If sex is selling then I am buying!
Some of you may remember a post I wrote a while back where I quoted a credit union marketing executive who said that their members wouldn’t know the difference between a postcard with a pretty design and one printed in black and white with a rate on the front.
It still hurts my stomach to write that. That CU marketing exec was explaining why he was going to the lowest bidder and using low-rent graphic designers and canned marketing for his credit union marketing. I couldn’t figure out if he was trying to mess with my head or negotiate a better deal from me or what. All I know is that I threw up in my mouth a little when he said that.
I mean, if you want to kick me in the gut, why not just tell me that I am funny looking or make a Ritchie Cunningham jokes or something. Just don’t tell me that design doesn’t matter.
I care about what I do and I know that we do a good job and provide a valuable service for our clients. Our ROI numbers prove it. So I know I am right when I say, visuals are important if not more important than substance when it comes to making the sale. I mean, really, you can get tap water for free, pay 25 cents for a store brand bottle or $2.00 for “the good stuff” and there really isn’t that much of a difference to justify the huge difference in price right?
Oh, I guess I should say that the CU marketing genius is no longer employed at that credit union.
Anyhow, that is why I was giggley when I read an article called What’s Psychology Worth? A Field Experiment in the Consumer Credit Market. (which I came across via NeuroScienceMarketing).
This is pretty neat so hang in there.
There was a bank in South Africa who was trying to increase their loan portfolio (like most of us). They wanted to know what psychological factors impacted their customers the most. They mailed 50,000 customers a loan offer, and used several variations of two features of a traditional direct mail piece:
- The mailed offers included a range of randomly selected interest rates – The thought is that the interest rate (along with repayment terms) is the most important criteria for whether a loan offer is appealing to the consumer. This is what we in the marketing biz call the “Steak” of the offer.
- The bank also included several “psychological features” - details of the mailed offer that had nothing to do with the loan. Things like marketing copy and images and colors. These elements were intended to “frame” the offer in some way or otherwise alter customer behavior regardless of the rate. We call this the “Sizzle”.
What did the researchers learn?
People would pay a higher rate if the design were good enough. Or, that rate alone was not a significant enough motivator for the recipients. People responded to the “Pretty Postcards” more than the “Black and White” ones. So much for the “know-it-all”, unemployed credit union marketing genius who kicked me in the guts with his assertion that I am in the business of making pretty pictures with no true value. And that is how I really feel about that.
The researchers went on to say:
Inconsistent with standard economics, some of the psychological features also significantly affected take-up. The average effect of a psychological manipulation was equivalent to a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers and persist across different income and education levels. In short, even in a market setting with large stakes and experienced customers, subtle psychological features appear to be powerful drivers of behavior. [Emphasis added. From What’s Psychology Worth? A Field Experiment in the Consumer Credit Market, Marianne Bertrand et al, 2005.]
The experiment featured a huge range in interest rates - 3.25% to 11.75% (I don’t even know how they got this experiment greenlighted - what credit union would have the courage to do this?). They also incorporated different features in the offer, including different descriptions of the loan, a comparison to competitive products, varied photos of males and females, and subtle suggestions to figure out what worked best.
The best part (in my opinion) was this:
For the male customers, replacing the photo of a male with a photo of female on the offer letter statistically significantly increases takeup; the effect is about as much as dropping the interest rate 4.5 percentage points… For female customers, we find no statistically significant patterns.
Overall, these results suggest a very powerful effect on male customers of seeing a female photo on the offer letter. Standard errors however do not allow us to isolate one specific mechanism for this effect. The effect on male customers may be due to either the positive impact of a female photo or the negative impact of a male photo.
What all this means is that it is usually better to have a female representing your loan no matter which demographic you are targeting, that men are gullible and that sex sells.
But take a good look at those numbers! Having an attractive female in the loan piece was as important as a 5% rate discount to the male recipients but made no difference to the female recipients. So it didn’t HURT the response to the females but gave a greater response to the male recipients. And having creative and interesting marketing pieces means that you might be able to have higher rates and still close loans. This is important to credit unions that cannot compete with banks in their market on loans.
Now I am not saying that you should sex-up all your marketing or play “Girls Gone Wild” DVDs in your lending department to squeeze a few extra points out of your members.
What I am saying is that you need to do experiments with your members and your marketing. If all you run are same old conservative stuff that every bank in town is running, how do you pull to the front of the pack in your market?
Do a “Crazy” experiment that blows past your current marketing strategy and see what happens. If it falls flat you can claim temporary insanity or go a different direction and try again.
Like this South African bank, you won’t know if you have an untapped resource of people willing to pay a few extra points unless you get their attention.
Maybe you need some pretty postcards or, at least, some pretty weird ones.
Note: After I posted this, I saw that Ron Shevlin posted on the same article. Read Ron’s apology to us marketing types who get the shaft when our design skills are compared to “Great Rates”.
Popularity: 32% [?]
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
[...] light shone brightly on this topic this week as Roger Dooley, Tony Mannor, Jeffry Pilcher, and I all blogged about a marketing test conducted by a South African bank which [...]