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Behavioral Economics Give Marketers Insight
28 Jul, 2010 By: Jackie JonesNEW YORK – Marketers and agencies trying to decode why consumers buy what they do are turning to behavioral economics for insight into consumers’ purchasing decisions.
Behavioral economics does not assume that consumers behave rationally based on logic such as price or quality, but rather are affected by emotional and social psychology. Concepts that are of particular interest to marketers include framing – the way in which an offer is put in context for consumers along with the bias and experience the consumers bring to the table – and anchoring, which refers to the way people base future thinking on initial facts first presented to them.
“Behavioral economics gives Ph.D. credibility and academic rigor to intuition,” said Jeff Jones, president of ad agency McKinney in Durham, N.C. “It’s really hard today to make million-dollar decisions based on intuition. This helps clients realize there is data behind the decisions and there is research behind the decisions.”
DraftFCB New York is one ad agency that incorporated behavioral economics as a key part of its marketing strategy when launching the Institute of Decision Making and its most recent pitch of a utility company.
“It’s easy to get people to agree that they should use less energy – 86 percent of them strongly agree they should – but they don’t do it,” said Matthew Wilcox, the institute’s executive director and director of account planning at DraftFCB San Francisco. DraftFCB researched and included several specific ideas in the pitch utilizing the ideologies of behavioral economics, including the number of things the utility could ask and people would be willing to do to reduce energy, or the things they would be willing to tell others about saving energy.
As consumers are offered more variety in brand choice, behavioral economics could help marketers pinpoint how and why consumers purchase, experts said. “It’s not about, ‘we used to do it this way and now it’s a wholesale change and we’re doing it this way,’” Jones said. “These are just new ways of understanding how and why people make decisions. And it’s just smart marketing to understand them and use them.”
