What game theory can teach us about brands

All transactions involve games. Rory Sutherland analyses the short versus the long game in business, and wonders if the instinct to prefer the long game in life may make women better marketers

If you want to have a bad meal, it’s very easy. Just go to a tourist restaurant. And if you want to have a really, really bad meal, go to a tourist restaurant with a view. The very worst meal I have ever eaten was at a tourist restaurant with a fine view of the Acropolis, the whole disastrous experience being exacerbated by the fact that the very bad food was very bad Greek food. I like Greek food at its best (the technical term for this is ‘Cypriot’), but at its worst it barely qualifies as food at all.

Any tourist restaurant with a view will almost always disappoint. And no wonder, for such a place will be driven by a combination of very high property costs and a reliable flow of never-to-return customers. This makes it advantageous to them to rip you off as much as they can on the sole occasion in your life when you cross their threshold.

Essentially, in almost any transaction, there are only two games you can play: the long game or the short game. The long game is where you seek to build an ever deepening relationship with customers over time, thereby maximising your long-term profits through a series of mutually rewarding exchanges. Then there’s the short game: that is a one-off trade, when it is in your interests to maximise short-term profits when you get the chance, since there’s no future trade for you to lose.

In their defence, tourist restaurants have little choice but to play the short game. There is little hope of repeat business. And there is also little risk from bad word-of-mouth (though this is probably changing as online feedback sites such a Tripadvisor become more influential).

There are other reasons why companies might play the short game. Monopolies, for example, don’t really suffer the risk of customer defection.

Other businesses may sell a product where shortcomings may not become evident for many decades. Or may sell a product no-one ever seems to buy more than once – a timeshare, for example.

Since the degree of confidence you have in any transaction – and hence the amount you are prepared to pay – varies immensely depending on which game you suspect the other party is playing, people look eagerly for signs of reassurance that the people we are dealing with are long-game players.

And sellers are equally eager to demonstrate their long-game credentials.

These take many forms. A bank’s marble pillars are designed to signal long-term commitment. Someone who invests in marble halls is probably not planning to skip town tomorrow with my £2,000 savings. A high eBay approval score is another such proof point, because a reputation that has taken many years to build is not something you would tarnish for the sake of a quick buck. In short, we like to deal with people who have something at stake beyond the immediate transaction. A brand is a perfect example of this. It is something valuable that you stand to lose from playing the short game.

This is what is sometimes described as the ‘brand as bond theory’ of brand value.

Interestingly, the signalling may work in both directions. Part of the reason loyalty cards may affect people’s behaviour is that, for example, if I believe that BA knows my value as an individual, it is in my interests to travel with them regularly; knowledge of my value will encourage them to treat me better than if I spread my favours evenly. This may also partially explain why people are very loyal to online retailers. If all my business goes through one place, I will expect better treatment – provided they know who I am.

This game theory approach to brands is important for several reasons. First, it shows why brands are seen as a guarantee of product quality rather than a promise of it. And it explains how many marketing actions can contribute to brand trust even if they contain no overt message at all.

This game theory seems to operate at an instinctive level within humans – most of us sense signals (or lack of them) without being consciously aware of them. It also explains why women may make better marketers. In evolutionary terms, it is usually in the interests of men to play the short game (inseminate as many women as they can before scarpering); women and the Child Support Agency prefer long-game relationships, with men who stick around after conception.

An engagement or wedding ring was originally a marker – a guarantee of fidelity that is conceptually similar to a brand. A valuable commitment that long-game men happily make but short-game men don’t.

“In the rich man’s arms she fluttered Like a bird with a broken wing But he loved ’er and he left ’er Now she hasn’t got no ring.”

Rory Sutherland is executive creative director and vice-chairman of OgilvyOne London and Ogilvy Group UK. [email protected]