People's behaviour is very contextual. In a specific context, something may have a completely different meaning for people, influence the way they evaluate something or decide to buy a product or service. The decision-making process of consumers is thus determined by a specific context. What exactly does context do to a person? How is context inseparable from making choices and what role does our frame of reference of behavioural economics play exactly? Read along to understand this better.
Why rosé wine tastes different in France
Just imagine: You are on holiday in the sunny south of France, sitting on a terrace enjoying a fresh rosé wine. Delicious, so you decide to buy a few cases from the local winemaker to enjoy a glass again at home afterwards. A few months later, you decide to open a bottle with friends on your own - less sunny - terrace, after you've been bragging about this magnificent wine. However, your visitors don't seem entirely enthusiastic. And you yourself suddenly perceive the same wine completely differently than in sunny, stress-free France. Too crazy for words, right? Or isn't it?
Context is king
Perception has everything to do with context. How people evaluate something is entirely related to the meaning of that context. People are predictably irrational and often make unconscious and emotional choices. Behavioural economics combines economic and psychological elements to discover why people behave in a certain way in the real world. To do this, it considers a broad spectrum:
- The societal context: looks at the society we live in and a specific culture associated with it. The latter determines how you will react to certain stimuli or what behaviour you will display.
- The individual context: Who are you as an individual? How do you act as a consumer on a psychological level? This can vary tremendously from one person to the next. That is why it is important to include different target groups in your research.
- The environmental context: In what environment is the product or service evaluated? Does it stand alone or is it placed alongside others? Does it concern a concrete situation?
All aspects are therefore considered in the research. This also means that analyzing trends is important. Because trends help determine the decisions people will take. Shopping behaviour is very changeable and as a manufacturer it is very important to keep monitoring this. Think for example of the corona crisis: consumers tried to get in and out of the supermarket as quickly as possible, which led to different buying behaviour. This is apart from the fact that there is also a changing focus on products, namely the focus suddenly shifted to hygiene products.
When doing research, it is best to be cautious about what you actually ask consumers, and what you do not. Will it give you relevant output? In recent years, behavioural economics has shifted towards observing people in their natural habitat. Behavioural economics lets the behaviour speak for itself - in the specific context - instead of analysing what people say directly. After all, consumers do not always say what they do and do not always do what they say. People lie, certainly not always on purpose.
The challenge lies in how to include as many behavioural measures as possible in a survey, to get people to actually do something, rather than having them claim things or say what they think. Asking explicit questions is rarely the right way, because it requires a respondent to be able to formulate the answer very clearly. What people describe and what they actually do differs. The so-called say/do-gap. Because one's own behaviour is difficult to describe via self-reporting, and an answer will also vary at different times. The state of mind has an influence on this. You will therefore have to find a way of measuring something better and narrowing the gap. In particular, measure much closer to the behaviour itself.
Behavioural economics as a research framework
The fact that people are just very impulsive and let their emotions take over makes it difficult to predict behaviour. How will people react? What behaviour will they display in certain situations? And therefore in certain contexts? When you test something in isolation, the results are very easy to evaluate. However, it is important to always test within a competitive context, because in this way other (decisive) elements can be highlighted.
In the human mind there is an urge to understand behaviour and better predict what people will do. This does not mean that neuroscience or other advanced techniques must be used immediately, as they are often too complex and expensive and simply do not bring out what is needed. Where neuro-research is hot for unconscious behaviour, it is not always clear what added value these techniques offer. With behavioural economics, experiments can also be applied that do reveal behaviour and measure its impact.
In our research methods, we will always take into account the belief of behavioural economics. Behavioural and observational approaches are preferred to long questionnaires full of irrelevant questions which the respondents cannot answer truthfully. Everything is always approached within a specific, competitive context. After all, that is what gives an approximate representation of the truth.