An Introduction to Behavioural Economics

Behavioural Economics is psychology… experimental science in action and it focuses on choice architecture and how consumers are subject to predictable biases that may lead to decision errors. It has been proven from in-aisle observation and eye tracking that shoppers consider only a small percent of the products available for sale in a category.

Ruby studies the WAY that people decide and not just the decisions to provide marketers with new and powerful ways of influencing purchase outcomes.

What is Behavioural Economics and what is its role in market research?

1. Behavioural Economics is the study of how thinking and emotions affect our behaviour and the economic decisions or choices that we make.
2. It is based on the idea that people are irrational and make emotional decisions. In effect we think far less than we think we think.
3. This is critical for any marketer to understand as it can impact how we message, and place product or services in front of consumers and how they will react.
4. In terms of research, the understanding of Behavioural Economics principles is critical to how we conduct research, the methodologies used and the framing of the recommendations and outcomes we propose,
5. Customer satisfaction and loyalty research has a lot to gain from understanding the principles of Behavioural Economics especially in terms of framing, making choices and creating the context of value.

 

The role of choice

1. Choices often have three dimensions…where to seek out or find advice in making a decision, what to buy, and who/where to buy from. Each choice has its own path that are intertwined and critical to understand.
2. We need to help consumers reduce choice overload, we need to understand the impact of time on choice and how information is presented. For instance when consumers are presented with default options, the default is most often the one chosen by people as a safe bet. When consumers are presented with 3 price points, the mid price point is often the one that is chosen… why is this?
3. Making a choice on what to buy is always considered rational, however there is much research to prove otherwise. The popularity of a wine is often used to judge quality (known as herd behaviour) and racing to grab a special before it disappears, and consumer behaviour can be manipulated by where a product is placed on a supermarket shelf.
4. The fourth dimension to choice, is the choice of the answer respondents give to a survey question. Survey-taking is full of decision-making because people are not opening their brain like it’s “a container” and just letting truthful answers pour out of their heads. They are reconstructing memories and opinions in the context of their current mental state, and how the question is framed and asked, and how the preceding parts of the survey all have an impact on how the consumer will respond to the question.

 

The power of nudge

1. The origins of nudge marketing can be traced back to product placement and subliminal advertising…buy now messages that you don’t actually notice.
2. Its all about guiding, not forcing, for example putting fruit at eye level, is a great way to avoid snacking on junk food. Seeing the financial benefits of using less water on your water bill is another.
3. In this way marketing has exploited cognitive biases to nudge, or gently guide, people into making choices that are better for them and for the rest of us too — while always leaving them free to choose otherwise.
4. At Ruby we can help you understand the underlying cognitive biases that consumers have and how to gently nudge them in the right direction – Want your consumers to move from trialling your service to staying as a customer? Want your consumers to notice you on a shelf?
5. Nudges are simply push ideas and how to create these are best understood by observing consumer natural behaviour and barriers to making choices or changing behaviours, rather than by asking them questions.

 

How can we help?

1. We have several behavioural techniques to help you get to the bottom of choice, decision making hierarchies and how to nudge behaviour.
2. At Ruby we believe in using ethnographic techniques to help us observe actual behaviours, either by using observational techniques or digital online communities.
3. We also believe that observation goes hand in hand with strategic moderation. Focus groups are not dead here, they just need to be more behaviourally oriented. Using techniques like conflict groups, shopping a mocked up shelf and creating behavioural tools within the group can go a long way toward helping us understand natural behaviours.
4. We also believe that quant techniques such as mobile surveys, conducted in the moment or at the time of consumption or decision making can be powerful in helping us understand the context and mood of the actual choice behaviour., the heuristics at play and how fast the decision was made.
5. The most important aspect of research that plays to behavioural science is ensuring that behaviour is observed and actual rather than recalled, because recalled information is often unintentionally inflated or incorrect. Just give a thought to witness accounts of theft for instance to get a handle on that.

 

Want to know more?

Give our team of market research experts a call on +612 8094 6800 or email us on info@rubychacha.com.