Tuesday, April 3, 2012

Magnum's Success and Consumer Ignorance

The only person who does not know about Magnum
Unless you live under a rock, you should now be familiar with Magnum: no, not the gun, not the condom either, but Selecta's Magnum ice-cream-on-a-stick.

So it's ice cream. On a stick. What's so special about that?

1) It's "made with Belgian chocolate"--but WAIT, THERE'S MORE!

2) At 50 to 55 pesos per bar, it costs at least twice as much as its closest local competitor (so imported premium ice cream brands don't count).

3) It's at the center of an aggressive marketing campaign that has taken over the local social networking landscape. To have an idea of what I'm talking about, try searching for "magnum" on Twitter and you'll see something like this:

4) What's really interesting is that regardless of whether Belgian chocolate is actually worth paying that much for, people are buying Magnum in droves, and no, I do not exaggerate--I have seen and experienced the phenomenon first hand.

I'm sure a lot of those who buy are just intrigued enough by the buzz to at least try the product (well I sure was, during my last trip to the Philippines a couple of weeks ago). But I've seen signs that people go beyond "just" trying it: in the supermarket, for example, there was a small mob of shoppers who were hovering around the Magnum freezer and the couple in front of me in the payment queue were already munching on their Magnums even before their first item was scanned; and when my girlfriend and I were going around the city, we've seen at least two groups of young people who were delightfully ravishing Magnums in front of convenience stores.

So what makes Filipinos buy this debatably-so-so and expensive product, collectively in huge quantities? It's all about the marketing, right? So I guess the more appropriate question to ask is: what makes this kind of marketing campaign so effective on us?

Economist Tibor Scitovsky, in an essay he wrote more than sixty years ago entitled "Ignorance as a Source of Oligopoly Power", offers an answer which, in my opinion, makes the most sense: marketing campaigns, such as the one used for Magnum, works on us because we are ignorant consumers. Before anyone gets offended, by "ignorant" Mr. Scitovsky definitely does not mean stupid or foolish. To be more specific:

"An ignorant buyer is a person who is unable to judge the quality of the products he buys by their intrinsic merit. Unable to appraise products by objective standards, he is forced to base his judgment on indices of quality, such as the price of products and the size, long-standing and general reputation of the producing firms. Moreover, aware of the shaky basis and insufficiency of his judgment, the ignorant buyer dare not rely on his judgment alone and falls prey to the emotional suggestion of advertising."

Since we are unsure of the quality of Magnum before we try it (actually, even after the first try the quality of the product remains fuzzy for many of us) we look at other cues like price (higher price = better quality) and the reputation of the names behind the product (i.e., Selecta, Unilever) to gauge quality and reinforce our initial impression of the product. And the fact that we are susceptible to high-budget marketing campaigns may be a sign that we are ignorant buyers (please take note that I just said "may be a sign", meaning it does not necessarily follow). Remember that this is not the first time something like this happened in recent history; if you recall, a few years back Unilever (slow clap, everyone) unleashed a monster of a marketing campaign for Clear, which was able to successfully usurp P&G's Head and Shoulders as the top shampoo brand in the country (and, according to the grapevine, was the reason why the P&G country manager then was sacked).

To summarize, I argue that Magnum has been very successful in the Philippines because its marketing campaign has been very effective, and that what makes this campaign effective is our ignorance--or lack of expertness or sophistication--as consumers.

As long as you don't start by saying "I have a fucking MBA from AIM, who are you calling ignorant?", I'd be happy to hear your thoughts. :)

Note: Scitovsky's essay is actually very interesting to read in its entirety. He posits a few more ideas that I'd love to talk about, if only this space were not so limited (it's hard to see the invisible walls, I know, but they are there). I can't post the whole article for download because of copyright issues, but if you want a copy, just send me an email and I'll give you one.

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