Dean Wormer's game was education (Faber College, remember?), not real estate. But what might brand managers learn from behavioral psychologists in today's anxiety-ridden housing market? My old friend Peter Coy of Business Week, who wrote this week's cover story ("Buyer and Seller Beware", April 10), includes a handy list of seven caveats with uncanny parallels to business-in-general, marketing in particular. There are, Coy writes, seven attitudes "that often lead to poor decision-making." Here they are, along with their implications for brand managers.
1. Herd behavior. In frothy markets, price has little in common with fundamentals. (See "Bubble Economy", ~Y2K.) Customers have the last word. The market won't bear too much for too long.
2. Loss Aversion. Waiting for any market to "come back" and bail you out can make a bad situation much, much worse. If you're stuck with a slow-mover, no matter what the product, heed what the market says.
3. Overconfidence. What you don't know is often more important than what you do know. Believing that you know what you don't -- and then betting or acting that belief -- can be disastrous.
4. Looking Backward. In the housing market, sellers are always six months behind reality. Pricing is tricky. In marketing, charging too much sacrifices business volume while setting prices too low leaves money on the table. A visceral feel for your product market and your brand may not sound scientific, but the best marketers have this gene. (See: "Steve Jobs".) This is also known as seeing the world through the eyes of your customer, which is what the marketing gene enables.
5. Castle Thinking. In home ownership, it's about the security of your home being your "castle". In technology companies it's the NIH syndrome. Sometimes it's to your advantage to be a "renter".
6. Keeping Up with the Joneses. Is conspicuous housing the moral equivalent of hypercompetitiveness (see View )? Think about it. Note: this is subset of #1 above.
7. Tangibility Fallacy. Home owners rightly see their investment as a important part of their portfolio. But the watchword is part. What is past, especially in investments, is not necessarily prologue. The marketing equivalent: too much reliance on today's cash cow , or yesterday's hot item. If you're going to put all your eggs in one proverbial basket, you better watch that basket carefully. Better to understand that you're only as hot as your next next thing...
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