I frequently talk about how behavioral economics provides an important perspective we can use to obtain more accurate results when we conduct market research.  For marketers, one of the most important mechanisms of behavioral economics is called “frame of reference,” which refers to the context in which people make choices.  We commonly ask research participants how likely they would be to buy an item; behavioral economics shows us the answer to that question varies widely based on the other choices available.

But how do people make the choice among the options available to them?  I recently attended a great presentation given by a colleague of mine, Tom Rich, at the Qualitative Research Consultants Association annual conference in New Orleans.  He talked about how we make trade-offs to arrive at a decision.  We do it all the time: for example, is it worth paying an extra $50 for a non-stop flight or should I save the money and make the stop?  Tom says there are five different factors people consider when they make trade-offs:

• Time
• Energy (e.g., the hassle involved)
• Money
• Performance (quality)
• Self-esteem

When we conduct market research, we can ask questions to find out which of the above factors play a role in a given decision and then discuss how the different choices are perceived with regard to the relevant factors.

For example, in buying a car, all five factors may come into play, but especially money, performance and self-esteem.  Is it worth paying more for a prestigious car?  We may persuade ourselves we’re really paying extra for the vehicle’s performance, rather than admit that driving that car adds to our self-esteem!  Tom recommends uncovering the hierarchy of factors: determine which are the most important for a given decision and focus on how people make trade-offs with regard to those factors.  We may also be able to define different segments based on the different ways that people make trade-offs for a specific decision.

Want to find out how your customers make trade-offs?  Give me a call at 818-752-7210 or email info at bureauwest.com.

Source: “Leave the Gun. Take the Cannoli. Consumer Trade-Off Analysis,” QRCA 2014