Behavioural Economics at the Brainy Bar
Given my penchant for all things brainy, I decided to check out the Brainy Bar, an event affiliated with WARC which gathers people interested in applying neuroscience to understand consumers. This session focused on behavioural economics, which combines economic models with psychology to forge powerful accounts of how people make decisions in a real-world setting. Below are some of the key points made throughout the talks that evening.
1. Understanding decision making in a social context
As we are inherently social beings, we engage in behaviours that benefit our status - including decision making. Our purchase decisions and brand loyalty are intertwined with how we want to present ourselves to others, as well as our perceptions of how others are interacting with brands. For example, we are more likely to engage in a behaviour if others are doing it. Hotels have leveraged this to reduce energy consumption among their guests. Even the Government has used this idea to ensure that taxes get paid on time.
It is therefore important that brands consider how people engage as a group or within a social context when looking to understand consumers.
2. Understanding symbolic value
Decision making is a time-consuming, complicated process of comparing pros and cons for a variety of options. Our brains try to bypass this process of comparison by looking for meaning in other non-materialistic attributes of a product, such as brand. Over time, these non-functional attributes are assigned a 'symbolic value' and we have come to rely on this to make decisions. This is the reason why consumers are willing to pay more for designer goods even though their high street (or even counterfeit) counterparts serve the same purpose. This is the reason why we place a disproportionately greater value on diamonds than water even though water is functionally more useful.
There is a lot of work in academia to understand symbolic value and the impact it has on decision making. What we have learnt so far is that symbolic values are intangible and rather arbitrary, best captured via implicit measures such as the 'Implicit Association Test' and the 'Priming Affective test', to name a couple. These are relatively new to the scene of market research but worth exploring to gain a further understanding of consumer decision making.
3. Understanding what behavioural economics can do for you
Behavioural economics is often seen as a new and shiny technique that will provide a simple solution to a brand’s problems. However, Mark Molloy, a behavioural change consultant is hesitant to promote it as a 'silver bullet'. Instead, he advocates that 'diversity is your friend' and to use behavioural economics alongside current, tried and tested research methods and philosophies. Being exposed to behavioural economics during my cognitive science postgraduate degree, I see it as a fresh perspective with fast accumulating empirical evidence to back it up and in my opinion, it should be welcomed alongside established research techniques.
Though very much in its infancy, behavioural insights and techniques can complement existing research methods to help brands get one step closer into the mindset of their consumers and how they really make decisions. Our work with Weetabix, which incorporated principles from behavioural economics not only contributed to a tangible success in sales for the brand but was also shortlisted for the MRS Application of Research Award earlier this year.