How Behavioral Economics Impacts Marketing Strategy and Research

Feature Friday: How Behavioral Economics Impacts Marketing Strategy and Research

Guest Post by Allison Vale

As a woman, I don’t always take too kindly to being called “irrational.” It’s pretty easy to accidentally hear “you’re crazy and I think you’re crazy because you’re female.” But when Dan Ariely (@danariely), Professor of Behavioral Economics at Duke University is the one calling me irrational, it’s hard to stay mad at someone with so much research to back up such an accusation! (Not the crazy lady part – but the irrational part.)

I recently completed an online course in Behavioral Economics entitled the Beginners Guide to Irrational Behavior with Dan Ariely on Coursera (if you haven’t checked out Coursera I highly recommend it). Yep, I’m a nerd. Always have been, always will be. My colleagues at BrainJuicer are certainly invested in Behavioral Economics and the implications of recent discoveries in this field in how they relate to research. But what Dan Airely’s course really brought home for me is how these realities of human behavior act upon us as researchers, as marketers, and not just on the consumers whose opinions we covet.

It’s always struck me as strange to refer to ‘consumers’ that way, because in this society, we’re all consumers. Beyond that, we’re all human beings, and there are facts about our biology and natural inclinations that are driving the decisions we all make on a daily basis subconsciously. The good news is that we can learn from research how to work with these habits and tendencies to create the ideal structures for ourselves personally and in our organizations.

For example, only 1% of the population are cheaters no matter what. Only 1% of the population are honest no matter what. The vast majority of us, the 98%, only cheat under circumstances where we can still rationalize to ourselves that we’re good people and we’re not confronted with the morality of it. That sounds like we’re all moral relativists, but the reality is that factors other than bounded rationality are at play. And ultimately, this is good news – we can set up systems to confront people with morality in situations where they could prosper from cheating, and voila! Better society.

The bad news is that much of the infrastructure of modern society and undeniable realities of our daily lives push us upstream, putting our instincts and habits at odds with our goals. Case in point: we’re much more likely to cheat or steal the further removed we are from actual money. Enter credit cards, mortgages, stocks, et. al., and you’ve created an environment that encourages cheating.

I’m not suggesting we throw out capitalism or anything of the sort, but what these examples point out to me is that it’s important to stop every once and again and take a look at how your organization is structured. Ask yourself – is this taking advantage of the way that people are already wired? Or are we not getting the best and the brightest ideas out of our colleagues because of the way we’re approaching things? Same goes for marketing strategies and communicating with consumers – by working with the way people think and act and make decisions, you can create a scenario in which your message is much more likely to come through and produce the desired result. Change is hard and we’re resistant to it – by limiting the amount of behavior change consumers have to engage in, you’re more much more likely to achieve the desired outcome, whether it’s buying your brand or visiting your website.