The Untapped Power of the Brand Placebo Effect
It’s early in my career. I’ve joined a hair care brand which has just launched two new products: one pink grapefruit and the other orange, each with the corresponding bottle color, fruit imagery, and scent.
It’s early in my career. I’ve joined a hair care brand which has just launched two new products: one pink grapefruit, the other orange. Each variant has the color, imagery, and scent of either fruit.
While sitting at my desk one day, an R&D director informs me that they are the same scent. I’m shocked. “That’s not possible,” I say. “They smell different.” She assures me they are the same.
Perplexed, I lift each of the bottles to smell them again. Even armed with 100% certainty that these fragrances are identical, the pink bottle still smells like grapefruit to me, and the orange one like orange. My brain simply can’t separate the two. It feels like my mind is playing tricks on me, but I can’t deny the difference in scent.
As my neuroscientist friend often says about the brain, “perception is reality.”
We’re taught that most products and services deliver objective, quantifiable results. R&D, engineering, and professional service teams build or implement products and measure definitive outcomes. Branding and marketing are often seen as the fluff on top. But is product performance absolute?
In this article, I argue that branding creates a placebo effect – a powerful expectation-setting tool that can measurably impact our customers’ experience.
What is the Placebo Effect?
The placebo effect describes the health improvements observed after receiving a treatment that has no therapeutic effect. It used to be perceived as mysterious, unexplainable, sometimes gullible healing, but is now understood to be the result of how the brain processes expected health outcomes.
Let me share just a few medical examples to illustrate its power.
Motor function: In one study, Parkinson’s patients received an injection of an active drug or a placebo. The placebo injection triggered a 200% increase in dopamine in the brain and translated into improved motor function among half of the patients.
Pain management: Placebos are often considered as effective as pain drugs. One study showed that a placebo resulted in strong pain relief, verified by fMRI brain scans.
Depression and anxiety: In one study, patients were given active or placebo antidepressants. Remarkably, 75–82% of the patients felt better, regardless of which drug they received. In a meta review of studies, about 35–40% of patients responded to placebos, and some studies suggested that 17% of individuals may show greater improvement with placebos than antidepressants.
How the Brand Placebo Effect Works
So, what does the placebo effect have to do with branding? In short, everything.
To put it simply, brands have the power to create the placebo effect.
In this case, the brand represents a set of expectations on top of the functional benefits the product or service delivers. Even with no additional performance or quality enhancement, brands can biochemically and behaviorally modify a customer’s experience.
Cues such as price, authority, logos, and claims create expectations about an impending result, and in doing so, have the power to influence the brain to make the expectation a reality.
Let’s look at an example of a brand’s impact on the functional performance of Ibuprofen. This drug is legally required to be the exact same ingredient across generic and branded versions, and in clinical trials, it has the same pharmacological impact.
One study looked at the impact of branded ibuprofen to treat headaches. In one leg of the study, participants were given ibuprofen tablets with a brand name (Nurofen). In reality, half the tablets were active ibuprofen and half were a placebo (no actual drug). Amazingly, the pain reduction reported was similar between the active ibuprofen and the placebo.
The study also examined the impact of tablets labeled as “generic ibuprofen.” Again, half the participants received active ibuprofen and half a placebo. This time, participants reported the placebo as significantly less effective compared to the generic active ibuprofen. This result is not surprising. We expect the actual drug to be more effective. What’s fascinating is how the branded placebo ibuprofen was able to so effectively reduce pain, delivering the SAME level of improvement as the actual drug.
Similar effects have been observed and measured across a number of other domains such as athletic performance, pleasure enhancement, and persistence. Brand and price cues consistently prove the power of branding to influence product results.
Here are a few more branded examples:
· Physical Performance: Two groups of people were given a putter and told to putt into a hole. While the putters were exactly the same, one group was told they had a Nike putter. The other group was not given any information on brand. The Nike group required fewer shots to sink the ball.
· Price: Participants tasted the same wine but were told they had different prices, either $5 or $45. The group that drank the $45 wine perceived it to taste better. Brain scans indicated that the participants who drank the more expensive wine had increased activity in pleasure centers of their brain, confirming that the price influenced taste.
· Mental Acuity: Participants were given the same lemon‑lime soda in two different cans—one plain, one labeled Red Bull Energy Drink. Those who drank the Red Bull-labeled can solved more difficult word‑puzzles and stuck with tasks 11% longer.
A strong brand triggers a set of expectations that have the potential to deliver meaningful gains in performance or improved experience. Brain imaging consistently shows that a strong brand or brand cues (such as price) can lead to higher reward activity, heightening pleasure, and altering physical behavior.
How to Create the Brand Placebo Effect
A brand does not equal advertising. Rather, a brand is the sum of all interactions a customer has with the product or company. This includes the product experience, customer service, your website, and what others say about you.
In my article on building a strong brand, I elaborate on these 3 principles, which should be the foundation of your brand.
1) Consistent: Customers need to have frequent, repeated exposure to the same message.
2) Congruent: All aspects of your brand need to reinforce the same idea across brand interactions, including marketing, sales, product experience, and customer service.
3) Connection: You must create empathy and understanding with your customer, often through authenticity and shared values, in order to build trust.
To fully harness the power of branding as the placebo effect, we need to create context. When we give our customers a frame of reference for how to evaluate and understand our product within their world, we have the opportunity to improve their experience.
Context is created through cues. Pricing, color, associations, endorsements, distribution, design, and use cases are all different types of cues. Depending on our customers’ perceptions, they interpret these cues in different ways, so we need to understand the associations our customers make with various cues. A celebrity may be highly influential for one group of customers and a turnoff to others. Nearly any element can influence how our brand is perceived and give subtle indicators of value and expected performance.
These cues, in turn, create expectations. The expectations are a set of beliefs about the anticipated result. The power of this mechanism is that our brain can—to some degree—impact the actual outcome.
That outcome then creates a feedback loop by reinforcing both the original cues, and the expectations, thereby further enhancing the outcomes.
Here’s how to maximize the power of the placebo affect through your brand:
Align your Brand Positioning to the Product or Service Purpose:
The Nike putter study also tested whether a “Gucci” putter improved performance. It did not. The specific attributes that define the brand, athletic performance for Nike versus luxury style for Gucci, must relate to the product’s objective in order to positively impact the outcome. (For more on brand positioning, check out my article series on this topic.)
Identify Relevant Cues to Reinforce Your Positioning:
Price impacts how customers perceive quality, taste, and experience. Color and design can signal attributes such as sustainable or artificial, modern or outdated. A lab coat creates a sense of trusted medical authority, whereas a rude salesperson communicates indifference. Pay attention to the explicit and subtle cues you communicate across all customer interactions to evaluate whether they reinforce or detract from the experience you want to enhance.
Reinforce the Expected Benefit Through the Customer Journey:
Identify moments after purchase, during use, and after use to remind your customer how you’re delivering on their expectation. Sensorial cues such as scents and sounds can reinforce the connection between cues and expectations. Emails with proof of performance, such as progress achieved and benefits delivered, remind customers that your promises are actively being fulfilled.
Ethics of the Brand Placebo Effect
The power of brands to influence our brains is a tool to be wielded intentionally and responsibly. Done well, it can benefit our customers. Done misleadingly, it can erode trust and diminish brand experience.
We can’t, nor should we, overpromise something that can’t be delivered. Many of the improvements from brands are in the 10-20% range, so they are meaningful yet moderate lifts.
As stewards of creating a valuable experience for our customers, we need to use the power of branding to enhance and delight rather than to deceive.
To ensure the responsible influence of our brand, ask these questions:
Are we creating expectations that our brand or product can deliver on?
Does the expectation actually create more value for the customer?
Does the expectation trick the customer into buying?
Do we have substantive proof that our product or service delivers our implied or explicit expectation?
Deceiving customers is not only unethical, it’s also bad strategy. A weak brand or one known for misleading or deceiving customers can elicit negative expectations and create the opposite of the placebo effect, a worse product experience. Instead of compensating or hiding deficits, we must build brands on value and quality.
Along with R&D, engineering, and operations teams dedicated to improving product performance and service outcomes, marketing is a powerful tool in this toolbox. Through consistent messaging that sets the right context for the benefits you offer, your brand can meaningfully enhance your genuine strengths to positively impact customer results and build loyalty.
The Marketing Funnel is Failing You: Growth is a Flywheel
The marketing funnel is pervasive. This framework—the dominant mindset among marketing professionals, whether B2B or B2C—is built on a series of assumptions:
The marketing funnel is pervasive. This framework—the dominant mindset among marketing professionals, whether B2B or B2C—is built on a series of assumptions:
First, we need to make people aware.
Then, a subset of those people become familiar with what we offer and consider purchasing.
Even fewer purchase.
If we’re lucky, we have a small sliver of buyers who advocate on our behalf.
We lose people at every stage. It seems like an unavoidable reality.
But what if this mindset is all wrong?
This innocent enough triangle forces us to accept systemic loss. There’s no momentum. There’s no feedback loop. There’s no priority on reducing friction. There’s no relationship between advocacy and awareness.
As a result, we pour money into the top and hope that what comes out on the bottom is enough to meet our business objectives.
This framework isn't just inefficient—it's increasingly out of step with how modern businesses, especially purpose-driven ones, create sustainable growth. The funnel's emphasis on volume over value, and transactions over relationships, limits its effectiveness in today's market where trust and authenticity fuel business success. We burn bridges spamming thousands of people with ads and emails they don’t want, not considering the cost to our brand.
Enter the growth flywheel.
The flywheel concept was originally conceived by Jim Collins. This iteration of the growth flywheel originated in the B2B tech world, and surprisingly has not permeated the rest of business. Applying this tool represents a huge opportunity for any business (even non-profits) to accelerate growth.
The growth flywheel can and should forever replace the marketing funnel.
Understanding your flywheel isn’t just about mapping the customer journey—it’s about identifying what’s holding back your momentum at each stage. Just as friction points limit a physical flywheel's speed, specific constraints at each phase limit your business growth. Identifying and addressing these constraints is critical to accelerating growth.
I’ve made a few modifications to the common tech flywheels so that it’s broadly applicable to all businesses. Let's examine each phase, considering both our goals and the typical constraints that might be limiting progress. (Note: I’m starting at the top, but you can start anywhere on the flywheel.)
Ideal Customer
At the center of the flywheel is the ideal customer. Your flywheel strategy must target customers where you have a clear right to win and who have sufficient market potential to achieve your business goals.
Customers → Delight
Our goal is to ensure customers fully appreciate the value of our product or service. I intentionally put delighting customers on top, rather than building awareness. We first must ensure a quality product before we invest behind building awareness. While one enter the flywheel from any point, focusing on delighting customers as the first step toward awareness building is an important mindset shift.
At this stage, limiting constraints often center on product quality, experience or service delivery. Even great products can be undermined by poor onboarding, insufficient customer support, or unrealistic expectations of performance. If you’re not delighting your customers, you have no hope of a sustainable business.
Advocates → Enable
Our goal is to make it easy and natural for delighted customers to spread the word, creating a virtuous cycle that attracts new strangers to your business.
The limiting constraint here is almost always a lack of infrastructure that makes advocacy easy and rewarding. Traditional tech growth flywheels often lack and explicit “enable” strategy. Brands can delight without creating advocates, so you need an intentional strategy to turn happy customers into brand promoters.
Strangers → Attract
Our goal is not just to build awareness, but to attract the right people to our business. We need to reach the right people where they’re naturally receptive to our value proposition.
The common limiting constraint here? Often it’s not how many people have heard of our brand, but whether we have identified, reached, and resonated with the right audience, especially given increasingly crowded channels and categories saturated with options.
Prospects → Engage
Our goal is to turn interest into action by engaging prospects meaningfully. This requires understanding their needs and making our offering and information clear, relevant, and helpful.
The limiting factor is often the capacity and capability to engage prospects effectively—whether that’s sales expertise or systems and content for nurturing relationships.
In a recent interview, Sean Ellis, author of Hacking Growth, says that he never puts significant resources into building awareness until he fully optimizes the flywheel. That is, he makes sure he reduces loss and friction as much as possible before investing to build awareness to scale. I see so many companies focus on awareness, customer acquisition or lead generation before they have solid engagement, product performance or advocacy strategies in place.
For example, Zoom didn’t enter the video-conferencing market with massive marketing campaigns. In fact they had no marketing team for two years. Instead, they recognized that their key limiting constraint was product experience. As such, leaders focused relentlessly on creating a solution that would delight users and spark natural advocacy. Their “freemium” model led to fast adoption and word of mouth advocacy that spread organically.
Four Ways the Flywheel Transforms Growth
1) It expects continuity over loss.
A funnel expects drop-off from one stage to the next. A flywheel is only operating efficiently when there is minimal loss. While traditional marketing accepts waste as inevitable, the flywheel pushes us to address the limiting constraints at each stage. This creates a more efficient and sustainable system that prioritizes genuine value creation over volume-based marketing tactics.
2) You can activate the flywheel from any starting point.
If you have a killer product, begin with enabling more advocates. If the flywheel is already humming, put more effort into building awareness to attract potential customers. If sales is your growth engine, optimize your sales process to close any leaky buckets, converting more prospects into customers. Unlike traditional push marketing, this flexibility allows you to lead with your strongest value proposition.
3) It integrates and values each of the core growth functions.
Marketing, sales, product/service, and customer success are the core growth engines of a business. The flywheel shows the unique and essential role each plays in delivering growth. Just like any athletic team, each function must play their position with excellence, otherwise everyone loses. The flywheel promotes building lasting customer relationships rather than just driving transactions.
4) It turns customers into awareness generators.
A funnel considers advocates “nice to have,” not core awareness generators for the business. And yet, most people prefer and trust word-of-mouth recommendations over ads or content coming from the business itself. This is especially true for purpose-driven brands, where authentic customer advocacy carries both the product value proposition and the brand's broader mission. When we enable our customers to advocate on behalf of our business, we activate a powerful engine for trusted (and low cost!) awareness building.
A Case Study: Allbirds
When Allbirds entered the footwear market, they chose an unconventional path to growth. They attracted attention through material innovation (notably wool) that connected to their point of difference on comfort, combined with an extensive focus on sustainability, including carbon footprint labeling.
• Delight: Since inception, Allbirds has delighted customers with a focus on comfort, supported by their choice of sustainable materials. Their retail staff, customer service, and impact initiatives like "ReRun" resale program keep customers engaged beyond the first purchase.
• Enable: A sophisticated advocacy program combines micro-influencers, user-generated content (#weareallbirds), and shareable sustainability metrics, making it easy for both casual fans and committed environmentalists to spread the word and attract new customers.
• Attract: Allbirds builds awareness through a powerful mix of word of mouth referrals who are activated through their ambassador program, social advertising, sustainability leadership (carbon labeling), and selective retail locations that let customers experience their materials firsthand.
• Engage: They convert interest through simplified shopping experiences (limited styles, clear pricing), risk-free trials, and targeted messaging that spans both lifestyle benefits (comfort, design) and environmental impact ("Flight Status" scores).
How to Measure Flywheel Effectiveness
The following relevant metrics will prove your growth flywheel is working.
1) Conversion rates from one stage to the next: These should increase over time, including the percentage of customers who advocate.
2) Increasing word-of-mouth attribution: As advocates build awareness, higher volumes of new customers will materialize.
3) Customer acquisition costs decline: If the flywheel is operating efficiently (all else being equal), the cost to acquire new customers should go down.
The Future of Growth is Circular, Not Linear
The funnel served its purpose to help brands understand how business and marketing objectives change throughout the customer journey. However, this model is not helpful to deliver real value to customers. Exclusively relying on paid mass awareness building is inefficient, expensive and increasingly ineffective. The flywheel model doesn’t just drive more efficient growth; it creates the conditions for long term sustainability by aligning business objectives with customer value. When we shift from thinking about marketing as a linear process of loss to a circular system of momentum, we unlock the potential for both profit and positive impact.
What limiting constraints will you address first to get your flywheel spinning?
The Brain’s Guide to Building a Brand
You only need to look at a fraction of one of these logos, and your brain fills with images and experiences.
You only need to look at a fraction of one of these logos, and your brain fills with images and experiences.
The Nike logo reminds me of an ad I saw over 20 years ago, featuring a montage of athletes in the moments before their competitions begin. Right when the whistle or gun was about to sound, the screen turned black. “Just do it” appeared. I still get chills thinking about that ad and the anticipation I feel competing.
Most people think about branding backward. Conventional marketing says companies create brands.
Not so.
Our brains create brands.
Companies can influence how a brand is perceived but do not control it.
To help create a strong brand we must begin with the brain and how it processes brands.
What is a Brand?
Let’s use Starbucks to illustrate the concept of a brand.
When driving on the highway, you pass a sign for Starbucks at the upcoming exit. It instantly triggers neurons in your brain to fire, activating memories and experiences associated with Starbucks:
You think of your favorite drink order and the relaxation you feel when you take your first sip.
You picture the smile of the barista, the dim lighting, and the earthy, comfy furniture in the stores.
You think of the ridiculous price tag and the painfully long line in the airport Starbucks as you fear missing your flight (just me??).
All of this is triggered nearly instantaneously by a company name with a color, font, and picture you recognize.
A brand exists when you experience repeated associations with a company that activates multiple parts of your brain to give you an impression of a company. A combination of sensory, emotional, visual, auditory, and conceptual experiences form memories and strengthen the neural networks surrounding the brand. When we say a company has a “strong brand,” we mean that a company or product activates a set of consistent, positive associations in the brain.
Neurons that Fire Together Wire Together
The neurons in your brain form complex networks of connections. When signals are repeatedly transmitted along certain routes, they form connections called neural pathways, which are like roads. Some roads are dirt paths, some are two-lane residential streets, and some are eight-lane highways. When one neuron repeatedly stimulates another, the strength of the signal between the two increases.
The more frequently neurons fire together (say, the mermaid logo and the delicious smell of coffee), the more pavement gets laid down on that road, making it faster to travel from one association to another. The stronger the associations between attributes and a brand (i.e., the bigger the roads), the quicker the brain activates all other associated attributes.
At a market level, “brand” is a culmination of the dominant attributes most people associate with your product or company.
That is, a brand is what other people perceive about you, not what you say about yourself.
Product Category is Your Brand’s Foundation
The product category is your brain’s most important association with a product or business. This association allows your brain to classify your brand within a familiar structure.
Let’s test this. What brand do you think of when reading these words?
Low cost
Friendly service
No frills
Colorful
Quirky
Having trouble? It’s probably difficult to think of a specific brand because you don’t have any context for these descriptions. What if we add the word “airline”? Now, what brand comes to mind?
If you didn’t guess Southwest, you likely narrowed it down to a few options. The category gave you context for these descriptions.
The category is a brand’s foundation. Associations and differentiation are nearly always built on top of the category.
This is why building a brand for a new category can be so difficult. Our brains don’t yet know how to process the category. The brand’s associations are essentially in limbo until we connect them to something familiar. A useful tactic for new categories is to borrow a familiar concept. Consider the common use of a cross-category metaphor: “Uber for groceries” (Instacart).
Category familiarity also explains why it can be challenging to brand services or concepts such as “cloud computing” or “mortgage-backed securities.” Unless the audience understands the category, any hope of brand-building is moot. If you sell water bottles, establishing your category can take milliseconds with a simple photo of a water bottle. IT consulting services may require more explanation to ensure your audience understands what exactly it is that you do.
Marketing doesn’t own the brand
Marketing is often thought of as the “owner” of a brand, but this mindset can be deceiving. While marketing typically sets brand strategy—such as positioning, messaging, color, and tone of voice—brand cohesiveness must be a multi-functional effort. The product experience, customer service, retail experience, sales, and marketing all influence the brand impression. The departments with the greatest influence on brand perception are those that have the most frequent interactions with the customer.
Consider a B2B software provider whose brand identity is more strongly influenced by frequent product usage, interactions with the sales rep, and annual conferences rather than advertising. The teams most accountable for the brand impression would be the sales, engineering, and events teams.
Compare this to a product such as toothpaste, whose brand touchpoints are dominated by product usage and advertising—the innovation and marketing teams would have the most influence over how the brand is perceived.
3 Principles for Building a Strong Brand
So, how do we apply this information to our daily work? Here are three simple principles to integrate into your strategies, practices, and reviews to help create a strong, brain-based framework for building a brand. Though simple on the surface, they are hard to execute.
1) Consistency:
Regular, reliable, and repeated exposure to the same brand elements creates stronger brand associations in the brain. This requires a consistent overall message, tone of voice, color, logo, and general brand experience. Messages can be slightly modified to fit the context, but aim for as much consistency as possible. Repeated exposure to the same elements will strengthen the neural networks.
Common Consistency Mistakes:
Product launches that seem totally from one another, as though they are come from different companies
Different messages in different channels
Changing brand assets too frequently (such as positioning, packaging, tagline
2) Congruency:
The entire brand experience must be cohesive. If advertising promises one thing and the product doesn’t deliver, customers experience dissonance. For example, an airline can’t boast about on-time flights when customers are frequently delayed.
Common Congruency Mistakes:
Messaging overpromises what the product delivers
Customer service or sales interactions don’t have the same tone of voice or vibe as marketing
Actions go against the company’s stated mission
A company promotes sustainability or social-impact efforts in one domain but is silent on a vulnerable issue for that category
3) Connection:
Connection in branding is about creating positive neural associations in your customers' minds. Aim to deeply understand your customer and demonstrate genuine empathy for their needs and challenges. By aligning your brand with their values, using storytelling to relate to their experiences, and building personal relationships, you create meaningful connections.
Common Connection Mistakes:
Evoking emotion without a purpose, such as creating tear-jerking content or humor without relating it to the brand or products
Trying too hard to appear “relatable” or “authentic”
Eliciting fear, guilt, or insecurity to try to sell more product
My hope is that you have shifted your thinking from brand as your asset to brand as your customer’s perception. Your role is to influence the desired impression you want your customers to have about you. The more intentional we are with consistency, congruency, and connection, the stronger our brand will be.