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Why behavioral economics is the future of shopper insights



Article ID:
20130706
Published:
July 2013, page 32
Author:
Tom Ewing

Article Abstract

The authors argue that the future opportunities for shopper insights lie in the ability to understand and tap into how people make decisions in a specific shopping context and how they are influenced by in-store factors such as sounds and scents.

On becoming designers as well as researchers

Editor's note: Will Leach is vice president of BrainJuicer’s Behavioral Labs. Peter Harrison is creative director at BrainJuicer. Tom Ewing is the firm’s digital culture officer. All three are based in London.

It’s already been 20 years since shopper insights began establishing itself as a distinct discipline within marketing research and most in the field would say its best days are ahead of it. Our discipline is growing and expanding and stands to benefit more than most from a shift to mobile research. Mobile interviewing, mobile-assisted ethnography and location analytics can join neuroscience, virtual shelves and trip-mission segmentations as new tools in the shopper insights tool belt.

The future is bright but there’s much room to take shopper insights further and faster. Many say it will be driven from the aforementioned technologies and data. We agree that technology will push our discipline forward. However, the strongest drivers of shopper insights will not come from changes in technology. Rather, we believe that the future of shopper insights will be fuelled by a changing in our collective roles and mind-sets, moving from “only” providing shopper insights to also pushing our discipline’s focus to a critical business-driving function, becoming the agents of behavioral change in-store.

How will this transformation happen when shopper insights has historically been so brand-centric? We have focused on a customer’s decision journey through a brand lens, i.e., how they come to choose one particular brand over another. This thinking has shaped how marketers have approached shopper insights’ great theoretical breakthroughs – like P&G’s famous “first moment of truth.” This pointed out – quite rightly – that a shopper typically takes only a tiny handful of seconds to make a decision about a purchase and that this is a marketer’s main window to influence them. In the brand-centric world of shopper insights, that puts the onus on the brand to convince the customer to choose it over another with packaging, POS marketing and so on.

This approach has unlocked precious insights and inspired a generation of shopper marketers. But does it also give too much influence to the brand? After all, there are many factors that sway shopping decisions far outside of a brand’s influence. Habit, for one. Mood, for another. In other words, emotional triggers that have little to do with information or brand messaging. How about the time of day or the impact of weather on choices? How do we account for the way choices are presented, in terms of pricing and layout? When shopper insights focuses only on brand-centricity (aka bringing their brands to life in-store) these personal, social and environmental factors that drive the majority of sales in-store might not get the attention they need.

There’s another problem with a brand-focused shopper insights. A brand-centric mentality limits the shopper insights departments to only understanding the “what” and “why” of shopping behavior. But who owns the “now what” part of the equation that is so often talked about these days? There’s increasingly a demand in corporate America for insights to do just that, to do more than just provide shopper insight. Increasingly we are asked to drive business by changing shopping behaviors not just understanding them.

Expand our focus

It is clear that our specific discipline is best positioned to actually design for behavioral change. Who understands shopping behaviors better than us? But to do this, we must expand our focus from brand-centricity to behavior-centricity and really start to grasp and design for the way we actually make decisions.

Luckily our understanding of decision-making has expanded dramatically over the last few years. There has been a boom in behavioral science, often described using the catch-all term behavioral economics, though it includes a lot of neuroscience and psychology too. We can now truly understand shopper decisions by applying the wider framework provided by behavioral science and then use these principles to design for behavioral change.

The leading voice in decision science is that of Daniel Kahneman, the psychologist who won the Nobel Memorial Prize in Economic Sciences and who is the author of the best-selling book Thinking, Fast And Slow. Kahneman’s theory of decisions – based on 30 years of experimental study – is simple but powerful. Human beings have two interlinked decision-making systems, which he calls System 1 and System 2. System 1 thinking is largely automatic, implicit and intuitive – we don’t realize we’re doing it. System 2 thinking is more considered and aware – it’s what we feel as thinking.

This sounds like many other theories of how the brain works – left-brain and right-brain thinking, for instance, or a division between our reptile brain and higher functions. But what Kahneman has done is to overturn ideas about the power of these systems. In his thinking, System 1 and 2 are not a balance of the emotional and rational or rapid and considered judgements. System 1 is by far the dominant partner. In fact, all of our decisions are led by System 1, with the slower and more effortful System 2 changing the decision only when System 1 cannot find an easy and plausible course of action. System 2’s role is otherwise simply to ratify and justify decisions. To quote advertising guru Rory Sutherland, System 1 is the Oval Office; System 2 is the press office.

So if we use System 1 to make decisions, what determines their outcome? System 1 is guided by a variety of things – past experiences, habits, heuristics (rules we might follow for instant decision-making, like “bigger is better”) or emotional associations. It’s also – and here is where shopper insights come in – strongly directed by the shopping environment.

What decision science makes clear is that we often behave irrationally. The “first moment of truth” – those split seconds in which a decision occurs at-shelf – is indeed crucial, because we use System 1 to make very fast decisions. But these decisions almost never involve a considered, rational choice between brands. Even our preexisting brand preferences are neither constant nor stable, due to the shopping environment itself. The environment around our brands – including flow, store layout, alternative offers, adjacencies, sensory triggers and messaging – has a strong psychological impact on our decision to buy or not buy.

Won’t be enough

So only using your shopper insights as a means to build stronger brand equity in-store won’t be enough in tomorrow’s corporation. Generating consumer pull alone rarely guarantees a sale these days. In a world where the typical person is exposed to hundreds of marketing messages and makes thousands of decisions daily, the chances of any one brand message being able to influence someone’s decision are vanishingly low. The future opportunities lie in our ability to understand and tap into how people make decisions in a specific shopping context.

That’s why we believe that the behavioral sciences, particularly behavioral economics, are the future of shopper insights. These fields are rich with insight on the whys of shopping behavior. But more importantly, by focusing on the shopper environment and advancing via experiments, they uncover practical ways to apply these insights to everyday marketing and innovation, which is the very need emerging from business.

Take, for instance, a pair of classic studies showing the effect of music on the sales of wine. In one, researchers controlled the music in an English shop selling both French and German wines. They alternated between playing French music and German music at a low, background level in the shop and otherwise used no other promotional or unusual tactics. When French music was played, French wine outsold German wine by five times. But when German music was played, the situation reversed – now German wine outsold French by two-to-one. None of the customers, when interviewed, mentioned the music as a reason for their choice and yet nothing else had changed. Meanwhile, a separate study found that playing classical music boosted sales in a wine shop, whereas playing rock music depressed them. We see in these studies the power of embedded emotional and cultural associations over sales but they also serve to spark the imaginations of shopper insight professionals looking for inspiration.

These kind of studies – practical explorations of the impact of the choice environment on decisions – are becoming more common. The question for shopper insight professionals is how to design a research structure which lets them be practically applied. You have to be willing to become designers as well as researchers.

At BrainJuicer we have been sharing a case study conducted with Dutch lingerie retailer Hunkemoller, which allowed us access to several of its stores to introduce behavioral interventions in the areas of signage (stickers in various places in the store) and behavioral priming. Priming is where behavior is influenced by seemingly unrelated or semi-related stimuli – like the music in the wine shops – which help trigger particular actions. We used scent primes to remind shoppers of romantic occasions and chocolate primes to make them feel happy.

We then designed a research structure where different interventions were “on” and “off” in alternating weeks across a six-week period and in several different stores. This meant we could factor in seasonality, regional differences, changes in footfall and other variables, as well as test interventions in combination. Our metric was actual sales; an advantage of this kind of behavioral design is that results can be measured in real-world sales. The most successful combinations – involving scent – showed as much as a 20 percent uplift in sales.

What’s the future?

This project was an example of how shopper insights based in behavioral science move our industry from insights advisors to designing and testing behavioral tactics for brand and retail growth. So what’s the future for shopper insights? What do we need to do to incorporate behavioral and decision science into our work? We believe there are four steps.

First, we need to move from a focus on shopper needs as the driver of action to a focus on choice environments, understanding the context behavior happens in.

Second, we need to move to a design mentality, designing in-store marketing that makes System 1 decisions easier and seeing ourselves as an active, not simply an analytical, influence on the shopper experience.

Third, we need to move from brand design to behavioral design. In other words, we are not designing improvements to the brand but interventions to change behaviors that drive business – from which the brand will benefit.

And finally, we need better integration of shopper and other marketing, so that pre-shop and post-shop decisions – also guided by System 1 – align with the rapid decisions taken in-store.

These changes aren’t simple ones – they involve a revolution in perspective even before their practical implementation – but if carried through they will help shopper insights make a historic leap: becoming a research discipline that moves from observing and advising to genuinely changing behaviors and driving corporate business.

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