<< by on September 14th, 2009
I recently finished reading “Predictably Irrational“, a book about behavioral economics by Dan Ariely. The book was fascinating and offered many examples of research in buyer behavior. One other concept that Ariely covered heavily in the book was a fundamental of behavioral economics: social norms versus market norms.
What are Social Norms and Market Norms?
Ariely defines social norms:
Social norms include the friendly requests that people make of one another… [they] are wrapped in our social nature and our need for community. Tye are usually warm and fuzzy. Instant paybacks are not required… It’s like opening a door for someone: it provides pleasure for both of you, and the reciprocity is not immediately required.
By contrast, market norms, as described by Ariely:
There’s nothing warm and fuzzy about it. The exchanges are sharp-edged: wages, prices, rents, interest, and cost-and-benefits. Such market relationships are not necessarily evil or mean–in fact, they also include self-reliance, inventiveness, and individualism–but they do imply comparable benefits and prompt payments. When you are in the domain of market norms, you get what you pay for–and that’s just the way it is.
Social Norms Versus Market Norms in Business
Social norms and market norms typically maintain separate paths — personal versus business. But many businesses have tried to bring social norms into our market economy. Think of companies that want to treat you like a friend or like family. Ariely gave examples of State Farm Insurance, who’s tagline is “Like a Good Neighbor, State Farm Is There.” or Home Depot with “You Can Do It. We Can Help.”. There are many other examples as well, such as “You’re In Good Hands with Allstate.”, “Fly the Friendly Skies” (United Airlines), or “We Love to See You Smile” (McDonald’s). Everywhere you look today, you can easily find examples of companies using a more social norm approach to their advertising — trying to form a “relationship” with customers.
Sounds great, right? Absolutely. But there are dangers in bringing social norms into a space that must also rely on market norms to drive revenue. Once a business makes its relationship more social with customers, customers then expect the benefits of a social relationship, such as instant payment not being required. Say for example, a credit card company uses social norm language to market its credit cards. Because companies think of the credit card company as a “friend”, they may expect lenience if a payment is not on time, because wouldn’t a friend be understanding if you had to be a little late to a lunch meeting?
Companies can successfully use social norm marketing and reap its benefits (such as increased customer loyalty), but those same companies must also remember not to damage a social relationship, which is an earned relationship over time. One negative move can have long-lasting damage on a social relationship.
The Danger of Market Norms Entering Social Media (a Social Norms Society)
Social media, by its very nature, is a social norm society and was born of social norms. Twitter, Facebook and other social media tools were created with the goal of social sharing of ideas, thoughts and information. At no time did these tools start with market norms — they were all free ways to share with others.
So what happens when companies and brands enter the social media (a social norms society) fray? Like with the examples above, companies must be cognizant of the responsibility that social norms bring — relationships that ask for little in return. That can be difficult for a company, traditionally driven by market norms, to embrace.
Have you ever seen spam tweets or sponsored tweets? Or any of those from tweeps you follow? How did it make you feel? It’s almost and awkward feeling. Many of those sponsored tweets are trying to bring market norms (selling a product/service) into a social norm society. They just don’t mix.
A great example Ariely gave in the book of how social norms and market norms can collide negatively is around the topic of sex. Imagine you’re on a date and you decide to have sex with your date. But then the date offers you money for having sex with him/her. You’d feel completely offended right? The date has turned what you expected to be a social norm into a market norm by offering money. And likely, you’d be so offended, you might not even see that person again, or it would take you a long time to forgive that slip.
The same is true for companies. As more companies enter the social norm society of social media, they must adjust the way they interact with others away from straight market norms and truly interact in a social way — otherwise, they risk damaging a valuable relationship with customers and evangelists that are their loyal following.