Human beings are rationalising not rational animals. Rationalising our decisions is very important to us. We do it to justify to ourselves that have done the right thing and to convince others of the ‘logic’ of our choice. There is no necessary correlation between reality and the rationalisation. Unless of course you agree that reality is entirely constructed in the mind. Some of the most adept rationalisers are marketing executives.
In the film The Big Chill Jeff Goldblum played a character called Michael Gold who made an observation about rationalising behaviour.
Michael: rationalisations are more important than sex
Sam: Nothing’s more important than sex!
Michael: Oh yeah, have you ever gone a week without a rationalization?
Let’s imagine for minute that we have spent a large sum of money on a marketing communications and re-branding project that we sincerely believe in, which attracts criticism and ridicule from some people. These two competing cognitions (I think its a great idea vs. other people don’t) create what Leon Festinger described as Cognitive Dissonance.
He articulated his ground breaking theory in his 1956 book When Prophecy Fails. In a nutshell the argument runs that if a person has made a serious commitment to a belief or course of action that is difficult to undo, the moment they are confronted with (and accept as a reality) new disconfirming evidence it causes great personal psychological anxiety. The individual then strives to re-establish psychological balance.
People do this by gathering around them social support (people who don’t, won’t or can’t disagree with them out of ignorance or fear) Irving Janis called this ‘group think’, and they proselytize. They attempt to persuade people of their rectitude, and the reasons they have spent the money.
One of the unfortunate criticisms of everyday marketing communications is that it is very good at spending money and less good at generating it. The mud that is thrown regretably sticks to the strategic task and role of marketing in general. Marketing communications executives have had a long time to become skilled at rationalising the sunk costs of campaigns.
Common rationalisations for sunk costs in expensive re-branding projects include:
Somebody had to do something rather than just sitting on their hands
It must be good because look what we paid for it
People have worked very hard on this so far
Just look at all the things we got for the money
Sunk Costs interfere with rational behaviour. The behavioral economics literature offers some helpful insights here. Cognitive Dissonance kicks in and…
The price becomes the indicator of the value, when the price paid should be irrelevant.
The chance of a good return on investment is poorly judged due to over optimistic probability of success bias.
I’m responsible for this campaign, it was my decison to spend the money so we should press on regardless of consequences
Of course I’d have to say that my decision to spend money on this new re-brand campaign was a good idea. Though As Mandy Rice Davies said
“Well, he would, wouldn’t he?”