Behavioral Economics
It matters it really does
It’s roots and where they spread
As Larry Page former CEO of Google stated, most companies don’t succeed over time because they miss the future. Why does this mean you may ask? Well in the most simplistic way he is saying, businesses fail to adapt to the unseen. They are more focused on the now, rather than what could happen in the future. So lets take a deeper look.
Most “seasoned vets” meaning business owners pre-digital, rely on naive or self-interest ways. Meaning, they would rely more on the advertiser rather than the consumer. And isnt the consumer one of, if not the biggest factor in decision making? These “self-interest” ways are based off the theory of Classical Economics which is the assumption that humans act both consistently and rationally. So what are the pros and cons of this?
- Pros of Classical Economics- It is simplistic and its models show how humans should behave.
- Cons of Classical Economics- Quite often the predictions have not come true and people have not behaved as expected.
Though Classical Economics seemed to be easy and trusting, the fact that people do not act in they way we wish them to brought much concern to executives, economists, and data driven professionals. Such thought eventually led to economists taking more of a psychologic approach to the way we look at data. Thus the birth of Behavioral Economics.
Evolution of the next
A new and deeper understanding of our industry
Behavioral Economics is not in itself a grand theory of economics. Yet it exists as a theory that challenges common economics and the assumptions about how humans make everyday decisions. Now it is easy to see the parallels between both common and behavioral economics, but what makes behavioral the front runner is the fact that there is deeper thought that goes into how the economy works in conjunction with humans and their thoughts.
“Hundreds of experiments were conducted by behavioral economists to provide examples of situations where people didn’t behave as expected” — The 4 A’s
So does all this really matter? Well yes it really does. Advertising has evolved by including psychological insight to a hard rational model. Advertising and marketing has also evolved from insights available from real time interactions, emotions, and behaviours from the increase of people using social media (Aka Data and Data Analytics).
“Every Behavioral Economics example we read suggests to us something we can put into practice easily, practically, and effectively, from the time in which we get involved with it.” — The 4 A’s
Looking forward
How to adjust to the new
With all this being said, our challenge is not to dart amongst this theory, but embrace it fully and respectfully as an academic discipline. We have to be Diving Deep in Data and listening to all in order to make the best decisions. Lastly, we need to go back to the data that is already out and question it if we are to make a fundamental improvement in the way our industry thinks and acts.
Don’t forget to check out my article titled Diving Deep in Data (coming soon). Are you interested in learning more? Or want to schedule a time to chat? Feel free to follow and like on Medium and connect with me on Instagram, Twitter, and Snapchat @eyeofthegeiger or email at joshgeiger.home@gmail.com
