Behavioural economics for market researchers

So the Behavioural Economics course has finished (and I got my certificate, wooo), and it’s about time I reflected on it to see what I think market researchers can learn. Maybe there will be a follow up blog post, as there are loads more things I think we can take from the discipline, these are just a few thoughts.

We rely on contextual information to make all sorts of judgements and decisions

In-situ research (facilitated to a large extent by smartphones), combined with observation, self-reportage and reflection is probably going to be key to getting closer to people’s decisions as they make them. That’s because understanding the context in which a decision is being made is much more important than traditional research has given it credit for, but also much more complex to research overall (what parts of the context do you look at – which parts might be relevant? How do you measure the contextual stimulus, defaults, or relative choice sets? If you do measure them, how do you aggregate and analyse them?).

We need to re-think the way we approach research design to help get us nearer to the ‘truth’, and figure out new ways of analysing the information we collect to find insights. It’s worth remembering though is that there are some things we’ll never be able to really predict about people’s behaviour, but we can certainly get cannier about how we try to understand as much as we can.

Experiment with experiments

One thing I’ve reflected on since the course is that much research is about asking people to predict their own behaviour, while much of the data cited in the course is based on experimention and testing hypotheses in ‘what if?’ scenarios, to see what actually happens. One of the criticisms I’ve heard people make about the course is that it wasn’t very commercial. So why don’t we test some of our hypotheses in a commercial environment?

Do we experiment enough in the real world to see, for example, whether people do actually notice the new packaging of our product on the shelf in the hustle and bustle of an actual supermarket with kids in tow, versus completing a survey with a pack stand-out test when they’re having a cup of tea at home? Which way of testing is likely to be closer to ‘the truth’?

(Okay, so both methods might still be survey-based – though I didn’t say they have to be – but something like eye-tracking kit could be a useful additional data source in store, and in store you’re at least getting people in the right emotional ‘state’.)

Making customers work can be a good thing (in moderation)

The IKEA effect theory suggests that if people put effort into things they own, they like and value them more. It’s like IKEA furniture, because you’ve had to put effort into creating it, so you appreciate it more than you would otherwise (apparently; I don’t speak from personal experience, DIY is not my thing). There is a reasonable tolerance here though; too much effort – and making customers work too hard – will count against you, so it’s about striking the right balance.

With that in mind, allowing a degree of personalisation to your products, requiring just the right amount of effort from the buyer to feel they have a personal stake in it could mean when people buy your wares, they become more attached to them than if they’d just bought an off-the-shelf version of your product. Linked to the idea of personal attachment to things is loss aversion (the posit that we over-inflate the impact of potential losses more than we estimate gains); if convincing consumers to switch to whatever you’re selling might make them feel they’re losing something by switching (even if they’re gaining more), you’re going to have to sell the benefits of switching really well to make it seem appealing.

Money is only one aspect of motivation

Okay, this isn’t new news if you’re a decent manager, and it isn’t even specific to research, but I found it interesting to think about how important meaning is to people in what they do and how this translates into a work context – and of course it makes sense when you think about it.

Making sure people’s efforts at work are recognised, even if that report they’ve spent ages working on doesn’t get presented to the client, or even if the project is cancelled and the brilliant workshop they’d planned never happened, recognising the effort and work put in by people can make all the difference to how people view a situation – as could re-deploying some of the original work so it’s used for something else. Certainly something I’ll be bearing in mind in future.

Google does a great job of this with its Labs project where employees are allowed to spend some of their working week devoted to their own creations. Apparently many of Google’s products came from this project, and it means people get to work on stuff they enjoy, stuff which has meaning for them. An interesting way of engaging people in a business and something I recognise in my own role, where I’m  able to explore new ideas I find interesting. And something I need to bear in mind as a manager – that I need to make sure the people I work with do things which have meaning for them. The BIG conference I attended this week suggested meaning is different for everyone, so this isn’t necessarily going to be an easy nut to crack, but if you can get it right at least some of the time, it’s definitely worth trying.

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