Can Behavioural Economics Save Market Research?

When I first started working in market research I realised that people frequently don’t say what they mean and don’t do what they say. Behavioural economics suggests that this is because our decisions are heavily influenced by cognitive biases, we post-rationalise (see Choice Supportive bias) the reasons for decisions and behaviour is strongly influenced by habits and preferences that become ingrained in our daily lives. Thus current behaviour is usually the best indicator of future behaviour.

It surprises me that some organisations spend thousands of pounds a year on surveys. They ask people direct questions about purchasing decisions and also intentions to purchase in the future. Businesses then wonder why such surveys fail to give genuine insights or accurately predict customer behaviour.

This questions the validity of market research and the usefulness of collecting customer feedback. Management complain that consumers are not rational and they don’t understand what they want. Perhaps ironically behavioural economics supports these views. This is not a reason to avoid using market research for supporting decision making.

” most people don’t know what they want unless they see it in context” Dan Airely

” what consumers are willing to pay can easily be manipulated, and this means that consumers don’t in fact have a good handle on their own preferences.” Dan Airely

These findings challenge conventional economic thinking, but as Dan Ariely points out in his first book, whilst humans are often irrational in their decision making, they are “predictably irrational”. This is why behavioural economics may provide a key to unlocking insights in market research. It provides researchers with a diagnostic label for each behavioural rule of thumb that people use in their decision making.

As Daniel Kahneman explains in his book Thinking, fast and slow, the existence of such diagnostic labels “makes it easier to anticipate, recognise, and understand” human behaviour. This should facilitate researchers with identifying genuine insights about human decision making.

That is not to say that behavioural economics doesn’t challenges many of the assumptions that traditional research is based upon. This reminds me of the old research saying – “garbage in garbage out”. As market researchers we should continually be challenging our methods and behavioural economics. They may provide us with insights to improve how we conduct and analyse research. This should not be a surprise as we have similar goals.

” ..behavioral economics is about figuring out the hidden forces that shape our decisions, across many different domains, and finding solutions to common problems that affect our personal, business and public lives.” Dan Ariely, the Upside of irrationality

Behavioural economics has major implications for market research, especially for the design of research. We have already seen this with the development of new methodologies by companies such as Brainjuicer. So although behavioural economics challenges conventional thinking, market research is more likely to prosper if we embrace its insights. It provides an opportunity for market researchers to improve the value that we and our insights add to the decisions and organisations we support.