Discover how we use behavioural economics to understand how your key stakeholders think.
Behavioural economics is a body of knowledge that aims to analyse economic decision-making through understanding our psychological biases.
More a series of observations as opposed to a theory, behavioural economics can explain why people might make irrational economic decisions about everything from ordering dinner in a restaurant to buying a new pair of shoes. The principles of this emerging discipline are commonly used by marketers to understand their customers. It’s a field that’s rapidly gaining popularity in the marketing space and is supported by the UK’s peak advertising body, The Institute of Practitioners in Advertising.
What can behavioural economics tell us?
Behavioural economics essentially tells us that decision-making isn’t rational.
Even when we think we’re making a logical, conscious decision, it’s more likely our brain is using a “short cut” (heuristic) or a bias to make that decision. Behavioural economics entered the mainstream around 1979, when psychologists Daniel Kahneman and Amos Tversky published a renowned paper called “Prospect Theory”.
The paper described the way people frame economic outcomes as gains and losses, with Kahneman and Tversky arguing that people dislike losses more than they like the equivalent gains. The two authors used this argument to understand how people manage risk and uncertainty.
Over the years, further studies have identified more than 50 heuristics and biases that we all use to make decisions in every facet of our lives - from trivial choices like how many discounted loaves of bread we’ll buy, to life-changing decisions such as choosing a partner.
How do we use behavioural economics?
We have a suite of behavioural strategy tools that help us understand the specific heuristics and biases your customers are using when they make decisions about purchasing your products. Combining the latest thinking in both behavioural economics and neuroscience, these tools are able to give us a clearer understanding of the complete behavioural economic picture.
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