Neuromarketing is Not so Hot

I am as disappointed as Zack is that Neuromarketing 2004 was cancelled. I think this stuff is the wave of the future, and people need to start listening to it. Much of what we do just isn't that rational.

Pioneer "neuroeconomists" around the country are ready to knock out the centuries-old model of Homo economicus, or "economic man," the perfectly reasonable, largely imaginary being who day in and day out maximizes his utility and gains and always clearly seeks the right thing to do. It's the foundation for Wall Street's "efficient market," which holds that every trade neatly reflects all available information. In theory, the saying goes, practice and theory are the same. But in practice, they are different.

The trouble with Homo economicus is that he has really very little to do with his emotional, dim-witted half brother Homo sapiens, who bought on a hunch. It's difficult to imagine Homo economicus upset and off to the mall for some "retail therapy." He doesn't make impulse buys. And he doesn't always know or care what he wants, let alone what he can afford. "The bursting of the Internet bubble may have been the final nail in the coffin of the efficient-market hypothesis," says Richard Thaler, a professor at the University of Chicago.

Research from fMRIs and other machines bears all this out. Gerald Zaltman, a professor at Harvard University, says 95% of consumer decision making occurs subconsciously. Read Montague, a professor at the Baylor College of Medicine, gave subjects the "Pepsi Challenge" in an fMRI scanner. Result: people found Pepsi more pleasing to the palate — their reward center lit up — but Coke's branding hit literally at the core of their sense of self, a much stronger bond. This affirms what we all suspected: brands are so powerful that we are sometimes more likely to buy something we identify with than something we like better or that is better for us.

The second most important thing for a leader to do is embrace the inevitable. Yet most businesspeople I talk to have still never heard of neuromarketing, or even behavioral economics. By reading this stuff you are building up knowledge that may soon provide you with a competitive advantage.