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.

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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.