THE MIND OF THE CUSTOMER
Neuroscience in Business
Consumers are emotional, irrational creatures who make decisions based on a host of factors other than thoughtful consideration, says Thomas Zoëga Ramsøy, associate professor of marketing and neuroscience and director of the Center for Decision Neuroscience at Copenhagen Business School in Denmark. Among these factors are memories, emotions, and faith in brands. Traditional market research methods such as surveys and focus groups are insufficient for determining how individuals choose to make a purchase, which is why business researchers are working with neuroscientists to figure out what’s going on in the consumer’s brain.
“The cognitive apparatus we’re born with and develop as adults is not an optimal system,” Ramsøy says. “We have bottlenecks and limitations, and we have inborn tendencies to stick with some things over others. Understanding these tendencies is a way of understanding the biological side of business.”
Since people don’t understand why they make certain decisions, simply asking them won’t uncover much information. Neuroscientists have long used equipment such as MRIs and PET scans to detect what individuals are seeing and responding to on a millisecond-bymillisecond basis.
Most people believe they make decisions after thoughtfully comparing options, Ramsøy says. “But we can use technology to follow their brain responses to products and predict which product they’re actually going to choose several seconds before they believe they’ve made their choices.”
New technology is making it easier to track consumers while they’re on the go. Instead of detaining subjects within the artificial and noisy confines of MRI machines, researchers can wire them to smartphones, which individuals can slip in their pockets. “We can do brain recordings while shopaholics are walking around a store or while gamblers are visiting a casino,” says Ramsøy.
Much of the current research is still deeply theoretical, Ramsøy notes, but the opportunities for applied research are enormous.
For instance, public health could be improved if neuroscientists learn how gamblers and compulsive shoppers make their choices—and Ramsøy has received funding from the Danish Research Council to study those very issues. And businesses could learn how to make their products and their marketing strategies more appealing to consumers once they understand what motivates people to buy.
Neuroscientists have already made major discoveries, such as those in a landmark 2004 study about Coke and Pepsi that emphasizes how greatly branding can influence consumers. Says Ramsøy, “In blind taste tests, most people are unable to tell the difference between the two colas. But if you tell them they’re tasting Coke, even if you give them Pepsi, they will love the Coke much more. Brands imbue value to products. They have an impact on people’s preferences because memories have set up expectations.”
Other research has shown that if people believe the product they’re consuming is expensive, they will like it better. “We’ve done studies with chocolate, wine, coffee, and fashion—and every time, people report they enjoy a product more if it’s high-priced or associated with an esteemed brand,” says Ramsøy.
As neuroscience provides more information to businesses, more business schools are providing neuroscience-themed coursework. For instance, Copenhagen Business School offers both a minor and several electives on the topic, including courses on neuromarketing, neuroeconomics, and even neurodesign.
Graduates with deep understanding in this field will be in high demand, Ramsøy believes, as neuromarketing becomes a more natural part of market research. He says, “Big companies like Procter& Gamble and Coke have teams of people who conduct marketing research through surveys and focus groups, but who also use the new technologies to understand consumer choice.”
Neuroscience also has applications in leadership, he says—from helping leaders make better choices to helping companies do a better job of selecting and training them. “We might be able to use neuroscience to understand candidates in ways we can’t just by using personality and IQ tests,” Ramsøy notes.
But even as the field expands with possibilities, scientists wrestle with ethical implications. For instance, there has been some outcry over “subliminal advertising,” such as when theaters show brief shots of popcorn or soda to encourage movie patrons to buy snacks. However, subliminal advertising creates only short-term effects and influences customers far less than repeated ads and specific ad placements, Ramsøy says.
A big question still remains, he says. “How can we design advertising that isn’t fooling people but still allows us to market to them in ways we know they respond to? I don’t see any straightforward answer to that.”
The question will only get more urgent as neuroscience becomes more sophisticated. Today, neuroscience has progressed so far that researchers can write algorithms predicting how people will react to certain stimuli—they no longer need to test people to make those predictions.
“It’s both scary and very, very interesting,” says Ramsøy. “How can we help business while still protecting the consumer? We need to discuss the issue in a meaningful way. To be honest, I don’t think the debate has really started yet.”
ON THE BRIGHT SIDE
Positive Organizational Scholarship
When Kim Cameron began researching forgiveness within organizations, some of his funding came from a highly untraditional source for a business professor: a foundation that was supporting research on the psychology of forgiveness. It was only one of many benefits he enjoyed by conducting cross-disciplinary research within his field of positive organizational scholarship.
“Disciplines such as psychology are better funded than a business discipline such as organizational behavior, and there are many more psychology journals where the resulting research might be accepted,” notes Cameron, associate dean of executive education and the William Russell Kelly Professor of Management and Organizations at the University of Michigan’s Ross School of Business in Ann Arbor.
“At the same time, researchers in those fields can conduct research much more quickly than organizational scholars,” he adds. “When I work with a psychology scholar, I can enter a lab, talk to 60 students, gather data, and write a paper the next week. That’s much faster than talking to leaders at 60 organizations.”
It’s useful to gain the additional cross-cultural insights, because positive organizational scholarship is not an entirely mainstream field of study: Scholars in the discipline look for what goes right within a company rather than what goes wrong, Cameron explains.
“For instance, in positive dynamics, researchers start with an affirmative bias and focus on opportunities and strengths, rather than threats and weaknesses,” he says. “They try to determine how companies achieve positively deviant performance.” They also might study areas such as virtuousness, compassion, the mechanisms that help individuals flourish within companies, and the ways people find meaningfulness in their careers.
As researchers in other fields—from law to accounting—also study the effects of positivity, new territory opens up for business researchers. “For instance, positive psychology has been an area of research for a long time, and I’ve gained many insights from Martin Seligman and other leaders in the field,” says Cameron, who is currently serving on the board of the International Positive Psychology Association. “I’m willing to work across sectors because, if the research is relevant, we can merge our best ideas and learn from each other.”
While Cameron believes academic research on, say, virtuousness in the organization is important in and of itself, he knows that CEOs pay more attention to theory when it helps them grow profits or beat the competition—and positive organizational scholarship can do both. “I’ve found compelling evidence to suggest that virtuous practices in organizations lead to substantially higher profitability, productivity, quality, innovation, customer satisfaction, and loyalty, as well as greater employee engagement, morale, and retention,” he says.
For instance, Cameron spent ten years researching what happens when companies downsize. While 85 to 90 percent of them deteriorate afterward, as top leaders depart and those left behind start hoarding information, 10 to 15 percent flourish. What’s the difference?
“I found that one of the biggest factors in their success was forgiveness, or the ability to put aside grudges and anger over the harm that’s been done,” says Cameron.
He has also researched the idea of positive energy within organizations by looking at positive energy networks. These are similar to the networks that map which people in an organization are at the hub of information or influence, and which ones are on the periphery. Unsurprisingly, those in the hubs perform better, as do the people who report to them, Cameron explains.
Along the same lines, Cameron has studied relational energy, or which people within a network leave others feeling uplifted and elevated, and which ones leave others depleted and exhausted. “As expected, the people at the hubs of positive energy networks are higher performers, and so are the units they manage,” he says. “But here’s the surprise. The energy network is four times more important in predicting performance than either the influence or information network. Not only that, positive energizers help other people’s performance improve. And the highest-performing organizations have at least three times the number of positive energizers that typical ones have.”
This research can have an impact in how leaders hire or deploy personnel—and it opens up a whole new area of literature about leadership. “While we are constantly telling leaders how to manage information and how to manage influence, we never teach them how to manage energy, which trumps them by a factor of four,” Cameron says.
Positive organizational scholarship also can have an impact on other scholars, he thinks, if they pursue lines of inquiry that “help CEOs become better leaders, make businesses be better places to work, and improve the lives of employees across organizations.”