Anyone involved in the business of selling should use behavioural economics to make sense of the way humans act
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In his book Darwin’s Dangerous Idea, the philosopher Daniel Dennett makes the case that Darwinism is the “single best idea anyone has ever had”: a candidate for a Theory of Everything, a “universal acid” that affects everything with which it comes into contact.
Marketers need some universal acid of their own. The quantitative potency of big data to guide marketing strategy has led some in the industry to pronounce “the end of theory”. This is wrong: we need some broadly agreed understanding and theory of human decision making before we launch into any form of activity that is designed to change customer patterns. Big data provides many of the raw facts about customers’ purchasing patterns but, as the great economist Friedrich Hayek said, “without theory, facts are dumb”.
Behavioural economics promises to be the universal acid marketers need, because it teaches marketers truths about consumer behaviour that mere facts and figures cannot. Humans are equipped with a brain whose job is enormously demanding. It, therefore, devises energy- and labour-saving devices to deal with all of the complexities thrown at it. These devices are essentially shortcuts – known as heuristics – which are based on something Professor Daniel Kahneman called “cognitive ease”: the neural equivalent of “if it ain’t broke, don’t fix it”. So we all have very strong assumptions, or prejudices, or defaults, or stereotypes, which take time and effort to shift because they become ingrained ruts that grow deeper with use.
Many of the default assumptions about human behaviour in sales and marketing have become precisely this type of heuristic: easy, convenient and reinforced through selective perception and by ignoring any conflicting evidence.
Despite their ease, convenience and popularity within many sections of the business community, the assumptions outlined are misleadingly false. They are born of our desire to believe we as serious, sophisticated businesspeople oozing self-worth and importance – are in control of ourselves and our jobs, the product of unalloyed rationality.
Branding efficiently in this place and age of instant gratification will need to take behaviour into account.Behavioural economics offers a radically different, and more exciting and creative, view of the motivations and behaviour that influence consumer decision making. After all, this is what most of us in the branding and communications business are concerned with. But are we brave – and honest – enough to face our true nature and apply its insights?
The numbers obsession
The heart of the problem is that Western business’s default monoculture is an arithmocracy: a system that wants to make everything more like physics and mathematics, where humans are predictable, controllable and measurable like atoms; and where the ‘rational man’ of classical economics rules the roost.
But 40 years of coherent and rigorous evidence in the behavioural economics field reveals that human beings are far more shaped and moulded by emotions, unconscious processes and environments than we like to admit. Biology and psychology trump physics and mathematics.
Humans are not rational information processors and, to quote a prominent neuroscientist, “we don’t think the way we think we think”. Our brain is resource-hungry, so it cannot make every decision afresh – to do so would require too much energy. So it relies on experience and heuristics.
The importance of emotion
Perhaps the most important truth that behavioural economics teaches us is that emotion lies at the heart of our decision making. This is because our emotions are designed by natural selection to be ‘evolution’s executioners’: to cut in and make decisions that enhance our chances of Darwinian survival.
There are six universal human emotions (see box, right) and these are collectively designed for our survival by short-circuiting rationality and making important decisions in our best interests, often without even bothering to contact the conscious mind. Rationality is – at the very least – overrated, which suggests that brands are not just about anchoring product messages into a mind, but often about reflecting or enhancing our sense of who we are (or want to be).
The two systems
The other central tenet of behavioural economics is one popularized by Kahneman in his bestseller Thinking, Fast and Slow: the fact that the brain has two very distinctive processes.
System 2 is the one that feels like ‘me’ – the conscious sense of who we are and how we are in control. It is slow, more calculating and tends to have a longer-term view of action and consequence.
System 1, on the other hand, is ‘the adaptive unconscious’ and is the earliest system designed with the evolutionary purpose described above. So System 1 is automatic, immediate and entirely focused on the here and now. Occasionally, System 1 will get things wrong, but it will always make what it considers to be the best decision at that moment.
Perhaps the crucial insight for those of us concerned with marketing, communications and research is that we want to think System 2 is in control, is taking the decisions and is ‘us’. But behavioural economics shows this to be an illusion: the part that is making the majority of the decisions is the element over which we have the least control.
The power of now
We have evolved to maximize our chances of survival and reproduction, so System 1 is, as we saw above, especially biased towards the immediate and the urgent.
As a result, we are very poor at predicting the future, and we are driven by the present. Most of what we think we are predicting is what social psychologist Daniel Gilbert calls “nexting”: creating a future which is mainly built of the present and a bit of the past.
Truly unexpected events – what Nassim Nicholas Taleb calls “Black Swan” events – are beyond the power of our brains. This is why no one predicted the internet, mobile phones with multiple functions, the global meltdown of 2008 or even Fifty Shades of Grey, the fan-fiction-turned-erotic-romance that became a global publishing sensation.
Give this proven human inability to predict the future, why ask consumers in surveys to predict the likelihood of their buying your new brand?
The new marketing manifesto: Tips to build brands in an emotional world
Once we understand behavioural economics, the universal acid of marketing, the way we sell to customers looks very different. Here’s a new manifesto for marketing the behavioural economics way:
1. Embrace surprise
Too much sales and marketing work is conducted against the old model of conscious rationality – a great deal of the effort trying to message people into submission is wasted and becomes ‘attention spam’. Use more surprise and emotion to gain meaningful cut-through
2. Know that less is more
Too much messaging may fail to permeate the brain’s attentional filters. Keep your communications simple and engaging
3. Massage, don’t message
Brands are about signalling. Unless your product is uniquely distinctive, create campaigns that aim to improve positive emotions about your product, rather than rational universal selling point-type propositions
4. Recognize the power of inertia
The brain develops heuristics – or shortcuts – because these are energy-conserving and convenient. Never underestimate how hard it might be for your consumer to change their ingrained brand choice, even when your product is objectively ‘better’
5. Use context to beat content
Decisions are made as much by context, mood and other people as they are by conscious, individual choice. So your media and creative work should concentrate on creating positive contexts for your sale
6. Innovate with instincts in mind
Create products that appeal to the brain’s System 1 (the adaptive unconscious) more than System 2, and that people think will make them look good and/or feel good about themselves
7. Challenge your researchers
Are you genuinely getting beneath the surface of what your customers think and why they are behaving in the way that they are, or are you receiving only the answers that System 2 gives, to save face? There is some exciting work happening with researching System 1, but the research industry is proving slow to adopt it
There is a raft of other ways in which this exciting new area offers the promise of opportunities in the world of business and communications. It is time that we marketers laid aside some of our old and lazy assumptions and began to embrace the many possibilities that behavioural economics offers.