Market Insights: How to Apply Behavioral Economics
Behavioral Economics has been causing quite a buzz on the New York Times bestseller list in recent years. Books such as Daniel Kahneman’s “Thinking Fast and Slow” and Dan Ariely’s ”Predictably Irrational” have helped to create a mainstream interest in behavioral economics. Market insights professionals should be especially interested in the recent surge of behavioral economics research, as their job is to study and anticipate human behavior on a daily basis.
We recently released a whitepaper – Applying Behavioral Economics to Market Insights (for CEB Market Insights members) – which seeks to understand the best ways Market Insights can use behavioral economics findings to guide research and insight generation processes. We found two areas for market insights to focus on applying behavioral economics:
- Use behavioral economics to guide hypothesis and insight generation: Behavioral economics principles suggest ways to influence consumers, taking advantage of natural cognitive processes to drive potential customers to choose and use products and services.
For Market Insights, an understanding of these processes can serve as a divining rod—helping to explain behaviors and craft insights and recommendations for business partners. When developing insights, MI professionals should review observed and desired behavior against a set of principles on consumers’ behavior, and base insights and recommendations on these behavioral economics principles.
- Use behavioral economics to improve research design: With the exception of direct observational techniques (which can benefit from an understanding of consumer behavior as above), the consumer research process often influences behaviors—potentially affecting outcomes and results.
Behavioral economics can make sense of why subjects may answer questions one way or another, and how their answers relate to the actual behaviors, attitudes, and drivers the study aims to capture. Behavioral economics suggests that many of the basic study design principles Market Insights relies on may be flawed, and can be used to set guidelines for improving the accuracy of the research process.
CEB Market Insights members, learn more about the basic principles describe in behavioral economics literature, and techniques for applying behavioral economics to insight-generation activities in the full whitepaper here – Applying Behavioral Economics to Market Insights.