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How Neuromarketing is Changing the Retail Industry

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Podcast April 8, 2019
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How Neuromarketing is Changing the Retail Industry

Retail brands know the key to success is understanding what the customer really wants – ideally before they even know they want it. Market research and consumer data analysts all promise to help retailers answer this tricky question. Most techniques rely on direct consumer feedback – and this may sound reasonable, but the results aren’t always accurate. What if, however, you could actually look inside the customers’ mind, beyond their preconceived ideas or biases, to what really captures their attention? That is the promise of neuromarketing – research that measures consumers’ physiological responses to brands, providing a window into their true feelings and reactions like never before. Today we talk to renowned neuromarketer Diana Lucaci about how retail brands can benefit from this cutting-edge technology.

Episode Transcript

Melinda: Hi, I’m Melinda from Shikatani Lacroix Design and today on Think Retail we’re talking about neuromarketing.

Retail brands know the key to success is understanding what the customer really wants, ideally before they even know they want it. Market research and consumer data analysts all promise to help retailers answer this tricky question. Most techniques rely on direct consumer feedback, and this may sound reasonable, but the results aren’t always accurate. What if, however, you could actually look inside the customers’ mind beyond their preconceived ideas or biases to what really captures their attention? That is the promise of neuromarketing. Research that measures consumers’ physiological responses to brands providing a window into their true feelings and reactions like never before.

Today, we talk to renowned neuromarketer, Diana Lucaci, about how retail brands can benefit from this cutting-edge technology. Welcome, Diana. Can you start us off by telling us a little bit about yourself?

Diana: Thank you so much for having me. Essentially, I am a neuroscientist, turned marketer, turned neuromarketer. So, my initial curiosity revolved around the human mind, how we make decisions. And after spending some time studying this at the University of Toronto, I then started working in marketing, you know, handling anything from online offline communications, a lot of marketing analytics, a lot of market research, more on the brand side directly. So, it was really interesting to me to have to make decisions based on very few data points that I had available, maybe I knew a little bit about who my customers were and what they were buying, but I didn’t know so much about why they were doing what they were doing. So, I didn’t have the ability to be intentional or predictive in any way with what collateral we would put out there.

So, many times we would end up crossing our fingers. I felt like okay, there’s a lot that I know from my education in neuroscience and psychology. There’s a lot there that speaks to why people do what they do, why they make the choices they make, and there are a number of shortcuts or best practices that could be implemented by businesses today. So, after about, you know, eight years of working as a marketer with very different brands, some smaller companies, some larger ones, like a Microsoft reseller and Bell Canada and so on, I said that I feel like I could add more value to the world by combining my passion for, you know, how people make decisions with, you know, helping to drive conversions on the brand side, right? So, True Impact was founded in 2012 out of this curiosity, out of this kind of little mini adventure that I was on at the time.

And we’ve been growing organically, and we’ve been helping some of the larger brands really understand what their differentiator is in the market and come to terms with the fact that the customer is always changing. So, they have no choice but to adapt. And through this understanding, you do a better job at adapting, you do a better job at delivering an experience that they’re going to be happy with in the end.

Melinda: Right. So, neuromarketing has been around long enough that maybe people have a bit of an understanding of what it is. But for those who don’t, could you just give us a brief explanation of what it is and how it works?

Diana: Absolutely. So, neuromarketing at the very core is about applying neuroscience technologies to solving marketing questions. We are looking at finding ways to drive brand growth, whether in-store, online, through print or out of home media, and trying to answer those questions that are not easily addressed through traditional market research. So, customer understanding is at the core of every brand success. Some of the larger retailers that have been able to reinvent themselves have done so because they understand how the customer attitudes have shifted from generation to generation, from across the world, different geographical areas. So, what we do is we say let’s get a little deeper, let’s get a layer that is non-conscious, that is nonverbal, that the customer is not able to verbally explain why they prefer certain colors or certain brands.

But when you understand that aspect of decision-making, you understand the full picture on the people that you’re trying to address. So, you know how they feel and also, perhaps with traditional research, you then know what they say. So, with those two pieces together, you can then better predict what they’re going to do, allowing you to be more intentional and more predictive.

Melinda: Right. So can you just describe, say, you were conducting this type of research, how would you measure those feelings? Can you just describe a little bit about the science in layman’s terms?

Diana: Absolutely. So, it’s a very interesting process, you wanna start out with a sample audience that is representative of the brand, perhaps in a certain region, perhaps they’re a certain age group and so on. So, we recruit a typical sample of about 20 to 30 people. In the retail scenarios, we will have people come to an actual store. At the store they would receive a headset which is called EEG or electroencephalogram. They would wear this headset, which is wireless, very lightweight, very comfortable to wear after awhile. And that measures how they feel second by second as they navigate through the environment or as they view any packages, or any point of sale displays in front of them. We pair that measurement from their brain activity with measurement from their body activity, so, biomeasures. And biomeasures indicate whether there is a reaction or there is no reaction.

So, you know, biometrics in general are unidirectional, they tell you, “oh, something’s happening, perhaps heart rate has gone up, skin conductivity has gone up,” but they don’t explain if it’s a good thing or a bad thing, such as eye tracking, that’s a biometric, for example. So, using eye tracking glasses, you can see where somebody is looking in a certain, like, on the planogram. But you don’t know if they’re staring at your competitor’s package for a longer time because they like it or because perhaps they’re confused by it. It’s not until you have the neuromeasurement coming from the EEG and you put those together with others that we are able then to say they spent this much time looking in this region, and it’s because they were feeling this way. So then we can better advise on how to create the experience you want to have instead of the one that you are listening right now.

So it comes down to nonverbal, implicit type of reactions that people are not able to verbalize, you know, within, like, a fraction of a second you’re not able to say, “Oh, I felt slightly confused when I was looking that way but then, you know, 300 milliseconds later, I felt interested and then 400 milliseconds later, I felt this way.” So, that is the level of granularity and this type of research is often placed at the intersection between qualitative research because of the smaller sample sizes, and quantitative research because of the large volume. We’re talking like, hundreds of thousands of data points that we’re working with from the brain activity and the biometrics. So, it’s a very interesting insight that you would not be able to gather any other way by asking a person after the fact.

Melinda: So, would you say…what would you say the key benefit is that neuromarketing presents to a retailer, for example?

Diana: Yeah, you know, at the end of the day, I think the benefit is in a more holistic customer understanding, which allows them to make better business decisions. So, yes, it starts with the granularity but it’s not until you combine non-conscious data coming from a neuroscience study with conscious data, perhaps coming from a survey or focus group, that you really understand what people are feeling, what are they saying, and then you can better, you know, decide where to take the business. So, integrating those data points, I feel like this is something that a lot of, you know, neuromarketing providers should really focus on nowadays to really excel. It’s not just about measuring brain activity; it’s been done the same way for decades. It’s more about having that business sense to know how to combine the data points, how to connect the dots for a client and to be able to translate that into a story that they can make a decision out of, that they can, you know, adapt to.

And the most successful retailers and brands are the ones who can quickly adapt to shifting customer attitudes, right? So, this is that extra tool that gives you the inside to be more confident, and where you’re going to take the business, how you’re going to design the store, how you’re going to design a certain packaging experience, all of that comes down to how well do you know the person. So, if you perhaps know 60% about your customer, having neuromarketing will help you get to maybe 75% or 80% understanding.

Melinda: And what about any examples of retailers that are successfully using neuromarketing? Do you have an example of a story that you can give us?

Diana: Sure. I think the first story that comes to mind comes from a couple of years ago when we were approached by Colgate to try to shift the customer behavior of browsing the toothpaste aisle, which is so busy, it’s so cluttered. There’s so many different packages and colors to look at. Their goal was to help people to make that decision a little bit faster and not search and look around, you know, for so long. So, stopping that kind of behavior and really helping them focus on a package that they want. What we did is we took a multi-phase approach. So, a lot of brands, CPG brands, retailer brands, they look at starting with a large number of concepts and then paring down and then doing deeper testing on a few winning concepts. So, in this case, with Colgate, we had 8 or 10 different package designs that we put in a typical planogram and we tested that with a predictive tool, it’s called predictive eye tracking which is very quick and inexpensive. After that phase is completed, the winning packages were then tested into a lab.

So, you know, people were brought into a demo store, they wear the EEG headset, they wear eye tracking glasses, we measured their heart rate as well. And we send them shopping and we see how they behave once certain packages are up versus when the other ones are up. Which ones do they notice? Which ones don’t they notice? And are they shoppers for that brand? Or perhaps, you know, in this case, we were also looking at shoppers of the competitive brand as well, to see is this package going to distract attention from your typical kind of search criteria where you’re, you know, looking for a particular package, but then maybe are you going to notice this as well? So, it’s about being really intentional with the way you design a communication for a particular type of audience. And the end result essentially, with when we came down to the wire and we understood, okay, this is the winning package that’s going to grab attention, at this height from this angle as you walk down the aisle from a certain distance to the shelf.

So, all these parameters led us to believe that this was a winning package and it actually resulted in close to, I believe 20% increase in basket size. So, you know, many people think that retail is the simple thing, it’s almost kind of silly, like it’s just shopping but there’s so many things that go into it. Everything from lighting, to scent, to the height of things, the placement of things, the shape of things, at retail, all of these things convey an emotion. And they convey an experience which happens between the years, right? So, when we understand what that experience is, we can then better, you know, steer people towards a certain value that we want them to see from our brand.

Melinda: Right. And I think a lot of the time people are very…when they talk about an emotional retail experience, they’re thinking of something very high level. You know, like the Nike experience store where you get to go and play basketball, but with something as simple as toothpaste, it’s still that level of attention that needs to be paid. So, there is a lot of technology that promises to change the retail industry and how customers are connecting with their brands. How does neuromarketing fit in with things like artificial intelligence and big data? Are they related at all or is there some crossover there?

Diana: They are the multiple sides of the same coin, you’re essentially trying to understand human beings. We’re approaching, when I say we, I’m talking about neuromarketers, consumer neuroscientists, we’re approaching the individual from a biological perspective, right? So, my perspective is always start understanding their biology before you think about technology. Like just start understanding our, you know, in our brain, what is our visual system drawn to, what colors, what shapes, human faces and so on. Understanding the building blocks of the way we interpret the world will help you design the world, right? Because it is the human being that’s going to be interpreting it. So, it’s just at the end of the day you’re trying to get to an understanding of who are these people and what are they going to like today, tomorrow, next year. And big data looks at large volumes of whether it’s social, whether it’s purchasing data, whether it’s anything that has occurred already.

What we’re doing is marrying that with small data, if you will, where we say like, “Hey, their brain is reacting to these types of stimuli.” And we can predict, you know, next week, next year, the brain is still going to be wired the same. So, we’re adding to that body of knowledge around, you know, who is the individual that you’re trying to target. There’s a lot of AI application within market research and even within our own company, we do use tools to make our lives easier for data processing, analyzing computer vision. Every brain-computer interface platform actually has some machine learning built in. So, I think it has, you know….we’ve been able to benefit by reducing the research time from what used to take four weeks can take four days and reporting time from two weeks to two hours. So, there are benefits to the technology in that space but at the high level, the brands that are going to win are the ones who have a good understanding of what are people saying and doing out there? You know, what have they done yesterday? But also, what are they going to like and what are they drawn to tomorrow?

And these are the core human values that go beyond our generations, beyond our genders, these are values that are true from, you know, one human to another. And these are kind of truths that we help, you know, expose and interpret.

Melinda: So, what would it take for neuromarketing to become commonplace? I mean, how common place is it? Maybe that would be a good first question. And then, where do you see it going?

Diana: Major retailers and major brands are already using it in some capacity. So, we do work with a lot of CPG brands but also, you know, a lot of media testing is put through in neuromarketing. So, some of the larger brands like Unilever, they put out a press release a couple of years ago saying that all their creative material is going to go through some sort of neuromarketing testing. You know, large brands like Disney, Nestle, Coca-Cola, everyone is using or, you know, they have large neuroscience departments already, right? Where I feel the industry will be going, it’ll be a matter of adapting to shifting customer attitudes in the end, because you can have so much…you can have piles and piles of data. If you don’t know how to look at it and how to make sense of it, it’s not very useful. So, it’s about getting a partner who is able to connect those dots, to tell you the shifting attitudes in consumer spending and so on.

We hear a lot about retail apocalypse and things like that. It’s kind of all doom and gloom but the reality is that people are just shifting their behavior. It’s not the end of retail, it’s just a change. And maybe a lot of people are caught off guard by that, by the fact that things are changing but that’s the one constant in life, right? It goes on. So, it’s, I think, you know, at the end of the day, I feel like being able to understand where people are going to be next year, in the next five years, that is going to make the biggest difference. And you want the data that’s going to support you in that decision in a way that’s connected, right? Not just, you know, mountains of data for the sake of having it, you want to be able to connect these pieces together. And this is something that I enjoy doing a lot of the time, making sense of large volumes of data and putting it into a story that’s actually useful. For example, large brands may not have as many locations, but the locations they do have, they’re gonna be more experiential, they’re gonna be better, perhaps more people employed, better trained to serve the customer a better experience.

Maybe you’re gonna see stores who cater to a community as opposed to, you know, the same across the country, right? So, we need that level of understanding of human beings beyond just data, like, people are actually more than numbers. So, we need to understand, do they live in a city, do they live in a rural area, what age are they, what gender are they? What is their tolerance for risk? What is their technological affinity? Are they technophobes, technophiles? So, that’s what makes it interesting.

Melinda: So, what I kind of hear you saying there is that maybe retail as a whole. I mean, we know that personalization is a huge thing right now, that maybe the retail space itself becomes more personalized to the locale.

Diana: Yeah. I feel like that’s the direction we’re going in. It’s almost like going back to the ’50s and ’60s where stores used to be really community-focused and people would gather and would spend time there. You know, even malls nowadays have so many experiences outside of the stores, like some malls are getting, like, what is it? Little hockey ranges or hockey arenas and driving ranges and, like, all these things that you can do in that space as opposed to only stores. So, you know, we’re just seeing a shift, I’m hoping that more and more brands are seeing it as an opportunity as opposed to an apocalypse because the faster you understand how to adapt, you know, the better off that brand is gonna be in the end.

Melinda: Absolutely. Thanks so much, that was wonderful. Thanks for being with us.

The quality of the data brands are collecting and then how to interpret it and use it are big issues for retailers. If we really wanna get granular and offer specific, targeted experiences, the data that we use to drive those decisions really needs to be accurate. And as Diana pointed out, it needs to keep pace with how fast things are changing. Neuromarketing is a tool that we’re familiar with it at SLD. It’s something that we use, and we believe in as a way to provide that kind of information and we’re especially interested in the intersection of other kinds of research with neuromarketing, which is where Diana sees these techniques going. We’d love to hear your thoughts, your experiences and your questions about neuromarketing, so please get in touch and thanks for listening.

About

Diana Lucaci is the Founder of True Impact, Chair of the Neuromarketing Science and Business Association (NMSBA, 2012-2018), Committee Member of the Standards Council of Canada and winner of the Best in Class Research Award from the Marketing Research and Intelligence Association (MRIA). Diana offers growth-focused insights to Canada Post, General Motors, Colgate-Palmolive, Yahoo Canada, Miller Coors and other Fortune 500 organizations. She holds a degree in Neuroscience and Psychology from the University of Toronto.

Think Retail is a podcast where top designers, strategists, thought leaders and business people discuss what’s coming next. For more information, email info@sld.com.

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