Behavioral economics

BySixthfactor Team

Behavioral economics

In Today’s world of market research, researchers are often puzzled by persistent doubts. We always ask customers the reason for buying a certain product and in return we get a reply stating it’s due to the value reliability. Is that a good reason to believe them? Similarly if we question someone “what drives their choice of a chemical supplier, and they reply to us saying it’s the price, quality and delivery. How far can we trust their answers? In other words we have to measure the extent of what people actually say and what factors drive them to invoke that behavior, which brings us to the gist of behavioral economics.

Behavioral Economics Interpretation

Behavioral Economics is a study related to the economic decision making processes of individuals and institutions. In a broader perspective behavioral economics takes into account the psychological, social, cognitive and the emotional ingredients in the economic decisions of individuals and institutions.The core aspect of behavioral economics still carries the conviction that experience plays a vital role in the decision making process. Behavioral economics does not believe that decisions are made rationally rather it explores to gain insight why people make irrational decisions how and why it cannot adhere to the predictions of some economic models. In other a clearer outlook, behavioral economics assumes the short minded and irrational decisions of people to derive vindications based on assessments and observations. Behavioral economics firmly believes that mistakes are made all the time thus considers that deficiency in the real world can figure out why people behave imperfectly.
In simple words behavioral economics emphasizes to a greater extent on how we behave rather than what we say or think.
Hence behavioral economics can adjust and manipulate a person’s behavior.

Behavioral Economics Effect on Market Research

Behavioral economics throws light on the factors that influence people’s actions. It is important as a marketing researcher to think in the view of a behavioral economist to know how the choices are made rather than what choices are made. Each choice has its own direction that has its own meaning and is critical to understand. Marketers were constantly deploying behavioral economics even before it had a name.

Single Consumer, Two Perspectives

The lens of the behavioral economics process on consumer choices points out why some marketing efforts are not effective and most importantly how to build effective marketing strategies by analyzing consumer choices. Famous researchers on consumer insights state that one of the most important insights about consumer choices is that consumers think more intuitively than deliberate thinking. The Intuitive approach of thinking is known as system1 thinking and the deliberate approach of thinking is known as system2 thinking. Habits and Inertia also have an impact on consumer choices. For instance say the consumer receives a superior message about a product, it’s not necessary that the message will get converted into an action. Since our intuition sometimes overplays our beliefs, which many not be even salient at the moment of decision. Market Researchers should therefore be aware not only to decode and influence consumer behaviors but also know to decode and understand long held habits (intuition).

Improved Marketing with Behavioral Economics

Behavioral Economics drives the standard marketing approach with revelations from the blend of psychology, economics and market research. It enlightens our quest to find why and how people make the choices, what aspects are involved in the decision making process and what levers most effectively triggers outcomes. Though firms shed billions of dollars through their marketing efforts in order to persuade the customers the results are often mixed and is rarely in proportion to the amount with the spending.
Behavioral economics gives insights to devise methodologies that are effective and cost friendly to achieve the desired consumer behavior.

A Fresh Consumer Psychology

Market Researches are often accustomed to think about demographics while being accustomed to such a thought process they fail to realize that every consumer has a goal that is active. Recent psychological studies show a deeper perception about goals as opposed to standard marketing approaches that considers only static needs. People in today’s world have various goals ,goal of being a better husband ,goals of being a better parent but it’s always the case that one goals remain active at the moment while others remain latent. Conveying messages to consumers when the wrong goal is active can lead to disastrous results. We need to offer these messages when the right goal is active and it definitely boost our marketing efforts to a better level. Behavioral economics also highlights the need to understand a range of factors that are beyond the control of a marketer. For example people make decisions differently when they are subjected to time pressure or when they have made a series of unrelated decisions

Perceiving the Lens of Consumer Beliefs

Eventually it is the system of beliefs that the consumers interpret the world. These beliefs can actually have an impact on how we experience a certain product or a service.
This would involve understating and acting upon on the authentic beliefs at the right moments.
Beliefs about a product can be the stimulating force for not only the predictions about the products but the actually experiences that consumers attain after using the product or service. The challenge for us is not only on product enhancements through research and development but also managing and influencing consumer beliefs.

Shopper Insights

In the same line the presentation of the alternative solution known as choice architecture is essential in successful marketing. Retailers have learnt for years that the products displayed on the middle shelves are more attractive than the products displayed on the top or bottom shelves. This is because our intuitive thinking (System 1) generally starts by selecting what is right in front of us. These findings clearly indicate that intuitive thinking (System 1) involves simpler processes than what is assumed actually about it. Careful choice architecture can thus have an impact on offering a superior product.

Behavioral Economics uncovering new opportunities

Behavioral Economics unveils that consumer decisions are more complicated, it also discovers a new sphere of opportunities to marketers. System1 (Intuitive) and System2 (Deliberate) Thinking: Given from findings that most of the consumer decisions are dominated by System1; marketers have ample of economic opportunities to convince the consumer. It can be attained by simply generating appropriate messages that cater to all the process involved in System1. Beliefs: Marketers face a stiff challenge for the need to reset the belief systems along with designing a good product. They need to find tools to change the beliefs that people hold or alternatively utilize the existing belief systems to attain benefits. Goals: Delivering messages to consumers when the right goal is active is important to get attention and boost marketing efforts. We also need to design communication network that influences which goals are active. Behavioral Economics undoubtedly delineate the modern consumer in a concise manner.
Behavioral Economic thus is a vital aspect in understanding what drives in consumer actions/decisions.

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