Market Research Applied to Irrational Consumer Behavior

What Market Research and Choice Architecture Have in Common

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Market Research Points to Irrational Consumer Behavior. Getty Images | Robert Cravens | E+

Marketing has inherited a theoretical legacy from economists. It is not just a casual coincidence that the concept of “the market” is common to economics, investment, and business in general. Marketers and advertisers often make reference to target markets, and market segmentation is fundamental to the thinking behind many marketing campaigns and advertising concepts.

The idea of a fair market, on the other hand, is fundamental to investment strategy and economic policy.

Fair market thinking assumes that people are rational and will make rational decisions if they have access to all the relevant information they need to do so. But experts in a  number of different fields are currently questioning this line of thinking. Two of these experts are Cass R. Sustein and Richard H. Thaler, and together they wrote a book called Nudge that became a New York Times bestseller, an Economist Best Book of the Year, and a Financial Times Best Book of the Year.

The book Nudge argues people are not primarily rational, but instead harbor biases and make misjudgments because of their individual quirks. Thaler is a behavioral economist and Sustein is a former professor of law at the University of Chicago and currently director of the Office of Information and Regulatory Affairs (OIRA) in Washington DC.  

Sustein believes that the possibility of being able to: 

“...uncover the ways in which people are predictably irrational, ‘is the most exciting intellectual development of my lifetime.’” (Craig R. Fox and David Tannenbaum)

 Understanding Human Behavior for Commerce and Politics

The White House established a Social and Behavioral Sciences Team (SBST) under the administration of President Barack Obama.  A primary purpose of the SBST is to use research insights from behavioral science to focus on decision making so that it becomes easier for citizens to engage with Federal programs.

Common sense and techniques familiar to private enterprise play a part in retooling federal programs to be more human-centered, but the deliberate consideration of the behavioral science in the design of federal programs is new. The establishment of this team is a formal validation of the potential and strength of the approach.  

For their part, economists are beginning to replace the rational actor used in their conventional models: 

"...with an often befuddled character — bedeviled by impulses and sentiments, overwhelmed by choice." (Benjamin Wallace-Wellsmay)

Now That You Know

Some of the basic takeaways from the behavior science research that readily apply to usability and consumer choice include the following:

  • Avoid providing too many choices as consumers may be overwhelmed and postpone decision-making, sometimes indefinitely.
  • Ensure that action steps are easy to understand and follow. Consumers will quickly move on to another website, product, service, or brand if they perceive too many hurdles in their way.
  • Be sure that information about the product, service, or brand is complete and accessible across channels and screens. If consumers are confused, even for a brief moment, while trying to conduct research, make a choice, or complete a purchase, they may abandon the task. 
  • Provide a few options that are easy to understand and provide a way for consumers to gain additional specific information or receive answers to their questions about a product or service.

Sources:

Fox, C. R. and Tannenbaum, D. (2015, September 26). The Curious Politics of the ‘Nudge.’ The New York Times.

Shankar, M. (2015, September 15). Designing Federal Programs with the American People in Mind. The White House blog.

Thaler, R. H. and Sustein, C. R.  (2009). Nudge: Improving Decisions About Health, Wealth, and Happiness. Penguin Publishing Group.

Wallace-Wellsmay, B. (2010, May 13).  Cass Sunstein Wants to Nudge Us. The New York Times.