Marketing lessons from the Nobel Prize-Winning Behavioral Economist, Daniel Kahneman
Every once in a while, a visionary thinker produces a work that transforms our perspective on consciousness and who we are as a race. Thinking, Fast and Slow by Daniel Kahneman is one such creation. Although the book was first released in 2011, I had the good fortune of reading it in 2023 (Twelve years too late in my opinion...)
Thinking, Fast and Slow by Kahneman presents a framework for understanding how people think and make decisions. The author frames this idea based on the idea that our brains have two distinct modes of thinking: System 1 and System 2.
System 1 thinking is fast, automatic, and intuitive, while System 2 thinking is slower, more deliberate, and more logical. Kahneman argues that these two modes of thinking interact in complex ways to shape our judgments and decisions, often leading to grave biases and errors in everyday life.
Examples of System 1 & System 2 tasks
As I read the book, I could not stop myself from taking notes on the deep implications these systems have and their implications for a marketer. In this blog, I have compiled a few key takeaways from the book that can help you understand and influence consumer behavior and win as a marketer.
Lesson 1 - The lazy system 2
The 'System 2' of the human mind has a tendency to be lazy. People are programmed to do as little work as possible and delegate decisions to their automatic and intuitive System 1 thinking. Thus, once brands form a habit or become familiar to customers, it becomes incredibly difficult to replace these brands from the customer’s top-of-mind awareness.
Established brands, for instance, Coca-Cola, Colgate, and Mcdonald's stand a significant advantage, especially in today's busy times. Customers are more likely to choose these brands because they are familiar and require less effort to make a decision, even more so in cases of small-ticket purchases.
Although a person’s system 2 is slower, more deliberate, and more logical in decision-making, it is seldom active. System 2 is also more likely to be busy or depleted when people are exhausted. For instance, after a long day of meetings, System 1 thinking has a more profound influence on behavior, and customers are more likely to choose a familiar brand or make an impulse purchase.
Independent research has also confirmed that people tend to shop more and make impulse purchases at night. It can be safely deduced that fatigue plays some role in this phenomenon. For instance, in the influence of Time on Consumer Behavior: An Empirical Study on Late Night Shopping, researchers Soumya K. Mishra and Utkarsh Bhatt found that time of day, mood, and shopping environment had a significant impact on consumers' purchase decisions, with late-night shoppers being more likely to engage in impulse purchases of novel products.
So marketers, the next time you are setting up programming and placement for your new product, keep in mind - Night time is the right time ;)
Lesson 2 - Using priming to influence decision-making
Priming is the concept that exposure to a stimulus can influence subsequent behavior.
One of my favorite parts of the book is the study by Melissa Bateson and her team at Newcastle University. Findings from this research can be used by communications teams, especially in public sector enterprises. Researchers at Newcastle University, UK conducted a study on honesty boxes to test the effect of a picture of human eyes on people's honesty when paying for drinks and snacks. Over a ten-week period, the researchers alternated between putting up a picture of human eyes and a control image above the honesty box.
The average amount of money paid per week was £1.67 when the eyes were displayed, compared to £0.57 when the control image was used. This increase in honesty was seen across all categories of items, including tea, coffee, and snacks. Deny it all you want, but humans tend to act differently when they subconsciously think someone is watching.
Marketers can use priming to their advantage by using images, sounds, or other stimuli to influence consumer behavior. For example, an ad that makes you smile can leave a positive image of the brand in your subconscious. This positive image can then influence your behavior when making a purchase decision.
Lesson 3 - Repetition breeds familiarity. Familiarity breeds likeability.
Kahneman also discusses the concept of cognitive ease, which means that people are more likely to remember and act on things that are easy to process. One way to achieve this is through repetition. Repetition increases recall and breeds familiarity, which in turn breeds the likeability of a brand. This likeability leads to reduced vigilance from system 2 while making purchase decisions.
As a marketer, you can use repetition to increase your brand's recall and likeability.
Lesson 4 - Anchoring
Anchoring is the tendency for people to rely too heavily on the first piece of information they receive when making a decision. This concept is particularly important in product pricing. For instance, by setting a high price as an anchor, marketers can make other prices seem more reasonable by comparison. This can influence consumer behavior and increase sales.
Anchoring can also be used in the form of arbitrary rationing as an effective marketing ploy. In one famous example from the book, Campbell's soup marketing executives tested a 10% sales promotion in Sioux, Iowa, by placing a sign with a limit of 12 cans per person on some days and no limit on others. The study found that customers purchased an average of seven cans when the limit was enforced, but twice as many when the limit was removed. By establishing a maximum limit of 12 cans, the marketers at Campbell's used anchoring to embed the number 12 in the minds of consumers, encouraging them to purchase more cans than they normally would have. Anchoring is a powerful concept and can be used by salespeople and marketers to influence customer behavior.
Lesson 5 - How to write a persuasive message
Creating and delivering a message effectively is perhaps the most important role of a marketer. When writing a message, there are a few key things to keep in mind to ensure that your message is effective.
According to Kahneman, one of the most critical factors is to reduce cognitive strain by prioritizing legibility. Make sure your message is easy to read and understand by using clear, bold fonts with contrasting backgrounds. This will help your message to stand out and be more memorable, ensuring that your message is heard and acted upon.
Consider the following example -
Use clear and legible fonts to minimize cognitive strain
Secondly, using simple and easy words is crucial in delivering an effective message. Contrary to popular belief, using complicated vocabulary and technical jargon can actually hinder your message and make it harder for people to understand what you're trying to say.
Lastly, in addition to keeping it simple, use rhymes where possible. Putting your ideas in a verse increases recall and believability (If it doesn't fit, you must acquit 🤣). Research participants in a highly cited study were asked to read dozens of unfamiliar aphorisms, and the ones that rhymed were judged as more insightful than those that didn't.
In short, remember KISS - Keep It Simple Stupid.
Conclusion
"As Copernicus removed the earth from the centre of the universe and Darwin knocked humans off their biological perch, Kahneman has shown that we are not the paragons of reason we assume ourselves to be" - Economist
Although I've tried my best to sum up lessons from the book in the form of a blog, I am sure it does not do justice to the amazing work of Daniel Kahneman. 'Thinking, Fast and Slow' is a must-read for everyone, especially marketers. It provides valuable insights into human decision-making that can help marketers understand and influence consumer behavior. His work has challenged traditional assumptions about rationality and decision-making and has opened up new avenues for research and exploration.
I would love to hear your thoughts on the book and these lessons for marketers. Have you ever had such an Aha moment in your marketing journey? Tell us what you think in the comments section below or drop me a note!
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