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The Warc Blog

Is market research myopic about Behavioural Economics?
 
Edward Appleton, Senior European Consumer Insights Manager, Avery Dennison
 
Edward Appleton

I'm currently taking an online educational course in Behavioural Economics (BE), lead by the eminent Dan Ariely, author of Predictably Irrational and teaching Professor of Duke University (http://danariely.com/)

It's a fabulously well done course – lasting 6 weeks, it consists of Video tutorials, Reading Assignments, and tests that lead to a possible certification. And it costs nothing.

So first up – I doff my cap to all involved.

After approximately one week, I am beginning to get a more in-depth understanding of BE concepts – the availability Heuristic, loss aversion and the Endowment effect, the impact of Default options, subliminal priming and optical illusions are a few that come to mind.

As always, I find the central theses of BE convincing and depressing at the same time – we are, it would seem, one big bundle of cognitive biases. Our task as Market Researchers seems immensely onerous given the complexity of decision making – how on earth, I wonder, do we rise to the challenge?

But then another thing happened. I am currently exploring various insurance options, and after having done my online research, read the reviews and ratings, compared prices, came to a preference of which company I thought had the best offer. I rang up the Company in question, was impressed by their friendliness and efficiency, briefed them on my needs and asked them to send me a proposal.

All fine. The quote arrived, and I pushed it one side – not riveting reading, and something I would gladly avoid trawling through. However, come the Weekend, I forced myself to concentrate and waded through all sizes of print size – something, I guess, none of us enjoys doing.

Within ten minutes of reading I stopped short: the proposal had been set for a 3 year period, something I had not specified at all. I checked for Cancellation options – and sure enough, if you sign for a three year period, then it's fixed, no get-outs. Hmmm. I certainly didn't wish to be bound for such a long period of time.

Was this something akin to one of the very Default options that I had learned of courtesy of Dan Ariely? Had the Insurance Company in question beaten me to a study of BE and implemented its findings to its own potential advantage?

This lead me to wonder if we Researchers are actually blinded to potentially more immediate impacts of Behavioural Economics, which will be more for those in Marketing, Communications, Branding and Sales than Research. Here's my take.

1. Implications for Sales and Marketing are much clearer – and worrying – than for MR

Anyone in Sales or Marketing reading some of the examples of how people's decisions on pricing decisions can be influenced – manipulated – by using tricks such as decoys may well jump mentally to how they could use that for their own purposes and strategies. Why not exploit people's inherent mental weaknesses that BE shows up?

This to me is the darker side of what Behavioural Economics is telling us – we are eminently influence-able, often make mistakes in our judgements, and can be lead to different courses of behaviour through simple tricks like anchoring and the targeted use of Default options. Take my example: assume people won't read masses of small print, include a Default option that favours the seller rather than the buyer.

This is anti-Enlightenment stuff, and worrying – especially as the BE literature I have read tends to neglect this potential downside, choosing to highlight positive ways Policy Makers in Government might take in encouraging people to behave better. How many (un)scrupulous selling companies will willingly learn the tricks of the BE trade? How many people will attempt to be better thinking individuals after they have understood how prone to bias and error we all are?

2. Quantitative Research needs to Listen to Behavioural Economics more than Qual.

Much of what Behavioural Economics observes cannot possibly surprise any seasoned qualitative practitioner – who knows from her or his own psychological training about the mental lacunae and irrationalities we exhibit in our everyday behaviours.

Quantitative Researchers tend not to have access to the individual, de-aggregated response – context, perspective, observation, comparison and evaluations of behaviour vs stated intent all helping gain a full understanding of a particular situation.

BE holds out a huge Warning Sign to us here – we need to think carefully about what we ask, how we ask it, and how we interpret it. For those who feel that this is patronising, needless advice, I'd point to quite a number of quantitative surveys I've participated in as a respondent over the past 12 months that seem to be badly in need of a good dose of BE reading, not to say a 1-on-1 with Professor Ariely.

3. Why Shouldn't We Trust our Intuition When we Encourage Respondents to do so?

This may be the result of me being only a beginner student of Behavioural Economics, but I see two distinct and to me potentially conflicting lines of thinking on Intuition. The first position comes from Dan Ariely: we should learn to distrust our intuition, as it is often wrong – instead we should look to experiment and gather evidence. The second one comes from the methodology advocated by neuromarketing thinking, closely linked to BE – encourage respondents to answer quickly, access their System 1 thinking which is intuitive, automatic, non-rational.

Which is right? I guess it depends on your objective, and which audience you are looking at – a typical Research response, and one I trot out happily. I'm keen to hear others' views here.

My own view is that Researchers need to become more embracing of and comfortable with intuition – we are often over-rationalised, discount enthusiasm, and err on the side of caution. I'd say it's a modus we should change, adopting more entrepreneurial traits: a bias towards action, an ability to inspire others.

In sum, I am a total fan of the intellectual rigour that underpins the thinking of Daniel Kahneman, Dan Ariely et al, and applaud – again – the ambition to spread the word via online Education. For those of you interested, I've included one of the Required Reading lists from the Course below.

However, I think we as Researchers shouldn't become overly defensive about what BE means for our own – relatively small and often well-meaning – industry. Yes, we should evolve and adapt our approaches and toolkits, essentially raise our game. Perhaps we should instead deflect attention away from our own industry and instead highlight the potential uses – and potential abuses – a heightened appreciation of BE can foster in the harsh world of sales and business advantage.

Sellers may well get smarter about the perceptual tricks BE highlights quicker than buyers' (and respondents') ability to get wise to their own perceptual limitations and develop appropriate corrective mental strategies. Put another way: as more Sales professionals become wise to the intricacies of BE, our job as Researchers at disentangling and delayering motivations becomes more complex.

Curious, as ever, as to others' views.

Reading List from Week 1 of the Ariely/Duke Course:



Subjects: Consumers, Brands, Data

02 April 2013 18:00
 

There are 4 comments on this blog

(Want to have your say? Add your Comment)

Thanks for a fine, thoughtful post Edward. One thing I'd add - I don't think the two views of intuition you outline in point 3 are completely in conflict. When "System 1 researchers" encourage people to access their fast, intuitive responses, it's because we believe that's how most decisions are made.

But we're not inherently making a judgement about the QUALITY of those decisions, just saying research needs to reflect the reality of decision-making. Ariely, on the other hand, is saying that it would be good if people made fast intuitive decisions less, and offers tips on doing so. (Kahneman, by my understanding, is pessimistic about the possibilities of doing this).

As it happens I think you're right, and that many of the pro-BE researchers are quite happy with the idea of fast, intuitive decisions and feel such choices are good enough most of the time. But even if the idea of System 1 terrified us, we'd need to research it in the same way, because we have to align research with the ways people decide, not the ways we (or our clients) would like them to.
Tom E. 03 April 2013 at 12:51pm
Hi Edward,
I'm in the class as well and I think your blog is dead on target.  I was amazed at how well put together the class is !  I really feel like I'm learning and the format is surprisingly effective at helping me learn and understand the topic.  I'm a product developer not a market researcher but I'm finding valuable information also in terms of how consumers make buying decisions and how I have to be careful when trying to "reinvent" a product or brand.  We don't want to be the ugly Tom that drives folks to pretty Tom.  Thanks so much for this great thoughtful blog !
Del L. 03 April 2013 at 2:36pm
@tom - thanks for your comments and thoughts. On the intuition thing, it makes me wonder where there is value of asking people's opinions (whether its quicker or slower) at all, where gaps between stated and derived preference or attitude are likely to be larger. If one wanted to be a little provocative, one could say "we (MR folk) ask people to say what they think, they don't have a stable or clear view or preference, what they do tell us is full of biases which we almost certainly cannot quantify in a normal commercial context, and by the way, if they're relying on their intuition more than giving a rational reseponse, they may well not correct in their judgement". Now, I am not a cultural optimist, unfortunatley, but it does seem to me overly negative - if things are so bad, and we make so many wrong decisions, how come humanity has progressed at all over eg the past 50 - 100 years.?

@del - how do you interact normally with Insights when you're developing products?  Do your people use BE principles at all, if so how?
Edward A. 03 April 2013 at 5:56pm
Comparison markets in the UK thrive on people consistently utilising their S1 brain and being fleeced by the results. Annuities markets are a prime example. S1 is intuitive but views the world through eyes (and thoughts) laden with cognitive biases.

The lily pad test is a good acid example for this sort of thinking - a pond, in its centre is a lily pad. Every day it doubles in size. If it takes 48 days for the lily pad to completely cover the pond, how long did it take to only cover half?

Some people, more than a comfortable amount, will answer 24.

Rob T. 13 March 2014 at 2:39pm
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