Behavioral Economics for Marketing and Market Research

Показать описание

Behavioral economics is a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making.

While it’s not actually this grim, It has broad use in marketing to target consumers irrational behaviors in order to achieve the desired outcome.

For example, What deal are you more likely to respond to?

buy one get one free or buy 2 and get 50% off?

They are the same deal! And yet most will often choose the first because people love the word “free” - studies show the word “Free” releases large quantities of dopamine in our brain to make us feel happy, and we end up responding irrationally.
This is behavioral economics. Behavior outside the rational expectations explained by economics.
So how is it done?
Psychological theories are applied to purchasing behaviors and marketers use those theories in an effort to influence consumer behaviors.
Let’s look at some examples.
Starbucks uses a process called anchoring - the process of planting a thought in a person’s mind that will later influence their actions - to convince people to buy a copy of coffee at a much higher price than competitors.
Starbucks differentiates itself by a unique store appearance or fancy coffee names - neither of which affect the actual cup of coffee - but the association creates a higher willingness to pay for the exact same cup of coffee.
Maybe you’re thinking “I like Starbucks coffee better than Dunkin Donuts because it tastes way better” You may be right… or maybe they’ve just effectively anchored you.
Here are a few other marketing applications.
Suggesting something is in scarce supply makes us want it more. Remember supreme?
Sensory priming plays off the 5 senses, Like, playing music while you shop;
a wine shop found if they played French music they sold more French wine. But when they played German music, they sold more German wine.

Another method is to remove “pain” points or signposts - people don’t like spending money, but they do like buying new things:
Studies have shown that by removing the ($) on menus increase average spending by 12%

We also hate losing stuff - Loss aversion is almost 2x as influential as possible gains
Losing 10$ hurts more than the pleasure of gaining $10

Let’s explore how behavioral economics is used looking specifically at social reinforcement and loss aversion.
Social reinforcement is a commonly used practice that shows celebrities and/or well-known companies that use a particular product or service.
Examples include Collin Kaepernick with Nike, Steph Curry with Under Armour, displaying customer logos on your website, using stats like 9 of out 10 people save money when they switch to our insurance company, etc.
These marketing campaigns carry social weight that can change how people buy your products.
Nike has been very successful with this marketing approach with a large portion of its customers making purchases because well-known athletes or celebrities promote the product.
Loss aversion is another popular behavioral economics topic for marketers.
As mentioned earlier, consumers hate to losses twice as much as they enjoy gains. Framing maketing campaign and materials in terms of loss rather than gain can have a big impact.
For example, a doctors office gave patients nearly identical brochures on breast exams. The only difference was that one brochure emphasized the gains of the exam while the other emphasized the negative outcomes of not performing the exam. Framing the exams in terms of loss led to greater action and more positive attitudes towards the exams.
Loss aversion also shows up frequently in e-commerce with wording like “buy in the next hour and save” or “only 5 of this item left.” Customers don’t want to miss those opportunities.

Images from Wikipedia