Diamonds are Bullshit

Diamonds are Bullshit

While it seems odd today, diamonds weren’t used in many engagement rings prior to our grandparents’ generation. Until then, when engagement rings even had precious stones, exotic gems like opals, rubies, sapphires, and turquoise were chosen more frequently. In a world without the “A Diamond is Forever” campaign that wouldn’t be surprising. After all, there isn’t really much difference between diamonds and other rocks coming out of the ground, except that they are a lot less noticeable than the gems we just mentioned.

So why are they the top choice now?

To answer that we first need to discuss De Beers, which was founded as a monopoly to raise the value of diamonds by creating artificial scarcity. Unfortunately for them, scarcity alone isn’t enough to make everything desirable and De Beers was faced with the question of how to raise demand for something with little inherent value.

After struggling through two decades of stalled sales, De Beers turned to the ad agency N.W. Ayer. But the way the agency saw it, raising demand meant completely eschewing the idea of inherent value and instead making diamonds mean something.

N.W. Ayer’s first step was to raise public perception of diamond’s by associating them with high society. They lent jewelry out to stars for awards ceremonies and other highly visible social events. They also pushed diamonds into movies and magazines. But they began to branch out from using diamonds solely as a mark of status and towards connoting love as well. For instance, they placed diamond rings in movies as symbols of unwavering devotion, and instructed the press to report on celebrity romances, the diamonds celebrities wore, and particularly on their diamond engagement rings.

By 1941 sales of diamonds had risen 55%, but N.W. Ayer wasn’t done. Actually, in their 1947 strategy plan they stated, “We seek to … strengthen the tradition of the diamond engagement ring — to make it a psychological necessity”. Incidentally, 1947 is also the year they created the slogan “A Diamond is Forever”, which is perhaps their most effective conveyance of the idea that diamonds are the symbol of love and commitment. Obviously, they were successful in creating that psychological necessity: diamond engagement rings became a part of our culture because we accepted the idea that giving someone a diamond proved you were in love. In fact, they were so successful that in their 1951 annual report N.W. Ayer said “jewelers now tell us ‘a girl is not engaged unless she has a diamond engagement ring.’”

Further campaigns continued to promote the association between diamonds and love, solidifying their brand positioning. For instance, some campaigns used diamonds as anniversary presents or encouraged people to hold on to the stones of family members as heirlooms, which had the side benefit of keeping supply down.

But it wasn’t always easy for De Beers.  They made diamonds objects of conspicuous consumption. Engagement rings in particular are meant to show that you are in a committed relationship and to ward off new suitors. But that also makes diamonds status symbols – bigger stones were bringing higher status (or proving great devotion). That is, until later in the cold war, when Soviet diamonds appeared on the market and threatened the delicate pricing De Beers created. It’s at this point that De Beers began to inform people that, actually, the the size of the diamond didn’t matter, after all. Instead much less noticeable things like color and cut were the important factors.

At this point we could sit back and roll our eyes. Their success in making diamonds represent love and commitment is certainly arbitrary, but it’s also kind of beautiful.

Unfortunately, there are also other pernicious factors at play. The price of diamonds isn’t just inflated because of manufactured scarcity or successful marketing. It’s also inflated because diamonds unnecessarily pass through the hands of several middlemen who take a cut of the profits even before entering a second monopoly. Often people will shop around for the best deal on an item, jewelry is no exception. The difference for jewelry is that the big chains (Kay, Jared, and many others), are actually owned by the same company, and strategically placed near each other to trick you into believing the prices for their monopoly supplied diamonds are fair. They aren’t.

De Beers campaign was so successful that 80 years later the diamond ring is still an unquestioned rite of passage. It’s legacy is undeniable.¹ And that’s also why De Beers shouldn’t fear the new technology enabling diamonds to be mass produced – those diamonds weren’t formed over thousands of years, those diamonds haven’t stood the test of time, those diamonds aren’t forever. What De Beers should fear isn’t a new twist on the problem of Soviet diamonds, what they should fear is an erosion of what diamonds stand for.  

1. In fact, I find it hard to imagine turning your loved ones into jewelry could have happened without it, though perhaps that would have been for the best.

What Can Political Advertising Tell Us About Human Nature?

What Can Political Advertising Tell Us About Human Nature?

People view the Swift Boat Veterans for Truth attack ad against John Kerry as a turning point in the 2004 election, but the research says it probably didn’t have much of an effect. While billions of dollars are spent on political advertisements, they are generally ineffective. However, they do reveal a lot about both advertising and human nature.

To start, political advertising seems to be ineffective because many people have already made up their minds. As a result of confirmation bias, once a mind is set any new information will be viewed in relation to preserving previous thoughts. As George Washington political scientist John Sides told NPR, “When voters are confronted with inconvenient facts, it is oftentimes difficult to persuade them that those facts are, in fact, facts. When supporters of President Obama see negative information about Obama, they don’t think it is true. To the extent it is true, they find ways to explain it or rationalize it — they discount it.”

Since most of the viewers are already committed to a party or candidate, there are very few people out there whose minds can be changed. But, Rolling Stone’s basic position is that this small number of people is large enough to sway our elections and thus justifies the large ad spends. However, the data doesn’t fully support that conclusion. In fact, the person or campaign launching an attack ad often loses support, and the best research in negative ads’ favor suggests that they are most effective when shown sparsely.

But here’s where it gets more complicated and even more interesting. What if it’s not just confirmation bias? What if the ads are ineffective because we have entirely different ways of seeing the world? Fear based ads and imagery are more effective at pushing people to vote conservatively. In fact, reminders of disease or contamination, pictures of children, and images of the flag have all been shown to push people to vote more conservatively in the past. Could that lead us to believe that conservative people in general think more emotionally or make fear-based decisions?

Yes. In fact, the data shows that conservatives and liberals don’t just have minor disagreements, they have different brains with which to interpret the world. Conservatives are more affected by fear – they have a bigger amygdala, respond more sensitively to negative stimuli, interpret things as being more threatening, and are focused on preventing negative outcomes. Liberals, on the other hand, tend to be more open-minded, open to risk, capable of change, and focused on creating positive outcomes. Differences in thinking style may also shed light on how to approach these groups. Studies show conservative policies are in general derived from more “low-effort” thinking, while more deliberate (or possibly censored) thought leads to more liberal decisions. A simple summary of these studies can be found here.

Undoubtedly, that should begin to explain the political divide and why compromise seems to be so hard. But it also hints at how to bridge the gap. If you can flip your perspective to examine the issues from either a risk aversion or gain focus, policy issues begin to make more sense. For example, opposition to or support for the Iran Nuclear Deal, Immigration, Stimulus spending, etc, are more relatable when you can see how the other side approaches the issue.

In terms of advertising, the takeaways seem to be focus on thorough action plans and benefits while building a coalition of support with liberals and focus on the preservation of order or the avoidance of negative outcomes while reaching out to conservatives. Products which stereotypically fit a certain type of person may also benefit from these approaches.

How Ads Take Advantage of our Cognitive Biases

While I don’t believe we pay attention enough to psychology in advertising many advertisers have made good use of the science. Below are common and easy to spot examples. Some of them are intuitive but it still helps to consciously add them to the repertoire.

Rhyme-as-reason Effect – Rhyming doesn’t just make things more memorable. It also makes us see them as being more accurate or truthful. The most famous example of this is John Cochrane’s memorable “If it doesn’t fit, you must acquit” defense of O.J. Simpson. Plenty of ad slogans rhyme as well: “A nose in need deserves Puffs Plus indeed”, “Drive sober or get pulled over”, “To save and invest, talk to natwest”.

Decoy Effect – The decoy effect is when an extra option is added to a choice that skews someone’s perception of their relative value and sways them in a certain direction.  One of the best examples of this is the economist’s print and web sale, which was explored in Dan Ariely’s Predictably Irrational. I pulled this old image off another site, since the economist has now changed their pricing strategy after all the publicity.

Economist Decoy Effect

As you can see, the online subscription was offered for $59 and the print option was offered at $125. But, the third option combines the first two. It is designed to pull people from the online option to pay for the print version as well. For the customer this probably feels like a good deal, but many of them probably would have been just as happy with the online subscription only (and  they would be $66 bucks richer too).

Another example involves restaurants and wine. People will typically buy the second lowest priced wine at a restaurant, which has led restaurants to strategically price their options, typically by raising the price of the cheapest wine so that it becomes the second cheapest thereby increasing their profit margins. It’s worth mentioning, since we’re talking about biases, that a lot of wine’s taste actually comes from perception of quality rather than inherent characteristics, so it actually might not matter to the consumer that the prices are rearranged.

Picture Superiority Effect – We are better at remembering images than words. In general this means products are going to be easier to sell than services. Either way, finding an image to say what we need to say is a winning strategy.  

That’s why verizon chooses to show you their coverage rather than tell you about it:

Verizon Coverage Map

Framing Effect – You could probably consider the Decoy Effect to be a component of the framing effect. Indeed, almost all of marketing can be attributed to the Framing Effect: How you say something has a big impact on the results of advertisements, even if the information conveyed is the same. 

Are you more likely to buy a package of beef that says “80% lean meat” or one that says “20% fat”? They convey the same information, but I know which one I’d put money on.

Anchoring – The first piece of information we receive about something affects the rest of the information we receive about it. That is, once an anchor is set people don’t tend to move from it as fully as they should. For example, quantity limits can be used to increase sales. If you’ve ever seen a sale that included a maximum limit of the good people could buy that limit actually carries information to us about how many people should buy. It’s creates a starting point for the number we should purchase that is likely far higher than we would have without it.

Anchors can also be set for the amount of something that should be used. You only need to use about a pea-sized shape of toothpaste, yet most people cover the entire brush because that’s what they show in the ads. There’s also the example of Alka-Seltzer, when they started advertising using two tablets sales increased dramatically

Bandwagon Effect or Herd Instinct – Normally in advertising this is exploited with an appeal to the popularity of the brand. It’s not always bad as surely many category leaders are good products, but it does work off our bias to trust in other people’s opinions when we aren’t sure (herd instinct) or off our attempts to fit in (bandwagon effect). 

Any brand trumpeting their success is probably operating on one of these biases. McDonald’s makes very good use of them:

McDonald's

Loss Aversion – We are more averse to losing a particular amount of a good than we are receptive to gaining that same amount. The best example of this deals with blood donations where individuals told to focus on saving lives were significantly less likely to donate than those told to prevent deaths.

Functional Fixedness – Functional fixedness is the idea that we are incapable of seeing alternate uses for products once their established purpose is known. The concept plays a role in quite a few riddles. It’s also a common topic for listicles  But, it can also be used to boost sales for some products. Imagine Duct tape or Baking Soda starting out. They’re each only used for one purpose each, but as time goes on the companies educate us on additional ones. What do sales do? Skyrocket, of course.

Why isn’t humorous advertising more effective?

Humor is the copywriters go to strategy. In fact, according to Millward Brown more than half of TV advertisements use humor. Yet on a wide variety of measures these campaigns are ineffective. As Mark Levitt of Partners and Levitt summarizes,  “Humor in advertising tends to improve brand recognition, but does not improve product recall, message credibility, or buying intentions.”

Unfortunately there isn’t much research available on the topic. While the general consensus is that humor doesn’t help much, a few studies have shown that humor is effective for lower engagement products. We can start by stating that humor is overused, then, since it is used in campaigns for more expensive purchases all the time. But, there is a second factor that we should consider, as well. Humor, when it is studied in advertising, is treated homogeneously, but it shouldn’t be because it actually breaks down along two distinct dimensions.

Let’s compare two ads to get a feel for the different styles.

As you’ll notice, one ad wants us to find humor from somebody using their product, while the other one wants us to find it from someone not using their product. A second difference is the degree to which the humor relates to the benefit the ad tries to convey – does it reinforce the point or is it really there to get attention?

From a psychology and branding perspective, using humor that puts your brand or product in a bad light is a bad idea. That’s why the “Jake from State Farm” commercials are an example of the wrong type of humor. Using State Farm’s product creates a negative experience for the customer in the ad – it causes an unpleasant interaction with his wife. That may raise our awareness of State Farm but how could it increase our intention to buy? Many people would view the ad as a success because it has staying power and entered our cultural consciousness in a way that few advertisements do. But the actual barometer is long term sales. Does the ad make us more likely to use State Farm? I doubt it.

On the other hand, the Berlitz ad makes us laugh at people who don’t use their product and the humor also reinforces the product’s benefit.  Our awareness of Berlitz rises and we become more likely to use Berlitz because it resolves the situation we are laughing at.

It’s a simple but key distinction. In an advertising sense, to be effective humor doesn’t need to improve an opinion of a brand (we think State Farm is funnier now but that doesn’t make us want to use their service) it needs to effectively highlight the brand’s benefits and make us more likely to purchase it. Audi’s ‘Grandpa Bode’ commercial is another good example of a humorous ad for those reasons. Celebrity endorsement aside, it is effective. 

Moving forward, humor shouldn’t just be inserted into a commercial to raise its memorability. That may get views but it won’t sell product. But ads using positive brand humor, that is focused on the selling point, may prove to be more beneficial.

The Psychology behind Characters and Mascots

I’ve always enjoyed looking at the intersection of psychology and advertising. A particularly interesting overlap is brands’ use of fictional characters as mascots. Why did Geico invent a gecko to sell insurance, for instance? And why do they keep rolling out new commercials for him?

The common explanation is that using mascots can set products apart and help consumers identify with the brand personality. The gecko certainly helps us remember Geico, just as Mayhem helps us remember Allstate and Flo Progressive. However, individuation is far from the only reason for mascots.

In addition, two human biases underlie the success of advertising icons. On the one hand, humans have a preference for the familiar. In fact, there is a bias called the mere-exposure effect, which is the preference people display for things simply because they have encountered them before. This is no secret in the advertising world. In fact, Leo Burnett whose agency created the likes of Tony the Tiger, the Jolly Green Giant, the Pillsbury Doughboy, and the Marlboro Man once said “None of us can underestimate the glacier-like power of friendly familiarity.”

The mere-exposure effect makes sense in evolutionarily terms, but it also plays out in our purchasing decisions. If you need tissues, for instance, would you be more likely to buy Kleenex or Joe Blow’s Mighty Nose Wipes? Probably Kleenex. All else equal, purchasing the familiar brand feels safer.  Indeed, the mere-exposure effect plays a large role in our otherwise nonsensical  preference for branded options over their generic counterparts. But, if our preference for the familiar is so strong why don’t companies just show the same ad over and over and why do they make changes to product lines?

It’s for the same reason most of us don’t watch the same movie day after day, or eat the same meals. Working in opposition to the mere-exposure effect is our need for the novel. We habituate to old stimuli. In a larger sense, we need stimulation and we actively search for it. In psychology this is known as sensation seeking or novelty seeking behavior. Basically, companies need to make new ads because we stop responding to the old ones.¹

When you combine the preference for the familiar with the need for the novel it becomes clear why brands use mascots. They are trying to have the best of both worlds. By putting a familiar character in a new situation you can increase the audience’s’ interest compared to running an old ad, and you’ll have the benefit of having a familiar (more liked) character. With every good commercial the brand can add more and more favorable thoughts to the character and thus to the brand itself.

Footnotes:

  1. At least for the time being. As time goes on we get a bit more receptive to old stimuli again. This dishibuation helps when brands play with nostalgia.