So who's taking the decisions round here? System 1 or System 2?

Behavioural economics has moved centre stage since the financial meltdown of 2007/8. It is the study of human judgement and decision-taking and how that influences behaviour. Behavioural economics is not a methodology: it is a theory base for understanding human behaviour.
Real decision-taking is often not rational or optimal, as classical economics asserts. At the heart of behavioural economics are cognitive biases or rules of thumb (‘heuristics’) that arise from fast, intuitive decisions – so called System 1 thinking rather than the more effortful, considered System 2 decisions. These Systems have implications across a whole range of areas but in this blog we will focus on how they influence purchasing behaviour.

Marketers need to consider behavioural economics when deciding whether their product or service needs primarily to target System 1 or System 2 decision taking. Effective branding can play into the hands of System 1 decisions with the reassurance of a well-known name, trust and habit. Marketing and packaging for a product bought through System 1 decisions would be bold, visual and emotive, with little factual detail. In order to play into System 2, marketing and packaging would need to have more factual detail, to support making a considered decision.

It is also important to consider that some decisions are a hybrid, e.g. starting in System 2, with serious effort and research intended, but then jumping to System 1 when the effort gets too much or emotions become engaged. This sort of behaviour is commonly seen in major purchases, e.g. mortgage buying. A home mover or first time buyer may genuinely intend to research their mortgage decision thoroughly, because they see it as a big and important decision, but then their attention is consumed by the effort of choosing and buying the home, so they take short cuts to buying the mortgage (e.g. using a mortgage adviser or defaulting to their main bank). On other occasions we may see something we really like and jump within seconds to a ‘want it’ mind set (System 1), which we then merely justify by back-filling on the rational elements (System 2).

Our awareness of System 1 decision-taking has grown enormously in recent years but at the same time IT has made it easier to make a rational System 2 decision. Websites such as Moneysupermarket or Trip Advisor take the labour out of identifying and evaluating alternatives, supporting a more considered choice than most individuals could achieve on their own.

We use behavioural economic concepts extensively when interpreting research findings. But how can we tailor our questionnaire approach to the style of decision taking that applies? A questionnaire for a System 2 decision would be longer to cater for multi-stage decisions with specific product / brand comparisons and a degree of rationality in final selection. A questionnaire for a System 1 decision would be shorter and more visual, with less emphasis on reasons for brand choice and more emphasis on feelings.

Determining the respondent’s prior involvement with the sector or product field, the extent of received advice from ‘experts’ or others, the time spent researching choices and whether they undertook any explicit comparison of alternatives can effectively reveal the System being used.

Scoring highly in at least one of these areas suggests more of a rational, System 2 decision. Scoring low on all of these suggests more of a System 1 (emotional) decision but we do need to take into account the extent of prior knowledge. Rapid decisions are not always standard System 1 decisions if the decision-taker has a high level of learned expertise within the product field. Understanding the context of the decision is therefore important, not just the moment of decision.

When we work behavioural economics into market research we reflect the science of how decisions are made, which can only make it more powerful.