BIAS MEANS CONSUMER BEHAVIOUR IS RARELY RATIONAL.

?Human beings like to think of themselves as rational. However, the fact is that humans are nowhere near as rational as many think and indeed, most purchase decisions are not made entirely rationally. Further, consumers' lack of rational decision-making and behaviour makes predicting behaviour difficult and influencing behaviour more complicated. Mitigating this is the growing body of research that is making consumer behaviour 'predictably irrational.'?

Cost-effectively managing consumer behaviour requires an understanding of the drivers of consumer behaviour, including the irrational drivers like cognitive biases.?

1.?????Learn to understand the predictability of irrational behaviour.

?In his 2008 book,?Predictably Irrational, Duke University Professor?Dan Ariely?discussed the observation that human beings, while irrational, are predictably so. He discusses a range of examples of irrational decision making by humans – decision making that is common in consumer purchase behaviour.?

Irrational thinking or – 'automatic thinking,' 'bottom up' thinking or 'fast thinking'. In contrast, rational thinking is variously referred to as 'considered thinking,' 'top-down thinking', and is often referred to as 'show thinking.' I would argue that irrational thinking is not thinking at all, but perhaps a semantic argument best left for a philosophical debate. Suffice to say here that irrational decisions are generally automatic and or emotional and involve little thought.

Recognizing the prevalence and importance of irrational thinking,?Daniel Kahneman?coined the phrases:

·???????'slow thinking'?- irrational thinking occurring in the frontal cortex or conscious mind.

·???????'fast thinking'?- rational thinking occurring in the brain stem or limbic system or unconscious part of the mind.

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The cortex is responsible for cognitive thinking, where we consider facts in detail and respond using the evidence available to them. The brain stem is responsible for instinctive 'thinking', and the limbic system is responsible for emotional 'thinking'. All are essential. We think automatically when we are driving a car, and there is no time to ponder. We think emotionally in picking a partner. We need to think slowly when we are thinking through an important issue or complex problem.

Neurological and psychological research would suggest that about 20% of thought occurs in the neo-cortex and therefore is conscious. By comparison, 80% of 'thinking' (if you can call it that) occurs in the brain stem or limbic system and is therefore unconscious. In terms of consumers' purchase behaviour,?research?by Harvard Professor?Gerald Zaltman?suggests that 95% of decision making is unconscious or what he calls 'subconscious'.

The point here is that consumer purchase decisions tend to be more irrational than rational. Indeed, purchase decisions are often made irrationally, with rational thinking used to justify or 'rationalize' the purchase.??Research?suggests that over 50% of people' experience buyer's remorse often or at least sometimes – indicating a failure to rationalize. The other 50% seem to have been successful in their rationalization.

It is folly to consider consumers or consumer decision making rational. Indeed, it is folly to consider your own decision making rational. Instinct and emotions, neither of which are rational, impact significantly on decision making.

Embrace the irrationality of consumers.

2.?????Beware 25 cognitive biases that drive consumer behaviour.?

Significant and frequently drivers of consumer behaviour driving irrational behaviour are some 25 cognitive biases – common to almost all human beings.

The media and self-serving politicians propagate a myth that terrorism is a bigger problem today than it was at any time in history. As a result, there is a view in the broader community that we are at greater risk of terrorist attack in 2021 than at any time in history.

This doesn't seem right. In?2017?there were 80 terrorist attacks in Europe. In?2018?there were 83, and in 2019, there were just 57 terrorist attacks in Europe. In 1972, there were 300 terrorist attacks in Europe. Indeed, the only years with lower levels of terrorist attack than 2017, since 1970, are – 1970 and 2003 – 2008, also reported as very bad for terrorist attacks. The perception that terrorist attacks are more common today reflects what is known as the 'availability bias.'

The availability bias?involves making decisions based on how easy it is to bring something to mind. This involves the human propensity to conclude whatever is top of mind – including media reports. Hence the importance in marketing of awareness and being top of mind. Consumers are biased towards reacting to or basing judgements on what is top of mind.?

Tversky and Kahneman?identified three heuristics or biases:

·???????Availability

·???????Representativeness

·???????Anchoring and adjustment

The representativeness bias?occurs when the similarity of objects or events confuses people's thinking regarding the probability of an outcome. People frequently make the mistake of believing that two similar things or events are more closely correlated than they actually are.

Hence the importance of differentiation in marketing. Effective branding is, at least in part – helping to ensure that your product is not compared with substandard competitors.

The?anchoring bias?involves an individual's decisions being influenced by a particular reference point or 'anchor'. Once the value of the anchor is set, subsequent arguments, estimates, etc., made by an individual may change from what they would have otherwise been without the anchor.

The anchoring bias at work might include:

·???????Viewing a $100.00 T-shirt as cheap because the last similar T-shirt we saw was $500.

·???????Predicting what Apple share price will be tomorrow based on today's $266.37.

·???????Viewing a $300 bottle of wine as high quality because most bottles are $100.

Hence, Apple and many other businesses used the strategy to release three models in a product category – a premium, a standard, and an economic model. Due to the anchoring effect – and the effect of the premium model and economy models – consumers are driven to the standard product (which often delivers the highest margin to the business.

These three biases can also deliver irrational decisions:

·???????The consumer buying a substandard product because it is top of mind and they did not consider others – believing that because they knew the brand – it must be good.

·???????The consumer not buying a Lexus because they are comparing it to a Toyota (the same manufacturer) rather than a Mercedes (which Toyota believe it should be compared with)

·???????The consumer paying far too much for a product because they have no anchor to judge value – or viewing a product as expensive – because it is dearer than their ancho.

Remember that cognitive biases drive consumer irrational behaviour.

3.?????Leverage one of the 25 cognitive biases to help achieve your objective.

Research?in the United States found that while more than half (54%) of US citizens are on a diet- 69% of fad diets fail to achieve the target weight. The most recent figures in Australia suggest that more than 2 million Australians are on a diet at any one time. By the time the average Australian woman is 45, she has tried an average of?61 diets.?

Why would this be so when the research and anecdotal evidence suggest that diets don't work – and they don't! A big part of the answer lies in the 'bandwagon bias.' Rather than assessing each diet on its merits – consumers tend to follow the lead of others and rationalize their diet choice based on second-hand information they pretend to understand and use to establish a personal rationale.

If you want people to buy your product – lead them to believe everyone else is.

Studies?have found that 42% of people living in the United States believe in the creationist view of the origins of mankind - that the earth is less than 10,000 years only. This is in stark contrast to the scientific view and the weight of scientific evidence suggesting that the earth is 4.5 billion years old. The most extraordinary thing about this finding is that these people will not even countenance the mammoth quantity of evidence to the contrary.

Physicist?Lawrence Kraus?suggested that the difference between scientists and creationists is that while scientists are actively seeking facts, they can prove them wrong. Creationists seek evidence that supports their fixed opinion. This is an example of the?'confirmation bias,'?– where consumers prioritize information that confirms their previously existing beliefs or?biases.

If you want people to buy your product, supply them with information that supports an existing belief or suggests your product's purchase.

The Australian government is taking a lot of credit for the number of jobs they are 'creating' – citing the?5.1%?unemployment rate. They have credited this low rate on their great work with taxation reform, trade deals and various other strategies. At the same time, however, 8.5% of Australian workers are underemployed (unable to earn a living wage from the work they?have?secured). This the government blames on the changing nature of work.

In other words, this government, like most of its contemporaries and forebears, is taking credit for good results and blaming others for inadequate results. Not unique to politicians, the?self-serving bias?involves an individual taking credit for positive events or outcomes but blaming outside factors for adverse events. In essence, this is all about people thinking they are better than they are, and others are worse.

An example of this bias occurs when wealthy people think they made their own luck and got rich because of their brilliance. Tell people they are brilliant, and most often – they will believe you.

Leverage the power of cognitive biases.

4.??????Repetition will not make it right but can make it seem so.

?In 2019, the Collingwood Football Club had?85,226 members?– all of whom no doubt believed that Collingwood is the greatest football club in the country – regardless of any evidence to the contrary – or even a definition of what constitutes 'great', or the criteria for evaluation. Why do they think this? Well, one of the reasons is most certainly that they keep on hearing each other say it.

I frequently hear people say that Australia is the most successful multi-cultural society on earth, despite not offering criteria for evaluating 'success', an inability to cite data and any real evaluation of other nations who think they are the best – including the US. They believe it c=none the less – largely due to the constant repetition of the observation (NOT FACT) by politicians who know consumers want to hear it.

In the 2016 election, the Labor Party took votes from the Coalition by suggesting that the latter would destroy Medicare. In the 2019 election, the Coalition took votes from the Labor party by suggesting that Labor would introduce a death tax. In both cases, the continual repetition of a claim – true or otherwise – leads to it sticking and affecting the election's outcome. Both claims were wrong, but voters embraced both claims.

This gives substance to the notion that – 'If you through enough mud, eventually some of it will stick. And it will. This is an example of the repetition bias at work. This might also be evidence that repeated advertising of a message can, in time, transform a claim into a 'fact' – a technique politicians have used very effectively for many years.

The?repetition bias?occurs when there is a willingness by an individual to believe what we have been told most often and by the greatest number of different sources. Nobel prize winner Daniel Kahneman likes this to 'human gullibility' – and with considerable justification.

These are just some of the many biases impacting consumer behaviour, all of which dramatically impact consumer decision making. Others include repetition bias and tunnel vision.?

The repetition bias clearly works in favour of big advertisers and, even more so, favouring businesses with highly effective social media and media relations programmes. Social media can be highly effective in converting an observation into a 'fact' through repetition. It is important to understand the impact of repetition and strategies for countering it. Once an observation becomes a 'fact', it can be difficult to change.

'Everyone knows that!'. Do they indeed?

Embrace the power of repetition.

5.?????Help your customers avoid buyer's remorse and leverage choice bias.

A US?study?found that up to 50% of US shoppers experience buyer's remorse, at least occasionally. The situation in Australia is likely to be similar. 'Buyer's?remorse'?occurs where a customer regrets a purchase shortly after making it. It occurs when there is an absence of post-purchase rationalization or the – choice bias.?Choice bias, also called post-purchase rationalization, is - the tendency to retroactively ascribe positive attributes to an option one has selected and to demote the forgone options.?

Regarding choice bias,?Neil Patel?notes – 'All of us hold preferences that have little factual evidence to support them. We will defend a preferred flavour of ice cream, type of phone, favourite sports team, political ideology, superstitious hunch, or worldview because we focus on its positives, not giving much consideration to its negatives." Successful post-purchase rationalization is the opposite of?buyer's remorse.

According to Patel, the choice bias impacts purchase behaviour as follows:

·???????People tend to buy products and services with which they are familiar.

·???????People tend to trust any piece of information that seems to support this choice.

·???????People tend to forget any information that opposes a strongly held viewpoint.

The choice bias most commonly occurs where:

·???????We make an emotionally driven purchase.

·???????We don't like to admit we are wrong.

·???????We place a higher value on what we have.

Research suggests that the choice bias increases as we age.

Rather than being a concern, the choice bias can very often represent an opportunity. For this reason, it is not uncommon for businesses to invest significantly in promotion specifically designed to help consumers cognitively rationalize what might have been an emotional purchase – and in so doing, increase the likelihood of repeat purchasing and referral. BMW has been a leading exponent of this strategy.

Leverage the potential of choice bias.

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Twenty-five cognitive biases can influence consumer behaviour. These biases can also be leveraged to cause preferred consumer behaviour. Understand the impact of these biases on the behaviour of your consumers. Embrace the potential for leveraging these biases to influence consumer behaviour.