Our view of consumer behaviour has acquired new dimensions thanks to the contribution of behavioural economics, which reveals a previously hidden landscape of unconscious and contextual influences on our behaviour.
Behavioural economics insights often complete the picture when it comes to helping us understand why people behave the way that they do – but this does not mean that behavioural economics offers a complete picture in itself.
If we take the example of a couple shopping for an engagement ring, we can theorise about many potential behavioural economics-related factors that could be triggering particular reactions or nudging choices in certain directions. The two great contributions of behavioural economics are its appreciation of heuristics, the rough, mental rules of thumb that our brains use to enable rapid decision-making, and its understanding of the contextual triggers that influence our choices. Together these forms of influence help to explain why people frequently do not choose what seems, rationally, to be the best option for them.
In our engagement ring example, the heuristics our couple follow could include the multiple of the man’s salary they believe they should spend on a ring, or a preference for diamonds. The huge range of contextual influences includes both internal and external contexts: where the jewellery shop is and how the rings are displayed within it, but also a broad kaleidoscope of social and cultural factors that can be as individual as the couple themselves.
However, if we see this couple as simply the sum of all of their potential triggers, heuristics and impulses, then we miss arguably the most important part of the picture: the role of consciousness in determining their priorities and motivations, and directing their decisions. Understanding the purchase of a wedding ring is wholly impossible without taking our unique capacity for conscious planning, hoping and deliberating into account. And our understanding of any other consumer decision will be equally distorted if we push consciousness out of the picture.
Key action points for marketers:
- Insist on a holistic understanding of consumer behaviour
- Make sure your understanding encompasses both System 1 (unconscious and contextual factors) and System 2 (deliberative thought) don’t put all your eggs in the System 1 basket by only focusing on behavioural economics
- Ensure that you are taking into account all heuristics and contextual factors that could influence consumers (including social and cultural factors)
- Pay particular attention to situations in which consumers do not behave in line with their stated brand or price preferences, as behavioural economics can provide valuable insight in these scenarios