qual’s secret weapon: behavioral economics in practice

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: [email protected] 1

Qual’s Secret Weapon: Behavioral Economics in Practice

• Presented to QRCA Chicago Chapter • May, 2013

• Jay Zaltzman• Bureau West Market Research• Los Angeles, California, USA• Tel: +1-818-588-6050• Email: [email protected]

mailto:[email protected]


Behavioral economics

• We’ve been hearing a lot about behavioral economics in the past few years.

• Some QRCs are intimidated: “What is this behavioral economics thing?” “Is it a new skill I’m supposed to have?”

• I have good news: behavioral economics is a new perspective on things we already know.

• Understanding this perspective can help increase your value to clients. So it’s a win-win!


Behavioral economics: how do people make decisions?

• Traditional economics approach: when people have all the necessary information, they will make the rational decision.

• Behavioral economics found that’s not the case. Decisions aren’t based mainly on logic: the context (choices, environment) and emotions play a major role.


Asking direct questions

• When conducting market research, it’s tempting to simply ask participants direct questions:

– Would you buy this product?

– What do you like about that product?

– What do you think of this brand?

• The problem is, research participants lie. (Perhaps unintentionally.)

– When asked a direct question, people try to theorize how they would make a decision in a given situation, which can be different than actually being in that situation.

– They try to figure out what they would logically decide.


Behavioral economics: understanding the irrational decision-making process

• Dan Ariely says: while people are irrational, they’re predictably irrational.


The power of the default

• Ariely gives an example of organ donations: Germany 12%, Austria 100%

– “Check the box below if you want to participate in the organ donor program”

– “Check the box below if you don't want to participate”

• Do people choose the default because they don't care?

– On the contrary: it’s because of the complexity of the decision


The power of the default (continued)

• It even happens with experts!

• Study conducted with doctors:

– Patient with hip pain, medications hadn’t worked, referred to have a hip replacement; doctor discovered forgot to try one medication. Most doctors would pull patient back.

– Second scenario: doctor discovered that two medications hadn’t been tried. Majority opt for hip replacement.

• When the decision is complicated, the default has huge power.


Frame of reference

• Two sets of choices.

– Weekend in Paris, including hotel and breakfast

– Weekend in Rome, including hotel and breakfast

• Or:

– Weekend in Paris, including hotel and breakfast

– Weekend in Rome, including hotel and breakfast

– Weekend in Rome, including hotel and breakfast, but coffee is not included

• Third option has a surprising impact


How much will people pay?

• The frame of reference has such a huge influence on our decisions.

– Company sells product A for $20 and a higher-end version, product B, for $25

– 80% of sales are product A

– Second company comes to the market with a premium option, let’s call it C, for $35

– Guess what happens to the first company’s sales…


How much will people pay? (continued)

• People have an “anchor,” a price they expect to pay, for certain items. Marketers desperately want to know how to change that anchor.

– One example: when Starbucks opened, and people decided it was worth paying the higher price for their coffee.

– Starbucks changed the context: different ambience, smell of roasting beans, Italian names (“grandé,” “macchiato).


How we value things

• Once people own something, they value that thing far more than they did before they owned it… by a significant percentage.

– We fall in love with what we have.

– We focus on what we might lose if we part with that thing.

– Can lead to a great deal of disappointment when you try to sell your home!

– But has important implications. For example, utilizing customers to help promote a product.


Changing habits

• Charles Duhigg wrote The Power of Habit.

– Once habits are developed, people do them unconsciously, without thinking.

– Habitual behaviors are made up of three parts: the cues (trigger), the behavior itself, and the reward.

– Marketers frequently want to change habits:• Febreze discovered they needed to define

the reward.• Starbucks changed the cues.

– Or wait for the moment went the context changes. Like when people are on vacation. (Or have children, or get divorced, or move…)


The role of emotion

• We all know that our emotional state can play a role in decision-making.

– Dan Ariely ran experiments and the surprise was just how much of a role emotions play.

– People were asked to make decisions when relaxed, and asked again in an aroused state. The difference between the two was shocking – like Dr. Jekyll and Mr. Hyde.

– This has important implications for safe sex and drunk driving… but also for consumer decision-making.


Asking direct questions

• The moral of the story: when it comes to market research, direct questioning won’t always work.

• We need to give participants the context to answer the question.

– Physical context (what are the cues? What are the choices?)

– Emotional context (how do they feel about it?)

• That’s where our skills as professional qualitative researchers come into play.

• We already have the tools to design research that uses methods other than direct questioning.

• Following slides can be used as a reference.

– List is not exhaustive; feel free to add.


Understanding customers’ relationship with…

• Direct questioning:

• “How do you feel about X?”

• “Why is it important to you?”


Understanding customers’ relationship with…

• “Choose a picture that best illustrates how you feel about X.”

• Or:

– Choose among colors.

– Choose among random pictures and tell a story about how it relates to X.

– Role play

– “Here’s a photo of Mabel. Mabel is everyone’s favorite grandmother. Explain to Mabel about X…” (Thanks, Revelation Global)

– “Close your eyes…”


Impressions and benefits of a brand


• “What do you think of X?”

• “What do you like about it?”

• “What don’t you like?”



• “Think of as many things as you can say about X and write them on the lines shown.” (Thank you, Pat Sabena!)

• Or…

Brand



• Laddering

– “What attributes of X are important to you?

– “What’s the benefit to you of attribute Y?”

– “Tell me a bit more about the personal value of that benefit to you. Why is it valuable?”

• Or…



• What do people say about the product or brand?

• What do they think about the product or brand?

• Can add: What do they feel?

• Or…



• “Imagine a situation where the product was not available.”

– “Describe what life would be like.”

• “Write a love letter to the brand…”

• Provide a wastebasket and ask what participants would throw away from the brand and what they’d keep from the brand.

• What would a competitor (or the competitor’s salesperson) say about this brand?

• What would you tweet? What would you really want to say if you weren’t limited to 140 characters?

• What would you tell a friend about x? And what would you tell x company’s engineers about it? [The second question uncovers areas for improvement]


Which positioning statement is best?


• “Please read this statement. This isn’t an ad, but it’s an idea that might be behind an ad. What do you think of what it’s saying?

• “Now please read this statement…”

• “And this statement…”



• “Which statement works best? Why do you say that?”


Which positioning statement is best?

• Provide a bullseye with the attributes the statements need to convey in the center.

– Participants place positioning statements based on how close they are to those attributes. (Thank you, Abby Leafe!)


Where is the brand in the competitive field?


• “Who are the competitors for X?”

• “How does X compare? In what ways is X better? In what ways is X worse?”


Where is the brand in the competitive field?

• “If brand x, y and z were people at a party, what would they be like? What car would they drive up in? How would they be dressed? How would they behave?”

• (Or for more broad-stroke impressions:) “What animal would they be? Why do you say that?”

• Perceptual map:

– (Based on attributes defined earlier)

– “Where is X on this map?”

– “Where are the competitors?” (one at a time)

Higher

Lower

Less More


Which features are important?


• “Here is a list of features. Which of these is important to you? Which are unimportant? Which are just ‘nice to have?’”


Which features are important?

• “Here is a list of 20 features. You each have four green dots and four yellow dots. Put a green dot on the features you want the most, and put a yellow dot on the features that you want, but that aren’t as important to you as the green-dot ones.”

• (Or give them a certain number of dollars to allocate. Or poker chips.)

• “Imagine this is the box for this product. What goes on the front of the box? What goes on the back?”


Evaluating a new product


• “Do you like this product? Why do you say that?”



• “The first stick figure is the typical customer for this product. Let’s describe that person…”

• “The second stick figure is you. Let’s go over the same descriptions.”

• “Now let’s compare the two.”

Name: ____________________

Lives where? ________________________________

Car drives: __________________________

Marital status: __________________

Kids? How many? ________________

5 adjectives to describe lifestyle:

____________________

____________________

____________________

____________________

____________________

Name: ____________________

Lives where? ________________________________

Car drives: __________________________

Marital status: __________________

Kids? How many? ________________

5 adjectives to describe lifestyle:

____________________

____________________

____________________

____________________

____________________



• “Imagine yourself using the product.”

– “What would change?”

– “How would it fit in to your routine?”

• From Naomi Henderson:

– What are the barriers to you using this product?

– Let’s talk about ways to get around those barriers:• Go above and beyond• Bust through• Sneaky or under-handed ways


Evaluating designs, logos


• “What does this communicate to you?”


Evaluating designs, logos

• “What’s the first word that comes into your mind when you see this logo?”

• Or:

• Place the designs on a perceptual map, with the axes based on the attributes we want to convey.

• Or:

• “What if this logo came to life…”

Higher

Lower

Less More


Likelihood to buy


• “How likely would you be to buy this?”

• Alternate approach:

• “Here are your options and their prices. How do you go about choosing?”


Many other options

• Examples?

• Use your creativity. Consider:

– Context

– Emotions

• Also, feel free to call me... one of the great benefits of QRCA how members are so helpful to one another. Two heads are better than one!


Thank you

• Jay Zaltzman

• Bureau West - Market Research & Marketing Strategy

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qual’s secret weapon: behavioral economics in practice

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