Cake Can Teach Us About Marketing and Psychology
What do coffee mugs, Netflix, and IKEA all have in common?
Have you seen this meme going around?
Cake. Everything is cake. Is your worldview broken? Good. Go kiss your wife through the tears. Oh wait, you can’t — SHE’S CAKE TOO.
Housewives from the American 40’s were not made of cake. In fact, this was the era when instant cake mixes were just being introduced to the public.
When they were first rolled out, all they had to do was pour the mix into a bowl, add water and stir, put it into the oven and yabba-dabba-doo — cake!
Sounds like heaven, right? WRONG. Despite the convenience of the instant cake mix, sales floundered. So the producers got on the case:
Was it the taste? ❌ The cakes were delicious.
Packaging? ❌ That wasn’t it either.
Then they struck gold: It was just too easy.
There was so little effort involved in baking these cakes, it was hard to say “This is a cake I made”. It just felt like you bought it from the store.
The fix? They took milk and eggs out of the powder mix. Now you had to crack the eggs and measure the milk before adding them. Presto!
Now it was your cake.
How to Create Ownership
This story illustrates what behavioral economists call the endowment effect. (AKA the IKEA effect!)
When we can extend some form of ownership over something, we value it much more. And that means we’re willing to pay more.
Ownership can be created in a few ways — one is mere exposure.
In a study called “The Power of Touch” (also the name of the next EL James novel) researchers found that the longer a participant held on to a coffee mug, the higher they were willing to bid on it in an online auction.
Here’s the kicker: it only took 30 seconds for this effect to take hold.
This is the reason car dealerships will let you drive a car around for a day before deciding to buy it. It’s why Spotify used to be 99¢ for the first 3 months, and why Netflix is free for the first 30 days.
Free trials are a great way for people to feel like they own something before they even buy it. Spotify and Netflix are interesting examples because they build ownership via an extra secret weapon — customization.
You’ve probably heard about how great Netflix’s recommendation engine is. Your Netflix home page probably looks very different from the profile your wife (who is still made of cake) has.
In 30 days, Netflix can get a really good idea of what you like to watch and deliver a highly personalized experience. That has value.
$15/month kinda value.
Spotify’s Discover Weekly + its other personalized playlists do the same thing. It’s why people will pay hundreds of dollars to engrave jewelry with their names.
But sometimes, the seller doesn’t have to bother with customizing. If the buyer does it, it builds ownership through effort.
We return once again to the IKEA effect. Have you ever built a piece of IKEA furniture? Have you read the adorable Swedish hieroglyphics? Have you wondered why there are so many GODDAMN SCREWS?
It doesn’t matter. Because once you’ve poured your blood, sweat, and tears (+ an afternoon) into that structurally unstable post-modern bookshelf, you’ve become attached.
And this brings us back to the cake mix.
Simply adding milk and eggs doesn’t seem like a lot of effort — but it’s enough. Enough to make it feel like your cake.
And that’s something you can charge for.
Using the Endowment Effect to Sell
- Exposure: Best applied in physical retail. Provide opportunities for the customer to hold the product or take it for a test drive.
- Customization: Great for digital products or online stores. Build a recommendation algorithm or a virtual customization platform.
- Effort: Apply this idea to physical goods— edible products, toys, décor. Not to services; those should be as effortless as possible.
On a final note…
We can extend this thinking to our work lives, employers and employees alike.
Autonomy is one component of meaningful work — it also lends itself to ownership and eventually a happier work life.
Give your team the runway to try independent projects and give them credit for their work. Value their autonomy, and they’ll value the opportunity.
Unless, of course, they’re cake. Unless, of course…
You are cake?