Thursday, February 12, 2009

You Don't Arb Your Friends

I've always believed that you can't pay people money to watch ads. I also believe you can't pay them to pitch products to their friends, either directly, by endorsing things on social networks or by creating UGC tied to a product-pitch. (I mean, obviously, you can pay them to do these things, but it's not a good business model.)

This belief is probably the most recurring source of disagreement I have with other people in the online marketing business. I used to argue my side by making vague references to the "Attention Economy", but that was just hand-waving. Then I read Looking Good by Doing Good in the Economist. It references Image Motivation and Monetary Incentives in Behaving Prosocially, by Ariely, Bracha and Meier.

The brief:

This paper experimentally examines image motivation--the desire to be liked and well-regarded by others--as a driver in prosocial behavior (doing good), and asks whether extrinsic monetary incentives (doing well) have a detrimental effect on prosocial behavior due to crowding out of image motivation.
Or, as Richard Titmuss noted in 1970: paying people to donate blood reduces the number of donors.

I think this explanation can be made broader: people try to maximize utility, not money. Making money can have a high disutility in some circumstances. This creates asymmetries: someone may work for half an hour to make $5 and then spend that $5 on a magazine, but they won't work for half an hour to get the magazine. That this seems illogical is the reason I've had to make this point so many times, but I've always thought it was pretty self-evidently true. Now I've got science (well, economics anyway) on my side.

The really interesting point, though, is that it is actually cash that creates the disutility. If you want to pay your users, you can use anything except cash.

4 comments:

josh reich said...

Don't pay your users with cash. Give them a good product instead. Then they will tell their friends.

But that is not social marketing. Its just marketing. And you won't get on the top of Digg with that.

Jerry Neumann said...

Actually, I don't think that's even marketing at all. But, you know, people don't often tell their friends about even the best new products in most product categories... razors, say, or laundry soap. The word of mouth velocity for most products is very low. So marketing can play a role.

John K said...

Predictably Irrational has a whole chapter on this topic - the difference between societal norms and economic norms.

So go read that - it's worthwhile.

BTW, here's my amazon link to the book - buy it thru this :)

http://www.amazon.com/dp/006135323X/?tag=guides5-20

Jerry Neumann said...

Thanks, John, I will check it out.