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Behavioral economics: enhance your research

Caroline Dieleman Senior Director 05/22/2023

It's tempting to believe that the decisions we make are the result of diligence, and careful consideration.

As humans, we like to think that our minds are impenetrable – far too strong-willed to be tempted or swayed into purchasing something that we might not even need.

But that would be naiive, wouldn’t it? As such, let’s delve into the realm of implicit bias – our unconscious thoughts that we are not aware of…

Implicit bias tells us that not only are we subject to irrationality, but we cannot possibly process the sheer amount of information we have at our disposal. As a result, our purchase decisions are not always dictated by reason alone. More often than we realize, emotion can subdue our logical thinking.

Otherwise, we’d never buy cigarettes. We wouldn’t fork out £100 for a basic cotton t-shirt just because it has a designer label on it.

We’re won over by discounts, customer reviews, upselling, a perceived brand promise, social media influencers, celebrity endorsements, or environmental and social concerns much more than we know.

This is where behavioral economics comes into play.

“Behavioral economics incorporates the study of psychology into the analysis of the decision-making behind an economic outcome, such as the factors leading up to a consumer buying one product instead of another.” – Richard Parkington, The Guardian

An emotional response

Behavioral economics helps us better understand decision making when we realize humans are not fully rational. We are deeply emotional.

Take the celebrated John Lewis Christmas advert, which barely shows a single product. A perfect example of emotional response that fascinates marketing professionals. It helps us appreciate why people behave the way they do in the real world and gain knowledge about decision-making behaviors. Ultimately it helps us understand the bias we can’t account for.

Our limitations also affect our behavior – in fact, cognitive forces impact decision making every day. This includes our personality, the environment around us, whether we are risk averse, and our age. Each of these carry different weights – some of us play it safe, some trust our gut.

Precision decisions

Understanding the psychology behind purchasing choices helps organizations make clear-cut choices. It adds a valuable extra dimension to the insights we collect in marketing research projects. What if we can use behavioral insights to improve the customer experience, build relationships, achieve competitive edge, boost online conversion and loyalty?

There are many behavioral biases that make us all different and shape our decision making. And the information overwhelm means we happily let ourselves be influenced by the environment around us.

“Marketers have long been aware that irrationality helps shape consumer behavior. Behavioral economics can make that irrationality more predictable. Understanding exactly how small changes to the details of an offer can influence the way people react to it is crucial to unlocking significant value—often at very low cost.” – Ned Welch, McKinsey & Company

Behavioural economics in practice how do we test emotional response?

The Implicit Association Test (IAT) gets to the root cause of someone’s implicit bias. The goal is to measure the strength of associations between concepts and evaluations. The theory is that a response is quicker when the concept and evaluation are relatable – therefore getting to the root of implicit bias.

While the IAT is great for uncovering potentially unknown biases, commercial use of an IAT is limited because of the sheer number of biases you can test and the extensive length of the exercise.

To overcome these hurdles, Savanta has worked with behavioral experts to create a fit-for-purpose behavioral exercise that taps into the respondent’s “system-one” thinking – our brain’s automatic emotional response to stimuli – in the same way that the original IAT does.

This exercise is shorter and involves timing responses to stimuli within a questionnaire to establish implicit vs considered associations with a stimulus. Based on a respondent’s reaction time, it tests three different types of Implicit Response Time (IRT):

  1. Associative IRT – testing associations with a brand or concept. For example, if McDonald’s want to establish the words that are best associated with them to use them in a new campaign. The respondent is shown a list of words to select from. In our research, people are more likely to associate McDonald’s with ‘cheap’ and ‘tasty’ than with ‘healthy’.
  2. Accept Reject IRT – evaluating speed of selection of a stimulus where respondents either agree / accept the statement or disagree / reject the statement. This gives the ability to gauge intuitive or considered acceptance and intuitive or considered rejection. For example, if you want to evaluate a mission statement and select which one they agree or disagree with as quickly as possible. Looking at Meta, ‘allowing brands to steal our data’ is the most intuitively accepted statement, which goes against its brand values of connecting people, so is at odds with perceptions.
  3. Conjoint and Max Diff IRT – in this exercise we trade-off preferences through traditional trade-off methodologies, however the respondents will be under time pressure to answer the question as quickly as possible. Time pressure evokes system-one thinking, which leads to more instinctive answers and is a more multi-dimensional approach. For example, we utilized implicit Max Diff to help an international cosmetics brand in its search for a celebrity ambassador. The brand was looking for a new spokesperson and examined the implicit associations different celebrities had, to see which one fit their brand strategy best.

Rich understanding

Behavioral economics gives you a richer understanding of your target audience. It’s not just about gathering the data around what they do, it’s why they do it: that’s what makes it so powerful.

With this added dimension to your data, you can:

  • Frame your products both rationally and emotionally
  • Use pricing psychology to increase purchases and make the cost feel less painful
  • Upsell and cross sell
  • Appeal directly to audience needs – such as convenience, quality, speed etc.
  • Better connect on social media
  • Offer valuable options and focus on what works
  • Understand how and why habits are formed
  • Build and reward brand loyalty.

Used in a systematic way, behavioral economics has game-changing potential for brands. Understanding target audiences in more detail means you can make tiny changes that have a big impact.

If you’d like to know more about how behavioral economics can add another level of insight to your market research project, please get in touch.

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