The psychology behind consumer behaviour

Hi everyone, welcome back to my blog! For this entry, I have decided to write about what I aim to study at university, consumer behaviour within economics, and the psychology behind it. Therefore, I am taking both Economics and Psychology A level to integrate the two as I further my studies. 

One quite infamous book looking into consumer behaviour is 'Nudge' by Richard H. Thaler, which I have begun to read to extend my wider reading and look more into my interests. In the introduction, Thaler proposes the idea that external factors affect our everyday choices as opposed to humans being in complete control of their choices. Each of our decisions is affected by slight 'nudges' that something/someone imposes. All of us make poor judgments daily which can be due to emotions, cognitive flaws, and lack of information. Daniel Kahneman attempts to simplify the reason that humans make bad decisions into two cognitive systems; Reflective and Automatic thinking. Reflective thinking refers to the slow, thoughtful, and effortful approach to thinking which can be when learning a new skill or solving the more complex problems one faces in life. However, once the skill is learned you switch to automatic thinking. This is fast, effortless thinking. It becomes naturally part of our daily actions due to bias, memories, or information we possess. For example, eating breakfast each day uses automatic thinking. This method of thinking allows people to make split-second decisions, but also bad decisions.

Nudge introduces 4 key 'nudges'; anchoring, availability, repetition, and status quo. 

Anchoring:

This is where you associate decisions with specific facts or anchors. These can be beneficial for solving problems however they can cause issues within decision making. For example, you automatically assume that a bigger country geographically will have a higher population than a smaller one, however it's not the case. For example, Australia has a large geographic area but is not as populated as Japan which has a smaller geographic area.

Availability

This is like a mental shortcut where people rely on information that quickly comes to mind when making decisions, rather than thoroughly considering all the options. This can be used to influence consumer behaviour by making certain options or information more readily available or accessible to influence decision-making. For example, if a government wants to encourage healthier eating habits, they might use this nudge. They may place healthier food options at eye level in grocery stores or make nutritional information more prominent. In this case, the availability of healthier options and information is increased, making individuals more likely to choose them based on the availability heuristic.

Repetition

This is where people will make decisions based on previous choices they have made or experiences they have had. Consumers can be influenced by repeatedly presenting a specific cue, reminder, or message to influence behavior over time. The idea is that by encountering the same nudge multiple times, individuals are more likely to notice it, remember it, and eventually act on it. For example, a fitness app may encourage you to take a short walk every day. If the app sends you daily reminders or nudges to go for a walk, it's using repetition to gently influence your behavior. The more you see the reminder, the more likely you might be to go for that walk. It's a way of nudging you in a certain direction by making the suggestion more familiar and noticeable over time.

Status quo

Status quo refers to making a decision and failing to take action to avert the consequences of it later. It is also called the doing nothing or default bias. This nudge affects people who are too lazy or busy to choose at a particular time. For example, if you sign up for a free trial of a streaming service but forget to cancel it before it converts into a paid subscription. As a result, your credit card gets billed for the full subscription automatically. 

That's all for today! I will likely dive further into this topic in future entries as I read and research more about it as I think it's a really interesting concept.

Hope you enjoyed and please check out my other entries if you haven't done so already :).