Humans Are Predictably Irrational

Psychologist Daniel Kahneman, whose work on the psychology of judgment and decision-making, as well as behavioral economics, was awarded the 2002 Nobel Memorial Prize in Economic Sciences. His empirical findings challenged the assumption of human rationality prevailing in modern economic theory. The intersection between these two fields happen because economists assume that humans are rational actors always seeking to maximize utility; psychologists know that humans are anything but rational. Or, as Dan Ariely puts it, humans are predictably irrational.

Enter a real client brief for a research project to solve a real conundrum. The following is the conversation between Fresh Squeezed Ideas’ President, and our Behavioral Science Insights expert. (All other references have been changed to protect the innocent!)

President: So, our client believes that the root of their business problem, and the reason the brand is not breaking through, is an issue with how consumers perceive their product attributes. They cite that “only 1/3 of consumers are aware that there are real [ingredients] in our product”. This is a hypothesis based upon the belief that the underperformance is caused by a rational issue. But we know the brand is much more important than the actual product in most mainstream categories—few people can actually taste the differences. And we know that people make emotional or subconscious decisions, right?

Behavioral Science Insights expert: Yes, but if there is something novel about the product that is important to them, it can help them choose. For example, I may start to drink this coffee and then feel more energized just because I think there’s caffeine in it. By the way, I happen to know you often slip decaf in the machine and yet everyone in the office says they’re ‘buzzing’ despite getting virtually no caffeine. It’s a dirty trick.

President: What can I say, you caught me . . .  Ok, so you’re saying that even though every coffee may have caffeine, simply highlighting the presence of caffeine might create a perception that is uniquely attributed to a particular product? A brand of coffee could become known for being ‘supercharged’ even though it has no more caffeine than any other just by drawing attention to caffeine content?

Behavioral Science Insights expert: Yes. It’s almost always about the subconscious perceptions that impact the experience. But that doesn’t mean that those perceptions cannot be product attributes. Another example is with instant coffee; the product attributes alone can’t be leveraged because the social perception of instant coffee is so bad! I’m not sure there is a strongly negative social aspect in say, iced tea. It’s not quite as bad as having a soda, but also not quite a juice…maybe that’s part of the problem. A brand would need to create some culture around it. Perhaps a first step could be to highlight the ‘real natural’ aspect, so people might think about it for a boost, and then the brand can play this up in their marketing communications.

President: So how do we prove or disprove their original hypothesis, that the product attributes are the reason for their underperformance?

Behavioral Science Insights expert: The only way to provide valid and reliable evidence for or against is a randomized controlled trial. But given they’re set on a quick round of focus groups, I’m not sure they’ll go for it!

President: So what do you suggest as an alternative?

Behavioral Science Insights expert: To get the full story, we must observe behaviors and tap into the non-rational subconscious attitudes, on top of the typical direct inquiry they want from the focus groups. By deploying a selection of behavioral research methods to uncover the true drivers of behavior, and probing deep on points of interest, we get the complete story, thereby allowing us to build an impactful strategy for the client. Essentially, it’s first task, don’t ask! We can do the asking after.

President: Some clients are very stuck on regular focus groups . . .

Behavioral Science Insights expert: Remember we said that humans are not rational? There is ample scientific proof that focus groups and conventional multi-choice or Likert scale survey questions are highly biasing—they prime and anchor the respondents to produce answers that fuel the gap between what people say in research and what they do in real life. This is not news. But still some people cling to what is familiar. Our job is to make the switch to the right methods easy and safe, which we’re good at. When they see the results they’ll be converts forever.