:09So it's really important that your ad is distinct. And what's really interesting is most brands fail to apply this due to probably something like groupthink or lack of creativity. So Heineken's have got a wonderful example. There was a study in the nineties with Heineken, which tested lots of different taglines to see which would be most effective for recall. They tried loads of different taglines, stuff like Heineken, delicious beer, Heineken open your world, which is their classic tagline. Heineken, the best beer money can buy. Stuff that isn't distinctive. And then they came up with a distinctive slogan, which was Heineken, the beer that made Milwaukee jealous.

22:42That's one for the folks in the States who probably understand that better than us in the UK. And that line was recalled more than any other line because it was distinct. 85 % of the people who heard that line remembered it a week later. And yet what you actually find is that most marketers feel it's far too risky to come up with anything that distinct. Obviously Heineken didn't follow that tagline. They came up with a tagline, which is Heineken, open your world. And I guarantee you, if you don't know that tagline, and I asked you in a week, which of the two taglines I've mentioned on this show, will you remember?

23:09It'll be far more likely you remember Heineken, the beer that made Milwaukee jealous. But the important thing to remember with distinctiveness for marketers is that you don't have to just be totally distinct. You don't have to come up with something that's totally random that stands out in some of my mind. You don't have to come up with the only podcast with a pink logo because that's distinct from everything. What instead you have to do is look at your competitor set and come up with something which is slightly distinct from them. So great example of this 2018 study, researchers showed a bunch of brands from the same category to a bunch of participants.

23:46So you saw a load of car brands, so Mercedes, Honda, Ford, et cetera, et cetera. And then one brand from a different category, so a fast food brand, McDonald's. What they found was the fast food brand in that example was four times more memorable. They then repeated the experiment, but switched it around. Suddenly it's a load of fast food brands, McDonald's, Burger King, Subway, KFC, and then one car brand, so Skoda, for example. And suddenly the car brand is four times more memorable. So you are far more distinctive if you stand out compared to your relative peers. So what you shouldn't be doing as a marketer is thinking, how can we create the most wacky ad that has ever been created in marketing or in the Super Bowl history?

24:25What you should do instead is look at the competitors that are close to you. If you're selling beer, look at the other people who sell beer. Well, what do they typically say? They say stuff like, the taste is wonderful, fresh as hells, whatever it might be. And then come up with something distinct within that category, the beer that made Milwaukee jealous. That's not the most distinct ad of all time. It's just distinct compared to other beer brands. And every marketer can benefit from doing this. We spend a lot of time thinking about our unique positioning, exactly what we're about internally.

24:53We should spend a little bit more time looking at our direct competitors, looking at the other companies that our customers will consider when they're looking to buy us and think, how can we be slightly more distinct from them? I think this is amazing, especially, I mean, we both come from the software space. And if you go to an average software or like a conference, the number one thing you see most brands saying is like we're the number one or like we're the best in the space or like or like we're the best crm instead of like figuring out like what is that thing that makes us different that we can say that would stand out it doesn't have to be wacky like you said but they could be like one little thing that is very different or you get a mascot versus they don't have mascots or like something little different that could make you stand out but most people just go with the easy thing where it's like let's just say we're better than yeah everybody else can i give an example of sass because i i worked on this at buffer so my buffer before i went full time on my podcast i was there for a year and a half and we had social proof on our website and the social proof was classic the same social proof all of your listeners have seen on every sass website.

26:07We are used by HubSpot. We're used by Huel. We are used by Google. We're used by Microsoft. You know, the same sort of grayscale lados that are floating along the screen in a little carousel. And obviously that is absolutely pointless because everybody is used by Amazon. Everybody is used by Uber. Everybody is used by Facebook because these companies are so massive that everybody's got an account somewhere. So what we decided to do instead is come up with something distinct. How can we be different from everybody else in our market? So we got rid of Amazon, Facebook, whoever else it might have been that we had on the site.

26:38And instead, we found users, very small users who have grown dramatically since they started using Buffer. So Bob's hot dog van has grown 255 % on Instagram since they started scheduling social media content on Buffer. That was one of the little carousels that went past. Sharon's hairdressing company has grown by four times on LinkedIn since they started using it. Julia Comedy's TikTok account has increased their content production by four times and growing their follower count by 100 ,000 since starting using Buffer. These are so different from everybody else. Suddenly, we're not talking about the giant companies who everybody else is using.

27:14We're talking about far smaller people. And we're giving actual concrete examples of how they've grown by using this tool. And just making that one change to the social proof, being slightly distinct compared to the competitor set. And there's other nudges in there that are helping. That alone increased the conversion rate on the homepage compared to the control. And for homepage conversion rate to see a noticeable difference from just changing one part of your homepage, you know that that's a significant impact. So being distinct compared to your comparison set can be very impactful. I love that.

27:46I actually saw a, um, I think it was a supplement brand and I went on to like their landing page and right next to the product was like a customer quote that was basically exactly like the pain point I was thinking, like I was trying to solve by like getting a, like I get no bloating from this like protein brand, like blah, blah, blah. And it was like right next to the protein, like right next to the image and i was like okay this is exactly what i want like it got i knew they were doing this to get me but exactly what like being a market i know when they're trying to get me but it still got me because it's like that quote is exactly what i'm trying to solve with like a logo doesn't really tell you that it's gonna solve anything a direct customer quote from like social proof of people like you exactly and it makes you distinctive like you said if if no brand is doing it so you that's why i think like some of these things which you were saying you could use so many multiple different things of psychology like social proof mix with distinctiveness missed a quote that shows loss aversion in it like there's so many things that we're talking about that you could use multiple in one or you could just use one which is cool what is the pratfall effect yeah i love this one so from a young age we are told to highlight our strengths this is sort of a classic thing you go into an interview you're told to practice talking about your strengths what is good about you if you if you go on a first date with someone you probably don't want to tell them you're an awful cook and you can't clean your house you'll instead tell them that you were number one in track and field for example we like to highlight our strengths.

29:31And what's interesting is this is pretty concrete amongst everyone. Politicians do this, brands do this, salespeople do this. We always like to talk about our strengths. And yet there is a part of psychology that suggests that purely talking about your strengths can actually make you less likable than if you highlight a weakness. So this is an Elliot Aronson study. I think I spoke about him towards the start of the show. And in this study, this is a fairly old study from the 80s. He recorded a video of a very intelligent quiz show participant who was asked a lot of quiz show questions and got them all right.

30:06In reality, this was just an actor, but the participants who were watching this video didn't know that. They were watching someone who they perceived to be very intelligent, answering all sorts of quiz questions correctly. Half of them just watched that video and they were asked how likeable do you think that quiz participant is. Half of them watched a slightly longer video and then the slightly longer variant of the video, the quiz participant walks off stage, grabs a coffee, takes a sip of the coffee and clumsily spills it down himself and says, oh God, I've got to spill my coffee down myself.