Researchers starting to embrace new thinking?

ESOMAR best paper nomination 2011

Behaving economically with the truth - How behavioural economics can help research to better understand, identify and predict behaviour. Authors: Orlando Wood, Alain Samson, Peter Harrison.

The above paper was nominated for best paper by ESOMAR in 2011. Researchers are starting to consider the importance of behavioural economics and its impact on consumer behaviour.

Discounts may devalue your product

I love going to the city markets and scouring for interesting pieces. One weekend whilst browsing the stalls and tables, I came across a lovely vase that I had seen a few days ago in a popular shopping centre. The price of the vase in the retail store was $220, but here the vase at the markets was priced at $40. I couldn’t believe my luck – what a bargain! Of course, I bought my treasured little piece (an impulsive-emotional buy). But the very next day, looking at it sitting in the centre of my dining table, it no longer looked so lovely. What had happened?

Behavioural economics explains that buying the vase at a ‘discounted’ price led to my devaluing the item. Prices are typically used to determine the ‘value’ of products, particularly in the absence of other helpful information. However, this assessment is relative, not absolute. We set an anchor in our minds about how much we expect particular items to cost - and any item below this we tend to deem is probably of lesser quality. Now, discounts are a big draw card, and work well with some items. But where brand image is critical, like Prada or Mercedes for example, lowering prices can actually lower consumer’s perceived value. Discounting may have a short term effect of boosting sales, but the longer term effect is likely to be damaging.

The message is – use discounts scrupulously.

Avoid the 6 Common shopping traps

The Emotion and Decision Making Group at Harvard Kennedy School have contributed to an article that empowers shoppers to avoid common 'traps' of marketing that encourage impulsive spending. They include (1) don't make all your purchases in the one store - shop around. We don't feel the pain of cost once we've already spent a large amount, so adding to this figure is easier. (2) Bargains and discounts automatically activate our pleasure centre - so try and avoid these, or else you may end up with something you didn't want in the first place. (3) Carry cash - credit cards delay the onset of pain in our brain's pain centres, (4) Don't shop in a bad mood - you may spend more to elevate your self worth (5) Find other ways to occupy your time instead of shopping, and (6) Build will power - train your brain to be able to better inhibit impulsive tendencies.

See the link below:

http://content.ksg.harvard.edu/lernerlab/media/6_common_shopping_traps.php/

Make a habit of it

Some products have become such an integral part of our daily habits that we can’t imagine how incorrigible life had been before they existed – for example, mobile phones, cars, clothes, shoes, toothpaste, and deodorant, to name a few. Most of these habits have formed due to herding behaviour – we assume something is good based on other people’s behaviour and we follow suit. Staple products like bread and milk go one step further – consumers are in the habit of buying these products so regularly that the buying process itself becomes almost automatic. This is the marketer's dream scenario.

Habits are formed when a routine of behaviours are learned through reinforcement with reward. The dorsolateral striatum (contained in the basal ganglia) is involved in committing habits to memory and is anatomically linked with the reward centre – the ventral striatum. With enough reward reinforcement, habits become ingrained and we perform the behaviours automatically, on cue. Even if you can’t convince consumers that your product is indispensible, marketers can tap into the habit-forming part of the brain by creating a ritual or routine around the use of their product. This will ensure a habit is linked to your product, and will enourage repeated use.

And as the old idiom goes – Old habits die hard.

Neuroterms: habits, procedural learning, basal ganglia, herd behaviour

Why smelly brands win

The HAM - Hippocampus-Amygdala-Memory - effect refers to limbic structures involved in emotional memories. The Amygdala is responsible for stamping emotional significance to experiences. The Hippocampus is vital for encoding and recall of memories.

Aim to create strong sensory memories with every interaction your consumer has with your brand. Aromas impress the strongest emotional memories because the olfactory nerve is located right next to the limbic system – our emotional brain. Companies like ScentSational Technologies (http://scentsationaltechnologies.com/) know how powerful sensory stimulation is as a marketing tool. They offer aroma-releasing packaging for consumer products. With each interaction the consumer has with the package, emotional memories are triggered and a strong memory is developed around the product. So even if a potential customer does leave before purchasing, the HAM effect may draw them back.

Why consumers liking your brand is not enough

Wanting’ and ‘liking’ involve different neurochemical systems in the ventral striatum. Wanting relies on the reward system regulated by dopamine, and is activated to the anticipation of receiving something we crave after. Liking, on the other hand, is a response resulting from the opiod system, and is activated you’ve tried had the chance to try it. Research shows that impairing dopamine receptors in rats causes them to stop eating, and they eventually end up starving. Despite needing and ‘liking’ food, ‘wanting’ the food was crucial for ensuring the rats were motivated to eat.

This kind of research suggests that creating ‘wanting’ for a brand may be even more important than the actual ‘liking’ of it. Perhaps Facebook should add a “WANT” button!

Some practical ways of stimulating the dopamine system for your brand include creating a great deal of anticipation of a reward, providing small teasers that a reward is imminent, and making the timing of the reward unpredictable. These are sure ways of keeping everyone ‘wanting’

Using Fun to change behaviour

Old habits die hard. However, turning those activities you’d rather avoid into a fun experience can be enough to nudge us in the right direction of positive behaviour change!

Unfortunately, human brains like to be lazy and will normally seek the path of least effort, relying on previously formed habitual behaviours. But how does fun work to shift us out of this pattern? Fun activates the reward centres in our brain, including the ventral striatum (nucleus acumbens), orbitofrontal cortex, and amygdala. Each time we engage in ‘fun’, our brain releases dopamine through our reward centres, ‘stamping in’ an association between the activity and a pleasurable feeling. Psychologists call this positive reinforcement. The other element that makes fun work is engagement. The more engaged we are in an activity, the more likely the ’brain stamping’ will have a long-lasting effect. The positive experience of engagement facilitates and strengthens neuronal associations between the activity and reward centres, leading to the formation of long-term memories and habits.

An example of fun in action. The 2009/10 winner of Voltzwagon’s Fun Theory Award

The same neural processes related to reward reinforcement and engagement underlie the powerful effect of games. This may be why the games industry has grown more than 112% since 2006, why two-thirds of Australian play video games with just under half of these being female (IEAA for their Interactive Australia 2009 report), and why game players spend an average of 18 hours a week playing games. In games, the dopamine-reward system is particularly activated when people are aware that have made a successful prediction, choice or action. So solving a puzzle or completing a sequence of movements when playing a song on a piano provides us with feedback on our actions, rewarding our typically lazy brains and promoting physical or mental effort.

Have a think about how you can introduce a bit more fun and games into your life!

‘Feel good’ messages vs. Scare-tactics

In Neuro terms: Reward-Contingency Program. 

I commend the new government Quit Smoking campaign which is moving away from negative, scare-tactic messages to a more positive approach. We all remember the TV ads of the surgeon operating on the melanoma patient. The campaign’s new motto is ‘Every Cigarette You Don’t Smoke is Doing You Good’. Their website ads show a running list of health benefits that people can achieve if they stop smoking, while the new TV commercial adopts a compassionate approach that shows smokers they need to stop beating themselves up if they fail to quit by encouraging them to try again. Although research shows that negative messages elicit a stronger immediate arousal response, reward-contingency programs show us that punishment does not lead to lasting change. In contrast, positive messages may be slow to influence, but when they do change behaviour, the change is more enduring.

http://en.wikipedia.org/wiki/Reinforcement

Stuff it, I’ll start exercising tomorrow...

In Neuro terms: Hyperbolic Discounting.

With Christmas just behind us, those extra servings of delectable desserts have converted into an annoying reminder around the waist that perhaps we shouldn’t have indulged quite so much. If your anything like me, your new year resolution probably goes something like this..”I hereby promise to exercise this year and lose that extra 5 kgs!” Well, this year has arrived and yet each morning I wake up with a range of excuses as to why I won’t be able to make it to the gym that day, but reinstate my promise that I’ll start ‘tomorrow’. I really do have the right intention! But why is it that the reward of a much fitter me isn’t enough to drive me to work out today?

Behavioural economics has provided us with an answer. Hyperbolic discounting is the tendency for people to discount the value of a benefit that will be gained at some point in the future, preferring instead an immediate reward. So the incentive of a better body and physical health 3 or 4 months from now is usually not enough to out-weigh the immediate reward of not exercising today. But why? Brain imaging studies suggest an interaction between (1) a weak neural representation of a delayed reward in the medial prefrontal cortex and nucleus accumbens, and (2) poor activation of frontal processes involved in the inhibition of immediate gratification. So you may have a greater problem with hyperbolic discounting if you have an impulsive personality.

To overcome this bias we need to increase the value associated with your goal of exercising. There are several ways you can do this. Quantify in real dollars how much your goal is worth and penalise yourself each time you don’t go to the gym, have someone keep you in check and commit to a contract. A number of new applications like ‘Earndit’ and ‘Gym-Pact’ are using these principles to help people commit to the gym. So now you can earn cash just for going to the gym!

http://en.wikipedia.org/wiki/Hyperbolic_discounting