Friday, August 08, 2014

a note on recognition heuristics and moving from party tricks to business results

Until recently we were unfamiliar with the German psychologist, Gerd Gigerenzer.

It turns out that Gigerenzer and Kahneman were at odds for many years.

This is despite that both researched and studied heuristics and came to about 95% of the same conclusions, however the principle point of conflict appeared to be; Gigerenzer believed in a kind of ‘expert intuition’, whereas Kahneman is more sceptical.

Whereas the Kahneman and Tversky school (ie much of the behavioural economics lobby) principally associate heuristics and biases with human error  (to be fair, in Thinking Fast and Slow DK does say that his view had softened over time, much System one activity can also be described as 'skill'), Gigerenzer assert that heuristics not necessarily cost the decision-maker and are often 'smart'.

These are the semantics that cause the big rifts in Academia. Heh.

What is initially startling about Gigerenzer's ‘Gut Feelings’ (we are reading this just now) is how much of his schtick Gladwell appropriated for ‘Blink’.

In 'Gut Feelings' Gigerenzer references H G Wells, who famously noted "If we want to have an educated citizenship in a modern technological society, we need to teach them three things: reading, writing, and statistical thinking."

To this day we teach reading and writing to children but not yet statistical thinking in any significant way.

Perhaps we won't get much better at avoiding certain cognitive slip-ups until this is addressed.

An example of a typical statistical error is given from the New Scientist magazine.

A Food inspector visited a restaurant in Salt Lake City famous for its quiches made from four fresh eggs. She told the owner that according to FDA research every fourth egg has salmonella bacteria, so the restaurant should only use three eggs in a quiche.


Anyway, Gigerenzer describes a 'smart heuristic' as a tool for making good decisions in an uncertain world, where one sometimes has to ignore information in order to make an optimal choice.

His principal gift to the advertising world is one such smart heuristic - it should be said that this one crops up less frequently than it's usefullness would indicate - the recognition heuristic.

In simple terms, this means that when faced with a choice between something familiar and something unfamiliar, people tend to opt for the former, and this choice is often the best choice.

In other words, it's usually sensible that people should place a higher value on something they recognise over an alternative that is less familiar.

Therefore recognition based heuristics help consumers choose which brands to buy in frequently purchased categories.

Another way to describe this is salience.
Salience in this context, being the propensity of a brand to come to mind in buying situations.

It seems simple but, and this is something you can try at home, when asked to name as many brands in a particular category as possible, people can rarely name more than three or four in that first instant.

After a few moments thought a few more can come to mind, but theres rarely that kind of reflection in a buying situation.

Though when read a list of brands in a given category then people will be 'aware' of a far larger number.

Therefore, unaided salience is an better predictor of the brands people will buy.

And a useful example of a recognition-based heuristic.

As Professor Sharp notes in 'How Brands Grow'; there are many brands that buyers could consider, if they had thought of them.

I've introduced the good Professor at this point for a specific purpose.

I attended the MSIX (Marketing Science Ideas Exchange) conference in Sydney last week.

A fuller review of this I intend to write shortly, but one of the stand out (salient) points was made by one of the speakers - a non-marketing person - Jon Williams of PwC who said that for behavioural economics to have an impact on business/marketing then 'we need to move from party tricks to business results'.

My sense is that is what Professor Sharp was alluding to in an article he published in Marketing Mag this week entitled 'Behavioural Economics is not the big story in marketing'.

Professor Sharp says:

'But what really worries me is that this infatuation with theatrical psychology lab experiments – that show participants in lab experiments can be nudged without knowing it – is bringing back a discredited theory of brand image of besotted/manipulated consumers'

Then goes on to describe recognition heuristics almost exactly.

'Yes, consumers use heuristics to make ‘good enough’, not perfect, decisions. But they use these heuristics because they work rather well. For example, the assumption that higher-priced items are better quality works pretty well because it’s largely true.

Then later adds.

....don’t forget that the main reason your sales aren’t what you’d like them to be is that your brand doesn’t have the mental and physical availability to produce the demand that you would like.'

Many months ago I read a piece by Mark Earls who also expressed some scepticism abut the ability of behavioural economics to paint the whole picture. At the time this didn't really register however there is a picture becoming clearer now that is pointing towards a more unified theory.

What Professor Sharp describes as 'mental availability' - or salience - is the same thing that Gigerenzer would describe as recognition. A major factor in recognition is the sense of popularity - and this is core to Mark Earls's thesis.

These factors combine to create demand.

Fulfilling demand, however, is heavily dependent on 'physical availability' and much of the so-called 'party tricks' of nudg-ery are perhaps best employed in that context, if only from the point of view that even if recognition is a principle driver we will tend to 'satisfice' right at the last second if one of the other couple of brands that are salient present themselves more easily.

Anyway, to round off we were delighted to discover the very first TV ad for the fledgeling VW Golf featuring The Munich Beefeaters Dixieland Band with one Gerd Gigerenzer on the steering wheel and banjo.

As an undergraduate Gigerenzer was a keen trad-jazz banjo player, playing in jazz bands at night in order to fund his university studies.

blog comments powered by Disqus