We Are What We Drink

Just as beer cases have become filled with colorful labels and wine cellars have started to fill with more regional variety than we could ever have imagined, craft spirits are becoming alternatives to the traditional big liquor names. The number of craft distilleries jumped 16% in 2018 and 26% in 2017. In terms of what that represents to the workforce, 19,529 people now work full-time at craft spirits companies.

By far, the greatest number of craft distillers, 32.7 %, are in western states, with the South coming in second at 29.3. Third is the Midwest with 19.1% and the Northeast right behind at 18.9%. Among individual states, the leader by far is California, which has 148 craft distilleries, or nearly 10% of the total. New York State is next, with 123 craft distilleries. Washington State has 106, Texas has 86, and Colorado has 80.

Craft distilleries still represent a fraction of the overall booze market, but they’re steadily picking up sales and volume. In 2016, craft distilleries held 3% of sales. By 2017, that rose to 3.8%. On the surface that seems small, but gaining nearly a percentage point in such a massive industry point to a broader shift, just as it did with beer. Looking at the volume, that becomes abundantly clear. In actual cases, the craft industry has risen from 2.5 million cases sold in 2012, to 5.8 million cases in 2017. Interestingly, more than half of the sales for craft distillers come from customers in their home state. So craft distilling is on the rise, but why? And what does it say about marketing?

Food and drink can have something that the distilling world has long dismissed: a sense of place, drawn from the soil and climate where the grains grow – drawn from the history and cultural patterns that create a sense of meaning. This is tied to a growing international movement by distillers, plant breeders and academic researchers to return distilling to what they see as its locally grounded. Spirits with a sense of place can be made by cultivating regionally specific varieties, along with farming and distilling techniques that emphasize a spirit’s local flavor. But this idea goes well beyond flavor.

Something craft distilleries have done, whether intentional or not, is to tap into or create a sense of history and, in some cases, a sense of mystery. Lifestyle and connectedness have a great impact on consumer behavior and brand preferences. Very often, we choose brands that are considered “appropriate” for our self-image, that fit within a specific context/mood, or are representational of an idea. As a result, we use brands as a relevant means of self-expression and drama. They are “beacons”. Identifying the contexts in which a brand finds life and meaning establishes a sense of connectedness. Tying it to a sense of place and time creates a story that we can immerse ourselves in. For any brand, that crafting of the story can have a huge impact on its longevity and relevance.

We identify and find purpose through the symbols we adorn ourselves with. Those symbols take on the shape of brands, which is probably why a wider variety of cultural expressions among brands can close the gap between the individual self and the commercial self.

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Yellowstone’s Wolves and Reintroducing a Brand

Two decades ago, Yellowstone National Park was suffering. It was the victim of defoliation, erosion, and an unbalanced ecosystem. But in 1995, everything changed. That was the year wolves were reintroduced to the park.

Prior to the return of wolves, deer, elk, and bison populations had increased substantially, resulting in overgrazing, particularly of willows and other vegetation important to soil and riverbank structure. This left the landscape vulnerable to erosion. Without wolves, the entire ecosystem of the park suffered.

When wolves were brought back to the park, they changed their prey’s behavior patterns. The herbivores started to avoid areas like valleys and gorges where they could be easily hunted by predators. And those areas began to regenerate. Species such as birds, beavers, mice, and bears returned. Plant life once again thrived along the riverbanks and erosion decreased significantly. Perhaps most remarkable, the stabilization of the riverbanks actually made the rivers and streams change course. The entire landscape of the park transformed.

Brands aren’t that dissimilar. They exist as part of a broader ecosystem and when they are removed, that ecosystem changes. Now, to be fair, “ecosystem” is admittedly an industry buzz word that’s been around for years, including the branding world. Most focus on the integration of social media, digital marketing, and consumer data. And they usually employ traditional means of brand communication. Every brand is part of a larger, interconnected cultural system. Not just the culture of the people inside the company, but its partners, customers, non-customers, and even competitors. It has history, mythology, functions, and forms. Every action results in a reaction.  

So, when a brand is reintroduced or reinvented, it does so in the context of a deeply interconnected set of variables. When ta brand is reintroduced or reinvented, it change the system. The burden of a brand revivalist, then, is to rewrite and reshape not only the brand itself, but the ecosystem in which it operates. No matter what the reason is for your brand relaunch, this means it needs to be specific and backed up by a concrete plan. The first step in the process is understanding where it fits in the ecosystem, what role it plays, and then deciding which aspects of the brand need to be retooled.  This, of course, requires a thorough evaluation of the core brand identity across all of its various components.

The second and perhaps more important step is to fully understand how the brand shapes the broader cultural patterns that impact its consumers/customer/users. Most situations involving a brand relaunch are going to be long-term affairs, and the planning stages need to be informed not only so the reintroduction itself will have maximum impact, but also so that it positively effects the system of which it is part, both sort and long-term.

Millennials, Motorcycles, and Marketing: The End Is Not Nigh.

CNBC ran a story yesterday on the slow demise of Harley Davidson that caught my eye. It began with the statement, “The supposed millennial penchant for ‘killing’ industries gets thrown around a lot, but it could really be happening to one American icon: the Harley-Davidson  motorcycle.” The reasoning is that in addition to a decline in sales (which are admittedly significant) and behavioral data suggest a considerable generational divide in attitudes toward heavyweight motorcycles. There’s little question that this American icon is dealing with difficult times, but there are two distinct problems with the article. The first is the fetishizing of data and the inability to interpret it in a broader context. The second is the obsession we seem to have as a society with blaming Millennials for crushing industries.

The Data Problem. Survey data suggests that the reasons for buying a bike differ fairly dramatically for older and younger generations. In response to why they buy a motorcycle, 21-34-year olds state that it’s a matter of ease of transportation, while older buys (the article doesn’t really qualify what “older” means) are buying because bikes are “cool” or as part of a hobby.  Younger buyers, so the story goes,  appear to be more motivated to consider motorcycles for practical reasons, which means it is likely they will be more interested in less expensive bikes that bring in lower margins for manufacturers. However, potential younger buyers cited the second most common reason to buy a motorcycle was that it “goes with their self-image”. That is, they’re buying them, or considering buying them because they are “cool”. So, from the outset there is a bit of a contradiction, or at least a misinterpretation, of the data and what appears to be a complete disinterest in exploring the findings with a critical eye.

First, these assessments don’t take into account that the economy into which this population into after leaving college, and the bulk of them are indeed college grads, is one of the most hostile times in U.S. History. Even with a booming stock market and labor market, this generation is mired in debt and jobs simply don’t pay what they did. Because of these tough times, they were forced to change the outlook or the norm in key areas such as ownership. Like their great grandparent who weathered the depression, their outlook and buying habits are more frugal, more pragmatic. This has affected other industries including the motorcycle industry, and as such we’ve have seen the rise of smaller more “urban-esque” style motorcycle in recent years. This presents a problem for brands like Harley-Davidson, but it is one they are addressing. The problem is, innovation and change take time, so the current decline in sales doesn’t necessarily indicate the death of the brand.

Second, there’s that point about bikes being cool. Motorcycle culture exists on the margins of mainstream culture as both a social community and a mode of transportation, and the cultural stereotype imagines all bikers to be rebels, socially as well as sexually. The motorcycle is much more than a means of transportation; it is a symbol of freedom, a life that breaks through the norms. To put it briefly, the motorcycle culture implies being one with the bike and living by the road’s unwritten rules. The degree of freedom, individuality, and adventure found in motorcycle riding and culture distinguishes it as nontraditional in contrast with cars, the bus, etc. In other words, while the technology behind a bike may have to shift to accommodate changing interpretations of technology and the economic realities of a younger generations, motorcycles still have a cultural allure that can’t be overlooked. And the Harley-Davidson brand is still the heart and soul of the motorcycle mystique.

The Millennial Problem.  Quite simple, Millennials haven’t destroyed industries any more than they’ve brought plagues of locusts. Piling up on a generation is divisive and counterproductive. American institution is declared dead, the news media like to haul the same usual suspect before the court of public opinion: the Millennial generation. But based on analysis of economists at the Federal Reserve, this idea is pure fiction.

When researchers compared the spending habits of Millennials with those of young people from past years, such as the Baby Boomers and Gen Xers, they concluded that “Millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.” They also found that “Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth.” So, the fact that young people are buying fewer motorcycles doesn’t prove that they don’t want them. It might mean they simply can’t afford them.

It’s typical for Millennials to bear blame for dramatic cultural and economic changes when their only crime is behaving like everybody else. For example, last year The Wall Street Journal published a report that cited young people for killing grocery stores. The data show consumers ages 25 to 34 are spending less at traditional grocers than their parents’ generation did in 1990. But here’s the rub: Americans of all ages are relying more on convenience stores, pharmacies, and superstores, for food to eat at home, and those institutions aren’t typically counted as grocers in government data. Furthermore, the same holds true for etailers, like Amazon. Also, Americans of all ages are eating out at restaurants more. The group shifting its spending toward restaurants the fastest? It’s not 20-somethings. It’s people over 50. In other words, whether it’s motorcycles, cars, groceries, or nearly anything else, the woes of these industries can’t be pinned on Millennials. Millennials have simply become scapegoats and tired tropes for unimaginative reporting.

What It All Means. Harley-Davidson’s reaction to the article from CNBC sums up everything about it quite nicely: “There’s nothing new here”. Blaming millennials for the failures of various industries, including the motorcycle industry, is rather asinine. Indeed, it might make more sense to thank them for forcing the motorcycle industry to go back to their roots of innovation, rebellion, and coolness. Manufacturers and marketers ultimately have a responsibility to work with dealers, influencers, etc. to create new riding opportunities and messages that breath life back into the industry. Brands like Harley-Davidson are making terrific bikes that people want to ride. But weak marketing communication efforts around their overall value have allowed the price-to-ride value equation to slide. Add to that a fixation on data over creativity and reflection on the cultural significance of the motorcycle and you have a tremendous problem. Millennials aren’t killing the industry. The industry, like society, is simply changing.

Brands and Self-Creation

The old brand model advocated the creation of an external brand image to influence consumers. It talked about benefits, it talked about the company, it promised to give you sex appeal. Those times are long past. This is partly due to the sheer number of channels in which people interact, but I believe there is a deeper reason. And that deeper reason is that successful brands reflect culture, not targets or widgets. In other words, talking about what you do is no longer enough.

Consumers will no longer buy the external brand image we create, but will take it upon themselves to define what a brand really stands for by probing for their own truth. Today we’re seeing that certain issues which could be considered secondary to a brand are suddenly primary. People are not just choosing the best, the sexiest, or the cheapest. They’re choosing brands that have meaning. Their concept of nature, of self, of society takes center stage. Particularly in such a media-rich, postmodern, global environment, a sense of culture has become increasingly complex. That 35-year-old, American woman, might identify more closely as a post-punk-artist-suburban-engineer. In other words, she isn’t defined so much by her demographic makeup or media habits as she is by the choices she makes in shaping our own worldview and sense of self. And this is where brands taking on a new and intriguing role.

So, what role does brand play in this landscape of self-creation? Brands become symbols and metaphors for crafting identity. They introduce, reflect, and influence meaning. The most resonant brands are creating value not just by the products or services they represent, but by the symbolic power they impart. Indeed, meaning has become the most important product a brand creates.

Perhaps the most relevant is that “culture” is a transmitted pattern of meanings embodied in symbols by which people communicate, perpetuate, and develop their knowledge about and attitudes toward the world. We’ve all heard it. A brand must stand for something and drive people to participate in it, become part of it. Wonderful, but how do you begin to determine where your brand fits into a cultural matrix? I believe it starts with eight simple questions:

  1. Does it have a higher purpose?
  2. Does it have norms?
  3. Does it have specific values?
  4. Does it have special language?
  5. Does it use specific metaphors and symbols?
  6. Does it have myths, legends, and storytelling?
  7. Does it have rituals?
  8. How broad is its social presence?

Why this particular approach? Because, when people make a purchase, whether it be a mobile phone, a bag of dog food, or a bottle of milk, they are actually using that product or service to add meaning to their lives. The meaning that has been created in the goods and services that everybody buys is not intrinsic to those goods and services. It’s our culture that determines this. If you come to marketing from that point of view, it suggests that the choices we make are actually very important to us, even if those choices seem rather functional. From that perspective, the marketer has a responsibility to craft strategies and messages that reflect these cultural perspectives.

Grey Salmon and Building A Brand

A few years back, people were left reeling after ABC revealed in a piece on farmed salmon a widespread use of chemical coloring in the industry. Following the report, much of the public voiced concerns, outrage in some cases, over the chemicals used and a general feeling of deception about the practice’s existence, even though this is hardly a trade secret. Even so, the notion of farmed salmon having the color of their flesh altered in any way was disconcerting to many and there are countless websites and journals calling into question the products stemming from salmon farming specifically and aquaculture in general.

But while many consumers and consumer groups, were and are shouting for more transparency in the industry around the labelling of synthetically colored salmon, the question remains: is colored salmon actually bad for us to eat? And should we be encouraging the industry to abandon the practice in place of a chemical-free farmed salmon—one with a decidedly less appealing grey flesh? There are a couple of overarching themes that need to be explored when thinking the problem through.

Biology. So what is it that makes wild salmon pink? The chemical in question can be found in nature. Astaxanthin is a naturally occurring antioxidant, meaning that it helps to protect cells from damage and happily turns wild salmon pink. Functionally, synthetic astaxanthin used by aquaculturists is the same. The synthetic compound will have exactly the same effect in the body of the farmed fish as it does in the wild. In the wild, it is a natural process which occurs when fish consume a diet of algae and krill. The same process is mimicked with farm salmon, meaning they are receiving the same nutrients they would in nature, and their bodies metabolize astaxanthin as they would in nature.

The process, as it turns out, is about more than visual appeal. Astaxanthin is essential to the salmon natural reproductive cycle and functions as a provitamin, being converted to vitamin A. Salmon are unable to make astaxanthin themselves, needing a dietary supply for these vital functions. It just happens to have a pink pigmentation to it, which in turn impacts the salmon flesh. So the notion of “dying” is something of a myth. Ultimately, there isn’t a lot of difference between wild-caught and farmed salmon, at least for the more reputable farms, simply because farmed salmon are fed a diet that seeks to maximize the fish’s natural nutrition and mimic what they would eat in a wild scenario. Major farmers will give their fish a diet that keeps their fatty acids as similar to that of wild salmon as possible – it’s a matter of flavor and, in turn, profits.

To be sure, there are ample arguments why NOT to eat farmed salmon, all of which are open to debate. Contaminants in the water, the types of feed used, and a host of other issues are all relevant, and I’m certainly not advocating one position or another. But color is hardly one of them.

The Ick Factor. Beyond biology, there’s also the matter of how we respond to foods that don’t fit out psychological frame.And grey salmon falls into that category. A study by DSM showed that shoppers are more attracted to darker shades of salmon. And that added color can be priced higher in part because of its resemblance to wild salmon. Not dying farmed salmon would make it more affordable, but only if people would actually purchase salmon that’s not pink, which doesn’t seem likely. We have a cultural understanding of how ingredients and dishes are “supposed” to be. These reflect notions of cleanliness, nature, purity, and an array of other norms. Consequently, eating grey salmon would be reminiscent of eating blue bread – beyond the potential novelty, it simply doesn’t fit our understanding of what’s “right”. Furthermore, grey is a color often associated with decay or blandness in our society. So in addition to grey salmon falling outside our idea of what salmon “should be”, it also signals associations with unhealthiness and death. Pretty heavy, yes, but relevant if you’re farming or selling salmon for a living.

We learn from those around us what’s worth eating and what should be avoided, and those categories vary between regions. But somehow, the reminder that taste  is so very relative, and so very learned, never fails to shock. The same holds true when we think about how food should look. Ultimately, visual appeal is just as important as the tasting experience of the food. Before we even take that first bite, we’ve already judged the meal in front of you. How that food looks makes an impression, even a promise, with the viewer. Pink salmon promises delight. Grey salmon promises disappointment.

Putting Pink Into Practice. So if your goal is to sell more farmed salmon, you have to convey that its pink hue isn’t detrimental and that it keeps the buyer from freaking out. Great. Those are fairly straightforward tasks, assuming you can get people to stop long enough to listen to what your brand has to say. This holds true of nearly any product – features, benefits, and fact are all necessary to make your brand’s case. But they hardly win hearts and minds. And that requires digging a bit deeper and connecting bigger cultural truths to what you make or do.

In the case of farmed salmon, one path may be to speak to the higher moral truth of climate change and consumption. Wild-caught salmon is commonly available but under current rates of spawn and catch, it is not sustainable. The ability to make an identical version of this nutrient increases the ability of the industry to sustainably grow without depleting naturally occurring, but limited, resources. Therefore your brand stands for something bigger than fish production, it stands for a healthy, sustainable future. Adding astaxanthin using the current methods, while not perfect, helps maintain and preserve the planet and wild fish stocks. Of course, there is a simple reality that in a polarized, digital age you will always be a target. Taking a position means taking on risk. But responding to criticism strengthens a brand’s relationship with its customer base. Some negative commentary is short-lived, some is continuous and reflects a specific world view. In either case, it requires having a plan in place to diffuse the situation.

And the clearer your brand’s cause, the easier it is for that plan to come together. The point is simple — dig deeper, whether you’re selling salmon or flea medicine. Uncovering cultural patterns of meaning leads to better branding, better campaigns, and better marketing.

Love, Rot, and Cheese: Culture and Marketing Artisanal Foods

Let’s talk about cheese. Cheese is at its most basic level carefully rotted milk. Beyond the milk itself, it is, like beer, an ancient domestication of microbial activities for human consumption. We work in concert with communities of bacteria, molds, and fungi, eating the sugars, proteins, and fats in the milk to produce the hundreds of different kinds of cheeses. It is symbiotic, sustained funk. It isn’t sexy, but it is the biological reality.

But cheese is more than biology. It is poetry and passion. It is the embodiment local identity as well as a testament to the power of mass production. That said, after an evening of exploring locally-produced charcuterie with my daughters, my thoughts drift to artisanal cheeses, not the stuff produced in sterile factories. Making and marketing artisanal cheese is a dance in how we as humans blur the lines between nature and culture, urban and rural, production and consumption. It is the product of human skill working in concert with the natural agencies of bacteria, yeasts, and molds to transform a fluid made by cows, sheep, and goats (and no doubt other milk-producing creatures I’m simply unaware of).

Cheesemakers are increasingly interested in the microbial inhabitants of local environments and the unique communities that shape a place and its cheeses. Microbial terroir emphasizes the importance of the unique geography of a place, using the qualities of specific, local microbes to craft an identity for a brand of cheese. While the microbial similarities of cheeses from different regions are often more striking than their differences, identifying cheeses through the flavors produced by their bacteria allows consumers to get to know the microbes in our lives, and through those microbes, establish a sense of connectedness and regional pride.

Beyond the unique flavors produced by virtue of location, the lifestyle is part of the appeal to consumers of artisanal cheese. The ethics and politics of locally produced foods of American farmstead or imported raw-milk cheeses are all symbols of a privileged kind of eating, but with their own challenges and their own complex cultural contexts – like all things, cheese is political. For producers, the single most relevant issue is how to create a product that is economically viable while staying true to their beliefs. There’s a very small profit margin in cheese or most other “craft” foods. No one goes into these professions to get rich. But that is, for many consumers, the draw.  Its production is about passion and commitment to the local community. In essence, all foods have social lives. But with an increased sense of local or regional identity, the antithesis of post-war industrial sameness, artisanal cheeses are becoming less an expression of privilege and wealth, and more an expression of community involvement. Uncovering the many complex practices and decisions of artisanal cheesemakers and cultivating a sense of place, shows that food is a means of building of cultural identity. And all of this matters because it extends beyond cheese to locally produced foods.

Shatto is a small family-owned and operated dairy farm located just north of the Kansas City. With approximately 350 dairy cows, they have established a strong regional following. As their website points outs, “Our family has been farming here for more than 100 years and began a dairy farm more than 80 years ago. In June 2003 our family began processing our own milk on the farm.” Two things stand out with Shatto. First, the milk has a consistent and specific taste because the herd is small and the food it eats reflects the local grasses and alfalfa. Second, Shatto is about the product, not just the profits. The messaging and the access consumers have to the dairy farm (including the small bottling plant) represent a strong sense of belonging to regional culture. The romance sells to be sure, stirring up pastoral images of a simple, rural life. It appeals to people because it is the rural counterpart to independent restaurant, locally distilled spirits, even regional start-ups. But the labor behind it sells it as well. It’s hard work, which appeals to the cultural underpinnings of the Midwestern work ethic. The things that have helped drive Shatto’s success hold true for makers of artisanal cheeses.

Handcrafted foods, whether cheese or Duroc pork, bring the practices of food production “back to the future,” reintroducing techniques that have been marginalized and largely eliminated during the modernization of industrial food production. Through artisanal cheese and other foods, producers and consumers challenge these industrial imperatives, leading to diverse and exuberant elements to our diet. For producers and the people who market their products, understanding the deeper personal and cultural connections we have with our food is central to success.

Retail Behavioral Economics

Agencies have been applying behavioral economics, sometimes knowingly, sometimes not, for years. But as a formalized discipline, behavioral economics is a relatively new school of thought at the intersection of economics and psychology (when compared against economics as a whole).  At its core is a simple principle: human beings are predictably irrational. The discipline has been used to shed light on all sorts of entrenched patterns of behavior, such as why gamblers are willing to keep betting even while expecting to lose, or why people who want to save for retirement, or to eat better, or start exercising and quit smoking, end up doing no such things. Long before behavioral economics had a name, agencies and marketers have been using it using it. “Three for the price of two” offers and extended-payment layaway plans became widespread because they worked, not because agencies had run scientific studies showing that people prefer a supposedly free incentive to an equivalent price discount. In essence, it’s about targeting behavior humans are hardwired for.

There’s nothing new in finding the psycho-social hook that triggers a reaction. What is new is an interest in systematizing behavioral thinking and using the discipline more conspicuously to shed insight on the challenges advertisers face. Advertising is a business that tries to shape how people think about their choices – it taps into the underlying triggers that drive our beliefs, actions, and passions. Neoclassical economics can explain ads only as providing information. But if the seller can invest in advertising that frames the choice, that frame will skew the buyer’s decision. In other words, a more systematic approach can unlock significant value and increase share of culture by targeting actions to match practices, beliefs, and the reptilian brain.

A shot before bedtime: Take a product’s cost less painful. In almost every purchasing decision, consumers have the option to do nothing: they can always save their money for another day. That’s why the marketer’s task is not just to beat competitors but also to persuade shoppers to part with their money in the first place. According to economic principle, the pain of payment should be identical for every dollar we spend. In marketing practice, however, many factors influence the way consumers value a dollar and how much pain they feel upon spending it.

Retailers know that allowing consumers to delay payment can dramatically increase their willingness to buy. One reason delayed payments work is perfectly logical: the time value of money makes future payments less costly than immediate ones. But there is a second, less rational basis for this phenomenon. Payments, like all losses, are viscerally unpleasant. But emotions experienced in the present—now—are especially important. Even small delays in payment can soften the immediate sting of parting with your money and remove an important barrier to purchase.

Another way to minimize the pain of payment is to understand the ways “mental accounting” affects decision making. Consumers use different mental accounts for money they obtain from different sources rather than treating every dollar they own equally, as economists believe they do, or should. Commonly observed mental accounts include windfall gains, pocket money, income, and savings. Windfall gains and pocket money are usually the easiest for consumers to spend. Income is less easy to relinquish, and savings the most difficult of all.

Technology creates new frontiers for harnessing mental accounting to benefit both consumers and marketers. A credit card marketer, for instance, could offer a Web-based or mobile-device application that gives consumers real-time feedback on spending against predefined budget and revenue categories—green, say, for below budget, red for above budget, and so on. The budget-conscious consumer is likely to find value in such accounts (although they are not strictly rational) and to concentrate spending on a card that makes use of them. This would not only increase the issuer’s interchange fees and financing income but also improve the issuer’s view of its customers’ overall financial situation. Finally, of course, such an application would make a genuine contribution to these consumers’ desire to live within their means.

Become the icon: Harness the power of a default option. The evidence is overwhelming that presenting one option as a default increases the chance it will be chosen. Defaults (what you get if you don’t actively make a choice) work by instilling a perception of ownership before any purchase takes place, because the pleasure we derive from gains is less intense than the pain from equivalent losses. When we’re “given” something by default, it becomes more valued than it would have been otherwise. And we are more loath to part with it.

Savvy marketers can harness these principles. An Italian telecom company, for example, increased the acceptance rate of an offer made to customers when they called to cancel their service. Originally, a script informed them that they would receive 100 free calls if they kept their plan. The script was reworded to say, “We have already credited your account with 100 calls, how could you use those?” Many customers did not want to give up free talk time they felt they already owned.

Defaults work best when decision makers are too indifferent, confused, or conflicted to consider their options. That principle is particularly relevant in a world that’s increasingly awash with choice. A default eliminates the need to make a decision. The default, however, must also be a good choice for most people. Attempting to mislead customers will ultimately backfire by breeding distrust.

Limit the options: Don’t overwhelm consumers with choice. When a default option isn’t possible, marketers must be wary of generating “choice overload,” which makes consumers less likely to purchase. In a classic field experiment, some grocery store shoppers were offered the chance to taste a selection of 24 jams, while others were offered only 6. The greater variety drew more shoppers to sample the jams, but few made a purchase. By contrast, although fewer consumers stopped to taste the 6 jams on offer, sales from this group were more than five times higher. Large in-store assortments work against marketers in at least two ways. First, these choices make consumers work harder to find their preferred option, a potential barrier to purchase. Second, large assortments increase the likelihood that each choice will become imbued with a “negative halo”—a heightened awareness that every option requires you to forgo desirable features available in some other product. Reducing the number of options makes people likelier not only to reach a decision but also to feel more satisfied with their choice.

Brand matters: Position your preferred option carefully. Economists assume that everything has a price: your willingness to pay may be higher than mine, but each of us has a maximum price we’d be willing to pay. How marketers position a product, though, can change the equation. Consider the experience of the jewelry store owner whose consignment of turquoise jewelry wasn’t selling. Displaying it more prominently didn’t achieve anything, nor did increased efforts by her sales staff. Exasperated, she gave her sales manager instructions to mark the lot down “x½” and departed on a buying trip. On her return, she found that the manager misread the note and had mistakenly doubled the price of the items.  In this case, shoppers almost certainly didn’t base their purchases on an absolute maximum price. Instead, they made inferences from the price about the jewelry’s quality, which generated a context-specific willingness to pay.

The power of this kind of relative positioning explains why marketers sometimes benefit from offering a few clearly inferior options. Even if they don’t sell, they may increase sales of slightly better products the store really wants to move. Similarly, many restaurants find that the second-most-expensive bottle of wine is very popular. So is the second-cheapest. Customers who buy the former feel they are getting something special but not going over the top. Those who buy the latter feel they are getting a bargain but not being cheap. Sony found the same thing with headphones: consumers buy them at a given price if there is a more expensive option, but not if they are the most expensive option on offer.

Another way to position choices relates not to the products a company offers but to the way it displays them. For instance, that ice cream shoppers in grocery stores look at the brand first, flavor second, and price last. Organizing supermarket aisles according to way consumers prefer to buy specific products makes customers both happier and less likely to base their purchase decisions on price, allowing retailers to sell higher-priced, higher-margin products. For thermostats, by contrast, people generally start with price, then function, and finally brand. The merchandise layout should therefore be quite different.

Marketers have been aware that irrationality helps shape consumer behavior for a long time. Behavioral economics can make that irrationality a bit more predictable. Understanding exactly how small changes to the details of an offer can influence the way people react to it is crucial to unlocking significant value.