Welcome visitor you can log in or create an account

800.275.2827

Consumer Insights. Market Innovation.

blog-page
Subscribe to this list via RSS Blog posts tagged in Consumer Behavior

new years resolution market researchWe had a notion here at TRC that by the middle of March most New Year’s Resolutions would have been tossed by the wayside, either in favor of giving up something meaningful for Lent, or the simple acknowledgement that this just isn’t the year to lose 25 pounds. Would folks who made a resolution at the beginning of the year still be keeping that resolution 3 months later?

We kicked around a few hypotheses, and then went about testing them using our online panel of consumers:

  • Younger consumers would be more likely to make resolutions than older ones (we figured they hadn’t become jaded by their resolutions not working out over time)
  •  People would be more focused on issues relating to their health (losing weight, exercising more) than other types of resolutions.
  • Most folks who made a resolution would have dropped it by the 3-month mark

So how did our predictions fare?

daniel-kahneman-thinking-fast-slowIn his opus Thinking, Fast & Slow, Nobel winner Daniel Kahneman (click here for previous post) relates a story from early in his career when he was leading a team to develop a curriculum and write a textbook on judgment and decision-making in high schools. He had assembled a group of experts and after working diligently for a year they had completed an outline of the syllabus and written two chapters. One fine day when discussing procedures for estimating uncertain quantities, it occurred to him that he should get an estimate from everyone on how long he thought this whole project would take. Being the clever psychologist that he was, rather than ask the group to guess publicly, he asked each person to make a confidential prediction. The mean was about two years and the range was about half a year on either side. In other words, the group was very consistent in its prediction.  

Then Kahneman had the idea of asking the curriculum expert in the group, Seymour Fox, for his specific opinion. Only this time he asked Seymour to think about other teams like theirs and asked how long it had taken them to finish. After a long silence the astonishing answer came out. Nearly half the groups never even finished the project. Among those who did the average time taken was about seven years! Seymour Fox also estimated that this group was slightly below average in terms of the skill set it possessed compared to the other groups. The killer, of course, was how long it actually took Kahneman’s group to complete their project. Eight years!

Effectively what had happened was that a group of experts in judgment and decision-making had somehow fooled themselves into thinking way too optimistically about the future and had made predictions based on it. This included the expert who in spite of having the best information somehow ignored that in favor of an optimism bias. As Kahneman graciously adds, it also included a leader who did not pull the plug on a project that would likely take another six years and was a coin toss as to whether it would even be completed.  

The biggest lesson Kahneman draws from this episode is that there are two approaches to forecasting which he labels the inside view and the outside view. The inside view is when we focus on the specifics of our own situation, try to form a coherent story and somehow convince ourselves that given the “special” nature of our situation success is just around the corner. In some ways this probably explains the enormously high failure rates of new products and the only slightly lower failure rates of new small businesses. The outside view is one that takes into account the general failure rate of the reference class of objects. Assuming the reference class is properly chosen, the outside view should provide a nice ballpark of where the estimate is going to be. In practice it is better to start there and adjust it using the special knowledge of the inside view and thus avoid embarrassing predictions. Not following this kind of procedure is why we routinely read about say, large transportation projects often running over by years and into several times the original projected cost. It is also why kitchen renovations routinely cost twice the initial estimate for the average household.

So are there specific lessons for market researchers? Of course. One is with the likelihood of success of any kind of new technological advance (mobile, neuro, text analytics, social media monitoring, whatever). Without understanding the reference information for how such new technologies can ultimately fare, we can too easily get caught up in the fanciful nature of a specific technology and make prognostications not just about success, but also about time frames within which such things can come true. On the flip side the death of older technologies can be too gleefully forecast (“Surveys will die in a year!”) because of the glamour of newer techniques if the reference cases are not carefully analyzed.

...

buffet sign panel studyOn a trip to Las Vegas in November 2011 I was twice presented with an option to move to the head of the line – for a price. I could take advantage of “early check-in” by paying $25. And I could get my buffet breakfast right away without waiting in line, again for a small fee. The buffet sign struck me as peculiar, since the 4 people ahead of me didn’t really constitute much of a “line”. I snapped a photo.

The concept of express fees is nothing new – Universal Florida, for example, has offered its ExpressSM Plus Pass for years, affording visitors to skip the regular lines, and as a result experience more attractions during their visit. But the express fee is spreading beyond the domain of the theme park.  You can even pay to bypass the long security lines at the airport now, if you’re so inclined.

This got me thinking...who’s in such a rush?  And, even more important, who’s willing to fork over some cash so they won’t waste any more time waiting? We put that question to the test with a small web survey among members of TRC’s online panel.

Among the general population of adults, paying for speedy service is a somewhat polarizing notion. While about half of our survey takers are neutral on the concept, 1/3 are pro and 1/5 are anti. We asked about specific situations as well. Paying for early hotel check-in has nearly twice as many fans (23%) as paying for premium seating at a movie (12%) or paying to jump the line at a warehouse store (13%).

The Nobel Prize winner and the intellectual godfather of behavioral economics, Daniel Kahneman, has summarized a lifetime of research in his recent book Thinking, Fast & Slow. In the next few blog posts I will be drawing upon some concepts that he espouses and link them up to research to see what practitioners can take away from his four decades of work.

This post goes directly to the title of the work; fast and slow thinking. This is the foundation of his work. He and his great collaborator Amos Tversky, (who passed away and therefore could not receive the Nobel) see human thinking in two forms that they call System 1 and System 2. More aptly they could be called “automatic” and “effortful” systems, but Fast and Slow is a good shorthand description. According to Kahneman’s description,

System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control

System 2 allocates attention to the effortful mental activities that demand it, including complex computations”

Recent comment in this post - Show all comments
  • Irfan kazi
    Irfan kazi says #
    Thank you it was insightful..

what am i supposed to doYes, it is a rather important issue and can be approached in a variety of ways. My purpose with this post is not to provide a comprehensive answer, but look at one specific solution based on what I recently read. The book is Thinking, Fast and Slow, the Nobel Prize winner Daniel Kahneman's excellent summary of a lifetime of research. He is perhaps the most accomplished psychologist around and could (among other things) justifiably be called the intellectual godfather of behavioral economics. It is always worth listening to what he says and in this particular case, it seems to me there is a nugget that applies to making quantitative research more actionable.

talking_webPrior to my current tour at TRC I was a partner at a small data mining boutique that had a simple objective: support the sales and marketing goals of our clients by helping them stem attrition. While the goal may have been simple, how we set out to do this was not. See, we took upwards of 30 months of time-series data on all of their customers and applied some mind-numbing statistical techniques that identified patterns in the data that preceded an eventual behavior. In most cases that behavior was a customer terminating their relationship with our client. Once our system identified the patterns that preceded attrition, we would then continue to feed it customer data each month and it would dutifully output a list of customers that were likely candidates to attrite. In addition, for each customer on this golden list we provided the prediction "trigger", or the thing that they did that was responsible for the system flagging them as a high-risk customer.

shopping cart image smallI was shopping for groceries with my 12-year old son the other day -a quick trip to the store that qualified us for the express check-out line. On the way out he said to me:

"It must be more fun to work the express line, because you can really learn things about people."

Well spoken young researcher.

Look into full shopping carts and you'll see a lot of the same things - milk; eggs; orange juice; the ever-popular banana. With our shared national culture, neighborhoods built around people from similar socio-economic backgrounds, and good old fashioned peer pressure we're all alike in many ways. Except for where we're not, and that (to paraphrase my son) is the fun part.

If you had the time to dig through a person's cart (and if she LET you look through her cart) you'd come...

The Optimism Discount

Posted by on in Consumer Behavior

half_full smallA recent Time Magazine article talks about the Optimism Bias -- the phenomenon of people being eternally optimistic about the future. This can be shown in various ways including how people wildly overestimate things like personal life expectancy, marriage solvency, career prospects, etc. In this context "bias" doesn't mean something inherently bad. There is good reason to have an Optimism Bias as it leads to concrete positive outcomes like better health and longer life, not to mention inspiring us and making life generally better.

Tagged in: Consumer Behavior

People Don't Do the Math

Posted by on in Miscellaneous

I was on a call recently working through the details of a complex discrete-choice task. Specifically we were debating how best to apply price prohibitions - restrictions on the design that would prevent certain "monthly" and "one-time" prices from ever appearing together.

Rest assured our thinking was all very logical. We needed to put controls in place because who in their right mind would ever choose an option where a low monthly rate, coupled with a contract, quickly added up to more out of pocket costs than would accrue by skipping the contract and paying a (slightly) higher up-front fee. That's when the client's client chimed in:

"People don't do the math," said the man who spends little to none of his time conducting surveys.

Recent comment in this post - Show all comments
  • Ed Olesky
    Ed Olesky says #
    I've always just simply relied on including whatever prices simulate the actual prices consumers will see. Whether the price opti

Air Travel Trade-offs

Posted by on in Market Research

Doesn’t it seem like air travel has become more of a hassle recently compared to a few years (or a decade) back? Even leaving aside stricter security after 9/11 there appears to be more complaints about air travel these days. How much truth is there in these complaints? Let’s look at the possibilities, namely competition among carriers, new TSA rules and weather.

 

Tagged in: Consumer Behavior

During times of upheaval do people naturally choose what is familiar or don’t they? The notion of “comfort food” seems to imply that when faced with trying situations people take comfort in certain old favorites that, well, comfort them. This is conventional wisdom and as we know researchers like to question said wisdom. That is what Stacy Wood set out to do and her findings offer interesting implications for marketers.

Tagged in: Consumer Behavior Food

Mindful and Heartfelt Choices

Posted by on in Rajan Sambandam

How do you make choices in your life? Even simple ones like chocolate cake or fruit salad for a snack? Are you completely rational about the process, calculating the costs and benefits properly before choosing (also known as the cognitive approach)? Or are you more likely to go by feel, allowing your emotions to guide the choice (the affective approach)? Traditionally, researchers have favored the rational model, but more recently the emotional side has been getting more attention. Regular folks may even argue that they use both approaches depending on the situation, even though they may not know which one predominates without their knowledge. But can your decision-making process, and thus the choices you make, be influenced by external conditions to the extent that you will switch from one mode to another? That was the question that drove two researchers in their quest to understand the process of making choices.

 

Want to know more?

Give us a few details so we can discuss possible solutions.

Please provide your Name.
Please provide a valid Email.
Please provide your Phone.
Please provide your Comments.
Enter code below : Enter code below :
Please Enter Correct Captcha code
Our Phone Number is 1-800-275-2827
 Find TRC on facebook  Follow us on twitter  Find TRC on LinkedIn

Our Clients