Behavioral Economics is a hot topic. Social Scientists are writing entire books on it. Psychologists, Economists and Marketers are talking about it. So what is it? What’s the big deal about it? More importantly, how can marketers effectively utilize it?
Here’s an intriguing definition of Behavioral Economics from Paul Conner at Sentient Decision Science: The study of environmental, situational, physiological, psychological, and/or emotional mechanisms that produce “economic” (i.e., consumer) behavior that runs counter to what rational economic theory would predict. It sounds a bit complicated but the last phrase is where the intrigue comes in: running counter to what rational economic theory would predict.
You may remember an Economics class you took in college talking about Marginal Utility and similar concepts. It essentially boils down to traditional Economics assuming that we make logical, rational choices by carefully studying all of our options and choosing the one that provides us the best value. Well, in the real world, Behavioral Economists know that’s not true. We use shortcuts to make decisions due to limited time, limited information or just not wanting to put in all of the effort we could. We don’t even realize how often we make subconscious or intuitive decisions. And they are often good decisions.
Behavioral Economics has even identified many principles describing how we make choices, such as the Certainty Effect, Hedonic Bundling, Social Forces, and many more. Behavioral Economists have devised clever experiments (often using college students –remember those days?) to demonstrate these principles. You’d be amazed at how “irrational” our behavior can be, but on the other hand it makes perfect sense.
If you missed the live webinar, “How Can Behavioral Ecomonics Help Develop P-O-P Messaging Stragegy?” presented by Michelle Adams, Paul Conner and Valla Roth, Click Here to request a link to the recorded presentation.
Please contact Leslie Downie for a copy of our article “Locating Your New Product in the Store” with two in-depth case studies and overall conclusions on how to determine the best location for a new brand.