Behavioral economics in marketing - more than just theory?

CUSTOMER BEHAVIOR Companies often assume that their customers make purely benefit-driven decisions. The price of a product is still often treated as the sales argument par excellence. However, findings from behavioral economics and psychology allow new perspectives on consumer behavior: Judgments and decisions often follow irrational patterns of thought and behavior.Ever since Daniel Kahneman's book "Thinking fast and slow", "behavioral economics" has been a buzzword among marketers. However, despite increasing awareness, many practitioners lack an understanding of how these seemingly theoretical concepts can be put into practice. Yet they can lead to interesting results that deviate from the widespread ideal image of "homo economicus": Behavioral economics takes into account psychological insights into how people think and decide, so that actual customer behavior can be better captured and predicted.Take the example of the marketing of insurance products: It is important to understand that risk perception is not solely influenced by how great the statistical risk of a negative event is. Rather, customers are guided by how well they can imagine a negative event. Many find it difficult to vividly imagine abstract or complex risks, such as inadequate financial security in old age. The so-called availability heuristic (i.e. how easily certain knowledge content or images are available) leads to customers underestimating certain risks or classifying them as irrelevant and not taking action. If marketers develop an understanding of what actually influences decisions, they can address customers in a more targeted way. In the insurance example, the risks would have to be presented to customers in a clear way, making them more aware of them. In any case, the benefit of behavioral economics in marketing lies in the systematic examination of the actual (not ideal or optimal) decision-making processes of customers. Any design of marketing and communication measures should be preceded by this analysis. Which typical thought patterns, heuristics and distortions are activated in the decision-making situation? As these are deeply rooted in human thinking, they can be identified in various decision-making situations, regardless of the industry. We teach the basics of this in a three-day compact course at the Institute of Marketing Management. here.Author: Linda Miesler, Lecturer in Marketing at the ZHAW School of Management and Law