Behavioral Economics provides a set of powerful and specific types of irrationality that marketers should consider each time they consider customer/prospect engagement. Other articles here lay out many examples. We highly recommend that a BE audit (BEMA) be conducted around each and every communication, to ensure that all relevant insights of BE are leveraged.

We also recommend a Causal Economics Marketing Audit (CEMA) be carried out. A CE audit must capture core BE insights but also show total personal cost and personal total benefit at each stage of the prospect/customer journey. Costs and benefits must go beyond your view, and include everything that impacts the customer, even if that is in areas outside your business. These other things in their life affect their cost and benefit. In addition, personal costs at each stage must be monitored and minimized as much as possible to impede barriers to conversion to the next phase.

A CEMA approach involves visually drawing out the phases a potential buyer goes through and listing (quantifying where possible) the personal costs and benefits they experience at that stage.  Next, the marketer flags high cost transitions for attention.

For free CEMA templates email andrewhorton@causaleconomics.com.

Causal Economics provides a great deal of insight on compensation practices. It reinforces some well recognized practices, flags some areas of poor approaches and lays out potential new approaches. This post puts a few areas on the table for discussion.

Good compensation systems always try to connect pay (the cost to the employer and the benefit to the employee) to results (the benefit to the employer). An employee then manages his/her effort (their cost) to achieve target pay. Employees try to hit their benefit pay with the least amount of effort possible maximizing their B/C change ratio. Employers try to get the most results for the least amount of required pay, also maximizing their B/C change ratio. Through market negotiation they strike a balance.

Sales commission is the purest example of effectively coupling C and B for company and individual.

The next best example of coupling in practice in compensation is the bonus structure. Bonuses are tied to results, and so follow the idea with commission. Management bonuses are usually heavilly dependent on individual and broader team-based contributions.

Beyond these, most compensation is for effort exerted (time worked etc.), which often reflects base salary demands (to reduce employee risk). But, flat pay for time worked with no variable compensation often results from a stated difficulty in measuring an individual’s impact on results. This is where many experts are wrong. Every situation in business is one where individual and team impacts intermingle. Individuals must manage what they can and influence where they need to. No one’s individual impact is a lone endeavor, especially in today’s fast moving and free flowing economy.

Imagine if sales people didn’t have to worry about closing deals because customer decisions are out of the sales executive’s control. That’s reality and they get over it. Do employees take the brunt on pay sometimes when things out of their control go the wrong way? Yes. Do they sometimes get to ride the coattails of the hard work of others? Yes. This is business and reality and Causal Economics reminds us that anyone who spends time debating poor measurability of individual results as an insurmountable barrier is out of touch.

Causal economics suggests that all compensation should be a combination of some base plus a variable compensation component for individual performance plus a variable component for broader results (team, company etc.). This structure pragmatically couples B and C for employers and employees.

Meetings

Management meetings in general need an overal

Decisions

If you are one of the few business people, let alone marketers, who hasn’t feverishly digested the work of Anthony Robbins, then we recommend that you get on it.

Tony is still the master of applied behavior and decision making in business. It occured to us that in many ways, Causal Economics is an academic formalization of many of the concepts Tony Robbins shared with us. He demonstrates that people act on their perceptions of pain and pleasure (like cost and benefit). What matters most for marketers and business people is Tony’s work on what drives change and action from inertia. He educates us pain thresholds and conditioning assocations.  The former idea is fundamental in the personal cost/benefit trade-off constraint and the person cost maximum curve in Causal Economics.

It’s refreshing that our theory aligns to the work of the absolute guru of applied psychology. Too bad previous theories of economics don’t line up. We’re excited about the future ahead for Causal Economics (and the work of Tony Robbins) in helping people and businesses make better decisions that advance the prospects of everyone.

The standard in sales and marketing today is to relentlessly communicate benefits of our solutions. Barriers to implementation get very little attention during the buying process.  It’s a natural situation, because bringing up costs and problems creates tough discussions. This can slow things down, right? Bringing up things that are negative.

It’s actually not true. The act of not bringing them up and dealing with them is what truly slows things down. Buyers know that solutions involve cost and benefit. When you highlight benefits and not costs, both financial, effort and timelines, you lose credibility and force more work on your buyer, who has to build this out on their own.

In addition, if you convey a more realistic B/C ratio, you set your standard of credibility way ahead of competitors. That gets you more trust and trust is critical in moving from stage to stage in the buying cycle.

Being realistic and transparent is what moves the buying process along as fast as possible. Traditional thinking about buying behavior forces into the one-sided mindset of conveying an unrealistically high B/C ratio. Causal Economics thinking shows us that it is critical to convey a realistic and likely smaller B/C ratio.

Give it a try and see if your sales cycle speeds up. We’re confident it will. Let us know!

Too often, sales and marketing teams are transaction focused. Since they are usually recognized and compensated for short-term results, it’s no wonder. But, in such an environment, a distorted value proposition is presented to prospective customers. Communications highlight extensive benefits and few if any costs. The result is a lack of credibility that tarnishes the brand and the downstream elements of the customer journey.

Causal Economics drives home the importance of a long-term perspective in customer relationships in nurture marketing programs. The matching of B (benefits) and C (costs) reminds us how critical it is to be uprfont with both of these. Change always has costs. When a seller is clear about necessary change and the role they will take in making it as easy as possible, the build genuine trust. As marketers, we’re very used to pumping up the B. Causal Economics reminds us to not deflate the C. If we have a solid value proposition, we should still have a very strong Causal Coefficient (X >1).

Being more transparent on C upfront builds trust, which is a key part of increasing conversion to the next stage of the funnel. Remember, if you don’t help them cut through all the BS out there, they are still going to do it, and they won’t look favorably on any selling making them do it on their own.

Keep in mind that buyers know that solution implementation is never easy, not does it go as expected. Don’t act like all is smooth sailing, or you’ll see potential buyers stall out early in the customer journey.