Monday Memo

A Byte of Knowledge

Let's talk about Elon Musk's approach to creating new products.

He says: "I don't decide on a new product based on, say, consumer surveys or something like that. I try to mentally simulate what the end customer would be like that would want this. But I'm not going to do a bunch of consumer surveys or... I don't really ask people. It's really pretty obvious, I think."

In other words, Elon starts by empathizing with his end user.

By considering their life, their needs, their desires...

He doesn't rely on solely on them to tell him what they want.

Because as he points out, "if you listen to surveys of do people want an electric car, you would not... There's no way you'd start an electric car company because people don't say yes."

Customers can't always articulate the innovations that will transform their lives.

As Henry Ford famously said, "If I had asked people what they wanted, they would have said faster horses."

Sometimes, to create something revolutionary, you have to see past the "faster horse."

You have to envision the automobile the customer doesn't even know they want yet.

*Quote taken from Musk's recent interview at the 2024 Cannes Film Festival

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Something to Ponder

In the 1940s, the U.S. military set up bases on remote Pacific islands. Locals watched in awe as planes delivered valuable cargo. When the bases closed, some islanders built crude airstrips and performed rituals - "Cargo Cults" - in hopes the planes would return with more goods.

Physicist Richard Feynman later coined "Cargo Cult Science" for things that look like science but lack its substance and rigor.

The islanders had the superficial trappings of an airfield, but not the underlying aviation knowledge to actually make planes land.

And let us tell you, the AI marketing world is rife with Cargo Cults these days.

Folks are jumping on the bandwagon left and right - using ChatGPT for everything from writing copy to brainstorming mechanisms.

But do they really understand the core marketing principles behind them?

A lot don't. They're just going through the artificial intelligence motions, hoping the magic AI cargo will appear.

But that's the real key to making AI work for you - having a solid marketing foundation FIRST. Knowing how to spot great copy, killer hooks, winning offers - with or without the tech.

Do you?

We Asked – AI Answered

Our Question: 

"Why are upsells in marketing funnels so effective immediately after a purchase? What psychological factors make customers more receptive to buying additional products right after their initial transaction?"

ChatGPT's Answer:

This phenomenon is well-known in marketing, but why does it work so effectively? One explanation is rooted in the "Diderot Effect," which suggests that acquiring a new item can trigger a chain of subsequent purchases. Let's delve deeper into the details to understand why upsells are so powerful.

• Denis Diderot's Story: Denis Diderot, an 18th-century French philosopher, is the namesake of the Diderot Effect. The story goes that after receiving a luxurious scarlet dressing gown as a gift, Diderot found that his old possessions looked out of place. He ended up purchasing new furnishings and decor to match the elegance of the gown, leading to a cascade of acquisitions.
  
• Concept: The Diderot Effect explains a phenomenon where acquiring a new item creates a psychological chain reaction of consumption. This effect is driven by a desire for harmony and consistency among one's possessions.

Principle:

• Consumer Behavior: The acquisition of one item often leads to further purchases as consumers seek to create a cohesive and aesthetically pleasing lifestyle. This aligns with the principle that our possessions contribute to our identity and lifestyle, leading us to continually upgrade and complement our belongings.
• Aesthetic and Functional Consistency: When a consumer buys something new, especially if it's an upgrade or luxury item, they often feel compelled to improve other related aspects of their life to maintain a consistent standard. This can apply to fashion, home decor, technology, and even personal habits.

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Consistency and Cognitive Dissonance:

• Consistency Theory: This theory, rooted in social psychology, posits that individuals have a fundamental need to maintain internal consistency among their beliefs, values, and behaviors. When a new purchase is made, there may be an inconsistency between the new item and the existing environment or possessions. To resolve this inconsistency, additional purchases are made to create a cohesive whole.
• Cognitive Dissonance: First introduced by psychologist Leon Festinger, cognitive dissonance refers to the mental discomfort experienced when holding two or more contradictory beliefs, values, or behaviors. After making a purchase, consumers may experience dissonance if the new item does not align with their existing possessions or lifestyle. To alleviate this discomfort, they engage in further consumption to justify the initial purchase and create harmony.

Positive Emotions and the 'Shopping High':

• Dopamine Release: Neuroscience research indicates that the act of purchasing releases dopamine, a neurotransmitter associated with pleasure and reward. This dopamine surge creates a temporary 'high,' making consumers more susceptible to further purchases in the immediate aftermath.
• Impulse Buying: The dopamine effect can reduce the consumer's ability to critically assess the necessity of additional purchases, leading to impulsive buying behavior. The initial purchase primes the brain for more immediate gratification, creating a window of opportunity for upsells.

Commitment and Investment:

• Sunk Cost Fallacy: This cognitive bias leads individuals to continue investing in something they have already committed resources to, rather than considering the overall return on investment. After an initial purchase, consumers are more likely to buy complementary products to 'maximize' their investment in the original item.

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Until next time!

The AI Marketers

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