People can be pretty bad at making decisions, and it's very costly to train them to be better decision makers - it just takes too much time and energy. Instead, we can use Behavioral Economics to change the environment in which people make decisions, and influence that environment in favor of better decisions - and helps people improve their outcomes, too.
Behavioral Economics is a science that combines the findings of psychology, economics and decision psychology. This discipline mix makes it possible to gain a more accurate and robust understanding of how people make decisions.
4 Facts about Behavioral Economics
1. Behavioral economics deals with the behavior of people in economic contexts.
2. Using diagnosed behavioral patterns, it can explain why people behave apparently irrationally in certain situations - and as a result can predict accurately which behavior will occur in the future.
3. Because of this fact the discipline has already received three Nobel Prizes
(Daniel Kahneman (& Amos Tversky) (2002), Richard Thaler (2017) and Esther Duflo/Michael Kremer (2019)
4. With behavioral effects and nudges it's a tool which can effectively be used as a design principle when it comes to customer centricity.
Closest thing to reality.
The focus is on what is actually "done" - and not on what we think is best. With a behavioral focus, only those questions are asked which the respondent can actually answer. As a result: we get simple, authentic and robust responses.
Effective - By actually recognizing what triggers behavioral changes.
For something to change in your favor, it's not enough to change your customer's opinion / attitude about you. They must instead change their actual behavior, for example by actually reaching for your product next time, and not opting for the competitor (like they did when they last went shopping). Find out when and how a change in behavior can actually be achieved. To find this out, experiments and observations play an important role, as well as surveys.
Focus on the essentials
Opinions and attitudes result in an ocean of knowledge. How do you know where you really need to start to advance your business? By focusing on human behavior, it becomes clearer what things you need to focus on to move forward.
With behavioral economics you create KPIs that monitor key customer behavior. You can react early to changes and only invest in those measures that will bring about a change in current customer behavior. This increases the ROI of customer research and creates an ideal link between customer and business goals.