Who is the irrational consumer? We all are! As consumers, don’t always do what we say. We sometimes don’t make purchase decisions that seem very logical. This is a fact that market researchers have to wrestle with during the design phase of any research project.
Behavioral economics has been drawing attention to the inadequacy of the rational choice theory. This assumes that consumers have perfect information about all the alternatives and weigh in pros and cons before making a purchase decision.
Sometimes this may be true for product categories with which consumers are engaged for a variety of reasons. However, it is often the case that consumers often:
- Make decisions with incomplete information.
- Skip the evaluation of options and make impulse purchases
- Simply go with what is available
As behavioral economists have pointed out, actual behavior doesn’t always match the rational approach to decision making.
Our Irrational Buying Decisions
You may not want to admit it, but you have been an irrational consumer, without realizing it. More often than not, we all make purchase decisions using at least one of these approaches.
Rules of thumb
We rely on heuristics or rules of thumb as shortcuts to decision making. The irrational consumer doesn’t take into account all possible options, as economists expects him or her to do.
Consequently, we may not make optimal decisions, but our decisions are “good enough.” This may be due to information overload, too many options, time constraints, financial situation, and lack of category involvement, among other factors.
The irrational consumer also makes purchase decisions influenced by his or her emotional state. When you are calm, you are more likely to think through your purchase decision.
However, if you are experiencing strong emotions (positive or negative), you are more likely to succumb to impulse purchases without much thought of the long term consequences.
The context often influences purchase decisions in ways we may not be aware of. For example, we often compare products to others that are present, particularly on price. Therefore, the same product may look like a good value at one store or terribly expensive at another, depending on competing alternatives and our expectations.
Store atmosphere, layout, music, scents, in-store advertising can invite or discourage us to buy. For online retailers, the website design, layout, navigation path, graphics, type and amount of information, and trustworthiness indicators, among others, provide a context that influences our decision to buy from a particular online retailer.
Overall, we tend to overvalue items we own (the endowment effect) or have invested in (the sunk-cost fallacy) and feel losses more intensely than gains. This may explain why for some, paying for shipping feels worse even if the cost of shipping may be compensated by a price discount.
While we often assume that others think like us, we are also influenced by the decisions of others (e.g. recommendations by word-of-mouth).
Moreover, we also seem to be wired to think short-term and have a hard time resisting instant gratification. Subsequently, this may interfere with rational decisions that would be more beneficial to us in the long run. For more on cognitive biases check: 10 Cognitive Biases You Shouldn’t Ignore In Research
Segment Your Audience
In order to tackle this problem from a research perspective, we first need to understand how consumers make purchase decisions in a particular product category and identify potential segments with different decision-making approaches.
For instance, a consumer may consider laundry detergent a commodity and buys whatever brand is on sale at the time of purchase. Another consumer may browser the detergent aisle, opening bottles to check for fragrance, and reading packaging labels searching for harmful ingredients for herself or the environment. The key is segmentation within product categories based on purchase decision approaches.
To capture the nuances and situations influencing purchase decisions, we can’t rely only on traditional concept tests or focus groups. We need to combine these with methods that go deeper.
The goal is to understand consumer emotions, purchase context, cognitive biases, and rules of thumbs. Here are some of the research techniques that are useful for these purposes.
Adaptive Choice-Based Conjoint Analysis
In ACBC, we ask consumers to build their own products based on a set of criteria. We use this information to understand the rules they use to choose products (must-haves and unacceptables) and to present relevant alternatives they would actually purchase.
We go along with consumers in their shopping trip and observe how they make purchase decisions, what the motivators are, how the context influences their decision, the role of emotions, etc.
Consumers participate in shopping occasions and report back their personal experience with different aspects of the purchase occasion.
Consumers report about their experience with products and services in a journal format using text, video or pictures as the experience progresses.
We interview consumers as they carry on different tasks or use products in real-time and environment.
Mobile Surveys in Real-Time
We ask consumers about their immediate and current experience, feelings and opinions via text messages.
Acting like a fly on the wall, we can watch how consumers buy and use the products and integrate them into their daily life.
We delve deeper into purchase drivers, cognitive biases, situational factors, etc. We can use projective techniques to uncover motivators, not consciously recognized.
We use neuroscience, psychology and other cognitive science techniques to study consumer responses to marketing stimuli and products. Some of the responses measured include eye-tracking, heart rate, electroencephalography – EEG, functional magnetic resonance imaging – fMRI, galvanic skin responses, etc.
In conclusion, if you want to understand the gap between what consumers do and say, don’t rely only on one research methodology. In other words, each research method provides data that reflect only a few facets of the consumer.