Marketing Thought

Rationality And Marketing Strategy

Rationality and marketing strategy is an important topic for marketers to think about. I worry that many scholars and writers haven’t given too much thought to the big picture of decision-making. This is important because securing consumer choice is at the heart of marketing. Yet views of the decision-making underlying marketer’s discussions are often quite limited.

Influences On Marketing Thought

There are two major disciplinary influences on marketing thought about decision making. First, is economics. One challenge is that rather silly popular views of rationality come from economics. Namely that people optimize and are always consistent. These are so easily disprovable that it is tempting for some marketers to assume that economic thinking has no value. This is disappointing as economics has some of the best thinking about how markets work. Such ideas are critical to marketing. Too many marketing academics are happy to find out how people react in controlled/isolated circumstances but don’t see the need to take that further. Yet marketing must consider markets/how consumers react given a multitude of market influences to be of any use to anyone.

The second influence is from psychology. Again there is plenty of great work to draw on but plenty of tosh too. I can’t believe that so many scholars have blithely ceded the definition of rationality to economics. They, therefore, call people irrational; which is a bucket containing every approach ever taken by a human being. The problem is that a rational decision, to normal laypeople, means a good decision. Thus we get irrationality being lauded and it is pretty confusing. We don’t know whether the speaker means something reasonable, ‘don’t beat yourself up for not knowing everything’, or less reasonable, that the speaker thinks we should all believe in lizard people.

When people try to reclaim irrationality my question is: why reclaim it? Irrational is a useful term for some really bad decision-making. Instead, we need to reclaim rationality from those who think you can only be rational if you are a selfish ass.

Selfishness

This is the simplest bit of this piece. Is selfishness necessary to be rational? No, of course it is not. The idea is clearly absurd. To be clear this is an absurd idea in economic logic. (As well as any other logic you want to use).

Preferences are something you respond to in economic logic. No one tells you what you should prefer. If you like helping others, technically gain most utility through using your resources to assist others, that is absolutely what you should do. (And good for you too).

The fact that this concern for others makes preference functions hard to formulate in math models is not a good reason to attempt to overturn basic economic principles and human decency. For more see here.

Enjoying Yourself Is Rational

Following on from this I should make the point that enjoying yourself is rational by any reasonable standard. Why would economic ideas about maximizing your stuff be rational if it didn’t make you happy — i.e. engender an emotional reaction?

Remember also that there is nothing wrong with spending on fun experiences rather than spending on stuff you can point to. Enjoying yourself makes sense (see here). Similarly, there is nothing irrational about spending money on things you want rather than on sensible things you think you should want (see here). Rather than buy the boring grey scarf you ‘should want’ why not buy the purple earmuffs you really want even if you think adults don’t do that sort of thing.

Emotions Aren’t The Opposite Of Rationality

I don’t want to get into the quagmire of defining an emotion. Still, I want to push back on the weird notion that emotions are somehow not rational. Emotions can help with decision-making, see here. So if you contrast using emotions with being rational you get the strange conundrum that rational decisions can be worse than non-rational decisions. That is just plain odd by any reasonable definition of rational. We then would have a definition of rationality which contrasts with the everyday definition of rational as a good decision process. Why do this? Who does it help?

Don’t Contrast Emotions And Rationality

To those who contrast emotions and rational — and this is probably most of the people I meet — I would like to know what they mean by rational. This is usually unclear, see here. If it is just unemotional, why don’t they use the word unemotional? It is a lovely word and is relatively clear. (Okay I didn’t define emotional so it is still vague but is it still better than irrational).

Let’s leave rational as an indication of an effective approach. An effective approach includes listening to your emotions — how else do you know what your preferences are? As such emotions are central to rationality.

To repeat there is nothing wrong with having emotions. It is bizarre that we have fetishized lack of emotion. Emotions can be bad, but they are often very useful. Spock, the epitome of lack of emotions is always relying on his emotions. This isn’t because Star Trek is bad. (How could you dare think that?) Spock relies on his emotions because emotions are useful. Don’t leave home without them.

Don’t fall into the trap of thinking emotions are irrational. I really can’t understand why well-meaning psychologically trained people have bought into that silly idea. Don’t contrast rational with emotional. It doesn’t help anyone and doesn’t make any sense.

Rationality And Marketing Strategy Involves Markets

It is important to understand that rationality can emerge at different levels. It is possible for lots of people to make decisions with a fair amount of quality variability in them and the net result to be a pretty good decision by the collective. This is a lot of what the work of Vernon Smith shows, see here. The challenge then, if you want to critique a lot of economic theory, is not to say that individual human beings do not optimize. Everyone knows this. It is painfully obvious from any introspection. Sharing that insight is about as interesting as saying that Eddie the Eagle wasn’t the greatest ever ski jumper. We all know that, it wasn’t the point though. (Actually, he is the greatest ski jumper to my mind. To be fair he is the only ski jumper I have heard of/care about in the slightest. Still please ignore the bit in these brackets — I intellectually accept that there have been lost of people who can ski jump better than Eddie).

Instead, to critique models of markets that assume rationality we need to get a bit more sophisticated. Marketers have a unique ability to understand decision-making in markets. This is something psychologists are not trained enough in market thinking to do. Furthermore, economists often lack the decision-making training to do. (The best economists can reveal a crude understanding of decision making and even what a preference is, see here.) Marketers have a great opportunity to work on translating the interesting findings of non-standard behaviors into market outcomes. Why don’t we academics do more of this? Practicing marketers do this in their jobs everyday.

Get Beyond Simple Questions

The question shouldn’t be: “do people always behave as they are assumed in some econ models”. The answer ‘no’ is so obvious it isn’t worth debating.

Likewise the question “can markets work well despite people not behaving as Homo Economicus?” is not that interesting either. The answer is yes. This has been shown in experiments. Certain markets can work pretty well even with less restrictive assumptions about human behavior.

The interesting question becomes more nuanced. When do markets work and when do they not work? This is a massive question — and central to political ideology. Answering it requires a pretty sophisticated knowledge of economics and psychology. Marketers (at our best) have that knowledge. We have something to offer. Let us do more of it.

Evolutionary Perspectives On Rationality And Marketing Strategy

Evolutionary views of rationality can be interesting. These seek to explain behavior in terms of what might have been useful over evolutionary history. This can be more controversial than you might think it would be. Perhaps unexpectedly it isn’t people who don’t believe in evolution who hate evolutionary thinking in psychology. (I have been to the Creation Museum in Kentucky — it isn’t really the people who created that museum who worry most about evolutionary thinking as a problem in decision making).

Indeed, in one of those twists you couldn’t see coming, it is often more left-wing people who reject the idea of evolution impacting our decision-making. To be fair there is some pretty bad evolutionary thinking out there and it is used for dodgy aims so there can be reasons to worry if you only read bad evolutionary thinking.

The main thing people object to would be arguments that go something like: ‘I want to do something awful — people have done awful things in evolutionary times — I can do the awful thing and evolution approves’. I agree there is some pretty sloppy use of evolutionary ideas if you look for it. (To be fair there are pretty awful ideas of any type if you look hard enough, or just type something into Google). Still, that doesn’t seem a reason to close off all thought in an area.

To be clear that your ancestor may have done something is not an ethical justification for your action. Nature does not have an ethical aim: think dysentery, parasitic wasps, and why your body creaks when you hit your forties.

What Happened To My Hair? Nature Can Be Pretty Cruel

Nature Doesn’t Care About You, Or Anyone Else. It Isn’t A Guide To Ethics

When we consider what rationality might be in evolutionary terms it isn’t really about you. Evolution ideas of rationality aren’t about making the decision maker happy. Thus, this is quite different from a standard utility-based approach. That makes for interesting discussions. (Maybe the evolutionary people need a different term than ‘rational’ but that is a topic for another day).

The key point is that evolutionary ideas of rationality are about what has worked in evolutionary terms not about what is good or morally right. Following evolutionary logic doesn’t absolve anyone from their actions. If you cheat your friend, you can’t say that cheating is a human ancestral trait that was selected for. It may be (we could debate) but either way you are a bad friend. The bad things you do aren’t okay just because nature is also kinda cruel.

The marketing strategy lesson is that evolutionary ideas might help us understand human behavior even if they don’t help us tell right from wrong. This might assist us in getting beyond traditional rational/irrational perspectives from economics and psychology. For more on evolutionary definitions of rationality and the philosophy of decision making see here and here.

Rationality And Marketing Strategy In Politics

What you think of voters matters to how you market to them. Do you think you can get away with a colorful patriotic display and a chant of “<Insert Your Country Here>”. (See here for a discussion of how operatives think of voters).

Whether you believe in democracy depends upon your view of voters (see here). I take a relatively positive view. We can be decent. (I admit that is a bit glass half full thinking). I’d also suggest that we can be better collectively than any individual is. But that is my view. Your view of decision-making matters to how you might study political marketing.

Marketers have a lot to contribute to thinking about political strategy and your view of rationality is at the heart of this. Politics, rationality and marketing strategy are inextricably intertwined.

Rationality And Marketing Strategy

Overall I’d like to see more thought given to what human decision-making means for marketers and marketing strategy. I don’t think humans are (mostly) irrational in the sense of bouncing around making terrible decisions. Decision-making is hard, your customers, friends, and voters may not be optimizers but they aren’t headless chickens either.

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