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Qual’s Secret Weapon: Behavioral Economics in Practice

Qual’s Secret Weapon: Behavioral Economics in Practice. Presented to QRCA SF (and includes input from the chapter) January , 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

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  1. Qual’s Secret Weapon: Behavioral Economics in Practice Presented to QRCA SF (and includes input from the chapter) January, 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

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

  21. 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 21

  22. 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 22

  23. 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 23

  24. 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 24

  25. 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 25

  26. 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.) • “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 26

  27. 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 27

  28. 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 28

  29. Evaluating a new product • “Imagine yourself using the product.” • “What would change?” • “How would it fit in to your routine?” Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 29

  30. 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 30

  31. 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 31

  32. 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 32

  33. Many other options • Examples? • Use your creativity. Consider: • Context • Emotions • Also, consider calling us for advice! Bureau West ▪ Market Research & Marketing Strategy ▪ Los Angeles, CA ▪ tel: (818) 588-6050, email: info@bureauwest.com 33

  34. 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 34

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