Wednesday, October 28, 2009

Perception is all

Here's an interesting fact. Between 2001 and 2006 the proportion of new drugs beating placebos in “Phase II” trials (sometimes called the “futility test”) fell by 20%. Only 24 first-of-a-kind drugs were approved by the US FDA in 2008. In 2007, only 19 were approved, the lowest number for 25 years. We might conclude that drug R&D is failing. Yet even some drugs which passed this test previously, are now failing it (Prozac is one example), leading to suggestions that the problem is not the new drugs, but that the placebo effect is getting stronger. The placebo effect bears striking resemblance to the brand effect. Both are the power of perception to influence our actual experience of something. And so the drug companies investigations into placebos reveal some truths for marketers too.

Expectation: The power of the placebo is dependent on the ability to anticipate. Those who expect an effect are far more likely to get it. Alzheimer's sufferers, who can't anticipate the impact of painkillers, need much higher doses.
Competitive set: Different communities react differently to the same placebo, and the impact seems to depend on background culture. For example, in Germany low blood pressure is a widely perceived medical condition (17% of people self report as suffering from it). Brits and Americans, by contrast, are a lot more worried about high blood pressure. In trials of drugs for patients with high blood pressure, Brits and Americans gain far more benefit from the placebo than Germans.
The 4Ps: Packaging and presentation of the placebo play a role too. Studies have shown that antidepressants work better if they're yellow, while red pills are more stimulating and green ones better at reducing anxiety. This hard science is unnervingly similar to the "meanings" of colours ascribed by crystal healers, for whom yellow is optimism/ happiness, red is action/ courage/ vitality and green is life/ well-being. I don't believe in crystals, but I do believe in perception (the fourth law).

Drug companies are desperate to understand this issue so they can design “better” trials (presumably where drugs efficacy will show through). There is also the chance that the trials are right – that many of the drugs on the market are little better than a well presented placebo. The right name, colour, size, shape and packaging in the right environment for the right people may be what is delivering most of the quality of experience. I'm always cautious about the value of consumer research. When we get the results we want, everything is fine (the confirmation bias). When we don't, its tempting to question the methodology. We cannot be sure what hidden factors underlie the results (and most marketing research is a lot less rigorous than drug trials).

But if we view the placebo not as the problem, but part of the solution, things look much more optimistic. From this perspective, brands – even advertising – are integral parts of the product or service itself, helping to reinforce the user experience. And any element that doesn't live up to the core proposition – whether its a tawdry piece of packaging or a mis-aligned piece of creative or PR - doesn't just undermine the ability to charge a premium, it actually diminishes the user benefit.

Next time you're faced with a cynical view about the value (or lack) of marketing, respond with a truly consumer centric justification for brands, rather than the typical brand centric justifications we're so used to. Fact: the brand may, in many instances, be more effective than the product itself.

And in the mean time, now might be a good moment to audit every detail of the brand's user experience, and weed out the bad ones.

Wednesday, October 07, 2009

Space oddity - in the long run we're all dead

I have less sympathy for GM than for Blacks. Some crimes of strategy are less forgivable than others. The latest part of GM to break is Saturn which is closing down. My original impression of Saturn was formed not as a car buyer, but as a marketing case study - an example of a skunkworks project, which were rather trendy at the time (10+ years ago). Turns out not to have been such a smart idea in this case since not only were the cars not awfully good, they sold at a loss.

There's a very simple lesson here. It may (or may not) be smart to isolate little groups of innovators in order to break the corporate cultural assumptions about what might or should be done. The jury's out, but my judgement tells me there are times this is very smart indeed. What is clearly - inexcusably - dumb is to build a completely parallel production capability (so sacrificing all your efficiencies of scale), and to stick the new products out in a separate brand so that if there's any equity to be gained, you fail to capture it where you need it. The threat from Japan was to GM itself. A retailation brand (which is all Saturn was) was doomed. The arrival of Japanese manufacturers was the first big unheeded warning that the whole of Detroit needed to revamp its capabilities and its offer.

This mistake took so long to play out that Roger Smith, on whose watch it happened, didn't live to see the wheels finally come off. A small personal mercy. I hope I die too, before my mistakes get found out.