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07.19.2002

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The Science Behind Irrationality

As I and others in The Hartman Group have hinted in earlier discussions (HartBeat 6, HartBeat 11 and HartBeat 12) within this forum, even though much of the contemporary consumer and marketing literature rests upon a view of the consumer as a rational, free-thinking individual, an ever-expanding body of evidence suggests most real-world behavior is anything but rational. And it's likewise our belief that this disconnect between theory (consumers as perfect) and practice (consumers as woefully imperfect) likely explains many of the shortcomings associated with current marketing perspectives.

So rather than continuing to "spin our wheels" in a vein attempt at portraying ourselves as something we are not ("all wise" and "all knowing"), why not suck up our collective pride and meet the enemy face to face? That is, since most of us readily admit that humans are imperfect, why not look to see if there are identifiable forces causing us to make mistakes in similar patterns and similar directions? From a marketing perspective, wouldn't it be darned interesting to know, for example, any potential scientific basis underlying our errors in perception and judgment?

To cite but one now infamous example, most of us are guilty in believing in the "law of small numbers." Even though we all generally agree that the odds of a flipped coin ending up "heads" is about .5, most of us encountering three straight "tails" on three successive flips would place the odds of the next flip coming up "heads" at much higher than .5, probably on the order of .7 or .8. Also know as the gambler's fallacy, this lapse in good judgment emanates from our tendency to exaggerate the degree to which a small sample (4 coin flips) estimates the population from which it is drawn (infinite coin flips). And as trivial as this error may seem to you or I, casino operators in Las Vegas depend on it quite heavily to fill their coffers.

On the more cutting edge front, a number of researchers are now taking a closer look at the cognitive limits to our ability to properly perceive pain and pleasure. These researchers are busy immersing human subjects in 39 degree water (supposedly quite painful!) in a variety of settings and durations and then asking said subjects to evaluate their relative levels of pain. Contrary to standard economic/business thinking, which assumes that individuals evaluate painful/pleasurable experiences (a nice day at Disneyland, a horrible movie, etc.) by "averaging out" their relative levels of pain/pleasure across the duration of the experience, these researchers are finding that humans look toward two primary measures (the level of pain/pleasure at the end of the experience and the relative change in pain/pleasure across the second half of the experience) in casting their evaluations. And while it may not be obvious at first glance, from a retail and marketing perspective these implications are really quite startling.

For example, if it is the level of pain/pleasure at the end of the experience that counts most, retailers may wish to seriously consider reengineering the "exit experience." Wal-Mart might be advised to move their infamous "greeters" to the exits. Similarly, big-box retailers such as Costco and Sam's may want to rethink the positioning of the "receipt cops," who hover conspicuously near the exits. Likewise, if consumers are, indeed, more sensitive to changes in pain/pleasure relative to an experienced standard, those retailers in the enviable position of commanding the highest price premiums (presumably by offering the best mix of products, services and experiences) may have the most to lose. Put another way, a retailer offering consistently average products and experiences might be looked upon more favorably by consumers than one which was originally far superior but had recently slipped -- even if it's current level was still superior to the "average" retailer.

Of course, these brief examples only hint at the enormous possibilities to come from what is a most exciting and (more or less) unprecedented development in the arena of human/consumer research. Namely, the decision to quit studying humans "as they should be" and, instead, look more closely at humans "as they really are."

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