Book Review

For this assignment, I chose to review the book “Predictably Irrational: The Hidden Forces that Shape Our Decisions” by Dan Ariely. The reason I chose this book is because it provides deep insights about the human psyche during various routine decision making and it can be leveraged by the marketers to promote their offerings.

To give a brief background, the author is a behavioural economist who had met an accident and while spending lots of time at the hospital he started to observe people and thus chose behavioural economics as his career. Behavioural economics involves studying through experiments the people’s decision making process whilst they take routine life decisions. This social psychology can be very well leveraged by the marketers to design strategies. It is hugely interesting to learn about his personal experiences shared in the book & those he had by conducting various experiments to study this human behaviour.

“Zero Price effect’’: The author conducted an experiment where he offered to choose between a premium chocolate at a very attractive discount and reduced Hershey’s chocolate price from 1 cent to free. He observed a dramatic change in the consumer behaviour and now the number of people chose Hershey’s increased because it was available for free. This is how marketers convince us to buy something that we really don’t need.  It’s not the gift that allures us but the word “free” makes it irresistible that we end up making a purchase, which is both irrational and predictable. He also quoted the example of “free shipping” concept used by Amazon.com which increased its sales significantly. I have myself fallen in this trap a couple of times and I’m sure we all have at some point. I bought a book at Amazon and was charged a shipping cost as my bill was lower than the amount to avail the free shipping. So just to save $2 of shipping charge I bought one more book that I wasn’t really interested in that time, raising my total bill by a significant amount. At that point I thought I saved money but a deeper thought made me realise how irrational that decision was. As a marketer coming up with strategies Combo offers / bundled deals or multi pack are all based on discreet discounting leading to enhanced customer spend or usage.

Herding: Humans have a very common tendency of herding. We generally make decisions based on the quantity. A huge line up outside a restaurant makes us believe that it would be good. When we look for reviews online before buying something, we not only look what people have to say about it but also how many. Real life example: When I came to Vancouver and had heard that the “Vij” restaurant offers the best Indian food and always has a long line up. Very excitedly I went and waited for quite long time to enjoy that heavenly feast but alas it wasn’t worth the hype. He brings a term called self herding as per which people perceive value in a product/service consumed in the past. We would find numerous examples where some products such as few brands of soaps, toothpastes etc.  that have been bought since generations and have never been changed since ages overlooking the cost benefit other products might offer.  He quotes an example of how Starbucks has leveraged this perceived value. Some customers buy Starbucks coffee everyday because they have been doing this for long and now don’t question the price paid for it.  As a shrewd marketer would do “10 Million Copies Sold” or “Serving west coast since 1904” etc. to take advantage of the herding phenomenon, this book elaborates the why behind his actions.

Placebo Effect: When presented with an option of a 5 cent aspirin and a 50 cent pain killer the latter is the winner.Ever wonder why?  Also a branded pair of jeans would be more comfortable and better than the one bought from Wal-Mart. These perceived values are our beliefs which are conditioned through are experience and familiarity. This is known as the placebo effect. This is how brands create value for themselves in consumers’ mind. It is our belief in the product which is further conditioned by the marketers by creating a familiarity through repeated marketing efforts.

The famous Coke and Pepsi test tells us that without the brand mention people preferred Pepsi but as soon as the brand is revealed Coke stands out as the winner. It is the expectation set by the brand. Also the presentation has a great influence. A well garnished dish looks much more tempting than one with simple presentation. In culinary schools not only the food but also its artful presentation is emphasized upon.

In today’s time internet has become the major source of any information. The marketers have realised this well and every company strives to make its online presence as appealing as possible. I realised how important the presentation is while reviewing the website we chose for our Internet marketing team project. On comparing it with the top player’s website in its domain this notion of presentation instantly made its relevance. It was very attractive, appealing and very impressive. High resolution pictures, its content, navigation, information available spoke for the brand.

The book covers lots of such human behaviours through experiments and the insights offered can be utilized by the marketers to design strategies to lure customers. Understanding the consumer behaviour is a mandate as customers are bombarded with so much information everyday that it’s difficult to create an anchor in their minds without creating a meaningful sustainable impact. It’s no more a price war and even the products that compete on price have to try hard to squeeze out the minimal margins.

Reference: Few excerpts as it is have been taken from the book “Predictably Irrational: The Hidden Forces that Shape Our Decisions” by Dan Ariely.