Back to home page click here

HOW CONSUMERS AND CITIZENS

MAKE CHOICES

Contents


INTRODUCTION

Each of us makes thousands of decisions every day: what to wear, what to eat, whom to see, what work to do. We understand that we can only make so many decisions by taking many of them on an instinctive nature based on past practice and established preferences (what the author of "Blink" Michael Gladwell has called "thin-slicing"), but we like to think that our more important decisions are the subject of a rational and considered process.

Classical economics suggests that as a consumer we make choices by weighing price and quality of the product or service as offered by competing retailers or providers. Most political campaigning assumes that voters choose a candidate based on his or her record of service and how the policies espoused would impact on our material wellbeing.

But a growing body of evidence from the various social sciences suggests that we take many decisions less on rational grounds that on emotional ones, less through a conscious process and more on an unconscious basis. Although much of this decision-making is strictly speaking irrational, we can anticipate the processes so often that the academic Dan Ariely has called it being "predictably irritational" and the writer David Brooks has described humans as "the social animal".

HOW CONSUMERS MAKE CHOICES

In the economic sphere, behavioural economics teaches us to identify the following sorts of influence or bias:

Location

Supermarkets and department stores especially put a lot of thought into positioning items where consumers are most likely to buy them.

Examples:

Branding

Consumers are very attracted to brand goods even though there may well be options which are the same quality and even cheaper from other suppliers, partly because they are drawn to the familiar and partly because advertising has created some sort of subliminal image around the product.

Example:

Influence of others

The purchasing decisions made by others often act as a recommendation of how a consumer will decide, even if the decisions of others are not themselves necessarily rational.

Examples:

Irrational pricing

By taking a small amount off from a major pricing point, prices can appear lower than they actually are.

Example:

Limited attention

Consumers can focus on certain aspects of pricing and ignore (or play down) other elements of pricing.

Examples:

Anchoring

This involves persuading a consumer to think of one price in relation to another the anchor in ways which induce the consumer to opt for a particular price point.

Example:

Framing

This involves placing information in a particular 'frame' that influences how the information is perceived.

Example:

Free offers

When offered something for 'free', many consumers are emotionally engaged.

Example:

Loss aversion

Most people are more upset at losing a particular sum of money than they are excited at gaining the same cash amount of money.

Examples:

Altruism

Consumers do not always buy the product that is in their own self-interest but might consider the interests of others.

Examples:

Discounting of the future

We all tend to give more weight to present pleasure than future benefit or gain.

Examples:

The status quo bias or habit

Consumers often make the same choices as before rather than considering whether new information would suggest a new choice.

Examples:

Inertia

If a consumer is given a series of financial choices with no action being one of the options, many will choose to take no action.

Examples:

HOW CITIZENS MAKE DECISIONS

In the non-economic sphere, the sort of non-rational factors that influence people include the following:

Priming

This involves consciously providing information which unconsciously influences subsequent behaviour in a particular, intended direction.

Examples:

Framing

This involves placing information in a particular 'frame' that influences how the information is perceived.

Example:

Expectations

The mind contains all sorts of models or paradigms of what it expects to happen in certain circumstances which colour its expectations of what is actually happening.

Example:

Influence of others

If we know or think we know what choices others are going to make, we can easily be influenced, usually in the direction of making the same choice.

Examples:

Group think

There is a powerful tendency to agree with others in the group. This is most strongly the case if you are a member of a close-knit group of people where there is a strong sense of loyalty to the group, deference to an authority figure within the group, and a demonised view of those outside the group.

Examples:

The familiar

We like what we know and tend to opt for the familiar and comfortable.

Examples:

Recent experience

If we have had a recent experience or a friend has - or even if the experience was not one close at hand but prominent in the media, we are likely to give extra (and unreasonable) weight to that experience, especially if it is negative.

Examples:

Excessive optimism

People can be unrealistically optimistic even when the risks are high.

Examples:

Arousal

People think differently depending on their state of mind, so a whole range of emotions anger, fear, jealousy, happiness, sexual arousal - can influence their choice or decision.

Examples:

Altruism

Citizens do not always make decisions in their own self-interest but might consider the interests of others.

Examples:

Discounting of the future

We all tend to give more weight to present pleasure than future benefit or gain.

Examples:

The status quo bias or habit

There is a tendency to make the same decisions as we made before in the same circumstances.

Examples:

Inertia

If a credible option is to do nothing and the other options involve time or difficulty, it is so tempting to hesitate or procrastinate.

Examples:

CONCLUSION

It is important that we understand the processes and biases involved in making choices or decisions.

FURTHER READING

ROGER DARLINGTON

Last modified on 19 August 2011

If you would like to comment on this essay e-mail me


Back to home page click here