Why and how do we make decisions? How do we shape our judgments and decisions? Today I’ll bring an ode to Nobel prize-winner Daniel Kahneman (2012), writer of international bestseller ‘’Thinking, fast and slow’’. In about four minutes you’ll learn the basics of how our complicated brain works. The question is: what can we as marketers learn from this all? Maybe more than you might think. Based on Kahneman’s work and other psychology experts two lessons will be presented
Kahneman found out that there are basically two systems that drive the way we think. These two systems are called System 1 and System 2. Both systems contain two different manners of thinking. System 1 is related to our intuitive thinking. System 1 acts as an automatic pilot and is fast, automatic and emotional. Every day decisions are made unconsciously and effortless. Peter Murray (Ph.D. in consumer psychology, 2016) found out that 95% of our decisions are made unconsciously. Does this surprise you?
Most of the time System 1 helps us throughout the day without any problems. Think about the little sum of 2 x 5. The answer is 10, simple. Your automatic pilot steered you in the right direction. Unfortunately, System 1 is not perfect and therefore not always right. Why? Well, it’s because System 1 doesn’t like thinking... Kahneman says about this: "Thinking is to humans as swimming is to cats; they can do it but they'd prefer not to’’. Here is the interesting thing about System 1. When we don’t actively reflect about things because we use our lazy automatic pilot, we’re prone to make errors and unfounded conclusions.
Now, think about the sum of 2 x 1789. The answer is 3.578. This sum took more energy than the previous one, right? Thank God System 2 was already on his way to rescue you. Once we can’t use our automatic pilot anymore, System 2 comes into action. System 2 is based on rational (or conscious) thinking and comes in action when we are in trouble. In opposition to System 1, System 2 is slow, deliberate and acts as our well-advised system. System 2 is used for deeper evaluations, analysis and problem-solving. OK, but how about System 2’s reliability? Well... We tend to overestimate ourselves about how much we understand about the world. Kahneman says about this: “We can be blind to the obvious, and we are also blind to our blindness”. Time for today's’ lessons.
Lessons for marketers
First, too many marketers try to appeal to rational aspects such as cost savings. This is ineffective, consumers don’t make fully reasoned decisions. According to Murray (2016), establishing an emotional connection between a brand and a person is much more important in order to create brand loyalty. Consumers are looking for a match between their own personality and a particular brand. The story behind a brand is more relevant than the offer itself. OK, but how important is brand loyalty, then? Well, think about this statistic: 5% increase in customer retention leads to an increase in profits of between 25 and 95% (Harvard Business School, 2000).
Also, research of the University of Columbia (2000) found consumers don’t purchase anything as their options are presented too broadly. Presenting consumers with too many different alternatives leads to choice stress. Concluding, try to focus on people’s intuitive thinking and limit the number of options to avoid choice stress.