Despite increased awareness of behavioural economics in the industry, little advertising is shaped by using it. Faris Yakob wonders if the future lies in attention economics instead.
In 2011, Jim Stengel, former CMO of Procter & Gamble, published his book Grow. In it, he analysed 50 brands with the highest Millward Brown loyalty scores to determine what might connect them. His answer was brand purpose, the shared intent of everyone at the company to improve lives. He compared this Stengel 50 index with the S&P 500 between 2000 and 2011 and saw that his index had grown 393% compared with a 7% loss in the S&P. It seemed that brand purpose was driving significant alpha (the financial term for outperforming the market).
The idea spread influentially. Marketers and agencies suddenly found themselves seeking out their brands’ higher purpose to inform communications in the hope of driving outsized returns. However, a new book by Richard Shotton called The Choice Factory contains a robust rebuttal of the thesis. In it, among a number of challenges, he points out that in the five years following 2011, only nine of the brands outperformed the market, which suggests that “ideals weren’t the panacea Stengel suggested”.
Companies should rise above just making money and have a higher purpose – to galvanise employees, guide decisions and because it is the right thing to do, not just because it creates more profitable brand communication. Why then did so many ad folk leap upon this idea without subjecting it to sufficient rigour? Because of what psychologists call wishful seeing and motivated reasoning. Purpose appeared as a simple rule, applicable across categories, that seemed to imbue advertising with a moral purpose, all of which are pleasing ideas to hard-working practitioners.
Despite increased awareness of behavioural economics in the industry, little advertising is directly shaped by using it. Shotton’s book covers 25 scientifically demonstrated biases that can inform better advertising. Some have been used intuitively for years, like the power of social proof to persuade people, as reflected in all claims of popularity, such as the classic ‘8 out of 10 cats prefer Whiskas’ advertising. Others, like the importance of context in decoding communication, have been dangerously ignored in the development of programmatic audience buying, which serves ads anywhere they find the target, regardless of environment.
Advertising practitioners are only human and thus have the same biases influencing how we make decisions about advertising, reflected in the appeal of brand purpose. In fact, much of the advertising industry is structured around a persistent metacognitive error, the one that the field of behavioural economics was created to counter: the belief that we make rational decisions. It informs briefs, pretesting, research and measurement, creative decisions and media strategies, because it feels like common sense. It feels as though we make decisions consciously about what we buy, yet we often don’t. Contextual factors can influence us without us knowing. Even the fact that people pay price premiums for brands is a persistent non-rational behaviour that advertising both impacts and relies on.
The foundations of behavioural economics are built on the insight that our brains use heuristics because we are overwhelmed by the number of decisions life presents us with, and that these shortcuts are prone to systemic biases. There is an ever-growing body of research and innumerable biases that have been demonstrated – one for every advertising problem one might come across. The application is complex because the predictive power of each bias insight is situational and drawing too many different insights can lead to overfitting. Overfitting is when models are created that are so expansive they can explain everything but predict nothing – or when new models are created for every occasion.
The disparity of behavioural biases leaves it open to this latter challenge but a Harvard professor has begun to develop a unified theory. Xavier Gabaix recently published a paper incorporating behaviours into standard economic models. His thesis is that all these biases stem from ‘limited human attention’. Temporal discounting, overconfidence, fundamental attribution errors and many other irrational behaviours can be mathematically represented as functions of limited attention, a changing but bounded parameter. So attention economics might come to mean more than just the business model for media and the driving force behind the development of digital that’s increasingly colonising our time. It might be the key to understanding decision-making.