Importance of context on consumers choice: Behavioral Economics Perspective

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Importance of context on consumers decision-making is a broadly discussed topic. However, there is still a lot of potential in leveraging of the extincting knowledge in development and execution of the marketing plans.

Let’s ask ourselves the following questions:

  1. How much attention do you pay to the sequence of your and competitors commercials while developing your marketing toolkits?
  2. Do you build different digital communication which message will vary depending on the time when it’s shown?
  3. Do you know how your novelty will fall into an existing consumers consideration set?

And why should we care about these questions while many marketers have already a fully packed agenda?

Context surrounds consumers and impacts their behavior and decision-making from environmental (cultural, social, time), situational (being at the store, at home, in a train) and brand & competition (product shelf, commercial banners on a street) perspectives.

bestinsightsphere_contexts

Behavioral Science shows that in the majority of cases consumers behave much less rationally due to impact of context (e.g. Ariely, 2010; Thaler and Sunstein, 2009). At the same time, researchers have found several basic principles that allow to understand underlying mechanisms of the impact of context on consumers decision-making.

bestinsightsphere_relativityRelativity 

D. Ariely in his famous book “Predictably Irrational” mentions: “Most people don’t know what they want unless they see it in context”.

Brand & competition context plays an important role in shaping consumers product expectations and preferences. In the result, consumers define a set of products which attributes and values undergo final consideration.

As the previous description sounds rather scientific, in reality consumers prefer to simplify their product selection process (that eventually takes just few seconds in case of FMCG products!). Hence, consumers end up comparing things which can be easily compared (Ariely, 2010).

This leads to comparison of products that is focused locally, e.g. consumers consider products which are available on the shelf right now. So, in case of FMCG categories, less than a third of consumers is ready to travel to another store to buy the exact product that they were looking for. Majority of the them prefer to select another product variant and/or brand.

This is also a reason why so often conjoint research don’t provide the expected quality of insights – quite often researchers build a set of products for conjoint studies based on the general understanding of the market and competitors rather than considering what set of products consumers will have in the place where they usually purchase this product.

bestinsightsphere_anchoringAnchoring

Anchoring is an another widely discussed Behavioral Economics principle which has very high potential for implementation in marketing plans.

Overall, anchors allow consumers to have a reference point in their purchase decision-making.

For companies, anchors play a critical role. Let’s take for instance a new product launch. Before introducing a new product on the market, it’s vital for companies to investigate anchors which consumers will consider while encountering with this new product. Is it a type of anchor that allows the company to achieve its positioning and marketing targets? Should company introduce consumers another anchor or use a new product as a separate anchor?

Thinking about innovative products, it can be much more beneficial for the company to separate this products from others that can be used by consumers as anchors (Ariely, 2009). As a result, the company can create a whole product range to provide sufficient context and use one of its own products as an anchor.

It’s also important to remember that anchors have a long-lasting effect and stay with consumers long after they make their first purchase decision (Ariely, 2010). Marketers know this from the experience with the brand repositioning – that requires a lot of investments and not always ends up to be successful. Hence, creating a new product and/or brand, it’s critical to consider what anchors consumers will use along with this product and whether it’s aligned with what is planned to be achieved.

These two basic Behavioral Economics principles can be also used for broader environmental and situational contexts.

Speaking about situational context, let’s take e-commerce shopping as an example, where despite all technological advances, companies still can improve application of broader contexts in the creation of consumers nudges. Consumers can purchase on-line being located in different places, e.g. during a break in an office or sitting in a relaxed atmosphere at home. These two different contexts that can be leveraged by companies to shape their communication in the e-store. In case of office break, consumers tend to make their purchase quickly and are much less open to discover new information about products. So, communication should be sharp and calling to the immediate action. Being at home consumers tend to spend more time on their shopping, and stay more open to discover product information and new products – that makes messages with various ideas and descriptions much more attractive.

As for environmental context, changing a country of residence or life stage consumers also tend to change some of their consumption habits. And this is where many POME (point of market entrance) programs show their very high effectiveness. Eventually these marketing activities provide consumers new anchors.

Using an idea of nudges, companies can benefit from context in shaping consumers choice architecture, providing for instance different messages for various situational contexts, setting right anchors for new product launches, and creating POME programs for various consumer groups.

Sources: 1. Ariely, D. (2010). Predictable Irrational: The Hidden Forces That Shape Our Decisions, New York: Harper Perennial; 2. Thaler, R.H., Sunstein, C.R. (2009). Nudge, England: Penguin Books

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