Transcript Behavioral Economics in Practice

Qual’s Secret Weapon:
Behavioral Economics in Practice
• Presented to QRCA Chicago Chapter
• May, 2013
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Jay Zaltzman
Bureau West Market Research
Los Angeles, California, USA
Tel: +1-818-588-6050
Email: [email protected]
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Behavioral economics
• We’ve been hearing a lot about behavioral
economics in the past few years.
• Some QRCs are intimidated: “What is this
behavioral economics thing?” “Is it a new skill
I’m supposed to have?”
• I have good news: behavioral economics is a
new perspective on things we already know.
• Understanding this perspective can help
increase your value to clients. So it’s a win-win!
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Behavioral economics:
how do people make decisions?
• Traditional economics approach: when
people have all the necessary information,
they will make the rational decision.
• Behavioral economics found that’s not the
case. Decisions aren’t based mainly on
logic: the context (choices, environment) and
emotions play a major role.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Asking direct questions
• When conducting market research, it’s tempting
to simply ask participants direct questions:
– Would you buy this product?
– What do you like about that product?
– What do you think of this brand?
• The problem is, research participants lie.
(Perhaps unintentionally.)
– When asked a direct question, people try to
theorize how they would make a decision in a
given situation, which can be different than
actually being in that situation.
– They try to figure out what they would
logically decide.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Behavioral economics:
understanding the irrational decision-making process
• Dan Ariely says: while people are irrational,
they’re predictably irrational.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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The power of the default
• Ariely gives an example of organ
donations: Germany 12%, Austria 100%
– “Check the box below if you want to
participate in the organ donor
program”
– “Check the box below if you don't
want to participate”
• Do people choose the default because
they don't care?
– On the contrary: it’s because of the
complexity of the decision
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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The power of the default (continued)
• It even happens with experts!
• Study conducted with doctors:
– Patient with hip pain, medications hadn’t
worked, referred to have a hip
replacement; doctor discovered forgot to
try one medication. Most doctors would
pull patient back.
– Second scenario: doctor discovered that
two medications hadn’t been tried.
Majority opt for hip replacement.
• When the decision is complicated, the default
has huge power.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Frame of reference
• Two sets of choices.
– Weekend in Paris, including hotel and
breakfast
– Weekend in Rome, including hotel and
breakfast
• Or:
– Weekend in Paris, including hotel and
breakfast
– Weekend in Rome, including hotel and
breakfast
– Weekend in Rome, including hotel and
breakfast, but coffee is not included
• Third option has a surprising impact
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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How much will people pay?
• The frame of reference has such a huge
influence on our decisions.
– Company sells product A for $20 and a
higher-end version, product B, for $25
– 80% of sales are product A
– Second company comes to the market with a
premium option, let’s call it C, for $35
– Guess what happens to the first company’s
sales…
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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How much will people pay? (continued)
• People have an “anchor,” a price they expect to
pay, for certain items. Marketers desperately
want to know how to change that anchor.
– One example: when Starbucks opened, and
people decided it was worth paying the
higher price for their coffee.
– Starbucks changed the context: different
ambience, smell of roasting beans, Italian
names (“grandé,” “macchiato).
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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How we value things
• Once people own something, they value that
thing far more than they did before they owned
it… by a significant percentage.
– We fall in love with what we have.
– We focus on what we might lose if we part
with that thing.
– Can lead to a great deal of disappointment
when you try to sell your home!
– But has important implications. For example,
utilizing customers to help promote a
product.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Changing habits
• Charles Duhigg wrote The Power of Habit.
– Once habits are developed, people do them
unconsciously, without thinking.
– Habitual behaviors are made up of three
parts: the cues (trigger), the behavior itself,
and the reward.
– Marketers frequently want to change habits:
• Febreze discovered they needed to define
the reward.
• Starbucks changed the cues.
– Or wait for the moment went the context
changes. Like when people are on vacation.
(Or have children, or get divorced, or
move…)
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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The role of emotion
• We all know that our emotional state can play a
role in decision-making.
– Dan Ariely ran experiments and the surprise
was just how much of a role emotions play.
– People were asked to make decisions when
relaxed, and asked again in an aroused
state. The difference between the two was
shocking – like Dr. Jekyll and Mr. Hyde.
– This has important implications for safe sex
and drunk driving… but also for consumer
decision-making.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Asking direct questions
• The moral of the story: when it comes to market
research, direct questioning won’t always work.
• We need to give participants the context to
answer the question.
– Physical context (what are the cues? What
are the choices?)
– Emotional context (how do they feel about it?)
• That’s where our skills as professional qualitative
researchers come into play.
• We already have the tools to design research that
uses methods other than direct questioning.
• Following slides can be used as a reference.
– List is not exhaustive; feel free to add.
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Understanding customers’ relationship with…
• Direct questioning:
• “How do you feel about X?”
• “Why is it important to you?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Understanding customers’ relationship with…
• “Choose a picture that best
illustrates how you feel about X.”
• Or:
– Choose among colors.
– Choose among random
pictures and tell a story about
how it relates to X.
– Role play
– “Here’s a photo of Mabel.
Mabel is everyone’s favorite
grandmother. Explain to Mabel
about X…” (Thanks,
Revelation Global)
– “Close your eyes…”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Impressions and benefits of a brand
• Direct questioning:
• “What do you think of X?”
• “What do you like about it?”
• “What don’t you like?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Impressions and benefits of a brand
• “Think of as many things as you can
say about X and write them on the
lines shown.”
(Thank you, Pat Sabena!)
Brand
• Or…
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Impressions and benefits of a brand
• Laddering
– “What attributes of X are important to you?
– “What’s the benefit to you of attribute Y?”
– “Tell me a bit more about the personal value of
that benefit to you. Why is it valuable?”
• Or…
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Impressions and benefits of a brand
• What do people say about the product or brand?
• What do they think about the product or brand?
• Can add: What do they feel?
• Or…
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Impressions and benefits of a brand
• “Imagine a situation where the product was not
available.”
– “Describe what life would be like.”
• “Write a love letter to the brand…”
• Provide a wastebasket and ask what participants would
throw away from the brand and what they’d keep from
the brand.
• What would a competitor (or the competitor’s
salesperson) say about this brand?
• What would you tweet? What would you really want to
say if you weren’t limited to 140 characters?
• What would you tell a friend about x? And what would
you tell x company’s engineers about it? [The second
question uncovers areas for improvement]
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Which positioning statement is best?
• Direct questioning:
• “Please read this statement. This isn’t an
ad, but it’s an idea that might be behind an
ad. What do you think of what it’s saying?
• “Now please read this statement…”
• “And this statement…”
• “And this statement…”
• “And this statement…”
• “Which statement works best? Why do you
say that?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Which positioning statement is best?
• Provide a bullseye with the attributes
the statements need to convey in the
center.
– Participants place positioning
statements based on how close
they are to those attributes.
(Thank you, Abby Leafe!)
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Where is the brand in the competitive field?
• Direct questioning:
• “Who are the competitors for X?”
• “How does X compare? In what ways is X
better? In what ways is X worse?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Where is the brand in the competitive field?
• “If brand x, y and z were people at a party, what
would they be like? What car would they drive
up in? How would they be dressed? How
would they behave?”
• (Or for more broad-stroke impressions:) “What
animal would they be? Why do you say that?”
Higher
• Perceptual map:
– (Based on attributes defined earlier)
– “Where is X on this map?”
Less
More
– “Where are the competitors?” (one at a
time)
Lower
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Which features are important?
• Direct questioning:
• “Here is a list of features. Which of these
is important to you? Which are
unimportant? Which are just ‘nice to
have?’”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Which features are important?
• “Here is a list of 20 features. You each have
four green dots and four yellow dots. Put a
green dot on the features you want the most,
and put a yellow dot on the features that you
want, but that aren’t as important to you as the
green-dot ones.”
• (Or give them a certain number of dollars to
allocate. Or poker chips.)
• “Imagine this is the box for this product. What
goes on the front of the box? What goes on the
back?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Evaluating a new product
• Direct questioning:
• “Do you like this product?
Why do you say that?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Evaluating a new product
• “The first stick figure is the typical customer for this product. Let’s describe
that person…”
• “The second stick figure is you. Let’s go over the same descriptions.”
• “Now let’s compare the two.”
Name: ____________________
Name: ____________________
Lives where? ________________________________
Lives where? ________________________________
Car drives: __________________________
Car drives: __________________________
Marital status: __________________
Marital status: __________________
Kids? How many? ________________
Kids? How many? ________________
5 adjectives to describe lifestyle:
5 adjectives to describe lifestyle:
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Evaluating a new product
• “Imagine yourself using the product.”
– “What would change?”
– “How would it fit in to your routine?”
• From Naomi Henderson:
– What are the barriers to you using this
product?
– Let’s talk about ways to get around
those barriers:
• Go above and beyond
• Bust through
• Sneaky or under-handed ways
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Evaluating designs, logos
• Direct questioning:
• “What does this communicate to you?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Evaluating designs, logos
• “What’s the first word that comes into your
mind when you see this logo?”
Higher
• Or:
• Place the designs on a perceptual map,
with the axes based on the attributes we
want to convey.
• Or:
Less
More
Lower
• “What if this logo came to life…”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Likelihood to buy
• Direct questioning:
• “How likely would you be to buy this?”
• Alternate approach:
• “Here are your options and their prices.
How do you go about choosing?”
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Many other options
• Examples?
• Use your creativity. Consider:
– Context
– Emotions
• Also, feel free to call me... one of the
great benefits of QRCA how members
are so helpful to one another. Two heads
are better than one!
Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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Thank you
• Jay Zaltzman
• Bureau West - Market Research &
Marketing Strategy
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Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected]
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