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We as human beings are highly rational, and the belief we share in that rationality pervades our every thought and action across countless decisions each day, minor and major, from the $4 cup of latte we pick up on the way into the office to the really great deal we just got on our new flat screen TV, with free shipping.
Now here’s some disappointing news. That's all hooey.
This grand notion of rationality is entirely in our heads. In reality, we as humans are predictably irrational in our decision-making process, and that's proven over and over again by the poor buying decisions we make. We overpay, we buy things we don't need. And perhaps most discouraging, we never seem to learn from our mistakes.
In short, we're kidding ourselves about our ability to make rational buying decisions.
“The idea that we could compute all the possible options of every motion and decide what the optimal course of action is – I just think it’s inhumane,” says Dan Ariely, a behavioral economist at MIT and author of “Predictably Irrational: The Hidden Forces that Shape Our Decisions," a new book on how consumers really behave in the marketplace.
“We are just starting to understand that the reality that we experience is not just about what’s out there. It is about what we create.”
This of course hardly comes as news to marketers, whose very expertise is in persuading people not only to buy their products but to rest in the comfort that they made the wisest decision.
As a behavioral economist, Ariely looks beyond theory--say, Adam Smith's writings on capitalism and how it works or ought to work in the grand scheme of things, to how things actually work based on observing consumers in action.
It's enough to break Smith's heart, were he to return. A lot of Ariely’s experiments show just how much consumers are swayed by what they choose to believe versus the facts at hand. Call it willful self-deception. While believing they're weighing the evidence at hand, they often reach back into memory--all those associations built up over years--to make decisions.
Case in point: Ariely tested pricing on a pain reliever that was actually a placebo, vitamin C. First he priced it at $2.50, then at 10 cents. Which one delivered the greater pain relief, in the minds of test subjects? Most thought the $2.50 pain reliever was effective. Half that number thought the cheaper one did the job.
Our minds are embedded to believe in a correlation between price and quality, when in so many cases it's simply not true.
Yet at the same time consumers are invariably taken in by offers of free this or free that. The word "free" may be the most powerful word in the English language, and certainly the most powerful device in the quiver of marketers, even though common sense tells us that nothing is really ever free.
In another experiment, Ariely offered two beers to groups of students, one a name brand and the other a brew containing a special ingredient. The special ingredient was balsamic vinegar, but the students were not told that. They mostly preferred the special brew.
However, if told beforehand that the unique ingredient was vinegar, they found the drink unpalatable. Balsamic vinegar is not an expected ingredient in beer, so it must not taste very good, and of course it didn't.
“Your ideas,” he explains, “change the realities of what you experience."
He firms that notion up citing yet another experiment, a Pepsi versus Coke taste challenge. The participants tasted the two drinks, and as they did so their brain activity was measured. Researchers found that the brain reacted differently when the product names were revealed than and when they weren’t.
The mention of Coke stimulated the area of the brain relating to higher order association. That's to say, the mention of the Coke name earned a more positive response.” That’s where the higher enjoyment comes from, not the taste,” says Ariely.
Coke's years of brand building were paying off where it mattered most, not in the mouth but in the brain.
What might consumers take away from Ariely's research? That perhaps we ought to rethink how we make decisions based on the real facts at hand versus the entire set of beliefs we've stored up.
Ariely also believes there's room in the marketplace for products that accept our irrational side rather than exploit it. One idea he proposes is a credit card that would allow the user to set certain limits for different types of products per month. This would help people live within budgets.
Another is a healthcare plan where dates of important screening tests are mandated, either by the company or upfront by the consumer, to avoid procrastination, another key failing of the not-so-rational human brain.
“My hope for behavioral economics is that if we could design a world that is suited for our needs, that would be great,” says Ariely.
We should perhaps remember what “Star Trek’s” Dr. Spock told us years ago: “Nowhere am I so desperately needed as among a shipload of illogical humans.”
Meanwhile, elsewhere in popcult, the popular children’s book adaptation “Dr. Seuss’ Horton Hears a Who” dropped down to No. 2 after two weeks in the top spot, giving way to “21,” which took in $23.7 million in ticket sales. The new “Superhero Movie” took third.
In DVD rentals for the week ended March 23, according to IMDb.com, Oscar winner “No Country for Old Men” dropped to second after new release “I Am Legend.” In third place was the new Disney release “Enchanted.”
On iTunes this morning, Mariah Carey’s single “Touch My Body” took the No. 1 slot, knocking Leona Lewis’ “Bleeding Love” down to number three after Madonna’s “4 Minutes.”
And in books, Valerie Bertinelli’s “Losing It” finally dropped out of the No. 1 spot on The New York Times’ hardcover nonfiction best-sellers list for the week ended March 22, coming in second after “Beautiful Boy” by David Sheff. On the USA Today’s book chart Eckhart Tolle’s “A New Earth” stayed at the top spot.
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TOP MOVIES
Weekend Box Office Estimates
Weekend of March 28-30, 2008
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Rank
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MOVIE
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Engagements
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Box office (millions)
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1
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21 (Sony)
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2,648
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$23.70
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2
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Dr. Seuss’ Horton Hears a Who (20th Century Fox)
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3,826
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$17.43
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3
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Superhero Movie (MGM)
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2,960
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$9.51
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4
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Tyler Perry’s Meet the Browns (Lionsgate)
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2,016
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$7.76
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5
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Drillbit Taylor (Paramount)
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3,061
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$5.80
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6
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Shutter (20th Century Fox)
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2,756
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$5.32
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7
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10,000 B.C. (Warner Bros.)
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3,055
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$4.88
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8
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Stop-Loss (Paramount)
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1,291
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$4.53
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9
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College Road Trip (Buena Vista)
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2,270
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$3.51
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10
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The Bank Job (Lionsgate)
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1,605
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$2.80
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Source: Yahoo Movies
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IMDb TOP DVD RENTALS
Week ending March 23, 2008
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Rank
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TITLE
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Last week
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1
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I Am Legend
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-
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2
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No Country for Old Men
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1
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3
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Enchanted
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-
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4
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Bee Movie
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2
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5
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Atonement
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-
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6
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Dan in Real Life
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3
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7
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Hitman
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4
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8
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Into the Wild
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5
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9
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Beowulf
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6
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10
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August Rush
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7
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Source: IMDB
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ITUNES TOP 8 SONG DOWNLOADS
for week ended Monday, March 31, 2008
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Rank
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TITLE
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1
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Touch My Body, Mariah Carey
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2
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4 Minutes, Madonna feat. Justin Timberlake and Timbaland
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3
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Bleeding Love, Leona Lewis
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4
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Beat It, Fall Out Boy feat. John Mayer
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5
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Lollipop, Lil Wayne
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6
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You’re Gonna Miss This, Trace Adkins
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7
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No Air, Jordin Sparks and Chris Brown
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8
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Love In This Club, Usher feat. Young Jeezy
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Source: iTunes
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NEW YORK
TIMES BESTSELLING BOOKS
Week ending March 22, 2008
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Fiction (hardback)
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Rank
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TITLE
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Last week
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Weeks on chart
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1
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Change of Heart by Jodi Picoult
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1
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2
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2
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The Appeal by John Grisham
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2
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7
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3
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Remember Me? by Sophie Kinsella
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3
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6
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4
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Dead Heat by Joel C. Rosenberg
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-
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1
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5
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7th Heaven by James Patterson and Maxine Paetro
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4
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5
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Nonfiction (hardback)
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1
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Beautiful Boy by David Sheff
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2
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4
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2
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Losing It by Valerie Bertinelli
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1
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4
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3
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Stori Telling by Tori Spelling with Hilary Liftin
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3
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2
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4
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In Defense of Food by Michael Pollan
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4
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12
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5
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Predictably Irrational by Dan Ariely
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-
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1
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Fiction (paperback)
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|
1
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Nineteen Minutes by Jodi Picoult
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1
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7
|
|
2
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The Other Boleyn Girl by Philippa Gregory
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2
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9
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|
3
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Water for Elephants by Sara Gruen
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3
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29
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4
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The Friday Night Knitting Club by Kate Jacobs
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4
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3
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5
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The Kite Runner
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-
|
1
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Nonfiction (paperback)
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|
1
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Eat, Pray, Love by Elizabeth Gilbert
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1
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61
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2
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Three Cups of Tea by Greg Mortenson and David Oliver Relin
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2
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60
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3
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The Audacity of Hope by Barack Obama
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3
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13
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4
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John Adams by David McCullough
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-
|
1
|
|
5
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Dreams From My Father by Barack Obama
|
4
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88
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Source: New York Times
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USA
TODAY BESTSELLING BOOKS
Week ending March 23, 2008
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Rank
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TITLE
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Last week
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1
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A New Earth by Eckhart Tolle
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1
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2
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The Final Warning: A Maximum Ride Novel by James Patterson
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-
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3
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Horton Hears A Who! by Dr. Seuss
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6
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4
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Diary of a Wimpy Kid: Rodrick Rules, Jeff Kinney
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5
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5
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Eat, Pray, Love by Elizabeth Gilbert
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4
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6
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The Other Boleyn Girl by Philippa Gregory
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3
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7
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Change of Heart by Jodi Picoult
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2
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8
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Three Cups of Tea by Greg Mortensen and David Oliver Relin
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7
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9
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Twilight by Stephenie Meyer
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11
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10
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Diary of a Wimpy Kid by Jeff Kinney
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14
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Source: USA Today
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