Many recent bestselling books have forced marketers and marketing researchers to rethink the motivations they attribute to consumers—books such as Freakonomics, by Steven D. Levitt and Stephen J. Dubner; Predictably Irrational: The Hidden Forces That Shape Our Decisions, by Dan Ariely; and Malcom Gladwell’s The Tipping Point: How Little Things Can Make a Big Difference. We no longer think of either retail consumers, like you and me, or business decision-makers as homo economicus (economic man)—that phantom of classical economics, the unemotional, value-maximizing buyer of goods and services, whose computer brain, with perfect market information, activates sophisticated product attribute/price trade-off algorithms prior to every purchase.
In forming strong and cogent marketing arguments whose premises reference consumer motivations, you need to know something about Behavioral Economics. For example, consider a project that one of the authors conducted for a global cell phone manufacturer some years ago. Standard marketing research methods such as focus groups, one-on-one interviews, and quantitative surveys painted cell phone purchasers as the classic homo economicus consumer. Cell phone owners reported being “rational” decision-makers, carefully evaluating not only the various product features of cell phones, but also the various carrier service plans. Plugging all this information into their CPU brains, consumers indicated they chose the phone and plan that “maximized their utility.”
However, an ethnographic study in which consumers were observed evaluating and purchasing their phones (and later interviewed while their phone was being programmed) revealed the image of homo economicus to be an apparition. In reality, a significant segment of cell phone buyers were confused by all the product choices and carrier plans available. In place of cranking up their computer algorithms, after a short conversation with the store’s sales rep, they simply purchased the phone and plan recommended by the rep. In short, they were acting more like a dumb robot than an Artifical Intelligence android. Study findings significantly affected how this company marketed to the end consumer. For instance, they redoubled their efforts in educating store clerks on the company’s new phones and worked with their channel members to display their phones in a way that facilitated consumer education as opposed to striking confusion in their minds.
In short, what behavioral economics is teaching marketers is that the context in which a purchase is made—the surrounding environment, consumer emotions, and situational factors—can have as much influence on purchase choice as do a product’s price and features. Yes, several studies have shown that playing French music in a liquor store spikes the sale of French wines.1 And if product offers are perceived to be too confusing, consumers will often not make a purchase. A study conducted by a friend of one of the authors for a national luggage manufacturer discovered that their placards placed in front of product displays in department stores were being ignored, thus causing lost sales. De-briefing consumers after they purchased a competing product uncovered that the company’s placards simply contained too much information. Many consumers were gravitating toward brands with simple or no signage at all.
The central point of these Think Better pieces is to emphasize the importance of background knowledge in strengthening your ability as a marketer to make sound and cogent arguments. Simply sharpening your logic skills so that you can quickly catch a colleague using a logical fallacy is not enough to be a good critical thinker. More than ever before, marketing knowledge is being informed by fields such as behavioral economics, neuroscience, psychology, and anthropology. We can’t be experts in all these areas, but we can at least acquaint ourselves with them by reading in our field, attending marketing conferences, and talking with our colleagues about what they’ve learned and how they think it applies to their situations.
Make more rational marketing arguments by understanding the often irrational consumer to whom you are marketing.