Ho Ho Ho Happiness

This is a guest post by Jennifer Jeffrey, a third-year PhD candidate in Marketing at the Ivey School of Business and the current S. C. Torno PhD Scholarship Award Holder. Jen's research interests include the effects of negative affect on persuasive appeals and the impact of authenticity on endorser effectiveness.  

 

There are lots of reasons why I’m a little envious of the big guy’s job: a flying sleigh, a legion of elves at his disposal, and unlimited access to fresh-baked cookies…really, what’s not to like?  It turns out, however, that there’s an even better reason to lust after Santa’s job: the oodles of happiness it must surely bring with it. 

Elizabeth Dunn, Michael Norton, and Lara Aknin have spent considerable time researching the age-old question of whether money can truly buy you happiness.   The results of their research suggest that it can, with one big caveat; you need to spend that money on other people if you want to increase your happiness.  

Dunn, Norton, and Aknin started researching the topic of happiness through a series of surveys, looking for the relationship between spending patterns and reported happiness levels.  For example, in one study they looked at employees who received an annual bonus, measuring their happiness prior to receiving that bonus and then eight weeks later.  What they found is that employees who had spent their bonuses paying bills, mortgages, or purchases for themselves reported similar happiness levels after their bonus spending sprees to before.  Those employees, however, who had spent more of their bonuses on purchases for other people and on charitable contributions actually reported increases in their happiness levels at follow-up.   

These findings were further tested through several field experiments, where participants were randomly given a sealed envelope containing either $5 or $20, and the instructions to either spend that money on themselves or on others by the end of the day.  Happiness levels were recorded at baseline, prior to anyone receiving their envelope, and again after the money had been spent.  As the researchers predicted, the amount of money given out had no impact on later reported happiness levels, but the manner in which the money had been spent sure did.  Those participants who had spent the money on themselves reported no difference in happiness after their unexpected windfall, whereas those who spent the money on others reported a significant bump in their overall happiness levels.  

Subsequent studies showed that spending money on close others yields the highest happiness returns, versus on more casual friends and acquaintances. 

Why do we find these results surprising?  It appears that many of our lay beliefs about money may just not be accurate.  For example, Dunn, Norton, and Aknin also found that in general we overestimate the impact that money has on happiness, assuming erroneously that big salary increases lead to big happiness increases and that the poor must also be significantly less happy than the wealthy. We also assume that spending on ourselves is the quickest route to happiness (in spite of what many of our grandmothers have told us!).  When the researchers presented a new group of people with the same four options as in their original field experiment and asked them which option would make them happiest, most assumed that more money equaled more happiness, and that money spent on themselves was the best choice. 

 

As the holiday season approaches, many of us are dreading the busy shopping malls, hours of gift wrapping, and inevitable shock of that January VISA bill arriving at our doorsteps. But lest the thought of shopping for others start bringing out the Scrooge in you, take a page from Santa’s book. It turns out the reason he’s so darn jolly isn’t the cookies or the flying sleigh, but rather it’s from the happiness he gets giving others so many gifts. As you fight through the crowds and the stores this December, take some comfort in the fact that the more you harness your own inner Santa this year, the happier you too will be. 

Dr. Michael Norton will be presenting some of his research at Western University on November 30^th. 

Selected Readings:

Aknin, L.B., Norton, M.I., & Dunn, E.W. (2009), From wealth to well-being?  Money matters, but less than people think.  The Journal of Positive Psychology, 4(6), 523-527.

Aknin, L.B., Sandstrom, G.M., Dunn, E.W., & Norton, M.I. (2011), It’s the Recipient That Counts: Spending Money on Strong Social Ties Leads to Greater Happiness than Spending on Weak Social Ties, PLoS ONE, 6(2), e17018.

Dunn, E.W., Aknin, L.B., & Norton, M.I. (2008), Spending Money on Others Promotes Happiness, Science, 319, 1687-1688. 

Prisoners of war

At 11:00 AM on November 11^th, we will gather at cenotaphs, pause at work or at school, and reflect on past wars, on the sacrifices of our troops, and on the debts we owe those who fight.

I pause to think about the folly of war. I think about all of the victims. That includes the countless civilians killed.

I reflect on the puzzle of why civilian casualties remain “countless” in a world where everything else is meticulously counted. "What gets measured gets managed," is a well-known management maxim. Is this why we refuse to tally the civilian toll of our wars?

I reflect on the stark asymmetry of our concerns. We agonize over the psychological trauma of our returning troops, but do we ever look back on the village where our bombs killed most of the boys aged 10 to 15 who were gathering firewood on a hillside?

I reflect on the hypocrisy of the rhetoric of a “just war” deployed to justify control over resources. I wonder how we square the circle of the sanctimonious, straight-faced claims that we can impose democracy and human rights through the barrel of a cannon.

I reflect on the liberties we so easily give up in the heat of war; how we allow our governments license to kill and incarcerate their own citizens, without trial and without the checks and balances that underpin our freedom. In the whipped up fury against the enemy du jour, we shoot ourselves in the foot.

I reflect on the blank check we write our armed forces. I wonder why we do not demand accountability for the trillions spent laying foreign lands to waste. I wonder why, despite the vast superiority of our resources and firepower, our forces are still being chased out of countries we attack, by resistance fighters in sandals, armed with little more than Kalashnikovs and home-made bombs.

I wonder why in the twenty-first century, we still resort to the barbaric idea of war.

I wonder how many of those present at solemn cenotaphs at 11:00 AM on November 11^th are reflecting on reasons that glorify, justify, and perpetuate war. 

I wonder whether, as long as war continues to be glorified and marketed, we are not all prisoners of war.

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Hobson's choice on Tuesday

One of the things that marketing does really well is to make small differences loom large. To believe the ads, the difference between Tide and Sunlight laundry detergents, between Coke and Pepsi colas, Nike and Adidas athletic shoes, and Shell and Exxon gasoline, are so vast and so consequential that you should make your decisions to buy one or the other very very carefully.

But common sense tells us that the differences are not so large, and the choices not so consequential that we cannot switch between them, or even choose not to choose at all.

Could it be that the perception of extreme polarization of American politics, the perceived gulf between the right and the left, the supposedly irreconcilable differences between the red states and blue states, are the result of the magnification of small differences – the result of marketing by the two parties to frame the debate as a choice, and maximize the perceived differences between a diet Coke and a diet Pepsi, between a mocha latte and a mocha cappuccino?

Perhaps the choice between alternatives that are almost indistinguishable is the result of a two-party system in which both parties must appeal to a broad center. That gives us the spectacle of the two parties trying to make a very big deal of differences that are otherwise trivial (they are both less filling; they both attempt to taste great).  Each campaign has spent one billion dollars trying to stir up storms in teacups.

A multi-party system would be messier in that it would bring out more and different positions. But under the present system, those positions are aired and dispensed with early, in the primaries, when few people are watching: the Ron Pauls and Dennis Kucinichs have their say at the fringes, and exit left or right before even making it to the main stage (see their 2012 and 2008 ads below).

On the main stage, the debate is no longer about broad policy aspects because the two parties are essentially in agreement: the Republican candidate does not question that the President has the right to order the assassination of American citizens, or to order assassinations without legal process – presumably they both agree that that is AOK; The Republican candidate does not bicker about provisions of the Democratic President’s NDAA that encroach on civil liberties – those merely build upon and extend the Patriot Act introduced by his Republican predecessor; Both parties support democracy in the Middle-East. Except, of course, in Bahrain, Saudi Arabia, and Kuwait, where both parties agree it is inconvenient to support democracy. Neither party questions the seriousness of the other’s commitment to democracy in allowing these exceptions. Neither party wants to touch climate change as a topic when coal appears to be the fastest growing energy source over the next decade. Both candidates' plans will add trillions to the national debt (will that be on Visa or Mastercard?). One candidate will be great for the defense and health insurance companies' shares in the voters' 401k, the other will be pretty good.

The two parties are far more similar than they want voters to believe. The differences are carefully crafted, and marketing helps magnify them to give the impression of choice. But it remains Hobson’s choice.

Is it any surprise, then, that as many as half of eligible American voters will exercise that choice by not voting on Tuesday?

Value and values

If you're a marketer, consider this dilemma: what would you do if you know a product you sell is crap, but the customers love it, want more of it, are willing to pay a premium for it, and can’t get enough of it? 

Would you make and sell more of it, or have nothing to do with it?

The ethical choice is to have nothing to do with it, you say?

Right.

But hold on.

The question gets at something deeper: what is value? Who determines what value is? How do you put a value on value?

Let’s take each of these questions in turn.

Surely, the only way to determine if something is of value is to find out if someone is willing to pay for it.

If no one is willing to pay anything for it, it isn’t of (monetary) value (that high-school diary you’ve held on to is of sentimental value to you, but is unlikely to find buyers unless you’re a celebrity). You might make a piece of art that to you is a masterpiece, and your friends may even coo admiringly about it, but if no one is willing to pay cold cash for it, monetarily, it’s not so hot.

By the same reasoning, if someone is willing to pay for something that in your eyes has no value, then both you and they are probably better off going with their opinion. Why burst their bubble?

In fact, if you try to educate them by telling them they’re wasting their money on something that has no value, they’ll hate you for it.

So who determines value? Yes, value lies in the eye of beholder. Let it rest there.

There are plenty of people who see no reason to pay a premium for the value in a Louis Vuitton bag, Evian water, and a Mercedes.

But there are also plenty who do. And how much value they place on these products is reflected in how much they’re willing to pay for them. And how can you argue with them? They see enough value in the product to sacrifice their hard-earned money paying for it.

But if you’re in the no-value-in-a-Louis-Vuitton-bag camp, then you might argue that there isn’t any “real” value in a Louis Vuitton bag. That value is created by marketing – it is all “perceived” value – it’s just marketing.

You’d be right; at least partially: marketing does contribute to creating value – indeed, that is the job description of marketing: to create perceived value.

But does that make the value created any less “real”?

Who are we to judge?

Too much innovation

We’ve all heard the lament: “we are not innovative enough!” We’ve heard the exhortation: “to survive against brutal competition we need to innovate.” We know all too well the warning “to avoid commoditization, we need to launch new products.”

Every year businesses throw billions of dollars at innovation – and generally interpret innovation to mean the development of new products or features.

Where does this money go?

We’ve all heard the dismal statistics about new products: 95% of new products fail. Year after year, several thousand new products are launched on the super market shelf, a couple of hundred may survive until the one year anniversary of their launch. Most are withdrawn and sink into oblivion. And that is just the super market channel – several thousand products are launched through other channels, and face similar mortality rates in infancy.

So what does this high failure rate tell us? What should we conclude from the dismal data?

The broad conclusion managers draw is that we need to improve new product development and marketing processes to improve the chances of success.

Specific recommendations include stage gate models of innovation where concepts and prototypes are market checked; and well developed marketing programs that take in to account customer feedback obtained through market research; positioning that differentiates the new product from competitors while demonstrating the added value to the customer.

Those are valid conclusions if you are in the trenches battling to make your product succeed in hand-to-hand combat with other new products competing for the same shelf space and the same consumer dollar.

But what if you are a General surveying the battlefield and witnessing the slaughter? What conclusions do you come to? 

How would you alter your strategy?

If you’re on that perch overseeing the pitched battles, the data should be a clear indicator that there is too much money chasing too little innovation. At a 95% failure rate, clearly most innovation is little more than a shot in the dark. You’ve handed your managers expensive weapons, but they’re shooting blindly.

As a General, even before you decide to introduce better controls for managing the innovation process, perhaps the first thing you should do is to cut your innovation budget. Don’t get me wrong – you don’t need to stifle experimentation and the innovative spirit – but let your troops experiment on the shooting range before they go to battle. Let them innovate without actually launching new products – prevent them from going to market with products that will end up in the trash. Filter better, and save yourself expensive launches. 

You wouldn't play a Las Vegas table that had 95% odds of losing, so why do you throw money at innovation?

 
The most important lesson we should draw from the high failure rate of new products is: innovate less, not more. Innovation budgets should be spent better, they should not be bigger. What innovation needs is quality, not quantity.