Black is the new white for behavourial science evangelist Brainjuicer
By Richard Embrey
November 13 2014, 1:41pm
Famous in the annals of advertising history is the Cadbury gorilla.
It was a sensation that not only helped lift sales of chocolate, but helped the world forget the Cadbury’s salmonella scare.
What it didn’t do was conform to the standard for TV promotion of this kind.
And rumour has it the ad nearly didn’t make it to the screens at all.
But it did and people felt a connection with the gorilla and the commercial that had a knock-on impact on the number of chocolate bars sold by Cadbury.
It defied traditional logic, according to John Kearon, chief executive of the market research consultancy BrainJuicer Group.
“Market research will ask: ‘did you like the ad?’
“In the case of the Gorilla, people said, yes I loved it. Traditional research will then ask: ‘Will you buy more chocolate?’ And with unconventional adverts like Gorilla the answer is usually no of course not,” he explains.
“But they’re wrong. The more people feel about an advert, the more they’ll buy, even if they think they won’t.
“Black is white. Traditional market research will say they like the ad, but people don’t remember the brand and they say they won’t buy more chocolate.
“They will then say ‘you need to get more stuff in the advert about how good the chocolate is and make sure viewers know it’s from Cadbury all the way through…shout, shout, shout.
“The end result is pretty boring ads and far less sales than famous ads like Gorilla.”
Kearon is an evangelist for the behavioural science behind whether people will warm to an advert to the point it will drive purchasing decisions.
“What we do, we take behavioural science and say to clients ‘as long as you make people feel something overwhelmingly, you will have a famous ad on your hands and you will have the biggest commercial effect’.
“And we can prove this; that all you have to do is make someone feel something strongly; ideally happiness, but even negative emotions are more commercially valuable than no emotional at all.
“It’s why the ads we love to hate work far better than the dull, forgettable ones.”
Kearon’s BrainJuicer is at the heart of a revolution in market research that can more accurately predict successful marketing.
Scholars of the discipline will know political polling of the 1920s soon morphed into the market research we see today.
The premise is that if you ask direct questions of a representative sample of people then this will allow you predict the success of a political party, or brand of frying pan.
We have held firm to this notion now for almost a century, despite that rather sketchy success rate of mainstream market research, says Kearon.
He points to the success of alternative predictive methods such as the Iowa Electronic Market.
This is an experiment where 500 people are asked to buy and sell shares based on who they think is going to win a particular election.
More than 700 elections later it has been more accurate than the most accurate pollsters three-quarters of the time.
“Even if we don’t know how we are going to vote, we know how other people are going to vote because we are social animals and we have an uncanny sense of what the herd feels,” Kearon says.
“Behavioural sciences say all the neat economic science of the rational man just isn’t actually the way we make decisions.
“We are social animals that are really good at predicting other people.”
One of the techniques the company has pioneered and its biggest product, is Predictive Markets.
It is at the heart of what BrainJuicer does and helped generate its £24.5mln of revenues last year that gave operating profits of £3.6mln.
“The current approach to marketing is a left-brain/right-brain model which assumes decisions are roughly 50% rational and 50% emotional, like, a fist of brand proposition, the USP, wrapped in a velvet glove of emotion,” Kearon adds.
“That is the model pretty much every company briefs their agency to entertain and lure people in with the velvet glove before hitting them with the proposition that the brand is superior to the competition and persuade them to buy. It is essentially a persuasion model.
“What behavioural science says is we don’t optimise or rationalise and calculate, we make an emotional decision from satisfactory options. So as long as it satisfices we make the final choice purely emotionally.
“So we measure emotions; how we feel about an ad is the best predictor of whether people will buy your product and far, far more accurate than asking people whether they think they’ll buy the product.”
The memorable ads it has been involved with include 3 Mobile’s moonwalking Shetland pony, Guinness’ wheelchair basketball advert and the John Lewis’ Christmas adverts.
BrainJuicer has developed two main tools – Predictive Markets, which uses the “wisdom of the crowd to identify winning concepts” and its ComMotion ad-testing approach to predict famous adverts.
Building on this bedrock of behavioural science they turn what could be perceived as a slightly ‘touchy-feely’ form of analysis into a means of “identifying efficient, high-return advertising”.
The firm also has “qualitative” Juice Generation process, which it says helps clients “gain real insight into their consumers and give the company a commercial edge”.
And its behaviour change unit might sound like it's better suited to a young offenders’ institution, but actually helps clients when they need to do the most difficult thing in marketing, which is changing consumer behaviour.
Employing 170 people in 11 countries, BrainJuicer (LON:BJU), which has been around since January 2000, on the public markets since 2006 and now works with 15 of the world’s top 20 companies and 70 of the top 250. All of them are household names.
And while the projects it carries are on an “ad hoc project basis” with no more than six weeks’ visibility BrainJuicer does have “recurring relationships” with a number of large multinationals such as SABMiller.
This means the marketers in that company globally use BrainJuicer’s Predictive Markets method when testing their new product ideas.
The competition is limited to the up-and-coming devotees to behavioural science, with the traditional market research behemoths such as WPP, Neilsen or IPSOS starting to adopt the language but not really changing their methodologies.
The operating margins generated by the business are almost 15% with plenty of scope to increase as their newer global offices grow to match the profitability of the UK operation.
Canaccord Genuity’s research analyst, Simon Brown, forecasts that the group will post pre-tax profits of £4.2mln in 2014, up 10% on the year earlier.
He sees the surplus rising to £4.8mln and then £5.6mln by 2016.
In that period the valuation comes down from 17.5 times earnings to a relatively modest 13.2 times.
With over £2.5mln cash in hand and no debt, BrainJuicer is unusual for AIM.
Not just that, it pays a dividend – 1.0p at the halfway stage of the financial year, representing an 11% increase on the prior year.
The stock, up 12% in the year to date at 376.5p each, has further to go, according to Canaccord Genuity, which has a price target of 495p.
The pace of international expansion and winning mandates will be the main catalysts behind any upward movement of the share price, the broker said.