The Big Window Consultancy Limited www.the-big-window.co.uk l info@the-big-window.co.uk

To BE or not to BE : Is it really a binary question?

Lisa Edgar, Founder, the Big Window®

Thanks to:

Jo Kenrick, Marketing Director, Homebase

Dr Lynn Sudbury-Riley, University of Liverpool Omnisis Limited, Programming and Data Processing

Consumer and Organisational

Psychology

To BE: A Quick Recap

3

Consumers’ Decisions – in Theory

Working full-time

Children at home

Internal Pressures

We process 174

newspapers every day

Av social media users consumers

54,000 words every day

External Pressures

Other priorities

Can I be bothered?

4

Life is a Processing Nightmare

5

Information Overload

System 1: Thinking Fast Almost automatic, superfast system of

processing that allows us to cut through data/information to arrive at a decision 6

Behavioural Economics: System 1

System 2: Thinking Slow Allocates full attention to the mental

activities that are demanded, consciously trying to take in as much

information as possible 7

Behavioural Economics: System 2

In other words, with so much to process we take easy to follow or

well trodden decision paths or patterns…

‘System 1’ rather than ‘System 2’ Thinking 8

q  These patterns are called Biases or Heuristics and they explain: §  How advertising works §  Why we try to emulate our peer groups §  We we respond to 3 for the price of 2 §  Why we are willing to buy add-ons with big

purchases §  Why we respond to ‘closing down’ sales §  ….

9

Biases and Heuristics

!

10

… Biases and Heuristics In Action

Herd Behaviour… One of My Favourites

Behavioural Economics: The New Nirvana?

CRT Test 89% of our

sample made 1+ System 1

errors 65% made 2+

Approach to Decision-Making 54% agreed they make spontaneous

decisions

Herd Behaviour Test

61% agreed with at least 2 HB statements

Delayed Gratification 65% needed at least 100% return to delay

gratification of a financial reward for 2 years

Lots of evidence for Behavioural Economics

And in academia…Delayed Gratification

Because, in Behavioural Economics world…

But… we do not all respond to BE in the same way

…Or not to BE: Variations on a Theme A Case Study on Age

Starting with Age … with older consumers not ready to rollover to marketing techniques

Theory suggests…

Age in Years

Reactions to emotional/rational advertising

Emotional Advert Rational Advert

Nectar Panel (February 2013)

c2600 responses

Reactions to emotional/rational advertising

CRT Test (Fredericks, 2005)

Perceptions of task approach (Novak and Hoffman, 2009)

Approach to decision-making (Nenkov, 2009)

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Emotional Engagement

Headlines Opinion about

headlines

General furniture

Main furniture

Colour

Net recall of Living Room Adverts

As expected… System 1 (Impression formation) rules

22 Net recall of Living Room Adverts

Older consumers breaking our ‘rules’

16-24 70+

32%

8%

23% Rational Ad Net Recall

Emotional Ad Net recall

40-49

Living Room Adverts

… much preferring the rational ads

q How could BE help explain this? q Do different people have different BE tendencies?

… anxiety and cynicism about letting their hearts rule their heads

The advert felt meaningful to me

I could really relate to this advert

I learned something about this product in

this advert that I didn’t know before

I can now more accurately compare

this brand with other competing brands …

Effortful

Optimising

Heuristics Speed

Rule-based

Maximising

Instinct

Emotion

Deliberate

➔  the CRT test, Fredericks ‘05

Measuring BE Tendencies

System 1

System 2

9%: all correct 26%: 2+ correct

49%: 0 correct 73%: 2+ incorrect

➔  with little age differences

System 1 dominates

100#

110#

120#

130#

140#

150#

160#

170#

16*29# 30*39# 40*49# 50*59# 60*69# 70+#

Av#$me#taken#in#secs#

Av#/me#taken#in#secs#

Older Customers trying to use System 2

q  75% thought they tackled the tasks in System 2

q  66% of those who got all the tasks wrong thought they were in System 2

I am in System 2, honest

20%$

30%$

40%$

50%$

60%$

70%$

80%$

90%$

16-29$ 30-39$ 40-49$ 50-59$ 60-69$ 70+$

system$2$

system$1$

Older consumers more than most

I want to see it as it is

I want to know the facts

I worry about making the

wrong decision I like to stop and

think first

➔  evidence that older adults are less inclined to make ‘mental leaps’?

Older consumers very wary of using System 1

Park et al, 2002

… perhaps ‘world knowledge’ serving as a warning signal

…Or not to BE: Variations on a Theme Other Bits and Bobs

Cross Cultural Variances in the CRT Test

34 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 Errors <= 1 Error <= 2 Errors <=3 Errors

Country A

Country B

Cross Cultural Variances in the CRT Test

Personality-Based Variances in CRT Results

36 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

External Personality Internal Personality

0 Sys 1 Errors

1 Sys 1 Error

2 Sys 1 Errors

3 Sys 1 Errors

44% make <2 System 1 errors

34% make <2 System 1 errors

66% make 2+ Sys 1 Errors

56% make 2+ Sys 1 Errors

Variances by Personality

Different Decision-Makers Have Different Products Too

40%

50%

60%

70%

80%

90%

100%

4 future choices 3 future choices 2 future choices 1 future choice 0 future choices

Has Product No Product

Q Which of the following gifts would you prefer… e.g. £50 now or £100 in 2 years

38

Variances in Delayed Gratification

…So…

40

The Big Window Consultancy Limited www.the-big-window.co.uk l info@the-big-window.co.uk

Keeping Pace with the Older Consumer

Lisa Edgar, Founder, the Big Window®

Thanks to:

Jo Kenrick, Marketing Director, Homebase Dr Lynn Sudbury-Riley, University of Liverpool

Omnisis Limited, Programming and Data Processing

Consumer and Organisational

Psychology