description

What does “Behavioral Economics” mean, and why does it matter?

All exchange, even economic exchange, is behavior.

BECG's interest and expertise lie in an emerging and as-yet under-populated field known as applied economic psychology or applied behavioral economics. In our work, we bring an abiding interest in understanding what makes people do the things they do, together with a track record of devising creative, practical solutions that honor the past, engage the present, and invite the future. In our experience, this is a powerful and startlingly effective combination.

Our underlying premise is that economic behavior is a subset of human behavior, not a separate arena. This means that if we want to understand and/or influence behavior in the marketplace, we must start with a basic grasp of the rules that govern human behavior.

While many give lip service to “people issues,” most business decisions are still made on the assumption that economic behavior is primarily rational. Yet the reality is that most important decisions (economic and otherwise) rely as much on emotion as they do on logic.

The bad news in this is that the role of emotion in economic decisions is hard to learn, difficult to document, and even harder to quantify. The good news is that there exists a vast body of information about how to identify, quantify, and predict patterns in human behavior. Better yet, this information can serve as a powerful source of competitive advantage when applied in the marketplace--ethically, consistently, and with creativity.

Why it makes sense to assume nothing when measuring peoples' attitudes

Z-score histogram-level of agreement with: “Better marketing will make a difference in the markets we currently serve.”

When we asked top managers of a publishing company whether marketing was important, all said it was. But when we asked them if it would make a difference in existing markets, we found sharp disagreement. As it turns out, the company's previous marketing efforts had been stymied by this rift.