Behavioural Economics and Market Research The Inexorable Intertwining of Two Disciplines

Von Adele Gritten, Managing Director, LRW Europe

I started my career in market research 20 years ago. At that time, behavioural economics was, at best, confined to a basic understanding of low and high involvement processing in advertising theory. At worst, it was an unknown term, relegated to the academic corridors of Ivy League Universities. 

Fast forward 20 years and cue a well-deserved Nobel Prize for Daniel Kahneman, whose seminal book, Thinking Fast and Slow, paved the way for an epiphany amongst the marketing research community where we all realized, unequivocally and incontrovertibly, that we need a much better grasp of how consumers – people – really make decisions. The paths to decisions are messy, indeterminate, prosaic, sometimes contradictory, change according to circumstances, and do not lend themselves to easy explanations. It is clear now that the old explanations of marketing effectiveness are predicated almost exclusively on what Kahneman calls “system 2” thinking, and the evaluation of consumers’ rational responses now seem increasingly naïve and simplistic. Thus marketers have started to take notice of the power of the fast, heuristic, effortless cognitive thought processes that comprise “system 1” thinking.

Some research agencies have emerged over the last 15 years and focused almost exclusively on understanding consumers’ non-conscious decision-making processes, e.g. evaluating consumers’ responses to stimuli such as advertising via a “system 1” (or, crassly speaking, implicit) approach. At LRW, we have a dedicated business unit called the Pragmatic Brain Science Institute®, the term “pragmatic” lying at the heart of our overall research philosophy. In order to understand and to predict consumers’ behaviors more accurately, we seek to measure both the non-conscious (“system 1”) and conscious (“system 2”). We seek to understand how these two systems both differ and interconnect with each other, rather than focusing on an either/or research framework or method of enquiry. In short, at LRW, we believe that the most productive approach to understanding consumers should be balanced, and leverage the right tools at the right time in order to understand both the rational and irrational drivers of consumers’ behaviours and choices – of human actions.

Academic research has long since validated reaction time as a scientific measure of the strength of automatic evaluations. The essential premise is simple: networked models of memory and associations are stored in our mind, and the more closely two concepts are associated, the more quickly the activation of one leads to the other. Via LRW’s Rapid Choice™ tool, research participants in online surveys are presented with a rapid succession of words that they must individually classify as describing the stimulus or not. Responses are made quickly, using the keyboard so that active cognitive processing is limited, and latent associations are captured. Our clients find this a powerful tool for evaluating less-conscious brand, advertising, image, or product associations within the minds of consumers. It is powerful because subtle differences in the speed of reactions indicate the strength of association between the priming stimulus (e.g. a brand logo) and the secondary stimulus (e.g. a brand attribute) shown to consumers. We have successfully used this tool to help reposition and strengthen brands, evaluate logos and packaging on a deeper level, and to identify winning product concepts.

We also regularly deploy LRW’s Implicit Identity Mapping™ (IIM), which is a proprietary approach rooted in the science of self-identity, to assess the extent to which consumers incorporate a brand into “who they are”. For example, participants in an online survey see two circles, one with their name and one with the brand name/logo. They move one circle to show how much they and the brand overlap. The extent of the overlap is analyzed, while other measures like speed of movement are also recorded and explored. Unlike overt responses to “system 2” type questions like “how would you rate this brand?” or “how much do you like this brand?”, responses to IIM surveys are subtler, more holistic, and better able to tap inner “system 1” attitudes. LRW has validated data that shows IIM to be more predictive of purchase, loyalty, and recommendation than traditional affinity metrics. Across three categories and 28 brands, we found that people with high identity overlap are five times more likely to follow a brand/store into new categories, three times more likely to purchase ‘most often’, twice as willing to recommend a brand to others, and half as willing to substitute brands/use other stores.

More recently, embracing the technological revolution that is perched on our doorstep in terms of how marketing researchers can interact with consumers, LRW is pioneering the use of Virtual Reality (VR) as a research tool. Facebook’s recent $2bn acquisition of VR start up Oculus signals to the world that VR is part of the future consumer and research landscape – perhaps as part of an as yet undefined hybrid mode of consumer thought that Kahneman might call “system 3” thinking. In a marketing research context, there are unique benefits to using VR where the possibilities are endless. Real life scenarios can be created: for example, architectural drawings such as CAD can be converted into an immersive VR environment. The laws of physics and reality no longer apply in VR in their conventional ways – any environment or stimulus can be created with spherical film or 3D modeling. The whole VR experience creates an unparalleled immersive presence and the feeling of actually being somewhere else, enabled by high-quality tracking, 200 frames per second graphics rendering, and real-time sensory feedback.

It would seem that context, rather than content, is the new king in terms of evaluating the complex web of decision-making that consumers face every day. To misquote Dan Ariely, “Wouldn't market research make a lot more sense if it were based on how people actually behave, instead of how they should behave?” (Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions). Now, more than ever before, marketing research has the technology, the science and, increasingly, the Big Data to ensure that the decisions of the future can indeed be based on validated truths rather than outmoded fables and fallacies based on linear, laddered and increasingly illogical approaches that are antithetical to how real consumers make real decisions.