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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: jay@bureauwest.com. Behavioral economics.

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qual s secret weapon behavioral economics in practice

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: jay@bureauwest.com

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 1

behavioral economics
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!

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 2

behavioral economics how do people make decisions
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 3

asking direct questions
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 4

behavioral economics understanding the irrational decision making process
Behavioral economics: understanding the irrational decision-making process
  • Dan Ariely says: while people are irrational, they’re predictably irrational.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 5

the power of the default
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

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 6

the power of the default continued
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 7

frame of reference
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

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 8

how much will people pay
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…

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 9

how much will people pay continued
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).

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 10

how we value things
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 11

changing habits
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…)

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 12

the role of emotion
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 13

asking direct questions1
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.

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 14

understanding customers relationship with
Understanding customers’ relationship with…
  • Direct questioning:
  • “How do you feel about X?”
  • “Why is it important to you?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 15

understanding customers relationship with1
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…”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 16

impressions and benefits of a brand
Impressions and benefits of a brand
  • Direct questioning:
  • “What do you think of X?”
  • “What do you like about it?”
  • “What don’t you like?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 17

impressions and benefits of a brand1
Impressions and benefits of a brand
  • “Think of as many things as you can say about X and write them on the lines shown.” (Thank you, Pat Sabena!)
  • Or…

Brand

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 18

impressions and benefits of a brand2
Impressions and benefits of a 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…

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 19

impressions and benefits of a brand3
Impressions and benefits of a brand
  • 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…

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 20

impressions and benefits of a brand4
Impressions and benefits of a brand
  • “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]

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 21

which positioning statement is best
Which positioning statement is best?
  • Direct questioning:
  • “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…”
  • “And this statement…”
  • “And this statement…”
  • “Which statement works best? Why do you say that?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 22

which positioning statement is best1
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!)

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 23

where is the brand in the competitive field
Where is the brand in the competitive field?
  • Direct questioning:
  • “Who are the competitors for X?”
  • “How does X compare? In what ways is X better? In what ways is X worse?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 24

where is the brand in the competitive field1
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

Less

More

Lower

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 25

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

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 26

which features are important1
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?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 27

evaluating a new product
Evaluating a new product
  • Direct questioning:
  • “Do you like this product? Why do you say that?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 28

evaluating a new product1

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:

____________________

____________________

____________________

____________________

____________________

Evaluating a new product
  • “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.”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 29

evaluating a new product2
Evaluating a new product
  • “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

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 30

evaluating designs logos
Evaluating designs, logos
  • Direct questioning:
  • “What does this communicate to you?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 31

evaluating designs logos1
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

Less

More

Lower

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 32

likelihood to buy
Likelihood to buy
  • Direct questioning:
  • “How likely would you be to buy this?”
  • Alternate approach:
  • “Here are your options and their prices. How do you go about choosing?”

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 33

many other options
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!

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 34

thank you
Thank you
  • Jay Zaltzman
  • Bureau West - Market Research & Marketing Strategy
    • Our Research Tidbit newsletter keeps you up to date on what's new and interesting in marketing and market research each month
    • Please send me an email if you'd like to receive it. Just email info@bureauwest.com and write “newsletter” in the subject line

Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 35