Behavioral Economics 101 for Marketers

As marketers are increasingly expected to make data-driven decisions to drive ROI of their marketing programs, knowing a good measure of Behavioral Economics, a growing sub-discipline of economics that attempts to explain and understand the inherent irrationalities of human behaviors that guides economic decision-making, would be of immense value to make sense of inconsistencies in human behavior. As a marketing strategist and graduate student in the Integrated Marketing Communications program at Northwestern University’s Medill School of Journalism, I have found two very insightful articles that will help you understand the potential of behavioral economics in uncovering unexpected insights and driving marketing decisions.

Article 1 – “A marketer’s guide to behavioral economics” by Ned Welch for Mckinsey Quarterly

Ned in his article drives the case for a more structured and systematic use of behavioral economics by marketers to unlock significant value from it.  He highlights the four practical techniques that should be a part of every marketer’s tool-kit as they think about using behavioral economics to guide their marketing decisions.

Read the article here on McKinsey.

    Source: Dilbert Does Behavioral Economics: A case study on common behavioral biases

Article 2  - “Rethinking Marketing and Customers : Lessons from Behavioral Economics” by Ravi Dhar, Emily Haisley, Michael Sanders, Ned Welch

This article talks about opportunities, and inherent challenges of turning the academic findings of Behavioral Economics into practical solutions that can be used by organizations.

Read the article here on Yale Insights.

Based on the insights, here are three  key learnings from Behavioral Economics that can dramatically improve your ability to uncover unexpected consumer insights and drive marketing decisions:

• Consumers are not rational –Accept and embrace the idea that consumers are neither fully rational nor fully aware of what drives their own economic decision-mak
• You can predict the unpredictable- Recognize that you have the ability to predict the irrationality in consumer decision making to drive marketing decisions.

• Opportunity for B2B –Behavior Economics is not just for B2C, it is equally relevant for B2B situations as well. Businesses are a collection of individuals after all.

This is just the beginning of how Behavioral Economics can guide your marketing decisions. Keep learning more about your customer through this exciting field.

About the Author:

Asha Vaidyanath is a marketing professional with expertise in customer-centric approach to solving marketing problems.  She is currently pursuing a Master’s degree in Integrated Marketing Communications at Northwestern University.

You can follow her on Twitter @abrimfulofasha, and read her blog here.