There are Free Lunches Statement of Intentions

There are Free Lunches: Behavioral Clues to Live Happy in the Economic World is a blog that intends to present updated and relevant information about the "hidden" and only recently uncovered dimensions of the economic science: the behavioral factors. With this blog we intend to promote in Europe and in the rest of the World, the top research articles and perspectives on behavioral economics, decision making, consumer behavior, and general behavioral science. We aim to be followed by journalists, academics, managers, civil servants, and everyone who wishes to improve their daily interaction with the economic world and consequently, their lives' happiness.

Tuesday, 15 May 2012

O2 #3 Behavioral economics: what it is and three ways marketers can use it (via Quirk's)

Behavioral economics has recently taken marketing by storm, showing that consumer decisions and behavior can be quite curious, even fascinatingly irrational.
Research results like the following have impelled the behavioral economics movement:
When given a choice, 73 percent of a sample of college students chose a Lindt Truffle for $0.15 versus a Hershey's Kiss for $0.01. However, 69 percent chose the Hershey's Kiss for free versus the Lindt Truffle for $0.14. In each case, the students stood to save $0.14 by choosing the Hershey's Kiss but the Hershey's Kiss was not favored until it was completely free.
In a recent shopper behavior study, a significantly higher percentage of shoppers chose a bundled food offering that included a standard snack item and a decadent condiment for $2.00 off the decadent condiment versus $2.00 off the combination as a whole.
In each of these studies, consumers' decisions were inconsistent with what rational economic theory would predict. Rational economic theory - founded in maximizing expected utility - would have predicted that the percentage of people buying each option would be equal because the expected utility of each option was the same: a savings of the same amount of money.
But in these studies this didn't happen. Why not? Behavioral economics.
Read here about how marketing can use the insights of BE: BE&Marketing

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