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According to the most recent Gartner CMO spend survey, marketing budgets in U.S. and U.K. companies are mostly steady or declining. This means that each dollar or pound spent in 2020 has to deliver higher ROI than last year. One way in which businesses can achieve this is by applying a behavioral economics approach to market research.
A study by Emotional Logic has shown that using a behavioral economics approach enables marketing teams to achieve higher sales impact with the same budgets. This is just one of the reasons why behavioral economics is a key growth sector within market research and is forecast to continue to increase significantly in 2020. Behavioral economics applies to brand development, packaging testing, digital user experience, segmentation, communication development, in-store shopper studies and customer satisfaction and can increase efficiencies in all areas of your marketing activity.
Behavioral economics helps you find the meaning behind the data
Digitization has rapidly increased businesses’ ability to collect data. The challenge we all face is how to turn this deluge of data into actionable insights that will help marketing departments deliver commercial success.
Success in marketing is inevitably linked to changing behavior – we want people to consume more (or less) of something, switch to a new brand or change the way they think about a subject. But we can only change behavior if we know what is motivating it. Many businesses fail to truly understand the motivations of their customers and that is why they have such a hard time influencing their behavior.
Big data alone will not deliver the answer. While it provides powerful information on what consumers are doing and when and where they’re doing it, it struggles to explain why. Adjacently, traditional market research that simply asks consumers why they do what they do will also inevitably get the wrong answer because consumers don’t always know.
Behavioral economics-based market research gets closer to real consumer behavior than any other approach and reveals the motivations that are driving current habits so brands can influence and change them.
Behavioral economics delivers 44% more sales on the same marketing budget
Emotional Logic, one of the leading providers of behavioral economics-based consumer research, conducted a study with a U.K. retailer which proved simply asking consumers about their purchasing behavior isn’t effective. A behavioral economics-based methodology was used alongside traditional focus group research to identify the drivers of loyalty (in this case, repeat purchasing transactions). In focus groups, consumers explained why they repeatedly came back to the retailer (factors such as value for money and staff expertise). The behavioral science method then identified several other factors around how consumers felt during and after the transaction. When the identified factors were tracked against repeat purchasing, the aspects that consumers had said they wanted during focus groups showed a much lower link with sales than the factors identified using a behavioral economics approach. On average, factors derived through behavioral economics had a 44% stronger impact on repeat sales transactions – proving that this approach gets us closer to real behavior and results.
How behavioral economics works
A behavioral scientist understands how consumers process information and subsequently how they behave and react. This is different to how consumers think they react. Consumers think they want an orderly and simple product shelf yet eye-tracking reveals they spend more time engaging with the messy shelf that has not been restocked properly. They say they are worried about plastic packaging but then overwhelmingly choose the plastic bottle in choice experiments.
Applying a behavioral economics approach means stopping simply believing what consumers are saying and instead researching what is really driving their behavior. Emotional Logic has worked with clients such as Jaguar Land Rover, Unilever and the British Heart Foundation to cut through the noise of consumer opinions and find the core of the behavioral shift they wish to achieve.
Maybe you have heard of System 1 thinking – the fast, automatic and often unconscious reactions humans have – which is the current buzzword of market research. Many new approaches attempt to quantify the effects of System 1 on buying behavior – often in isolation. But this is a risky approach.
Human beings switch seamlessly between the unconscious, emotional gut reactions of System 1 and the logical, step-by-step thinking of System 2. Both are essential for decision-making and in order to truly understand consumers, both have to be researched. For more than a decade Emotional Logic has been doing just that as a core element of the research delivery.
Each of Emotional Logic’s research solutions, for example, combines traditional research techniques with tools from neuroscience and psychology to ensure both System 1 and System 2 factors are accurately measured. This approach delivers a more accurate picture of real decision-making, resulting in a stronger impact on actual buying behavior.
Get actionable results, not jargon
When it comes to System 1 measurements, hardly a week goes by without another new research methodology being launched. Eye-tracking, biometric measures, implicit testing – none are new but all are redeveloped continuously.
One of the challenges many organizations face is keeping up to speed with who is the best provider and assessing which tool is best fit for what purpose. And then there are the reports – many of us have seen the overcomplicated eye-tracking report showing 30 different “interesting” measurements only to be stumped by what to do with the results.
Using a methodologically neutral provider such as Emotional Logic gives brands access to a wider range of tools available and ensures that the most suitable methodology is applied to each research problem. The reports you get deliver a clear set of a few key metrics which indicate direct actions. Behavioral economics is one of the key growth sectors within market research because it delivers commercial results. Maybe it’s time to add it to your research portfolio in 2020.