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August 31, 2004

Future Shock Marketing - CMO Magazine

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Posted by Zack Lynch

The premier issue of CMO Magazine (Chief Marketing Officer) launched yesterday with an article titled Future Shock that describes five emerging technologies could jolt the marketing profession in the future.

Neuromarketing is highlighted and contains a nice (and accurate) quote from me, "Zack Lynch, managing director of NeuroInsights, a San Francisco-based research and advisory firm that specializes in neuromarketing, believes that as many as one of every 10 marketing dollars eventually will be spent on neuroscience-based research." (click here to read the article).

Having spent 6 years at two enterprise software start-ups as the VP of Marketing (Maxager & Steelwedge) and 4 years deciphering the perils and promises of neurotechnology, I was glad to see that my past and present work projects have begun to merge.

CMO is the third executive title published by CXO Media, known for its award-winning CIO and CSO magazines. CXO Media has a 17 year history of developing resources for C-level executives while creating opportunities for marketers to reach them. CMO will have a controlled monthly circulation of 25,000 qualified readers. I highly recommend checking out this first issue, it is full of concise, well written articles.

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April 20, 2004

Neuromarketing Our Next President

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Posted by Zack Lynch

As Matt Drudge reported last night, today's NYTimes has a front page story on how UCLA brain researchers are using brain imaging to understand how the brains Democrats and Republicans differ in their response to campaign ads.

From the Times article, Using M.R.I.'s to See Politics on the Brain:

"— The political consultants discreetly observed from the next room as their subject watched the campaign commercials. But in this political experiment, unlike the usual ones, the subject did not respond by turning a dial or discussing his reactions with a focus group.

He lay inside an M.R.I. machine, watching commercials playing on the inside of his goggles as neuroscientists from the University of California, Los Angeles, measured the blood flow in his brain. Instead of asking the subject, John Graham, a Democratic voter, what he thought of the use of Sept. 11 images in a Bush campaign commercial, the researchers noted which parts of Mr. Graham's brain were active as he watched. The active parts, they also noted, were different from the parts that had lighted up in earlier tests with Republican brains.

The researchers do not claim to have figured out either party's brain yet, since they have not finished this experiment. But they have already noticed intriguing patterns in how Democrats and Republicans look at candidates. They have tested 11 subjects and say they need to test twice that many to confirm the trend.

"These new tools could help us someday be less reliant on clichés and unproven adages," said Tom Freedman, a strategist in the 1996 Clinton campaign, later a White House aide and now a sponsor of the research. "They'll help put a bit more science in political science."

In the experiment with Mr. Graham, researchers exposed him to photographs of the presidential candidates, commercials for President Bush and John Kerry, and other video images, including the "Daisy" commercial from 1964. In that advertisement, promoting Lyndon B. Johnson against Barry Goldwater, images of a girl picking petals from a daisy were replaced by images of a nuclear explosion."...

"It seemed so last century," Professor Freedman said. "Consultants were quoting Freud as if it was cutting edge. It was all about interpretation instead of using new technology to measure what's actually happening in the mind."

But then, after the Bush campaign commercial is shown, the subjects respond in a partisan fashion when the photographs are shown again. They still respond emotionally to the candidate of their party, but when they see the other party's candidate, there is more activity in the rational part of the brain, the dorsolateral prefrontal cortex. "It seems as if they're really identifying with their own candidate, whereas when they see the opponent, they're using their rational apparatus to argue against him," Professor Iacoboni said.

The neuroscientists warned against drawing conclusions until the experiment was over. They said the results would mainly point the way for future research, and other neuroscientists echoed their caution.

"Brain imaging offers a fantastic opportunity to study how people respond to political information," said Jonathan D. Cohen, director of the Center for the Study of Brain, Mind and Behavior at Princeton. "But the results of such studies are often complex, and it is important to resist the temptation to read into them what we may wish to believe, before our conclusions have been adequately tested."

As I wrote in neuromarketing to your mind, this emerging field presents many ethical issues, but as the auto industry and others drive towards perfecting their advertising schemes, neuromarketing will quickly gain momentum.

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March 19, 2004

Neuromarketing Goes to the Cars

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Posted by Zack Lynch

This week's Newsweek International edition contains another story about how brain imaging technologies are being used to understand consumer choice:

"Radiologists at the Neurosense clinic in south London aren't looking for lesions or lumps. Instead, they've set up a periscope that allows her to view a series of videotaped advertisements." Contrary to the beliefs of many brand managers, neuromarketing will improve product success rates over time which primarily depend upon focus groups to help determine which products will be put on the market.

"Almost every focus group throws up someone more vocal and bossy, who either inspires others to follow or react against [them] or both," says Tim Ambler, senior fellow at London Business School. Perhaps that's why only one in 100 products survives in the marketplace after the typical product launch."

"According to researchers, the act of deciding whether to make a purchase lasts 2.5 seconds. When the possibility of buying something first occurs to a person, the visual cortex, in the back of the head, springs into action. A few fractions of a second later the mind begins to turn the product over, as though it were looking at it from all sides, which triggers memory circuits in the left inferotemporal cortex, just above and forward of the left ear. Finally, when a product registers as a "strongly preferred choice"—the goal of every advertiser—the action switches to the right parietal cortex, above and slightly behind the right ear.

"We can scan people looking at lots of different images, find out afterward which ones they remembered and then go back to the scan data and find out what was specific about the brain activity that occurred in response to the remembered images," says Michael Brammer, chairman of Neurosense."

Among the companies currently testing the technique are Ford of Europe who are using such "neuromarketing" techniques to better understand how consumers make emotional connections with their brands and DaimlerChrysler has funded several research projects at the University of Ulm in Germany, using brain-imaging technology to decode which purchasing choices go into buying a car.

[Note: Thanks to Jerome for the Headsup]

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March 06, 2004

Neuromarketing Not So Hot, Yet...

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Posted by Zack Lynch

Either corporate America doesn't believe the hype surrounding neuromarketing or their marketing departments don't understand what "neuromarketing" means. My bet it is more the latter than the former. Regardless of the reason, the lack of interest in neuromarketing caused the first neuromarketing conference to be cancelled this week:

Thank you for your interest in Neuromarketing 2004. Unfortunately, the interest expressed about this meeting exceeded the actual number of participants who signed up. This number was too small for the meeting to be economically feasible. We expect this nascent field to grow quickly, and hope to have sufficient participation to support our meeting next year.

Conference organizers had even put together an all-star group of neuroeconomic researchers that included:

-P. Read Montague, PhD - Director, Human Neuroimaging Lab, Baylor College
-Steve Quartz, PhD - Director, Social Cognitive Neuroscience Lab at Caltech
-Kevin McCabe, PhD - Prof. Economics and Law at George Mason University
-Paul Zak, PhD - Director, Center for Neuroeconomics,Claremont Graduate U.
-Brian Knutson, PhD - Assistant Prof., Psychology and Neuroscience at Stanford
-Colin Camerer, PhD - Professor of Business Economics at Caltech
-Samuel McClure, PhD - Fellow at Princeton University
-Ronald Fisher, MD, PhD - Director of Nuclear Medicine, Baylor Hospital
-Clint Kilts PhD - Vice Chair for Research, Department of Psychiatry and Behavioral Sciences of the Emory University School of Medicine

If you really think about it, how many marketing or advertising executives do you know that have a background in neuroscience. As I've said before, as brain imaging advances, neuromarketing will become a significant growth sector in years to come as the trillion-per-year advertising and marketing industries leverage brain scanning technology to better understand how and why people react to different market campaigns. If you know any highly energetic, experience business executives with neuroscience degrees, have them give me a call. I've got a few companies that are interested in talking with them.

Update: What Brand Are You? My first brand was "Pro-Performa" which means "hitting the wall" my second was "Tenax" meaning "calm chaos collectively collaborated".

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December 16, 2003

Are You Trustworthy? Give Me Your Blood.

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Posted by Zack Lynch

As Paul Zak explained in the Neurobiology of Trust, the hormone Oxytocin is a pretty good indicator of a person's trustworthiness. When someone receives an anonymous monetary transfer connoting trust, Oxytocin rises. The stronger the signal of trust, the more Oxytocin increases.

As Brad Delong pointed out earlier this year, what's going to happen to contract negotiations and interest rates on individual loans when an Oxytocin Test (OT) becomes inexpensive and readily available?

Would you receive lower interest rates on your home loan or your credit cards if you took the test? Would it become prerequisite for any government job?

From an economic point of view, the OT would provide valuable information to help the market make a more efficient allocation of resources. Think about the resources we burn enforcing contracts, from the national and state levels to individuals personally — this economic loss could be avoided.

You work hard for what you have. Will you submit? Will you have a choice? As neurotechnology progresses there will indeed be tests for all sorts of behaviors. Just read what Carl Zimmer dragged up today.

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December 03, 2003

Emotions, Cognition and Perception with Daniel Kahneman

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Posted by Zack Lynch

In forecasting happiness I overviewed some of Daniel Kahneman's research into affective forecasting. This month's Strategy+Business has a nice interview with him sharing more of his thoughts.

Here are some highlights, with all the credit going to MIT interviewer Michael Schrage and to HBS student Matt Mahoney: (I highly recommend reading the whole article, free subscription).

-You can always find an evolutionary quotation for anything. But the question is whether it’s functional, which is not the same as being evolutionary. There might be some environment in which it’s dysfunctional, but mainly it’s inevitable.

-They’re not trying to learn from their own mistakes; they’re not investing the smallest amount in trying to actually figure out what they’ve done wrong. And that’s not an accident: They don’t want to know.

-But, you know, there’s also the issue of perception, which links to intuition. Perception evolved differently than either intuition or cognition evolved.

Matt's final comment is great, "This hits on so many themes from my cognitive science days at UCLA, plus, more crucially, every single class I'm taking (finance, reporting & control, lead, technology operations mgmt.)

His question for me is: "If emotions get in the way (b/c it overweights), how can we use emotion as a tool to build intuition? to blend intuition and reasoning?" Matt, here is one idea (see Finance with Feelings).

As far as it's implications for marketing (see Neuromarketing to Your Mind).

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November 21, 2003

Understand Emotions, Become Profitable

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Posted by Zack Lynch

Business Pundit points to "Welcome to The Feelings Economy" which explains that "in an oversupplied economy, customer feelings drive purchase decisions and profitability....Your new imperative is to assess and appeal to your customers’ feelings—period. Feelings are the basis for all profit generating consumption in a market at the mercy of customer choice. Focus on feelings, especially the subtle ones that customers themselves cannot articulate."

I agree with the writers up to this point, but then they make a fatal flaw by trying to distinguish emotions from feelings.

"For our purposes, feelings are not the same as emotions. Rather, “feelings” refers to a very specific quality: pleasantness, unpleasantness, or neutrality in an experience. Pleasant feelings—excitement, fun, reward, increased self-esteem, etc.—habitually condition desire. Unpleasant feelings—pain, effort required, decreased self-esteem, etc.—condition aversion. And neutral feelings condition forgetfulness. Given this definition, the purpose of every business in an oversupplied market should be to increase customers’ pleasant feelings while minimizing their unpleasant ones."

As Paul Zak has mentioned, "emotions play a critical role in decision making" (see Neurobiology of Trust), and I've detailed in Emotions and Neurotechnology and The Future is Emotional Economics, understanding the emotional motivation behind purchase making decisions is critical to long-term success.

Why not "feelings" as described above? Because people always overestimate the happiness a product will bring them (see Forecasting Happiness) and if you oversell the "end feeling" all you will ultimately create is disillusionment and dissatisfaction, not long-term loyalty. The critical issue for brand management and profitability comes from satisfying your customers emotional needs so that they trust your brand and will continue to come back.

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November 14, 2003

Selling Your Mind?

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Posted by Zack Lynch

Jonathon Keats, a San Francisco Artist, recently sold a futures contract on his mind. Here is how it worked, he filed with the United States Copyright Office for intellectual property protection on his mind.

Because Title 17 of the United States Code stipulates that copyright "endures for a term consisting of the life of the author and 70 years after the author's death", experts have calculated that Jonathon Keats's mind will survive, legally speaking, for precisely seven decades after his body stops working. In order to exploit this opportunity, he will transfer all intellectual property rights to the Jonathon Keats Holding Company immediately upon his death. Operating expenses for the Holding Company will be covered by the sale of Keats's brain.

On October 23rd, aninitial public offering of futures contracts on his brain sold options on an unexpected 71,000,000 neurons. At a strike price of one cent per unit, those contracts alone could net $710,000, upon the artist's death, enough money, some believe, to fund his recently-declared bid for immortality, an enterprise described in this prospectus.

As part of the due diligence process Keats visited the Memory and Aging Center at the University of California at San Francisco, where he had functional MRIs done on his brain while he sat thinking about art, truth and beauty. The 45 resulting pictures of Keats' brain were on the walls of the gallery, in part to assure potential investors that they are making a solid financial decision.

Investors included neurologists, economists and roboticists. One speculator, Jeremiah Benjamin Stewart of Oakland, CA, even made a $10 profit when he resold a contract for 1,000,000 neurons to George Coates of Berkeley, CA for $20 (plus the Board of Trade's 10 percent transfer fee). As the neurons optioned thus far represent a mere 1.18 percent of the 6 billion available, active trading at Modernism is expected to continue for at least the next several decades.

I wonder what the Center for Cognitive Liberty & Ethics and fellow Corante Copyfight blogger Donna Wentworth thinks of this?

Thanks to Craig for pointing this out.

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October 28, 2003

Neuromarketing to Your Mind

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Posted by Zack Lynch

As neurotechnology advances and brain imaging technology becomes more precise, all aspects of business, including the art of marketing, will be reinvented.

This week's NYTimes Magazine article There's a Sucker Born in Every Medial Prefrontal Cortex highlights how one neuromarketing firm, BrightHouse, is pushing the boundaries of understanding how and why people buy different products. As the article explains, "marketers in the United States spent more than $1 billion last year on focus groups, the results of which guided about $120 billion in advertising. But focus groups are plagued by a basic flaw of human psychology: people often do not know their own minds."

Neuromarketing has a long road to travel though as neuroeconomist Kevin McCabe wisely suggests, "While the first step is to look for reward processing in the brain, it is not the last step since demand itself is an emergent mental construct involving cognition, emotion, and motivation."

Moreover, neuromarketing has some interesting philosophical and ethical implications that will surely emerge as more light is shined on this emerging discipline. But with billions of dollars at stake, the search will surely continue as businesses search for the brain's buy button.

So which do you really want, Coke or Pepsi?

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