The economics of attention

[[ CHAPTER INTRO]]

May I have your attention please?

When your third grade teacher told you (or the kid shooting spitballs at you) to “pay attention,” she wasn’t just demonstrating her unwavering command of 22 eight-year-olds. She was teaching you a valuable lesson about economics. Attention is a scarce commodity. It’s best to assume no one will give it to you for nothing.

Attention is the prime commodity, the fundamental raw material that marketing seeks to extract from the environment. And not all attention is created equal.

The price and value of your attention is a function of timing, context, circumstance, proximity to decision, acuteness of need, skill, interest, emotion, fear, social hierarchy, and a host of factors. You experience these and more every time you decide to pay some of your attention to one thing or another.

Understanding these factors, and finding a way to control, is a direct input to controlling how much attention you can get. If attention is the output you want, these factors are the inputs.

That positioning statement from the prior section? It was a test, a hypothesis about your marketing objective for Thing 2.0, starting with ways to seek attention for the value of Thing 2.0.

You could probably get some amount of attention by painting yourself blue, standing in front of a movie theatre that’s showing The Princess Bride and repeating your carefully formulated positioning statement in each of India’s 22 official languages, one after another.

Naturally, I don’t recommend you try this. The attention getting factors of this specific tactic — a person painted blue, using a positioning statement as message, delivering it in what might be a prospect’s native language, locating the tactic at a cinema — are all arbitrary spurious examples of real world marketing choices.

What makes them spurious is that they bear no little or no relationship to the objectives indicated in the positioning statement. To get the attention of wearable device manufacturers who might need an in-line accelerometer, you probably need to know where to find them, what to say to them, how to say it, and who should be in contact with them.

In the pursuit of their attention, there are choices to be made on each of these factors. We’ll expand on these later in the book.

Does paying attention make sense?

Attention is not always a rational activity. How else would you explain the continued popularity of cat videos on youtube? The past 15 years have seen huge breakthroughs in research concerning human judgment and decision-making under uncertainty, including the Nobel Prize awarded to Dr. Daniel Kahneman. It’s hard to exaggerate the impact of his work on the intersection of psychology and economics, something that is only beginning to have an impact on marketing practices. It’s worth a small digression.

In his bestselling 2011 book, Thinking Fast and Slow, Kahneman explores two archetypes of mental processing, i.e., the way the brain forms thoughts:

• System 1: Fast, automatic, frequent, emotional, stereotypic, subconscious
• System 2: Slow, effortful, infrequent, logical, calculating, conscious

Kahnemann’s hypotheses, formulated in collaboration with the late Amos Tversky, explores the ways in which each of these two ‘systems’ gets it right — and wrong. System 1 conserves energy more effectively than System 2, and often provides intuitive shortcuts to spare our brains a bunch of hard work.

Some have speculated that there’s an evolutionary basis to this: the ancient hominids who made slow, effortful, calculating evaluations of whether they would be attacked by the lions they spotted in the Serengeti survived less often than those who reacted automatically and ran away without doing too much analysis. Our ancestors were in the latter group.

What should come as no surprise is that the competition for attention from System 1 is intense. Rare is the human who is sitting around, doing nothing is a state of heightened awareness as she awaits knowledge the one thing she needs to achieve progress towards enlightenment. It’s best you assume she does not exist — and you’re going to have to find a way to get her attention.

Both System 1 and System 2 are susceptible to error; what’s remarkable is how often System 1 gets it right at all. When you’re trying to get someone’s attention for the first time, chances are that you’re looking to hook System 1.

Is now a good time?

Given that attention is to marketing as water is to life on earth, it’s not surprising that we often find ourselves at the receiving end of more marketing than we can stand. Attention is a fragile construct: if you don’t believe me, go and count how many browser tabs you have open.

As a limited resource attention is easily abused. Considering how often we each misuse our own attention, it’s small wonder that marketers are often reviled for doing the same to us. But have some sympathy: anyone trying to reach you with something that might benefit you has to compete with all those browser tabs.

Beyond sympathy, the key to resolving the equation is in finding the right people who might benefit from paying attention. Now, it may be that the patriotic Indian who minored in subcontinent linguistics who is responsible for technology decisions in a major wearables technology company loves two things: the color blue and The Princess Bride. Like those odds? I didn’t think so.

Let’s say that despite the ridiculous odds, that person went to see The Princess Bride the same night that you painted yourself blue and demonstrated your own linguistic versatility. Did she notice you?

Bad news: you don’t know, both because you were so busy giving the speech and because you didn’t ask her to tell you. There you were, and she walked right past you, and the golden opportunity to get Thing 2.0 into some badass bluetooth thing evaporated.

Now, if you’d read this book before your cinema stunt, this might not have happened. You need more than attention: you need a demonstration of interest, and you need to set it up in such a way that your target audience can demonstrate that interest. So let’s go digital.

May I have your digital attention please?

I don’t mean to insult your intelligence by suggesting that you didn’t know that Google made all its gazillions by charging marketers for finding people who would read 25-character phrases and click on the associated link. Or a jpeg of a button. Or a cat video. Once you gave that money to Google, what would you get in return?

Google shifted the economics of attention in ways comparable to humanity’s discovery of fire and the invention of the wheel. Modern supply and demand of attention now achieve equilibrium via the following sequence:

1. Decider takes an action in some context
2. Marketer seeks decider’s attention in that context
3. Decider grants attention by taking an action
4. Marketer provides an outcome for the user worth their attention
5. Decision gives marketer some information

What distinguishes this sequence from attention equilibrium prior to the debut of ARPANET is the timing. Back then, steps 1-2 happened in isolation. The table below  shows how it used work:

(COMPLETE PROOF LEFT TO THE READER)

You get the idea. It used to be that the attention equation was an open loop, subject to some statistical assumptions and some hope. Hope is not a strategy.

While the collapse of all time latency in the modern sequence would seem to suggest that instant gratification may be within reach for all marketers and all buyers in all cases. If it’s not Black Friday and you’re not Amazon, however, attention equilibrium is bound to two classes of time: Now and Later.

The quid pro quo of attention

So far, we have treated the construct of attention and payment as a single iteration. Let’s now expand that assumption. With or without Google’s help, you can successfully transit the modern sequence once. Let’s look at two ways in which it differs from the blue cinema linguistics stunt, both tied to timing.

First, in the modern sequence, attention and action are inextricably bound. Action is now the most substantial signal of attention, and if you seek attention without providing an opportunity for that signal, you’ve achieved exactly nothing. In the marketing world, this is referred to as a “call to action”. This can take many forms, ordered here in roughly escalating investment of attention: hit ‘like’ button or retweet; fill out a form and download a file; spend time watching a video; click the link to chat with a customer representative; send email; make a phone call.  

Second, signalling attention at one discrete point it time is necessary, but not sufficient. The goal is to escalate the investment of attention towards ever higher value, until you get to the point where Thing 2.0 has such value that targeted_decider gives you all the money you think you can get for it.

That escalation requires iterating a sequence of attention transactions, providing incremental value. At each iteration, there’s a quid pro quo: you get attention by giving something of value. That’s why you gave the beer commercial with the puppy got your attention, because, c’mon, who doesn’t love puppies? But we’re not here to help you unlock the value of your love of puppies. If you want to iterate successive increments of attention, you’re going to have to provide successive increments of value. That’s right: the more attention they give you, the more they expect it to pay off.

The challenge for marketing is to optimize both the possible set of attention transactions and their sequence. It’s not a straight line, and the increments are not uniform. This optimization is known as the ‘customer journey’ or ‘prospect journey’. In its simplest form, the optimization is a model known as ‘the funnel’; we’ll go there next.

An aside: Why are there still glossy magazine ads, television commercials and mood-inducing advertisements in the subway, since you can’t click on them and they capture little-to-no personal information? While these mechanisms have declined in importance (and torpedoed classic print journalist with them), they are a calculated attempt to acquire some attention at a point within the customer journey. Will that attention prove more enduring or valuable than a retweet? More than one media company will live or die based on that answer.

Attention by the numbers

Neither Vint Cerf nor Google invented marketing; its roots, as we’ve seen, are closer to Adam Smith or ancient Rome or whenever it is that humans started making decisions. Looking back only a couple of centuries, however, there is a basic model that has held together pretty well to trace the sequence from attention to money.

Known as a ‘funnel’ in the abstract, this model recognizes that not everyone who encounters your offer will give you money. Put another way, it sets a number of phase exit criteria, with decreasing yields of people and increasing yields of potential at each phase in the sequence. (Remember, we’re going to start with a simple model, so don’t rush to calculate the rate of decay in the anti-scratch finish with exposure to humidity).

Since we’re talking about human behavior here, there are lots of variants on this model; we’ll work with an early version of it, made up by a guy named Elias St. Elmo Lewis about “potential of advertising to educate the public” in 1898. He called it the AIDA model (shout out to opera fans?), which stood for “Attention, Interest, Desire, Action.” In the imperative form, this came to be known as:

• Attract attention
• Maintain interest
• Create desire
• Get action

You might quickly notice that this looks a lot like the attention equilibrium sequence ascribed to Google earlier. It doesn’t take much imagination to apply it to persuading a child to eat vegetables or even to train your dog. But this very recursiveness — the property of recapitulating itself within expanding or contracting scope — is a key insight.

You may also observe that it’s hard to tell the difference between attention, interest, and desire. If you’ve ever been on a date with someone you’re not married to (or going to be married to), you have experienced this first hand. You need to establish some signal to determine what phase your audience is in.

Since neither your child nor your dog will be buying Thing 2.0 no matter how good your marketing, let’s restate the AIDA model as a sequence progressing to purchase.

Well, duh: these values to represent progress towards our goal:

• a > b > c > d
• z > y > x > w

Also, if you get it right:

• z – w > 0
• (d*z)-(a*w)>0

For the three or four of you reading this who might not be geniuses

• to make z bigger, you’re gonna need as much d as you can possibly get
• If you can make a smaller, than you’ll have a lot more d*z
• When a is smaller, you might be able to make do with less w

By now you’re probably thinking “Right, this doesn’t give me a machine prints money” —  not unless they’re willing to pay you more for z than it costs you. (Non-genius aside: that’s how you get to ‘greater than zero’.) But how would you know?

The top level indicator is attention.

There’s your third grade teacher again, with that attention equilibrium thing: the less  you pay attention, the less likely was your teacher to let you out early for recess. The more ‘they’ pay…

• s > r > q > p

Yep, the increasing amount of attention seems to move in the same direction as value.

Here’s the secret: in order to succeed in getting from a to z, you need to get more  p/q/r/s. Duh, again: in business transactions where both sides are professionals, you don’t generally get a lot of money from those who are not paying a lot of attention.

So enough funnel and pseudo-algebraic blather: we all have credit cards, we all think before we spend money (especially if we’re at work), most of us don’t have endless supplies of cash to draw from. What’s the big deal?

Three take-aways:

1. As the Royal Swedish Academy of Sciences concluded in awarding the Nobel in Economics to Professor Kahnemann, paying attention doesn’t always make sense. Attention transactions at every stage of the funnel include psychological noise, and fit into imperfectly rational patterns.
2. Since you’re going to invest time and money in getting to z from a, you’re going to need some sort mechanism to determine whether someone is moving from a to d,increasing their attention from p to q and so forth. The signal:noise problem is going to be fundamental.
3. Finding the d among the a is a lot like finding a needle in a haystack. Step zero: start with a smaller haystack.

This all ties together with your positioning statement: if you know exactly who you’re going after, you can leave the rest of them out of the haystack.

By the way, marketers love to talk about the funnel, for which you can again thank ARPA and Vint Cerf, as well as Jeff Bezos.

How attention relates to the business canvas

We’ve spent most of the discussion so far working through why marketing people do what they do, in the context of navigating attention in order to reach an intended decision. If what’s getting marketed is one-time transaction — getting married, getting a job, selling your house — you’ll have less opportunity to use the concluding transaction as an outcome to be optimized across multiple iterations. You can still apply the lessons about audience and attention, but you’ll end at one and done.

But if you make and sell more than one of anything, what you make and who buys it is something that will change over time. Getting anything you do more than once right requires a degree of organization, and if you do it with anyone else, you’ll need some agreement on the organization. (Organization sound bureaucratic or political to you? Rest assured, world domination will not be achieved without some form of organization.)

There was a time when business models were formal documents, with long descriptions of ideal outcomes, assumptions and research. If that’s your thing, you should probably stay in graduate school as long as you can. For the rest of us who need to live off the work we do making and selling, the business model needs to provide a way to iterate through our assumptions, learn from our experience and stay aligned with each other’s expectations.

There are three seminal bodies of work on making a business plan in the 21st century:

• The Lean Startup, by Eric Ries
• The Startup Owner’s Manual, by Steve Blank and Bob Dorf
• The Business Model Canvas, by Alexander Osterwalder

It’s well beyond the scope of our discussions here to explore any of those in great depth. You’ll like their books and a large number of search results you’ll get by Googling any of them. But both Ries and Blank draw heavily on Osterwalder’s idea of the Business Model Canvas, and the fact that it can be rendered in a nine-box rectangle makes it pretty darned useful.

In better setting the space for collaboration between engineers and marketers, the Business Model Canvas organizes a whole bunch of assumptions required to make the pieces of the business (and its people) work together. But its greatest virtue is that it supports iterations. Each of its 9 boxes contains a hypothesis about how the business will work, and as you go from crazy idea to happy customers.

Wikipedia is a fine jumping off point for the business model canvas; here, we’ll take a look at how you might string together these assumptions in your journey to take get all those people to love your awesome so much they give you lots of money.

(cca)

Some quick definitions of the pieces:

• Value Propositions: From your positioning statement, what is the context and unique advantage of Thing 2.0?
• Customer Segments: Again, from the positioning statement, what distinct groupings of people or organizations will pay you enough money to solve the problem that Thing 2.0 addresses?
• Customer Relationships: How do those nice people with the money connect with you when they are ready to get Thing 2.0? Download? Delivery by drone from mobile-phone order?
• Channels: Who are you going to have to pay to deliver the value proposition of Thing 2.0 to the customer?
• Revenue Streams: What’s the mechanism for income from each customer segment? Do they subscribe to Thing 2.0, license it, rent it, buy it by the piece, by the gallon?
• Cost Structure: How do you make a profitable relationship between relationship what it costs you and what the customer will pay?
• Key Activities: what are you going to do early and/or often so you will have all the Thing 2.0 you want to sell? Write code? Operate a 3D printer? Wash dishes? Program your 3D printer to create delicious food on clean dishes?
• Key Resources: what stuff are you going to need so that you can create a lot of Thing 2.0? Things you’ll resell once you refine them, like petroleum? Or something you’ll need to create them, like SSDs so that you can retrieve software libraries and run the build faster?
• Key Partners: who outside your organization helps you get Thing 2.0 to the people it needs to get it?

There are two tests you can apply before embarking on filling out the business model canvas: (a) can you answer the questions and fill in all the boxes and (b) do the people you work with (partners, bosses, colleagues) have the same answers? [next section?]

We could simplify this by dividing the entire thing into three states:

• Before you get attention
• Once you get attention
• Turning attention into money

You’ll note that there is a fair amount of ‘make’-ing in that last part.

When your focus is on the ‘Before’ and ‘Once’ parts, there’s indeed no point doing any marketing without identifying the Value Proposition and Customer Segments. However, to proceed from executing attention-getting_video_campaign_on_snapchat to raking_in_big_bucks, you’ll do well to have a clear grasp of Customer Relationships, Channels, and Revenue Streams.

And what happens when you point all those attention-seeking instruments at those nice people with the money? For sure, before they actually give you the money, there had better be a plan for all that Cost Structure, Key Activities, Key Resources and Key Partners stuff.

There’s another reason to back up your story before you get to collect the money: you’re not the only ones pointing attention-seeking instruments.  In the competition for attention, you can use information from all that Business Plan Template stuff Cost Structure, Key Activities, Key Resources and Key Partners stuff to back up your story. In fact, every part of the Business Plan Canvas offers potential sources of the credibility you’re going to need to beat those other guys and their attention-getting tactics.

That’s right: if you’re on to a whole lot of people who really need what Thing 2.0 can do, you won’t be alone. There are going to be others who will try to get there ahead of you or show up after you and take that money in your stead. Time to figure out how to win, starting with differentiating your offer and segmenting your market.