THE IMPORTANCE OF CONTEXT / BY LAURA FLETCHER
3 September 2010
Humans are imperfect. We need all the help we can get.' Thaler, RSA, 2008
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Our obsession with gaining a better understanding of how consumers might react to branded products and/or services continues to have its own fair share (and growing) of the annual marketing purse. Will consumers buy Starbucks or opt for the local caff? Will they spend an extra £500 for the GPS upgrade on their car, or take the standard model?
What drives these myriad purchase or 'experience' decisions we all make every day?
If there was a simple answer to this, I'd be writing from my yacht in Monaco. That said, as an industry, the more we delve into consumers' decision making processes, the more we can appreciate what the IPA is currently championing - Behavioural Economics and its challenge to the theories of classical economics. In simple terms, behavioural economics suggests that consumers do not make choices based entirely on rational thinking, jarring with classical theories that essentially, they believe they do. To put more formally, behavioural economics is the synthesis of psychological and cognitive theory mixed with traditional economics.
As a digital marketing agency, we at 3Sixty understand that how choices are designed for consumers and the context they are presented in can have an enormous impact on the decision to purchase one product or brand over another. Behavioural economics and what sits beside it - choice architecture - have both been around for some time as marketingtools yet the industry has never truly understood how and why these principles work. Until now.
In order to understand it all a little better, we need to look at the diagram above and understand the effect that context has on us.
Strange isn't it? The grey circle has not changed at all, yet simply by altering the context which it is placed in, by splitting (diagram b) or offsetting (diagram c), the grey circle appears to be totally different colours. Now you may be wondering what an optical illusion such as this has to do with marketing - and this is where it starts to get interesting...
Seeing in context
Vision is something we as humans are really very good at, we have evolved over millions of years to use our sight to hunt animals on the plains, get out of the way of danger and find the best possible mate, so an enormous part of our brain's processing power is given over to it. Yet, as we can see from the diagram above, we can still make fairly elementary and predictable mistakes with our eyes, and in this example it comes down to the simple idea of context.
Prof Nick Chater from UCL explained the importance of context in his speech at the IPA's Behavioural Economics event. In his words 'For humans, everything is relative. There are no absolute measures. Our judgement becomes swamped by local context. We can only tell you how pleasurable or painful an experience is based on our previous experience of what is painful or pleasurable, hot or cold, slow or fast and so on.'
Now, suppose you are choosing for afternoon tea and you can have either:
a) A toasted teacake with a cup of tea
b) A slice of chocolate cake with a cup of tea
c) A slice of chocolate cake.
Psychological studies have shown we are most likely to choose the slice of chocolate cake with the cup of tea. Why? Well we immediately recognise that option c) is the least desirable, and because we are able to compare it to b) quite easily, it makes it look even better (i.e. the chocolate cake and a cup of tea). In this simple instance, where we have context and an easy comparison between options, average minds will naturally tend to disregard the teacake.
Too much choice is overwhelming and when faced with a multitude of options, consumers are likely to do nothing at all. So, how might we use choice architecture to help our customers make the best decisions and improve outcomes for a brand?
Bread making machines were a very new product in the American market and the company that was manufacturing them became very concerned by poor sales figures. They brought in a market research firm, which suggested a simple fix: introduce a larger and even more expensive bread machine as a 'decoy'. The problem was that at this time, bread machines were a new product and consumers simply did not know what to make of them, with nothing to compare them to. Once the new, larger and more expensive, machine had been introduced, sales for the original bread machine rocketed, while the decoy languished. With a choice and now in proper context, consumers felt they could make a rational decision.
Despite the fact that as in this instance, the cheaper bread machine won the day, the presence of a more expensive option within a comparative set has been shown to raise the amount of money spent overall. Many of you will appreciate this within the role choice architecture plays in the restaurant business. According to research, it has been found that consumers rarely choose the most expensive items on food or wine menus and in fact, restaurant owners do not expect to sell many of these items anyway. So why have them? Simply, their role is to provide a contextual anchor, to make sure all the other dishes on the menu look relatively good value. Including a super premium product in your range might not result in many sales of that product but it will certainly up the overall spend of other products.
Sales are what we strive for but they do not necessarily build longer term brand advocates and loyalty. That's the marketing bit. With smart choice architecture in place, consumers will understand that the brand in question helped guide them towards a good purchase decision which in turn results in goodwill and longer term advocacy.
With the rise of social media, a brand's relationship with its consumer has changed, with more control in the hands of those that purchase. Consumers are more marketing savvy and with it, comes a fickleness in terms of brand choice and loyalty. Decisions are not made in a vacuum, nor can we force certain outcomes - consumers will still always have the ability to make the choice. However we can 'nudge' them to make the decisions we as marketers would prefer them to make.
Behavioural economics and choice architecture can help us to make that consumer decision making process more efficient and less confusing, guiding them towards the best choices of product or service. A greater focus on a brand's strategic planning both in terms of the wider context our products are viewed in as well as the local context we place our products in online, will help to create truly effective marketing campaigns for the future. Brands and their agencies create choices for consumers every day. Whether or not they maximise the chances of success is another matter.
Laura Fletcher is Account Planner 3 Sixty Digital Marketing
What drives these myriad purchase or 'experience' decisions we all make every day?
If there was a simple answer to this, I'd be writing from my yacht in Monaco. That said, as an industry, the more we delve into consumers' decision making processes, the more we can appreciate what the IPA is currently championing - Behavioural Economics and its challenge to the theories of classical economics. In simple terms, behavioural economics suggests that consumers do not make choices based entirely on rational thinking, jarring with classical theories that essentially, they believe they do. To put more formally, behavioural economics is the synthesis of psychological and cognitive theory mixed with traditional economics.
As a digital marketing agency, we at 3Sixty understand that how choices are designed for consumers and the context they are presented in can have an enormous impact on the decision to purchase one product or brand over another. Behavioural economics and what sits beside it - choice architecture - have both been around for some time as marketingtools yet the industry has never truly understood how and why these principles work. Until now.
In order to understand it all a little better, we need to look at the diagram above and understand the effect that context has on us.
Strange isn't it? The grey circle has not changed at all, yet simply by altering the context which it is placed in, by splitting (diagram b) or offsetting (diagram c), the grey circle appears to be totally different colours. Now you may be wondering what an optical illusion such as this has to do with marketing - and this is where it starts to get interesting...
Seeing in context
Vision is something we as humans are really very good at, we have evolved over millions of years to use our sight to hunt animals on the plains, get out of the way of danger and find the best possible mate, so an enormous part of our brain's processing power is given over to it. Yet, as we can see from the diagram above, we can still make fairly elementary and predictable mistakes with our eyes, and in this example it comes down to the simple idea of context.
Prof Nick Chater from UCL explained the importance of context in his speech at the IPA's Behavioural Economics event. In his words 'For humans, everything is relative. There are no absolute measures. Our judgement becomes swamped by local context. We can only tell you how pleasurable or painful an experience is based on our previous experience of what is painful or pleasurable, hot or cold, slow or fast and so on.'
Now, suppose you are choosing for afternoon tea and you can have either:
a) A toasted teacake with a cup of tea
b) A slice of chocolate cake with a cup of tea
c) A slice of chocolate cake.
Psychological studies have shown we are most likely to choose the slice of chocolate cake with the cup of tea. Why? Well we immediately recognise that option c) is the least desirable, and because we are able to compare it to b) quite easily, it makes it look even better (i.e. the chocolate cake and a cup of tea). In this simple instance, where we have context and an easy comparison between options, average minds will naturally tend to disregard the teacake.
Too much choice is overwhelming and when faced with a multitude of options, consumers are likely to do nothing at all. So, how might we use choice architecture to help our customers make the best decisions and improve outcomes for a brand?
Bread making machines were a very new product in the American market and the company that was manufacturing them became very concerned by poor sales figures. They brought in a market research firm, which suggested a simple fix: introduce a larger and even more expensive bread machine as a 'decoy'. The problem was that at this time, bread machines were a new product and consumers simply did not know what to make of them, with nothing to compare them to. Once the new, larger and more expensive, machine had been introduced, sales for the original bread machine rocketed, while the decoy languished. With a choice and now in proper context, consumers felt they could make a rational decision.
Despite the fact that as in this instance, the cheaper bread machine won the day, the presence of a more expensive option within a comparative set has been shown to raise the amount of money spent overall. Many of you will appreciate this within the role choice architecture plays in the restaurant business. According to research, it has been found that consumers rarely choose the most expensive items on food or wine menus and in fact, restaurant owners do not expect to sell many of these items anyway. So why have them? Simply, their role is to provide a contextual anchor, to make sure all the other dishes on the menu look relatively good value. Including a super premium product in your range might not result in many sales of that product but it will certainly up the overall spend of other products.
Sales are what we strive for but they do not necessarily build longer term brand advocates and loyalty. That's the marketing bit. With smart choice architecture in place, consumers will understand that the brand in question helped guide them towards a good purchase decision which in turn results in goodwill and longer term advocacy.
With the rise of social media, a brand's relationship with its consumer has changed, with more control in the hands of those that purchase. Consumers are more marketing savvy and with it, comes a fickleness in terms of brand choice and loyalty. Decisions are not made in a vacuum, nor can we force certain outcomes - consumers will still always have the ability to make the choice. However we can 'nudge' them to make the decisions we as marketers would prefer them to make.
Behavioural economics and choice architecture can help us to make that consumer decision making process more efficient and less confusing, guiding them towards the best choices of product or service. A greater focus on a brand's strategic planning both in terms of the wider context our products are viewed in as well as the local context we place our products in online, will help to create truly effective marketing campaigns for the future. Brands and their agencies create choices for consumers every day. Whether or not they maximise the chances of success is another matter.
Laura Fletcher is Account Planner 3 Sixty Digital Marketing
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