Saturday, February 16, 2008

#11 Do You Understand Signaling Theory

261 Questions

"Yes. Absolutely," he said with some aplomb, yet his head shook back and forth tightly as he spoke the words. Immediately, I felt a twinge of concern that I hadn't been heard or understood. I wanted him to get my point. I felt strongly about it. His mouth spoke the words I wanted to hear. His head signaled something different.

Either he wasn't listening or he was thinking something more than his words communicated. Maybe he was tired of listening to me. In the parlance of Tom Wanek, this was counter-signaling. I recently saw Tom's presentation at the Wizard Academy on Signaling Theory. He gave me permission to summarize it here.

Signaling: Aligning actions with words to gain credibility and trust in your marketing.

UPDATE: Tom Wanek is teaching the workshop Fight the Big Boys and Win at the Wizard Academy near Austin, Texas May 13-14. Free meals and lodging for first 12 students.

The Costs of Signaling

There is a cost to making action and communication match. In the case of my friend, he could have paid with better attention, or with honesty about his doubts. Tom would have called the first a "Time and Energy" cost; the latter an "Opportunity Cost" in that he may have insulted me and lost all opportunity with me.

The key to credibility is the cost of aligning word and action. If you pay the cost, you can gain the credibility.

Tom identified six Signaling Costs in his presentation.

Material Wealth (or your businesses' resources)

To build credibility, don't make claims that the business hasn't made real.

If you're going to offer a warranty as proof of your quality, you're going to have to give some money back. That's a material cost

If you're going to taut your great customer service, you're going to have to hire excellent people to service your customers. That's a real investment of salary dollars.

If you're going to claim industry-leading technology (please never use this terminology) you've got to invest in technology that offers more than your competitors. That's a real capital expenditure.

Time and Energy

Where does the business you're marketing for focus its energy? At Conversion Sciences, I would get more leads if I led with my SEO or SEM resources. It's what people are looking for today. But I spend 75% of my time on Conversion Analysis. Hence, I focus my brand and messaging on conversion. For example, my title is "Conversion Specialist." Better than "Online Marketing Specialist," this signals where I invest my time.

By this time next year, everyone will know what "conversion" means.


What opportunities are you willing to pass by so that you can signal clearly?

This is the cost that marketing to personas illuminates. In the process of focusing your marketing message on a few visitor personas, you must stop messaging to some segment of your visitorship. That's the opportunity cost.

Tom uses the example of  Toyota's Scion brand, which is targeted and signals to buyers 18 to 24 with non-conformist tendencies. It was a success and they could have significantly expanded the market to older, more conformist buyers. But they felt they would have lost their core buyers. So the capped production and maintained their targeted message.

That's a real opportunity cost.

Power and Control

The social marketing movement has caused us to begin considering this cost. Anytime you let visitors and customer post on your site, you lose power and control. Facebook recently counter-signaled it's community by trying to take back some control with their Beacon advertising platform. This unilateral action was not in alignment with their signaling that said the users owned and controlled their Facebook experience.

Reputation and Prestige

Standing for what you believe can cost you in reputation and prestige. Tom uses the example of Patagonia, a clothing manufacturer that, in the midst of thriving turned "green." They now only offer environmentally-friendly products. Naturally, a portion of their loyal customer base found this to be "preachy" or alarmist. It was inevitable that their reputation would suffer, but the owner decided to signal his beliefs and, by proxy Patagonia's values.

Safety and Well-being

The most extreme example of paying the price of safety and well-being is "betting the company" on an idea or marketing message. Putting your entire marketing budget into Superbowl ad is one example.

Lifelock CEO Todd Davis published his Social Security Number in the company's marketing and advertising. This was bold, and seems to have worked well for them. Of course, if he'd been hacked, the company would have been humiliated and all credibility lost.

The Benefits Must Exceed the Cost

My friend Jeffrey Peltier is an incredibly knowledgeable search marketer. Yet, he doesn't have a Web site. Not even a blog. He has great referral business and the cost of maintaining a site that would pass muster for a search "expert" is too high. While his competition is spending time on their Web site, he's spending time making customers LOVE -- and talk about -- his results.

More From Tom

It is always a treat to spend time at the Wizard Academy, and this past Tuesday's Open House was no exception. The Academy is about understanding communication. The ideas you'll find are generally new ways of looking at how we deliver and absorb messages.

Tom Wanek will be presenting a workshop at the Wizard Academy in the coming months. Enter your email below, and I'll remind you with a post when the date has been finalized.

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1 comment:

  1. Brian,

    Perfecto! Very nice summary on the Six Costs of Signaling. Thank you.

    Marketers can no longer rely solely on their ads and copywriting to persuade customers to take action. Words without cost have zero credibility.

    Signaling provides customers with proof that your business is as advertised. And the size of the cost or risk to signal dictates the strength of that signal. Unfortunately, many marketers woefully neglect the signals their decisions send :-(

    Great job again, Brian.

    Keep in touch, more Signaling developments to come.

    Tom Wanek


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