Brand AwarenessProduct Concept TestingQualitative Research

What Market Researchers Need to Know About Irrational Consumers

Consumers may be irrational in their decision making, but according to behavioral economist Dan Ariely, they’re predictably so.

For marketers, the implications are fairly straightforward. Consider the advice from Oliver digital strategist Mark Fitzgerald, who advises that there are several important principles for marketers to know and incorporate if they wish to influence consumers. Consider these three examples:

  1. The “power of free.” Did you know that simply viewing the word “free” can produce dopamine in consumers’ brains, making them excited and more likely to behave irrationally in their decision making process? For example, making shipping free has been shown to dramatically increase orders while sales resulting from negligibly priced shipping do not even compare.
  2. The principle of consistency. If companies can get consumers to engage in a small way with their brand—say, by liking their page on Facebook—those consumers will probably engage in a bigger way—maybe by purchasing—down the road. This is a principle that social psychologists call the foot-in-the-door phenomenon.
    Ever bought a pair of shoes from Zappos? If so, you’ll know that the online company is famous for its free return policy. However, Zappos cleverly knows that many people who believe they can purchase without committing end up committing to the brand once they get their shoes. The free return policy is that small hook that leads to more extensive brand engagement down the road.
  3. The potential of decoy pricing. In one study, The Economist priced their print paper at $56, while pricing a print + online option at $125. As expected, the first option was much more popular. Yet, when a third option was introduced—a print subscription for $125—people still preferred the cheapest option, but many more now chose the print + online option. This was because they now perceived the online version to be a free add-on.

The implications for marketing seem straightforward.

But what about the implications for market researchers? In short, it means than we do things like test marketing messages and price points, we have to seek ways of testing that include the potential impact of actual consumer experiences. For example, asking people what they will pay in an academic way simply will not reflect what they will pay if trigger words (such as “free shipping”) are also in view in the real world setting. So when designing a research study, the lesson is clear: make the participants’ experience mimic the actual consumer experience as much as possible if you want to maximize accuracy.

Want to find out more? Check out behavioral economist Dan Ariely’s “The Irrational Bundle,” consisting of his three books: Predictably Irrational: The Hidden Forces That Shape our Decisions, The Upside of Irrationality, and The (Honest) Truth About Dishonesty.

Wants some instructor-led training about the subject? Sign up here for our next 4-week behavioral economics course, starting October 14 at 1 pm EST. It dives deeply into these and related concepts, and is co-taught by Behavioral Scientist Namika Sagara, PhD.


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