Behavioural economics is considered the science behind understanding the human decision-making process. Through experiments and trials, researchers try to understand and uncover how we as humans think and arrive at decisions. Basic questions like how are information processed and how is our behaviour influenced are addressed.
From a marketer’s perspective, behavioural economics is important because it helps to understand how consumers’ minds work and develop marketing campaigns accordingly. By understanding the consumers’ needs and wants, marketers can design value propositions better to cater to these.
Basis of behavioural economics – a quick look
As per behavioural economics studies, the human brain can be thought to have a two-system mechanism. The first system helps one to survive. By processing stimuli, it forms perceptions and develops intuitions to indicate situations and circumstances. The second system drives reflective thinking and affects the deliberate decisions one makes after thinking about it.
But thinking hard all the time isn’t practical, as it would make one tired. The default mode of thinking for someone is the first system. It processes details and information fast, and then the second system is prompted to analyse and arrive at a decision.
Key principles of behavioural economics
Here are a few key principles to understand the psyche of consumers that marketers can use systematically for their campaigns.
Consumers tend to think that a product is good if it’s more popular. They rely on the validation and reviews from other people who have used and experienced the product. In the age of offline and online advertising, user reviews have gained more prominence as a vital feature of marketing.
Brands that give a sense of familiarity and feel-good factor gain more trust in consumers’ minds. Simple and soothing designs give a sense of simplicity. Simple and easily navigable website design would be more appealing than a complex design.
Through the right and apt presentation of details, consumers can be nudged to choose more expensive products too.
To invoke a particular reaction from consumers, they need to be nudged accordingly. For example, if the purpose is to make them eat less, they need to be given smaller plates so that they can take limited portions only.
Where the brands are sold forms of perceptions in consumer minds. Luxury brands keep tight control on their distribution channels because of this. A new market and new audience may require a different context for brand messages.
Consumers get drawn to brand ambassadors and they tend to identify with them to emotionally connect to a brand. Faces are an effective tool to position brands and to form an emotional connect with consumers.
Brands that step out of the usual designs of communication may get noticed more and find better recall in consumer minds. It will nudge them to think and consider that brand.
Emotions click with consumers more than any rational logic. Marketing communication that aims to connect emotionally drive the message across better than a logical or thinking format of communication.