I am captivated by the field of behavioral economics, where psychology and economics are merging to provide us with tremendous insights to be applied to our work with consumers. It’s not that marketing and advertising folks weren’t already using these principals intuitively. But, prior to its organization as a defined science with the support of research, it was much harder for us to quantify the expected results.
One of the significant areas where we benefit from the study of behavioral economics is in the change from presuming man to be rational—always making reasonable decisions—to understanding man as having significant biases that affect how we make decisions. Again, this is something that marketers have intuitively known, which lacked support and documented research. Over the next several blog posts, I am going to explore some of the important findings of behavioral economists, and explain how they can be applied.
The first finding is around the idea of Optimism.
In our country, optimism has become widely regarded as among the most admirable personality traits. It is viewed as a prerequisite for success—financial or otherwise—and even, perhaps, an essential “American” trait. Entire industries have formed to help people think more optimistically. Even the much-heralded Mayo Clinic has done studies that confirm: optimism leads to longer life.
There is, however, a darker side to this fundamental human bias toward optimism, one that we in the business planning world need to consider carefully when planning our efforts; in particular, when we are trying to influence behavior in the healthcare and wealth management arenas.
In their fascinating book, Nudge: Improving Decisions About Health, Wealth, and Happiness, Richard Thaler and Cass Sunstein put it this way:
• Unrealistic optimism is a pervasive feature of human life.
• Unrealistic optimism can explain a lot of individual risk taking, especially in the domain of risk to life and health.
• When people overestimate their personal immunity from harm, people may fail to take sensible and preventable steps.
In other words, we cannot envision that we could EVER experience a negatively life-altering event, despite the fact that we personally know plenty of people who have experienced these exact situations in our own little spheres of the universe. A cancer or diabetes diagnosis. A drinking problem. Divorce. Losing a house. Failing in a business. If we cannot acknowledge the possibilities of such tragedies, then we are unlikely to protect ourselves against them. So, we don’t get an annual mammogram. We don’t work out habitually. We don’t stop smoking. We don’t buy enough life insurance. We don’t save enough to recover from a financial loss. We continue gambling and buying lottery tickets, despite the fact that we have never actually met anyone who has won.
From a marketer’s point of view, when tasked, for example, with helping a client figure out a way to get people to do (or not do) these very things, we sometimes fail to take into account the strength of this pervasive human characteristic. If we start out, as we should, by looking at it the target audiences’ perspectives, we must acknowledge that this fundamental truth in how our audiences look at the world has vast consequences for what and how we market to them.
The growing study of behavioral economics is helping us to see that we are not going to change the fundamental nature of human beings—especially Americans—to be overly optimistic. But as researchers and strategists, we can use that knowledge and work around this trait in ways that permit our messages to be infinitely more successful.
IMAGE: "half full" by Ira Gelb