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Despite Brexit Uncertainties, Ireland’s 2017 economic performance set to surpass 2016

Posted By The Marketing Institute & UCD Michael Smurfit Graduate Business School, Monday 4 September 2017
Updated: Friday 1 September 2017

Dublin, 4 September 2017: Spending in the consumer economy was up by 3% in Q1 2017, and all the signs are positive for continuing growth—a growing population, increasing employment, and rising incomes, and the drop in the value of Sterling is enhancing buying power in many sectors, particularly cars. All forecasts are positive for this year and may actually surpass the performance achieved in 2016. The consumer economy is now one of the main contributors to economic growth, along with investment in construction.

These are the key findings of the latest Consumer Market Monitor (CMM), published today by the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School. Data from the Q2 2017 Monitor indicate that Irish consumers seem to have shrugged off initial fears of Brexit and are spending on many types of goods and services, especially every kind of household goods. 

“The strength of demand is most evident in the housing market where mortgage approvals increased by 41% in H1, and the number of homes purchased was up by 8%, despite a shortage of supply. All types of household goods are all growing very strongly,” according to Marketing Professor Mary Lambkin UCD Smurfit School author of the report.  

“The growing population along with increasing employment and rising income are driving a strong increase in disposable income, which is positive for Irish marketers,” said Tom Trainor, Chief Executive of the Marketing Institute of Ireland.

 

 

Summary 

Consumer spending continues to be one of the main drivers of economic growth in Ireland at present, along with investment in construction. Strong growth is continuing in both sectors in 2017 and this trend is expected to continue through 2018. Personal consumption has grown by 3% in the first quarter of the year, and is expected to grow by 3.1% for the whole of this year, and by 2.7% in 2018. 

The main drivers of this growth are population expansion, along with increasing employment, and rising incomes. It has been estimated that half of the growth in consumer spending was driven by population growth between 2011 and 2016. Furthermore, there are now 2.045 million people at work, up 68,600 year-on-year, and up by 220,000 or 12% since the low point in 2012. 

Employment is expected to continue performing strongly this year and next, with growth of 2.8% projected for 2017 and 2.3% in 2018. This will mean an additional 105,000 persons at work which would bring employment to over 2.15 million for the first time since 2008. 

Pay increases have also contributed, up by 2% on average in 2015 and by 5% in 2016. The  drop in the value of Sterling since the Brexit referendum has also helped, causing  consumer prices to be approximately 1.2% lower than would have been the case had Sterling remained stable. 

These factors drive the amount of disposable income circulating in the economy, and spending closely matches income. In fact, there has been a remarkable increase in disposable income in recent times -- it increased by 5% in 2015, and by a further 4.4% in 2016. In sum, it reached €99 billion in 2016, not far off the 2007 peak of €102 billion.  Disposable income is up by a further 4.7% this year and this is expected to support consumer spending growth through this year and next.

Another important influence on consumer spending is household wealth, as perceptions of increasing wealth raise consumer confidence, encouraging people to release funds for spending. Irish household wealth is increasing again as property values recover and progress is being made in paying down debt. 

As a result, consumer confidence is very strong here at present, and significantly higher than in the UK and the rest of Europe. It fell a little bit in the second half of 2016 due to worries about Brexit. However, the confidence barometer is now back in positive territory and has got a significant boost in recent months. 

This is driving a steady increase in consumer spending that is producing sales growth in most retail and service sectors. The strongest growth was in cars which were up 20% in volume terms last year and which accounted for 24% of total consumer spending growth. Spending on holidays also increased by 10% last year. 

Retail sales excluding the motor trade grew by 5.3% in volume and 2.4% in value in 2016 which was a relatively strong performance, considering the upheavals provoked by Brexit and the US election. Retail sales have continued to be strong in the first half of 2017, up by 6% in volume and 3% in value, the highest rate of growth experienced since 2007.

Sales of new cars are one important exception; sales of new cars were down by 10% in the first half of this year, for a total of 87,346 units. This might suggest a weakening in the consumer economy but that is not actually the full story because there has been a dramatic rise in the number of imported second hand cars, up 47% in 2016, and up by another 46% in the first half of 2017 for a total of 44,945. This reflects the weakening of sterling which has made imports better value. Taken together, car sales in the first half of the year are actually up by 3% on last year, which is quite healthy. 

Sales of services are also showing a bit of weakness, with growth slowing to 2.5% in the second quarter of this year, compared to 5.5% for 2016. Professional, scientific and technical services have done best in Q2 (+11.9%), followed by wholesaling (+6.7%), and accommodation (+3%), but several other categories have fared poorly: administrative and support services (-3%), Transportation and Storage (-1%), Information and Communication (-3%), and Other Service Activities (-8%).

Residential property is the sector under most pressure, as is well known. There were 45,342 homes sold in 2016 which was actually lower than the 47,313 sold in 2015, partly driven by a shortage of supply. 

There were just 20,500 properties for sale nationwide in March 2017, the lowest since the series started in January 2007. Despite the tight market, residential transaction volumes are up in 2017; there have been 16,975 transactions in the first half of the year, up 8% year-on-year. Mortgage approvals in H1 2017 were also up by a very large 41%, for a total of 17,605, indicating the strength of demand in the market. 

 

Consumer Confidence

Consumer confidence in Ireland reached a record high in June 2015, and remained strong through the rest of the year. At this point, confidence here was well ahead of the last peak in 2007, and well ahead of our European neighbours.

Unfortunately, confidence fell steadily through 2016, with Q4 at 5.9, (compared to 16.6 in Q4 2015,) reflecting uncertainly about Brexit, the tumult of the US election, and industrial unrest. 

The first half of 2017 saw confidence pick up again, reaching a high of 9.4 in June, reflecting continuing strength in the economy. The current level of confidence is consistent with a solidly improving Irish economy, although a majority of consumers still say they do not perceive an improvement in their own finances.

Consumer confidence in the UK has been negative since Q2 2016 due to worries about Brexit, as well as general political uncertainty. Confidence has declined steadily through the first half of 2017, reaching -7 in June.

2016 was a tumultuous year for US consumers, which negatively affected confidence levels. However, confidence has recovered this year, to the highest level in 16 years, despite the continuing upheaval in the White House.  

 

 

Consumer Incomes and Spending

The amount of disposable income in the economy rose by 5.5% in 2015 and by 4.4% in 2016 bringing it to a total of €99 billion, close to the €100 million level that was last seen in 2007. Increasing employment and pay increases of 2% in 2015 and 5% in 2016, were the main drivers of the increases in disposable income. Lower fuel prices and a weakening in the value of Sterling also boosted disposable income. Disposable income is up by a further 4.7% this year so far, suggesting continuing strength in the consumer economy.

Household spending began to recover in 2014, when it grew by 2%, and it grew by a very strong 4.5% in 2015. Spending continued to grow in the first half of 2016, but the rate of growth weakened in the latter half, ending the year up by 3.3%. The pre-Christmas peak in 2016 surpassed the 2007 peak for the first time in nine years. Within this, goods related consumption was particularly buoyant – up by 4.1% with services related consumption growing by 2.4%.

Spending is continuing to grow in 2017, up by 3% for Q1, year-on-year, and is currently the main driver of growth in the Irish economy, along with construction.  Growth of 3%  is forecast for 2017 as a whole, and this rate of growth is expected to continue in 2018.

All of the main components of spending continue to be strong in 2017. Retail was up by 6% in volume terms in the first half and Vat was up by 11%, year-on-year, supporting evidence of strong spending. Services were not quite as strong, up by 2.5% on average for the first half of the year.

Personal spending in the UK grew each quarter since Q4 2011 at an average annual rate of 2%, and continued to grow right through to the end of 2016, suggesting that Brexit had little impact up to that point. However, growth has slowed to 0.1% in Q1 2017, as have other key economic indicators. 

 

 

Consumer Borrowing

Borrowing by Irish consumers grew at a record level from 2000 and peaked in March 2008 at €150 billion, but declined steadily since then, down -41% to €86 billion in Q1 2017. Household debt continued to fall during 2016, down by €1.5bn to €144 billion or €30,199 per capita, but grew by a very slight 0.4% in Q1 2017, the first sign of a return to normal conditions.

Loans for house purchase, which account for 84% of household loans, peaked in Q1 2008 at €124 billion, but decreased to €73 Billion by end Q4 2016, a cumulative decline of 40%, or an annual rate of -2.4%. The number of mortgages in arrears fell further in Q1 2017-- the fifteenth consecutive quarter of decline. A total of 76,422 (10%) of accounts were in arrears at end-March. 

Lending for other consumption accounts for approximately 18% of total borrowing. This category peaked in Q1 2008 at €30 billion but declined to €12 billion by December 2016, a reduction of 60%. This category resumed growth in 2016, up by 5.9%, and is grew by a very significant 10% in Q1 of this year, primarily driven by car financing.

Overall, the ratio of household debt to disposable income has fallen by 60% since a peak of 215% in mid-2011. Between Q4 2012 and Q4 2016, Irish household debt has fallen from 194% of disposable income to 141%, a decline of 53%. Despite this, Irish households remain the fourth most indebted in the European Union. 

 

Car Sales

New car sales were up 30% in the first half of 2016 but this slowed in the second half of the year. A final figure of 142,688 cars was sold in 2016, up 18% on the 121,110 cars sold in 2015. The 2016 total was just about the average annual sales level of the early 2000s.

 
New car sales have been weak in the first half of 2017, down 10.4% year-on-year, for a total of 87,346 units. This would normally suggest a weakening in the consumer economy but that is not actually the full story because there has been a dramatic rise in the number of imported second hand cars, up 47% in 2016, and up by another 46% in the first half of 2017 to a total of 44,945. This reflects the weakening of sterling which has made imports better value. 

Taken together, car sales in the first half of the year are actually up by 3% on last year, which is quite healthy, and not indicative of a weakening in consumer spending. 
 

Retail Spending

Retail sales got off to a good start in the first quarter of 2017, up by 5.9% in volume and 2.3% in value on an annual basis. This growth accelerated in Q2, up by 6.9% in volume and by 3.6% in value, year-on-year. For the first half year, therefore, retail sales have grown by 6% in real volume terms, and by 3% in value terms, suggesting a very strong outcome for the year as a whole. This would be the fastest growth in retail sales since 2007.

All product categories except books/newsagents experienced healthy growth in Q2 2017. Household equipment which combines furnishings, electrical goods, hardware, paints and glass, continues to be the fastest growing category, up by 12.9% in volume and 7.1% in value, year-on-year. The only category showing weakness was books/newsagents which continued a declining pattern, down -2% year-on-year, both in volume and value.

Food sales up 5.3% in volume and up 3.5% in value; 
Non-specialised stores (supermarkets) up 5.8% in volume and 4% in value; 
Fuel up 1.4% in volume and 6.4% in value; 
Clothing, footwear & textiles up 6.2% in volume and 1.1% in value; 
Household equipment up 12.9% in volume and 7.1% in value;
Department stores up 7.2% in volume and 2.4% in value;
Pharmaceuticals and cosmetics up 4.8% in volume and 2.9% in value;
Bar sales up 1.3% in volume and up 2.6% in value.
Books, newspapers, stationery down -2.0% in volume and -2.0% in value. 

 

 

 

read report

 

 

    

About the Author

 

Mary Lambkin

Mary Lambkin, is Professor of Marketing in the UCD School of Business where she teaches courses to undergraduate and postgraduate students and is involved in a range of research projects under the general heading of marketing strategy.  She has written extensively on this subject in academic journals, and also writes commentaries on marketing topics of contemporary interest for professional publications. She has served as Head of the Marketing Group, as Dean of the UCD Business School and as a member of the Governing Authority of the university at various times, and also holds a number of positions in companies and professional organisations outside the university.

 

 

About The Marketing Institute of Ireland

 

The Marketing Institute is the professional body for Ireland's marketing people. It exists “to enable marketers to build great brands and great careers”. It does this by sharing best practice, insights and expert content, building the community of marketers, and aiding marketers in career progression. The three themes of content, community and career underpin all Institute activities. The Marketing Institute also owns and operates the All Ireland Marketing Awards, the CMO Summit, and DMX Dublin, Ireland's largest marketing conference.

 

About UCD Michael Smurfit Graduate Business School

 

University College Dublin became one of the first universities in Europe to offer the degree of Master of Business Administration (MBA), starting in 1964.  In 1991, the graduate business school opened its own campus in Blackrock, County Dublin.  With over 100 faculty members, 1,400 students and 70,000 alumni worldwide, UCD Smurfit School is one of a small number of business schools worldwide to hold triple international accreditation (US - AACSB, European - EQUIS and UK – AMBA). The school’s programmes have been consistently ranked among the leading European business schools by the Economist and Financial Times, since 2000.

 

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How to Innovate with Integrity: the Key Takeouts

Posted By The Marketing Institute, Tuesday 29 August 2017

Independent News & Media and The Marketing Institute of Ireland, hosted an event titled “Innovation with Integrity” on Thursday 24th August 2017 with special guest Mike Villaseñor, Creative Director for The New York Times. The event was attended by senior marketing management and media industry professionals. Here are the key takeouts from the briefing.

 

How do we improve campaign performance? 

Declan Fahy shared how brand teams and media organisations can collaborate earlier in the process for better results!

 

The creative process

  • invite us to chat
  • provide detailed briefs
  • challenge us

Optimisation

  • insist on a/b testing
  •  provide specific objectives
  • request campaign reports, don’t file it away, use it and apply key learnings to your next brief

Transparency

  • interrogate campaign reports
  •  insist on third party trackers
  • insist on agencies and publishers sharing data & insights

 


Declan Fahy

 

How can publishers innovate brand solutions?

Mike Villaseñor shared his unique insights and experience on innovative brand solutions from publishers.

 

Put the reader first

More than ever we must respect and understand the reader. This means that we ought to lean into best practices of how both editorial and advertising coexist in a clear and meaningful way for the reader. Labels and other markers of contrast should be based on research produced for your core audience. A quality core experience doesn't mean less or less impactful ads, in can be quite the opposite given the meaningfulness of the ad stride and positioning. 

 

Have clear KPIs 

Define what the campaign objective is up front. This will help the creators define and develop the most effective campaign for your brand. Publishers are brought in far too late in the process and may in fact have the keys to your goal. 

 

Bring the makers to the table first

Gather your key makers and creative minds; bring them to the table at the start instead of at the end. Too often the request that ends up with them is largely watered down and without creative challenge resulting in an experience that is similar to everyone else's. 

 

Develop strategies that respect both the editorial and brand voices 

This means to try emerging technologies, redesign the experience, and apply new methods to storytelling that are fully conscious of both the newsroom and advertiser need. Avoid developing for one over the other, the entire package is one experience for the reader

 


Mike Villaseñor

 

How can AI bring branded content Back to the Future?

Hugo McCafferty on how AI and Data are big buzzwords just now, but how can they really impact brand storytelling?

While much of the current discourse around AI revolves around ethics there is a lot of scaremongering going on. It's only natural to be afraid of change, but let's not forget about the many benefits AI can bring to our daily lives.

There are already some good case studies of early adoption of AI in advertising although the execution seems somewhat primitive at this early stage. What we're potentially aiming for is an AI that can communicate to us on our own level with all the nuance and wit of humans. They'll understand our moods, our behaviour, our desires and needs, even before we do, and for brands, that's good news as they'll be able to offer their customers solutions before and as they arise.

For now we can use AI to mine the data set of social media to provide a highly accurate context in which to create more effective branded content.

 

 


Hugo McCafferty

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How to Innovate with Integrity: A breakfast briefing by Independent News and Media and The Marketing Institute

Posted By The Marketing Institute, Tuesday 29 August 2017

Dublin, 24th August: Independent News & Media and The Marketing Institute of Ireland, hosted an event titled “Innovation with Integrity” on Thursday 24th August 2017 with special guest Mike Villaseñor, Creative Director for The New York Times. The event was attended by senior marketing management and media industry professionals.

With the media landscape changing at a frantic pace, the event sought to look at innovations such as artificial intelligence, mobile storytelling and ad fraud through the lense of integrity for both the reader and the brands whose advertising revenues keep innovation and story telling alive for publishers.

Peter McPartlin, MediaCom, MC for the morning, Tom Trainor, MII and Mitchel O’Gorman, INM led proceedings, and spoke about the importance of taking a step back to consider your audience and the diverse range of media options now available before jumping on to the newest and most shiny piece of tech. Innovation for innovation sake without the counter balance of integrity and creativity is of little merit for sustainable customer focused and impactful advertising solutions.

Special guest Mike Villaseñor, Creative Director for The New York Times presented the latest innovations in reader centric design for storytelling along with the powerful “The Truth Is” campaign.

Special guest Mike Villaseñor, Creative Director for The New York Times said: “We truly believe that reader experience is everything. It runs through the fibres of our brand and inspires creativity everywhere, from the newsroom to advertising."

Declan Fahy brought a seemingly complex topic of Innovation back to brilliant basics by speaking about the three fundamentals needed to breed a trusted and innovative partnership among brand, agency and publisher.

Declan Fahy, Head of Digital Sales, Independent News & Media said: “In order to improve better campaign performance we need three things; an improved creative process, better campaign optimisation and also to demand better transparency with all parties. I am fully aware that my solutions are back to basics but unfortunately it’s the basics that currently aren’t being done correctly in the first place."

Hugo McCafferty bravely stood up and spoke the words that were on many peoples minds. When it comes to Artificial Intelligence, “we don’t know what the future will hold” Speaking about his talk which covered unique opinion based on some award winning examples of AI

Hugo McCafferty, Native Editor, Independent News & Media said: "A lot of the discourse around AI is negative, there's a lot of scare mongering, but that really is just fear of the unknown. If we focus on the possible benefits from working with AI, we have so much to gain."


Elizabeth Sheehan (Lucozade Ribena Suntory), Joanne Grant (JCDecaux) and Tom Trainor (The Marketing Institute)


Miriam Hughes, (DDFH+B), Peter McPartlin (MediaCom) and Lisa Browne (Electric Ireland)


Niall Kenna (Mars Ireland), Karen Preston (INM) and Gerry Culligan (Iarnrod Eireann)


Hugo McCafferty (INM), Michael Villaseñor (The New York Times) and Declan Fahy (INM)

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A Day in the Life of... Daragh Anglim, Head of Marketing at Fáilte Ireland

Posted By The Marketing Institute, Wednesday 23 August 2017

daragh anglim failte ireland

The Marketing Institute: What does a Head of Marketing at Fáilte Ireland do?

Daragh Anglim: I do the best job in the country; I get Irish people to take more holidays in Ireland. I help increase the revenue contribution of tourism to the country and ultimately help create more sustainable jobs in tourism. We do this by encouraging people to take incremental short breaks in Ireland. It’s amazing the more holidays people take in Ireland the better for me and ultimately the better for Ireland.

 

MII: What were your key career moves to get to your current role?

D.A: I’ve spent most of my career on the other side of the table working in agencies. I started out working BTL then moved into DM and ended up in specialising in Digital,  I also ran my own consultancy business for a number of years.  I started out in Fáilte Ireland initially as the Head of Digital and over time lead the creation of an integrated marketing team. Fáilte Ireland was already a leader in digital and in traditional marketing so I had a really fantastic base to build a team of marketing specialists from.

 

MII: What is the biggest challenge you face in your role?

D.A: Measuring the effectiveness of our marketing and work, my job is do work that will drive visitor numbers, revenue and jobs however there are a huge number of macro and micro factors that we have no influence over that fundamentally effect peoples decisions to take incremental short breaks in Ireland. While we have a brilliant research and insights team we’re really focusing on building an even more robust insight engine to help us deliver effective work and help us track the impact of that work on people’s holiday behaviour.

 

MII: What key skills do you need to be effective in your role?

D.A: Passion, patience, tenacity and a good sense of humour. We’re lucky we sell holidays and don’t have the same pressures as other teams in terms of case sales or pints in hand, we do however have other pressures. Tourism is such a critical economic driver for the country and is so important to so many people’s livelihoods that we have a bigger responsibility than P&L. We need to bring people with us both internally and externally and demonstrate that the work we’re doing will deliver for them and the country. That can take time and be a slow process but it’s worth it when we see the effect on revenue and employment.

 

MII: Describe a typical working day.

D.A: Phew, not sure there is one. I spend about an hour a day planning, about 2 hours working with each of the marketing managers (Wild Atlantic Way, Ireland’s Ancient East and Dublin) on their current WIP and future projects. I sit on the Executive of Fáilte Ireland so a lot of my days are often spent working business strategies and plans. Most days I meet with internal stakeholders and/or our agency partners.

 

MII: What do you love most about your role?

D.A: I’m selling holidays in Ireland!! I love the pride I feel when I tell people in the pub where I work and what I do. I have an absolutely brilliant team who work incredibly hard to deliver amazing work, a lot which is never seen publicly but is critical to the success of domestic tourism.  I’m incredibly lucky to have a very supportive ‘boss’ who gives me the freedom to do the work I think is right and the permission to try new things. I believe we work with the best agencies in the country creatively, digitally and in media all of whom are extensions of our marketing team, and finally Fáilte Ireland is a fantastic organisation whose sole focus is to make Ireland unforgettable for every visitor who holidays here. What’s not to love?

 

MII: Looking ahead, where might your career path lead to next?

D.A: I do see myself moving back into the private sector in time, I miss some of the commercial and financial pressures of a P&L. Having run my own business I’m tempted to someday go back out and work for myself again but who knows what will come along. At the moment we’re going through a period of change in Fáilte Ireland so I’m excited to see where that will lead.

 

MII: To whom do you look for professional inspiration in your role?

D.A: The wider Fáilte Ireland Executive team has some really brilliant people on it who constantly challenge your thinking and opinions; they have a huge wealth of experience. I’ve maintained good relationships with most of the senior people I worked with in agencies and I’m lucky I can check in with these people to help me with any big professional challenges. Finally I’m a big believer in ongoing coaching and personal development so I regularly work with a professional coach to keep me on track with my personal and professional goals.

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The Value of Marketing to Consumers’ Instincts

Posted By Matthew Willcox, Tuesday 22 August 2017

A good friend of mine, Lloyd Glen, says, “I like choices that make themselves.” This is a keen insight into human nature. While we are often loath to admit it at a conscious level, our instincts consistently guide us to the easiest choice. If there is a path that allows us to cut a corner, saving three seconds and 0.5 calories of effort, we take it.

Taking away a little effort, or even adding a little, can change our choices quite dramatically. In an experiment at Google’s New York office, behavioral economist Dan Ariely showed that putting the free M&Ms dotted around Google’s offices in jars with lids rather than open bowls reduced consumption by about 3 million pieces per month (good news for the company that provides Google’s dental insurance, but not such good news, perhaps, for Mars Inc.). We replicated this experiment in our offices and found that a day’s supply of M&Ms in a bowl lasted a full week in a jar with a lid. A study led by Paul Rozin from the University of Pennsylvania showed that when the door of an ice cream freezer in a cafeteria was left open, ice cream sales were 20% greater than when the door was left shut.

Behavioral science is littered with examples of how making things cognitively or physically easier (or more difficult) affects choice. An analysis of organ donation consent programs across Europe shows that countries that require you to opt in to donating your organs—that is, requiring you to actively indicate that you consent to donate them—seldom get more than 20% consent rates, according to research by Dan Goldstein, principal researcher at Microsoft, and Eric Johnson, a professor at Columbia University. Countries that require you to opt out seldom got less than 80% consent rates. For example, Denmark, a country that requires you to opt in, showed a consent rate of 4%, while neighboring Sweden, an opt-out country, has consent rates of about 86%.

With its vivid reminder of our own mortality, the choice to donate or not to donate our organs is an extreme example of a decision that we’d rather not think about. The default makes something difficult to consider an easier choice. For better or worse (in this case, I would put a larger supply of organs for people who need them as better), the default makes organ donation a choice that makes itself.

In his wonderful book, Misbehaving, behavioral economist Richard Thaler tells of how, in his work with the U.K. government’s Behavioural Insights Team (a breakthrough group whose work probably encompasses the biggest and broadest evidence-based and practical applications of behavioral science to date), he used a simple mantra: “If you want to encourage someone to do something, make it easy.”

In the process of writing my book, The Business of Choice: Marketing to Consumers’ Instincts, I developed an appreciation of marketing that makes choice easier. What I concluded was that approaches that did this often had other benefits to both the marketer and the chooser.

In Effortless Experience: Conquering the New Battleground for Customer Loyalty by Matthew Dixon, Nick Toman and Rick DeLisi, the authors define the role of customer service as “mitigating disloyalty by reducing customer effort.” One example that caught my attention was how clothing retailer Old Navy has labeled hooks in dressing rooms: At the time that Dixon et al wrote their book, one hook was labeled “Love It,” a second was labeled “Like It,” and a third was labeled “Not For Me.”

While researching my book, I visited a number of Old Navy stores and found that the retailer had modified the program slightly. The middle hook no longer has the “Like It” label, but is now a “Love It” hook. Forgive my enthusiasm, but I think these hooks are marketing genius! First, they make physical aspects of choice easier. I do not have to think how I will organize the clothes I like and the clothes that don’t work for me. It sounds like a small thing, but I would argue that it could make a big difference.

Second, by relabeling the “Like It” hook to “Love It,” the retailer took away the ambiguity in choice, something that makes us slower and unhappier as choosers. Third, having two “Love It” hooks and one “Not For Me” hook suggests that people bring more clothes into the changing rooms that they love rather than dislike, creating an implied social norm.

Finally, having choosers put an item on a hook that says “Love It” closes the gap between trying something on and buying it by making people feel a sense of ownership of and commitment to that item. Confirming our choice makes our preference for that choice even stronger. If Old Navy could put a credit card swipe next to those “Love It” hooks, they should.

I came across another great example of making choice easier while on vacation in Budapest a couple of months ago. Visiting in the middle of a heat wave, I ducked into a drug store to buy some sunscreen. The thoroughly modern store had mini shopping carts that had magnifying glasses built into their handles. Rather than struggle with the small type on the ingredients panel (Is that type getting smaller every year or is it my ageing eyesight?), the magnifying glass lets you read it clearly. The shopper feels that he is making a smart and informed choice, and the retailer probably gets some degree of conscious or non-conscious credit for making a difficult task easier.

Making that difficult task easier means that people are more likely to do it, so shoppers may pick up and examine more products. There is a benefit for the retailer and the brand in this. Simply picking up and touching a product increases perceived ownership, which leads to people being prepared to pay more for that item, according to a 2009 study in the Journal of Consumer Research. The magnifying glass also requires shoppers to hold the item over the shopping cart while they examine it. It’s much easier to drop it in the cart than to stretch to put it back on the shelf.

In Effortless Experience, the authors suggest that organizations should evaluate how easy it is for their customers to do business with them and resolve problems with a metric that they call the “customer effort score.” I think that they’re onto something that deserves to live beyond customer service. As marketers, a question that we should always be considering is, How can we make the decision to choose our brand easier? If you take a long, hard look at every aspect of your marketing through the filter of an “effort to choose” score, you could end up making the decision for people to choose your brand—a choice that makes itself.

 

This article was first published on The American Marketing Association website.


ABOUT THE AUTHOR

Matthew WillcoxMatthew Willcox is the Founding Partner of The Business of Choice, a behavioral insights and choice architecture consultancy and author of The Business of Choice: Marketing to Consumer's Instincts.

Matthew Willcox will lead the next edition of the Marketing Institute Masterclass series The Business of Choice: Customer and Consumer Decision Making.

See event information and register here.

 

 

 

 

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