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Behavioural economics and brands

Which brand of biscuits will you buy during a trip to the supermarket?

Whilst you may have something in mind in the seconds leading up to your purchase, your decision will most likely be subconscious, instantaneous and based off emotional, rather than rational, thought processes. Not only that, but your purchase will also be influenced by the context in which you make it – promotional sales, shelf displays, the simplicity and level of choice and many other factors.

These truths derive from the principles of behavioural economics, the application of psychological insight into human behaviour in order to better explain decision-making. Behavioural economics helps us to understand why people sometimes make seemingly irrational decisions which go against the predictions of traditional economic models. It highlights the importance of mental shortcuts, social intuition, external nudges and gut emotions, all of which serve to aid rapid decision-making.

For research, it doesn’t mean to do away with asking people questions or distrusting their answers. It simply tells us to ask better questions; questions which help establish the context as well as the content of people’s decisions.

The conscious vs the unconscious

It was Daniel Kahneman, an Israeli-American psychologist – often coined the father of behavioural economics – who established a dual system theoretical framework known as System 1 and System 2; essentially, our conscious and unconscious decision-making systems.

Put simply, System 1 thought processes are rapid, emotional, unconscious and effortless, and it is these which actually drive the vast majority of our behaviour and decisions. This is the last minute chewing gum purchase at the counter, or the impulsive urge to sing in the car; the immediate ‘oh-I-know who-this-advert-is-for response. On the other hand, System 2 thought processes are slow, deliberate and requiring of much effort – this is the home of mulling things over and post-rationalisation – ‘I bought this car because it does 70 miles per gallon and has really good safety features’ (not because of the way I felt driving it).

For marketers and researchers, understanding System 1 thinking allows us to gain more accurate pictures of people’s likely behaviour, and therefore develop more profitable marketing strategies. Behavioural economics debunks the myth that people are rational decision-makers whose considered preferences are entirely predictive of their behaviour – research which is also able to bypass rational, conscious thoughts and assess automatic attitudes and reactions is key.

What does it mean for brands?

Organisations are destined to believe that their brand is entirely unlike any other, but really there are very few genuinely unique products in the market. Many successful brands stand out from their competitors due to their distinctive assets – consistently used brand features which make them instantly recognisable and different.

These include logos, symbols, slogans, music, pack designs, characters, celebrity ambassadors, typeface and many others. It’s these distinctive assets that enhance salience, drive instant purchase and allow brands to create more engaging and more subtly-branded advertising.

Central to this is processing fluency, the ease with which information is processed. Behavioural economics notions that the quicker people recognise something, the better and the safer a choice it is, and the more likely they are to select it.

Understanding your distinctive assets – what they are and how strong they are – is crucial for brands. PepsiCo learnt this the hard way in 2009 when it replaced the packaging for Tropicana Pure Premium in the USA. Within two months, sales had dropped by 20% – a loss of around $30m, and the packaging was scrapped less than two months in.

So what went wrong?

The clearest failure was the removal of Tropicana’s core brand signifiers – the orange with the straw and the horizontal word-mark. Consumers struggled to find Tropicana within the few seconds that they were willing to spend looking for orange juice, which was catastrophic for the brand. They also admitted that research prior to the roll out of the new packaging failed to identify the emotional connection and therefore that a number of customers had with the original Tropicana packaging.

Applying behavioural economics

Brands can apply the principles of behavioural economics to influence behaviour in lots of subtle ways, whether this be to increase sales, encourage responsible behaviour or even drive social change. From framing – presenting information in a way which encourages a particular line of thought or decision-making – to anchoring, drawing on our tendency to over rely on the first piece of information offered to us, to loss aversion – the notion that we feel the pain of loss much greater than a gain of an equivalent value.

Tax penalty reminders, default tipping, opt-out organ donations and purchase quantity limits are just a couple examples of how brands and organisations play on our inherent biases in day-to-day life to influence our behaviours and decisions.

Brands also impact upon the social and environmental context in which decisions are made. For instance, using the principle of social conformity, they play on our tendencies to follow the herd, to be seen as ‘normal’, to want to do the right thing and to seek approval from others.

Populus uses a number of techniques to account for the importance of System 1 thinking, including virtual reality, facial coding, implicit testing, shelf-tests and non-verbal scales. Find out more by contacting Populus’s Business & Consumer Insight team on +44 [0]20 7253 9900 or email info@populus.co.uk.

Freddie Bell

Freddie is a Research Manager within the Business & Consumer Insight division of Populus, and works on a number of large-scale trackers and ad-hoc projects for clients such as BT, King and ESPN. He has experience within a wide range of sectors, which also include FMCG, finance and transport.

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