white paper Is Behavioural Economics a Game Changer in Hospitality Marketing
uch has been written, and said, lately about the impact of behavioral economics on marketing. Some pay no attention to it, some fear it and some adapt it to their own particular cause. But, in reality, does behavioral economics really change anything?
First letâ€™s look at what "it" is. Behavioral Economics (BE to the enlightened) is a different approach to economic theory. In it's simplest interpretation, BE comes from the proposition that people do not behave in rational ways, as opposed to more traditional thinking which, following on the teachings of the late great Adam Smith, believes that people do indeed behave rationally to further their own best interests. BE is a mashup of psychology and economics, and as a discipline seeks to explain why individuals and therefore societies do what they do.
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For instance: if we act rationally in our own best economic interest, explain the following: the price of gas in Toronto is $1.239 at my local station, but I hear on TorontoGasPrices.com (which I follow religiously), that I can fill up for $1.1239 at a station approximately 3 minutes away from my regular station. This is a great deal and I enthusiastically drive 3 minutes out of my way to save 10 cents/litre or a total of $4.50 cents. On the other hand, if Saul Korman at Korry's Clothiers for Gen-
tlemen were to advertise a $4.50 saving on a $700 suit, I would think he is crazy and not be in any way motivated to go out of my way to buy that suit. And yet, in both cases I would be saving the same amount. Rationally they are the same. But they would certainly not have the same effect on sales. There are many more examples of irrational behaviour, and there should be no need for an entire academic discipline to point them out. We can figure them out for ourselves. Behavioral Economics is not so much dedicated to isolating these irrational behaviours as it is to understanding why they happen. There are many reasons, but for the sake of this discussion, three are the most relevant: Heuristics: The first is that w e have lazy little minds and therefore avoid thinking about as much as we can. To do this we rely on a rules of thumb or other heuristics that allow
Published on Oct 15, 2014
Touching lightly on a few principles of Behavioural economics to demonstrate the application of BE to hospitality marketing and experience d...