The counterintuitive secrets to effective market research with Leigh Caldwell

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Today on 3-Minute Marketing, I have the pleasure of sitting down with Leigh Caldwell, a cognitive and behavioral scientist turned marketer. He’s the Founder of Irrational Agency, an award-winning author of “The Psychology of Price” and an avid blogger at his site, knowingandmaking.com. He’s also a successful entrepreneur, having built and successfully exited 3 firms in the tech and economics consulting space.

Leigh’s behavioral economics background has helped him yield some surprising insights on what does and doesn’t work when it comes to understanding your market. My question for Leigh is: “What are the counterintuitive secrets to performing GOOD market research?”

Show notes:

  1. Secret #1: People don’t tell you the truth.
  2. Your customers want to tell you all the great things about your product. But you want them to tell you the truth. So you need to ethically “trick” them into being honest with you.
  3. Leigh built a simulated web store for his CPG client. While 60% of their panelists said they would buy their product, only 15% of users actually bought on the website.
  4. They they then tested variables like packaging, pricing, etc. to drive the purchase rate up.
  5. Secret #2: Behind everything people do, there is a hidden story.
  6. Learn why and hear the rest of Leigh’s secrets in the bonus footage.

Transcript:

– You’re listening to Three Minute Marketing, where we interview the world’s top growth marketing leaders, and distill their knowledge into actionable, bite size insights. Now here’s your host, Chris Mechanic.

– What’s up, everybody? Welcome to another episode of Three Minute Marketing. We’ve got a real treat for you today. Our guest today is a cognitive and behavioral scientist turned marketer, so definitely a dangerous weapon. He’s an award-winning author of a book called “The Psychology of Price.” He’s also an avid blogger at his site, knowingandmaking.com. And he’s built, since the 90s, and successfully exited three different companies in the tech and/or economics consulting space. Currently, he’s founder CEO at the Irrational Agency, which provides market research with a behavioral economics twist. I love this kind of stuff, ladies and gentlemen, welcome to the show, Leigh Caldwell.

– Hey, great to meet you, Chris. I’ve been listening to some of your other experts, and I am honored to be among them. I hope I can share something of value and interest to your listeners.

– I’m really excited about this. So you know the drill, let’s get right into it. I got a question for you today. Tell us about some of the counterintuitive secrets involved with performing good market research.

– Okay, we’ve got time for about two secrets, I think. The first one is people don’t tell you the truth. The second one is behind everything that people do and everything they say, there is a hidden story, and that’s a story that started sometime in their life long before they probably encountered your product, and it’ll go on after. But you need to find that story in order to unlock how your product can play a role in their life. Let’s go back to the first secret, and that’s people don’t tell you the truth. Well, why would that be the case? Don’t they like you? Actually, it’s the opposite. You know, imagine you show your parents, you know, you’ve made this new thing, you play them your podcast, or you show them this new soda that you invented. What are they going to say? They’re going to say, “Oh, you know, Chris, I love it, it’s amazing, it’s wonderful.” And actually, your customers are a bit like that too, they want you to feel good, they want to tell you all the great things about your product, because they like you and they want you to feel nice. They don’t want to hurt you. And so they’ll tell you, “Yeah, I buy your product. Yeah, it’s great.” That’s not what you want. You don’t want them to make you feel good, you want them to tell you the truth. So you’ve got to figure out a way to ask them, not a question, but well, you need to kind of trick them. You need to trick them to tell you the truth. So let me tell you about a client of ours, a soda company. They asked people, “Would you buy this product?” And 60% of them said, “Yeah, I love it, I would buy that product.” It’s not the truth, they’ve got 15% market share. Obviously, 60% of people are not buying this. So what did we do? We actually built a website for them that looks basically like a grocery store. We built them this simulated grocery store visit so that when they ask their customers, they can walk in this store, they can, you know, well, park, they look at the weather, they walk in the store, they walk through the different aisles, and finally they get to the shelf where the soda is. And not only is our client’s product there, but of course, all the competitors’ are there. And so the juices and the waters. And what do you find? Well, actually now 15% of people do choose the product. So you’ve got the truth, but what do you do with that? Well, my client wanted to know, how do we get that 15 to be 17, 19, 23%. And so what we can do is we can test different ways of presenting that product, so we can bring more people into that virtual store, but with different labeling, we can put it, try different pricing. We can say, “Do you give a discount? Well, if you give a 25% discount, do you say, “25%?” Or do you say, “A quarter off?” Or do you say, “Buy three, get one free?” And so now we’re getting some real levers that they can pull to actually increase that market share.

– That’s fascinating, I love that. I have questions, we have nine seconds left.

– All right, let me tell you then the second secret is about story. Actually, I’m just going to–

– No, they got to listen to the rest. You can find the rest on our website. All right, ’cause that’s three minutes. We can’t start the second secret now, it’ll take like, another three minutes resume ’cause there’s a lot to unpack there, I have a ton of questions. But in the name of brevity in three minutes, I think that one is enough, people will not tell you the truth, they just won’t. And so if you can devise an experiment to ethically trick them, then you will get to the truth and then you can get at some answers. I think that’s perfect for like, a today’s micro tidbit. If you like this, if you want to hear the rest of Leigh and I’s conversation, stay tuned, drop a like, a comment, share, help us spread the word here. Leigh, give us your plug, man, and let’s finish our combo.

– All right, brilliant, thank you. If anyone wants to know about how to do really good market research, come visit me at irrationalagency.com, or find me on LinkedIn, and we’ve got a guy to what’s called behavioral market research on the website that you can download. It’s got about 30 different techniques for how to get to that truth in that, you know, ethically trick people as Chris said. So yeah, we’d love to see you there and hear from you.

– I literally, I’m going to hire you. Like, I have a client in mind specifically that I want to get you involved with.

– Wonderful.

– Are you all well? Hey, stay tuned or check out the website, webmechanix.com/threemm for Three Minute Marketing, where you’ll find the rest of our conversation along with links, show notes, et cetera, et cetera. Great episode, much love. So you build this, you know, simulated sounds like an e-commerce website with many different products on basically.

– Yeah, sometimes, it’s a simulated like a real life experience. So you’re actually walking into a store, but still, obviously, within the website, and sometimes it’s a simulation of a web, like a website itself where you actually would replicate the eCommerce experience.

– So how do you traffic, like, where do you get people from?

– Well, basically, basically we hire them, so the market research industry has a whole set of suppliers called panel companies, and you can pay like, anywhere between $1 and $4 per person. So if we want a thousand people, that might cost $2,000 to come through and run that test.

– What’s that you use? Or what’s the name of that tool?

– .com. If you search for market research panels, then you’re going to find a few, there’s one called that’s the market leader. One called Cint, C-I-N-T. One called Pure Spectrum. You know, that’s not a business we are in, but those are three of the suppliers that we use.

– Cool, and is it self-service? Like, you just go in there and do it all online, or you have to call somebody?

– It’s kind of a mix, some of them are self-service. So I know that Cint has got a self-service option. Some of them are bit more like, you know, if you’re an agency like us, you’re doing it all the time, so we have a relationship with them. So we would call them up and set up a new project.

– That’s really cool. It’s got my head spinning, and I actually do want to get you involved with one of our clients, if you have bandwidth.

– Yeah, yeah, I’d love to talk, yeah.

– Okay, cool. Well, let’s jump into secret number two, even though there’s a lot more to unpack from secret, number one. Like, I’m a nerd, I like the details. But for secret number two, lay it on us. You said, I think, there’s a story behind the reason.

– Yeah.

– Everything they do and say, there’s a story behind it, is that–

– Exactly, exactly. So the mind is, I’ll get a little bit into the psychology now that we’ve got a few moments more. The mind is divided into different systems, and people, if you’ve read some behavioral science, then you might have heard of system one and system two, and these are the leads.

– Monkey brain.

– Yeah.

– Versus thinking brain kind of thing.

– Yeah, basically, yeah. So system one is like, automatic reactions, very unconscious, system two is calculating and deliberative.

– Got it.

– Well, what has more recently started to emerge is there’s also a system three. And so system three is where the imagination sets and where storytelling sits. And so system three is where, if you are thinking about buying a product and you’re not sure, and maybe it’s something new, then you’re going to project yourself into that mind, into a future mindset where you’ve got the product. You’re imagining the experience of using it, or tasting it, or driving it, and you want to kind of figure out for yourself, “What does this feel like? Is this good? Am I going to enjoy this?” And what you’re using to do that is you’re piecing together a story based on all of the stories you had from before. So all of your past experiences, you kind of reassemble them into a projection of this new future experience of the product that you’re buying. And so we uncovered that in that process of market research, by asking people to tell us stories, and they will see, “Tell us a story.”

– Real quick, is system three like an industrywide recognized thing that exists, or is that more so like your process and your statement?

– Yeah, I mean, this is something that’s emerging that is based on… So we, as well as my commercial life, I also do scientific research out work, working with different universities, different researchers, and publishing those papers. And so system three is something that I’ve developed in that side of my work.

– Got it, so you invented, or you discovered and defined system three in a way.

– Yeah.

– So my question is–

– It’s kind of like, yeah.

– Is that a subset of the thinking mind? Meaning like, oh, when thinking mind is engaged, then I will begin this imaginative process based on what stories, or is it a completely different system?

– So the way I see it, it sets kind of on the actually in between one and two. So it’s kind of in between the monkey minds, as you say, will have stored the basic experiences that I’ve had. So let’s say I tasted the soda before, and it was sweet, and it kind of activated my reward center, that’s system one. The thinking mind is where I will eventually get to, let’s say, I want to calculate how much money do I have and can I afford the soda? That’s system two. But in between, you have this where I extrapolate the taste that I learned in system one into a possible future experience that I haven’t had before. So it’s kind of like a layer in between.

– And in that way, two different people could experience completely different reactions or imaginations to the same exact product and the same .

– Definitely, because they have different life experiences, they have different stories. So for some people sort is like a thing that you love, for some people, sort of has maybe got a guilt story attached to that, so those two people would imagine the consequence differently.

– Well, for me, it’s kind of off limits. Like, I really don’t drink soda.

– Okay, yeah.

– And I haven’t for many years. So my imagination would be like, “Nope, not buying that.”

– Absolutely.

– Yeah, I’ll go for the guava or I’ll go for the, whatever, naked juice, or whatever they have.

– Yeah, absolutely. So you’ve got a story about soda that’s, and I say, you know, when I say story, it doesn’t mean it’s not true, you know, but that’s the way you perceive soda in the world. Occurs to you in a certain way.

– When you say soda, I’m like, “Nope.” When you say beer, sure, I’m like, “I know it’s bad for me, but I’m still like, yep.” ‘Cause it makes me feel great.

– Yeah, absolutely.

– So I have a different story about that.

– Interesting.

– So how do you unravel? So just to summarize, so we’ve got, first and foremost, is that people lie.

– Yep.

– So you need to design experiments, and you know, it makes me think of that book, “Thinking Fast and Slow,” I’m sure you’ve read it.

– Yeah, that’s where you’ll get system one and two in lots of detail in that book.

– Yeah.

– Yeah and, you know, there’s, as well as people, as well as they want to like you and they want you to like them, there’s other reasons why they like, you know, people are bad at forecasting their own behavior. They think that they’ll try something new, but actually they often want to stay with a status quo. When they put themselves in an imagined situation, they overemphasize the benefits and the pleasure of something, but they underweight the costs. But when they’re in the situation, the cost suddenly starts to become very, very real.

– That sounds like my daily life. ‘Cause I’m like the visionary, I don’t know if you’re familiar with EOS, but I’m the co-founder here. But I’m not the operational, well organized guy. I’m like, the idea guy, I’m the sales guy. So they call that visionary in this system we use called EOS. And so–

– Yeah, I’ve been reading about EOS recently, it sounds cool.

– Yeah, I’m like, “This is a great idea.” All my pleasure centers go off. But then when I can convince the team to actually do something with it, which is, I mean, I come up with too many ideas to pursue them all.

– Yeah, I feel you.

– But then it seems like almost every time we do pursue them, then the realities start to set in of the complexity, or the difficulty, or whatever.

– Sure, yep. So those are some of the reasons that people lie, it’s not that they, you know, they’re malicious, it’s just that their mind wouldn’t let them tell the truth.

– Right, yeah. And it kind of, I mean, it really, you can’t separate that from the second secret of it’s the stories that they–

– Absolutely, the story, this is like, some of the underlying drivers of why they see the things that they do. And so what we want to get to is, in market research, we ask people, “Tell us your story. Tell us a story of when you went to the grocery store. Tell us a story of the next time you’re going to drink a beer. Imagine that and describe it.” And the way that people tell you that story, I dunno if you’ve looked at any storytelling theory, but there’s, you know, there’s an arc of every story, there’s the, you know, the beginning, the middle, of the end, you have the hero’s journey, or you have the, you know, your antagonist and your turning points. These are all the elements that go into good storytelling. And when you get someone to tell your story, you can recognize those same elements. And you can say, “Okay, that’s your antagonist, that’s your turning point, so therefore, if I want to sell you a soda, or a beer, or a car, now I know who the antagonist is in your story. Now I know what the turning point is, so I can activate that turning point and make you want my car or my beer.”

– Yeah, mine is high fructose corn syrup. So I’m much more likely to buy if it’s like, natural cane sugar, you know?

– Okay, yeah.

– So it’s like, not going to change it. But yeah, so this sounds, it sounds like really sophisticated, advanced, thoughtful, and high impact work that you are doing. I imagine it costs a pretty penny like, to recreate an eCommerce website experience. Like, it’s not cheap, or a physical experience. I guess that might be cheaper if you could rent out space. But for an average brand, let’s say that you’re not like a, you know, a billion dollar brand, but you are, you’re an average brand, say like, a hundred million dollar company, something like that. And you’re on a budget and every dollar counts, what’s something that brands could do to like, try this or just even move in that direction, other than just hiring you?

– Yeah, well, absolutely. So the first thing is, when you’re doing your market research, just be aware of all these things. So if you want to absolutely rethinking fast and slow, or go to go to my website and download the guide, you’ll get some ideas of how you can design your surveys to get closer to the truth. The second tip is, you know, just ask people their story. Now, you don’t need to do all this sophisticated analysis with the story. You know, you don’t need to use kind of our technology to drill into those turning points. You can just collect from 500 customers, “Tell me the best story that you remember about drinking a beer,” and you’re going to get some cool stories, I bet. And you know, read through those 500 stories that’ll be there, it’ll be a fun afternoon you spend with your team going through those and finding the things that reveal things you hadn’t thought of before, about how people interact with your type of product, with your brand. And that’s a simple way to do it. The other thing that we are starting to try to do is to, rather than having companies commission, bespoke ad hoc research, is that we’re actually going out and doing some of it by ourselves, so we can publish those results in a syndicated form. So like, we’ve done a, you know, a big question for lots of brands right now is sustainability. How can I be sustainable? How can I make sure my customers see my sustainability credentials? I see that I’m eco-friendly. And rather than everyone having to kind of go and do that research one after another, we’ve kind of boiled down the key, like, the four or five key narratives for all food and drink consumers, for instance, around sustainability. And we we’ve published that into a report that people can can buy. So that’s a way of accessing some of that research without having to spend a hundred thousand dollars on a study.

– That’s awesome, man. And I want to keep going deeper and deeper into that ’cause you we’re getting into user voice and you know, the voice of the customer, which is incredibly powerful. I’ve seen huge win stories come from that. But I’m conscious of time. I want to spend the last few minutes just kind of like, understanding your story, ’cause you’re obviously, very impressive, right? Like, you’ve written books, you’re doing research, you’re starting and exiting company successfully. It sounds like you’re working with some large brands, you know, but I want to know the making of Leigh, like, take us back to when you were a kid. Take us back to Leigh, the kid, and just give us like, a quick kind of chronological, like, hey, here’s how you became you.

– That is better storytelling, okay. So I was one of those kids that loves math, or maths as we call it. But now I’m sure that all of your listens were late, I’m sure they all loved doing algebra at, you know, in their spare time. For some reason, they’re just what turned me on. And so I was, you know, I was, my mom tells me stories that I was counting up the even numbers on one side of the street in the pram when I was one and a half. And so I went to university actually at 14, I came out early, and I was very much on this academic track. Like, I wanted to prove mathematical theorems that had never been proven before, and discovered all this new stuff. And then I kind of ran into the .com boom. So I finished university in 1994, just at the beginning of when, you know, the way 1.0 was exploding, everyone was, you saw these billion dollar IPOs and you know, a billion dollars was a lot of money back then. You know, I got into that, I thought, “I can use some of my talents to build web companies and so on.” And I started doing that, and you know what they say, the people that sell the shovels are the ones that get rich. And so I was a web developer, I was creating software to build websites and so on. But what I ran into is I didn’t understand people. I didn’t know how to sell to human beings. And of course, guess who’s trying to buy this software is human beings. Who’s using this software are human beings. And so I was probably a little bit like Sheldon Cooper, trying to sketch out how to make friends on a whiteboard. And I wanted to understand, “How can I get how people buy the things part, you know, initially for my own services?” I wanted to sell them software. I wanted to understand how they buy, how they understand pricing, you know, how much should I charge? And I approached it in the way only way I knew how, which is a scientific way. I thought, “Right, I’m going to use mathematical theorem and signs to try and understand people.” So then I kind of went out and learned the economic theory, learned this psychology theory, and then came across this emerging field of behavioral economics that was starting to become a recognized field of science at that time. And I thought, “Right, this is it. This is what I need to know.” So I became kind of a behavioral economist, self-taught, but immersed in all the academic community. And then I realized, “Right, the technology world’s moved on a bit. Like, since I was making software, I’ve been overtaken by people with more investments, so that’s not my thing anymore, but now I know behavioral economics, so then I can make that my business.” And so there, that’s when I started the Irrational Agency and thought, “Right, here’s where I can sell this knowledge to those billion dollar brands that really need to understand their customers better.” So that’s how I got here.

– So you’re like a natural born mathematician turned kind of marketer that couldn’t sell turned behavioral economist.

– Yeah.

– And now entrepreneur and agency owner, and out there working with billion dollar brands and probably learning so much. So you are a dangerous, dangerous weapon, Mr. Caldwell. And you’re a programmer?

– Yeah, I still keep my hand a little bit doing some of the programming of our survey software. I do have a team now that mostly takes that over. And there, you can imagine they probably hate it when I decide, “Oh, I’m going to do some coding,” ’cause it’s like, “God, he’s going to forget to commit this to the virtual control system, or he is going to use his 1990s Java code instead of something modern.” But you know still enjoy.

– Last question I have before we wrap. So like, let’s say that I want to to hire you, or somebody wants to hire you. Is it like, a big, massive commitment, or is there some way to engage your brains and get you involved? Like, that’s like, not that expensive.

– You know, I’m always happy to have a conversation. If someone’s got an interesting question, then that’s going to get my curiosity, and I’ll engage on a lower level. Typically, the brands that uses, they’re usually spending like, 50 to a hundred thousand dollars upwards, but we do have that subscription service where you can buy into one of those prebuilt reports for much less, for more like, $10,000. But you know, if you want to just chat for a couple of hours and you’ve got an interesting question, then I’ll often be tempted.

– Well, I have a feeling, like, even if my budget’s not a hundred thousand, I have a feeling once I talk to you for a little while, I’ll be like, “Hundred thousand sounds good, let’s do it.”

– I try to trick you only in the most ethical way.

– Well, hey, I’ma let you go. For the listeners out there, if you’re liking this, I think this is next level. I think bringing behavioral psychology and behavioral economics into the marketing mix is a very smart idea. It doesn’t cost much, if a hundred thousand costs much, just think about how much you could make. Think about for 10% better sales, 20% better sales. Like, a hundred thousand bucks is not that much money. So anyway, I’m going to talk with you, Leigh. Check Leigh Caldwell out. Your website was knowingandmaking.com, right?

– That’s the blog, yep.

– Rock and roll, I’m going to go read that right now, and thank you so much.

– Not at all, thank you, it’s–

– I’ll be in touch.

– A lovely chat.

– See you soon, there, bye-bye. Amazing, love it. All right, sounds great.

– Thanks a lot, bye.

– See you soon. All right, bye.

Featuring:
Leigh Caldwell

Leigh CaldwellFounder

Chris Mechanic

Chris MechanicCEO & Co-Founder

Podcast Info:
24:28
Categories:
Marketing

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