Why has behavioural science moved up the agenda so rapidly? There is a strong case to be made that it represents a structural change in the market.
We are now in an environment where the valuation of companies is increasingly based on intangible (non-physical) assets. Much of this is because of the way technology has transformed the modern company, which led Erik Brynjolfsson, director of the MIT Initiative on the Digital Economy to point out that “More and more important assets in the economy are composed of bits instead of atoms”.
Indeed, there is a new breed of company that are light on physical assets but heavy on data assets — Airbnb, Facebook and Netflix are obvious examples. These have all changed the terms of competition in their respective industries. But this is not limited to these types of ‘digital’ companies; it is estimated that some 70% of the value of a modern company is now derived from intangible assets.
The fact that technology is influencing company valuations reflects how technology is increasingly a platform for consumer behaviour. Of course, we know this – an increasing amount of our lives are played out on technology platforms whether this is through social media, engaging with a company’s customer service team, buying goods and services and so on. Value is generated via data, relationships, insights and activities of an organisation all mediated by technology.
It fundamentally changes the nature of the judgments and decisions that consumers are being asked to make. Consumers are now faced with an environment where decision making is much more complex and multifaceted. So perhaps consumers are less able to account for their decisions than they once were so we can no longer rely, to such a significant degree, on their explicit perceptions of the issues.
How is the market changing?
Ways in which this plays out includes the following:
Category collapse: In the past, there were quite clear delineations in the jobs delivered by different industry sectors – if we needed a financial service we would use a retail bank. If we wanted groceries, we would go to a supermarket. Today, however, we are seeing the collapse of traditional categories as digital players move into adjacent categories. So, we are seeing Uber move from offering taxi journeys into food delivery services. Traditional consumer understanding of ‘brand stretch’ is being challenged – who knows what is appropriate for any company to offer anymore?
Liquid expectations: Technology disruption means that new expectations of standards for product and service experience are being created by brands in completely different categories. So, my experience of the slickness of using Uber will influence my expectations of interactions with an online bank. The ease with which I use my iPhone will bleed into my experience when trying to book an appointment to get a new washing machine delivered. So our expectations of what our experiences should be are, to use the term coined by experience agency Fjord, increasingly ‘liquid’ across categories and therefore much harder to identify and track.
Experiences not things: We are seeing a fundamental shift from product ownership to access – so in a sense, we are moving to the ‘servitization’ of many categories. This is happening across all categories from music (e.g. Spotify) and snacking (e.g. Hotel Chocolate) to accommodation (e.g. Airbnb) and travel (e.g. Uber). So in the past consumers were used to much more product-based transactions which were easier to compare and evaluate than the largely experiential propositions that dominate many markets.
Channel proliferation: In the past brand communication would be broadcast one-way mass communication such as TV advertising. Today brands are communicating through a wide range of technology platforms, so consumers are seeing a wide range of messages from a large number of brands. And as the costs of advertising decline, it is possible for a much wider range of brands to communicate with consumers. In this environment, it is harder for any brand to achieve ‘cut through’ and to drive up mental availability among target consumers. From the consumer perspective, there is greater potential for confusion about brands and messages.
Personalisation: As brands hold ever more information on consumers, so there is an expectation that the customer experience will be increasingly personalised using this data. This applies to all parts of the customer journey from advertising to proposition execution and customer services. While personalisation is clearly of value for consumers it can also be increasingly difficult for them to compare propositions or even understand the value of personalised services versus something more standardised.
So what does this mean for market research?
We have gone from a world of relative stability and certainty where changes were broadly incremental and understood to one which is uncertain, where change can be sudden and unexpected and innovation is disruptive rather than incremental.
In this environment, it is entirely understandable that consumers are less likely to determine what they want or don’t want, what they are likely to buy or not, how they feel about new forms of customer experience and so on. And we know that if consumers are trying to make decisions under uncertainty then they will typically look at the information in front of them (using environmental cues) and make decisions based on mental shortcuts.
This means that we must be less reliant on consumers’ self-reports in the form of surveys and qualitative work. These are still important – essential in fact – but we will inevitably see a shift towards the measurement of observable behaviour (or strong proxies of these) and then making sense of these behaviours through the use of the extensive academic /practitioner body of knowledge.
The nature of the consumer decision has effectively become more ‘intangible’. In the same way, we are seeing the market move from tangible products to intangible experiences so we are seeing a comparable move in consumer decision making from something reflective and considered to something more intuitive and nonconscious.
Of course, this makes the task of the consumer research much more difficult. Market research has had considerable success in the measurement of conscious, explicit determinants of behaviour. It has also had some success in deriving insight into ways we can understand less conscious, implicit drivers of behaviour but this has never been the main focus of the discipline.
What is now called for is behavioural science within market research to measure behaviour, drive insights into the processes underlying that behaviour and design (and indeed test) the means of then changing that behaviour towards desired outcomes.
By Colin Strong