5 Expert Tips on Saving for Your First Home

5 Expert Tips on Saving for Your First Home

This article was written by Silvi Specter and originally appeared on Lemonade.com

How to save up for a house, according to behavioral economics experts

When you were younger, what did you want to be when you grow up?

Whether it was an astronaut, teacher, skydiver, or NBA star, that dream may have included your very own home. (And, if you’re like us, a gigantic trampoline and massive tree house.)

But the thing is, your 9-year-old self probably didn’t realize how hard it is to save for this first house. And now that the time has finally come (!!), chances are it’s more daunting than you thought.

It’s no help that headlines are calling out millennials for struggling to buy homes. But the truth is, millennials aren’t the only ones – every human wrestles with the idea of saving for a big purchase far down the line.

Why? As humans, we’re not very good at prioritizing our future selves. “If given the opportunity to spend a thousand dollars now or wait until it grows larger in the future, most people will choose to spend that money now,” said Garrett Meccariello, a behavioral scientist.

It’s no wonder saving up for a home poses such a challenge, and the biggest regret among millennial homeowners is not saving more money before buying. (Nerdwallet)

To get to the bottom of how to save for your first house, we met with experts: graduates of UPenn’s Behavioral and Decision Sciences Masters Program (MBDS). They spent a year studying how to apply behavioral sciences to improve the lives of others.

1. Narrow your home savings goals, and write them everywhere

Truth is, it’s hard to save without a concrete goal in mind. In fact, studies show that if you have a savings goal without a concrete vision, it’ll soon become wishful thinking.

So a crucial first step to saving for your first home is figuring out how much you’ll need to set aside each month. How? It’s tough to know the exact number, but this’ll help you get close:

1. Research the average price of a home in your dream neighborhood, and take 20% of that number. This is your hypothetical down payment.

2. Decide roughly when you’d like to sign the dotted line. Is it 12, 24, or 34 months from now? Divide your down payment by that number.

That number is your new monthly savings goal for your home. Now that you have this goal, Garrett Meccariello advises:

“Take your future goal, and write it down somewhere visible, say, on a post-it-note. Do this often. When you see your goals in front of you, you’ll be reminded of what you want to accomplish, and it’ll be seared into your subconscious.”

So write your monthly savings goals down on a few post-its, and place them wherever you feel comfortable: on your laptop, bathroom mirror, front door, or even on your milk carton! You’ll see instant results.

Saving Money Reminders - Lemonade Blog

2. Save for your home automatically

Behavioral economics 101: People only save money when it’s automatic. Science shows that many of us would rather splurge on a sushi dinner than save that money for the future.

So to combat this bias, MBDS alum Sakshi Ghai suggests:

“Develop a habit that’ll help you attain your future house. Push yourself to start saving every month. How do you do that? Put dollars into your bank account automatically. I find commitment devices are the most practical ways to save.”

Her suggestion is backed by research. In a study, one group of people deposited their money in ‘commitment accounts,’ while the other group spent their money freely. The first group ended up with considerably more savings than the second.

The trick here is to allocate a flat percentage (10%, 15%, or 20%) of your salary to your savings account the day you get your salary, rather than at the end of the month. Why? If you spend first and save second, you might run out of money before you have the chance to save.

Follow this habit to a tee, and you could have enough for your down payment in less than 2 years, according to Veritas Urbis Economics.

Saving For First Home Graph - Lemonade Blog

3. Stick to one spending rule

Being realistic here, it’s difficult (and even unproductive) to tell yourself, ‘I’m going to cut back on my spending.’ Remember what we said about needing a concrete goal? That applies to spending, also.

“If you need to cut back on your lifestyle, we find that in general, it’s easier for people to just cut things off as a category,” our Chief Behavioral Officer Dan Ariely told us.

If you tell yourself you’ll stop spending money on a single category, it’ll eliminate your need to choose on a daily basis. The decision will have already been made for you.

“Rather than allow yourself to shop unnecessarily, you should stop that behavior before it happens,” advised Garrett.

So what should you cut back on?

The best approach is to understand which activity you can give up without impacting your happiness. Is it shoe shopping, going out to dinner, or taking Lyfts?

To figure it out, take a look at your most recent bank statement, and rate your purchases on a scale of 1 to 10 (1 being, ‘I wish I never bought this,’ and 10 being ‘best purchase I made all year!’). Sort your purchases into categories, and determine which category led to the highest amount of regret. That’s your sweet spot of where you can stop spending, without compromising your lifestyle.

If you struggle with committing to this, follow Sakshi’s hack:

“Every time you save, reward yourself to give your brain an incentive to change. Be creative! This could be as simple as treating yourself to an ice cream, or your most sinful food. All you have to do is repeat this loop of saving and then rewarding yourself, and suddenly, you have a habit.”

Change your phone background to your dream house

Ever heard the phrase, out of sight, out of mind? Well, the opposite also applies. If you keep your long-term goals in sight, they’ll stay top-of-mind.

The first step is figuring out what your new home may actually look like. Try answering these questions:

  • Do I want to live in an urban or rural neighborhood?
  • Do I want a standalone house, or neighbors in my building?
  • Do I want to drive, ride the train, or walk most of the time?

These questions will help you narrow down what you envision when you think about your future home. Once you have a clear picture, Tobias Nasgarde, an MBDS alum, suggests:

“Have your dream house on the back of your phone screen. That’ll give you a constant reminder of your goal.”

Garrett had a similar suggestion:

“Realistically, I look at my phone 20 times a day. If I see a picture of the type of home I want to live in, that subconscious process is going to come into play when I make spending decisions.”

Why does this work, you ask? Garrett gave us a personal example:

“Every time I want to buy something new online, I look at what I have in my shopping cart, and back at what I could have: the house. I say to myself, ‘if I buy now, I won’t be where I want to be in the future.’ So I don’t go through with the purchase, because I brought the outcome (the house) a lot closer to the decision of purchasing something unnecessary.”

This low-effort hack will make it much easier to stick to your saving goals. All it’ll take is some simple Google image searching to find a photo that resembles the house of your dreams.

Home Search OG

5. Curate your Instagram feed for inspiration

Have you ever looked at an Instagram photo of someone vacationing in Florida, and suddenly developed a craving to hop on a plane? Or swiped through stories of a fantastic restaurant, and proceeded to check their availability on Resy?

Turns out, there’s some science behind that. What you see on your Instagram feed can determine your desires, and even alter your behavior.

Garrett suggests using that to your advantage:

“Curate your feed to help yourself reach your goals. You’ll want to put the best role models possible in front of you, because naturally, you’re going to want to act on what you see. If you see a bunch of pictures of people’s new homes, you’re going to want to save up to get there yourself.”

So pinpoint what gets your heart racing when you think about your future home: interior design, gardening, etc. Then, follow Instagram accounts or hashtags that’ll get those types of images on your feed. You’ll be itching to reap the benefits of your new home ASAP, which will motivate you to save.

Garrett also suggests using Instagram as a tool to pay it forward:

“If you see people who are saying, ‘I saved up, I finally got my dream home!’ and you post a similar picture, you can actually help empower someone who’s in a similar situation, and complete the cycle of social proof that’s important when making decisions.”

Ready, set, save!

Wrapping it all up, here’s the TL;DR of the hacks that’ll make saving for a home a bit less painful:

1. Calculate how much you need to save each month, write that number on post-its, and stick them them everywhere.

2. When you get your monthly paycheck, automatically allocate and send a percentage of it to your savings account

3. Cut one category of splurge purchases off entirely

4. Change your phone background to a pic of your dream house

5. Curate your feed to help reach your savings goals

Should you make a fresh start for New Year?

Should you make a fresh start for New Year?

This article originally appeared on ezonomics.com

People are notoriously bad at reaching their goals. The root of the problem is not that they set goals for themselves, but that this doesn’t always match up with the ability to see them through. In a perfect world, financial, savings and investment goals would be reached, right on schedule, as planned.

Unfortunately, planning doesn’t always solve the problem.

Ironically, many start to talk about setting new goals for themselves as the New Year approaches, forgetting that this plan didn’t work so well last year. Some cultural traditions call for setting certain types of goals or resolving to start a new habit as every new year begins. Some behavioural scientists even talk about a “fresh start effect” .

Yet resolutions made in this fashion also run the risk of falling victim to what is known in behavioural science as planning fallacy. This involves misjudging exactly how much time and effort will be needed to reach the goal.

According to psychologist Hal Hershfield, the problem with the planner’s fallacy is that we believe our plans made in the present are for a future version of ourselves to deal with. It is easier to put off paying into your savings account or investing in the future when you believe it is, as it were, someone else’s responsibility.

And as a result, you may feel free instead to make choices that make you happy immediately, in the moment.

Compounding the problem
We falsely believe that the will power and self-control required to achieve our financial goals will magically appear once the calendar resets, but in reality, we’re the same people on 1 January we were on 31 December.

Shift your lifestyle change from a temporary resolution mindset to a long-term behaviour change, says Garrett Meccariello

Instead, to set and reach financial goals in the coming year, act as soon as possible. If you can, one idea is to actually kick off your savings or investing plan before the “landmark” holiday, perhaps a week or so ahead.

This can actually help shift your lifestyle change from a temporary “resolution” mindset to a long-term behaviour change. For example, by distancing yourself from the over-hyped New Year resolution-setting period, your goals will feel permanent and meaningful. Additionally, easing into reaching your goal will feel less dramatic than diving right in on the first day of the year.

Next year, why not try kick-starting the steps necessary to reach your goal on a random Tuesday towards the end of December, and maintain your progress throughout the following year? This should stop you falling victim to a “New Year’s Resolution” version of the planner’s fallacy.

On the money
The brain is already at a disadvantage when it comes to consistently making smarter financial choices. Sometimes we just want to do what feels right in the moment, driven by our hearts’ desires, and not necessarily what is right for our budget. This is especially true when it comes to bringing change to your life that seems foreign or unfamiliar as it pulls you away from your old ways.

Making healthy financial behaviour a daily routine ensures that any changes to your day-to-day lifestyle do not feel drastic or unplanned. Progressing more slowly towards your goals helps you form healthy habits for the long term. Budgeting and saving for the future shouldn’t be calendar-based chores; instead, they should become ingrained and second nature.

Snowed under yet still spending? Here’s why (and how) to shore up a budget

Snowed under yet still spending? Here’s why (and how) to shore up a budget

Regardless of how well you usually stick to your budget, chances are you’ve experienced a moment of weakness. Whether that moment consisted of giving into temptation while window-shopping or was made despite knowing the consequences, this can harm your long-term financial outlook.

You may have meant well but, in the heat of the moment, things changed. A quick trip to the shops for a single necessary item can turn into a budget-busting spree. One small purchase becomes two, and suddenly you’re rationalising your decision to keep spending money

If this sounds familiar, you are not alone. Shopping in retail stores under the glitter of bright lights can make you fall into an almost trance-like state. Conditions in these stores make buying the things you want (but don’t need) addictive and hard to control.

Even with the best of intentions, spending can snowball.

Opening Pandora’s box
Snowball spending is when one small purchase lends itself to a second, third, and potentially even more. Each purchase becomes that much more attractive, making it harder to say no.

If you’re spending above your budget, the brain can view shopping just like other addictions – a “forbidden” behaviour that gets all the more attractive the longer you go without. Just as the brain learns to feel good knowing when the next cup of coffee is on the way, it trains itself to release a small dose of feel-good hormones when a purchase is on the way.

Saying no to an unnecessary purchase can be challenging. Your mind fights with itself over what’s more important, sticking to your budget or getting that jolt of feel-good hormones.

You may even find yourself debating internally: “After all, I’ve already spent some money, what’s the harm in spending a little more?”

In psychology, the thought process known as moral licensing involves rationalising small things like skipping your diet when you’re out with friends if you ate healthier earlier in the week. Snowball spending, on the other hand, doesn’t come with the luxury of healthy behaviour occurring prior to it. Instead, it’s just the opposite (“un-moral” licensing, if you will).

You might tell yourself that buying a second item is acceptable because you already spent some money today, but in reality, if you cannot afford it, it is far from OK.

Stop that snowball roll
The first thing you must do in this situation is separate yourself from the temptation. Removing yourself from the environment makes it that much harder to rationalise additional purchases.

Another tactic is to set the agenda for the day early on.

When heading to the shops to purchase a necessary item, remind yourself that your aim is a specific goal, not a general “treat yourself” experience. If all else fails, set realistic limits on your spending beforehand; this may be your last line of defence if you cannot avoid temptation altogether.

It’s easy to set a few barriers – for instance, by setting a mobile app to alert you when you approach a chosen limit, or by leaving your plastic cards at home when you go out (only taking a prescribed amount of cash).

Snowball spending is a growing problem, often only recognised once the dust settles and the receipts pile up. So next time you find your purchases snowballing, pump those brakes, and stay on course.

Value-Signaling in Packaging Design

Value-Signaling in Packaging Design

This article originally appeared on brandingtimes.com 

If people ceased to be influenced by brands, brands wouldn’t exist. Beyond catalysts for change and innovation, brands represent a lot more than meets the eye, including cultural symbols, claims of trust, and desire.

We are immersed in brands. If one ever questions how prominent brands are in our daily lives, think about two of the world’s most powerful brands (arguably): Velcro and Kleenex.

Everyday, people around the world use these products and refer to them by their brand names. The brand name, “Velcro”, is the official product’s name for hook and loop tape. The same is true for Kleenex (facial tissue anyone?). Well-established brand names have become synonymous with the generic product and stand for something that extends far beyond the functional benefits of the product.

When brand names are eliminated from product packaging and displayed generically, a consumer may lose the trust built up with a well-known brand. A consumer might be dissuaded from purchasing the generic product over the branded competition. Brands such as Velcro established and invested in building confidence to showcase dependability- a signal of the brand’s values. This is a reason that trusted brands are able to charge significantly higher prices for the same generic products.

In addition to the trust that brands build between their product and the consumer, they also serve another purpose that consumers ignore, but is noticed (consciously or not) by everyone else.

Consumer culture theory suggests that consumers see themselves in the brands they purchase. These purchases reflect who they are on an individual level. The act of buying products with a well-known brand name is driven in part by conscious factors such as the price/quality tradeoff; including the rationalization of how it would make their lives better, and another part that represents an often unconscious behavior known as social value signaling.

Social value signaling involves engaging in a particular behavior to demonstrate one’s personal values to others. Humans are social creatures and appreciate being part of the “in-crowd” at all times. Being a part of a larger social group provides an overarching sense of comfort and security that is desperately craved. People love to find something in common with others. Humans crave meeting those similar to themselves.

Rooted in the field of behavioral economics, the power of leveraging social value signaling to create a competitive advantage is wide spread. When leveraged in the marketing domain, this technique is used to increase product sales by tapping into the universal truths that guide consumer behavior. By creating products with external packaging that signal social values, products play a broader role in consumer life and reflect who these buyers are and what they intrinsically believe.

There are three consumer packaged goods (CPG) companies that are at the forefront of creating bold packaging designs that empower consumers to exhibit their values to others when purchased:

1) Boxed Water

When people typically think of packaged water, un-eco-friendly plastic often comes to mind. Boxed Water, a premium water brand, disrupts this norm by using biodegradable cardboard boxes to reduce the amount of plastic waste when discarded after use.

What makes Boxed-Water stand out is its bold use of the phrase “Boxed Water is Better,” placed centrally on the packaging. This ideal placement on the front panel ensures that when the water is consumed in public, the drinker is making a social values statement. Boxed Water did not place the tag line inside the cap where only the consumer would see it. Their forward-facing statement is purposeful in its convictions.

2) Beyond Meat

What people consume or purchase in public settings has the power to signal deep-seated values to others. Beyond Meat is a plant-based meat substitute company that designs its product exteriors to resemble traditional butcher packages. The core promise to consumers is showcased in a larger font on the box.

Owning the phrase “beyond” in their brand marketing and packaging designs signals far-reaching, advanced values that represent a healthier lifestyle supported by innovative food solutions such as the ones they offer. Plainly packaged veggie burgers by Beyond Meat’s competitors cannot signal the values that Beyond embodies.

3) Leafs by Snoop

The number of American states decriminalizing the sale of cannabis paved the way for companies to tap into the growing (pun not intended) marijuana market. Leafs by Snoop is the brainchild startup founded by Hip-Hop artist Snoop Dog, who was determined to elevate the positioning of consumable marijuana products. Leafs’ packaging takes the traditional 5-point plant imagery and elevates the design aesthetic by using embossed colors of gold and various other shades. This packaging design makes a bold statement: this product is not your “Grandparent’s’” variety of marijuana; instead, it represents the new guard of consumers that value premium experiences and a range of products.

The drivers behind the purchase of these products extend well beyond their functional benefits. Bold, statement-making package designs enable consumers to signal many things ranging from their eco- or health-conscious values to their receptivity to traditionally taboo subjects. All of the packaging designs mentioned above share unmistakable commonality: the causes they support and the brand values that they embody.

To rise to the level of mass appeal, products must stand for something that matters to those who purchase them. Consumers already buy items because those products reflect their personal values. Brands can make it easier for consumers to express themselves in their purchases by formulating their packaging designs to make value-signaling statements.

Demonstrating a brand’s value through its product packaging creates an additional level of demand for the product that isn’t accomplished solely with traditional product marketing. Tapping into this deeper level of consumer insight with eye-catching package designs will captivate a consumers’ attention toward the product as a reflection that the brand stands for something beyond its functional use.

Short-sighted about investing? Step back to take a long view

Short-sighted about investing? Step back to take a long view

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This article originally appeared on ING’s eZonomics.com

Data is everywhere – flowing through your phone, across your desktop, and even streamed beneath your favourite TV show. Thanks to mobile apps, anyone from an amateur investor to a seasoned pro can tap into data to monitor their investment portfolio in real time.

You may think that having data at your fingertips is a good thing. In some cases, however, it can harm your financial outlook. This is because frequently checking the status of your investments reduces your desire to seek risk – a necessary component of investing.

Often equated to gambling, investing involves taking a certain amount of risk in hopes of receiving a larger future gain.

Many investment portfolios and retirement funds automatically balance “safer” risks, such as bonds, with riskier investments like stocks for you to achieve the perfect balance. Convenient, right? These combinations are, in fact, a great place to start out because they reduce the risk of your whole portfolio tanking because one company performs poorly.

People often say that investing is a “long play”. Investing has earned this description since returns on market investments have a higher chance of rising over an extended period of time. While a single stock may not change much value-wise day to day, portfolios that take calculated risks over time generally provide higher rates of return.

Don’t fear the market
Reporters often talk about the movement of the markets – up or down depending on when you tune in. Don’t fear the small dips in daily performance. Being overly cautious about your financial choices because you fear a small drop in your investment is not healthy for your financial future.

Focusing heavily on these changes – for example, obsessively checking your performance, even when the markets are closed – if the market is down can instill a terrible fear of the calculated risks necessary to grow your portfolio.

This avoidance of risk when exposed to an excess of data has been dubbed “myopic loss aversion“, by famous behavioural economist Richard Thaler.

In an experiment by Thaler’s team, one group of investors were shown more market performance data than another that saw very little.

Those with access to the most data took the least risk in growing their investment portfolio for the future. And as a result their profits shrank: they made less money than everyone else in the experiment.

You might think having more data available on your finances has to be a good thing. However, Thaler and his colleagues proved that too much data can actually be harmful.

Here’s how to avoid trouble
If you want to step away from the distraction presented by large amounts of financial data, mark a date on your calendar about once every three to six months to revisit investment plans.

Checking in less often, instead of daily or weekly, will help you assess how your portfolio does over time.

Data can be totally addictive, especially when it’s readily available via your mobile phone or on social media. So try removing apps from your phone or moving investing-related apps behind others. This should make your performance data harder to reach as often. They’ll still be available when you really need them.

Another tip: read articles that focus on the broader state of the economy – not specific investing-focused ones. Taking a broader view can reduce the chance of myopic loss aversion. Separating yourself from share market performance data can improve your ability to think clearly and make better decisions.

Checking how much money is left in your wallet before payday is no fun. Neither is reviewing your investment portfolio every day.

Instead, take a break from the data and focus on the life around you. Markets can be scary enough.

How to Effectively Leverage Behavioral Science in Market Research

How to Effectively Leverage Behavioral Science in Market Research

 

This blog originally appeared on greenbookblog.org

There is a lot of discussion in the market research community surrounding the application of behavioral science to survey research. This dialogue has challenged the insights community to address several methodological shortcomings that have long plagued the field. Such weaknesses include a general lack of predictive validity, and the inability to isolate and replicate insights outside of the survey context.

To researchers, these pitfalls often reflect the status quo. To a client, these caveats determine whether a decision based on consumer insights will become a success, or fail with spectacular fashion. The interjection of behavioral science has challenged both parties to think critically about the insight collection process and the application of valuable learnings to solve business challenges.

This change in vantage point is spurring innovation in areas that have traditionally gone unchallenged since their inception. The namesake field of behavioral science has lent the most impact to market research, more so in the rigorous approach than any specific methodologies used. At its core, behavioral science utilizes the scientific method to understand the drivers of behavior and introduce theories to guide an observed behavior towards a targeted alternative.

On a broad scale, behavioral insights are applied to reduce the consumption of unhealthy food, increase the amount of those who sign up for organ donation, and ensure that retirement funds are endowed well for the future. In the consumer context, behavioral science is used to increase the adoption or uptake of new products, and strengthen the relationship that consumers have with brands.

As the discourse on applying behavioral science to enhance the understanding of consumer behavior continues, there are three things that market researchers can do to implement a more scientific approach to their work:

1. Identify a testable hypothesis

Designing quantitative questionnaires with a pre-defined, testable hypothesis in mind ensures that the insights uncovered in the study are in line with the stated business objectives. Just as scientists develop hypotheses before testing theories in a lab setting, market researchers should work cooperatively with their clients to identify the underlying factors that answer the fundamental business question. Defining the business problem upfront and ideating solutions supports the creation of clear and concise deliverables that are actionable. Reframing research briefs from “what would we like to uncover” to “what sort of behavior do we think we can change” brings traditional market research one step closer to its social science brethren.

2. Measure actions, not an intent

Consumers struggle with predicting their behavior thirty, sixty, or ninety days into the future. This fact challenges the convention of traditional survey logic where researchers use their one touch point with consumers as a be-all, end-all data capturing moment. One way to circumvent this future prediction inability is to ask survey respondents questions that they can answer at the moment. Asking consumers to choose one product over the other in a forced choice fashion, or to “invest” game-like currency into one concept or another starts to replicate how consumer choices are made in the real world, rather than evaluating them in a speculative bubble.

3. Utilize control groups

Common reactions to this recommendation are often immediately followed by questions of: Use a control group? For what? How will that enhance my current concept testing study design? When testing concepts of any sort, utilizing control groups isolates the potential effects that a new concept may have on the parent brands’ perception. Without an unexposed control group, it is nearly impossible to identify the extent to which the concept alters brand perceptions. Control groups are a valuable addition that can help explain how well one concept iteration performs over another and the impact that it has on the brand.

There are countless crossover applications to market research one can borrow from behavioral science. The underlying scientific method-based approach ensures that there are accountability and confirmatory powers in consumer research; two components that researchers have struggled achieving in recent years when utilizing the present approach.

The first step in uncovering actionable insights is ensuring that the data patterns discovered are representative of human behavior in the marketplace. Additionally, insights should be easily replicated across large populations to ensure that the responses observed reflect how a majority of consumers will act in a given situation. Methods used in traditional online surveys should not be asked in an isolated research bubble either; instead, successful researchers must employ tools that bring the insights uncovered closer to the reality of how consumers make decisions.

Applying the three takeaways listed above is not the final chapter to this story; instead, it is where the challenge to expand the horizon of market research begins.

The Psychology of “Scary” Brand Campaigns

The Psychology of “Scary” Brand Campaigns

 

This article originally appeared on Branding Times

The month leading up to Halloween is filled with the chill of fall air and stockpiling bite-size candies to hand out to children. Everybody loves getting “spooky,” especially major brands. Once September rolls around, some brands focus their product mix and advertising on pumpkin-flavored products, while others choose to mix up their communication practices with creative and scary advertisements.

But do scary campaigns really have a purpose beyond inducing panic and nightmares? The answer is resounding “yes.” Ads that capture consumer attention drive growth and strengthen relationships, and they can make people feel something on an emotional level – the goal for all marketers.

Why do people love getting scared? Simple: it’s an “exciting” sensation. It’s why the
“Friday the 13th” movies were so successful in theaters. Even if we sense outright fear, the human brain commits strong emotions and their associated experiences to memory. This is how consumers can feel a connection, even nostalgia, towards scary media.

For companies, scary advertisements capture more attention than those focusing on product benefits alone. Once a scary experience occurs, the brain recognizes the emotional shift toward terror and then records the memory for future retrieval.

This subconscious process began evolutionarily with cave people understanding that the roar of a lion meant impending danger, compelling them to run fast in the other direction. This mental shortcut proved valuable in helping to escape danger by heightening awareness, focusing attention, and increasing reaction time. Today, creative departments for major brands have tapped into the same psychological components to spice up advertisements leading up to Halloween.

In 2014, IKEA Singapore and BBH launched a “haunted” campaign that was modeled after a famous scene from “The Shining”. BBH brilliantly recreated the tricycle scene in which the young child navigates the hallways until he reaches the suspenseful climax of meeting two similarly dressed people blocking his path. In the movie, these people were the ghosts of past hotel guests. In the commercial, they were his parents calling him over to the checkout line.

Creating heightened levels of suspense works brilliantly for advertisers when executed correctly. The fright-filled nature of Halloween-themed advertisements offers creative minds the ability to flip traditional advertising on its head and create a memorable scene that ensures the brand is the center of at least one nightmare during the run of the campaign.

Psychologically, the same part of the brain that guides the “fight or flight” response regulates our responses to fear. Just as the mind can go from seeking a fright in one instance, it can go “on guard” with similar features to the ones listed above based upon past experiences that have been committed to memory.

IKEA is not alone in leveraging Halloween advertisements to build brand awareness and recall. Brands like Dirt Devil use scare tactics to differentiate itself from competitors in the traditionally functional space of vacuum cleaner advertisements.

By borrowing artistic elements from Hollywood, Dirt Devil was able to showcase the power of their products’ suction in the context of a parody of a scary film. Not only did the advert capture attention and build suspense, but it also ended with a comedic spin on a classic special effect laden ending.

Similarly, Nike tapped into the slasher-movie culture by debuting their ad titled “Horror”during the 2000 Olympics. This ad featured a young woman, alone in an empty house, being stalked by a masked serial killer. After a brief foot pursuit through the dark woods, the young woman is able to outrun her attacker…due to her superior shoes.

At the end of the day, Nike’s scary tactics paid off. Thousands of viewers saw the ad live, and another million heard about the spot in the days after. As we can see from Nike, IKEA, and Dirt Devil, advertisements that capture attention and pique interest through the use of horror-themed plot lines tap into the deeper level psychological processes that are attractive to watch and become memorable for years to come.

5 Lies You’ve Been Told About Behavioral Science Market Research

5 Lies You’ve Been Told About Behavioral Science Market Research

This article originally appeared on Greenbook.com

The rise in behavioral science terms flooding into the market research community has been a blessing for some, and a curse for others. Identify and avoid these 5 lies told by behavioral science bandwagoners to avoid getting actionless insights.

If you work with consumer insights, chances are you have heard buzz statements such as “System 1”, “Behavioral Science,” or “Understanding Emotions” tossed around quite frequently over the past year. Beyond the buzz, these terms, if harnessed correctly are valuable for understanding what informs human behavior.

The rise in behavioral science (also known as behavioral economics to some) terms flooding into the market research community has been a blessing for some, and a curse for others. Research buyers who have selected trusted, qualified research partners that are well versed in applying behavioral science should stop reading this article now.

If you classify yourself into the other category of research stakeholders that have fallen victim to false claims and empty promises, the following five lies as told by legacy research companies attempting to jump on the behavioral science bandwagon will sound all too familiar:

  1. “We capture future purchase intent” – Every time I hear this, I cringe. Consumers have trouble vocalizing their thoughts and feelings in the present, let alone in predicting future behavior 30 days from now. Traditional measures of future purchase intent such as Likert scales have been shown not accurate for predicting future behavior. If future purchase intent metrics do not offer any statistically significant or predictive validity, they are not valuable enough to report on, let alone to collect from respondents.
  2. “Respondents love our surveys” – For those not in market research, online quantitative studies can be a bore. With the average length of segmentation studies creeping above 30 minutes in length, respondent fatigue and dissatisfaction comes at the expense of collecting a multitude of dimensionless metrics through scale questions. Respondent friendly surveys must be succinct to the point where they avoid long-winded open response boxes and monotonous scale type questions.
  3. “We’re powered by behavioral science” – If a firm tells you this and is unable to identify which scientifically validated methodologies they use, or what experience they have in understanding what informs behavior, the chances are high that their practice is not powered by any behavioral metrics… or science at all for that matter.

Additionally, be careful to not fall for the alphabet soup: a team full of Ph.D.’s is a fantastic resource in market research, but if not appropriately leveraged can yield actionless results for industry players. The benefits of incorporating behavioral science principles lie within the power of understanding what truly drives behavior and examining such behavior through the lens of a specific business application.

  1. “We do System 1” – Implicit association tests that evaluate nonconscious responses are occasionally believed to be the only methodology available to assess the System 1 mind. In reality, there is more to understanding behavior than gauging fast associations alone.

If we made every decision based upon what our System 1 or “fast” brain suggested, half of us would be in jail, and the other half would find themselves indulging in too much dessert at the dinner table. Emotions, experiences, and relationships are also prominent factors in understanding System 1 behavior. Evaluating the speed of attribute associations alone is not enough to understand what drives behavior. It is imperative that System 1 and System 2 research techniques be layered together holistically.

  1. “We’re innovative” – Research methodologies such as conjoint analyses and the Net Promoter Score (NPS) have been around for 30 years. Yes, these are useful tools at a thirty-thousand-foot level, but we must challenge what they tell us about behavior.

Identifying preferences is only half the battle for understanding what informs consumer choice. Without taking a step back and evaluating all of the inputs into decision making, researchers run the risk of telling an incomplete story.

Just because a large (or small) market research firm has adopted the hip terms of the day does not mean that the promised deliverables will meet expectations. If a vendor is unable to identify, quantify, and offer predictions or actionable insight into what informs human behavior, they cannot be considered “System 1” or “Behavioral Science” driven. The field of behavioral science is not limited to observing behavior, as it also can provide insight into how to influence such behavior.

Imposters will say that they have been practicing System 1 research for years, but in reality, offer little by way of methodologies or expertise. It is imperative that research buyers can separate experienced vendors from those seeking to ride a wave of popularity. Research vendors must be able to substantiate claims to be trusted and credible.

If you can’t change behavior with your insights, are they insights into behavior at all?

Be your own choice architect: see your savings grow

Be your own choice architect: see your savings grow

This article originally appeared on eZonomics

Self-sabotage. Yes, sometimes we are our own biggest enemies when it comes to sticking to our personal budgets. For every commitment we make to saving money, there is always a temptation to spend just a little on ourselves. What happens when the silly concept of a personal budget gets in the way of the desire to shop? What else: we feel bad.

These feelings are the opposite of how great we feel when we spend money on things that make us happy. When real-life stuff like bills and saving get in the way, it’s time to balance the choice between what we want to do right now and what we know we’ll need long term.

No one likes being told that hard-earned money can’t be used to buy something we really want, but for the sake of our future, it’s time to start listening to the voice inside your head.

Unplugged and unprepared

For help sticking with a budget, you can download an app or sign up on a website to encourage you to spend less or save more money. But what happens when these digital tools aren’t in your face to stop you from random purchases? These tempting moments occur almost daily.

If this sounds familiar, you are not alone. Think about the times you’re at the local pub with friends or feed feelings of hunger with a snack from the office café. These situations are hard to avoid; even our friends might encourage us to “just have one more”. Sticking to your budget might be the difference between feeling guilty and staying ahead of the curve financially.

If this sounds familiar, you are not alone. Think about the times you’re at the local pub with friends, and tempted to spend …

Tools to avoid the temptation

Instead, plan way ahead of time. Create a daily budget, and leave the credit or debit cards at home. Carry your allotted daily spend in physical cash (instead of plastic) so you can keep an eye on what you’ve spent throughout the day; this way, you’re paying attention to what’s left every time you pull your wallet out.

The best part? When your wallet is empty, you can’t spend any more. If notes and coins don’t appeal, why not organize yourself a debit card or digital wallet which only has the amount you’re allowed to spend in it?

You can also be smarter about how you spend your money. Take a page from the party crowd and “pre-game” your social events. One way to do this is to ensure you eat and drink at home before going out and joining your friends. The markup on food and drinks bought from cafés, bars, and restaurants can be high, quickly pushing you out of your budget range.

Sure, it can be challenging, even for the most money-conscious people. The key is to think about your future goals today and plan ahead, especially when tech tools might not be available to rescue your budget.

Committing to these small change strategies will give you a chance to simply do better financially longer term. Moral of the story? While you might not want to do save more in the heat of the moment, a few simple actions can help you achieve your biggest dreams over time. You only have to get started.

How Behavioral Economics Found Its Way into Market Research

How Behavioral Economics Found Its Way into Market Research

Market researchers, regardless of the industry they find themselves working in, are in the business of understanding people. Understanding how people or consumers behave has been of interest to business leaders for decades as it can determine success in the marketplace.

By understanding who customers are and what they want, businesses can tailor their product and service offerings to match expectations.

Serving as a tool to avoid managerial bias in decision-making, market research provides a necessary ‘checks and balances’ system for business leaders.  This practice ensures that consumer needs are met and exceeded, further strengthening the triangular relationship between customer, product (or service) and brand. Business leaders must make decisions involving changes to products or services with the customer’s voice in mind, at all times.

Traditionally, consumer research has taken a normative approach. Normative views on behavior involve projecting how we believe consumers will act based upon available information. If you have ever conducted an online study that yielded positive results upfront, only to find out that what you uncovered didn’t hold true in the field, you have observed the nuances of evaluating human behavior first hand.

 

When consumers deviate from the normative path, or how we think they will act based on what we know about them or what they tell us, they engage in descriptive behavior. Descriptive behavior refers to how the person acted, regardless of the prior prediction. It is this difference between normative and prescriptive types of behavior that has given rise to a new field of social sciences that continues to grow exponentially in relevance: behavioral economics.

Behavioral economics was born at the intersection of two namesake fields: economics and psychology.

Thinking about economics, a normative field, and psychology, a descriptive field, the newfound approach to evaluating consumer insights allows researchers to observe how people behave in the “real” world when no one is watching (or paying for their input).

As Richard Thaler, the winner of the 2017 Nobel Prize in Economic Sciences, began to observe how people made seemingly irrational choices that differ from what the traditionally normative economic theory would predict, the importance of understanding how and why consumers make decisions became ever important.

Traditional market research studies (such as concept testing or brand tracking) often ask consumers to predict how likely they will be to engage with a product or brand at some point in the future. This approach is commonly believed to predict precisely how loyal customers will be, but when asked on a 7-point Likert scale without additional context, has been shown to not accurately predict future behavior.

How can it be that consumers can say how they will act at one point in time, and engage in different behavior in the future? The answer lies in the field of behavioral economics.

Daniel Kahneman, a psychologist (go figure!) who won the 2002 Nobel Prize in Economic Sciences explained this differing behavior in his 2011 New York Times bestseller, Thinking Fast and Slow. Kahneman suggests that the brain thinks and makes decisions using two separate metaphorical brains, the System 1 and System 2.

The System 1 brain is responsible for “fast, automatic, frequent, emotional, and unconscious” thinking. A few examples of thinking with the System 1 brain as explained by Kahneman are: solving the math equation 2+2, completing the phrase “war and …”, also, connecting the description ‘quiet and structured person with an eye for details’ to a specific job, all in a fast and automatic manner.

In contrast, the System 2 brain is responsible for “slow, effortful, infrequent, logical, calculating, and conscious” decisions. Examples of System 2 thinking are solving 17×24, determining the price/quality ratio of two washing machines, and actively counting the number of times that the letter A appears in this paragraph. All of these functions require a significantly more amount of time and mental bandwidth.

When consumers make decisions, they often rely on their System 1 (with the occasional moderative input from their System 2) to make choices. This approach is more efficient than thinking with the System 2 alone, saving valuable brain power to process other mental tasks that are frequent or habitual in nature.

Due to the vast amount of processing that the System 1 brain conducts, it is typically handled in the nonconscious parts of the human mind, or in the background while the System 2 is working on completing other complex tasks.

 

Without relying on their System 1 brain as they currently do, consumers purchasing a soda at a supermarket would be passed by dozens of other shoppers in the aisle while they deliberated over which brand has the best price/quantity trade-off. The System 1 uses automatic thinking that is guided by past experiences, relationships, and mental models to help make decisions faster, easier, and more automatically than the more deliberate and rational System 2 brain.

Unfortunately, traditional market research taps into the System 2 brain- an old approach that is normative in nature and does not begin to reflect how consumers descriptively make decisions.

Protobrand leverages behavioral economics to understand behavior better by tapping into the System 1 to evaluate the factors that drive behavior such as emotions and subconscious preferences.

This new approach utilizes methodologies such as visual metaphor elicitation and response latency. These tools can better predict actions as they tap into the emotional and non-conscious drivers that play a role in informing behavior. By asking questions that consumers can answer about how they feel, at the moment, researchers can better predict the choices that consumers will make in the future.

It is essential that the field of market research continues on its path to understanding what truly drives behavior: implicit preferences and emotions, to deliver actionable consumer insights to clients. Without a keen focus on identifying the drivers of descriptive behavior, business decisions using normative predications become at risk for failure.