The Essential Behavioral Science Reading List for Marketers

Last month, I wrote an article here arguing that, to achieve success in 2023 and beyond, marketers will need to be adept at leveraging both the capabilities of technology and data science, and the principles of behavioral science describing how people make decisions. I called technology/data science and behavioral science the yin and yang of high-performance marketing.  

Technology and data science have received a great deal of attention in marketing circles. For example, the use of artificial intelligence in marketing has been a hot topic in the industry for the past few years, and the recent tsunami of buzz surrounding ChatGPT and other generative AI applications has been nothing short of astounding. 

The use of behavioral science in marketing has received somewhat less attention, even though marketers have been using principles of behavioral science for decades.

Given the importance of technology/data science and behavioral science for marketing, I'll be providing a reading list of the books I've found most useful for learning about these topics. I'll cover books relating to technology and data science in a future post. In this post, I'll describe the books that I think are required reading for marketers who want to leverage behavioral science principles in their marketing efforts.

The following list is by no means comprehensive, and most of the books listed aren't that new. However, these four books will give you a solid foundation in the principles of behavioral science that are relevant to marketing.

Here are my essential must-reads.

Thinking, Fast and Slow by Daniel Kahneman (Farrar, Straus and Giroux, 2011)

Source:  Farrar, Straus and Giroux

If you can only read one book about human thinking and decision making, it should be Thinking, Fast and Slow by Daniel Kahneman, one of the most influential psychologists in history, and the winner of the 2002 Nobel Prize in economics.

Kahneman can accurately be described as the intellectual "godfather" of behavioral economics. In the 1970's, he and fellow psychologist Amos Tversky collaborated on research regarding the non-rational aspects of human decision making. The work of Kahneman and Tversky laid the foundation for the behavioral science discipline we now call behavioral economics.

In Thinking, Fast and Slow, Kahneman asserts that the cognitive processes people use can be thought of as two "systems."

• System 1 (fast thinking) operates automatically, quickly, with little or no effort, and with no sense of voluntary control.
• System 2 (slow thinking) consists of thinking processes that are reflective, controlled, deliberative, and analytical.

When we think of ourselves, we identify with System 2, our rational self, but System 1 actually originates many of the impressions and feelings that are the sources of the explicit beliefs and deliberative choices of System 2. Therefore, System 1 exerts a powerful influence on the economic decisions we make, including decisions about the products and services we decide to buy.

The most important lesson for marketers in Thinking, Fast and Slow is that System 1 uses heuristics (mental shortcuts) to generate our impressions, intuitions, and feelings. Astute marketers can use these heuristics to make marketing messages and programs more effective.

Predictably Irrational, Revised and Expanded Edition:  The Hidden Forces That Shape Our Decisions by Dan Ariely (HarperCollins Publishers, 2009)

Source:  HarperCollins Publishers

The original edition of Predictably Irrational was published in 2008, and this book, along with Nudge (discussed below), raised public awareness of behavioral economics and put it on the radar screens of business and marketing leaders.

In Predictably Irrational, Ariely described several experiments that illustrate the many invisible factors that lead us to think and behave in ways that are both irrational and predictable.

Ariely summarized the basic thesis of the book when he wrote:

"If I were to distill one main lesson from the research described in this book, it is that we are pawns in a game whose forces we largely fail to comprehend. We usually think of ourselves as sitting in the drivers seat, with ultimate control over the decisions we make and the direction our life takes; but, alas, this perception has more to do with our desires - with how we want to view ourselves - than with reality."

Nudge:  The Final Edition by Richard Thaler and Cass Sunstein (Yale University Press, 2021)

Source:  Yale University Press

The original edition of Nudge was published in 2008, and "nudging" soon became a popular behavior change/management tactic in both the public and the private sectors.

A key lesson for marketers in Nudge is the power of choice architecture, which describes how the arrangement and/or framing of choices or options can affect what choices are made and which option is selected. One example in the book discusses how the order in which food items are arranged in a school cafeteria can lead students to make more healthy eating habits.

Using Behavioral Science in Marketing:  Drive Customer Action and Loyalty by Prompting Instinctive Responses by Nancy Harhut (Kogan Page, 2022)

Source:  Kogan Page

Thinking, Fast and Slow, Predictably Irrational, and Nudge aren't specifically about the role of behavioral science in marketing. But these books provide insights into human decision making that are essential for marketers to understand if they want to create effective marketing messages and programs.

Using Behavioral Science in Marketing speaks directly to how marketers can leverage principles of behavioral science to improve their marketing efforts.

Nancy Harhut clearly wrote this book for hands-on marketing practitioners. While she provides clear descriptions of the behavioral science principles discussed in the book, and ample citations to the research relating to those principles, her primary focus is on how marketers can apply those principles in real-world situations.

I wrote a review of Using Behavioral Science in Marketing last fall, and I recommend that you read that review to get a more complete description of this book.

Top image courtesy of Affen Ajlfe (www.modup.net) via Flickr (CC).

[Book Review] A Valuable Introduction To the Complex World of Marketing Technology

 "MarTech is marketing."

Source:  Kogan Page

That's the tagline adopted by Third Door Media a few years ago for its MarTech conferences and martech.org website. And while some have argued that the tagline goes a little too far, few marketing thought leaders or practitioners would dispute the idea that marketing and technology have become nearly inseparable.

Scott Brinker, the MarTech conference chair and editor of the Chiefmartec Blog, captured the interconnectedness of marketing strategy and marketing technology when he wrote, "Strategy alone isn't enough. You've got to be able to execute on it. And martech has become integral to marketing execution. That's what 'martech is marketing' really gets at." 

Marketing technology has been discussed in hundreds, if not thousands, of ebooks, white papers, blog posts, webinars, and conference presentations over the past two decades. But there are surprisingly few full-length books that specifically address this vitally important topic.

So, a new book by Darrell Alfonso is a welcome addition to our body of knowledge regarding marketing technology. The Martech Handbook:  Build a Technology Stack to Attract and Retain Customers (Kogan Page, 2022) provides a valuable introduction to the complex and dynamic world of marketing technologies. 

Darrell Alfonso is well-suited to write about this topic. He is currently the Director of Marketing Strategy and Operations at Indeed.com, and he was previously Global Marketing Operations Leader at Amazon Web Services. 

What's In the Book

The author used an expansive approach in writing The Martech Handbook. The book addresses - or at least touches on - all of the aspects of marketing technology that you would expect to find in an introductory treatment of the subject.

In the first chapter, Mr. Alfonso describes the phenomenal growth of martech, reviews the history of martech, and provides an overview of the martech industry. In Chapter 2, he lays out the business need for marketing technology and discusses the key business goals that martech can help companies achieve.

The next five chapters of The Martech Handbook cover several of the "nuts and bolts" aspects of marketing technology, including:

• The key categories of marketing technology (Chapter 3)
• The basic attributes of a "martech stack" (Chapter 4)
• How to design an effective martech stack (Chapter 5)
• How to identify and select "core" marketing technology platforms and applications (Chapter 6}
• How to identify and select the right "ancillary" martech applications (Chapter 7}

Mr. Alfonso then turns to several issues relating to the management of marketing technology. In Chapter 8, he reviews some of the basic principles of managing a martech stack, and in Chapter 9 he discusses martech measurement, governance, and enablement.

In Chapter 10, he discusses the vital importance of getting buy-in for marketing technology. This includes buy-in from company leaders for martech investments and buy-in from the people who will use the technology platforms and applications.

Mr. Alfonso concludes The Martech Handbook with a chapter devoted to how marketing leaders can drive continuous improvement in the performance of their marketing technology systems.

My Take

The Martech Handbook is a welcome addition to our "library" of resources regarding marketing technology. The book is well-written, and Darrell Alfonso does an excellent job of making what can be a complex and technical topic easy to understand. The author also has extensive hands-on experience with several types of marketing technologies, and this enables him to bring a real-world perspective to the book.

The most important thing for potential readers to understand is that The Martech Handbook is mostly written at a very basic level. As I noted earlier, this book provides a sound introduction to many important aspects of marketing technology, and the key word here is introduction.

The Martech Handbook will be particularly useful and valuable for any marketer who is not already familiar with marketing technology tools and systems. This might include:

• Recent graduates who have just started their first marketing job
• Marketing students who want to learn more about the marketing technology landscape
• Marketers who have had limited experience with most types of martech (e.g. a marketer at a small company who has only worked with e-mail marketing software)
• A marketer who has recently been given responsibility for evaluating new types of marketing technology

This book would also be an excellent resource for a person working in another business function (e.g. sales, customer service, finance, etc.) who needs to better understand the capabilities and the potential benefits and pitfalls of marketing technology solutions.

If you have significant experience working with a variety of marketing technology applications, The Martech Handbook may not benefit you greatly. But, if you aren't familiar with the landscape of marketing technology, or if you have colleagues who fit this description, The Martech Handbook will be a great learning resource.

[Research Round-Up] The State of Artificial Intelligence in Marketing

(The marketing world has been captivated by ChatGPT for the past several weeks. The generative AI-powered chatbot developed by OpenAI has been widely hailed by some members of the marketing community, and widely criticized by others. While the jury is still out on the actual impact of ChatGPT on marketing, the use of artificial intelligence has been one of the hottest topics in marketing for the past few years. So, it seems appropriate that this month's Research Round-Up features two recent surveys that explore the state of AI in marketing.)

2022 State of Marketing and Sales AI Report by the Marketing AI Institute and Drift

Source:  Marketing AI Institute and Drift

• A survey of more than 600 marketers representing a wide range of industries and company sizes
• 49% of the respondents were director level or above
• 65% of the respondents were based in the United States, the UK, India, Canada, and Germany
• 38% of the respondents work exclusively in B2B - 41% work in both B2B and B2C
• Survey open from June 1, 2021 to June 1, 2022

The objective of this survey was to gain insight into how marketers are using artificial intelligence to support their activities and programs. Overall, the survey findings indicate that the use of AI in marketing is still in the early stages.

Two-thirds of the respondents (67%) said they were still learning how AI works and exploring use cases and technologies. Just 15% of the respondents reported that they had achieved wide-scale implementation of AI.

When asked how they would classify their understanding of AI terminology and capabilities, 45% of the respondents rated their level of understanding as beginner, 43% said intermediate, and only 12% said advanced. In addition, only 29% of the respondents said they are highly confident or very highly confident in their ability to evaluate AI-powered marketing technologies.

The research found that marketers recognize the importance of AI and expect its use to grow significantly in the near future. Fifty-one percent of the survey respondents said AI is very important or critically important to their marketing success over the next 12 months. And another 33% said it is somewhat important.

Over three-quarters of the survey respondents (77%) said they are currently automating 25% or less of their marketing tasks using AI, but a similar proportion of respondents (74%) said they expect more than 25% of their tasks will be automated using AI over the next five years.

The final part of the survey report provides interesting data on 50 marketing AI use cases across five categories of marketing activities - planning, production, promotion, personalization, and performance. This portion of the research should be particularly useful for any marketer who is evaluating potential AI use cases.

The state of AI in 2022 - and a half decade in review (McKinsey & Company)

Source:  McKinsey & Company

• This article discusses the major findings from the 2022 McKinsey Global Survey on AI
• Survey produced 1,498 responses
• Survey respondents represented "the full range of regions, industries, company sizes, functional specialties, and tenures."
• Survey was in the field from May 3 to May 22, 2022 and from August 15 to August 17, 2022

Note:  McKinsey's Global Survey on AI focuses on the use of artificial intelligence by business organizations, not exclusively on the use of AI in marketing. However, some of the survey findings are specifically about the use of AI by the marketing and sales function.

McKinsey has been conducting surveys to track the use of AI in business for the past five years, and the research shows that AI adoption has more than doubled during that period. In the 2022 edition of the survey, 50% of the survey respondents said they had adopted AI in at least one business function, up from 20% in the 2017 edition of the survey.

However, the survey also showed that the proportion of survey participants using AI has plateaued between about 50% and about 60% for the past four years.

The research found that the average number of AI capabilities that organizations use has doubled over the past four years, rising from 1.9 in the 2018 survey to 3.8 in the 2022 survey.

The investment in AI has increased significantly over the past five years. In the 2017 edition of McKinsey's survey, 40% of the survey respondents at organizations using AI said that more than 5% of their digital budgets went to AI; in the 2022 edition of the survey, more than half of the respondents reported that level of investment. In addition, 63% of the respondents in the 2022 survey said they expect their organization's investment in AI to increase over the next three years.

Of the ten most commonly adopted AI use cases identified by respondents in the 2022 survey, three were marketing and sales use cases - customer service analytics, customer segmentation, and customer acquisition and lead generation.

Lastly, 70% of the survey respondents at organizations using AI for marketing said their marketing and sales function realized revenue increases in 2021 from the adoption of AI.

 

How Marketers Should Navigate Economic Uncertainty in 2023

Source:  Analytic Partners

Analytic Partners, a provider of marketing optimization solutions, recently published an ebook that offers marketers five recommendations for addressing the economic uncertainty that's likely to exist for much of 2023.

The Marketer's Guide to Survive (even thrive) in 2023 is based on insights derived from the firm's proprietary ROI Genome dataset, which contains millions of marketing and measurement metrics from 1,000+ brands in 50 countries. 

Analytic Partners contends that economic uncertainty will be a prominent feature of the business landscape in 2023. The risk of a recession in the U.S. has risen as the Federal Reserve has increased interest rates and taken other steps to tighten financial conditions in an effort to combat inflation.

Even if a recession doesn't occur, fears of an economic downturn and the continuing effects of inflation may lead both consumers and business organizations to tighten their purse strings and put prospective purchases under greater scrutiny.

Here are Analytic Partners' five recommendations:

1. "Hold your nerve:  don't cut marketing spending"
2. "Focusing only on performance messaging misses opportunities"
3. "Exploit the power of brand marketing"
4. "Measure everything (because everything counts)"
5. "Use scenario planning to understand the total customer journey"  

While all of these recommendations are valuable, the first three are particularly important when economic conditions turn sour. Let's take a closer look at those three.

Don't Cut Marketing Spending

The research by Analytic Partners found that 63% of brands that increased their investment in marketing after the "great financial crisis" of 2008 generated a positive ROI, and those that increased their media investments realized a 17% growth in incremental sales.

The idea that companies should maintain their marketing spending during an economic downturn isn't new. Numerous studies dating back to the early years of the last century have consistently shown that companies that maintain their spending on marketing during a slowdown outperform those that slash their marketing and advertising budgets.

One of the more recent studies was described in a March 2010 article in the Harvard Business Review. The objective of this research was to identify the strategies that can "help companies survive a recession, get ahead during a slow-growth recovery, and be ready to win when good times return."

The study examined the strategies and performance of 4,700 public companies before, during, and after three pre-2008 global recessions. The researchers found that an optimal combination of offensive and defensive strategies gave companies the best chance of outperforming their peers (in terms of both sales and profit growth) after the recession. They summarized their core finding as follows:

"According to our research, companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after a recession . . . These companies reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets."

Balance Brand and Performance Marketing

The second and third recommendations made by Analytic Partners relate to the importance of maintaining the right balance of brand and performance marketing even when economic conditions are difficult.

During an economic slowdown, business and marketing leaders tend to focus on activities that will produce quick wins. Because of this tendency, they will often shift marketing spending from upper funnel brand building programs to lower funnel performance marketing programs.

Analytic Partners argues that this is the wrong strategy to follow. Their ROI Genome data shows that brand messaging outperforms performance messaging 80% of the time. The data also shows that, overall, upper funnel brand marketing tactics are 60% more effective over the long term than lower funnel performance marketing tactics, and only 25% less effective in the short term.

The conclusion reached by Analytic Partners is stated in clear terms:  "The evidence shows that channeling budget away from brand marketing to performance marketing is the wrong lever to pull. It will negatively impact both the short and long-term success of your business."

Given this view, Analytic Partners recommends that marketers, ". . . cap performance marketing spend at no more than 50% [of total marketing spend], so that at least half goes on brand and other upper funnel marketing activities."

The view advocated by Analytic Partners has been supported by other (relatively) recent research. In 2019, The B2B Institute (a think tank funded by LinkedIn) published a research report dealing with B2B growth. The 5 Principles of Growth in B2B Marketing described the findings of research conducted by Les Binet and Peter Field, two highly-regarded experts on advertising effectiveness.

This report was based on an analysis of data contained in the IPA (Institute of Practitioners in Advertising) Databank. The IPA is a trade organization representing the UK advertising industry, and the Databank contains extensive data submitted for the IPA effectiveness awards competition.

Binet and Field argued that B2B companies should balance their spending on brand building activities and what they called sales activation activities. They defined sales activation as any marketing activity designed to produce an immediate response from a potential customer. So, sales activation is essentially equivalent to what Analytic Partners calls performance marketing.

Sales activation programs usually produce results relatively quickly, and their short-term ROI can be high. But the effects of sales activation programs don't last very long, so they don't foster long-term growth. Brand building programs, on the other hand, excel at driving long-term growth because their effects last longer.

Binet and Field found that the effectiveness of B2B marketing is maximized when a company allocates about 46% of its marketing budget to brand building and about 54% to short-term sales activation.