Read some of her highlights from the conference on RWConnect:
Read some of her highlights from the conference on RWConnect:
Recently our co-founder Leigh Caldwell chaired the behavioural economics panel session at the Market Research Society conference. Our goal with this was to go beyond the anecdotal party tricks approach which has dominated much of the BE conversation in market research so far. Our title, “behavioural sillynomics”, was meant as a playful challenge to this conversation.
Of course party tricks are a fun way to introduce the ideas of BE for the first time, and they help to catch the attention of a new audience. The market research industry has already got to that stage, however, and is hungry to know how to apply these discoveries in practice.
We structured the session as a conversation between a client, behavioural scientists and – bridging the gap – market research agencies. The client wants to use BE to create more value for his consumers; the scientist has a whole library full of useful (but sometimes complicated) discoveries that she and her colleagues have made; and the agencies can sit in between, picking out the most important and practical pieces from the scientific literature and putting them into practice for businesses.
Our client, Erkan Balkan of PepsiCo Snacks, opened with a call for agencies to start finding out how consumers make decisions in an unconscious way. Existing research methods mostly rely on the conscious beliefs and memories of respondents, and rarely access the deeper drivers of behaviour. Some agencies have started to adopt BE methods in the early stages of research – qualitative methods which are usually used for ideation and invention. Even there, even the most advanced agencies only use behavioural methods for 20% of their insights. But to really change market research, we have to start applying BE at scale. The real money in research is in validation and testing, for ads, products, concepts or packaging – mostly quantitative disciplines. According to Erkan, nobody has really figured out how to scale up behavioural economics research. (Read more on Erkan’s views on Research-live.com.)
Barbara Fasolo of London Business School represented scientists and economists – the people discovering the underlying science. One possible reason BE has not immediately been seen as a useful discipline for market research is that it sometimes uses a straw man approach. BE sets up an image of people as “rational” in order to prove they’re “irrational” – and presents this as a revolutionary discovery. But no practising market researcher has ever been under the illusion that consumers are rational! Only economists believe that.
Instead, BE and the science of decision-making should forget the argument about “irrationality” and instead focus on providing a scientifically valid description of how people make decisions. Market researchers know a lot about decision-making, and behavioural economists know a lot too – by combining their expertise we can understand the consumer much better than before. The key insight that behavioural economists and psychologists can bring is an understanding of heuristics, and the smart methods that consumers use to find their way through a complex world. Barbara called this “Behavioural smart-onomics” which made a good contrast to our title.
So, a client wants to know how BE can help him, and a scientist has presented a new way to look at the discoveries the field has made. Could our two agencies act as a translation service, putting the science into terms that clients can use?
Lisa Edgar took us through an example of how her agency Big Window has done that. Working with client Jo Kenrick at Homebase, she measured the cognitive response of Homebase consumers to specific advertising messages. The psychology literature predicts that older consumers will rely more on “System 1” and emotional responses, rather than logical, considered “System 2” responses. This might suggest that emotional advertising works better on this audience (an important segment for Homebase). Lisa set out to test this, but it turned out that the picture wasn’t as simple as this. Older people turned out to respond better to logical, feature-oriented advertising than to emotional ads. But they took longer to do so, suggesting that they are alert to the risk of being fooled by heuristics and take care to think things through and avoid it.
Tom Vannozzi from Jigsaw then showed three case studies they’ve carried out. In one, they showed consumers messages about the social norms in their area – for example, that 60% of consumers eat the recommended five servings of fruit and vegetables each day. In a survey afterwards, they found that this message changed consumers’ claimed attitudes to healthy eating – although didn’t necessarily make them buy any more vegetables! In another study, subconscious “goal priming” of consumers changed their behaviour at a petrol station – if they were thinking of environmental goals, they’d make different choices than if they were thinking of goals around speed and excitement, or self-actualisation. Consumers weren’t conscious of how these messages or primes were changing their behaviour, but the effects were statistically robust.
The whole panel reinforced the message that there’s no real meaning in saying consumers are “rational” or “irrational”. Instead, we would be better off thinking about what a consumer’s goal is, knowing the heuristics they are likely to use to achieve it, how those vary by consumer type, and how to influence them. Heuristics follow certain rules – based on the capabilities and limits of our minds – and by knowing these rules, we can predict and understand consumer behaviour very well.
We also gave attendees at the session a copy of the handbook of behavioural economics written by our founders Leigh and Elina. If you’d like a copy, email us at firstname.lastname@example.org.
Is there a better way to start the week than a glitzy industry party? Turns out there is – coming back from one with a shiny award!
On Monday evening we got all dressed up and headed to the MRS Awards at the Westminster Bridge Park Plaza as our partner, Elina Halonen, had been shortlisted for the Young Research Writer Award (sponsored by the International Journal of Market Research) for her research on brand personality measurement.
And to our great surprise… she won!
The paper itself will be published in the January issue of International Journal of Market Research, and all three finalists will be presenting their work at Young Research Writer Showcase presented by R-Net and IJMR on 28th January.
For the past couple years, behavioural economics has increasingly become a buzz word in both the marketing and market research world. As the field is becoming better known, a lot of people are also questioning what exactly is new about it. Quite rightly, many market researchers are asking how any of it is different to what marketers have known for years and what good researchers should be doing anyway.
We keep using the same examples over and over again, in order to cater to those audiences who have not yet become familiar with the basic principles underlying behavioural economics. Anchoring, framing and nudging have now more or less entered our professional vocabularies but, as the critics are pointing out, that’s all well and good, but what do we do with this new information?
One of the issues lies with us as practitioners.
Too many presentations on behavioural economics in conferences include the same examples, repeated again and again. I could personally go without ever seeing the bat and the ball example again, especially as it was originally devised as a scale for measuring an individual’s cognitive ability. Using it as an example for System 1 and System 2 thinking helps no-one: it confuses audiences who end up seeing behavioural economics as even less amenable to practice and therefore makes us as practitioners look detached from reality.
The reason we, as the BE practitioner community, are failing to convince a large part of our audiences that there is something worthwhile here is because… Well, we haven’t really shown them anything worthwhile yet.
Yes, we’re all irrational. Yes, we are influenced by context and social pressure. Yes, we’re not very good at figuring out what things should be worth. Then what?
Being aware of two systems of thinking or a range of cognitive biases like hyperbolic discounting (a preference for a smaller reward now rather than a larger reward later) and loss aversion is good, but what we really need is more detailed advice on exactly how to use these in our work (for example, just how much more are customers willing to pay if they pay by instalment). We’re still at the stage where we have still barely moved beyond entertainment value – worse yet, we’re in danger of becoming a joke.
The answer? We need to go beyond Predictably Irrational, Nudge and other popular literature aimed at mass audiences because decision making research is a vast field with much more to offer than just a few authors’ work. In fact, ‘behavioural economics’ is only the part of a larger scientific discipline of the psychology of judgment and decision-making that focuses on individuals’ economic decisions. Using popular science books as the basis of our knowledge is like trying to do crochet with a baseball bat when we really need to start using more elaborate tools to promote our trade. At the moment, as practitioners, we’re playing with the theoretical equivalents of the brightly coloured Lego Duplo blocks for toddlers while the academic world is building models more like Lego Technic.
It’s not enough to read a couple of books that have been designed for a general reader instead of thinking about specific industry applications, with examples of research that is, at best, several years old at time of publication and weaved into an entertaining narrative. What that means is that at the moment many practitioners are shoehorning client problems to match the answers that are available in those books. That’s simply not good enough.
However, there are a couple of problems.
The first one is that we still largely lack a baseline understanding of the basics of behavioural economics amongst clients and even non-BE practitioners in the marketing and market research industries. Despite the frequently repeated examples, or perhaps because of them, we’re still unable to move to a more advanced level of debate because of the background knowledge needed. Biases and fallacies are easy to grasp, but these are far from the height of sophistication of the discipline – they’re just the starting point for branches of research such as examining the exact contexts in which, for example, the endowment effect occurs. Not fully understanding the specific conditions may cause policies and marketing plans to backfire, so it’s important to get to grips with the details of the literature.
This is the second issue that we currently face. Merely familiarising yourself with a couple of books means seeing the BE world in black and white, not in the technicolour version of the full discipline. We need to engage with the literature more deeply and make a bigger effort to communicate these more advanced examples to a broad audience. The work of prominent behavioural economics academics such as George Loewenstein is currently being ignored in the mainstream simply because they have not (yet) written a popular psychology book summarising their work. Yet, there is much there for us to benefit from. One way to stay tuned with the field is to attend academic conferences to immerse yourself in the current debates. The recent behavioural economics conference in Tilburg showcased some the most up-to-date research that will not be available in published format for another year at least. Conferences also offer access for practitioners to speak to leading academics in informal settings. However, even at this conference the absence of practitioners (excluding the Dutch financial markets authority) was notable.
The responsibility of communicating the benefits of behavioural economics and decision science lies with us – the practitioners. How do we raise the level of the debate? And when are we really going to start engaging with decision making as a science?
(This post originally appeared on Knowing and Making on 28th October 2009)
This gap is where cognitive models provide the missing link in both explaining and predicting human behaviour.
Beneath this level, neuroscientists are discovering the specific physiology of the brain and how it responds to certain stimuli. There is a lot of useful work on how the limbic and motor systems control certain responses below our conscious awareness.
The first time you heard them they were quite fun, memorable even. But then they got more airplay. And more. And more. Radio stations figured out that the sugary, bubbly popness of the tunes would cut through a lot of background noise and get your attention, so they played them again and again. Soon we had Got To Be Certain, and Je Ne Sais Pas Pourquoi, which were exactly the same as the first two songs. Then a “strategic inter-agency collaboration” with Jason Donovan on Especially For You.
After a short interlude in late 1989, another number 1 with Tears On My Pillow, which was meant to be more sophisticated but was equally artificial, overproduced and in fact just the same old song as I Should Be So Lucky. By this time anyone who wasn’t a 13-year-old girl was thoroughly sick of Miss Minogue, who wasn’t even on Neighbours any more. Interest and record sales rapidly declined, and thankfully Nirvana showed up to distract us.
On a completely unrelated subject, do you remember those talks about behavioural economics that infected the market research industry in 2009? Someone had read Nudge, and someone else got a copy of Predictably Irrational. It’s quite easy to write a behavioural economics talk – you just claim that everyone else in the world thinks people are irrational, but you have spotted (with the help of Daniel Kahneman perhaps) that they’re not. Read out a list of cognitive biases – anchoring, hyperbolic discounting, social norms. Show some slides with illustrated examples of each bias. If you’re brave, test one of them on your audience and hope they haven’t yet been to enough identical talks to see through your ultimatum game or your auction. I am just as guilty of this as anyone else.
As straightforward as this formula is, it’s no surprise that throughout 2010 and 2011 you’ve had the opportunity to attend perhaps twenty workshops, panel discussions and seminars every year containing exactly the same content. Every Market Research Society conference since 2009 has had a behavioural economics session. Every agency has sent one director and two junior researchers to a training course. Every agency at the top of the GRIT rankings has a behavioural economics link on its website or its case study at ESOMAR.
(Don’t get me started on fecking neuromarketing.)
The backlash was smooth, professional and equally predictable. “But isn’t behavioural economics just what good marketers have been doing all along? This theory is all very well, but how do weuse it? Cognitive biases are all very well in the lab, but how do you know the results apply to consumers in the real world? Anyway, it’s all just a fad.”
Put any three market researchers in a pub and mention behavioural economics, and I guarantee the conversation will proceed swiftly along the above lines.
It’s 2000. Kylie hasn’t had a number 1 single for ten years, or even a top ten hit since 1994. She’s a joke. She’s been dropped by her record label. There isn’t even a nostalgia industry around her yet. In fact, Nicole Kidman’s the only Australian we recognise now.
Paula Abdul writes a song but decides not to record it. It is hawked around the industry and eventually gets passed on to Kylie.
Spinning Around is a worldwide hit, number 1 in the UK and Australia, and revolutionises Kylie’s career. The theme of the song reflects Kylie’s own transition: she’s grown up. No more novelty singles or soap opera posing. She’s sexy now.
Behavioural economics is ready to grow up too. Enough with the cognitive biases, the party tricks. The field is actually based on much deeper psychological research into judgement and decision-making, cognitive theory and information processing. It’s time to abandon the false tension between “rationality” and “irrationality”. Our minds process information and choose actions in a way that is locally rational. But when viewed globally, these choices show that there are conflicts between the different interests and needs that a single human being has.
Behavioural economics, and the cognitive theories that underpin it, gives us insight into how people interpret the world, what people want, and the actions people take in response. It invalidates traditional methods of market research and marketing cliches – but only once it is taken seriously. It tosses out the basis of conventional economics, consumer preferences – and the very notion that we make “decisions” between “products”.
There is a proper, integrated theory here, based on the idea that people adapt to a basic level of satisfaction, and act to restore it when it is disturbed. They rely on efficient but imperfect memory to retrieve a variety of strategies to restore that homeostatic equilibrium, and only when those strategies lead them towards product acquisition do they apply something a little bit like a standard consumer choice process – but one constrained by the brain’s information processing limits. Experimental psychologists can help you design experiments to measure each of these stages, and you can design interventions to change the behavioura of the average consumer at each point.
Yet we only have access to these insights once we stop playing at party tricks; stop pretending that people are really rational except when we pull the wool over their eyes with a clever heuristic. Only when we use a well-founded model of cognition and design our research methods to uncover its parameters, will we be able to predict, and more importantly influence, what consumers do.
Behavioural economics has a new record company, and it’s about ready for its serious phase. Time to reinvent it. That complex, but scientifically measurable, cognitive model is what runs your mind, and you can’t get it out of your head.