Rory Sutherland, vice-chairman of Ogilvy Group UK, writing in Campaign, makes an argument for behavioural economics – a decades-old, yet newly fashionable, field of study.
Why is marketing – and, more importantly, the vital study of human behaviour – so little celebrated in the wider world of business? And why have marketers and agencies not fought back against a left-brained business culture, which seems to place human understanding so low on its list of priorities?
Perhaps it’s because we haven’t had much to fight back with.
I mean, frankly, you can’t really answer a spreadsheet with a mood-board.
Actually, I think you can answer a spreadsheet with a mood-board, but I digress.
Richard Huntington, for one, is on board with behavioural economics. “As the study of why people rarely act consistently and rationally it is the natural academic bed-fellow of the business we are all in – turning human understanding into commercial value.”
According to Wikipedia, there are three main themes in behavioural finance and economics:
- Heuristics: People often make decisions based on approximate rules of thumb, not strictly rational analysis.
- Framing: The way a problem or decision is presented to the decision maker will affect their action.
- Market inefficiencies: There are explanations for observed market outcomes that are contrary to rational expectations and market efficiency. These include mis-pricings, non-rational decision making, and return anomalies.
In other words, behavioural economics is a great way to sound smart while saying people are not rational; thus, we must appeal to their emotional impulses. I hope I got that right. Last time I was in an economics class, I was hung over and deeply confused by all the graphs.
Let’s watch a video, shall we?
