Behavioral Economics + DSM Program Marketing = Improved Outcomes

Posted by Danielle Marquis, Esq. on February 27, 2018

A large amount of research in recent years shows that consumers make most of their decisions in life unconsciously. Yet in market research, we continuously ask people why they do what they do. A reporter once asked Steve Jobs how much market research went into development of the iPod. His response? "None. It isn't the consumers job to know what they want."


As marketers, we need to go beyond asking "why" and begin asking "how."

  • How do our minds process information?
  • How do our minds structure our experience?
  • How do our minds form (often unconscious) beliefs and motivations that drive behavior?

Behavioral economics, a field of study that blends psychology, neuroscience and microeconomic insights to predict human behavior, helps us understand how consumers behave economically, in real time. According to the pioneer of behavioral economics, Nobel Memorial Prize in Economic Sciences' winner Richard Thaler, "The primary reason for adding humans to economic theories is to improve the accuracy of the predictions made with those theories, but behavioral economics is also more interesting and more fun than regular economics. It is the un-dismal science."

Behavioral Economics Insights for Marketers

Behavioral economics research often uncovers hidden biases and the role emotions plan in consumer judgments, such as placing more value on products you own versus those you do not. Might a customer value the incandescent light bulbs they already have in their cupboard more than the low-cost LEDs available via their utility's retail buy-down program? Despite the teachings of pure economic theory, we know from behavioral economics research that consumers make decisions all the time that are a departure from purely rational choice.

As marketers, we have the potential to use these insights to create change in future behavior. While it is important to consult best practices, we must be sure not to follow them blindly. Especially if they're more generic in nature, but even if they are just from another similar program. Consumer response can differ across different program types and tactics for a variety of reasons market research and best practices will not help us identify. Prototypes and tests can both be used to validate best practices and hypotheses about customer behavior. Both help us rapidly validate learning and improve our marketing outreach by creating our own tactic- and program-specific best practices.

Psychologists tell us that in order to learn from experience, frequent practice and immediate feedback are required. The combination helps us develop brands and campaigns that appeal both rationally and emotionally, ultimately yielding insights that help us exert influence in the market.

A disciplined approach that incorporates behavioral economic theory into a culture of rapid prototyping and testing can fill an organizational need. Marketers with the ability to induce change can be appealing to management who value action and are skeptical of insights and research that don't necessarily lead to action. When you can test a specific hypothesis or best practice, then find evidence to support it, there is a strong case for your team's ability to achieve a stated goal. And that can help secure budget and resources for the endeavor. This approach can help a marketing department realize change.

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