The Science of Emotional Decision-Making

Marketers are experiencing the long transition from Rational Decision Theory (RDT) to the science of emotional decision-making. At the Social Intelligence Lab, data from 800,000 respondents across three continents accelerated the transition by revealing the limitations of RDT and the progress in emotional decision-making through neuroscience and behavioural science.

RDT is the traditional foundation of consumer marketing strategies, advocating a logical, utility-focused approach to consumer behaviour. However, advancements in emotional decision-making theory challenge RDT as a one-size-fits-all approach.

One advancement is the application of emotional decision-making theory to the design of AI, particularly in enhancing personalisation and UX by understanding and responding to users' emotional states. Another is a kind of storytelling that enables brands to connect with their high-value, enriched audience on a deeper emotional level.

These evolutionary shifts reveal a marketing ecosystem where the one-size-fits-all approach is outdated. The changes highlight the divide between traditional consumers who continue responding to RDT marketing cues and the emotional decision-making of a new economic order who yearn for innovation, authenticity and emotional resonance above rational considerations.

RDT proposes that traditional consumer decisions are predominantly logical, processing detailed information about products and services. Marketing strategies using this theory emphasise factual information and utility maximisation. However, RDT faces limitations, such as information overload and decision fatigue.

Moreover, we have evidence that the economy has bifurcated into two distinct consumer mindsets – a new economic order or NEO, and a traditional economic order or Traditional (Honeywill, 2023).

The two consumer mindsets were discovered using discriminant modelling, identifying those things that matter the most and those that discriminate the most; make the biggest difference. And with 24 percent of the population NEOs, 26 percent Aspiring NEOs and 50 percent Traditionals, it delivers the benefits of scale (Honeywill & Norton, 2012) and can amplify existing customer segments.

This aligns with Byron Sharp’s sophisticated mass marketing, which he describes as understanding the heterogeneity in your market and then catering for only the differences that matter to maximise reach while not eliminating the benefits of scale (Sharp, 2010).

The NEO algorithm, deeply rooted in behavioural science and neuroscience and configured on the Roy Morgan Single Source database, pinpoints emotional aspects of decision-making as a key characteristic of the NEO mindset. Behavioural science sheds light on how emotional responses, driven by values and ethics, predominantly influence NEOs' consumption choices. This emotional resonance is critical, as NEOs are not just rational actors but are also deeply moved by their beliefs and future desires.

Neuroscience adds a predictive layer, highlighting how NEOs' brains respond emotionally to future-oriented messaging. This includes activating the limbic system associated with empathy, memory, emotions, forward-thinking, and anticipating positive outcomes. Such neural activations are pivotal in shaping the emotional landscape of consumers with a NEO mindset, guiding their preference for products and experiences that align with their progressive ideals and aspirations. Thus, by leveraging these emotional and forward-thinking aspects, the algorithm accurately anticipates NEO preferences, shaping marketing strategies that resonate on a deeper, more emotionally meaningful level.

Conversely, Rational Decision Theory continues its unbroken lineage as the currency for marketers engaging and motivating consumers with a Traditional mindset.

Significantly, consumers with a Traditional mindset also respond to emotional cues like memory, familiarity, and nostalgia. In short, emotion works for both mindsets at the top of the funnel, but at the bottom, Traditionals are heavily rational, while NEOs are still yearning for the emotional triggers they loved at the top.?For example, in the sales activation space, the price has primacy for Traditionals, while for NEOs, price is just the cost of falling in love.

In the practical marketing landscape, the high-value NEO algorithm provides a nuanced understanding of consumer psychology and desires that AI high-value-audience (HVA) targeting tools like Google DV360 cannot replicate. By accessing the rich tapestry of NEOs' emotions, attitudes, values, preferences, and lifestyles, marketers develop strategies that resonate on a more personal and profound level for both brand marketing (top of the funnel) and performance marketing (bottom of the funnel).

The importance of emotional decision-making in HVA marketing cannot be overstated. Understanding and leveraging these dynamics leads to more impactful and resonant marketing, aligning with the evolving landscape of bifurcated consumer preferences and behaviours.

1. Consumer Neuroscience Research: Studies in consumer neuroscience have shown that emotional responses to marketing stimuli often precede and have a greater influence on consumer decisions than cognitive evaluation. For example, research using fMRI has demonstrated that emotional engagement with a brand or product can significantly predict purchase decisions (Plassmann, O'Doherty, Shiv, & Rangel, 2007).
2. Impact on Brand Loyalty and Perception: Emotional connections with brands are a stronger predictor of customer loyalty than brand satisfaction alone (Thomson, MacInnis, & Park, 2005). Brands that successfully evoke positive emotions can create lasting customer relationships and enhance perceived value.
3. Influence on High-Value-Audience Purchases: HVA purchases, which are often more complex and involve higher stakes, are particularly influenced by emotional factors. High-value consumers rely on emotions as a heuristic to simplify decision-making, with trust and brand affinity playing critical roles (Mikulincer, Shaver, Gillath, & Nitzberg, 2005). Price, on the other hand, plays a subsidiary role (Honeywill, 2023).
4. Bifurcated Consumer Preferences: The divergence in consumer preferences, especially between NEOs and Traditional consumers, highlights the need for nuanced emotional targeting (Honeywill, 2023). NEOs, for example, are drawn to innovation and sustainability, values deeply connected to emotional identity and worldviews, necessitating strategies that resonate on an emotional level
5. Effectiveness of Emotional Advertising: Emotional advertising has been shown to be more effective than rational advertising in terms of recall, liking, and persuasion, particularly for challenger brands (Heath, Brandt, & Nairn, 2006). This suggests that leveraging emotional dynamics can provide an asymmetric advantage for brands seeking to capture the attention of high-value audiences.
6. Digital and Social Media Engagement: Emotional content is more likely to be shared and engaged on social media platforms (Berger & Milkman, 2012). This virality factor is critical for marketers aiming to capture high-value audiences in digital spaces, where emotional resonance can amplify reach and impact.

We’re Going To Need A Smaller Funnel

The increasing use of emotional decision-making is challenging the traditional view of the marketing funnel.

With emotional decision-making as our lens, we analysed every phase of the marketing funnel, from brand narrative at the top to sales activation at the bottom.

Forethought’s Ken Roberts says,

"Emotion is our decision-making detonator" (Roberts, 2020).

NEO marketing results revealed that the emotional detonator is not limited to the top of the funnel but runs through it from awareness to conversion, repeat, and advocacy.

Unlike the traditional funnel, which distances emotional brand building from more rational performance marketing, the NEO funnel provides a unique interplay between these phases, significantly shortening the journey.

The evidence is that the five million Australian NEOs and the 65 million in the US respond more favourably to marketing strategies that maintain a consistent emotional narrative from brand awareness to conversion—and beyond. This response pattern confirms that the emotional associations forged at the top of the funnel can effectively be leveraged to enhance conversion rates at the bottom for NEOs.

While the separation is maintained between brand narrative (focused on emotional connections and values) and sales activation (where these emotions are harnessed towards concrete actions), the emotional triggers initiated in the brand-building phase do not end there but extend to performance marketing, thereby shortening the overall funnel.

For instance, a NEO consumer actively shopping for a new car significantly shortens the marketing funnel in several ways. First, NEO factors like their high education level, digital savviness, and proactive information-seeking behaviour mean they move through the awareness and consideration phases much faster than Traditional car buyers. Their ability to rapidly assimilate and evaluate information, often through digital channels, allows them to quickly become aware of car models and assess the personal relevance of a brand’s features and customer value propositions.

Second, NEOs' high internal locus of control, price flexibility, and propensity for risk-taking enable them to make quicker car-buying decisions. They are less likely to be influenced by traditional, rational decision-making tactics and more by compelling, emotionally driven storytelling about the brand and the driving experience. As a result, they often skip or quickly move through the evaluation phase, typical of longer car-buying processes.

?A shorter funnel means a shorter timeline to unlocking value from this high-value audience: consumers with a NEO mindset spend, for example, 3X more than consumers with a Traditional mindset in the retail sector – regardless of a Traditional’s affluence.

The shorter, truncated NEO marketing funnel offers several tangible benefits for businesses and marketers aiming to engage with this high-value consumer:

1. Increased Efficiency: NEOs move more quickly from initial awareness to the point of purchase, and this efficiency reduces the cost and time associated with converting leads into customers.
2. Higher Conversion Rates: By maintaining a consistent emotional narrative throughout the funnel, businesses achieve higher conversion rates.
3. Enhanced Customer Loyalty: The emotional engagement in the NEO funnel doesn't stop at the point of sale; it extends into post-purchase experiences, leading to higher levels of customer satisfaction and loyalty. This makes NEO customers more likely to repeat purchases and become brand advocates.
4. Better ROI on Marketing Spend: The efficiency of the NEO funnel translates into a better return on investment for marketing campaigns.
5. Improved Brand Perception: Consistent emotional messaging throughout the customer journey enhances brand perception and Share of Heart among NEOs.
6. Agility in Market Response: Marketers can react more quickly to changes in NEO preferences and market trends. The close alignment between emotional branding and sales activation enables quicker adaptations to new information or feedback.

A word of warning: we found that every decision along the journey had to be evaluated and refined through the lens of the NEO algorithm. It became clear that while it’s ‘not rocket science’ to get it right for NEOs, it’s dangerously easy to get it wrong, and it takes just one misstep to break the emotional spell.

Strategic Implications for Marketers

In broad terms, marketing strategies targeting NEOs should provide an emotional continuum. Brand campaigns at the top of the funnel should not only create awareness and an emotional connection but also seed the emotional triggers that will be activated during the shortened journey.

This approach necessitates a closer collaboration between brand and performance marketers, ensuring that the emotional undercurrent initiated in brand campaigns is effectively harnessed and surfaced in performance activation.

?Conclusion

The science of emotional decision-making is now essential to modern marketing. With two distinct consumer mindsets—NEO and Traditional—rational decision theory and emotional decision-making must be applied differently. There are two marketing funnels: Traditional and NEO. The Traditional funnel follows a classical structure, guiding consumers through a lengthy process of awareness, consideration, evaluation, decision, retention, and advocacy.

In contrast, the NEO funnel represents a paradigm shift, characterised by a shortened journey through just three phases. It’s tailored to valuable NEO consumers who favour swift, emotionally charged interactions. This demands a marketing approach that blends intellectual appeal with emotional depth, quickly moving consumers from awareness to action and ultimately to loyalty and advocacy.

It’s not just about catching their eye. It needs to create an emotional continuum that catches their heart and resonates at a much deeper level.

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Dr Ross Honeywill is a social scientist and internationally published author. As chairman of the Social Intelligence Lab, he works with a team of former corporate and agency executives and social scientists to develop profitable growth programs for world-leading brands in Australia and North America.

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See also:

NEO Power: how the new economic order is changing the way we live, work and play, Scribe Publications. Sep 1, 2006, Melbourne.

One Hundred Thirteen Million Markets of One: How the New Economic Order can remake the American economy. Fingerprint, Dec 1, 2012, Los Angeles.

Being NEO: Embrace your inner NEO and change the world. The Right Customer Publishing, Jul 27, 2023, Melbourne.

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