Episode 312

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The world of neuroscience might seem like an odd place to seek out powerful marketing tactics, but there’s no denying that effective marketing isn’t just about being great creatively. Art might draw attention, but human nature and how our mind works is what inspires the buy. Understanding neuro-marketing and what triggers the mind of an audience can only improve the rate of success.

Dan Russell runs Vivid Labs, a conversion optimization agency that has developed neuroscience-inspired marketing strategies. He moved out of the service space so he could teach agencies and other businesses how to utilize these techniques for business growth and success.

In this episode of Build a Better Agency, Dan and I talk about the different ways neuroscience insights can be used effectively in marketing. We discuss how his team determines what tests to run that are both practical and ethical. Using real-world examples, we take a closer look at a few effects that marketing agencies absolutely need to know about and incorporate.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

Neuro-Marketing

Neuro-Marketing

What You Will Learn in This Episode:

  • What is neuro-marketing?
  • How to determine what scientific tests apply to marketing
  • Ensuring tests are both practical and ethical
  • Why the physical world can trigger more effects than the digital world
  • Nuero-marketing effects agencies need to incorporate
  • The importance of video to increase conversion
“In the same way that a researcher has to invent the experiment, you have to think about how you can use the copywriting, the design, and the technical performance of a campaign to incorporate a scientifically proven mental effect.” @heydanrussell Share on X “The physical world has more of a capability of triggering these effects than the digital world because you’re engaged with more senses.” @heydanrussell Share on X “If you work with somebody in a physical store, multisensory marketing strategies will change the game.” @heydanrussell Share on X “What people fight for in marketing is the extra split second of consideration.” @heydanrussell Share on X “If you’re building a webpage, there better be testimonials on it. If not, you’re already behind your competition. People are expecting it.” @heydanrussell Share on X “I can’t emphasize enough how much the use of video has transformed conversions over the last year.” @heydanrussell Share on X

Ways to contact Dan Russell:

Additional Resources:

Speaker 1:

Welcome to the Agency Management Institute community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money and keep more of what you make. The Build A Better Agency podcast presented by White Label IQ is packed with insights on how small to mid-size agencies survive and thrive in today’s market. Bringing his 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew McLellan:

Hey, everybody Drew McLellan here from Agency Management Institute. Welcome to another episode of Build A Better Agency. Really glad you’re here. I’ve been super excited about this interview. Some of you may know that my original major in college was psychology. I was quite convinced that I was going to go into private practice as a psychologist, which didn’t end up working out. That’s an interesting story, sometimes, maybe over a scotch. But I ended up shifting from psychology to marketing and advertising, but the way the human mind works has always fascinated me.

And so when I met Dan Russell, who owns a company called Vivid Labs and found out what he did, how he uses sort of neuroscience to understand how to create reactions in buyers and how he helps clients do that, I knew that we had to talk to him. And so I’m super excited about that. But first, before we get to Dan, I just want to remind all of you that we have some killer workshops coming up. We have Money Matters in December. That’s the ninth and 10th of December. We have Build & Nurture Your Agency’s Sales Funnel. That’s in January, I think it’s the 20th and 21st. And then we have, with our friends at Mercer Island Group, Selling with Insights, the following week. I think it’s January 25th and 26th.

So all of the information about all of those workshops is on the website. I highly recommend you check them out. I expect all of them will sell out, so don’t wait too long before you grab a seat. We’d love to have you. They all are workshops that we’ve taught before and we get rave reviews. And so I would love to see you there, but I don’t want to delay any longer. Let’s get to our conversation with Dan because I have a ton of questions. And I know that once he starts talking, I’m going to have even more. So I don’t want to waste a minute, let’s do it. Dan, welcome to the podcast. Thanks for joining us.

Dan Russell:

Thanks for having me. I’m excited to be here Drew.

Drew McLellan:

So before we hit record, already, we’re kindred spirits. We’ve had a great discussion about single malt scotches. I have no doubt that this is going to be a good conversation.

Dan Russell:

Well, look forward to having one in person at some point in the future.

Drew McLellan:

I would love that. I would love that. So tell everybody a little bit about your background and how you came to start the company and the kind of work that you guys are doing now.

Dan Russell:

I run a company called Vivid Labs. We have been a conversion optimization agency for the last eight years and built up a library of what we call neuro tactics, which are neuroscience-inspired marketing strategies. And we use those as the basis of a lot of the experiments that we ran. And over the years, we really started to develop this scientific approach to marketing, to the point that we now teach it to other agencies. So we moved out of the service space and we teach it to agencies as well as other businesses. And we help people use those same strategies and optimization techniques that we developed over the course of those years. And on a philosophical note, I did that primarily because working with a small number of clients, although it’s a great way to run an agency, I was super excited to get that knowledge out into the world. That’s really what the focus is in this phase.

Drew McLellan:

Okay. So how did you come to start the company? What were you doing before that?

Dan Russell:

Oh man, I was kind of thrust into the entrepreneurial world. I went to college for finance and technology management. So I double majored in those two degrees and was actually on an investment banking path. I was going to-

Drew McLellan:

That sounds awful.

Dan Russell:

… going straight into banking. Yep. I had my internship and for whatever reason, they thought that I wasn’t a cultural fit. And they said, “Maybe you should try something else.” And I was heartbroken for a couple of weeks, but then realized that I had already started a business in college. So told the career service office that I wanted to work with a startup. So they found one for me, it was a company called SYNDUIT and I was the second hire over there. And it was a marketing technology company. I knew nothing about marketing, but I learned very quickly.

I was on the phone with chiropractors and natural paths and other natural medicine experts pretty much every hour of every day, helping them put together the marketing campaigns. And so I cut my teeth there and that’s when I started to get into following guys like Frank Kern and Jeff Walker and Ryan Dice and the gurus, the big guys. Eventually, getting to the point where I started taking on some local clients. My first client that I signed was a local construction company owner, helped him put together a website. And I was doing everything for everyone, just no niche, no focus. Just if you’re going to pay me a thousand dollars a month, then I’m going to-

Drew McLellan:

I’m going to do stuff.

Dan Russell:

… I’ll do whatever you want.

Drew McLellan:

Right.

Dan Russell:

Yeah. I’ll do your taxes if you want me to, like whatever.

Drew McLellan:

Back to that investment banking background.

Dan Russell:

Yeah, exactly, exactly. So eventually, I began to find that niche. And through the guidance of people like you and other entrepreneurs that were in my networks, I began to focus. And so started to get really obsessed over the science of human behavior and why we buy. And that obsession, that focus began to draw me towards this idea of building what I now call a marketing operating system, sort of like this master system of how to lay the right foundations. Because there’s a lot of moving parts out there, especially for entrepreneurs that don’t really know how to get started. So I would go into businesses… this is basically where the business model moved. I would go into our client businesses and help them lay those foundations and then move into that optimization territory. Because most of the time, I always say 5% of the time, they were immediately ready for CRO activities. 95% of the time, there was some work to be done.

Drew McLellan:

Yeah. I’m sure that is true. So how does one go from being in essence, sort of a marketing generalist, “I’ll build your website for a thousand dollars,” to really being a student of human behavior science? How do you make that transition and then how did you educate yourself? How did you learn what you know today? And then I want to dig into what you know. But first, how did you learn it? How did you figure it out?

Dan Russell:

I think that was really… honestly, that was trial and error for me. The way that I got the… you and I had a short conversation on a post you made a few days ago, about following your gut. And really, that was the process that I went through, the learning process that I went through, was learning to listen to my gut. Listen to my gut telling me, “This is the wrong type of project.” Listening to my gut telling me, “This is the wrong type of client. This is the wrong time to do this. You’re overloaded. You’re going to over-commit. You’re over-promising,” whatever that was. And so I started to understand where my gut was pushing me. Eventually getting to the idea of, “Okay, I do have an analytical mind and I do want to build systems.” I come from the startup world, right? I’m obsessed with scale and structure. And agencies are notoriously difficult to structure for growth, just because everything was on my shoulders. So I started to take that scientific perspective, out of a desire to have more control over my projects and my outcomes. So that’s where that focus came from.

Drew McLellan:

So how did you begin to understand sort of the science behind buying decisions?

Dan Russell:

That became a really heavy focus for me. The first step that I took was learning neuro-linguistic programming. And for those who aren’t aware, NLP is essentially the science of human language, using different speech patterns and writing patterns in order to mimic somebody’s emotional state and create new emotional states. But anyway, I started to get into that side of things, because I had run a couple of dozen different product launches, built funnels, did product launches for clients. And a number of them failed. And I was trying to figure out what about it failed and what about that product or that client, or what I did, I wasn’t ruling myself out, contributed to that failure. And I saw a big question mark. There are a lot of these moving parts, these variables, like is the product actually proven?

Early on in my agency, I ended up working with clients that just did not have viable products. Then there’s also me, is there something about the process I’m following that is not effective? And part of that was my understanding of how people buy and the different sub-variables, I guess, of that question. Why is it that people pay attention to, or feel differently about Pepsi than they do about Coca-Cola? Why is it that somebody’s going to buy from Zappos instead of some random shoe store online? Those sorts of questions were swirling around in my mind. My, as I said, “analytical mind” was attracted to the scientific side of things.

And so that led me to cognitive behavior studies, neuroscience, behavioral economics, sociology, all of these areas of research that had papers that I could just access online and read about how the human mind works. And a lot of these are typically known as biases or effects. People have probably heard of anchoring. There’s a lot of… like Robert Cialdini wrote about his major influences of persuasion in his book, Persuasion. And now more recently, Pre-Suasion. So there’s a lot of talk about these mental effects, but I started getting into that from the ground up because I was less… by that point, I was disillusioned from the distraction of another tactic and I really wanted to get at the root of what made people do what they do. And so that was sort of like me opening the door of this whole neuro-marketing world.

Drew McLellan:

So what did you discover? What are some of the… Well, first of all, let’s talk about your methodology because you talk a lot in your business about running experiments. So talk a little bit about that, because it sounds to me like how you tested all of these things that you learned was through a series of experiments, that either proved or disproved what you thought was true. So talk a little bit about the methodology and then we’ll get into some of the things that you learned.

Dan Russell:

The methodology is pretty simple. It’s the scientific method. So I haven’t invented anything new here. That’s kind of the beauty of it and the simplicity of it. I believe the most unique contribution that we’ve made as a company is figuring out how to translate those complex reports into practical and ethical marketing strategies that can be tested. So for example, let’s take anchoring as an example. For those who don’t know, anchoring is the presentation of a high number to a number higher than let’s say a price that your product is at in order to make your price seem lower comparably.

Drew McLellan:

So it’s the $1,000 hamburger model, right?

Dan Russell:

Exactly.

Drew McLellan:

Yeah. Okay.

Dan Russell:

Yes.

Drew McLellan:

Yeah.

Dan Russell:

Let’s say that we have a research study around anchoring. We would read that and think, “How can this be applied in a practical and ethical way…” that’s the filter… “to marketing?” And so that ends up with us saying, “All right, well, we’re going to initiate an experiment where the question is going to be centered around this effect.” So the question could look like, “Does presenting an MSRP on our product page increase the conversion rate of the checkout?” Right? We launch an AB test and test one version with the MSRP, one version without the MSRP and we have a result. That was a test of anchoring.

And there are more complex or at least more nuanced what we call neuro tactics that we test as well. There’s all sorts of them. We have a whole library of them. So that’s the process, the method. It’s just following the scientific method all the way from problem down to conclusions or question down to conclusions. I would say the most important step is taking those conclusions and documenting them and keeping them in some sort of place for your company to apply elsewhere. Usually, people launch AB tests and forget about them. So that next step, application, should be added to the scientific method for marketing companies and agencies.

Drew McLellan:

So what was the result of the anchoring test?

Dan Russell:

Anchoring has almost always increased the conversion rate. You’re going to see this in… you’re probably familiar with Russell Brunson. He’s got his Perfect Webinar Script. He’s got anchoring all over that method. You’re going to see it on every Amazon page. You see there’s an MSRP on almost every single Amazon product page. You see anchoring everywhere. Even when you hear somebody say, “Not $10,000, not 5,000, not 1,000, only 29.99.”

Drew McLellan:

Right. Two easy payments.

Dan Russell:

Right, exactly. [crosstalk 00:14:55].

Drew McLellan:

Right?

Dan Russell:

Yep.

Drew McLellan:

Yep. Yep. So as you have been doing your experiments, what was one that you thought was going to work that didn’t?

Dan Russell:

So we had a client that was selling a wine subscription online. Their whole business is built around selling monthly subscriptions of healthy wines, like no sulfates, no sulfites, and so on. And we’d began working with them to increase their checkout completion rate. One effect one, one neuro tactic that we are testing was the endowed progress effect. And the endowed progress effect states that if you are given a headstart on a process or a journey towards a particular goal, you have a higher likelihood of completing that process. Now, we thought this would be an interesting thing to apply in the copywriting and design of the cart page.

So on this website, if you clicked, “Add to cart,” I want to add the red wine subscription to my cart, then you’re brought to the cart page. Then you click through the checkout, checked off that I’m 21 years or older. Then you’re brought to the recharged checkout page that has two steps into itself. And then you get to the order confirmation page. Well, we wanted to focus on the cart page because we saw that there was a certain percentage conversion rate on the cart page and a certain percentage conversion on the checkout page. So we had our own experiments running on the checkout page. And the experiment that we were putting on the cart page was endowed progress effect. So we change the headline of the cart page from just “Your cart,” to… I think we had a few versions. One of them said something like, “Your shipment has been reserved,” or, “We’re packing up your wine,” right? That sort of thing, to get them thinking-

Drew McLellan:

Like we’re halfway there-

Dan Russell:

… that the process-

Drew McLellan:

Right.

Dan Russell:

Exactly. So you see this in other places like progress bars on upsell pages and so on. So we ran that experiment and it ended up being just totally in line with the original just cart page. And so we’re like, “All right-”

Drew McLellan:

So it didn’t diminish the close rate, but it-

Dan Russell:

No, it didn’t reset.

Drew McLellan:

… didn’t increase it.

Dan Russell:

It was so close. So one of the most important elements of the scientific method is looking at the data, so statistics comes into play here. And if the performance of two versions of the page are so close together, you need a ton of data in order to differentiate them. So if one page is at like 12% click-through rate and another one’s at like 12.5% click-through rate, it’s at that point, statistically insignificant, between one or the other results. So we closed down that experiment and focus all of our efforts on the checkout page, which worked very well.

Drew McLellan:

Okay. So part of what makes this fascinating for me is you have to first decide what you’re going to test. So how do you dig through all the scientific journals, all of the papers, all of this stuff, and come up with this list of things that you want to test? And then of course, obviously, you have to have clients to test them again. So as you were reading all of the scientific data, what filters did you use to go, “Worthy of a test, not worthy of a test, worthy of a test, I don’t think that’s going to work?”

Dan Russell:

That’s a really good question. It has a few moving parts. So the first piece, I would say, is the filter. The second part is the creativity involved with it. So the filtering mechanism actually was pretty objective. And the filtering mechanism was, as I mentioned before, we asked the question, “Is this practical and is this ethical?” So the first piece, practical, like can this actually be translated into marketing context? There are a lot of psychology studies out there that have nothing to do with marketing at all, or the way that we communicate, or the way that we make decisions. On the other hand, there are some that are. There’s constant flows of research coming out in journals that just have no relevance.

Drew McLellan:

Sure. Right.

Dan Russell:

That’s the first filter. The second one is ethical. So there is a neuro-marketing code of ethics that you can find on the NMSBA website, Neuromarketing Science and Business Administration. And that sort of outlines the guidelines or the playbook for people who want to be responsible. Because there are a lot of tactics, as you would guess, that aren’t ethical, that are just evil. And you can manipulate people and just not be serving the betterment of the world. So after you go through that filter, then you end up with the ones that you can test. That’s totally objective. So let’s say that you go through 10 journals and you come up with two mental heuristics or effects that you’d be able to apply and test their marketing context.

That’s why we have a library. So we just throw that in the library and then categorize it appropriately. So in our library, we categorize things according to a few different methods. So [ADA 00:20:38], which is a popular method of categorization. We have our own called DREAM, which stands for desire, routing emotion, attention, and memory. And a few others. So that we can look them up when we have a client that we say, “All right. Well, we’re having a problem with conversions,” or, “We’re having a problem with branding,” or, “We’re probably having a problem with customer experience.”

So we just look them up by that point and that’s the point where the creativity comes in. Because you can have a list of five neuro tactics that could equally be applied to a checkout conversions problem, but not all five of those are going to be appropriate to test. So then you have to think, “Okay, well, how can this be uniquely crafted? How can we invent an experiment that can test this hypothesis?” We did this actually with the endowed progress effect when we had a client’s checkout flow that we were testing, we… oh, no, it wasn’t the endowed progress. It was the Zeigarnik effect.

So there’s another effect known as the Zeigarnik effect, which basically states that we will feel a mental tension until a task has been completed. There’s a whole backstory to this with the researcher. But I’ll skip to the punchline, which is, we thought, “All right. How can we use this tension to increase the likelihood that somebody will complete an upsell?” So we thought, “All right. Well, what if we just had this animation? And we checked off all of the steps of this person’s funnel that they’ve already completed up until this point. Like it’s all green and it’s nice and they can feel like they’ve got it done.”

Drew McLellan:

But there’s two boxes left.

Dan Russell:

Exactly.

Drew McLellan:

Yeah. Right.

Dan Russell:

And we had that last box or the last two boxes that were yellow or red, and they were unchecked and they just appeared one at a time. So we just built this GIF image and put it on the checkout page, checkouts increased by 30%.

Drew McLellan:

Wow.

Dan Russell:

That was it.

Drew McLellan:

Yeah. Huh.

Dan Russell:

That was it.

Drew McLellan:

Fascinating.

Dan Russell:

Yeah. But that’s the creativity, right? It’s the… in the same way a researcher has to invent the experiment. Sometimes they’ve got precedents. But in this case, you really have to th