Behavioral Economics has been in the news a lot in the last few years because it helps us understand consumer decision-making. As a refresher, Behavioral Economics is a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making. As market research is often concerned with decision-making, Behavioral Economics can significantly impact research results. The good news is that being aware of Behavioral Economics, can help researcher adapt.
Classic Economics assumes that consumers are rational. That is, in all decisions, consumers weigh the costs and benefits to rationally make their choice. On the other hand, psychology sees consumers as emotional, making decisions based on how they feel. Behavior Economics blends the two and has empirically validated that humans are predictably irrational. There are constant flaws in consumers' decisions, but they can be predicted and, for the majority, accounted for.
Therefore, Behavioral Economics identified two types of thinking:
System 1: which is fast, intuitive, automatic, effortless, associative
System 2: which is slow, counterintuitive, controlled, effortful, logical
System 1 produces the fast, intuitive reactions and instantaneous decisions that govern most of our lives. Daniel Kahneman, the 2002 Nobel Prize winner for Economics and author of Thinking, Fast and Slow, says that for every System 2 decision we make, there are 1,000s of System 1 decisions. In fact, research has shown that 79% - 93% of our decisions are guided by System 1 (our instincts and our past behavior).
System 2 is the deliberate type of thinking involved in focus, reasoning, or analysis, such as calculating a complex math problem, exercising self-control, or performing a demanding physical task. When humans face decisions, System 1, which is faster, stronger, and more intuitive than system 2, goes into action.
In market research, we ask respondents to make many decisions in a short amount of time. Do you like this product or that product? Which of these two feature bundles would you purchase? Most of the time, consumers are answering with System 1 thinking.
The largest online behavioral science network (BehavioralEconomics.com) lists over 90 principles in their online mini encyclopedia. In our research into this topic, we discovered a variety of resources that, combined, suggest that there may be over 300 principles. We’ve identified the eight principles that may impact qualitative research the most. And we know what you can do to overcome System 1 and bring System 2 back into respondents' thinking.
Here are the eight Behavioral Economic principles we’ve identified that impact qualitative research — and what you can do about them:
Herd Behavior is when people do what others are doing instead of using their own information or making independent decisions. People tend to be ‘followers’ or just go with the flow. To address Herd Behavior, you can consider the various influences and influencers in the respondent's life (their herd). What are their beliefs and norms? How might that influence the behavior of the respondent? Perhaps if you are researching patients, you should also include caregivers, partners, and others to better understand the beliefs and norms surrounding the patient. You could also consider a pre-research assignment or a new line of questioning at the start of the interview.
Choice Architecture is when people's choices are influenced by how options are presented. In short, how you present choices impact the decisions respondents make. This may have some implications for how we ask respondents to choose between various pieces of stimuli. So, in qualitative research, think about how you are presenting the options. For example, if wanting optimize a patient brochure, consider asking patients to review multiple brochures (including the one being evaluated) prior to the start of the interview. This can be helpful in the understanding of how well the brochure to be optimized stands up against the competition without biasing the choice made. This can provide a starting point for discussing additional information needed or optimizations to be made.
The Framing Effect The framing effect tells us that people react in different ways depending on how the choice is presented. Or, said another way, people react differently to the same information depending on how it is framed. For example, would you be interested in having a stranger paw at your bare skin… or would you rather get a massage? Market researchers are always thinking about how to present information. However, the key — especially in qualitative research — is to consistently deliver the choices to every respondent. How we frame the stimuli at the start of the project should be the same as at the end. If we are doing research across several countries, then how we frame the stimuli in one country should be the same as in the other countries. Consistency is key when it comes to overcoming the framing effect.
Anchoring is when people rely too heavily on the first piece of information offered – this is the anchor – when making decisions. During decision-making, anchoring occurs when individuals use an initial piece of information to make subsequent evaluations. That may be why your mother told you never to "judge a book by its cover.” Anchoring can begin with your first respondent contact, so consider the screener questions you ask, the order you ask them, and the topic you share with respondents when screening. What they hear first could influence what they do, think, and say in the actual research. This also can apply to how the interview is set up. What goes into the introduction can make a difference. Often, we start interviews asking about a specific treatment experience. This can become the anchor for respondents when what we really need is not for them to anchor on a specific treatment experience, but rather the emotional toll of living with everyday symptoms.
Default Behavior tells us that people make choices based on past experiences and past behaviors. Consumers often don't even have to stop to think about whether or not they have default behaviors. They are so automatic they don't give them thought. When you are seeking to understand what people do, or what they might be likely to do, look at their past behaviors. You may want to consider identifying an analog experience to explore how respondents behaved in the past and to understand their responses to questions about future behavior.
Loss aversion is when consumers make decisions to avoid loss. Depending on how you present the choices, if one is presented as a loss, respondents will choose the option that does not represent a loss. We need to find new ways set the stage differently and bring respondents to the point where they are no longer concerned about a potential loss, real or imagined. Another way to avoid the impact of loss aversion is reciprocity. By giving the respondent additional information, you encourage the respondent to give back information of equivalent value.
Decision Fatigue happens to people after long sessions of decision-making, which can lead to poor decisions. Choosing can be difficult and requires effort like any other activity; therefore, long decision-making sessions can tire out participants, leading to poor choices. The obvious solution to Decision Fatigue is to limit respondents' time making decisions. That means fewer choices, fewer questions, and even fewer topics. We should seek to avoid loading up the discussion with too many questions or too much stimuli. Loaded discussion guides may provide more information, but it may not be reliable.
The Do-Say principle that what people say motivates them and what actually motivates them are often very different. The impact of the Do-Say principle can be mitigated by more closely duplicating the setting, or environment people will be in when they make a choice or act, the more reliable the results. Take the time to guide respondents into the time and place that fits your research needs. Not only will they be closer to the experience mentally, but you have also anchored them on the experience you want to discuss and framed the discussion around what you are trying to learn.
Understanding Behavioral Economics and its potential impact on market research will improve your research results and make them more reliable. Dan Ariely, author of ‘Predictably Irrational’ and Duke University Professor in Behavioral Economics, has found, through various experiments, that context matters in how people make choices and behave. By thinking ahead and taking a few precautions to adapt your research process to respondents' decision-making, you can go a long way toward creating a context that will optimize your research.