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- [00:00]
Phil Agnew
In 2011, five guys became the fastest growing fast food chain in America. The burger joint grew by 786% over a six year period. There are hundreds of reasons why Five Guys is so successful. But my guest on Nudge today says one reason backed by behavioural science contributed most to Five Guys success.
- [00:22]
Richard Shotton
We have this idea, we have this assumption that those who specialise a higher quality.
- [00:28]
Phil Agnew
Find out why in today's episode of Nudge. Apparently most businesses only use 20% of their data. That's like reading a book with 80% of the pages torn out. The point is you will miss a lot unless you use HubSpot. Their customer platform gives you access to the data you need to grow your business. The insights that are trapped in emails and call logs, in transcripts, all that unstructured data can really make a difference to your business. Because when you know more, you grow more. You won't learn much reading 20% of a book. So why settle for just 20% of your company's data? Visit HubSpot.com today to learn more. Today I am joined by a legendary author and applied behavioral scientist.
- [01:15]
Richard Shotton
My name's Richard shorten and I specialize in applying behavioural science to marketing.
- [01:19]
Phil Agnew
Richard is the author of two of my favorite books, the Choice Factory and the Illusion of Choice. But just last month Richard Richard released a new book titled Hacking the Human Mind. The book details how some of the world's most successful brands have applied behavioral science to succeed. The book starts with the Five Guys.
- [01:37]
Richard Shotton
Example and there's this fascinating story about this guy called Jerry Murrell. He gives his sons an offer. I'll either pay for you to go to college or I'll give you some cash to set up a business. And they decide that they're gonna set up a business and forego college.
- [01:51]
Phil Agnew
The four sons needed to find a business idea quickly.
- [01:55]
Richard Shotton
They're interested in a restaurant that seems like quite a simple thing to set up. And this is back in the mid-80s and they go to Ocean City to try and learn what businesses are doing well. And as they are walking up and down the boardwalk, what they notice is there are loads of different restaurants, fast food shops, but there is one restaurant that has this hundred yard queue. So everyone else has a few people keep standing outside. This restaurant has 100 yard queue Q. And it's called Thrasher's Fries.
- [02:24]
Narrator
In the early days of the boardwalk At Ocean City, Mr. J.T. thrasher introduced a unique concept, a food concession stand that would specialize in only one product, the noble French fry.
- [02:34]
Richard Shotton
And the thing that Thrasher's fries do differently is that they only sell fries. They only sell fries and they only give you one condiment and get cider vinegar.
- [02:44]
Narrator
Yes. In 1926, Mr. Thrasher had one goal. To produce the best tasting French fry ever. Today, five generations and 82 years later, traditions still reign supreme. Nowhere will better French fries be found.
- [02:56]
Richard Shotton
Everyone else is giving you, like, chicken wings, burgers. You know, they're trying to be all things to all people. And Murrell thinks to himself, well, wait a minute, why is this brand doing so brilliantly? It's because they are specializing. And there's something in this power of specialization in sacrificing, you know, peripheral offerings.
- [03:16]
Phil Agnew
Jerry Murrell described this experience on the How I Built this podcast.
- [03:20]
Jerry Murrell
I saw something I just couldn't believe was Ocean City, Maryland, and they had a place and they were selling Boardwalk fries. There's a place there called Threshers, and there must have been 20 places selling boardwalk fries. But only one place had a long line, and that was Threshers. It was a line that was 100ft long all day long. So me and the kids, that got into our mind, like hamburgers and fries, keep it simple might work. And that's where the idea came from.
- [03:53]
Phil Agnew
Keep it simple. That was Jerry's mantra.
- [03:56]
Richard Shotton
Merle decides this is going to be the kind of key focus of his brand. He sets up his restaurant with his four sons. So straightforwardly enough, he calls it Five Guys. And he just offers a very, very short menu. It's basically burgers and fries. He doesn't have to begin with yogurts and salads and chicken. He specialises in one area.
- [04:18]
Phil Agnew
This specialization worked. Shotton writes that the first store thrived. Jerry quit his day job, and in 2002, as the brand grew, they began offering franchises. Since then, Five Guys has grown to become one of the American favorites in the better burger category.
- [04:33]
News Reporter
Back to 23 ABC. And to make you a little hungry, this morning, I'm finding out that In N Out has officially lost its title as America's favorite burger chain. Now five Guys hold the honor, and.
- [04:46]
Phil Agnew
The brand is taking off globally with 1,800 stores worldwide and 1500 more on the way. The CEO Murrell was asked by Forbes what led them to all this success. And he said this.
- [04:58]
Jerry Murrell
We were pretty lucky, real lucky that we stuck with our. We stuck to our guns, kept it simple.
- [05:04]
Phil Agnew
He says it was partly luck, but partly sticking to his guns, keeping it simple. And Richard says that keeping it simple really did help the brand grow.
- [05:15]
Richard Shotton
Now, from a kind of, I don't know, economic or logistical point of view, there are benefits to doing that. But what's really interesting is there is also a psychological benefit. Now, let's say there's an alternative universe where there's five guys and there's six guys and they're competitors and five guys do brilliant burgers. Nine out of 10 and six guys do brilliant burgers and they score nine out of 10 in terms of taste. Well, if six guys offer pizza and chicken and Chinese, even if the physical quality of their offering is just as amazing as five guys, people will not perceive it that way. We have this idea, we have this assumption that those who specialize are higher quality.
- [06:01]
Phil Agnew
Richard has evidence to prove this. Specifically a study on the goal dilution effect.
- [06:07]
Richard Shotton
Now, that's not speculation. You mentioned this idea of the gold dilution effect. So that's a study back from 2007 by Zhang and Fishbank, the University of Chicago. And they did this beautifully simple study. They recruit a group of people and then they split them into two subgroups. And half the people hear about the benefits of tomatoes. So you eat tomatoes and you have a reduced cancer risk. And those people are then asked, how good is tomato consumption at reducing cancer? They get their answer. They then get a new group. The second subgroup, they give them the same paragraph about cancer prevention, but then at the end they add on a bit about tomatoes being good for stopping the degeneration of the eye.
- [06:57]
Phil Agnew
So the first group is told of one benefit of eating tomatoes, and the second group is told about two benefits you'll get if you eat tomatoes.
- [07:06]
Richard Shotton
That second group are then asked about how good are tomatoes at preventing cancer? And even though they have exactly the same information regarding cancer, they score it about 12, 13% lower.
- [07:19]
Phil Agnew
This is totally irrational. People rated eating tomatoes as 12% more effective at preventing cancer when this was given as the only benefit compared to it being listed alongside with another benefit. It's not logical, but we are more confident when just one advantage is presented. Fish back this suggested that conveying one clear benefit is simply just more persuasive. Adding multiple benefits seems to dilute credibility.
- [07:47]
Richard Shotton
So the point here is, if you add on extra reasons about why a vegetable is super healthy or a burger joint is really tasty. If you give people multiple reasons, rather than those additional reasons adding to the appeal or the believability of the offering, they actually reduce it. Because people have a rule of thumb that we can't be all things to all people. That a jack of a trade, jack of all trades is a master of none. And once we have this rule in our head, we apply it even in situations where it's probably not appropriate.
- [08:22]
Phil Agnew
Five guys kept it simple and succeeded because of it. They now serve 165 million burgers a year. They rake in over $2.3 billion in sales per year. And, and Richard is fairly certain that this success wouldn't have happened if five guys had tried to offer a full menu. By applying this evidence backed behavioural insight, the goal dilution effect. Five guys succeeded. But that's not the only example we'll cover today. We've got two more, starting with Kraft and their world famous Mac and cheese.
- [08:54]
Richard Shotton
There's a theme that runs through an awful lot of experimentations, especially around food, which is what we expect to taste affects the actual taste. So if you think something's going to be amazing, it becomes a self fulfilling prophecy. So if you think five guys are going to be amazing because you know they're a specialist, the same burger will taste better than if you thought they were a poor quality generalist. Now that specialism is a positive effect on perceptions and then taste. One of the things that leads to a negative expectation about taste, especially in America, and this is definitely a culturally specific one, I don't think you see the same effect in France. I'm pretty sure there are studies to that effect. But there is this expectation that if something is unhealthy in America, people assume that it will taste better.
- [09:43]
Phil Agnew
If you think food is unhealthy, you'll actually assume it tastes better. Evidence for this comes from a 2006 study.
- [09:51]
Richard Shotton
So the study in question comes from Raghunathan. So it's this 2006 study. He's at the McCombs Business School at Austin Texas University and what he does gets this group of Americans to try an Indian buffet and every different food item they have to score how much they like it. Raghunathan doesn't care about the scores for most of the items. The basmati rice, the naans, the curries. He only cares about how people score the mango lassi. The rest of the food is there. Just a smokescreen. Now with the mango lassi, some of the diners are told that it is a Indian health drink. Other diners are told that it is an unhealthy Indian drink. Now when people come to rate the lassi, the key finding is that the people who think it's unhealthy, they rate it 55% higher than the people who think it's healthy. Now that is A massive change.
- [10:50]
Phil Agnew
Here's Raghunathan explaining the results in the context of food. More tasty equals less healthy. And most people, if you ask them, do you think that healthy food is less tasty or unhealthy food is tasty, they'd probably say yes, but why is this?
- [11:04]
Richard Shotton
If we are told something's healthy, we assume it's going to be poor quality. That leads us to look for confirming evidence and it becomes this self fulfilling prophecy. So the danger here is when brands want to communicate a health message, they are actually diminishing the taste that people experience. And that's exactly the challenge Kraft had back in 2016. So 2016, Kraft is an absolute gigantic gargantuan brand in North America, in Canada, it is huge. It's like a real kind of part of people's childhood and culture. Massive, massive sales. Kraft, and I don't think I'm being too unkind though, is not the healthiest of dishes. It's got lots of artificial preservatives in that era. And what they realize is that there is an increasing trend of people disliking that. So they want to remove those chemical nasties and they'll replace them with natural colourings like paprika or turmeric.
- [12:05]
Phil Agnew
Specifically, Kraft wanted to improve its Mac and cheese, the most popular Mac and cheese ready meal in the world.
- [12:11]
Richard Shotton
What they also realize though is that just as Raguna said, if they tell people they're doing that, they will create this negative perception. So what they do is they change the recipe, they get rid of the chemical nasties, they replace them with much healthier, fresh, natural alternatives. They don't tell anyone. Obviously on the side of the pack in that little white box with the ingredients, they have to legally say what they're doing. But no one reads that. They wait a few months and then to a massive fanfare, they come out and say, we have just been doing the world's largest blind taste test. And they do it in a very funny, very witty, very attention grabbing way. And the great thing there is because people had tried this product for three months, they hadn't noticed any difference. Kraft managed to get around this problem of self fulfilling prophecies.
- [13:02]
Phil Agnew
Richard's right. The reaction was very positive.
- [13:05]
News Reporter
Kraft macaroni and cheese, the original comfort food, the meal moms whip up for less than $2, is getting a healthy makeover.
- [13:13]
Richard Shotton
I think they're keeping up with the.
- [13:14]
Phil Agnew
Times and it'll be a wonderful thing. God knows what's really in it.
- [13:18]
Richard Shotton
So that's great.
- [13:19]
News Reporter
No more synthetic coloring Artificial preservatives and flavors. New coloring will come from natural sources like paprika.
- [13:26]
Phil Agnew
If the taste stays the same, then it's all good. And Kraft avoided negative reactions because they only told buyers about the change three months after they made it. Evidence for this comes from a 2006 study by Lee, Frederick and Ariely. They asked 388 Bar Go taste two drinks. One was a regular beer, it was a Budweiser. And another was a slightly altered beer. It was called the MIT brew. This was a regular Budweiser beer plus a few drops of balsamic vinegar. Now, the drinkers were split into three groups. The first group tasted the beer without knowing anything about the secret ingredients. So they weren't told about the few drops of balsamic vinegar. And when questioned, 59% of them actually preferred the MIT brew, the balsamic vinegar brew, to normal Budweiser. So the majority actually preferred that, that kind of strange concoction. Now, the second group were told that the MIT brew actually contained balsamic vinegar before tasting it. And consistent with other experiments that Richard has discussed, hearing about an off putting ingredient affected taste perception. In this setup, a mere 30% preferred the MIT brew. So a massive drop from the control. Now, the third group were told that the beer contained vinegar too. But they were only told that after they tasted it. Here, 52% of the drinkers preferred the MIT brew. That is almost double compared to those who were told about the vinegar before sampling. This proved that perception will shape what you taste. If Kraft had told people about the changes immediately, expectations would have shaped perception and loyal customers would have just tasted a worse product. But by telling customers that the ingredients have changed after they tried it for three months, Kraft Mac and cheese fans, well, they just didn't mind so much.
- [15:11]
Richard Shotton
So that I think was a really smart way of recognizing a behavioral science insight that is causing them a big problem. And then rather than trying to just ignore that human truth, they launched their campaign in a way that mitigated it.
- [15:29]
Phil Agnew
Kraft used behavioral science to create a healthier product without turning off buyers. Five guys used the gold dilution effect to create one of the fastest growing fast food chains of all time. But that's not all. Richard claims Starbucks use behavioural science too. And he makes a very interesting claim.
- [15:47]
Richard Shotton
I think if Starbucks had behaved logically, pumpkin spice latte would be a distant memory.
- [15:52]
Phil Agnew
Hear all about that after this quick break. Inclusion and Marketing, hosted by Sonja Thompson is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Inclusion and marketing digs into the important topics like belonging and customer experience and helping you practice inclusive marketing authentically. Sonja's most recent episode is on Buyer Personas and I think it's a very good one to get started with. So go and listen to inclusion and marketing wherever you get your podcasts to check it out. Hello and welcome back. You are listening to Nudge with me, Phil Agnew. So far, Richard has shared how five guys and Kraft have used behavioral science to market their products. But arguably the most well known example from Richard's book is Starbucks and their pumpkin spice latte.
- [16:41]
Richard Shotton
I think with pumpkin cider latte, it's a phenomenally large brand. I think it's a billion dollars in sales and it's been around about 20 years. You go back to when it launched and I think if Starbucks had behaved logically, pumpkin spice latte would be a distant memory. It have lasted a couple of years and then, and then been taken off the menu because no one was buying it. Because it's quite, you know, quite powerful taste. And when they launch, it does very well. What 99% of marketers would think is, oh, we've got this amazingly high selling item, let's promote it more, let's push it more, let's, let's, you know, try and maximize the revenue we can get. But what Starbucks did is take it off the menu and then they brought it back the next year and then it sold a huge amount and then they took it off the menu. They were very much focused on long term revenue, not maximizing immediate sales. And the real benefit in the long term of taking this best selling item off the menu is it avoids the problem of habituation. So habituation is you might like a product or a service, but over time we kind of acclimatise to it and we appreciate it less and less.
- [17:56]
Phil Agnew
When a resource is limited, we want it more. It happens with pumpkin spice lattes, Glastonbury tickets, reservation at Michelin Star restaurants, and also with gift vouchers. In 2010, researchers Hsu and Ganese offered participants a gift voucher worth $6 for free coffee and cake at a local cafe. Quite a nice gift voucher. Now, they randomly gave participants one of two different variations of the vouchers. One variation expired in three weeks and the other variation expired in two months. Much longer. Now, conventional wisdom suggests that giving customers a longer window to spend the voucher would make the customers more likely to use it. After all, they have more time to use it. But that is not what happened when the expiry date was two months away. Only 6% of the vouchers were redeemed within that time. But with a shorter deadline, just three weeks, 33% of the vouchers were used within that time. It showed that scarcity inspires action. And Richard has more evidence to show that pausing an experience, stopping an experience, whether it be access to a pumpkin spice latte or perhaps an enjoyable massage, will make us value that experience more.
- [19:05]
Richard Shotton
So some lovely studies that back this up, there's a lesser known study by Leif Nelson, so he's at NYU and he does this in 2008, and he gets people to try a massage chair. And then they rate how much they like the experience and everyone enjoys it. So it's a pleasant experience. But there's a bit of a twist. Sometimes people get a three minute uninterrupted massage and they rate the experience at 6.05 out of nine. Other people, they still use it for three minutes, but there's a gap in the middle of 20 seconds. Now that group, even though they get less positive stimulus, they rate it at 7.05 out of 9. Remember, the other group was 6.05, so they rate it 17% higher. So by giving people less of the positive experience, you actually create a bigger impact. And what's happening here is you are removing the stimulus before people habituate.
- [20:08]
Phil Agnew
This sounds counterproductive. If the experience is enjoyable, then why should you add breaks? But research proves that breaks help us avoid habituation. Richard writes that the break in pleasure prevents us from becoming too familiar with the positive experience and thus noticing it less.
- [20:25]
Richard Shotton
This is exactly what pumpkin spice latte do. You know, you have it out for six weeks, eight weeks, whatever it is, and people, you know, maybe have a chance have two or three pumpkin spice lattes. But by not letting them get their seventh or their eighth or their ninth in a short succession, you stop this problem of habituation. And then when it comes back in a year's time, everyone is enthused and looking forward to it. And that, I don't know, some might, people might say that's obvious, that's that, you know, that's kind of, you know, we all know this, but how many brands do it? I mean, virtually every other brand would have destroyed pumpkin spice lattes by keeping them on the menu permanently. So it's one of my favorite examples in the, in the book. Because even if lots of people know the experimentation it takes, I think a brilliant, forceful, strong will marketer to actually, to actually make it happen in the book.
- [21:19]
Phil Agnew
Richard and Michael Aaron share a similar British example. They write how tempting it is for a brand to cash in on popularity for a limited product, and in the 1980s, Cadbury's felt this pressure with their limited edition Cadbury's Creme Eggs. Previously, the eggs were only available in the run up to Easter, but facing pressure to hit sales targets, Cadbury's started to make the eggs available all year round. What happened? Sales slumped, the novelty wore off and fortunately Cadbury's noticed the problem. They quickly reverted the Cadbury's eggs back to seasonal availability and 40 years later, Cadbury's Creme Eggs are still one of the most successful limited products today. That is all we have time for on today's episode of Nudge. But don't worry, Richard and I recorded a few more episodes of Nudge and the next one will be airing next week. To make sure you don't miss that, then please do go and subscribe to the Nudge newsletter. Not you get the incredibly popular Friday newsletter, which almost 10,000 of you read every single week. And on that newsletter I share the best behavioral science insight I have found from that week. It's well worth a read. But in addition to that, you also get an email reminder every Monday when the latest episode goes out. So if you don't want to miss Richard's next episode, sign up to the newsletter. Just go to nudgepodcast.com that is nudgepodcast.com and click newsletter in the menu to sign up. It is totally free and you can read all of the previous newsletters at no cost as well. If you've enjoyed today's episode, you'll love Richard and Michael Aaron's book Hacking the Human Mind. I think it is incredible. It is fantastic. I genuinely love all of the books Richard writes, but this one is one of his best. Just search for Hacking the Human Mind wherever you get your books and you will find it. Thank you for listening folks. I've been your host Phil Agnew, and I'll be back next Monday with another episode of Nudge, again with Richard Shotton next week. Richard explains how Guinness became the most popular pint in Britain. And don't miss it.