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Behavioral Economics and Motivation Research: Good Companions

Behavioral economics and motivation research: Equations on a chalkboard

 

Behavioral economics is “economics with strong injections of good psychology.”

– Richard H. Thaler, 2017 Nobel Prize in Economics winner and co-author, with Cass R. Sunstein, of Nudge: Improving Decisions and Health, Wealth and Happiness

 

An old cartoon shows a serious-looking economist in front of an equation-covered blackboard. His speech bubble says, “Well, that may work in practice but will it work in theory?”

Behavioral economics introduced a beneficial dose of practicality to the economics profession by emphasizing the non-rational elements of decision-making. This was a good thing. Anyone with a spouse or a child, or who has been an advisor of any kind, would agree that not all human decisions are rational. We might rely on our gut instincts, or be influenced by our gratitude, guilt, anger or joy.

Behavioral economics and motivation research: Trying to understand decision-making without context can be like rolling dice

Trying to understand decision-making without knowing the context can be like rolling dice.

 

The Connections Between Behavioral Economics and Motivation Research

The non-rational element in decision-making is one of several connections between behavioral economics and our Motivation Research approach. Both approaches also treat context as a critical force affecting the decisions people make. Richard Thaler, whose Nobel Prize put a spotlight on behavioral economics, tells the story of someone offering to bring a cold beer to a beach party. The beach bathers are willing to pay one price for beer picked up at a convenience store and a higher price if it comes from a nearby upscale hotel. Same beer, different context.

Behavioral economics and motivation research: Same beer on the beach, two different contexts

We completed a study using our Motivation Research approach that was in sync with Thaler’s behavioral economics narrative when we looked at convenience-store beer-buying behavior through the lens of context. We found that the consumers’ choice of where to buy depended on the beer-drinking occasion in addition to many small moments leading up to the purchase. For example, driving by a convenience store led to anticipation. Planning a quick stop by a buddy’s house with a six-pack was a convenience-store-relevant drinking occasion. In all instances, the context both before and after the purchase influenced the decision — and drove the action.

 

The Difference Between Behavioral Economics and Motivation Research

Behavioral economics is insightful when used to frame choices to tap specific decision-making biases: framing, anchoring, feedback, salience, inertia and so forth. These structural patterns are mighty helpful. However, they don’t apply to all decisions. The application of any given tool to a specific decision requires insight on the nature of that specific decision. Motivation Research is particularly helpful at this point. It plots both the tangible and intangible emotional elements that influence specific choices, and illustrates why they do so.

Only if we understand why a behavior occurs can we create generalizable knowledge, the goal of science.

– David Gal, Professor Marketing, University of Illinois, Chicago in his op-ed for The New York Times Why is Behavioral Economics So Popular?”

 

Behavioral economics and Motivation Research: Understanding the context surrounding decision-making
 

Why Behavioral Economics and Motivation Research Are Good Companions

The explosion in the availability and application of Big Data in tracking behaviors has led some to assume that they get enough information from a steady stream of behavioral data to make their marketing decisions. But the smart marketers we work with in financial, health, education and other areas of fundamental life decisions think otherwise. They realize that they create better programs when they gain sharper insights on why people make the choices they do in specific contexts. This is the essential power of Motivation Research — and why it’s such a good companion to behavioral economics.

 

Further Reading on Behavioral Economics

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