Behavioural economics keeps coming up in market research conversations. Surprisingly, I’ve never heard in that context one of the most important names in the discipline: George Loewenstein. Loewenstein’s work provides deep psychological insight into how consumers choose and value the products they buy. And one of his long-term research projects might have unlocked a key secret of why people want what they want: the theory of curiosity.
He is not one of the best known researchers among the general public: unlike Dan Ariely, Richard Thaler or Daniel Kahneman, he hasn’t written a book for popular consumption. But the scope of his writing and his research is as broad and rich as any of theirs. Ariely is well-known for clever experiments; Thaler for policy applications and experiments in behavioural finance; and Kahneman (apart from that Nobel prize) for coming up with some key simplifying models of thinking.
Loewenstein’s research has its own core message: people’s preferences are not straightforward. Despite the claims of standard economics, people seek out information or risk or meaning in a fundamentally different way to how they seek out apples or BMWs. This insight is probably more important for marketing than any of the better known behavioural economics discoveries. Since market research is traditionally focused on discovering people’s preferences (or as we call it in MR, liking), Loewenstein’s work is highly relevant.
Simplistic marketing, like simplistic economics, assumes that we can explain all consumer purchases in a simple way:
- people have fixed desires
- they know what those desires are and how strong they are
- once they become aware of products that can satisfy their desires, they buy those products
In this model, marketing is just a matter of making people aware of your products in a memorable way; and market research is just a matter of finding out what their desires are.
Loewenstein’s research is all about the complex ways in which the things we want do not work like this simple model. He questions the relationship between our underlying long-term preferences and the product choices we make. He shows that it is not enough simply to understand what people like. To gain useful brand insight, we must also understand the process of how their subconscious minds construct choices from those likes, from their knowledge and from emotions, in order to finally pick a product.
He looks at how we trade off pleasure today against pain tomorrow, how our mood influences the choices we make, and how much we know about our own future behaviour. He looks at how our preferences and behaviour are controlled by ideas of fairness, how much we actually know about the attributes of the products we buy, and how much we enjoy the anticipation of consuming something, not just the actual experience of it.
His writing about all of this is engaging and readable, with plenty of fun examples. One of his experiments asks how much you would pay for a kiss from your favourite movie star – now, or in ten years time. Another paper examines why people risk their lives to climb Mount Everest while hating every minute of the physical experience of it. If you want the rigorous mathematical theory behind his ideas, that is there too – but you can skip it and just enjoy the writing.
For me, two particular subjects in his work are relevant to MR:
One of these should be required reading for all market researchers. His paper “A Bias in the Prediction of Tastes” tackles what is perhaps the most important question in MR: do consumers know what they want? Loewenstein demonstrates that they do not; and also that their mistakes are consistent (they underestimate how much they will value a product when they first possess it, but they don’t realise how much they will adapt to pleasure or pain over time). The paper poses a series of important questions that market researchers should ask about the accuracy of consumer responses, such as: Can regular buyers of a product understand the attitudes of people who don’t buy it? Do people realise how much their tastes will change in future? Two followup papers are particularly relevant to researchers in the food industry and other fmcg categories.
The other subject is one Loewenstein has been developing throughout his career. He has built a model of curiosity from a behavioural economics perspective. Why are people curious; why do we so desperately want to know things that will often make us unhappy when we know them; why do we so easily lose interest in something we were once intensely curious about, even without finding out the answer; and why do we care about information before knowing it (who killed JR? What does that person in front of me on the pavement look like?) that we barely give a toss about after we find out?
Curiosity in itself is an important subject. It improves the effectiveness of advertising, explains a lot about consumer behaviour, and has been explored by philosophers as one of the basic aspects of being human.
More fundamentally, Loewenstein’s answer to the curiosity question – that whenever we are conscious of an information gap, we instinctively want to fill it – provides the basis for a powerful general model of consumer behaviour.
Instead of seeing curiosity as a passion or a personality trait, he suggests that it’s merely one example of how we instinctively want to close perceived gaps in our environment. If this same drive applies to other gaps in perception, it could explain our desire for any product and the strategies we follow to satisfy that appetite.
This also implies a difference between wanting and liking something – with curiosity we may want to close that information gap even if we know we won’t like the outcome. What if the same applies to other products?
Richard Thaler may be best at understanding finance, and Dan Ariely at designing experiments, but I’d rate George Loewenstein as the top behavioural economist for illuminating the psychology of consumer behaviour in general. If you’d like to understand, and perhaps influence, consumer behaviour, it’s his papers you should be reading. Most of the papers I’ve referred to, and many more, are collected in his highly recommended book Exotic Preferences: Behavioural Economics and Human Motivation.