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CRISIS, WHAT CRISIS?_Confronting the situation through neuroscience and direct marketing

Cerebro

Photo: C. de Psiquiatra (flickr.com)

ABSTRACT

Before coming up with a solution, we’ve first got to know what we’re dealing with. To begin with, if we’re talking about ‘crisis’, we should do so in the plural. Otherwise, a wrong diagnosis will lead to ineffective decision-making.

To address the crises, we encounter a good ally in the direct marketing, supported by neuroscience. Thus the focus should be on providing a positive shopping experience based on emotions to encourage clients to buy.

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The crisis: Without a doubt the topic of the past months. And the two most frequently asked questions are: What’s really going on? What should we be doing about it?

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Human behaviour when facing a crisis

When people are negatively affected by something unexpected, they go through three different phases:

The first phase consists of a shock, characterized by one’s confusion and failure to comprehend what is really happening. It is something similar to the instantaneous daze of the flash of a camera.

The second phase starts once we’ve assimilated the emotional impact. We are now able to analyse what has actually happened, diagnosing the situation and elaborating a coherent plan of action.

The third and final phase is when the planned action is carried out.

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We’ve all experienced it

Practically everyone has noticed difficulties over the past months, especially those of us who live in Spain, one of the countries most affected by the crisis.

But this period of difficulties is not homogeneous: At least two crises have occurred within this so-called crisis ‘in the singular’.

We should recall the level of inflation in mid 2008, both in relation to food and fuel prices. The European Bank rose interest rates, and mortgage payments reached limits that were difficult to sustain.

And now we just observe what is happening these days: prices are falling and are expected to drop even more – deflation -, with mortgage rates being at an all-time low. Families accumulate their savings and stop spending due to a lack of confidence in the future. And the Spanish unemployment rate is well above the European average.

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If you’ve taken decisions only once, it’s likely that you didn’t take the right one

The majority of executives (in both private and public sectors) failed to notice the change of scenery around them due to their big dismay. If you think that there is only one crisis, you may not have conducted a good diagnosis, …and consequently failed to take efficient decisions.

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Direct marketing helps us

If you want to know who is most likely to buy from you over the next month, there’s a valid technique formed by three key variables: frequency, recency and value.

Those who will buy from us in the near future are those who buy from us the most frequently, those who bought from us recently, and those who spent more than the average. Of the three variables, the one with the greatest statistical impact is the frequency. Consequently, our focus should be the clients that buy from us most frequently.

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Neuroscience also helps

95% of our decisions (e.g. those that are purchase-related) are made unconsciously and generated in the limbic system, a part inside of our brain that is also responsible for the processing of our emotions. On the contrary, our rational decisions that account for the remaining 5% are taken in the cerebral cortex.

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Suggestions for the latest crisis

It seems obvious that one’s objective should be to prevent habitual customers to stop buying our brands or in our shops.

From a neuro-scientifical perspective, the regular customers should not switch from unconscious to conscious actions. Moreover, they shouldn’t think only in terms of price – generated by the cerebral cortex – but also in the emotional part of the shopping experience – dealt with by the limbic system.

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Lluis Martinez-Ribes

Source: Distribución Actualidad, the spanish magazine of retail

(nº 403, May 2009)

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