There is attractive simplicity to the notion that consumers choose what they want which is the basis for Behavioural Economics in Marketing. It makes the work of marketers relatively straightforward: give the right people the right information and they’ll synthesise it, weigh their various interests, and make the most informed choice.
In an increasingly interconnected world, there exists an opportunity to create a closer relationship between customers and companies. Behavioural economics, a relatively new field of study that has developed over the last three decades, is helping marketers to improve the customer experience. According to behaviouraleconomics.com, behavioural economics studies, “cognitive, social and emotional influences on people’s observable economic behaviour.” Emotions take part in shaping our economic choices, and, in fact, behavioural economists tell us that consumer decision-making is 30 percent rational and 70 percent emotional.
In order to improve engagement, and Marketing growth marketers have to understand that customers are human beings whose purchasing decisions are strongly influenced by emotions. Behavioural economics can provide valuable insights for marketers by helping them to identify behaviours and adapt to customers’ irrational biases and emotional demands and needs.
Use of Behavioural Economics in improving Marketing
Behavioural economics injects the standard marketing approach with insights from the past three decades of psychology, economics, and marketing research. It sharpens our focus on how and why people make the choices that they do—what feeds the decision-making process? What levers most effectively influence outcomes?
A behavioural economics lens on consumer choice helps explain why some marketing efforts are not effective and, more importantly, how to construct more effective marketing programs. Many of the important lessons of behavioural economics stem from a construal of how consumers approach choice.
Psychology of a New Customer related to Behavioural Economics in Marketing
Marketing approaches that take account of active goals or that actually activate goals are going to have a much greater impact on consumers. Behavioural economics also reveals a range of factors that, though beyond marketers’ direct control, is nonetheless critical to understanding how to influence consumer decisions. For instance, people make decisions differently when they are under time pressure, or when they have just made a series of decisions. This latter case, known as mental depletion or fatigue, occurs because people’s limited attention spans can be “used up” by repeated decision-making, leading to a greater willingness to succumb to temptation and indulgence.
An insight into the customer’s perspective to understand Behavioural Economics in Marketing
Beliefs about a product can be the driving influence not just of predictions about a product, but of actual experiences and memories of those experiences. The challenge for marketers for their marketing growth is thus not simply product improvements, but managing and influencing consumer beliefs, including understanding and activating the relevant beliefs at the right moments.
Customer Insights as a part of Behavioural Economics in Marketing
The presentation of alternatives, as in the choice architecture, is essential to a successful marketing approach. Retailers have for years known that products on middle shelves are more attractive and more likely to be purchased than products on top or bottom shelves. Why? Because System 1 imposes a satisfying rule: stop when you find something that is good enough and System 1 generally starts by considering what is right in front of us.
While the work of behavioural economics continues to convey that consumer decisions are more complicated than previously thought, it also uncovers new realms of opportunity for marketers in order to obtain Marketing Growth.
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