Caution! Elephants shopping. How Behavioural Economics can be applied to marketing. When Great Minds Think Alike #2

Behavioural Economics applied to marketing

23 Nov Caution! Elephants shopping. How Behavioural Economics can be applied to marketing. When Great Minds Think Alike #2

Part Two of “When Great Minds Think Alike”: The application of behavioural science to the practice of marketing.

 

This post is the second part of a series of articles based on the white paper “When Great Minds Think Alike” published in November 2018. For a full copy of that text email info@brandtraction.com.au with the subject “I want it all”. Or click here for more information.

How Behavioural Economics can be applied to marketing?

We have a much richer understanding of how people behave and are influenced. And are developing a broad and deep toolkit for how we as marketers can use that insight to build stronger brands and more effective campaigns. But much of what we are learning from the field of behavioural economics challenges some of the things we have believed as marketers and needs us to reframe our thinking quite considerably to deal with this new information. Consumers we have discovered are irrational, intuitive and impulsive in the main. Not logical and thoughtful. It takes a big effort to get us to change course and often the best way of doing that is not to try and show us some persuasive advertising our promotion. But to make the behaviour we want easier to perform. But we do now have a good understanding of how behavioural economics can be applied to marketing.

Here’s what we have learned in summary.

The science of spending

Behavioural Economics is the study of why we choose to buy what we buy. ‘Rational Choice’ theory was the foundation of modern economics. It is a theory that assumes that human actors have stable preferences and engage in maximizing behavior. This theory has been widely debunked. Amos Tversky and Daniel Kahneman published a number of papers in the late 70’s and early 80’s that undermined the ideas about human nature held by mainstream economics.

“Call it behavioural economics or the psychology of spending, all of us, whether we know it or not, take our emotions, eccentricities and idiosyncrasies to the cash register.”

– Dr. Richard Thaler, UK Behavioural Economics Unit (The Nudge Unit)

Marketer as Behavioural Scientist

As marketers, our distinct role in the organisation is to persuade consumers to choose our brands over others. To get people to behave in the way we want, in a way that drives a commercial outcome. To profitably get more people, to buy more things, on more occasions, at higher prices. We are then, the behavioural scientists of commerce. Or at least we should be.  Understanding how Behavioural Economics, the study of choice, can be applied to marketing seems like a very good idea.

In recent years, we have made huge strides in the behavioural sciences that give us a much better understanding of why we humans behave as we do, and how to shape that behaviour. It’s mostly depressing reading, that demonstrates we haven’t really got that far from the fires of the cave and the fear of the sabre-toothed tiger.

“It is true that from a behavioural economics perspective we are fallible, easily confused, not that smart, and often irrational. We are more like Homer Simpson than Superman. So, from this perspective it is rather depressing.”

– Dan Ariely, Professor of Psychology and Behavioural Economics, Duke University

If our role is to persuade people to choose our offer over others, understanding how and why people choose, and how to affect those choices, has to be a fundamental start point. We just need to apply a healthy amount of ‘so what’, to bring this complex, often academic, arena, into our world. How can behavioural economics be applied to marketing then?

The fast and slow elephant

Any review of the research on behaviour really needs to start with Danny Kahneman’s Nobel prize-winning work, “Thinking Fast and Slow”. If there is one source text, this is it. In “Thinking Fast and Slow”, we see that the the the way we make decisions is in one of two modes; System One or System Two.  Kahneman shows us that 95% of our decisions are made emotionally and instinctively, in System One mode, not rationally, by the System Two mind.

Behavioural Economics applied to marketing

System One and System Two

Jonathan Haidt in “The Happiness Hypothesis”, brilliantly dramatises Danny’s findings, by describing our minds as in two parts; like a rider, sat upon an elephant. Our irrational, hard to control, intuitive brain is the metaphoric elephant and our more rational, thoughtful self, the rider. With the elephant very much in charge, most of the time.

“The conscious rational brain isn’t the oval office. It’s actually the press office issuing explanations for actions we’ve already taken”

– Jonathan Haidt

Elephants don’t dance.

As marketers understanding this insight is critical. We have to learn to work with the elephant, not against it. Understand that people will rarely be persuaded to choose a new path versus the one they are on. That the choices they make will have more to do with how they feel about something, than what they think. That they can be nudged and encouraged in a certain direction, but not easily reversed, or turned around. That long lists of differentiated features and benefits might make us feel good, but probably won’t get considered by the herd of elephants we want to buy us.

Start with the behaviour you want, not the ad you want to make

No wonder then that people’s relationships with brands are very different to how we might have thought. They are not thinking about brands very much at all. Understanding this and being clear about what is, and isn’t, possible, needs to be at the heart of any marketing plan. Any good marketing plan should begin by defining the behaviour it wants to affect. Not the tactic it wants to deploy. I believe the first key step in any marketing exercise, from long term strategy development to tactical campaign briefing, should be to translate the business outcome required, into a clear definition of how many people, need to do what, by when.

It’s why persuasive advertising should probably be the last thing we think about as marketers, rather than the first. Let’s first make sure we have a product or service that meets a real need and solves a real problem. Let’s make sure it’s widely available and easy to buy. Let’s price it in a way that signals its value to consumers and identifies where it fits in the category frame in which they are shopping. Let’s do everything we can to make it easy for the elephant to stumble over us, before we start trying to persuade it to choose us over others. Taking the first step to marketing enlightenment, means we need to understand and work with this system, not against it.

Behaviour = money

The other good thing about starting with behaviour, is that we can link behaviour change directly to the P&L, in a way that’s very hard to do with things like brand tracking. More people, buying more stuff, on more occasions, at higher prices, has a simple mathematical relationship to revenue that any business can connect with. Explaining to the CFO why growing your “brand liking” score to 81.7% is worthy of investment, can be a tough conversation. Explaining that you want to make 10,000 people, spend $10, twice in the next 12 months makes for a much more engaging meeting. And rightly so.

The Fogg Clears

B.J. Fogg at Stanford has a great way of thinking about a more practical application of the science of behaviour change. How can behavioural economics be applied to marketing? What he suggests, is that to get the elephant to do the things that we want, we need to pull on three potential levers; motivation, ability and triggers.

Motivation

We need to make, shape and invent things such that our brands and products identify and meet real deep and powerful needs and are inherently, emotionally appealing, distinctive, memorable, and salient. Make things people actually want and need. Solve real problems that people have. Innovate with real insight. It’s not enough that it practically works. It needs to also trigger a more emotional response. Antonio Damasio says it well;

“We are not thinking machines that feel; rather, we are feeling machines that think.”

Antonio Damasio

We then need to communicate with the elephant. Trigger and prime their emotions. Get remembered. Be salient. Worry less about features and benefits and differentiation. The elephant doesn’t care much.  Worry much more about being desirable, distinctive and memorable. Or create what Byron Sharp, in How Brands Grow, calls mental availability. An emotionally primed recall of the brand’s distinctive and memorable assets. The message of our communications is much less important than we used to think. Of much more importance is the need to stand out and get noticed, then get remembered and correctly recalled. This is the language of elephants. On messaging, we will discuss more later, when we get into the realm of creative effectiveness.

Ease (or ability)

The second job is to make our brands easy to buy. Get rid of the practical and mental barriers to purchase. Be widely available. Be easy to choose. Be simple to find. Be easy to understand. Reduce complexity. Erase tensions. Dispel myths. Simplify brand architecture. Improve the customer experience. Layer service over product. Find new distribution points and new routes to market. Create physical availability (Also ref: Byron Sharp.)

Simplify, simplify, simplify.

There’s so much for the marketer to do here. This isn’t the sexy world of creative development. This is the brutal world of sub-brand killing and SKU count reduction. Of doing less activity, not more. Of reducing the number of pain points on the customer journey. The hard-graft world of shoppability and UX.

Perhaps the single, biggest and most effective change a marketer can make is to make the brand experience easier and the product simpler to buy. These are rarely the sexy end of the marketing role. It takes a great ad-man to explain best, why advertising isn’t always the answer:

“You can try to change people’s minds, but this is difficult. You can bribe people to change their behaviour, but it’s expensive. Far simpler is to make the new behaviour easy and enjoyable in and of itself.”

Rory Sutherland, 2017

Rory Sutherland

Rory Sutherland

Triggers

Once we have a consumer motivated to buy our thing. Once our product or service is easy to access and pain-free. Then we can then consider pulling triggers, to ensure they pick us, not one of the other 5 brands they also regularly buy. At their simplest, triggers look much like a price promotion, a gift with purchase or a chance to win. Australian marketing has long had a somewhat misplaced obsession and love affair with the good old-fashioned promotion. The world of behavioural science now offers us some more sophisticated options about how we might trigger that final all important choice.

Cialdini’s Six Principles

A good place to start is with Robert Cialdini’s six principles of influence. These six core biases alone, create a powerful toolkit that helps us nudge consumers to choose our brand over the competition.  (ref: The Psychology of Influence and persuasion, Robert B Cialdini. 2011). Really understanding just these six powerful shapers of behaviour can really drive up the tactical effectiveness of your communications, web design and experience design.

  1. Reciprocity. Human beings are wired to basically want to return favours and pay back our debts. Give a little to get back a lot.
  2. Commitment and Consistency. We have a deep need to be seen as consistent. Once we have publicly committed to something or someone, we are much more likely to go through and deliver on that commitment. Its why those of us locked into Apple’s system are happy in our walled garden.
  3. Social Proof. People do what they observe other people doing. It’s a principle that’s based upon the idea of safety in numbers. Its why don’t easily choose an empty restaurant over a busy one.
  4. Liking. The more you like someone, the more you’ll be persuaded by them. Sadly its why attractive people make better salespeople and why we prefer to buy things from people who are ‘like’ us.
  5. Authority. People have a tendency to obey figures of authority, or even just those with the appearance and symbols of authority. Stick a man in a white coat in your ad and watch the effectiveness increase.
  6. Scarcity. When you believe something is in short supply, you want it more! “Only a few left”, is a powerful call to action.

For those of you interested in this topic there’s a great video that Cialdini made that can be found here.

The bigger tool-kit

There is a richer, “weapons of persuasion” tool-kit, to be uncovered that includes a much broader array of techniques.  Behavioural science has now identified over 150 biases and heuristics (rules of thumb) people actually rely on to navigate the world of choice. These biases shape how we behave and once understood can be used to make behaviour change programs significantly more effective. Working out how for your business behavioural economics can be applied to marketing should be a journey you undertake.

Cognitive Bias Codex

Why Byron thinks BE is BS

Byron Sharp rightly gives the whole field of behavioural economics a bit of a dressing down in an article in Marketing in July 2014. It’s all a little overwhelming. 150+ biases to navigate. And deeply tactical. There are bigger fish to fry, than understanding the “Lake Wobegone Effect”. Too much focus on biases and heuristics can trap us into becoming more tactical and less strategic in our approach to marketing.

There will always be a part of the marketing role, however, that is about getting someone to buy tomorrow, versus longer-term more strategic brand building. More of that later. But if we want to get people choosing us tomorrow, really understanding how choices are made, and how to design behavioural triggers, needs to be a critical new skill set we develop.

More importantly the founding principles of behavioural economics; that of the rider and the elephant, and sub-conscious, low attention, fast buying, are the bed-rock on which we should build our brand plans. Even Byron agrees with that.

How behavioural economics can be applied to marketing.

The so what? How to operationalise the learning:

  1. Stay focused on the consumer. Remember how little they think, how hard it is to get them to do something new, and how irrational and emotionally they decide things. Don’t fall for the ‘you are like your consumer’ fallacy.

  2. Invent with insight. Create stuff that has deep emotional resonance and solves real problems that people have. Design for the user not the manufacturer.

  3. Build your plan around the three pillars; motivation, ease and triggers. Make tough strategic choices about where to focus. If in doubt make stuff easier.

  4. We need to be honest with ourselves about the role advertising is likely to play. And prioritise making things easier, when budget shove comes to push.

  5. Try to do less trigger-based stuff. If you must use triggers, experiment with nudges, biases and heuristics, that go beyond the free tinny and beach towel.

We have always said that marketing starts with the consumer. In a post Daniel Kahnemann world that means we have to build up a richer, applicable, working knowledge of behavioural science if we as marketers are to really understand consumers and how and why they behave as they do.

How do I find out more?

“When great minds alike” has developed some real traction since publication in November 2018. Thanks to all of you who said nice things. Especially some of the original authors. If you’d like me to come and lead a session with your team on that work and start a discussion about how your marketing or agency team can start to really embrace some of these seismic shifts in our understanding of marketing, please get in touch at jon.bradshaw@brandtraction.com.au

Thanks for reading.

JB

No Comments

Post A Comment