Hacking Into People’s Mental Accounts to Guide Purchase Decisions

01

No matter how powerful a person is, there is money that cannot be earned.
According to reports, Lululemon sold Mirror as a package and sold it for more than two months without a buyer.
How much is Lululemon buying Mirror for $500 million three years ago? $58 million.
Lululemon is a well-known brand and a well-known village-run enterprise in Vancouver. Another brand was born in Wencun: Arc’teryx (Arc’teryx).
The company started as a design studio set up in a yoga studio and has grown into an internationally renowned clothing brand.
Part of the reason for Lululemon’s success: ‍‍‍‍‍‍‍‍‍‍‍
1. A strong brand and community marketing strategy. The company often hosts free yoga and fitness classes in its retail stores to build and maintain a strong connection with its customers.
2. Pay attention to the quality and functionality of products. Its products are designed and manufactured with great attention to detail, which is why it is able to attract consumers and maintain a high price point.
Mirror is a company that provides smart fitness solutions. Its core product is also called Mirror, which is a smart fitness mirror. Through this mirror, users can participate in various online fitness courses at home. At the same time, the mirror will display the user’s movements so that users can compare and correct their own movements.
Not only that, Mirror also integrates personalized fitness plans, real-time feedback, personal fitness data tracking and other functions, so that users can better understand their exercise status and progress.
The story of Mirror is very moving, and it fits with various hot spots: smart hardware, subscription system, AI coach…
Lululemon also looks like a very suitable buyer. The purpose of its acquisition of Mirror is to:
1. Expand the scope of business and enter the field of fitness technology.
2. Enhance customer stickiness and establish a fitness preferred platform that connects brands and users.
3. Taking advantage of the opportunities brought by the epidemic, many people began to exercise at home.
4. Realize the synergistic effect and improve the overall business efficiency.
However, the results do not seem to be satisfactory. ‍‍‍
There are many reasons for this, and perhaps the biggest ones are:
Users do not have the “mental account” of “smart fitness mirror”.
Therefore, there are no relevant application scenarios, so it cannot be embedded in real life.
Therefore, it is difficult to generate purchasing behavior.
It can be seen that creating a new category is extremely difficult.
In other words, it is difficult for you to make money outside of your mental account.
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02

What is a mental account ?
Mental accounting is an important concept in behavioral economics, proposed by Richard Thaler, a Nobel laureate in economics.
This theory focuses on how people categorize their money and wealth, and how these categories affect their consumption and investment decisions.
For example, someone may divide their money into different accounts such as “savings”, “daily expenses”, “travel”, etc., and may use the money in different ways in different accounts.
They may be more willing to use the money in the “spending” account than touch the “savings” account.
Even though all money is equivalent in reality, in their psychology, the money has different value and meaning.
Mental accounting theory provides many valuable insights into understanding people’s money views and consumption behavior.
An example that is a bit jumpy is that Li Ka-shing wanted to do a lot of charity, but it was difficult to get rid of the traditional concept of money. Later, he regarded charity as his “third son”, and he “got through” all of a sudden.
In the context of this article, we will make it a little more secular. From the perspective of consumption, it refers to:
1. It is a rigid need, and we define a certain type of thing as a rigid need in our hearts;
2. Have a budget, and have a budget with a clear price range for such things.
Once I heard CEO Tuobuhua talk about the impact of “mental accounts” on book sales:
a. Some book topics that look particularly good, because the psychological account is not large enough , even if the author’s IP is strong, the theme and content of the book are very attractive, the sales volume may not be too large;
b. Some book topics seem to be all over the street, such as writing, reading, etc., but because the psychological account is large enough , repeated publications may also sell well. ‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍‍
(The above remarks are based on memory only and have not been verified by myself.)
If there is no mental account , no matter how strong the company is and how cool the product looks, it may not succeed.
For example, Google Glass: This is a smart glasses that integrates camera, camera, navigation, email, information, etc. In theory, it can bring unprecedented convenience to people.
But it wasn’t widely accepted because it didn’t tap into consumers’ mental accounts. Many consumers feel that it violates their privacy, and it is not convenient to use in practice.
Even if it is as powerful as Apple, it is difficult to make money other than “psychological accounts”.
In the past two years, Apple’s new products, Apple Watch, and the popular AirPods are all “reinvented” of existing things.
The success of the recently launched Apple AR glasses is the verification of ” creating a new category ” .
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03

As smart as you are, you will sniff out the connection between ” mental account ” and ” mental position ” from the above description , and associate it with the theory of ” positioning ” .
The concept of “positioning” was first proposed by Jack Trout and Al Raith in their book “Positioning: Finding Mental Positions for Products and Services”, which was originally published in 1981.
They define “positioning” as how to find a unique place for a product or service in a potential customer’s mind.
In contrast, the application of the concept of “mental accounts” in behavioral economics was first proposed by Richard Thaler in 1985.
This article does not do research. Taken together, both positioning theory and mental accounting theory are important tools in helping us understand and influence consumer decision-making processes.
Positioning theory has the following main points:
1. Mental position. Positioning is how to find a unique place for a product or service in the mind of the consumer. Once the consumer’s mind is formed, it is almost impossible to change, so don’t try to change the consumer’s existing cognition.
2. Simplify information. Marketing messages are extremely simplified. In an information-overwhelmed society, the only hope of success lies in simplifying information.
3. Card slot by name. A good brand name is just as important, if not more important, than positioning. The brand name is the first point of contact between information and consumers’ minds.
Elon Musk, who is known for his hard-core technology, probably has a clear understanding of “positioning theory” because of his experience at Wharton Business School:
a. For SpaceX, Musk’s description is “Southwest Airlines in the space industry.” In one sentence, the core advantage of the unit weight transportation cost that the company is pursuing is clear. The method of grafting analogy is proposed in the book “Positioning” and is widely used;
b. The naming of Tesla’s models is even more doctrine. S corresponds to the S series of Mercedes-Benz, X and 3 correspond to the X series and 3 series of BMW, ready-made mental positions, no need to explain.
The analogy approach mentioned above is sometimes called ” bridge targeting ” :
Help consumers understand and remember a new concept or brand by connecting known concepts or brands.
Similar cases are:
In the eyewear market, Warby Parker gained consumer attention by positioning itself as the ” Netflix of eyewear . ” Their online glasses purchase service model, just like Netflix’s online video streaming service, provides convenient and fast services through the Internet.
Furthermore, Pinduoduo said that it is “Costco + Disney”, and it has built two bridges at the same time.
In psychology, bridging behavior refers to the process of associating new knowledge or behavior with knowledge or behavior that already exists.
I think there are two particularly important reasons behind this bridging behavior:
1. The human brain is very lazy. The brain is designed based on energy saving, so it always wants to save energy. Bridging familiar things allows people to make quick decisions;
2. There is a huge excess of information at the moment. It is difficult for people to remember more new things. Some familiar elements will make people feel safe, and it is easier to generate emotional resonance and social identity.
Merchants try to persuade users to pay, just like they want to break into the ” mental account ” and occupy the ” mental position ” .
Compared with a strong attack, hacking in cleverly like a hacker is often more effective.
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04

“Hacking” into the user’s psychological account, the next thing to achieve is to promote purchase behavior.
Regarding the theories and strategies mentioned in the previous paragraphs, the most famous one used in the field of local marketing may be the “super symbol” theory.
The theory holds that a super symbol is a symbol that people remember, are familiar with, and like, and will listen to its command.
Therefore, the “bridge” of super symbols is more domineering, sometimes even without analogy. Please observe the specific cases by yourself.
The super symbol has three functions: 1. Referral recognition function; 2. Information compression function; 3. Action instruction function.
The most important thing for merchants may be the third point above – ” directing the behavior of consumers, buying our products, and recommending them to relatives and friends .”
“Promoting”, or “commanding”, is often not achieved by reason and persuasion.
After all, ” reason is the slave of passion “. This is even more so in the field of human consumption.
Let’s look at the irrationality of human consumption.
An interesting study was conducted by researchers at Stanford and Harvard Universities.
The experimental process is as follows:
They gave participants simulated painful stimuli and told them it was a pain treatment.
For some participants, they were told that the treatment was more expensive;
For others, they were told the treatment was less expensive.
The achieved result is strange:
Although all participants received the same treatment, those who were told the higher price reported significantly less pain.
Why is this so?
This may involve how our brains process the relationship between pain and expectations .
Our expectations of something can affect how we actually experience it.
If we expect something to work well (for example because of a higher price), we may actually experience better results.
This phenomenon is known as the ” expectation effect ” or ” placebo effect “.
This research reveals a complex interplay between price, expectations, and perceptions, with implications for our understanding of consumer behavior, market positioning, and pricing strategies.
In addition, humans have many unreasonable cognitive biases and irrational automatic behaviors.
From the perspective of this article, perhaps sometimes, what you want to do to persuade buyers is not to convince the brain, but to “deceive” the brain so that the purchase behavior “happens automatically”.
As a moderate author, I do not want to explore the relationship between various marketing theories and Pavlovian conditioning theory.
And let us return to the ” mental account ” of the academic concept.
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05

George Lowenstein said: “In spirit, the process of putting money into separate accounts is often associated with different purposes, somewhat like earmarking. While it may seem like a simple device, it may have implications for retirement savings. big influence.”
He mentions a discovery by Cheema and Soman:
Low-income parents can save twice as much if they put a picture of their child on the designated envelope.
How amazing.
This is the perfect combination of mental accounting and nudge theory .
Nudge theory, also known as ” induced selection theory “, its main ideas are:
Influence people’s decisions and behaviors through small design changes to achieve social good.
Nudge theory has a strong connection to mental accounting:
Mental Accounting Theory refers to the fact that people divide different financial decisions into different “accounts” and this affects their decision-making process;
Nudge theory can be used to influence the setting and management of these mental accounts, leading people to make decisions that are more in line with their self-interest.
Let’s look at a few practical examples of nudge theory.
1. Healthy eating: A classic nudge case is changing the placement of healthy foods in school cafeterias. By placing healthy foods in a more prominent position, students can improve their eating habits by making it easier for them to choose healthy foods. This is the so-called “changing the construct of choice” approach.
2. Energy saving and emission reduction: Another example is that on the bill sent by the power company to the user, in addition to showing the user’s electricity usage, it also shows the comparison of the user’s electricity usage with that of the neighbors. This method stimulates people’s awareness of social comparison, prompting them to reduce electricity consumption, thereby achieving the goal of energy saving and emission reduction.
3. Automatic savings and investments: In the financial sector, many companies and government agencies have set up automatic accrual retirement savings plans for their employees. That is, when employees’ wages increase, their savings automatically increase accordingly. This setting reduces the number of times people need to make saving decisions, making saving behavior easier to implement.
All of the above examples illustrate that through carefully designed small changes, people can be effectively “nudged” to make choices and behaviors that are more beneficial to themselves and society.
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06

summary
Lululemon is an amazing company. They dare to take on Mirror, and they must know the challenge, but they may have illusions of “synergy” in their hearts (most commercial synergies are indeed illusions), and they have broken through the obsession that they are just a clothing company.
Maybe Lululemon wants to prove that he is not a clothing company, and the lifestyle and health concepts it advocates are not just retail slogans, but can be transformed into intelligent services…
However, no matter how good the wish is, how smooth the logic is, and how powerful the strength is, it is difficult to create a new consumer psychology account. ‍‍‍‍‍‍‍‍
It is difficult for us to earn money outside of our mental accounts.
For the topic of this article, there are the following clues for thinking:
1. Find a large enough mental account, choose a fine enough mental position, and “hack” it smoothly, instead of relying on explanation and persuasion.
Mental accounts are generalized in this article. For example, the vulgar title of this article comes from the psychological account of the traffic title party of “You can’t make money other than xx”.
2. The brain does work in a way that prioritizes saving energy, a phenomenon known as the” cognitive effort-saving principle .” We generally tend to understand and remember new information with a minimum of thought.
Therefore, it is necessary to give users simple enough information, as simple as riding a slide.
3. We are more likely to accept and remember new information that is connected to known information, so” bridging positioning “is often useful.
Using super symbols or other familiar elements can help consumers understand and accept new categories more quickly.
This bridging behavior saves consumers mental energy and helps them make purchasing decisions faster.
4. However, you can call yourself “Wu Yanzu in the west of the city”, or call yourself ” the apple
5. It is very difficult to create a new category. The best thing to do is to use existing mental accounts. For example, Musk said that Tesla is a good car first, and an electric car second.
6. The human brain has some innate and acquired cognitive biases, such as ” anchor effect, herd effect, scarcity principle, usability heuristic, loss aversion, default effect, framing effect “and so on. In a realistic marketing environment, rational use of the above weaknesses is more effective than rational persuasion.
7. Successful companies are often those that can expand or create new psychological accounts through category innovation.
For example, Uber, Airbnb, Netflix and Tesla, they not only innovate products or services, but also create new mental accounts in the minds of consumers.
8. Nudge theory, using the brain’s conditioned reflex and automatic occurrence in good faith, can often achieve “better in a daze”.
With the pool of mental accounts, it is necessary to break through the threshold and open the valve to realize the occurrence of behavior.
9. For particularly new things, there is no real mental account, for example: “There is cognition, but there is no underlying psychological motivation for payment”. At this time, the best business may be “selling water” in this field.
10. Where there are human beings, in order to achieve success in the secular sense, one must not only be emotional, but also rational; not only immediate stimulation, but also long-term calling.
In short, the final winners are people like this:
They have a rational trajectory, and a passionate dance.