CHAPTER 1

Overview

There’s a mighty big difference between good, sound reasons and reasons that sound good.

—Burton Hillis

Our Prescriptive Thesis

Bad decisions lead to marketing failures. And marketers deficient in critical thinking skills often make bad decisions. The purpose of our book is to improve your critical thinking skills so you make good marketing decisions.

We do this by first giving examples of poor ways of thinking—called logical fallacies—in a series of marketing vignettes. Then we describe how to recognize, avoid, and circumvent logical fallacies in your organizations. Additionally, we introduce you to a variety of topics related to critical thinking such as viewing marketing as a science, how cognitive biases affect judgment, and how all marketing strategies are constrained by marketing “laws.”

Why We Wrote This Book

Our combined 105 years of marketing experience reveal that new product introductions are no more successful today than they were 40 years ago. In fact, many of the companies we grew up with—Pontiac, Lionel, RCA, Compaq, Pan Am, and General Foods—no longer exist, primarily due to marketing missteps over decades.

As many as 95 percent of new product introductions fail, according to AcuPoll, a Cincinnati-based research firm.¹ Do you remember New Coke, Coors Rocky Mountain Spring Water, Kellogg’s Breakfast Mates, McDonald’s Arch Deluxe, and HP’s TouchPad? Several have become Harvard Business Review cases demonstrating various flaws in thinking critically about new product development.²

Yet, during this same period, we’ve seen an ever-growing number of marketing conferences, seminars, and books dispensing advice to marketers on “how to be successful.” A recent Google search of “marketing success” turned up 174 million references! More than ever before, a greater number of MBAs occupy the C-suite; companies spend more on marketing research; and, business “self-help” books land on The New York Times’ best seller lists. Yet, most new product introductions fail.

How do you explain this paradox? We believe that most of these efforts to improve business performance have failed in one fundamental way: Although many organizations and consultants provide excellent advice on what to think when formulating marketing strategies and tactics, they have failed to help today’s marketer know how to think about these issues. And we are not alone in this belief.

• “If you want to succeed in 21st Century business you need to become a critical thinker,” says John Baldoni in a Harvard Business Review blog post. “... Critical thinking [knowing how to think] has always been a prized attribute of leadership, but over the years, especially as business schools have emphasized quantitative skills over qualitative ones, critical thinking dropped by the wayside.”³

• A recent survey conducted by The Wall Street Journal of nearly 480 college recruiters “named some combination of critical thinking” skills as an area that college graduates need to improve most.⁴

• John Engler, president of the Business Roundtable—an association of CEOs of leading U.S. companies—says that, “In a global economy, companies will be attracted to countries where students demonstrate the knowledge [and] critical thinking abilities ... to succeed at work.”⁵

• Forbes’ contributor Holly Green states that the number one characteristic of strategic leaders is their critical thinking skills—“the mental process of objectively analyzing a situation by gathering information from all possible sources, and then evaluating both the tangible and intangible aspects, as well as the implications of any course of action.”⁶

To improve marketing success, marketers should strive to improve their critical thinking skills. But what do we mean by “critical thinking” and how do we go about improving it?

Critical Thinking and Marketing

Marketing’s central task and responsibility is making recommendations to senior management about the creation and management of the firm’s marketing mix—what we have all learned as the “Four Ps”:

• Product: What products should we create?

• Price: At what prices should we sell our products?

• Place: What channels of distribution should we use to reach our customers?

• Promotion: How do we communicate to our customers?

In our experience, the strength of recommendations supporting the Four Ps often dictates a marketing plan’s success or failure. Sharpening one’s critical thinking skills, therefore, can help you develop stronger and more successful recommendations for your organization.

So, what is “critical thinking?” One expert in the field, Edward M. Glaser, wrote the following in 1941:

The ability to think critically ... involves three things: (1) an attitude of being disposed to consider in a thoughtful way the problems and subjects that come within the range of one’s experiences, (2) knowledge of the methods of logical inquiry and reasoning, and (3) some skill in applying those methods. Critical thinking calls for a persistent effort to examine any belief or supposed form of knowledge in the light of the evidence that supports it and the further conclusions to which it tends. It also generally requires ability to recognize problems, to find workable means for meeting those problems, to gather and marshal pertinent information, to recognize unstated assumptions and values, to comprehend and use language with accuracy, clarity, and discrimination, to interpret data, to appraise evidence and evaluate arguments, to recognize the existence (or non-existence) of logical relationships between propositions, to draw warranted conclusions and generalizations, to put to test the conclusions and generalizations at which one arrives, to reconstruct one’s patterns of beliefs on the basis of wider experience, and to render accurate judgments about specific things and qualities in everyday life.⁷

Clearly, Glaser’s definition covers a lot of ground. Learn How to Think, Not What to Think focuses on Glaser’s second and third points, by gleaning some of the methods of logical inquiry and reasoning and applying these methods in the real world—specifically, the world of marketing.

The following vignette portrays a hypothetical recommendation proposed by John Black, vice-president of marketing for Acme, Inc., to William Smith, the firm’s chief financial officer. Acme manufactures and markets anvils. The firm is going through its yearly budget review and John’s team is recommending a five percent increase in the advertising budget (promotion). The rationale John gives is typical; perhaps you have heard a similar dialogue in your workplace.

William: John, I’ve reviewed your marketing budget for the upcoming fiscal year and I see that your line items really haven’t changed all that much from previous years. You still plan to spend the majority of your budget on television advertising and social media, with a minority of your budget going to the standard trade-shows we attend and the selected charity events we support.

What I found a little bit surprising, John, is that you’re asking for a five percent increase in your budget overall, with most of the increase going to television advertising and social media. The most I recall ever increasing the advertising budget is two or maybe three percent. I know sales are up, but, honestly, I was expecting maybe a two to three percent increase. The market isn’t going to stay strong forever as much as we’d like it to. How did you come up with the five percent figure?

John: I see where you’re coming from, Bill. But our marketing team has done its homework, and we believe that we’ve got some good reasons to ask for that extra few percent.

First, as you know, the company has already exceeded its aggressive sales and profit targets for this fiscal year [calendar year 2015] and we believe that that was in large part due to last year’s increased advertising budget and the new corporate image campaign we launched back in May of 2014. Most of the campaign’s expenditures went into television and social media. Heck, if the advertising is working, then our sales and profits should go up. And they did. Advertising works!

Second—and, Bill, you know this is the case, since you’ve been with the company for over 10 years—every year, year in and year out, marketing is always having to fight engineering, manufacturing, and customer service for every dollar in our budget. And you know what? Nothing, not even the research we’ve conducted, has ever shown that our advertising isn’t working. That’s just a fact, Bill, and that can’t be ignored.

Finally, and you know this from last week’s meeting, not only our advertising agency but that article I showed you from Advertising Age has shown that companies all over the U.S. are increasing their advertising budgets—and that includes our competitors. We have to match their ad spends or our message is going to be drowned out by those of our competitors.

I know that the five percent is high, but my team strongly believes we have good reasons for requesting that increase.

William: I understand what you’re saying, John, and it sounds to me like you’re making a good case for your budget. I’ll give it my preliminary approval and next week I’ll recommend to the board that you get your five percent.

Ostensibly, the marketing team’s reasons for requesting a budget increase appear to be “logical.” The unexpected increase in company sales and profits were indeed preceded by marketing’s new advertising campaign. No one had ever offered evidence that the firm’s advertising was not working and, by all accounts, competitors had indeed been increasing their advertising budgets. So William’s recommendation to the board seems completely “logical.”

Except that it isn’t!

Marketing “Arguments”

John’s rationale for requesting a five percent increase in his marketing budget takes the form of an “argument.” In this context, arguments are not heated disputes between individuals yelling back and forth at each other. Rather, an argument is a set of statements comprising premises and a conclusion.

A statement is a proposition that can be either true or false. In reality, it is difficult for some marketing statements to be completely true. For example, many marketing research studies contain statistics that purport to describe markets. But these statistics are only estimates of market characteristics, and they often contain measurement and sampling errors. Consequently, statements in a marketing argument—if they can’t be true with a capital T—at least need to be plausible and reflect justified beliefs about market characteristics.

The premises are the reasons given to believe a conclusion. The conclusion is what you are trying to make your audience believe. “In other words, an argument tries to make you believe something, and gives you reasons to believe it.”⁸

A graphical standardization of John’s marketing argument is given in Figure 1.1. One way to interpret this figure is to read it from the bottom-up and insert the word “therefore” where you see an arrow. For example:

• “Sales and profits increased after increasing this year’s budget and launching the new advertising campaign.”

• Therefore, “Our advertising worked this year.”

• Therefore, “Increasing advertising will increase sales and profits next fiscal year.”

• Therefore, “We need to increase our advertising budget by five percent.”

Conversely, you can read from the top-down and insert the word “because” for each arrow.

Note that John does not give William a reason for why the marketing team recommends a five percent increase in the advertising budget versus, say, a 4 or 10 percent increase. Additionally, John implies the ad budget increase and new campaign together caused the increase in company sales and profits. It’s possible that the jump in sales and profits came solely from the new campaign independent of the budget increase.

Figure 1.1 An outline of John’s argument

Yet when John does give reasons to support his conclusion, none of the reasons he offers are good ones—that is, based on facts or empirically justified beliefs. For example, John uses a false implied premise to suggest that what happened this fiscal year—increased advertising supposedly led to an increase in sales and profits—will happen next fiscal year. He also states that, “Our advertising works” because “No one has proven that our advertising does not work.” In fact, all the reasons John gave to William to support the ad budget increase are described as logical fallacies.

Logical Fallacies

If you search the term logical fallacies on the Internet, your search engine will produce over a million references, many with slightly different and perhaps confusing definitions of this term. Often, the terms fallacy and logical fallacy are used interchangeably, plus there are many different types of fallacies.

Consider a fallacy as an argument that uses bad reasoning—the kind of reasoning John used to convince William to increase the advertising budget. Examples of bad reasoning are using false, irrelevant, or weakly supported propositions to support an argument, or poor logic connecting the premises of an argument to the argument’s conclusion. The Internet Encyclopedia of Philosophy elaborates on the nature of fallacies:

Fallacies should not be persuasive, but they often are. Fallacies may be created unintentionally, or they may be created intentionally in order to deceive other people. The vast majority of the commonly identified fallacies involve arguments, although some involve explanations, or definitions, or other products of reasoning. Sometimes the term “fallacy” is used even more broadly to indicate any false belief or cause of a false belief.⁹

In the earlier sketch, John did not intentionally use fallacies to deceive William, although William unwittingly accepted John’s reasons. Let’s look more closely at the fallacies that John used:

• Heck, if the advertising is working, then our sales should go up—and they did! This fallacy is called Affirming the Consequent. We will explain later the origin of this term and the other names by which it is known. For now, consider the following relationships:

  • If P is true, then Q is true.	→	If our advertising is working (P), then our sales and profits will increase (Q).
  • Q is true.	→	Sales and profits increased (Q).
  • Therefore, P is true.	→	Therefore, it’s true that our advertising is working (P).

  In this argument, the truth of Q does not logically guarantee the truth of P. Q could be true because of factors other than P. For example, an increase in sales and profits could be caused by a growing economy, mistakes made by competitors, or an improvement or expansion of the company’s channels of distribution. In the extreme case, the increase in sales and profits may not have been affected by the advertising at all.

• Advertising caused sales to increase this year; advertising will cause sales to increase next year: Even if you grant John his premise that the recent image campaign did cause sales and profits to increase this year, that fact does not by itself strongly support the contention that advertising will cause sales to increase next year. Evidence supporting John’s claim, however, could come from a marketing research study showing, for example, how the company’s advertising increased top-of-mind brand awareness, which positively changed brand attitudes, which increased brand purchase intentions, and eventually caused sales to increase. John’s unsupported assertion, however, does not give good reasons to believe that the same events will occur next year.

• Nothing, not even the research we’ve conducted, has ever shown that our advertising isn’t working. This is the Arguing from Ignorance Fallacy. Just because no one has proven a given proposition false is not a good reason to assert that that proposition is true.

• We have to match our competitors’ ad spends or our message is going to be drowned out by theirs. Appeal to Popularity is often invoked to support a proposition based on the following reasoning: If everyone else is doing “X,” we should be doing “X,” too. The fact that one’s competitors have increased their advertising is not evidence that increasing one’s own advertising will protect or lead to increased company sales, market share, and profits. All other factors held constant, increased competitor advertising could actually increase Acme’s sales, share, and profits by increasing consumers’ general awareness of the product category. This famously happened to Apple’s computer line in 1981–1982 when IBM introduced its first PC. IBM’s new product validated, in a sense, the new product category that Apple pioneered and led to increased sales of the Apple II.¹⁰

Fallacies sometimes creep into our arguments unconsciously. For example, how often have we marketers used the Ad hominem (i.e., attacking the person) fallacy—“they don’t know anything about marketing”—to discount the sales department’s advice about advertising or promotion programs? How often has an advertising agency used the Ambiguity fallacy when recommending that a company promote a particular product feature because that feature is “important” to consumers? The term important has multiple vernacular meanings. It can refer to a product attribute that consumers desire and affects their brand choice. Or it can refer to an attribute that consumers desire but does not affect brand choice (e.g., everyone values driver-side air bags but, since all vehicles must have them by law, they do not affect brand choice).

Since you are reading this book, we can safely assume that you will not use fallacies to support your marketing recommendations. But what of your colleagues? What happens when you are confronted with a marketing recommendation that is propped up on a fragile foundation of fallacies?

Dealing with Fallacies

Everyday business-world interactions often require marketers to respond to recommendations riddled with fallacies. The people who make these recommendations are sometimes difficult to deal with or irrational. One of them might even be your boss. What can you do in these situations?

This book contains 60 fallacy vignettes giving you advice on how to identify, understand, and deal with different fallacies when you encounter them. We did not invent these fallacies; we are simply looking at them through a marketing lens in order to help other marketers avoid some of the mistakes we have seen (and made) in our careers.

Each fallacy can be found in the existing literature. Many have cool Latin names, which gives you an idea how long fallacies have been around.

For example, consider the Alleged Certainty fallacy. Alleged Certainty is a claim that presupposes its own truth (e.g., “Everyone knows that attending industry conventions leads to better distributor relationships;” “We all know that quality sells”). Some recommendations for dealing with Alleged Certainty are as follows:

1. Although it is second nature to try to assess the speaker’s intentions, don’t. The logical “high ground” is to treat the Alleged Certainty fallacy as an honest attempt to state what the speaker feels should be obvious to all.

2. If the fallacy is innocuous (has no bearing on the business), let it go.

3. If it will potentially affect the business, ask the speaker for supporting facts in a nonthreatening way. For example:

“That sounds logical to me; what’s that based on?”

“That’s a really interesting point—was anyone else aware of that?” “That may well be the case, but do we have the data to support that?”

More generally, when others use poor reasoning in an attempt to convince us of a marketing recommendation, try to “show how their arguments and beliefs are inconsistent with other beliefs they hold.”¹¹ For example:

Bill (Director of Sales): I like the new product features that R&D came up with at their off-site brainstorming meeting and I think we should incorporate all of them into our entry-level lawnmower. In fact, the more features we can put on our entry-level line, the better, assuming of course we’re still price competitive. Our retail partners will love it!

Frank (VP of Marketing): Well, we certainly want to keep our retailers happy. But tell me Bill, is it really true that the more features we put on the entry-level mower, the better? When we did our research, what mower feature did entry-level buyers most value?

Bill: Let me think, oh, yes, the entry-level buyer wanted simplicity and not a lot of extra features that can make the mower too complicated to operate or maintain. I see your point. We should save those extra features for our mid- and upper-level mowers where the target customer likes a lot of bells-and-whistles.

Based on research the company had conducted, Bill was guilty of assuming that adding additional features to an entry-level lawnmower makes it more attractive to the target customer. Frank’s questions revealed to Bill that he holds contrary beliefs. Bill’s belief that (a) target consumers will value added features on an entry-level lawnmower is inconsistent with his belief that (b) target consumers want a simple, easy-to-operate and maintain lawnmower.

Marketing Theory and Logical Fallacies

As used in this book (as well as any book on science or social-science), a theory is an explanation that possesses some empirical support. Theories, in varying degrees, help us explain, understand, predict, and often control aspects of the world.

Clearly, some theories are more developed and tested than others. The theory of evolution (first noted in Alfred Russell Wallace’s correspondence with Charles Darwin on evolution by natural selection in 1858 and Darwin’s 1859 The Origin of Species) has existed longer and has more empirical support than, say, the theories supporting dark matter (established by Vera Rubin in the late 1970s of the Department of Terrestrial Magnetism at the Carnegie Institution of Washington) and dark energy (developed in 1988 by two teams of astronomers led by Adam Riess of John Hopkins University and Saul Perlmutter of the University of California, Berkeley).

Marketing has its theories, too. Perhaps the most well-known is the theory of supply and demand, originating from the field of economics, and salient in all marketers’ minds when it comes to pricing a product (i.e., the third P in marketing’s Four Ps).

Marketers whose knowledge of marketing theories is deficient are more prone to using logical fallacies to support an argument. For example, consider the following case, in which Marketer #1 is proposing to be the first competitor in a market to create a customer loyalty program, and Marketer #2 is making a counter argument not to do so.

The point of this example is not to prove that loyalty programs are ineffective. Rather, the point is to show that Marketer #1’s argument does not give factual or otherwise good reasons to support his conclusion, which are based on several logical fallacies.

Almost certainly everyone does not agree that these programs work (Alleged Certainty). Just because loyalty programs are popular with major retailers, does not mean that they will work for Marketer #1’s company (Appeal to Popularity). Finally, the conference speaker’s background is unknown (Appeal to Authority).

In contrast, Marketer #2 bases his conclusion on marketing studies and peer reviewed research conducted by an internationally acclaimed market research institute. In the following chapters, we will draw several more examples from the Ehrenberg-Bass Institute for Marketing Science to help you think more critically in developing marketing arguments and avoid logical fallacies.

Note: * Appeal to Authority is a logical fallacy if the authority is not strongly justified. For Marketer #1 it isn’t; for Marketer #2, it is.

Similar examples of how marketing theory and other “thinking tips” can be used to inform sound marketing arguments will appear in a separate section of the book under the title “Think Better.” Here’s the first one.

Now ... let’s begin learning how to think better!