Here’s a really interesting tidbit from Fast Company. The July issue featured a profile by Adam Penenberg of Professor Paul J. Zak of Claremont Graduate University, a.k.a. Dr. Love, who is pioneering a new field, neuroeconomics, the study of brain chemicals and their impact on consumerism.

In a series of studies spanning nine years, Zak has changed our understanding of human beings as economic animals. Oxytocin is the key (and please, do not confuse the cuddle drug with the painkiller oxycontin). Known for years as the hormone forging the unshakable bond between mothers and their babies, oxytocin is now, thanks largely to Zak, recognized as the human stimulant of empathy, generosity, trust, and more. It is, Zak says, the “social glue” that adheres families, communities, and societies, and as such, acts as an “economic lubricant” that enables us to engage in all sorts of transactions. Zak is a walking advertisement for oxytocin; his vanity license plate reads oxytosn, and he hugs virtually everyone he meets. (“I’ll hug you, too,” he warns.) It’s this passion for the hormone that led to his Claremont campus nickname, Dr. Love.

What Zak discovered is that oxytocin, the cuddle chemical, not only engenders generosity and trust, it also promotes social networking. Apparently, hanging out on Twitter or Facebook stimulates the release of oxytocin in our brains.

“Your brain interpreted tweeting as if you were directly interacting with people you cared about or had empathy for,” Zak says. “E-connection is processed in the brain like an in-person connection.

Consider what this really means. According the the article, when 200 University of Maryland students were asked to give up social networking for a day, many of them actually had withdrawal symptoms. The implications for business are huge. If companies start trading in trust, they can reap greater profits:

The idea is that if businesses wish to thrive in our interconnected world, where consumers’ opinions spread at the speed of light, they must act as a trusted friend: create quality products, market them honestly, emphasize customer care.

So the reasoning goes something like this. Companies that engender trust in their customers will gain customer loyalty and even customer evangelists. If you have a positive experience with a vendor then you Tweet or post to Facebook about it – it’s the entire business premise for Yelp! The actual act of sharing information online promotes trust, not only because of our sense of online connectedness, the tribal nature of social media, but because our brains are wired to release oxytocin while networking, which promotes trust and a sense of connected well-being. Ergo, companies that engage in building trust online have a leg up on the competition, not only because they build a closer relationship with their customers, but because people’s internal hormonal chemistry makes them more disposed to trust their online connections.

Not long ago, when sitting in a marketing meeting with a client, the Vice President of Sales repeated a worn marketing axiom, “People are motivated by fear and greed.” If Dr. Love’s research is any indicator, people are also highly motivated by trust, and it’s time that companies started realizing that they will go farther by building a loyal customer following than striving to scare of con them into buying a better mousetrap.

In this most recent recession, I have seen more panic than usual. All the marketing budgets were slashed in December and are just now they starting to rebound. With the increase in marketing layoffs there are more “consultants” out there than ever before, and agencies have been signing contracts for a fraction of what they used to charge. So as companies are now realizing they can’t dismantle their marketing machines and continue to generate sales, they are are starting to shop for PR and marketing talent at bargain prices.

All the rates have been slashed so services are generally available dirt cheap. In tough times, marketeers tend to abandon their rates just so they can stay competitive, and in the end, it’s all about price…

“Attention marcomm shoppers, we now have a blue light special in Aisle 5 – discounts on press releases and media tours.”

If you have tried to use any of the online freelance referral services, like E-lance, you know that most of them put contracts out to bid, and the result is that it’s all about price. With online referral services, you find yourself competing with international rates as well as domestic. It’s hard to compete with writing and PR services in less expensive markets that have little or no overhead. They may not be able to deliver results , but they certainly can deliver the process for less. (One of the many reasons I steer away from RFPs.)

I have been guilty of discounting along with many other PR professionals, but it’s a cannibalistic practice. If you bill $60, $70, or $80 per hour today, or offer to do a press release for $200 or $300, why should that same work be worth two or three times more when the economy improves? Better to stick to your guns. I, for one, have developed a rate card for common PR services so clients and prospects can estimate cost for my services, just as though they were estimating a press wire drop. I don’t think you have to drop your rates if you can adopt a “no surprises” policy when it comes to pricing. Clients understand they get what they pay for, as long as you tell them the price in advance.

So stick to your pricing and resist the temptation to offer discounted contracts, no matter what the economic climate. It just makes it that much harder to charge a fair rate when market conditions improve.

To dramatize the point, I want to direct you to a YouTube video that has been making the rounds among the consulting set. Everything else in our lives has a predefined rate. You don’t negotiate the price of groceries, or gasoline, or a haircut, so why are PR services negotiable? Set your rate and stick by your guns. In the long run, it will pay off.

Hence the launch of The PRagmatist, which I hope will evolve into an online forum to exchange insights and ideas about the rapidly changing world of marketing, communications, and public relations. I run across interesting insights and tidbits every day that I share with clients and colleagues. By launching this blog I now have a forum to share my thoughts and ideas with a wider audience, and solicit your feedback as to PR and marketing ideas that make sense, and those that don’t in today’s market.

Much of my insight will relate to revelations from client projects and exchanges with other professionals. And I hope to interject some fun and personal insights as well. The challenge, of course, will be finding the time to keep up with posts on a timely basis. Unlike the shoemaker whose children go barefoot, I will endeavor to make this online destination insightful, interesting, and worthy of your attention.

Feel free to engage, comment, critique, and keep me honest. I look forward to hearing from you.

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